THIS PROSPECTUS SUPPLEMENT RELATES 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 SEPTEMBER 19, 1994
PROSPECTUS SUPPLEMENT RULE 424(b)(5)
(TO PROSPECTUS DATED APRIL 8, 1994) FILE NO. 33-52701
1,500,000 CHIPS(SM)
THE BEAR STEARNS COMPANIES INC.
% CU COMMON-LINKED HIGHER INCOME
PARTICIPATION SECURITIES(SM) (CHIPS) DUE 1998
(ISSUE PRICE AND PRINCIPAL AMOUNT AT MATURITY BASED ON THE
PER SHARE PRICE OF CUC INTERNATIONAL INC. COMMON STOCK)
The issue price (the "Issue Price") of each of the % CU Common-Linked
Higher Income Participation Securities Due 1998 ("CHIPS") of The Bear Stearns
Companies Inc. (the "Company") being offered hereby will be $ (50% of the per
share closing price of the Common Stock (the "CU Common Stock") of CUC
International Inc. ("CUC") on , 1994, as reported on the New York
Stock Exchange Composite Tape). The CHIPS will mature on , 1998,
subject to extension in the event that any of the 10 Business Days (as defined
herein) immediately prior to , 1998 is not a Trading Day (as defined
herein), but in no event later than , 1998. See "Description of the
CHIPS--Non-Trading Days."
The principal amount of each CHIPS payable at maturity will equal the lesser
of (A) % of the Issue Price or (B) 50% of the average Closing Price of CU
Common Stock, subject to adjustment as a result of certain dilution events (see
"Description of the CHIPS--Anti-Dilution Adjustments" herein), for the 10
Trading Days (as defined herein) immediately prior to maturity. Interest on the
CHIPS is payable quarterly on each , , and
, at the rate of % of the Issue Price per annum (or $ per
annum), beginning , 1994. The CHIPS are not redeemable by the Company
prior to maturity.
Prospective investors are advised to consider carefully the information
contained herein under "Special Considerations." For a discussion of certain
United States federal income tax consequences for holders of CHIPS, see "Certain
Federal Income Tax Considerations."
CUC is neither affiliated with the Company nor involved in this offering of
CHIPS. See "Special Considerations--Lack of Affiliation Between the Company and
CUC."
"CHIPS" and "Common-Linked Higher Income Participation Securities" are
service marks of the Company.
The CHIPS have been approved for listing on the American Stock Exchange, Inc.
("AMEX"), subject to official notice of issuance, under the symbol "UCP."
------------------------
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.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(3)
<S> <C> <C> <C>
Per CHIPS......... $ $ $
Total(4).......... $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 1994.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses estimated at $ .
(4) The Company has granted the Underwriters a 30-day option to purchase up to
an aggregate of 225,000 additional CHIPS solely to cover over-allotments. If
the option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------
The CHIPS are offered by the several 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 and to withdraw, cancel or
modify the offer without notice. It is expected that delivery of the CHIPS will
be made at the offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York,
New York 10167 on or about , 1994.
Following the initial offering of the CHIPS, this Prospectus Supplement and
the accompanying Prospectus may be used by Bear, Stearns & Co. Inc. in
connection with offers and sales associated with market-making transactions in
the CHIPS. Bear, Stearns & Co. Inc. may act as principal or agent in such
transactions. Such offers and sales will be made at prices related to prevailing
market prices at the time.
------------------------
BEAR, STEARNS & CO. INC.
ALEX. BROWN & SONS
INCORPORATED
SMITH BARNEY INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
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.
S-2
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was 1.6 for the fiscal year ended
June 30, 1994. This ratio was 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.
See "Ratio of Earnings to Fixed Charges" in the Prospectus.
USE OF PROCEEDS AND HEDGING
An amount equal to approximately half of the net proceeds from the sale of
the CHIPS will be used by the Company or one or more of its subsidiaries to
acquire CU Common Stock or listed or over-the-counter options contracts in, or
other derivative or synthetic instruments related to, CU Common Stock in
connection with hedging the Company's obligations under the CHIPS. The remaining
net proceeds will be used for general corporate purposes. See "Use of Proceeds"
in the Prospectus.
Prior to the pricing of the CHIPS, the Company, through its subsidiaries,
hedged its anticipated obligations under the CHIPS and, subject to market
conditions, the Company expects that it will continue to hedge its obligations
under the CHIPS from time to time following this offering by taking long or
short positions in CU Common Stock or in listed or over-the-counter options
contracts in, or other derivative or synthetic instruments related to, CU Common
Stock. In addition, the Company, through its subsidiaries, may purchase or
otherwise acquire a long or short position in CHIPS from time to time and may,
in its sole discretion, hold or resell such CHIPS. The Company, through its
subsidiaries, may also take positions in other types of appropriate financial
instruments that may become available in the future. To the extent that the
Company, through its subsidiaries, has a long hedge position in CU Common Stock
or options contracts in, or other derivative or synthetic instruments related
to, CU Common Stock, the Company, through its subsidiaries, may liquidate a
portion of its holdings at or about the time of the maturity of the CHIPS.
