<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C>
SALOMON SMITH BARNEY HOLDINGS INC. TARGETS TRUST I
(EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS
SPECIFIED IN CHARTER) SPECIFIED IN CERTIFICATE OF TRUST)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
22-166-0266 TO BE APPLIED FOR
(I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
</TABLE>
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
(212) 816-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
ROBERT H. MUNDHEIM, ESQ.
GENERAL COUNSEL
SALOMON SMITH BARNEY HOLDINGS INC.
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
(212) 816-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
<TABLE>
<S> <C> <C>
STEPHANIE B. MUDICK, ESQ. ALAN L. BELLER, ESQ. GREGORY A. FERNICOLA, ESQ.
TRAVELERS GROUP INC. CLEARY, GOTTLIEB, STEEN & SKADDEN, ARPS, SLATE,
388 GREENWICH STREET HAMILTON MEAGHER & FLOM LLP
NEW YORK, NEW YORK 10013 ONE LIBERTY PLAZA 919 THIRD AVENUE
NEW YORK, NEW YORK 10006 NEW YORK, NEW YORK 10022
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c)under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
Targeted Growth Enhanced Terms Securities of TARGETS
Trust I.............................................
- --------------------------------------------------------------------------------------------------------------------
Forward Contract of Salomon Smith Barney Holdings
Inc.................................................
- --------------------------------------------------------------------------------------------------------------------
Guarantee of Salomon Smith Barney Holdings Inc. with
respect to the Targeted Growth Enhanced Terms
Securities of the Trust.............................
- --------------------------------------------------------------------------------------------------------------------
Totals....................................... $125,000,000 $36,875
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN 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 TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS 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 DATED FEBRUARY 3, 1998
PROSPECTUS
TARGETS TRUST I
TARGETED GROWTH ENHANCED TERMS SECURITIES ("TARGETSSM")
WITH RESPECT TO THE COMMON STOCK OF CORPORATION
DUE ON
FULLY AND UNCONDITIONALLY GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
SALOMON SMITH BARNEY HOLDINGS INC.
------------------------
The Targeted Growth Enhanced Terms Securities ("TARGETS") offered hereby
represent preferred undivided beneficial ownership interests in the assets of
TARGETS Trust I, a statutory business trust formed under the laws of the State
of Delaware (the "Trust"or "TARGETS Trust I"). Salomon Smith Barney Holdings
Inc., a Delaware corporation ("Salomon Smith Barney"), will own all the common
securities (the "Common Securities" and, together with the TARGETS, the "Trust
Securities") representing undivided beneficial ownership interests in the assets
of the Trust. The Trust exists for the sole purpose of issuing the Trust
Securities and investing the proceeds as described below and engaging in
activities incident thereto. Approximately 85% of the proceeds from the sale of
the Trust Securities will be used by the Trust to purchase from Salomon Smith
Barney a forward contract (the "Forward Contract") with respect to the common
stock (the "Common Stock") of the Corporation, a
corporation (the "Corporation"), as more fully described
herein. In addition, approximately 15% of the proceeds from the sale of the
Trust Securities will be used by the Trust to purchase certain Treasury
Securities (as defined herein under "Description of the Treasury Securities").
See "Description of the TARGETS" and "TARGETS Trust I".
The TARGETS will mature on (the "Maturity Date"), subject
to acceleration to an earlier maturity date (the "Accelerated Maturity Date")
upon an Acceleration Event as described herein under "Description of the
TARGETS -- Acceleration of Maturity Date; Enforcement of Rights". On the
Maturity Date, holders of the TARGETS will be entitled to receive, to the extent
the Trust has funds available therefor, a maturity payment (the "Maturity
Payment") with respect to each TARGET in an amount equal to the sum of (A) the
product of (i) the then Current Market Price (as defined herein) of the Common
Stock, multiplied by (ii) an exchange rate (the "Exchange Rate") as described in
the following paragraph, and (B) any accrued and unpaid Yield Enhancement
Payments (as defined herein) with respect to such TARGET. On the Maturity Date,
holders of TARGETS will also receive a final quarterly Periodic Distribution (as
defined herein) with respect to each TARGET. See "Description of the
TARGETS -- Maturity Payment", "-- Acceleration of Maturity Date; Enforcement of
Rights", "-- Periodic Distributions" and "-- Dilution Adjustments".
(CONTINUED ON NEXT PAGE)
The Common Stock is listed on the Exchange (the " ")
under the symbol " ". The last reported sales price of the Common Stock
on the on , 1998 was $ per share.
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE TARGETS OFFERED
HEREBY.
Application will be made to list the TARGETS on the Chicago Board Options
Exchange (the "CBOE") under the symbol " ".
------------------------
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 REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===========================================================================================================================
PRICE TO PROCEEDS TO
PUBLIC(1) UNDERWRITING(2) THE TRUST(3)
COMMISSIONS
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
Per TARGET...................... $ $ $
- ---------------------------------------------------------------------------------------------------------------------------
Total(4)........................ $ $ $
===========================================================================================================================
</TABLE>
(1) Plus accrued distributions, if any, from , 1998.
(2) The Trust and Salomon Smith Barney have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(3) In view of the fact that a portion of the proceeds of the sale of the
TARGETS will be used by the Trust to purchase the Forward Contract from
Salomon Smith Barney, Salomon Smith Barney has agreed to pay to the
Underwriters as compensation (the "Underwriters Compensation") $
per TARGET (or $ in the aggregate). See "Underwriting". Expenses
of the offering which are payable by Salomon Smith Barney are estimated
to be $ .
(4) The Trust and Salomon Smith Barney have granted to the several
Underwriters the option to purchase up to an additional TARGETS,
exercisable within 30 days of the date hereof, solely to cover
overallotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Commissions and Proceeds to the Trust will
be $ , $ and $ , respectively. See "Underwriting".
------------------------
The TARGETS offered hereby are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that delivery of the TARGETS will
be made only in book-entry form through the facilities of The Depository Trust
Company ("DTC") on or about , 1998.
SALOMON SMITH BARNEY
, 1998
"TARGETSSM" is a service mark of Salomon Smith Barney Holdings Inc.
<PAGE> 3
(continued from cover page)
If the Current Market Price of the Common Stock (which is determined by
reference to an average stock price over the 10 preceding Trading Days (as
defined herein)) as of the Maturity Date is less than or equal to % of the
Current Market Price on the date of the issuance of the TARGETS (the
"Appreciation Threshold Price"), then the Exchange Rate shall be one (1), and if
the Current Market Price of the Common Stock as of the Maturity Date or the
Accelerated Maturity Date, as the case may be, is greater than the Appreciation
Threshold Price, then the Exchange Rate shall be a fraction, the numerator of
which is the Appreciation Threshold Price, and the denominator of which is the
Current Market Price of the Common Stock as of the Maturity Date or the
Accelerated Maturity Date, as the case may be.
Upon acceleration of maturity to an Accelerated Maturity Date, the
Institutional Trustee (as defined herein) will sell the Treasury Securities and,
holders of the TARGETS will be entitled to receive an accelerated maturity
amount (the "Accelerated Maturity Payment") and a pro rata (as defined herein)
portion of the net proceeds received from the sale of the Treasury Securities
(the "Treasury Proceeds"). The Accelerated Maturity Payment with respect to each
TARGET will be an amount equal to the sum of (A) the product of (i) the Current
Market Price of the Common Stock as of the Accelerated Maturity Date multiplied
by (ii) the Exchange Rate as of the Accelerated Maturity Date and (B) any
accrued and unpaid Yield Enhancement Payments with respect to such TARGET.
Accordingly, the amount of the Maturity Payment or Accelerated Maturity Payment,
as the case may be, with respect to each TARGET to be received by holders of the
TARGETS at maturity will not necessary equal to the amount originally invested
by such holders in the TARGETS and may be less than the amount of such initial
investment. Under no circumstances will the Forward Contract or the Treasury
Securities held by the Trust or any Common Stock be distributed in-kind to the
holders of the TARGETS. See "Description of the TARGETS -- Maturity Payment",
"-- Acceleration of Maturity Date; Enforcement of Rights", "-- Periodic
Distributions" and "-- Dilution Adjustments".
Holders of the TARGETS will be entitled to receive cash distributions (the
"Periodic Distributions") of $ per TARGET per quarter from the date of
original issuance and payable quarterly in arrears on each ,
, and , commencing , 1998, if, as and
when the Trust has funds available for payment. See "Description of the
TARGETS -- Periodic Distributions". The aggregate amount of and the payment
dates for the Periodic Distributions will correspond to the aggregate amount of
and payment dates for distributions of (a) payments to be received by the Trust
with respect to the Treasury Securities held by the Trust and (b) certain yield
enhancement payments (the "Yield Enhancement Payments") payable to the Trust by
Salomon Smith Barney pursuant to the Forward Contract. Of each quarterly
Periodic Distribution payable per TARGET to holders of the TARGETS, $
will be paid out of payments received by the Trust with respect to the Treasury
Securities and $ will be paid out of Yield Enhancement Payments. The
Treasury Securities and the Forward Contract will be the sole assets of the
Trust. See "Description of the TARGETS -- Periodic Distributions".
The Maturity Payment or the Accelerated Maturity Payment, as the case may
be, with respect to each TARGET will be paid by the Trust out of funds received
by the Trust from Salomon Smith Barney with respect to the Forward Contract. The
Treasury Proceeds will be paid by the Trust out of funds received by the Trust
from the sale of the Treasury Securities upon an Acceleration Event.
This Prospectus sets forth information about the Trust that a prospective
investor should consider before investing. Potential investors are advised to
read this Prospectus and to retain it for future reference.
TARGETS may be a suitable investment for those investors who are capable of
evaluating the risks regarding the Common Stock of the Corporation and the
advantages and disadvantages of making an indirect investment in the Common
Stock of the Corporation in a manner which will give investors in the TARGETS
potentially higher yield but a lesser opportunity for equity appreciation than
would be afforded by a direct investment in the Common Stock. There is no
assurance that the yield on the TARGETS will be higher than the dividend yield
on the Common Stock over the term of the TARGETS.
2
<PAGE> 4
The obligations of the Trust with respect to the TARGETS are, as described
more fully herein, guaranteed by Salomon Smith Barney (the "Guarantee") to the
extent the Trust has funds available to meet such obligations. See "Description
of the Guarantee". The Guarantee, when taken together with the Forward Contract
and Salomon Smith Barney's obligations to pay all fees and expenses of the
Trust, constitutes a full and unconditional guarantee to the extent set forth
herein by Salomon Smith Barney of all payments to be made to the holders of the
TARGETS.
Upon the occurrence of either an Acceleration Event or the failure by
Salomon Smith Barney to satisfy any of its obligations under the Guarantee, the
holders of the TARGETS will have a preference over the holders of the Common
Securities with respect to payments of any amounts owed by the Trust in respect
of the Trust Securities. See "Description of the TARGETS -- Acceleration of
Maturity Date; Enforcement of Rights".
This Prospectus may be used by Smith Barney Inc. ("Smith Barney") and/or
Salomon Brothers Inc ("Salomon Brothers") or any of their respective successors
(collectively, the "SSBH Subsidiaries") in connection with offers and sales
related to market-making transactions in the TARGETS. The SSBH Subsidiaries may
act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale. Application will
be made to list the TARGETS on the CBOE, subject to official notice of issuance.
Trading of the TARGETS on the CBOE is expected to commence within a 30-day
period after the date of this Prospectus.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE TARGETS OFFERED
HEREBY, INCLUDING PURCHASES OF SUCH TARGETS TO STABILIZE THEIR MARKET PRICE,
PURCHASES OF SUCH TARGETS TO COVER ALL OR SOME OF A SHORT POSITION IN THE
TARGETS MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
AVAILABLE INFORMATION
Salomon Smith Barney and the Trust have filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-3 (the
"Registration Statement", which term shall include all amendments, exhibits and
schedules thereto), pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder, with
respect to the TARGETS offered hereby as well as the Forward Contract and the
Guarantee. 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.
Salomon Smith Barney is subject to the informational and reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports and other information with the
Commission. Except for the listing of TARGETS that is expected to be made on the
CBOE, the Trust does not have any securities that are listed on any national
securities exchange. The Registration Statement, as well as reports, proxy and
information statements and other information filed by Salomon Smith Barney 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,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2551 and Seven World Trade Center, New York, New York 10048. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a site on a World Wide Web, the address of
which is http://www.sec.gov that contains reports, proxy and information
statements and other information concerning issuers, such as Salomon Smith
Barney, that file electronically with the Commission. Such reports and other
information may also be inspected at the offices of
3
<PAGE> 5
the New York Stock Exchange, 20 Broad Street, New York, New York 10005 and the
American Stock Exchange, 86 Trinity Place, New York, New York 10006.
No separate financial statements of the Trust have been included or
incorporated by reference herein. Salomon Smith Barney does not consider that
such financial statements would be material to holders of the TARGETS because
(i) all of the voting securities of the Trust will be owned, directly or
indirectly, by Salomon Smith Barney, a reporting company under the Exchange Act,
(ii) the Trust has no independent operations but exists for the sole purpose of
issuing securities representing undivided beneficial interests in its respective
assets and investing the proceeds thereof in the Forward Contract issued by
Salomon Smith Barney and the Treasury Securities, and (iii) the obligations of
the Trusts under the TARGETS are fully and unconditionally guaranteed by Salomon
Smith Barney to the extent that the Trust has funds available to meet such
obligations. See "Description of the TARGETS" and "Description of the
Guarantee".
In future filings under the Exchange Act, a footnote to Salomon Smith
Barney's annual financial statements will state that the Trust is consolidated
with Salomon Smith Barney, that the sole assets of the Trust are the Forward
Contract and the Treasury Securities and that the Guarantee when taken together
with the Forward Contract and Salomon Smith Barney's obligations to pay all fees
and expenses of the Trust constitutes a guarantee to the extent described herein
by Salomon Smith Barney of the distribution, liquidation and other payments
payable to the holders of the TARGETS. The Guarantee does not apply, however, to
distributions by the Trust unless and until the Trust has funds available
therefor, as more fully described under "Description of the Guarantee".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Salomon Smith Barney incorporates by reference the following documents
heretofore filed by Salomon Smith Barney with the Commission pursuant to the
Exchange Act: (i) the Annual Report on Form 10-K for the year ended December 31,
1996, (ii) the Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997, and (iii) the Current Reports on
Form 8-K dated January 21, 1997, March 17, 1997, April 15, 1997, July 17, 1997,
September 24, 1997, September 29, 1997 (as amended by the Current Report on Form
8-K/A dated October 28, 1997 and the Current Report on Form 8-K/A2 dated
December 1, 1997), October 21, 1997, October 28, 1997 (as amended by the Current
Report on Form 8-K/A dated December 1, 1997), November 21, 1997 (as amended by
the Current Report on Firm 8-K/A dated December 1, 1997) November 28, 1997,
December 5, 1997, December 9, 1997 and January 7, 1998, January 26, 1998,
January 27, 1998 and January 29, 1998.
All documents filed by Salomon Smith Barney 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 TARGETS 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.
Salomon Smith Barney will provide without charge to each person, including
any beneficial owner of TARGETS, 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
Treasurer, Salomon Smith Barney Holdings Inc., 388 Greenwich Street, New York,
New York 10013. Telephone requests for such copies should be directed to the
Treasurer at (212) 816-6000.
4
<PAGE> 6
SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information appearing elsewhere in this
Prospectus.
The Trust.................. TARGETS Trust I, a Delaware statutory business
trust. The sole assets of the Trust will be the
Forward Contract and the Treasury Securities. See
"TARGETS Trust I".
Securities Offered......... Targeted Growth Enhanced Terms Securities.
The TARGETS represent preferred undivided
beneficial ownership interests in the assets of the
Trust. Of the proceeds to the Trust from the sale
of the TARGETS, approximately 85% will be invested
by the Trust in the Forward Contract with respect
to the Common Stock and approximately 15% will be
invested by the Trust in the Treasury Securities.
The Forward Contract and the Treasury Securities
will be the sole assets of the Trust.
The TARGETS are designed to provide holders with a
higher yield than the current dividend yield paid
on the Common Stock, while also providing the
opportunity for holders to share in the
appreciation, if any, of the Common Stock up to the
Appreciation Threshold Price. The annual calendar
year distribution on the TARGETS is $ per
TARGET. The annual fiscal year dividend currently
paid per share of Common Stock is $ .
However, there is no assurance that the yield on
the TARGETS will be higher than the dividend yield
on the Common Stock over the term of the TARGETS.
The Maturity Payment or Accelerated Maturity
Payment, as the case may be, payable to holders of
each TARGET at maturity is dependent upon the
Current Market Price of the Common Stock at such
time. If the Current Market Price as of the
Maturity Date or Accelerated Maturity Date is less
than $ , then the value of the Maturity
Payment or Accelerated Maturity Payment with
respect to each TARGET to be received by holders of
TARGETS at maturity will be less than the amount
originally invested by such holders in the TARGETS.
In addition, the opportunity for equity
appreciation afforded by an investment in the
TARGETS is less than the opportunity for equity
appreciation afforded by a direct investment in the
Common Stock because the Maturity Payment or
Accelerated Maturity Payment with respect to each
TARGET to be received by holders of TARGETS at
maturity will generally be limited to % of the
amount originally invested by such holders in the
TARGETS. See "Description of the
TARGETS -- Maturity Payment", " -- Acceleration of
Maturity Date; Enforcement of Rights" and "Risk
Factors -- Comparison to Other Securities;
Relationship to the Common Stock; Potential Losses;
Limitation on Opportunity For Equity Appreciation".
Offering Price............. The TARGETS are being offered hereby for
$ each.
Maturity................... The TARGETS will mature on , subject to
acceleration to an Accelerated Maturity Date, as
described herein.
Maturity Payment........... On the Maturity Date, holders of the TARGETS will
be entitled to receive, with respect to each TARGET
and to the extent the Trust has funds available
therefor, the Maturity Payment. The Maturity
Payment
5
<PAGE> 7
with respect to each TARGET will be an amount equal
to the sum of (A) the product of (i) the Current
Market Price of the Common Stock as of the Maturity
Date multiplied by (ii) the Exchange Rate and (B)
any accrued and unpaid Yield Enhancement Payments
with respect to such TARGET. On the Maturity Date,
holders of TARGETS will also receive the final
quarterly Periodic Distribution with respect to
each TARGET.
If the Current Market Price of the Common Stock as
of the Maturity Date is less than or equal to the
Appreciation Threshold Price, then the Exchange
Rate shall be one (1), and if the Current Market
Price of the Common Stock as of the Maturity Date
is greater than the Appreciation Threshold Price,
then the Exchange Rate shall be a fraction, the
numerator of which is the Appreciation Threshold
Price, and the denominator of which is the Current
Market Price of the Common Stock as of the Maturity
Date. The Exchange Rate and the Appreciation
Threshold Price are subject to certain dilution
adjustments upon the occurrence of certain events
involving the Corporation and its capital
structure, as described herein.
