<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-38931
Prospectus Supplement
(To Prospectus Dated December 1, 1997)
[Background: Salomon Smith Barney trading floor]
[Graphic]
6,500,000 Units
SALOMON SMITH BARNEY HOLDINGS INC.
CALLABLE EQUITY LINKED NOTES
BASED UPON THE
THESTREET.COM INTERNET SECTOR INDEX
DUE MAY 30, 2006
($10 INITIAL PRINCIPAL AMOUNT PER UNIT)
SALOMON SMITH BARNEY
A member of citigroup (logo)
<PAGE> 2
CALLABLE EQUITY LINKED NOTES
Salomon Smith Barney Holdings Inc.'s callable equity linked notes are bonds
whose return is tied or "linked" to the performance of a specified stock index.
Unlike typical bonds, no periodic interest payments are made on these notes
prior to maturity. However, at maturity, Salomon Smith Barney Holdings will
repay the original principal amount of the notes plus or minus an amount linked
to the increase or decrease in the value of the underlying index during a
specified period prior to maturity. In all cases, however, the amount paid to
investors at maturity will not be less than 90% of the notes' original principal
amount, regardless of the performance of the underlying index. In some cases,
Salomon Smith Barney Holdings will have the right to redeem the notes prior to
maturity for a specified call price that will exceed the amount of an investor's
original investment, but may be less than the expected payment due at maturity
based on then-current index values.
All of the information set forth on this page is qualified in its entirety by
the more detailed explanations set forth elsewhere in this Prospectus Supplement
and the accompanying Prospectus.
SELECTED PURCHASE CONSIDERATIONS
- - GROWTH POTENTIAL - The value of the callable equity linked notes is tied to
the performance of the relevant stock index, enabling you to participate in
potential increases in the value of the index without having to acquire each
of the underlying stocks.
- - PRESERVATION OF THE MAJORITY OF THE INVESTOR'S CAPITAL - At maturity, Salomon
Smith Barney Holdings will pay you at least 90% of the original principal
amount of the notes, regardless of the performance of the underlying index.
- - DIVERSIFICATION - The notes' link to a particular domestic or foreign stock
index may allow you to diversify an existing portfolio mix of stocks, bonds,
mutual funds and cash.
- - EXCHANGE LISTING - Although the notes are intended to be "buy and hold"
investments, they are listed on a major U.S. securities exchange.
- - U.S. SETTLEMENT - The notes, even those linked to an index of non-U.S.
securities, trade and are settled in the U.S. market. You therefore do not
have to address issues of clearance, custody and settlement of non-U.S.
securities even when the notes are linked to an index of those securities.
- - LOW MINIMUM INVESTMENT - Minimum investments start at $10 per unit of notes.
SELECTED RISK CONSIDERATIONS
An investment in the notes involves significant risks. These risks are explained
in more detail in the "Risk Factors Related to the Notes" section of this
Prospectus Supplement. Some are summarized here.
- - POSSIBILITY OF PARTIAL LOSS OF CAPITAL - If the ending index value (as
calculated over the applicable period prior to maturity) is less than the
index value at the time the notes are first sold to the public, you will
receive less than the original principal amount of the notes at maturity, even
if the value of the underlying index exceeded the starting index value at one
or more times over the life of the notes. However, in all cases, the payment
at maturity will not be less than 90% of the original amount invested. Even if
a supplemental amount due to appreciation of the index is paid, the total
yield on the notes to you may be less than that on a normal fixed income
instrument.
- - NO CURRENT INCOME - You will not receive any periodic interest payments on the
notes. Unlike holders of the stocks underlying the index, investors in the
notes will not receive any dividend payments or other distributions on those
stocks.
- - LIQUIDITY - The notes will be listed on a major exchange, but there can be no
guarantee of liquidity in the secondary market. Although Salomon Smith Barney
Inc. currently intends to make a market in the notes, it is not obligated to
do so.
- - POSSIBLE LOSS OF VALUE IN SECONDARY MARKET - The market price for the notes
will be affected by a number of interrelated factors including, but not
limited to, supply and demand, the level of the underlying index, the
volatility of the index, dividend rates on stocks underlying the index, the
time remaining to maturity, the level of interest rates and other economic
conditions, as well as the issuer's perceived creditworthiness. For these
reasons, the notes may trade at prices below their initial issue price and
investors selling their notes prior to maturity could thus receive
substantially less than the amount of their original investment.
<PAGE> 3
SALOMON SMITH BARNEY
A member of citigroup (LOGO)
PROSPECTUS SUPPLEMENT
(To Prospectus Dated December 1, 1997)
6,500,000 UNITS
SALOMON SMITH BARNEY HOLDINGS INC.
CALLABLE EQUITY LINKED NOTES
BASED UPON THE
THESTREET.COM INTERNET SECTOR INDEX
DUE MAY 30, 2006
($10 INITIAL PRINCIPAL AMOUNT PER UNIT)
------------------------
GENERAL:
- - Senior unsecured debt securities of Salomon Smith Barney Holdings Inc.
- - Issuable and transferable only in Units of $10 or integral multiples thereof.
- - No payments prior to maturity, unless called by the Company.
- - The Notes have been approved for listing on the American Stock Exchange under
the symbol "SSB", subject to official notice of issuance.
PAYMENT AT MATURITY:
- - Initial principal amount ($10 per Unit) + Supplemental Redemption Amount
(which may be positive, negative or zero).
- - The Supplemental Redemption Amount will be based on the percentage increase or
decrease in the TheStreet.com Internet Sector Index during the term of the
Notes.
- - The Supplemental Redemption Amount may be NEGATIVE, but will not be less than
-$1.00 per Unit. If the Supplemental Redemption Amount is negative, you will
receive at maturity an amount that is less than the amount of your original
investment, although you will not receive less than $9.00 per Unit.
CALL FEATURE:
- - The Company may call (redeem) all (but not less than all) of the Notes during
certain specified periods prior to the stated maturity date, starting in 2002.
If we elect to call the Notes, you will receive only the specified Call Price
and will not receive the $10 initial principal amount or any Supplemental
Redemption Amount.
For information as to the Supplemental Redemption Amount, Call Price and
certain United States federal income tax consequences to holders of the Notes,
you should refer to "Description of the Notes -- Determination of the
Supplemental Redemption Amount", "-- Early Call of the Notes at the Option of
the Company" and "Certain United States Federal Income Tax Considerations" in
this Prospectus Supplement.
TheStreet.com Internet Sector Index is disseminated by the Philadelphia Stock
Exchange, Inc. and has been licensed for use by the Company in connection with
certain securities, including the Notes. TheStreet.com, Inc. owns all
proprietary interests in the name and mark "TheStreet.com Internet Sector". The
Notes are not sponsored, endorsed, sold or promoted by the Philadelphia Stock
Exchange, Inc. or TheStreet.com, Inc. Neither the Philadelphia Stock Exchange,
Inc. nor TheStreet.com, Inc. makes any representation regarding the advisability
of investing in the Notes.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS RELATING TO THE NOTES" BEGINNING ON PAGE S-7.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROCEEDS TO
PUBLIC UNDERWRITING THE COMPANY
OFFERING PRICE DISCOUNT (BEFORE EXPENSES)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit........................... $10.00 $0.35 $9.65
- ---------------------------------------------------------------------------------------------------------------------------------
Total.............................. $65,000,000 $2,275,000 $62,725,000
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------
The underwriter is offering the Notes subject to various conditions. The
underwriter expects to deliver the Notes to purchasers on or about May 28, 1999.
SALOMON SMITH BARNEY
May 25, 1999
<PAGE> 4
SUMMARY INFORMATION -- Q&A
This summary includes questions and answers that highlight selected
information from the accompanying Prospectus and this Prospectus Supplement to
help you understand the Callable Equity Linked Notes (the "Notes")* based upon
the TheStreet.com Internet Sector Index (the "TSC Internet Sector Index" or the
"Index"), as disseminated by the Philadelphia Stock Exchange, Inc. (the "PHLX").
You should carefully read the entire Prospectus and Prospectus Supplement to
fully understand the terms of the Notes, certain information regarding how the
TSC Internet Sector Index is calculated and maintained, as well as the principal
tax and other considerations that are important to you in making a decision
about whether to invest in the Notes. You should, in particular, carefully
review the section entitled "Risk Factors Relating to the Notes", which
highlights certain risks, to determine whether an investment in the Notes is
appropriate for you. All of the information set forth below is qualified in its
entirety by the more detailed explanation set forth elsewhere in this Prospectus
Supplement and the accompanying Prospectus.
WHAT ARE THE NOTES?
The Notes are a series of unsecured senior debt securities issued by
Salomon Smith Barney Holdings Inc. (the "Company"). The Notes will rank equally
with all other unsecured and unsubordinated debt of the Company. The Notes
mature on May 30, 2006 and do not provide for earlier redemption by you though
they may be called prior to maturity by the Company, as described below. The
Company will make no periodic payments of interest on the Notes. Except in the
case of such an early redemption by the Company prior to maturity (in which case
we will pay you the specified Call Price), the Company will make no other
payments on the Notes until maturity.
Each "Unit" of Notes represents an initial principal amount of $10. You may
transfer the Notes only in Units of $10 and integral multiples thereof. You will
not have the right to receive physical certificates evidencing your ownership
except under limited circumstances. Instead, the Company will issue the Notes in
the form of a global certificate, which will be held by The Depository Trust
Company (the "Depositary") or its nominee. Direct and indirect participants in
the Depositary will record beneficial ownership of the Notes by individual
investors. You should refer to the section "Description of the
Notes -- Book-Entry System" in this Prospectus Supplement.
WHAT WILL I RECEIVE AT MATURITY OF THE NOTES?
We have designed the Notes for investors who want to protect a significant
portion of their investment by receiving at least 90% of their initial principal
at maturity, while also having an opportunity to participate in a possible
increase in the Index during the term of the Notes. At maturity, unless we have
earlier called the Notes, you will receive a payment on each Unit of Notes equal
to the sum of two amounts: the initial principal amount ($10 per Unit) and the
"Supplemental Redemption Amount", which is based on the percentage increase or
decrease in the Index and may be positive, zero or negative, although not less
than -$1.00 per Unit, as described in more detail below. You will not receive
less than 90% of the initial principal amount of your Notes ($9 per Unit) at
maturity.
Initial Principal Amount
The initial principal amount per Unit is $10.
Supplemental Redemption Amount
The Supplemental Redemption Amount per Unit will equal:
<TABLE>
<S> <C>
Ending Value - Starting Value
$10 X
----------------------------------------
Starting Value
</TABLE>
but will not be less than -$1.00.
- ---------------
* Please refer to the "Index of Terms" attached hereto as Appendix A for a
listing of defined terms (which are capitalized) and the pages on which they
are defined in this Prospectus Supplement.
S-2
<PAGE> 5
"Calculation Period" means the period from and including the seventh
scheduled Index Business Day (as defined below) prior to the maturity date to
and including the second scheduled Index Business Day prior to the maturity
date. A "Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event (as defined below) has not occurred.
"Ending Value" means the average of the values of the Index at the close of
the market on each of the first five Index Business Days during the Calculation
Period. We may calculate the Ending Value by reference to fewer than five or
even a single day's closing value if there is a disruption in the trading of the
component stocks comprising the Index or certain futures or options relating to
the Index during the Calculation Period. You should refer to the section
"Description of the Notes -- Market Disruption Events" in this Prospectus
Supplement.
"Starting Value" equals 550.30, which was the value of the Index at the
market close on May 25, 1999, the date on which the Notes were priced for
initial sale to the public.
For more specific information about the Supplemental Redemption Amount,
please see "Description of the Notes -- Determination of the Supplemental
Redemption Amount" in this Prospectus Supplement.
The Company will pay you a positive Supplemental Redemption Amount only if
it has not earlier called the Notes and if the Ending Value is greater than the
Starting Value. IF THE ENDING VALUE IS EQUAL TO THE STARTING VALUE, THE
SUPPLEMENTAL REDEMPTION AMOUNT WILL BE ZERO. IF THE ENDING VALUE IS LESS THAN
THE STARTING VALUE, THE SUPPLEMENTAL REDEMPTION AMOUNT WILL BE NEGATIVE, THOUGH
IT WILL NOT BE LESS THAN -$1.00 PER UNIT; AS A RESULT, YOU COULD RECEIVE AT
MATURITY AN AMOUNT THAT IS LESS THAN THE AMOUNT OF YOUR ORIGINAL INVESTMENT.
SUPPLEMENTAL REDEMPTION AMOUNT -- EXAMPLES
Here are three examples of hypothetical Supplemental Redemption Amount
calculations:
Example 1: The Ending Value is more than 10% lower than the Starting Value:
Starting Value: 550.30
Hypothetical Ending Value: 467.76
<TABLE>
<S> <C> <C> <C>
467.76 - 550.30
Supplemental Redemption Amount (per Unit) = $10 X --------------- = (-$1.50), but the
550.30 Supplemental
Redemption Amount
cannot be less than
-$1.00.
</TABLE>
Total payment at maturity (per Unit) = $10 - $1.00 = $9.00
Example 2: The Ending Value is less than 10% lower than the Starting Value:
Starting Value: 550.30
Hypothetical Ending Value: 522.79
<TABLE>
<S> <C> <C> <C>
522.79 - 550.30
Supplemental Redemption Amount (per Unit) = $10 X --------------- = -$0.50
550.30
</TABLE>
Total payment at maturity (per Unit) = $10 - $0.50 = $9.50
S-3
<PAGE> 6
Example 3: The Ending Value is greater than the Starting Value:
Starting Value: 550.30
Hypothetical Ending Value: 605.33
<TABLE>
<S> <C> <C> <C>
605.33 - 550.30
Supplemental Redemption Amount (per Unit) = $10 X --------------- = $1.00
550.30
</TABLE>
Total payment at maturity (per Unit) = $10 + $1.00 = $11.00
HOW DOES THE CALL FEATURE WORK?
We may choose to call all (but not less than all) of the Notes on any Index
Business Day during the 30-day period beginning on May 28 in each of 2002, 2003,
2004 or 2005 (each such 30-day period, a "Call Period") by giving at least 15
days' notice to the Trustee as described below. Any such notice will specify the
date (the "Call Date") on which we will pay the applicable call price set forth
below (each such price, a "Call Price") to you.
<TABLE>
<CAPTION>
CALL PERIOD: CALL PRICE:
<S> <C>
30 Day Period Beginning on $17.50 per Unit
May 28, 2002 (175% of the $10 initial principal amount)
30 Day Period Beginning on $20.00 per Unit
May 28, 2003 (200% of the $10 initial principal amount)
30 Day Period Beginning on $22.50 per Unit
May 28, 2004 (225% of the $10 initial principal amount)
30 Day Period Beginning on $25.00 per Unit
May 28, 2005 (250% of the $10 initial principal amount)
</TABLE>
If we elect to call the Notes prior to the stated maturity date, you will
receive only the specified Call Price and will not receive the initial principal
amount or any Supplemental Redemption Amount. If we do not call the Notes prior
to the stated maturity date, the $10 initial principal amount plus the
Supplemental Redemption Amount (which may be positive, negative or zero) that
you receive at the stated maturity date may be greater or less than any of the
Call Prices that would have been payable had we called the Notes.
WHO PUBLISHES THE INDEX AND WHAT DOES IT MEASURE?
The TSC Internet Sector Index is disseminated by the PHLX and is intended
to measure the average performance of a group of stocks within the Internet
sector. The Index is an equal-dollar weighted index made up of the stocks of 20
leading companies involved in internet commerce, service, and software that are
traded on the New York Stock Exchange Inc. (the "NYSE") and the Nasdaq National
Market ("Nasdaq"). European-style options on the Index have been traded on the
PHLX since November 1998. The methodology used to calculate the Index is an
equal-dollar weighted method, meaning that each of the component stocks is
represented in the Index in approximately equal dollar amounts. The PHLX
believes that this method of calculation is important because it provides each
component issue with equivalent influence on the movement of the Index value
instead of allowing one highly capitalized stock to dominate the movement of the
Index. To determine the initial dollar weighting of the stocks, the PHLX
calculated the number of shares of each stock comprising the Index that would
represent an investment of approximately $10,000 in each such stock based on
closing prices on September 30, 1998. As explained in more detail below, the TSC
Internet Sector Index is re-balanced quarterly, following the close of trading
on the third Friday of January, April, July and October, in order to re-align
component weightings. In addition, the list of companies involved in the TSC
Internet Sector Index is subject to change at any time and will be reviewed by
the PHLX every quarter to ensure that it continues to represent the internet
sector accurately.
Please note that an investment in the Notes does not entitle you to any
ownership or other interest in the stocks of the companies included in the TSC
Internet Sector Index, and you will not receive any payments in respect of
dividends that may be payable on those stocks.
S-4
<PAGE> 7
HOW HAS THE INDEX PERFORMED HISTORICALLY?
We have provided a table and a graph showing the closing values of the TSC
Internet Sector Index on each Index Business Day from the Index's inception on
October 1, 1998 through May 25, 1999, as well as providing indicative Index
values for each Index Business Day in the period from May 1, 1998 through
September 30, 1998 that have been calculated as if the Index had been created on
May 1, 1998 and based on historical trading data for each of the stocks
underlying the Index. You can find this information in the section
"TheStreet.com Internet Sector Index -- Historical Data on the Index" in this
Prospectus Supplement. You can observe from the table and the graph that while
the TSC Internet Sector Index has increased over the periods shown, it has
declined significantly in recent weeks (by approximately 30.38% from April 12,
1999 to May 25, 1999 and approximately 15.01% from May 19, 1999 to May 25,
1999). We have provided this information to help you evaluate the behavior of
the TSC Internet Sector Index in various economic environments; however, past
performance is not necessarily indicative of how the Index will perform in the
future. This is particularly true given the short history of the TSC Internet
Sector Index. You should refer to the section "Risk Factors Relating to the
Notes -- Relationship of the Notes and the Index".
WHAT ABOUT TAXES?
If you are a U.S. individual or taxable entity, you generally will be
required to pay taxes on ordinary income from the Notes over their term based
upon an estimated yield for the Notes, even though you will not receive any
payments from us until maturity or the Call Date. We have determined this
estimated yield, in accordance with regulations issued by the Treasury
Department, solely in order for you to figure out the amount of taxes that you
will owe each year as a result of owning a Note. This estimate is neither a
prediction nor a guarantee of what the actual Supplemental Redemption Amount
will be, that the actual Supplemental Redemption Amount will even exceed zero,
or that we will not elect to call the Notes prior to maturity. We have
determined that this estimated yield will equal 6.39% per annum (compounded
annually).
Based upon this estimated yield, if you pay your taxes on a calendar year
basis and if you buy a Unit of Notes at original issue for $10, you will be
required to pay taxes on the following amounts of ordinary income from the Unit
for each of the following periods: $0.3798 in 1999 (beginning on the issue
date), $0.6650 in 2000, $0.7056 in 2001, $0.7507 in 2002, $0.7987 in 2003,
$0.8520 in 2004, $0.9041 in 2005 and $0.3953 in 2006 (ending at maturity). Any
such amount that you are required to pay taxes on will increase your tax basis
in the Notes.
If you buy a Unit of Notes at original issue for $10 and hold it until
maturity in 2006, the amount of ordinary income that you will be required to pay
taxes on from owning the Unit in 2006 may be greater or less than $5.4512,
depending upon the amount you receive at maturity. Also, if the sum of the
initial principal amount and the Supplemental Redemption Amount (which may be
positive, negative or zero) is less than $15.4512, you may have an ordinary
(rather than capital) loss which you could deduct against other income you may
have in 2006. If we elect to call the Notes prior to maturity, you will have
ordinary income (rather than capital gain) equal to the difference between the
Call Price and your tax basis in the Notes.
If you purchase the Notes at a time other than original issue, the tax
consequences to you may be different. For further information, you should refer
to "Certain United States Federal Income Tax Considerations" in this Prospectus
Supplement.
WILL THE NOTES BE LISTED ON A STOCK EXCHANGE?
The Notes have been approved for listing on the American Stock Exchange
(the "AMEX") under the symbol "SSB", subject to official notice of issuance. You
should be aware that the listing of the Notes on the AMEX will not necessarily
ensure that a liquid trading market will be available for the Notes. You should
review the section "Risk Factors Relating to the Notes -- Possible Illiquidity
of the Secondary Market" in this Prospectus Supplement.
S-5
<PAGE> 8
WHAT IS THE ROLE OF OUR SUBSIDIARY, SALOMON SMITH BARNEY INC.?
Our subsidiary, Salomon Smith Barney Inc. ("Salomon Smith Barney"), is the
underwriter for the offering and sale of the Notes. After the initial offering,
Salomon Smith Barney and/or other subsidiaries of the Company intend to buy and
sell Notes to create a secondary market for holders of the Notes, and may engage
in other activities described in "Underwriting". However, neither Salomon Smith
Barney nor any of these affiliates will be obligated to engage in any of these
activities, or continue them once it has started.
Salomon Smith Barney will also be our agent (the "Calculation Agent") for
purposes of calculating the Starting Value, the Ending Value and the
Supplemental Redemption Amount and in determining whether a Market Disruption
Event has occurred. Potential conflicts of interest may exist between Salomon
Smith Barney and you as a holder of the Notes. Please refer to "Risk Factors
Relating to the Notes -- Affiliation of the Company and the Calculation Agent"
in this Prospectus Supplement.