Depending, among other things, on future market conditions, the aggregate amount
and the composition of such positions are likely to vary over time. Profits or
losses from any such position cannot be ascertained until such position is
closed out and any offsetting position or positions are taken into account.
CUC INTERNATIONAL INC.
According to publicly available documents, CUC, a Delaware corporation, is a
membership-based consumer services company, providing consumers with access to a
variety of services. These memberships include such components as discount
shopping, travel, automobile discounts, dining, home improvement, vacation
exchange, credit card and checking account enhancement packages and dining
coupon programs. CUC is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended. Accordingly, CUC files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Copies of such reports, proxy statements and
other information may be inspected and copied at certain offices of the
Commission and at the offices of the New York Stock Exchange, Inc. ("NYSE") at
the addresses listed under "Available Information" in the Prospectus.
THIS PROSPECTUS SUPPLEMENT RELATES ONLY TO THE CHIPS OFFERED HEREBY AND DOES
NOT RELATE TO CU COMMON STOCK. ALL DISCLOSURES CONTAINED IN THIS PROSPECTUS
SUPPLEMENT REGARDING CUC ARE DERIVED FROM THE PUBLICLY AVAILABLE DOCUMENTS
DESCRIBED IN THE PRECEDING PARAGRAPH. NEITHER THE COMPANY NOR THE UNDERWRITERS
HAVE PARTICIPATED IN THE PREPARATION OF THOSE DOCUMENTS, OR MADE ANY DUE
DILIGENCE INQUIRY WITH RESPECT TO THE INFORMATION PROVIDED THEREIN. THERE CAN BE
NO ASSURANCE THAT ALL EVENTS OCCURRING PRIOR TO THE DATE HEREOF THAT WOULD
AFFECT THE TRADING PRICE OF CU COMMON STOCK (INCLUDING EVENTS THAT WOULD AFFECT
THE ACCURACY OR
S-3
<PAGE>
COMPLETENESS OF THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING
PARAGRAPH) HAVE BEEN PUBLICLY DISCLOSED. BECAUSE THE PRINCIPAL AMOUNT OF THE
CHIPS PAYABLE AT MATURITY IS RELATED TO THE TRADING PRICE OF CU COMMON STOCK,
ANY SUCH EVENTS ALSO WOULD AFFECT THE TRADING PRICE OF THE CHIPS.
PRICE RANGE AND DIVIDEND HISTORY OF CU COMMON STOCK
CU Common Stock is listed and traded on the NYSE under the symbol CU. The
following table sets forth, for the periods indicated, the high and low sales
prices on the NYSE for CU Common Stock as reported on the NYSE Composite Tape.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
CUC Fiscal Year Ended January 31, 1993
$15
First Quarter............................................. 5/8 $11 7/8
Second Quarter............................................ 14 3/4 11 5/8
Third Quarter............................................. 16 11 1/2
Fourth Quarter............................................ 19 1/4 15 7/8
CUC Fiscal Year Ended January 31, 1994
$20
First Quarter............................................. 7/8 $16 5/8
Second Quarter............................................ 31 3/4 20 1/4
Third Quarter............................................. 39 3/4 29 5/8
Fourth Quarter............................................ 38 3/8 30 3/8
CUC Fiscal Year Ending January 31, 1995
$33
First Quarter............................................. 5/8 $26 1/2
Second Quarter............................................ 30 7/8 25
Third Quarter (through September 16)...................... 34 7/8 30
</TABLE>
The prices shown in the foregoing table have been adjusted to give
retroactive effect to three-for-two stock splits that became effective July 2,
1992 and April 30, 1993, respectively.
CUC paid no dividends in the fiscal years ended January 31, 1993 and January
31, 1994. The Company makes no representation as to the amount of dividends, if
any, that CUC may pay in the current fiscal year or any future fiscal year. In
any event, holders of the CHIPS will not be entitled to receive any dividends
that may be payable on CU Common Stock.
SPECIAL CONSIDERATIONS
The CHIPS are novel and innovative securities. Accordingly, the AMEX
requires its members and member organizations to sell CHIPS only to investors
whose accounts have been specifically approved for trading equity-linked
securities.
As described in more detail below, the trading price of the CHIPS may vary
considerably prior to maturity due, among other things, to fluctuations in the
price of CU Common Stock and other events that are difficult to predict and
beyond the Company's control.
