<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-38931
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND
MAY BE CHANGED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS PRELIMINARY PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Prospectus Supplement
(To Prospectus Dated December 1, 1997)
SALOMON SMITH BARNEY HOLDINGS INC.
Call Warrants
on the
2000 TEN+ Index
Expiring on , 2002
SALOMON SMITH BARNEY
A Member of citigroup
<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND
MAY BE CHANGED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS PRELIMINARY
PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL
THESE SECURITIES AND ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
[SALOMON SMITH BARNEY LOGO]
SUBJECT TO COMPLETION, DATED AUGUST 29, 2000
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 1, 1997)
SALOMON SMITH BARNEY HOLDINGS INC.
CALL WARRANTS
ON THE
2000 TEN+SM INDEX
EXPIRING ON , 2002
GENERAL:
- Unsecured contractual obligations of Salomon Smith Barney Holdings Inc.
- No payments prior to exercise. May expire worthless.
- Any payment upon exercise, including automatic exercise, will be linked to the
performance of the 2000 TEN+SM Index, a diversified basket of the common
stocks of 15 corporations operating in several industry groups selected by
Salomon Smith Barney Inc.'s TEN+ Selection Committee as undervalued stocks
deemed to have above average appreciation potential over the 12 months
following their selection.
- Application will be made to list the Warrants on the Chicago Board Options
Exchange under the symbol "TJS", subject to official notice of issuance.
EXERCISE AND PAYMENT UPON EXERCISE:
- Upon exercise, including automatic exercise, we will pay you a Cash Settlement
Value for each Warrant equal to the product, if positive, of $10.00 and the
percentage change in the 2000 TEN+ Index from a Strike Index Value equal to
80% of the index's value on the date the warrants are priced for initial sale
to the public, as described in this prospectus supplement. The Cash Settlement
Value will not be less than zero.
- You will be able to exercise the Warrants from the date they are issued until
shortly before their expiration, subject to the possibility that the valuation
date for the Warrants or your right to exercise may be postponed or that the
Warrants may be cancelled if certain specified events occur.
- The valuation date for an exercised Warrant will generally occur shortly after
the relevant exercise date. As a result, you will not be able to determine, at
the time of your exercise of a Warrant, the precise Spot Index Value that will
be used in calculating the Cash Settlement Value that we will pay you.
- There is a maximum limit on the number of Warrants that may be exercised on
any one day. Any Warrants that have not been exercised by the expiration date
will be automatically exercised on that date.
- ON THE DATE OF THIS PRELIMINARY PROSPECTUS SUPPLEMENT, THE WARRANTS ARE NOT
EXERCISABLE.
For information as to the calculation of the Cash Settlement Value and certain
United States federal income tax consequences to holders of the Warrants, you
should refer to "Description of Warrants -- Determination of the Cash Settlement
Value" beginning on page S-22 and "Certain United States Federal Income Tax
Considerations" beginning on page S-34.
INVESTING IN THE WARRANTS INVOLVES A HIGH DEGREE OF RISK, INCLUDING THE
RISK OF THE WARRANTS EXPIRING WORTHLESS IF THE SPOT INDEX VALUE IS LESS THAN OR
EQUAL TO THE STRIKE INDEX VALUE. PURCHASERS SHOULD BE PREPARED TO SUSTAIN A
TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS AND SHOULD CONSIDER CAREFULLY
THE SECTION ENTITLED "RISK FACTORS RELATING TO THE WARRANTS" BEGINNING ON PAGE
S-8.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Warrants 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>
PER WARRANT TOTAL
----------- -----
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discount....................................... $ $
Proceeds to Salomon Smith Barney Holdings Inc., before
expenses.................................................. $ $
</TABLE>
The underwriter is offering the Warrants subject to various conditions, as
explained under "Underwriting" beginning on page S-35. The underwriter expects
to deliver the Warrants to purchasers on or about , 2000.
"TEN+ Index" is a registered servicemark of Salomon Smith Barney Holdings
Inc.
SALOMON SMITH BARNEY
, 2000
<PAGE> 3
SUMMARY INFORMATION -- Q&A
This summary includes questions and answers that highlight selected
information from this prospectus supplement and the accompanying prospectus to
help you understand the Call Warrants based upon the 2000 TEN+SM Index. You
should carefully read the entire prospectus and prospectus supplement to fully
understand the terms of the Warrants, certain information regarding how the 2000
TEN+SM Index (the "TEN+ Index" or the "Index"*) is calculated and maintained, as
well as the principal risk, tax and other considerations that are important to
you in making a decision about whether to invest in the Warrants. You should, in
particular, carefully review the section entitled "Risk Factors Relating to the
Warrants" beginning on page S-8, which highlights certain risks, to determine
whether an investment in the Warrants 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 WARRANTS?
The Warrants are a series of Index Warrants (as defined on page 6 in the
prospectus accompanying this prospectus supplement) issued by Salomon Smith
Barney Holdings Inc. ("SSBHI"). The Warrants are contractual obligations of
SSBHI and are not secured by collateral. The Warrants will rank equally with all
other unsecured contractual obligations of SSBHI and SSBHI's unsecured and
unsubordinated debt. Since SSBHI is a holding company, the Warrants will be
effectively subordinated to the claims of creditors of SSBHI's subsidiaries.
The initial purchase price of the Warrants is $ per Warrant. SSBHI
will make no periodic payments on the Warrants. As explained in the section
entitled "What Will I Receive Upon Exercise of the Warrants", SSBHI will make a
payment to you upon your exercise of the Warrants only if the Spot Index Value
on the Valuation Date with respect to the time you exercise the Warrants is
greater than the Strike Index Value, which will be equal to 80% of the value of
the Index on the date the Warrants are priced for initial sale to the public.
The Warrants expire on , 2002 (the "Expiration Date"), and any
Warrants that have not been exercised prior to that date or an earlier Delisting
Date will be subject to automatic exercise as described under "Description of
the Warrants -- Automatic Exercise" beginning on page S-31. However, if the Spot
Index Value at that time is less than or equal to the Strike Index Value, then
the Warrants will expire worthless and you will receive no payment.
You will not have the right to receive physical certificates evidencing
your ownership of the Warrants except under limited circumstances. Instead,
SSBHI will issue the Warrants in book-entry form in the form of one or more
global certificates, which will be held by The Depository Trust Company ("DTC",
which term, as used in this prospectus supplement and in the accompanying
prospectus, will include any successor depositary selected by SSBHI) or its
nominees. Direct and indirect participants in DTC, including participants in the
Euroclear and Clearstream clearing systems, will record beneficial ownership of
the Warrants by individual investors. You should refer to the section
"Description of the Warrants -- DTC Book-Entry Procedures" and "-- Clearstream
and Euroclear" beginning on page S-23.
WHAT WILL I RECEIVE UPON EXERCISE OF THE WARRANTS?
We have designed the Warrants to permit investors to participate in the
appreciation, if any, of the TEN+ Index, a diversified basket of the common
stocks of 15 corporations operating in several industry groups that is described
in the section "Description of the Index" beginning on page S-18. Since warrants
are inherently leveraged instruments, the purchase of a Warrant allows investors
to benefit from the performance of a larger notional investment in the TEN+
Index with a smaller initial investment in the Warrants.
---------------
* Refer to the "Index of Terms" attached as Appendix A for a listing of defined
terms and the pages on which they are defined in this prospectus supplement.
S-2
<PAGE> 4
Cash Settlement Value
The amount, if any, that you will receive upon exercise (including
automatic exercise) of your Warrants (the "Cash Settlement Value") is equal to:
<TABLE>
<S> <C> <C> <C> <C>
the greater of (A) zero; and
Spot Index Value -- Strike Index Value
(B) -------------------------------------- X $10.00
Initial Index Value
</TABLE>
In certain circumstances, as described more fully in the section
"Description of the Warrants -- Market Disruption Events, Extraordinary Events
and Extension Events" beginning on page S-27, you will receive an Alternative
Settlement Amount rather than the Cash Settlement Value of your Warrants.
"Spot Index Value" generally means the value of the TEN+ Index at the close
of trading on the Chicago Board Options Exchange ("CBOE") on the applicable
Valuation Date. However, the Spot Index Value with respect to the Expiration
Date, any Early Extended Expiration Date or any Extended Expiration Date means
the value of the TEN+ Index at the opening of trading on the CBOE on the
applicable Valuation Date. The Valuation Date will generally be the Business Day
following the date on which you exercise your Warrants, but may be the second
Business Day following exercise, depending on the timing of your exercise. The
Valuation Date may also be postponed as a result of an Extraordinary Event or a
Market Disruption Event or the exercise of a number of Warrants exceeding
certain limits on exercise. Please refer to "Description of the
Warrants -- Market Disruption Events, Extraordinary Events and Extension Events"
and "-- Exercise of Warrants -- Maximum Exercise Amount" beginning on page S-27.
"Strike Index Value" means 80.0000, or 80% of the Initial Index Value.
"Initial Index Value" means 100.0000, the value of the TEN+ Index on the
date the Warrants will be priced for initial sale to the public.
As used in this prospectus supplement, "Business Day" means any day other
than a Saturday or Sunday or a day on which either the CBOE is not open for
securities trading or commercial banks in New York City are required or
authorized by law or executive order to remain closed, and a "Trading Day" means
any Business Day on which no Extraordinary Event or Market Disruption Event has
occurred.
SSBHI will pay you a Cash Settlement Value only if the Spot Index Value is
greater than the Strike Index Value on the applicable Valuation Date. IF THE
SPOT INDEX VALUE IS EQUAL TO OR LESS THAN THE STRIKE INDEX VALUE ON THE RELEVANT
VALUATION DATE, THE CASH SETTLEMENT VALUE WILL BE ZERO.
The Cash Settlement Value and any Alternative Settlement Amount payable on
each Warrant will be rounded down to the nearest cent.
For more specific information about the Cash Settlement Value, please refer
to the section "Description of the Warrants -- Determination of the Cash
Settlement Value" beginning on page S-22.
Cash Settlement Value -- Examples
Here are five examples of hypothetical Cash Settlement Value calculations:
Example 1: The Spot Index Value is less than the Strike Index Value
on the Valuation Date relating to the relevant Exercise Date (i.e., the
Index has declined by more than 20% from the Initial Index Value):
Initial Index Value: 100.0000
Strike Index Value: 80.0000
Hypothetical Spot Index Value: 60.0000
Cash Settlement Value per Warrant = 60-80 X $10.00 = (-$2.00)
-----------------------------------------
100
(but the Cash Settlement Value
cannot be less than zero)
The Cash Settlement Value is zero and you would receive nothing upon
exercising your Warrants.
S-3
<PAGE> 5
Example 2: The Spot Index Value is equal to the Strike Index Value on
the Valuation Date relating to the relevant Exercise Date (i.e., the Index
has declined by 20% from the Initial Index Value):
Initial Index Value: 100.0000
Strike Index Value: 80.0000
Hypothetical Spot Index Value: 80.0000
Cash Settlement Value per Warrant = 80-80 X $10.00 = $0.00
-----------------------------------------
100
The Cash Settlement Value is zero and you would receive nothing upon
exercising your Warrants.
Example 3: The Spot Index Value is greater than the Strike Index
Value, but less than the Initial Index Value, on the Valuation Date
relating to the relevant Exercise Date (i.e., the Index has declined by
less than 20% from the Initial Index Value):
Initial Index Value: 100.0000
Strike Index Value: 80.0000
Hypothetical Spot Index Value: 90.0000
Cash Settlement Value per Warrant = 90-80 X $10.00 = $1.00
-----------------------------------------
100
You would receive $1.00 per Warrant upon exercising your Warrants.
Example 4: The Spot Index Value is greater than the Strike Index
Value and equal to the Initial Index Value on the Valuation Date relating
to the relevant Exercise Date:
Initial Index Value: 100.0000
Strike Index Value: 80.0000
Hypothetical Spot Index Value: 100.0000
Cash Settlement Value per Warrant = 100-80 X $10.00 = $2.00
-------------------------------------------
100
You would receive $2.00 per Warrant upon exercising your Warrants.
Example 5: The Spot Index Value is greater than both the Strike Index
Value and the Initial Index Value on the Valuation Date relating to the
relevant Exercise Date:
Initial Index Value: 100.0000
Strike Index Value: 80.0000
Hypothetical Spot Index Value: 140.0000
Cash Settlement Value per Warrant = 140-80 X $10.00 = $6.00
--------------------------------------------
100
You would receive $6.00 per Warrant upon exercising your Warrants.
HOW DO I EXERCISE MY WARRANTS?
The Warrants will be exercisable on any Business Day from
, 2000 until 3:00 P.M., New York City time, on the earlier of
- the fourth Business Day immediately preceding the Expiration Date for the
Warrants, which is , 2002, or
- if the Warrants are delisted, the Business Day immediately preceding the
effective date of their delisting from, or permanent suspension from
trading on, the CBOE and failure to list the Warrants on another United
States national securities exchange (the "Delisting Date").
S-4
<PAGE> 6
SSBHI will issue the Warrants in the form of one or more global
certificates, which will be held by DTC or its nominee. Direct and indirect
participants in DTC, including the depositaries in the Euroclear or Clearstream
clearing systems, will record beneficial ownership of the Warrants by individual
investors. To exercise Warrants, you must direct a broker, who may, in turn,
need to direct a participating organization in DTC (a "Participant"), to
transfer Warrants held by DTC on your behalf and to submit an exercise notice in
the form of Appendix B (an "Exercise Notice") to the Warrant Agent. In order for
the Business Day on which the Warrants and Exercise Notice are delivered on your
behalf to the Warrant Agent to constitute the Exercise Date for the Warrants
being exercised, you must cause the Warrants to be transferred free on the
records of DTC to, and the Exercise Notice to be received by, the Warrant Agent
at or prior to 3:00 P.M., New York City time, on that Business Day. However, in
the case of Warrants held through Clearstream or Euroclear, the Warrants must be
transferred to the Warrant Agent prior to 3:00 P.M., New York City time, on the
applicable Valuation Date. Please refer to "Risk Factors -- Risks and Costs
Associated with Exercise of Warrants" beginning on page S-11 and "Description of
the Warrants -- Exercise and Settlement of Warrants" beginning on page S-23.
Any Warrant not exercised on or before the Expiration Date or the Delisting
Date, if any, will be automatically exercised on that date. Please refer to
"Description of the Warrants -- Exercise and Settlement of Warrants" beginning
on page S-23.
All exercises of Warrants, other than automatic exercises, are subject, at
SSBHI's option, to the limitation that not more than 250,000 Warrants in total
may be exercised on any Exercise Date and not more than 100,000 Warrants may be
exercised by or on behalf of any person or entity, either individually or in
concert with any other person or entity, on any Exercise Date. Please refer to
"Description of the Warrants -- Maximum Exercise Amount" beginning on page S-27.
WHO SHOULD CONSIDER PURCHASING THE WARRANTS?
Since the Warrants are tied to the results of an underlying equity index,
they may be appropriate for investors with specific investment horizons who seek
to participate in the potential price appreciation of the underlying stocks
comprising the Index with risk limited to the cost of the Warrants they
purchase. The CBOE requires that the Warrants be sold only to investors whose
accounts have been approved for options trading. In addition, the CBOE requires
that its members and member organizations and registered employees thereof make
certain suitability determinations before recommending transactions in the
Warrants. Investors should be prepared to sustain a total loss of the purchase
price of their Warrants.