CAN YOU TELL ME MORE ABOUT THE COMPANY?
Salomon Smith Barney Holdings Inc. is a holding company that provides
investment banking, securities and commodities trading, brokerage, asset
management and other financial services through its subsidiaries. The Company is
a subsidiary of Citigroup Inc. (formerly Travelers Group Inc.) ("Citigroup"), a
diversified financial services holding company. On October 8, 1998, Travelers
Group Inc. and Citicorp completed a merger, pursuant to which Citicorp was
merged into a subsidiary of Travelers Group Inc. and Travelers Group Inc.
changed its name to Citigroup Inc.
For additional information about the Company, you should refer to the
section "The Company" in the accompanying Prospectus. You should also read the
other documents that the Company has filed with the Securities and Exchange
Commission (the "SEC"), which you can find by referring to the section "Where
You Can Find More Information" in the Prospectus.
ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?
Yes, the Notes are subject to a number of risks. Please refer to the
section "Risk Factors Relating to the Notes" in this Prospectus Supplement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the SEC pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (File No. 1-4346), are incorporated herein by reference: (i) the Annual
Report on Form 10-K for the year ended December 31, 1998, (ii) the Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999 and (iii) the Current
Reports on Form 8-K filed on January 25, 1999, February 25, 1999 and April 19,
1999. You should refer to "The Company -- Where You Can Find More Information"
and "Incorporation of Certain Documents by Reference" in the Prospectus. These
documents may also be accessed electronically by means of the SEC's home page on
the world wide web on the Internet at "http://www.sec.gov".
S-6
<PAGE> 9
RISK FACTORS RELATING TO THE NOTES
An investment in the Notes entails significant risks not associated with
similar investments in a conventional debt security, including the following:
COMPARISON TO OTHER SECURITIES
You May Receive Less Than the Amount of Your Original Investment At
Maturity. In the event that the Ending Value is less than the closing value of
the Index on May 25, 1999 (i.e., the Starting Value), the Supplemental
Redemption Amount will be NEGATIVE. In any such case you will receive less than
the initial principal amount of your Notes at maturity, and can lose up to 10%
of your original investment (you will not receive less than $9 per unit). This
may be true even if the value of the Index exceeds the Starting Value at one or
more times during the life of the Notes but later falls below that threshold.
The Supplemental Redemption Amount May Be Zero. In the event that the
Ending Value equals the Starting Value, the Supplemental Redemption Amount will
be ZERO. This may be true even if the value of the Index exceeds the Starting
Value at one or more times during the life of the Notes but later falls. If the
Supplemental Redemption Amount is zero, at maturity we will pay you only the
initial principal amount of your Notes.
No Periodic Interest. No periodic payments of interest will be made on the
Notes or the principal amount thereof. However, the payment of a positive
Supplemental Redemption Amount at maturity or that portion of any Call Price
that exceeds the initial principal amount may be deemed to be interest for tax
purposes.
Yield May Be Lower than the Yield on a Standard Debt Security of Comparable
Maturity. The amount we pay you at maturity may be less than the return you
could earn on other investments. Because the Ending Value may be less than,
equal to or only slightly greater than the Starting Value, the effective yield
to maturity on the Notes (which is linked to the amount by which the Ending
Value exceeds the Starting Value) may be less than that which would be payable
on a conventional fixed-rate, non-callable debt security of the Company. In
addition, any such return may not fully compensate you for any opportunity cost
to you when you take into account inflation and other factors relating to the
time value of money.
Return Does Not Reflect Dividends. Your return on the Notes may not
reflect the return you would realize if you actually owned the stocks underlying
the Index and received any dividends that may be paid on those stocks because
the Index is calculated by reference to the prices of the stocks comprising the
Index without taking into consideration the value of any dividends that may be
paid on those stocks.
Call Price May be Lower than Expected Payment at Maturity. Because the
Call Price is determined by reference to a pre-established schedule, rather than
with regard to the value of the Index at the relevant time, the Call Price
payable by the Company in the event of any early redemption of the Notes may be
less than the total payment at maturity that an investor may expect to receive
at such time, based on the then-current value of the Index.
RELATIONSHIP OF THE NOTES AND THE INDEX
The historical Index values should not be taken as an indication of the
future performance of the Index during the term of the Notes. This is
particularly true given the short history of the TSC Internet Sector Index,
which has only been in existence since October 1, 1998. The performance of the
TSC Internet Sector Index and the sector that it reflects have recently been
more volatile than that of many other market segments of the economy. In
particular, the value of the Index has declined significantly in recent weeks,
by approximately 30.38% from April 12, 1999 to May 25, 1999 and approximately
15.01% from May 19, 1999 to May 25, 1999. While the trading prices of the stocks
underlying the Index will determine the value of the Index, it is impossible to
predict whether the value of the Index will fall or rise. Trading prices of the
stocks underlying the Index will be influenced by both the complex and
interrelated political, economic, financial and other factors that can affect
the capital markets generally and the equity trading markets on which the
S-7
<PAGE> 10
underlying stocks are traded, and by various circumstances that can influence
the values of the underlying Internet stocks or a particular underlying stock.
The policies of the PHLX concerning additions, deletions and substitutions
of the stocks underlying the TSC Internet Sector Index and the manner in which
the PHLX takes account of certain changes affecting such underlying stock may
affect the value of the Index. The policies of PHLX with respect to the
calculation of the Index could also affect the value of the Index. The PHLX may
discontinue or suspend calculation or dissemination of the Index or materially
alter the methodology by which it calculates the Index. Any such actions could
affect the value of the Notes. See "TheStreet.com Internet Sector Index" below.
POSSIBLE ILLIQUIDITY OF SECONDARY MARKET
The Notes have been approved for listing on the AMEX, subject to official
notice of issuance. However, there can be no assurance as to whether there will
be a secondary market in the Notes or if there were to be such a secondary
market, whether such market would be liquid or illiquid. If the secondary market
for the Notes is limited, there may be few buyers when you will decide to sell
your Notes if you do not wish to hold your investment until maturity. This may
affect the price you will receive. There is currently no secondary market for
the Notes.
FACTORS AFFECTING TRADING VALUE OF THE NOTES
We believe that the value of the Notes in the secondary market will be
affected by supply and demand of the Notes, the value of the Index and a number
of other factors. Some of these factors are interrelated in complex ways; as a
result, the effect of any one factor may be offset or magnified by the effect of
another factor. The price at which you will be able to sell the Notes prior to
maturity may be at a discount, which could be substantial, from the initial
principal amount thereof, if, at such time, the value of the Index is less than,
equal to, or not sufficiently above the Starting Value. The following paragraphs
describe what we expect to be the impact on the market value of the Notes of a
change in a specific factor, assuming all other conditions remain constant.
Call Feature. Our ability to call the Notes prior to their stated maturity
date is likely to limit the secondary market price at which the Notes will trade
in the event that the value of the Index exceeds the Starting Value by a
sufficient amount to make the exercise of the call attractive to the Company. In
particular, we expect that the secondary market price of the Notes during a Call
Period will not exceed the applicable Call Price (even if the value of the Index
were high enough to cause the market price to do so in the absence of the call
feature), due to the fact that we will be able to call the Notes and pay only
such Call Price. We believe that in such circumstances if we did not have the
right to call the Notes, the secondary market price of the Notes could be
significantly different.
Index Value. We expect that the market value of the Notes will likely
depend substantially on the relationship between the current Index value and the
Starting Value. If you choose to sell your Notes when the value of the Index
exceeds the Starting Value, you may receive substantially less than the amount
that would be payable at maturity based on that Index value because of
expectations that the Index will continue to fluctuate between such time and the
time when the Ending Value is determined. If you choose to sell your Notes when
the value of the Index is below the Starting Value, you can expect to receive
less than the $10 initial principal amount per Unit of Notes. Political,
economic and other developments that affect the stocks underlying the Index may
also affect the value of the Index and, thus, the value of the Notes.
Interest Rates. Because the Notes repay the initial principal amount plus
the Supplemental Redemption Amount (which may be positive, negative or zero) at
maturity, we expect that the trading value of the Notes will be affected by
changes in interest rates. In general, if U.S. interest rates increase, the
trading value of the Notes may be adversely affected, and if U.S. interest rates
decrease, the trading value of the Notes may be favorably affected. Interest
rates may also affect the U.S. economy and, in turn, the value of the Index,
which (for the reasons discussed above) would affect the value of the Notes.
Rising interest rates may lower the value of the Index and, thus, the value of
the Notes. Falling interest rates may increase the value of the Index and, thus,
the value of the Notes.
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<PAGE> 11
Volatility of the Index. Volatility is the term used to describe the size
and frequency of market fluctuations. Because the Index is based on a relatively
small basket of common stocks, the value of the Index may be subject to greater
volatility. If the volatility of the Index increases or decreases, the trading
value of the Notes may be adversely affected.
Time Remaining to Maturity. The Notes may trade at a value above that
which would be expected based on the level of interest rates and the Index. Any
such difference will reflect a "time premium" resulting from expectations
concerning the value of the Index during the period prior to the stated maturity
of the Notes. However, as the time remaining to the stated maturity of the Notes
decreases, this time premium may decrease, adversely affecting the trading value
of the Notes.
Dividend Yields. Currently, none of the stocks underlying the Index pay
dividends. If one or more of the underlying stocks were to begin to pay
dividends, we expect that the value of the Notes may be adversely affected,
since the Index does not incorporate the value of such payments.
Company Credit Ratings, Financial Condition and Results. Actual or
anticipated changes in the Company's credit ratings, financial condition or
results may affect the market value of the Notes.
Economic Conditions and Earnings Performance of Underlying
Companies. General economic conditions and earnings results of the companies
whose common stocks comprise the Index and real or anticipated changes in such
conditions or results may affect the market value of the Notes. All of the
companies whose common stocks comprise the Index are in the Internet sector.
There are a number of different views regarding the valuation of stocks in the
Internet sector and the future performance of these stocks; some of these views
suggest that these stocks are currently overvalued. In addition, you should
consider the following risks related to the Internet sector:
- Limited Operating History. Internet companies in general have relatively
short operating histories. They are subject to the risks, expenses and
difficulties frequently encountered by early-stage companies in new and
rapidly evolving markets, such as evolving and unpredictable business
models, intense competition, management of growth and rapid changes in
customer demands and industry standards. The failure of an Internet
company to address these challenges could have a material adverse effect
on its business, results of operations, financial condition and
prospects.
- Potential Fluctuations in Future Results. Due to the limited operating
history of Internet companies and the unpredictability of the industry,
Internet companies generally have neither internal nor industry-based
historical financial data for any significant period of time upon which
to project revenues or base planned operating expenses. The results of
operations of a particular Internet company may fluctuate significantly
in the future due to a variety of factors, many of which relate to the
Internet industry as a whole and are outside the control of any
individual Internet company, such as the rate of growth, usage and
acceptance of the Internet as information media, the rate of acceptance
of the Internet as an advertising medium and a channel of commerce, and
specific economic conditions in the Internet markets.
- Intense Competition. The market for the Internet products and services
is highly competitive, and this competition is expected to continue to
intensify. Increased competition could result in price reductions,
reduced margins or loss of market share. There can be no assurance that a
particular Internet company will be able to compete successfully against
its competitors or that the increased competition will not have a
material adverse effect on its business, results of operations, financial
condition and prospects.
- Risk of System Failure. The ability of Internet companies to provide
timely and continuous online products and services and to manage
advertising depends on the efficient and uninterrupted operation of their
computer and communications hardware and software systems. These systems
and operations are vulnerable to damage or interruption from human error,
natural disasters, power loss, telecommunication failures, break-ins,
sabotage, computer viruses, intentional acts of vandalism and similar
events. The occurrence of any such event that interrupts or delays the
operations of an Internet company would have a material adverse effect on
the business, results of operations, financial condition and prospects of
such company.
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- Risks of Year 2000 Non-Compliance. Many currently installed computer
systems and software products are coded to accept only two-digit entries
to identify a year in the date code field. Consequently, on January 1,
2000, many of these systems could fail or malfunction because they may
not be able to distinguish between 20th century dates and 21st century
dates. Accordingly, all Internet companies must upgrade their computer
systems and software products to comply with applicable "Year 2000"
requirements. The failure of an Internet company, or any of its viewers,
customers, linked sites, advertisers, suppliers or other companies on
which it relies, to be Year 2000 compliant could materially affect its
business, results of operations, financial conditions and prospects.
- Dependence on Continued Growth in Use of the Internet. Future growth in
the revenues of Internet companies will depend on the widespread
acceptance and use of the Internet as a source of information and
entertainment and as a vehicle for commerce in goods and services. Rapid
growth in the use of the Internet is a recent phenomenon, and there can
be no assurance that such use will continue to develop or that a
sufficient base of users will emerge to support the combined companies'
businesses. Moreover, critical issues concerning the commercial use of
the Internet (including security, reliability, cost, ease of use and
access, quality of service and acceptance of advertising) remain
unresolved and may negatively affect growth in the use of the Internet.
Internet usage may be inhibited for a number of reasons, such as
inadequate development of the necessary network infrastructure, failure
to develop critical enabling technologies in a timely manner, security
concerns and government regulations. In addition, corporations and other
networks providing access to the Internet may restrict access to certain
sites or hours of usage, which could limit access to and reduce traffic
on web sites. If the use of the Internet does not continue to grow or
grows more slowly than expected, the business, financial condition,
operating results and prospects of Internet companies would be materially
adversely affected.
- Unproven Acceptance of Internet Advertising. Standards to measure the
effectiveness of web advertising have yet to be widely developed. If
standards do not develop, existing advertisers may not continue or
increase their levels of web advertising. Furthermore, advertisers that
have traditionally relied upon other advertising media may be reluctant
to advertise on the web. The business, results of operations, financial
condition and prospects of Internet companies could be materially
adversely affected if the market for web advertising declines or develops
more slowly than expected. In addition, "filter" software programs that
limit or prevent advertising from being delivered to a web user's
computer are available. Widespread adoption of this software could
materially adversely affect the commercial viability of web advertising,
which could materially adversely affect the advertising revenues of
Internet companies.
- Government Regulation And Legal Uncertainties Relating to the
Internet. Existing domestic and international laws and regulations
specifically regulate communications or commerce on the web. Furthermore,
laws and regulations that address issues such as user privacy, pricing,
online content regulation, taxation and the characteristics and quality
of online products and services are under consideration by federal,
state, local and foreign governments and agencies. In addition, several
telecommunications companies have petitioned the Federal Communications
Commission to regulate Internet service providers and online services
providers in a manner similar to the regulation of long distance
telephone carriers and to impose access fees on such companies. This
regulation, if imposed, could increase the cost of transmitting data over
the web. Moreover, it may take years to determine the extent to which
existing laws relating to issues such as intellectual property ownership
and infringement, libel, obscenity and personal privacy are applicable to
the web. New laws or regulations relating to the web, or certain
application or interpretation of existing laws, may impede the growth in
the use of the web or otherwise materially adversely affect the business
of Internet companies.
- Concerns About Web Security. Concern about the transmission of
confidential information over the Internet has been a significant barrier
to electronic commerce and communications over the web. Any
well-publicized compromise of security could deter more people from using
the web or from using it to conduct transactions that involve the
transmission of confidential information, such as signing up for a paid
subscription, executing stock trades or purchasing goods or services.
Because many of the Internet advertisers seek to advertise on the web to
encourage people to use the web to purchase goods or
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<PAGE> 13
services, the business, results of operations and financial condition of
Internet companies could be materially adversely affected if the Internet
users significantly reduce their use of the web because of security
concerns. In addition, Internet companies may incur significant costs to
protect themselves against the threat of security breaches or to
alleviate problems caused by these breaches.
- Management of Growth. Like other early-stage companies, Internet
companies in general have experienced rapid growth in their operations.
This rapid growth has placed, and the anticipated future growth will
continue to place, a significant strain on the managerial, operational
and financial resources of Internet companies. To manage the growth,
Internet companies will need to continue to implement and improve their
operational, financial and management information systems and to hire,
train, motivate and manage their employees. The failure of an Internet
company to successfully manage any of these issues would have a material
adverse effect on its business, results of operations, financial
condition and prospects.
- Intellectual Property and Proprietary Rights. The success of an Internet
company depends significantly upon its proprietary technology. Internet
companies generally rely on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual
agreements to protect their proprietary rights. The protective steps
taken by a particular Internet company may be inadequate to deter
misappropriation of its proprietary information, which may result in harm
to its brand, devaluation of its proprietary content and decrease in its
competitiveness. Furthermore, the defense of a company's intellectual
property rights could require the expenditure of significant financial
and managerial resources. In addition, an Internet company may become
subject to infringement claims brought by other companies. Any such
infringement claim, even if not meritorious, could result in the
expenditure of significant financial and managerial resources on the part
of such Internet company, which could materially adversely affect its
business, results of operations and financial condition.
- Technological Change and New Products and Services. The market for
Internet products and services is characterized by rapid technological
change, changing customer needs, frequent new product introductions and
evolving industry standards. A particular Internet company's future
success will depend on its ability to continually and timely introduce
new products, services and technologies or improve the performance,
features and reliability of its existing products and services in
response to both evolving demands of the marketplace and competitive
product offerings. If an Internet company fails to develop new or
improved products, services or technologies in a timely manner in
response to changing market conditions or customer requirements, its
business, results of operations, financial condition and prospects could
be materially adversely affected.
We want you to understand that the impact of one of the factors specified
above, such as an increase in interest rates, may offset some or all of any
change in the trading value of the Notes attributable to another factor, such as
an increase in the Index value.
In general, assuming all relevant factors are held constant, we expect that
the effect on the trading value of the Notes of a given change in most of the
factors listed above will be less if it occurs later in the term of the Notes
than if it occurs earlier in the term of the Notes.
AFFILIATION OF THE COMPANY AND CALCULATION AGENT
Because the Calculation Agent is an affiliate of the Company, potential
conflicts of interest may exist between the Calculation Agent and the holders of
the Notes, including with respect to certain determinations and judgments that
the Calculation Agent must make in determining the Ending Value (and accordingly
the Supplemental Redemption Amount) or whether a Market Disruption Event has
occurred. See "Description of the Notes -- Market Disruption Events",
"-- Discontinuance of the Index" and "-- Alteration of Method of Calculation"
below. Salomon Smith Barney, as a registered broker-dealer, is required to
maintain policies and procedures regarding the handling and use of confidential
proprietary information, and such policies and procedures will be in effect
throughout the term of the Notes to restrict the use of information relating to
the calculation of the Index values that the Calculation Agent may be required
to make prior to their dissemination. Salomon Smith Barney is obligated to carry
out its duties and functions as Calculation Agent in
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<PAGE> 14
good faith and using its reasonable judgment. Salomon Smith Barney may also
engage in certain activities in connection with hedging the Company's obligation
under the Notes. See "Use of Proceeds and Hedging" in the accompanying
Prospectus.
PURCHASES AND SALES BY AFFILIATES OF THE COMPANY
The Company, Salomon Smith Barney and other affiliates of the Company may
from time to time buy or sell the stocks underlying the Index or derivative
instruments related to the Index for their own accounts in connection with their
normal business practices or in connection with hedging the Company's
obligations under the Notes. These transactions could affect the price of such
stocks or the value of the Index.
POTENTIAL FEDERAL INCOME TAX CONSEQUENCES
Because the Notes will be treated by the Company as contingent payment debt
obligations of the Company, and because by accepting a Note holders thereof
agree to this treatment of the Notes, U.S. holders of a Note will be required to
include original issue discount for U.S. federal income tax purposes ("Tax OID")
in gross income on a constant yield basis over the term of such Note. Such Tax
OID will be includible in a U.S. holder's gross income for U.S. federal income
tax purposes (as ordinary income) over the life of the Note, even though no
payments are to be made on the Note except at maturity or on the Call Date. The
amount of Tax OID is calculated based (in part) on an assumed amount payable at
maturity. This assumed amount is neither a prediction nor guarantee of the
actual amount payable at maturity or that the Company will not elect to call the
Notes prior to maturity. If the Company does not call the Notes and the amount
actually paid at maturity is, in fact, less than the assumed amount payable at
maturity, a U.S. holder will have recognized taxable income in periods prior to
maturity that exceeds such holder's economic income from the holding of the Note
during such periods (with an offsetting ordinary loss at the maturity of the
Note). If the Company calls the Notes or a U.S. holder otherwise sells the Note
prior to maturity, the holder will be required to treat any gain recognized upon
the disposition of the Note as ordinary income (rather than capital gain). In
addition, there can be no assurance that the Internal Revenue Service would not
take a position contrary to that taken by the Company. See "Certain United
States Federal Income Tax Considerations" in this Prospectus Supplement.
OTHER CONSIDERATIONS
If a bankruptcy proceeding is commenced in respect of the Company, the
claim of a holder of Notes may, under Section 502(b)(2) of Title 11 of the
United States Code, be limited to the initial principal amount of such Notes
plus a Supplemental Redemption Amount (which may be positive, negative or zero)
calculated as though the maturity date of the Notes were the date of the
commencement of the proceeding.
