<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-38931
PRICING SUPPLEMENT NO. H 129 DATED SEPTEMBER 8, 2000
(TO PROSPECTUS DATED DECEMBER 1, 1997 AND PROSPECTUS SUPPLEMENT DATED
DECEMBER 5, 1997)
RULE 424(B)(2) FILE NO. 333-38931
$27,623,000 PRINCIPAL AMOUNT
SALOMON SMITH BARNEY HOLDINGS INC.
MEDIUM-TERM NOTES, SERIES H
(REGISTERED NOTES -- FIXED RATE)
0.25% CASH EXCHANGEABLE NOTES LINKED TO A BASKET OF SELECTED TECHNOLOGY STOCKS,
DUE 2007
The 0.25% Cash Exchangeable Notes Linked to a Basket of Selected Technology
Stocks, Due 2007 are Medium-Term Notes, Series H of Salomon Smith Barney
Holdings Inc., as further described in this Pricing Supplement and in the
accompanying Prospectus dated December 1, 1997 and Prospectus Supplement dated
December 5, 1997.
The Notes are exchangeable at your option and are redeemable at our option
for cash in an amount equal to the value of a basket of shares comprised of the
stocks of five selected technology companies (CIENA Corporation, LM Ericsson
Telephone Company, Nokia Corporation, Nortel Networks Corporation and Sycamore
Networks, Inc.). The number of shares of each of the underlying securities in
each basket is linked to a basket composition ratio for each stock that is fixed
at the time the Notes are issued and subject to change only in the event of
certain extraordinary corporate events affecting the issuer of the relevant
underlying security. In certain cases, we may redeem the Notes for a fixed
amount of cash, rather than cash in an amount equal to the value of the basket
of underlying securities.
The Notes bear interest at the rate of 0.25% per annum, payable on March 13
and September 13 of each year, commencing March 13, 2001. If not previously
exchanged by you or called by us, the Notes will mature on September 13, 2007.
You will receive $1,000 at maturity for each $1,000 principal amount of Notes
that you hold. The Notes are not subject to any sinking fund prior to maturity
and are issued in minimum denominations of $1,000 and integral multiples
thereof.
- EXCHANGE RIGHT On any trading day (beginning October 13, 2000), you will
have the right to exchange each $1,000 principal amount of Notes you then
hold for cash in an amount equal to the value of 9.2827 baskets of shares.
The number of shares of each of the underlying securities included in a
basket will equal the basket composition ratio of the security on the
applicable exchange date.
- CALL RIGHT Beginning on July 15, 2002, upon not less than 30 nor more
than 60 days' notice, we may call the Notes, in whole, and not in part,
for mandatory redemption on or after September 13, 2002. Following an
exercise of our call right, you will receive for each $1,000 principal
amount of Notes:
- cash in an amount equal to the value of 9.2827 baskets of shares, with
the number of shares of each of the underlying securities included in
each basket being equal to the basket composition ratio of the security
on the applicable call date, if the value of 9.2827 baskets on the
trading day immediately preceding the notice date is greater than
$1,000; or
- cash in an amount equal to the call price of $1,000, if the value of
9.2827 baskets on the trading day immediately preceding the notice date
is less than or equal to $1,000. Your exchange right will cease to be
available following any exercise of our call right for the call price.
Accordingly, the amount of cash that you will receive at maturity or upon an
earlier exchange or call for the Notes will not necessarily be greater than (and
may be less than) the issue price of your Notes.
PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE PS-2 FOR A DISCUSSION OF
CERTAIN FACTORS THAT PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CAREFULLY
CONSIDER.
For more details on the exchange right, call right, the underlying
securities, definitions of certain terms and a discussion of certain United
States federal income tax consequences for holders of the Notes, please refer to
"Description of the Notes", "The Underlying Issuers" and "Certain United States
Federal Income Tax Considerations" in this Pricing Supplement.
The issuers of the underlying securities are not affiliated with Salomon
Smith Barney Holdings, are not involved in this offering of Notes and will have
no obligations with respect to the Notes.
The Notes have been approved for listing on the American Stock Exchange
under the symbol "TSB.A", subject to official notice of issuance.
<TABLE>
<CAPTION>
PRICE TO AGENT'S PROCEEDS TO SALOMON
PUBLIC(1) COMMISSION SMITH BARNEY HOLDINGS(1)
-------------- ---------- ------------------------
<S> <C> <C> <C>
Per Note............................................... $ 1,100.00 $0.00 $ 1,100.00
Total.................................................. $30,385,300.00 $0.00 $30,385,300.00
</TABLE>
---------------
(1) Plus accrued interest, if any, from September 13, 2000 to the date of
delivery.
The Notes are being offered through Salomon Smith Barney Inc., as principal.
Salomon Smith Barney
<PAGE> 2
RISK FACTORS
An investment in the Notes entails significant risks not associated with
similar investments in a conventional debt security, including, among other
things, fluctuations in the market price of the underlying securities and other
events that are difficult to predict and beyond Salomon Smith Barney Holdings'
control:
COMPARISON TO OTHER SECURITIES
The terms of the Notes differ from those of ordinary debt securities in
that the Notes are exchangeable at your option and are redeemable at our option
for an amount of cash based on the value of a basket of shares comprised of the
stocks of five selected technology companies. The number of shares of each of
the underlying securities in each basket is linked to a basket composition ratio
for each stock that is fixed at the time the Notes are issued and subject to
change only in the event of certain extraordinary corporate events affecting the
issuers of the underlying securities. In certain cases, we may redeem the Notes
for a fixed amount of cash, rather than an amount of cash based on the value of
the basket of underlying securities.
Because the Notes Are Being Sold at a 10% Premium, Your Investment in the
Notes Will Result in a Loss Unless the Value of the Basket of Underlying
Securities Increases At Least 18.5% from its Value on September 5, 2000. The
Notes are being sold at a price of $1,100 for each $1,000 principal amount. As a
result, the maturity payment on the Notes, if they are held to the maturity
date, will be less than the amount of your initial investment. You will also
receive less than the amount of your initial investment if the Notes are called
at the call price of $1,000. Even if the Notes are called at a time when the
value of 9.2827 baskets of underlying securities exceeds $1,000 (such that you
receive cash in an amount based on the basket of underlying securities rather
than the call price) but is less than $1,100, you will receive less than the
amount of your initial investment. You will only receive more than the amount of
your initial investment if (1) the Notes are called or exchanged and (2) on the
date the exchange is effected (or, if we call the Notes, on the trading day
before the date we give notice), the value of 9.2827 baskets of underlying
securities exceeds $1,100, which would require an appreciation in the value of
the basket of underlying securities at that time of approximately 18.5% from the
value of the basket on September 5, 2000.
No Equity Appreciation if Value of Basket of Underlying Securities Does Not
Increase At Least 7.73% from its Value on September 5, 2000. The opportunity
for equity appreciation afforded by an investment in the Notes is less than the
opportunity for equity appreciation afforded by an investment in the underlying
securities. You will not participate in any equity appreciation unless (1) the
Notes are called or exchanged and (2) on the date the exchange is effected (or,
if we call the Notes, on the trading day before the date we give notice), the
value of 9.2827 baskets of underlying securities exceeds $1,000, which would
require an appreciation in the value of the basket of underlying securities at
that time of approximately 7.73% from the value of the basket on September 5,
2000. In addition, even if this condition is met at that time, you will not
participate in approximately the first 7.73% of the appreciation of the value of
the basket from September 5, 2000.
Prices of stocks in the technology sector have been highly volatile in
recent months. See "The Underlying Issuers -- Historical Data on the Underlying
Securities".
Return Does Not Reflect Dividends. Your return on the Notes will not
reflect the return you would realize if you actually owned the underlying
securities and received the dividends paid on those underlying securities
because the Notes do not take into consideration the value of the dividends paid
on those underlying securities.
Price of the Underlying Securities May Decline During the Period from the
Exercise of Our Call Right to the Date of Redemption. Following any exercise of
our call that results in delivery of cash in an amount based on the value of the
basket of underlying shares (rather than a call price) right up to and including
the date on which the redemption is effected, you are subject to the risk of a
depreciation in the
PS-2
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value of the underlying securities, and therefore a reduction in the value of
the amount you would receive upon redemption. Unlike most conventional
convertible debt securities, this risk may cause you to receive an amount less
than the principal amount of your Notes in certain circumstances. Although you
can limit this risk by immediately exercising your exchange right on the date we
provide notice of a call, you cannot entirely eliminate this risk with respect
to a decline in the value of the basket of underlying securities on the relevant
notice date.
Low Interest Rate; Possible Low Yield. The annual interest rate on the
Notes will be only 0.25%. As a result, if the value of the basket of underlying
securities over the term of the Notes is less than, equal to or only slightly
greater than its value on September 5, 2000 (resulting in your receiving an
amount of shares or cash upon exchange or redemption with a value that is equal
to or slightly greater than the principal amount of your Notes), the effective
yield on your Notes may be less than that which would be payable on a
conventional fixed-rate, non-callable debt security of Salomon Smith Barney
Holdings.
