Filed Pursuant to Rule 424(b)(5)
Registration No. 33-52701
THIS PROSPECTUS SUPPLEMENT IS RELATED TO SECURITIES THAT ARE THE SUBJECT OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND IS SUBJECT TO COMPLETION OR AMENDMENT.
SUBJECT TO COMPLETION, DATED JULY 18, 1994
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 8, 1994)
2,000,000 WARRANTS
THE BEAR STEARNS COMPANIES INC.
1,000,000 JAPAN INDEX* CALL WARRANTS
1,000,000 JAPAN INDEX PUT WARRANTS
ALL EXPIRING , 1997
------------------------
Each Call Warrant ("Call Warrant") will entitle the holder thereof to
receive from The Bear Stearns Companies Inc. (the "Company"), upon exercise
(including automatic exercise), an amount in U.S. dollars computed by reference
to increases in the American Stock Exchange Japan Index (the "Japan Index").
Such amount (the "Call Cash Settlement Value") will equal the quotient (rounded
down to the nearest cent) of (A) the amount, if any, by which the Spot Japan
Index (as defined herein) for the applicable Valuation Date (as defined herein)
exceeds the Strike Japan Index (as defined herein) divided by (B) the Warrant
Divisor (as defined below). If the Strike Japan Index is equal to or exceeds the
Spot Japan Index for such Valuation Date, the Call Cash Settlement Value will be
zero, in which case the Call Warrantholder (as defined herein) will be
permitted, subject to certain exceptions, to re-exercise such Call Warrant prior
to the Expiration Date or the Delisting Date (as such terms are defined herein).
Each Put Warrant ("Put Warrant") will entitle the holder thereof to receive from
the Company, upon exercise (including automatic exercise), an amount in U.S.
dollars computed by reference to decreases in the Index (as defined herein).
Such amount (the "Put Cash Settlement Value") will equal the quotient (rounded
down to the nearest cent) of (A) the amount, if any, by which the Strike Japan
Index exceeds the Spot Japan Index for the applicable Valuation Date divided by
(B) the Warrant Divisor. If the Spot Japan Index for such Valuation Date is
equal to or exceeds the Strike Japan Index, the Put Cash Settlement Value will
be zero, in which case the Put Warrantholder (as defined herein) will be
permitted, subject to certain exceptions, to re-exercise such Put Warrant prior
to the Expiration Date or the Delisting Date.
The Strike Japan Index is , which is equal to the closing level of
the Japan Index (which is the Spot Japan Index) on , 1994, and the
Warrant Divisor is . If such date were the applicable Valuation Date, the
Call Cash Settlement Value and Put Cash Settlement Value of the Call Warrants
and the Put Warrants (collectively, the "Warrants"), respectively, would be
zero. The Japan Index was established on April 2, 1990, on which date it was set
at a level of 280.0.
Under certain circumstances described herein, a New Japan Index (as defined
herein) will be substituted for the Japan Index, in which event the Strike Japan
Index and the Warrant Divisor will be adjusted to take into account such
substitution. See "Description of the Warrants--Substitution of the Japan Index"
herein. The Japan Index (or, if such substitution shall occur, the New Japan
Index) or any Successor Index (as defined herein) is referred to herein as the
"Index".
The Warrants are unsecured contractual obligations of the Company and will
rank on a parity with the Company's other unsecured contractual obligations and
unsecured and unsubordinated debt.
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF EXPIRING
WORTHLESS IF THE LEVEL OF THE INDEX DECLINES IN THE CASE OF THE CALL WARRANTS OR
INCREASES IN THE CASE OF THE PUT WARRANTS, AS THE CASE MAY BE. PURCHASERS SHOULD
BE PREPARED TO SUSTAIN A TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS AND
ARE ADVISED TO CONSIDER CAREFULLY THE INFORMATION UNDER "CERTAIN IMPORTANT
INFORMATION CONCERNING THE WARRANTS" HEREIN AND "RISK FACTORS" HEREIN, AS WELL
AS OTHER INFORMATION HEREIN AND IN THE PROSPECTUS.
Application has been made to list the Warrants on the American Stock
Exchange, Inc. ("AMEX"). The AMEX symbol for the Call Warrants will be BJC.WS,
and the AMEX symbol for the Put Warrants will be BJP.WS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS(1) COMPANY(2)(3)
<S> <C> <C> <C>
Per Call Warrant............................... $ $ $
Total.................................... $ $ $
Per Put Warrant................................ $ $ $
Total.................................... $ $ $
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses estimated at $ , which are payable by the
Company.
(3) The Company has granted to the Underwriters options, exercisable within 30
days of the date hereof, to purchase up to 150,000 additional Call Warrants
and up to 150,000 additional Put Warrants, on the same terms, solely to
cover over-allotments, if any. If the Company exercises both options in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting" herein.
---------------------------
The Warrants are offered by the Underwriters, subject to prior sale, when,
as and if delivered to and accepted by the Underwriters, and subject to their
right to reject any order in whole or in part. It is expected that delivery of
the Warrants will be made in New York City on or about , 1994.
------------------------
BEAR, STEARNS & CO. INC.
------------------------
*The use of, and reference to, the term "Japan Index" herein has been consented
to by the American Stock Exchange, Inc. The "Japan Index" is a service mark of
the American Stock Exchange, Inc.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 1994.
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The valuation of and payment for any exercised Warrant may be postponed as
a result of an Exercise Limitation Event (as defined herein) or an Extraordinary
Event (as defined herein), in which case the Warrantholder (as defined herein)
will receive a Call Cash Settlement Value or Put Cash Settlement Value, as the
case may be (referred to herein as the "Applicable Cash Settlement Value"), or,
under certain circumstances, the Alternative Settlement Amount (as defined
herein) for such Warrant, in either case determined as of a later date. See
"Description of the Warrants--Extraordinary Events and Exercise Limitation
Events" herein.
The Warrants will be exercisable from the time of issuance and may be
exercised until 3:00 P.M., New York City time, on the New York Business Day (as
defined herein) immediately preceding the earlier of (i) the Expiration Date,
which will be , 1997, or (ii) the effective date of their delisting
from, or permanent suspension from trading on, the AMEX and failure to list on
another United States national securities exchange (the "Delisting Date"). All
Warrants that are outstanding on the New York Business Day immediately preceding
the earlier of (i) the Expiration Date or (ii) the Delisting Date will be
automatically exercised on such New York Business Day. A Warrantholder may
exercise no fewer than 500 Call Warrants or 500 Put Warrants, as the case may
be, at any one time, except in the case of automatic exercise. See "Description
of the Warrants--Automatic Exercise". A Warrantholder tendering Warrants for
exercise will have the option of specifying that, unless an Alternative
Settlement Amount (as defined herein) is payable in respect of such Warrants,
such Warrants are not to be exercised if the Spot Japan Index as of the
applicable Valuation Date is at least 5% lower, in the case of the Call
Warrants, or at least 5% higher, in the case of the Put Warrants, than the most
recent closing level of the Index prior to exercise. See "Certain Important
Information Concerning the Warrants" and "Description of the Warrants" herein.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE WARRANTS
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------------
NOTICE TO UNITED KINGDOM RESIDENTS
THIS DOCUMENT HAS NOT BEEN APPROVED BY AN AUTHORIZED PERSON IN THE UNITED
KINGDOM AND HAS NOT BEEN REGISTERED WITH THE REGISTRAR OF COMPANIES IN THE
UNITED KINGDOM. NEITHER THIS DOCUMENT NOR ANY OTHER PUBLICATION OR DOCUMENT
RELATING TO THE OFFERING MAY BE ISSUED OR BE CAUSED TO BE ISSUED IN THE UNITED
KINGDOM OTHER THAN TO PERSONS, WHOSE ORDINARY BUSINESS IT IS TO BUY OR SELL
SHARES OR DEBENTURES, WHETHER AS PRINCIPAL OR AGENT, AND EXCEPT IN COMPLIANCE
WITH THE FINANCIAL SERVICES ACT 1986. IN PARTICULAR, THIS DOCUMENT MAY NOT BE
ISSUED OR PASSED ON IN THE UNITED KINGDOM TO ANY PERSON WHO DOES NOT FALL WITHIN
ARTICLE 9(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT ADVERTISEMENTS)
(EXEMPTIONS) ORDER 1988 (AS AMENDED BY ARTICLE 6(C) OF THE FINANCIAL SERVICES
ACT 1986 (INVESTMENT ADVERTISEMENTS) ORDER 1992).
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in the Prospectus and this Prospectus Supplement
and in the documents incorporated therein and herein by reference. Appendix A
hereto (the "Index of Key Terms") contains a listing of defined terms and the
pages on which they are defined in this Prospectus Supplement.
THE OFFERING
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SECURITIES OFFERED
. CALL WARRANTS................... 1,000,000 Japan Index Call Warrants Expiring , 1997. Each Call
Warrant will entitle the beneficial owner thereof to receive from The Bear
Stearns Companies Inc. (the "Company"), upon exercise (including automatic
exercise), an amount in U.S. dollars computed by reference to increases in
the Index. Such amount (the "Call Cash Settlement Value") will equal the
quotient (rounded down to the nearest cent) of (A) the amount, if any, by
which the Spot Japan Index (as defined herein) for the applicable Valuation
Date (as defined herein) exceeds the Strike Japan Index (as defined herein)
divided by (B) the Warrant Divisor. If the Strike Japan Index is equal to
or exceeds the Spot Japan Index for a Valuation Date, the corresponding
Call Cash Settlement Value will be zero, in which case the Call
Warrantholder (as defined herein) will be permitted, subject to certain
exceptions, to re-exercise such Call Warrant prior to the Expiration Date
or the Delisting Date (as defined herein).
. PUT WARRANTS.................... 1,000,000 Japan Index Put Warrants Expiring , 1997. Each Put
Warrant will entitle the beneficial owner thereof to receive from the
Company, upon exercise (including automatic exercise), an amount in U.S.
dollars computed by reference to decreases in the Index. Such amount (the
"Put Cash Settlement Value") will equal the quotient (rounded down to the
nearest cent) of (A) the amount, if any, by which the Strike Japan Index
exceeds the Spot Japan Index for the applicable Valuation Date divided by
(B) the Warrant Divisor. If the Spot Japan Index is equal to or exceeds the
Strike Japan Index for a Valuation Date, the corresponding Put Cash
Settlement Value will be zero, in which case the Put Warrantholder (as
defined herein) will be permitted, subject to certain exceptions, to
re-exercise such Put Warrant prior to the Expiration Date or the Delisting
Date.
Unless a New Japan Index is substituted, the Strike Japan Index is , which
is equal to the closing level of the Japan Index (which is the Spot Japan
Index) on , 1994, and the Warrant Divisor is . If
such date were the applicable Valuation Date, the Call Cash Settlement
Value and Put Cash Settlement Value of the Call Warrants and Put Warrants
(collectively, the "Warrants"), respectively, would be zero.
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PRICE
. CALL WARRANTS................... U.S.$ per Call Warrant.
. PUT WARRANTS.................... U.S.$ per Put Warrant.
THE INDEX........................... The Index initially will be the Japan Index. The Japan Index is a modified
price-weighted stock index, designed, calculated, published and
disseminated by, and is a service mark of, the American Stock Exchange,
Inc. (the "AMEX"). The Japan Index is being used by the Company with the
permission of the AMEX. The Japan Index measures the composite price
performance of 210 selected Japanese stocks trading on the Tokyo Stock
Exchange (the "TSE") and is designed to represent a broad cross-section of
Japanese industries. The Japan Index was established on April 2, 1990, on
which date it was set at 280.0. The Japan Index is not affected by the
Japanese Yen/U.S. dollar exchange rate. See Appendix B hereto.
Stocks that comprise the Japan Index may be changed or substituted by the
AMEX based on certain criteria. The AMEX is under no obligation to continue
the calculation or the dissemination of the Japan Index. See "The Japan
Index" herein. If the AMEX or any Third Party (as defined herein)
discontinues publication of the Japan Index (or a New Japan Index) or any
Successor Index (as defined herein) that is used at the time for
determining the Spot Japan Index and, after giving effect thereto, there is
no published index used for determining the Spot Japan Index, the
Determination Agent (as defined herein) shall determine the Applicable Cash
Settlement Value, based on the formula and method used in calculating the
Japan Index (or, if the New Japan Index is substituted, the New Japan
Index) or any Successor Index as in effect on the date the Japan Index (or,
if the New Japan Index is substituted, the New Japan Index) or such
Successor Index was last published. See "Certain Important Information
Concerning the Warrants" herein.
SUBSTITUTION OF THE INDEX........... Under certain circumstances, a New Japan Index will be substituted for the
Japan Index. Upon the substitution of the New Japan Index, (i) the Spot
Japan Index for each Valuation Date thereafter will be determined by
reference to the closing level on such Valuation Date of the New Japan
Index, (ii) an adjusted Strike Japan Index will be substituted for the
original Strike Japan Index and (iii) an adjusted Warrant Divisor will be
substituted for the original Warrant Divisor. Any such substitution will be
made for the purpose of utilizing a capitalization-weighted index and will
be made in a manner intended to preserve any gains or losses in the Japan
Index that have occurred as of the time the New Japan Index is substituted
for the Japan Index. See "Description of Warrants--Substitution of Index"
herein.
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EXERCISE OF WARRANTS................ The Warrants will be exercisable from the time of issuance (subject to
postponement as described herein under "Description of the
Warrants--Extraordinary Events and Exercise Limitation Events") and may be
exercised until 3:00 P.M., New York City time, on the New York Business Day
(as defined herein) immediately preceding the earlier of (i) ,
1997 (the "Expiration Date"), (ii) the effective date of their delisting
from, or permanent suspension from trading on, the AMEX and failure to list
on another United States national securities exchange (the "Delisting
Date") or (iii) the cancellation of the Warrants upon the occurrence of
certain Extraordinary Events, as described under "Description of the
Warrants--Extraordinary Events and Exercise Limitation Events" (the
"Cancellation Date"). All outstanding Warrants not exercised by the holder
thereof prior to that time will be automatically exercised on the New York
Business Day immediately preceding the Expiration Date or the Delisting
Date, as the case may be. See "Description of the Warrants--Exercise and
Settlement of Warrants" herein.
EXERCISE AMOUNT..................... A Warrantholder may exercise no fewer than 500 Call Warrants or 500 Put
Warrants, as the case may be, at any one time, except in the case of
automatic exercise, as provided herein. See "Description of the
Warrants--Minimum Exercise Amount" herein.
EXTRAORDINARY EVENTS AND EXERCISE
LIMITATION EVENTS................... See "Description of the Warrants--Extraordinary Events and Exercise
Limitation Events" herein for a description of these events and the
consequences of such an event .
CERTAIN RISK FACTORS................ The Warrants involve a high degree of risk, including risks arising from
fluctuations in the prices of the Underlying Stocks (as defined herein),
risks relating to the Index and general risks applicable to the TSE (the
exchange on which the Underlying Stocks are traded), such as, for example,
market disruption events, suspensions and trading halts. 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. The Warrants are appropriate investments only for
investors with accounts approved for options trading who are able to
understand and bear the risk of a speculative investment in the Warrants.
It is not possible to predict how the Warrants will trade in the secondary
market or whether such market will be liquid or illiquid. To the extent
Warrants are exercised, the number of Warrants outstanding will decrease,
which may result in a decrease in the liquidity of the Warrants.
Application has been made to list the Warrants on the AMEX. If the Warrants
are delisted from, or permanently suspended from trading on, the AMEX, and
not accepted at the same time for listing on another United States national
securities exchange, Warrants not
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previously exercised will be deemed automatically exercised on the last New
York Business Day prior to the effective date of such delisting or
suspension, and the Applicable Cash Settlement Value, if any, shall be
calculated and settled as provided below under "Description of the
Warrants--Automatic Exercise". See "Description of the Warrants--Delisting
of Warrants" herein. In the event of a delisting or suspension of trading
on the AMEX, the Company will use its best efforts to list the Warrants on
another United States national securities exchange.
The Index will initially be the Japan Index, which is currently calculated
and published by the AMEX. Upon the occurrence of certain events described
under "Description of Warrants-- Substitution of the Index", a New Japan
Index (which will also relate to the trading of equity securities in Japan)
will be substituted for the Japan Index as the basis of the calculation of
any Applicable Cash Settlement Value or Alternative Settlement Amount. The
characteristics of such New Japan Index are described herein; however, the
New Japan Index does not currently exist, and such New Japan Index may be
calculated and published by a United States stock exchange other than the
AMEX. If a New Japan Index is substituted for the Japan Index, no assurance
can be given as to whether any Applicable Cash Settlement Value or
Alternative Settlement Amount calculated on the basis of such New Japan
Index will be more than, less than or equal to the Applicable Cash
Settlement Value or Alternative Settlement Amount which would have been
payable had such substitution not occurred. However, any such substitution
will be made in a manner intended to preserve any gains or losses in the
Japan Index that have occurred as of the time the New Japan Index is
substituted for the Japan Index. See "Description of Warrants--Substitution
of Index" herein.
The underlying stocks that constitute the Japan Index have been issued by
Japanese companies. Any New Japan Index that may be substituted for the
Japan Index also would be based upon stocks issued by Japanese companies.
Investments in securities indexed to the value of Japanese equity
securities involve certain risks. The Japanese securities markets may be
more volatile than U.S. or other securities markets and may be affected by
market developments in different ways than U.S. or other securities
markets. Direct or indirect Japanese government intervention to stabilize
the Japanese securities markets and cross-shareholdings in Japanese
companies on such markets may affect prices and volume of trading on those
markets. There is generally less publicly available information about
Japanese companies than about those U.S. companies that are subject to the
reporting requirements of the Securities and Exchange Commission, and
Japanese companies are subject to accounting, auditing and financial
reporting standards and requirements that differ from those to which U.S.
reporting companies are subject.
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Securities prices in Japan are subject to Japanese political, economic,
financial and social factors. These factors (including the possibility that
recent or future changes in the Japanese government's economic and fiscal
policies, the possible imposition of, or changes in, currency exchange laws
or other Japanese laws or restrictions applicable to Japanese companies or
investments in Japanese equity securities and the possibility of
fluctuations in the rate of exchange between currencies) could
significantly affect the Japanese securities markets. Moreover, the
Japanese economy 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.
Although the underlying stocks comprising the Japan Index are traded in
Japanese Yen and payments upon exercise of the Warrants will be made in
U.S. Dollars, any Applicable Cash Settlement Amount or Alternative
Settlement Amount will be based on absolute changes in the Index, and will
not be affected by the currency exchange rates.
The Japan Index has experienced significant price fluctuations in the past,
and it is impossible to predict its future direction. See "The Japan
Index--Historical Data on the Japan Index" herein.
If the AMEX or any Third Party (as hereinafter defined) discontinues
publication of the Japan Index (or a New Japan Index) or any Successor
Index that is used at the time for determining the Spot Japan Index and,
after giving effect thereto, there is no published index used for
determining the Spot Japan Index, the Determination Agent will determine
the Applicable Cash Settlement Value. If the Company determines that either
an Extraordinary Event or an Exercise Limitation Event has occurred and is
continuing on the Expiration Date, the Delisting Date or the Cancellation
Date, then the Determination Agent will determine, compose or calculate the
amount (the "Alternative Settlement Amount") that each Warrantholder is to
receive in lieu of the Applicable Cash Settlement Value. Potential
investors should be aware that Bear, Stearns & Co. Inc. ("Bear Stearns"),
in its capacity as Determination Agent, is under no obligation to take the
interests of the Company or the Warrantholders into consideration in the
event that it is called on to determine, compose or calculate the
Applicable Cash Settlement Value or Alternative Settlement Amount. In
addition, because Bear Stearns is an affiliate of the Company, conflicts of
interest may arise in connection with Bear Stearns performing its role as
Determination Agent. Bear Stearns, 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 Warrants to restrict the use
of information relating to the calculation of the Applicable Cash
Settlement Value or Alternative Settlement Amount prior to its
dissemination. Moreover, Bear Stearns is obligated to carry out its
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duties and functions as Determination Agent in good faith and using its
reasonable judgment.
Except for cases of automatic exercise, a Warrantholder must tender at
least 500 Call Warrants or 500 Put Warrants, as the case may be, at any one
time in order to exercise its Warrants. Thus, except in such cases,
Warrantholders with fewer than 500 Warrants will need either to sell their
Warrants or to purchase additional Warrants, incurring transaction costs in
each case, in order to realize upon their investment.
A Warrantholder will not be able to determine, at the time of exercise of a
Warrant, the Spot Japan Index that will be used in calculating the
Applicable Cash Settlement Value of such Warrant (and will thus be unable
to determine the Applicable Cash Settlement Value). In addition, the
Valuation Date for exercised Warrants may be postponed upon the occurrence
and continuation of an Extraordinary Event or an Exercise Limitation Event.
(See "Description of the Warrants--Extraordinary Events and Exercise
Limitation Events" herein.) Any change in the level of the Index between
the time a Warrantholder submits an Exercise Notice (as defined herein) and
the time the Spot Japan Index for such exercise is determined (which period
will, at a minimum, be one Tokyo Business Day (as defined herein) (two
Tokyo Business Days in the event that the AMEX is not open for trading on
the first Tokyo Business Day following submission of the Exercise Notice)
and, in the case of a Valuation Date that is postponed following an
Extraordinary Event or an Exercise Limitation Event, may be substantially
longer) will result in such Warrantholder receiving an Applicable Cash
Settlement Value or Alternative Settlement Amount (as defined herein)
(including a zero Alternative Settlement Amount) that is different from the
Applicable Cash Settlement Value anticipated by such Warrantholder based on
the level of the Index most recently reported prior to exercise. At
present, the AMEX calculates the Index once each New York Business Day
based upon the most recent official closing prices of each of the
Underlying Stocks as reported by the TSE. Due to time differences, trading
on the TSE occurs when the AMEX is closed for business.
If the Company determines on a Valuation Date that an Extraordinary Event
or Exercise Limitation Event has occurred and is continuing, then the
Applicable Cash Settlement Value may be calculated on the basis that the
Valuation Date shall be later than the date otherwise provided for herein.
Circumstances existed on January 7, 1989 that would have constituted an
Extraordinary Event and an Exercise Limitation Event. See "Description of
the Warrants--Extraordinary Events and Exercise Limitation Events" herein.
Investors are advised to consider carefully the foregoing risk factors and
the risks and other matters discussed under "Certain Important
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Information Concerning the Warrants", "Risk Factors", "Description of the
Warrants" and "Certain United States Federal Income Tax Considerations"
herein prior to purchasing the Warrants.
WHO SHOULD INVEST................... The AMEX requires that the Warrants be sold only to investors whose
accounts have been approved for options trading. In addition, the AMEX
requires that its members and member organizations and registered employees
thereof make certain suitability determinations before recommending
transactions in Warrants.
Investment decisions relating to the Warrants require an investor to
predict the direction of movements in the Index as well as the amount and
timing of those movements. The Warrants may change substantially in value,
or lose all of their value, with relatively small movements in the Index.
Moreover, an index warrant is a "wasting asset" in that in the absence of
countervailing factors, such as an offsetting movement in the level of the
index, the market value of an index warrant will tend to decrease over time
and the warrant will have no market value after the time for exercise has
expired. Accordingly, the Warrants involve a high degree of risk and are
not appropriate for every investor. Investors who are considering
purchasing the Warrants must have an options approved account, 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 stock index transactions. Those investors 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 and the information set forth in this Prospectus
Supplement and the Prospectus. See "Certain Important Information
Concerning the Warrants" and "Risk Factors" herein. As indicated above,
investors should be prepared to sustain a total loss of the purchase price
of the Warrants.