------------------------
We suggest that prospective investors who consider purchasing the Notes
reach an investment decision only after carefully considering the suitability of
the Notes in light of their particular circumstances.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Offered Securities")
supplements the description of the general terms and provisions of the Debt
Securities set forth in the Prospectus, to which description reference is hereby
made. The following summary of the Notes is qualified in its entirety by
reference to the Senior Debt Indenture referred to in the Prospectus.
GENERAL
The Callable Equity Linked Notes based upon the TSC Internet Sector Index
(the "Notes") are a series of Debt Securities issued under the Senior Debt
Indenture described in the accompanying Prospectus. The aggregate initial
principal amount of Notes issued will be limited to $65,000,000 (6,500,000
Units). The
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Notes will mature on May 30, 2006, will constitute part of the senior debt of
the Company and will rank pari passu with all other unsecured and unsubordinated
debt of the Company. The Notes will be issued only in fully registered form and
in denominations of $10 (per Unit) and integral multiples thereof.
The "Trustee" under the Senior Debt Indenture will be The Bank of New York
under an indenture dated as of October 27, 1993, as amended from time to time. A
copy of the Senior Debt Indenture under which The Bank of New York serves as
Trustee has been filed with the SEC as an exhibit to the Registration Statement
of which the accompanying Prospectus forms a part and is hereby incorporated by
reference as part of the Registration Statement. Section numbers in the Bank of
New York Senior Debt Indenture take the form "1.01", "2.01" and so forth, rather
than "101", "201" and so forth. Section references in the accompanying
Prospectus should be read accordingly.
Reference is made to the accompanying Prospectus for a detailed summary of
additional provisions of the Notes and of the Senior Debt Indenture under which
the Notes will be issued.
INTEREST
No interest is payable on the Notes or the principal amount thereof, other
than (i) in connection with a default on payment at maturity, (ii) if and to the
extent that the Supplemental Redemption Amount exceeds zero and is deemed to be
an interest payment or (iii) if and to the extent that the Company calls all the
Notes and the amount by which the Call Price exceeds the $10 initial principal
amount is deemed to be an interest payment.
REDEMPTION AT THE OPTION OF THE HOLDER; DEFEASANCE
The Notes are not subject to redemption at the option of any holder prior
to maturity and are not subject to the defeasance provisions described in the
accompanying Prospectus under "Description of Debt Securities -- Defeasance".
PAYMENT AT MATURITY
Unless the Notes have been previously called by the Company, at maturity
(including as a result of acceleration or otherwise), a holder of a Note will be
entitled to receive the initial principal amount thereof plus a Supplemental
Redemption Amount (which may be positive, negative or zero) as provided below.
If the Ending Value is equal to the Starting Value, the holder of a Note will be
entitled to receive only the initial principal amount thereof. If the Ending
Value is less than the Starting Value, the holder of a Note will be entitled to
receive only a portion, but no less than 90%, of the initial principal amount
thereof. The initial principal amount will equal $10 per Unit of Notes.
DETERMINATION OF THE SUPPLEMENTAL REDEMPTION AMOUNT
The Supplemental Redemption Amount for each Unit of Notes ($10 initial
principal amount) will be determined by the Calculation Agent and will equal:
<TABLE>
<S> <C>
Ending Value - Starting Value
$10 X
-----------------------------
Starting Value
</TABLE>
provided, however, that in no event will the Supplemental Redemption Amount be
less than -$1.00. As indicated in the formula above, the Supplemental Redemption
Amount for the Notes will be calculated using the $10 initial principal amount
of the Notes.
The "Ending Value" will be determined by the Calculation Agent and will
equal the average (arithmetic mean) of the closing values of the Index on each
of the first five Calculation Days during the Calculation Period. If there are
fewer than five Calculation Days, then the Ending Value will equal the average
(arithmetic mean) of the closing values of the Index on such Calculation Days,
and if there is only one Calculation Day, then the Ending Value will equal the
closing value of the Index on such Calculation Day. If no Calculation Days occur
during the Calculation Period, then the Ending Value will equal the closing
value
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<PAGE> 16
of the Index on the last scheduled Index Business Day in the Calculation Period,
regardless of the occurrence of a Market Disruption Event on such day. See
"-- Market Disruption Events" below.
The "Starting Value" equals 550.30, which was the closing value of the
Index on May 25, 1999.
The "Calculation Period" means the period from and including the seventh
scheduled Index Business Day prior to the maturity date to and including the
second scheduled Index Business Day prior to the maturity date. A "Calculation
Day" means any Index Business Day during the Calculation Period on which a
Market Disruption Event has not occurred.
An "Index Business Day" is a day on which each of the AMEX, the PHLX, the
NYSE and Nasdaq is open for trading and the Index or any Successor Index, as
defined below, is calculated and published. The Calculation Agent may, in its
discretion, add to (or delete from) the definition of "Index Business Day" any
other major U.S. exchange which commences to serve (or ceases to serve) as the
primary exchange upon which a stock underlying the Index trades or as an
exchange upon which a futures contract, an option on a futures contract or an
option contract relating to the Index trades. All determinations made by the
Calculation Agent shall be at the sole discretion of the Calculation Agent and
shall be conclusive for all purposes and binding on the Company and the
beneficial owners of the Notes, absent manifest error.
EARLY CALL OF THE NOTES AT THE OPTION OF THE COMPANY
The Company, in its sole discretion, may, by giving at least 15 days'
notice to the Trustee, elect to call the Notes offered hereby, in whole but not
in part, on any Index Business Day during the 30-day period beginning on May 28
in each of 2002, 2003, 2004 or 2005 at the following Call Prices:
<TABLE>
<CAPTION>
CALL PERIOD: CALL PRICE:
<S> <C>
30 Day Period Beginning on $17.50 per Unit
May 28, 2002 (175% of the $10 initial principal amount)
30 Day Period Beginning on $20.00 per Unit
May 28, 2003 (200% of the $10 initial principal amount)
30 Day Period Beginning on $22.50 per Unit
May 28, 2004 (225% of the $10 initial principal amount)
30 Day Period Beginning on $25.00 per Unit
May 28, 2005 (250% of the $10 initial principal amount)
</TABLE>
Generally, the Company can be expected to call the Notes if the value of
the Index has increased to a level at which the expected market value of notes
with identical terms but without the call feature would be greater than the Call
Price that the Company would have to pay on the relevant Call Date. A number of
other factors can also be expected to affect the value of the Notes (and thus
the likelihood that the Company will call the Notes) at any time. See "Risk
Factors Relating to the Notes -- Factors Affecting Trading Value of the Notes".
IF WE ELECT TO CALL YOUR NOTES PRIOR TO THE STATED MATURITY DATE, YOU WILL
RECEIVE ONLY THE RELEVANT CALL PRICE AND WILL NOT RECEIVE THE INITIAL PRINCIPAL
AMOUNT PLUS ANY SUPPLEMENTAL REDEMPTION AMOUNT AT MATURITY. If we do not call
the Notes prior to the stated maturity date, the initial principal amount plus
the Supplemental Redemption Amount (which may be positive, negative or zero)
that you will receive at maturity may be greater than or less than any of the
Call Prices that would have been payable had we called the Notes. The Company
may elect to call the Notes on any Index Business Day during a Call Period by
giving notice to the Trustee and specifying the Call Date, which shall be no
later than the 20th day after such call notice is given. The Trustee will
provide notice of such call election to the registered holders of the Notes,
specifying the Call Date, no later than 15 days prior to the Call Date. While
the Notes are held at the Depositary, the registered holder will be the
Depositary, and the Depositary will receive the notice of the call. It is
expected that the Depositary will forward such notice to its Participants which
will pass such notice on to the beneficial owners.
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<PAGE> 17
You should compare the features of the Notes to other available investments
before deciding to purchase the Notes. Due to the uncertainty as to whether the
Notes will earn a positive Supplemental Redemption Amount or be called prior to
the stated maturity date, the return on investment with respect to the Notes may
be higher or lower than the return available on other securities issued by the
Company or by others and available through Salomon Smith Barney. It is suggested
that you reach an investment decision only after carefully considering the
suitability of the Notes in light of your particular circumstances.
HYPOTHETICAL RETURNS
The following table illustrates, for a range of hypothetical ending values
of the Index during the Calculation Period, and based upon the Starting Value of
550.30 and a seven year maturity of the Notes, (i) the hypothetical Ending Value
used to calculate the Supplemental Redemption Amount; (ii) the percentage change
from the Starting Value to the hypothetical Ending Value; (iii) the hypothetical
total amount payable per Unit of Notes; (iv) the hypothetical total rate of
return on the Notes; (v) the hypothetical pretax annualized rate of return on
the Notes; and (vi) the hypothetical pretax annualized rate of return on the
stocks underlying the Index. THIS TABLE ASSUMES THAT THE NOTES ARE NOT CALLED BY
THE COMPANY PRIOR TO THE STATED MATURITY DATE.
<TABLE>
<CAPTION>
PRETAX
PERCENTAGE CHANGE PRETAX ANNUALIZED
HYPOTHETICAL OF ENDING VALUES TOTAL AMOUNT TOTAL RATE OF ANNUALIZED RATE RATE OF RETURN ON
ENDING OVER THE PAYABLE AT MATURITY RETURN ON OF RETURN ON STOCKS UNDERLYING
VALUE(1) STARTING VALUE PER $10 UNIT THE NOTES THE NOTES(2) THE INDEX(2)(3)
- ------------ ----------------- ------------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
467.76 -15.0% $ 9.00 -10.0% -1.50% -2.30%
495.27 -10.0% $ 9.00 -10.0% -1.50% -1.50%
522.79 -5.0% $ 9.50 -5.0% -0.73% -0.73%
550.30(4) 0.0% $10.00 0.0% 0.00% 0.00%
605.33 10.0% $11.00 10.0% 1.36% 1.36%
660.36 20.0% $12.00 20.0% 2.62% 2.62%
715.39 30.0% $13.00 30.0% 3.78% 3.78%
770.42 40.0% $14.00 40.0% 4.86% 4.86%
825.45 50.0% $15.00 50.0% 5.87% 5.87%
880.48 60.0% $16.00 60.0% 6.82% 6.82%
935.51 70.0% $17.00 70.0% 7.71% 7.71%
990.54 80.0% $18.00 80.0% 8.56% 8.56%
1,045.57 90.0% $19.00 90.0% 9.37% 9.37%
1,100.60 100.0% $20.00 100.0% 10.14% 10.14%
1,155.63 110.0% $21.00 110.0% 10.87% 10.87%
1,210.66 120.0% $22.00 120.0% 11.57% 11.57%
1,265.69 130.0% $23.00 130.0% 12.24% 12.24%
1,320.72 140.0% $24.00 140.0% 12.89% 12.89%
1,375.75 150.0% $25.00 150.0% 13.51% 13.51%
</TABLE>
- ---------------
(1) The ending value of the Index is equal to the average of the Index values on
each of the Calculation Days during the Calculation Period.
(2) These annualized rates of return are calculated on a semi-annual
bond-equivalent basis.
(3) This rate of return assumes (i) no transaction fees or expenses; (ii) a
seven-year maturity of the Notes from the date of issue; (iii) a final
ending value of the Index equal to the hypothetical ending value; and (iv)
that the stocks underlying the Index do not pay any dividends during the
term of the Notes.
(4) The Starting Value, which equals the closing value of the Index on May 25,
1999.
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<PAGE> 18
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the total and pretax
rate of return resulting therefrom will depend entirely on the Starting Value
and the actual Ending Value determined by the Calculation Agent as provided
herein. In particular, the actual Ending Value could be lower or higher than
those reflected in the table. Historical data regarding the Index is included in
this Prospectus Supplement under "TheStreet.com Internet Sector Index --
Historical Data on the Index".
MARKET DISRUPTION EVENTS
"Market Disruption Event" means any of the following events, as determined
by the Calculation Agent.
(a) The suspension or material limitation of trading in 20% or more of
the underlying stocks which then comprise the Index or any Successor Index,
in each case, for more than two hours of trading or during the one-half
hour period preceding the close of trading on the NYSE, Nasdaq or any other
applicable organized U.S. exchange. For purposes of this definition,
limitations on trading during significant market fluctuations imposed
pursuant to NYSE Rule 80B (or any applicable rule or regulation enacted or
promulgated by the NYSE, Nasdaq, any other self regulatory organization or
the SEC of similar scope or as a replacement for Rule 80B, as determined by
the Calculation Agent) shall be considered "material".
(b) The suspension or material limitation, in each case, for more than
two hours of trading or during the one-half hour period preceding the close
of trading (whether by reason of movements in price exceeding levels
permitted by the relevant exchange or otherwise) in (A) futures contracts
related to the Index or any Successor Index or options on such futures
contracts which are traded on any major U.S. exchange or (B) options
contracts related to the Index or any Successor Index which are traded on
the PHLX or any other major U.S. exchange.
(c) The unavailability, through a recognized system of public
dissemination of transaction information, for more than two hours of
trading or during the one-half hour period preceding the close of trading,
of accurate price, volume or related information in respect of 20% or more
of the underlying stocks which then comprise the Index or any Successor
Index or in respect of futures contracts related to the Index or any
Successor Index, options on such futures contracts or options contracts
related to the Index or any Successor Index, in each case traded on any
major U.S. exchange.
For purposes of determining whether a Market Disruption Event has occurred:
(1) a limitation on the hours or number of days of trading will not constitute a
Market Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange or market, (2) a decision to discontinue
permanently trading in the relevant futures or options contract will not
constitute a Market Disruption Event, (3) any suspension in trading in a futures
or options contract on the Index or any Successor Index by a major securities
market by reason of (x) a price change violating limits set by such securities
market, (y) an imbalance of orders relating to such contracts or (z) a disparity
in bid and ask quotes relating to such contracts will constitute a Market
Disruption Event, notwithstanding that such suspension or material limitation is
less than two hours, and (4) a "suspension or material limitation" on an
exchange or in a market will include a suspension or material limitation of
trading by one class of investors provided that such suspension continues for
more than two hours of trading or during the last one-half hour period preceding
the close of trading on the relevant exchange or market (but will not include
limitations imposed on certain types of trading under NYSE Rule 80A or any
applicable rule or regulation enacted or promulgated by the NYSE, Nasdaq, any
other self-regulatory organization or the SEC of a similar scope or as a
replacement for Rule 80A, as determined by the Calculation Agent) and will not
include any time when such exchange or market is closed for trading as part of
such exchange's or market's regularly scheduled business hours. Under certain
circumstances, the duties of Salomon Smith Barney as Calculation Agent in
determining the existence of Market Disruption Events could conflict with the
interests of Salomon Smith Barney as an affiliate of the issuer of the Notes.
S-16
<PAGE> 19
Based on the information currently available to the Company, on October 27,
1997, the NYSE suspended all trading during the one-half hour period preceding
the close of trading, pursuant to NYSE Rule 80B. If such a suspension of trading
occurred during the term of the Notes, such event would constitute a Market
Disruption Event. The existence or non-existence of such circumstances, however,
is not necessarily indicative of the likelihood of such circumstances arising or
not arising in the future.
DISCONTINUANCE OF THE INDEX
If the PHLX discontinues publication of the Index and the PHLX or another
entity publishes a successor or substitute index that the Calculation Agent
determines, in its sole discretion, to be comparable to such Index (any such
index being referred to herein as a "Successor Index"), then the Ending Value
shall be determined by reference to the value of such Successor Index using the
methodology described above under "Determination of the Supplemental Redemption
Amount".
Upon any selection by the Calculation Agent of a Successor Index, the
Calculation Agent will cause notice thereof to be furnished to the Company and
the Trustee, who shall provide notice thereof to the holders of the Notes.
If the PHLX discontinues publication of the Index and a Successor Index is
not selected by the Calculation Agent or is no longer published on any
Calculation Day, the value to be substituted for the Index for any such
Calculation Day used to calculate the Supplemental Redemption Amount at maturity
will be a value computed by the Calculation Agent for such Calculation Day in
accordance with the procedures last used to calculate the Index prior to any
such discontinuance.
If the PHLX discontinues publication of the Index prior to the period
during which the Supplemental Redemption Amount is to be determined and the
Calculation Agent determines that no Successor Index is available at such time,
then on each Index Business Day until the earlier to occur of (a) the
determination of the Ending Value and (b) a determination by the Calculation
Agent that a Successor Index is available, the Calculation Agent shall determine
the value that would be used in computing the Supplemental Redemption Amount as
described in the preceding paragraph as if such day were a Calculation Day. The
Calculation Agent will cause notice of each such value to be published not less
often than once each month in The Wall Street Journal (or another newspaper of
general circulation), and arrange for information with respect to such values to
be made available by telephone. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Index may adversely affect trading in
the Notes.
If a Successor Index is selected or the Calculation Agent calculates a
value as a substitute for the Index as described above, such Successor Index or
value shall be substituted for the Index for all purposes, including for
purposes of determining whether an Index Business Day occurs or a Market
Disruption Event exists. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Index may adversely affect the value of
the Notes.
ALTERATION OF METHOD OF CALCULATION
If at any time the method of calculating the Index or a Successor Index is
changed in any material respect, or if the Index or a Successor Index is in any
other way modified so that the value of the Index or such Successor Index does
not, in the opinion of the Calculation Agent, fairly represent the value thereof
had such changes or modifications not been made, then, from and after such time,
the Calculation Agent shall, at the close of business in New York, New York, on
each date when the closing value with respect to the Ending Value is to be
calculated, make such adjustments as, in the good faith judgment of the
Calculation Agent, may be necessary in order to arrive at a calculation of a
value of a stock index comparable to the Index or such Successor Index as if
such changes or modifications had not been made, and calculate such closing
value with reference to the Index or such Successor Index, as adjusted.
Accordingly, if the method of calculating the Index or such Successor Index is
modified so that the value of such Index or such Successor Index is a fraction
or a multiple of what it would have been if it had not been modified (e.g., due
to a split in such Index), then the Calculation Agent shall adjust such Index in
order to arrive at a value of such Index as if it had not been modified (e.g.,
as if such split had not occurred).
S-17
<PAGE> 20
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default (as defined in the accompanying Prospectus)
with respect to any Notes shall have occurred and be continuing, the amount
declared due and payable upon any acceleration of the Notes will be determined
by the Calculation Agent and will equal, for each Unit, the $10 initial
principal amount plus the Supplemental Redemption Amount (which may be positive,
negative or zero, but not less than -$1.00) calculated as though the maturity
date of the Notes were the date of early repayment. See "-- Determination of the
Supplemental Redemption Amount" above. If a bankruptcy proceeding is commenced
in respect of the Company, the claim of the beneficial owner of a Note may be
limited, under Section 502(b)(2) of Title 11 of the United States Code, to the
$10 initial principal amount of the Note plus an additional amount of contingent
interest calculated as though the maturity date of the Notes were the date of
the commencement of such proceeding.
In case of default in payment at the maturity date of the Notes (whether at
their stated maturity or upon acceleration), from and after the maturity date
the Notes shall bear interest, payable upon demand of the beneficial owners
thereof, at the rate of 6.50% per annum on the unpaid amount due and payable on
such date in accordance with the terms of the Notes through the date when
payment of such amount has been made or duly provided for.
BOOK-ENTRY SYSTEM
Upon issuance, all Notes will be represented by one or more
fully-registered global securities (the "Global Notes"). Each such Global Note
will be deposited with, or on behalf of, the Depositary and registered in the
name of the Depositary or a nominee thereof. Unless and until it is exchanged in
whole or in part for Notes in definitive form, no Global Note may be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any such nominee to a successor of the Depositary or a
nominee of such successor. Accountholders in the Euroclear or Cedel Bank
clearance systems may hold beneficial interests in the Notes through the
accounts each such system maintains as a participant in the Depositary.
The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. The Depositary holds
securities that its participants ("Participants") deposit with the Depositary.
The Depositary 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 include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations ("Direct Participants").
The Depositary is owned by a number of its Direct Participants and by the NYSE,
the AMEX and the National Association of Securities Dealers, Inc. Access to the
Depositary system is also available to others, such as securities brokers and
dealers, banks and trust companies that clear transactions through, or maintain
a custodial relationship with, a Direct Participant, either directly or
indirectly. The rules applicable to the Depositary and its Participants are on
file with the SEC.
A further description of the Depositary's procedures with respect to the
Global Notes is set forth in the Prospectus under "Description of Debt
Securities -- Global Securities". The Depositary has confirmed to the Company,
the Underwriter and the Trustee that it intends to follow such procedures.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriter in same-day funds.
All payments of principal and the Supplemental Redemption Amount (if positive)
at maturity (or of the Call Price if the Notes are redeemed prior to maturity)
will be made by the Company in same-day funds so long as the Notes are
maintained in book-entry form.
S-18
<PAGE> 21
CALCULATION AGENT
The Calculation Agent for the Notes will be Salomon Smith Barney. All
determinations made by the Calculation Agent shall be at the sole discretion of
the Calculation Agent and shall, in the absence of manifest error, be conclusive
for all purposes and binding on the Company and holders of the Notes. Because
the Calculation Agent is an affiliate of the Company, potential conflicts of
interest may exist between the Calculation Agent and the holders of the Notes,
including with respect to certain determinations and judgments that the
Calculation Agent must make in determining the Ending Value and the Supplemental
Redemption Amount or whether a Market Disruption Event has occurred. See
"-- Market Disruption Events", "-- Discontinuance of the Index" and
"-- Alteration of Method of Calculation" above. Salomon Smith Barney is
obligated to carry out its duties and functions as Calculation Agent in good
faith and using its reasonable judgment.