RELATIONSHIP OF THE NOTES AND THE UNDERLYING SECURITIES
You will have no rights against the issuers of the underlying securities
even though (1) the amount that you receive upon an exchange or call is
dependent on the then-current prices of the underlying securities, and (2) the
market value of the Notes is expected to depend primarily on the extent of the
appreciation, if any, of the value of the basket of underlying securities above
the value of the basket on September 5, 2000. The historical trading prices of
the underlying securities included in this Pricing Supplement under "Historical
Data on the Underlying Securities" are not an indicator of the future
performance of the underlying securities during the term of the Notes. While the
trading prices of the underlying securities will affect the trading price of the
Notes, it is impossible to predict whether the prices of the underlying
securities will rise or fall. The issuers of the underlying securities are not
in any way involved in this offering and have no obligations relating to the
Notes or to holders of the Notes. In addition, you will only have voting rights
with respect to the underlying securities if you receive shares following your
exchange or our call.
There can be no assurance that each of the issuers of the underlying
securities will continue to be subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, and will distribute any reports,
proxy statements and other information required thereby to its shareholders. In
the event that any of the issuers of the underlying securities cease to be
subject to such reporting requirements and the Notes continue to be outstanding,
pricing information for the Notes may be more difficult to obtain and the value
and liquidity of the Notes may decrease.
FACTORS AFFECTING TRADING VALUE OF THE NOTES
We believe that the value of the Notes in the secondary market will be
affected by supply and demand for the Notes, the value of the basket of
underlying securities and a number of other factors. Some of these factors are
interrelated in complex ways; as a result, the effect of any one factor may be
offset or magnified by the effect of another factor. The following paragraphs
describe what we expect to be the impact on the market value of the Notes of a
change in a specific factor, assuming all other conditions remain constant.
Underlying Securities Prices. The trading price of the Notes at any time
may be affected by changes in the prices of the underlying securities. Trading
prices of stocks of companies in the technology sector, including those of the
underlying securities, have been volatile in recent periods and can be subject
to significant risks. Trading prices of the underlying securities will be
influenced by the results of operations of the respective issuers and by complex
and interrelated political, economic, financial and other factors that can
affect the capital markets generally, the stock exchanges on which the
underlying securities are traded and the market segment of which the issuers are
a part. Trading prices of the underlying securities also may be influenced if
we, the issuers or any other entity issues securities with terms similar to the
Notes or transfers shares of the underlying securities. In addition, the prices
of the underlying securities could become more volatile and could be depressed
by hedging or arbitrage trading activity that may
PS-3
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develop involving the Notes and the underlying securities. You should refer to
"Use of Proceeds and Hedging" in this Pricing Supplement and the accompanying
Prospectus.
Call Feature. Our ability to call the Notes prior to their maturity date
is likely to limit the secondary market price at which the Notes will trade. We
believe that if we did not have the right to call the Notes, the secondary
market price of the Notes could be significantly different.
Interest Rates. We expect that the trading value of the Notes will be
affected by changes in interest rates. In general, if U.S. interest rates
increase, the trading value of the Notes may decrease, and if U.S. interest
rates decrease, the trading value of the Notes may increase.
Volatility of the Value of the Basket. Volatility is the term used to
describe the size and frequency of market fluctuations. Because the basket is
based on a relatively small number of underlying securities, the value of the
basket may be subject to greater volatility. If the volatility of the value of
the basket increases or decreases, the trading value of the Notes may decrease.
Time Remaining to Maturity. The Notes may trade at a value above that
which would be expected based on the level of interest rates and the prices of
the underlying securities. Any such difference will reflect a "time premium"
resulting from expectations concerning the prices of the underlying securities
during the period prior to the maturity of the Notes. However, as the time
remaining to the maturity of the Notes decreases, this time premium may
decrease, decreasing the trading value of the Notes.
Dividend Yields. If dividend yields on the underlying securities increase,
we expect that the value of the Notes may decrease, since the value of any
shares or cash you will receive upon your exchange or our call will not reflect
the value of such payments.
Salomon Smith Barney Holdings' Credit Ratings, Financial Condition and
Results. Actual or anticipated changes in our credit ratings, financial
condition or results may affect the market value of the Notes.
Economic Conditions and Earnings Performance of Underlying
Issuers. General economic conditions and earnings results of the issuers of the
underlying securities and real or anticipated changes in those conditions or
results may affect the market value of the Notes.
We want you to understand that the impact of one of the factors specified
above, such as an increase in prices of the underlying securities, may offset
some or all of any change in the trading value of the Notes attributable to
another factor, such as an increase in interest rates.
In general, assuming all relevant factors are held constant, we expect that
the effect on the trading value of the Notes of a given change in most of the
factors listed above (with the exception, in particular, of the factor described
in "Time Remaining to Maturity") will be less if it occurs later in the term of
the Notes than if it occurs earlier in the term of the Notes.
SOME UNDERLYING SECURITIES ARE AMERICAN DEPOSITARY RECEIPTS
Two of the underlying securities (Nokia and Ericsson) are American
Depositary Receipts ("ADRs"), which represent the shares of foreign issuers.
While the market for the shares represented by an ADR will generally be in the
country in which the foreign issuer is organized and while trading in that
market will generally be based on that country's currency, ADRs trade in U.S.
currency.
Although an ADR is a distinct security from the shares it represents, the
trading characteristics and valuation of an ADR will usually, but not
necessarily, mirror the characteristics and valuation of the shares represented
by the ADR. Active trading volume and efficient pricing in the principal market
in the home country for the shares represented by an ADR will usually, but not
necessarily, indicate similar characteristics in respect of that ADR. Because of
the size of an offering of ADRs outside the home country and/or other factors
that have limited or increased the float of certain ADRs, the liquidity of those
ADRs may be less than or greater than the liquidity of the shares represented by
the ADRs. In addition, the terms and the conditions of depositary facilities may
result in less liquidity or lower market values for
PS-4
<PAGE> 5
the ADRs than for the shares they represent. Inasmuch as a holder of an ADR may
surrender the ADR in order to take delivery of and trade the shares represented
by the ADR, a characteristic that allows investors in ADRs to take advantage of
price differentials between different markets, a market for the shares
represented by the ADRs that is not liquid will generally result in an illiquid
market for those ADRs.
SOME UNDERLYING ISSUERS ARE NON-U.S. ISSUERS
Three of the underlying issuers (Nokia, Ericsson and Nortel) are non-U.S.
issuers. There are certain risks involved in investing in securities of foreign
companies, which are in addition to the usual risks inherent in U.S.
investments. These risks include those resulting from fluctuations in currency
exchange rates, revaluation of currencies, future adverse political and economic
developments and the possible imposition of currency exchange controls or other
foreign governmental laws or restrictions, reduced availability of public
information concerning issuers and the lack of uniform accounting, auditing and
financial reporting standards or of other regulatory practices and requirements
comparable to those applicable to domestic companies. Moreover, securities of
many foreign companies may be less liquid and their prices more volatile than
those of securities of comparable domestic companies. In addition, with respect
to certain foreign countries, there is the possibility of expropriation,
nationalization, confiscatory taxation and limitations on the use or removal of
funds or other assets including the withholding of dividends. Foreign securities
may be subject to foreign government taxes that could reduce the yield on such
securities. The adoption of exchange control regulations and other legal
restrictions could also have an adverse impact on the marketability or prices of
underlying securities of non-U.S. issuers. In addition, non-U.S. issuers are not
necessarily subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to U.S.
issuers.
The prices of the securities of non-U.S. issuers may also be affected by
political, economic, financial and social factors in the relevant country or
region. These factors (including the possibility that recent or future changes
in a country's government, economic and fiscal policies, the possible imposition
of, or changes in, currency exchange laws or other laws or restrictions
applicable to such companies or investments in non-U.S. equity securities and
the possibility of fluctuations in the rate of exchange between currencies)
could reduce the price of securities of non-U.S. issuers. Moreover, the relevant
non-U.S. economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resources and self-sufficiency.
DILUTION OF THE UNDERLYING SECURITIES
The basket composition ratio, or relative weight of each underlying
security in the basket, and, in certain circumstances, the process of
determination of the value of the basket, are subject to adjustment for a number
of events arising out of stock splits and combinations, stock dividends, a
number of other transactions involving the issuers of the underlying securities,
as well as for the liquidation, dissolution or winding up of an issuer. You
should refer to the section "Description of the Notes -- Adjustment to Basket
Composition Ratios; Reorganization Events" below. The basket composition ratios
and the process of determination of the value of the basket will not be adjusted
for other events that may adversely affect the price of an underlying security,
such as offerings of common stock for cash or in connection with acquisitions.