LISTING............................. American Stock Exchange
CALL WARRANT TRADING SYMBOL......... BJC.WS
PUT WARRANT TRADING SYMBOL.......... BJP.WS
WARRANT AGENT....................... Chemical Bank
DETERMINATION AGENT................. Bear, Stearns & Co. Inc.
THE JAPAN INDEX QUOTATION SYMBOL.... JPN
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USE OF PROCEEDS AND HEDGING
All or a portion of the net proceeds from the sale of the Warrants will be
used by the Company or one or more of its subsidiaries in connection with
hedging the obligations represented by the Warrants. Any remaining net proceeds
will be used for general corporate purposes. See "Use of Proceeds" in the
Prospectus.
Prior to the pricing of the Warrants, the Company, through its affiliates,
hedged its anticipated exposure in connection with the Warrants and the Company
expects, from time to time following the initial offering of the Warrants, to
continue to hedge its exposure. Such hedging was and will be carried out in a
manner designed to minimize any impact on the prices of the Underlying Stocks or
the Index. Nonetheless, there can be no assurance that the Company did not or
will not affect the prices of the Underlying Stocks or the Index as a result of
its hedging activities. The Company, through its affiliates, expects to modify
its hedge position throughout the life of the Warrants by purchasing and selling
securities and instruments related directly or indirectly to the Underlying
Stocks and the Index.
CERTAIN IMPORTANT INFORMATION CONCERNING THE WARRANTS
SETTLEMENT VALUE
A holder of Call Warrants (a "Call Warrantholder") and a holder of Put
Warrants (a "Put Warrantholder") (each, a "Warrantholder" and collectively, the
"Warrantholders") will receive a cash payment upon exercise (including automatic
exercise) only if such Warrant has an Applicable Cash Settlement Value (or,
under certain circumstances, during the continuance of an Extraordinary Event or
an Exercise Limitation Event as described under "Description of the
Warrants--Extraordinary Events and Exercise Limitation Events" herein, an
"Alternative Settlement Amount", as defined herein) greater than zero at such
time. Prospective purchasers of the Warrants should recognize that their
Warrants may expire worthless and they should be prepared to sustain a total
loss of the purchase price of their Warrants. The Call Cash Settlement Value of
a Call Warrant will be an amount in U.S. dollars equal to the quotient (rounded
down to the nearest cent) of (A) the amount, if any, by which the Spot Japan
Index for the applicable Valuation Date exceeds the Strike Japan Index divided
by (B) the Warrant Divisor. The Put Cash Settlement Value of a Put Warrant will
be an amount in U.S. dollars equal to the quotient (rounded down to the nearest
cent) of (A) the amount, if any, by which the Strike Japan Index exceeds the
Spot Japan Index for the applicable Valuation Date divided by (B) the Warrant
Divisor.
Unless a New Japan Index is substituted, (i) the "Strike Japan Index" is
, which is equal to the closing level of the Japan Index on ,
1994, (ii) the "Spot Japan Index" for any Valuation Date means the closing level
on such date of the Japan Index as compiled and published by the AMEX and (iii)
the "Warrant Divisor" is . See "The Japan Index" herein. Upon the
occurrence of certain events described under "Description of
Warrants--Substitution of the Index", the New Japan Index will be substituted
for the Japan Index. Upon such substitution, (i) the Spot Japan Index for any
Valuation Date thereafter will mean the closing level on such date of the New
Japan Index, (ii) an adjusted Strike Japan Index will be substituted for the
original Strike Japan Index based on a calculation described herein and (iii) an
adjusted Warrant Divisor will be substituted for the original Warrant Divisor
based on a calculation described herein. See "Description of
Warrants--Substitution of Japan Index" and "New Japan Index".
The level of the Index will determine whether the Warrants have an
Applicable Cash Settlement Value greater than zero on any given day. The
Applicable Cash Settlement Value of the Warrants will be zero when initially
offered. The Call Cash Settlement Value of the Call Warrants will be greater
than zero on any given day only if the closing level of the Index on that day is
above the Strike Japan Index. An increase in the closing level of the Index will
result in a greater Call Cash Settlement Value, and a
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decrease in the closing level of the Index will result in a lesser or zero Call
Cash Settlement Value. Conversely, the Put Cash Settlement Value of the Put
Warrants will be greater than zero on any given day only if the closing level of
the Index on that day is below the Strike Japan Index. A decrease in the level
of the Index will result in a greater Put Cash Settlement Value, and an increase
in the level of the Index will result in a lesser or zero Put Cash Settlement
Value. Potential profit or loss upon exercise (including automatic exercise) of
a Warrant will be a function of the Applicable Cash Settlement Value (or, if
applicable, the Alternative Settlement Amount) of such Warrant upon exercise,
the purchase price of such Warrant and any related transaction costs.
If a Call Warrant is not exercised prior to 3:00 P.M. on the New York
Business Day immediately preceding the earlier of (i) the Expiration Date or
(ii) the Delisting Date, and if the Spot Japan Index on the Valuation Date for
Warrants that are automatically exercised is less than the Strike Japan Index,
such Call Warrant will expire worthless and the Call Warrantholder will have
sustained a total loss of the purchase price of such Call Warrant. Similarly, if
a Put Warrant is not exercised prior to 3:00 P.M. on the New York Business Day
immediately preceding the earlier of (i) the Expiration Date or (ii) the
Delisting Date, and if the Strike Japan Index is less than the Spot Japan Index
on the appropriate Valuation Date, such Put Warrant will expire worthless and
the Put Warrantholder will have sustained a total loss of the purchase price of
such Put Warrant. See "Risk Factors" herein.
If the Japan Index is not published by the AMEX (or, if a New Japan Index
has been substituted, the New Japan Index is not published by the AMEX or
another United States national securities exchange), but is published by another
person not affiliated with the Company and acceptable to the Company (the "Third
Party"), then the Spot Japan Index for any Valuation Date thereafter will be
determined based on the closing level of the Japan Index (or, if a New Japan
Index has been substituted, the New Japan Index) as published by such Third
Party. If the AMEX or any Third Party discontinues publication of the Japan
Index (or, if a New Japan Index has been substituted, the New Japan Index) and
publishes a successor or substitute index that the Company determines, in its
sole discretion, to be comparable to the Japan Index (or if a New Japan Index
has been substituted, the New Japan Index) (any such index being a "Successor
Index"), then the Spot Japan Index for any Valuation Date thereafter will be
determined based on the closing level of the Successor Index on such date. If
the AMEX or any Third Party makes a material change in the formula for, or the
method of calculating, the Japan Index (or, if a New Japan Index has been
substituted, the New Japan Index) or any Successor Index, the Determination
Agent shall make such calculations as may be required to determine the
Applicable Cash Settlement Value, using the formula and method of calculating
the Japan Index (or, if a New Japan Index has been substituted, the New Japan
Index) or any Successor Index as in effect prior to such change or modification.
If the AMEX and/or any Third Party discontinues publication of the Japan Index
(or, if a New Japan Index has been substituted, the New Japan Index) and/or any
Successor Index and, after giving effect thereto, there is no published index
used for determining the Spot Japan Index, the Company will cause the
Determination Agent to determine the Applicable Cash Settlement Value, based on
the formula and method used in calculating the Japan Index (or, if a New Japan
Index has been substituted, the New Japan Index) or any Successor Index as in
effect on the date the Japan Index (or, if a New Japan Index has been
substituted, the New Japan Index) or such Successor Index was last published.
VALUATION DATE
Except under the circumstances described in the next paragraph, the
Valuation Date for an exercised Warrant will be the first Index Calculation Day
(as defined herein) after the related Exercise Date. The Exercise Date for an
exercised Warrant, subject to certain exceptions described under "--Exercise and
Settlement of the Warrants", "--Limit Option" and "--Automatic Exercise" under
"Description of the Warrants" herein, will be the New York Business Day on which
such Warrant and an Exercise Notice in proper form are received by the Warrant
Agent (as defined herein) if received at or prior to 3:00 P.M., New York City
time, on such day; if such Warrant and Exercise Notice are
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received after such time, the Exercise Date will be the next succeeding New York
Business Day. See "Description of the Warrants--Exercise and Settlement of
Warrants" herein.
The Valuation Date for an exercised Warrant will occur after the Exercise
Date (see "Description of the Warrants--Exercise and Settlement of Warrants"
herein). Therefore, a Warrantholder will not be able to determine, at the time
of exercise of a Warrant, the Spot Japan Index that will be used in calculating
the Applicable Cash Settlement Value of such Warrant (and will thus be unable to
determine the Applicable Cash Settlement Value). In addition, the Valuation Date
for exercised Warrants may be postponed upon the occurrence and continuation of
an Extraordinary Event or an Exercise Limitation Event (see "Description of the
Warrants--Extraordinary Events and Exercise Limitation Events" herein). Any
change in the level of the Index between the time a Warrantholder submits an
Exercise Notice and the time the Spot Japan Index for such exercise is
determined (which period will, at a minimum, be one Tokyo Business Day (as
defined herein) (two Tokyo Business Days in the event that the AMEX is not open
for trading on the first Tokyo Business Day following submission of the Exercise
Notice) and, in the case of a Valuation Date postponed following an
Extraordinary Event or an Exercise Limitation Event may be substantially longer)
will, subject to the Limit Option described below and under "Description of the
Warrants--Limit Option" herein, result in such Warrantholder receiving the
Applicable Cash Settlement Value or Alternative Settlement Amount (including a
zero Alternative Settlement Amount) that is different from the Applicable Cash
Settlement Value anticipated by such Warrantholder based on the closing level of
the Index most recently reported prior to exercise. At present, the AMEX
publishes the Japan Index once each New York Business Day based upon the most
recent official closing prices of each of the Underlying Stocks as reported by
the TSE. Due to time differences, trading on the TSE occurs when the AMEX is
closed for business.
WARRANT CERTIFICATES
The Warrants will originally be issued as certificates in registered form.
Accordingly, a beneficial owner of Warrants holding such Warrants indirectly
(for instance, through a broker that holds such Warrants in "street name") may
exercise such Warrants only through such owner's registered holder. In the case
of a beneficial owner holding Warrants through his broker in "street name" who
wishes to exercise his Warrants, such beneficial owner must direct his broker,
who may in turn need to direct another intermediary, to deliver an Exercise
Notice and the related Warrants to the Warrant Agent. 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 particular New York Business Day, a
beneficial holder of Warrants may need 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
and other mechanics. See "--Exercise and Settlement of Warrants" and "--Limit
Option" under "Description of the Warrants" herein.
Forty-five calendar days after the consummation of the sale of the Warrants
pursuant to this Prospectus Supplement (which sale is expected to be consummated
on , 1994), each Warrantholder will have the option to convert the form
in which such Warrantholder holds his Warrants from certificated to book-entry
form (the "Conversion Option"). Such conversion will occur through the
facilities of The Depository Trust Company, New York, New York ("DTC", which
term, as used herein and in the Prospectus, includes any successor depository
selected by the Company). In addition, Warrant certificates held through the
facilities of CEDEL or Euroclear (as such terms are defined herein) will
automatically be exchanged into book-entry form by CEDEL or Euroclear, as the
case may be, pursuant to the Conversion Option on the last day of the Conversion
Option Period (as defined herein) without action of, or consent by, the
beneficial owner of the related Warrants. Accordingly, Warrantholders holding
their Warrants through CEDEL or Euroclear who do not wish to convert the form in
which they hold such Warrants to book-entry form must arrange to transfer their
Warrants out of the CEDEL or Euroclear systems, as the case may be, prior to the
last day of the Conversion Option
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Period. See "Description of the Warrants--Book-Entry Conversion" and "--CEDEL
and Euroclear" herein. To exercise Warrants, a Warrantholder who has utilized
the Conversion Option must direct a broker, who may in turn need to direct an
entity entitled to execute, clear and settle transactions through DTC (a
"Participant"), to transfer Warrants held by DTC on behalf of such Warrantholder
and to submit an Exercise Notice to the Warrant Agent. A Warrantholder may
desire that the New York Business Day on which his Warrants and an Exercise
Notice are delivered on his behalf to the Warrant Agent will constitute the
Exercise Date for the Warrants being exercised (for example, to utilize the
Limit Option most effectively). To achieve such objective, the Warrantholder
must cause such Warrants to be transferred free on the records of DTC to, and
such Exercise Notice to be received by, the Warrant Agent at or prior to 3:00
P.M., New York City time, on such New York Business Day; provided, however, that
in the case of Warrants held through CEDEL or Euroclear, the Warrants must be
transferred to the Warrant Agent prior to 3:00 P.M., New York City time, on the
relevant Valuation Date. To ensure that such Warrants and Exercise Notice will
be received by the Warrant Agent at or prior to such time, such Warrantholder
must give the appropriate directions to his broker before such broker's (and, if
such broker is not a Participant, the applicable Participant's) cut-off time for
accepting exercise instructions from customers for that day. Different brokerage
firms may have different cut-off times for accepting and implementing exercise
instructions from their customers. Therefore, Warrantholders holding their
Warrants in book-entry form should consult with their brokers or other
intermediaries, if applicable, as to applicable cut-off times and other exercise
mechanics. See "--Exercise and Settlement of Warrants" and "--Limit Option"
under "Description of the Warrants" herein. FORMS OF EXERCISE NOTICE FOR
WARRANTS HELD IN BOOK-ENTRY FORM MAY BE OBTAINED AT THE WARRANT AGENT'S OFFICE
(AS DEFINED HEREIN), DURING THE WARRANT AGENT'S NORMAL BUSINESS HOURS. SEE
"DESCRIPTION OF THE WARRANTS--GENERAL" HEREIN.
EXTRAORDINARY EVENTS AND EXERCISE LIMITATION EVENTS
If the Company determines that an Extraordinary Event or an Exercise
Limitation 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 such
Warrant will be postponed to the next Index Calculation Day following such day
on which there is no Extraordinary Event or Exercise Limitation Event; provided
that if the postponed Valuation Date has not occurred on or prior to the
Expiration Date or the Delisting Date, the Warrantholders will receive the
Alternative Settlement Amount (as described below) in lieu of the Applicable
Cash Settlement Value; provided, further, that, in the case of an Extraordinary
Event, if the Company determines that such Extraordinary Event is expected to
continue and the Company notifies the Warrant Agent that it is cancelling the
Warrants, then the date on which such notice is given (whether or not such date
is a New York Business Day) will become the Valuation Date for such Warrant, in
which case such Warrantholder will receive, in lieu of the Applicable Cash
Settlement Value, the Alternative Settlement Amount of such Warrant, which, in
such case, is an amount equal to the sum of the Applicable Cash Settlement Value
of the Warrants on such Valuation Date (determined as provided under
"Description of the Warrants--Extraordinary Events and Exercise Limitation
Events" below) and a ratable portion of 50% of the initial offering price of the
Warrants, in each case subject to certain exceptions and adjustments. The
Applicable Cash Settlement Value or the Alternative Settlement Amount of a
Warrant determined as of any such postponed Valuation Date may be substantially
lower (including zero) than the Applicable Cash Settlement Value thereof that
would be determined if the Valuation Date had not been postponed. See
"Description of the Warrants-- Extraordinary Events and Exercise Limitation
Events" herein, which includes a description of events, circumstances or causes
constituting Extraordinary Events and Exercise Limitation Events.
LIMIT OPTION
Except in the case of automatic exercise, a Warrantholder may be able to
limit to some extent the risk associated with any change in the Index between an
Exercise Date and the applicable Valuation Date by electing the Limit Option in
connection with an exercise of Warrants. Pursuant to the Limit
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Option, Warrants tendered for exercise will not be exercised if the Spot Japan
Index as of the applicable Valuation Date is at least 5% lower, in the case of
the Call Warrants, or higher, in the case of the Put Warrants, than the closing
level of the Index on the applicable Exercise Date or, if such date is not an
Index Calculation Day, on the immediately preceding Index Calculation Day. See
"Description of the Warrants--Limit Option" herein. However, in the event of the
occurrence of an Extraordinary Event resulting in the payment to Warrantholders
of an Alternative Settlement Amount in lieu of the Applicable Cash Settlement
Value, the Limit Option will not preclude the exercise of Warrants as described
herein under "Description of the Warrants--Extraordinary Events and Exercise
Limitation Events".
MINIMUM EXERCISE QUANTITY
A Warrantholder may exercise no fewer than 500 Call Warrants or 500 Put
Warrants, as the case may be, at any time, except in the case of automatic
exercise. Accordingly, except in the case of automatic exercise of the Warrants,
Warrantholders with fewer than 500 Call Warrants or 500 Put Warrants, as the
case may be, will need either to sell their Warrants or to purchase additional
Warrants, thereby incurring transaction costs, in order to realize upon their
investment.
DETERMINATION AGENT
Potential investors should be aware that Bear Stearns, in its capacity as
Determination Agent, is under no obligation to take the interests of the Company
or the Warrantholders into consideration in the event it determines, composes or
calculates the Applicable Cash Settlement Value or Alternative Settlement
Amount. In addition, because Bear Stearns is an affiliate of the Company,
conflicts of interest may arise in connection with Bear Stearns performing its
role as Determination Agent. Bear Stearns, 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 Warrants to restrict the use of information
relating to the calculation of the Applicable Cash Settlement Value or
Alternative Settlement Amount prior to its dissemination. Bear Stearns and its
affiliates may from time to time engage in transactions involving the Underlying
Stocks for their proprietary accounts and for other accounts under their
management, which may influence the value of such Underlying Stocks. Affiliates
of Bear Stearns will also hedge the Company's obligations under the Warrants and
will be obligated to pay to the Company upon exercise of the Warrants an amount
equal to the value of the Warrants. Bear Stearns is obligated to carry out its
duties and functions as Determination Agent in good faith and using its
reasonable judgment.
THE INITIAL OFFERING PRICE OF THE WARRANTS MAY BE IN EXCESS OF THE PRICE
THAT A COMMERCIAL USER OF OPTIONS ON THE JAPAN INDEX MIGHT PAY FOR A COMPARABLE
OPTION IN A PRIVATE TRANSACTION.
EXCHANGE RATE IMPACT
Since the Japan Index does not give effect to changes in the Japanese
Yen/U.S. dollar exchange rate, prospective purchasers should recognize that the
effect of changes in the U.S. dollar market value of a Japanese stock portfolio
cannot be hedged by holding the Warrants.
On , 1994 the closing level of the Japan Index was .
CERTAIN DEFINITIONS
References herein to "U.S. dollar", "U.S.$" or "$" are to the lawful
currency of the United States of America. References to "Japanese Yen", "(Yen)"
or "Y" are to the lawful currency of Japan. As used herein, "New York Business
Day" means any day other than a Saturday or a Sunday in New York City or a day
on which either the AMEX or the New York Stock Exchange 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 "Tokyo Business Day"
means any day other than (i) a Saturday or a Sunday, (ii) a
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day on which banks are not open for business in Tokyo or (iii) a day on which
the TSE, the Singapore International Monetary Exchange Ltd. (the "SIMEX") or the
Osaka Securities Exchange (the "OSE") is not open for business. As used herein,
"Index Calculation Day" means any Tokyo Business Day on which the Index is
calculated and published.
RISK FACTORS
The Warrants involve a high degree of risk, including risks arising from
fluctuations in the prices of the Underlying Stocks, risks relating to the
Index, general risks applicable to the stock market (or markets) on which the
Underlying Stocks are traded and the potential illiquidity of the secondary
market for the Warrants. 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, understand the risks of international stock index transactions,
and reach an investment decision only after careful consideration, with their
advisers, of the suitability of the Warrants in light of the purchaser's
particular financial circumstances and an evaluation of the information set
forth herein.
THE JAPANESE MARKET
The Underlying Stocks that constitute the Japan Index have been issued by
Japanese companies. Any New Japan Index that may be substituted for the Japan
Index also would be based upon stocks issued by Japanese companies. Investments
in securities indexed to the value of Japanese equity securities involve certain
risks. The Japanese securities markets may be more volatile than U.S. or other
securities markets and may be affected by market developments in different ways
than the U.S. or other securities markets. Direct or indirect Japanese
government intervention to stabilize the Japanese securities markets and
cross-shareholdings in Japanese companies on such markets may affect prices and
volume of trading on those markets. There is generally less publicly available
information about Japanese companies than about those U.S. companies that are
subject to the reporting requirements of the U.S. Securities and Exchange
Commission, and Japanese companies are subject to accounting, auditing and
financial reporting standards and requirements that differ from those to which
U.S. reporting companies are subject.
Securities prices in Japan are subject to political, economic, financial
and social factors that apply in Japan. These factors (including the possibility
that recent or future changes in the Japanese government's economic and fiscal
policies, the possible imposition of, or changes in, currency exchange laws or
other Japanese laws or restrictions applicable to Japanese companies or
investments in Japanese equity securities and the possibility of fluctuations in
the rate of exchange between currencies) could significantly affect the Japanese
securities markets. Moreover, the Japanese economy 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.
LIMITATIONS ON CHANGES IN STOCK PRICES BY THE TOKYO STOCK EXCHANGE
Investors should realize that the TSE places daily floors and ceilings upon
prices of individual stocks listed on the TSE. Any stock listed on the TSE
cannot be traded at a price outside of these limits, which are absolute Japanese
Yen limits, and not percentage limits, from the closing price of the stock on
the previous day. In addition, when there is a major order imbalance in a listed
stock, the TSE posts a "special bid quote" or a "special asked quote" for that
stock at a slightly higher or lower price level than the stock's last sale price
in order to solicit counter orders and balance supply and demand for the stock.
Investors should also be aware that the TSE may suspend the trading of an
individual stock in certain limited and extraordinary circumstances, including,
for example, unusual trading activity in that stock. As a result, variations in
the Index may be limited by price limitations or special quotes on, or by
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suspension of trading in, individual stocks that are included in the Index,
which may, in turn, adversely affect the value of the Warrants.
POSSIBLE ILLIQUIDITY OF SECONDARY MARKET
It is not possible to predict how the Warrants will trade in the secondary
market or whether that market will be liquid or illiquid. The Company intends to
list the Warrants on the AMEX. In the event of a delisting or suspension of
trading of the Call Warrants or the Put Warrants, as the case may be, on the
AMEX, the Company will use its best efforts to list the Warrants on another
national securities exchange. Moreover, those Warrants will be automatically
exercised on the Delisting Date. (See "Description of the
Warrants--Extraordinary Events and Exercise Limitation Events" and "--Exercise
and Settlement of Warrants" herein.) To the extent the Call Warrants or the Put
Warrants, as the case may be, are exercised, the number of those Warrants
outstanding will decrease which may result in a decrease in the liquidity of
such Warrants.