S-19
<PAGE> 22
THESTREET.COM INTERNET SECTOR INDEX
GENERAL
The TSC Internet Sector Index is intended to measure the average
performance of a group of stocks within the Internet sector. The Index is an
equal-dollar weighted index made up of the stocks of 20 leading companies
involved in internet commerce, service and software that are traded on the NYSE
and Nasdaq. European-style options on the Index have been traded on the PHLX
since November 1998. The PHLX disseminates the value of the Index every 15
seconds during each trading day from 9:30 a.m. to 4:02 p.m. (Philadelphia time).
As explained in more detail below, the TSC Internet Sector Index is
re-balanced quarterly, following the close of trading on the third Friday of
January, April, July and October, in order to re-align component weightings. In
addition, the list of companies involved in the TSC Internet Sector Index is
subject to change at any time and will be reviewed by the PHLX every quarter to
ensure that it continues to represent the Internet sector accurately.
Below is a list of the names as well as the stock symbols of the 20
companies whose stocks currently are included in the TSC Internet Sector Index:
Amazon.com, Inc. ("AMZN")
America Online Inc. ("AOL")
At Home Corp. ("ATHM")
BroadVision Inc. ("BVSN")
Check Point Software Technologies ("CHKP")
CMG Information Services Inc. ("CMGI")
Egghead.com Inc. ("EGGS")
Excite Inc. ("XCIT")
Infoseek Corporation ("SEEK")
Inktomi Communications ("INKT")
Lycos Inc. ("LCOS")
Macromedia Inc. ("MACR")
MindSpring Enterprises ("MSPG")
Network Associates Inc. ("NETA")
ONSALE Inc. ("ONSL")
Open Market Inc. ("OMKT")
RealNetworks Inc. ("RNWK")
Security Dynamics ("SDTI")
USWeb Corp. ("USWB")
Yahoo! Inc. ("YHOO")
INDEX CALCULATION
The PHLX has retained Bridge Data Inc. to compute and perform all of the
necessary maintenance on the Index, with backup support provided by the PHLX's
internal index calculation system. The methodology used to calculate the Index
is an equal-dollar weighted method, meaning that each of the component stocks is
represented in the Index in approximately equal dollar amounts. The PHLX
believes that this method of calculation is important because it provides each
component issue with equivalent influence on the movement of the Index value
instead of allowing one highly capitalized stock to dominate the movement of the
Index. To determine the initial dollar weighting of the stocks, the PHLX
calculated the number of shares of each stock comprising the Index that would
represent an investment of approximately $10,000 in each such stock based on
closing prices on September 30, 1998. The value of the Index equals the current
market value of the sum of the assigned number of shares of all of the stocks in
the Index divided by the current Index divisor. The Index divisor was set to
yield an initial Index value of 200 at the opening on October 1, 1998 and is
currently equal to 297.3304.
INDEX MAINTENANCE
To maintain the continuity of the Index, the divisor is adjusted to reflect
non-market changes in the price of the component securities as well as changes
in the composition of the Index. Changes which may result in divisor adjustments
include but are not limited to stock splits, dividends, spin-offs, mergers and
acquisitions. In accordance with PHLX Rule 1009A, if any change in the nature of
any component (e.g., delisting, merger, acquisition or otherwise) in the Index
will change the overall market character of the Index, the PHLX will take
appropriate steps to remove the stock or replace it with another stock that the
PHLX believes would be compatible with the intended market character of the
Index. All of the component stocks are "reported
S-20
<PAGE> 23
securities" as defined in Rule 11Aa3-1 under the Exchange Act, and any
replacement components will also be "reported securities".
Currently, the Index is comprised of 20 component stocks. Absent SEC
approval, the PHLX will not change the number of components to more than 24 or
fewer than 16. In addition, the PHLX has undertaken to the SEC that it will
maintain the Index so that the component stocks comprising the top 90% of the
Index, by weight, will each maintain a minimum market capitalization of $75
million. The remaining 10%, by weight, will each maintain a minimum market
capitalization of $50 million. The component stocks comprising the top 90% of
the Index, by weight, will maintain a trading volume of at least 500,000 shares
per month. The component stocks constituting the bottom 10% of the Index, by
weight, will maintain a trading volume of at least 400,000 shares per month. No
fewer than 90% of the component issues by weight or fewer than 80% of the total
number of the components will qualify as stocks eligible for options trading.
Finally, no single component of the Index will account for more than 25% of the
Index and the three highest weighted component securities will not account for
more than 60% of the Index.
REBALANCING
Following the close of trading on the third Friday of January, April, July
and October, the PHLX adjusts the Index portfolio by changing the number of
whole shares of each component so that each company is again represented in
"equal" dollar amounts. If necessary, a divisor adjustment is made at the
rebalancing to ensure the continuity of the Index's value. The newly adjusted
portfolio then becomes the basis for the Index's value on the first trading day
following the adjustment.
The number of shares of each component stock in the Index portfolio remains
fixed between quarterly rebalances except in the event of certain types of
corporate actions, such as the payment of a dividend other than an ordinary cash
dividend, stock dividend, stock split, reverse stock split, rights offering,
distribution, reorganization, recapitalization, or similar event with respect to
the component stocks. In the case of a merger or consolidation of an issuer of a
component stock, if the stock remains in the Index, the number of shares of that
security in the portfolio may be adjusted to the nearest whole share to maintain
the component's relative weight in the Index at the level immediately prior to
the corporate action. In the event of a stock addition or replacement, the
average dollar value of the remaining portfolio components is calculated and
that amount invested in the stock of the new component, to the nearest whole
share. In all cases, the divisor is adjusted, if necessary, to ensure Index
continuity. All stock replacements and the handling of non-routine corporate
actions are announced at least ten business days in advance of such effective
changes, whenever possible. The PHLX makes this information available to the
public through dissemination of an information circular.
HISTORICAL DATA ON THE INDEX
The following table sets forth the value of the TSC Internet Sector Index
at the market close on each Index Business Day in the period from the Index's
inception on October 1, 1998 through May 25, 1999, as well as providing
indicative Index values for each Index Business Day in the period from May 1,
1998 through September 30, 1998 that have been calculated by the PHLX as if the
Index had been created on May 1, 1998 and based on historical trading data for
each of the stocks underlying the Index. These data on the TSC Internet Sector
Index are not necessarily indicative of the future performance of the Index or
what the value of the Notes may be. Any upward or downward trend in the value of
the TSC Internet Sector Index during any period set forth below is not any
indication that the Index is more or less likely to increase or decrease at any
time during the term of the Notes.
S-21
<PAGE> 24
DAILY CLOSING VALUE OF THE INDEX(1)
<TABLE>
<CAPTION>
DAILY DAILY DAILY DAILY DAILY
CLOSING CLOSING CLOSING CLOSING CLOSING
DATE VALUE DATE VALUE DATE VALUE DATE VALUE DATE VALUE
---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
05/01/98 229.27 07/20/98 290.03 10/05/98 181.00 12/21/98 419.97 03/11/99 584.08
05/04/98 237.21 07/21/98 291.38 10/06/98 176.12 12/22/98 410.24 03/12/99 568.00
05/05/98 232.22 07/22/98 293.52 10/07/98 159.07 12/23/98 428.25 03/15/99 604.83
05/06/98 227.35 07/23/98 281.05 10/08/98 143.82 12/24/98 429.77 03/16/99 604.65
05/07/98 223.26 07/24/98 268.17 10/09/98 152.65 12/28/98 449.82 03/17/99 608.93
05/08/98 225.09 07/27/98 262.34 10/12/98 168.14 12/29/98 435.69 03/18/99 617.46
05/11/98 217.30 07/28/98 252.85 10/13/98 161.51 12/30/98 405.97 03/19/99 628.60
05/12/98 220.69 07/29/98 234.55 10/14/98 166.46 12/31/98 406.42 03/22/99 633.51
05/13/98 228.76 07/30/98 249.29 10/15/98 179.51 01/04/99 413.26 03/23/99 596.81
05/14/98 231.46 07/31/98 237.55 10/16/98 179.27 01/05/99 411.95 03/24/99 594.11
05/15/98 228.02 08/03/98 226.17 10/19/98 193.31 01/06/99 445.35 03/25/99 627.90
05/18/98 221.79 08/04/98 226.99 10/20/98 187.35 01/07/99 475.10 03/26/99 629.58
05/19/98 222.04 08/05/98 225.12 10/21/98 193.83 01/08/99 499.77 03/29/99 654.16
05/20/98 219.42 08/06/98 238.37 10/22/98 202.16 01/11/99 588.19 03/30/99 643.88
05/21/98 221.42 08/07/98 247.10 10/23/98 200.84 01/12/99 542.07 03/31/99 643.01
05/22/98 211.91 08/10/98 250.47 10/26/98 210.31 01/13/99 506.34 04/01/99 657.43
05/26/98 196.81 08/11/98 240.77 10/27/98 211.57 01/14/99 492.68 04/05/99 683.12
05/27/98 203.89 08/12/98 246.70 10/28/98 206.32 01/15/99 504.37 04/06/99 720.66
05/28/98 205.09 08/13/98 243.06 10/29/98 212.61 01/19/99 548.26 04/07/99 699.85
05/29/98 202.66 08/14/98 238.08 10/30/98 211.13 01/20/99 508.70 04/08/99 710.76
06/01/98 191.85 08/17/98 239.88 11/02/98 224.00 01/21/99 482.64 04/09/99 731.93
06/02/98 194.88 08/18/98 249.92 11/03/98 225.04 01/22/99 490.01 04/12/99 790.44
06/03/98 190.68 08/19/98 245.95 11/04/98 232.05 01/25/99 496.59 04/13/99 776.18
06/04/98 194.61 08/20/98 240.78 11/05/98 236.55 01/26/99 520.09 04/14/99 694.17
06/05/98 197.24 08/21/98 236.18 11/06/98 243.86 01/27/99 534.60 04/15/99 678.72
06/08/98 202.24 08/24/98 234.20 11/09/98 258.16 01/28/99 552.41 04/16/99 669.02
06/09/98 211.90 08/25/98 229.50 11/10/98 269.32 01/29/99 557.52 04/19/99 560.81
06/10/98 208.54 08/26/98 221.28 11/11/98 260.13 02/01/99 547.89 04/20/99 595.95
06/11/98 206.63 08/27/98 205.24 11/12/98 261.19 02/02/99 533.44 04/21/99 636.05
06/12/98 205.48 08/28/98 189.87 11/13/98 254.85 02/03/99 548.92 04/22/99 659.31
06/15/98 201.71 08/31/98 159.20 11/16/98 264.41 02/04/99 538.45 04/23/99 679.72
06/16/98 209.34 09/01/98 174.69 11/17/98 270.01 02/05/99 532.52 04/26/99 714.27
06/17/98 218.09 09/02/98 181.22 11/18/98 286.88 02/08/99 504.85 04/27/99 696.97
06/18/98 223.90 09/03/98 171.29 11/19/98 278.81 02/09/99 456.26 04/28/99 657.90
06/19/98 221.96 09/04/98 171.47 11/20/98 285.70 02/10/99 450.90 04/29/99 647.41
06/22/98 226.28 09/08/98 187.94 11/23/98 306.80 02/11/99 505.21 04/30/99 656.26
06/23/98 237.35 09/09/98 177.50 11/24/98 318.14 02/12/99 483.18 05/03/99 632.97
06/24/98 250.49 09/10/98 174.13 11/25/98 346.40 02/16/99 471.83 05/04/99 615.13
06/25/98 250.79 09/11/98 176.09 11/27/98 414.31 02/17/99 459.13 05/05/99 637.49
06/26/98 246.28 09/14/98 179.16 11/30/98 351.87 02/18/99 461.40 05/06/99 611.80
06/29/98 254.94 09/15/98 175.34 12/01/98 343.78 02/19/99 471.20 05/07/99 614.15
06/30/98 256.84 09/16/98 187.17 12/02/98 330.65 02/22/99 490.98 05/10/99 635.33
07/01/98 271.37 09/17/98 180.82 12/03/98 303.37 02/23/99 514.53 05/11/99 654.09
07/02/98 273.08 09/18/98 183.23 12/04/98 314.19 02/24/99 505.74 05/12/99 656.91
07/06/98 292.99 09/21/98 183.99 12/07/98 337.67 02/25/99 507.88 05/13/99 641.70
07/07/98 275.17 09/22/98 192.43 12/08/98 348.21 02/26/99 510.55 05/14/99 629.53
07/08/98 271.27 09/23/98 206.79 12/09/98 355.10 03/01/99 525.13 05/17/99 641.28
07/09/98 268.85 09/24/98 204.14 12/10/98 339.84 03/02/99 527.76 05/18/99 639.36
07/10/98 273.58 09/25/98 206.86 12/11/98 348.73 03/03/99 521.13 05/19/99 647.50
07/13/98 285.16 09/28/98 209.65 12/14/98 334.02 03/04/99 523.39 05/20/99 624.79
07/14/98 282.25 09/29/98 208.02 12/15/98 348.37 03/05/99 534.34 05/21/99 623.38
07/15/98 280.63 09/30/98 200.08 12/16/98 356.12 03/08/99 571.43 05/24/99 576.68
07/16/98 277.54 10/01/98 184.76 12/17/98 361.05 03/09/99 568.89 05/25/99 550.30
07/17/98 278.71 10/02/98 191.25 12/18/98 377.71 03/10/99 587.68
</TABLE>
- ---------------
(1) Values for periods prior to the inception of the Index on October 1, 1998
are indicative values calculated by the PHLX as if the Index had been
created on May 1, 1998 and based on historical trading data for each of the
stocks underlying the Index.
The closing value of the TSC Internet Sector Index on May 25, 1999 was
550.30.
S-22
<PAGE> 25
The following graph illustrates the performance of the TSC Internet Sector
Index based on the closing value thereof at the market close on each Index
Business Day in the period from October 1, 1998 through May 25, 1999 and on
indicative Index values calculated in the manner described above for each Index
Business Day in the period from May 1, 1998 through September 30, 1998. Past
movements of the Index are not necessarily indicative of future Index values.
[PERFORMANCE GRAPH]
LICENSE AGREEMENT
The Company and the PHLX have entered into a non-exclusive license
agreement providing for the license to the Company, in exchange for a fee, of
the right to use the Index in connection with certain securities, including the
Notes.
The license agreement between the Company and the PHLX provides that the
following language must be included in this Prospectus Supplement:
"The Notes are not sponsored, endorsed, sold or promoted by the PHLX. The
PHLX makes no representation or warranty, express or implied, to the holders of
the Notes or any member of the public regarding the advisability of investing in
securities generally or in the Notes particularly or the ability of the Index to
track the performance of the market for Internet-related stocks in general. The
PHLX's only relationship to the Company with respect to the Notes is the
licensing of certain trademarks and trade names of the PHLX and of the Index
which is determined, composed and calculated by the PHLX without regard to the
Company or the Notes. The PHLX has no obligation to take the needs of the
Company or the holders of the Notes into consideration in determining, composing
or calculating the Index. The PHLX is not responsible for and has not
participated in the determination of the timing, prices or quantities of the
Notes to be issued or in the determination or calculation of the equation by
which the Notes are to be converted into cash. The PHLX has no obligation or
liability in connection with the administration, marketing or trading of the
Notes.
THE PHLX DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
INDEX OR ANY DATA INCLUDED THEREIN AND SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS OR INTERRUPTIONS THEREIN. THE PHLX MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE COMPANY, THE HOLDERS OF THE NOTES
OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED
THEREIN. THE PHLX MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE, WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO
S-23
<PAGE> 26
EVENT SHALL THE PHLX HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF IT IS NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES."
All disclosures contained in this Prospectus Supplement regarding the
Index, including its make-up, method of calculation and changes in its
components, are derived from publicly available information prepared by the PHLX
or TheStreet.com, Inc. None of the Company, Salomon Smith Barney or the Trustee
under the Senior Debt Indenture assumes any responsibility for the accuracy or
completeness of such information.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States federal income
tax considerations that may be relevant to a holder of a Note. This summary is
based on laws, regulations, rulings and decisions now in effect, all of which
are subject to change (possibly with retroactive effect) and to differing
interpretations. Furthermore, there can be no assurance that the Internal
Revenue Service would not take a position contrary to those expressed herein.
This summary deals only with holders that will hold Notes as capital assets, and
does not address all aspects of U.S. federal income taxation that may be
applicable to investors in light of their particular circumstances, or to
investors subject to special treatment under U.S. federal income tax law
(including, but not limited to, financial institutions, tax-exempt entities,
insurance companies or dealers in securities or currencies, persons having a
functional currency other than the U.S. dollar, persons holding the Notes as a
position in a "straddle" or conversion transaction, or as part of a "synthetic
security" or other integrated financial transaction). This summary also does not
address the state, local or foreign tax consequences of an investment in the
Notes. The discussion below is based on the advice of Cleary, Gottlieb, Steen &
Hamilton, counsel to Salomon Smith Barney and special tax counsel to the
Company.
Investors should consult their own tax advisors in determining the tax
consequences to them of holding Notes, including the application to their
particular situation of the U.S. federal income tax considerations discussed
below.
As used herein, the term "U.S. holder" means a person who is a citizen or
resident of the United States, or that is a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, an estate the income of which is subject to
United States federal income taxation regardless of its source or a trust if (i)
a U.S. court is able to exercise primary supervision over the trust's
administration and (ii) one or more U.S. persons have the authority to control
all of the trust's substantial decisions.
TAX CHARACTERIZATION OF THE NOTES
Each Note will be treated by the Company for U.S. federal income tax
purposes as a single debt instrument issued by the Company that is subject to
U.S. Treasury regulations governing contingent debt instruments (the "Contingent
Debt Regulations"). Moreover, each holder, by accepting a Note, agrees to this
treatment of such Note and to report all income (or loss) with respect to the
Notes in accordance with the Contingent Debt Regulations. The remainder of this
summary assumes the treatment of the Note as a single debt instrument subject to
the Contingent Debt Regulations and the holder's agreement thereto.
U.S. HOLDERS
Taxation of Interest. A U.S. holder of a Note will recognize income (or
loss) on a Note in accordance with the Contingent Debt Regulations. The
Contingent Debt Regulations require the application of a "noncontingent bond
method" to determine accruals of income, gain, loss and deduction with respect
to a contingent debt obligation. As described in more detail in the second
succeeding paragraph, under the noncontingent bond method, a U.S. holder of a
Note will be required for tax purposes to include in income each year an accrual
of interest at the rate of 6.39 percent (the "comparable yield"). Solely for
purposes of determining the comparable yield pursuant to the Contingent Debt
Regulations, a holder of a Note will be assumed to be entitled to receive, in
respect of each Note, a payment of $5.4512 on the maturity date (the
S-24
<PAGE> 27
"Assumed Supplemental Redemption Amount"). The Assumed Supplemental Redemption
Amount is calculated as the amount required to produce the comparable yield of a
Note, taking into account the Note's issue price.
The comparable yield and the Assumed Supplemental Redemption Amount are
used to determine accruals of interest FOR TAX PURPOSES ONLY and are not
assurances or predictions by the Company with respect to the actual yield of, or
payment to be made in respect of, a Note. The comparable yield and the Assumed
Supplemental Redemption Amount do not necessarily represent the Company's
expectations regarding such yield, the amount of such payment, or whether the
Company will call the Notes prior to maturity.
Each Note will be issued at par. However, there will be Tax OID because Tax
OID must be accrued at the comparable yield. Under the Tax OID rules of the
Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury
regulations promulgated thereunder, a U.S. holder of a Note, whether such holder
uses the cash or the accrual method of tax accounting, will be required to
include as ordinary interest income the sum of the "daily portions" of Tax OID
on the Note for all days during the taxable year that the U.S. holder owns the
Note. As a result, a U.S. holder of a Note that employs the cash method of tax
accounting will be required to include amounts in respect of Tax OID accruing on
a Note in taxable income each year, even though cash payment on the Note is only
at maturity or upon the Call Date.
The daily portions of Tax OID on a Note are determined by allocating to
each day in any accrual period a ratable portion of the Tax OID allocable to
that accrual period. In the case of an initial holder, the amount of Tax OID on
a Note allocable to each accrual period is determined by multiplying the
"adjusted issue price" (as defined below) of a Note at the beginning of the
accrual period by the comparable yield of a Note (appropriately adjusted to
reflect the length of the accrual period). The "adjusted issue price" of a Note
at the beginning of any accrual period will generally be the sum of its issue
price and the amount of Tax OID allocable to all prior accrual periods.