Because of the relationship of the value of any basket of shares you receive
upon exchange or redemption to the then-current prices of the underlying
securities, these other events may reduce the value of those shares. There can
be no assurance that the issuers of the underlying securities will not make
offerings of common stock or take such other action in the future, or as to the
amount of these offerings, if any.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
The Notes have been approved for listing on the American Stock Exchange,
subject to official notice of issuance, under the symbol "TSB.A". However, it is
not possible to predict how the Notes will trade in the secondary market or
whether such market will be liquid or illiquid. There is currently no secondary
PS-5
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market for the Notes. Accordingly, the liquidity of the Notes may be limited.
Salomon Smith Barney Inc. currently intends, but is not obligated, to make a
market in the Notes. There can be no assurance that a secondary market will
develop or, if a secondary market does develop, that it will provide holders of
Notes with liquidity or that it will continue for the life of the Notes.
AFFILIATION OF SALOMON SMITH BARNEY HOLDINGS AND THE CALCULATION AGENT
Because Salomon Smith Barney Inc., which is acting as the calculation agent
for the Notes, is an affiliate of ours, potential conflicts of interest may
exist between the calculation agent and the holders of the Notes, including with
respect to certain determinations and judgments that the calculation agent must
make in determining amounts due to holders of the Notes or whether a market
disruption event has occurred. You should refer to "Description of the
Notes -- Market Disruption Events" below. Salomon Smith Barney Inc., as a
registered broker-dealer, is required to maintain policies and procedures
regarding the handling and use of confidential proprietary information, and such
policies and procedures will be in effect throughout the term of the Notes to
restrict the use of information relating to the calculation of the value of the
basket of underlying securities that the calculation agent may be required to
make prior to their dissemination. Salomon Smith Barney Inc. is obligated to
carry out its duties and functions as the calculation agent in good faith and
using its reasonable judgment.
PURCHASES AND SALES BY AFFILIATES OF SALOMON SMITH BARNEY HOLDINGS
Salomon Smith Barney Holdings, Salomon Smith Barney Inc. and other
affiliates of ours may from time to time buy or sell the underlying securities
or derivative instruments related to those securities for their own accounts in
connection with their normal business practices or in connection with hedging
the Salomon Smith Barney Holdings obligations under the Notes. These
transactions could affect the price of such stocks. You should refer to "Use of
Proceeds and Hedging" in this Pricing Supplement and the accompanying
Prospectus.
POTENTIAL FEDERAL INCOME TAX CONSEQUENCES
Because the Notes will be treated by Salomon Smith Barney Holdings as
contingent payment debt obligations of Salomon Smith Barney Holdings, and
because by accepting a Note each holder agrees to this treatment of the Notes,
United States holders of a Note will be required to include original issue
discount for United States federal income tax purposes in gross income on a
constant yield basis over the term of the Note. This tax OID will be includible
in a United States holder's gross income (as ordinary income) over the term of
the Note even though the amount of tax OID included in income in each year will
exceed the semi-annual interest payments to be made on the Note prior to
maturity or our exercise of our call right or your exercise of your exchange
right. The amount of the tax OID is calculated based in part on an assumed
amount payable upon exchange or redemption. This assumed amount is neither a
prediction nor guarantee of the actual yield of, or payment to be made in
respect of, a Note or whether we will exercise our call right or you will
exercise your exchange right. If the amount we actually pay upon exchange or
redemption is, in fact, less than this assumed amount, or if neither Salomon
Smith Barney Holdings nor a United States holder exercises, respectively, the
call right or the exchange right, then a United States holder will have
recognized taxable income in periods prior to exchange, redemption or maturity
that exceeds that holder's economic income from holding the Note during such
periods (with an offsetting ordinary loss upon exchange or redemption or at
maturity). If we exercise our call right, or a United States holder exercises
its exchange right or otherwise disposes of the Note prior to maturity, the
United States holder will be required to treat any gain recognized upon the
disposition of the Note as ordinary income (rather than capital gain). You
should refer to "Certain United States Federal Tax Considerations" in this
Pricing Supplement and the Prospectus Supplement.
DESCRIPTION OF THE NOTES
GENERAL
The description in this Pricing Supplement of the particular terms of the
0.25% Cash Exchangeable Linked to a Basket of Selected Technology Stocks, Due
2007 (the "Notes") supplements, and to the
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extent inconsistent therewith replaces, the descriptions of the general terms
and provisions of the Registered Notes set forth in the accompanying Prospectus
and Prospectus Supplement, to which descriptions reference is hereby made. See
"Definitions" beginning on page PS-8 for the definition of certain terms used
herein. Terms used but not defined herein have the meanings given to them in the
Prospectus or the Prospectus Supplement.
MATURITY
If not previously exchanged by you or called by us, the Notes will mature
on September 13, 2007. You will receive $1,000 at maturity for each $1,000
principal amount of Notes that you hold.
EXCHANGE RIGHT
On any Exchange Date, you will have the right (the "Exchange Right"), by
completing the Official Notice of Exchange attached as Exhibit A hereto and
delivering that notice to both the Calculation Agent and the Paying Agent for
the Notes no later than 11:00 a.m. New York City time on the relevant Exchange
Date, to exchange each $1,000 principal amount of Notes you then hold for an
amount in cash equal to the Exchange Amount. We will make this payment to you
three Business Days after the Exchange Date, as long as the Paying Agent has
received delivery of the Notes on the Exchange Date.
The Exchange Right will cease to be available following any exercise of our
Call Right that will result in payment to you of the Call Price, as explained
more fully below.
We will not pay accrued and unpaid interest on Notes that you exchange
under your Exchange Right. Notwithstanding the foregoing, we will pay you
accrued interest up to and including the earlier of the Exchange Date and
September 12, 2002, if:
- you exercise your Exchange Right after we call the Notes for mandatory
redemption for the Exchange Amount,
- the Company Notice Date is on or before September 12, 2002, and
- the Call Date is on or after September 13, 2002.
CALL RIGHT
Beginning on July 15, 2002, upon not less than 30 nor more than 60 days'
notice to holders of the Notes in the manner described below, we may call the
Notes (the "Call Right"), in whole, and not in part, for mandatory redemption on
or after September 13, 2002. Following an exercise of our Call Right, you will
receive for each $1,000 principal amount of Notes:
- the Exchange Amount, if Parity on the Trading Day immediately preceding
the Company Notice Date, as determined by the Calculation Agent, is
greater than the Call Price, or
- the Call Price, if Parity on the Trading Day immediately preceding the
Company Notice Date, as determined by the Calculation Agent, is less than
or equal to the Call Price.
Once we call the Notes, unless you have already exercised your Exchange
Right, we will pay you the Exchange Amount or the Call Price, as the case may
be:
- three Business Days after the Call Date, if we pay you cash equal to the
Exchange Amount, or
- on the Call Date specified in the notice of mandatory redemption, if we
pay you the Call Price.
We will not pay accrued but unpaid interest on the Notes if we call them
for mandatory redemption at the Exchange Amount. We will pay accrued and unpaid
interest up to and including the Call Date on the Notes if we call them for
mandatory redemption at the Call Price.
On or after the Company Notice Date, you will continue to be entitled to
exercise your Exchange Right, unless we have called the Notes for redemption at
the Call Price.
Notices to holders of the Notes will be published in a leading daily
newspaper in The City of New York, which is expected to be The Wall Street
Journal. Notwithstanding the foregoing, so long as the Notes are represented by
Global Securities and such Notes are held on behalf of the Depositary, any such
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notice may, at our option in lieu of publication, be given by delivery to the
Depositary, in which event such notice shall be deemed to have been given to
holders of the Notes on the seventh Trading Day after the day on which such
notice is delivered.
INTEREST
The Notes will bear interest at a rate equal to 0.25% per annum, calculated
on the basis of 30 over 360. The Interest Payment Dates with respect to the
Notes are March 13 and September 13 of each year, commencing March 13, 2001. The
record date with respect to any Interest Payment Date will be the date (whether
or not a Business Day) immediately preceding such Interest Payment Date.
PAYING AGENT; TRUSTEE; CUSIP NUMBER
Citibank, N.A. will serve as Paying Agent and Registrar for the Notes and
will also hold the Global Security representing the Notes as custodian for DTC.
The First National Bank of Chicago, as successor trustee under an indenture
dated as of December 1, 1988, as amended or supplemented from time to time, will
serve as Trustee for the Notes.
The CUSIP number for the Notes is 79548E FG2.