The Maturity Payment with respect to each TARGET
will be paid by the Trust out of the funds received
by the Trust from Salomon Smith Barney in respect
of the Forward Contract. The ability of the Trust
to make any Maturity Payment is therefore entirely
dependent upon the receipt by the Trust from
Salomon Smith Barney of such payment with respect
to the Forward Contract. See "Description of the
TARGETS -- Maturity Payment" and "-- Dilution
Adjustments".
Acceleration of Maturity
Date....................... Upon an Acceleration Event, the Institutional
Trustee will sell the Treasury Securities,
liquidate the Trust and cause the Accelerated
Maturity Payment with respect to each TARGET and a
pro rata portion of the Treasury Proceeds to be
distributed to the holders of the TARGETS. The
Accelerated Maturity Payment with respect to each
TARGET will be an amount equal to the sum of (A)
the product of (i) the Current Market Price of the
Common Stock as of the Accelerated Maturity Date
multiplied by (ii) the Exchange Rate as of the
Accelerated Maturity Date and (B) any accrued and
unpaid Yield Enhancement Payments with respect to
each TARGET. If any Accelerated Maturity Payment
can be paid only in part because the Trust has
insufficient assets available to pay the
Accelerated Maturity Payment with respect to each
TARGET in full, then the amounts payable directly
by the Trust to holders of the TARGETS will be paid
on a pro rata basis.
The holders of the Common Securities will be
entitled to receive distributions upon any such
liquidation pro rata with the holders of the
TARGETS, except that upon (i) default by the Trust
on any of its obligations under the TARGETS or (ii)
default by Salomon Smith Barney on any of its
obligations under the Guarantee, the holders of the
TARGETS will have a preference over the holders of
the Common Securities with respect to payments upon
liquidation of the Trust. An "Acceleration Event"
will occur with respect to the TARGETS upon any of
(i) a Tax Event (as defined herein), which will
generally be considered to be the occurrence of
certain adverse tax consequences to the Trust, (ii)
an Investment Company Event (as defined herein),
which will generally be considered to be
classification of the Trust as an
6
<PAGE> 8
"investment company" under the Investment Company
Act of 1940, as amended or (iii) a Bankruptcy Event
(as defined herein), which will generally be
considered to be the initiation of bankruptcy
proceedings regarding Salomon Smith Barney. See
"Description of the TARGETS -- Acceleration of
Maturity Date; Enforcement of Rights" and "Risk
Factors -- Acceleration of Maturity Date".
Periodic Distributions..... Holders of TARGETS will be entitled to receive
Periodic Distributions at the rate per TARGET of
$ per quarter, payable on each ,
, and , commencing .
The Periodic Distributions will be paid by the
Trust out of (i) payments to be received by the
Trust in respect of the Treasury Securities held by
the Trust and (ii) the Yield Enhancement Payments
to be received by the Trust from Salomon Smith
Barney under the Forward Contract. Of each Periodic
Distribution payable to holders of the TARGETS,
$ will be paid out of payments received by
the Trust with respect to the Treasury Securities
and $ will be paid out of Yield
Enhancement Payments received by the Trust.
The Treasury Securities and the Forward Contract
will be the sole assets of the Trust. The ability
of the Trust to make Periodic Distributions on the
TARGETS is therefore entirely dependent on receipt
by the Trust of both payments with respect to the
Treasury Securities held by the Trust and the Yield
Enhancement Payments payable by Salomon Smith
Barney under the Forward Contract. See "Description
of the TARGETS -- Periodic Distributions".
Rights Upon Certain
Events..................... If, at any time, (i) the Trust has not satisfied
any of its obligations under the TARGETS or (ii)
Salomon Smith Barney has not satisfied any of its
obligations under the Guarantee, then (a) the
Institutional Trustee, as the holder of the Forward
Contract and the Treasury Securities, will have the
right to enforce the terms of the Forward Contract
and the Treasury Securities and (b) the Guarantee
Trustee (as defined herein), as the holder of the
Guarantee, will have the right to enforce the terms
of the Guarantee. See "Risk Factors -- Enforcement
of Certain Rights by Holders of TARGETS".
Guarantee.................. Salomon Smith Barney will irrevocably guarantee the
payment in full to the holders of the TARGETS of
(i) any Maturity Payment that is required to be
made in respect of the TARGETS, to the extent the
Trust has funds available therefor, (ii) any
Accelerated Maturity Payment that is required to be
made in respect of the TARGETS, to the extent the
Trust has funds available therefor, (iii) any
Periodic Distributions that are required to be made
in respect of the TARGETS, to the extent the Trust
has funds available therefor, (iv) the Treasury
Proceeds that are required to be distributed in
respect of the TARGETS, to the extent the Trust has
funds available therefor and (v) any other
remaining assets of the Trust upon liquidation of
the Trust. See "Description of the Guarantee" and
"Risk Factors -- Rights Under the Guarantee".
Voting Rights.............. Generally, holders of the TARGETS will not have any
voting rights. The holders of the TARGETS, however,
have the right to direct the time, method and place
of conducting any proceeding for any remedy
available to the Institutional Trustee, or direct
the exercise of any trust or power conferred upon
the Institutional Trustee under the Declaration (as
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<PAGE> 9
defined herein), including the right to direct the
Institutional Trustee, as holder of the Forward
Contract and the Treasury Securities, to exercise
its rights in the manner described above under
"Rights Upon Certain Events". See "Description of
the TARGETS -- Acceleration of Maturity Date;
Enforcement of Rights" and " -- Voting Rights" and
"Risk Factors -- Enforcement of Certain Rights by
Holders of TARGETS" and "-- Limited Voting Rights;
No Stockholders Rights".
Book-Entry Form............ The TARGETS will be represented by a global
certificate or certificates registered in the name
of Cede & Co., as nominee for DTC. Beneficial
interests in the TARGETS will be evidenced by, and
transfers thereof will be effected only through,
records maintained by the participants in DTC.
Except as described herein, TARGETS in certificated
form will not be issued in exchange for the global
certificate or certificates. See "Description of
the TARGETS -- Book-Entry Only Issuance".
Obligations of the Trust... The TARGETS are obligations of the Trust and, to
the extent of the Guarantee, of Salomon Smith
Barney. Neither the TARGETS nor the Guarantee are
obligations of the Corporation or any other
company. See "Risk Factors -- No Obligation on the
Part of the Corporation With Respect to the
TARGETS".
Listing.................... Application will be made to list the TARGETS on the
CBOE under the symbol " ".
Use of Proceeds............ Of the total proceeds from the sale of the Trust
Securities, the Trust will use $ to
purchase the Forward Contract from Salomon Smith
Barney and $ to purchase the Treasury
Securities. See "TARGETS Trust I", "Use of Proceeds
and Hedging Activities" and "Risk Factors -- Use of
Proceeds and Hedging Activities".
Forward Contract........... Pursuant to the terms of the Forward Contract,
Salomon Smith Barney will be obligated to pay to
the Trust the aggregate Maturity Payments or the
aggregate Accelerated Maturity Payments, as the
case may be, and the Yield Enhancement Payments.
The proceeds from the sale of the Forward Contract
will be used by Salomon Smith Barney for general
corporate purposes. See "Use of Proceeds and
Hedging Activities", "Description of the Forward
Contract" and "Risk Factors -- Use of Proceeds and
Hedging Activities".
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<PAGE> 10
RISK FACTORS
As described in more detail below, the trading price of the TARGETS may
vary considerably prior to maturity, due to, among other things, fluctuations in
the market price of the Common Stock and other events that are difficult to
predict and beyond the control of Salomon Smith Barney and the Trust.
Prospective purchasers of the TARGETS should consider carefully the risk factors
set forth below, as well as all other information contained or incorporated by
reference in this Prospectus, in evaluating an investment in the TARGETS.
COMPARISON TO OTHER SECURITIES; RELATIONSHIP TO THE COMMON STOCK; POTENTIAL
LOSSES;
LIMITATION ON OPPORTUNITY FOR EQUITY APPRECIATION
The amount of cash that holders of TARGETS are entitled to receive at
maturity is not fixed, but is based on the Current Market Price of the Common
Stock at the time of maturity. There can be no assurance that the amount of such
payment will be equal to or greater than the amount an investor initially paid
for its TARGETS (except to the extent of any Periodic Distributions). For
example, if at maturity, the Current Market Price of the Common Stock is less
than $ per share, the Maturity Payment or Accelerated Maturity Payment,
as the case may be, with respect to each TARGET will be less than the initial
offering price of each TARGET, in which case an investment in TARGETS will
result in a loss (again, except to the extent of any Periodic Distributions)
and, if the Corporation is insolvent or bankrupt, could result in a total loss
of the amount invested in the TARGETS (again, except to the extent of any
Periodic Distributions). Investors in the TARGETS therefore bear the full risk
of a decline in the value of the Common Stock prior to maturity of the TARGETS.
In addition, the opportunity for equity appreciation afforded by an
investment in the TARGETS is less than the opportunity for equity appreciation
afforded by a direct investment in the Common Stock. Holders of the TARGETS will
only be entitled to receive at maturity an amount representing a maximum of %
of any appreciation of the value of the Common Stock. Because the price of the
Common Stock is subject to market fluctuations, the Maturity Payment or
Accelerated Maturity Payment, as the case may be, with respect to each TARGET
may be more or less than the amount initially invested in each TARGET. In
addition, because the Current Market Price is determined by reference to an
average stock price over 10 Trading Days, the value of a share of the Common
Stock on the date of maturity may be more or less than the Current Market Price
used to determine the amount holders of TARGETS are entitled to receive at
maturity. See "Description of the TARGETS" for an illustration of the Maturity
Payment with respect to each TARGET that a TARGETS holder would receive at
various Current Market Prices for the Common Stock at maturity.
The market price of the TARGETS at any time will be affected primarily by
changes in the price of the Common Stock. It is impossible to predict whether
the price of the Common Stock will rise or fall. Trading prices of the Common
Stock will be influenced by the Corporation's results of operations and by
complex and interrelated political, economic, financial and other factors that
can affect the capital markets generally, the stock exchange on which the Common
Stock is traded and the market segment of which the Corporation is a part.
Trading prices of the Common Stock also may be influenced if Salomon Smith
Barney, another market participant or others hereafter issue securities with
terms similar to those of the TARGETS or sell or otherwise transfer shares of
the Common Stock.
The yield on the TARGETS is higher than the current dividend yield on the
Common Stock. However, there is no assurance that the yield on the TARGETS will
be higher than the dividend yield on the Common Stock through the term of the
TARGETS.
ACCELERATION OF MATURITY DATE
Upon the occurrence of an Acceleration Event as described herein, the
maturity of the Trust Securities will be accelerated. An Acceleration Event will
generally occur upon the occurrence of (i) certain adverse tax consequences to
the Trust, (ii) the Trust being considered an "investment company" under the
Investment Company Act of 1940 (the "1940 Act") or (iii) the bankruptcy of
Salomon Smith Barney. As a result, the Accelerated Maturity Payment with respect
to each TARGET and a pro rata portion of the Treasury
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<PAGE> 11
Proceeds will be distributed to the holders of the TARGETS on the Accelerated
Maturity Date. See "Description of the TARGETS -- Acceleration of Maturity Date;
Enforcement of Rights".
There can be no assurance as to the amount of either the Accelerated
Maturity Payments or the Treasury Proceeds that may be distributed to holders of
the TARGETS on the Accelerated Maturity Date. Accordingly, the TARGETS may trade
at a discount to the price that the investor paid to purchase the TARGETS
offered hereby.
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act. The Chase Manhattan Bank will act as Guarantee Trustee under the Guarantee
for the purposes of compliance with the provisions of the Trust Indenture Act
(in such capacity, the "Guarantee Trustee"). The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the TARGETS.
The Guarantee guarantees to the holders of TARGETS the payment of (i) any
Maturity Payment that is required to be made in respect of each TARGET, to the
extent the Trust has funds available therefor, (ii) any Accelerated Maturity
Payment that is required to be made in respect of each TARGET, to the extent the
Trust has funds available therefor, (iii) any Periodic Distribution that is
required to be made in respect of each TARGET, to the extent the Trust has funds
available therefor, (iv) the Treasury Proceeds that are required to be
distributed in respect of each TARGET to the extent the Trust has funds
available therefor and (v) any other remaining assets of the Trust upon
liquidation of the Trust. Salomon Smith Barney's obligation to make a payment
pursuant to the Guarantee may be satisfied by direct payment of the required
amounts by Salomon Smith Barney to the holders of TARGETS or by causing the
Trust to pay such amounts to such holders. The holders of a majority of TARGETS
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under the Guarantee. If
the Guarantee Trustee fails to enforce the Guarantee, any holder of TARGETS may
directly institute a legal proceeding against Salomon Smith Barney to enforce
the Guarantee Trustee's rights under the Guarantee without first instituting a
legal proceeding against the Trust, the Guarantee Trustee or any other person or
entity. A holder of TARGETS may also directly institute a legal proceeding
against Salomon Smith Barney to enforce such holder's right to receive payment
under the Guarantee without first (i) directing the Guarantee Trustee to enforce
the terms of the Guarantee or (ii) instituting a legal proceeding against the
Trust or any other person or entity. If Salomon Smith Barney were to default on
its obligation to pay amounts due in respect of the Forward Contract, the Trust
would lack available funds for the payment of any Maturity Payment, any
Accelerated Maturity Payment and any portion of a Periodic Distribution that
would be paid from Yield Enhancement Payments received by the Trust and, in such
event, holders of the TARGETS would not be able to rely upon the Guarantee for
payment of such amounts. In such event, the remedy of a holder of the TARGETS is
to (i) vote to direct the Institutional Trustee to enforce the Institutional
Trustee's rights under the Forward Contract and Treasury Securities or (ii) if
the failure by TARGETS Trust I to pay distributions is attributable to the
failure of Salomon Smith Barney to pay amounts in respect of the Forward
Contract, institute a proceeding directly against Salomon Smith Barney for
enforcement of payment to such holder of the amounts owed on such holder's pro
rata interest in the Forward Contract. See "Description of the Guarantee" and
"Description of Forward Contract". The Declaration provides that each holder of
TARGETS by acceptance thereof, agrees to the provisions of the Guarantee and the
Indenture governing the terms of the Forward Contract.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TARGETS
If Salomon Smith Barney fails to pay the aggregate Maturity Payments, the
aggregate Accelerated Maturity Payments or the Yield Enhancement Payments in
respect of the Forward Contract, then the holders of TARGETS would rely on the
enforcement by the Institutional Trustee of its rights as a holder of the
Forward Contract against Salomon Smith Barney. In addition, the holders of the
TARGETS will have the right to direct the time, method, and place of conducting
any proceeding for any remedy available to the Institutional Trustee or to
direct the exercise of any trust or power conferred upon the Institutional
Trustee
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<PAGE> 12
under the Declaration, including the right to direct the Institutional Trustee
to exercise the remedies available to it as a holder of the Forward Contract. If
the Institutional Trustee fails to enforce its rights under the Forward
Contract, any holder of TARGETS may directly institute a legal proceeding
against Salomon Smith Barney to enforce the Institutional Trustee's rights under
the Forward Contract without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. If Salomon Smith Barney
fails to pay amounts owed on the Forward Contract on the date such amounts are
otherwise payable, then a holder of TARGETS may also directly institute a
proceeding for enforcement of payment to such holder of the amounts owed on such
holder's pro rata interest in the Forward Contract (a "Direct Action") on or
after the respective due date specified in the Forward Contract without first
(i) directing the Institutional Trustee to enforce the terms of the Forward
Contract or (ii) instituting a legal proceeding against Salomon Smith Barney to
enforce the Institutional Trustee's rights under the Forward Contract. In
connection with such Direct Action, Salomon Smith Barney will be subrogated to
the rights of such holder of TARGETS under the Declaration to the extent of any
payment made by Salomon Smith Barney to such holder of TARGETS in such Direct
Action. Consequently, Salomon Smith Barney will be entitled to payment of
amounts that a holder of TARGETS receives in respect of an unpaid amount that
resulted in the bringing of a Direct Action to the extent that such holder
receives or has already received full payment with respect to such unpaid
amounts from the Trust. The holders of TARGETS will not be able to exercise
directly any other remedy available to the holders of the Forward Contract.
IMPACT OF THE TARGETS ON THE MARKET FOR THE COMMON STOCK
It is not possible to predict accurately how or whether the TARGETS will
trade in the secondary market or whether such market will be liquid. Any market
that develops for the TARGETS may influence and is likely to be influenced by
the market for the Common Stock. For example, the price of the Common Stock
could be affected by (i) possible sales of the Common Stock by investors who
view the TARGETS as a more attractive means of equity participation in the
Corporation and (ii) hedging or arbitrage trading activity that may develop
involving the TARGETS and the Common Stock.
USE OF PROCEEDS AND HEDGING ACTIVITIES
Of the total proceeds to be received by the Trust from the sale of the
Trust Securities, approximately $ will be used by the Trust to purchase
the Forward Contract from Salomon Smith Barney and approximately $ will
be used by the Trust to purchase the Treasury Securities. A portion of the net
proceeds to be received by Salomon Smith Barney from the sale of the Forward
Contract will be used for general corporate purposes, which may include capital
contributions to subsidiaries of Salomon Smith Barney and/or the reduction or
refinancing of borrowings of Salomon Smith Barney or its subsidiaries. In order
to fund its investment brokerage business, Salomon Smith Barney expects to incur
additional indebtedness in the future. To the extent that TARGETS being
purchased for resale by the Underwriters are not sold, the aggregate proceeds to
Salomon Smith Barney and its subsidiaries would be reduced. Salomon Smith Barney
or an affiliate may enter into a swap agreement with one of Salomon Smith
Barney's affiliates in connection with the sale of the TARGETS and may earn
additional income as a result of payments pursuant to such swap or related hedge
transactions.
The remainder of the net proceeds to be received by Salomon Smith Barney
from the sale of the Forward Contract will be used, in part, by Salomon Smith
Barney or one or more of its subsidiaries for hedging activities related to
Salomon Smith Barney's obligations under the Forward Contract. On or prior to
the Closing Date (as defined herein), Salomon Smith Barney, directly or through
its subsidiaries, will hedge its anticipated exposure under the Forward Contract
by the purchase or sale of Common Stock or options, futures contracts, forward
contracts or swaps or options on the foregoing, or other derivative or synthetic
instruments related to, the Common Stock. From time to time after the initial
sale of the TARGETS and prior to the Maturity Date or Accelerated Maturity Date,
depending on market conditions (including the price of the Common Stock),
Salomon Smith Barney expects that it or its subsidiaries will increase or
decrease their initial hedge positions through various transactions and may
purchase or sell Common Stock or options, swaps, futures contracts, forward
contracts or other derivative or synthetic instruments related to, the Common
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<PAGE> 13
Stock. In addition, Salomon Smith Barney and its subsidiaries may purchase or
sell TARGETS from time to time. Salomon Smith Barney or its subsidiaries may
also take positions in other types of appropriate financial instruments that may
become available in the future. To the extent that Salomon Smith Barney or its
subsidiaries have a long or short hedge position in the Common Stock or options,
swaps, futures contracts, forward contracts or other derivative or synthetic
instruments related to, the Common Stock, Salomon Smith Barney or one or more of
its subsidiaries may liquidate all or a portion of their holdings close to
maturity of the Forward Contract and the TARGETS. Depending on, among other
things, future market conditions, the aggregate amount and 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 Salomon Smith Barney has
no reason to believe that such hedging activity will have a material effect on
the price of TARGETS, such options, swaps, futures contracts, forward contracts
or other derivative or synthetic instruments or on the value of the Common
Stock, there can be no assurance that the hedging activities of Salomon Smith
Barney and its subsidiaries will not affect such prices or value.