Disposition of the Notes. When a U.S. holder sells, exchanges or otherwise
disposes of a Note (including upon redemption or a call prior to maturity by the
Company) (a "disposition"), the U.S. holder's gain (or loss) on such disposition
will equal the difference between the amount received by the U.S. holder for the
Note and the U.S. holder's tax basis in the Note. A U.S. holder's tax basis
(i.e., adjusted cost) in a Note will be equal to the U.S. holder's original
purchase price for such Note, plus any Tax OID accrued by the U.S. holder. Upon
a Note's maturity, if there is a payment of a Supplemental Redemption Amount and
such Supplemental Redemption Amount exceeds the Assumed Supplemental Redemption
Amount, the U.S. holder will be required to include such excess in income as
ordinary interest on the maturity date. Alternatively, if there is a payment of
a Supplemental Redemption Amount and such Supplemental Redemption Amount is less
than the Assumed Supplemental Redemption Amount, the shortfall will be treated
as an offset to any interest otherwise includible in income by the U.S. holder
with respect to the Note for the taxable year in which the maturity date occurs
but only to the extent of the amount of such includible interest. Any remaining
portion of such shortfall may be recognized and deducted by the U.S. holder as
an ordinary loss.
Any gain realized by a U.S. holder on a disposition will be treated as
ordinary interest income. Any loss realized by a U.S. holder on a disposition
will be treated as ordinary loss, to the extent of the U.S. holder's Tax OID
inclusions with respect to the Note up to the date of disposition. Any loss
realized in excess of such amount generally will be treated as a capital loss.
An individual U.S. holder generally will be allowed a deduction for any such
ordinary loss without regard to the two-percent miscellaneous itemized deduction
rule of Section 67 of the Code. Any capital loss recognized by a U.S. holder
will be a long-term capital loss if such U.S. holder has held such Note for more
than one year, and a short-term capital loss in other cases.
A U.S. holder that purchases a Note in the secondary market for an amount
that differs from the Note's adjusted issue price at the time of purchase will
be required to accrue Tax OID on the Note in accordance with the comparable
yield and Assumed Supplemental Redemption Amount, even if market conditions have
changed since the date of issuance. A U.S. holder must determine whether the
difference between the purchase price for a Note and the adjusted issue price of
the Note is attributable to a change in expectations as
S-25
<PAGE> 28
to the Supplemental Redemption Amount, a change in interest rates, or both, and
allocate the difference accordingly. Adjustments allocated to a change in
interest rates will cause, as the case may be, a "positive adjustment" or a
"negative adjustment" to the U.S. holder's Tax OID inclusion. If the adjusted
issue price is more than the purchase price for the Note, a "positive
adjustment" will result, and if the adjusted issue price is less than the
purchase price of the Note, a "negative adjustment" will result. If the
difference between a U.S. holder's purchase price for a Note and the adjusted
issue price of the Note is attributable to a change in expectations as to the
Supplemental Redemption Amount (and not to a change in market interest rates),
the U.S. holder will be required to allocate that difference to the Supplemental
Redemption Amount. Adjustments allocated to the Supplemental Redemption Amount
are taken into account at the time the Supplemental Redemption Amount is paid.
If the purchaser's tax basis in a Note is greater than the adjusted issue price
of the Note, the excess is treated as a "negative adjustment" that reduces the
Supplemental Redemption Amount; if the purchaser's tax basis in a Note is less
than the adjusted issue price of the Note, the difference is treated as a
"positive adjustment" that increases the Supplemental Redemption Amount. Any
negative or positive adjustment of the kind described above made by a U.S.
holder of a Note will decrease or increase, respectively, the U.S. holder's tax
basis in the Note.
Certain U.S. holders may receive Forms 1099-OID reporting Tax OID accruals
on a Note. Those forms will not, however, reflect the effects of any positive or
negative adjustments resulting from the U.S. holder's purchase of the Note in
the secondary market at a price that differs from its adjusted issue price on
the date of purchase. U.S. holders are urged to consult their tax advisors as to
whether, and how, such adjustments should be made to the amounts reported on any
Form 1099-OID.
Information Reporting and Backup Withholding. A noncorporate U.S. holder
may be subject to information reporting and to backup withholding at a rate of
31 percent with respect to payments of principal, premium and interest
(including Tax OID) made on a Note, or the proceeds of a disposition of a Note
before maturity, unless such U.S. holder provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the information reporting and backup withholding
rules.
NON-U.S. HOLDERS
Taxation of Interest and Disposition of the Notes. Under current U.S.
federal income tax law: (a) payment of a Supplemental Redemption Amount to a
holder who is not a U.S. holder (a "non-U.S. holder") will not be subject to
withholding of U.S. federal income tax, provided that (i) the holder does not
actually or constructively own 10 percent or more of the combined voting power
of all classes of stock of the Company and is not a controlled foreign
corporation related to the Company through stock ownership and (ii) the
beneficial owner provides a statement signed under penalties of perjury that
includes its name and address and certifies that it is a non-U.S. holder in
compliance with applicable requirements or, with respect to payments made after
December 31, 2000, satisfies certain documentary evidence requirements for
establishing that it is a non-U.S. holder; and (b) a non-U.S. holder will not be
subject to U.S. federal income tax on gain realized on the disposition of a
Note. Notwithstanding the above, a non-U.S. holder that is subject to U.S.
federal income taxation on a net income basis with respect to its income from a
Note generally will be subject to the same rules to which a U.S. holder is
subject with respect to the accrual of interest (including Tax OID) on a Note
and with respect to gain or loss realized or recognized on the disposition of a
Note.
Information Reporting and Backup Withholding. U.S. information reporting
requirements and backup withholding tax will not apply to payments on, or
proceeds from the disposition of, a Note if the beneficial owner thereof
certifies its non-U.S. status under penalties of perjury (or, with respect to
payments made after December 31, 2000, satisfies certain documentary evidence
requirements for establishing that it is a non-U.S. holder) or otherwise
establishes an exemption.
The U.S. Treasury Department issued final Treasury regulations governing
information reporting and the certification procedures regarding withholding and
backup withholding on certain amounts paid to non-U.S. persons after December
31, 2000. Such regulations, among other things, may change the certification
procedures relating to the receipt by intermediaries of payments on behalf of a
beneficial owner of a Note.
S-26
<PAGE> 29
Prospective investors should consult their tax advisors regarding the effect, if
any, of such Treasury regulations on an investment in the Notes.
With respect to payments made after December 31, 2000, for purposes of
applying the rules set forth in the three preceding paragraphs to an entity that
is treated as fiscally transparent (e.g., a partnership or certain trusts) for
U.S. federal income tax purposes, the beneficial owner means each of the
ultimate beneficial owners of the entity.
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement") between the Company and Salomon Smith Barney, as
sole Underwriter (the "Underwriter"), the Company has agreed to sell to the
Underwriter, and the Underwriter has agreed to purchase from the Company,
$65,000,000 initial principal amount of Notes (6,500,000 Units).
The Notes are offered subject to receipt and acceptance by the Underwriter,
to prior sale and to the Underwriter's right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Notes will be made at the office of Salomon Smith Barney,
388 Greenwich Street, New York, New York, or through the facilities of the
Depositary, on or about May 28, 1999.
The Company has been advised that the Underwriter proposes to offer the
Notes to the public initially at the public offering price set forth on the
cover page of this Prospectus Supplement and to certain dealers at a price that
represents a concession not in excess of $0.30 per Unit, and that the
Underwriter may allow, and each such dealer may reallow, to other dealers a
concession not exceeding $0.10 per Unit. After the initial public offering, the
public offering price, the underwriting discount and such concessions may be
changed from time to time.
The Company has been advised by the Underwriter that the Underwriter
currently intends to make a market in the Notes, subject to applicable laws and
regulations. However, the Underwriter is not obligated to do so and may
discontinue any such market-making activity at any time without notice. No
assurance can be given that an active public market for the Notes will develop.
The Underwriting Agreement provides that the Company will indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments that the
Underwriter may be required to make in respect thereof.
The Notes may be offered to investors outside the United States. The
Underwriter has further agreed that any offers and sales made outside the United
States will be made in compliance with any selling restrictions applicable in
the jurisdictions where such offers and sales are made.
Salomon Smith Barney is an indirect wholly-owned subsidiary of the Company.
Accordingly, the offering is being made pursuant to the provisions of Rule 2720
of the Conduct Rules of the National Association of Securities Dealers, Inc.
regarding the offering by an affiliate of the securities of its parent.
In connection with this offering, the Underwriter and selling group members
and their respective affiliates may engage in transactions that stabilize,
maintain or otherwise affect the market price of the Notes. 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 Notes for the purposes of stabilizing their market price. The
Underwriter also may create a short position for its accounts by selling more
Notes in connection with this offering than it is committed to purchase from the
Company, and in such case may purchase Notes in the open market following
completion of this offering to cover all or a portion of such short position.
Any of the transactions described in this paragraph may result in the
maintenance of the price of the Notes 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 is undertaken, it may be discontinued at any
time.
S-27
<PAGE> 30
The Company or one or more of its subsidiaries may from time to time
purchase or acquire a position in the Notes and may, at its option, hold, resell
or retire such Notes. This Prospectus Supplement and the Prospectus may be used
by Salomon Smith Barney and/or any affiliate thereof in connection with offers
and sales of the Notes in market-making transactions at negotiated prices
related to prevailing market prices at the time of sale. Any such affiliate may
act as principal or agent in such transactions.
ERISA MATTERS
The purchaser, by its purchase or other acquisition of the Notes, is deemed
to represent that such purchaser is not an employee benefit plan subject to the
fiduciary responsibility provisions of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or any entity with respect to which part or
all of its assets constitute assets of any such employee benefit plan by reason
of 29 C.F.R. 2510.3-101 or otherwise, or any government or other plan subject to
Federal, state or local law substantially similar to the fiduciary
responsibility provisions of ERISA ("ERISA Plan"). Any plan that is subject to
Section 4975(e)(1) of the Code that is not an ERISA Plan (for example,
individual retirement accounts, individual retirement annuities or Keogh Plans)
will be deemed to have represented, by its purchase or other acquisition of the
Notes, that such purchase, acquisition, holding and subsequent disposition of
such Notes and the transactions contemplated hereby do not constitute a
prohibited transaction under Section 4975 of the Code.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed upon for the
Company by Joan Guggenheimer, Esq., as counsel for the Company. Ms.
Guggenheimer, General Counsel of the Company, beneficially owns, or has rights
to acquire under Citigroup employee benefit plans, an aggregate of less than one
percent of the common stock of Citigroup. Certain legal matters relating to the
Notes will be passed upon for the Underwriter by Cleary, Gottlieb, Steen &
Hamilton.
Cleary, Gottlieb, Steen & Hamilton has also acted as special tax counsel to
the Company in connection with the Notes and has, from time to time, acted as
counsel for the Company and certain of its affiliates and may do so in the
future.
S-28
<PAGE> 31
APPENDIX A
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
adjusted issue price........................................ S-25
AMEX........................................................ S-5
Assumed Supplemental Redemption Amount...................... S-25
Calculation Agent........................................... S-6
Calculation Day............................................. S-3, S-14
Calculation Period.......................................... S-3, S-14
Call Date................................................... S-4
Call Period................................................. S-4
Call Price.................................................. S-4
Citigroup................................................... S-6
Code........................................................ S-25
Company..................................................... S-2
comparable yield............................................ S-24
Contingent Debt Regulations................................. S-24
Depositary.................................................. S-2
Direct Participants......................................... S-18
disposition................................................. S-25
Ending Value................................................ S-3, S-13
ERISA....................................................... S-28
ERISA Plan.................................................. S-28
Exchange Act................................................ S-6
Global Notes................................................ S-18
Index....................................................... S-2
Index Business Day.......................................... S-14
Market Disruption Event..................................... S-16
Nasdaq...................................................... S-4
non-U.S. holder............................................. S-26
Notes....................................................... S-2, S-12
NYSE........................................................ S-4
Participants................................................ S-18
PHLX........................................................ S-2
Salomon Smith Barney........................................ S-6
SEC......................................................... S-6
Starting Value.............................................. S-3, S-14
Successor Index............................................. S-17
Supplemental Redemption Amount.............................. S-2
Tax OID..................................................... S-12
Trustee..................................................... S-13
TSC Internet Sector Index................................... S-2
Underwriter................................................. S-27
Underwriting Agreement...................................... S-27
U.S. holder................................................. S-24
</TABLE>
A-1
<PAGE> 32
PROSPECTUS
SALOMON SMITH BARNEY HOLDINGS INC.
may offer --
DEBT SECURITIES
INDEX WARRANTS
We will provide the specific terms of these securities in supplements to
this Prospectus. You should read this Prospectus and the supplements carefully
before you invest.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC OR ANY STATE SECURITIES
COMMISSION, NOR HAS ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS,
OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT OR PRICING SUPPLEMENT, IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
SALOMON SMITH BARNEY
December 1, 1997
<PAGE> 33
PROSPECTUS SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the terms
of our securities, you should carefully read this document and the Prospectus
Supplement that explains the specific terms of the securities we are offering.
You should also read the documents we have referred you to in "Where You Can
Find More Information" on page 4 for information on our Company and our
financial statements. The Prospectus Supplement may also add, update or change
information contained in this Prospectus. It is important for you to consider
the information in the Prospectus and any Prospectus Supplement in making your
investment decision.
OUR COMPANY
Salomon Smith Barney Holdings Inc. is a holding company primarily engaged
in investment banking, proprietary trading, retail brokerage and asset
management activities through its U.S. and foreign broker-dealer subsidiaries.
THE SECURITIES WE MAY OFFER
We may use this Prospectus to offer up to $11,710,346,786 of Debt
Securities and Index Warrants. A Prospectus Supplement will describe the
specific types, amounts, prices, and detailed terms of any securities we offer.
DEBT SECURITIES
These securities are unsecured general obligations of our Company in the
form of senior or subordinated debt. Senior debt includes our notes, debt, and
guarantees, which are for money borrowed and not subordinated. Subordinated
debt, designated at the time it is issued, is not entitled to interest and
principal payments if payments on the senior debt are not made.
The senior and subordinated debt will be issued under separate indentures
between the Company and a trustee. The trustees under the indentures are bank or
trust companies; we have certain banking relationships with these companies. We
have summarized below the general features of the debt securities from these
indentures. We encourage you to read the indentures (which are incorporated by
reference in our registration statement No. 333-38931), our recent annual report
on Form 10-K, our recent quarterly reports on Form 10-Q and our recent Reports
on Form 8-K, including the Report on Form 8-K filed on November 28, 1997.
Directions on how you can receive copies of these documents are provided on page
4.
GENERAL INDENTURE PROVISIONS THAT APPLY TO SENIOR AND SUBORDINATED DEBT
- - None of the indentures limits the amount of debt that we may issue or provides
holders any protection should there be a highly leveraged transaction
involving our Company, although the senior debt indenture does limit our
company's ability to pledge the stock of certain of our important
subsidiaries.
- - Each indenture allows for different types of Debt Securities (including
indexed securities) to be issued in series and provides for the issuance of
securities in book-entry, certificated, and, in limited circumstances, bearer
form.
- - The indentures allow us to merge or to consolidate with another company, or
sell all or substantially all of our assets to another company. If any of
these events occur, the other company will be required to assume our
responsibilities on the debt, and, assuming that the transaction has not
resulted in an event of default, we will be released from all liabilities and
obligations under the Debt Securities.
- - The indentures provide that holders of a majority of the total principal
amount of the Debt Securities outstanding in any series may vote to change
certain of our obligations or your rights concerning those securities.
However, every holder of a particular security must consent to certain
important changes in the
2
<PAGE> 34
terms of that security, including changes in the payment of principal or
interest on any security or the currency of payment.
- - We may discharge certain of the Debt Securities issued under the indentures or
be released from our obligation to comply with the limitations discussed above
at any time by depositing sufficient amounts of cash or U.S. government
securities with the trustee to pay our obligations under the particular
securities when due. If we choose to discharge certain securities, all amounts
due to you on those securities will be paid by the trustee from the deposited
funds.
- - The indentures govern the actions of the trustee with regard to the Debt
Securities, including the circumstances under which the trustee is required to
give notices to holders of the securities and the procedures by which lost or
stolen Debt Securities may be replaced.
EVENTS OF DEFAULT
The events of default specified in the indentures include:
- Principal not paid when due.
- Sinking fund payment not made when due.
- Failure to pay interest for 30 days.
- Covenants not performed for 60 days following notice.
- Certain events of insolvency or bankruptcy, whether voluntary or not.
REMEDIES
If there is a default, the trustee or holders of 25% of the principal
amount of Debt Securities outstanding in a series may declare the principal
immediately payable. However, holders of a majority in principal amount of the
securities in that series may rescind this action.
INDEX WARRANTS
We may issue Index Warrants independently or together with Debt Securities.
We will issue each series of Index Warrants under a separate Warrant Agreement
between our Company and a bank or trust company. We encourage you to read the
standard form of the Warrant Agreement, which is incorporated by reference in
our registration statement No. 333-38931. We provide directions on how you can
get copies of these documents on page 4.
Index Warrants are securities that, when exercised by the purchaser at a
time when certain conditions are met, entitle you to receive from our Company an
amount in cash or number of securities that will be indexed to prices, yields,
or other specified measures or changes in an index or differences between two or
more indexes. You may only exercise Index Warrants during a specified period and
the Index Warrants expire on a specified date. Depending on circumstances and
the terms and conditions of the particular Index Warrant, you may not be
entitled to receive any amount for an Index Warrant during any period when you
may exercise it or at its expiration.
The Prospectus Supplement for a series of Index Warrants will set forth the
formula for determining the amount in cash or number of securities, if any, that
we will pay you when you exercise an Index Warrant and certain information about
the relevant underlying assets, as well as other information about the specific
terms of the Index Warrant.
We will generally issue Index Warrants in book-entry form and list Index
Warrants for trading on a national securities exchange, such as the New York
Stock Exchange, American Stock Exchange or Chicago Board Options Exchange.
The Warrant Agreement for any series of Index Warrants will provide that
holders of a majority of the total principal amount of the Index Warrants
outstanding in any series may vote to change certain of our
3
<PAGE> 35
obligations or your rights concerning those Index Warrants. However, every
holder of a particular Index Warrant must consent to certain important changes
in the terms of that security, including changes in the amount or manner of
payment on an Index Warrant or further limits on the time during which it may be
exercised.
Index Warrants can involve a high degree of risk, including risks arising
from changes in the values of the underlying assets that are used to determine
the amount to be paid to you when you exercise the Index Warrant. Certain Index
Warrants may also involve risks linked to changes in foreign exchange rates,
securities markets, interest rates and the business of certain companies or
groups of companies. You should recognize that any Index Warrant that does not
have a specified minimum expiration value may be worthless when it expires.
Buyers of Index Warrants should be experienced in options transactions and
understand these types of risks. You should only decide to buy Index Warrants
after careful consideration with your advisers about the suitability of the
Index Warrants in light of your particular financial circumstances and the terms
and conditions of the particular Index Warrant.
Any prospective purchasers of Index Warrants should be aware of special
United States federal income tax considerations applicable to instruments such
as the Index Warrants. The Prospectus Supplement relating to each series of
Index Warrants will describe certain tax considerations.
USE OF PROCEEDS
We will use the net proceeds we receive from any offering of these
securities for general corporate purposes, primarily to fund our operating units
and subsidiaries. We may use some of the proceeds to refinance or extend the
maturity of some of the Company's existing debt obligations. We will use a
portion of the proceeds from the sale of Index Warrants and Indexed Notes to
hedge our exposure to payments that we may have to make on such Index Warrants
and Indexed Notes.
PLAN OF DISTRIBUTION
We may sell the securities in any of the following ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; (iii) through
agents or (iv) through a combination of any of these methods of sale. The
Prospectus Supplement will explain the ways in which we are selling specific
securities, including the names of any underwriters and details of the pricing
of the securities, including the commissions, concessions or discounts we are
granting the underwriters, dealers or agents.
If we use underwriters in any sale, the underwriters will buy the
securities for their own account and may resell the securities from time to time
in one or more transactions, at a fixed public offering price or at varying
prices determined at the time of sale. In connection with an offering,
underwriters and selling group members and their affiliates may engage in
transactions to stabilize, maintain or otherwise affect the market price of the
securities, in accordance with applicable law.
We expect that the underwriters for any offering will include one or more
of our broker-dealer subsidiaries.
These broker-dealer subsidiaries (including their successors) also expect
to offer and sell previously issued Debt Securities and Index Warrants as part
of their business, and may act as a principal or agent in such transactions. We
or any of our subsidiaries may use this Prospectus and the related Prospectus
Supplements and Pricing Supplements in connection with these activities.
4
<PAGE> 36
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. SEC filings are also available to the public from
the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to other documents. The information incorporated by reference is
considered to be part of this Prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June
30, 1997 and September 30, 1997;
(c) Current Reports on Form 8-K filed on 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 filed on October 28, 1997 and the
Current Report on Form 8-K/A2 filed on December 1, 1997), October 21, 1997,
October 28, 1997 (as amended by the Current Report on Form 8-K/A filed on
December 1, 1997), November 21, 1997 (as amended by the Current Report on
Form 8-K/A filed on December 1, 1997), and November 28, 1997.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Treasurer
Salomon Smith Barney Holdings Inc.
388 Greenwich Street
New York, NY 10013
212-816-6000
You should rely only on the information incorporated by reference or
provided in this Prospectus or the Prospectus Supplement. We have authorized no
one to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this Prospectus or the Prospectus Supplement is
accurate as of any date other than the date on the front of the document.
