<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 8, 1994)
$2,873,608,750
The Bear Stearns Companies Inc.
Medium-Term Notes, Series B With Minimum Maturity
of Nine Months From Date Of Issue
The Bear Stearns Companies Inc. (the "Company") may issue and
sell from time to time its Medium-Term Notes, Series B (the "Notes"),
at 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), subject to reduction as a result of the
sale of other Securities (as defined in the accompanying Prospectus).
The Notes may be denominated in U.S. dollars or in such foreign
currencies or composite currencies as set forth in the applicable
Pricing Supplement. The principal amount payable at or prior to
maturity, the amount of interest payable and/or any premium payable
with respect to the Notes may be determined by the relationship
between a specified currency and another currency, by the difference
in price of a specified security or commodity on certain dates or by
some other index or indices. The specific currency or composite
currency or index, interest rate or rates (if any), issue price and
maturity date of any Note will be set forth in the related Pricing
Supplement to this Prospectus Supplement.
(continued on following page)
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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, ANY SUPPLEMENT HERETO OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Agents' Discounts and Proceeds to
Public(1) Commissions(2) Company(2)(3)
<S> <C> <C> <C>
Per Note........... 100% .125%-.750% 99.250%-99.875%
Total(4)........... $2,873,608,750 $3,592,011 - $21,552,066 $2,852,056,684 - $2,870,016,739
<FN>
(1) The Notes will be issued at 100% of their principal amount unless
otherwise set forth in the applicable Pricing Supplement.
(2) The Company will pay a commission to each Agent, in the form of a
discount, ranging from .125% to .750% of the Price to Public of
any Note, depending upon maturity, when such Agent places such
Note. Any Agent may agree with the Company, in respect of the
sale of a Note, to accept a commission other than one based upon
maturity, in which case such commission shall range from .025% to
.750%. The Company may sell Notes to any Agent as principal at a
discount for resale to investors and other purchasers at varying
prices related to prevailing market prices at the time of resale
to be determined by such Agent. The Company has agreed to
indemnify each Agent against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
(3) Before deduction of expenses payable by the Company, estimated at
$1,175,000.
(4) In U.S. dollars or the equivalent thereof in one or more foreign
or composite currencies or currency units.
</TABLE>
<PAGE>
The Notes are being offered on a continuing basis by the Company
through Bear, Stearns & Co. Inc., Lehman Brothers Inc. (including
Lehman Special Securities Inc.), Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, Salomon Brothers Inc and any other agent to be
designated by the Company (each, an "Agent" and collectively, the
"Agents"). Each Agent has agreed to use its best efforts to solicit
purchases of the Notes. The Company has reserved the right to sell
Notes directly on its own behalf. The Notes will not be listed on any
securities exchange, and there can be no assurance that the Notes
offered by this Prospectus Supplement will be sold or that there will
be a secondary market for the Notes. The Company reserves the right to
withdraw, cancel or modify the offer made hereby without notice. The
Company may reject any offer in whole or in part. See "Supplemental
Plan of Distribution."
This Prospectus Supplement may be used by each Agent in
connection with offers and sales associated with market-making
transactions in the Notes. Each Agent may act as principal or agent
in such transactions. Such offers and sales will be made at prices
related to prevailing prices at the time.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
The date of this Prospectus Supplement is April 8, 1994
<PAGE>
<PAGE>
(continued from cover page)
Interest on Notes which bear interest at a fixed rate ("Fixed
Rate Notes") will accrue from their dates of original issue and,
unless otherwise specified in the applicable Pricing Supplement, will
be payable semiannually on each April 15 and October 15 and at
maturity or, if applicable, upon redemption or optional repayment.
Interest on Notes which bear interest at a floating or variable rate
("Floating Rate Notes") will accrue from their dates of original issue
and will be payable monthly, quarterly, semiannually, annually or as
otherwise set forth in the applicable Pricing Supplement and at
maturity or, if applicable, upon redemption or optional repayment.
The interest rate on Floating Rate Notes will be determined by
reference to the "Commercial Paper Rate," "LIBOR," the "Federal Funds
Rate," the "Treasury Rate" or other interest rate formula, and may be
adjusted by a "Spread," all as defined herein or in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
each Note offered hereby will be represented by a global security (a
"Global Security") to be deposited with or on behalf of the Depository
Trust Company (the "Depositary") and registered in the name of the
Depositary's nominee (each such Note represented by a Global Security
being herein referred to as a "Book-Entry Note"). Beneficial
interests in Book-Entry Notes will be shown on, and transfers thereof
will be effected only through, records maintained by the Depositary
and its participants. Book-Entry Notes will be issuable only in the
form of a Global Security, except under the circumstances described
herein.
On and after the Redemption Date (as hereinafter defined), if
any, fixed by the Company at the time of sale and set forth in the
applicable Pricing Supplement, a Note will be subject to redemption by
the Company, in whole or in part, at 100% of the principal amount to
be redeemed or as otherwise set forth in the applicable Pricing
Supplement, together with interest to the date of redemption. On the
Optional Repayment Date (as hereinafter defined), if any, fixed by the
Company at the time of sale and set forth in the applicable Pricing
Supplement, a Note will be subject to repayment at the option of the
holder thereof (a "Holder"), in whole or in part, at 100% of the
principal amount to be repaid, together with interest to the date of
repayment. See "Description of the Notes."
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DESCRIPTION OF THE NOTES
GENERAL
The following description of the particular terms of the Notes
offered hereby supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of Debt
Securities (as defined in the accompanying Prospectus) set forth in
the Prospectus, to which description reference hereby is made. The
following description will apply to the Notes unless otherwise
specified in the applicable Pricing Supplement.
The Notes are part of a single series of Debt Securities of the
Company issuable 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"). The
Notes are limited in amount as set forth on the cover page hereof,
less an amount equal to the aggregate initial public offering price of
any other Securities, including any other series of medium-term notes,
issued from time to time by the Company. The foregoing limit,
however, may be increased by the Company if in the future it
determines that it may wish to sell additional Notes. For a
description of the rights attaching to the Debt Securities under the
Indenture, see "Description of Debt Securities" in the Prospectus.
The Notes will be offered on a continuing basis and (unless
specified in the appropriate Pricing Supplement) will mature at par on
any Business Day (as hereinafter defined) at least nine months from
the date of issue, as selected by the purchaser and agreed to by the
Company, and may be subject to redemption at the option of the Company
or repayment at the option of the Holders thereof prior to maturity at
the price or prices and on or after the date or dates specified in the
applicable Pricing Supplement.