COMPARISON TO OTHER DEBT SECURITIES
The terms of the CHIPS differ from those of ordinary debt securities, in
that the principal amount received at maturity is not fixed, but is based on the
price of CU Common Stock. There can be no assurance that the principal amount
payable at maturity will be greater than the Issue Price. If the price of CU
Common Stock at maturity is less than the Issue Price, the principal amount
payable at maturity also will be less than the Issue Price, in which case an
investment in the CHIPS may result in a loss.
S-4
<PAGE>
RELATIONSHIP OF THE CHIPS AND CU COMMON STOCK
The market price of the CHIPS at any time is expected to be affected
primarily by changes in the price of CU Common Stock. As indicated in "Price
Range and Dividend History of CU Common Stock" herein, the price of CU Common
Stock during certain recent periods has been highly volatile.
It is impossible to predict whether the price of CU Common Stock will rise
or fall. Trading prices of CU Common Stock will be influenced by CUC's operating
results and by complex and interrelated political, economic, financial and other
factors that can affect the capital markets generally, the stock exchange on
which CU Common Stock is traded and the market segment of which CUC is a part.
See "CUC International Inc." herein.
DILUTION OF CU COMMON STOCK
The principal amount of the CHIPS payable at maturity is subject to
adjustment upon the occurrence of stock splits and combinations, stock
dividends, extraordinary cash dividends and certain other events that would
result in the modification of CUC's capital structure. See "Description of the
CHIPS--Anti-Dilution Adjustments" herein. The principal amount of the CHIPS will
not be adjusted for other events, such as offerings of CU Common Stock for cash,
that may adversely affect the price of CU Common Stock and, because of the
relationship of the principal amount of the CHIPS to the price of CU Common
Stock, those events also may adversely affect the price of the CHIPS. There can
be no assurance that CUC will not make offerings of CU Common Stock in the
future or as to the size of any such offerings.
LACK OF AFFILIATION BETWEEN THE COMPANY AND CUC
The Company is not affiliated with CUC and, although the Company has no
knowledge that any of the events described in the preceding subsection are
currently being contemplated by CUC or of any event that would have a material
adverse effect on CUC or on the price of CU Common Stock, those events are
beyond the Company's ability to control and are difficult to predict.
CUC is not involved in the offering of the CHIPS and has no obligations with
respect to the CHIPS, including any obligation to take the needs of the Company
or of holders of the CHIPS into consideration for any reason. CUC will not
receive any of the proceeds of this offering and is not responsible for, and has
not participated in, the determination of the timing of, prices for, or
quantities of, the CHIPS to be issued or in the determination or calculation of
the principal amount to be paid at maturity. CUC is not involved with the
administration, marketing or trading of the CHIPS and has no obligations with
respect to the principal amount to be paid to holders of the CHIPS at maturity.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET FOR THE CHIPS
It is not possible to predict how the CHIPS will trade in the secondary
market or whether that market will be liquid or illiquid.
At issuance, the CHIPS will be listed on the AMEX. However, there can be no
assurance that the CHIPS will not later be delisted or that trading in the CHIPS
on the AMEX will not be suspended. In the event of a delisting or suspension of
trading on the AMEX, the Company will use its best efforts to list the CHIPS on
another national securities exchange. If the CHIPS are not listed or traded on
any securities exchange, or if trading of the CHIPS is suspended, pricing
information for the CHIPS may be more difficult to obtain and the liquidity of
the CHIPS may be adversely affected.
DESCRIPTION OF THE CHIPS
The CHIPS are a series of Securities to be issued under the Indenture
described in the accompanying Prospectus. The CHIPS will be issued only in fully
registered form. Reference should be made to the accompanying Prospectus for a
detailed summary of additional provisions of the CHIPS and the Indenture under
which the CHIPS will be issued and to the Prospectus and the Indenture for the
S-5
<PAGE>
definitions of certain capitalized terms used herein. The Trustee under the
Indenture is Chemical Bank (formerly Manufacturers Hanover Trust Company).
The aggregate number of the CHIPS to be issued will be 1,500,000, subject to
increase to the extent the Underwriters' over-allotment option is exercised. The
CHIPS will mature on , 1998, subject to extension in the case of
certain Non-Trading Days, but in no event later than , 1998. At
maturity, the holder of a CHIPS will be entitled to receive a principal amount
equal to the lesser of (A) % of the Issue Price or (B) 50% of the average
Closing Price per share of CU Common Stock, subject to adjustment as a result of
certain dilution events (see "Anti-Dilution Adjustments" below), for the 10
Trading Days immediately prior to maturity.