THE BASKET
The "Basket" is comprised of the common stocks (together, the "Underlying
Securities") of the five following issuers (together, the "Underlying Issuers")
as weighted below based on their Closing Prices on September 5, 2000 (to achieve
a Basket value of $100 on that date):
<TABLE>
<CAPTION>
UNDERLYING SECURITY INITIAL BASKET
(TICKER SYMBOL/LISTING/ PERCENTAGE COMPOSITION
UNDERLYING ISSUER STOCK OR ADR) OF BASKET RATIO
----------------- ----------------------- ---------- -----------
<S> <C> <C> <C>
CIENA Corporation........................ CIEN (NASDAQ, stock) 20% 0.092452
LM Ericsson Telephone Company............ ERICY (NASDAQ, ADR) 20% 0.975610
Nokia Corporation........................ NOK (NYSE, ADR) 20% 0.445682
Nortel Networks Corporation.............. NT (NYSE, stock) 20% 0.247678
Sycamore Networks, Inc................... SCMR (NASDAQ, stock) 20% 0.146654
</TABLE>
The value of the Basket on any Trading Day will equal the sum of the
products of each Underlying Security's Closing Price by that Underlying
Security's Basket Composition Ratio. The Basket Composition Ratios are subject
to adjustment for certain corporate events. See "-- Adjustments to Basket
Composition Ratios; Reorganization Events" below.
DEFINITIONS
"Calculation Agent" means Salomon Smith Barney Inc.
"Call Date" means the date, from and including September 13, 2002,
specified in the notice of mandatory redemption, which must be not less than 30
nor more than 60 days after the Company Notice Date.
"Call Price" means $1,000 for each $1,000 principal amount of Notes.
"Closing Price" means, with respect to any security on any date of
determination, the closing sale price (or, if no closing price is reported, the
last reported sale price) of the security:
- on the New York Stock Exchange ("NYSE") or any successor exchange on that
date, or
- if the security is not listed on the NYSE on that date, as reported on
the Nasdaq National Market of the Nasdaq Stock Market, Inc. or any
successor exchange or securities market on that date, or
PS-8
<PAGE> 9
- if the security is not listed on the NYSE or quoted on the Nasdaq
National Market on that date, as reported in the composite transactions
for the principal United States securities exchange on which the security
is listed or quoted, or
- if the security is not listed on any such exchange or quoted on the
Nasdaq National Market, the last quoted bid price for the security in the
over-the-counter market as reported by Nasdaq, the National Quotation
Bureau or any similar organization, or
- if this bid price in unavailable, the market value of the security on
that date determined by a nationally recognized independent investment
banking firm, which may be the Calculation Agent, retained for this
purpose by us.
In the event that an Underlying Security in the form of an ADR is delisted from
the NYSE or the Nasdaq National Market, as the case may be, or the related
American Depositary Receipt program is terminated, the Calculation Agent will
determine the Closing Price of the Underlying Security based on the closing
price of the security represented by that ADR on its primary international
exchange, making any adjustments it deems appropriate in its sole discretion,
including adjustments relating to exchange rates and the number of shares
represented by each ADR.
"Company Notice Date" means any Trading Day, from and including July 15,
2002, on which we are entitled to give notice to call the Notes for mandatory
redemption and on which we issue the notice of mandatory redemption.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Exchange Amount" means the product of the Exchange Ratio and the value of
the Basket on, in the case of your Exchange Right, the applicable Exchange Date
or, in the case of our Call Right, the Call Date, in each case as calculated by
the Calculation Agent.
"Exchange Date" means any Trading Day from and including October 12, 2000
through and including the Trading Day prior to the earliest of (1) the date
three Trading Days prior to the maturity date, (2) the Call Date, and (3) if we
call the Notes for cash at the Call Price as described below, the Company Notice
Date.
"Exchange Ratio" means 9.2827.
"Parity", with respect to any Trading Day, means the Exchange Ratio times
the value of the Basket on that Trading Day, as determined by the Calculation
Agent.
A "Trading Day" means a day on which trading is generally conducted on the
NYSE, in the Nasdaq National Market and on the American Stock Exchange, as
determined by the Calculation Agent, and on which a Market Disruption Event has
not occurred.
ADJUSTMENTS TO BASKET COMPOSITION RATIOS; REORGANIZATION EVENTS
The Basket Composition Ratio for each Underlying Security will be subject
to adjustment from time to time in certain situations. Any such adjustments
could have an impact on the Exchange Amount. Salomon Smith Barney Inc., as
Calculation Agent, will be responsible for the effectuation and calculation of
any adjustment described herein and will furnish the Paying Agent and Trustee
with notice of any such adjustment.
If any Underlying Issuer, after the closing date of the offering
contemplated hereby,
PS-9
<PAGE> 10
(1) pays a stock dividend or makes a distribution with respect to that
issuer's Underlying Security in shares of such security,
(2) subdivides or splits that issuer's outstanding Underlying Securities
into a greater number of securities,
(3) combines that issuer's outstanding Underlying Securities into a smaller
number of securities, or
(4) issues by reclassification of that issuer's Underlying Securities any
shares of other common stock of the Underlying Issuer,
then, in each such case, the Underlying Security's Basket Composition Ratio will
be multiplied by a dilution adjustment equal to the number of shares of that
issuer's Underlying Security, or in the case of a reclassification referred to
in (4) above, the number of shares of other common stock of the Underlying
Issuer, issued pursuant thereto, or the fraction thereof, that a holder who held
one of that issuer's Underlying Security immediately prior to such event would
be entitled solely by reason of such event to hold immediately after such event.
If any Underlying Issuer, after the closing date, issues, or declares a
record date in respect of an issuance of, rights or warrants to all holders of
that issuer's Underlying Securities entitling them to subscribe for or purchase
the Underlying Securities at a price less than the Then-Current Market Price of
one Underlying Security, other than rights to purchase Underlying Securities
pursuant to a plan for the reinvestment of dividends or interest, then, in each
such case, the Basket Composition Ratio for that Underlying Security will be
multiplied by a dilution adjustment equal to a fraction, the numerator of which
will be the number of that issuer's Underlying Securities outstanding
immediately prior to the time the adjustment is effected by reason of the
issuance of such rights or warrants, plus the number of additional Underlying
Securities of that issuer offered for subscription or purchase pursuant to such
rights or warrants, and the denominator of which will be the number of that
issuer's Underlying Securities outstanding immediately prior to the time the
adjustment is effected, plus the number of additional Underlying Securities of
that issuer which the aggregate offering price of the total number of that
issuer's Underlying Securities so offered for subscription or purchase pursuant
to such rights or warrants would purchase at the Then-Current Market Price,
which will be determined by multiplying the total number of Underlying
Securities so offered for subscription or purchase by the exercise price of such
rights or warrants and dividing the product so obtained by such Then-Current
Market Price. To the extent that, after the expiration of such rights or
warrants, that issuer's Underlying Securities offered thereby have not been
delivered, the Basket Composition Ratio for the Underlying Security will be
further adjusted to equal the Basket Composition Ratio which would have been in
effect had such adjustment for the issuance of such rights or warrants been made
upon the basis of delivery of only the number of Underlying Securities actually
delivered.
If any Underlying Issuer, after the closing date, declares or pays a
dividend or makes a distribution to all holders of its Underlying Securities of
any class of its capital stock, the capital stock of one or more of its
subsidiaries, evidences of its indebtedness or other non-cash assets, excluding
any dividends or distributions referred to above, or issues to all holders of
its Underlying Securities rights or warrants to subscribe for or purchase any of
its securities other than rights or warrants referred to above, then, in each
such case, the Basket Composition Ratio for that issuer's Underlying Security
will be multiplied by a dilution adjustment equal to a fraction, the numerator
of which will be the Then-Current Market Price of the Underlying Security, and
the denominator of which will be such Then-Current Market Price less the fair
market value (as determined by a nationally recognized independent investment
banking firm retained for this purpose by Salomon Smith Barney Holdings, whose
determination will be final) as of the time the adjustment is effected of the
portion of the assets, evidences of indebtedness, rights or warrants so
distributed or issued applicable to one Underlying Security. Notwithstanding the
foregoing, in the event that, with respect to any dividend or distribution to
which this paragraph would otherwise apply, the denominator in the fraction
referred to in the above formula is less than $1.00 or is a negative number,
then Salomon Smith Barney Holdings may, at its option, elect to have the
adjustment provided by this paragraph not be made and in lieu of such
adjustment, on the maturity date, the holders of the Notes will
PS-10
<PAGE> 11
be entitled to receive an additional amount of cash equal to the product of the
number of Notes held by such holder multiplied by the fair market value of such
indebtedness, assets, rights or warrants (determined, as of the date such
dividend or distribution is made, by a nationally recognized independent
investment banking firm retained for this purpose by Salomon Smith Barney
Holdings, whose determination will be final) so distributed or issued applicable
to one Underlying Security of that issuer.
If, after the closing date, any Underlying Issuer declares a record date in
respect of a distribution of cash, other than any permitted dividends described
below, any cash distributed in consideration of fractional shares of that
issuer's Underlying Securities and any cash distributed in a Reorganization
Event, by dividend or otherwise, to all holders of that issuer's Underlying
Securities, or makes an excess purchase payment, then the Basket Composition
Ratio for the Underlying Security will be multiplied by a dilution adjustment
equal to a fraction, the numerator of which will be the Then-Current Market
Price of the Underlying Security on such record date, and the denominator of
which will be such Then-Current Market Price less the amount of such
distribution applicable to one Underlying Security which would not be a
permitted dividend, or, in the case of an excess purchase payment, less the
aggregate amount of such excess purchase payment for which adjustment is being
made at such time divided by the number of Underlying Securities outstanding on
such record date.