Each Note will be denominated in either U.S. dollars or in such
other currency or composite currency ("Specified Currency") as
specified on the face thereof and in the applicable Pricing
Supplement. Purchasers of the Notes are required to pay for such
Notes by delivery of the requisite amount of the Specified Currency to
an Agent unless other arrangements have been made. Unless otherwise
specified in the applicable Pricing Supplement, payments on the Notes
will be made in the applicable Specified Currency in the country
issuing the Specified Currency (or, in the case of European Currency
Units ("ECUs"), in Brussels, Belgium), provided that, at the election
of the Holder thereof and in certain circumstances at the option of
the Company, payments on Notes denominated in other than U.S. dollars
may be made in U.S. dollars. See "Payment of Principal and Interest"
below in this section and "Foreign Currency Risks."
Unless otherwise specified in the applicable Pricing Supplement,
each Note will be represented by a Global Security registered in the
name of a nominee of the Depositary. Book-Entry Notes will be
issuable only in the form of Global Securities, except as set forth
under "Book-Entry System" below. So long as the Depositary or its
nominee is the registered owner of any Global Security, the Depositary
or its nominee, as the case may be, will be considered the sole owner
or holder of the Book-Entry Note or Notes represented by such Global
Security for all purposes under the Indenture. See "Book-Entry
System" below.
Unless otherwise specified in the applicable Pricing Supplement,
(i) the authorized denominations of any Note denominated in U.S.
dollars will be $100,000 and integral multiples of $1,000 in excess
thereof, and (ii) the authorized denominations of any Note denominated
in other than U.S. dollars will be the amount of the Specified
Currency for such Note equivalent, at the noon buying rate in the City
of New York for cable transfers for such Specified Currency (the
"Exchange Rate"), on the first Business Day in the City of New York
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<PAGE>
and the country issuing such currency (or, in the case of ECUs,
Brussels, Belgium) next preceding the date on which the
Company accepts the offer to purchase such Note, to U.S. $100,000
(rounded down to an integral multiple of 10,000 units of such
Specified Currency) and any greater amount that is an integral
multiple of 10,000 units of such Specified Currency.
The Notes may be issued as Currency Indexed Notes (as hereinafter
defined), the principal amount of which is payable at or prior to
maturity and the interest on which and/or any premium payable with
respect to which, unless otherwise specified in the applicable Pricing
Supplement, will be determined by the difference between the currency
in which such Notes are denominated and another currency or composite
currency or by reference to any other currency index or indices, in
each case as set forth in the applicable Pricing Supplement. See
"Currency Indexed Notes" below in this section. The Notes may also be
issued as indexed notes, the principal amount of which is payable at
or prior to maturity and the interest on which and/or any premium
payable with respect to which will be determined by reference to the
difference in the price of a specified security or commodity on
certain specified dates, a securities or commodities index or by some
other index, indices or formulas. See "Other Indexed Notes" below in
this section.
Under the terms of the Indenture, the Company is entitled to
defease the Notes. See "Description of Debt Securities - Defeasance"
in the accompanying Prospectus.
INTEREST RATE
The applicable Pricing Supplement relating to a Note will
designate, in the case of a Fixed Rate Note, a fixed rate of interest
per annum payable on such Fixed Rate Note and, in the case of a
Floating Rate Note, one of the following interest rate formulas as
applicable to such Floating Rate Note: (i) the Commercial Paper Rate
(as defined below), in which case such Note will be a "Commercial
Paper Rate Note;" (ii) LIBOR, in which case such Note will be a "LIBOR
Note;" (iii) the Federal Funds Rate (as defined below), in which case
such Note will be a "Federal Funds Rate Note;" (iv) the Treasury Rate
(as defined below), in which case such Note will be a "Treasury Rate
Note;" (v) the Prime Rate (as defined below), in which case such Note
will be a "Prime Rate Note;" (vi) the CMT Rate (as defined below), in
which case such Note will be a "CMT Rate Note" or (vii) such other
interest rate formula as is set forth in such Pricing Supplement. The
rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semiannually or annually (each an
"Interest Reset Period") as set forth in each such Floating Rate Note,
or as may otherwise be specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
each Note will bear interest from its date of original issue at the
rate per annum (in the case of a Fixed Rate Note), or pursuant to the
interest rate formula (in the case of a Floating Rate Note), stated in
the applicable Pricing Supplement until the principal thereof is paid
or made available for payment. Interest will be payable on each
interest payment date ("Interest Payment Date") and at maturity or, if
applicable, upon redemption or optional repayment. Unless otherwise
provided in the applicable Pricing Supplement, the "Record Date" with
respect to any Interest Payment Date for a Fixed Rate Note shall be
the April 1 or October 1 preceding such Interest Payment Date, and
with respect to any Interest Payment Date for a Floating Rate Note
shall be the date fifteen calendar days immediately preceding such
Interest Payment Date, whether or not such date is a Business Day.
Interest will be payable to the person in whose name a Note is
registered (which in the case of Global Securities representing Book-
Entry Notes will be the Depositary or a nominee of the Depositary) at
the close of business on the Record Date next preceding each Interest
Payment Date; provided, however, that interest payable at maturity or,
if applicable, upon redemption or optional repayment will be payable
to the person to whom principal shall be payable (which in the case of
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Global Securities representing Book-Entry Notes will be the Depositary
or a nominee of the Depositary). The first payment of interest on any
Note issued between a Record Date and an Interest Payment Date will be
made on the Interest Payment Date following the next succeeding Record
Date to the registered owner on such next succeeding Record Date.
Unless otherwise specified in the applicable Pricing Supplement,
all percentages resulting from any calculation on Floating Rate Notes
will be rounded, if necessary, to the nearest one hundred-thousandth
of a percent, with five one-millionths of a percent being rounded
upward (e.g., 6.876545% (or .06876545) being rounded to 6.87655% (or
.0687655) and 6.876544% (or .06876544) being rounded to 6.87654% (or
.0687654)), and all U.S. dollar amounts used in or resulting from such
calculation on Floating Rate Notes will be rounded to the nearest cent
(with one-half cent being rounded upward).