5
<PAGE> 37
THE COMPANY
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. (the "Company"). Immediately thereafter,
Smith Barney Holdings Inc., another wholly owned subsidiary of Travelers Group,
was merged into the Company. The Company 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
Inc. ("Smith Barney") and Salomon Brothers Inc ("Salomon Brothers").
The principal offices of the Company 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 the Company's commodities trading activities are conducted by the
Company's wholly owned subsidiary, Phibro Inc., and its subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED -----------------------------------------------
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 fixed charges has been computed by dividing earnings
before income taxes and fixed charges by the fixed charges. For the purpose of
this ratio, fixed charges consist of interest expense and that portion of
rentals deemed representative of the appropriate interest factor.
THE OFFERED SECURITIES
The Company intends to issue from time to time (i) debt securities ("Debt
Securities"), which may be subordinated to other indebtedness of the Company; or
(ii) warrants ("Index Warrants") representing the right to receive, upon
exercise, an amount in cash or number of securities that will be determined by
reference to prices, yields, levels or other specified objective measures, or
changes in an Index or differences between two or more Indexes all having an
aggregate initial public offering price or purchase price of up to
$11,710,346,786, or the equivalent thereof in one or more foreign or composite
currencies. The Debt Securities and Index Warrants are referred to herein
collectively as the "Offered Securities." The Offered Securities may
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<PAGE> 38
be offered separately or as units with other Offered Securities, in separate
series in amounts, at prices and on terms to be determined at or prior to the
time of sale. The sale of other securities under the registration statement of
which this Prospectus forms a part or under a registration statement to which
this Prospectus relates will reduce the amount of Offered Securities which may
be sold hereunder.
The specific terms of the Offered Securities with respect to which this
Prospectus is being delivered will be set forth in an accompanying supplement to
this Prospectus (a "Prospectus Supplement"), together with the terms of the
offering of the Offered Securities and the initial price and the net proceeds to
the Company from the sale thereof. The Prospectus Supplement will also contain
information, where applicable, about material United States federal income tax
considerations relating to, and any listing on a securities exchange of, the
Offered Securities covered by such Prospectus Supplement. This Prospectus may
not be used to consummate sales of Offered Securities unless accompanied by a
Prospectus Supplement.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be unsecured general obligations of the Company.
As a holding company, the Company's sources of funds are derived principally
from advances and dividends from subsidiaries, certain of which are subject to
regulatory considerations, and from sales of assets and investments. The Debt
Securities will constitute either senior or subordinated debt of the Company and
will be issued, in the case of Debt Securities that will be senior debt, under a
senior debt indenture (as amended or supplemented from time to time, the "Senior
Debt Indenture") and, in the case of Debt Securities that will be subordinated
debt, under a subordinated debt indenture (as amended or supplemented from time
to time, the "Subordinated Debt Indenture"). The Senior Debt Indenture and the
Subordinated Debt Indenture are sometimes hereinafter referred to individually
as an "Indenture" and collectively as the "Indentures." The institutions named
as trustees under the Indentures are hereinafter referred to individually as a
"Trustee" and collectively as the "Trustees." Forms of the Indentures have been
filed with the Securities and Exchange Commission (the "Commission") and are
incorporated by reference as part of the registration statement on Form S-3
under the Securities Act of 1933, as amended (the "Securities Act") that the
Company has filed with the Commission relating to the Offered Securities (such
registration statement, together with all exhibits and amendments, the
"Registration Statement"). The following summaries of certain provisions of the
Indentures and the Debt Securities do not purport to be complete and such
summaries are subject to the detailed provisions of the applicable Indenture to
which reference is hereby made for a full description of such provisions,
including the definition of certain terms used, and for other information
regarding the Debt Securities. Numerical references in parentheses below are to
sections in the applicable Indenture or, if no Indenture is specified, to
sections in each of the Indentures. Wherever particular sections or defined
terms of the applicable Indenture are referred to, such sections or defined
terms are incorporated herein by reference as part of the statement made, and
the statement is qualified in its entirety by such reference.
Unless otherwise provided in the applicable Prospectus Supplement, the
Trustee under the Senior Debt Indenture will be Citibank, N.A., a national
banking association, under an Indenture dated as of December 1, 1988, as amended
or supplemented from time to time, and the Trustee under the Subordinated Debt
Indenture will be Bankers Trust Company, a New York banking corporation, under
an Indenture dated as of December 1, 1988, as amended or supplemented from time
to time.
GENERAL
Neither of the Indentures limits the amount of Debt Securities that may be
issued thereunder, and each Indenture provides that Debt Securities may be
issued from time to time in series (Section 301). The Debt Securities to be
issued under either of the Indentures will be unsecured senior or subordinated
obligations of the Company as set forth below. Debt Securities of a series may
be issuable as individual securities in registered form without coupons
("Registered Securities") or in bearer form ("Bearer Securities") with or
without coupons ("Coupons") attached or as one or more global securities in
registered or bearer form (each a "Global Security").
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<PAGE> 39
Reference is made to the Prospectus Supplement for a description of the
following terms of the Debt Securities in respect of which this Prospectus is
being delivered: (i) the title and series of such Debt Securities, whether such
Debt Securities will be senior or subordinated debt of the Company and under
which indenture such Debt Securities are being issued; (ii) the limit, if any,
upon the aggregate principal amount of such Debt Securities and the method by
which such principal amount (and premium, if any) will be determined; (iii) the
dates on which or periods during which such Debt Securities may be issued and
the dates on which, or the range of dates within which, the principal of (and
premium, if any, on) such Debt Securities will be payable or the method by which
such date or dates shall be determined; (iv) the rate or rates (which may be
fixed or variable) or the method of determination thereof, at which such Debt
Securities will bear interest, if any; the date or dates from which such
interest will accrue; the dates on which such interest will be payable (each, an
"Interest Payment Date"); in the case of Registered Securities, the regular
record dates for the interest payable on such Interest Payment Dates (each, a
"Regular Record Date"); and the place or places where the principal of, premium,
if any, and interest on the Debt Securities shall be payable; (v) the
obligation, if any, of the Company to redeem or purchase such Debt Securities
pursuant to any sinking fund or analogous provisions, or at the option of the
Company or a Holder, and the periods within which or the dates on which, the
prices at which and the terms and conditions upon which such Debt Securities
will be redeemed or repurchased, in whole or in part, pursuant to such
obligation or option; (vi) the periods within which or the dates on which, the
prices at which and the terms and conditions upon which such Debt Securities may
be redeemed, if any, in whole or in part, at the option of the Company; (vii) if
other than denominations of $1,000 and any integral multiple thereof, the
denominations in which such Debt Securities will be issuable; (viii) whether
such Debt Securities are to be issued as Discount Securities (as defined below)
and the amount of discount with which such Debt Securities will be issued; (ix)
provisions, if any, for the defeasance of such Debt Securities; (x) whether such
Debt Securities are to be issued as Registered Securities or Bearer Securities
or both and, if Bearer Securities are to be issued, whether Coupons will be
attached thereto, whether Bearer Securities of the series may be exchanged for
Registered Securities having the same terms and the circumstances under which
and the place or places at which any such exchanges, if permitted, may be made;
(xi) whether such Debt Securities are to be issued in whole or in part in the
form of one or more Global Securities and, if so, the identity of the Depositary
(as defined below) for such Global Security or Securities; (xii) if a temporary
Debt Security is to be issued with respect to such Debt Securities, whether any
interest thereon payable on an Interest Payment Date prior to the issuance of a
definitive Debt Security of the series will be credited to the account of the
persons entitled thereto on such Interest Payment Date; (xiii) if a temporary
Global Security is to be issued with respect to such Debt Securities, the terms
upon which beneficial interests in such temporary Global Security may be
exchanged in whole or in part for beneficial interests in a definitive Global
Security or for individual Debt Securities of the series and the terms upon
which beneficial interests in a definitive Global Security, if any, may be
exchanged for individual Debt Securities having the same terms; (xiv) if other
than United States dollars, the foreign or composite currency in which such Debt
Securities are to be denominated, or in which payment of the principal of (and
premium, if any) and any interest on such Debt Securities will be made and the
circumstances, if any, under which such currency of payment may be changed; (xv)
if the principal of (and premium, if any) or any interest on such Debt
Securities are to be payable, at the election of the Company or a Holder, in a
currency other than that in which such Debt Securities are denominated or stated
to be payable, the periods within which, and the terms and conditions upon
which, such election may be made and the time and the manner of determining the
exchange rate between the currency in which such Debt Securities are denominated
or stated to be payable and the currency in which such Debt Securities are to be
paid pursuant to such election; (xvi) if the amount of payments of principal of
(and premium, if any) or any interest on such Debt Securities may be determined
with reference to an index based on a currency or currencies other than that in
which such Debt Securities are stated to be payable, the manner in which such
amounts shall be determined; (xvii) if the amount of payments of principal of
(and premium, if any) or any interest on such Debt Securities may be determined
with reference to an index based on the prices, changes in prices, or
differences between prices, of one or more securities, currencies, intangibles,
goods, articles or commodities or by application of a formula (any such index,
or index referred to in clause (xvi) being referred to herein as an "Index"),
the manner in which such amounts shall be determined; (xviii) any additional
Events of Default (as defined below) or restrictive covenants provided for with
respect to such Debt Securities; (xix) whether and under what circumstances the
8
<PAGE> 40
Company will pay additional interest on such Debt Securities held by a Person
who is not a U.S. Person (as defined herein) in respect of any tax, assessment
or governmental charge withheld or deducted and, if so, whether the Company will
have the option to redeem such Debt Securities under such circumstances; (xx)
whether and under what circumstances the Company will be obligated to redeem
such Debt Securities if certain events occur involving United States information
reporting requirements; (xxi) the terms, if any, upon which such Debt Securities
may or shall be exchangeable or exercisable for or payable in, among other
things, securities of any kind, instruments, contracts, currencies, commodities,
or other forms of property, rights or interests, or any combination of the
foregoing, and the terms and conditions upon which such exchange, exercise or
payment shall be effected, including, but not limited to, the initial, exchange
or exercise price, rate or ratio, and the relevant exchange or exercise period;
and (xxii) any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture under which they are issued (Section 301).
Under the Indentures, the Company may authorize the issuance and provide
the terms of a series of Debt Securities pursuant to a supplemental indenture or
pursuant to a resolution of its Board of Directors, any duly authorized
committee of the Board or any committee of officers or other representatives of
the Company duly authorized by the Board of Directors for such purpose. The
provisions of the Indentures provide the Company with the ability, in addition
to the ability to issue Securities with terms different from those of Debt
Securities previously issued, to "reopen" a previous issue of a series of
Securities and to issue additional Securities of such series.
Unless otherwise indicated in the applicable Prospectus Supplement, Debt
Securities will be issued only as Registered Securities in denominations of
$1,000 and any integral multiple thereof and will be payable only in United
States dollars (Section 302).
If Bearer Securities are issued, the United States federal income tax
consequences and other special considerations applicable to such Bearer
Securities will be described in the Prospectus Supplement relating thereto.
If the amount of payments of principal of (and premium, if any) or any
interest on Debt Securities is determined with reference to any type of Index,
the United States federal income tax consequences, specific terms and other
information with respect to such Debt Securities and such index or formula,
securities, currencies, intangibles, goods, articles or commodities will be
described in the Prospectus Supplement relating thereto.
If the principal of (and premium, if any) or any interest on Debt
Securities are payable in a foreign or composite currency, the restrictions,
elections, United States federal income tax consequences, specific terms and
other information with respect to such Debt Securities and such currency will be
described in the Prospectus Supplement relating thereto.
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate that at the time of
issuance is below market rates ("Discount Securities"). Debt Securities may be
variable rate debt securities that may be exchangeable for fixed rate debt
securities. United States federal income tax consequences and other special
considerations applicable to any such Debt Securities will be described in the
Prospectus Supplement relating thereto.
Unless otherwise provided in the applicable Prospectus Supplement, the
principal of (and premium, if any) and any interest on Debt Securities will be
payable (in the case of Registered Securities) at the corporate trust office or
agency of the applicable Trustee in the City and State of New York or (in the
case of Bearer Securities) at the principal London office of the applicable
Trustee; provided, however, that payment of interest on Registered Securities
may be made at the option of the Company by check mailed to the Registered
Holders thereof or, if so provided in the applicable Prospectus Supplement, at
the option of a Holder by wire transfer to an account designated by such Holder
(Section 307). Except as otherwise provided in the applicable Prospectus
Supplement, no payment on a Bearer Security will be made by mail to an address
in the United States or by wire transfer to an account maintained by the Holder
thereof in the United States.
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Securities may be transferred or exchanged at the corporate trust
office or agency of the applicable Trustee in the City and State
9
<PAGE> 41
of New York, subject to the limitations provided in the applicable Indenture,
without the payment of any service charge, other than any tax or governmental
charge payable in connection therewith (Section 305). Bearer Securities will be
transferable by delivery. Provisions with respect to the exchange of Bearer
Securities will be described in the applicable Prospectus Supplement.
All moneys paid by the Company to a paying agent for the payment of
principal of (and premium, if any) or any interest on any Debt Security that
remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company, and
the Holder of such Debt Security or any Coupon appertaining thereto will
thereafter look only to the Company for payment thereof (Section 1204).
Unless otherwise indicated in the applicable Prospectus Supplement, the
covenants contained in the Indenture and the Debt Securities would not afford
Holders protection in the event of a highly leveraged or other similar
transaction that may adversely affect Holders.
GLOBAL SECURITIES
Debt Securities having the same issue date and the same terms may be issued
in whole or in part in the form of one or more Global Securities that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the Prospectus Supplement relating to such Debt Securities. Global Securities
may be issued in either registered or bearer form and in either temporary or
definitive form. Unless and until it is exchanged in whole or in part for the
individual Debt Securities represented thereby, a Global Security may not be
transferred except as a whole by the Depositary for such Global Security to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor of such Depositary or a nominee of such successor (Sections 303
and 305).
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will apply
to all depositary arrangements for Debt Securities.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Debt Securities represented by
such Global Security to the accounts of institutions that have accounts with
such Depositary ("participants"). The accounts to be credited shall be
designated by the underwriters of such Debt Securities or, if such Debt
Securities are offered and sold directly by the Company or through one or more
agents, by the Company or such agent or agents. Ownership of beneficial
interests in a Global Security will be limited to participants or Persons that
may hold beneficial interests through participants. Ownership of beneficial
interests in a Global Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the Depositary
for such Global Security or by participants or Persons that hold through
participants. The laws of some states require that certain purchasers of
securities take physical delivery of such securities. Such limits and such laws
may limit the market for beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
owner of such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole Holder of the individual Debt Securities
represented by such Global Security for all purposes under the Indenture
governing such Debt Securities. Except as set forth below, owners of beneficial
interests in a Global Security will not be entitled to have any of the
individual Debt Securities represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of any
such Debt Securities and will not be considered the Holders thereof under the
Indenture governing such Debt Securities.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities and Bearer Warrants" below, payments of principal of (and
premium, if any) and any interest on individual Debt Securities represented by a
Global Security will be made to the Depositary or its nominee, as the case may
be, as the Holder of such Global Security. None of the Company, the Trustee for
such Debt Securities, any
10
<PAGE> 42
paying agent or the security registrar for such Debt Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in such Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Company expects that the Depositary for any Debt Securities, upon
receipt of any payment of principal, premium or interest in respect of a
definitive Global Security representing any of such Debt Securities, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such Global
Security as shown on the records of such Depositary. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments of principal, premium or
interest in respect thereof will be subject to the restrictions discussed under
"Limitations on Issuance of Bearer Securities and Bearer Warrants" below.
If the Depositary for any Debt Securities is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within ninety days, the Company will issue individual Debt
Securities in exchange for the Global Security or Securities representing such
Debt Securities. In addition, the Company may at any time and in its sole
discretion determine not to have certain Debt Securities represented by one or
more Global Securities and, in such event, will issue individual Debt Securities
in exchange for the Global Security or Securities representing such Debt
Securities. Further, if the Company so specifies with respect to any Debt
Securities, an owner of a beneficial interest in a Global Security representing
such Debt Securities may, on terms acceptable to the Company and the Depositary
for such Global Security, receive individual Debt Securities in exchange for
such beneficial interest. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to physical delivery of
individual Debt Securities represented by such Global Security equal in
principal amount to such beneficial interest and to have such Debt Securities
registered in its name (if the Debt Securities are issuable as Registered
Securities). Individual Debt Securities so issued will be issued (i) as
Registered Securities in denominations, unless otherwise specified by the
Company, of $1,000 and integral multiples thereof if the Debt Securities are
issuable as Registered Securities, (ii) as Bearer Securities in the denomination
or denominations specified by the Company if the Debt Securities are issuable as
Bearer Securities or (iii) as either Registered or Bearer Securities, if the
Debt Securities are issuable in either form (Section 305). See, however,
"Limitations on Issuance of Bearer Securities and Bearer Warrants," below, for a
description of certain restrictions on the issuance of individual Bearer
Securities in exchange for beneficial interests in a Global Security.
SENIOR DEBT
The Debt Securities and Coupons that will constitute part of the senior
debt of the Company will be issued under the Senior Debt Indenture and will rank
pari passu with all other unsecured debt of the Company except subordinated
debt.
SUBORDINATED DEBT
The Debt Securities and Coupons that will constitute part of the
subordinated debt of the Company will be issued under the Subordinated Debt
Indenture and will be subordinate and junior in the right of payment, to the
extent and in the manner set forth in the Subordinated Debt Indenture, to all
"Senior Indebtedness" of the Company. The Subordinated Debt Indenture defines
"Senior Indebtedness" as the following indebtedness or obligations, whether
outstanding at the date of such Indenture or thereafter incurred, assumed,
guaranteed or otherwise created, unless in the instrument creating or evidencing
any such indebtedness or obligation or pursuant to which the same is outstanding
it is provided that such indebtedness or obligation is not superior in right of
payment to the subordinated Debt Securities and any appurtenant Coupons: (a) all
indebtedness of the Company (including indebtedness of others guaranteed by the
Company), other than the subordinated Debt Securities and any appurtenant
Coupons and other than the debt securities issuable under the indenture dated as
of July 1, 1986 between the Company and The Bank of New York, as trustee, that
(i) is for money borrowed, (ii) arises in connection with the acquisition of any
business, properties, securities or assets of any
11
<PAGE> 43
kind, other than in the ordinary course of the Company's business as heretofore
conducted or (iii) is secured, in whole or in part, by real or personal
property, (b) obligations of the Company (including obligations of others
guaranteed by the Company) as lessee under leases required to be capitalized on
the balance sheet of the lessee under generally accepted accounting principles
and leases of property or assets made as part of any sale and lease-back
transaction and (c) amendments, renewals, extensions, modifications and
refundings of any such indebtedness or obligation (Subordinated Debt Indenture,
Section 101). The subordinated Debt Securities and any appurtenant Coupons will
not be superior in right of payment to the debt securities issuable under the
indenture dated as of July 1, 1986 between the Company and The Bank of New York,
as trustee (Subordinated Debt Indenture, Section 1601).
In the event (a) of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or a substantial part of its property, or (b) that (i) a
default shall have occurred with respect to the payment of principal of (and
premium, if any) or any interest on or other monetary amounts due and payable on
any Senior Indebtedness, or (ii) there shall have occurred an event of default
(other than a default in the payment of principal, premium, if any, or interest,
or other monetary amounts due and payable) with respect to any Senior
Indebtedness, as defined therein or in the instrument under which the same is
outstanding, permitting the holder or holders thereof to accelerate the maturity
thereof (with notice or lapse of time, or both), and such event of default shall
have continued beyond the period of grace, if any, in respect thereof, and such
default or event of default shall not have been cured or waived or shall not
have ceased to exist, or (c) that the principal of and accrued interest on the
subordinated Debt Securities issued under the Subordinated Debt Indenture shall
have been declared due and payable upon an Event of Default pursuant to Section
502 thereof and such declaration shall not have been rescinded and annulled as
provided therein, then the holders of all Senior Indebtedness shall first be
entitled to receive payment of the full amount due thereon, or provision shall
be made for such payment in money or money's worth, before the Holders of any of
the subordinated Debt Securities or Coupons issued under the Subordinated Debt
Indenture are entitled to receive a payment on account of the principal of (and
premium, if any) or any interest on the indebtedness evidenced by such Debt
Securities or such Coupons (Subordinated Debt Indenture, Section 1601). If this
Prospectus is being delivered in connection with a series of subordinated Debt
Securities, the related Prospectus Supplement will set forth the amount of
Senior Indebtedness outstanding as of the most recent practicable date.
LIMITATION ON LIENS
The Senior Debt Indenture provides that the Company will not, and will not
permit any Restricted Subsidiary to, incur, issue, assume, guarantee or suffer
to exist any indebtedness for borrowed money if the payment of such indebtedness
is secured by a pledge of, lien on or security interest in any shares of stock
of any Restricted Subsidiary without effectively providing for the equal and
ratable securing of the payment of the Debt Securities issued thereunder
(Section 1205). The term "Restricted Subsidiary" is defined in the Senior Debt
Indenture to mean each of Salomon Brothers Inc, Smith Barney Inc. and any
Subsidiary of the Company owning, directly or indirectly, any of the common
stock of, or succeeding to any substantial part of the business now conducted
by, any of such corporations.