EXTRAORDINARY EVENTS; EXERCISE LIMITATION EVENTS; CANCELLATION OF WARRANTS;
DELAYED EXERCISE
The Warrants may be cancelled by the Company upon the occurrence of certain
Extraordinary Events described herein. If the Warrants are cancelled,
Warrantholders will have the right to receive only the Alternative Settlement
Amount, which is an amount to be determined in accordance with a predetermined
formula specified herein. Certain events that may constitute Extraordinary
Events and, therefore, lead to cancellation of the Warrants may be events that
would tend to increase or decrease, as the case may be, the Applicable Cash
Settlement Value of the Warrants. In addition, any exercise of the Warrants may
be suspended, and the valuation of, and payment for, the Warrants may be
postponed and/or the determination of the Applicable Cash Settlement Value
thereof may be made on a different basis, upon the occurrence of an
Extraordinary Event or Exercise Limitation Event. See "Description of the
Warrants--Extraordinary Events and Exercise Limitation Events" herein.
CERTAIN FACTORS AFFECTING VALUE AND TRADING PRICE OF WARRANTS
Investment decisions relating to Warrants require the investor to predict
the direction of movements in the underlying Index as well as the amount and
timing of those movements. The Warrants may change substantially in value, or
lose all of their value, with relatively small movements in the Index. Moreover,
an index warrant is a "wasting asset" in that, in the absence of countervailing
factors such as an offsetting movement in the level of the index, the market
value of an index warrant will tend to decrease over time and the warrant will
have no market value after the time for exercise has expired. Accordingly, the
Warrants 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 international stock index transactions. Those investors 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 and the information set forth in this Prospectus Supplement and in
the Prospectus. The AMEX requires that the Warrants be sold only to investors
whose accounts have been approved for options trading. In addition, the AMEX
requires that its members and member organizations and registered employees
thereof make certain suitability determinations before recommending transactions
in Warrants. 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. An investor should understand the consequences of liquidating his
investment in an index warrant by exercising it as opposed to selling it. This
includes knowing when warrants are exercisable and how to exercise them.
The Applicable Cash Settlement Value of the Warrants at any time prior to
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
Applicable Cash Settlement Value will reflect, among other things, a "time
value"
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for the Warrants. The "time value" of the Warrants will depend partly upon the
length of the period remaining to expiration and expectations concerning the
level of the Index during the period as compared to the Strike Japan Index.
Before exercising or selling Warrants, Warrantholders should carefully consider,
among other things, (i) the trading price of the Warrants, (ii) the level of the
Index at that time, (iii) the time remaining to expiration, (iv) the probable
range of Applicable Cash Settlement Values and (v) any related transaction
costs.
The trading price of a Warrant at any time is expected to be dependent on
(i) the relationship between the Strike Japan Index and the level of the Index
at that time and (ii) a number of other interrelated factors, including those
listed below. The relationship among these factors is complex. However, the
expected effect on the trading price of a Warrant of each of the factors listed
below, assuming in each case that all other factors are held constant, is as
follows:
(1) The prevailing level of the Index. If the level of the Index falls
in relation to the Strike Japan Index, the trading price of a Call Warrant
is expected to decrease and the trading price of a Put Warrant is expected
to increase. If the level of the Index rises in relation to the Strike
Japan Index, the trading price of a Call Warrant is expected to increase
and the trading price of a Put Warrant is expected to decrease. However, as
a result of other factors, the trading price of a Warrant may decline
significantly even if, in the case of a Call Warrant, there is an increase
in the level of the Index as compared to the Strike Japan Index or, in the
case of a Put Warrant, there is a decrease in the level of the Index as
compared to the Strike Japan Index.
(2) The volatility of the Index. If the volatility of the Index
increases, the trading price of both Call Warrants and Put Warrants is
expected to increase. If such volatility decreases, the trading price of
both Call and Put Warrants is expected to decrease.
(3) The time remaining to the expiration date of the Warrants. As the
time remaining to the expiration date of the Warrants decreases, the
trading price of both Call and Put Warrants is expected to decrease.
(4) Prevailing interest rates. If prevailing interest rates in Japan
increase, the trading value of a Put Warrant is expected to decrease and
the trading value of a Call Warrant is expected to increase. If those
interest rates decrease, the trading value of a Put Warrant is expected to
increase and the trading value of a Call Warrant is expected to decrease.
Increases and decreases in prevailing interest rates in other countries
also may affect the value of the Warrants.
(5) Dividend rates. If dividend rates on the Underlying Stocks
increase, then, assuming no change in the value of the Index, the trading
value of a Put Warrant is expected to increase and the trading value of a
Call Warrant is expected to decrease. However, increased dividend rates may
positively affect the value of the Index, which will tend to positively
affect the trading value of a Call Warrant and negatively affect the
trading value of a Put Warrant. If dividend rates on the Underlying Stocks
decrease, then, assuming no change in the level of the Index, the trading
value of a Put Warrant is expected to decrease and the trading value of a
Call Warrant is expected to increase. However, decreased dividend rates may
negatively affect the level of the Index, which will tend to negatively
affect the trading value of a Call Warrant and positively affect the
trading value of a Put Warrant.
Some of the factors referred to above are in turn influenced by various
political, economic and other factors referred to herein that can affect trading
prices of the Underlying Stocks and the level of the Index and currency exchange
rates.
TIME LAG AFTER EXERCISE AND POTENTIAL INTERIM CHANGES IN INDEX
In the case of any exercise of Warrants, there will be a time lag between
the time a Warrantholder gives instructions to exercise and the time the Spot
Japan Index relating to such exercise is determined.
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The delay will, at a minimum, be one Tokyo Business Day (two Tokyo Business Days
in the event that the AMEX is not open for trading on the first Tokyo Business
Day following submission of the Exercise Notice) and could be much longer,
particularly following the occurrence of an Extraordinary Event or an Exercise
Limitation Event as described herein under "Extraordinary Events; Exercise
Limitation Events; Cancellation of Warrants; Delayed Exercise". The relative
level of the Index may change significantly during any such period, and those
changes could decrease the Applicable Cash Settlement Value of the Warrants
being exercised and may result in the Applicable Cash Settlement Value being
zero.
MINIMUM EXERCISE AMOUNT
Except in the case of automatic exercise, a Warrantholder must tender at
least 500 Call Warrants or Put Warrants, as the case may be, at any one time in
order to exercise any Warrants, including at expiration. Thus, except in the
case of automatic exercise, Warrantholders with fewer than the specified minimum
number of Warrants will either have to sell those Warrants or purchase
additional Warrants, incurring transaction costs in each case, in order to
realize upon those investments. Furthermore, such Warrantholders incur the risk
that there may be differences between the trading price of the Warrants and the
Applicable Cash Settlement Value of those Warrants.
OFFERING PRICE OF WARRANTS
The initial offering price of the Warrants may be in excess of the price
that a commercial user of options might pay for a comparable option in a private
transaction.
POTENTIAL MODIFICATIONS OF THE JAPAN INDEX
The policies of the AMEX concerning additions, deletions and substitutions
of Underlying Stocks and the manner in which Japan Index calculations take
account of certain changes affecting the Underlying Stocks (such as stock
dividends and stock splits) can also result in changes to the value of the Japan
Index that significantly affect its performance. Additions, deletions or
substitutions may be necessary due to the disappearance of one or more
Underlying Stocks as a result of liquidations, bankruptcies, insolvencies,
mergers or business combinations, or may be occasioned by the AMEX's view that a
particular Underlying Stock is, for example, no longer representative of a
particular industry category. Although the Japan Index is designed to be
calculated in a manner (typically involving adjustments to the "base" of the
Japan Index) intended to ensure that such additions, deletions, substitutions
and changes do not, by themselves, instantaneously change the level of the Japan
Index, the level of the Japan Index over time may be influenced by changes in
the composition and characteristics of the Underlying Stocks. The method of
adjusting the "base" of the Japan Index in respect of changes affecting the
Underlying Stocks, is within the discretion of the AMEX.
The AMEX may replace the Japan Index with an index that the Company
determines to be a Successor Index or may cease publishing the Japan Index
entirely. If the AMEX or any Third Party makes a material change in the formula
for, or the method of calculating, the Index, the Determination Agent shall make
such calculations as may be required to determine the Applicable Cash Settlement
Value, using the formula and method of calculating the Index as in effect prior
to such change or modification. If the AMEX and/or any Third Party discontinues
publication of the Index that is used at the time for determining the Spot Japan
Index and, after giving effect thereto, there is no published index used for
determining the Spot Japan Index, the Company will cause the Determination Agent
to determine the Applicable Cash Settlement Value, based on the formula and
method used in calculating the Index as in effect on the date the Index was last
published. Although the method used will generally be intended to enable the
Applicable Cash Settlement Values to be determined on as consistent a basis as
practicable, discontinuities may arise in such circumstances. Moreover,
information regarding the current level of certain substitute indexes may not be
readily available to Warrantholders, which may adversely affect the trading
market for their Warrants.
S-18
<PAGE>
The Index used to calculate any Applicable Cash Settlement Value or
Alternative Settlement Amount will initially be the Japan Index, which is
currently calculated and published by the AMEX. Upon the occurrence of certain
events described under "Description of Warrants--Substitution of the Index", the
New Japan Index (which will also relate to the trading of equity securities in
Japan) will be substituted for the Japan Index as the basis of the calculation
of any Applicable Cash Settlement Value or Alternative Settlement Amount. The
characteristics of such New Japan Index are described herein; however, the New
Japan Index does not currently exist, and such New Japan Index may be calculated
and published by a United States securities exchange other than the AMEX. If a
New Japan Index is substituted for the Japan Index, no assurance can be given as
to whether the Applicable Cash Settlement Value or Alternative Settlement Amount
calculated on the basis of such New Japan Index will be more than, less than or
equal to the Applicable Cash Settlement Value or Alternative Settlement Amount
that would have been payable had such substitution not occurred. However, any
such substitution will be made in a manner intended to preserve any gains or
losses in the Japan Index that have occurred as of the time the New Japan Index
is substituted for the Japan Index. See "Description of Warrants--Substitution
of Index" herein.
CERTAIN CONSIDERATIONS REGARDING HEDGING
Prospective purchasers intending to purchase Warrants to hedge against the
market risk associated with investing in one or more individual Underlying
Stocks and/or other stocks should recognize the complexities of utilizing
Warrants in this manner. Prospective purchasers intending to use Warrants in
this manner should also understand that they remain subject to issuer risk--i.e,
the risk that factors affecting a particular issuer, such as its market position
or the quality of its management, may cause its stock to perform differently
than the market as a whole. In addition, prospective purchasers intending to
utilize Warrants to hedge a stock portfolio against market risk should
understand that unless the stocks in the portfolio exactly mirror the Underlying
Stocks, the portfolio and the Index may respond differently to a given market
influence (including in different directions and to different extents). For this
reason, the use of Warrants for hedging purposes involves special risks that are
not present with "true" hedges--i.e., hedges composed of options on the specific
stocks in the hedged position. In addition, because the Index is not affected by
changes in the Japanese Yen/U.S. dollar exchange rate, fluctuations in that
exchange rate could complicate any hedging strategy.
DESCRIPTION OF THE WARRANTS
The Call Warrants will be issued pursuant to a Warrant Agreement (the "Call
Warrant Agreement"), to be dated as of , 1994, between the
Company, Chemical Bank, as Warrant Agent (the "Warrant Agent"), and Bear,
Stearns & Co. Inc., as Determination Agent. The Put Warrants will be issued
pursuant to a Warrant Agreement (the "Put Warrant Agreement"), to be dated as of
, 1994, between the Company, the Warrant Agent, and Bear, Stearns
& Co. Inc., as Determination Agent.
The following summaries of certain provisions of the Call Warrant Agreement
and the Put Warrant Agreement (collectively, the "Warrant Agreements") and the
Warrants do not purport to be complete and are subject to, and qualified in
their entirety by reference to, all of the provisions of the Warrant Agreements
(including the form of Warrant certificate and form of global Warrant
certificate attached as exhibits thereto). The Warrant Agreements will be
available for inspection by any Warrantholder at the office of the Warrant Agent
(the "Warrant Agent's Office"), which is currently located at 450 West 33rd
Street, New York, New York 10001, during the Warrant Agent's normal business
hours. See "Description of Warrants" in the Prospectus.
The aggregate number of Warrants to be issued pursuant to this offering
will be 2,000,000, comprised of 1,000,000 Call Warrants and 1,000,000 Put
Warrants, subject to the over-allotment options granted by the Company to the
Underwriters and to the right of the Company to issue additional Warrants with
substantially identical terms at a later time. See "Underwriting."
S-19
<PAGE>
A Warrant will not require or entitle a Warrantholder to sell, deliver or
purchase any shares of any component stock underlying the Index (an "Underlying
Stock") or any other securities to or from the Company. The Company is under no
obligation to, nor will it, purchase, take delivery of or sell any shares of any
Underlying Stock or any other securities from or to Warrantholders in connection
with the exercise of any Warrants. Upon exercise of a Warrant, the Company will
make only a U.S. dollar cash payment in the amount, if any, of the Applicable
Cash Settlement Value or Alternative Settlement Amount, as applicable, of such
Warrant. Warrantholders will not receive any interest on any Applicable Cash
Settlement Value or Alternative Settlement Amount, and the Warrants will not
entitle the Warrantholders to any of the rights of holders of any Underlying
Stock or any other securities.
The Warrants are unsecured contractual obligations of the Company and will
rank on a parity with the Company's other unsecured contractual obligations and
unsecured and unsubordinated debt. The Company may issue several issues of
warrants relating to various stock indexes. At any given time the number of such
issued warrants (including the Warrants) outstanding may be substantial. The
Warrants are not standardized stock index options of the type issued by the OCC.
For example, unlike purchasers of OCC standardized options who have the credit
benefits of guarantees and margin and collateral deposits by OCC clearing
members to protect the OCC from a clearing member's failure, purchasers of
Warrants must look solely to the Company for performance of its obligations to
pay the Applicable Cash Settlement Value upon the exercise or expiration of the
Warrants. Further, the market for the Warrants is not expected to be generally
as liquid as the market for some OCC standardized options.
The AMEX has advised the Company that, for margin purposes, the Warrants
will be treated as if they were option contracts subject to AMEX Rule 462(d)
relating to minimum margins.
CASH SETTLEMENT VALUE
Each Warrant will entitle the Warrantholder to receive, upon exercise
(including automatic exercise), the Applicable Cash Settlement Value of such
Warrant, except that, under the circumstances described under "--Extraordinary
Events and Exercise Limitation Events" below, such Warrantholder may instead
receive the Alternative Settlement Amount for such Warrant.
The Cash Settlement Value of a Call Warrant will be an amount in U.S.
dollars equal to the quotient (rounded down to the nearest cent) of (A) the
amount, if any, by which the Spot Japan Index for the Valuation Date for such
Warrants exceeds the Strike Japan Index divided by (B) the Warrant Divisor, as
indicated in the following formula:
<TABLE>
<S> <C>
Spot Japan Index--Strike Japan Index
Cash Settlement Value of a Call Warrant = ------------------------------------
Warrant Divisor
</TABLE>
The Cash Settlement Value of a Put Warrant will be an amount in U.S.
dollars equal to the quotient (rounded down to the nearest cent) of (A) the
amount, if any, by which the Strike Japan Index exceeds the Spot Japan Index for
the Valuation Date for such Warrant divided by (B) the Warrant Divisor as
indicated in the following formula:
<TABLE>
<S> <C>
Strike Japan Index--Spot Japan Index
Cash Settlement Value of a Put Warrant = ------------------------------------
Warrant Divisor
</TABLE>
HYPOTHETICAL WARRANT VALUES ON EXERCISE
Set forth below is an illustrative example demonstrating the Cash
Settlement Values of a hypothetical Call Warrant with a Strike Japan Index of
(based on a Warrant Divisor of ) at various hypothetical levels
of the Spot Japan Index. The illustrative hypothetical Cash Settlement
S-20
<PAGE>
Values in the table do not reflect any "time value" for a Call 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. The numbers in the table have been rounded down to the
nearest cent.
<TABLE><CAPTION>
APPROXIMATE
CASH SETTLEMENT
VALUE (ALSO KNOWN
AS "INTRINSIC
HYPOTHETICAL SPOT VALUE")
JAPAN INDEX OF CALL WARRANT
----------------- -------------------
<S> <C> <C>
Equal to or less than..................................................... (Strike Price) $ 0.00
</TABLE>
Set forth below is an illustrative example demonstrating the Cash
Settlement Values of a hypothetical Put Warrant with a Strike Japan Index of
(based on a Warrant Divisor of ) at various hypothetical levels
of the Spot Japan Index. The illustrative hypothetical Cash Settlement Values in
the table do not reflect any "time value" for a Put 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.
The numbers in the table have been rounded down to the nearest cent.
<TABLE><CAPTION>
APPROXIMATE
CASH SETTLEMENT
VALUE (ALSO KNOWN
HYPOTHETICAL SPOT AS "INTRINSIC VALUE")
JAPAN INDEX OF PUT WARRANT
--------------------- -------------------------
<S> <C> <C>
Equal to or less than............................................ (Strike Price) $ 0.00
</TABLE>
SUBSTITUTION OF THE INDEX
Movements in the Japan Index correspond generally to movements in the
Nikkei 225 Index published by Nihon Keizai Shimbun, Inc., which is currently the
most widely utilized index relating to Japanese equity securities, as measured
by trading volume and open interest relating to the futures
S-21
<PAGE>
contract on such index (the "Nikkei 225 Futures Contract"). In October 1993,
Nihon Keizai Shimbun, Inc. commenced the calculation and publication of a new
broad-based index referred to as the Nikkei 300 Index (the "Nikkei 300 Index").
Unlike the Nikkei 225 Index, which is a price-weighted index of 225 Japanese
companies listed in the First Section of the TSE, the Nikkei 300 Index is a
capitalization-weighted index of 300 Japanese companies listed in the First
Section of the TSE. See "The New Japan Index" for a description of the Nikkei
300 Index. On February 14, 1994, trading on the OSE of a new futures contract on
the Nikkei 300 Index (hereafter, the "Nikkei 300 Futures Contract") was
introduced. If the Nikkei 300 Futures Contract develops trading volume and open
interest exceeding that of the Nikkei 225 Futures Contract, the Company believes
this would indicate that the Nikkei 300 Futures Contract will have become more
widely utilized than the Nikkei 225 Futures Contract.
On the thirtieth calendar day (or if such day is not a New York Business
Day, the next succeeding New York Business Day) (a "Substitution Date")
following a Substitution Event (as defined herein), the New Japan Index will be
substituted for the Japan Index. Upon the occurrence of a Substitution Event,
the Company will cause prompt notice of the occurrence of such Substitution
Event and the Substitution Date to be given to the Warrantholders. The notice
will also state that on the Substitution Date, for purposes of calculating any
Applicable Cash Settlement Value or any Alternative Settlement Amount, (i) the
Spot Japan Index will be determined by reference to the closing level of the New
Japan Index, (ii) an adjusted Strike Japan Index will be substituted for the
original Strike Japan Index and (iii) an adjusted Warrant Divisor will be
substituted for the original Warrant Divisor. The adjusted Strike Japan Index
will be calculated as follows:
<TABLE>
<S> <C> <C>
Current Level of New Japan Index
initial Strike Japan Index x -------------------------------- = adjusted Strike Japan Index
Current Level of Japan Index
</TABLE>
The adjusted Warrant Divisor will be calculated as follows:
<TABLE>
<S> <C> <C>
Current Level of New Japan Index
initial Warrant Divisor x -------------------------------- = adjusted Warrant Divisor
Current Level of Japan Index
</TABLE>
For purposes of the above calculations, the "Current Level" of the Japan
Index and the New Japan Index will equal their respective levels at the close of
business on the Tokyo Business Day immediately preceding the Substitute Date.
A "Substitution Event" will occur if and when, as determined by the
Determination Agent (whose opinion shall be conclusive and binding on the
Company and the Warrantholders), the following conditions are fulfilled:
(a) Nikkei 300 Futures Contracts shall at the time of the Substitution
Event be publicly traded on the OSE;
(b) The AMEX or another United States national securities exchange
shall publish (on a basis not less regularly than each day on which it and
the TSE are open for trading) an index (the "New Japan Index") that for a
period of 90 calendar days immediately preceding the date of the
Substitution Event shall have had a correlation (based on daily closing
value to closing value percentage changes) of not less than 90% with the
Nikkei 300 Index (during the 90 calendar days immediately preceding the
date of this Prospectus Supplement, the Japan Index had a correlation of
approximately 99% with the Nikkei 225 Index); and
S-22
<PAGE>
(c) an option or warrant that has payments determined by reference to
the New Japan Index shall at the time of the Substitution Event have been
approved to be listed on a national securities exchange by the Securities
and Exchange Commission;
(d) Either of the following shall have occurred:
(i) the Nikkei 225 Index shall no longer be published and/or the
Nikkei 225 Futures Contracts shall have been delisted from trading on
the OSE; or
(ii) the Nikkei 300 Futures Contracts publicly traded on the OSE
have (A) greater average daily volume and (B) greater average daily open
interest than the Nikkei 225 Futures Contracts that trade on the OSE,
each for any three-month period prior to the date of the Substitution
Event, commencing on a futures expiration date on the OSE and ending on
the following futures expiration date; and
(e) To the extent required, the Company shall have obtained any
license necessary to use the New Japan Index as described herein. The
Company will agree in the Warrant Agreements to use its reasonable efforts
to obtain any such license.
Notwithstanding the above, unless the Nikkei 225 Index is no longer published
and/or the Nikkei 225 Futures Contracts shall have been delisted from trading on
the OSE, a Substitution Event will not be deemed to have occurred on any of the
60 days next preceding the Expiration Date of the Warrants.
All information contained in this Prospectus Supplement regarding the
Nikkei 225 Index and Nikkei 225 Futures Contract, Nikkei 300 Index and Nikkei
300 Futures Contract, as well as their publisher, Nihon Keizai Shimbun, Inc., is
derived from publicly available information. Nihon Keizai Shimbun, Inc. has no
relationship with the Company or the Warrants; it does not sponsor, endorse,
authorize, sell or promote the Warrants and has no obligation or liability in
connection with the administration, marketing or trading of the Warrants.
WARRANT CERTIFICATES
The Warrants will be issued as certificates in registered form (each, a
"Warrant Certificate"). The Warrant Agent will from time to time register the
transfer of any outstanding Warrant Certificate upon surrender thereof at the
Warrant Agent's Office duly endorsed by, or accompanied by a written instrument
or instruments of transfer in form satisfactory to the Warrant Agent and the
Company duly executed by, the registered holder thereof, a duly appointed legal
representative or a duly authorized attorney-in-fact. Such signature must be
guaranteed by a bank or trust company having a correspondent office in New York
City or a member of a national securities exchange. A new Warrant Certificate
will be issued to the transferee upon any such registration of transfer.
At the option of a Warrantholder, Warrant Certificates may be exchanged for
other Warrant Certificates representing a like number and kind of Warrants upon
surrender to the Warrant Agent at the Warrant Agent's Office of the Warrant
Certificates to be exchanged. The Company will thereupon execute, and the
Warrant Agent will countersign and deliver, one or more new Warrant Certificates
representing such like number and kind of Warrants.
S-23
<PAGE>
If, after any exercise of Warrants evidenced by a Warrant Certificate, the
number of Warrants exercised is fewer than the total number of Warrants
evidenced by that certificate, a new Warrant Certificate evidencing the number
of Warrants not exercised will be issued to the registered holder or his
assignee. See "--Minimum Exercise Amount" below.