The "Closing Price" of any security on any date of determination means the
closing sale price or last reported sale price of such security on the NYSE on
such date or, if such security is not listed for trading on the NYSE on any such
date, on such other national securities exchange or association that is the
primary market for the trading of such security. A "Trading Day" is defined as a
Business Day on which that security (A) is not suspended from trading on any
national securities exchange or association at the close of business and (B) has
traded at least once on the national securities exchange or association that is
the primary market for the trading of such security. "Business Day" with respect
to the CHIPS means any day that is not a Saturday, a Sunday or a day on which
the NYSE, the AMEX or banking institutions or trust companies in The City of New
York are authorized or obligated by law or executive order to close.
Based on the Closing Price of CU Common Stock on , 1994, the
maximum aggregate principal amount payable at maturity of the CHIPS is
$ ($ , if the Underwriters' over-allotment option is exercised
in full). The Company in the future may, however, "reopen" the issue of the
CHIPS and issue additional CHIPS at a later time or issue additional Debt
Securities or other securities with terms similar to those of the CHIPS, and
such issuances may affect the trading value of the CHIPS.
NON-TRADING DAYS
In the event that any of the 10 Business Days immediately prior to
, 1998 is not a Trading Day (a "Non-Trading Day"), the CHIPS will not
mature on , 1998, but the maturity of the CHIPS will be extended one
Trading Day for each Non-Trading Day; provided, however, that in no event will
the CHIPS mature later than , 1998. The CHIPS will continue to accrue
interest until their principal amount is paid at maturity. If the maturity of
the CHIPS is extended as a result of a Non-Trading Day, interest thereon payable
at maturity to the holders of the CHIPS will be paid on the date of such
extended maturity.
INTEREST
The CHIPS will bear interest from , 1994 at the rate of % of
the Issue Price per annum (or $ per annum) until the principal amount
thereof is paid or made available for payment. Interest on the CHIPS will be
payable quarterly in arrears on each , , and
(each an "Interest Payment Date"), beginning , 1994, and at
maturity, and will be computed on the basis of a 360-day year of twelve 30-day
months. The first interest payment due , 1994 will be $ per CHIPS.
Each payment of interest in respect of an Interest Payment Date will include
interest accrued through the day before such Interest Payment Date. If an
Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on that Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on that
Interest Payment Date, and no additional interest will accrue as a result of the
delayed payment. Interest payable on the CHIPS on any Interest Payment Date will
be paid to the person in whose name the CHIPS are registered at the close of
business on the fifteenth day of the calendar month immediately preceding that
Interest Payment Date, or at 5:00 P.M., New York City time, on such fifteenth
day, if it is not a Business Day.
S-6
<PAGE>
ANTI-DILUTION ADJUSTMENTS
The Closing Price of CU Common Stock on any of the 10 Trading Days (the "10
Trading Days") used to calculate the principal amount of the CHIPS payable at
maturity is subject to adjustment as described below to the extent that any of
the events requiring such adjustment occur during the period commencing on the
date hereof and ending at the maturity of the CHIPS:
(I) CU COMMON STOCK DIVIDENDS, EXTRAORDINARY CASH DIVIDENDS AND OTHER
DISTRIBUTIONS. If a dividend or other distribution is declared (A) on any
class of CUC's capital stock (or on the capital stock of any CUC Survivor,
as defined in (iv) below) payable in shares of CU Common Stock (or the
common stock of any CUC Survivor) or (B) on CU Common Stock payable in cash
in an amount greater than 10% of the Closing Price of CU Common Stock on the
date fixed for the determination of the shareholders of CUC entitled to
receive such cash dividend (an "Extraordinary Cash Dividend"), any Closing
Price of CU Common Stock (or the common stock of any CUC Survivor) used to
calculate the principal amount of the CHIPS payable at maturity of the CHIPS
on any Trading Day that follows the date (the "CUC Record Date") fixed for
determination of the shareholders of CUC (or any CUC Survivor) entitled to
receive the dividend or distribution shall be increased by multiplying the
Closing Price by a fraction of which the numerator shall be the number of
shares of CU Common Stock (or the common stock of any CUC Survivor)
outstanding on the CUC Record Date plus the number of shares constituting
the dividend or distribution or, in the case of an Extraordinary Cash
Dividend, plus the number of shares of CU Common Stock that could be
purchased with the amount of that Extraordinary Cash Dividend at a price
equal to the Closing Price of CU Common Stock on the Trading Day immediately
subsequent to the CUC Record Date, and the denominator shall be the number
of shares of CU Common Stock (or the common stock of any CUC Survivor)
outstanding on the CUC Record Date.