EVENTS OF DEFAULT
The following will constitute Events of Default under each Indenture with
respect to any series of Debt Securities issued thereunder: (i) default in the
payment of the principal of (and premium, if any, on) any Debt Security of such
series when due; (ii) default for 30 days in the payment of any interest on any
Debt Security of such series or of any related Coupon when due; (iii) default in
the deposit of any sinking fund payment, when and as due by the terms of any
Debt Security of such series; (iv) default in the performance of any other
covenant in such Indenture, continued for 60 days after written notice thereof
by the applicable Trustee or the Holders of at least 25% in principal amount of
the Debt Securities then outstanding (the "Outstanding Debt Securities") of such
series; and (v) certain events of bankruptcy, insolvency or reorganization
(Section 501). Any additional Events of Default provided with respect to a
series of Debt Securities will be set forth in the applicable Prospectus
Supplement. No Event of Default with respect to a particular series of Debt
Securities issued under either Indenture necessarily constitutes an Event of
Default with respect to any other series of Debt Securities.
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Each Indenture provides that if an Event of Default specified therein shall
occur and be continuing with respect to a series of Debt Securities issued
thereunder, either the Trustee thereunder or the Holders of at least 25% in
principal amount of the Outstanding Debt Securities of such series may declare
the principal of and all accrued interest on all Debt Securities of such series
(or, in the case of Discount Securities or Indexed Notes (as defined herein), an
amount equal to such portion of the principal amount thereof as will be
specified in the related Prospectus Supplement or Pricing Supplement) to be due
and payable. In certain cases, the Holders of a majority in principal amount of
the Outstanding Debt Securities of a series may, on behalf of the Holders of all
such Debt Securities, rescind and annul such declaration and its consequences
(Section 502).
Each Indenture contains a provision entitling the Trustee thereunder,
subject to the duty of such Trustee during the continuance of a default to act
with the required standard of care, to be indemnified by the Holders of the Debt
Securities or any Coupons of any series thereunder before proceeding to exercise
any right or power under such Indenture with respect to such series at the
request of such Holders (Section 603). Each Indenture provides that no Holder of
a Debt Security or any Coupon of any series thereunder may institute any
proceeding, judicial or otherwise, to enforce such Indenture except in the case
of failure of the Trustee thereunder, for 60 days, to act after it receives (i)
written notice of such default, (ii) a written request to enforce such Indenture
by the Holders of at least 25% in aggregate principal amount of the Outstanding
Debt Securities of such series (and the Trustee receives no direction
inconsistent with such written request from the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of such series)
and (iii) an offer of reasonable indemnity (Section 507). This provision will
not prevent any Holder of any such Debt Security from enforcing payment of the
principal thereof (and premium, if any, thereon) and any interest thereon or of
any such Coupon from enforcing payment thereof at the respective due dates
thereof (Section 508). The Holders of a majority in aggregate principal amount
of the Outstanding Debt Securities of any series may direct the time, method and
place of conducting any proceedings for any remedy available to the applicable
Trustee or of exercising any trust or power conferred on it with respect to the
Debt Securities of such series. However, such Trustee may refuse to follow any
direction that conflicts with law or the applicable Indenture or that would be
unjustly prejudicial to Holders not joining therein (Section 512).
Each Indenture provides that the Trustee thereunder will, within 90 days
after the occurrence of a default with respect to any series of Debt Securities
thereunder known to it, give to the Holders of Debt Securities and Coupons of
such series notice of such default, unless such default shall have been cured or
waived; but, except in the case of a default in the payment of the principal of
(and premium, if any) or any interest on any Debt Security or of any Coupon of
such series or in the payment of any sinking fund installment with respect to
Debt Securities of such series, the Trustee shall be protected in withholding
such notice if it determines in good faith that the withholding of such notice
is in the interest of the Holders of such Debt Securities and Coupons (Section
602).
The Company will be required to file annually with each Trustee a
certificate of an appropriate officer of the Company as to the absence of
certain defaults under the terms of the appropriate Indenture (Section 1206;
Subordinated Debt Indenture, Section 1205).
MODIFICATION AND WAIVER
Each Indenture contains provisions for convening meetings of Holders to
consider matters affecting their interests (Article Nine).
Modifications of and amendments to each Indenture may be made by the
Company and the Trustee thereunder with the consent of the Holders of a majority
in principal amount of the Outstanding Debt Securities of each series issued
thereunder that is affected by such modification or amendment, voting
separately; provided, however, that no such modification or amendment may,
without the consent of the Holder of each Outstanding Debt Security affected
thereby: (i) change the stated maturity of the principal of, or any installment
of interest or additional amounts payable on, any Debt Security or Coupon; (ii)
reduce the principal amount (including the amount payable on a Discount Security
upon the acceleration of the maturity thereof) of, or any interest on or any
premium payable upon redemption of, or additional amounts payable on, any Debt
Security or Coupon; (iii) change the currency or composite currency of
denomination or payment of the principal of (and premium, if any, on) or any
interest or additional amounts payable on any Debt Security or Coupon; (iv)
impair the right to institute suit for the enforcement of any payment on or with
respect to any
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Debt Security or Coupon; (v) reduce the percentage of the principal amount of
the Outstanding Debt Securities of any series, the consent of the Holders of
which is required for modification or amendment of the applicable Indenture with
respect to waiver of compliance with certain provisions of the applicable
Indenture or waiver of certain defaults; (vi) limit the Company's obligation to
maintain a paying agent outside the United States for Bearer Securities; or
(vii) limit the obligation of the Company to redeem certain Bearer Securities if
certain events occur involving United States information reporting requirements
(Section 1102).
The Subordinated Debt Indenture may not be amended to alter or impair the
subordination of the subordinated Debt Securities issued thereunder without the
consent of each holder of Senior Indebtedness then outstanding (Subordinated
Debt Indenture, Section 1107).
The Holders of a majority in principal amount of the Outstanding Debt
Securities of each series may, on behalf of all Holders of Debt Securities of
that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the applicable Indenture before
the time for such compliance (Section 1207; Subordinated Debt Indenture, Section
1206). The Holders of a majority in principal amount of the Outstanding Debt
Securities of each series may, on behalf of all Holders of Debt Securities of
that series, waive any past default under the applicable Indenture with respect
to Debt Securities of that series, except a default in the payment of the
principal of (and premium, if any) or any interest on any such Debt Security or
in the payment of any Coupon of that series and except a default in respect of a
covenant or provision the modification or amendment of which would require the
consent of the Holder of each Outstanding Debt Security affected thereby
(Section 513).
CONSOLIDATION, MERGER AND TRANSFER OR LEASE OF ASSETS
Each Indenture provides that the Company may not consolidate with or merge
into any corporation, or transfer or lease its assets substantially as an
entirety to any Person, unless (i) the successor corporation or transferee or
lessee (the "Successor Corporation") is a corporation organized under the laws
of the United States or any political subdivision thereof; (ii) the Successor
Corporation assumes the Company's obligations under the applicable Indenture and
on the Debt Securities and any Coupons issued thereunder; (iii) after giving
effect to the transaction no Event of Default and no event that, after notice or
lapse of time, or both, would become an Event of Default shall have occurred and
be continuing; (iv) the Successor Corporation waives any right to redeem any
Bearer Security under circumstances in which the Successor Corporation would be
entitled to redeem such Bearer Security but the Company would not have been so
entitled if such consolidation, merger, transfer or lease had not occurred; and
(v) certain other conditions are met (Section 1001).
DEFEASANCE
If so specified in the applicable Prospectus Supplement with respect to
Debt Securities of any series that are Registered Securities payable only in
United States dollars, the Company, at its option, (i) will be discharged from
any and all obligations in respect of the Debt Securities of such series (except
for certain obligations to register the transfer or exchange of Debt Securities
of such series, replace stolen, lost or mutilated Debt Securities of such
series, maintain paying agencies and hold moneys for payment in trust) or (ii)
will not be subject to provisions of the applicable Indenture described above
under "Limitation on Liens" and "Consolidation, Merger and Transfer or Lease of
Assets" with respect to the Debt Securities of such series, in each case if the
Company deposits with the applicable Trustee, in trust, money or U.S. Government
Obligations that through the payment of interest thereon and principal thereof
in accordance with their terms will provide money in an amount sufficient to pay
all the principal of (and premium, if any) and any interest on the Debt
Securities of such series on the dates such payments are due in accordance with
the terms of such Debt Securities. To exercise any such option under either of
the Indentures, the Company is required to deliver to the applicable Trustee an
opinion of counsel to the effect that (1) the deposit and related defeasance
would not cause the Holders of the Debt Securities of such series to recognize
income, gain or loss for Federal income tax purposes and, in the case of a
discharge pursuant to clause (i) above, a ruling to such effect received from or
published by the United States Internal Revenue Service, and (2) if the Debt
Securities of such series are then listed on the New York Stock Exchange, such
Debt Securities would not be delisted from
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the New York Stock Exchange as a result of the exercise of such option (Sections
1501 and 1502). Defeasance provisions, if any, with respect to any other Debt
Securities of any series will be described in the applicable Prospectus
Supplement.
REPLACEMENT DEBT SECURITIES
Unless otherwise provided in the applicable Prospectus Supplement, if a
Debt Security of any series or any related Coupon is mutilated, destroyed, lost
or stolen, it may be replaced at the corporate trust office or agency of the
applicable Trustee in the City and State of New York (in the case of Registered
Securities) or at the principal London office of the applicable Trustee (in the
case of Bearer Securities and Coupons) upon payment by the Holder of such
expenses as may be incurred by the Company and the applicable Trustee in
connection therewith and the furnishing of such evidence and indemnity as the
Company and such Trustee may require. Mutilated Debt Securities and Coupons must
be surrendered before new Debt Securities (with or without Coupons) will be
issued (Section 306).
NOTICES
Unless otherwise provided in the applicable Prospectus Supplement, any
notice required to be given to a Holder of a Debt Security of any series that is
a Registered Security will be mailed to the last address of such Holder set
forth in the applicable security register. Any notice required to be given to a
Holder of a Debt Security that is a Bearer Security will be published in a daily
morning newspaper of general circulation in the city or cities specified in the
Prospectus Supplement relating to such Bearer Security (Section 105).
CONCERNING THE TRUSTEES
The Company and certain of its subsidiaries maintain lines of credit and
have other customary banking relationships with Citibank, N.A. and Bankers Trust
Company, and certain of their respective affiliates, and may have such
relationships with other Trustees and their affiliates.
DESCRIPTION OF INDEX WARRANTS
The following description of the terms of the Index Warrants sets forth
certain general terms and provisions of the Index Warrants to which any
Prospectus Supplement may relate. The particular terms of the Index Warrants
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions do not apply to the Index Warrants so offered will be
described in such Prospectus Supplement.
Index Warrants may be issued independently or together with Debt Securities
offered by any Prospectus Supplement and may be attached to or separate from any
such Offered Securities. Each series of Index Warrants will be issued under a
separate index warrant agreement (each, an "Index Warrant Agreement") to be
entered into between the Company and a bank or trust company, as warrant agent
(the "Index Warrant Agent"), all as described in the Prospectus Supplement
relating to such Index Warrants. A single bank or trust company may act as Index
Warrant Agent for more than one series of Index Warrants. The Index Warrant
Agent will act solely as the agent of the Company under the applicable Index
Warrant Agreement and will not assume any obligation or relationship of agency
or trust for or with any owners of such Index Warrants. A copy of the form of
Index Warrant Agreement, including the form of index warrant certificate (the
"Index Warrant Certificate," or, if issued in global form, the "Index Warrant
Global Certificate"), is filed as an exhibit to or incorporated by reference in
the Registration Statement. The following summaries of certain provisions of the
Index Warrants and the form of Index Warrant Agreement do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Index Warrant Agreement and the Index Warrant
Certificate or Index Warrant Global Certificate.
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GENERAL
The Index Warrant Agreement does not limit the number of Index Warrants
that may be issued thereunder. The Company will have the right to "reopen" a
previous series of Index Warrants and to issue additional Index Warrants of such
series.
Each Index Warrant will entitle the holder (each, a "Warrant Holder") to
receive from the Company, upon exercise, including any automatic exercise, an
amount in cash or a number of securities that will be determined by reference to
an Index calculated by reference to prices, yields, levels or other specified
objective measures in respect of specified securities or securities indexes or
specified foreign currencies or currency indexes, or a combination thereof, or
changes in such measure or differences between two or more such measures. The
Prospectus Supplement for a series of Index Warrants will set forth the formula
or methodology pursuant to which the amount payable or distributable on the
Index Warrants will be determined by reference to the relevant Index or Indexes.
Certain Index Warrants will, if specified in the Prospectus Supplement,
entitle the Warrant Holder to receive from the Company, upon automatic exercise
at expiration and under certain other circumstances, a minimum or maximum
amount.
The Prospectus Supplement applicable to any series of Index Warrants will
set forth any circumstances in which the payment or distribution or the
determination of the payment or distribution on the Index Warrants may be
postponed and the period for which such payment or distribution or determination
may be postponed. Conversely, the Index Warrants may be subject to early
exercise or cancellation in certain circumstances described in the applicable
Prospectus Supplement. The amount due, or the means by which the amount due, on
the Index Warrants may be determined after any such delay or postponement, or
early exercise or cancellation will be set forth in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
Company will be under no obligation to, nor will it, purchase or take delivery
of or sell or deliver any securities or currencies (including the Underlying
Assets), other than the payment of any cash or distribution of any securities
due on the Index Warrants, from or to Warrant Holders pursuant to the Index
Warrants.
Unless otherwise specified in the applicable Prospectus Supplement, the
Index Warrants will be deemed to be automatically exercised upon expiration.
Upon such automatic exercise, Warrant Holders will be entitled to receive the
cash amount or number of securities due, if any, on such exercise of the Index
Warrants.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Index Warrants offered thereby for the terms of such Index
Warrants, including, where applicable: (i) the aggregate number of such Index
Warrants; (ii) the offering price of such Index Warrants; (iii) the measure or
measures by reference to which payment or distribution on such Index Warrants
will be determined; (iv) certain information regarding the underlying
securities, foreign currencies or indexes; (v) the amount of cash or number of
securities due, or the means by which the amount of cash or number of securities
due may be calculated, on exercise of the Index Warrants, including automatic
exercise, or upon cancellation; (vi) the date on which the Index Warrants may
first be exercised and the date on which they expire; (vii) any minimum number
of Index Warrants exercisable at any one time; (viii) any maximum number of
Index Warrants that may, subject to the Company's election, be exercised by all
Warrant Holders (or by any person or entity) on any day; (ix) any provisions
permitting a Warrant Holder to condition an exercise of Index Warrants; (x) the
method by which the Index Warrants may be exercised; (xi) the currency in which
the Index Warrants will be denominated and in which payments on the Index
Warrants will be made or the securities that may be distributed in respect of
the Index Warrants; (xii) the method of making any foreign currency translation
applicable to payments or distributions on the Index Warrants; (xiii) the method
of providing for a substitute Index or Indexes or otherwise determining the
amount payable in connection with the exercise of Index Warrants if an Index
changes or is no longer available; (xiv) the time or times at which amounts will
be payable or distributable in respect of such Index Warrants following exercise
or automatic exercise; (xv) any national securities exchange on, or
self-regulatory organization with which, such Index Warrants will be listed;
(xvi) any provisions for issuing such Index Warrants in certificated form;
(xvii) if
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such Index Warrants are not issued in book-entry form, the place or places at
and the procedures by which payments or distributions on the Index Warrants will
be made; and (xviii) any other terms of such Index Warrants.
Prospective purchasers of Index Warrants should be aware of special United
States federal income tax considerations applicable to instruments such as the
Index Warrants. The Prospectus Supplement relating to each series of Index
Warrants will describe such tax considerations. The summary of United States
federal income tax considerations contained in the Prospectus Supplement will be
presented for informational purposes only, however, and will not be intended as
legal or tax advice to prospective purchasers. Prospective purchasers of Index
Warrants are urged to consult their own tax advisors prior to any acquisition of
Index Warrants.
BOOK-ENTRY PROCEDURES AND SETTLEMENT FOR INDEX WARRANTS
Subject to the rules of the Warrant Depositary (as defined below) and
unless otherwise specified in the Prospectus Supplement, the Index Warrants
offered thereby will be issued in the form of a single Index Warrant Global
Certificate that will be deposited with, or on behalf of, a depositary (the
"Warrant Depositary"), which shall be, unless otherwise specified in the
applicable Prospectus Supplement, the Depository Trust Company, New York, New
York ("DTC"). Index Warrants will be registered in the name of the Warrant
Depositary or a nominee of the Warrant Depositary. Unless and until it is
exchanged in whole or in part for the individual Index Warrants represented
thereby, an Index Warrant Global Certificate may not be transferred except as a
whole by the Warrant Depositary to a nominee of the Warrant Depositary or by a
nominee of the Warrant Depositary to the Warrant Depositary or another nominee
of the Warrant Depositary or by the Warrant Depositary or any such nominee to a
successor of the Warrant Depositary or a nominee of such successor.
The Company anticipates that the following provisions will apply to all
depository arrangements.
Upon the issuance of an Index Warrant Global Certificate, the Warrant
Depositary will credit, on its book-entry registration and transfer system, the
respective numbers of the individual Index Warrants represented by such Index
Warrant Global Certificate to the accounts of institutions that have accounts
with the Warrant Depositary ("depositary participants"). The accounts to be
credited shall be designated by the underwriters of such Index Warrants or, if
such Index Warrants are offered and sold directly by the Company or through one
or more agents, by the Company or such agent or agents. Ownership of beneficial
interests in an Index Warrant Global Certificate will be limited to participants
or persons that may hold beneficial interests through participants. Ownership of
beneficial interests in an Index Warrant Global Certificate will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the Warrant Depositary for such Index Warrant Global Certificate
or by participants or persons that hold through participants. The laws of some
states require that certain purchasers of securities take physical delivery of
such securities. Such limits and such laws may limit the market for beneficial
interests in an Index Warrant Global Certificate.
The Warrant Depositary's nominee for all purposes will be considered the
sole owner or holder of the Index Warrants under the related Index Warrant
Agreement. Except as set forth below, owners of beneficial interests in the
Index Warrant Global Certificate will not be entitled to have any of the
individual Index Warrants represented by such Index Warrant Global Certificate
registered in their names, will not receive or be entitled to receive physical
delivery of any such Index Warrants, and will not be considered the holders
thereof under the related Index Warrant Agreement.
Neither the Company nor the Index Warrant Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Index Warrant
Global Certificate or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
If the Warrant Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within 90
days, the Company will issue individual Index Warrant
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Certificates in exchange for the Index Warrant Global Certificate. In addition,
the Company may at any time and in its sole discretion determine not to have
certain Index Warrants represented by an Index Warrant Global Certificate and,
in such event, will issue individual Index Warrant Certificates in exchange for
such Global Certificate. Further, if the Company so specifies with respect to
any Index Warrants, an owner of a beneficial interest in an Index Warrant Global
Certificate may, on such terms acceptable to the Company and the Warrant
Depositary, receive individual Index Warrants in exchange for such beneficial
interest. In any such instance, an owner of a beneficial interest in the Index
Warrant Global Certificate will be entitled to have Index Warrants equal in
aggregate number to such beneficial interest registered in its name and will be
entitled to physical delivery of such Index Warrants. The registered owner of
such Index Warrants will be entitled to receive any amounts payable in respect
of such Index Warrants, upon surrender of such Index Warrants to the Index
Warrant Agent in accordance with the procedures set forth in the Prospectus
Supplement.
LISTING
Unless otherwise indicated in the Prospectus Supplement, the Index Warrants
will be listed on a national securities exchange or with a self-regulatory
organization, the rules and regulations of which are filed with the Commission
pursuant to Section 19(b) of the Exchange Act (a "Self-Regulatory
Organization"), in each case as specified in the Prospectus Supplement. It is
expected that such Self-Regulatory Organization will cease trading a series of
Index Warrants as of the close of business on the related expiration date of
such Index Warrants.
MODIFICATION
The Index Warrant Agreement and the terms of the related Index Warrants may
be amended by the Company and the Index Warrant Agent, without the consent of
the holders of any Index Warrants, for the purpose of curing any ambiguity or of
curing, correcting or supplementing any defective or inconsistent provision
contained therein, maintaining the listing of such Index Warrants on any
national securities exchange or with any other Self-Regulatory Organization or
registration of such Index Warrants under the Exchange Act, permitting the
issuance of individual Index Warrant certificates to Warrant Holders, reflecting
the issuance by the Company of additional Index Warrants of the same series or
reflecting the appointment of a successor depository, or for any other purpose
which the Company may deem necessary or desirable and which will not materially
and adversely affect the interests of the Warrant Holders.
The Company and the Index Warrant Agent also may modify or amend the Index
Warrant Agreement and the terms of the related Index Warrants, with the consent
of the holders of not less than a majority in number of the then outstanding
Warrants affected by such modification or amendment, for any purposes; provided,
however, that no such modification or amendment that changes the amount to be
paid to the Warrant Holder or the manner in which such amount is to be
determined, shortens the period of time during which the Index Warrants may be
exercised, or otherwise materially and adversely affects the exercise rights of
the holders of the Index Warrants or reduces the percentage of the number of
outstanding Index Warrants the consent of whose holders is required for
modification or amendment of the Index Warrant Agreement or the terms of the
related Index Warrants, may be made without the consent of each Holder affected
thereby.