For purposes of these adjustments, a permitted dividend is any quarterly
cash dividend in respect of an Underlying Security, other than a quarterly cash
dividend that exceeds the immediately preceding quarterly cash dividend, and
then only to the extent that the per share amount of such dividend results in an
annualized dividend yield on the Underlying Security in excess of 10%. An excess
purchase payment is the excess, if any, of (x) the cash and the value (as
determined by a nationally recognized independent investment banking firm
retained for this purpose by Salomon Smith Barney Holdings, whose determination
will be final) of all other consideration paid by the Underlying Issuer with
respect to one Underlying Security of that issuer acquired in a tender offer or
exchange offer by the Underlying Issuer, over (y) the Then-Current Market Price
of the Underlying Security. Notwithstanding the foregoing, in the event that,
with respect to any dividend or distribution or excess purchase payment to which
this paragraph would otherwise apply, the denominator in the fraction referred
to in the formula in the preceding paragraph is less than $1.00 or is a negative
number, then Salomon Smith Barney Holdings may, at its option, elect to have the
adjustment provided by this paragraph not be made and in lieu of such
adjustment, on the maturity date, the holders of the Notes will be entitled to
receive an additional amount of cash equal to the product of the number of Notes
held by such holder multiplied by the sum of the amount of cash plus the fair
market value of such other consideration (determined, as of the date such
dividend or distribution is made, by a nationally recognized independent
investment banking firm retained for this purpose by Salomon Smith Barney
Holdings, whose determination will be final) so distributed or applied to the
acquisition of the Underlying Security in such a tender offer or exchange offer
applicable to one Underlying Security.
Each dilution adjustment will be effected as follows:
- in the case of any dividend, distribution or issuance, at the opening of
business on the Business Day next following the record date for
determination of holders of the applicable Underlying Securities entitled
to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution, or issuance is after
such record date, at the time such dividend, distribution or issuance
will be announced by the Underlying Issuer;
- in the case of any subdivision, split, combination or reclassification,
on the effective date of such transaction;
- in the case of any excess purchase payment for which the Underlying
Issuer announces, at or prior to the time it commences the relevant share
repurchase, the repurchase price per share for shares proposed to be
repurchased, on the date of such announcement; and
- in the case of any other excess purchase payment on the date that the
holders of the repurchased shares become entitled to payment in respect
thereof.
PS-11
<PAGE> 12
All dilution adjustments will be rounded upward or downward to the nearest
1/10,000th or, if there is not a nearest 1/10,000th, to the next lower
1/10,000th. No adjustment to any Basket Composition Ratio will be required
unless such adjustment would require an increase or decrease of at least one
percent therein, provided, however, that any adjustments which by reason of this
sentence are not required to be made will be carried forward and taken into
account in any subsequent adjustment. If any announcement or declaration of a
record date in respect of a dividend, distribution, issuance or repurchase
requiring an adjustment as described herein is subsequently canceled by the
Underlying Issuer, or such dividend, distribution, issuance or repurchase fails
to receive requisite approvals or fails to occur for any other reason, then,
upon such cancellation, failure of approval or failure to occur, the Basket
Composition Ratio will be further adjusted to the Basket Composition Ratio which
would then have been in effect had adjustment for such event not been made. If a
Reorganization Event occurs after the occurrence of one or more events requiring
an adjustment as described herein, the dilution adjustments previously applied
to the Basket Composition Ratio in respect of such events will not be rescinded
but will be applied to the new Basket Composition Ratio provided for below.
"Then-Current Market Price" of any Underlying Security, for the purpose of
applying any dilution adjustment, means the Closing Price of one Underlying
Security for the trading day immediately prior to the time such adjustment is
effected or, in the case of an adjustment effected at the opening of business on
the Business Day next following a record date, immediately prior to the earlier
of the time such adjustment is effected and the related ex-date. The "ex-date"
with respect to any dividend, distribution or issuance is the first date on
which the Underlying Security trades regular way on its principal U.S. market
without the right to receive such dividend, distribution or issuance.
For purposes of this section, "trading day" as to any Underlying Security
means a day on which that Underlying Security (A) is not suspended from trading
on any national or regional securities exchange, securities market or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary U.S. market for the
trading of such security.
In the event of any of the following "Reorganization Events":
- any consolidation or merger of an Underlying Issuer, or any surviving
entity or subsequent surviving entity of an Underlying Issuer, with or
into another entity, other than a merger or consolidation in which the
Underlying Issuer is the continuing corporation and in which that
issuer's Underlying Securities outstanding immediately prior to the
merger or consolidation are not exchanged for cash, securities or other
property of the Underlying Issuer or another issuer,
- any sale, transfer, lease or conveyance to another corporation of the
property of an Underlying Issuer or any successor as an entirety or
substantially as an entirety,
- any statutory exchange of securities of an Underlying Issuer or any
successor of an Underlying Issuer with another issuer, other than in
connection with a merger or acquisition, or
- any liquidation, dissolution or winding up of an Underlying Issuer or any
successor of an Underlying Issuer,
the value of the Basket, upon a call by Salomon Smith Barney Holdings for
mandatory redemption for shares of the Underlying Securities in an amount per
$1,000 principal amount of Notes equal to the Exchange Amount or upon exchange
at the option of the holder, will be calculated with respect to that issuer's
Underlying Security by multiplying the Basket Composition Ratio for that
Underlying Security by the Transaction Value (rather than the Closing Price of
that Underlying Security), provided that for purposes of determining whether
Parity on the trading day preceding the Company Notice Date is less than the
Call Price, the value of the Basket will be calculated with respect to that
issuer's Underlying Security by multiplying the then-existing Basket Composition
Ratio for that Underlying Security by the Transaction Value. At such time, no
adjustment will be made to the Basket Composition Ratio of the Underlying
Securities.
PS-12
<PAGE> 13
"Transaction Value" means the sum of:
(1) for any cash received in a Reorganization Event, the amount of
cash received per Underlying Security;
(2) for any property other than cash or Marketable Securities received
in a Reorganization Event, an amount equal to the market value on the date
the Reorganization Event is consummated of such property received per
Underlying Security (as determined by a nationally recognized independent
investment banking firm retained for this purpose by Salomon Smith Barney
Holdings, whose determination will be final); and
(3) for any "Marketable Securities" received in a Reorganization
Event, an amount equal to the Closing Price per share of such Marketable
Securities on the trading day immediately prior to the maturity date or
Exchange Date multiplied by the number of such Marketable Securities
received per Underlying Security.
"Marketable Securities" are any perpetual equity securities or debt
securities with a stated maturity after the maturity date, in each case that are
listed on a U.S. national securities exchange or reported by the Nasdaq Stock
Market, Inc. The number of shares of any equity securities constituting
Marketable Securities included in the calculation of Transaction Value pursuant
to clause (3) of the preceding paragraph will be subject to adjustment if any
event that would, had it occurred with respect to any Underlying Security or to
an Underlying Issuer, have required an adjustment as described above occurs with
respect to such Marketable Securities or the issuer thereof between the time of
the Reorganization Event and the maturity date. Adjustment for such subsequent
events shall be as nearly equivalent as practicable to the adjustments described
above.
MARKET DISRUPTION EVENTS
"Market Disruption Event" means any of the following events, as determined
by Salomon Smith Barney Inc., as Calculation Agent.
(a) The suspension or material limitation of trading in one or more of the
Underlying Securities which comprise the Basket, for more than two hours of
trading or during the one-half hour period preceding the close of trading on the
NYSE, the Nasdaq National Market, any other applicable organized U.S. exchange
or the primary international exchange on which a security represented by an
Underlying Security is traded. For purposes of this definition, limitations on
trading during significant market fluctuations imposed pursuant to NYSE Rule 80B
(or any applicable rule or regulation enacted or promulgated by the NYSE, the
Securities and Exchange Commission (the "SEC") or any other self regulatory
organization or of similar scope as a replacement for Rule 80B, as determined by
the Calculation Agent) shall be considered "material".
(b) The suspension or material limitation, in each case, for more than two
hours of trading or during the one-half hour period preceding the close of
trading (whether by reason of movements in price exceeding levels permitted by
the relevant exchange or otherwise) in options contracts related to one or more
of the Underlying Securities which are traded on any major U.S. or international
exchange.
(c) The unavailability, through a recognized system of public dissemination
of transaction information, for more than two hours of trading or during the
one-half hour period preceding the close of trading, of accurate price, volume
or related information in respect of one or more of the Underlying Securities or
in respect of options contracts related to one or more of the Underlying
Securities, in each case traded on any major U.S. or international exchange.