If any Warrant Certificate is mutilated, lost, stolen or destroyed, the
Company may in its discretion execute, and the Warrant Agent may countersign and
deliver, in exchange and substitution for such mutilated Warrant Certificate, or
in replacement for such lost, stolen or destroyed Warrant Certificate, a new
Warrant Certificate representing a like number and kind of Warrants, but only
(in the case of loss, theft or destruction) upon receipt of evidence
satisfactory to the Company and the Warrant Agent of loss, theft or destruction
of such Warrant Certificate and security or indemnity, if requested,
satisfactory to them. Warrantholders requesting replacement Warrant Certificates
must also comply with such other reasonable regulations and pay such reasonable
charges as the Company or the Warrant Agent may prescribe. If all of the
Warrants represented by any such mutilated, lost, stolen or destroyed Warrant
Certificate have been or are about to be exercised (including automatic
exercise), the Company in its discretion, instead of issuing a new Warrant
Certificate, may direct the Warrant Agent to treat that Warrant Certificate as
if the Warrant Agent had received an Exercise Notice in proper form in respect
thereof or as being subject to automatic exercise, as the case may be.
No service charge will be made for any registration of transfer or exchange
of Warrant Certificates, but the Company may require the payment of a sum
sufficient to cover any tax or government charge that may be imposed in
connection therewith, other than exchanges not involving any transfer. In the
case of the replacement of mutilated, lost, stolen or destroyed Warrant
Certificates, the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Warrant Agent)
connected therewith.
Warrant Certificates held through CEDEL will be held by Citibank, N.A.
("Citibank"), as custodian for CEDEL, and Warrant Certificates held through
Euroclear will be held by Morgan Guaranty Trust Company of New York ("Morgan"),
as custodian for Euroclear. After the last day of the Conversion Option Period,
Warrantholders may no longer hold certificated positions through CEDEL or
Euroclear. See "--Book Entry Conversion" herein.
BOOK-ENTRY CONVERSION
Forty-five calendar days after the consummation of the sale of the Warrants
pursuant to this Prospectus Supplement (which sale is expected to be consummated
on , 1994), each Warrantholder will have the option to convert the form
in which such Warrantholder holds his Warrants from certificated to book-entry
form by utilizing the Conversion Option. The Conversion Option will be available
for 45 calendar days (the "Conversion Option Period") and is expected to run
from , 1994 through , 1994.
In order to be exchanged for a Warrant in book-entry form, a Warrant
Certificate must be delivered to DTC, in proper form for deposit, by a
Participant. Accordingly, a Warrantholder who is not a Participant (other than a
Warrantholder holding Warrants through CEDEL or Euroclear) must deliver his
Warrant Certificate, in proper form for deposit, to a Participant, either
directly or through an indirect participant (such as a bank, brokerage firm,
dealer or trust company that clears through, or maintains a custodial
relationship with, a Participant) or brokerage firm which maintains an account
with a Participant, in order to have its Warrant Certificate exchanged for a
Warrant in book-entry form. Warrantholders who desire to exchange their Warrant
Certificates for Warrants in book-entry form should contact their brokers or
other Participants or indirect participants to obtain information on procedures
for submitting their Warrant Certificates to DTC, including the proper form for
submission and (during the Conversion Option Period) the cut-off times for same
day and next day exchange. A Warrant Certificate held by the Warrantholder in
nominee or "street" name may be automatically
S-24
<PAGE>
exchanged into book-entry form by the broker or other entity in whose name such
Warrant Certificate is registered, without action of, or consent by, the
beneficial owner of the related Warrant. In addition, a Warrant Certificate held
through the facilities of CEDEL or Euroclear will automatically be exchanged
into book-entry form by CEDEL or Euroclear, as the case may be, pursuant to the
Conversion Option on the last day of the Conversion Option Period without action
of, or consent by, the beneficial owner of the related Warrants. Accordingly,
Warrantholders holding their Warrants through CEDEL or Euroclear who do not wish
to convert the form in which they hold such Warrants to book-entry form must
arrange to transfer their Warrants out of the CEDEL or Euroclear systems, as the
case may be, prior to the last day of the Conversion Option Period. Thereafter,
Warrantholders may no longer hold certificated Warrants through the facilities
of CEDEL or Euroclear.
Warrant Certificates received by DTC for exchange during the Conversion
Option Period will be exchanged for Warrants in book-entry form by the close of
business on the New York Business Day that those Warrant Certificates are
received by DTC (if received by DTC at its then applicable cut-off time for same
day credit) or on the following New York Business Day (if received by DTC at its
then applicable cut off-time for next day credit). After the last day of the
Conversion Option Period, DTC will not be required to accept delivery of Warrant
Certificates in exchange for book-entry Warrants, but may permit Warrant
Certificates to be so exchanged on a case-by-case basis. However, there can be
no assurance that such Warrant Certificates will be accepted for exchange.
Warrant Certificates surrendered at any time for exchange for book-entry
Warrants may not be exercised or delivered for settlement or transfer until such
exchange has been effected. Accordingly, if a change in the level of the Index
were to occur after a Warrant Certificate had been surrendered for exchange into
book-entry form, a Warrantholder would not be able to take advantage of the
change by exercising the related Warrant until such exchange had been effected.
Since Warrant Certificates are not required to be exchanged for Warrants in
book-entry form, it is likely that not all Warrant Certificates will be so
exchanged. Accordingly, Warrantholders purchasing Warrants in secondary market
trading after commencement of the Conversion Option Period may wish to make
specific arrangements with brokers or other Participants or indirect
participants if they wish to purchase only Warrants in book-entry form and not
Warrant Certificates. The Company has been informed by CEDEL and Euroclear that
they will only clear Warrants in book-entry form after the Conversion Option
Period.
Once a Warrantholder has elected the Conversion Option, such Warrantholder
may hold his Warrants only in book-entry form and will not be able to change his
election or withdraw from the book-entry system. Accordingly, ownership of the
Warrants in certificated form will no longer be available to investors who have
elected the Conversion Option.
CEDEL AND EUROCLEAR
Initially, Warrantholders may hold their Warrants in either book-entry or
certificated form through Cedel S.A. ("CEDEL") or Euroclear if they are
participants in those systems, or indirectly through organizations which are
participants in such systems. However, as described above under "--Book-Entry
Conversion", it is anticipated that Warrant Certificates held through those
systems will be converted into book-entry form on the last day of the Conversion
Option Period and, accordingly, certificated ownership of Warrants will no
longer be available through those systems after such day.
CEDEL and Euroclear will hold omnibus certificated positions and omnibus
book-entry positions on behalf of their participants through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective depositaries which in turn will, in the case of certificated
positions only, hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank will act as depositary for
CEDEL and Morgan will act as depositary for Euroclear (in such capacities, the
"Depositaries"). All securities in CEDEL or Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts.
S-25
<PAGE>
Exercises of certificated Warrants by persons holding through CEDEL or
Euroclear participants will be effected through Citibank or Morgan, as the case
may be; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participant in that 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 depositary to take action to effect the exercise of
the Warrants on its behalf by delivering Warrants to the Warrant Agent and
receiving payment in accordance with its normal procedures for next-day funds
settlement. Payments with respect to the certificated Warrants held through
CEDEL or Euroclear will be credited to the cash accounts of CEDEL participants
or Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. See "--Exercise and
Settlement of the Warrants" herein.
Exercises of book-entry Warrants by persons holding through CEDEL or
Euroclear participants will be effected through DTC, in accordance with DTC
rules, on behalf of the relevant European international clearing system by its
Depositary; 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 Depositary to take action to effect its 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 CEDEL or Euroclear will be
credited to the cash accounts of CEDEL participants or Euroclear participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. See "--Exercise and Settlement of the Warrants"
herein.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between
CEDEL participants through electronic book-entry changes in accounts of CEDEL
participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in CEDEL in any of 28 currencies,
including U.S dollars. CEDEL provides to its participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. CEDEL
interfaces with domestic markets in several countries, As a professional
depository, CEDEL is subject to regulation by the Luxembourg Monetary Institute.
CEDEL participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations and may include the
Underwriters. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for its
participants and to clear and settle transactions between its participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 27 currencies, including U.S. dollars. The Euroclear System
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan's Brussels, Belgium office (the "Euroclear
Operator" or "Euroclear"), under contract with Euroclear Clearance System S.C.,
a Belgian cooperative corporation (the "Cooperative"). Morgan is a member bank
of the United States Federal Reserve System. All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of Euroclear participants. Euroclear participants include banks
(including central banks), securities brokers and dealers and other professional
financial intermediaries and may
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include the Underwriters. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipt of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
All information herein on CEDEL and Euroclear is derived from CEDEL or
Euroclear, as the case may be, and reflects the policies of those organizations,
which are subject to change without notice.
EXERCISE AND SETTLEMENT OF WARRANTS
The Warrants will be exercisable from the time of issuance, subject to
postponement or, under certain circumstances, cancellation, during the
continuance of an Extraordinary Event or an Exercise Limitation Event as
described under "--Extraordinary Events and Exercise Limitation Events" herein,
and will expire on , 1997 (the "Expiration Date"). Warrants not
exercised (including by reason of any such postponed exercise) at or before 3:00
P.M., New York City time, on the New York Business Day immediately preceding the
earlier of (i) the Expiration Date or (ii) the Delisting Date, will be
automatically exercised as described under "--Automatic Exercise" below. See
"--Minimum Exercise Amount" below.
A Warrantholder may exercise certificated Warrants on any New York Business
Day during the period from the date of issuance of such Warrants until 3:00
P.M., New York City time, on the New York Business Day immediately preceding the
earlier of (i) the Expiration Date or (ii) the Delisting Date, by delivering or
causing to be delivered to the Warrant Agent the Warrant Certificate
representing such Warrants with the irrevocable notice of exercise on the
reverse thereof (or a notice of exercise in substantially identical form
delivered therewith) (such notice, an "Exercise Notice") duly completed and
executed. The Warrant Agent's telephone number and facsimile transmission number
for this purpose are (212) 623-0692 and (212) 422-2648, respectively.
In the case of Warrants held through the facilities of DTC, a Warrantholder
may exercise such Warrants on any New York Business Day during the period from
the date of issuance of such Warrants until 3:00 P.M., New York City time, on
the New York Business Day immediately preceding the earlier of (i) the
Expiration Date and (ii) the Delisting Date, by causing (x) those Warrants to be
transferred to the Warrant Agent on the records of DTC and (y) a duly completed
and executed Exercise Notice to be delivered by a Participant on behalf of the
Warrantholder to the Warrant Agent. Forms of Exercise Notice for Warrants held
through the facilities of DTC may be obtained from the Warrant Agent at the
Warrant Agent's Office. The Warrant Agent's telephone number and facsimile
transmission number for this purpose are (212) 623-0692 and (212) 422-2648,
respectively.
In the case of book-entry Warrants held through the facilities of CEDEL or
Euroclear, a Warrantholder may exercise such Warrants on any New York Business
Day during the period from the date of issuance of such Warrants until 3:00
P.M., New York City time, on the New York Business Day immediately preceding the
earlier of (i) the Expiration Date and (ii) the Delisting Date by causing (x)
those Warrants to be transferred to the Warrant Agent, by giving appropriate
instructions to the participant holding those Warrants in either the CEDEL or
Euroclear system, as the case may be, and (y) a duly completed and executed
Exercise Notice to be delivered to the Warrant Agent by CEDEL, in the case of
Warrants held through CEDEL, or such participant, in the case of Warrants held
through
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<PAGE>
Euroclear. Forms of Exercise Notice for Warrants held through the facilities of
either CEDEL or Euroclear may be obtained from the Warrant Agent at the Warrant
Agent's Office or from CEDEL or Euroclear. The Warrant Agent's telephone number
and facsimile transmission number for this purpose are (212) 623-0692 and (212)
422-2648, respectively.
Except for Warrants subject to automatic exercise or held through the
facilities of CEDEL or Euroclear, and subject to the Limit Option, the "Exercise
Date" for a Warrant will be (i) the New York Business Day on which the Warrant
Agent receives the Warrant and Exercise Notice in proper form with respect to
that Warrant, if received at or prior to 3:00 P.M., New York City time, on that
day, or (ii) if the Warrant Agent receives such Warrant and Exercise Notice
after 3:00 P.M., New York City time, on that day, then the next succeeding New
York Business Day.
In the case of Warrants held through the facilities of CEDEL or Euroclear,
except for Warrants subject to automatic exercise, and subject to the Limit
Option, the "Exercise Date" for a Warrant will be (i) the New York Business Day
on which the Warrant Agent receives the Exercise Notice in proper form with
respect to that Warrant, if received at or prior to 3:00 P.M., New York City
time, on that day, or (ii) if the Warrant Agent receives the Exercise Notice
after 3:00 P.M., New York City time, on that day, then the next succeeding New
York Business Day; provided, in each such case that the Warrant is received by
3:00 P.M., New York City time, on the Valuation Date. If a Warrant is received
after 3:00 P.M., New York City time, on the Valuation Date, then the Exercise
Date for that Warrant will be the day on which the Warrant is received or, if
such day is not a New York Business Day, the next succeeding New York Business
Day. In the case of Warrants held through the facilities of CEDEL or Euroclear,
in order to ensure proper exercise on a given New York Business Day,
participants in CEDEL or Euroclear must submit exercise instructions to CEDEL or
Euroclear, as the case may be, by 10:00 A.M., Luxembourg time, in the case of
CEDEL and by 10:00 A.M., Brussels time (by telex), or 11:00 A.M., Brussels time
(by EUCLID), in the case of Euroclear. In addition, in the case of book-entry
exercises by means of the Euroclear System, (i) participants must also transmit,
by facsimile (facsimile no: (212) 422-2648), to the Warrant Agent a copy by 3:00
P.M., New York City time, on the desired Exercise Date, of the Notice of
Exercise submitted to Euroclear and (ii) Euroclear must confirm to the Warrant
Agent, by facsimile no later than 9:00 A.M., New York City time, on the
Valuation Date, that the Warrants will be received by the Warrant Agent by 3:00
P.M., New York City time, on such date; provided that if such facsimile is
received after 9:00 A.M., New York City time, on the Valuation Date, the Company
will be entitled to direct the Warrant Agent to reject the related Exercise
Notice or waive the requirement for timely delivery of such facsimile
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
New York Business Day, a Warrantholder may need to give exercise instructions to
his broker or other intermediary substantially earlier than 3:00 P.M., New York
City time, on that 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 and other
intermediaries, if applicable, as to applicable cut-off times and other exercise
mechanics. See "Certain Important Information Concerning the Warrants" above.
Except in the case of Warrants subject to automatic exercise and Warrants
that upon exercise will entitle the holder thereof to receive an Alternative
Settlement Amount in lieu of the Applicable Cash Settlement Value, if on any
Valuation Date the Applicable Cash Settlement Value for any Warrants would be
zero, then the attempted exercise of those Warrants will be void and of no
effect and, in the case of certificated Warrants, the Warrant Certificate
evidencing those Warrants will be returned to the registered holder by first
class mail at the Company's expense or, in the case of Warrants held through the
facilities of DTC, CEDEL or Euroclear, the Warrants will be transferred back to
the participant (including the Depositaries) that submitted them free on the
records of DTC, CEDEL or Euroclear, as the case may be, and, in any such case,
the Warrantholder will be permitted to re-exercise the Warrants prior to the
Expiration Date or the Delisting Date, as the case may be.
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<PAGE>
The "Valuation Date" for a Warrant will be the first Index Calculation Day
following the applicable Exercise Date, subject to postponement upon the
occurrence of an Extraordinary Event or an Exercise Limitation Event as
described under "--Extraordinary Events and Exercise Limitation Events" below.
At present, the AMEX calculates the Japan Index once on each New York Business
Day based on the last reported closing prices of the Underlying Stocks on the
TSE. Due to time differences, trading on the TSE occurs when the AMEX is closed
for business. The following is an illustration of the timing of an Exercise
Date, the ensuing Valuation Date and the Limit Option Reference Index (as
defined herein), assuming that all relevant dates are New York Business Days and
Index Calculation Days and assuming the absence of any intervening Extraordinary
Event or Exercise Limitation Event. If the Warrant Agent receives a
Warrantholder's Warrants and Exercise Not ice in proper form at or prior to 3:00
P.M., New York City time, on Wednesday, July 6, 1994, the Exercise Date for
those Warrants will be July 6] and the Valuation Date for such Warrants will be
Thursday, July 7, 1994. However in the case of Warrants held through the
facilities of CEDEL or Euroclear, the Warrants must be received by 3:00 P.M.,
New York City time, on the Valuation Date; if Warrants are received after that
time, then the Exercise Date for those Warrants will be the day on which those
Warrants are received or, if that day is not a New York Business Day, the next
succeeding New York Business Day, and the Valuation Date for those Warrants will
be the first Index Calculation Day following the Exercise Date and the Limit
Option Reference Index will be determined by reference to such Exercise Date and
Valuation Date. The Spot Japan Index used to determine the Cash Settlement Value
of the Warrants will be the closing level of the Index on July 7 (i.e., the
level of the Index calculated using values for the Underlying Stocks as of the
close of the TSE on July 7, which, because of time differences, will occur at
2:00 A.M. in New York City on July 7 (or 1:00 A.M. in New York City during the
months in which Eastern Daylight Savings Time is not in effect)). If the
Warrantholder elected the Limit Option in connection with the exercise of such
Warrants, the Limit Option Reference Index would be the closing level of the
Index on July 6. If the Warrant Agent were to receive the Warrants and Exercise
Notice after 3:00 P.M., New York City time, on July 6, 1994 (except in the case
of Warrants held through the facilities of CEDEL or Euroclear), then the
Exercise Date for such Warrants would instead be July 7, the Valuation Date
would be July 8 and the applicable Limit Option Reference Index would be the
closing level of the Index on July 7 (which would not have occurred at the time
such Warrantholder tendered his Exercise Notice on July 6).
Following receipt of Warrants and the related Exercise Notice in proper
form, the Warrant Agent, not later than 5:00 P.M., New York City time, on the
applicable Valuation Date (or, if such Valuation Date is not a New York Business
Day, on the next succeeding New York Business Day) (i) will obtain the Spot
Japan Index (which will be the level of the Index on such Valuation Date), (ii)
will determine the Cash Settlement Value of such Warrants and (iii) will advise
the Company of the aggregate Cash Settlement Value of the exercised Warrants.
Except in the case of Warrants held through the facilities of DTC, CEDEL or
Euroclear, if the Company has made adequate funds available to the Warrant Agent
in a timely manner as required by the Warrant Agreements, the Warrant Agent will
thereafter be responsible for making payment available to each registered holder
of a Warrant on the fifth New York Business Day following the Valuation Date
(or, if the Valuation Date is not a New York Business Day, on the fifth New York
Business Day following the New York Business Day next succeeding the Valuation
Date) in the form of a cashier's check or official bank check or (in the case of
payments of at least U.S.$100,000) by wire transfer to a U.S. dollar bank
account maintained by such holder in the United States (at such holder's
election as specified in the applicable Exercise Notice), in an amount equal to
the aggregate Applicable Cash Settlement Value of such holder's exercised
Warrants. In the case of Warrants held through the facilities of DTC, CEDEL or
Euroclear, the Company will be required to make available to the Warrant Agent,
in a timely manner as required by each of the Warrant Agreements, funds in an
amount sufficient to pay such aggregate Applicable Cash Settlement Value. If the
Company has made those funds available by such time, the Warrant Agent will
thereafter be responsible for making funds available to each appropriate
Participant (including Citibank and Morgan who in turn will disburse payments to
CEDEL and Euroclear, as the case may be, who will be
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<PAGE>
responsible for disbursing funds to their respective participants, who, in turn,
will be responsible for disbursing funds to the Warrantholders it represents),
and such participant will be responsible for disbursing funds 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.
"Determination Agent" means Bear Stearns or, in lieu thereof, another firm
selected by the Company to perform the functions of the Determination Agent in
connection with the Warrants. Bear Stearns is obligated to carry out its duties
and functions as Determination Agent in good faith and using its reasonable
judgment. However, Bear Stearns, in its capacity as Determination Agent, will
have no obligation to take the interests of the Company or the Warrantholders
into consideration when it determines, composes or calculates the Applicable
Cash Settlement Value or Alternative Settlement Amount. Because Bear Stearns is
an affiliate of the Company, conflicts of interest may arise in connection with
Bear Stearns performing its role as Determination Agent. Bear Stearns, 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 Warrants to
restrict the use of information relating to any calculation of the Cash
Settlement Value prior to its dissemination. Bear Stearns and its affiliates may
from time to time engage in transactions involving the Underlying Stocks for
their proprietary accounts and for other accounts under their management, which
may influence the value of such Underlying Stocks. Affiliates of Bear Stearns
will also be the writers of the hedge of the Company's obligations under the
Warrants and will be obligated to pay to the Company upon exercise of the
Warrants an amount equal to the value of the Warrants. Accordingly, under
certain circumstances, conflicts of interest may arise between Bear Stearns'
responsibilities as Determination Agent with respect to the Warrants and its
obligations under its hedge.
MINIMUM EXERCISE AMOUNT
No fewer than 500 Call Warrants or 500 Put Warrants, as the case may be,
may be exercised by a Warrantholder at any one time, except in the case of
automatic exercise or exercise upon cancellation of the Warrants as described
under "--Extraordinary Events and Exercise Limitation Events" below.
Accordingly, except in the case of automatic exercise of the Warrants or upon
cancellation of the Warrants, Warrantholders with fewer than 500 Call Warrants
or 500 Put Warrants, as the case may be, will need either to sell their Warrants
or to purchase additional Warrants, thereby incurring transaction costs, in
order to realize upon their investment. Warrantholders must satisfy the minimum
exercise amount requirement described above separately with respect to both
certificated and book-entry Warrants and both Call Warrants and Put Warrants
even if more than one kind of Warrant is to be exercised at the same time. Thus,
a Warrantholder seeking to exercise at the same time both certificated and
book-entry Warrants or both Call Warrants and Put Warrants must still exercise a
minimum of 500 of each kind of Warrant in order to satisfy this requirement. In
addition, book-entry Warrants held through one Participant (including
participants in CEDEL or Euroclear) may not be combined with book-entry Warrants
held through another Participant in order to satisfy the minimum exercise
requirement.
LIMIT OPTION
Except for Warrants subject to automatic exercise and except as described
below with respect to payments of any Alternative Settlement Amount, each
Warrantholder, in connection with any exercise of Warrants (including a
postponed exercise following an Extraordinary Event or an Exercise Limitation
Event), will have the option (the "Limit Option") to specify that such Warrants
are not to be exercised if the Spot Japan Index that would otherwise be used to
determine the Applicable Cash Settlement Value of such Warrants is at least 5%
lower, in the case of Call Warrants, or higher, in the case of Put Warrants,
than the closing level of the Index for the day specified below (such closing
level
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<PAGE>
being referred to herein as the "Limit Option Reference Index"). A
Warrantholder's election of the Limit Option must be specified in the applicable
Exercise Notice delivered to the Warrant Agent. The Limit Option Reference Index
will be the closing level of the Index on the relevant Exercise Date (or, if
such date is not an Index Calculation Day, on the immediately preceding Index
Calculation Day). If an Exercise Notice and the related Warrants are received
after 3:00 P.M., New York City time, on a given day (except as permitted in the
case of Warrants held through the facilities of CEDEL or Euroclear), the
applicable Limit Option Reference Index will be determined as of the next day
that is also a New York Business Day (or, if such day is not an Index
Calculation Day, as of the immediately preceding Index Calculation Day).