If an Interest Payment Date with respect to any Note would
otherwise fall on a day that is not a Business Day with respect to
such Note, such Interest Payment Date will be the following day that
is a Business Day with respect to such Note, except that in the case
of a LIBOR Note, if such day falls in the next calendar month, such
Interest Payment Date will be the preceding day that is a Business Day
with respect to such LIBOR Note. "Business Day" means (i) with
respect to any Note, any day that is not a Saturday or Sunday and
that, in the City of New York, is neither a legal holiday nor a day on
which banking institutions or trust companies are authorized or
obligated by law to close, and (ii) with respect to LIBOR Notes only,
a London Banking Day. A "London Banking Day" means any day on which
dealings in deposits in U.S. dollars are transacted in the London
interbank market.
FIXED RATE NOTES. Each Fixed Rate Note will bear interest from
its date of original issue at the rate per annum stated on the face
thereof, until the principal thereof is paid or made available for
payment. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Payment Dates for Fixed Rate Notes will be on
April 15 and October 15 of each year and at maturity (or on the
Redemption Date, if a Fixed Rate Note is redeemed by the Company, or
the Optional Repayment Date, if repaid at the option of the Holder,
prior to maturity). Interest will be computed on the basis of a 360-
day year of twelve 30-day months. In the event that any Interest
Payment Date is not a Business Day, interest on Fixed Rate Notes will
be paid on the next succeeding Business Day and, unless otherwise
specified by the applicable Pricing Supplement, no interest shall
accrue for the period from and after such Interest Payment Date to
such next succeeding Business Day.
FLOATING RATE NOTES. The interest rate on each Floating Rate
Note will be calculated by reference to the specified interest rate
formula, plus or minus a Spread, if any. The Spread is the number of
basis points specified in the applicable Pricing Supplement as being
applicable to the interest rate for such Floating Rate Note and may be
a fixed amount or an amount that increases or decreases over time. A
Floating Rate Note may also have either or both of the following: (i)
a maximum limitation, or ceiling, on the rate of interest which may
accrue during any interest period; and (ii) a minimum limitation, or
floor, on the rate of interest which may accrue during any interest
period. In addition to any maximum interest rate which may be
applicable to any Floating Rate Note pursuant to the above provisions,
the interest rate on the Floating Rate Notes will in no event be
higher than the maximum rate permitted by New York law, as the same
may be modified by United States law of general application.
The applicable Pricing Supplement will specify the interest rate
formula, the amount or amounts of the Spread, if any, and the maximum
or minimum interest rate limitation, if any, applicable to each
Floating Rate Note. In addition, such Pricing Supplement will define
or specify for each Floating Rate Note the following terms, if
applicable: Calculation Date, Initial Interest Rate, Interest Payment
Period, Interest Payment Dates, Record Date, Index Maturity, Interest
Determination Date, Interest Reset Period, Interest Reset Date and
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Sinking Fund, if any. "Index Maturity" means, with respect to a
Floating Rate Note, the period to maturity of the instrument or
obligation on which the interest rate formula is based, as specified
in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
the date or dates on which interest will be reset (each an "Interest
Reset Date") will be, in the case of Floating Rate Notes which reset
daily, each Business Day; in the case of Floating Rate Notes which
reset weekly, the Wednesday of each week (with the exception of weekly
reset Treasury Rate Notes which will reset the Tuesday of each week,
except as specified below); in the case of Floating Rate Notes which
reset monthly, the third Wednesday of each month; in the case of
Floating Rate Notes which reset quarterly, the third Wednesday of
March, June, September and December; in the case of Floating Rate
Notes which reset semiannually, the third Wednesday of the two months
specified in such Floating Rate Notes; and in the case of Floating
Rate Notes which reset annually, the third Wednesday of the month as
specified in such Floating Rate Note; provided, however, that (i) the
interest rate in effect from the date of original issue to the first
Interest Reset Date with respect to a Floating Rate Note (the "Initial
Interest Rate") will be as set forth in the applicable Pricing
Supplement and (ii) unless otherwise specified in the applicable
Pricing Supplement, the interest rate in effect for the ten days
immediately prior to maturity will be that in effect on the tenth day
preceding such maturity. If any Interest Reset Date for a Floating
Rate Note would otherwise be a day that is not a Business Day, such
Interest Reset Date shall be postponed to the next succeeding day that
is a Business Day, except that, in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, such Interest
Reset Date shall be the next preceding Business Day. In the case of
weekly reset Treasury Rate Notes, if an auction of Treasury bills (as
hereinafter defined) falls on a day that is an Interest Reset Date for
Treasury Rate Notes, the Interest Reset Date will be the following day
that is a Business Day.
Unless otherwise specified in the applicable Pricing Supplement,
the "Interest Determination Date" pertaining to an Interest Reset Date
for a Commercial Paper Rate Note and for a Federal Funds Rate Note
will be the Business Day preceding the Interest Reset Date with
respect to such Note. The Interest Determination Date pertaining to
an Interest Reset Date for a LIBOR Note will be the second London
Banking Day preceding such Interest Reset Date. The Interest
Determination Date pertaining to an Interest Reset Date for a Treasury
Rate Note will be the day of the week in which such Interest Reset
Date falls on which Treasury bills (as hereinafter defined) would
normally be auctioned. Treasury bills are usually sold at auction on
Monday of each week, unless the day is a legal holiday, in which case
the auction is usually held on the following Tuesday, except that such
auction may be held on the preceding Friday. If, as the result of a
legal holiday, an auction is so held on the preceding Friday, such
Friday will be the Interest Determination Date pertaining to the
Interest Reset Date for a Treasury Rate Note occurring in the next
succeeding week. The Interest Determination Date pertaining to an
Interest Reset Date for a Prime Rate Note will be the same day as the
Interest Reset Date. The Interest Determination Date pertaining to an
Interest Reset Date for a CMT Rate Note will be the tenth Business Day
prior to the Interest Reset Date.
Unless otherwise specified in the applicable Pricing Supplement,
interest on each Floating Rate Note will be payable monthly,
quarterly, semiannually or annually (the "Interest Payment Period").
Except as provided below or in the applicable Pricing Supplement, the
date or dates on which interest will be payable (each an "Interest
Payment Date") will be, in the case of Floating Rate Notes which reset
daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each
year; in the case of Floating Rate Notes which reset quarterly, on the
third Wednesday of March, June, September and December of each year;
in the case of Floating Rate Notes which reset semiannually, on the
third Wednesday of the two months of each year specified in such
Floating Rate Notes; and in the case of Floating Rate Notes which
reset annually, on the third Wednesday of the month specified in such
Floating Rate Notes and in each case, at maturity or, if applicable,
upon redemption or optional repayment.