In particular, the Warrants may be an attractive investment for investors
who:
- Want to participate in the appreciation potential offered by the stocks
underlying the Index, but are concerned about limiting their investment
risk to the cost of the Warrants they purchase.
- Seek to add a leveraged equity-linked investment to further diversify a
portfolio of fixed income and equity investments.
- Desire to benefit from the potential appreciation and diversification
offered by an Index based on a portfolio of the stocks of 15 companies
with a significantly smaller initial investment than would otherwise be
required.
- Are willing to forego dividend payments on the stocks underlying the
Index.
WHO PUBLISHES THE INDEX AND WHAT DOES IT MEASURE?
The TEN+ Index is a stock index calculated, published and disseminated by
the CBOE that is intended to measure the composite price performance of the
underlying stocks. The underlying stocks that comprise the Index have been
selected by Salomon Smith Barney Inc.'s TEN+ Selection Committee as undervalued
stocks deemed to have above average appreciation potential over the 12 months
following their selection. A list of the underlying stocks, together with
certain information about the historical price performance of the Index, is
included in the section "Description of the Index" beginning on page S-18.
S-5
<PAGE> 7
WHAT ABOUT TAXES?
Unlike certain other publicly-traded index and currency warrants, you
generally will not be required to mark the Warrants offered by this prospectus
supplement to market (i.e., treat them as sold at fair market value) for federal
income tax purposes on the last business day of each taxable year. Rather, when
you sell or exercise the Warrants, you will have a gain or loss equal to the
difference between the cash you receive and your tax basis in the Warrants. If
you hold Warrants when they expire, you will have a loss equal to your tax basis
in the Warrants. All of these gains or losses will generally be capital gains or
losses. Please refer to the section "Certain United States Federal Income Tax
Considerations" beginning on page S-34.
WILL THE WARRANTS BE LISTED ON A STOCK EXCHANGE?
We will apply to list the Warrants on the CBOE under the symbol "TJS",
subject to official notice of issuance. You should be aware that the listing of
the Warrants on the CBOE will not ensure that a liquid trading market will
develop or, if any market does develop, that it will remain available throughout
the term of the Warrants. The delisting of the Warrants from, or permanent
suspension of trading of the Warrants on, the CBOE, and failure to list the
Warrants on another national securities exchange will result in the automatic
exercise of the Warrants, and could result in an investor's total loss of the
purchase price for his Warrants. You should review the sections "Risk Factors
Relating to the Warrants -- A Secondary Market for the Warrants May Not Develop,
or the Secondary Market May Be Illiquid" and "Description of the Warrants --
Automatic Exercise" beginning on pages S-14 and S-32.
WHAT IS THE ROLE OF OUR SUBSIDIARY, SALOMON SMITH BARNEY INC.?
Salomon Smith Barney Inc.'s TEN+ Selection Committee has selected the
underlying stocks that comprise the TEN+ Index. See "Description of the Index"
beginning on page S-18. The inclusion of an underlying stock in the TEN+ Index
should not be considered a recommendation to buy or sell any security, and
neither SSBHI, Salomon Smith Barney Inc. ("Salomon Smith Barney") nor any of
their respective affiliates make any representation to any purchaser of the
Warrants as to the performance of the Index or any underlying stock. Beneficial
owners of the Warrants will not have any right to receive any underlying stock
or any dividends on any underlying stock.
The underlying stocks in the Index comprise all of the portfolio securities
(the "Portfolio Securities") included in the Uncommon Values Trust, 2000 Series
(the "Trust"). The Trust is a unit investment trust sponsored by Salomon Smith
Barney, a subsidiary of SSBHI, which offered units in the Trust for initial sale
to the public on July 12, 2000. In connection with the offering of units in the
Trust, as well as in connection with satisfying redemptions from the Trust,
Salomon Smith Barney, as the sponsor of the Trust, or the Trust itself has
bought and sold, and will buy and sell, the Portfolio Securities. Especially
during the period of the initial offering of units in the Trust in July and
early August 2000, during which Salomon Smith Barney, as sponsor of the Trust,
purchased a material amount of the Portfolio Securities, the volume of these
transactions in the Portfolio Securities may have affected the value of the
Portfolio Securities.
This type of activity in the Portfolio Securities may have had an impact on
the value of the underlying stocks comprising the Index, and thus, on the value
of the Index. The publication of the list of the Portfolio Securities selected
for the Trust may have also caused increased trading activity in certain of the
Portfolio Securities. In response to the announcement of the components of the
Index, investment advisory and brokerage clients of Salomon Smith Barney and its
affiliates may have purchased some or all of the individual Portfolio Securities
appearing on the list during the period of the initial offering of units in the
Trust.
This type of activity in the Portfolio Securities may also have had an
impact on the value of the stocks underlying the Index, and thus, on the value
of the Index. Moreover, throughout the term of the Warrants, purchasing and
selling activity, including sales by the Trust in connection with satisfying
redemptions from the Trust and purchases and sales by the Trust's clients or by
investors acting in response to research coverage or other analysis by Salomon
Smith Barney or other affiliates of SSBHI, may impact the value of the stocks
underlying the Index. SSBHI has decided to set the Initial Index Value of the
Warrants on a date more than two months after the selection of the Portfolio
Securities and the public offering of units in the Trust, in the
S-6
<PAGE> 8
expectation that this delay in setting the Initial Index Value will tend to
reduce the impact that the activity of the Trust and of investment advisory and
brokerage clients of Salomon Smith Barney will have on the value of the
underlying stocks comprising the Index during the term of the Warrants, and
thus, on the value of the Index during that time, as this impact is expected to
be most significant in the twenty-Trading Day period following the public
offering of units in the Trust (i.e., the twenty-Trading Day period ending on
August 9, 2000). No assurance can be given, however, that this purchase and sale
activity will not affect the Initial Index Value or the Spot Index Value at any
given time during the term of the Warrants, and therefore affect the trading
value and Cash Settlement Value of the Warrants.
Salomon Smith Barney will also be our Determination Agent for purposes of
calculating the Initial Index Value, the Strike Index Value, any Spot Index
Value, the Cash Settlement Value and any Alternative Settlement Amount, and in
determining whether an Extraordinary Event or Market Disruption Event has
occurred. Potential conflicts of interest may exist between Salomon Smith Barney
and the investors in the Warrants.
CAN YOU TELL ME MORE ABOUT SALOMON SMITH BARNEY HOLDINGS INC.?
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. SSBHI is a
subsidiary of Citigroup Inc., a diversified financial services holding company.
For additional information about SSBHI, you should refer to the section
"The Company" beginning on page 6 of the accompanying prospectus. You should
also read the other documents SSBHI has filed with the Securities Exchange
Commission (the "SEC"), which you can find by referring to the section "Where
You Can Find More Information" beginning on page 5 of the accompanying
prospectus.
ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?
Yes. Investing in the Warrants involves a high degree of risk, including
the risk of the Warrants expiring worthless if the Spot Index Value with respect
to the Expiration Date is equal to or less than the Strike Index Value. You
should be prepared to sustain a total loss of the purchase price of your
Warrants and are advised to consider carefully the section entitled "Risk
Factors Relating to the Warrants" beginning on page S-8.
------------------------
S-7
<PAGE> 9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by SSBHI 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:
(1) the Annual Report on Form 10-K for the year ended December 31, 1999;
(2) the Quarterly Reports on Form 10-Q for the quarters ended March 31,
2000 and June 30, 2000; and
(3) the Current Reports on Form 8-K filed on January 18, 2000, April 17,
2000 and July 19, 2000.
Please refer to "Prospectus Summary -- Where You Can Find More Information" and
"Incorporation of Certain Documents by Reference" beginning on pages 5 and 25 of
the accompanying prospectus. These documents may be accessed electronically
through the SEC's web site at "http://www.sec.gov".
------------------------
RISK FACTORS RELATING TO THE WARRANTS
The Warrants involve a high degree of risk. Prospective purchasers of the
Warrants should recognize that their Warrants may expire worthless and should be
prepared to sustain a total loss of the purchase price of their Warrants.
Prospective purchasers of the Warrants should be experienced with respect to
options and options transactions, should understand the risks of transactions in
equity-indexed instruments and should reach an investment decision only after
careful consideration, with their advisers, of the suitability of the Warrants
in light of their particular financial circumstances, the information set forth
below and the other information set forth in this prospectus supplement and the
accompanying prospectus.
THE WARRANTS ARE A RISKY INVESTMENT AND MAY EXPIRE WORTHLESS
You will receive a cash payment from SSBHI upon exercise, including
automatic exercise, of a Warrant only if the Warrant has a Cash Settlement Value
greater than zero at that time. The "Cash Settlement Value" of a Warrant will
equal the product, if positive, of $10.00 and the percentage change in the TEN+
Index above the Strike Index Value (i.e., the difference between the Spot Index
Value and the Strike Index Value, divided by the Initial Index Value). If the
Spot Index Value for any Valuation Date is less than or equal to the Strike
Index Value, the Cash Settlement Value will be zero. The Strike Index Value will
be set to equal 80.0000 or 80% of the Initial Index Value on the day the
Warrants are priced for initial sale to the public and will remain constant
throughout the term of the Warrants. Please refer to "Description of the
Warrants -- Determination of the Cash Settlement Value" beginning on page S-22.
Investment decisions relating to equity-indexed warrants, such as Warrants
offered by this prospectus supplement, require the investor to predict the
direction of movements in the values of the stocks underlying the relevant index
as well as the amount and timing of those movements. Equity-indexed warrants may
change substantially in value, or lose all of their value, with relatively small
movements in the value of the relevant index. Moreover, an equity-indexed
warrant is a "wasting asset" in that, in the absence of countervailing factors,
such as an offsetting movement in the value of the relevant index, the market
value of an equity-indexed warrant will tend to decrease over time and the
warrant will have no market value after the time for exercise has expired. You
may therefore lose your entire investment in the Warrants. Accordingly, equity-
indexed warrants, such as the Warrants offered by this prospectus supplement,
involve a high degree of risk and are not appropriate for every investor.
Investors who are considering purchasing the Warrants must be able to understand
and bear the risk of a speculative investment in the Warrants, be experienced
with respect to options and option transactions and understand the risks of
transactions in equity-indexed instruments. Investors should reach an investment
decision only after careful consideration, with their advisors, of the
suitability of the Warrants in light of their particular financial circumstances
and the information set forth in this prospectus supplement and in the
accompanying prospectus.
S-8
<PAGE> 10
THE VALUE OF THE WARRANTS WILL FALL IF THE VALUE OF THE TEN+ INDEX DECLINES
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 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 underlying stocks are traded, and by various
circumstances that can influence the values of the underlying stocks in a
specific market segment or a particular underlying stock. There is, of course,
no assurance that any of the underlying stocks comprising the Index will
appreciate in value, and indeed any or all of the underlying stocks, and the
Index, may depreciate in value at any time in the future.
The policies of the CBOE or any subsequent publisher of the Index
concerning additions, deletions and substitutions of the stocks underlying the
Index and the manner in which the publisher takes account of certain changes
affecting the stocks comprising the Index may affect the value of the Index, as
may the policies of such publisher with respect to the calculation of the Index.
The CBOE or any subsequent publisher may discontinue or suspend calculation or
dissemination of the Index or materially alter the methodology by which it
calculates the Index. Any of these actions could affect the value of the
Warrants. You should refer to the section "Description of the Index" in this
prospectus supplement beginning on page S-18 for more information.
CERTAIN FACTORS MAY ADVERSELY AFFECT THE TRADING VALUE OF THE WARRANTS
The Warrants will have a Cash Settlement Value of $2.00 at the time of
their initial public offering. The Cash Settlement Value of the Warrants at any
time prior to their expiration is expected typically to be less than the trading
price of the Warrants at that time. The difference between the trading price and
the Cash Settlement Value will reflect, among other things, a "time value" for
the Warrants. The "time value" of the Warrants will depend partly upon the
length of time remaining to their expiration and expectations concerning the
value of the Index and the underlying stocks during that period. The expiration
date of the Warrants will be accelerated should the Warrants be delisted from,
or should there be a permanent suspension of their trading on, the CBOE, unless
the Warrants simultaneously are accepted for listing on another national
securities exchange. Any acceleration of this type would result in the total
loss of any otherwise remaining "time value", and could occur when the Warrants
are "at-the-money" or "out-of-the-money", as these terms are defined in the
following paragraphs, thus resulting in the total loss of the purchase price of
the Warrants.
The Spot Index Value on any given day will determine whether the Warrants
have a Cash Settlement Value greater than zero on that day. The Warrants will be
"at-the-money" (i.e., their Cash Settlement Value will be zero) on any given day
if the Spot Index Value is equal to the Strike Index Value, will be "out-of-the-
money" (i.e., their Cash Settlement Value will be zero) on any given day if the
Spot Index Value is less than the Strike Index Value and will be "in-the-money"
(i.e., their Cash Settlement Value will be greater than zero) on any given day
only if the Spot Index Value exceeds the Strike Index Value. An increase in the
positive difference, if any, between the Spot Index Value and the Strike Index
Value will result in a greater Cash Settlement Value, and a decrease in the
difference will result in a lesser or zero Cash Settlement Value. Potential
profit or loss upon exercise, including automatic exercise, of a Warrant will be
a function of the Cash Settlement Value of the Warrant upon exercise, the
purchase price of the Warrant and any related transaction costs.
Investors in the Warrants should be aware that SSBHI and its affiliates may
take positions in the stocks underlying the Index to facilitate client
transactions and as principal positions for SSBHI or its affiliates' own
accounts. Through these activities, SSBHI and its affiliates may take positions
in the underlying stocks that are inconsistent with an investment in the
Warrants. Please refer to "-- Conflicts of Interest May Arise as a Result of
Salomon Smith Barney's Role as Determination Agent and Sponsor of the Trust"
beginning on page S-15.
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Before purchasing, exercising or selling Warrants, investors in the
Warrants should carefully consider, among other things:
- the purchase or trading price of the Warrants;
- the value of the Index at that time;
- the time remaining to their expiration,
- the probable range of Cash Settlement Values; and
- any related transaction costs.
The trading value of a Warrant at any time is expected to be dependent on
(1) the relationship between the Strike Index Value and the Spot Index Value at
that time and (2) a number of other interrelated factors, including those listed
below. The relationship among these factors is complex, and as a result, the
effect of any one factor may be offset or magnified by the effect of another
factor. The following discussion describes the expected impact on the trading
value of the Warrants given a change in a specific factor, assuming all other
conditions remain constant.
Index Value. The trading of the Warrants at any given time will likely
depend substantially on the amount, if any, by which the then current Spot Index
Value exceeds the Strike Index Value (80% of the Initial Index Value). If the
value of the Index falls, the trading value of a Warrant is expected to
decrease; if the value of the Index rises, the trading value of a Warrant is
expected to increase. If you choose to sell your Warrants when the Spot Index
Value is below the Strike Index Value, you can expect to receive less than the
initial purchase price of the Warrants, especially if a relatively short period
of time remains until maturity.
Volatility of the Index. Volatility is the term used to describe the size
and frequency of market fluctuations. If the volatility of the Index increases,
the trading value of the Warrants may be favorably affected. If the volatility
of the Index decreases, the trading value of the Warrants may be adversely
affected.