To ensure that the Limit Option will have its intended effect of limiting
the risk of any downward (in the case of Call Warrants) or upward (in the case
of Put Warrants) movement in the level 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 New York Business Day on
which it is submitted (except as permitted in the case of Warrants held through
the facilities of CEDEL or Euroclear) and the Exercise Date must also be an
Index Calculation Day. See the illustration under "--Exercise and Settlement of
Warrants" above and "Certain Important Information Concerning the Warrants"
herein.
Following receipt of an Exercise Notice and the related Warrants subject to
the Limit Option, the Warrant Agent will obtain the applicable Limit Option
Reference Index and will determine whether those 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 either the Warrant Certificate
evidencing those Warrants will be returned to the registered holder by first
class mail at the Company's expense or, in the case of Warrants held through the
facilities of DTC, CEDEL or Euroclear, the Warrants will be transferred to the
account at DTC, CEDEL or Euroclear, as the case may be, from which they were
transferred to the Warrant Agent. To exercise those Warrants, a Warrantholder
will be required to resubmit the Warrants and a related Exercise Notice 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
Reference Index as initially determined for those Warrants, even if the
Valuation Date for such Warrants is postponed, except when the Valuation Date is
postponed until the Expiration Date, the Delisting Date or the Cancellation Date
(as defined herein), as described under "--Extraordinary Events and Exercise
Limitation Events" below. Pursuant to the Limit Option, Call Warrants either (i)
will be exercised on a delayed basis if the applicable Spot Japan Index on the
postponed Valuation Date is not less than the Limit Option Reference Index by at
least 5%, or (ii) will be excluded from being exercised if, on any applicable
postponed Valuation Date, the applicable Spot Japan Index is less than the Limit
Option Reference Index by at least 5%; conversely, Put Warrants that are subject
to the Limit Option either (i) will be exercised on a delayed basis if the
applicable Spot Japan Index on the postponed Valuation Date does not exceed the
Limit Option Reference Index by at least 5%, or (ii) will be excluded from being
exercised if, on any applicable postponed Valuation Date, the applicable Spot
Japan Index exceeds the Limit Option Reference Index by at least 5%.
In connection with any exercise of Warrants, a Warrantholder may elect to
subject the exercise of only a portion of those Warrants to the Limit Option,
provided, that the number of Warrants subject to the Limit Option and the number
of Warrants not subject to the Limit Option shall each be 500 or more. A
Warrantholder may not combine certificated and book-entry Warrants or Call
Warrants and Put Warrants in order to meet the 500-Warrant minimum requirement.
See "--Minimum Exercise Amount" above.
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<PAGE>
AUTOMATIC EXERCISE
All Warrants for which the Warrant Agent has not received a valid Exercise
Notice at or prior to 3:00 P.M., New York City time, on the New York Business
Day immediately preceding (i) the Expiration Date or (ii) the Delisting Date, as
the case may be, or for which the Warrant Agent has received a valid Exercise
Notice but with respect to which timely delivery of the relevant Warrants has
not been made, and all Warrants for which the Valuation Date has been postponed
as described under "--Extraordinary Events and Exercise Limitation Events"
below, will be automatically exercised on the New York Business Day immediately
preceding the Expiration Date or the Delisting Date, as the case may be. The
Warrant Agent will obtain the Spot Japan Index (determined as of the first Index
Calculation Day following such date, which will be the Valuation Date for such
Warrants), and will determine the Applicable Cash Settlement Value, if any, or
Alternative Settlement Amount, if any, of such Warrants.
Except if an Extraordinary Event or Exercise Limitation Event has occurred
and is continuing on the Expiration Date or the Delisting Date, as the case may
be, as described under "--Extraordinary Events and Exercise Limitation Events"
below, or in the case of Warrants held through the facilities of DTC, CEDEL or
Euroclear, if the Company has made adequate funds available to the Warrant Agent
in a timely manner as required by the Warrant Agreements, the Warrant Agent will
thereafter be responsible for making a payment available to each registered
holder of a Warrant in the form of a cashier's check or official bank check, or
(in the case of payments of at least $100,000) by wire transfer to a U.S. dollar
account maintained by the holder in the United States (at the holder's election)
after 3:00 P.M., New York City time, on the fourth New York Business Day after
the Valuation Date (or, if the Valuation Date is not a New York Business Day, on
the fourth New York Business Day following the New York Business Day next
succeeding the Valuation Date), against receipt by the Warrant Agent at the
Warrant Agent's Office of the holder's Warrant Certificates. Payment will be in
an amount equal to the aggregate Applicable Cash Settlement Value of the
Warrants evidenced by such Warrant Certificates.
In the case of Warrants held through the facilities of DTC, CEDEL or
Euroclear, except if an Extraordinary Event or Exercise Limitation Event has
occurred and is continuing on the Expiration Date or the Delisting Date, as the
case may be, as described under "--Extraordinary Events and Exercise Limitation
Events" below, the Company will be required to make available to the Warrant
Agent, no later than 3:00 P.M., New York City time, on the fourth New York
Business Day after such Valuation Date (or, if such Valuation Date is not a New
York Business Day, on the fourth New York Business Day following the New York
Business Day next succeeding such Valuation Date), funds in an amount sufficient
to pay the aggregate Applicable Cash Settlement Value of the Warrants. If the
Company has made the required 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 Applicable Cash Settlement Value of the
Warrants. DTC will be responsible for disbursing funds to each appropriate
Participant (including Citibank and Morgan who in turn will disburse payments to
CEDEL and Euroclear, as the case may be, who will be responsible for disbursing
funds to their respective participants, who, in turn, will be responsible for
disbursing funds to the Warrantholders it represents) and such Participant will
be responsible for disbursing such funds 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.
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<PAGE>
EXTRAORDINARY EVENTS AND EXERCISE LIMITATION EVENTS
Extraordinary Events. Each Warrant Agreement will provide that, if the
Company determines that an Extraordinary Event has occurred and is continuing on
the Tokyo Business Day with respect to which the Spot Japan Index on a Valuation
Date is to be determined (the "Applicable Tokyo Business Day"), then the
Applicable Cash Settlement Value in respect of an exercise will be calculated on
the basis that the Valuation Date shall be the next Index Calculation Day
following such Applicable Tokyo Business Day on which there is no Extraordinary
Event or Exercise Limitation Event; provided, that if the Valuation Date has not
occurred on or prior to the Expiration Date or the Delisting Date, the
Warrantholders will receive the Alternative Settlement Amount in lieu of the
Applicable Cash Settlement Value. In addition, if an Extraordinary Event or an
Exercise Limitation Event has occurred and is continuing on the Expiration Date
or the Delisting Date, as the case may be, Warrantholders whose Warrants have
been automatically exercised will receive the Alternative Settlement Amount in
lieu of the Applicable Cash Settlement Value. The Alternative Settlement Amount
shall be calculated as if the Warrants had been cancelled on the Expiration Date
or the Delisting Date, as the case may be. The Company will promptly give notice
to Warrantholders, by publication in a United States newspaper with a national
circulation (currently expected to be The Wall Street Journal), or through other
means deemed appropriate by the Company, if an Extraordinary Event occurs.
"Extraordinary Event" means any of the following events:
(i) a suspension or absence of trading on the TSE of all the
Underlying Stocks that then comprise the Japan Index, any New Japan Index
or a Successor Index;
(ii) the enactment, publication, decree or other promulgation of any
statute, regulation, rule or order of any U.S. or non-U.S. governmental
authority or court that would make it unlawful for the Company to perform
any of its obligations under the Warrant Agreements or the Warrants or that
has or, in the judgment of the Company, is likely to have, a material
adverse effect on the ability of the Company to perform its obligations
under the Warrants or to modify the hedge of its position with respect to
the Japan Index, any New Japan Index or a Successor Index; or
(iii) 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 Company, may materially and
adversely affect the economy of Japan or the trading of securities
generally on the TSE) that has or, in the judgment of the Company, is
likely to have, a material adverse effect on the ability of the Company to
perform its obligations under the Warrants or to modify the hedge of its
position with respect to the Japan Index, any New Japan Index or a
Successor Index.
For the purpose of determining whether an Extraordinary Event has occurred: (a)
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 TSE, and (b) an "absence of trading" on the TSE will not
include any time when the TSE itself is closed for trading under ordinary
circumstances.
Based on information provided by the TSE, the Company is not aware of any
circumstances that have arisen since the inception of the Japan Index that could
have constituted an Extraordinary Event. Prior to the inception of the Japan
Index, and based on the information published by the TSE, trading on the TSE was
suspended, due to the death of the Emperor of Japan, on January 7, 1989 (the
"January 1989 Suspension"). The absence of such circumstances, however, is not
necessarily indicative of the likelihood of such circumstances arising or not
arising in the future. See "The Japan Index--The TSE" below.
If the Company determines that an Extraordinary Event has occurred and is
continuing, and if the Extraordinary Event is expected by the Company to
continue, the Company may immediately cancel the Warrants by notifying the
Warrant Agent of such cancellation (the date such notice is given being
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<PAGE>
the "Cancellation Date"), and each Warrantholder's rights under the Warrants and
the Warrant Agreement shall thereupon cease; provided that each Warrant shall be
exercised (even if such Warrant would not otherwise be exercisable on such date
because of the Limit Option) on the basis that the Valuation Date for such
Warrant shall be the Cancellation Date and the holder of each such Warrant will
receive, in lieu of the Applicable Cash Settlement Value of such Warrant, an
amount (the "Alternative Settlement Amount"), determined by the Determination
Agent, which is equal to the amount "X" calculated using the formula set forth
below:
__ __
| |
X = I + | T (A) |
| --- x --- |
| 2 (B) |
|__ __|
where
<TABLE>
<S> <C> <C>
I = the Applicable Cash Settlement Value of the Warrants determined as described under "-- Cash
Settlement Value" above, but calculated with a Spot Japan Index determined by the
Determination Agent which, subject to approval by the Company (such approval not to be
unreasonably withheld), in the reasonable opinion of the Determination Agent, fairly reflects
the value of the Underlying Stocks on the Cancellation Date;
T = U.S.$ , in the case of Call Warrants (the initial offering price per Call Warrant), or
U.S.$ , in the case of Put Warrants (the initial offering price per Put Warrant);
A = the total number of days from but excluding the Cancellation Date for such Warrants to and
including the Expiration Date; and
B = the total number of days from but excluding the date the Warrants were initially sold to and
including the Expiration Date.
</TABLE>
For the purposes of determining "I" in the foregoing formula, if the
Determination Agent and the Company are required, but 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 Japan Index that fairly reflects the value
of the Underlying Stocks on the Cancellation Date, then the Determination Agent
shall promptly nominate a third party, subject to approval by the Company (such
approval not to be unreasonably withheld), to determine and calculate the
Alternative Settlement Amount in accordance with the formula. That third party
shall act as an independent expert and not as an agent of the Company or the
Determination Agent, and its determination and calculation shall, absent
manifest error, be final and binding on the Company, the Warrant Agent, the
Determination Agent and the Warrantholders. Any such determination and
calculation will be made available to a Warrantholder for inspection at the
Warrant Agent's Office. Neither the Company, the Determination Agent nor that
third party shall have any responsibility for good faith errors or omissions in
calculating the Alternative Settlement Amount.
Exercise Limitation Events. Each Warrant Agreement will provide that, if
the Company determines that on an Applicable Tokyo Business Day an Exercise
Limitation Event has occurred and is continuing, then the Applicable Cash
Settlement Value in respect of an exercise shall be calculated on the basis that
the Valuation Date shall be the next Index Calculation Day following such
Applicable Tokyo Business Day on which there is no Exercise Limitation Event or
Extraordinary Event; provided that, if the Valuation Date has not occurred on or
prior to the Expiration Date or the Delisting Date, the Warrantholders will
receive the Alternative Settlement Amount in lieu of the Applicable Cash
Settlement Value, which shall be calculated as if the Warrants had been
cancelled on the Expiration Date or the Delisting Date, as the case may be. The
Company will promptly give notice to Warrantholders, by publication in a United
States newspaper with a national circulation (currently expected to be The Wall
Street Journal), or through other means deemed appropriate by the Company, if an
Exercise Limitation Event occurs.
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<PAGE>
"Exercise Limitation Event" means either of the following events:
(i) a suspension or absence of trading on the TSE of 20% or more (in
number) of the Underlying Stocks; or
(ii) the suspension or material limitation on the Singapore
International Monetary Exchange Ltd (the "SIMEX"), the OSE or the AMEX or
any other major futures, options or securities market (which as of the date
of this Prospectus Supplement includes only the SIMEX, OSE or AMEX, but
which in the Company's judgment may change in the future) of trading in
futures or options contracts related to the Nikkei 225 Index (or in the
event of a substitution of the New Japan Index for the Japan Index, the
Nikkei 300 Index), the Japan Index, the New Japan Index or a Successor
Index.
For purposes of determining whether an Exercise Limitation Event has occurred:
(a) a limitation on the hours or number of days of trading will not constitute
an Exercise Limitation Event if it results from an announced change in the
regular business hours of the relevant exchange, (b) a decision to permanently
discontinue trading in the relevant futures or options contract will not
constitute an Exercise Limitation Event, (c) a suspension of trading in 20% or
more (in number) of the Underlying Stocks, or in a futures or options contract
referred to in clause (ii) above, by reason of (x) a price change violating
limits set by the TSE, SIMEX, OSE or AMEX or other futures or securities market
on which futures or options contracts related to the Nikkei 225 Index (or, in
the event of a substitution of the New Japan Index for the Japan Index, the
Nikkei 300 Index), the Japan Index, a New Japan Index or a Successor Index are
traded or (y) an imbalance of orders relating to Underlying Stocks or such
contracts will constitute a suspension or material limitation of trading, (d) an
"absence of trading" on the TSE will not include any time when the TSE is closed
for trading under ordinary circumstances and (e) the occurrence of an
Extraordinary Event described in clause (i) of the definition of Extraordinary
Event will not constitute, and will supersede the occurrence of, an Exercise
Limitation Event.
Based on information provided to the Company by the TSE, it is the
Company's understanding that during the past ten years there have been no
suspensions of trading on the TSE under circumstances that could have
constituted an Exercise Limitation Event, except for the January 1989
Suspension. The Company has not, however, verified with the TSE, SIMEX, OSE or
AMEX, and makes no representations concerning, whether any suspensions of
trading by reason of a price change violating limits set by the TSE, SIMEX, OSE
or AMEX or any absences of trading during such period could have constituted an
Exercise Limitation Event. The lack of such suspensions over the period
indicated is not necessarily indicative of the number or frequency of any future
suspensions. See "The Japan Index--The TSE" below.
In the case of (i) a postponed exercise following the occurrence of an
Extraordinary Event or an Exercise Limitation Event or (ii) an automatic
exercise if an Extraordinary Event or an Exercise Limitation Event has occurred
and is continuing on the Expiration Date or the Delisting Date, as the case may
be, if the Company has made adequate funds available to the Warrant Agent by
3:00 P.M., New York City time, on the third New York Business Day following the
date on which the Applicable Cash Settlement Value or Alternative Settlement
Amount, as the case may be, has been calculated, the Warrant Agent will
thereafter be responsible for making payment available to each registered holder
who holds Warrants in certificated form in the form of a cashier's check or
official bank check, or (in the case of payments of at least $100,000) by wire
transfer to a U.S. dollar bank account maintained by the holder in the United
States (at the holder's election), in an amount equal to the aggregate
Applicable Cash Settlement Value or Alternative Settlement Amount, as
applicable, of such holder's exercised Warrants. In the case of Warrants held
through the facilities of DTC, CEDEL or Euroclear, if the Company has made such
funds available by such time as noted above, the Warrant Agent will thereafter
be responsible for making funds available to DTC in an amount sufficient to pay
the Applicable Cash Settlement Value or Alternative Settlement Amount of the
Warrants. DTC will be
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<PAGE>
responsible for disbursing funds to each appropriate Participant (including
Citibank and Morgan who in turn will disburse payments to CEDEL and Euroclear,
as the case may be, who will be responsible for disbursing funds to their
respective participants who, in turn, will be responsible for disbursing funds
to the Warrantholders it represents) and such participant will be responsible
for disbursing funds 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 Exercise Limitation Events may be
events that would tend to decrease the level of the Index and accordingly
decrease the Call Cash Settlement Value for the Call Warrants and increase the
Put Cash Settlement Value for the Put Warrants following the occurrence of such
Extraordinary Event or Exercise Limitation Event. However, as a result of any
postponed exercise as described above, Warrantholders would not receive the
Applicable Cash Settlement Value that would have been payable but for such
postponement, but instead would receive an Applicable Cash Settlement Value (or,
if applicable, an Alternative Settlement Amount) determined as of a later date,
in which case, any immediate impact of the related Extraordinary Event or
Exercise Limitation Event on the Index may be negated by interim market and
other developments and, as a result of the postponement, the Applicable Cash
Settlement Value (or Alternative Settlement Amount) actually received by
Warrantholders may be substantially lower (including zero) than the Applicable
Cash Settlement Value that would have been payable if the valuation of the
Warrants had not been postponed.
LISTING
Application has been made to list the Warrants on the AMEX. The AMEX symbol
for the Call Warrants will be BJC.WS and the AMEX symbol for the Put Warrants
will be BJP.WS. The AMEX expects to cease trading the Call Warrants or the Put
Warrants, as the case may be, as of the close of business on the applicable
Expiration Date.
If the Warrants are delisted from, or permanently suspended from trading
on, the AMEX, 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 last New York Business Day prior to the
Delisting Date and the Applicable Cash Settlement Value or Alternative
Settlement Amount, as the case may be, if any, shall be calculated and paid as
provided above under "--Automatic Exercise" or "--Extraordinary Events and
Exercise Limitation Events." However, if the Company first receives notice of
the delisting or suspension on the same day on which the Warrants are delisted
or suspended, such day will nevertheless be deemed to be the Delisting Date. The
Company will notify Warrantholders as soon as practicable of such delisting or
trading suspension. The Company has covenanted in each Warrant Agreement that it
will not seek delisting of the Warrants from, or suspension of their trading on,
the AMEX unless the Company has concurrently arranged for listing of the
Warrants on another United States national securities exchange.
S-36
<PAGE>
THE JAPAN INDEX
Unless otherwise stated, all information in this Prospectus Supplement
regarding the Japan Index has been derived from the AMEX or other publicly
available sources. The information reflects the policies of the AMEX as stated
in such sources and such policies are subject to change by the AMEX.
The Japan Index is a stock index calculated, published and disseminated by
the AMEX that measures the composite price performance of selected stocks of
Japanese companies. The Japan Index currently is based on the stocks of 210
highly capitalized companies representing a broad cross-section of Japanese
industries, all of which are listed in the First Section of the TSE. Stocks
listed in the First Section are among the most actively traded stocks on the
TSE. As of July 14, 1994, the five largest Underlying Stocks accounted for 8.57%
of the Japan Index with the largest being Sony Corporation (2.92%), Toyo Seikan
Kaisha (1.71%), Pioneer Electronic Corporation (1.45%), Mitsubishi Bank Ltd.,
(1.30%) and Nomura Securities Co. Ltd. (1.19%). See Appendix B hereto for a list
of the Underlying Stocks as of July 14, 1994. Options contracts on the Japan
Index are traded on the AMEX.
The Japan Index is a modified, price-weighted index (i.e., an Underlying
Stock's weight in the index is based on its price per share rather than the
total market capitalization of its issuer) which is calculated by (i)
multiplying the per share price of each Underlying Stock by the corresponding
weighing factor for such Underlying Stock (a "Weight Factor"), (ii) calculating
the sum of all these products and (iii) dividing such sums by a divisor (the
"Divisor"). The AMEX first calculated the Japan Index on April 2, 1990, on which
date the Japan Index was set at 280.0. The data relating to the Japan Index was
back-calculated by the AMEX from October 26, 1989 through March 30, 1990 as if
the Japan Index had been calculated by the AMEX during that period. The Divisor,
initially set in September 1990 at 97,994.60, was 96,116.66 as of July 14, 1994,
and is subject to periodic adjustments as set forth below. Each Weight Factor is
computed by dividing Y50 by the par value of the relevant Underlying Stock and
multiplying the result by 100, so that the share price of each Underlying Stock
when multiplied by its Weight Factor corresponds to a share price based on a
uniform par value of Y50. Each Weight Factor represents the number of shares of
the related Underlying Stock included in one trading unit of the Japan Index.
The stock prices used in the calculation of the Japan Index are those reported
by a primary market for the Underlying Stock (currently the TSE). The level of
the Japan Index is calculated once each New York Business Day using last sale
prices only (i.e., not "special bid quotes" or "special asked quotes" which are
used in connection with other stock indices) for transactions in Underlying
Stock on the TSE. The level of the Japan Index is disseminated via the
Consolidated Tape Authority Network-B (commonly referred to as the "AMEX Tape").
The AMEX Tape symbol for the Japan Index is "JPN". At the close of the market on
July 14, 1994, the Japan Index level was 210.56.
In order to maintain continuity in the level of the Japan Index in the
event of certain changes due to non-market factors affecting the Underlying
Stocks, such as the addition or deletion of stocks, substitution of stocks,
stock dividends, stock splits or distributions of assets to stockholders, the
Divisor used in calculating the Japan Index is adjusted in a manner designed to
prevent any instantaneous change or discontinuity in the level of the Japan
Index. Thereafter, the Divisor remains at the new value until a further
adjustment is necessary as the result of another change. As a result of each
such change affecting any Underlying Stock, the Divisor is adjusted in such a
way that the sum of all share prices immediately after such change multiplied by
the applicable Weight Factor and divided by the new Divisor (i.e., the level of
the Japan Index immediately after such change) will equal the level of the Japan
Index immediately prior to the change.
Underlying Stocks may be deleted or added by the AMEX. However, to maintain
continuity in the Japan Index, the policy of the AMEX is generally not to alter
the composition of the Underlying Stocks except when an Underlying Stock is
deleted due to (i) bankruptcy of the issuer, (ii) merger of the issuer into, or
acquisition of the issuer by, another company, (iii) delisting of such stock, or
(iv) failure of such
S-37
<PAGE>
stock to meet, upon periodic review by the AMEX, market value and trading volume
criteria established by the AMEX (as those criteria may change from time to
time). Upon deletion of an Underlying Stock from the Japan Index, the AMEX may
select a suitable replacement for the deleted stock. The current policy of the
AMEX is to announce any such change in advance via distribution of an
information circular.
The AMEX is under no obligation to continue the calculation and
dissemination of the Japan Index and the method by which the Japan Index is
calculated and the name "Japan Index" may be changed at the discretion of the
AMEX. The Warrants are not sponsored, endorsed, sold or promoted by the AMEX. No
inference should be drawn from the information contained in this Prospectus
Supplement that the AMEX makes any representation or warranty, implied or
express, to the Company, the Warrantholders, or any member of the public
regarding the advisability of investing in securities generally or in the
Warrants in particular or the ability of the Japan Index to track general
Japanese stock market performance. The AMEX has no obligation to take the needs
of the Company or the Warrantholders into consideration in determining,
composing or calculating the Japan Index. The AMEX is not responsible for, and
has not participated in the determination of the timing of, prices for, or
quantities of, the Warrants to be issued or in the determination or calculation
of the equation by which the Warrants are to be settled in cash. The AMEX has no
obligation or liability in connection with the administration, marketing or
trading of the Warrants.