For purposes of determining whether a Market Disruption Event has occurred:
(1) a limitation on the hours or number of days of trading will not constitute a
Market Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange or market, (2) a decision to discontinue
permanently trading in the relevant options contract will not constitute a
Market Disruption Event, (3) any suspension in trading in an options contract on
one or more of the Underlying Securities by a major securities market by reason
of (x) a price change violating limits set by such securities market,
PS-13
<PAGE> 14
(y) an imbalance of orders relating to such contracts or (z) a disparity in bid
and ask quotes relating to such contracts will constitute a Market Disruption
Event, notwithstanding that such suspension or material limitation is less than
two hours, and (4) a "suspension or material limitation" on an exchange or in a
market will include a suspension or material limitation of trading by one class
of investors provided that such suspension continues for more than two hours of
trading or during the last one-half hour period preceding the close of trading
on the relevant exchange or market (but will not include limitations imposed on
certain types of trading under NYSE Rule 80A or any applicable rule or
regulation enacted or promulgated by the NYSE, any other self-regulatory
organization or the SEC of a similar scope or as a replacement for Rule 80A, as
determined by the Calculation Agent) and will not include any time when such
exchange or market is closed for trading as part of such exchange's or market's
regularly scheduled business hours. Under certain circumstances, the duties of
Salomon Smith Barney Inc. as the Calculation Agent in determining the existence
of Market Disruption Events could conflict with the interests of Salomon Smith
Barney Inc. as an affiliate of the issuer of the Notes.
USE OF PROCEEDS AND HEDGING
Before and immediately following the initial offering of the Notes, Salomon
Smith Barney Holdings or one or more of its subsidiaries will use a portion of
the proceeds from this offering to acquire the Underlying Securities or listed
or over-the-counter options contracts in, or other derivative or synthetic
instruments related to, the Underlying Securities in connection with hedging
Salomon Smith Barney Holdings' obligations under the Notes. The balance of the
proceeds will be used for general corporate purposes. Please refer to "Use of
Proceeds and Hedging -- Use of Proceeds Relating to Index Warrants and Indexed
Notes" in the accompanying Prospectus.
THE UNDERLYING ISSUERS
According to publicly available documents:
- CIENA Corporation operates in the optical networking equipment market. It
offers a comprehensive portfolio of products for telecommunications and
data communications service providers worldwide. CIENA is incorporated
under the laws of the State of Delaware. CIENA is currently subject to
the informational requirements of the Exchange Act. Accordingly, CIENA
files reports (including its Annual Report on Form 10-K for the fiscal
year ended October 31, 1999 and its Quarterly Reports on Form 10-Q for
the fiscal quarters ended January 31, 2000, April 30, 2000 and July 31,
2000), proxy statements and other information with the SEC.
- LM Ericsson Telephone Company is in the business of providing advanced
systems and products for fixed line and mobile telecommunications in
public and private networks. Ericsson is incorporated under the laws of
Sweden. Ericsson is currently subject to the informational reporting
requirements of the Exchange Act applicable to foreign private issuers.
Accordingly, Ericsson files reports (including its Annual Report on Form
20-F for the fiscal year ended December 31, 1999) and other information
with the SEC.
- Nokia Corporation is in the business of manufacturing mobile phones,
supplying mobile, fixed and Internet Protocol networks and related
services as well as multimedia terminals. Nokia is incorporated under the
laws of Finland. Nokia is currently subject to the informational
reporting requirements of the Exchange Act applicable to foreign private
issuers. Accordingly, Nokia files reports (including its Annual Report on
Form 20-F for the fiscal year ended December 31, 1999) and other
information with the SEC.
- Nortel Networks Corporation is in the business of supplying networking
solutions and services that support voice, data and video transmission
over wireless and wireline technologies. Nortel is incorporated under the
laws of Canada. Nortel is currently subject to the informational
reporting requirements of the Exchange Act. Accordingly, Nortel files
reports (including its Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 and its Quarterly Reports on
PS-14
<PAGE> 15
Form 10-Q for the fiscal quarters ended March 31, 2000 and June 30,
2000), proxy statements and other information with the SEC.
- Sycamore Networks, Inc. is in the business of developing and marketing
networking products that enable service providers to quickly and cost
effectively provide bandwidth and create new high-speed data services.
Sycamore is incorporated under the laws of Delaware. Sycamore is
currently subject to the informational reporting requirements of the
Exchange Act. Accordingly, Sycamore files reports (including its
Quarterly Reports on Form 10-Q for the fiscal quarters ended October 30,
1999, January 29, 2000 and April 29, 2000), proxy statements and other
information with the SEC.
Any registration statement, report, proxy statement or other information of
the Underlying Issuers filed with the SEC may be inspected and copied at the
offices of the SEC at the addresses listed under "Available Information" in the
accompanying Prospectus.
THE UNDERLYING ISSUERS ARE NOT AFFILIATED WITH SALOMON SMITH BARNEY
HOLDINGS, WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF THE NOTES AND
WILL HAVE NO OBLIGATIONS WITH RESPECT TO THE NOTES. THIS PRICING SUPPLEMENT
RELATES ONLY TO THE NOTES OFFERED HEREBY AND DOES NOT RELATE TO THE UNDERLYING
ISSUERS OR THE UNDERLYING SECURITIES.
HISTORICAL DATA ON THE UNDERLYING SECURITIES
Holders of the Notes will not be entitled to any rights with respect to the
Underlying Securities (including, without limitation, voting rights or rights to
receive dividends or other distributions in respect thereof) prior to receiving
shares of the underlying securities as a result of your exchange or our call.
CIENA
CIENA's common stock is quoted on the NASDAQ National Market under the
symbol "CIEN". The following table sets forth, for each of the quarterly periods
indicated, the high and the low sale price for CIENA common stock, as reported
on the NASDAQ National Market, and adjusted to reflect a 2 for 1 split of the
common stock scheduled for September 18, 2000. CIENA has not declared or paid
any dividends on its common stock during the periods indicated.
<TABLE>
<CAPTION>
QUARTER HIGH LOW
------- ---- ---
<S> <C> <C>
1997
First....................................................... $44 $23
Second...................................................... 54 22 1/4
Third....................................................... 59 43
Fourth...................................................... 63 5/8 47 1/2
1998
First....................................................... 63 9/16 37 1/4
Second...................................................... 73 37 3/8
Third....................................................... 92 3/8 10 3/4
Fourth...................................................... 22 1/8 8 1/8
1999
First....................................................... 29 1/4 13 5/8
Second...................................................... 34 1/8 16 5/8
Third....................................................... 42 13/16 29 1/16
Fourth...................................................... 74 9/16 29 3/8
</TABLE>
PS-15
<PAGE> 16
<TABLE>
<CAPTION>
QUARTER HIGH LOW
------- ---- ---
<S> <C> <C>
2000
First....................................................... 189 45 3/8
Second...................................................... 169 3/4 79 1/4
Third (through September 8, 2000)........................... 230 1/8 128 3/8
</TABLE>
The closing price of CIENA's common stock on September 8, 2000 was
$208 7/16.
According to CIENA's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 31, 2000, as of August 17, 2000, there were 142,021,588 shares of
CIENA common stock outstanding.
Ericsson
Ericsson's ADRs are quoted on the NASDAQ National Market under the symbol
"ERICY". Each Ericsson ADR represents one B share of Ericsson. The following
table sets forth, for each of the quarterly periods indicated, the high and the
low sale price for Ericsson's ADRs, as reported on the NASDAQ National Market,
and adjusted to reflect a 4 for 1 split of the ADRs on June 21, 1995, a 2 for 1
split of the ADRs on May 29, 1998 and a 4 for 1 split of the ADRs on May 11,
2000, and the cash dividend per ADR.
<TABLE>
<CAPTION>
DIVIDEND
DECLARED
QUARTER HIGH LOW PER ADR*
------- ---- --- ---------
<S> <C> <C> <C>
1995
First.................................................... $ 1 81/89 $ 1 157/256
Second................................................... 2 4/9 1 111/128
Third.................................................... 3 4/27 2 13/64
Fourth................................................... 3 3/64 2 3/16
1996
First.................................................... $ 2 59/64 $ 2 11/64
Second................................................... 2 29/32 2 19/64
Third.................................................... 3 7/32 2 19/64
Fourth................................................... 3 71/73 3 21/128
1997
First.................................................... 4 33/64 3 23/32
Second................................................... 5 1/8 3 19/32
Third.................................................... 6 5/64 4 51/64
Fourth................................................... 6 21/64 4 1/4
1998
First.................................................... 6 3/32 4 15/64
Second................................................... 7 3/4 5 15/16 $0.055292
Third.................................................... 8 1/2 4 1/2
Fourth................................................... 7 3/8 3 3/4
</TABLE>
PS-16
<PAGE> 17
<TABLE>
<CAPTION>
DIVIDEND
DECLARED
QUARTER HIGH LOW PER ADR*
------- ---- --- ---------
<S> <C> <C> <C>
1999
First.................................................... 7 19/64 5 1/8
Second................................................... 8 17/32 5 15/16 0.060128
Third.................................................... 8 13/16 6 7/8
Fourth................................................... 16 13/16 7 11/16
2000
First.................................................... 26 5/16 13 3/4
Second................................................... 23 3/8 17 0.057714
Third (through September 8, 2000)........................ 23 7/16 16 1/2
</TABLE>
---------------
* Before withholding taxes
The closing price of Ericsson's ADRs on September 8, 2000 was $20.