DILUTION OF THE COMMON STOCK
Maturity Payments or Accelerated Maturity Payments, as the case may be, are
subject to adjustment for certain events arising from stock splits and
combinations, stock dividends, certain other actions of the Corporation that
modify its capital structure and certain other transactions involving the
Corporation. See "Description of the TARGETS -- Dilution Adjustments". Payments
upon maturity will not be adjusted for other events, such as offerings of the
Common Stock for cash or in connection with acquisitions, that may adversely
affect the price of the Common Stock and, because of the relationship of each
such Maturity Payment or Accelerated Maturity Payment to the price of the Common
Stock, such other events may adversely affect the trading price of the TARGETS.
There can be no assurance that the Corporation will not take any of the
foregoing actions, or that it will not make offerings of, or that major
shareholders will not sell any, Common Stock in the future or as to the amount
of such offerings or sales, if any.
In addition, holders of the TARGETS will not be entitled to any rights with
respect to the Common Stock, including, without limitation, voting rights and
the rights to receive any dividends or other distributions in respect thereof.
NO OBLIGATION ON THE PART OF THE CORPORATION WITH RESPECT TO THE TARGETS
The Corporation is not in any way involved with the offering contemplated
hereby and has no obligations with respect to the TARGETS, including any
obligation to take the needs of Salomon Smith Barney, the Trust or of holders of
the TARGETS into consideration for any reason. The Corporation will not receive
any of the proceeds of the offering of the TARGETS made hereby and is not
responsible for, and has not participated in, the determination of the time of,
prices for or quantities of TARGETS to be issued. The Corporation is not
involved with the administration of the Trust or the TARGETS.
LIMITED VOTING RIGHTS; NO STOCKHOLDERS RIGHTS
Holders of the TARGETS will have limited voting rights and will not be
entitled to vote to appoint, remove or replace, or to increase or decrease the
number of, the Trustees, which voting rights are vested exclusively in the
holder of the Common Securities. See "Description of the TARGETS -- Voting
Rights". In addition, holders of TARGETS will not be entitled to any rights with
respect to the Common Stock (including, without limitation, voting rights and
the rights to receive any dividends or other distributions in respect thereto.)
UNCERTAINTY OF FEDERAL INCOME TAX CONSEQUENCES
No statutory, judicial or administrative authority directly addresses the
characterization of the TARGETS or instruments similar to the TARGETS for U.S.
federal income tax purposes. As a result, significant aspects of the U.S.
federal income tax consequences of an investment in the TARGETS are not certain.
No ruling is being requested from the Internal Revenue Service with respect to
the TARGETS and no
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<PAGE> 14
assurance can be given that the Internal Revenue Service will agree with the
conclusions expressed under "Certain Federal Income Tax Considerations".
SECONDARY TRADING VALUE; LISTING ON CBOE
The Trust is a newly created business trust with no previous operating
history and the TARGETS are innovative securities. It is not possible to predict
how the TARGETS will trade in the secondary market. The trading price of the
TARGETS may vary considerably prior to maturity due to, among other things,
fluctuations in the price of the Common Stock (which may occur due to changes in
the Corporation's financial condition, results of operations or prospects, or
because of complex and interrelated political, economic, financial and other
factors that can affect the capital markets generally, the stock exchanges or
quotation systems on which the Common Stock is traded and the market segment of
which the Corporation is a part) and fluctuations in interest rates, the
volatility of the Common Stock, the length of time to maturity and other factors
that are difficult to predict and beyond the Trust's control.
The Underwriters have advised the Trust that they currently intend to make
a market in the TARGETS; however, they are not obligated to do so. There can be
no assurance that a secondary market will develop or, if a secondary market does
develop, that it will provide the holders with liquidity of investment or that
it will continue for the life of the TARGETS. The Underwriters may cease to make
a market in the TARGETS at any time without notice. Application has been made to
list the TARGETS on the CBOE, subject to official notice of issuance, but there
can be no assurance that the TARGETS will not later be delisted or that trading
in the TARGETS on the CBOE will not be suspended. In the event of a delisting or
suspension of trading on such exchange, the Trust intends to apply for listing
of the TARGETS on another national securities exchange or for quotation on
another trading market. If the TARGETS are not listed or traded on any
securities exchange or trading market, or if trading of the TARGETS is
suspended, pricing information for the TARGETS may be more difficult to obtain,
and the price and liquidity of the TARGETS may be adversely affected.
RISK RELATING TO BANKRUPTCY OF SALOMON SMITH BARNEY
Although the TARGETS are to be issued by the Trust, the ability of the
Trust to meet its obligations under the TARGETS is primarily contingent upon
receipt by the Trust from Salomon Smith Barney of (i) the aggregate Maturity
Payments or the aggregate Accelerated Maturity Payments, as the case may be, and
(ii) the Yield Enhancement Payments under the Forward Contract. The ability of
Salomon Smith Barney to meet its obligations thereunder and, in turn, the
ability of the Trust to meet its obligations under the TARGETS, is therefore
dependent on the solvency and creditworthiness of Salomon Smith Barney.
The TARGETS are a new form of security, and as such, there is no direct
precedent regarding the effect on the TARGETS of a bankruptcy of Salomon Smith
Barney. Accordingly, there can be no assurance of how the TARGETS, the Forward
Contract or the Trust would be treated in such a bankruptcy and whether or to
what extent the holders of TARGETS would be able to recover all or any portion
of their investment in the TARGETS.
In the event of a bankruptcy of Salomon Smith Barney filed before final
payment of the aggregate Maturity Payments or aggregate Accelerated Maturity
Payments in respect of the Forward Contract, the Trust believes the Forward
Contract will be treated as a general unsecured claim against Salomon Smith
Barney in the amount of the aggregate Maturity Payments or the aggregate
Accelerated Maturity Payments, as the case may be, calculated as of either the
date of bankruptcy or the date of any earlier Acceleration Event, but there is a
risk that the claim could be allowed in a lesser amount. In either event, final
payment of amounts owed under the Forward Contract may be delayed beyond the
Maturity Date. Moreover, if a bankruptcy of Salomon Smith Barney were to be
filed within 90 days after the payment of the aggregate Maturity Payments or the
aggregate Accelerated Maturity Payments, the payment might be deemed to be a
preference and thus revocable from the holders of TARGETS. Thus, in the event of
a bankruptcy of Salomon Smith Barney, any recovery to the holders of TARGETS
will likely be substantially delayed and recovery according to the terms of the
Forward Contract and the TARGETS would be uncertain.
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<PAGE> 15
SALOMON SMITH BARNEY
Pursuant to an agreement and plan of merger dated as of September 24, 1997,
a newly-formed wholly owned subsidiary of Travelers Group Inc. ("Travelers
Group") merged with and into Salomon Inc ("Salomon") on November 28, 1997;
Salomon then became a wholly owned subsidiary of Travelers Group and was renamed
Salomon Smith Barney Holdings Inc. Immediately thereafter, Smith Barney Holdings
Inc., another wholly owned subsidiary of Travelers Group, was merged into
Salomon Smith Barney. Salomon Smith Barney is a holding company primarily
engaged in investment banking, proprietary trading, retail brokerage and asset
management activities through its two broker-dealer subsidiaries, Smith Barney
and Salomon Brothers.
The principal offices of Salomon Smith Barney are located at 388 Greenwich
Street, New York, New York 10013 (telephone number: (212) 816-6000).
SMITH BARNEY
Smith Barney provides investment banking, asset management, brokerage and
other financial services for United States and foreign corporations, governments
and institutional and individual investors. These activities include securities,
options and commodities brokerage for domestic and international institutional
and individual clients; underwriting and distribution of securities; arranging
for the private placement of securities; assisting in mergers and acquisitions
and providing financial advisory services; market making and trading in
corporate debt and equity, United States government and agency, mortgage-related
and municipal securities and foreign exchange, futures and forward contracts;
consumer financing activities; securities lending activities; investment
management and advisory services; securities research; and other related
activities.
SALOMON
Together with Salomon Brothers Holding Company Inc. and its subsidiaries
(which subsidiaries include Salomon Brothers), Salomon Brothers engages in
global investment banking and global securities trading activities; provides
capital raising, advisory, trading and risk management services to its
customers; and executes proprietary trading strategies on its own behalf.
Certain of Salomon Smith Barney's commodities trading activities are conducted
by Salomon Smith Barney's wholly owned subsidiary, Phibro Inc., and its
subsidiaries.
USE OF PROCEEDS AND HEDGING ACTIVITIES
Of the total proceeds to be received by the Trust from the sale of the
Trust Securities, approximately $ will be used by the Trust to purchase
the Forward Contract from Salomon Smith Barney and approximately $ will
be used by the Trust to purchase the Treasury Securities. A portion of the net
proceeds to be received by Salomon Smith Barney from the sale of the Forward
Contract will be used for general corporate purposes, which may include capital
contributions to subsidiaries of Salomon Smith Barney and/or the reduction or
refinancing of borrowings of Salomon Smith Barney or its subsidiaries. In order
to fund its investment brokerage business, Salomon Smith Barney expects to incur
additional indebtedness in the future. To the extent that TARGETS being
purchased for resale by the Underwriters are not sold, the aggregate proceeds to
Salomon Smith Barney and its subsidiaries would be reduced. Salomon Smith Barney
or an affiliate may enter into a swap agreement with one of Salomon Smith
Barney's affiliates in connection with the sale of the TARGETS and may earn
additional income as a result of payments pursuant to such swap or related hedge
transactions.
The remainder of the net proceeds to be received by Salomon Smith Barney
from the sale of the Forward Contract will be used, in part, by Salomon Smith
Barney or one or more of its subsidiaries for hedging activities related to
Salomon Smith Barney's obligations under the Forward Contract. On or prior to
the Closing Date (as defined herein), Salomon Smith Barney, directly or through
its subsidiaries, will hedge its anticipated exposure under the Forward Contract
by the purchase or sale of Common Stock or options, futures contracts, forward
contracts or swaps or options on the foregoing, or other derivative or synthetic
instruments
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<PAGE> 16
related to, the Common Stock. From time to time after the initial sale of the
TARGETS and prior to the Maturity Date or Accelerated Maturity Date, depending
on market conditions (including the price of the Common Stock), Salomon Smith
Barney expects that it or its subsidiaries will increase or decrease their
initial hedge positions through various transactions and may purchase or sell
Common Stock or options, swaps, futures contracts, forward contracts or other
derivative or synthetic instruments related to, the Common Stock. In addition,
Salomon Smith Barney and its subsidiaries may purchase or sell TARGETS from time
to time. Salomon Smith Barney or its subsidiaries may also take positions in
other types of appropriate financial instruments that may become available in
the future. To the extent that Salomon Smith Barney or its subsidiaries have a
long or short hedge position in the Common Stock or options, swaps, futures
contracts, forward contracts or other derivative or synthetic instruments
related to, the Common Stock, Salomon Smith Barney or one or more of its
subsidiaries may liquidate all or a portion of their holdings close to maturity
of the Forward Contract and the TARGETS. Depending on, among other things,
future market conditions, the aggregate amount and 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 Salomon Smith Barney has no reason to
believe that such hedging activity will have a material effect on the price of
TARGETS, such options, swaps, futures contracts, forward contracts or other
derivative or synthetic instruments or on the value of the Common Stock, there
can be no assurance that the hedging activities of Salomon Smith Barney and its
subsidiaries will not affect such prices or value.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the supplemental consolidated capitalization
of Salomon Smith Barney at September 30, 1997, after giving retroactive effect
to the merger of Salomon Smith Barney with Smith Barney Holdings Inc. as a
combination of entities under common control in a transaction accounted for in a
manner similar to a pooling of interests, and as adjusted to give effect to the
issuance of the TARGETS, the issuance and sale of additional long-term debt of
Salomon Smith Barney after September 30, 1997 through the date hereof, and the
application of the proceeds from each of these transactions to the repayment of
short-term borrowings, as if such transactions had occurred on September 30,
1997.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
---------------------------
OUTSTANDING AS ADJUSTED
----------- -----------
(DOLLARS IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Short-term borrowings................................................ $11,161 $
Notes payable........................................................ 10
Long-term debt....................................................... 19,717
------- -------
Total debt................................................. $30,888 $
======= =======
Redeemable Preferred Stock, Series A(1).............................. 420 --
Salomon Smith Barney -- Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust holding solely Subordinated Debt
Securities of Salomon Smith Barney(2).............................. 345 345
SSBH -- Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust holding solely junior subordinated deferrable
interest debentures of SSBH(3)..................................... -- 400
Salomon Smith Barney -- Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust holding solely a Forward Contract of
Salomon Smith Barney and treasury securities.......................
Stockholder's equity
Preferred Stock, Series D and E(1).............................. 450 --
Common Stock and additional paid-in capital (net of treasury
stock)......................................................... 634 1,504
Retained earnings.................................................... 7,318 7,318
Cumulative translation adjustment.................................... 3 3
------- -------
Total stockholder's equity................................. 8,405 8,825
------- -------
Total capitalization................................................. $40,058 $
======= =======
</TABLE>
- ---------------
(1) On November 28, 1997, in connection with the merger of Salomon Smith Barney
with a wholly owned subsidiary of Travelers Group, each share of Series A
Cumulative Convertible Preferred Stock, 8.08% Cumulative Preferred Stock,
Series D and 8.40% Cumulative Preferred Stock, Series E of Salomon Smith
Barney was exchanged, respectively, for one share of Series I Cumulative
Preferred Stock, 8.08% Cumulative Preferred Stock, Series J and 8.40%
Cumulative Preferred Stock, Series K of Travelers Group Inc.
(2) The sole asset of SI Financing Trust is $355,700,000 aggregate principal
amount of 9.25% Subordinated Debt Securities of Salomon Smith Barney due
June 30, 2026.
(3) The sole asset of SSBH Capital I is $412,372,000 aggregate principal amount
of 7.200% junior subordinated deferrable interest debentures of Salomon
Smith Barney due January 28, 2038.
16
<PAGE> 18
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------------
1997 1996 1995 1994 1993 1992
------------- ---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.............. 1.29 1.37 1.20 0.98* 1.32 1.27
</TABLE>
- ---------------
* For the year ended December 31, 1994, earnings as defined were inadequate to
cover fixed charges. The amount by which fixed charges exceeded earnings as
defined for the year was $173 million.
The ratio of earnings to combined fixed charges and preferred stock
dividends has been computed by dividing earnings from continuing operations
before income taxes and fixed charges by the combined fixed charges and
preferred stock dividends. For purposes of these ratios, fixed charges consist
of interest expense and that portion of rentals deemed representative of the
appropriate interest factor. The ratio of earnings to combined fixed charges and
preferred stock dividends has been computed excluding dividends relating to
Salomon Smith Barney's Series A Cumulative Convertible Preferred Stock, 8.08%
Cumulative Preferred Stock, Series D and 8.40% Cumulative Preferred Stock,
Series E, each of which was exchanged on November 28, 1997 into shares of
preferred stock of Travelers Group in connection with the merger of the Company
with a wholly owned subsidiary of Travelers Group.
THE CORPORATION
According to publicly available documents, the Corporation is engaged in
the business of . The Corporation is currently subject to the
informational requirements of the Exchange Act. Accordingly, the Corporation
files reports (including its Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and its Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 30, 1997, June 30, 1997 and September 30, 1997), proxy
statements and other information with the Commission. Copies of the
Corporation's registration statements, reports, proxy statements and other
information may be inspected and copied at offices of the Commission at the
addresses listed under "Available Information".
The Corporation is not affiliated with the Trust, will not receive any of
the proceeds from the sale of the TARGETS and will have no obligations with
respect to the TARGETS, the Treasury Securities or the Forward Contract. This
Prospectus relates only to the TARGETS offered hereby and does not relate to the
Corporation or the Common Stock.
17
<PAGE> 19
PRICE RANGE OF THE COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the under the symbol " ".
The following table sets forth, for each of the quarterly periods indicated, the
high and low sales price for the Common Stock, as reported on the
and the cash dividends per share of Common Stock.
<TABLE>
<CAPTION>
DIVIDEND
DECLARED
HIGH LOW PER SHARE
----- ----- ---------
<S> <C> <C> <C>
1995
Quarter
First.................................................. $ $ $
Second.................................................
Third..................................................
Fourth.................................................
1996
Quarter
First..................................................
Second.................................................
Third..................................................
Fourth.................................................
1997
Quarter
First..................................................
Second.................................................
Third..................................................
Fourth.................................................
1998
Quarter
First (through , 1998)..........................
</TABLE>
According to the Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997, as of 1997, there were
holders of record of shares of the Common Stock and
shares of the Common Stock outstanding.
Holders of TARGETS will not be entitled to any rights with respect to the
Common Stock (including, without limitation, voting rights or rights to receive
dividends or other distributions in respect thereof).
TARGETS TRUST I
TARGETS Trust I is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust executed by Salomon Smith Barney, as
sponsor (in such capacity, the "Sponsor"), and the trustees of TARGETS Trust I
(as described below) and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware. Such declaration will be amended
and restated in its entirety (as so amended and restated, the "Declaration")
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the TARGETS, the purchasers thereof will own
all the TARGETS. See "Description of the TARGETS -- Book-Entry Only Issuance".
Salomon Smith Barney will directly or indirectly acquire all of the Common
Securities in an aggregate amount equal to 3% or more of the total capital of
TARGETS Trust I. The Trust will use all the proceeds derived from the issuance
of the TARGETS and the Common Securities to purchase the Forward Contract and
Treasury Securities and, accordingly, the assets of the Trust will consist
solely of the Forward Contract and Treasury Securities. Of the total proceeds
from the sale of the Trust Securities, $ will be invested by the Trust
in the Forward Contract and $ will be invested by the Trust in the
Treasury
18
<PAGE> 20
Securities. The Trust exists for the exclusive purposes of (i) issuing the Trust
Securities representing undivided beneficial interests in the assets of the
Trust, (ii) investing the gross proceeds of the Trust Securities in the Forward
Contract and the Treasury Securities, and (iii) engaging in only those other
activities necessary or incidental thereto.
TARGETS Trust I's business and affairs are conducted by its Trustees, each
appointed by Salomon Smith Barney as holder of the Common Securities. Pursuant
to the Declaration, the number of trustees of TARGETS Trust I will be four: The
Chase Manhattan Bank, a New York banking corporation that is unaffiliated with
Salomon Smith Barney, as the Institutional Trustee (the "Institutional
Trustee"), Chase Manhattan Bank Delaware, a Delaware state banking corporation
with its principal place of business in the State of Delaware, as the Delaware
trustee (the "Delaware Trustee"), and two individual trustees (the "Regular
Trustees" and, together with the Institutional Trustee and the Delaware Trustee,
the "Trustees") who will be persons who are employees or officers of, or who are
affiliated with Salomon Smith Barney. Initially the Regular Trustees will be
Michael J. Day and Charles W. Scharf, each of whom is an officer of Salomon
Smith Barney. The Institutional Trustee will act as the sole indenture trustee
under the Declaration for purposes of compliance with the Trust Indenture Act
until removed or replaced by the holder of the Common Securities. The Chase
Manhattan Bank will also act as indenture trustee (the "Guarantee Trustee")
under the Guarantee. See "Description of the Guarantee" and "Description of the
Forward Contract".