The use of and reference to the Japan Index in connection with the Warrants
has been consented to by the AMEX. "Japan Index" is a service mark of the AMEX.
Except with respect to the responsibility of the Determination Agent to
make certain calculations under certain circumstances as described herein, none
of the Company, the Warrant Agent, the Determination Agent or the Underwriters
accepts any responsibility for the calculation, maintenance or publication of
the Japan Index or any Successor Index. The Determination Agent is obligated to
carry out its duties and functions in good faith and using its reasonable
judgment. The Determination Agent shall have no responsibility for good faith
errors or omissions in making any calculations in connection with the Warrants.
Except as provided in the Warrant Agreements, the calculations and
determinations of the Determination Agent under the Warrant Agreements will,
absent manifest error, be final and binding. The AMEX disclaims all
responsibility for any inaccuracies in the data on which the Japan Index is
based, or any mistakes or errors or omissions in the calculation or
dissemination of the Japan Index or for the manner in which such index is
applied in determining the Applicable Cash Settlement Value or Alternative
Settlement Amount upon exercise of the Warrants.
S-38
<PAGE>
HISTORICAL DATA ON THE JAPAN INDEX
The AMEX first calculated the Japan Index on April 2, 1990. Historical data
relating to the Japan Index in the table below for the period from October 26,
1989 through March 30, 1990 have been retroactively determined by the AMEX as if
the Japan Index had been calculated by the AMEX during that period.
The following table sets forth the highest and lowest daily closing level
of the Japan Index for each quarter or partial quarter, as the case may be, in
the period from October 26, 1989 through July 14, 1994, as well as the closing
level of the Japan Index as of the end of each such quarter or partial quarter,
as the case may be. These data are not an indication of the future performance
of the Japan Index or what the value of the Warrants may be. Any historical
upward or downward trend in the closing level of the Japan Index during any
period set forth below is not an indication that the Japan Index is more or less
likely to decline at any time during the term of the Warrants.
<TABLE><CAPTION>
DAILY CLOSING LEVELS
-------------------------------
HIGH LOW CLOSE
---- --- -----
<S> <C> <C> <C>
1989:
4th Quarter (beginning October 26)............................................... 388.96 354.23 388.96
1990:
1st Quarter...................................................................... 388.96 296.06 299.14
2nd Quarter...................................................................... 331.00 280.00 318.83
3rd Quarter...................................................................... 331.51 210.48 210.48
4th Quarter...................................................................... 252.55 202.99 237.57
1991:
1st Quarter...................................................................... 270.11 223.26 260.59
2nd Quarter...................................................................... 268.29 232.12 232.12
3rd Quarter...................................................................... 240.46 214.58 239.67
4th Quarter...................................................................... 253.51 216.22 230.72
1992:
1st Quarter...................................................................... 238.57 194.39 194.39
2nd Quarter...................................................................... 189.53 158.69 160.82
3rd Quarter...................................................................... 190.56 144.34 175.28
4th Quarter...................................................................... 178.81 161.52 171.23
1993:
1st Quarter...................................................................... 192.67 164.83 188.22
2nd Quarter...................................................................... 213.32 193.37 198.47
3rd Quarter...................................................................... 214.42 198.84 203.98
4th Quarter...................................................................... 207.84 163.61 177.33
1994:
1st Quarter...................................................................... 210.45 176.86 194.85
2nd Quarter...................................................................... 218.84 194.81 209.66
3rd Quarter (through July 14).................................................... 211.75 207.47 210.56
</TABLE>
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<PAGE>
The following graph, which has been prepared by the Company based on data
obtained from the AMEX, illustrates the historical performance of the Japan
Index at the end of each quarter from December 31, 1989 through June 30, 1994
and weekly Japan Index levels through July 14, 1994. Past performance of the
Japan Index is not necessarily indicative of its Japan Index performance.
Japan Index - Historical Performance
Quarterly Values Through July 14, 1994
[GRAPHIC MATERIAL OMITTED - GRAPH I]
Source: Prepared by the Company from data obtained from the AMEX.
The July 14, 1994 closing level of the AMEX Japan Index was 210.56.
THE TSE
The Tokyo Stock Exchange is one of the world's largest exchanges in terms
of market capitalization. The TSE is a two-way continuous pure auction market.
Trading hours are currently from 9:00 A.M. to 11:00 A.M. and from 1:00 P.M. to
3:00 P.M., Tokyo time, Monday through Friday.
Due to the time zone difference, on any normal trading day the TSE will
close prior to the opening of business in New York City on the same calendar
day. Therefore, the closing level of the Japan Index on such trading day will
generally be available in the United States by the opening of business in New
York City on the same calendar day.
The TSE has adopted certain measures intended to prevent any extreme
short-term price fluctuation resulting from order imbalances. These include
daily price floors and ceilings intended to prevent extreme fluctuations in
individual stock prices. Any stock listed on the Tokyo Stock Exchange cannot be
traded at a price outside of these limits, which are absolute Japanese Yen, and
not percentage, limits from the closing price of the stock on the previous day.
In addition, when there is a major order imbalance in a listed stock, the TSE
posts a "special bid quote" or a "special asked quote" for that stock at a
specified higher or lower price level than the stock's last sale price in order
to solicit counter orders and balance supply and demand for the stock. Investors
should also be aware that the TSE may suspend the trading of an individual stock
in certain limited and extraordinary circumstances including, for example,
unusual trading activity in that stock.
As a result of the foregoing, variations in the Index may be limited by
suspension of trading of individual stocks that comprise the Index, which may,
in turn, adversely affect the value of the
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<PAGE>
Warrants. In addition, if the Company so determines, a suspension in trading of
20% or more of the Underlying Stocks would result in an Exercise Limitation
Event and a halt in trading of all of the Underlying Stocks would result in an
Extraordinary Event. As a result, the Valuation Date of exercised Warrants would
be postponed and the Applicable Cash Settlement Value (or Alternative Settlement
Amount) actually received by Warrantholders might be substantially lower
(including zero) than the otherwise Applicable Cash Settlement Value if the
valuation of the Warrants had not been postponed. See "Description of the
Warrants--Extraordinary Events and Exercise Limitation Events" herein.
THE NEW JAPAN INDEX
Under certain circumstances, a new Japan Index (a "New Japan Index") will
be substituted for the Japan Index for purposes of calculating any Applicable
Cash Settlement Value or Alternative Settlement Amount. The New Japan Index
would be an index published by the AMEX or another United States securities
exchange with a high correlation to the Nikkei 300 Index.
The Nikkei 300 Index is an index calculated, published and disseminated by
Nihon Keizai Shimbun, Inc., that measures the composite price performance of
stocks of 300 Japanese companies. All 300 stocks are listed in the First Section
of the TSE. Stocks listed in the First Section are among the most actively
traded stocks listed on TSE. Publication of the Nikkei 300 Index began on
October 8, 1993.
The Nikkei 300 Index is a market capitalization-weighted index which is
calculated by (i) multiplying the per share price of each stock included in the
Nikkei 300 Index by the number of outstanding shares (excluding shares held by
the Japanese Government), (ii) calculating the sum of all these products (such
sum being hereinafter referred to as the "Aggregate Market Price"), (iii)
dividing the Aggregate Market Price so obtained by the Aggregate Market Price as
of October 1, 1982 (the "Base Price") and (iv) multiplying the result by 100.
Because of such capitalization-weighting, movements in share prices of companies
with relatively larger market capitalization will have a greater effect on the
level of the entire index than will movements in share prices of companies with
relatively smaller market capitalization.
Although the Nikkei 300 Index was first published in October 1993, Nihon
Keizai Shimbun, Inc. has calculated values for the Nikkei 300 Index for the
period from October 1, 1982 through October 8, 1993. The stocks included in the
Nikkei 300 Index (the "Nikkei 300 Stocks") were selected from a reference group
of stocks in the First Section of the TSE other than those with (i)
conspicuously low trading volume or low share prices as compared to other stocks
in the First Section of the TSE, or (ii) in respect of which the issuer had
failed to pay a dividend for a considerable period of time or had posted
excessive losses for a considerable period of time. From this reference group
there were selected by (i) the stocks with the largest aggregate market value in
each of 36 industrial sectors and (ii) additional stocks (with priority within
each industrial sector given to the stock with the largest aggregate market
value) so that the selection ratios (i.e. the ratio of the aggregate market
value of the included stocks to that of the stocks in the reference group) with
respect to all 36 industry sectors would be as nearly equal as possible and the
total number of companies with stocks included in the Nikkei 300 Index would be
300.
In order to maintain continuity in the level of the Nikkei 300 Index, the
Nikkei 300 Index will be reviewed annually by Nihon Keizai Shimbun, Inc. and the
Nikkei 300 Stocks may be replaced, if necessary, in accordance with the
"deletion/addition" rule. The "deletion/addition" rule provides generally for
the deletion of a stock from the Nikkei 300 Index if it is no longer included in
the reference group or if its aggregate market value is low relative to other
stocks in the relevant industry sector. Stocks deleted pursuant to the
"deletion/addition" rule will be replaced by stocks included in the reference
group that have relatively high Aggregate Market Values. In addition, stocks may
be added or deleted from time to time for extraordinary reasons.
S-41
<PAGE>
All information in this Prospectus Supplement regarding the Nikkei 225
Index, Nikkei 225 Futures Contract, Nikkei 300 Index, Nikkei 300 Futures
Contract, or their publisher, Nihon Keizai Shimbun, Inc., has derived from
publicly available sources. Nihon Keizai Shimbun, Inc. has no relationship with
the Company or the Warrants; it does not sponsor, endorse, authorize, sell or
promote the Warrants, and has no obligation or liability in connection with the
administration, marketing or trading of the Warrants.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNERSHIP OF A WARRANT BY A U.S. HOLDER
The following is a summary of certain anticipated U.S. federal income tax
consequences of an investment in Warrants and represents the views of Weil,
Gotshal & Manges, special tax counsel to the Company. This summary only
considers the tax consequences to "U.S. Holders" (as defined below) that will
hold Warrants as capital assets and as to which the Underlying Stocks, if
acquired by such holders, would be capital assets, and does not consider
Warrantholders in special tax situations, such as dealers in options, securities
or currencies, tax exempt entities, S corporations or insurance companies. A
"U.S. Holder" means a Warrantholder who or which is (i) a citizen or resident of
the United States, (ii) a domestic corporation or (iii) an estate or trust the
income of which is subject to U.S. federal income tax regardless of source.
This summary does not address every U.S. federal income tax issue raised by
the ownership of Warrants. In particular, this summary does not consider (i) the
U.S. federal income tax consequences of holding Warrants as a hedge against, or
hedged against, currency or security price risks or the holding of the Warrants
themselves (ii) the possible application of the "straddle" rules of the Internal
Revenue Code of 1986, as amended (the "Code"), to a Warrantholder as a result of
holding other "positions" (within the meaning of Section 1092 of the Code) or
(iii) whether a Warrantholder is holding Warrants as part of a "conversion
transaction" within the meaning of description 1258 of the Code. Any of these
factors might substantially alter the tax consequences described below and may
require specific identification of positions in the Warrants before the close of
the date on which they are acquired. In particular, if the "straddle rules" were
to apply, a Warrantholder might be required to defer all or a portion of any
loss realized upon the sale, exchange, exercise, cancellation or lapse of a
Warrant. This determination does not address the tax consequences to
shareholders, partners or beneficiaries of a Warrantholder or any U.S.
alternative minimum tax or state tax consequence. Accordingly, prospective
purchasers of Warrants are urged to consult their own tax advisors before any
such acquisition concerning the U.S. federal, state and local tax consequences,
in light of their own particular circumstances, of owning Warrants.
A U.S. Holder will generally recognize capital gain or loss only upon the
sale, exchange, exercise, cancellation or lapse of a Warrant, which gain or loss
will be long-term capital gain or loss if the U.S. Holder has held the Warrant
for more than one year. While not entirely free from doubt, any substitution of
a New Japan Index for the Japan Index pursuant to the terms of the Warrants
should not be a transaction on which gain or loss is recognized to a U.S.
Holder.
Notwithstanding the foregoing, if the Warrants remain traded on, or subject
to the rules of, a "qualified board or exchange" (as defined in Section
1256(g)(7) of the Code), they will become "nonequity options" subject to the
"mark-to-market" rules of Section 1256 of the Code at such time as either (i)
the Commodities Futures Trading Commission (the "CFTC") designates a contract
market for a contract based on the Index or (ii) the Secretary of the Treasury
otherwise determines that the Warrants meet the requirements of law for such a
designation. Although the CFTC has designated a contract market for contracts
based on the Nikkei 225 Index, no such designation or determination has yet
occurred with respect to the Japan Index. If the mark-to-market rules of Section
1256 were to apply to the Warrants, a U.S. Holder of an unexercised Warrant
would generally be required (a) to treat the Warrant as if it were sold for its
fair market value on the last day of each taxable year during which the U.S.
Holder owned the Warrant and (b) to recognize gain or loss as 60% long-term and
40% short-term
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<PAGE>
capital gain or loss. Thus, a U.S. Holder of a Warrant that is subject to the
mark-to-market rules of Section 1256 might incur federal income tax liability on
an annual basis in respect of an increase in the value of a Warrant without a
corresponding receipt of cash. Under the mark-to-market rules, any gain or loss
realized by a U.S. Holder upon the sale, exchange, exercise, cancellation or
lapse of a Warrant would also be treated as 60% long-term and 40% short-term
capital gain or loss.
Whether or not the Warrants are treated as "nonequity options", no portion
of gain or loss in respect of a Warrant will be treated as foreign currency gain
or loss for U.S. federal income tax purposes.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNERSHIP OF A WARRANT BY A NON-U.S.
HOLDER
In general, a Warrantholder who or which is (i) a nonresident alien
individual or (ii) a foreign corporation, partnership, estate or trust which is
not subject to U.S. federal income tax on a net income basis in respect of a
Warrant (a "non-U.S. Holder") will not be subject to U.S. federal withholding
tax with respect to amounts received, if any, with respect to a Warrant.
BACKUP WITHHOLDING
In general, the proceeds received from a sale, exchange, cancellation or
exercise of a Warrant by a U.S. Holder will be subject to information reporting,
and may be subject to a U.S. "backup" withholding at a rate of 31% if the U.S.
Holder thereof fails to supply an accurate taxpayer identification number or
otherwise comply with applicable U.S. information reporting or certification
requirements. Such payments made to a non-U.S. Holder will not be subject to
information reporting or back-up withholding if the non-U.S. Holder certifies
its status as a non-U.S. Holder under penalty of perjury, provided that the
payor does not have actual knowledge that the holder is a U.S. Holder. Any
amounts so withheld would be refundable or allowed as a credit against such
holder's U.S. federal income tax liability.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the number
of Warrants set forth opposite its name.
UNDERWRITERS
------------
Call Warrants
- -------------
Bear, Stearns & Co. Inc..........................................
---------
Total..................................................... 1,000,000
=========
Put Warrants
- ------------
Bear, Stearns & Co. Inc..........................................
---------
Total..................................................... 1,000,000
=========
S-43
<PAGE>
The Underwriters have advised the Company that they propose to offer the
Call Warrants and the Put Warrants to the public initially at the offering price
set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of $ per Call
Warrant and per Put Warrant. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per Call Warrant and per Put
Warrant to certain other dealers. After the initial public offering, the public
offering price and such concessions may be changed.
The Company has granted the Underwriters an option, exercisable within
thirty days of the date of this Prospectus Supplement, to purchase up to 150,000
additional Call Warrants and 150,000 additional Put Warrants from the Company at
the same price per Warrant as described above. This option may be exercised only
for the purpose of covering over-allotments, if any, made in the sale of the
Warrants offered hereby.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the Warrants if any are purchased.
The Company has agreed to indemnify the Underwriters against, and to
contribute to losses arising out of, certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
Bear, Stearns & Co. Inc. is a wholly owned subsidiary of the Company. The
participation of Bear, Stearns & Co. Inc. in the offer and sale of the Warrants
complies with the requirements of Schedule E of the By-Laws of the National
Association of Securities Dealers, Inc. (the "NASD") regarding underwriting
securities of an affiliate. Under the provisions of Schedule E, when a NASD
member such as Bear, Stearns & Co. Inc. distributes warrants of an affiliate,
the price of the warrants can be no higher than that recommended by a "qualified
independent underwriter", as such term is defined in Schedule E, meeting certain
standards. In accordance with such requirements, has agreed to
serve as a "qualified independent underwriter" and has conducted due diligence
and will recommend a price for the Warrants in compliance with the requirements
of Schedule E.
VALIDITY OF THE WARRANTS
The validity of the Warrants will be passed upon for the Company by Weil,
Gotshal & Manges, New York, New York, a partnership including professional
corporations, and for the Underwriters by Kramer, Levin, Naftalis, Nessen, Kamin
& Frankel, New York, New York.
S-44
<PAGE>
APPENDIX A
INDEX OF KEY TERMS
<TABLE><CAPTION>
PAGE ON WHICH
TERM TERM IS DEFINED
---- --------------
<S> <C>
Aggregate Market Price........................................................................ S-41
Alternative Settlement Amount................................................................. S-7, S-34
AMEX.......................................................................................... front cover, S-4
AMEX Tape..................................................................................... S-37
Applicable Cash Settlement Value.............................................................. S-2
Applicable Tokyo Business Day................................................................. S-33
Base Price.................................................................................... S-41
Bear Stearns.................................................................................. S-7
Call Cash Settlement Value.................................................................... front cover, S-3
Call Warrant.................................................................................. front cover
Call Warrant Agreement........................................................................ S-19
Call Warrant Holder........................................................................... S-10
Cancellation Date............................................................................. S-5, S-34
CEDEL......................................................................................... S-25
CFTC.......................................................................................... S-42
Citibank...................................................................................... S-24
Code.......................................................................................... S-42
Company....................................................................................... front cover, S-3
Conversion Option............................................................................. S-12
Conversion Option Period...................................................................... S-24
Cooperative................................................................................... S-26
Current Level................................................................................. S-22
Delisting Date................................................................................ S-2, S-5
Depositaries.................................................................................. S-25
Determination Agent........................................................................... S-30
Divisor....................................................................................... S-37
DTC........................................................................................... S-12
Euroclear..................................................................................... S-26
Euroclear Operator............................................................................ S-26
Exercise Date................................................................................. S-28
Exercise Limitation Event..................................................................... S-35
Exercise Notice............................................................................... S-27
Expiration Date............................................................................... S-5, S-27
Extraordinary Event........................................................................... S-33
Index......................................................................................... front cover
Index Calculation Day......................................................................... S-15
Index of Key Terms............................................................................ S-3
January 1989 Suspension....................................................................... S-33
Japan Index................................................................................... front cover
Japanese Yen, Yen, Y.......................................................................... S-14
Limit Option.................................................................................. S-30
Limit Option Reference Index.................................................................. S-31
Morgan........................................................................................ S-24
NASD.......................................................................................... S-44
New Japan Index............................................................................... S-22, S-41
New York Business Day......................................................................... S-14
Nikkei 225 Futures Contract................................................................... S-22
</TABLE>
A-1
<PAGE>
<TABLE><CAPTION>
PAGE ON WHICH
TERM TERM IS DEFINED
---- --------------
<S> <C>
Nikkei 300 Index.............................................................................. S-22
Nikkei 300 Futures Contract................................................................... S-22
Nikkei 300 Stocks............................................................................. S-41
Non-U.S. Holder............................................................................... S-43
OSE........................................................................................... S-15
Participant................................................................................... S-13
Put Cash Settlement Value..................................................................... front cover, S-3
Put Warrant................................................................................... front cover
Put Warrant Agreement......................................................................... S-19
Put Warrant Holder............................................................................ S-10
SIMEX......................................................................................... S-15
Spot Japan Index.............................................................................. S-10
Strike Japan Index............................................................................ S-10
Substitution Date............................................................................. S-22
Substitution Event............................................................................ S-22
Successor Index............................................................................... S-11
Terms and Conditions.......................................................................... S-27
Third Party................................................................................... S-11
Tokyo Business Day............................................................................ S-14
TSE........................................................................................... S-4
U.S. Dollar, U.S. $, $........................................................................ S-14
U.S. Holder................................................................................... S-42
Underlying Stock.............................................................................. S-20
Valuation Date................................................................................ S-29
Warrant Agent................................................................................. S-19
Warrant Agent's Office........................................................................ S-19
Warrant Agreements............................................................................ S-19
Warrant Certificate........................................................................... S-23
Warrant Divisor............................................................................... S-10
Warrantholders................................................................................ S-10
Warrants...................................................................................... front cover, S-3
Weight Factor................................................................................. S-37
</TABLE>
A-2
<PAGE>
APPENDIX B
JAPAN INDEX--UNDERLYING STOCKS
The following is a list of the issuers of the 210 stocks constituting the
Japan Index as of July 14, 1994. Such information was obtained from the AMEX.
The AMEX may delete, add or substitute any stock underlying the Japan Index. See
"The Japan Index" in this Prospectus Supplement.