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Unless otherwise specified in the applicable Pricing Supplement,
interest payments on each Floating Rate Note shall be the amount of
interest accrued from, and including, the next preceding Interest
Payment Date in respect of which interest has been paid (or from, and
including, the date of original issue if no interest has been paid
with respect to such Floating Rate Note) to, but excluding, the
Interest Payment Date. In the case of Floating Rate Notes on which the
interest rate is reset daily or weekly, however, the interest payments
shall include interest accrued from, and including, the next preceding
Record Date in respect of which interest has been paid (or from and
including the date of original issue if no interest has been paid with
respect to such Floating Rate Note) to but excluding the Record Date
next preceding the applicable Interest Payment Date. Interest paid on
the maturity date of Notes will include interest accrued to but
excluding such date.
With respect to a Floating Rate Note, accrued interest from its
date of original issue or from the last date to which interest has
been paid is calculated by multiplying the face amount of such
Floating Rate Note by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factors calculated
for each day from the date of issue, or from the last date to which
interest has been paid, to the date for which accrued interest is
being calculated. The interest factor (expressed as a decimal
calculated to seven decimal places without rounding) for each such day
is computed by dividing the interest rate applicable to such day by
360, in the case of Commercial Paper Rate Notes, Federal Funds Rate
Notes and LIBOR Notes, or by the actual number of days in the year, in
the case of Treasury Rate Notes.
The "Calculation Date," where applicable, pertaining to an
Interest Determination Date will be the tenth calendar day after such
Interest Determination Date or, if any such day is not a Business Day,
the next succeeding Business Day.
Unless otherwise specified in the applicable Pricing Supplement,
Chemical Bank will be the calculation agent (the "Calculation Agent")
with respect to the Floating Rate Notes. Upon the request of the
Holder of any Floating Rate Note, the Calculation Agent will provide
the interest rate then in effect, and, if different, the interest rate
which will become effective as a result of a determination made on the
most recent Interest Reset Date with respect to such Floating Rate
Note.
COMMERCIAL PAPER RATE NOTES. Commercial Paper Rate Notes will
bear interest at the interest rates (calculated with reference to the
Commercial Paper Rate and the Spread, if any) specified in the
Commercial Paper Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest
Determination Date, the Money Market Yield (as defined below) on such
date of the rate for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in "Statistical
Release H.15(519), Selected Interest Rates" ("H.15(519)"), or any
successor publication, under the heading "Commercial Paper." In the
event that such rate is not published on the Calculation Date
pertaining to such Interest Determination Date, then the Commercial
Paper Rate shall be the Money Market Yield on such Interest
Determination Date of the rate for commercial paper of the specified
Index Maturity as published by the Federal Reserve Bank of New York in
its daily statistical release, "Composite 3:30 P.M. Quotations for
U.S. Government Securities" ("Composite Quotations") under the heading
"Commercial Paper." If by 3:00 P.M., New York City time, on such
Calculation Date the rate for an Interest Determination Date is not
yet published in either H.15(519) or Composite Quotations, the rate
for that Interest Determination Date shall be calculated by the
Calculation Agent and shall be the Money Market Yield of the
arithmetic mean of the offered rates, as of 11:00 A.M., New York City
time, of three leading dealers of commercial paper in The City of New
York selected by
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the Calculation Agent on that Interest Determination Date, for
commercial paper of the specified Index Maturity placed for an
industrial issuer whose bond rating is "AA," or the equivalent,
from a nationally recognized rating agency; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent
are not quoting as mentioned in this sentence, the Commercial Paper
Rate will be the Commercial Paper Rate in effect on such Interest
Determination Date.
"Money Market Yield" shall be a yield calculated in accordance
with the following formula:
Money Market Yield = D x 360 X 100
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360 - (D x M)
where "D" refers to the per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal; and "M" refers to
the actual number of days in the interest period for which interest is
being calculated.
LIBOR NOTES. LIBOR Notes will bear interest at the interest
rates (calculated with reference to LIBOR and the Spread, if any)
specified in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
LIBOR will be determined by the Calculation Agent in accordance with
the following provisions:
(i) With respect to an Interest Determination Date,
LIBOR will be determined on the basis of the offered rates
for deposits in U.S. dollars having the Index Maturity
specified in the applicable Pricing Supplement, commencing
on the second London Banking Day immediately following such
Interest Determination Date, which appear on the Reuters
Screen LIBO Page (or such other page as may replace such
Reuters Screen LIBO Page for the purpose of displaying
London interbank rates of major banks), as of 11:00 A.M.,
London time, on such Interest Determination Date. If at
least two such offered rates appear on the Reuters Screen
LIBO Page (or such other page), the rate for such Interest
Determination Date will be the arithmetic mean of such
offered rates as determined by the Calculation Agent. If
fewer than two offered rates appear, LIBOR for such Interest
Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
(ii) With respect to an Interest Determination Date on
which fewer than two offered rates appear on the Reuters
Screen LIBO Page (or such other page) as described in (i)
above, LIBOR will be determined on the basis of the rates at
approximately 11:00 A.M., London time, on such Interest
Determination Date at which deposits in U.S. dollars having
the Index Maturity specified in the applicable Pricing
Supplement are offered to prime banks in the London
interbank market by four major banks in the London interbank
market selected by the Calculation Agent commencing on the
second London Banking Day immediately following such
Interest Determination Date and in a principal amount equal
to an amount of not less than $1,000,000 that is
representative of a single transaction in such market at
such time. The Calculation Agent will request the principal
London office of each of such banks to provide a quotation
of its rate. If at least two such quotations are provided,
LIBOR for such Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR for such Interest
Determination Date will be the arithmetic mean of the rates
quoted at approximately 11:00 A.M., New York City time, on
such Interest Determination Date by three major banks in the
City of New York, selected by the Calculation Agent for
loans in U.S. dollars to leading European banks, having the
specified
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Index Maturity commencing on the second London
Banking Day immediately following such Interest
Determination Date and in a principal amount equal to an
amount of not less than $1,000,000 that is representative of
a single transaction in such market at such time; provided,
however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this
sentence, LIBOR will be LIBOR in effect on such Interest
Determination Date.