Time Remaining to Expiration. The Warrants may trade at a value above that
which would be expected based on the level of the Index due to a "time premium"
resulting from expectations concerning the value of the Index prior to the
expiration of the Warrants. However, as the time remaining to the expiration of
the Warrants decreases, this time premium may decrease, adversely affecting the
trading value of the Warrants.
Interest Rates. If interest rates increase, the trading value of the
Warrants may be favorably affected due to the increased carrying costs of an
investment in the underlying stocks, which makes an investment in the Warrants
relatively more attractive, and, accordingly, if interest rates decrease, the
value of the Warrants may be adversely affected.
Dividend Yields. If dividend yields on the underlying stocks comprising
the Index increase, the trading value of the Warrants may be adversely affected
since the Index does not incorporate the value of dividend payments. Conversely,
if dividend yields on the stocks comprising the Index decrease, the trading
value of the Warrants may be favorably affected.
SSBHI's Credit Ratings, Financial Condition and Earnings Results. Real or
anticipated changes in SSBHI's credit ratings, financial condition or earnings
results may affect the trading value of the Warrants.
Economic Conditions and Earnings Performance of Underlying Companies. Real
or anticipated changes in general economic conditions, the values of common
stocks generally, the earnings results and financial condition of the companies
whose stocks comprise the Index and conditions in a given issuer's industry
and/or the markets in which it operates may affect the trading value of the
Warrants.
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<PAGE> 12
We want you to understand that the impact of one of the factors specified
above, such as a decrease in the time remaining to the expiration of the
Warrants, may offset some or all of any change in the trading value of the
Warrants attributable to another factor, such as an increase in the Index value.
RISKS AND COSTS ASSOCIATED WITH EXERCISE OF WARRANTS
SSBHI will issue the Warrants in the form of one or more global
certificates, which will be held by DTC or its nominee. Direct and indirect
participants in DTC, including the depositaries in the Euroclear or Clearstream
clearing systems, will record beneficial ownership of the Warrants by individual
investors. To exercise Warrants, you must direct a broker, who may, in turn,
need to direct a Participant, to transfer Warrants held by DTC on your behalf
and to submit an Exercise Notice to the Warrant Agent. In order for the Business
Day on which your Warrants and Exercise Notice are delivered on your behalf to
the Warrant Agent to constitute the Exercise Date for the Warrants being
exercised, you must cause the Warrants to be transferred free on the records of
DTC to, and the Exercise Notice to be received by, the Warrant Agent at or prior
to 3:00 P.M., New York City time, on that Business Day. However, in the case of
Warrants held through Clearstream or Euroclear, the Warrants must be transferred
to the Warrant Agent prior to 3:00 P.M., New York City time, on the applicable
Valuation Date.
TO ENSURE THAT THE WARRANTS AND EXERCISE NOTICE WILL BE RECEIVED BY THE
WARRANT AGENT AT OR PRIOR TO THAT TIME, YOU MUST GIVE THE APPROPRIATE DIRECTION
TO YOUR BROKER BEFORE THAT BROKER'S CUT-OFF TIME FOR ACCEPTING EXERCISE
INSTRUCTIONS FROM CUSTOMERS FOR THAT DAY. IF YOUR BROKER IS NOT A PARTICIPANT,
YOU MUST DO SO BEFORE THE APPLICABLE PARTICIPANT'S CUT-OFF TIME. DIFFERENT
BROKERAGE FIRMS MAY HAVE DIFFERENT CUT-OFF TIMES FOR ACCEPTING AND IMPLEMENTING
EXERCISE INSTRUCTIONS FROM THEIR CUSTOMERS. THEREFORE, YOU SHOULD CONSULT WITH
YOUR BROKER OR OTHER INTERMEDIARIES, IF APPLICABLE, AS TO APPLICABLE CUT-OFF
TIMES AND OTHER EXERCISE MECHANICS. PLEASE REFER TO "DESCRIPTION OF THE
WARRANTS -- EXERCISE AND SETTLEMENT OF WARRANTS", "-- CLEARSTREAM AND EUROCLEAR"
AND "-- LIMIT OPTION" BEGINNING ON PAGES S-23 AND S-31. A FORM OF EXERCISE
NOTICE FOR WARRANTS APPEARS IN APPENDIX B. ADDITIONAL FORMS MAY BE OBTAINED AT
THE WARRANT AGENT'S OFFICE DURING THE WARRANT AGENT'S NORMAL BUSINESS HOURS.
PLEASE REFER TO "DESCRIPTION OF THE WARRANTS -- GENERAL" BEGINNING ON PAGE S-22.
If a Warrant is not exercised prior to 3:00 P.M., New York City time, on
the earlier of (1) the fourth Business Day preceding the Expiration Date and (2)
the Delisting Date, if any, the Warrant will be subject to automatic exercise as
described under "Description of the Warrants." However, if at that time, the
Spot Index Value on the appropriate Valuation Date is equal to or less than the
Initial Index Value, the Warrant will expire worthless and you will have
sustained a total loss of the purchase price of the Warrant.
THERE ARE LIMITS ON THE NUMBER OF WARRANTS THAT CAN BE EXERCISED ON ANY SINGLE
DAY
SSBHI will have the option to limit the number of Warrants exercisable on
any date, except on automatic exercise, to an aggregate of 250,000 and, in
conjunction with this limitation, to limit the number of Warrants exercisable by
or on behalf of any person or entity, either individually or in concert with any
other person or entity, on that date to 100,000. In the event that the total
number of Warrants being exercised on any date exceeds such maximum number and
SSBHI elects to limit the number of Warrants exercisable on that date, you may
not be able to exercise all of the Warrants that you desire to exercise on that
date. Warrants to be exercised on that date will be selected on a pro rata
basis. The Warrants tendered for exercise but not exercised on that date will be
automatically exercised on the next date on which Warrants may be exercised,
subject to the same daily maximum limitation and certain delayed exercise
provisions. Any limitation of this type will not apply in the event of automatic
exercise, including at expiration.
THE VALUATION OF WARRANTS FOLLOWING THEIR EXERCISE IS SUBJECT TO POSTPONEMENT OR
DELAY
In the case of any exercise of Warrants, there will be a time lag between
the time you give instructions to exercise and the time the Spot Index Value
used to calculate the Cash Settlement Value relating to the
S-11
<PAGE> 13
exercise is determined. Except under the circumstances described in this risk
factor and the following risk factor "Market Disruption Events and Extraordinary
Events May Postpone the Valuation Date", the Valuation Date for an exercised
Warrant will be the first Business Day after the related Exercise Date.
Generally, the Exercise Date for an exercised Warrant, subject to certain
exceptions described under "Description of the Warrants -- Exercise and
Settlement of Warrants", "-- Limit Option" and "-- Automatic Exercise", will be
the Business Day on which the Warrant and an Exercise Notice in proper form are
received by the Warrant Agent if received at or prior to 3:00 P.M., New York
City time, on that day; if the Warrant and Exercise Notice are received after
that time, the Exercise Date will be the next succeeding Business Day. Please
refer to "Description of the Warrants -- Exercise and Settlement of Warrants"
beginning on page S-24.
The Valuation Date for an exercised Warrant will occur after the Exercise
Date. Please refer to "Description of the Warrants -- Exercise and Settlement of
Warrants". Therefore, you will not be able to determine, at the time of exercise
of a Warrant, the Spot Index Value that will be used in calculating the Cash
Settlement Value of the Warrant, and you will thus be unable to determine the
Cash Settlement Value. In addition, the Valuation Date for exercised Warrants
may be postponed as a result of the exercise of Warrants in a number exceeding
the limits on exercise described under "Description of the Warrants -- Maximum
Exercise Amount" beginning on page S-27 or upon the occurrence and continuation
of an Extraordinary Event or a Market Disruption Event. Please refer to
"Description of the Warrants -- Market Disruption Events, Extraordinary Events
and Extension Events" beginning on page S-27.
Any downward movement in the value of the Index between the time you submit
an Exercise Notice and the time the Spot Index Value for that exercise is
determined will result in your receiving a Cash Settlement Value, including a
zero Cash Settlement Value, that is less than the Cash Settlement Value you may
have anticipated based on the Spot Index Value most recently reported prior to
the time of exercise. The period between exercise and valuation will, at a
minimum, represent an entire Business Day and, in the case of a Valuation Date
postponed as a result of there being exercised a number of Warrants exceeding
the maximum permissible amount or the occurrence and continuance of a Market
Disruption Event or an Extraordinary Event, may be substantially longer. The
value of the Index may change significantly during any period, and any change of
this type may adversely affect the Cash Settlement Value to be paid on your
Warrants.
Except in the event of automatic exercise, you may be able to limit to some
extent the risk associated with any downward movement in the value of the Index
between an Exercise Date and the applicable Valuation Date if you, in connection
with an exercise of Warrants, elect the Limit Option. Pursuant to the Limit
Option, Warrants tendered for exercise will not be exercised if the Spot Index
Value for the applicable Valuation Date has declined by five or more points from
the Spot Index Value for the applicable Exercise Date. Please refer to
"Description of the Warrants -- Limit Option" beginning on page S-31.
MARKET DISRUPTION EVENTS AND EXTRAORDINARY EVENTS MAY POSTPONE THE VALUATION
DATE
The Valuation Date for an exercised Warrant may be postponed upon the
occurrence and continuation of an Extraordinary Event or a Market Disruption
Event described under "Description of the Warrants -- Market Disruption Events,
Extraordinary Events and Extension Events" beginning on page S-27, or as a
result of the exercise of a number of Warrants exceeding the limits on exercise
described under "Description of the Warrants -- Maximum Exercise Amount"
beginning on page S-27. If SSBHI determines that an Extraordinary Event or a
Market Disruption Event has occurred and is continuing on any day that would
otherwise be a Valuation Date for any exercised Warrant, then the Valuation Date
for the Warrant will be postponed to the next Business Day on which there is no
Extraordinary Event or Market Disruption Event. However, subject to an automatic
extension of the term of the Warrants or to a determination that the Warrants
are worthless, as described under "Description of the Warrants -- Market
Disruption Events, Extraordinary Events and Extension Events" beginning on page
S-27, if the postponed Valuation Date has not occurred on or prior to the
Expiration Date or any Delisting Date, you may receive the Alternative
Settlement Amount, as described in the section entitled "Description of the
Warrants -- Market Disruption Events, Extraordinary Events and Extension
Events", instead of the Cash Settlement Value. In addition, in the case of an
Extraordinary Event,
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<PAGE> 14
if SSBHI determines that the Extraordinary Event is expected to continue and
SSBHI notifies the Warrant Agent that it is canceling the Warrants, then the
date on which the notice is given will become the Valuation Date for the
Warrants, in which case you will receive, instead of the Cash Settlement Value,
the Alternative Settlement Amount, which, subject to certain exceptions and
adjustments, is equal to the sum of (1) the Intrinsic Value of the Warrants on
the Valuation Date, determined as described under "Description of the
Warrants -- Market Disruption Events, Extraordinary Events and Extension Events"
and (2) a ratable portion of 50% of the initial offering price of the Warrants.
The Cash Settlement Value or the Alternative Settlement Amount of a Warrant
determined as of any postponed Valuation Date may be substantially lower than
the otherwise applicable Cash Settlement Value thereof, and may be zero. Please
refer to "Description of the Warrants -- Market Disruption Events, Extraordinary
Events and Extension Events" beginning on page S-27, which includes a
description of events, circumstances or causes constituting an Extraordinary
Event or a Market Disruption Event.
THE TERM OF THE WARRANTS WILL BE EXTENDED AND THE WARRANTS MAY EXPIRE WORTHLESS
IF SSBHI IS UNABLE TO TRADE IN THE UNDERLYING STOCKS OR RELATED INSTRUMENTS
In the event that a Market Disruption Event, including
- the suspension, material limitation or absence of trading of
(A) 20% or more of the stocks underlying the Index or
(B) if futures or options contracts related to the Index are then approved
for trading, such futures and options contracts; or
- the unavailability of accurate price, volume or related information in
respect of 20% or more of the underlying stocks or such futures or
options contracts
is continuing on the Expiration Date, the term of the Warrants will be extended
for a period of thirty days, except that if the Cash Settlement Value or the
Intrinsic Value used in calculating the Alternative Settlement Amount, as the
case may be, of the Warrants would have been zero if the Warrants had been
exercised using as the Valuation Date the Measurement Date, then the term of the
Warrants will not be extended and the Warrants will be deemed to be worthless,
and, as a result, investors will suffer a total loss of the purchase price of
their Warrants. Please refer to "Description of the Warrants -- Market
Disruption Events, Extraordinary Events and Extension Events" beginning on page
S-27.
YOU WILL NOT RECEIVE ANY DIVIDENDS; THE WARRANTS ARE NOT A DIRECT INVESTMENT IN
THE UNDERLYING STOCKS
The Warrants do not entitle you to any rights in the stocks underlying the
Index. The Cash Settlement Value will not include the payment of any dividends
on the underlying stocks.
THE PRICE OF THE WARRANTS MAY EXCEED THAT OF SIMILAR OPTIONS; THE WARRANTS ARE
NOT A PERFECT HEDGE
The initial offering price of the Warrants may be in excess of the price
that a commercial user of options on the Index or the underlying stocks might
pay for a comparable option in a private transaction. The Warrants should not be
considered to be a perfect hedge with respect to the level of the Index or all
or any portion of the underlying stocks.
A REDUCTION IN SSBHI'S CREDIT RATING COULD REDUCE THE TRADING VALUE OF THE
WARRANTS
The value of the Warrants is expected to be affected, in part, by
investors' general appraisal of SSBHI's creditworthiness. Such perceptions are
generally influenced by the ratings accorded to SSBHI's outstanding debt
securities by the standard statistical rating services, such as Moody's
Investors Service, Inc., Standard &
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<PAGE> 15
Poor's Corporation and Fitch IBCA. A reduction in the rating, if any, accorded
to outstanding debt securities of SSBHI by one of these rating agencies could
result in a reduction in the trading value of the Warrants.
WARRANTS ARE UNSECURED OBLIGATIONS; OTHER RISKS REGARDING FLUCTUATIONS IN THE
VALUE OF INDEX WARRANTS
The Warrants are unsecured contractual obligations of SSBHI and will rank
equally with SSBHI's other unsecured contractual obligations and with SSBHI's
unsecured and unsubordinated debt. SSBHI may issue several series of Index
Warrants relating to various indices, currencies or other commodities. However,
no assurance can be given that SSBHI will issue any Index Warrants other than
the Warrants to which this prospectus supplement relates. At any given time, the
number of Index Warrants outstanding may be substantial. Options and warrants
provide opportunities for investment and pose risks to investors as a result of
fluctuations in the value of the underlying investment. In general, certain of
the risks associated with the Warrants are similar to those generally applicable
to other options or warrants of private corporate issuers. However, unlike
options or warrants on equity or debt securities, which are priced primarily on
the basis of the value of a single underlying security, the trading value of a
Warrant is likely to reflect primarily present and expected values of the Index,
which is comprised of the stocks of 15 companies.