STOCK
-----
AJINOMOTO CO INC
ALL NIPPON AIRWAYS CO LTD
AOKI CORPORATION
ASAHI BREWERIES LTD
ASAHI CHEMICAL INDUSTRY CO LTD
ASAHI DENKA KOGYO KK
ASAHI GLASS CO LTD
BANK OF TOKYO LTD
BRIDGESTONE CORPORATION
CANON INC
CHIYODA CORPORATION
CITIZEN WATCH CO LTD
DAI ICHI KANGYO BANK LTD
DAI NIPPON PRINTING CO LTD
DAINIPPON PHARMACEUTICAL CO LTD
DAIWA HOUSE INDUSTRY CO LTD
DAIWA SECURITIES CO LTD
DENKI KAGAKU KOGYO KK
DOWA MINING CO LTD
EBARA CORPORATION
FUJI BANK LTD
FUJI ELECTRIC CO LTD
FUJI HEAVY INDUSTRIES LTD
FUJI PHOTO FILM CO LTD
FUJI SPINNING CO LTD
FUJIKURA LTD
FUJITA CORPORATION
FUJITSU LTD
FURUKAWA CO LTD
FURUKAWA ELECTRIC CO LTD
HAZAMA CORPORATION
HEIWA REAL ESTATE CO LTD
HINO MOTORS LTD
HITACHI LTD
HITACHI ZOSEN CORPORATION
HOKUETSU PAPER MILLS LTD
HONDA MOTOR CO LTD
HONSHU PAPER CO LTD
ISHIKAWAJIMA HARIMA HEAVY IND
ISUZU MOTORS LTD
ITOCHU CORPORATION
B-1
<PAGE>
STOCK
-----
IWATANI INTERNATIONAL CORPORATION
JAPAN ENERGY CORPORATION
JAPAN SECURITIES FINANCE CO LTD
JAPAN STEEL WORKS LTD
JAPAN WOOL TEXTILE CO LTD
KAJIMA CORPORATION
KANEBO LTD
KANEKA CORPORATION
KANSAI ELECTRIC POWER CO INC
KAWASAKI KISEN KAISHA LTD
KEIHIN ELECTRIC EXPRESS RAILWAY CO
KEIO TEITO ELECTRIC RAILWAY CO LTD
KEISEI ELECTRIC RAILWAY CO LTD
KIKKOMAN CORPORATION
KINKI NIPPON RAILWAY CO LTD
KIRIN BREWERY CO LTD
KOMATSU LTD
KONICA CORPORATION
KUBOTA CORPORATION
KUMAGAI GUMI CO LTD
KURARAY CO LTD
KYOKUYO CO LTD
KYOWA HAKKO KOGYO CO LTD
MARUBENI CORPORATION
MARUZEN CO LTD
MATSUSHITA ELECTRIC INDUSTRIAL
MAZDA MOTOR CORPORATION
MEIDENSHA CORPORATION
MEIJI MILK PRODUCTS CO LTD
MEIJI SEIKA KAISHA LTD
MINEBEA CO LTD
MITSUBISHI BANK LTD
MITSUBISHI CORPORATION
MITSUBISHI ELECTRIC CORP
MITSUBISHI ESTATE CO LTD
MITSUBISHI HEAVY INDUSTRIES
MITSUBISHI KASEI CORPORATION
MITSUBISHI MATERIALS CORPORATION
MITSUBISHI OIL CO LTD
MITSUBISHI PAPER MILLS LTD
MITSUBISHI STEEL MANUFACTURING CO
MITSUBISHI TRUST AND BANKING CORP
MITSUBISHI WAREHOUSE AND TRANSPORT
MITSUI AND CO LTD
MITSUI ENG AND SHIPBUILDING
MITSUI FUDOSAN CO LTD
MITSUI MARINE AND FIRE INSURANCE CO
MITSUI MINING AND SMELTING LTD
MITSUI MINING CO LTD
MITSUI OSK LINES LTD
MITSUI SOKO CO LTD
B-2
<PAGE>
STOCK
-----
MITSUI TOATSU CHEMICALS INC
MITSUI TRUST AND BANKING CO LTD
MITSUKOSHI LTD
MORINAGA AND CO LTD
NACHI FUJIKOSHI CORPORATION
NEC CORPORATION
NEW OJI PAPER CO
NGK INSULATORS LTD
NICHIREI CORPORATION
NICHIRO CORPORATION
NIHON CEMENT CO LTD
NIIGATA ENGINEERING CO LTD
NIKKO SECURITIES CO LTD
NIKON CORPORATION
NIPPON BEET SUGAR MANUFACTURING CO
NIPPON CARBIDE INDUSTRIES CO INC
NIPPON CARBON CO LTD
NIPPON CHEMICAL INDUSTRIAL CO LTD
NIPPON DENKO CO LTD
NIPPON EXPRESS CO LTD
NIPPON FLOUR MILLS CO LTD
NIPPON KAYAKU CO LTD
NIPPON LIGHT METAL CO LTD
NIPPON METAL INDUSTRY CO LTD
NIPPON OIL CO LTD
NIPPON SHARYO LTD
NIPPON SHEET GLASS CO LTD
NIPPON SHINPAN CO LTD
NIPPON SODA CO LTD
NIPPON STEEL CORPORATION
NIPPON SUISAN KAISHA LTD
NIPPON SYNTHETIC CHEMICAL INDUSTRY
NIPPON TELEGRAPH AND TELEPHONE NTT
NIPPON YAKIN KOGYO
NIPPON YUSEN KK
NIPPONDENSO CO LTD
NISSAN CHEMICAL INDUSTRIES LTD
NISSAN MOTOR CO LTD
NISSHIN FLOUR MILLING CO LTD
NISSHIN OIL MILLS LTD
NISSHINBO INDUSTRIES INC
NITTO BOSEKI CO LTD
NOF CORPORATION
NOMURA SECURITIES CO LTD
NORITAKE CO LTD
NSK LTD
NTN CORPORATION
OBAYASHI CORPORATION
ODAKYU ELECTRIC RAILWAY
OKI ELECTRIC INDUSTRY CO LTD
OKUMA CORPORATION
B-3
<PAGE>
STOCK
-----
ONODA CEMENT CO LTD
PIONEER ELECTRONIC CORPORATION
RASA INDUSTRIES LTD
RICOH CO LTD
SAKURA BANK LTD
SANKYO CO LTD
SANKYU INC
SANYO ELECTRIC CO LTD
SAPPORO BREWERIES LTD
SATO KOGYO CO LTD
SEIKA CORPORATION
SHARP CORPORATION
SHIMIZU CORPORATION
SHIN ETSU CHEMICAL CO LTD
SHINAGAWA REFRACTORIES CO LTD
SHIONOGI AND CO LTD
SHOWA DENKO KK
SHOWA ELECTRIC WIRE AND CABLE CO LTD
SHOWA LINE LTD
SHOWA SHELL SEKIYU KK
SONY CORPORATION
SUMITOMO BANK LTD
SUMITOMO CEMENT CO LTD
SUMITOMO CHEMICAL CO LTD
SUMITOMO COAL MINING CO LTD
SUMITOMO CORPORATION
SUMITOMO ELECTRIC IND LTD
SUMITOMO HEAVY INDUSTRIES LTD
SUMITOMO METAL INDUSTRIES LTD
SUMITOMO METAL MINING CO LTD
SUZUKI MOTOR CORPORATION
TAISEI CORPORATION
TAKARA SHUZO
TAKASHIMAYA CO
TAKEDA CHEMICAL INDUSTRIES
TEIKOKU OIL
TEKKEN CONSTRUCTION
TOA CORPORATION
TOAGOSEI CHEMICAL INDUSTRY
TOBISHIMA CORPORATION
TOBU RAILWAY
TOEI CO
TOHO RAYON
TOHO ZINC CO LTD
TOKAI CARBON CO LTD
TOKIO MARINE AND FIRE INSURANCE CO
TOKYO DOME CORPORATION
TOKYO ELECTRIC POWER CO INC
TOKYO GAS CO LTD
TOKYO ROPE MFG
TOKYU CORPORATION
B-4
<PAGE>
STOCK
-----
TOKYU DEPARTMENT STORE
TONEN CORPORATION
TOPPAN PRINTING CO LTD
TORAY INDUSTRIES
TOSHIBA CORPORATION
TOSOH CORPORATION
TOTO LTD
TOYO SEIKAN KAISHA
TOYOBO CO LTD
TOYOTA MOTOR CORPORATION
YAMAHA CORPORATION
YAMANOUCHI PHARMACEUTICAL
YASUDA FIRE AND MARINE INSURANCE CO
YAUSA CORPORATION
YOKOGAWA ELECTRIC
YOKOHAMA RUBBER
B-5
<PAGE>
PROSPECTUS
$2,873,608,750
THE BEAR STEARNS COMPANIES INC.
DEBT SECURITIES AND WARRANTS
The Company may issue and sell from time to time, in one or more series
with an aggregate initial public offering price of up to $2,873,608,750 (or the
equivalent in foreign denominated currency or units based on or relating to
currencies), debt securities ("Debt Securities") consisting of debentures, notes
and/or other unsecured evidences of indebtedness and warrants ("Warrants") to
purchase Debt Securities or to buy and sell government debt securities,
currencies, currency units, currency indices or currency baskets, stock indices,
stock baskets, commodities, commodity indices or another index or reference. The
Debt Securities and Warrants are herein collectively referred to as the
"Securities." The Debt Securities and Warrants may be offered independently or
together for sale directly to purchasers or through dealers, underwriters or
agents. The Company will offer the Securities to the public on terms determined
by market conditions. The Securities may be sold for, and principal of and
interest on Debt Securities and the cash settlement value of the Warrants may be
payable in, United States dollars, foreign denominated currency or currency
units, in each case, as the Company specifically designates.
The accompanying Prospectus Supplement sets forth the specific designation,
aggregate principal amount, purchase price, maturity, interest rates (or manner
of calculation thereof), time of payment of interest (if any), currency or
currency units in which payments will be made (if other than United States
dollars), listing (if any) on a securities exchange and any other specific terms
of the Debt Securities, the purchase price, exercise price, exercise period,
detachability and any other specific terms of any Warrants and the name of and
compensation to each dealer, underwriter or agent (if any) involved in the sale
of the Securities. The managing underwriters with respect to each series sold to
or through underwriters will be named in the accompanying Prospectus Supplement.
Any such underwriters (and any representative thereof), dealers or agents may
include Bear, Stearns & Co. Inc., a wholly-owned subsidiary of the Company.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
The Securities may be offered through dealers, through underwriters or
through agents designated from time to time, as set forth in the accompanying
Prospectus Supplement. The net proceeds to the Company will be, in the case of a
dealer, the sales price to such dealer, in the case of an underwriter, the
public offering price less the applicable underwriting discount or commission,
and, in the case of an agent, the public offering price less the applicable
agency commission, in each case, less other expenses attributable to issuance
and distribution. See "Plan of Distribution" for possible indemnification
arrangements for dealers, underwriters and agents.
This Prospectus and the accompanying Prospectus Supplement may be used by
Bear, Stearns & Co. Inc. in connection with offers and sales of Debt Securities
and Warrants in market-making transactions at negotiated prices related to
prevailing market prices at the time of sale or otherwise. Bear, Stearns & Co.
Inc. may act as a principal or agent in such transactions.
------------------------------
BEAR, STEARNS & CO. INC.
APRIL 8, 1994
<PAGE>
IN CONNECTION WITH THE OFFERING OF CERTAIN SECURITIES HEREUNDER, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICES OF THOSE SECURITIES, OR OTHER SECURITIES OF THE COMPANY, AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES 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.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission 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 or at its Regional
Offices located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, 13th Floor,
New York, New York 10048, and copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Reports, proxy statements and other
information concerning the Company can also be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the Securities.
Statements contained herein concerning the provisions of any document 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. 1-8989), are incorporated herein by
reference: (i) the Annual Report on Form 10-K (including the portions of the
Company's Annual Report to Stockholders incorporated by reference therein) for
the fiscal year ended June 30, 1993 (the "1993 Form 10-K"), (ii) the Quarterly
Report on Form 10-Q for the quarterly period ended September 24, 1993 and (iii)
the Quarterly Report on Form 10-Q for the quarterly period ended December 31,
1993. All documents filed by the Company pursuant to Sections 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 Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents.
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 to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all documents incorporated by reference into this Prospectus
except the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to Corporate Communications Department, The Bear Stearns Companies
Inc., 245 Park Avenue, New York, New York 10167; telephone number (212)
272-2000.
------------------------
2
<PAGE>
THE COMPANY
The Company is a holding company that, through its subsidiaries,
principally Bear, Stearns & Co. Inc. ("Bear Stearns") and Bear, Stearns
Securities Corp. ("BSSC") is a leading United States investment banking,
securities trading and brokerage firm serving United States and foreign
corporations, governments and institutional and individual investors. The
business of the Company and its subsidiaries includes market-making and trading
in corporate, United States government and agency, mortgage-related,
asset-backed and municipal securities and trading in options, futures, foreign
currencies, interest rate swaps and other derivative products; securities and
commodities arbitrage; 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 restructurings and
providing other financial advisory services, including advising on, and
participating in principal investments in, leveraged acquisitions; providing
securities clearance services; specialist activities in securities on the floors
of the New York Stock Exchange (the "NYSE"); customer financing activities;
securities lending activities; fiduciary services; and providing other services,
including real estate brokerage, investment management and advisory activities,
and securities research.
The Company's operations are conducted from its principal offices in New
York City, from domestic regional offices in Atlanta, Boston, Chicago, Dallas,
Los Angeles and San Francisco, from representative offices in Geneva, Hong Kong
and Shanghai, through international subsidiaries in Frankfurt, Hong Kong, London
and Paris, through a branch office in Tokyo and through joint ventures with
other firms in Karachi, Madrid and Paris. The Company's foreign offices provide
services and engage in investment activities involving foreign clients and
international transactions. The Company's trust company subsidiary, Custodial
Trust Company, operates from offices in Princeton, New Jersey.
Bear Stearns and BSSC are broker-dealers registered with the Commission,
futures commission merchants registered with the Commodity Futures Trading
Commission, members of the NYSE and all other principal United States securities
and commodities exchanges and members of the National Association of Securities
Dealers, Inc. (the "NASD") and the National Futures Association. Bear Stearns is
also recognized as a "primary dealer" in United States government securities
designated by the Federal Reserve Bank of New York.
The Company is incorporated in Delaware. The principal executive office of
the Company is located at 245 Park Avenue, New York, New York 10167; its
telephone number is (212) 272-2000.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, which may include additions to working capital, the
repayment of short-term indebtedness and investments in, or extensions of credit
to, subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was 1.9 for the six months ended
December 31, 1993 and 1.8, 1.6, 1.2, 1.2 and 1.3 for the fiscal years ended June
30, 1993, 1992, 1991, 1990 and 1989, respectively. These ratios were calculated
by dividing the sum of fixed charges into the sum of earnings before taxes and
fixed charges. Fixed charges for these purposes consist of all interest expense
and certain other immaterial expenses.
3
<PAGE>
DESCRIPTION OF DEBT SECURITIES
GENERAL
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general terms and provisions will not apply to
the Debt Securities so offered will be described in the Prospectus Supplement
relating to those Debt Securities.
The Debt Securities will be issued under an Indenture, dated as of May 31,
1991 (the "Indenture"), between the Company and Chemical Bank (formerly
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of the
Indenture is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part (the "Registration Statement"). The following summaries
of certain provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all provisions
of the Indenture, including the definitions therein of certain terms.
The Indenture does not limit the principal amount of Debt Securities that
may be issued thereunder, and provides that Debt Securities may be issued
thereunder in one or more series up to the aggregate principal amount that may
be authorized from time to time by the Company. The Company from time to time
may, without the consent of the Holders of outstanding Debt Securities, provide
for the issuance of other debt securities under the Indenture in addition to the
Debt Securities authorized on the date of this Prospectus. The Indenture
provides the Company with the ability, in addition to the ability to issue Debt
Securities with terms different than those of Debt Securities previously issued,
to "reopen" a previous issue of a series of Debt Securities and issue additional
Debt Securities of such series. Debt Securities in an aggregate principal amount
of up to $2,873,608,750 may be offered pursuant to this Prospectus. As of the
date of this Prospectus, $6,214,091,250 aggregate principal amount of Debt
Securities have been issued under the Indenture and are outstanding.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Debt Securities offered thereby for the terms of those Debt
Securities, including, where applicable (1) the title of the Debt Securities and
the series of which those Debt Securities are a part; (2) the aggregate
principal amount of, or any limit on the aggregate principal amount of, those
Debt Securities; (3) the date or dates on which those Debt Securities will
mature; (4) the rate or rates per annum (which may be fixed or variable) at
which those Debt Securities will bear interest, if any; (5) the date or dates on
which such interest, if any, will be payable and the record date or dates
relating thereto; (6) the provisions, if any, for redemption of those Debt
Securities and the redemption price thereof; (7) the sinking fund requirements,
if any, with respect to those Debt Securities; (8) whether those Debt Securities
provide for payment in United States dollars, a foreign currency or a composite
currency; (9) any index, formula or other method used to determine the amount of
payments of principal (and premium, if any) or interest, if any, on those Debt
Securities; (10) the form (registered or bearer or both) in which those Debt
Securities may be issued and any restrictions applicable to the exchange of one
form for another and to the offer, sale and delivery of the Debt Securities in
either form; (11) whether those Debt Securities will be issued in book-entry
form (a "Global Security") or in certificated form; (12) whether and under what
circumstances the Company will pay additional amounts ("Additional Amounts")
relating to specified taxes, assessments or other governmental charges in
respect of those Debt Securities and whether the Company has the option to
redeem those Debt Securities rather than pay such Additional Amounts, and the
terms of any such redemption; (13) if the amount of payments of principal of
(and premium, if any) or interest, if any, on, and Additional Amounts in respect
of those Debt Securities may be determined with reference to an index, formula
or other method based on a coin or currency other than that in which the Debt
Securities are stated to be payable, the manner in which those amounts will be
determined; (14) the provisions, if any, for the defeasance of those Debt
Securities; and (15) any other terms of those Debt Securities not inconsistent
with the provisions of the Indenture.
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Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities will be issued only in registered form without coupons ("Registered
Securities") in denominations of $1,000 and integral multiples thereof, and in
bearer form with or without coupons ("Bearer Securities") in the denomination of
$5,000. If Bearer Securities of a series are issued, the federal income tax
consequences and other special considerations applicable to those Bearer
Securities will be described in the Prospectus Supplement relating to that
series.
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Securities may be transferred or exchanged at the corporate trust
office or agency of the Trustee in the City and State of New York, subject to
the limitations provided in the Indenture, without the payment of any service
charge, other than any tax or other governmental charge that may be imposed in
connection therewith. Bearer Securities will be transferable by delivery.
Provisions with respect to the exchange of Bearer Securities of any series 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 of any series is to be determined with reference to
any type of index, formula or other method, the federal income tax consequences
(if material), specific terms of and other information with respect to those
Debt Securities and that index, formula or other method will be described in the
Prospectus Supplement relating to that series.
If the principal of (and premium, if any) or any interest on Debt
Securities of any series are payable in a foreign or composite currency, the
restrictions, elections, federal income tax consequences, specific terms and
other information with respect to those Debt Securities and such currency will
be described in the Prospectus Supplement relating to that series.
One or more series of Debt Securities may be sold at a substantial discount
below its or their stated principal amount, bearing no interest or interest at a
rate that at the time of issuance is below market rate. One or more series of
Debt Securities may be variable rate debt securities that may be exchangeable
for fixed rate debt securities. Federal income tax consequences and other
special considerations applicable to any such series will be described in the
Prospectus Supplement relating thereto.
The Debt Securities will be unsecured and will rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. The Company
extends credit to its subsidiaries from time to time. Extensions of credit to
subsidiaries may be subordinated to the claims of unaffiliated creditors of
those subsidiaries. In addition, since the Company is a holding company, the
right of the Company and hence the right of creditors of the Company (including
the Holders of the Debt Securities) to participate in any distribution of the
assets of any subsidiary upon its liquidation or reorganization, or otherwise,
is necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. Furthermore, dividends, loans and advances to the
Company from certain of its subsidiaries, including Bear Stearns and BSSC, are
restricted by net capital requirements under the Exchange Act and under rules of
certain exchanges and other regulatory bodies and by covenants governing certain
indebtedness of those subsidiaries.
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 Trustee in the City and State of New York or (in the case of
Bearer Securities) at the office of the Trustee located outside the United
States maintained for such purpose; provided, however, that payment of interest
other than interest payable at maturity (or on the date of redemption, if any,
if the Debt Securities are redeemable by the Company prior to maturity, or on
the date of repayment, if the Debt Securities are repayable at the option of the
Holder thereof prior to maturity) on Registered Securities may be made at the
option of the Company by check mailed to the address of the person entitled
thereto or, at the option of a Holder of at least $10,000,000 in principal
amount of Registered Securities, by wire transfer to an account designated by
such Holder in writing at
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least 16 days prior to the date on which such payment is due. Unless 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 or
will otherwise be made inside the United States.
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
newspaper of general circulation in the city or cities specified in the
Prospectus Supplement relating to such Bearer Security.
GLOBAL SECURITIES
The Debt Securities of a series 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 series. 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 the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any nominee to a successor of the Depositary or a
nominee of the successor.
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.
Upon the issuance of a Global Security, the Depositary will credit on its
book-entry system the respective principal amounts of the individual Debt
Securities represented by such Global Security to the accounts of institutions
that have accounts with the Depositary ("participants"). The accounts to be
credited shall be designated by the underwriters of the Debt Securities, or if
the Debt Securities are offered and sold directly by the Company or through
agents, by the Company or those agents. Ownership of beneficial interest in a
Global Security will be limited to participants or persons that may hold
beneficial interests through participants. Ownership of beneficial interest in a
Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary's participants or
persons that hold through participants. The laws of some states require that
certain purchasers of securities take physical delivery of 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
registered owner of a Global Security, the Depositary or nominee, as the case
may be, will be considered the sole owner or Holder of the Debt Securities
represented by the Global Security for all purposes under the Indenture. Except
as provided below, owners of beneficial interests in a Global Security will not
be entitled to have Debt Securities represented by Global Securities registered
in their names, will not receive or be entitled to receive physical delivery of
Debt Securities in definitive form and will not be considered the owners or
Holders thereof under the Indenture.
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 the individual Debt Securities registered
in the name of the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the Holder of such Global Security. Neither
the Company nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of a Global Security, or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests and each of
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them may act or refrain from acting without liability on any information
provided by the Depositary. The Company expects that the Depositary, upon
receipt of any payment of principal, premium or interest in respect of a Global
Security, will credit immediately the accounts of the participants with payment
in amounts proportionate to their respective holdings in principal amount of
beneficial interest in a Global Security as shown on the records of the
Depositary. The Company also expects that payments by participants to owners of
beneficial interests in a Global Security will be governed by standing customer
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 interest is paid on a bearer Global Security, or if no interest has been
paid but the bearer Global Security remains outstanding beyond a reasonable
period of time after the restricted period (as defined in applicable U.S.
Treasury regulations) has ended, the Depositary must provide the Company with a
certificate to the effect that the owners of the beneficial interests in the
Global Security are non-U.S. persons or U.S. persons that are permitted to hold
bearer securities under applicable U.S. Treasury regulations. In general, U.S.
persons that are permitted to hold bearer securities are U.S. persons who
acquire the securities through the foreign branch of certain U.S. financial
institutions and certain U.S. financial institutions that hold the securities
for resale to non-U.S. persons or who hold the securities on their own account
through a foreign branch. The certificate must be provided within a reasonable
period of time after the end of the restricted period, but in no event later
than the date when interest is paid. The certificate must be based on statements
provided to the Depositary by the owners of the beneficial interests.
If the Depositary is at any time unwilling or unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 calendar days, then the Company will issue Debt Securities in
certificated form in exchange for all outstanding Global Securities. In
addition, the Company (but not a Holder) may at any time determine not to have
Debt Securities represented by a Global Security and, in that event, will issue
Debt Securities in definitive form in exchange for all Global Securities. In any
such instance, an owner of a beneficial interest in the Global Securities to be
exchanged will be entitled to delivery in definitive form of Debt Securities
equal in principal amount to such beneficial interest and to have such Debt
Securities registered in its name. Individual Debt Securities of the series so
issued will be issued (a) as Registered Securities in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof if
the Debt Securities of that series are issuable as Registered Securities, (b) as
Bearer Securities in the denomination or denominations specified by the Company
if the Debt Securities of that series are issuable as Bearer Securities or (c)
as either Registered or Bearer Securities, if the Debt Securities of that series
are issuable in either form. 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.
LIMITATION ON LIENS
The Indenture provides that the Company may not, and may not permit any
Restricted Subsidiary to, issue, incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money secured by a pledge of, lien on or security
interest in any shares of Voting Stock of any Restricted Subsidiary without
effectively providing that the securities issued under the Indenture, including
the Debt Securities, will be secured equally and ratably with such secured
indebtedness. The term "Restricted Subsidiary" as defined in the Indenture means
Bear Stearns, Custodial Trust Company, BSSC and any other subsidiary of the
Company owning, directly or indirectly, any of the common stock of, or
succeeding to a significant portion of the business, property or assets of a
Restricted Subsidiary, or with which a Restricted Subsidiary is merged or
consolidated.