(II) SUBDIVISIONS AND COMBINATIONS OF CU COMMON STOCK. If the
outstanding shares of CU Common Stock (or the common stock of any CUC
Survivor) are subdivided into a greater number of shares, the Closing Price
of CU Common Stock (or the common stock of any CUC Survivor) used to
calculate the principal amount of the CHIPS payable at maturity on any
Trading Day that follows the date on which that subdivision becomes
effective will be proportionately increased, and, conversely, if the
outstanding shares of CU Common Stock (or the common stock of any CUC
Survivor) are combined into a smaller number of shares, such Closing Price
will be proportionately reduced.
(III) RECLASSIFICATIONS OF CU COMMON STOCK. If CU Common Stock (or the
common stock of any CUC Survivor) is changed into the same or a different
number of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (except to the extent
otherwise provided in (i) or (ii) above or pursuant to a consolidation,
merger, sale, transfer, lease or conveyance, liquidation, dissolution or
winding up, as described in (iv) below), the principal amount of the CHIPS
payable at maturity shall be calculated by using the Closing Prices of the
shares of stock into which a share of CU Common Stock (or the common stock
of any CUC Survivor) was changed on any Trading Day that follows the
effectiveness of such change.
(IV) DISSOLUTION OF CUC; MERGERS, CONSOLIDATIONS OR SALES OF ASSETS IN
WHICH CUC IS NOT THE SURVIVING ENTITY; SPIN-OFFS. In the event of any (A)
consolidation or merger of CUC, or any surviving entity or subsequent
surviving entity of CUC (a "CUC Survivor") with or into another entity
(other than a consolidation or merger in which CUC is the surviving entity),
(B) sale, transfer, lease or conveyance of all or substantially all of the
assets of CUC or any CUC Survivor, (C) liquidation, dissolution or winding
up of CUC or any CUC Survivor or (D) any declaration of a distribution on CU
Common Stock of the common stock of any subsidiary of CUC (a "CUC Spin-Off")
(any of the events described in (A), (B), (C) or (D), a "Reorganization
Event"), for purposes of determining the principal amount of each CHIPS
payable at maturity, the Closing Price of CU Common Stock on any Trading Day
subsequent to the effective time of any Reorganization Event will be deemed
to be the value of the cash and other property (including securities)
received by a
S-7
<PAGE>
holder of a share of CU Common Stock in any such Reorganization Event plus,
in the case of a CUC Spin-Off, the value of a share of CU Common Stock, or,
to the extent that such holder obtains securities in any Reorganization
Event, the value of the cash and other property received by the holder of
such securities in any subsequent Reorganization Event. For purposes of
determining any such Closing Prices, the value of (A) any cash and other
property (other than securities) received in any such Reorganization Event
will be an amount equal to the value of such cash and other property at the
effective time of such Reorganization Event and (B) any property consisting
of securities received in any such Reorganization Event will be an amount
equal to the Closing Prices of such securities.
NOTWITHSTANDING THE FOREGOING, THE PRINCIPAL AMOUNT OF EACH CHIPS PAYABLE AT
MATURITY WILL NOT, UNDER ANY CIRCUMSTANCES, EXCEED % OF THE ISSUE PRICE (OR
$ PER CHIPS).
REDEMPTION
The CHIPS may not be redeemed prior to maturity.
DEFEASANCE
The defeasance provisions described in the accompanying Prospectus will not
be applicable to the CHIPS.
CERTIFICATES
The CHIPS will be evidenced by certificates in fully registered form (each,
a "Certificate"). The Trustee will from time to time register the transfer of
any outstanding Certificate upon surrender thereof at the Trustee's Office, duly
endorsed by, or accompanied by a written instrument or instruments of transfer
in a form satisfactory to the Trustee duly executed by the holder thereof, a
duly appointed legal representative or a duly authorized attorney. The signature
of the holder, legal representative or attorney must be guaranteed by a bank or
trust company having a correspondent office in New York City or by a broker or
dealer that is a member of the National Association of Securities Dealers, Inc.
(the "NASD") or a member of a national securities exchange. A new Certificate
will be issued to the transferee upon any such registration of transfer.
At the option of a holder, Certificates may be exchanged for other
Certificates representing a like amount of CHIPS, upon surrender to the Trustee
at the Trustee's Office of the Certificates to be exchanged. The Company will
thereupon execute, and the Trustee will countersign and deliver, one or more new
Certificates representing such like amount of CHIPS.
If any Certificate is mutilated, lost, stolen or destroyed, the Company
shall execute, and the Trustee shall countersign and deliver, in exchange and
substitution for such mutilated Certificate, or in replacement for such lost,
stolen or destroyed Certificate, a new Certificate representing the same
principal amount as was represented by the mutilated, lost, stolen or destroyed
Certificate, but only upon receipt of evidence satisfactory to the Company and
to the Trustee of loss, theft or destruction of such Certificate and, if
requested by them, security or indemnity satisfactory to them. Holders
requesting replacement Certificates must also comply with such other reasonable
regulations as the Company or the Trustee may prescribe.