According to Ericsson's Annual Report on Form 20-F for the fiscal year
ended December 31, 1999, as of December 31, 1999, there were 1,793,083,861
shares of Ericsson outstanding.
Nokia
Nokia's ADRs are listed on the NYSE under the symbol "NOK". Each Nokia ADR
represents one Nokia share. The following table sets forth, for each of the
quarterly periods indicated, the high and the low sale price for Nokia's ADRs,
as reported on the NYSE, and adjusted to reflect 2 for 1 splits of the ADRs on
April 24, 1995, April 15, 1998 and April 4, 1999 and a 4 for 1 split of the ADRs
on April 10, 2000, and the cash dividend per ADR.
<TABLE>
<CAPTION>
DIVIDEND
DECLARED
QUARTER HIGH LOW PER ADR*
------- ---- --- ---------
<S> <C> <C> <C>
1995
First................................................. $ 2 141/256 $ 2 27/128
Second................................................ 3 53/64 2 73/256 $0.036395
Third................................................. 4 7/8 3 91/128
Fourth................................................ 4 23/64 1 61/64
1996
First................................................. $ 2 71/128 $ 2 9/128
Second................................................ 2 51/64 1 121/128 $0.039561
Third................................................. 2 53/64 2 1/64
Fourth................................................ 3 89/128 2 91/128
1997
First................................................. 4 31/128 3 33/64
Second................................................ 4 203/256 3 57/128
Third................................................. 5 243/256 4 31/64
Fourth................................................ 6 103/256 3 61/64
1998
First................................................. 6 219/256 4 5/32
Second................................................ 9 47/128 6 49/64 0.083200
Third................................................. 11 19/32 8 5/16
Fourth................................................ 15 87/128 7 49/128
</TABLE>
PS-17
<PAGE> 18
<TABLE>
<CAPTION>
DIVIDEND
DECLARED
QUARTER HIGH LOW PER ADR*
------- ---- --- ---------
<S> <C> <C> <C>
1999
First................................................. 20 33/128 15 37/64
Second................................................ 23 16 59/64 0.129295
Third................................................. 24 27/32 19 17/64
Fourth................................................ 49 22 5/16
2000
First................................................. 58 11/32 38 1/4
Second................................................ 62 1/2 42 1/2 0.191640
Third (through September 8, 2000)..................... 57 9/16 37 9/16
</TABLE>
---------------
* Before withholding taxes
The closing price of Nokia's ADRs on September 8, 2000 was $43 3/8.
According to Nokia's Annual Report on Form 20-F for the fiscal year ended
December 31, 1999, as of December 31, 1999, there were 1,163,515,966 Nokia
shares outstanding. Prior to April 12, 1999, Nokia had two classes of common
shares, A shares and K shares. Effective April 12, 1999, Nokia split both its A
shares and its K shares 2-for-1 and consolidated both classes of shares into one
class of shares.
Nortel
Nortel's common shares are listed on the NYSE under the symbol "NT". The
following table sets forth, for each of the quarterly periods indicated, the
high and the low sale price for Nortel's common shares, as reported on the NYSE,
and adjusted to reflect 2 for 1 splits of the common shares on January 9, 1998,
August 19, 1999 and May 8, 2000, and the cash dividend per common share of
Nortel.
<TABLE>
<CAPTION>
DIVIDEND
DECLARED
QUARTER HIGH LOW PER SHARE*
------- ---- --- ----------
<S> <C> <C> <C>
1995
First.................................................. $ 5 $ 4 1/32 $0.013750
Second................................................. 5 1/8 4 25/64 0.013750
Third.................................................. 4 7/8 4 5/16 0.013750
Fourth................................................. 5 17/32 3 15/16 0.011250
1996
First.................................................. $ 6 23/64 $ 5 3/32 $0.013750
Second................................................. 6 59/64 5 55/64 0.016250
Third.................................................. 7 23/64 5 5/8 0.016250
Fourth................................................. 8 29/64 7 5/64 0.016250
1997
First.................................................. 9 5/8 7 9/16 0.016250
Second................................................. 11 3/8 7 49/64 0.018750
Third.................................................. 13 15/32 11 9/32 0.018750
Fourth................................................. 14 15/64 10 17/128 0.018750
1998
First.................................................. 16 23/64 9 59/64 0.018750
Second................................................. 17 5/16 12 27/32 0.018750
Third.................................................. 15 59/64 7 39/64 0.018750
Fourth................................................. 12 59/64 6 45/64 0.018750
</TABLE>
PS-18
<PAGE> 19
<TABLE>
<CAPTION>
DIVIDEND
DECLARED
QUARTER HIGH LOW PER SHARE*
------- ---- --- ----------
<S> <C> <C> <C>
1999
First.................................................. 15 15/16 12 17/32 0.018750
Second................................................. 22 15 23/64 0.018750
Third.................................................. 25 15/16 19 29/32 0.018750
Fourth................................................. 55 24 25/32 0.018750
2000
First.................................................. 72 3/32 37 3/4 0.018750
Second................................................. 71 1/4 44 3/8 0.018750
Third (through September 8, 2000)...................... 89 67 15/16 **
</TABLE>
---------------
* Before withholding taxes.
** A $0.018750 per common share dividend has been declared payable on September
29, 2000.
The closing price of Nortel's common shares on September 8, 2000 was
$77 3/8 .
According to Nortel's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2000, as of June 30, 2000, there were 2,982,071,052 Nortel common
shares outstanding.
Sycamore Networks
Sycamore Networks' common stock is quoted on the NASDAQ National Market
under the symbol "SCMR". The following table sets forth, for each of the
quarterly periods indicated, the high and the low sale price for Sycamore
Networks' common stock, as reported on the NASDAQ National Market, and adjusted
to reflect a 3 for 1 split of the common stock on February 11, 2000. Sycamore
Networks has not declared or paid any dividends on its common stock during the
periods indicated.
<TABLE>
<CAPTION>
QUARTER HIGH LOW
------- ---- ---
<S> <C> <C>
1999
Fourth...................................................... $109 85/256 $12 171/256
2000
First....................................................... 199 1/2 79 149/256
Second...................................................... 127 47 1/4
Third (through September 8, 2000)........................... 172 1/2 101 3/8
</TABLE>
The closing price of Sycamore Networks' common stock on September 8, 2000
was $131 5/8 .
According to Sycamore Networks' Quarterly Report on Form 10-Q for the
fiscal quarter ended April 29, 2000, as of May 31, 2000, there were 244,814,474
shares of Sycamore Networks' common stock outstanding.
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 Note. This summary
supplements, and should be read in conjunction with, the section entitled
"Certain United States Federal Income Tax Considerations" in the Prospectus
Supplement.
Investors should consult their own tax advisors in determining the tax
consequences to them of holding Notes, including the application to their
particular situation of the United States federal income tax considerations
discussed below and in the Prospectus Supplement.
TAX CHARACTERIZATION OF THE NOTES
Each Note will be treated by Salomon Smith Barney Holdings for United
States federal income tax purposes as a single debt instrument issued by Salomon
Smith Barney Holdings that is subject to United States Treasury regulations
governing contingent debt instruments (the "Contingent Debt Regulations").
PS-19
<PAGE> 20
Moreover, each holder, by accepting a Note, agrees to this treatment of the Note
and to report all income (or loss) with respect to the Note in accordance with
the Contingent Debt Regulations. The remainder of this summary assumes the
treatment of each Note as a single debt instrument subject to the Contingent
Debt Regulations and the holder's agreement thereto.
United States Holders
Taxation of Interest. A United States holder (as such term is defined in
the Prospectus Supplement) of a Note will recognize income (or loss) on a Note
in accordance with the Contingent Debt Regulations. The Contingent Debt
Regulations require the application of a "noncontingent bond method" to
determine accruals of income, gain, loss and deduction with respect to a
contingent debt obligation. As described in more detail in the second and third
succeeding paragraphs, under the noncontingent bond method, a United States
holder of a Note will be required for tax purposes to include in income each
year an accrual of interest at the semi-annual computational rate of 6.88% (the
"comparable yield"). Solely for purposes of determining the comparable yield
pursuant to the Contingent Debt Regulations, a United States holder of a Note
will be assumed to be entitled to receive, in respect of each Note, semi-annual
payments of interest at a rate of 0.25 percent, as well as a payment of $642.25
at maturity (the "Assumed Exchange Amount"). The Assumed Exchange Amount is
calculated as the amount required to produce the comparable yield when combined
with the semi-annual payments of interest made in respect of a Note, taking into
account the Note's issue price.