The Institutional Trustee will hold title to the Forward Contract for the
benefit of the holders of the Trust Securities and, in its capacity as the
holder, the Institutional Trustee will have the power to exercise all rights,
powers and privileges under the Indenture pursuant to which the Forward Contract
are issued. In addition, the Institutional Trustee will maintain exclusive
control of a segregated non-interest bearing bank account (the "Property
Account") to hold all payments made in respect of the Forward Contract for the
benefit of the holders of the Trust Securities. The Institutional Trustee will
make payments of distributions and payments on liquidation and otherwise to the
holders of the Trust Securities out of funds from the Property Account. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
TARGETS. Salomon Smith Barney, as direct or indirect holder of all the Common
Securities, will have the right, subject to certain restrictions contained in
the Declaration, to appoint, remove or replace any Trustees and to increase or
decrease the number of Trustees. Salomon Smith Barney will pay all fees and
expenses related to TARGETS Trust I and the offering of the Trust Securities.
See "Description of the TARGETS -- Miscellaneous".
The rights of the holders of the TARGETS, including economic rights, rights
to information and voting rights, are set forth in the Declaration, the Delaware
Business Trust Act, (the "Trust Act") and the Trust Indenture Act. See
"Description of the TARGETS".
The location of the principal executive office of the Trust is c/o Salomon
Smith Barney Holdings Inc., 388 Greenwich Street, New York, New York 10013 and
its telephone number is (212) 816-6000.
DESCRIPTION OF THE TARGETS
The TARGETS will be issued pursuant to the terms of the Declaration. The
Declaration will be qualified as an indenture under the Trust Indenture Act. The
Institutional Trustee, The Chase Manhattan Bank, will act as the institutional
trustee for the TARGETS under the Declaration for purposes of compliance with
the provisions of the Trust Indenture Act. The terms of the TARGETS will include
those stated in the Declaration and those made part of the Declaration by the
Trust Indenture Act. Pursuant to the Declaration, every holder of TARGETS will
be deemed to have expressly assented and agreed to the terms of, and shall be
bound by, the Declaration. The following summary of the material terms and
provisions of the TARGETS does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Declaration (a copy of which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part), the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of
TARGETS Trust I the Trust Securities, which represent undivided beneficial
interests in the assets of TARGETS Trust I. All of the Common Securities will be
owned, directly or indirectly, by Salomon Smith Barney. The Common Securities
19
<PAGE> 21
rank pari passu with, and payments will be made thereon on a pro rata basis
with, the TARGETS, except that upon the occurrence of an Acceleration Event, the
rights of the holders of the Common Securities to receive payments will be
subordinated to the rights of the holders of the TARGETS. The Declaration does
not permit the issuance by TARGETS Trust I of any securities other than the
Trust Securities or the incurrence of any indebtedness by TARGETS Trust I.
Pursuant to the Declaration, the Institutional Trustee will hold title to the
Forward Contract and the Treasury Securities for the benefit of the holders of
the Trust Securities. The payment of distributions out of money held by the
Trust and payments upon maturity of the TARGETS out of money held by the Trust
are guaranteed by Salomon Smith Barney to the extent described under
"Description of the Guarantee". The Guarantee will be held by The Chase
Manhattan Bank, the Guarantee Trustee, for the benefit of the holders of the
TARGETS. The Guarantee does not cover payment of distributions when the Trust
does not have sufficient available funds to pay such distributions. In such
event, the remedy of a holder of the TARGETS is to (i) vote to direct the
Institutional Trustee to enforce the Institutional Trustee's rights under the
Forward Contract and Treasury Securities or (ii) if the failure by TARGETS Trust
I to pay distributions is attributable to the failure of Salomon Smith Barney to
pay amounts in respect of the Forward Contract, institute a proceeding directly
against Salomon Smith Barney for enforcement of payment to such holder of the
amounts owed on such holder's pro rata interest in the Forward Contract. See
"-- Acceleration of Maturity Date; Enforcement of Rights" and "-- Voting
Rights".
The aggregate number of TARGETS to be issued will be plus such
additional number of TARGETS that may be issued pursuant to the over-allotment
option granted by the Trust to the Underwriters (see "Underwriting"). The
TARGETS will be issued in fully registered form. TARGETS will not be issued in
bearer form. See "-- Book-Entry Only Issuance".
MATURITY PAYMENT
The TARGETS will mature on the Maturity Date, subject to acceleration to
the Accelerated Maturity Date upon an Acceleration Event. See "-- Acceleration
of Maturity Date; Enforcement of Rights". On the Maturity Date, holders of the
TARGETS will be entitled to receive, to the extent the Trust has assets
available therefor, the Maturity Payment with respect to each TARGET. On the
Maturity Date, holders of TARGETS will also receive a final quarterly Periodic
Distribution with respect to each TARGET.
The Maturity Payment with respect to each TARGET will be an amount equal to
the sum of (A) the product of (i) the Current Market Price of the Common Stock
as of the Maturity Date multiplied by (ii) the Exchange Rate as of the Maturity
Date and (B) any accrued and unpaid Yield Enhancement Payments with respect to
such TARGET.
The "Current Market Price" shall be the average daily closing sale price
(or, if no closing sale price is reported, the last reported sale price) of the
Common Stock as reported on for the 10 Trading Days (as defined
herein) immediately prior to but not including any Date of Determination (as
defined herein) or, if the Common Stock is not traded on on any
such date, as reported in the composite transactions for the principal United
States securities exchange on which the Common Stock is so listed, or if the
Common Stock is not so listed on a United States national or regional securities
exchange, the last quoted bid price for the Common Stock in the over-the-counter
market as reported by the National Quotation Bureau or similar organization.
"Date of Determination" shall be the date that is one Business Day prior to the
Maturity Date or Accelerated Maturity Date.
If the Current Market Price of the Common Stock as of the Maturity Date is
less than or equal to the Appreciation Threshold Price, then the Exchange Rate
shall be one (1), and if the Current Market Price of the Common Stock as of the
Maturity Date is greater than the Appreciation Threshold Price, then the
Exchange Rate shall be a fraction (rounded upward or downward to the nearest
1/10,000th or, if there is not a nearest 1/10,000th, to the next lower
1/10,000th), the numerator of which is the Appreciation Threshold Price, and the
denominator of which is the Current Market Price of the Common Stock as of the
Maturity Date. The Exchange Rate and the Appreciation Threshold Price are
subject to certain dilution adjustments as described below. See "-- Dilution
Adjustments".
20
<PAGE> 22
For illustrative purposes only, the following chart shows the Maturity
Payment that a holder would receive for each TARGET at various Current Market
Prices. The chart assumes that there would be no adjustments to the aggregate
Maturity Payments deliverable by Salomon Smith Barney to the Trust under the
Forward Contract by reason of the occurrence of any of the events described
under "-- Dilution Adjustments" and that there would be no acceleration of the
maturity of the Forward Contract to an Accelerated Maturity Date upon an
Acceleration Event. There can be no assurance that the Current Market Price at
maturity will be within the range set forth below. Assuming an offering price of
$ per TARGET and an Appreciation Threshold Price of $ , a
holder of TARGETS would receive the following Maturity Payment with respect to
each TARGET at maturity:
<TABLE>
<CAPTION>
CURRENT MARKET PRICE MATURITY
OF THE COMMON STOCK PAYMENT
-------------------------------------------------------------- ------------
<S> <C>
</TABLE>
ACCELERATION OF MATURITY DATE; ENFORCEMENT OF RIGHTS
If at any time an Acceleration Event shall occur and be continuing, the
Institutional Trustee shall sell the Treasury Securities, dissolve the Trust
and, after satisfaction of creditors of the Trust, cause to be distributed, as
soon as is practicable following the occurrence of such Acceleration Event, to
the holders of the TARGETS in liquidation of such holders' interests in the
Trust, the Accelerated Maturity Payment with respect to each TARGET and a pro
rata portion of the Treasury Proceeds.
The Accelerated Maturity Payment with respect to each TARGET will be paid
out of amounts received by the Trust from Salomon Smith Barney in respect of the
Forward Contract and will be equal to the sum of (A) the product of (i) the
Current Market Price of the Common Stock as of the Accelerated Maturity Date,
multiplied by (ii) the Exchange Rate as of the Accelerated Maturity Date and (B)
any accrued and unpaid Yield Enhancement Payments with respect to such TARGET.
The Accelerated Maturity Date will be the date of the occurrence of the event or
events constituting such Acceleration Event.
The Treasury Proceeds shall be the amount received by the Trust as proceeds
from the sale of the Treasury Securities upon the occurrence of an Acceleration
Event. Salomon Smith Barney shall send the Trustee written notice and
instructions to liquidate the Treasury Securities on an Accelerated Maturity
Date. Upon receiving such notice, the Trustee shall solicit at least three bids
and sell and transfer the Treasury Securities to the highest of the three
bidders.
There can be no assurance as to the amount of either any Accelerated
Maturity Payment or the Treasury Proceeds which, in either case, may be
distributed to holders of the TARGETS upon a dissolution and liquidation of the
Trust. Accordingly, there can be no assurance as to the amount that a holder of
TARGETS may receive on the Accelerated Maturity Date.
"Acceleration Event" means any one of the following events (whatever the
reason for such Acceleration Event and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body: (i) a Tax Event, (ii) an Investment Company
Event or (iii) a Bankruptcy Event.
"Tax Event" means that Salomon Smith Barney shall have requested and
received and shall have delivered to the Regular Trustees an opinion of
nationally recognized independent tax counsel experienced in such matters (a
"Trust Dissolution Tax Opinion") to the effect that there has been (a) an
amendment to, change in or announced proposed change in the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, (b) a judicial decision interpreting,
applying, or clarifying such laws or regulations, (c) an administrative
pronouncement or action that represents an official
21
<PAGE> 23
position (including a clarification of an official position) of the governmental
authority or regulatory body making such administrative pronouncement or taking
such action, or (d) a threatened challenge asserted in connection with an audit
of Salomon Smith Barney or any of its subsidiaries, or the Trust, or a
threatened challenge asserted in writing against any other taxpayer that has
raised capital through the issuance of securities that are substantially similar
to the Forward Contract or the TARGETS, which amendment or change is adopted or
which proposed change, decision or pronouncement is announced or which action,
clarification or challenge occurs on or after the date of this Prospectus
(collectively a "Tax Action"), which Tax Action relates to any of the items
described in (i) and (ii) below, and that there is more than an insubstantial
risk that (i) the Trust is, or will be subject to United States federal income
tax with respect to income accrued or received on the Forward Contract and the
Treasury Securities, or (ii) the Trust is, or will be subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
"Investment Company Event" means that Salomon Smith Barney shall have
requested and received and shall have delivered to the Regular Trustees an
opinion of nationally recognized independent legal counsel experienced in such
matters to the effect that as a result of the occurrence on or after the date
hereof of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or
will be considered an "investment company" which is required to be registered
under the 1940 Act.
"Bankruptcy Event" means either of the following shall have occurred: (i)
the entry of a decree or order for relief in respect of Salomon Smith Barney by
a court having jurisdiction in the premises in an involuntary case under the
federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of Salomon Smith Barney or of any substantial part
of its property, or ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for a period
of 90 consecutive days; or (ii) the commencement by Salomon Smith Barney of a
voluntary case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or State bankruptcy, insolvency or
other similar law, or the consent by it to the entry of an order for relief in
involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of Salomon Smith Barney or of any substantial part of its property, or
the making by it of an assignment for the benefit of its creditors, or the
admission by it in writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by Salomon Smith Barney in
furtherance of any action.
"Pro Rata" means, with respect to any payment, distribution, interest in
any assets of the Trust or treatment, to each holder of Trust Securities
proportionately according to the aggregate beneficial interests in the assets of
the Trust represented by the Trust Securities held by the relevant holder in
relation to the aggregate beneficial interests in the assets of the Trust
represented by all Trust Securities outstanding unless, in relation to a
payment, an Acceleration Event has occurred and is continuing, in which case any
funds available to make such payment will be paid first to each holder of the
TARGETS proportionately according to the aggregate beneficial interests in the
assets of the Trust represented by the TARGETS held by the relevant holder
relative to the aggregate beneficial interests in the assets of the Trust
represented by all TARGETS outstanding, and only after satisfaction of all
amounts owed to the holders of the TARGETS, to each holder of Common Securities
proportionately according to the aggregate beneficial interests in the assets of
the Trust represented by the Common Securities held by the relevant holder
relative to the aggregate beneficial interests in the assets of the Trust
represented by all Common Securities outstanding.
On the date fixed for any payment of the Accelerated Maturity Payment or
the Treasury Proceeds, (i) the TARGETS and the Common Securities will no longer
be deemed to be outstanding and (ii) each TARGET and Common Security will be
deemed to represent the right to receive an Accelerated Maturity Payment and a
pro rata portion of the Treasury Proceeds. If the Accelerated Maturity Payments
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Accelerated Maturity Payments, then the amounts
payable directly by the Trust in respect of the TARGETS will be paid on a pro
rata basis. The holders of the Common Securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of the
TARGETS, except in the case of a default by Salomon Smith
22
<PAGE> 24
Barney on its obligations under the Guarantee, the holders of the TARGETS will
have a preference over the holders of the Common Securities with respect to
amounts owed on the Trust Securities.
Subject to the requirements of the Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority of the TARGETS, have the right to direct
the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or direct the exercise of any trust or
power conferred upon the Institutional Trustee under the Declaration, including
the right to direct the Institutional Trustee, as holder of the Forward Contract
and the Treasury Securities, to (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee, or
exercising any trust or power conferred on the Indenture Trustee with respect to
the Forward Contract, (ii) direct the time, method and place of conducting any
proceeding for any remedy available to the Institutional Trustee or exercise any
trust or power conferred on the Institutional Trustee with respect to the
Treasury Securities, (iii) waive the consequences of any Acceleration Event
under the Indenture that is waivable under Section 514 of the Indenture, (iv)
exercise any right to rescind or annul a declaration that any Accelerated
Maturity Payment shall be due and payable or (v) consent to any amendment,
modification or termination of the Indenture or the Forward Contract where such
consent shall be required, provided, however, that, where a consent or action
under the Indenture would require the consent or act of holders of more than a
majority of the beneficial interests in the Forward Contract (a "Super
Majority") affected thereby, only the holders of at least a Super Majority of
the TARGETS may direct the Institutional Trustee to give such consent or take
such action. If the Institutional Trustee fails to enforce its rights under the
Forward Contract, any record holder of TARGETS may directly institute a legal
proceeding against Salomon Smith Barney to enforce the Institutional Trustee's
rights under the TARGETS without first instituting any legal proceeding against
the Institutional Trustee or any other person or entity. The Institutional
Trustee shall notify all holders of TARGETS of any notice of default received
from the Indenture Trustee with respect to the Forward Contract. Except with
respect to directing the time, method and place of conducting a proceeding for a
remedy available to the Institutional Trustee, the Institutional Trustee, as
holder of the Forward Contract and the Treasury Securities, shall not take any
of the actions described in clauses (i), (ii), (iii), (iv) or (v) above unless
the Institutional Trustee has obtained an opinion of a nationally recognized
independent tax counsel experienced in such matters to the effect that as a
result of such action, TARGETS Trust I will not fail to be classified as a
grantor trust for United States federal income tax purposes.
If the Institutional Trustee fails to enforce its rights under the Forward
Contract, any holder of TARGETS may directly institute a legal proceeding
against Salomon Smith Barney to enforce the Institutional Trustee's rights under
the Forward Contract, without first instituting a legal proceeding against the
Institutional Trustee or any other person or entity. If Salomon Smith Barney
fails to pay amounts owed on the Forward Contract on the date such amounts are
otherwise payable, then a holder of TARGETS may also directly institute a Direct
Action, of the amounts owed on such holder's pro rata interest in the Forward
Contract, on or after the due date specified in the Forward Contract without
first (i) directing the Institutional Trustee to enforce the terms of the
Forward Contract or (ii) instituting a legal proceeding directly against Salomon
Smith Barney to enforce the Institutional Trustee's rights under the Forward
Contract. Except as provided in the preceding sentence, the holders of TARGETS
will not be able to exercise directly any other remedy available to the holder
of the Forward Contract. In connection with such Direct Action, Salomon Smith
Barney will be subrogated to the rights of such holder of TARGETS under the
Declaration to the extent of any payment made by Salomon Smith Barney to such
holder of TARGETS in such Direct Action.
A waiver of an Acceleration Event under the Indenture by the Institutional
Trustee at the direction of the holders of the TARGETS will constitute a waiver
of the corresponding Acceleration Event under the Declaration.
Any required approval or direction of holders of TARGETS may be given at a
separate meeting of holders of TARGETS convened for such purpose, at a meeting
of holders of Trust Securities or pursuant to written consent. The Regular
Trustees will cause a notice of any meeting at which holders of TARGETS are
entitled to vote, or of any matter upon which action by written consent of such
holders is to be taken, to be mailed to each holder of record of TARGETS. Each
such notice will include a statement setting forth (i) the date of such meeting
or the date by which such action is to be taken, (ii) a description of any
resolution
23
<PAGE> 25
proposed for adoption at such meeting on which such holders are entitled to vote
or of such matter upon which written consent is sought and (iii) instructions
for the delivery of proxies or consents. No vote or consent of the holders of
TARGETS will be required for TARGETS Trust I to cancel TARGETS in accordance
with the Declaration. It is anticipated that the only holder of TARGETS issued
in book-entry form will be Cede & Co., as nominee of DTC, and each Beneficial
Owner (as defined herein) of TARGETS will be permitted to exercise the rights of
holders of TARGETS only indirectly through DTC and its Participants (as defined
herein).
Notwithstanding that holders of TARGETS are entitled to vote or consent
under any of the circumstances described above, any of the TARGETS that are
owned at such time by Salomon Smith Barney or any entity directly or indirectly
controlling or controlled by, or under direct or indirect common control with,
Salomon Smith Barney, shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
PERIODIC DISTRIBUTIONS
Holders of TARGETS will be entitled to receive Periodic Distributions at
the rate per TARGET of $ per quarter, payable on each ,
, and , commencing .
The Periodic Distributions will be paid by the Trust out of payments to be
received by the Trust with respect to (i) the Treasury Securities held by the
Trust and (ii) the Yield Enhancement Payments payable to the Trust by Salomon
Smith Barney under the Forward Contract. Of each Periodic Distribution payable
to holders of the TARGETS, $ will be paid out of payments received by
the Trust with respect to the Treasury Securities and $ will be paid
from the Yield Enhancement Payments received by the Trust.