No service charge will be made for any registration of transfer or exchange
of Certificates, but the Company may require the payment of a sum sufficient to
cover any tax or governmental 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 Certificates, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
S-8
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal U.S. federal income tax
consequences that may be relevant to a holder of CHIPS that is a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized under the laws of the United States or an estate or trust
the income of which is subject to U.S. federal income taxation regardless of its
source (a "U.S. Holder").
This summary is based on the U.S. federal income tax laws, regulations,
rulings and decisions now in effect (or, in the case of certain Treasury
regulations, now in proposed or draft form), all of which are subject to change,
possibly on a retroactive basis. Except to the extent discussed below under
"Non-U.S. Holders", this summary applies only to U.S. Holders that will hold
CHIPS as capital assets. Except as specifically noted, this summary does not
address tax considerations applicable to investors that may be subject to
special tax rules, such as banks, insurance companies, dealers in securities,
tax exempt persons, persons that will hold CHIPS as a position in a "straddle"
for tax purposes, as part of a "synthetic security," a "hedge," a "conversion
transaction" or other integrated investment comprised of a CHIPS and one or more
other investments. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. dollar. It does not
include any description of the tax laws of any state or local governments or of
any foreign government that may be applicable to the CHIPS or to the holders
thereof. INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE TAX
CONSEQUENCES TO THEM OF HOLDING CHIPS, INCLUDING THE APPLICATION TO THEIR
PARTICULAR SITUATION OF THE U.S. FEDERAL INCOME TAX CONSIDERATIONS DISCUSSED
BELOW, AS WELL AS THE APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS.
There are no final regulations, published rulings or judicial decisions
addressing the characterization for federal income tax purposes of securities
with terms substantially the same as a CHIPS. As a result, a court might seek to
characterize a CHIPS as a combination of commercially available financial
instruments that is the economic equivalent of a CHIPS. The Company intends to
treat a CHIPS for U.S. federal income tax purposes as a combination of a fixed
loan (the "Loan Component") in an amount equal to the issue price of the CHIPS
and the application of the principal repayment of that loan at maturity to a
capped cash-settled forward purchase contract on CU Common Stock (the "Contract
Component"). Under this approach, upon the sale, exchange, retirement or other
disposition of a CHIPS, a U.S. Holder generally will recognize gain or loss
equal to the difference between the amount realized on the sale, exchange,
retirement or other disposition and the U.S. Holder's tax basis in the CHIPS.
Such gain or loss generally will be long-term capital gain or loss if the U.S.
Holder has held the CHIPS for more than one year at the time of disposition,
except that in the event of a retirement of the CHIPS, such gain or loss may be
ordinary. For information reporting purposes, the Company intends to treat each
payment of interest on a CHIPS as ordinary interest income to the U.S. Holder of
the CHIPS. Investors should be aware that an issuer's characterization of an
instrument as debt is binding on holders of such instrument for U.S. tax
purposes, unless the holder discloses inconsistent treatment on such holder's
U.S. tax return.
U.S. Holders should be aware that the Internal Revenue Service ("IRS") may
take the position that the Contract Component itself should be viewed as a
combination of a cash-settled forward purchase contract on CU Common Stock and a
cap on the forward purchase contract (i.e., a cash-settled call option) on CU
Common Stock. As a result of the cap in the Contract Component, the U.S. Holder
may be considered to have received an option premium for the cap (based on its
value on the date of acquisition) and to have acquired the Loan Component at a
premium which may be amortizable under the rules for amortizable bond premium.
Although the aggregate amount of income or loss over time from a CHIPS will be
the same under either approach, the timing and character of the components of
that income or loss may differ and may be materially adverse to any U.S. Holder.
S-9
<PAGE>
In the absence of authority for characterizing an instrument such as a
CHIPS, the IRS may contend that a CHIPS should be characterized for federal
income tax purposes in a manner different from the approach described above. For
example, the IRS may contend that a CHIPS should not be treated as separate
instruments but, instead, should be treated as a single instrument that is a
contingent payment debt obligation (although it is possible that the IRS may not
view a single instrument that has "principal" that is entirely contingent as
debt for federal income tax purposes).
There are at least two possible sets of rules that the IRS could seek to
apply to a contingent payment debt obligation for the purpose of characterizing
payments made under such an instrument. Draft regulations on contingent payment
obligations were released by the IRS but were withdrawn pending review (the
"Draft Regulations"). To date, the Draft Regulations have not yet been issued,
or even formally proposed.