The comparable yield and the Assumed Exchange Amount are used to determine
accruals of interest FOR TAX PURPOSES ONLY and are not assurances or predictions
by Salomon Smith Barney Holdings with respect to the actual yield of, or payment
to be made in respect of, a Note. The comparable yield and the Assumed Exchange
Amount do not necessarily represent Salomon Smith Barney Holdings's expectations
regarding such yield, the amount of such payment, or whether Salomon Smith
Barney Holdings will exercise its Call Right or any holder will exercise its
Exchange Right.
Each Note will be issued at a premium. However, there will be original
issue discount for United States federal income tax purposes ("Tax OID") because
Tax OID must be accrued at the comparable yield. Under the Tax OID rules of the
Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury
regulations promulgated thereunder, a United States holder of a Note, whether
such holder uses the cash or the accrual method of tax accounting, will be
required to include as ordinary interest income the sum of the "daily portions"
of Tax OID on the Note for all days during the taxable year that the United
States holder owns the Note. As a result, a United States holder of a Note that
employs the cash method of tax accounting will be required to include amounts in
respect of Tax OID accruing on a Note in taxable income each year, even though
cash payments will be made with respect to the Notes only upon Interest Payment
Dates, at maturity, or upon exchange or redemption.
The daily portions of Tax OID on a Note are determined by allocating to
each day in any accrual period a ratable portion of the Tax OID allocable to
that accrual period. In the case of an initial holder, the amount of Tax OID on
a Note allocable to each accrual period is determined by multiplying the
"adjusted issue price" (as defined below) of a Note at the beginning of the
accrual period by the comparable yield of a Note (appropriately adjusted to
reflect the length of the accrual period). The "adjusted issue price" of a Note
at the beginning of any accrual period will generally be the sum of its issue
price and the amount of Tax OID allocable to all prior accrual periods, less the
amount of any payments made in all prior accrual periods. Based upon the
comparable yield, if a United States holder who employs the accrual method of
tax accounting and pays taxes on a calendar year basis buys a Note at original
issue for $1,100 and holds it until maturity, such holder will be required to
pay taxes on the following amounts of ordinary income from the Note (in excess
of accrued semi-annual interest income) for each of the following periods:
$21.7747 in 2000, $75.7058 in 2001, $81.0039 in 2002, $86.6729 in 2003, $93.0049
in 2004, $99.2473 in 2005, $106.1930 in 2006 and $78.6465 in 2007.
Disposition (including Exchange) of the Notes. When a United States holder
sells, exchanges or otherwise disposes of a Note (including upon repayment of
the Note at maturity or upon the exercise by Salomon Smith Barney Holdings of
its Call Right or the holder of its Exchange Right) (a "disposition"), the
United States holder's gain (or loss) on such disposition will equal the
difference between the amount
PS-20
<PAGE> 21
received by the United States holder for the Note (including, for this purpose,
an Exchange Amount or the Call Price) and the United States holder's tax basis
in the Note. A United States holder's tax basis (i.e., adjusted cost) in a Note
will be equal to the United States holder's original purchase price for such
Note, plus any Tax OID accrued by the United States holder and less the amount
of any payments received by the holder while holding the Note. If the Call Right
or the Exchange Right is exercised, respectively, by Salomon Smith Barney
Holdings or the United States holder and the Exchange Amount or the Call Price,
as the case may be, exceeds the portion of the Assumed Exchange Amount accrued
to that date, the United States holder will be required to include such excess
in income as ordinary interest upon exchange or redemption. Alternatively, if
the Call Right or the Exchange Right is exercised and the Exchange Amount or the
Call Price, as the case may be, is less than the portion of the Assumed Exchange
Amount accrued to that date, or if neither the Call Right nor the Exchange Right
is exercised and the Note is held to maturity, the difference between the
accrued portion of the Assumed Exchange Amount and the Exchange Amount or the
Call Price or the difference between the Assumed Exchange amount and the amount
paid at maturity, as the case may be, will be treated as an offset to any
interest otherwise includible in income by the United States holder with respect
to the Note for the taxable year in which maturity, exchange or redemption
occurs, but only to the extent of the amount of such includible interest. Any
remaining portion of such shortfall may be recognized and deducted by the United
States holder as a loss under the rules described below for sales or exchanges.
Any gain realized by a United States holder on a sale or exchange of the
Note will be treated as ordinary interest income. Any loss realized by a United
States holder on a sale or exchange of the Note will be treated as an ordinary
loss to the extent of the United States holder's Tax OID inclusions with respect
to the Note up to the date of sale or exchange. Any loss realized in excess of
such amount generally will be treated as a capital loss. An individual United
States holder generally will be allowed a deduction for any such ordinary loss
without regard to the two-percent miscellaneous itemized deduction rule of
Section 67 of the Code. Any capital loss recognized by a United States holder
will be a long-term capital loss if such United States holder has held such Note
for more than one year, and a short-term capital loss in other cases.
Non-United States Holders
The discussion in the Prospectus Supplement under the heading "Certain
United States Federal Income Tax Considerations -- Non-United States Holders"
refers to Treasury regulations governing information reporting and the
certification procedures regarding withholding and backup withholding on certain
amounts paid to non-United States persons. Such regulations are described in the
Prospectus Supplement as being effective as of December 31, 1998. The effective
date of the regulations has been deferred until December 31, 2000.
ERISA MATTERS
The purchaser, by its purchase or other acquisition of Notes, is deemed to
represent that such purchaser is not an employee benefit plan subject to the
fiduciary responsibility provisions of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or any entity with respect to which part or
all of its assets constitute assets of any such employee benefit plan by reason
of 29 C.F.R. 2510.3-101 or otherwise, or any government or other plan subject to
Federal, state or local law substantially similar to the fiduciary
responsibility provisions of ERISA ("ERISA Plan"). Any plan that is subject to
Section 4975(e)(1) of the Code that is not an ERISA Plan (for example,
individual retirement accounts, individual retirement annuities or Keogh Plans)
will be deemed to have represented, by its purchase or other acquisition of the
Notes, that such purchase, acquisition, holding and subsequent disposition of
such Notes and the transactions contemplated hereby do not constitute a
prohibited transaction under Section 4975 of the Code.
PS-21
<PAGE> 22
EXHIBIT A
OFFICIAL NOTICE OF EXCHANGE
DATED: [ , ]
[Must be on or after October 13, 2000]
<TABLE>
<S> <C>
Citibank, N.A., as Salomon Smith Barney Inc., as
Paying Agent Calculation Agent
111 Wall Street, 5th. Floor 390 Greenwich Street
Global Agency & Trust Services New York, New York 10013
New York, NY 10005 Attn: Structured Products/Equity Derivatives
Attention: Sebastian Andrieszyn Group
Phone: (212) 657-9055 Phone: (212) 723-7349
Fax: (212) 825-3483 Fax: (212) 723-8732
</TABLE>
Ladies and Gentlemen:
The undersigned holder of the 0.25% Cash Exchangeable Notes Linked to a
Basket of Selected Technology Stocks, Due 2007 (the "Notes") hereby irrevocably
elects to exercise with respect to the principal amount of the Notes indicated
below, as of the date hereof (or, if this notice is received after 11:00 a.m. on
any Trading Day by either the Calculation Agent or the Paying Agent, as of the
next Trading Day), provided that such day is prior to the earliest of (i)
September 7, 2007, (ii) the Call Date, and (iii) in the event of a call for cash
at the Call Price, the Company Notice Date, the holder's Exchange Right as
described in the Pricing Supplement dated September 8, 2000 relating to the
Notes (the "Pricing Supplement"). Capitalized terms not defined herein have the
meanings given to such terms in the Pricing Supplement.
Please date and acknowledge receipt of this notice in the place provided
below on the date of receipt, and fax a copy to the fax number indicated,
whereupon Salomon Smith Barney Holdings shall cause our affiliate, Salomon Smith
Barney Inc., to deliver the required number of Underlying Securities to the
Paying Agent through the facilities of DTC; the Paying Agent will in turn be
obligated to deliver the Exchange Amount three Business Days after the Exchange
Date in accordance with the delivery instructions set forth below, as long as
the Paying Agent has received delivery of the Notes being exchanged on the
Exchange Date.
Very truly yours,
--------------------------------------
[Name of Holder]
By:
--------------------------------------
[Title]
--------------------------------------
[Fax No.]
$
--------------------------------------
Principal Amount of Notes being
Exchanged
[must be $1,000 or integral multiple
thereof]
A-1
<PAGE> 23
Receipt of the above Official Notice of
Exchange is hereby acknowledged:
SALOMON SMITH BARNEY INC., as Calculation Agent
CITIBANK, N.A., as Paying Agent.
By: CITIBANK, N.A., as Paying Agent.
By:
---------------------------------------------------
Name:
Title:
Date and Time of Acknowledgement:
---------------------------------------------
A-2