The Treasury Securities and the Forward Contract will be the sole assets of
the Trust. The ability of the Trust to make Periodic Distributions on the
TARGETS is therefore entirely dependent on receipt by the Trust of payments with
respect to both the Treasury Securities held by the Trust and the Forward
Contract. The Treasury Securities and the Forward Contract are held by the
Institutional Trustee on behalf of the Trust. A portion of each Periodic
Distribution should represent a return to the holder of a TARGET of that
holder's initial investment in the TARGETS. See "Certain Federal Income Tax
Considerations".
The following table sets forth information regarding the distributions to
be received on the Treasury Securities to be acquired by the Trust with a
portion of the proceeds received by the Trust from the sale of the Trust
Securities (assuming no exercise of the Underwriters' over-allotment option),
the portion of each year's distributions that should constitute a return of
capital for U.S. federal income tax purposes and the amount of original issue
discount that should accrue on such Treasury Securities with respect to a holder
who acquires its Trust Securities at the issue price from the Underwriters
pursuant to the original offering. See "Certain Federal Income Tax
Considerations".
<TABLE>
<CAPTION>
ANNUAL GROSS ANNUAL INCLUSION OF
ANNUAL GROSS DISTRIBUTIONS FROM ANNUAL RETURN OF ORIGINAL ISSUE
DISTRIBUTIONS FROM TREASURY SECURITIES CAPITAL PER DISCOUNT IN INCOME
YEAR TREASURY SECURITIES PER TARGET TARGET PER TARGET
- -------------------- ------------------- ------------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
1997................
1998................
1999................
2000................
</TABLE>
DILUTION ADJUSTMENTS
The Exchange Rate and the Appreciation Threshold Price will be subject to
adjustment from time to time in certain situations. Any such adjustments could
have an impact on the aggregate Maturity Payments or Accelerated Maturity
Payments to be paid by Salomon Smith Barney to the Trust upon maturity of the
Forward Contract and, therefore, on the Maturity Payment or Accelerated Maturity
Payment to be paid by the Trust with respect to each TARGET to the holders of
TARGETS.
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<PAGE> 26
If the Corporation shall, after the date of the closing of the offering
contemplated hereby (the "Closing Date"), (i) pay a stock dividend or make a
distribution with respect to the Common Stock in shares of such stock; (ii)
subdivide or split the outstanding shares of the Common Stock into a greater
number of shares of the Common Stock; (iii) combine the outstanding shares of
the Common Stock into a smaller number of shares; or (iv) issue by
reclassification of shares of the Common Stock any shares of other common stock
of the Corporation; then, in each such case, the Exchange Rate shall be
multiplied by a dilution adjustment equal to the number of shares of the Common
Stock (or in the case of a reclassification referred to in clause (iv) above,
the number of shares of other Common Stock of the Corporation issued pursuant
thereto), or the fraction thereof, that a holder who held one share of the
Common Stock immediately prior to such event would be entitled solely by reason
of such event to hold immediately after such event. The Appreciation Threshold
Price shall also be adjusted in the manner described below.
If the Corporation shall, after the Closing Date, issue, or declare a
record date in respect of an issuance of, rights or warrants to all holders of
the Common Stock entitling them to subscribe for or purchase shares of the
Common Stock at a price per share less than the Then-Current Market Price of the
Common Stock (other than rights to purchase the Common Stock pursuant to a plan
for the reinvestment of dividends or interest), then, in each such case, the
Exchange Rate shall be multiplied by a dilution adjustment equal to a fraction
the numerator of which shall be the number of shares of the Common Stock
outstanding immediately prior to the time the adjustment is effected by reason
of the issuance of such rights or warrants, plus the number of additional shares
of the Common Stock offered for subscription or purchase pursuant to such rights
or warrants, and the denominator of which shall be the number of shares of the
Common Stock outstanding immediately prior to the time the adjustment is
effected, plus the number of additional shares of the Common Stock which the
aggregate offering price of the total number of shares of the Common Stock so
offered for subscription or purchase pursuant to such rights or warrants would
purchase at the Then-Current Market Price of the Common Stock, which shall be
determined by multiplying the total number of shares so offered for subscription
or purchase by the exercise price of such rights or warrants and dividing the
product so obtained by such Then-Current Market Price. To the extent that, after
the expiration of such rights or warrants, the shares of the Common Stock
offered thereby shall not have been delivered, the Exchange Rate shall be
further adjusted to equal the Exchange Rate which would have been in effect had
such adjustment for the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of the Common Stock actually
delivered. The Appreciation Threshold Price shall also be adjusted in the manner
described below.
If the Corporation shall, after the Closing Date, declare or pay a dividend
or make a distribution to all holders of the Common Stock, in either case, of
evidences of its indebtedness or other non-cash assets (excluding any dividends
or distributions referred to above) or shall issue to all holders of the Common
Stock rights or warrants to subscribe for or purchase any of its securities
(other than rights or warrants referred to above), then, in each such case, the
Exchange Rate shall be multiplied by a dilution adjustment equal to a fraction,
the numerator of which shall be the Then-Current Market Price per share of the
Common Stock, and the denominator of which shall be such Then-Current Market
Price per share less the fair market value (as determined by a nationally
recognized independent investment banking firm retained for this purpose by
Salomon Smith Barney) as of the time the adjustment is effected of the portion
of the assets or evidences of indebtedness so distributed or of such
subscription rights or warrants applicable to one share of the Common Stock. The
Appreciation Threshold Price shall also be adjusted in the manner described
below. Notwithstanding the foregoing, in the event that, with respect to any
dividend or distribution to which this paragraph would otherwise apply, the
denominator in the fraction referred to in the above formula is less than $1.00
(or is a negative number), then Salomon Smith Barney may, at its option, elect
to have the adjustment provided by this paragraph not be made and in lieu of
such adjustment, on the Maturity Date, the holders of the Trust Securities shall
be entitled to receive an additional amount of cash equal to the product of the
number of Trust Securities held by such holder multiplied by the fair market
value of such indebtedness, assets, rights or warrants (determined, as of the
date such dividend or distribution is made, by a nationally recognized
independent investment banking firm retained for this purpose by Salomon Smith
Barney) so distributed or issued applicable to one share of the Common Stock.
25
<PAGE> 27
If, after the Closing Date, the Corporation declares a record date in
respect of a distribution of cash (other than any Permitted Dividends (as
defined herein), any cash distributed in consideration of fractional shares of
the Common Stock and any cash distributed in a Reorganization Event (as defined
herein)), by dividend or otherwise, to all holders of the Common Stock, or makes
an Excess Purchase Payment (as defined herein), then the Exchange Rate will be
multiplied by a dilution adjustment equal to a fraction, the numerator of which
shall be the Then-Current Market Price of the Common Stock on such record date,
and the denominator of which shall be such Then-Current Market Price less the
amount of such distribution applicable to one share of the Common Stock which
would not be a Permitted Dividend (or in the case of an Excess Purchase Payment,
less the aggregate amount of such Excess Purchase Payment for which adjustment
is being made at such time divided by the number of shares of the Common Stock
outstanding on such record date).
For purposes of these adjustments, (A) "Permitted Dividend" means any
quarterly cash dividend in respect of the Common Stock, other than a quarterly
cash dividend that exceeds the immediately preceding quarterly cash dividend,
and then only to the extent that the per share amount of such dividend results
in an annualized dividend yield on the Common Stock in excess of 10.0% and (B)
"Excess Purchase Payment" means the excess, if any, of (x) the cash and the
value (as determined by a nationally recognized independent investment banking
firm retained for this purpose by Salomon Smith Barney, whose determination
shall be final) of all other consideration paid by the Corporation with respect
to one share of the Common Stock acquired in a tender offer or exchange offer by
the Corporation, over (y) the Then-Current Market Price of the Common Stock. The
Appreciation Threshold Price shall also be adjusted in the manner described in
the following paragraph. Notwithstanding the foregoing, in the event that, with
respect to any dividend or distribution or Excess Purchase Payment to which this
paragraph would otherwise apply, the denominator in the fraction referred to in
the above formula is less than $1.00 (or is a negative number), then Salomon
Smith Barney may, at its option, elect to have the adjustment provided by this
paragraph not be made and in lieu of such adjustment, on the Maturity Date, the
holders of the Trust Securities shall be entitled to receive an additional
amount of cash equal to the product of the number of Trust Securities held by
such holder multiplied by the sum of the amount of cash plus the fair market
value of such other consideration (determined, as of the date such dividend or
distribution is made, by a nationally recognized independent investment banking
firm retained for this purpose by Salomon Smith Barney) so distributed (or
applied to the acquisition of the Common Stock in such a tender offer or
exchange offer) applicable to one share of the Common Stock.
If any adjustment is made to the Exchange Rate pursuant to the preceding
four paragraphs, an adjustment shall also be made to the Appreciation Threshold
Price. The required adjustment shall be made by dividing the Appreciation
Threshold Price by the relevant dilution adjustment. If, during any Calculation
Period used in calculating the Current Market Price, the Then-Current Market
Price or the Transaction Value (as defined herein), there shall occur any event
requiring an adjustment to be effected as described herein, then the Closing
Price for each trading day in the calculation period occurring prior to the day
on which such adjustment is effected shall be adjusted by being divided by the
relevant dilution adjustment.
Each dilution adjustment shall be effected as follows: (i) in the case of
any dividend, distribution or issuance, at the opening of business on the
Business Day next following the record date for determination of holders of the
Common Stock entitled to receive such dividend, distribution or issuance or, if
the announcement of any such dividend, distribution, or issuance is after such
record date, at the time such dividend, distribution or issuance shall be
announced by the Corporation; (ii) in the case of any subdivision, split,
combination or reclassification, on the effective date of such transaction;
(iii) in the case of any Excess Purchase Payment for which the Corporation shall
announce, at or prior to the time it commences the relevant share repurchase,
the repurchase price per share for shares proposed to be repurchased, on the
date of such announcement; and (iv) in the case of any other Excess Purchase
Payment on the date that the holders of the repurchased shares become entitled
to payment in respect thereof.
All dilution adjustments shall be rounded upward or downward to the nearest
1/10,000th (or if there is not a nearest 1/10,000th to the next lower
1/10,000th). No adjustment in the Exchange Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent
therein;
26
<PAGE> 28
provided, however, that any adjustments which by reason of this sentence are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. If any announcement or declaration of a record date in
respect of a dividend, distribution, issuance or repurchase requiring an
adjustment as described herein shall subsequently be cancelled by the
Corporation, or such dividend, distribution, issuance or repurchase shall fail
to receive requisite approvals or shall fail to occur for any other reason,
then, upon such cancellation, failure of approval or failure to occur, the
Exchange Rate shall be further adjusted to the Exchange Rate which would then
have been in effect had adjustment for such event not been made. If a
Reorganization Event shall occur after the occurrence of one or more events
requiring an adjustment as described herein, the dilution adjustments previously
applied to the Exchange Rate in respect of such events shall not be rescinded
but shall be applied to the new Exchange Rate provided for below.
"Then-Current Market Price" of the Common Stock, for the purpose of
applying any dilution adjustment, means the average Closing Price per share of
the Common Stock for the Calculation Period of 10 Trading Days (as defined
below) immediately prior to the time such adjustment is effected (or, in the
case of an adjustment effected at the opening of business on the Business Day
next following a record date, immediately prior to the earlier of the time such
adjustment is effected and the related ex-date); provided that if no Closing
Price for the Common Stock is determined for one or more (but not all) of such
Trading Days, such Trading Day shall be disregarded in the calculation of the
Then-Current Market Price (but no additional trading days shall be added to the
Calculation Period). If no Closing Price for the Common Stock may be determined
for any of such Trading Days, the Then-Current Market Price shall be the Closing
Price for the Common Stock for the most recent Trading Day prior to such 10
Trading Days for which a Closing Price for the Common Stock may be determined
pursuant to the "Closing Price" definition. The "ex-date" with respect to any
dividend, distribution or issuance shall mean the first date on which the shares
of the Common Stock trade regular way on their principal market without the
right to receive such dividend, distribution or issuance.
"Trading Day" means a day on which the Common Stock (A) is not suspended
from trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of such
security. "Calculation Period" means any period of Trading Days for which an
average security price must be determined pursuant to the Indenture. "Closing
Price" of the Common Stock or any marketable security on any such day in the
Calculation Period means the daily closing sale price (or, if no closing sale
price is reported, the last reported sale price) of such security as reported on
the (" ") on any such day in the Calculation Period or,
if such security is not traded on on any such date, as reported in the
composite transactions for the principal United States securities exchange on
which if such security is so listed, or if such security is not so listed on a
United States national or regional securities exchange, the last quoted bid
price for the Common Stock in the over-the-counter market as reported by the
National Quotation Bureau or similar organization.
In the event of (i) any consolidation or merger of the Corporation, or any
surviving entity or subsequent surviving entity of the Corporation (a
"Corporation Successor"), with or into another entity (other than a merger or
consolidation in which the Corporation is the continuing corporation and in
which the Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash, securities or other property of the
Corporation or another issuer), (ii) any sale, transfer, lease or conveyance to
another corporation of the property of the Corporation or any the Corporation
Successor as an entirety or substantially as an entirety, (iii) any statutory
exchange of securities of the Corporation or any the Corporation Successor with
another issuer (other than in connection with a merger or consolidation) or (iv)
any liquidation, dissolution or winding up of the Corporation or any the
Corporation Successor (any such event described in clause (i), (ii), (iii) or
(iv), a "Reorganization Event"), the Exchange Rate shall be adjusted so that, on
the Maturity Date, the holders of the TARGETS shall receive cash in an amount
equal to the product of the number of TARGETS held by such holder multiplied by
(i) if the Transaction Value (as defined herein) is less than or equal to the
Appreciation Threshold Price, the Transaction Value, and (ii) if the Transaction
Value is greater than the Appreciation Threshold Price, the Appreciation
Threshold Price.
"Transaction Value" means the sum of: (a) for any cash received in any such
Reorganization Event, the amount of cash received per share of the Common Stock;
(b) for any property other than cash or Marketable
27
<PAGE> 29
Securities (as defined herein) received in any such Reorganization Event, an
amount equal to the market value on the date the Reorganization Event is
consummated of such property received per share of the Common Stock (as
determined by a nationally recognized independent investment banking firm
retained for this purpose by Salomon Smith Barney) and (c) for any Marketable
Securities received in any such Reorganization Event, an amount equal to the
average Closing Price per share of such Marketable Securities for the
Calculation Period of 10 Trading Days immediately prior to the Maturity Date
multiplied by the number of such Marketable Securities received for each share
of the Common Stock; provided that if no Closing Price for such Marketable
Securities may be determined for one or more (but not all) of such Trading Days
such Trading Day shall be disregarded in the calculation of such average Closing
Price (but no additional Trading Days shall be added to the Calculation Period).
If no Closing Price for the Marketable Securities may be determined for all such
Trading Days, the calculation in the preceding clause (c) shall be based on the
most recently available Closing Price for the Marketable Securities prior to
such 10 Trading Days.
"Marketable Securities" means any perpetual equity securities or debt
securities with a stated maturity after the Maturity Date, in each case that are
listed on a U.S. national securities exchange or reported by The Nasdaq National
Market. The number of shares of any equity securities constituting Marketable
Securities included in the calculation of Transaction Value pursuant to the
preceding paragraph shall be subject to adjustment if any event that would, had
it occurred with respect to the Common Stock or the Corporation, have required
an adjustment as described above, shall occur with respect to such Marketable
Securities or the issuer thereof between the time of the Reorganization Event
and the Maturity Date. Adjustment for such subsequent events shall be as nearly
equivalent as practicable to the adjustments described above.
Salomon Smith Barney shall be responsible for the effectuation and
calculation of any adjustment described herein and shall furnish the Indenture
Trustee with notice of any such adjustment and shall provide the Indenture
Trustee with a reasonable opportunity to review the calculations pertaining to
any such adjustments.
PAYMENT PROCEDURES
Distributions on the TARGETS will be payable to the holders thereof as they
appear on the books and records of the Trust at the close of business on the
relevant record dates. While the TARGETS remain in book-entry form, the relevant
record dates for distributions of any Maturity Payment or Accelerated Maturity
Payment with respect to the TARGETS shall be one Business Day prior to the
relevant payment date, which payment date shall be the date the aggregate of
such Maturity Payments or Accelerated Maturity Payments, as the case may be, is
received by the Trust with respect to the Forward Contract. While the TARGETS
remain in book-entry form, the relevant record date for distribution of the
Treasury Proceeds to holders of TARGETS shall be one Business Day prior to the
relevant payment date, which payment date shall be the date such Treasury
Proceeds are received by the Trust upon liquidation of the Treasury Securities.
While the TARGETS remain in book-entry only form, the relevant record dates for
any Periodic Distributions shall be one Business Day prior to the relevant
payment dates, which payment dates shall correspond to the dates on which
payments are received by the Trust in respect of, and in accordance with the
terms of, the Treasury Securities and the Forward Contract. The relevant record
dates for the Common Securities shall be the same record dates as for the
TARGETS. If the TARGETS shall not continue to remain in book-entry only form,
the relevant record dates shall conform to the rules of any securities exchange
on which they are listed and, if none, shall be selected by the Regular
Trustees, which dates shall be at least 10 Business Days but no more than 15
days before the relevant payment dates, which payment dates shall correspond to
the dates on which payments are made in respect of, and in accordance with the
terms of, the Treasury Securities and the Forward Contract. Distributions
payable on any TARGETS that are not punctually paid on any payment date, as a
result of either Salomon Smith Barney having failed to make a payment under the
Forward Contract or the issuer of the Treasury Securities having failed to make
a payment in respect of the Treasury Securities, will cease to be payable to the
person in whose name such TARGETS are registered on the relevant record date,
and such defaulted distribution will instead be payable to the person in whose
name such TARGETS are registered on a special record date which shall be one
Business Day prior to the date on which the amount of the defaulted
distributions are actually received by the Trust. If any date on which
distributions are payable on
28
<PAGE> 30
the TARGETS is not a Business Day, then payment of the distribution payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) except that,
if such Business Day is in the next succeeding calendar year, such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. A "Business Day" shall mean any day
other than a day on which banking institutions in The City of New York are
authorized or required by law to close.
Payments in respect of the TARGETS represented by the Global Certificates
(as defined below under "Book-Entry Only Issuance") shall be made to DTC, which
shall credit the relevant accounts at DTC on the scheduled payment dates or, in
the case of certificated securities, if any, such payments shall be made by
check mailed to the address of the holder entitled thereto as such address shall
appear on the register.
VOTING RIGHTS
Except as described in this Prospectus under "Description of the
TARGETS -- Acceleration of Maturity Date; Enforcement of Rights" and
"Description of the Guarantee -- Modification of the Guarantee; Assignment", and
except as provided under the Trust Act, the Trust Indenture Act and as otherwise
required by law and the Declaration, the holders of the TARGETS will have no
voting rights.