THE WARRANTS ARE NOT SUITABLE FOR ALL INVESTORS
The CBOE requires that the Warrants be sold only to investors whose
accounts have been approved for options trading. In addition, the CBOE requires
that its members and member organizations and registered employees thereof make
certain suitability determinations before recommending transactions in the
Warrants. It is suggested that investors considering the purchase of Warrants be
experienced with respect to options on securities and option transactions and
reach an investment decision only after carefully considering, with their
advisers, the suitability of the Warrants in light of their particular
circumstances. The Warrants are not suitable for persons solely dependent upon a
fixed income, for retirement plan accounts or for accounts under the Uniform
Gift to Minors Act. Before making any investment in the Warrants, it is
important that a prospective investor become informed about and understand the
nature of the Warrants in general, the specific terms of the Warrants and the
nature of the Index and the underlying stocks that will comprise the Index. An
investor should understand the consequences of liquidating his investment in a
Warrant by exercising, as opposed to selling, the Warrant. It is especially
important for an investor to be familiar with the procedures governing the
exercise of Warrants, since a failure to properly exercise a Warrant prior to
its expiration could result in the loss of his entire investment. This includes
knowing when Warrants are exercisable and how to exercise them.
A SECONDARY MARKET FOR THE WARRANTS MAY NOT DEVELOP, OR THE SECONDARY MARKET MAY
BE ILLIQUID
Although application will be made to list the Warrants on the CBOE subject
to official notice of issuance, it is not possible to predict the price at which
the Warrants will trade in the secondary market or whether a market will develop
or, if developed, will be liquid or illiquid. To the extent Warrants are
exercised, the number of Warrants outstanding will decrease, resulting in a
decrease in the liquidity of the Warrants. In addition, during the life of the
Warrants, SSBHI or its affiliates may from time to time purchase and exercise
Warrants, resulting in a decrease in the liquidity of the Warrants. If
additional warrants or options relating to the Index or the underlying stocks
are subsequently offered to the public, the supply of warrants and options
relating to the Index or the underlying stocks in the market will increase,
which could cause the price at which the Warrants and any other warrants and
options trade in the secondary market to decline significantly.
UNEXERCISED WARRANTS WILL BE AUTOMATICALLY EXERCISED IF THE WARRANTS ARE
DELISTED
In the event the Warrants are delisted from, or permanently suspended from
trading, within the meaning of the Exchange Act and the rules and regulations
thereunder, on the CBOE and not accepted at the same time for listing on another
United States national securities exchange, Warrants not previously exercised
will be deemed automatically exercised on the Delisting Date, and any Cash
Settlement Value or Alternative
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<PAGE> 16
Settlement Amount, as the case may be, will be calculated and settled as
provided under "Description of the Warrants -- Delisting of Warrants" beginning
on page S-32. In the event of a delisting or suspension of trading on the CBOE,
SSBHI will use its best efforts to list the Warrants on another United States
national securities exchange.
POSSIBLE LOSS OF ALL OR A PORTION OF YOUR PURCHASE PRICE
The purchaser of a Warrant may lose his entire investment. This risk
reflects the nature of a Warrant as an asset which, other factors held constant,
tends to decline in value over time and which may, depending on the prevailing
Spot Index Value as compared to the Strike Index Value, become worthless when it
expires. Assuming all other factors are held constant, the more a Warrant is
"out-of-the-money" and the shorter its remaining term to expiration, the greater
the risk that a purchaser of the Warrant will lose all or part of his purchase
price for the Warrant. This means that if the Spot Index Value at expiration is
less than or equal to the Strike Index Value, then an investor in the Warrants
who has not sold his Warrant in the secondary market prior to expiration will
necessarily lose his entire purchase price for the Warrant upon expiration.
The risk of the loss of some or all of the purchase price of a Warrant upon
expiration means that, in order to recover and realize a return upon his
investment, a purchaser of a Warrant must generally be correct about both the
direction, timing and magnitude of an anticipated change in the value of the
Index. Even if the Warrant is "in-the-money" when exercised, including automatic
exercise upon expiration, if the Spot Index Value is not greater than the Strike
Index Value to an extent sufficient to cover a purchaser's cost of the Warrant
(i.e., the purchase price plus transaction costs, if any), the purchaser will
lose all or part of his purchase price for the Warrant. Investors in the
Warrants will thus bear the risk of a decline in the value of the Index.
CONFLICTS OF INTEREST MAY ARISE AS A RESULT OF SALOMON SMITH BARNEY'S ROLE AS
DETERMINATION AGENT AND SPONSOR OF THE TRUST
Because Salomon Smith Barney is an affiliate of SSBHI, conflicts of
interest may arise in connection with Salomon Smith Barney performing its role
as Determination Agent. 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 these policies and procedures will be
in effect throughout the term of the Warrants to restrict the use of information
relating to the calculation of the Cash Settlement Value prior to its
dissemination of those calculations. Salomon Smith Barney is obligated to carry
out its duties and functions as Determination Agent in good faith and using its
reasonable judgment.
Salomon Smith Barney and its affiliates may from time to time engage in
transactions involving the Index or the underlying stocks that comprise the
Index for their proprietary accounts and for other accounts under their
management, which may influence the value of the Index and therefore the value
of the Warrants. Salomon Smith Barney and its affiliates will also be the
writers of the hedge of SSBHI's obligations under the Warrants and will be
obligated to pay to SSBHI upon exercise of Warrants an amount equal to the value
of the exercised Warrants. Please refer to "Use of Proceeds and Hedging"
beginning on page S-33. Accordingly, under certain circumstances, conflicts of
interest may arise between Salomon Smith Barney's responsibilities as
Determination Agent with respect to the Warrants and its obligations under its
hedge.
The underlying stocks in the Index comprise all of the portfolio securities
(the "Portfolio Securities") included in the Uncommon Values Trust, 2000 Series
(the "Trust"). Please refer to "Description of the Index" beginning on page
S-18. The Trust is a unit investment trust sponsored by Salomon Smith Barney, a
subsidiary of SSBHI, which offered units in the Trust for initial sale to the
public on July 12, 2000. In connection with the offering of units in the Trust,
as well as in connection with satisfying redemptions from the Trust, Salomon
Smith Barney, as the sponsor of the Trust, or the Trust itself has bought and
sold, and will buy and sell, the Portfolio Securities. Especially during the
period of the initial offering of units in the Trust in July and early August
2000, during which Salomon Smith Barney, as sponsor of the Trust, purchased a
material amount of the Portfolio Securities, the volume of these transactions in
the Portfolio Securities may have affected the value of the Portfolio
Securities.
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<PAGE> 17
The publication of the list of the Portfolio Securities selected for the
Trust may have also caused increased trading activity in certain of the
Portfolio Securities. In response to the announcement of the components of the
Index, investment advisory and brokerage clients of Salomon Smith Barney and its
affiliates may have purchased some or all of the individual Portfolio Securities
appearing on the list during the period of the initial offering of units in the
Trust.
Moreover, throughout the term of the Warrants, purchasing and selling
activity, including sales by the Trust in connection with satisfying redemptions
from the Trust and purchases and sales by the Trust's clients or by investors
acting in response to research coverage or other analysis by Salomon Smith
Barney or other affiliates of SSBHI, may impact the value of the stocks
underlying the Index. SSBHI has decided to set the Initial Index Value of the
Warrants on a date more than two months after the selection of the Portfolio
Securities and the public offering of units in the Trust in the expectation that
this delay in setting the Initial Index Value will tend to reduce the impact
that the activity of the Trust and of investment advisory and brokerage clients
of Salomon Smith Barney will have on the value of the underlying stocks
comprising the Index during the term of the Warrants, and thus, on the value of
the Index during that time, as this impact is expected to be most significant in
the twenty-Trading Day period following the public offering of units in the
Trust (i.e., the twenty-Trading Day period ending on August 9, 2000). No
assurance can be given, however, that this purchase and sale activity will not
affect the Initial Index Value, the Strike Index Value, or the Spot Index Value
at any given time during the term of the Warrants, and therefore affect the
trading value and Cash Settlement Value of the Warrants.
THE STOCKS UNDERLYING THE INDEX MAY BE CONCENTRATED IN CERTAIN INDUSTRIES
The stocks underlying the Index may be considered to be concentrated in
common stock of companies engaged in technology related and/or
telecommunications industries. The securities of technology related companies
present certain risks that may not exist to the same degree in other types of
investments. Technology stocks, in general, tend to be relatively volatile as
compared to other types of investments. Any such volatility will be reflected in
the value of the Index. The technology and science areas may be subject to
greater governmental regulation than many other areas and changes in
governmental policies and the need for regulatory approvals may have a material
adverse effect on these areas. Additionally, companies in these areas may be
subject to risks of developing technologies, competitive pressures and other
factors and are dependent upon consumer and business acceptance as new
technologies evolve. Competitive pressures may have a significant effect on the
financial condition of companies in the technology sector. For example, if
technology continues to advance at an accelerated rate, and the number of
companies and product offerings continues to expand, these companies could
become increasingly sensitive to short product cycles and aggressive pricing.
Further, companies in the technology industry spend heavily on research and
development and are subject to the risk that their products or services may not
prove commercially successful or may become obsolete quickly.
Certain companies whose securities are among the stocks underlying the
Index are engaged in providing local, long-distance and wireless services, in
the manufacture of telecommunications products and in a wide range of other
activities, including directory publishing, information systems and the
operation of voice, data and video telecommunications networks.
S-16
<PAGE> 18
The performance of the stocks of companies in the telecommunications
industry, including local, local-distance and cellular service, the manufacture
of telecommunications equipment, and other ancillary services, is generally
dependent upon the amount and growth of customer demand, the level of rates
permitted to be charged by regulatory authorities, the effects of inflation on
the cost of providing services and the rate of technological innovation. To meet
increasing competition, companies may have to commit substantial capital,
particularly in the formulation of new products and services using new
technology. Telecommunications companies are undergoing significant change due
to varying and evolving levels of governmental regulation or deregulation and
other factors. As a result, competitive pressures are intense and the securities
of such companies may be subject to significant price volatility.
------------------------
INVESTORS ARE ADVISED TO CONSIDER CAREFULLY THE FOREGOING RISK FACTORS AND
THE RISKS AND OTHER MATTERS DISCUSSED UNDER "DESCRIPTION OF INDEX
WARRANTS -- SPECIAL CONSIDERATIONS RELATING TO INDEX WARRANTS" BEGINNING ON PAGE
19 OF THE ACCOMPANYING PROSPECTUS, "DESCRIPTION OF THE INDEX" BEGINNING ON PAGE
S-18 AND "CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS" BEGINNING ON
PAGE S-34, AS WELL AS THE OTHER INFORMATION IN THE ACCOMPANYING PROSPECTUS AND
THIS PROSPECTUS SUPPLEMENT, PRIOR TO PURCHASING WARRANTS.
We suggest that prospective investors who consider purchasing the Warrants
reach an investment decision only after carefully considering the suitability of
the Warrants in light of their particular circumstances.
S-17
<PAGE> 19
DESCRIPTION OF THE INDEX
SELECTION OF THE UNDERLYING STOCKS
The Index represents a diversified basket of the common stocks of 15
corporations operating in several industry groups. The stocks underlying the
Index consist of all of the Portfolio Securities of the Trust, and have been
selected by the TEN+ Selection Committee of Salomon Smith Barney (the
"Committee"), which is comprised of senior management and equity strategists,
with the assistance of the Salomon Smith Barney Research Department. Salomon
Smith Barney's Research Department is staffed by over 100 investment analysts,
who currently follow equities issued by more than 1,600 domestic and foreign
companies in 85 industry groups or stock areas of the market. The underlying
stocks comprising the Index have been selected by Salomon Smith Barney as
undervalued stocks deemed to have above average appreciation potential over the
12 months following their selection in July 2000. In arriving at the underlying
stocks, the Committee evaluated each analyst's top selections based on the
Committee's analysis of industry trends, overall market conditions and the
current economic environment. The investment rankings by Salomon Smith Barney
normally pertain to an outlook for a 12-18 month period from the time the stocks
are selected. Please refer to footnote 1 to the table on page S-19. In selecting
the underlying stocks, Salomon Smith Barney does not express any belief as to
the potential of these securities for capital appreciation over a period longer
than one year. There is, of course, no assurance that any of the underlying
stocks comprising the Index will appreciate in value, and indeed any or all of
such underlying stocks and the Index may depreciate in value at any time in the
future. Each January for the last 17 years, Salomon Smith Barney has published a
list of the top pick in each of the industry groups followed by its equity
analysts. The selection of underlying stocks comprising the Index differs from
these top picks both in that it is made in the middle of the year and in that
the Salomon Smith Barney analysts' selections have been screened by the
Committee, as described, to arrive at the list of the stocks underlying the
Index.
All of the Portfolio Securities are publicly traded on a stock exchange. In
addition, the stocks comprising the Index met the following criteria at the time
they were selected:
- minimum market capitalization of $150 million, except that up to 10
percent of the underlying stocks may have a market capitalization of not
less than $50 million;
- trading volume during each of the six months prior to the offering of the
Warrants of not less than one million shares, except that up to 10
percent of the underlying stocks may have a trading volume during each of
the six months prior to the offering of the Warrants of not less than
500,000 shares;
- at least 80 percent of the underlying stocks met the then current
criteria for standardized options trading set forth in CBOE Rule 5.3;
- at least 80 percent of the underlying stocks are listed on the New York
Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX"),
or are traded through the Nasdaq National Market of the Nasdaq Stock
Market, Inc. ("NASDAQ");
- all of the underlying stocks that are issued by companies incorporated in
the U.S. are "reported securities" as defined in Rule 11Aa3-1 under the
Exchange Act; and
- no more than 20 percent of the underlying stocks are listed only on a
foreign stock exchange.
S-18
<PAGE> 20
2000 TEN+SM INDEX
UNDERLYING STOCKS
<TABLE>
<CAPTION>
PRINCIPAL TRADING STOCK INVESTMENT
ISSUER MARKET SYMBOL RANKING(1)
------ ----------------- ------ ----------
<S> <C> <C> <C>
America Online, Inc.#.................................. NYSE AOL 1H
Amgen, Inc.*........................................... NASDAQ AMGN 1H
Baxter International Inc. ............................. NYSE BAX 1M
Chubb Corporation#..................................... NYSE CB 1L
Electronic Data Systems Corp.#......................... NYSE EDS 1M
Enron Corporation#..................................... NYSE ENE 1H
Infinity Broadcasting Corporation#..................... NYSE INF 1M
Lincoln National Corporation........................... NYSE LNC 1M
Nortel Networks Corporation............................ NYSE NT 1H
Pfizer Inc. ........................................... NYSE PFE 1L
Philips Electronics N.V. .............................. NYSE PHG 1H
Schlumberger Limited................................... NYSE SLB 1L
Target Corporation..................................... NYSE TGT 1M
Tyco International Ltd.#............................... NYSE TYC 1M
WorldCom, Inc.*#....................................... NASDAQ WCOM 1M
</TABLE>
---------------
(1) These rankings are current as of the date of this preliminary prospectus
supplement, and are subject to change without notice. Salomon Smith Barney
has assigned these rankings according to the following system, which, as
more fully explained below, uses two codes: a letter for the level of risk
(L, M, H, S or V) and a number for performance expectation (1-5).