FEDERAL FUNDS RATE NOTES. Federal Funds Rate Notes will bear
interest at the interest rates (calculated with reference to the
Federal Funds Rate and the Spread, if any) specified in the Federal
Funds Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Federal Funds Rate" means, with respect to any Interest Determination
Date, the rate on that day for Federal Funds as published in H.15(519)
under the heading "Federal Funds (Effective)" or, if not so published
on the Calculation Date pertaining to such Interest Determination
Date, the Federal Funds Rate will be the rate on such Interest
Determination Date as published in Composite Quotations under the
heading "Federal Funds/Effective Rate." If neither of such rates is
published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Federal Funds Rate
for such Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the
last transaction in overnight Federal Funds arranged by three leading
brokers of federal funds transactions in the City of New York selected
by the Calculation Agent as of 11:00 A.M., New York City time, on such
Interest Determination Date; provided, however, that if the brokers
selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the rate of interest in effect for the
applicable period will be the rate of interest in effect on such
Interest Determination Date.
TREASURY RATE NOTES. Treasury Rate Notes will bear interest at
the interest rates (calculated with reference to the Treasury Rate and
the Spread, if any) specified in the Treasury Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Treasury Rate" means, with respect to any Interest Determination
Date, the rate for the most recent auction of direct obligations of
the United States ("Treasury bills") having the Index Maturity
specified in the applicable Pricing Supplement as published in
H.15(519), or any successor publication, under the heading, "U.S.
Government Securities - Treasury bills - auction average (investment)"
or, if not so published on the Calculation Date pertaining to such
Interest Determination Date, the auction average rate (expressed as a
bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. Treasury bills are
usually sold at auction on Monday of each week, unless that day is a
legal holiday, in which case the auction is usually held on the
following Tuesday, except that such auction may be held on the
preceding Friday. In the event that the results are not published or
reported as provided above by 3:00 P.M., New York City time, on such
Calculation Date, or if no such auction is held in a particular week,
then the Treasury Rate shall be calculated by the Calculation Agent
and shall be a yield to maturity (expressed as a bond equivalent, on
the basis of a year of 365 or 366 days, as applicable, and applied on
a daily basis) of the arithmetic mean of the secondary market bid
rates as of approximately 3:30 P.M., New York City time, on such
Interest Determination Date, of three leading primary United States
government securities dealers selected by the Calculation Agent for
the issue of Treasury bills with a remaining maturity closest to the
specified Index Maturity; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Treasury Rate will be the Treasury
Rate in effect on such Interest Determination Date.
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PRIME RATE NOTES. Prime Rate Notes will bear interest at the
interest rate (calculated with reference to the Prime Rate and the
Spread, if any) specified in the Prime Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Prime Rate" means, with respect to any Interest Determination Date,
the rate set forth in H.15(519) for such date opposite the caption
"Bank Prime Loan." If such rate is not yet published by 9:00 a.m.,
New York City time, on the Calculation Date, the Prime Rate for such
Interest Determination Date will be the arithmetic mean of the rates
of interest publicly announced by each bank named on the Reuters
Screen NYMF Page as such bank's prime rate or base lending rate as in
effect for such Interest Determination Date as quoted on the Reuters
Screen NYMF Page on such Interest Determination Date, or, if fewer
than four such rates appear on the Reuters Screen NYMF Page for such
Interest Determination Date, the rate shall be the arithmetic mean of
the prime rates quoted on the basis of the actual number of days in
the year divided by 360 as of the close of business on such Interest
Determination Date by at least two of the three major money center
banks in The City of New York selected by the Calculation Agent from
which quotations are requested. If fewer than two quotations are
provided, the Prime Rate shall be calculated by the Calculation Agent
and shall be determined as the arithmetic mean on the basis of the
prime rates in The City of New York by the appropriate number of
substitute banks or trust companies organized and doing business under
the laws of the United States, or any State thereof, in each case
having total equity capital of at least U.S. $500 million and being
subject to supervision or examination by Federal or State authority,
selected by the Calculation Agent to quote such rate or rates. If in
any month or two consecutive months the Prime Rate is not published in
H.15(519) and the banks or trust companies selected as aforesaid are
not quoting as mentioned in the preceding paragraph, the "Prime Rate"
for such Interest Reset Period will be the same as the Prime Rate for
the immediately preceding Interest Reset Period (or, if there was no
such Interest Reset Period, the rate of interest payable on the Prime
Rate Notes for which the Prime Rate is being determined shall be the
Initial Interest Rate). If this failure continues over three or more
consecutive months, the Prime Rate for each succeeding Interest
Determination Date until the maturity or redemption of such Prime Rate
Notes or, if earlier, until this failure ceases, shall be LIBOR
determined as if such Prime Rate Notes were LIBOR Notes, and the
Spread, if any, shall be the number of basis points specified in the
applicable Pricing Supplement as the "Alternate Rate Event Spread."