In the event the consent of the Institutional Trustee, as the holder of the
Forward Contract, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture, the Institutional Trustee shall
request the written direction of the holders of the Trust Securities with
respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a majority
of the Trust Securities voting together as a single class; provided, however,
that where any amendment, modification or termination under the Indenture would
require the consent of a Super Majority, the Institutional Trustee may only give
such consent at the direction of the holders of at least the proportion number
of the Trust Securities which the relevant Super Majority represents of the
aggregate beneficial interests in the Forward Contract. The Institutional
Trustee shall be under no obligation to take any such action in accordance with
the directions of the holders of the Trust Securities unless the Institutional
Trustee has obtained an opinion of a nationally recognized independent tax
counsel experienced in such matters to the effect that for United States federal
income tax purposes TARGETS Trust I will not be classified as other than a
grantor trust.
The procedures by which holders of TARGETS may exercise their voting rights
are described below. See "-- Book-Entry Only Issuance".
Holders of the TARGETS will have no rights to appoint or remove the
Trustees, who may be appointed, removed or replaced solely by Salomon Smith
Barney as the indirect or direct holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Institutional Trustee and the
Delaware Trustee), provided, that, if any proposed amendment to the Declaration
provides for, or the Regular Trustees otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or special rights of
the Trust Securities, whether by way of amendment to the Declaration or
otherwise, or (ii) the dissolution, winding-up or termination of TARGETS Trust I
other than pursuant to the terms of the Declaration, then the holders of the
Trust Securities, voting together as a single class, will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the holders of at least a majority of the Trust
Securities affected thereby, provided that if any amendment or proposal referred
to in clause (i) above would adversely affect only the TARGETS or the Common
Securities, then only holders of the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a majority of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause TARGETS Trust
I to fail to be classified as a grantor trust for United States federal income
tax purposes, (ii) reduce or otherwise adversely affect the powers of the
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<PAGE> 31
Institutional Trustee or (iii) cause TARGETS Trust I to be deemed an "investment
company" which is required to be registered under the 1940 Act.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
TARGETS Trust I may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity, except as
described below. TARGETS Trust I may, with the consent of the Regular Trustees
and without the consent of the holders of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided, that (i) such successor entity either (x)
expressly assumes all of the obligations of TARGETS Trust I under the Trust
Securities or (y) substitutes for the TARGETS other securities having
substantially the same terms as the Trust Securities (the "Successor
Securities"), so long as the Successor Securities rank the same as the Trust
Securities rank with respect to distributions and payments upon liquidation,
maturity and otherwise, (ii) Salomon Smith Barney expressly acknowledges a
trustee of such successor entity possessing the same powers and duties as the
Institutional Trustee in its capacity as the holder of the Forward Contract and
the Treasury Securities, (iii) the TARGETS or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the TARGETS are then listed or quoted, (iv) such merger, consolidation,
amalgamation or replacement does not cause the TARGETS (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the holder's interest in the
new entity), (vi) such successor entity has a purpose identical to that of
TARGETS Trust I, (vii) prior to such merger, consolidation, amalgamation or
replacement, TARGETS Trust I has received an opinion of a nationally recognized
independent counsel to TARGETS Trust I experienced in such matters to the effect
that: (A) such merger, consolidation, amalgamation or replacement will not
adversely affect the rights, preferences and privileges of the holders of the
Trust Securities (including any Successor Securities) in any material respect
(other than with respect to any dilution of the holders' interest in the new
entity), and (B) following such merger, consolidation, amalgamation or
replacement, neither TARGETS Trust I nor such successor entity will be required
to register as an investment company under the 1940 Act and (viii) Salomon Smith
Barney guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding the
foregoing, TARGETS Trust I shall not, except with the consent of holders of 100%
of the Trust Securities, consolidate, amalgamate, merge with or into, or be
replaced by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if in the opinion of a nationally
recognized independent tax counsel such consolidation, amalgamation, merger or
replacement would cause the Trust or the Successor Entity to be classified as
other than a grantor trust for United States federal income tax purposes. In
addition, so long as any TARGETS are outstanding and are not held entirely by
Salomon Smith Barney, TARGETS Trust I may not voluntarily liquidate, dissolve,
wind-up or terminate except as described above under " -- Acceleration of
Maturity Date; Enforcement of Rights".
BOOK-ENTRY ONLY ISSUANCE
DTC will act as securities depository (the "Depository") for the TARGETS.
The TARGETS will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global TARGETS
certificates, representing the total aggregate number of TARGETS, will be issued
and will be deposited with DTC.
The laws of some jurisdictions require that certain purchases of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global TARGETS as
represented by a global certificate.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a
30
<PAGE> 32
"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 Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC, which Participants include Cedel Bank,
societe anonyne and The Euroclear System. DTC also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants in DTC include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. (the "NASD").
Access to the DTC system is also available to others, such as securities brokers
and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.
Purchases of TARGETS within the DTC system must be made by or through
Direct Participants, which will receive a credit for the TARGETS on DTC's
records. The ownership interest of each actual purchaser of TARGETS ("Beneficial
Owner") is in turn to be recorded on the Participants' and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased TARGETS. Transfers of ownership interests
in the TARGETS are to be accomplished by entries made on the books of
Participants and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in TARGETS, except in the event that use of the book-entry system for
the TARGETS is discontinued.
To facilitate subsequent transfers, all the TARGETS deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of TARGETS with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership, DTC has no knowledge of the actual
Beneficial Owners of the TARGETS. DTC's records reflect only the identity of the
Direct Participants to whose accounts such TARGETS are credited, which may or
may not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
Although voting with respect to the TARGETS is limited, in those cases
where a vote is required, neither DTC nor Cede & Co. will itself consent or vote
with respect to TARGETS. Under its usual procedures, DTC would mail an Omnibus
Proxy to TARGETS Trust I as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co. consenting or voting rights to those Direct
Participants to whose accounts the TARGETS are credited on the record date
(identified in a listing attached to the Omnibus Proxy). Salomon Smith Barney
and TARGETS Trust I believe that the arrangements among DTC, Direct and Indirect
Participants, and Beneficial owners will enable the Beneficial Owners to
exercise rights equivalent in substance to the rights that can be directly
exercised by a holder of a beneficial interest in TARGETS Trust I.
Distribution payments on the TARGETS will be made to DTC. DTC's practice is
to credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers in bearer form or registered in "street name," and such
payments will be the responsibility of such Participant and not of DTC, TARGETS
Trust I or Salomon Smith Barney, subject to any statutory or regulatory
requirements to the contrary that may be in effect from time to time. Payment of
Distributions to DTC is the responsibility of TARGETS Trust I, disbursement of
such payments to Direct Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
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Except as provided herein, a Beneficial Owner in a global TARGET will not
be entitled to receive physical delivery of TARGETS. Accordingly, each
Beneficial Owner must rely on the procedures of DTC to exercise any rights under
the TARGETS.
DTC may discontinue providing its services as securities depositary with
respect to the TARGETS at any time by giving reasonable notice to TARGETS Trust
I. Under such circumstances, in the event that a successor securities depositary
is not obtained, TARGETS certificates are required to be printed and delivered.
Additionally, the Regular Trustees (with the consent of Salomon Smith Barney)
may decide to discontinue use of the system of book-entry transfers through DTC
(or any successor depositary) with respect to the TARGETS. In that event,
certificates for the TARGETS will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Salomon Smith Barney and TARGETS Trust I
believe to be reliable, but neither Salomon Smith Barney nor TARGETS Trust I
takes responsibility for the accuracy thereof.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with
respect to the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after such a default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provisions, the Institutional
Trustee is under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of TARGETS, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. Notwithstanding the foregoing, the holders of TARGETS will
not be required to offer such indemnity in the event such holders, by exercising
their voting rights, direct the Institutional Trustee to take any action
following an Acceleration Event.
PAYING AGENT
In the event that the TARGETS do not remain in book-entry only form, the
following provisions will apply:
The Institutional Trustee will act as paying agent for the TARGETS and
may designate an additional or substitute paying agent at any time.
Registration of transfers of TARGETS will be effected without charge
by or on behalf of the TARGETS Trust I, but upon payment (with the giving
of such indemnity as TARGETS Trust I or Salomon Smith Barney may require)
in respect of any tax or other government charges which may be imposed in
relation to it.
GOVERNING LAW
The Declaration and the TARGETS will be governed by, and construed in
accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate TARGETS Trust I
in such a way so that TARGETS Trust I will not be required to register as an
"investment company" under the 1940 Act or be characterized as other than a
grantor trust for United States federal income tax purposes. In this connection,
Salomon Smith Barney and the Regular Trustees are authorized to take any action,
not inconsistent with applicable law, the certificate of trust or the amended
and restated certificate of incorporation of Salomon Smith Barney that each of
Salomon Smith Barney and the Regular Trustees determine in their discretion to
be necessary or desirable to achieve such end as long as such action does not
adversely affect the interests of the holders of the TARGETS or vary the terms
thereof.
Holders of the TARGETS have no preemptive rights.
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DESCRIPTION OF THE FORWARD CONTRACT
The terms of the Forward Contract will be set forth in an Indenture (the
"Indenture") between Salomon Smith Barney and The Chase Manhattan Bank (in such
capacity, the "Indenture Trustee"). The Indenture will be qualified under the
Trust Indenture Act. The Indenture Trustee, The Chase Manhattan Bank, will act
as trustee for the Forward Contract under the Indenture for purposes of
compliance with the provisions of the Trust Indenture Act. The terms of the
Forward Contract will include those stated in the Indenture and those made part
of the Indenture by the Trust Indenture Act.
The Forward Contract initially relates to an aggregate of shares
of the Common Stock. Pursuant to the terms of the Forward Contract, Salomon
Smith Barney will pay an amount equal to the aggregate Maturity Payments or the
aggregate Accelerated Maturity Payments, as the case may be, to the Trust at
maturity of the Forward Contract as described above. See "Description of the
TARGETS".
Pursuant to the terms of the Forward Contract, Salomon Smith Barney will
pay quarterly Yield Enhancement Payments to the Trust in the amount of
approximately $ , accruing from the date of issuance of the TARGETS,
computed on the basis of a 360-day year of twelve 30-day months and, for any
period less than a full calendar month, the number of days elapsed in such
month. The Yield Enhancement Payments, together with distributions received by
the Trust with respect to the Treasury Securities, will be used by the Trust to
pay the Periodic Distributions to the holders of the TARGETS. See "Description
of TARGETS -- Periodic Distributions".
The Indenture will provide that Salomon Smith Barney will pay all fees and
expenses related to (i) the offering of the Trust Securities and the Forward
Contract, (ii) the organization, maintenance and dissolution of TARGETS Trust I,
(iii) the retention of the Trustees and (iv) the enforcement by the
Institutional Trustee of the rights of the holders of the TARGETS.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by Salomon Smith Barney for the benefit of the
holders of TARGETS. The Guarantee will be qualified as an indenture under the
Trust Indenture Act. The Chase Manhattan Bank will act as indenture trustee
under the Guarantee (in such capacity, the "Guarantee Trustee"). The terms of
the Guarantee will be those set forth in the Guarantee and those made part of
the Guarantee by the Trust Indenture Act. The summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the form of Guarantee, which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, and
the Trust Indenture Act. The Guarantee will be held by the Guarantee Trustee for
the benefit of the holders of the TARGETS.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, Salomon Smith
Barney will irrevocably and unconditionally agree to pay in full to the holders
of the TARGETS (except to the extent paid by TARGETS Trust I), as and when due,
regardless of any defense, right of set off or counterclaim which TARGETS Trust
I may have or assert, the following payments (the "Guarantee Payments"), without
duplication: (i) any Maturity Payment that is required to be made in respect of
the TARGETS, to the extent the Trust has funds available therefor, (ii) any
Accelerated Maturity Payment that is required to be made in respect of the
TARGETS, to the extent the Trust has funds available therefor, (iii) any
Treasury Proceeds that are required to be distributed in respect of the TARGETS,
to the extent that the Trust has funds available therefor, (iv) any Periodic
Distributions that are required to be made in respect of the TARGETS, to the
extent the Trust has funds available therefor, and (v) any other remaining
assets of the Trust upon liquidation of the Trust. Salomon Smith Barney's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by Salomon Smith Barney to the holders of TARGETS or by causing
TARGETS Trust I to pay such amounts to such holders.
The Guarantee will be a guarantee with respect to the TARGETS from the time
of issuance of the TARGETS but will not apply to any payment of Periodic
Distributions, Maturity Payments, Accelerated
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Maturity Payments, Treasury Proceeds or to payments upon the dissolution,
winding-up or termination of the Trust, except to the extent TARGETS Trust I
shall have funds available therefor. If Salomon Smith Barney does not pay the
aggregate Maturity Payments or the aggregate Accelerated Maturity Payments to
the Trust upon maturity of the Forward Contract, including maturity as a result
of acceleration or otherwise, the Trust will not pay any Maturity Payment or
Accelerated Maturity Payment to holders of the TARGETS and will not have funds
available therefor. If either the U.S. federal government, as the issuer of the
Treasury Securities, does not make periodic payments to the Trust with respect
to the Treasury Securities or Salomon Smith Barney does not pay the Yield
Enhancement Payments to the Trust with respect to the Forward Contract then, in
either event, the Trust will not pay the full amount of the Periodic
Distributions to holders of the TARGETS and will not have funds available
therefor. See "Description of the TARGETS" and "Description of the Forward
Contract". The Guarantee, when taken together with Salomon Smith Barney's
obligations under the Forward Contract, the Indenture and the Declaration,
including its obligations to pay costs, expenses, debts and liabilities of
TARGETS Trust I (other than with respect to Trust Securities), will provide a
full and unconditional guarantee by Salomon Smith Barney of payments due on the
TARGETS.
MODIFICATIONS OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of TARGETS (in which case no vote will be required), the Guarantee
may be amended only with the prior approval of the holders of a majority of the
outstanding TARGETS. All guarantees and agreements contained in the Guarantee
shall bind the successors, assignees, receivers, trustees and representatives of
Salomon Smith Barney and shall inure to the benefit of the holders of the
TARGETS then outstanding.
GUARANTEE ENFORCEMENT EVENTS
An enforcement event under the Guarantee will occur upon the failure of
Salomon Smith Barney to perform any of its payment or other obligations
thereunder. The holders of a majority of the TARGETS have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee in respect of the Guarantee or to direct the exercise
of any trust or power conferred upon the Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee Trustee's rights under
the Guarantee any holder of TARGETS may directly institute a legal proceeding
against Salomon Smith Barney to enforce the Guarantee Trustee's rights under the
Guarantee, without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity. A holder of TARGETS may also
directly institute a legal proceeding against Salomon Smith Barney to enforce
such holder's right to receive payment under the Guarantee without first (i)
directing the Guarantee Trustee to enforce the terms of the Guarantee or (ii)
instituting a legal proceeding against TARGETS Trust I or any other person or
entity.
Salomon Smith Barney will be required to provide annually to the Guarantee
Trustee a statement as to the performance by Salomon Smith Barney of certain of
its obligations under the Guarantee and as to any default in such performance.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Guarantee, undertakes to perform only such duties as are specifically set
forth in the Guarantee and, after default with respect to the Guarantee, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of TARGETS unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to the TARGETS upon full payment to the
holders of the TARGETS of (i) the Maturity Payments, (ii) the Accelerated
Maturity Payments, (iii) the Treasury Proceeds or (iv) the
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amounts payable in accordance with the Declaration upon liquidation of TARGETS
Trust I. The Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of TARGETS must restore payment of
any sum paid under such TARGETS or such Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may directly institute a legal proceeding against
Salomon Smith Barney to enforce its rights under the Guarantee without
instituting a legal proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
DESCRIPTION OF THE TREASURY SECURITIES
The Treasury Securities will consist of a portfolio of stripped U.S.
Treasury securities (the "Treasury Securities") maturing on a quarterly basis
through the Maturity Date. The Treasury Securities will bear quarterly payments
corresponding to the payment dates of the Periodic Distributions payable on the
TARGETS. Upon acceleration of maturity to an Accelerated Maturity Date, any
Treasury Securities then held by the Institutional Trustee on behalf of the
Trust will be sold and the Treasury Proceeds will be distributed to holders of
the Trust Securities. See "Description of the TARGETS -- Acceleration of
Maturity".
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax consequences
of the purchase, ownership and disposition of TARGETS. Unless otherwise
specifically indicated herein, this summary only addresses a holder of TARGETS
that is a citizen or resident of the United States, a corporation, partnership
or other entity created or organized under the laws of the United States, an
estate the income of which is subject to U.S. federal income taxation regardless
of its source, a trust if (i) a U.S. court is able to exercise primary
supervision over the trust's administration and (ii) one or more United States
persons have the authority to control all of the trust's substantial decisions,
or a holder that is otherwise subject to U.S. federal income taxation on net
income basis in respect of its TARGETS (a "U.S. Holder"). The discussion below
is based on the advice of Skadden, Arps, Slate, Meagher & Flom LLP.
The summary is based on U.S. federal income tax laws, regulations, rulings
and decisions now in effect, all of which are subject to change, possibly on a
retroactive basis. It deals only with holders that will hold TARGETS as capital
assets and does not address tax considerations that may be relevant to a
particular holder in light of such holder's individual circumstances or that are
applicable to certain types of holders subject to special tax rules, such as
banks, insurance companies, dealers in securities, persons that will hold the
TARGETS as a position in a "straddle" for tax purposes or as part of a
"synthetic security" or a "conversion transaction" or other integrated
investment comprised of a TARGETS and one or more other investments, or persons
that have a functional currency other than the U.S. dollar. It does not include
any description of the tax laws of any state, local or foreign government that
may be applicable to the TARGETS or to the holders thereof. Prospective
purchasers of TARGETS should consult their tax advisors in determining the tax
consequences to them of purchasing, owning or disposing TARGETS, including the
application to their particular situation of the U.S. federal income tax
considerations discussed below, as well as the application of state, local,
foreign income or other tax laws.
There are no regulations, published rulings or judicial decisions
addressing the characterization for U.S. federal income tax purposes of TARGETS
or instruments with terms substantially similar to TARGETS. The Trust intends to
treat a TARGETS for U.S. federal income tax purposes as a beneficial interest in
a trust that holds the Treasury Securities and the Forward Contract, under the
terms of which Salomon Smith Barney is
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obligated to pay the Yield Enhancement Payments to the Trust. The Trust intends
to report holders' income to the Internal Revenue Service in accordance with
this treatment. Under this approach, the tax consequences of holding a TARGETS
should be as described below. Prospective investors in the TARGETS should be
aware, however, that no ruling is being requested from the Internal Revenue
Service with respect to the TARGETS and the Internal Revenue Service might take
a different view as to the proper characterization of the TARGETS and of the
U.S. federal income tax consequences to a holder thereof.
TAX STATUS OF THE TRUST
The Trust will be treated as a grantor trust owned solely by the present
and future holders of Trust Securities for U.S. federal income tax purposes, and
accordingly, income received by the Trust will be treated as income of the
holders of the TARGETS in the manner set forth below.
TAX BASIS IN THE TREASURY SECURITIES AND THE FORWARD CONTRACT
Each holder should be considered the owner of its pro rata portion of the
Treasury Securities and the Forward Contract in the Trust. The cost to the
holder of its TARGETS should be allocated between the holder's pro rata portion
of the Treasury Securities and the Forward Contract in the Trust (in proportion
to the fair market values thereof on the date on which the holder acquires its
TARGETS) in order to determine the holder's tax bases in such assets. It is
currently anticipated that approximately 15% and 85% of the net proceeds of the
offering will be used by the Trust to purchase the Treasury Securities and the
Forward Contract, respectively.