Each risk ranking in the form of a letter assesses predictability of
earnings/dividends and stock price volatility, as follows:
L (Low Risk): highly predictable earnings/dividends, low price volatility
M (Moderate Risk): moderately predictable earnings/dividends, moderate
price volatility
H (High Risk): low predictability of earnings/dividends, high price
volatility
S (Speculative): exceptionally low predictability of earnings/dividends,
highest risk of price volatility
V (Venture): Risk and return consistent with venture capital, suitable only
for well-diversified portfolios
Each performance ranking in the form of a number indicates the expected
total return, which includes capital gain or loss plus dividends, over the next
10-16 months (12-18 months since the selection of the stocks underlying the
Index), assuming an unchanged or "flat" market; performance expectations depend
on the risk category assigned to the stock, as shown in the following chart:
<TABLE>
<CAPTION>
LOW RISK MODERATE RISK HIGH RISK SPECULATIVE
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
1 (Buy)................ Over 15% Over 20% Over 25% Over 30%
2 (Outperform)......... 5% to 15% 5% to 20% 10% to 25% 10% to 30%
3 (Neutral)............ -5% to 5% -5% to 5% -10% to 10% -10% to 10%
4 (Underperform)....... -5% to -15% -5% to -15% -10% to -20% -10% to -20%
5 (Sell)............... -15% or worse -15% or worse -20% or -20% or worse
worse
</TABLE>
These rankings represent current opinions of Salomon Smith Barney research
analysts and are, of course, subject to change without notice; no assurance can
be given that the stocks will perform in line with such rankings. These rankings
have not been audited.
---------------
* Salomon Smith Barney, including its subsidiaries and/or affiliates, usually
maintains a market in the securities of this company.
# Within the last three years, Salomon Smith Barney, including its subsidiaries
and/or affiliates, has acted as manager or co-manager of a public offering of
the securities of this company or an affiliate.
S-19
<PAGE> 21
INDICATIVE SPOT INDEX VALUES
The following table sets forth indicative Spot Index Values on the last
business day of each month in the period from December 1998 through July 2000,
each calculated as if the Index had been created on December 31, 1998 and the
value of the Index on August 25, 2000 had been set at 100.0000. The table is
based on historical trading data for each of the stocks underlying the Index
obtained from the primary trading market for such stocks and was calculated
using hypothetical weightings for each of the underlying stocks in the Index
based on an investment of $10,000 in the stocks of each of the underlying
issuers rounded to the nearest whole share as of August 25, 2000. As explained
under "Calculation of the Index", the actual weightings of each of the
underlying stocks in the Index will be determined as of the date the Warrants
are priced for initial sale to the public and will therefore differ from those
used in calculating the indicative Spot Index Values in this table. These
indicative Spot Index Values should not be taken as an indication of future
performance. The indicative values set forth herein have been adjusted to
reflect certain corporate events that affected the relevant trading data,
including, but not limited to, stock splits and stock dividends. Certain
adjustments to the Index will be made by the CBOE as set forth under
"Calculation of the Index" below. Those adjustments may not correspond to the
adjustments made in determining the indicative Spot Index Values set forth in
the following table.
<TABLE>
<CAPTION>
MONTH 1998 1999 2000
----- ------- ------- -------
<S> <C> <C> <C>
January............................................... -- 76.7506 90.0566
February.............................................. -- 76.1047 88.6674
March................................................. -- 83.5039 96.7667
April................................................. -- 82.8049 94.9072
May................................................... -- 82.6482 93.3942
June.................................................. -- 84.4744 93.5071
July.................................................. -- 83.3118 95.3093
August................................................ -- 81.3718 --
September............................................. -- 79.0356 --
October............................................... -- 86.0372 --
November.............................................. -- 88.8886 --
December.............................................. 71.6780 91.6913 --
</TABLE>
CALCULATION OF THE INDEX
The Index will be calculated by the CBOE using an "equal dollar-weighting"
methodology designed to ensure that each of the issuers of the underlying stocks
is represented in an approximately equal dollar amount in the Index as of the
date the Warrants are priced for initial sale to the public. To create the
Index, Salomon Smith Barney will calculate a notional portfolio of the
underlying stocks representing an investment of $10,000 in the component
securities of each of the underlying issuers (rounded to the nearest whole
share) as of the date the Warrants are priced for initial sale to the public.
The value of the Index will equal the market value of the sum of the assigned
number of shares of each of the underlying stocks divided by an Index divisor.
The Index divisor will be set to provide a benchmark value of 100.0000 as of the
date the Warrants are priced for initial sale to the public. The Initial Index
Value will thus be equal to 100.0000.
The number of shares of each underlying stock in the Index will remain
fixed except in the event of certain types of corporate actions such as the
payment of a dividend (other than an ordinary cash dividend), a stock
distribution, stock split, reverse stock split, rights offering, distribution,
reorganization, recapitalization, or similar event with respect to the
underlying stocks. The number of shares of each underlying stock also may be
adjusted by the CBOE, if necessary, in the event of a merger, consolidation,
dissolution, or liquidation of an issuer or in certain other events such as the
distribution of property by an issuer to shareholders, the expropriation or
nationalization of a foreign issuer, or the imposition of certain foreign taxes
on shareholders of a foreign issuer. Shares of an underlying stock may be
replaced or supplemented by the CBOE with another security only under certain
circumstances, such as in the event of a merger or consolidation, the conversion
of
S-20
<PAGE> 22
an underlying stock into another class of security, the termination of a
depository receipt program, or the spin-off of a subsidiary. No attempt will be
made by the CBOE to find a replacement stock or to otherwise compensate for an
underlying stock that is extinguished due to bankruptcy or similar
circumstances.
More specifically,
- in the event of a merger or consolidation, whether between two issuers of
underlying stocks or between the issuer of an underlying stock and an
issuer of a non-underlying stock, the original underlying stock will be
replaced by the new security;
- in the event of a conversion into another class of security, the original
underlying stock will be replaced by the new security; and
- in the event of a spin-off of a subsidiary, both the subsidiary issue and
the original "parent security" will be included in the Index, unless the
subsidiary is an insignificant percentage of the original security, in
which case the CBOE will consult with the SEC prior to omitting the
subsidiary issue from the Index.
If the underlying stock remains in the Index following the occurrence of
any such event, the number of shares of the underlying stock may be adjusted by
the CBOE 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 all
cases, the divisor will be adjusted by the CBOE, if necessary, to ensure
continuity of the value of the Index.
The Index will be calculated based on real-time prices for all of the
underlying stocks.
The value of the Index will be calculated and disseminated by CBOE every 15
seconds under the symbol "TXS".
THE CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED
The CBOE trades options on more than 1400 stocks and on the two most
actively traded indices in the world, the S&P 100(Registered) (OEX(Registered))
and the S&P 500(TM)(Registered)(SPX(Registered)), as well as on the S&P Small
Cap 600 (SML), the Dow Jones Industrial Average(TM)(DJX), the Dow Jones
Transportation Average(TM) (DTX), the Dow Jones Utility Average(TM) (DUX), the
NASDAQ 100 Index(Registered) (NDX(Registered)), the Russell 2000(Registered)
Index (RUT), the S&P Barra Index (SGX and SVX) and a number of sector indices.
Options on the CBOE Mexico Index (MEX), the IPC(TM) Index (MXX), the Latin
15(TM) Index (LTX) and the Nikkei 300(Registered) Index (NIK) comprise the
CBOE's foreign index option complex. The CBOE also offers interest rate options;
LEAPS(Registered), which are long-term options on individual equities and stock
indices; and FLEX(Registered) (Flexible Exchange(Registered)) Options, an
alternative to the over-the-counter options market for institutional investors.
The CBOE also trades other securities including Equity Linked Notes and Warrants
related to several other indices.
The CBOE will enter into a calculation agency agreement with SSBHI,
pursuant to which it will calculate the Index as described under "-- Calculation
of the Index" on the previous page. The Warrants are not sponsored, endorsed,
sold or promoted by the CBOE. The CBOE makes no representation or warranty,
express or implied, to the holders of the Warrants or any member of the public
regarding the advisability of investing in securities generally or in the
Warrants particularly or in the ability of the Index to track the performance of
any market segment. The CBOE has no obligation to take the needs of Salomon
Smith Barney or the holders of the Warrants into consideration in calculating
the Index. The CBOE is not responsible for, and has not participated in the
determination of the timing of the sale of the Warrants, prices at which the
Warrants are to be sold initially, or quantities of the Warrants to be issued or
in the determination or calculation of the equation by which the Warrants are to
be converted into cash. The CBOE has no obligation or liability in connection
with the administration or marketing of the Warrants.
THE CBOE DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
INDEX OR ANY DATA INCLUDED THEREIN. THE CBOE MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY SSBHI, HOLDERS OF THE
S-21
<PAGE> 23
WARRANTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA
INCLUDED THEREIN. THE CBOE MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IN NO EVENT SHALL THE CBOE
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES,
INCLUDING LOST PROFITS, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
DESCRIPTION OF THE WARRANTS
GENERAL
The Warrants will be issued pursuant to a Warrant Agreement (the "Warrant
Agreement"), to be dated as of , 2000, between SSBHI, Citibank, N.A.,
as Warrant Agent (the "Warrant Agent"), and Salomon Smith Barney, as
Determination Agent. The following summaries of certain provisions of the
Warrants and the Warrant Agreement do not purport to be complete and reference
is made to all the provisions of the Warrant Agreement, including the form of
Global Warrant Certificate attached as an exhibit to the Warrant Agreement. The
Warrant Agreement will be available for inspection by any registered holder of
Warrants (a "Warrantholder") at the office of the Warrant Agent (the "Warrant
Agent's Office"), which is currently located at 111 Wall Street, 5th Floor, New
York, New York 10043, during the Warrant Agent's normal business hours. Please
refer to "Description of Index Warrants" beginning on page 15 of the
accompanying prospectus.
The aggregate number of Warrants to be issued is set forth on the cover
page of this prospectus supplement and is subject to the right of SSBHI to
"reopen" the issue of Warrants and issue additional Warrants with substantially
identical terms at a later time.
A Warrant will not require or entitle a Warrantholder to receive any of the
underlying stocks comprising the Index from SSBHI. Upon exercise of a Warrant,
SSBHI will make only a U.S. dollar cash payment in the amount of the Cash
Settlement Value, if any, of such Warrant. SSBHI is under no obligation to, nor
will it, sell the underlying stocks to, or purchase the underlying stocks from,
Warrantholders in connection with the exercise of any Warrants. Warrantholders
will not receive any interest on any Cash Settlement Value.
DETERMINATION OF THE CASH SETTLEMENT VALUE
Subject to the discussion under "-- Market Disruption Events, Extraordinary
Events and Extension Events" beginning on page S-27, each Warrant will entitle
the Warrantholder to receive, upon exercise (including automatic exercise), the
Cash Settlement Value of such Warrant. The "Cash Settlement Value" of a Warrant
will equal an amount in U.S. dollars, rounded down to the nearest cent,
calculated in accordance with the following formula:
the greater of (A) zero; and
<TABLE>
<S> <C> <C>
Spot Index Value -- Strike Index Value
---------------------------------------
(B) X $10.00
Initial Index Value
</TABLE>
"Spot Index Value" means the value of the TEN+ Index at the close of
trading on the CBOE on the applicable Valuation Date. However, the Spot Index
Value with respect to the Expiration Date, any Early Extended Expiration Date or
any Extended Expiration Date means the value of the TEN+ Index at the opening of
trading on the CBOE on the applicable Valuation Date. The Valuation Date may be
postponed as a result of an Extraordinary Event or a Market Disruption Event.
Please refer to "-- Market Disruption Events, Extraordinary Events and Extension
Events" beginning on page S-27. The Valuation Date may also be postponed as a
result of the exercise of Warrants in a number exceeding certain limits on
exercise. Please refer to "-- Exercise of Warrants -- Maximum Exercise Amount"
beginning on page S-27.
S-22
<PAGE> 24
"Strike Index Value" means 80.0000, or 80% of the Initial Index Value.
"Initial Index Value" means 100.0000, the value of the TEN+ Index on the
date the Warrants will be priced for initial sale to the public.
HYPOTHETICAL CASH SETTLEMENT VALUES ON EXERCISE
Set forth below is an illustrative example of the Cash Settlement Values of
a Warrant based on various hypothetical Spot Index Values, an Initial Index
Value of 100.0000 and a Strike Index Value of 80.0000. The closing value of the
Index on the date the Warrants are priced for initial sale to the public will be
set at 100.0000, as a result, the Strike Index Value will be equal to 80.0000.
The Strike Index Value will remain constant throughout the term of the Warrants.
The illustrative Cash Settlement Values in the table do not reflect any "time
value" for a Warrant, which may be reflected in trading value, and are not
necessarily indicative of potential profit or loss, which are also affected by
purchase price and transaction costs.
<TABLE>
<CAPTION>
CASH SETTLEMENT VALUE
(ALSO KNOWN AS "INTRINSIC
HYPOTHETICAL SPOT INDEX VALUE VALUE") OF A WARRANT
----------------------------- -------------------------
<S> <C>
140.0000.................................................... $6.00
135.0000.................................................... $5.50
130.0000.................................................... $5.00
125.0000.................................................... $4.50
120.0000.................................................... $4.00
115.0000.................................................... $3.50
110.0000.................................................... $3.00
105.0000.................................................... $2.50
100.0000 (Initial Index Value).............................. $2.00
90.0000..................................................... $1.00
85.0000..................................................... $0.50
80.0000 (Strike Index Value)................................ $0.00
</TABLE>
DTC BOOK-ENTRY PROCEDURES
SSBHI will issue the Warrants in the form of one or more global
certificates, which will be held by DTC or its nominee. Direct and indirect
participants in DTC, including the depositaries in the Euroclear and Clearstream
clearing systems, will record beneficial ownership of the Warrants by individual
investors. Accordingly, except in certain limited circumstances described on
page 17 of the accompanying prospectus under "Description of Index
Warrants -- Book-Entry Procedures and Settlement for Index Warrants," ownership
of the Warrants in certificated form will not be available to investors. For
additional information on DTC and its procedures, please refer to "-- Exercise
and Settlement of Warrants" beginning on page S-24 and "Description of Index
Warrants -- Book-Entry Procedures and Settlement for Index Warrants" beginning
on page 17 of the accompanying prospectus.
CLEARSTREAM AND EUROCLEAR
Warrantholders may hold their Warrants through the accounts maintained by
Clearstream Banking, societe anonyme ("Clearstream") or the Euroclear System
operated by Morgan Guaranty Trust's Brussels Office ("Euroclear") in DTC only if
they are participants of those systems, or indirectly through organizations
which are participants in those systems. The Common Code used by Clearstream and
Euroclear for the Warrants is and the ISIN Number is .
Clearstream and Euroclear will hold omnibus book-entry positions on behalf
of their participants through customers' securities accounts in Clearstream's
and Euroclear's names on the books of their respective depositaries which in
turn will hold such positions in customers' securities accounts in the names of
the
S-23
<PAGE> 25
nominees of the depositaries on the books of DTC. Citibank, N.A. ("Citibank"),
will act as depositary for Clearstream and Morgan Guaranty Trust Company of New
York, New York Office ("Morgan"), will act as depositary for Euroclear (in such
capacities, the "Depositaries"). All securities in Clearstream or Euroclear are
held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts.
Exercises of Warrants by persons holding through Clearstream or Euroclear
participants will be effected through DTC, in accordance with DTC rules, on
behalf of the relevant European international clearing system by its
Depositaries; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participant in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the exercise meets its requirements,
deliver instructions to its Depositaries to take action to effect exercise of
the Warrants on its behalf by delivering Warrants through DTC and receiving
payment in accordance with its normal procedures for next-day funds settlement.