CMT RATE NOTES. CMT Rate Notes will bear interest (calculated
with reference to the CMT Rate and the Spread, if any) specified in
the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing
Supplement, the CMT Rate for any CMT Rate Note will be determined by
the Calculation Agent on each Interest Determination Date in
accordance with the following provisions:
(i) the CMT Rate will be determined on the basis of the
latest rate displayed at the close of business on that Interest
Determination Date on (x) Telerate page 7055 for "Yields on
Treasury Constant Maturities ... Federal Reserve Board
Statistical Release H.15(519) ... Mondays approximately 3:45 pm
EST" (or "EDT" as the case may be) for U. S. Treasury Securities
with a maturity that is the same as the Index Maturity specified
in the applicable Pricing Supplement or (y) such other page as
may replace page 7055, as provided by the Telerate News Service,
for the purpose of displaying rates or prices that are
comparable, as determined by the Calculation Agent (after
consultation with the Company), to the Constant Maturity Treasury
rates formerly displayed on Telerate page 7055;
(ii) if the information specified in subparagraph (i) above
is not available at that Interest Determination Date, then the
CMT Rate for the applicable Interest Period shall be determined
on the basis of the Treasury Constant Maturity rate with a
maturity that is the same as the Index
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Maturity specified in the applicable Pricing Supplement (or other
United States Treasury rate, with a maturity that is the same as
the Index Maturity specified in the applicable Pricing Supplement)
published as of that Interest Determination Date by either the
Board of Governors of the Federal Reserve System or the United
States Department of the Treasury that the Calculation Agent
(after consultation with the Company) determines to be comparable
to the rate formerly displayed on Telerate page 7055 and
published in the Federal Reserve Board Statistical Release H.15
(519);
(iii) if the information specified in subparagraphs (i) and
(ii) is not available at that Interest Determination Date, then
the CMT Rate for the applicable Interest Period shall be the
yield to maturity of the then most recently issued direct non-
callable fixed rate United States Treasury Note with an original
maturity that is the same as the Index Maturity specified in the
applicable Pricing Supplement (the "Reference Treasury Note"),
such yield to maturity to be calculated by the Calculation Agent
on the basis of the arithmetic mean of the secondary market bid
side prices for such Reference Treasury Note quoted as of 3:00
pm, New York City time (or the closing of the market, if
earlier), on that Interest Determination Date, by (and appearing
in the written records of) three leading primary United States
government securities dealers in New York City selected by the
Calculation Agent;
(iv) if the information specified in subparagraphs (i) and
(ii) above is not available at that Interest Determination Date
and at least three price quotations for the Reference Treasury
Note are not available at that Interest Determination Date from
leading primary dealers in New York City as provided in
subparagraph (iii) above, then the CMT Rate for the applicable
Interest Period shall be the yield to maturity of the Reference
Treasury Note, as calculated by the Calculation Agent on the
basis of the arithmetic mean of the secondary market bid side
prices for such Reference Treasury Note quoted as of 3:00 pm, New
York City time (or the closing of the market, if earlier), on
that Interest Determination Date, by (and appearing in the
written records of) any three primary United States government
securities dealers selected by the Calculation Agent
(irrespective of where such dealers may be located);
(v) if the information specified in subparagraphs (i) and
(ii) above is not available at that Interest Determination Date
and the Calculation Agent is unable to obtain the requisite
quotations specified in either subparagraph (iii) above or
subparagraph (iv) above, then the interest rate on the applicable
CMT Rate Note for the applicable Interest Period shall be the
same as the interest rate on such CMT Rate Note in effect at the
opening of business on that Interest Determination Date.
PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement,
payments of principal (and premium, if any) and interest on all Notes
will be made in the applicable Specified Currency, provided, however,
that payments of principal (and premium, if any) and any interest on
Notes denominated in a Specified Currency other than U.S. dollars will
nevertheless be made in U.S. dollars (i) at the option of the Holders
thereof under the procedures described in the two following paragraphs
and (ii) at the option of the Company in the case of imposition of
exchange controls or other circumstances beyond the control of the
Company as described in the last two paragraphs under this heading.
Unless otherwise specified in the applicable Pricing Supplement,
and except as provided in the next paragraph, payments of principal
(and premium, if any) and any interest with respect to any Note
denominated in a Specified Currency other than U.S. dollars will be
made in U.S. dollars if the registered Holder of such Note on the
relevant Record Date or at maturity, as the case may be, has
transmitted a written request for such payment in U.S. dollars to the
Trustee at its Corporate Trust Office in the City of New York on or
prior to such Record Date or the date 15 days prior to maturity, as
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the case may be. Such request may be in writing (mailed or hand
delivered) or by cable, telex or other form of facsimile transmission.
Any such request made with respect to any Note by a registered Holder
will remain in effect with respect to any further payments of principal
(and premium, if any) and any interest with respect to such Note payable
to such Holder, unless such request is revoked on or prior to the relevant
Record Date or the date 15 days prior to maturity, as the case may be.
Holders of Notes denominated in a Specified Currency other than U.S.
dollars whose Notes are registered in the name of a broker or nominee
should contact such broker or nominee to determine whether and how an
election to receive payments in U.S. dollars may be made.
Unless otherwise specified in the applicable Pricing Supplement,
the U.S. dollar amount to be received by a Holder of a Note
denominated in a Specified Currency other than U.S. dollars who elects
to receive payment in U.S. dollars will be based on the highest bid
quotation in the City of New York received by the Exchange Rate Agent
(as defined below) as of 11:00 A.M., New York City time, on the second
Business Day next preceding the applicable payment date from three
recognized foreign exchange dealers (one of which may be the Exchange
Rate Agent) for the purchase by the quoting dealer of the Specified
Currency for U.S. dollars for settlement on such payment date in the
aggregate amount of the Specified Currency payable to all Holders of
Notes electing to receive U.S. dollar payments and at which the
applicable dealer commits to execute a contract. If three such bid
quotations are not available on the second Business Day preceding the
date of payment of principal (and premium, if any) or any interest
with respect to any Note, such payment will be made in the Specified
Currency. All currency exchange costs associated with any payment in
U.S. dollars on any such Note will be borne by the Holder thereof by
deduction from such payment. Unless otherwise specified in the
applicable Pricing Supplement, Chemical Bank will be the Exchange Rate
Agent (the "Exchange Rate Agent") with respect to the Notes.
Interest will be payable to the person in whose name a Note is
registered (which in the case of Global Securities representing Book-
Entry Notes will be the Depositary or a nominee of the Depositary) at
the close of business on the Record Date next preceding each Interest
Payment Date; provided, however, that interest payable at maturity
will be payable to the person to whom principal shall be payable
(which in the case of Global Securities representing Book-Entry Notes
will be the Depositary or a nominee of the Depositary).
The total amount of any principal (and premium, if any) and any
interest due on any Global Security representing one or more Book-
Entry Notes on any Interest Payment Date or at maturity will be made
available to the Trustee on such date. As soon as possible thereafter,
the Trustee will make such payments to the "Depositary." The
Depositary will allocate such payments to each Book-Entry Note
represented by such Global Security and make payments to the owners or
holders thereof in accordance with its existing operating procedures.
Neither the Company nor the Trustee shall have any responsibility or
liability for such payments by the Depositary. So long as the
Depositary or its nominee is the registered owner of any Global
Security, the Depositary or its nominee, as the case may be, will be
considered the sole owner or holder of the Book-Entry Note or Notes
represented by such Global Security for all purposes under the
Indenture. The Company understands, however, that under existing
industry practice, the Depositary will authorize the persons on whose
behalf it holds a Global Security to exercise certain rights of
holders of Securities. See "Book-Entry System" below in this section.