RECOGNITION OF ORIGINAL ISSUE DISCOUNT ON THE TREASURY SECURITIES
The Treasury Securities in the Trust will consist of stripped U.S. Treasury
securities. A holder should be required to treat its pro rata portion of each
Treasury Security in the Trust as a bond that was originally issued on the date
the holder purchased its TARGETS and at an original issue discount equal to the
excess of the holder's pro rata portion of the amounts payable on such Treasury
Security over the holder's tax basis therein, as discussed above. The amount of
such excess, however, should constitute only a portion of the total amounts
payable with respect to the Treasury Securities held by the Trust and,
accordingly, a substantial portion of the quarterly cash distributions from the
Trust to holders should be treated as a tax-free return of the holder's
investment in the Treasury Securities and should reduce the holder's tax basis
in its pro rata portion of the Treasury Securities. A holder (whether using the
cash or accrual method of tax accounting) should be required to include original
issue discount (other than original issue discount on short-term Treasury
Securities as described below) in gross income for U.S. federal income tax
purposes as it accrues, in accordance with a constant yield method, prior to the
receipt of cash attributable to such income.
With respect to any short-term Treasury Security (i.e., any Treasury
Security with a maturity of one year or less from the date it is purchased) held
by the Trust, holders using the cash method of tax accounting should (except as
provided below) generally be required to include interest payments on such
Treasury Securities in gross income as such payments are received. In addition,
such cash method holders may be denied a deduction for any related interest
expense until such payments are received.
Notwithstanding the above general rule for cash method holders, if in any
taxable year 20 percent or more of the value of the TARGETS is held for 90 days
or more by persons using the accrual method of tax accounting (and generally
with respect to subsequent taxable years), holders using the cash method of tax
accounting should be required to include original issue discount on any
short-term Treasury Security held by the Trust in gross income as such original
issue discount accrues. In all events, holders using the accrual method of tax
accounting should be required to include original issue discount on any
short-term Treasury Security held by the Trust in gross income as such original
issue discount accrues. Unless a holder elects to accrue the original issue
discount on a short-term Treasury Security according to a constant yield method
based on daily compounding, such original issue discount should be accrued on a
straight-line basis. A holder's tax basis in a Treasury Security held by the
Trust should be increased by the amount of any original issue discount included
in gross income by the holder with respect to such Treasury Security.
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TREATMENT OF THE FORWARD CONTRACT
Each holder should be treated as having entered into a pro rata portion of
the Forward Contract and, at the Maturity Date or Accelerated Maturity Date, as
having received a pro rata portion of the Maturity Payment or Accelerated
Maturity Payment, as the case may be, received by the Trust. A holder should not
recognize income, gain or loss upon entry into the Forward Contract and should
not be required to include in gross income additional amounts over the term of
the Forward Contract (except with respect to the Yield Enhancement Payments, as
described below).
TREATMENT OF THE YIELD ENHANCEMENT PAYMENTS
There is no authority for the treatment of the Yield Enhancement Payments
under current law, but Salomon Smith Barney intends to file information returns
on the basis that the Yield Enhancement Payments are ordinary income to holders
when received or accrued in accordance with their respective methods of tax
accounting. The treatment of amounts received in respect of accrued but unpaid
Yield Enhancement Payments upon a sale or other disposition of some or all of a
holder's TARGETS is also unclear under current law. Holders should consult their
tax advisors concerning the treatment of the Yield Enhancement Payments.
SALE OR OTHER DISPOSITION OF THE TARGETS
Upon a sale or other disposition of all or some of a holder's TARGETS, a
holder should be treated as having sold its pro rata portions of the Treasury
Securities and the Forward Contract underlying the TARGETS. The selling holder
should recognize capital gain or loss equal to the difference between the amount
realized from such sale or other disposition and the holder's aggregate tax
bases in its pro rata portions of the Treasury Securities and the Forward
Contract (except to the extent of any (i) accrued interest with respect to the
holder's pro rata portion of the Treasury Securities includible in gross income
as ordinary income and (ii) possibly any accrued but unpaid Yield Enhancement
Payments, as described above). Any such gain or loss will be long-term capital
gain or loss if the holder's holding period for the TARGETS was more than one
year. The distinction between capital gain or loss and ordinary income or loss
is important for purposes of the limitations on a holder's ability to offset
capital losses against ordinary income. In addition, certain individuals are
subject to taxation at a reduced rate on long-term capital gains. The Taxpayer
Relief Act of 1997 further provides that in the case of holders who are
individuals, any such capital gain will be subject to a maximum U.S. federal
income tax rate of (i) 20% if the holder's holding period in the TARGETS was
more than 18 months at the time of such sale or other disposition and (ii) 28%
if the holder's holding period in the TARGETS was more than 12 months but not
more than 18 months at such time. Holders should consult their tax advisers as
to the consequences of the Taxpayer Relief Act of 1997 in their particular
circumstances.
DISTRIBUTIONS OF CASH AT THE MATURITY DATE OR ACCELERATED MATURITY DATE
On the receipt of cash by the Trust with respect to the Forward Contract on
the Maturity Date or Accelerated Maturity Date, a holder should recognize
capital gain or loss equal to the difference between the holder's pro rata
portion of the amount of cash received by the Trust and the holder's tax basis
in its pro rata portion of the Forward Contract at that time (except to the
extent such cash is attributable the Yield Enhancement Payments, as described
above). Under certain circumstances, on or following the Accelerated Maturity
Date, the Trust may sell all or a portion of the Treasury Securities and
distribute the Treasury Proceeds to holders. Upon such a sale by the Trust, a
holder should recognize capital gain or loss equal to the difference between the
amount of cash received by the holder (except to the extent of any accrued
interest with respect to the holder's pro rata portion of the Treasury
Securities includible in gross income as ordinary income) and the holder's tax
basis in its pro rata portion of the Treasury Securities sold by the Trust. Any
such capital gain or loss described in this paragraph will be long-term capital
gain or loss if the holder's holding period for the TARGETS was more than one
year and will be subject to the same maximum U.S. federal income tax rates
discussed above under "Sale or Other Disposition of the TARGETS".
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ALTERNATIVE CHARACTERIZATIONS
The Internal Revenue Service may contend that TARGETS should be
characterized for U.S. federal income tax purposes in a manner different than
the approach described above. For example, the Internal Revenue Service might
assert that the Forward Contract should be treated as a contingent debt
obligation of Salomon Smith Barney that is subject to Treasury regulations
governing contingent payment debt instruments. If the Internal Revenue Service
were to prevail in making such an assertion, original issue discount would
accrue with respect to the Forward Contract at a "comparable yield" for Salomon
Smith Barney under the Forward Contract, determined at the time the Forward
Contract is entered into. A holder's pro rata portion of original issue discount
with respect to the Forward Contract and the Treasury Securities might exceed
the aggregate amount of the Periodic Distributions received by the holder. In
addition, under this treatment, a holder would be required to treat any gain
realized on the sale or other disposition of the TARGETS as ordinary income to
the extent that such gain is allocable to the holder's pro rata portion of the
Forward Contract. Any loss realized on such sale or other disposition that is
allocable to the holder's pro rata portion of the Forward Contract would be
treated as an ordinary loss to the extent of the holder's original issue
discount inclusions with respect to the Forward Contract and as capital loss to
the extent of loss in excess of such inclusions. It is also possible that the
Internal Revenue Service could take the view that a holder should include in
gross income the amount of cash actually received each year in respect of the
TARGETS or that the TARGETS as a whole constitute a contingent payment debt
instrument subject to the rules described above.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
In the case of a holder of TARGETS that is not a U.S. Holder: (a) Periodic
Distributions (other than Yield Enhancement Payments) made with respect to the
TARGETS should not be subject to U.S. withholding tax, provided that such holder
complies with applicable certification requirements (including in general the
furnishing of an Internal Revenue Service Form W-8 or a substitute form); (b)
Yield Enhancement Payments should be subject to U.S. withholding tax at a rate
of 30 percent (or a lower rate under an applicable income tax treaty); and (c)
any capital gain realized upon the sale or other disposition of the TARGETS
should not be subject to U.S. federal income tax if (i) such gain is not
effectively connected with a U.S. trade or business of such holder and (ii) in
the case of an individual, such individual is not present in the United States
for 183 days or more in the taxable year of the sale or other disposition or the
gain is not attributable to a fixed place of business maintained by such
individual in the United States.
Recently issued Treasury regulations may change the certification
procedures relating to withholding on certain amounts paid to Non-U.S. Holders
after December 31, 1998. Prospective investors should consult their tax advisors
regarding the effect, if any, of such new Treasury regulations on an investment
in the TARGETS.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A holder of TARGETS (including a holder that is not a U.S. holder) may be
subject to information reporting and to backup withholding at a rate of 31
percent of certain amounts paid to the holder unless such holder (a) is a
corporation or comes within certain other exempt categories and, when required,
provides proof of such exemption or (b) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. Any amounts withheld under the backup withholding rules are
not an additional tax and may be credited against the holder's U.S. federal
income tax liability, provided that the required information is furnished to the
Internal Revenue Service.
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UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
dated , 1998 (the "Underwriting Agreement"), each Underwriter
named below (the "Underwriters") has severally agreed to purchase from TARGETS
Trust I, and TARGETS Trust I has agreed to sell to such Underwriter, the number
of TARGETS set forth opposite the name of such Underwriter below.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF TARGETS
--------------------------------------------------- -----------------
<S> <C>
-------
Total....................................
=======
</TABLE>
The Underwriters are obligated to take and pay for the total number of
TARGETS offered hereby if any such TARGETS are purchased. In the event of
default by any Underwriter, the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the non-defaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
TARGETS Trust I has granted to the Underwriters an option, exercisable for
30 days from the date of this Prospectus, to purchase up to an aggregate of
additional TARGETS at the initial public offering price set
forth on the cover page of this Prospectus. Salomon Smith Barney will pay
Underwriters' Compensation in the amounts per TARGET set forth on the cover page
hereof with respect to such additional TARGETS. The Underwriters may exercise
such option to purchase additional TARGETS solely for the purpose of covering
over-allotments, if any, incurred in connection with the sale of the TARGETS
offered hereby. To the extent such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional TARGETS as the number of TARGETS set forth
opposite such Underwriter's name in the preceding table bears to the total
number of TARGETS in such table.
The Underwriting Agreement provides that TARGETS Trust I and Salomon Smith
Barney will indemnify the several Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, and to make
certain contributions in respect thereof, or to contribute to payments that such
Underwriters may be required to make in respect thereof and to reimburse each of
the Underwriters for certain legal and other expenses.
TARGETS Trust I and Salomon Smith Barney have agreed, during the period
beginning on the date of the Underwriting Agreement and continuing to and
including the date that is 60 days after the closing date for the purchase of
the TARGETS, not to offer, sell, contract to sell or otherwise dispose of any
securities (including any backup undertakings of such securities) of Salomon
Smith Barney or of TARGETS Trust I, in each case that are substantially similar
to the TARGETS, or any securities convertible into or exchangeable for the
TARGETS or such substantially similar securities of either TARGETS Trust I or
Salomon Smith Barney.
In view of the fact that the proceeds of the sale of the TARGETS will
ultimately be used by the Trust to purchase the Forward Contract, the
Underwriting Agreement provides that Salomon Smith Barney will pay as
compensation to the Underwriters $ per TARGET for the accounts of the
several Underwriters.
The Underwriters propose to offer the TARGETS, in part, directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus, and to certain dealers at a price that represents a concession not
in excess of $ per TARGET. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per TARGET to certain
brokers and dealers. After the
39
<PAGE> 41
TARGETS are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Underwriters.
In connection with the offering of TARGETS, 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 TARGETS.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M under the Exchange Act, pursuant to which such
persons may bid for or purchase TARGETS for the purposes of stabilizing their
market price. The Underwriters also may create a short position for their
respective accounts by selling more TARGETS in connection with this offering
than they are committed to purchase from TARGETS Trust I, and in such case may
purchase TARGETS 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 a specified aggregate principal
amount or number of TARGETS, by exercising the Underwriters' over-allotment
option. In addition, the managing Underwriter, 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 TARGETS that are distributed in the 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 TARGETS 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 any are undertaken, they may be discontinued at any time.
Application will be made to list the TARGETS on the CBOE, subject to
official notice of issuance. Trading of the TARGETS on the CBOE is expected to
commence within a 30-day period after the date of this Prospectus.
The participation of any affiliate of Salomon Smith Barney in the offer and
sale of TARGETS will comply with the requirements of Rule 2720 of the Conduct
Rules of the National Association of Securities Dealers, Inc. regarding the
underwriting by an affiliate of securities of its parent.
This Prospectus may be used by Salomon Smith Barney or any Underwriter that
is an affiliate or other affiliates of Salomon Smith Barney, including the SSBH
Subsidiaries, in connection with offers and sales of the TARGETS (subject to
obtaining any necessary approval of the CBOE for any such offers and sales) in
market-making transactions at negotiated prices related to prevailing market
prices at the time of sale. Any such entity may act as principal or agent in
such transactions. No such entity is obligated to make a market in the TARGETS
and any such entity may discontinue any market-making at any time without
notice, at its sole discretion. There can be no assurance of the liquidity or
existence of a secondary market for any TARGETS.
LEGAL MATTERS
The validity of the TARGETS, the Forward Contract, the Guarantee and
certain matters relating thereto and certain United States federal income tax
matters will be passed upon for Salomon Smith Barney and TARGETS Trust I by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Certain legal
matters will be passed upon for the Underwriters by Cleary, Gottlieb, Steen and
Hamilton, New York, New York. As to matters governed by Delaware law (other than
the Delaware General Corporation Law), Cleary, Gottlieb, Steen and Hamilton will
rely upon the opinion of Skadden, Arps, Slate, Meagher & Flom LLP. Kenneth J.
Bialkin, a partner of Skadden, Arps, Slate, Meagher & Flom LLP, is a director of
Travelers Group Inc., the parent of Salomon Smith Barney and he and other
attorneys in such firm beneficially own an aggregate of less than one percent of
the common stock of the Travelers Group Inc. Each of Cleary, Gottlieb, Steen and
Hamilton and Skadden, Arps, Slate, Meagher & Flom LLP has from time to time
acted as counsel for Salomon Smith Barney and certain of its affiliates and may
do so in the future.
40
<PAGE> 42
EXPERTS
The consolidated financial statements and schedule of Salomon Inc as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, included in Salomon Inc's Annual Report on Form 10-K
for the year ended December 31, 1996 (the "Salomon Financials"), are
incorporated by reference herein, in reliance upon the report (also incorporated
by reference herein) of Arthur Andersen LLP, independent public accountants, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements and schedule of Smith Barney Holdings
Inc. and its subsidiaries for the fiscal years ended December 31, 1996 and 1995,
and for each of the three years in the period ended December 31, 1996, included
in Salomon Smith Barney's Current Report on Form 8-K dated September 29, 1997,
have been audited by Coopers & Lybrand L.L.P., independent certified public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such financial statements referred to above
are incorporated by reference herein in reliance upon such report given upon the
authority of said firm as experts in accounting and auditing.
The supplemental consolidated financial statements of Salomon Smith Barney
and its subsidiaries for the fiscal years ended December 31, 1996 and 1995 and
for each of the three years in the period ended December 31, 1996, included in
Salomon Smith Barney's Current Report on Form 8-K dated November 28, 1997, have
been audited by Coopers & Lybrand L.L.P., independent certified public
accountants, as set forth in their report thereon, included therein and
incorporated herein by reference, which report states that Coopers & Lybrand
L.L.P. did not audit the Salomon Financials and that their opinion with respect
to any amounts contained in the Salomon Financials is based on the report of
Arthur Andersen LLP. Such financial statements referred to above are
incorporated by reference herein in reliance upon such reports given upon the
authority of said firm as experts in accounting and auditing.
41
<PAGE> 43
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS 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 SALOMON SMITH BARNEY OR ANY
OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT RELATES IN ANY STATE OR TO
ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE. THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Available Information.................. 3
Incorporation of Certain Documents by
Reference............................ 4
Prospectus Summary..................... 5
Risk Factors........................... 9
Salomon Smith Barney................... 14
Use of Proceeds and Hedging............ 14
Capitalization......................... 16
Ratio of Earnings to Fixed Charges..... 17
The Corporation........................ 17
Price Range of the Common Stock and
Dividends............................ 18
TARGETS Trust I........................ 18
Description of the TARGETS............. 19
Description of the Forward Contract.... 33
Description of the Guarantee........... 33
Description of the Treasury
Securities........................... 35
Certain Federal Income Tax
Considerations....................... 35
Underwriting........................... 39
Legal Matters.......................... 40
Experts................................ 41
</TABLE>
======================================================
======================================================
TARGETS TRUST I
TARGETED GROWTH
ENHANCED
TERMS SECURITIES
("TARGETS(SM)")
GUARANTEED TO THE
EXTENT SET
FORTH HEREIN BY
SALOMON SMITH BARNEY
HOLDINGS INC.
------------
PROSPECTUS
, 1998
------------
SALOMON SMITH BARNEY
======================================================
<PAGE> 44
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Commission Registration Fee...................................... $36,875
Accounting Fees.................................................. *
Trustees' Fees and Expenses...................................... *
Blue Sky Fees and Expenses....................................... *
Printing and Engraving Fees...................................... *
Rating Agency Fees............................................... *
NASD Fee......................................................... *
Legal Fees and Expenses.......................................... *
Miscellaneous.................................................... *
-------
Total.................................................. $ *
=======
</TABLE>
- ---------------
* To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware (the "DGCL") empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful on the merits or otherwise in the
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of Section 145, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; that indemnification provided for by Section
145 shall, unless otherwise provided when authorized and ratified, continue as
to such person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of such person's heirs, executors and administrators;
and empowers the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out
II-1
<PAGE> 45
of his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided that such provision shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from
which the director derived an improper personal benefit. Article Eight of
Salomon Smith Barney's By-Laws provides for indemnification of directors and
officers of Salomon Smith Barney against certain liabilities incurred as a
result of their duties as such and Article Fifth of Salomon Smith Barney's
Amended and Restated Certificate of Incorporation provides that no directors of
Salomon Smith Barney shall be liable for monetary damages for breach of
fiduciary duty as a director.