Payments with respect to the Warrants held through Clearstream or Euroclear will
be credited to the cash accounts of Clearstream participants or Euroclear
participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositaries. Please refer to "-- Exercise and
Settlement of the Warrants" below.
All information in this prospectus supplement on Clearstream and Euroclear
is derived from Clearstream or Euroclear, as the case may be, and reflects the
policies of such organizations; such policies are subject to change without
notice.
EXERCISE AND SETTLEMENT OF WARRANTS
The Warrants will be first exercisable on , 2000 and will
expire on the Expiration Date for the Warrants, which is , 2002.
Warrants not exercised (including by reason of any postponed exercise) at or
before 3:00 P.M., New York City time, on the "Last Exercise Date", which is the
earlier of
- the fourth Business Day immediately preceding the Expiration Date, and
- the Delisting Date, if any,
will be automatically exercised as described under "-- Automatic Exercise"
beginning on page S-32.
In the case of Warrants held through the facilities of DTC, a Warrantholder
may exercise such Warrants on any Business Day during the period from
, 2000 until 3:00 P.M., New York City time, on the Last Exercise Date by
causing
- such Warrants to be transferred free to the Warrant Agent on the records
of DTC, and
- a duly completed and executed Exercise Notice to be delivered on behalf
of the Warrantholder by a Participant to the Warrant Agent.
A Form of Exercise Notice for Warrants is included herein as Appendix B and may
also be obtained from the Warrant Agent at the Warrant Agent's Office.
In the case of Warrants held through the facilities of Clearstream or
Euroclear, a Warrantholder may exercise such Warrants on any Business Day during
the period from October , 2000 until 3:00 P.M., New York City time, on the
Last Exercise Date by causing
- such Warrants to be transferred free to the Warrant Agent on the records
of DTC, by giving appropriate instructions to the Participant holding
such Warrants in either the Clearstream or Euroclear system, as the case
may be, and
- a duly completed and executed Exercise Notice to be delivered on behalf
of the Warrantholder by Clearstream or Euroclear, as the case may be, to
the Warrant Agent.
S-24
<PAGE> 26
Except for Warrants subject to automatic exercise or held through the
facilities of Clearstream or Euroclear, and subject to the Limit Option, the
"Exercise Date" for a Warrant will be
- the Business Day on which the Warrant Agent receives the Warrant and
Exercise Notice in proper form with respect to such Warrant, if received
at or prior to 3:00 P.M., New York City time, on such day, or
- if the Warrant Agent receives such Warrant and Exercise Notice after 3:00
P.M., New York City time, on a Business Day, then the Business Day next
succeeding such Business Day.
In the case of Warrants held through the facilities of Clearstream or
Euroclear, except for Warrants subject to automatic exercise, and subject to the
Limit Option, the "Exercise Date" for a Warrant will be
- the Business Day on which the Warrant Agent receives the Exercise Notice
in proper form with respect to such Warrant if such Exercise Notice is
received at or prior to 3:00 P.M., New York City time, on such day; as
long as the Warrant is received by the Warrant Agent by 3:00 P.M., New
York City time, on the Valuation Date, or
- if the Warrant Agent receives such Exercise Notice after 3:00 P.M., New
York City time, on a Business Day, then the Business Day next succeeding
such Business Day; as long as the Warrant is received by 3:00 P.M., New
York City time, on the Valuation Date relating to exercises of Warrants
on such succeeding Business Day.
In the event that a Warrant is received after 3:00 P.M., New York City time, on
the Valuation Date, then the Exercise Date for such Warrant will be the day on
which such Warrant is received or, if such day is not a Business Day, the next
succeeding Business Day.
In the case of Warrants held through the facilities of Clearstream or
Euroclear, in order to ensure proper exercise on a given Business Day,
participants in Clearstream or Euroclear must submit exercise instructions to
Clearstream or Euroclear, as the case may be, by 10:00 A.M., Luxembourg time, in
the case of Clearstream and by 10:00 A.M., Brussels time, in the case of
Euroclear. In addition, in the case of book-entry exercises by means of
Euroclear,
- participants must also transmit, by facsimile (facsimile number (201)
262-7521), to the Warrant Agent a copy of the Exercise Notice submitted
to Euroclear by 3:00 P.M., New York City time, on the desired Exercise
Date, and
- Euroclear must confirm by telex to the Warrant Agent by 9:00 A.M., New
York City time, on the Valuation Date that the Warrants will be received
by the Warrant Agent on such date. However, if the telex communication is
received after 9:00 A.M., New York City time, on the Valuation Date,
SSBHI will be entitled to direct the Warrant Agent to reject the related
Exercise Notice or waive the requirement for timely delivery of such
telex communication.
TO ENSURE THAT AN EXERCISE NOTICE AND THE RELATED WARRANTS WILL BE
DELIVERED TO THE WARRANT AGENT BEFORE 3:00 P.M., NEW YORK CITY TIME, ON A GIVEN
BUSINESS DAY, A WARRANTHOLDER MAY HAVE TO GIVE EXERCISE INSTRUCTIONS TO HIS
BROKER OR OTHER INTERMEDIARY SUBSTANTIALLY EARLIER THAN 3:00 P.M., NEW YORK CITY
TIME, ON SUCH DAY. DIFFERENT BROKERAGE FIRMS MAY HAVE DIFFERENT CUT-OFF TIMES
FOR ACCEPTING AND IMPLEMENTING EXERCISE INSTRUCTIONS FROM THEIR CUSTOMERS.
THEREFORE, WARRANTHOLDERS SHOULD CONSULT WITH THEIR BROKERS OR OTHER
INTERMEDIARIES, IF APPLICABLE, AS TO APPLICABLE CUT-OFF TIMES AND OTHER EXERCISE
MECHANICS. PLEASE REFER TO "RISK FACTORS RELATING TO THE WARRANTS -- RISKS AND
COSTS ASSOCIATED WITH EXERCISE OF WARRANTS" BEGINNING ON PAGE S-11.
Except in the case of Warrants subject to automatic exercise, if on any
Valuation Date the Cash Settlement Value for any Warrants then exercised would
be zero, the attempted exercise of such Warrants will be void and of no effect
and such Warrants will be transferred back to the Participant, including the
Depositaries, that submitted them free to the Warrant Agent on the records of
DTC, and, in any such case, the Warrants in question will remain outstanding and
exercisable thereafter.
S-25
<PAGE> 27
The "Valuation Date" for a Warrant will be the first Business Day following
the Exercise Date, subject to postponement as a result of the exercise of a
number of Warrants exceeding the limits on exercise described below under
"-- Maximum Exercise Amount" beginning on page S-27 or as a result of an
Extraordinary Event or a Market Disruption Event described under "-- Market
Disruption Events, Extraordinary Events and Extension Events" beginning on page
S-27.
The following is an illustration of the timing of an Exercise Date and the
ensuing Valuation Date, assuming
- all relevant dates are Business Days;
- the number of exercised Warrants does not exceed the maximum permissible
amount; and
- no Extraordinary Event or Market Disruption Event has occurred and is
continuing.
ILLUSTRATIVE TIMING FOR WARRANTS HELD THROUGH DTC
<TABLE>
<CAPTION>
SPOT INDEX VALUE
USED TO DETERMINE
DATE AND TIME WARRANTS CASH LIMIT OPTION INDEX
ARE RECEIVED BY WARRANT SETTLEMENT VALUE VALUE EQUAL TO SPOT
AGENT IN PROPER FORM EXERCISE DATE VALUATION DATE DETERMINED AS OF INDEX VALUE AS OF
----------------------- ---------------- ---------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Monday, January 8, 2001 at January 8, 2001 January 9, 2001 January 9, 2001 January 8, 2001
or before 3:00 P.M., New
York City time
Monday, January 8, 2001 January 9, 2001 January 10, 2001 January 10, 2001 January 9, 2001
after 3:00 P.M., New York
City time
</TABLE>
ILLUSTRATIVE TIMING FOR WARRANTS HELD THROUGH EUROCLEAR AND CLEARSTREAM
<TABLE>
<CAPTION>
SPOT INDEX VALUE
USED TO DETERMINE
DATE AND TIME WARRANTS CASH LIMIT OPTION INDEX
ARE RECEIVED BY WARRANT SETTLEMENT VALUE VALUE EQUAL TO SPOT
AGENT IN PROPER FORM EXERCISE DATE VALUATION DATE DETERMINED AS OF INDEX VALUE AS OF
----------------------- ---------------- ---------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Tuesday, January 9, 2001 January 8, 2001 January 9, 2001 January 9, 2001 January 8, 2001
at or before 3:00 P.M.,
New York City time
Tuesday, January 9, 2001 January 9, 2001 January 10, 2001 January 10, 2001 January 9, 2001
after 3:00 P.M., New York
City time
</TABLE>
Following receipt of Warrants and the related Exercise Notice in proper
form, the Warrant Agent will, not later than 5:00 P.M., New York City time, on
the applicable Valuation Date,
- obtain from the Determination Agent the Spot Index Value,
- determine the Cash Settlement Value of such Warrants, and
- advise SSBHI of the aggregate Cash Settlement Value of the exercised
Warrants.
SSBHI will be required to make available to the Warrant Agent, no later
than 3:00 P.M., New York City time, on the third Business Day following the
Valuation Date, funds in an amount sufficient to pay the aggregate Cash
Settlement Value of the exercised Warrants. If SSBHI has made such funds
available by that time, the Warrant Agent will thereafter be responsible for
making funds available to each appropriate Participant Each Participant will be
responsible for disbursing such payments to the Warrantholders it represents and
to each brokerage firm for which it acts as agent. Participants include Citibank
and Morgan,
S-26
<PAGE> 28
who, in turn, will disburse payments to Clearstream and Euroclear, respectively,
who will be responsible for disbursing such payments to each of their respective
participants, who, in turn, will be responsible for disbursing payments to the
Warrantholders they represent. Similarly, each brokerage firm will be
responsible for disbursing funds to the Warrantholders that it represents.
"Determination Agent" means Salomon Smith Barney or another firm selected
by SSBHI to perform the functions of the Determination Agent in connection with
the Warrants.
MAXIMUM EXERCISE AMOUNT
All exercises of Warrants, other than automatic exercises, are subject, at
SSBHI's option, to the limitation that not more than 250,000 Warrants in total
may be exercised on any Exercise Date and not more than 100,000 Warrants may be
exercised by or on behalf of any person or entity, either individually or in
concert with any other person or entity, on any Exercise Date. If any Business
Day would otherwise, under the terms of the Warrant Agreement, be the Exercise
Date in respect of more than 250,000 Warrants, then; at SSBHI's election 250,000
of such Warrants, selected by the Warrant Agent on a pro rata basis, shall be
deemed exercised on such Exercise Date and the remainder of such Warrants (the
"Remaining Warrants") shall be deemed exercised on the following Business Day,
subject to successive applications of this provision. Remaining Warrants shall
be deemed exercised in the order of their respective initial Exercise Dates, and
Remaining Warrants shall be deemed exercised before any other Warrants initially
exercised after such Remaining Warrants.
If any individual Warrantholder attempts to exercise more than 100,000
Warrants on any Business Day, then at SSBHI's election, 100,000 of such Warrants
shall be deemed exercised on such Business Day and the remainder shall be deemed
exercised on the following Business Day, subject to successive applications of
this provision. As a result of any postponed exercise as described above,
Warrantholders will receive a Cash Settlement Value with respect to Remaining
Warrants determined as of a date later than the otherwise applicable Valuation
Date. In any such case, as a result of any such postponement and subject to the
Limit Option, the Cash Settlement Value actually received by Warrantholders with
respect to Remaining Warrants may be lower than the otherwise applicable Cash
Settlement Value if the Valuation Date of the Warrants had not been postponed.
MARKET DISRUPTION EVENTS, EXTRAORDINARY EVENTS AND EXTENSION EVENTS
Market Disruption Events. If SSBHI determines that on a Business Day that
would otherwise be a Valuation Date (an "Applicable Business Day") a Market
Disruption Event has occurred and is continuing, then the Cash Settlement Value
in respect of an exercise of Warrants shall be calculated using as the Valuation
Date the next Business Day following the relevant Applicable Business Day on
which there is no Market Disruption Event or Extraordinary Event. However, if no
Business Day occurs prior to the Expiration Date or the Delisting Date, if any,
then the provisions under "-- Extension Events" beginning on page S-30 or
"-- Delisting of Warrants" beginning on page S-32 will apply. SSBHI shall
promptly give notice to Warrantholders, by publication in a newspaper with a
national circulation (currently expected to be The Wall Street Journal), if a
Market Disruption Event shall have occurred.
"Market Disruption Event" means any of the following events, as determined
by the Determination Agent:
- The suspension or material limitation of trading in 20% or more of the
underlying stocks which then comprise the Index for more than two
hours of trading or during the one-half hour period preceding the
close of trading on the principal securities exchange on which such
stocks are traded. For purposes of this definition, limitations on
trading during significant market fluctuations imposed pursuant to any
rule or regulation of similar scope to NYSE Rule 80B (or any
applicable rule or regulation (A) enacted or promulgated by the NYSE,
any other self regulatory organization or the SEC of similar scope or
as a replacement for Rule 80B, as determined by the Determination
Agent, or (B) enacted or promulgated by any such securities exchange,
any self
S-27
<PAGE> 29
regulatory organization or relevant regulatory authority, as
determined by the Determination Agent), shall be considered
"material";
- 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 otherwise
exceeding levels permitted by the relevant exchange or otherwise) in
(A) if futures contracts related to the Index or options on such
futures contracts are then approved for trading, and are traded on any
major U.S. or foreign exchange, such contracts or options or (B)
options contracts related to the Index which are traded on any major
U.S. or foreign exchange; or
- 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 in respect of futures contracts related to the Index, options on
such futures contracts or options contracts related to the Index, in
each case traded on any major U.S. or foreign exchange.
For purposes of determining whether a Market Disruption Event has occurred:
- 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;
- a decision to discontinue trading permanently in the relevant futures
or options contract will not constitute a Market Disruption Event;
- any suspension in trading in a futures or options contract on the
Index by a major securities market by reason of
- a price change violating limits set by such securities market,
- an imbalance of orders relating to such contracts, or
- a disparity in bid and ask quotes relating to such contracts, will
constitute a Market Disruption Event, notwithstanding that the
duration of such suspension or material limitation is less than two
hours;
- 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, 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; and
- the occurrence of an Extraordinary Event described in the first bullet
of the definition of Extraordinary Event will not constitute, and will
supersede the occurrence of, a Market Disruption Event.
Under certain circumstances, the duties of Salomon Smith Barney as
Determination 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 Warrants.
Extraordinary Events. If SSBHI determines that an Extraordinary Event has
occurred and is continuing on an Applicable Business Day, then the Cash
Settlement Value with respect to an exercise of Warrants shall be calculated on
the basis that the Valuation Date shall be the next Business Day following an
Applicable Business Day on which there is no Extraordinary Event or Market
Disruption Event. However, if no Business Day occurs prior to the Expiration
Date or the Delisting Date, if any, then the provisions under "-- Extension
Events" or "-- Delisting of Warrants" will apply. SSBHI shall promptly give
notice to
S-28
<PAGE> 30
Warrantholders, by publication in a newspaper with a national circulation,
currently expected to be The Wall Street Journal, if an Extraordinary Event
shall have occurred.