In general, under the Draft Regulations, the treatment of contingent payment
obligations not subject to the hedging regulations (described below) depends
upon whether the obligation is considered to provide for "market-based
contingent payments." A note will be considered to provide for market-based
contingent payments if it provides for such payments and does not provide for
substantial contingent payments that are not market-based contingent payments. A
"market-based contingent payment" includes any payment based on the price or
yield of certain actively traded personal property (which apparently is intended
for this purpose to include publicly traded stock in a single issuer) or an
index of the prices or yields of such property. The Company's determination of
whether the rules for market-based contingent payments apply is binding on the
U.S. Holder unless the U.S. Holder, on its tax return for the year the
instrument is acquired, discloses its determination to the contrary. If the
Draft Regulations were applied to a CHIPS, the Company believes that the rules
for market-based contingent payments would apply.
If a contingent debt obligation provides for market-based contingent
payments, the Draft Regulations provide various alternative methods for accruing
interest on the obligation. All of the methods require that interest accrue on
the basis of a reasonable estimate of the yield at the time the instrument is
issued or acquired or on the basis of a reasonable estimate of the performance
of the contingencies. The methods require the estimates to be revised either
annually or as the amounts of the contingent payments become fixed, depending
upon the method used. The Draft Regulations provide that the choice of method
must be identified on the U.S. Holder's books and records within a reasonable
time after the instrument's acquisition. However, a U.S. Holder that is a
natural person and that acquires a debt instrument other than in connection with
a trade or business can choose a method on such U.S. Holder's federal income tax
return that is filed for the year in which the instrument is acquired. A U.S.
Holder can use different methods for different issues as long as the use of
different methods does not distort the U.S. Holder's income. Once a method is
chosen, however, the U.S. Holder must use the same method for the particular
debt instrument in all subsequent years.
For any debt instrument to which the Draft Regulations apply, any gain on
the sale, exchange or retirement of a contingent payment obligation is treated
as interest income.
Alternatively, the IRS may assert that a CHIPS is a single instrument that
is a contingent debt obligation but that the character of payments received on a
CHIPS should be determined under the principles of certain proposed Treasury
regulations (which are proposed to be retroactive) dealing with contingent
payment debt obligations (the "Proposed Regulations"). Under the Proposed
Regulations, payment of interest on a CHIPS would be treated as a non-taxable
return of the U.S. Holder's investment in the CHIPS. The amount payable at
maturity of the CHIPS would be treated first as a non-taxable return of the
holder's investment in the CHIPS until, after taking into account the amount of
any previous payments treated as a return of the holder's investment, the U.S.
Holder has recovered the full amount of its investment, and thereafter would be
taxable as interest income to the U.S. Holder. If a U.S. Holder receives total
payments in respect of a CHIPS in an amount less than the amount of its
investment in the CHIPS, or the U.S. Holder otherwise disposes of the CHIPS at a
loss, the U.S. Holder generally would recognize a capital loss, which would be a
long-term capital loss if the holder
S-10
<PAGE>
has held the CHIPS for more than one year. It is unclear, under the Proposed
Regulations, whether gain from the sale of a CHIPS would be ordinary income or
capital gain. Although there can be no assurances, it is unlikely that the
Proposed Regulations will be finalized in their current form without substantial
modification. It is not possible to predict in what manner the Proposed
Regulations may be modified and whether the Proposed Regulations would apply to
a CHIPS.
In addition, special rules apply to contingent payment debt obligations if
the contingent payments are substantially hedged by one or more financial
contracts or if the contingent payment debt obligation is itself a hedge. The
IRS has issued final and proposed regulations relating to the tax treatment of
certain hedging transactions. In general, under the hedging regulations, a hedge
subject to the regulations is accounted for in a manner that matches gain or
loss on the hedge with the accrual of the amount to which the hedge relates.
NON-U.S. HOLDERS
In the case of a holder of the CHIPS that is not a U.S. Holder and has no
connection with the United States other than holding a CHIPS (a "non-U.S.
Holder"), the Company believes that payments made with respect to the CHIPS
should not be subject to U.S. withholding tax, provided that such holder
complies with applicable certification requirements, and the Company does not
currently intend to withhold if such requirements are satisfied. Investors
should be aware that a "gross up" or "tax call" is not provided for in the event
it is determined that withholding applies. Any gain realized upon the sale or
other disposition of the CHIPS by a holder that is a non-U.S. Holder will
generally not be subject to U.S. federal income tax.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A holder of a CHIPS may be subject to information reporting and to backup
withholding at a rate of 31 percent of certain amounts paid to the holder unless
such holder (a) is a corporation or comes within certain other exempt categories
and, when required, provides proof of such exemption or (b) provides a correct
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. Information reporting and backup withholding do not apply to
payments made to a holder of a CHIPS that is a non-U.S. Holder if the beneficial
owner of the CHIPS certifies as to its non-U.S. status, or otherwise establishes
an exemption, provided that the Company or its agent does not have actual
knowledge that the holder is not a non-U.S. Holder.