The Declaration of the Trust provides that no Institutional Trustee or any
of its affiliates, Delaware Trustee or any of its affiliates, or officer,
director, shareholder, member, partner, employee, representative custodian,
nominee or agent of the Institutional Trustee or the Delaware Trustee (each a
"Fiduciary Indemnified Person"), and no Regular Trustee, affiliate of any
Regular Trustee, or any officer, director, shareholder, member, partner,
employee, representative or agent of any Regular Trustee, or any employee or
agent of the Trust or its affiliates (each a "Company Indemnified Person") shall
be liable, responsible or accountable in damages or otherwise to the Trust, any
Affiliate of the Trust or any holder of securities issued by the Trust, or to
any officer, director, shareholder, partner, member, representative, employee or
agent of the Trust or its Affiliates for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such Fiduciary Indemnified
Person or Company Indemnified Person in good faith on behalf of the Trust and,
in a manner such Fiduciary Indemnified Person or Company Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Fiduciary Indemnified Person or Company Indemnified Person by such Declaration
or by law, except that a Fiduciary Indemnified Person or Company Indemnified
Person shall be liable for any loss, damage, or claim incurred by reason of such
Fiduciary Indemnified Person's or Company Indemnified Person's gross negligence
(or in the case of a Fiduciary Indemnified Person, negligence) or willful
misconduct with respect to such acts or omissions. The Declaration of the Trust
also provides that, to the full extent permitted by law, Salomon Smith Barney
shall indemnify any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in right of the Trust) by reason of the fact that he
is or was a Company Indemnified Person against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
Declaration of the Trust also provides that to the full extent permitted by law,
Salomon Smith Barney shall indemnify any Company Indemnified Person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in right of the Trust to procure a judgment in
its favor by reason of the fact that he is or was a Company Indemnified Person
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that the Court of Chancery of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which such Court of Chancery or such other court shall deem proper. The
Declaration of the Trust further provides that expenses (including attorneys'
fees) incurred by a Company Indemnified Person in defending a civil, criminal,
administrative or investigative action, suit or proceeding referred to in the
immediately preceding two sentences shall be paid by Salomon Smith Barney in
advance of the final disposition of such action, suit or
II-2
<PAGE> 46
proceeding upon receipt of an undertaking by or on behalf of such Company
Indemnified Person to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by Salomon Smith Barney as authorized
in the Declaration. The directors and officers of Salomon Smith Barney and the
Regular Trustee are covered by insurance policies indemnifying them against
certain liabilities, including certain liabilities arising under the Securities
Act, which might be incurred by them in such capacities and against which they
cannot be indemnified by Salomon Smith Barney or the Trust. Any agents, dealers
or underwriters who execute any of the agreements filed as Exhibit 1(a) to this
Registration Statement will agree to indemnify Salomon Smith Barney's directors
and their officers and the Trustees who signed the Registration Statement
against certain liabilities that may arise under the Securities Act with respect
to information furnished to Salomon Smith Barney or the Trust by or on behalf of
such indemnifying party.
For the undertaking with respect to indemnification, see Item 17 herein.
See the Form of proposed Underwriting Agreement, filed or to be filed as
Exhibit 1, for certain indemnification provisions.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO.
- ----------------
<S> <C>
1+ -- Form of Underwriting Agreement for the offering of the TARGETS being
registered under this Registration Statement.
4(a) -- Certificate of Trust of TARGETS Trust I.
4(b)+ -- Form of Amended and Restated Declaration of Trust of TARGETS Trust I.
4(c)+ -- Form of TARGETS Guarantee Agreement between Salomon Smith Barney and The
Chase Manhattan Bank, as Guarantee Trustee.
4(d)+ -- Indenture between Salomon Smith Barney and The Chase Manhattan Bank, as
Trustee.
4(e)+ -- Form of TARGETS (included in Exhibit 4(b)).
4(f)+ -- Form of Common Securities (included in Exhibit 4(b)).
4(g)+ -- Form of Forward Contract (included in Exhibit 4(d)).
5+ -- Opinion of counsel as to certain corporate law matters.
8+ -- Opinion of counsel as to certain federal income tax matters.
12 -- Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends of Salomon Smith Barney (incorporated by reference to
Exhibits 12.01 and 12.07 to Salomon Smith Barney's Current Report on Form 8-K
dated November 28, 1997).
23(a) -- Consent of Coopers and Lybrand L.L.P., independent certified public
accountants.
23(b) -- Consent of Arthur Andersen LLP, independent public accountants.
23(c)+ -- Consent of counsel (to be contained in Exhibits No. 5 and 8).
24 -- Powers of Attorney.
25(a)+ -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as
amended, of The Chase Manhattan Bank, under the Declaration of Trust.
25(b)+ -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as
amended, of The Chase Manhattan Bank, under the TARGETS Guarantee Agreement.
25(c)+ -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as
amended, of The Chase Manhattan Bank, under the Indenture (contained in
Exhibit 4(d)).
</TABLE>
- ---------------
+ To be filed by amendment.
ITEM 17. UNDERTAKINGS.
Each of Salomon Smith Barney and TARGETS Trust I hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrants pursuant to
II-3
<PAGE> 47
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
the time shall be deemed to be the initial bona fide offering thereof.
(3) For purposes of determining any liability under the Securities Act
of 1933, each filing of Salomon Smith Barney's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as
amended, that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended may be permitted to directors, officers
and controlling persons of a registrant pursuant to the foregoing
provisions or otherwise, the registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by a registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted against a
registrant by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
II-4
<PAGE> 48
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust I
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or Amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 3rd day of February, 1998.
TARGETS TRUST I
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ CHARLES W. SCHARF
------------------------------------
Name: Charles W. Scharf
Title: Regular Trustee
II-5
<PAGE> 49
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, SALOMON SMITH
BARNEY HOLDINGS INC. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 3RD DAY OF FEBRUARY, 1998.
SALOMON SMITH BARNEY HOLDINGS INC.
By: /s/ CHARLES W. SCHARF
------------------------------------
Name: Charles W. Scharf
Title: Chief Financial Officer,
and Principal
Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES WITH SALOMON SMITH BARNEY HOLDINGS INC. ON
THE 3RD DAY OF FEBRUARY, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------------------ -----------------------------------------------
<C> <S>
* Co-Chairman, Co-Chief Executive Officer,
- ------------------------------------------ Director and Principal Executive Officer
(JAMES DIMON)
* Co-Chairman, Co-Chief Executive Officer,
- ------------------------------------------ Director and Principal Executive Officer
(DERYCK C. MAUGHAN)
/s/ CHARLES W. SCHARF Chief Financial Officer and Principal Financial
- ------------------------------------------ Officer
(CHARLES W. SCHARF)
/s/ MICHAEL J. DAY Controller and Principal Accounting Officer
- ------------------------------------------
(MICHAEL J. DAY)
Director
- ------------------------------------------
(STEVEN D. BLACK)
* Director
- ------------------------------------------
(JAMES BOSHART III)
* Director
- ------------------------------------------
(THOMAS G. MAHERAS)
* Director
- ------------------------------------------
(JAY MANDELBAUM)
* Director
- ------------------------------------------
(EDUARDO G. MESTRE)
* Director
- ------------------------------------------
(SHIGERU MYOJIN)
</TABLE>
- ---------------
* The undersigned, by signing his name hereto, does hereby sign this
registration statement or amendment thereto on behalf of each of the above
indicated directors and officers of Salomon Smith Barney Holdings Inc.
pursuant to powers of attorney executed on behalf of each such director and
officer.
By: /s/ CHARLES W. SCHARF
----------------------------------
Attorney-in-Fact
II-6
<PAGE> 1
EXHIBIT 4(a)
CERTIFICATE OF TRUST
The undersigned, the trustees of TARGETS TRUST I, desiring to
form a business trust pursuant to Delaware Business Trust Act, 12 Del. C.
Section 3810, hereby certify as follows:
i. The name of the business trust being formed hereby (the
"Trust") is "TARGETS TRUST I".
ii. The name and business address of the trustee of the Trust
which has its principal place of business in the State of Delaware is
as follows:
Chase Manhattan Bank Delaware
1201 Market Street
Wilmington, Delaware 19801
iii. This Certificate of Trust shall be effective as of the
date of filing.
Dated: January 30, 1998
/s/Michael J. Day
-----------------------------------------
Name: Michael J. Day, as Regular Trustee
/s/Charles W. Scharf
-----------------------------------------
Name: Charles W. Scharf, as Regular Trustee
CHASE MANHATTAN BANK DELAWARE,
as Delaware Trustee
By:/s/Denis Kelly
--------------------------------------
Name: Denis Kelly
Title: Trust Officer
SALOMON SMITH BARNEY HOLDINGS INC.,
as Sponsor
By:/s/Michael J. Day
--------------------------------------
Name: Michael J. Day
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Salomon Smith Barney Holdings Inc. (the "Company") and TARGETS Trust I on Form
S-3, filed with the Securities and Exchange Commission on or about January 30,
1998, of our report dated January 15, 1997 on our audits of the consolidated
financial statements and financial statement schedule of Smith Barney Holdings
Inc. and Subsidiaries ("SBHI") as of December 31, 1996 and 1995 and for each of
the three years in the period ended December 31, 1996, which report is included
in the Annual Report on Form 10-K of SBHI for the fiscal year ended December
31, 1996 and which appears in the Form 8-K of the Company (formerly known as
Salomon Inc) dated September 29, 1997, and of our report dated November 28,
1997 on our audits of the supplemental consolidated financial statements of the
Company and Subsidiaries as of December 31, 1996 and 1995 and for each of the
three years in the period ended December 31, 1996, which report is included in
the Form 8-K of the Company dated November 28, 1997. We also consent to the
reference to our firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
New York, New York
January 30, 1998
<PAGE> 1
EXHIBIT 23(B)
ARTHUR ANDERSEN LLP LETTERHEAD
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
AS independent public accountants, we hereby consent to the
incorporation by reference in the Registration Statement on Form S-3 of Salomon
Smith Barney Holdings Inc. and TARGETS Trust I (the "Registration Statement"),
of our report dated March 13, 1997, related to the consolidated statement of
financial condition of Salomon Inc and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996, which report is incorporated by reference or included
in the annual report on Form 10-K of Salomon Inc for the year ended December
31, 1996.
/s/ ARTHUR ANDERSEN LLP
New York, New York
February 3, 1998
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Salomon Smith Barney Holdings Inc. proposes
to file with the Securities and Exchange Commission, under the Securities Act of
1933, a Registration Statement to register certain securities, including,
without limitation, certain Targeted Growth Enhanced Terms Securities, Forward
Contract Certificates and a Guarantee of Targeted Growth Enhanced Terms
Securities.
NOW, THEREFORE, I, in my capacity as Co-Chairman,
Co-Chief Executive Officer, Principal Executive Officer and a director of
Salomon Smith Barney Holdings Inc., hereby appoint Charles W. Scharf and Robert
H. Mundheim and each of them severally, my true and lawful attorney or attorneys
with power to act with or without the other and with full power of substitution
and resubstitution, to execute in my name, place and stead, in my capacity as a
director of Salomon Smith Barney Holdings Inc., said Registration Statement and
any amendments thereto and all instruments necessary or incidental in connection
therewith, and to file same with the Securities and Exchange Commission, all as
fully to all intents and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument
this 30th day of January, 1998.
/s/ JAMES DIMON
------------------------
James Dimon
2
<PAGE> 2
POWER OF ATTORNEY
WHEREAS, Salomon Smith Barney Holdings Inc. proposes
to file with the Securities and Exchange Commission, under the Securities Act of
1933, a Registration Statement to register certain securities, including,
without limitation, certain Targeted Growth Enhanced Terms Securities, Forward
Contract Certificates and a Guarantee of Targeted Growth Enhanced Terms
Securities.
NOW, THEREFORE, I, in my capacity as Co-Chairman,
Co-Chief Executive Officer, Principal Executive Officer and a director of
Salomon Smith Barney Holdings Inc., hereby appoint Charles W. Scharf and Robert
H. Mundheim and each of them severally, my true and lawful attorney or attorneys
with power to act with or without the other and with full power of substitution
and resubstitution, to execute in my name, place and stead, in my capacity as a
director of Salomon Smith Barney Holdings Inc., said Registration Statement and
any amendments thereto and all instruments necessary or incidental in connection
therewith, and to file same with the Securities and Exchange Commission, all as
fully to all intents and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument
this 30th day of January, 1998.
/s/ Deryck C. Maughan
--------------------------
Deryck C. Maughan
<PAGE> 3
POWER OF ATTORNEY
WHEREAS, Salomon Smith Barney Holdings Inc. proposes
to file with the Securities and Exchange Commission, under the Securities Act of
1933, a Registration Statement to register certain securities, including,
without limitation, certain Targeted Growth Enhanced Terms Securities, Forward
Contract Certificates and a Guarantee of Targeted Growth Enhanced Terms
Securities.
NOW, THEREFORE, I, in my capacity as Controller and
Principal Accounting Officer of Salomon Smith Barney Holdings Inc., hereby
appoint Charles W. Scharf and Robert H. Mundheim and each of them severally, my
true and lawful attorney or attorneys with power to act with or without the
other and with full power of substitution and resubstitution, to execute in my
name, place and stead, in my capacity as a director of Salomon Smith Barney
Holdings Inc., said Registration Statement and any amendments thereto and all
instruments necessary or incidental in connection therewith, and to file same
with the Securities and Exchange Commission, all as fully to all intents and
purposes as I might or could do in person, and I hereby ratify and approve the
acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument
this 30th day of January, 1998.
/s/ Michael J. Day
--------------------------
Michael J. Day
<PAGE> 4
POWER OF ATTORNEY
WHEREAS, Salomon Smith Barney Holdings Inc. proposes
to file with the Securities and Exchange Commission, under the Securities Act of
1933, a Registration Statement to register certain securities, including,
without limitation, certain Targeted Growth Enhanced Terms Securities, Forward
Contract Certificates and a Guarantee of Targeted Growth Enhanced Terms
Securities.
NOW, THEREFORE, I, in my capacity as a director of
Salomon Smith Barney Holdings Inc., hereby appoint Charles W. Scharf and Robert
H. Mundheim and each of them severally, my true and lawful attorney or attorneys
with power to act with or without the other and with full power of substitution
and resubstitution, to execute in my name, place and stead, in my capacity as a
director of Salomon Smith Barney Holdings Inc., said Registration Statement and
any amendments thereto and all instruments necessary or incidental in connection
therewith, and to file same with the Securities and Exchange Commission, all as
fully to all intents and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument
this 30th day of January, 1998.
/s/ Steven D. Black
-------------------------
Steven D. Black
<PAGE> 5
POWER OF ATTORNEY
WHEREAS, Salomon Smith Barney Holdings Inc. proposes
to file with the Securities and Exchange Commission, under the Securities Act of
1933, a Registration Statement to register certain securities, including,
without limitation, certain Targeted Growth Enhanced Terms Securities, Forward
Contract Certificates and a Guarantee of Targeted Growth Enhanced Terms
Securities.
NOW, THEREFORE, I, in my capacity as a director of
Salomon Smith Barney Holdings Inc., hereby appoint Charles W. Scharf and Robert
H. Mundheim and each of them severally, my true and lawful attorney or attorneys
with power to act with or without the other and with full power of substitution
and resubstitution, to execute in my name, place and stead, in my capacity as a
director of Salomon Smith Barney Holdings Inc., said Registration Statement and
any amendments thereto and all instruments necessary or incidental in connection
therewith, and to file same with the Securities and Exchange Commission, all as
fully to all intents and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument
this 30th day of January, 1998.
/s/ James Boshart III
----------------------------
James Boshart III
<PAGE> 6
POWER OF ATTORNEY
WHEREAS, Salomon Smith Barney Holdings Inc. proposes
to file with the Securities and Exchange Commission, under the Securities Act of
1933, a Registration Statement to register certain securities, including,
without limitation, certain Targeted Growth Enhanced Terms Securities, Forward
Contract Certificates and a Guarantee of Targeted Growth Enhanced Terms
Securities.
NOW, THEREFORE, I, in my capacity as a director of
Salomon Smith Barney Holdings Inc., hereby appoint Charles W. Scharf and Robert
H. Mundheim and each of them severally, my true and lawful attorney or attorneys
with power to act with or without the other and with full power of substitution
and resubstitution, to execute in my name, place and stead, in my capacity as a
director of Salomon Smith Barney Holdings Inc., said Registration Statement and
any amendments thereto and all instruments necessary or incidental in connection
therewith, and to file same with the Securities and Exchange Commission, all as
fully to all intents and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument
this 30th day of January, 1998.
/s/ Thomas G. Maheras
-------------------------
Thomas G. Maheras
<PAGE> 7
POWER OF ATTORNEY
WHEREAS, Salomon Smith Barney Holdings Inc. proposes
to file with the Securities and Exchange Commission, under the Securities Act of
1933, a Registration Statement to register certain securities, including,
without limitation, certain Targeted Growth Enhanced Terms Securities, Forward
Contract Certificates and a Guarantee of Targeted Growth Enhanced Terms
Securities.
NOW, THEREFORE, I, in my capacity as a director of
Salomon Smith Barney Holdings Inc., hereby appoint Charles W. Scharf and Robert
H. Mundheim and each of them severally, my true and lawful attorney or attorneys
with power to act with or without the other and with full power of substitution
and resubstitution, to execute in my name, place and stead, in my capacity as a
director of Salomon Smith Barney Holdings Inc., said Registration Statement and
any amendments thereto and all instruments necessary or incidental in connection
therewith, and to file same with the Securities and Exchange Commission, all as
fully to all intents and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument
this 30th day of January, 1998.
/s/ Jay Mandelbaum
-------------------------
Jay Mandelbaum
<PAGE> 8
POWER OF ATTORNEY
WHEREAS, Salomon Smith Barney Holdings Inc. proposes
to file with the Securities and Exchange Commission, under the Securities Act of
1933, a Registration Statement to register certain securities, including,
without limitation, certain Targeted Growth Enhanced Terms Securities, Forward
Contract Certificates and a Guarantee of Targeted Growth Enhanced Terms
Securities.
NOW, THEREFORE, I, in my capacity as a director of
Salomon Smith Barney Holdings Inc., hereby appoint Charles W. Scharf and Robert
H. Mundheim and each of them severally, my true and lawful attorney or attorneys
with power to act with or without the other and with full power of substitution
and resubstitution, to execute in my name, place and stead, in my capacity as a
director of Salomon Smith Barney Holdings Inc., said Registration Statement and
any amendments thereto and all instruments necessary or incidental in connection
therewith, and to file same with the Securities and Exchange Commission, all as
fully to all intents and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument
this 30th day of January, 1998.
/s/ Eduardo G. Mestre
-----------------------------
Eduardo G. Mestre
<PAGE> 9
POWER OF ATTORNEY
WHEREAS, Salomon Smith Barney Holdings Inc. proposes
to file with the Securities and Exchange Commission, under the Securities Act of
1933, a Registration Statement to register certain securities, including,
without limitation, certain Targeted Growth Enhanced Terms Securities, Forward
Contract Certificates and a Guarantee of Targeted Growth Enhanced Terms
Securities.
NOW, THEREFORE, I, in my capacity as a director of
Salomon Smith Barney Holdings Inc., hereby appoint Charles W. Scharf and Robert
H. Mundheim and each of them severally, my true and lawful attorney or attorneys
with power to act with or without the other and with full power of substitution
and resubstitution, to execute in my name, place and stead, in my capacity as a
director of Salomon Smith Barney Holdings Inc., said Registration Statement and
any amendments thereto and all instruments necessary or incidental in connection
therewith, and to file same with the Securities and Exchange Commission, all as
fully to all intents and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument
this 30th day of January, 1998.
/s/ Shigeru Myojin
--------------------------
Shigeru Myojin
<PAGE> 10