"Extraordinary Event" means any of the following events, as determined by
the Determination Agent:
- a suspension, material limitation or absence of trading of all of the
stocks comprising the Index;
- the enactment, publication, decree or other promulgation of any
statute, regulation, rule or order of any court of any jurisdiction,
any administrative agency or any other governmental authority that
would make it unlawful for SSBHI to perform any of its obligations
under the Warrant Agreement or the Warrants or that has had or is
reasonably expected to have a material adverse effect on the ability
of (A) SSBHI to perform its obligations under the Warrants or to hedge
or modify the hedge of its position with respect to the Warrants or
(B) any affiliate of SSBHI to hedge or modify the hedge of its
position with respect to any hedging transaction entered into with
SSBHI in connection with SSBHI's obligations under the Warrants; or
- any outbreak or escalation of hostilities or other national or
international calamity or crisis, including, without limitation,
natural calamities that in the opinion of the Determination Agent may
materially and adversely affect the economy of the United States or
the trading of securities generally on the CBOE, NYSE or NASDAQ, or
any other securities exchange, that has had or is reasonably expected
to have a material adverse effect on the ability of (A) SSBHI to
perform its obligations under the Warrants or to modify the hedge of
its position with respect to the Warrants or (B) any affiliate of
SSBHI to hedge or modify the hedge of its position with respect to any
hedging transaction entered into with SSBHI in connection with SSBHI's
obligations under the Warrants.
For the purpose of determining whether an Extraordinary Event has occurred:
(1) a limitation on the hours or number of days of trading will not constitute
an Extraordinary Event if it results from an announced change in the regular
business hours of the relevant exchange or market and (2) 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, 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.
Cancellation of Warrants. If SSBHI at any time prior to the Expiration
Date or, if applicable, the Extended Expiration Date, determines that an
Extraordinary Event has occurred and is continuing, and if the Extraordinary
Event is expected by SSBHI to continue, SSBHI may immediately cancel the
Warrants by notifying the Warrant Agent of such cancellation (the date such
notice is given being the "Cancellation Date"), and each Warrantholder's rights
under the Warrants and the Warrant Agreement shall thereupon cease. In this
case, each Warrant shall be automatically exercised using as the Valuation Date
the Cancellation Date, and the holder of each Warrant will receive, instead of
the Cash Settlement Value, the Alternative Settlement Amount, determined by the
Determination Agent. SSBHI shall promptly give notice to Warrantholders, by
publication in a newspaper with a national circulation, currently expected to be
The Wall Street Journal, of any such cancellation.
Alternative Settlement Amount. The "Alternative Settlement Amount" is
equal to the amount calculated by the Determination Agent, subject to the
provisions set forth below, using the following formula:
Alternative Settlement Amount = Intrinsic Value + [T/2 X A/B]
Intrinsic Value = the Cash Settlement Value of the Warrants,
determined as described under "-- Determination of the Cash Settlement
Value" on page S-22, on the applicable Valuation Date but calculated with a
Spot Index Value on the applicable Valuation Date determined by the
Determination Agent which, subject to approval by SSBHI, which is not to be
unreasonably withheld, in the reasonable opinion of the Determination
Agent, fairly reflects the Spot Index Value on the applicable
S-29
<PAGE> 31
Valuation Date. However, if a Cancellation Date falls on (1) the Expiration
Date, (2) the Extended Expiration Date, or (3) any of the two Business Days
immediately preceding either the Expiration Date or the Extended Expiration
Date, then the Spot Index Value with respect to such date shall be
calculated so as to reflect the value of the Index at the opening of
trading on the CBOE on such date.
T = $ the initial offering price per Warrant;
A = the total number of days from, but excluding, the Cancellation
Date or Delisting Date, whichever has given rise to the payment of the
Alternative Settlement Amount for such Warrants, to and including the
Expiration Date; and
B = the total number of days from, but excluding, the date on which
sales of the Warrants were initially confirmed, to and including the
Expiration Date.
In calculating the Alternative Settlement Amount on the Extended Expiration
Date or on any Cancellation Date or Delisting Date falling between the
Expiration Date and the Extended Expiration Date (inclusive), the Alternative
Settlement Amount shall equal the Intrinsic Value.
For the purposes of determining "Intrinsic Value" in the above formula, in
the event that the Determination Agent and SSBHI have not, after good faith
consultation with each other and within five days following the first day upon
which such Alternative Settlement Amount may be calculated in accordance with
the above formula, agreed upon a Spot Index Value which fairly reflects the
value of the Index on the Cancellation Date, Delisting Date or Extended
Expiration Date, whichever gives rise to the payment of the Alternative
Settlement Amount, then the Determination Agent shall promptly nominate a third
party, subject to approval by SSBHI (such approval not to be unreasonably
withheld), to determine such figure and calculate the Alternative Settlement
Amount in accordance with the above formula. Such party shall act as an
independent expert and not as an agent of SSBHI or the Determination Agent, and
its calculation and determination of the Alternative Settlement Amount shall,
absent manifest error, be final and binding on SSBHI, the Warrant Agent, the
Determination Agent and the Warrantholders. Any such calculations will be made
available to a Warrantholder for inspection at the Warrant Agent's Office.
Neither SSBHI, the Determination Agent, the Warrant Agent nor any third party
shall have any responsibility for good faith errors or omissions in calculating
the Alternative Settlement Amount.
Extension Events. If a Market Disruption Event or an Extraordinary Event
is continuing on the Expiration Date (an "Extension Event"), the term of any
outstanding Warrants will be extended for a period of 30 days (the thirtieth day
following the Expiration Date being the "Extended Expiration Date"). However, if
the Cash Settlement Value of the Warrants would have been zero if the Warrants
had been exercised, using as the Valuation Date the Measurement Date, then,
notwithstanding any other provision of the Warrants, the term of the Warrants
will not be extended, the Cash Settlement Value will be zero and the Warrants
will be deemed to be worthless. Following an Extension Event, the Warrants will
expire on the earlier of:
(1) the first Business Day on which no Market Disruption Event and no
Extraordinary Event shall be occurring (the "Early Extended Expiration
Date");
(2) a Delisting Date falling between the Expiration Date and the
Extended Expiration Date;
(3) a Cancellation Date falling between the Expiration Date and the
Extended Expiration Date; and
(4) the Extended Expiration Date.
SSBHI will give the Warrant Agent prompt notice by telephone or facsimile
transmission and will give prompt notice to the Warrantholders by publication in
a newspaper with a national circulation, currently expected to be The Wall
Street Journal, of the occurrence of an Extension Event, any Extended Expiration
Date and any Delisting Date.
"Measurement Date" means the Business Day occurring most recently prior to
the Expiration Date on which none of the events described in the definition of
Market Disruption Event or Extraordinary Event had occurred or was continuing.
S-30
<PAGE> 32
Automatic Exercise; Payment. Any Warrants that expire on the Extended
Expiration Date or the Early Extended Expiration Date will be deemed to be
exercised automatically on the Extended Expiration Date or the Early Extended
Expiration Date, as the case may be, using as the Valuation Date for such
exercise the Extended Expiration Date or Early Extended Expiration Date, and the
holder of each such Warrant will receive the Cash Settlement Value, in the case
of the Early Extended Expiration Date, or the Alternative Settlement Amount in
the case of the Extended Expiration Date. Please refer to "-- Delisting of
Warrants" beginning on page S-32.
In the case of Warrants as to which there has been a postponed Valuation
Date resulting from an Extraordinary Event or a Market Disruption Event
(including an Extension Event) or as a result of the exercise of Warrants in a
number exceeding the maximum permissible amounts, SSBHI will be required to make
available to the Warrant Agent no later than 3:00 P.M., New York City time, on
the third Business Day following the date on which the Cash Settlement Value, or
Alternative Settlement Amount, as the case may be, has been calculated (the
"Alternative Funding Date"), New York Clearing House or next day funds in an
amount equal to, and for the payment of, the aggregate Cash Settlement Value, or
Alternative Settlement Amount, as applicable, for such Warrants. In the case of
Warrants held through the facilities of DTC, if SSBHI has made such funds
available by that time as noted above, the Warrant Agent will thereafter be
responsible for making funds available to DTC in an amount sufficient to pay the
Cash Settlement Value or Alternative Settlement Amount of the Warrants, if
applicable, prior to the close of business on the Alternative Funding Date. DTC
will be responsible for disbursing such funds to each appropriate Participant
and such Participant will be responsible for disbursing such payments to the
Warrantholders it represents and to each brokerage firm for which it acts as
agent. Each such brokerage firm will be responsible for disbursing funds to the
Warrantholders it represents.
Certain of the Extraordinary Events and Market Disruption Events may be
events that would tend to decrease the level of the Spot Index Value, and
accordingly decrease the Cash Settlement Value for the Warrants following the
occurrence of any such Extraordinary Event or Market Disruption Event. However,
as a result of any postponed exercise as described above, Warrantholders would
not receive such Cash Settlement Value, but would receive instead a Cash
Settlement Value, or if applicable, an Alternative Settlement Amount, determined
as of a later date. In any such case, any immediate impact of the related
Extraordinary Event or Market Disruption Event on the Spot Index Value may have
been negated by interim market and other developments and, as a result of any
such postponement, the Cash Settlement Value or Alternative Settlement Amount
actually received by Warrantholders may be substantially different than the
otherwise applicable Cash Settlement Value if the valuation of the Warrants had
not been postponed.
LIMIT OPTION
Except for Warrants subject to automatic exercise, each Warrantholder, in
connection with any exercise of Warrants, will have the option (the "Limit
Option") to specify that such Warrants are not to be exercised if the Spot Index
Value that would otherwise be used to determine the Cash Settlement Value of
such Warrants has declined by five or more points from the Spot Index Value for
the day specified below (such value, the "Limit Option Index Value"). A
Warrantholder's election of the Limit Option must be specified in the applicable
Exercise Notice delivered to the Warrant Agent, and the Limit Option Index Value
with respect to any such notice will be the Spot Index Value for the relevant
Exercise Date.
To ensure that the Limit Option will have its intended effect of limiting
the risk of any downward movement in the value of the Index between the date on
which a Warrantholder submits an Exercise Notice and the related Valuation Date,
such Exercise Notice and the related Warrants must be received by the Warrant
Agent not later than 3:00 P.M., New York City time, on the Business Day on which
they are submitted. Please refer to the illustration under "-- Exercise and
Settlement of Warrants" on page S-24 and "Risk Factors Relating to the
Warrants -- The Valuation of Warrants Following their Exercise is Subject to
Postponement or Delay" beginning on page S-11.
Following receipt of an Exercise Notice and the related Warrants subject to
the Limit Option, the Warrant Agent will obtain the applicable Limit Option
Index Value from the Determination Agent and will
S-31
<PAGE> 33
determine whether such Warrants will not be exercised because of the Limit
Option. Warrants that are not exercised will be treated as not having been
tendered for exercise, and such Warrants will be transferred back to the account
at DTC, Clearstream or Euroclear, as the case may be, from which they were
transferred to the Warrant Agent and will remain outstanding. To exercise such
Warrants, a Warrantholder will be required to cause the Warrants and a related
Exercise Notice to be submitted again to the Warrant Agent.
Once elected by a Warrantholder in connection with an exercise of Warrants,
the Limit Option will continue to apply, on the basis of the Limit Option Index
Value as initially determined for such Warrants, even if the Valuation Date for
such Warrants is postponed, except when such Valuation Date is postponed to a
date of automatic exercise of Warrants. Pursuant to the Limit Option, such
Warrants will either (1) be exercised on a delayed basis if the Spot Index Value
on any applicable postponed Valuation Date is not less than the Limit Option
Index Value by five or more points, or (2) not be exercised if, on any
applicable postponed Valuation Date, the Spot Index Value is less than the Limit
Option Index Value by five or more points.
AUTOMATIC EXERCISE
All Warrants not previously exercised will be automatically exercised on
the Expiration Date (subject to extension), the Extended Expiration Date, the
Early Extended Expiration Date, a Cancellation Date or a Delisting Date, as the
case may be. The Exercise Date for these Warrants will be the day they are
automatically exercised or, if such day is not a Business Day, the next
succeeding Business Day.
SSBHI will be required to make available to the Warrant Agent, no later
than 3:00 P.M., New York City time, on the third Business Day after the
applicable Valuation Date, funds in an amount sufficient to pay the aggregate
Cash Settlement Value, or Alternative Settlement Value, as the case may be, of
the Warrants subject to automatic exercise. If SSBHI has made such funds
available by that time, the Warrant Agent will thereafter be responsible for
making funds available to DTC in an amount sufficient to pay the aggregate Cash
Settlement Value, or Alternative Settlement Value, as the case may be, of the
Warrants. DTC will be responsible for disbursing such funds to each appropriate
Participant. Each Participant will be responsible for disbursing such payments
to the Warrantholders it represents and to each brokerage firm for which it acts
as agent and each brokerage firm will be responsible for disbursing funds to the
Warrantholders it represents. Participants include Citibank and Morgan, who, in
turn, will disburse payments to Clearstream and Euroclear, respectively, who
will be responsible for disbursing such payments to each of their respective
participants, who, in turn, will be responsible for disbursing payments to the
Warrantholders they represent.
LISTING
Application will be made to list the Warrants on the CBOE under the symbol
"TJS," subject to official notice of issuance. The CBOE expects to cease trading
the Warrants as of the close of business on the Expiration Date. Please refer to
"Risk Factors Relating to the Warrants -- A Secondary Market for the Warrants
May Not Develop, or the Secondary Market May be Illiquid" beginning on page
S-14.
DELISTING OF WARRANTS
In the event the Warrants are delisted from, or permanently suspended from
trading on (within the meaning of the Exchange Act) the CBOE and not accepted at
the same time for listing on another United States national securities exchange,
Warrants not previously exercised will be deemed automatically exercised on the
Delisting Date, and the Cash Settlement Value or, in the event that SSBHI
determines that a Market Disruption Event or Extraordinary Event has occurred
and is continuing on the Delisting Date, the Alternative Settlement Amount,
shall be calculated and settled as described under "Description of Warrants --
Determination of the Cash Settlement Value" beginning on page S-21. However, if
a Delisting Date falls on
- the Expiration Date,
- the Extended Expiration Date, or
- any of the two Business Days immediately preceding either the Expiration
Date or the Extended Expiration Date,
S-32
<PAGE> 34
then the Spot Index Value with respect to such date shall be calculated so as to
reflect the value of the Index at the opening of trading on the CBOE on such
date. SSBHI will notify the Warrant Agent, who will notify the Warrantholders as
soon as practicable of such delisting or trading suspension. However, if SSBHI
first receives notice of the delisting or suspension on the same day on which
the Warrants are delisted or suspended, such day will be deemed the Delisting
Date. SSBHI will covenant in the Warrant Agreement that it will not seek
delisting of the Warrants from, or suspension of their trading on, the CBOE
unless SSBHI has, at the same time, arranged for listing of the Warrants on
another United States national securities exchange.