Payment of the proceeds from the sale of a CHIPS to or through a foreign
office of a broker will not be subject to information reporting or back-up
withholding, except that if the broker is a U.S. person, a controlled foreign
corporation for U.S. tax purposes or a foreign person 50 percent or more of
whose gross income from all sources for the three-year period ending with the
close of its taxable year preceding the payment was effectively connected with a
U.S. trade or business, information reporting may apply to such payments.
Payment of the proceeds from a sale of a CHIPS to or through the U.S. office of
a broker is subject to information reporting and backup withholding unless the
holder or beneficial owner certifies as to its non-U.S. status or otherwise
establishes an exemption from information reporting and backup withholding.
Any amounts withheld under the backup withholding rules are not an
additional tax and may be refunded or credited against the U.S. Holder's U.S.
federal income tax liability, provided that the required information is
furnished to the IRS.
S-11
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
between the Company and the Underwriters (the "Underwriting Agreement"), the
Company has agreed to sell to each of the Underwriters named below, and each of
the Underwriters, for whom Bear, Stearns & Co. Inc., Alex. Brown & Sons
Incorporated and Smith Barney Inc. are acting as representatives (the
"Representatives"), has severally agreed to purchase from the Company, the
number of CHIPS set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
NAME CHIPS
- ------------------------------------------------------------------- ---------
<S> <C>
Bear, Stearns & Co. Inc............................................
Alex. Brown & Sons Incorporated....................................
Smith Barney Inc...................................................
---------
Total.......................................................... 1,500,000
---------
---------
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the CHIPS to the public initially at the public 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 CHIPS. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $ per
CHIPS to certain other dealers. After the initial public offering, the public
offering price and such concessions may be changed from time to time.
The Company has granted the Underwriters an option, exercisable within
thirty days of the date of this Prospectus Supplement, to purchase up to 225,000
additional CHIPS from the Company at the same price per CHIPS as described
above. This option may be exercised only for the purpose of covering
over-allotments, if any, made in the sale of the CHIPS offered hereby.
The CHIPS have been approved for listing on the AMEX, subject to official
notice of issuance. The Company will use its best efforts to maintain the
listing of the CHIPS on the AMEX or another national securities exchange.
Nevertheless, no assurances can be given as to the liquidity of the market for
the CHIPS. See "Special Considerations--Possible Illiquidity of the Secondary
Market for the CHIPS" herein.
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all the CHIPS 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
offer and sale of the CHIPS in respect of which this Prospectus Supplement is
delivered complies with the requirements of Schedule E of the By-Laws of the
NASD regarding underwriting securities of an affiliate of an NASD member.
VALIDITY OF THE CHIPS
The validity of the CHIPS will be passed upon for the Company by Weil,
Gotshal & Manges (a partnership including professional corporations), New York,
New York, and for the Underwriters by Andrews & Kurth L.L.P., New York, New
York.
S-12
<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.
4
<PAGE>
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
5
<PAGE>
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
6
<PAGE>
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.
7
<PAGE>
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
8
<PAGE>
$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.
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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.
12
<PAGE>
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.
13
<PAGE>
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.
14
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
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.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS 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.
-------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Ratio of Earnings to Fixed Charges... S-3
Use of Proceeds and Hedging.......... S-3
CUC International Inc................ S-3
Price Range and Dividend History of
CU Common Stock..................... S-4
Special Considerations............... S-4
Description of the CHIPS............. S-5
Certain Federal Income Tax
Considerations....................... S-9
Underwriting......................... S-12
Validity of the CHIPS................ S-12
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference............................ 2
The Company.......................... 3
Use of Proceeds...................... 3
Ratio of Earnings to Fixed Charges... 3
Description of Debt Securities....... 4
Description of Warrants.............. 10
Limitations on Issuance of Bearer
Securities and Bearer Warrants...... 12
Plan of Distribution................. 13
ERISA Considerations................. 14
Experts.............................. 14
Validity of the Securities........... 14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,500,000 CHIPS(SM)
THE BEAR STEARNS
COMPANIES INC.
% CU COMMON-LINKED
HIGHER INCOME PARTICIPATION
SECURITIES(SM) (CHIPS) DUE 1998
--------------------------------------
PROSPECTUS SUPPLEMENT
--------------------------------------
BEAR, STEARNS & CO. INC.
ALEX. BROWN & SONS
INCORPORATED
SMITH BARNEY INC.
, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