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MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation, and the Company may sell, lease or convey all or
substantially all of its assets to any corporation, organized and existing under
the laws of the United States of America or any state thereof, provided that (a)
the corporation (if other than the Company) formed by or resulting from any such
consolidation or merger or that shall have received such assets shall expressly
assume payment of the principal of, and premium, if any, and interest on, (and
any Additional Amounts payable in respect of) the Debt Securities and the
performance and observance of all of the covenants and conditions of the
Indenture to be performed or observed by the Company, and (b) the Company or
such successor corporation shall not immediately thereafter be in default under
the Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, the
Indenture does not restrict (i) a consolidation, merger, sale of assets or other
similar transaction that may adversely affect the creditworthiness of the
Company or a successor or combined entity, (ii) a change in control of the
Company or (iii) a highly leveraged transaction involving the Company, whether
or not involving a change in control, and the Indenture therefore will not
protect holders of the Debt Securities from the substantial impact that any of
the foregoing transactions may have on the value of the Debt Securities.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the Company
and the Trustee with the consent of the Holders of 66 2/3% in principal amount
of the outstanding Debt Securities of each series affected thereby, provided
that no such modification or amendment may, without the consent of the Holder of
each outstanding Debt Security affected thereby (a) change the Stated Maturity
or the date of any installment of principal of, or interest on, any Debt
Security or change the Redemption Price or the Optional Redemption Price
thereof; (b) reduce the principal amount of, or the rate of interest on, or the
amount of any Additional Amount payable in respect of, any Debt Security or
reduce the amount of principal that could be declared due and payable prior to
the Stated Maturity of that Debt Security, or change the obligation of the
Company to pay any Additional Amounts (except as contemplated or permitted under
the Indenture), or reduce the amount of the principal of a Discount Security
that would be due and payable upon a declaration of acceleration of the maturity
of that Debt Security pursuant to the Indenture; (c) change the place or
currency of any payment of principal, premium, if any, or interest on any Debt
Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security; (e) reduce the percentage in
principal amount of the outstanding Debt Securities of any series, the consent
of whose Holders is required to modify or amend the Indenture; or (f) modify the
foregoing requirements or reduce the percentage of outstanding Debt Securities
necessary to waive any past default to less than a majority. Except with respect
to certain fundamental provisions, the Holders of at least a majority in
principal amount of outstanding Debt Securities of any series may, with respect
to that series, waive past defaults under the Indenture and waive compliance by
the Company with certain provisions of the Indenture.
EVENTS OF DEFAULT
Under the Indenture, the following will be Events of Default with respect
to any series of Debt Securities: (a) default in the payment of interest on, or
any Additional Amounts payable in respect of, any Debt Securities of that series
when due, which default has continued for 30 days; (b) default in the payment of
the principal of, and premium, if any, on, any Debt Security of that series when
due; (c) default in the deposit of any sinking fund payment, when due, in
respect of any Debt Security of that series; (d) default in the performance of
any other covenant of the Company contained in the Indenture or in the Debt
Securities of that series, which default has continued for 60 days after written
notice as provided in the Indenture; (e) default for 10 days after notice as
provided in the Indenture, in respect of any other indebtedness for borrowed
money of the Company or any Restricted Subsidiary in excess of
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$10,000,000 that has been declared due and payable prior to maturity; (f)
certain events of bankruptcy, insolvency or reorganization; and (g) any other
Event of Default with respect to Debt Securities of that series. The Trustee or
the Holders of 25% in principal amount (or any lesser amount that may be
provided for in the Debt Securities of that series) of the outstanding Debt
Securities of that series may declare the principal amount of all outstanding
Debt Securities of that series due and payable immediately if an Event of
Default with respect to the Debt Securities of that series shall occur and be
continuing at the time of declaration. At any time after a declaration of
acceleration has been made with respect to the Debt Securities of any series,
but before a judgment or decree for payment of money due has been obtained by
the Trustee, the Holders of a majority in principal amount of the outstanding
Debt Securities of that series may rescind any declaration of acceleration and
its consequences, if all payments due (other than those due solely as a result
of acceleration) have been made and all Events of Default have been remedied or
waived. Any Event of Default with respect to Debt Securities of any series may
be waived by the Holders of a majority in principal amount of all outstanding
Debt Securities of that series, except in a case of failure to pay the principal
of, and premium, if any, or interest on, or any Additional Amounts payable in
respect of, any Debt Security of that series for which payment had not been
subsequently made or in respect of a covenant or provision that cannot be
modified or amended without the consent of the Holder of each outstanding Debt
Security of that series.
The Holders of a majority in principal amount of the outstanding Debt
Securities of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to Debt Securities of that series,
provided that this direction shall not be in conflict with any rule of law or
the Indenture. Before proceeding to exercise any right or power under the
Indenture at the direction of those Holders, the Trustee shall be entitled to
receive from those Holders reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction.
The Company will be required to furnish to the Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
Indenture.
DEFEASANCE
If so established by the Company under the terms of the Indenture with
respect to Debt Securities of any series that are Registered Securities
denominated and payable only in United States dollars (except as otherwise
provided under the Indenture), the Company, at its option, (a) will be
discharged from any and all obligations in respect of the Debt Securities of
that series (except for certain obligations to register the transfer or exchange
of Debt Securities of that series, replace stolen, lost or mutilated Debt
Securities of that series, maintain paying agents and hold moneys for payment in
trust) on the 91st day after the applicable conditions described in this
paragraph have been satisfied or (b) will not be subject to provisions of the
Indenture described above under "Limitation on Liens" and "Merger and
Consolidation" with respect to the Debt Securities of that series, in each case
if the Company deposits with the 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 (including any mandatory sinking fund payments) of, and
premium, if any, and any interest on, the Debt Securities of that series on the
dates such payments are due in accordance with the terms of those Debt
Securities. To exercise either option, the Company is required to deliver to the
Trustee an opinion of counsel to the effect that (a) the deposit and related
defeasance would not cause the Holders of the Debt Securities of the series
being defeased to recognize income, gain or loss for United States Federal
income tax purposes and (b) if the Debt Securities of that series are then
listed on the NYSE, the exercise of the option would not result in delisting.
Defeasance provisions, if any, with respect to any series of Debt Securities may
be specified by the Company under the terms of the Indenture.
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DESCRIPTION OF WARRANTS
The following description sets forth certain general terms and provisions
of the Warrants to which any Prospectus Supplement may relate. The particular
terms of the Warrants offered by any Prospectus Supplement and the extent, if
any, to which such general terms and provisions will not apply to the Warrants
so offered will be described in the Prospectus Supplement relating to those
Warrants.
The Company may issue Warrants for the purchase of Debt Securities,
Warrants to buy or sell debt securities of or guaranteed by the United States or
other sovereign states ("Government Debt Securities"), Warrants to buy or sell
currencies, currency units or units of a currency index or currency basket,
Warrants to buy or sell units of a stock index or stock basket and Warrants to
buy and sell a commodity or a commodity index. Warrants may be offered
independently of or together with any series of Debt Securities and may be
attached to or separate from those Debt Securities. The Warrants will be settled
either through physical delivery or through payment of a cash settlement value
as set forth herein and in any applicable Prospectus Supplement. Each series of
Warrants will be issued under a separate warrant agreement (a "Warrant
Agreement") to be entered into between the Company and a bank or a trust
company, as warrant agent (the "Warrant Agent"), all as described in the
Prospectus Supplement relating to that series of Warrants. The Warrant Agent
will act solely as the agent of the Company under the applicable Warrant
Agreement and in connection with the certificates for the Warrants (the "Warrant
Certificates"), if any, of that series, and will not assume any obligation or
relationship of agency or trust for or with any holders of those Warrant
Certificates or beneficial owners of those Warrants. The following summaries of
certain provisions of the forms of Warrant Agreements and Warrant Certificates
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Warrant Agreements and the
Warrant Certificates, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
GENERAL
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Warrants, if any, offered thereby for the terms of those
Warrants, including, where applicable: (1) whether the Warrant is for Debt
Securities, Government Debt Securities, currencies, currency units, currency
indices or currency baskets, stock indices, stock baskets, commodities,
commodity indices or any other index or reference as therein described; (2) the
offering price; (3) the currency, currency unit, currency index or currency
basket based on or relating to currencies for which those Warrants may be
purchased; (4) the date on which the right to exercise those Warrants will
commence and the date (the "Expiration Date") on which that right will expire;
(5) whether those Warrants are to be issuable in registered form ("Registered
Warrants") or bearer form ("Bearer Warrants"); (6) whether those Warrants are
extendable and the period or periods of such extendibility; (7) the terms upon
which Bearer Warrants, if any, of any series may be exchanged for Registered
Warrants of that series; (8) whether those Warrants will be issued in book-entry
form (a "Global Warrant Certificate") or in certificated Form; (9) United States
federal income tax consequences applicable to those Warrants; and (10) any other
terms of those Warrants not inconsistent with the applicable Warrant Agreement.
If the offered Warrants are to purchase Debt Securities, the Prospectus
Supplement will also describe (1) the designation, aggregate principal amount,
currency, currency unit or currency basket and other terms of the Debt
Securities purchasable upon exercise of those Warrants; (2) the designation and
terms of the Debt Securities with which those Warrants are issued and the number
of those Warrants issued with each such Debt Security; (3) the date or dates on
and after which those Warrants and the related Debt Securities will be
separately transferable; and (4) the principal amount of Debt Securities
purchasable upon exercise of one offered Warrant and the price at which and
currency, currency unit or currency basket in which such principal amount of
Debt Securities may be purchased upon such exercise. Prior to exercising their
Warrants, holders of those Warrants will not have any of the
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rights of Holders of the Debt Securities of the series purchasable upon such
exercise, including the right to receive payments of principal of, or premium,
if any, or interest, if any, on, those Debt Securities, or to enforce any of the
covenants in the Indenture.
If the offered Warrants are to buy or sell Government Debt Securities or a
currency, currency unit, currency index or currency basket, the Prospectus
Supplement will describe the amount and designation of the Government Debt
Securities or currency, currency unit, currency index or currency basket, as the
case may be, subject to each Warrant, whether those Warrants provide for cash
settlement or delivery of the Government Debt Securities or currency, currency
unit, currency index or currency basket upon exercise.
If the offered Warrants are Warrants on a stock index or a stock basket,
those Warrants will provide for payment of an amount in cash determined by
reference to increases or decreases in such stock index or stock basket, and the
Prospectus Supplement will describe the terms of those Warrants, the stock index
or stock basket covered by those Warrants and the market to which the stock
index or stock basket relates.
If the offered Warrants are Warrants on a commodity or commodity index,
those Warrants will provide for cash settlement or delivery of the particular
commodity or commodity index. The Prospectus Supplement will describe the terms
of those Warrants, the commodity or commodity index covered by those Warrants
and the market, if any, to which the commodity or commodity index relates.
Registered Warrants of any series will be exchangeable for Registered
Warrants of the same series representing in the aggregate the number of Warrants
surrendered for exchange. Warrant Certificates, to the extent exchangeable, may
be presented for exchange, and Registered Warrants may be presented for
transfer, at the corporate trust office of the Warrant Agent for that series of
Warrants (or any other office indicated in the Prospectus Supplement relating to
that series of Warrants). Warrants to buy or sell Government Debt Securities or
a currency, currency unit, currency index or currency basket, and Warrants on
stock indices or stock baskets or on commodities or commodity indices, may be
issued in the form of a single Global Warrant Certificate, registered in the
name of the nominee of the depository of the Warrants, or may initially be
issued in the form of definitive certificates that may be exchanged, on a fixed
date, or on a date or dates selected by the Company, for interests in a Global
Warrant Certificate, as set forth in the applicable Prospectus Supplement.
Bearer Warrants will be transferable by delivery. The Prospectus Supplement will
describe the terms of exchange applicable to any Bearer Warrants.
EXERCISE OF WARRANTS
Each Warrant will entitle the Holder to purchase such principal amount of
the Debt Securities or buy or sell such amount of Government Debt Securities or
of a currency, currency unit, currency index or currency basket, commodity or
commodities at the exercise price, or receive a settlement value in respect of
such amount of Government Debt Securities or of a currency, currency unit,
currency index or currency basket, stock index or stock basket, commodity or
commodity index, as shall in each case be set forth in or calculable from, the
Prospectus Supplement relating to that series of Warrants or as otherwise set
forth in the Prospectus Supplement. Warrants may be exercised at the corporate
trust office of the Warrant Agent (or any other office indicated in the
Prospectus Supplement relating to those Warrants) at any time up to 5:00 p.m.
New York time on the date set forth in the Prospectus Supplement relating to
those Warrants or as may be otherwise set forth in the Prospectus Supplement.
After such time on that date (or such later date to which such date may be
extended by the Company), unexercised Warrants will become void.
Subject to any restrictions and additional requirements that may be set
forth in the Prospectus Supplement relating thereto, Warrants may be exercised
by delivery to the Warrant Agent of the Warrant Certificate evidencing such
Warrants properly completed and duly executed and of payment as provided in the
Prospectus Supplement of the amount required to purchase the Debt Securities, or
(except in the case of Warrants providing for cash settlement) payment for or
delivery of the
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Government Debt Securities or currency, currency unit, currency basket, stock
index, stock basket, commodity or commodity index, as the case may be, purchased
or sold upon such exercise. Only Registered Securities will be issued and
delivered upon exercise of Registered Warrants. Warrants will be deemed to have
been exercised upon receipt of such Warrant Certificate and any payment, if
applicable, at the corporate trust office of the Warrant Agent or any other
office indicated in the Prospectus Supplement and the Company will, as soon as
practicable thereafter, issue and deliver the Debt Securities purchasable upon
such exercise, or buy or sell such Government Debt Securities or currency,
currency unit, currency basket, commodity or commodities or pay the settlement
value in respect of the Warrants. If fewer than all of the Warrants represented
by such Warrant Certificate are exercised, a new Warrant Certificate will be
issued for the remaining amount of the Warrants. Special provisions relating to
the exercise of any Bearer Warrants or automatic exercise of Warrants will be
described in the related 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 or during the restricted period (as defined in
applicable U.S. Treasury regulations) of such Bearer Security, they will not
offer, sell or deliver such Bearer Security, directly or indirectly, to a U.S.
Person or to any person within the United States, except to the extent permitted
under U.S. Treasury regulations.
Each Bearer Security, including Bearer Global Securities that will not be
exchanged for definitive individual Securities prior to the stated maturity,
will bear on the face of the Security and on any interest coupons that may be
detachable therefrom a legend to the following effect: "Any United States Person
who holds this obligation will be subject to limitations under the United States
income tax laws, including the limitations provided in Sections 165(j) and
1287(a) of the Internal Revenue Code." The sections referred to in the legend
provide that, with certain exceptions, a United States taxpayer who holds Bearer
Securities will not be allowed to deduct any loss, and will not be eligible for
capital gain treatment with respect to any gain, realized on a sale, exchange,
redemption or other disposition of those Bearer Securities. The legend described
above will also be evidenced on any book-entry system maintained with respect to
the Bearer Securities.
As used herein, "United States" means the United States of America and its
possessions, and "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under the
laws of the United States, or an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
Pending the availability of a definitive Global Security or individual
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security. Following the availability of a definitive Global Security in bearer
form, 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" unless such a certificate has
already been provided by the Depositary because interest has been paid on the
Global Security or because a reasonable period of time after the end of the
restricted period has passed.
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 those Bearer Warrants.
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PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) to
underwriters (including Bear Stearns) or dealers, who may act directly or
through a syndicate represented by one or more managing underwriters (including
Bear Stearns); (ii) through broker-dealers (including Bear Stearns) designated
by the Company to act on its behalf as agents; or (iii) directly to one or more
purchasers. Each Prospectus Supplement will set forth the manner and terms of
the offering of the Securities covered thereby, including (i) whether that
offering is being made to underwriters or through agents; (ii) any underwriting
discounts, dealer concessions, agency commissions and any other items that may
be deemed to constitute underwriters', dealers' or agents' compensation, and
(iii) the purchase price or initial public offering price of the Securities and
the anticipated proceeds to the Company from the sale of the Securities.
When Securities are to be sold to underwriters, unless otherwise set forth
in the applicable Prospectus Supplement, the obligations of the underwriters to
purchase those Securities will be subject to certain conditions precedent but
the underwriters will be obligated to purchase all of the Securities if any are
purchased. The Securities will be acquired by the underwriters for their own
account and may be resold by the underwriters, either directly to the public or
to securities dealers, from time to time in one or more transactions, including
negotiated transactions, either at fixed public offering price or at varying
prices determined at the time of sale. The initial public offering price, if
any, and any concessions allowed or reallowed to dealers, may be changed from
time to time.
To the extent that any Securities underwritten by Bear Stearns are not
resold by Bear Stearns for an amount at least equal to the public offering price
thereof, the proceeds from the offering of those Securities will be reduced.
Bear Stearns intends to resell any of those Securities from time to time
following termination of the offering at varying prices related to prevailing
market prices at the time of sale, subject to applicable prospectus delivery
requirements.
Unless otherwise indicated in the applicable Prospectus Supplement, when
Securities are sold through an agent, the designated agent will agree, for the
period of its appointment as agent, to use its best efforts to sell the
Securities for the Company's account and will receive commissions from the
Company as set forth in the applicable Prospectus Supplement.
Securities purchased in accordance with a redemption or repayment pursuant
to their terms may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing 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 Securities remarketed by them.
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 Securities at the public offering price set forth in
the Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in the Prospectus Supplement.
These contracts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and the Prospectus Supplement will set forth
the commissions payable for solicitation of these contracts.
Underwriters and agents participating in any distribution of Securities may
be deemed "underwriters" within the meaning of the Securities Act and any
discounts or commissions they receive in connection therewith may be deemed to
be underwriting compensation for the purposes of the Securities Act. Those
underwriters and agents may be entitled, under their agreements with the
Company, to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution by the
Company to payments that they may be required to make in respect of those civil
liabilities. Various of those underwriters or agents may be customers of, engage
in transactions with or perform services for the Company or its affiliates in
the ordinary course of business.
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Following the initial distribution of any series of Securities, Bear
Stearns may offer and sell previously issued Securities of that series from time
to time in the course of its business as a broker-dealer. Bear Stearns may act
as principal or agent in those transactions. This Prospectus and the Prospectus
Supplement applicable to those Securities will be used by Bear Stearns in
connection with those transactions. Sales will be made at prices related to
prevailing prices at the time of sale.
Each distribution of Securities will conform to the requirements set forth
in the applicable sections of Schedule E to the By-laws of the NASD.
ERISA CONSIDERATIONS
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
prohibits the borrowing of money, the sale of property and certain other
transactions involving the assets of plans that are qualified under the Code
("Qualified Plans") or individual retirement accounts ("IRAs") and persons who
have certain specified relationships to them. Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), prohibits similar
transactions involving employee benefit plans that are subject to ERISA ("ERISA
Plans"). Qualified Plans, IRAs and ERISA Plans are hereinafter collectively
referred to as "Plans."
Persons who have such specified relationships are referred to as "parties
in interest" under ERISA and as "disqualified persons" under the Code. "Parties
in interest" and "disqualified persons" encompass a wide range of persons,
including any fiduciary (e.g., investment manager, trustee or custodian), any
person providing services (e.g., a broker), the Plan sponsor, an employee
organization any of whose members are covered by the Plan, and certain persons
related to or affiliated with any of the foregoing.
The Company, Bear Stearns and/or BSSC each is considered a "party in
interest" or "disqualified person" with respect to many Plans, including IRAs
established with any of them. The purchase and/or holding of Securities by a
Plan with respect to which the Company, Bear Stearns and/or BSSC is a fiduciary
and/or a service provider (or otherwise is a "party in interest" or
"disqualified person") would constitute or result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code, unless such Securities
are acquired or held pursuant to and in accordance with an applicable statutory
or administrative exemption. An IRA that engages in a non-exempt prohibited
transaction could forfeit its tax-exempt status under Section 408 of the Code.
Applicable exemptions may include the exemption for services under Section
408(b)(2) of ERISA and certain prohibited transaction class exemptions (e.g.,
Prohibited Transaction Class Exemption 84-14 relating to qualified professional
asset managers and Prohibited Transaction Class Exemptions 75-1 and 86-128
relating to securities transactions involving employee benefit plans and
broker-dealers).
In accordance with ERISA's general fiduciary requirement, a fiduciary with
respect to any ERISA Plan who is considering the purchase of Securities on
behalf of such plan should determine whether such purchase is permitted under
the governing plan document and is prudent and appropriate for the ERISA Plan in
view of its overall investment policy and the composition and diversification of
its portfolio. No IRA established with, or for which services are provided by,
the Company, Bear Stearns, and/or BSSC should acquire any Securities and other
Plans established with, or for which services are provided by, the Company, Bear
Stearns and/or BSSC should consult with counsel prior to making any such
acquisition.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated by reference from the Company's 1993 Form 10-K have been
audited by Deloitte & Touche, independent auditors, as stated in their reports,
which are incorporated herein by reference, and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
VALIDITY OF THE SECURITIES
The validity of the Debt Securities and the Warrants will be passed upon
for the Company by Weil, Gotshal & Manges (a partnership including professional
corporations), New York, New York.
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NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN 2,000,000 WARRANTS
THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, THE BEAR STEARNS
SUCH INFORMATION OR REPRESENTATIONS COMPANIES INC.
MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR
ANY UNDERWRITER. NEITHER THE DELIVERY 1,000,000 JAPAN INDEX*
OF THIS PROSPECTUS SUPPLEMENT AND CALL WARRANTS
THE PROSPECTUS NOR ANY SALE MADE EXPIRING , 1997
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE 1,000,000 JAPAN INDEX
COMPANY SINCE THE DATES AS OF WHICH PUT WARRANTS
INFORMATION IS GIVEN IN THIS PROSPECTUS EXPIRING , 1997
SUPPLEMENT AND THE PROSPECTUS. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH AN OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Prospectus Summary................... S-3 ---------------------
Use of Proceeds and Hedging.......... S-10 PROSPECTUS SUPPLEMENT
Certain Important Information ---------------------
Concerning the Warrants............ S-10
Risk Factors......................... S-15
Description of the Warrants.......... S-19
The Japan Index...................... S-37
Certain United States Federal
Income Tax Considerations......... S-42 BEAR, STEARNS & CO. INC.
Underwriting......................... S-43
Validity of the Warrants............. S-44
Appendix A: Index of Key Terms....... A-1
Appendix B: Japan Index--
Underlying Stocks.................. B-1
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents
by Reference....................... 2 , 1994
The Company.......................... 3 ---------
Use of Proceeds...................... 3 * The use of, and reference
Ratio of Earnings to Fixed Charges... 3 to, the term "Japan Index"
Description of Debt Securities....... 4 herein has been consented to
Description of Warrants.............. 10 by the American Stock
Limitations on Issuance of Bearer Exchange, Inc. The "Japan
Securities and Bearer Warrants..... 12 Index" is a service mark of
Plan of Distribution................. 13 the American Stock
ERISA Considerations................. 14 Exchange, Inc.
Experts.............................. 14
Validity of the Securities........... 14
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GRAPHIC AND IMAGING MATERIAL APPENDIX
(pursuant to Item 304(a) of Regulation S-T)
All defined terms contained in the Prospectus Supplement to which this Appendix
is appended are incorporated herein by reference.
Graph 1. The information represented in the graph titled "Japan Index -
Historical Performance" is presented in tabular form in the
Prospectus Supplement in the section captioned "THE JAPAN INDEX -
Historical Data on the Japan Index".