USE OF PROCEEDS AND HEDGING
The proceeds to be received by SSBHI from the sale of the Warrants 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, SSBHI expects
to incur additional indebtedness in the future. SSBHI or an affiliate may enter
into a swap agreement with one of SSBHI's affiliates in connection with the sale
of the Warrants and may earn additional income as a result of payments pursuant
to such swap or related hedge transactions.
All or a portion of the proceeds to be received by SSBHI from the sale of
the Warrants may be used by SSBHI or one or more of its subsidiaries to purchase
or maintain positions in all or certain of the stocks underlying the Index, or
options, futures contracts, forward contracts or swaps, or options on the
foregoing, the Index, or other derivative or synthetic instruments relating to
such stocks or Index, as the case may be, and, if applicable, to pay the costs
and expenses of hedging any Index-related risk with respect to the Warrants.
From time to time after the initial offering and prior to the maturity of
the Warrants, depending on market conditions (including the value of the Index
and/or the stocks underlying the Index), in connection with hedging with respect
to the Warrants, SSBHI 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 underlying stocks, the
Index, options, futures contracts, forward contracts, swaps, or other derivative
or synthetic instruments related to, the underlying stocks or the Index. In
addition, SSBHI or one or more of its subsidiaries may purchase or otherwise
acquire a long or short position in the Warrants from time to time and may, in
its or their sole discretion, hold, resell, exercise, cancel or retire such
Warrants. SSBHI 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 SSBHI or one or more of such subsidiaries has a long
hedge position in, options contracts in, or other derivative or synthetic
instruments related to, the underlying stocks or the Index, SSBHI or one or more
of such subsidiaries may liquidate all or a portion of its holdings at or about
the time of the maturity of the Warrants and/or any Valuation Date. 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 SSBHI
has no reason to believe that its hedging activity will have a material impact
on the price of such options, swaps, futures contracts, forward contracts,
options on the foregoing, or other derivative or synthetic instruments, or on
the value of the underlying stocks or the Index, there can be no assurance that
SSBHI will not affect such prices or value as a result of its hedging
activities. Please refer to "Risk Factors -- Conflicts of Interest May Arise as
a Result of Salomon Smith Barney's Role as Determination Agent and Sponsor of
the Trust" beginning on page S-15. The remainder of the proceeds from the sale
of the Warrants will be used by SSBHI or its subsidiaries for general corporate
purposes, as described in the first paragraph of this section.
S-33
<PAGE> 35
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations that may be relevant to a holder of a Warrant. This summary is
based on laws, regulations, rulings and decisions now in effect, all of which
are subject to change, possibly with retroactive effect. This summary deals only
with holders that will hold Warrants as capital assets, and does not address tax
considerations applicable to investors that may be subject to special tax rules,
such as banks, tax-exempt entities, insurance companies, regulated investment
companies, common trust funds or dealers in securities, currencies or options,
persons that will hold Warrants as part of an integrated investment (including a
"straddle" or "conversion transaction") comprised of a Warrant and one or more
other positions or persons that have a "functional currency" other than the U.S.
dollar. The discussion herein is based on the advice of Cleary, Gottlieb, Steen
& Hamilton, counsel to SSBHI.
Investors should consult their own tax advisors in determining the tax
consequences to them of holding Warrants, including the application to their
particular situation of the United States federal income tax considerations
discussed below, as well as the application of state, local, foreign or other
tax laws.
As used herein, the term "US 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 (1)
a United States court is able to exercise primary supervision over the trust's
administration and (2) 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).
US HOLDERS
The Warrants will be treated as "equity options" and thus generally will
not be treated as "section 1256 contracts" which must be "marked-to-market"
(i.e., treated as sold at fair market value) for federal income tax purposes on
the last business day of each taxable year. Accordingly, upon the sale or
exercise (including automatic exercise) of a Warrant, a US Holder generally will
recognize gain or loss equal to the difference between the amount realized, if
any, and the US Holder's tax basis in the Warrant. A US Holder of a Warrant that
expires will recognize loss equal to the tax basis of the Warrant. Such gain or
loss generally will be capital gain or loss, and will be long-term capital gain
or loss if, at the time of sale or exercise, the US Holder has held the Warrant
for more than one year. The distinction between capital gain or loss and
ordinary income or loss is important for purposes of the limitations on a US
Holder's ability to offset capital losses against ordinary income. In addition,
long-term capital gains recognized by an individual US Holder generally are
subject to a maximum tax rate of 20%.
NON-US HOLDERS
A holder of Warrants that is not a US Holder (a "non-US Holder") will not
be subject to US federal income tax or withholding tax on any gain realized upon
a sale or other disposition of a Warrant, unless the gain is effectively
connected with the beneficial owner's trade or business in the United States or,
in the case of a non-US Holder that is an individual, the holder is present in
the United States for 183 days or more in the taxable year of the sale, exercise
or other disposition and certain other conditions are met.
The fair market value of a Warrant may be includible in the estate of an
individual non-US Holder for United States federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise.
S-34
<PAGE> 36
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement") between SSBHI and Salomon Smith Barney, as sole
Underwriter (the "Underwriter"), SSBHI has agreed to sell to the Underwriter,
and the Underwriter has agreed to purchase from SSBHI, a total of
Warrants.
The Warrants 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 Warrants 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 , 2000.
SSBHI has been advised that the Underwriter proposes to offer the Warrants
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 $ per Warrant, and that the Underwriter may
allow, and each such dealer may reallow, to other dealers a concession not
exceeding $ per Warrant. After the initial public offering, the public
offering price, the underwriting discount and such concessions may be changed
from time to time.
SSBHI has been advised by the Underwriter that the Underwriter and certain
of its broker-dealer subsidiaries or affiliates may make a market in the
Warrants, subject to applicable laws and regulations. However, neither the
Underwriter nor any such subsidiary or affiliate is obligated to do so and may
discontinue any such market-making at any time without notice. No assurance can
be given that an active public market for the Warrants will develop.
The Underwriting Agreement provides that SSBHI will indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the Underwriter
may be required to make in respect thereof.
The Warrants 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 SSBHI.
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 Warrants. 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 Warrants for the purposes of stabilizing their market price. The
Underwriter also may create a short position for its accounts by selling more
Warrants in connection with this offering than it is committed to purchase from
SSBHI, and in such case may purchase Warrants 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 Warrants at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph are required, and, if any are undertaken, they may be discontinued at
any time.
SSBHI or one or more its subsidiaries may from time to time purchase or
acquire a position in the Warrants and may, at its option, hold, resell or
retire such Warrants. This prospectus supplement and the accompanying prospectus
may be used by SSBHI or any of its broker-dealer subsidiaries or affiliates in
connection with offers and sales of the Warrants in market-making transactions
at negotiated prices related to prevailing market prices at the time of sale.
Salomon Smith Barney or any such broker-dealer subsidiary or affiliate may act
as principal or agent in such transactions.
S-35
<PAGE> 37
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 Warrants 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 Warrants should consider whether such a purchase
might constitute or result in a prohibited transaction under ERISA or Section
4975 of the Code.
SSBHI, 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 or Section 4975 of the Code. The purchase of Warrants by a Plan that is
subject to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of Section 4975 of the Code (including individual
retirement accounts and other plans described in Section 4975(e)(1) of the Code)
and with respect to which SSBHI 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; governmental plans may be subject to similar prohibitions. The
person making the decision on behalf of any such Plan on behalf of itself and
the Plan shall be deemed by its purchasing and holding of the Warrants to
represent that such purchase and holding of the Warrants will not result in any
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or
any other violation of ERISA, the Code or any other applicable law or
regulation. In this regard, such Plans may wish to review 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), PTCE 95-60 (an exemption for certain transactions
involving insurance company general accounts), or PTCE 96-23 (an exemption for
certain transactions involving an in-house asset manager). ANY PENSION OR OTHER
EMPLOYEE BENEFIT PLAN PROPOSING TO ACQUIRE ANY WARRANTS SHOULD CONSULT WITH ITS
COUNSEL.
LEGAL MATTERS
Certain legal matters relating to the Warrants will be passed upon for
SSBHI by Joan Guggenheimer, Esq., as counsel for SSBHI. Ms. Guggenheimer,
General Counsel of SSBHI, beneficially owns, or has rights to acquire under
Citigroup Inc. employee benefit plans, an aggregate of less than one percent of
the common stock of Citigroup Inc. Certain legal matters relating to the
Warrants will be passed upon for the Underwriter by Cleary, Gottlieb, Steen &
Hamilton.
Cleary, Gottlieb, Steen & Hamilton has also acted as special tax counsel to
SSBHI in connection with the Warrants, and has, from time to time, acted as
counsel for SSBHI and certain of its affiliates and may do so in the future.
S-36
<PAGE> 38
APPENDIX A
INDEX OF TERMS
<TABLE>
<S> <C>
Alternative Funding Date.................................... S-31
Alternative Settlement Amount............................... S-29
AMEX........................................................ S-18
Applicable Business Day..................................... S-27
Business Day................................................ S-3
Cancellation Date........................................... S-29
Cash Settlement Value....................................... S-3, S-8
CBOE........................................................ S-3
Clearstream................................................. S-23
Citibank.................................................... S-24
Code........................................................ S-36
Committee................................................... S-18
Delisting Date.............................................. S-4
Depositaries................................................ S-24
Determination Agent......................................... S-27
DTC......................................................... S-2
Early Extended Expiration Date.............................. S-30
ERISA....................................................... S-36
Euroclear................................................... S-23
Exchange Act................................................ S-8
Exercise Date............................................... S-25
Exercise Notice............................................. S-5
Expiration Date............................................. S-2
Extended Expiration Date.................................... S-30
Extension Event............................................. S-30
Extraordinary Event......................................... S-29
Index....................................................... S-2
Initial Index Value......................................... S-3
Intrinsic Value............................................. S-29
Last Exercise Date.......................................... S-24
Limit Option................................................ S-31
Limit Option Index Value.................................... S-31
Market Disruption Event..................................... S-27
Measurement Date............................................ S-30
Morgan...................................................... S-22
NASDAQ...................................................... S-18
non-US Holder............................................... S-34
NYSE........................................................ S-18
Participant................................................. S-5
Plans....................................................... S-36
Portfolio Securities........................................ S-6, S-15
PTCE........................................................ S-36
Remaining Warrants.......................................... S-27
Salomon Smith Barney........................................ S-6
</TABLE>
A-1
<PAGE> 39
<TABLE>
<S> <C>
SEC......................................................... S-7
Spot Index Value............................................ S-3
SSBHI....................................................... S-2
Strike Index Value.......................................... S-3
TEN+ Index.................................................. S-2
Trading Day................................................. S-3
Trust....................................................... S-6, S-15
Underwriter................................................. S-35
Underwriting Agreement...................................... S-35
United States............................................... S-34
US Holder................................................... S-34
Valuation Date.............................................. S-26
Warrant Agent............................................... S-22
Warrant Agent's Office...................................... S-22
Warrant Agreement........................................... S-22
Warrantholder............................................... S-22
</TABLE>
A-2
<PAGE> 40
APPENDIX B
FORM OF EXERCISE NOTICE
For Warrants Represented by the Global Warrant Certificate
CUSIP No.:
Citibank, N.A.
c/o Citicorp Data Distribution Inc.
404 Sette Drive
Paramus, New Jersey 07652
Telephone No.: (201) 262-5445
Facsimile No.: (201) 262-7521
Attention:
1. We refer to the Warrant Agreement dated as of , 2000 (the
"Warrant Agreement"), among Salomon Smith Barney Holdings Inc. (the "Company"),
Citibank, N.A., as Warrant Agent (the "Warrant Agent"), and Salomon Smith Barney
Inc., as Determination Agent (the "Determination Agent"). On behalf of certain
beneficial owners, each of whose Warrants have been, or will be, transferred to
the Warrant Agent in accordance with the provisions of the Representations
Letter relating to the Warrants, we hereby irrevocably exercise
Warrants (the "Tendered Warrants"). We hereby acknowledge that the Warrants
being exercised and this Exercise Notice must be received by you by 3:00 P.M.,
New York City time, on a Business Day in order for the Valuation Date for the
Tendered Warrants to be the Business Day following such Business Day and that,
if the Warrants being exercised and this Exercise Notice are received by you
after 3:00 P.M., New York City time, on a Business Day (or, in the case of
Warrants held through Cedel or Euroclear, if the Warrants are not received by
3:00 P.M., New York City time, on the first Business Day following such Business
Day), the Valuation Date of the Tendered Warrants shall be the Business Day next
succeeding such Business Day, in each case subject to certain provisions of the
Warrant Agreement.
2. If you determine that this Exercise Notice has not been duly completed
or is not in proper form, this Exercise Notice will be void and of no effect and
will be deemed not to have been delivered.
3. We hereby direct you to make payment to us of amounts payable to our
clients as a result of the exercise of the Warrants hereunder as follows:
By cashier's check or an official bank check;
By wire transfer to the following U.S. Dollar
bank account in the United States:
(Minimum payments of $100,000
only)
Bank:
---------------------------------
Account No.:
------------------------------
ABA Routing No.:
----------------------------------------------------------------------------
Reference:
------------------------------
4. The Tendered Warrants covered hereby [ARE/ARE NOT] subject to the Limit
Option(1).
5. Each client on whose behalf we are exercising Warrants pursuant to this
Exercise Notice has certified to us that it is not exercising in excess of
100,000 Warrants on behalf of any beneficial owner or in concert with any other
beneficial owner on the date of this Exercise Notice.
---------------
(1) Separate Notices of Exercise shall be submitted with respect to Warrants
subject to the Limit Option and Warrants not subject to the Limit Option.
B-1
<PAGE> 41
FOR PARTICIPANTS ONLY
6. We hereby certify that we are a Participant of The Depository Trust
Company (the "Depository") with the present right to use and receive its
services.
Capitalized terms used but not defined herein have the meanings assigned
thereto in the Warrant Agreement.
Dated:
NAME OF DEPOSITORY PARTICIPANT
Participant Number
NAME OF EUROCLEAR PARTICIPANT
Participant Number
NAME OF CLEARSTREAM PARTICIPANT
Participant Number
By
--------------------------------------
Authorized Signature
Address:
Telephone: ( )
B-2
<PAGE> 42
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> 43
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> 44
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> 45
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> 46
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> 47
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
6
<PAGE> 48
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> 49
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> 50
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
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<PAGE> 51
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> 52
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> 53
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.
12
<PAGE> 54
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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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> 64
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
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<PAGE> 65
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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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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary Information -- Q&A............... S-2
Incorporation of Certain Documents by
Reference.............................. S-8
Risk Factors Relating to the Warrants.... S-8
Description of the Index................. S-18
Description of the Warrants.............. S-22
Use of Proceeds and Hedging.............. S-33
Certain United States Federal Income Tax
Considerations......................... S-34
Underwriting............................. S-35
ERISA Matters............................ S-36
Legal Matters............................ S-36
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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WARRANTS
SALOMON SMITH
BARNEY HOLDINGS INC.
CALL WARRANTS
ON THE
2000 TEN+SM INDEX
EXPIRING ON , 2002
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PROSPECTUS SUPPLEMENT
, 2000
(INCLUDING PROSPECTUS
DATED DECEMBER 1, 1997)
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SALOMON SMITH BARNEY
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<PAGE> 68
Salomon Smith Barney is a service mark of
Salomon Smith Barney Inc.
SALOMON SMITH BARNEY
A member of citigroup