MERGER, CONSOLIDATION, SALE OR OTHER DISPOSITION
If at any time there is a merger or consolidation involving the Company or
a sale, transfer, conveyance (other than by way of lease) or other disposition
of all or substantially all of the assets of the Company, then the successor or
assuming corporation will succeed to and be substituted for the Company under
the Index Warrant Agreement and the related Index Warrants, with the same effect
as if it had been named in such Index Warrant Agreement and Index Warrants as
the Company. The Company will thereupon be relieved of any further obligation
under such Index Warrant Agreement and Index Warrants and may at any time
thereafter be dissolved, wound up or liquidated.
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ENFORCEABILITY OF RIGHTS BY WARRANT HOLDERS
Any Warrant Holder may, without the consent of the Index Warrant Agent or
any other Warrant Holder, enforce by appropriate legal action on his own behalf
his right to exercise, and to receive payment for, his Index Warrants.
SPECIAL CONSIDERATIONS RELATING TO INDEX WARRANTS
The Index Warrants involve a high degree of risk, including risks arising
from fluctuations in the values of the underlying securities, foreign currencies
or indexes, risks relating to the relevant Index or Indexes by which payments or
distributions on the Index Warrants are calculated, general risks applicable to
the securities or currency markets on which the underlying securities, foreign
currencies or indexes are traded and, in the case of certain Index Warrants,
foreign exchange, interest rate, issuer and other risks. Purchasers should
recognize that their Index Warrants, other than Index Warrants having a minimum
expiration value, may expire worthless. Purchasers should be prepared to sustain
a total loss of the purchase price of their Index Warrants, and are advised to
consider carefully the information set forth herein and under "Risk Factors
Relating to the Index Warrants" in the applicable Prospectus Supplement.
Prospective purchasers of the Index Warrants should be experienced with respect
to options and options transactions and understand the risks of the relevant
Index or Indexes and the underlying securities, foreign currencies or indexes
(and, if applicable, foreign currency transactions), and should reach an
investment decision only after careful consideration, with their advisers, of
the suitability of the Index Warrants in light of their particular financial
circumstances, the information set forth herein under "Description of Index
Warrants," and the information regarding the Index Warrants, the relevant Index
or Indexes and the underlying securities, foreign currencies or indexes set
forth in the Prospectus Supplement.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES AND BEARER WARRANTS
In compliance with United States federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Security will agree that, in connection with the original issuance
of such Bearer Security and during the period ending 40 days after the issue
date of such Bearer Security, they will not offer, sell or deliver such Bearer
Security, directly or indirectly, to a U.S. Person or to any person within the
United States, except to the extent permitted under United States Treasury
regulations.
Bearer Securities will bear a legend to the following effect: "Any United
States Person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the Internal Revenue Code." The sections referred to in
the legend provide that, with certain exceptions, a U.S. Person who holds Bearer
Securities will not be allowed to deduct any loss with respect to, and will not
be eligible for capital gain treatment with respect to any gain realized on a
sale, exchange, redemption or other disposition of, such Bearer Securities.
As used herein, "U.S. Person" means a person who is a citizen or resident
of the United States, or that is a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, an estate the income of which is subject to United States
federal income taxation regardless of its source or a trust if (i) a United
States 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, and the term "United States"
means the United States of America (including the States and the District of
Columbia).
Pending the availability of a definitive Global Security or individual
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security, without interest coupons, to be deposited with a common depositary in
London for Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System ("Euroclear"), and Cedel Bank, Societe Anonyme
("Cedel") for credit to the accounts designated by or on behalf of the
purchasers thereof. Following the availability of a definitive Global Security
in bearer form, without coupons
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attached, or individual Bearer Securities and subject to any further limitations
described in the applicable Prospectus Supplement, the temporary Global Security
will be exchangeable for interests in such definitive Global Security or for
such individual Bearer Securities, respectively, only upon receipt of a
"Certificate of Non-U.S. Beneficial Ownership". A "Certificate of Non-U.S.
Beneficial Ownership" is a certificate to the effect that a beneficial interest
in a temporary Global Security or Bearer Warrant is owned by a person that is
not a U.S. Person or is owned by or through a financial institution in
compliance with applicable U.S. Treasury regulations. In no event will a
definitive Bearer Security be delivered to a purchaser without the receipt of a
Certificate of Non-U.S. Beneficial Ownership. No Bearer Security will be
delivered in or to the United States. If so specified in the applicable
Prospectus Supplement, interest on a temporary Global Security will be paid to
each of Euroclear and Cedel with respect to that portion of such temporary
Global Security held for its account, but only upon receipt as of the relevant
Interest Payment Date of a Certificate of Non-U.S. Beneficial Ownership.
Limitations on the offer, sale, delivery and exercise of Bearer Warrants
(including a requirement that a Certificate of Non-U.S. Beneficial Ownership be
delivered upon exercise of a Bearer Warrant) will be described in the Prospectus
Supplement relating to such Bearer Warrants.
EUROPEAN MONETARY UNION
Stage III of the European Economic and Monetary Union ("Stage III") is
presently scheduled to commence on January 1, 1999 for those member states of
the European Union that satisfy the economic convergence criteria set forth in
the Treaty on European Union. Certain of the foreign currencies in which Debt
Securities may be denominated or payments in respect of Index Warrants may be
due or by which amounts due on the Offered Securities may be calculated are
issued by countries that are signatories to such Treaty (any such country, a
"Relevant Jurisdiction" with respect to such Offered Securities). Stage III
includes the introduction of a single currency (the "Euro") which will be legal
tender in such member states. It is anticipated that the European Union will
adopt regulations or other legislation providing specific rules for the
introduction of the Euro in substitution for the respective current national
currencies of such member states, which regulations or legislation may be
supplemented by legislation of the individual member states. In the event that
any Relevant Jurisdiction adopts the Euro, the laws and regulations of the
European Union (and, if any, of such Relevant Jurisdiction) relating to the Euro
implemented pursuant to or by virtue of the Treaty on European Union shall apply
to the relevant Offered Securities, Indenture or Indentures and Index Warrant
Agreement or Agreements, and, except as provided in the following paragraph, the
payment of principal of, or interest on, or any other amounts in respect of such
relevant Offered Securities or the calculation of amounts due thereon at any
time after the official date of introduction of the Euro by the Relevant
Jurisdiction shall be effected in Euro in conformity with any such legally
applicable measures.
If, following the introduction of the Euro by a Relevant Jurisdiction, the
Company has the option, pursuant to legally applicable measures, to make
payments of principal of, or interest on or any other amounts in respect of, the
relevant Offered Securities, or to calculate amounts due thereon, in either the
current national currency of such Relevant Jurisdiction or Euro, the Company
will make such payments or calculations in such national currency or Euro at its
sole discretion. To the extent that the terms and conditions of the relevant
Offered Securities require the rounding up or down of certain amounts or
quotations expressed in Euro, such rounding will be made to the smallest
currency unit of the Euro.
The circumstances and consequences described in this section and any
resultant amendment to the terms and conditions of the relevant Offered
Securities will not entitle any Holder of such Offered Securities (i) to any
legal remedy, including, without limitation, redemption, rescission, notice,
repudiation, adjustment or renegotiation of the terms and conditions of the
Offered Securities, Indenture or Indentures and Index Warrant Agreement or
Agreements, or (ii) to raise any defense or make any claim (including, without
limitation, claims of breach, force majeure, frustration of purpose or
impracticability) or any other claim for compensation, damages or any other
relief, nor will any such events affect any of the other obligations of the
Company under the Offered Securities, Indenture or Indentures and Index Warrant
Agreement or Agreements.
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USE OF PROCEEDS AND HEDGING
General. The proceeds to be received by the Company from the sale of the
Offered Securities will be used for general corporate purposes, principally to
fund the business of its operating units and to fund investments in, or
extensions of credit or capital contributions to, its subsidiaries and to
lengthen the average maturity of liabilities, which may include the reduction of
short-term liabilities or the refunding of maturing indebtedness. In order to
fund its business, the Company expects to incur additional indebtedness in the
future. The Company or an affiliate may enter into a swap agreement with one of
the Company's affiliates in connection with the sale of the Offered Securities
and may earn additional income as a result of payments pursuant to such swap or
related hedge transactions.
Use of Proceeds Relating to Index Warrants and Indexed Notes. All or a
portion of the proceeds to be received by the Company from the sale of Index
Warrants or Debt Securities on which certain or all payments of interest,
principal or premium may be linked to an Index ("Indexed Notes") may be used by
the Company or one or more of its subsidiaries to purchase or maintain positions
in all or certain of the assets by reference to which the relevant Index or
Indexes are determined or calculated ("Underlying Assets"), or options, futures
contracts, forward contracts or swaps, or options on the foregoing, or other
derivative or synthetic instruments relating to such Index or Underlying Assets,
as the case may be, and, if applicable, to pay the costs and expenses of hedging
any currency, interest rate or other Index-related risk with respect to such
Index Warrants and Indexed Notes. From time to time after the initial offering
and prior to the maturity of the Index Warrants and Indexed Notes, depending on
market conditions (including the value of the Index and/or the Underlying
Assets), in connection with hedging with respect to such Offered Securities, the
Company expects that it or one or more of its subsidiaries will increase or
decrease their initial hedging positions using dynamic hedging techniques and
may take long or short positions in the Index, the Underlying Assets, options,
futures contracts, forward contracts, swaps, or other derivative or synthetic
instruments related to, the Index and such Assets. In addition, the Company or
one or more of its subsidiaries may purchase or otherwise acquire a long or
short position in Index Warrants and Indexed Notes from time to time and may, in
their sole discretion, hold, resell, exercise, cancel or retire such Offered
Securities. The Company or one or more of its subsidiaries may also take hedging
positions in other types of appropriate financial instruments that may become
available in the future. To the extent that the Company or one or more of its
subsidiaries has a long hedge position in, options contracts in, or other
derivative or synthetic instruments related to, the Underlying Assets or Index,
the Company or one or more of its subsidiaries may liquidate all or a portion of
its holdings at or about the time of the maturity of the Index Warrants and
Indexed Notes. 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 the Company has no reason to believe that its hedging activity
will have a material impact on the price of such options, swaps, futures
contracts, options on the foregoing, or other derivative or synthetic
instruments, or on the value of the Index or the Underlying Assets, there can be
no assurance that the Company will not affect such prices or value as a result
of its hedging activities. The remainder of the proceeds from the sale of Index
Warrants and Indexed Notes will be used by the Company or its subsidiaries for
general corporate purposes, as described above.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities in any of the following ways: (i)
through underwriters or dealers; (ii) directly to one or more purchasers; (iii)
through agents or (iv) through a combination of any such methods of sale. The
applicable Prospectus Supplement will set forth the terms of the offering of any
Offered Securities, including the names of any underwriter or underwriters, the
purchase price of such Offered Securities and the proceeds to the Company from
such sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price, any discounts or concessions
allowed or reallowed or paid to dealers, any securities exchanges on which such
Offered Securities may be listed and any restrictions on the sale and delivery
of Offered Securities in bearer form. The Company reserves the right to
withdraw, cancel or modify the offer of any Offered Securities at any time
without notice.
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<PAGE> 53
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
Such Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or by underwriters
without a syndicate. The Company expects that such managing underwriters or
underwriters in the United States will include one or more broker-dealer
subsidiaries of the Company. Unless otherwise set forth in the applicable
Prospectus Supplement, the obligations of the underwriters to purchase such
Offered Securities will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all of such Offered Securities if any
of such Offered Securities are purchased. Any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
In connection with underwritten offerings of Offered Securities, 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 Offered Securities. Such transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), pursuant to
which such persons may bid for or purchase Offered Securities for the purposes
of stabilizing their market price. The underwriters also may create a short
position for their respective accounts by selling more Offered Securities in
connection with this offering than they are committed to purchase from the
Company, and in such case may purchase Offered Securities 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 Offered
Securities, by exercising any underwriters' over-allotment option that may be
applicable with respect to the particular underwritten offering. In addition,
the managing underwriter for the particular offering, 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 Offered Securities that are distributed in the
relevant 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 Offered Securities 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.
Offered Securities may also be offered and sold, if so indicated in the
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, by one or
more firms ("remarketing firms") acting as principals for their own accounts or
as agents for the Company. Any remarketing firm will be identified and the terms
of its agreement, if any, with the Company and its compensation will be
described in the Prospectus Supplement. Remarketing firms may be deemed to be
underwriters in connection with the Offered Securities remarketed thereby.
Offered Securities may also be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of Offered Securities will be named, and any commissions payable
by the Company to such agent will be set forth, in the applicable Prospectus
Supplement. Unless otherwise indicated in the applicable Prospectus Supplement,
any such agent will act on a best efforts basis for the period of its
appointment.
As one of the means of direct issuance of Offered Securities, the Company
may utilize the services of an entity through which it may conduct an electronic
"dutch auction" or similar offering of the Offered Securities among potential
purchasers who are eligible to participate in the auction or offering of such
Offered Securities, if so described in the applicable Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Securities at the public offering price set
forth in such Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a future date specified in such Prospectus
Supplement. Such contracts will be subject only to those conditions set forth in
the applicable Prospectus Supplement, and such Prospectus Supplement will set
forth the commissions payable for solicitation of such contracts.
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<PAGE> 54
The anticipated date of delivery of Offered Securities will be as set forth
in the Prospectus Supplement relating to the offering of such Securities.
Any underwriters, dealers or agents participating in the distribution of
Offered Securities may be deemed to be underwriters and any discounts or
commissions received by them on the sale or resale of Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Agents, underwriters and dealers may be entitled under agreements entered into
with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments that the agents or underwriters may be required to make
in respect thereof or reimbursement of certain legal and other expenses. Agents,
underwriters and dealers may be customers of, engage in transactions with, or
perform services for, the Company or its affiliates in the ordinary course of
business.
The participation of any affiliate of the Company in the offer and sale of
Offered Securities 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. Each of the Company's
broker-dealer affiliates may act as an underwriter in an "at the market" equity
offering pursuant to Rule 415(a)(4) under the Securities Act.
Certain of the Company's affiliates expect to offer and sell previously
issued Offered Securities in the course of each of their respective business in
market-making transactions at negotiated prices related to prevailing market
prices at the time of sale, and may act as principal or agent in such
transactions, but no such entity is obligated to do so, and any such entity may
discontinue any market-making at any time without notice, at its sole
discretion. This Prospectus and the related Prospectus Supplements and Pricing
Supplements may be used by the Company or any of its affiliates in connection
with such transactions.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus (including any accompanying Prospectus Supplement and Pricing
Supplement) and the accompanying Prospectus in connection with the offer
contained herein and, if given or made, such information or representations must
not be relied upon as having been authorized by the company or an agent. Neither
the delivery of this Prospectus (including any accompanying Prospectus
Supplement and Pricing Supplement) nor any sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the dates as of which information is given in this
Prospectus (including any accompanying Prospectus Supplement and Pricing
Supplement). This Prospectus (including any accompanying Prospectus Supplement
and Pricing Supplement) does not constitute an offer or solicitation by anyone
in any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or solicitation.
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans ("Plans") that are
subject to ERISA and on persons who are fiduciaries with respect to such Plans.
In accordance with ERISA's general fiduciary requirements, a fiduciary with
respect to any such Plan who is considering the purchase of the Offered
Securities on behalf of such Plan should determine whether such purchase is
permitted under the governing Plan documents and is prudent and appropriate for
the Plan in view of its overall investment policy and the composition and
diversification of its portfolio. Other provisions of ERISA and Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), prohibit certain
transactions involving the assets of a Plan and persons who have certain
specified relationships to the Plan ("parties in interest" within the meaning of
ERISA or "disqualified persons" within the meaning of Section 4975 of the Code).
Thus, a Plan fiduciary considering the purchase of the Offered Securities should
consider whether such a purchase might constitute or result in a prohibited
transaction under ERISA or Section 4975 of the Code.
The Company, directly or through its affiliates, may be considered a "party
in interest" or a "disqualified person" with respect to many Plans that are
subject to ERISA. The purchase of Offered Securities by a Plan that is subject
to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of
23
<PAGE> 55
Section 4975 of the Code (including individual retirement accounts and other
plans described in Section 4975(e)(1) of the Code) and with respect to which the
Company is a party in interest or a disqualified person may constitute or result
in a prohibited transaction under ERISA or Section 4975 of the Code, unless such
Offered Securities are acquired pursuant to and in accordance with an applicable
exemption, such as Prohibited Transaction Class Exemption ("PTCE") 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts), or PTCE
95-60 (an exemption for certain transactions involving insurance company general
accounts). ANY PENSION OR OTHER EMPLOYEE BENEFIT PLAN PROPOSING TO ACQUIRE ANY
OFFERED SECURITIES SHOULD CONSULT WITH ITS COUNSEL.
EXPERTS
The consolidated financial statements and schedules 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 the Company's Current Report on Form 8-K filed on September 29, 1997, have
been audited by Coopers & Lybrand L.L.P., independent certified public
accountants, as set forth in their report therein, included thereon 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 the Company 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 the
Company's Current Report on Form 8-K filed on 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.
LEGAL MATTERS
Certain legal matters relating to the Offered Securities will be passed
upon for the Company by Robert H. Mundheim, Esq., General Counsel of the
Company. Mr. Mundheim beneficially owns, or has rights to acquire under
Travelers Group employee benefit plans, an aggregate of less than one percent of
the common stock of Travelers Group.
Certain legal matters relating to the Offered Securities will be passed
upon for any underwriters or agents by Cleary, Gottlieb, Steen & Hamilton, New
York or Skadden, Arps, Slate, Meagher & Flom LLP, New York. Kenneth J. Bialkin,
a partner of Skadden, Arps, Slate, Meagher & Flom LLP, is a director of
Travelers Group, the parent of the Company, and he and other attorneys in such
firm beneficially own an aggregate of less than one percent of the common stock
of Travelers Group. Each of Cleary, Gottlieb, Steen & Hamilton and Skadden,
Arps, Slate, Meagher & Flom LLP has from time to time acted as counsel for
Travelers Group and certain of its subsidiaries and may do so in the future.
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<PAGE> 56
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Reports, proxy statements and other information
concerning the Company can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World
Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a site on the 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 the
Company, that file electronically with the Commission. Such reports and other
information may also be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005 and the American Stock Exchange,
86 Trinity Place, New York, New York 10006.
The Company has filed the Registration Statement under the Securities Act
relating to the Offered Securities with the Commission. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement and to the exhibits thereto. Statements contained herein
concerning the provisions of certain documents are not necessarily complete, and
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Commission pursuant
to Section 13 of the Exchange Act (File No. 1-4346), are incorporated herein by
reference: (i) the Annual Report on Form 10-K for the year ended December 31,
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 filed on 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 filed on October 28, 1997 and the Current Report on Form 8-K/A2 filed on
December 1, 1997), October 21, 1997, October 28, 1997 (as amended by the Current
Report on Form 8-K/A filed on December 1, 1997), November 21, 1997 (as amended
by the Current Report on Form 8-K/A filed on December 1, 1997) and November 28,
1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Offered Securities shall be deemed to be
incorporated by reference in this Prospectus.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of Offered Securities, 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.
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YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED
IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS ACCURATE
AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THE DOCUMENT.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary Information -- Q&A............ S-2
Incorporation of Certain Documents by
Reference........................... S-6
Risk Factors Relating to the Notes.... S-7
Description of the Notes.............. S-12
TheStreet.com Internet Sector Index... S-20
Certain United States Federal Income
Tax Considerations.................. S-24
Underwriting.......................... S-27
ERISA Matters......................... S-28
Legal Matters......................... S-28
Index of Terms........................ A-1
PROSPECTUS
Prospectus Summary.................... 2
The Company........................... 6
Ratio of Earnings to Fixed Charges.... 6
The Offered Securities................ 6
Description of Debt Securities........ 7
Description of Index Warrants......... 15
Limitations on Issuance of Bearer
Securities and Bearer Warrants...... 19
European Monetary Union............... 20
Use of Proceeds and Hedging........... 21
Plan of Distribution.................. 21
ERISA Matters......................... 23
Experts............................... 24
Legal Matters......................... 24
Available Information................. 25
Incorporation of Certain Documents by
Reference........................... 25
</TABLE>
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- ------------------------------------------------------
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6,500,000 UNITS
SALOMON SMITH
BARNEY HOLDINGS INC.
CALLABLE EQUITY LINKED NOTES
BASED UPON THE
THESTREET.COM INTERNET SECTOR INDEX
DUE MAY 30, 2006
($10 INITIAL PRINCIPAL AMOUNT PER UNIT)
------------
PROSPECTUS SUPPLEMENT
MAY 25, 1999
(INCLUDING PROSPECTUS
DATED DECEMBER 1, 1997)
------------
SALOMON SMITH BARNEY
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- ------------------------------------------------------
<PAGE> 58
[Background: Salomon Smith Barney trading floor]
[GRAPHIC]
SALOMON SMITH BARNEY
A member of citigroup (Logo)
Salomon Smith Barney is a service mark of
Salomon Smith Barney Inc.