Unless otherwise specified in the applicable Pricing Supplement,
payments of principal (and premium, if any) and any interest with
respect to any Note to be made in a Specified Currency other than U.S.
dollars will be made by wire transfer to such account maintained by
the Holder with a bank located in the country issuing the Specified
Currency (or, with respect to Notes denominated in ECUs, in Brussels,
Belgium) or other jurisdiction acceptable to the Company and the
Trustee as shall have been designated in writing on or prior to the
relevant Record Date preceding the Interest Payment Date or 15 days
preceding the maturity, as the case may be, by the registered Holder
of such Note on the relevant Record Date or maturity, provided that,
in the case of payment of principal of (and premium, if
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any) and any interest due at maturity, the Note is presented to the
Paying Agent in time for the Paying Agent to make such payments in
such funds in accordance with its normal procedures. Such designation
shall be made by filing the appropriate information with the Trustee at
its Corporate Trust Office in the Borough of Manhattan, the City of New
York, and, unless revoked in writing, any such designation made with
respect to any Note by a registered Holder will remain in effect with
respect to any further payments with respect to such Note payable to
such Holder. If a payment with respect to any such Note cannot be made by
wire transfer because the required designation has not been received by
the Trustee on or before the requisite date or for any other reason, a
notice will be mailed to the Holder at its registered address requesting
a designation pursuant to which such wire transfer can be made and, upon
the Trustee's receipt of such a designation, such payment will be made
within five Business Days of such receipt. The Company will pay any
administrative costs imposed by banks in connection with making payments
by wire transfer, but, except as otherwise specified in the applicable
Pricing Supplement, any tax, assessment or governmental charge imposed
upon payments will be borne by the Holders of the Notes in respect of
which payments are made.
Unless otherwise specified in the applicable Pricing Supplement,
if the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a
component shall be divided or multiplied in the same proportions. If
two or more component currencies are consolidated into a single
currency, the amounts of those currencies as components shall be
replaced by an amount in such single currency equal to the sum of the
amounts of the consolidated component currencies expressed in such
single currency. If any component currency is divided into two or
more currencies, the amount of that currency as a Component (as
hereinafter defined) shall be replaced by amounts of such two or more
currencies, each of which shall have a value on the date of division
equal to the amount of the former component currency divided by the
number of currencies into which that currency was divided.
Unless otherwise specified in the applicable Pricing Supplement,
Notes denominated in a Specified Currency other than U.S. dollars will
provide that, in the event of an official redenomination of the
Specified Currency, the obligations of the Company with respect to
payments on such Notes shall, in all cases, be deemed immediately
following such redenomination to provide for payment of that amount of
the redenominated Specified Currency representing the amount of such
obligations immediately before such redenomination.
All determinations referred to above made by the Calculation
Agent and the Exchange Rate Agent (except to the extent expressly
provided herein or in the applicable Pricing Supplement) shall be, in
the absence of manifest error, conclusive for all purposes and binding
on holders of the Notes and the Company, and the Calculation Agent and
the Exchange Rate Agent shall have no liability therefor.
If the principal of (and premium, if any) or interest on any Note
is payable in a Specified Currency other than U.S. dollars and such
Specified Currency is not available due to the imposition of exchange
controls or other circumstances beyond the control of the Company, or
is no longer used by the government of the country issuing such
currency or for settlement of transactions by public institutions of
or within the international banking community, the Company will be
entitled to satisfy its obligations to Holders of such Notes by making
such payment in U.S. dollars on the basis of the noon buying rate in
the City of New York for cable transfers in such Specified Currency as
certified for customs purposes by the Federal Reserve Bank of New York
(the "Exchange Rate") for such Specified Currency on the second
Business Day prior to the applicable payment date or, if the Exchange
Rate is then not available, on the basis of the most recently
available Exchange Rate.
If payment on a Note is required to be made in ECUs and on a
payment date with respect to such Note ECUs are unavailable due to the
imposition of exchange controls or other circumstances beyond the
Company's control, or are no longer used in the European Monetary System,
then all such payments due on such payment date shall be made in U.S.
dollars. The amount so payable on any payment date in
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ECUs shall be converted into U.S. dollars at a rate determined by the
Exchange Rate Agent as of the second Business Day prior to the date on
which such payment is due on the following basis: The component
currencies of the ECU for this purpose (the "Components") shall be the
currency amounts that were components of the ECU as of the last date on
which the ECU was used in the European Monetary System. The equivalent of
the ECU in U.S. dollars shall be calculated by aggregating the U.S.
dollar equivalents of the Components. The U.S. dollar equivalent of
each of the Components shall be determined by the Exchange Rate Agent
on the basis of the Exchange Rates for the Components as of the second
Business Day prior to such payment date or, if no Exchange Rates for
one or more of the Components is available for such date, as of the
most recently available Exchange Rates for the Components, or as
otherwise indicated in the applicable Pricing Supplement.
CURRENCY INDEXED NOTES
The Company may from time to time offer Notes ("Currency Indexed
Notes"), the principal amounts of which are payable at or prior to
maturity and the amounts of interest payable on which and/or any
premium payable with respect to which are determined by the rate of
exchange between the Specified Currency and the other currency or
composite currency or currencies specified as the Indexed Currency
(the "Indexed Currency") or by reference to some other currency index
or indices, in each case as set forth in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing
Supplement, Holders of Currency Indexed Notes will be entitled to
receive a principal amount or portion thereof in respect of such
Currency Indexed Notes exceeding the amount designated as the face
amount of such Currency Indexed Notes in the applicable Pricing
Supplement (the "Face Amount") if, at the stated maturity date, the
rate at which the Specified Currency can be exchanged for the Indexed
Currency is greater than the rate of such exchange designated as the
Base Exchange Rate, expressed in units of the Indexed Currency per one
unit of the Specified Currency, in the applicable Pricing Supplement
(the "Base Exchange Rate") and will only be entitled to receive a
principal amount in respect of such Currency Indexed Notes less than
the Face Amount of such Currency Indexed Notes, if, at the stated
maturity date, the rate at which the Specified Currency can be
exchanged for the Indexed Currency is less than such Base Exchange
Rate, in each case determined as described above in this section under
"Payment of Principal and Interest." Information as to the relative
historical value of the applicable Specified Currency against the
applicable Indexed Currency, any currency and/or exchange controls
applicable to such Specified Currency or Indexed Currency and any
additional tax consequences to holders will be set forth in the
applicable Pricing Supplement. See "Foreign Currency Risks."
Unless otherwise specified in the applicable Pricing Supplement,
interest and/or any premium will be payable by the Company in the
Specified Currency based on the Face Amount of the Currency Indexed
Notes and at the rate and times and in the manner set forth herein and
in the applicable Pricing Supplement.
OTHER INDEXED NOTES
The Company may also from time to time offer Notes ("Other
Indexed Notes"), the principal amounts of which are payable at or
prior to maturity and the amounts of any interest payable on which
and/or any premium payment with respect to which are determined with
reference to an index or indices (e.g., the difference in price of a
specified security or commodity on certain dates, a securities or
commodity index or any other index or indices). The applicable
Pricing Supplement relating to such Other Indexed Notes will set forth
the method by and the terms on which the amount of principal (payable
on or prior to the maturity date), interest and/or any premium will be
determined, any additional tax consequences to the holders of such
Notes, a description of certain risks associated with investment in
such Note and other information relating to such Notes.
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EXTENSION OF MATURITY DATE
The Pricing Supplement relating to each Note will indicate
whether the Company has the option to extend the maturity date of such
Note for one or more periods (each an "Extension Period") up to but
not beyond the date (the "Final Maturity Date") set forth in such
Pricing Supplement.
The Company may exercise such an option with respect to a Note by
notifying the Trustee of such exercise at least 60 but not more than
75 days prior to the maturity date of such Note in effect prior to the
exercise of such option (any such maturity date an "Original Maturity
Date"). Not later than 55 days prior to the Original Maturity Date,
the Trustee will mail to the Holder of such Note a notice (the
"Extension Notice"), first class, postage prepaid setting forth (i)
the election of the Company to extend the maturity date of such Note,
(ii) the new maturity date, (iii) in the case of a Fixed Rate Note,
the interest rate applicable to the Extension Period or, in the case
of a Floating Rate Note, the Spread, the new Interest Reset Date(s),
if any, and the new Interest Payment Date(s), if any, applicable to
the Extension Period, and (iv) the provisions, if any, for redemption
and/or repayment during the Extension Period, including the date on
which or the period or periods during which and the price at which
such redemption and/or repayment may occur during the Extension
Period. Upon the mailing by the Trustee of an Extension Notice to the
Holder of a Note, the maturity date of such Note shall be extended
automatically, and, except as modified by the Extension Notice and as
described in the next paragraph, such Note will have the same terms as
prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to an
Original Maturity Date for a Note, the Company may, at its option,
revoke the interest rate, in the case of a Fixed Rate Note, or the
Spread, in the case of a Floating Rate Note, provided for in the
Extension Notice and establish a higher interest rate, in the case of
a Fixed Rate Note, or a higher Spread, in the case of a Floating Rate
Note, for the Extension Period by causing the Trustee to mail notice
of such higher interest rate or higher Spread, as the case may be,
first class, postage prepaid, to the holder of such Note. Such notice
shall be irrevocable. All Notes with respect to which the maturity
date is extended will bear such higher interest rate, in the case of a
Fixed Rate Note, or higher Spread, in the case of a Floating Rate
Note, for the Extension Period, whether or not tendered for repayment.
If the Company extends the maturity date of a Note, the Holder of
such Note may have the option to elect repayment of such Note by the
Company on the Original Maturity Date at a price equal to the
principal amount thereof plus any accrued interest to such date. In
order for a Note to be so repaid on the Original Maturity Date, the
Holder thereof must follow the procedures set forth below in this
section under "Repayment and Repurchase" for optional repayment,
except that the period for delivery of such Note or notification to
the Trustee shall be at least 25 but not more than 35 days prior to
the Original Maturity Date and except that a Holder who has tendered a
Note for repayment pursuant to an Extension Notice may, by written
notice to the Trustee, revoke any such tender for repayment until the
close of business on the tenth day prior to the Original Maturity
Date.
REDEMPTION
Unless otherwise specified in the applicable Pricing Supplement,
the Notes will not have a sinking fund. Redemption Dates, if any,
will be fixed at the time of sale and set forth in the applicable
Pricing Supplement and on the applicable Note. If no Redemption Date
is indicated with respect to a Note, such Note will not be redeemable
prior to maturity. On and after the Redemption Date, the related Fixed
Rate Note or Floating Rate Note will be redeemable in whole, or in part in
increments of $1,000, at the option of the Company at a redemption
price equal to 100% of the principal amount to be redeemed, together
with interest thereon payable to the Redemption Date (the "Redemption
Price"), on notice given not more than 60 nor less than 30 days prior
to the Redemption Date.
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REPAYMENT AND REPURCHASE
Notes may be subject to repayment at the option of the Holders
thereof on their respective Optional Repayment Dates, if any. Optional
Repayment Dates, if any, will be fixed at the time of sale and set
forth in the applicable Pricing Supplement and on the applicable Note.
Except as provided above in this section under "Extension of Maturity
Date," if no Optional Repayment Date is indicated with respect to a
Note, such Note will not be repayable at the option of the Holder
prior to maturity. On the Optional Repayment Date, the related Fixed
Rate Note or Floating Rate Note will be repayable in whole, or in part
in increments of $1,000 (provided that any remaining principal amount
of such Note shall be at least $100,000), at the option of the Holder
thereof at a price equal to 100% of the principal amount to be repaid,
together with interest thereon payable to the Optional Repayment Date
(the "Optional Repayment Price"). Unless otherwise specified in the
applicable Pricing Supplement, for any Note to be repaid in whole or
in part at the option of the Holder thereof, the Trustee must receive
not less than 30 nor more than 60 days prior to the Optional Repayment
Date (or such shorter period as is set forth above in this section
under "Extension of Maturity Date") (i) the Note to be repaid with the
form entitled "Option to Elect Repayment" set forth on the reverse of
such Note duly completed or (ii) a telegram, telex, facsimile
transaction or a letter from a member of a national securities
exchange or the NASD or a commercial bank or a trust company in the
U.S. setting forth the name of the Holder of the Note, the principal
amount of the Note, the certificate number of the Note or a
description of the Note's tenor or terms, the principal amount of the
Note to be repaid, a statement that the option to elect repayment is
being exercised thereby and a guarantee that the Note to be repaid
with the form entitled "Option to Elect Repayment" set forth on the
reverse of the Note duly completed will be received by such Trustee no
later than five Business Days after the date of such telegram, telex,
facsimile transmission or letter and such Note and form duly completed
are received by the Trustee by such fifth Business Day. Exercise of
the repayment option shall be irrevocable (except as set forth above
under "Extension of Maturity Date").
If a Note is represented by a Global Security, the Depositary's
nominee will be the Holder of such Note and therefore will be the only
entity that can exercise a right to repayment. In order to ensure
that the Depositary's nominee will timely exercise a right to
repayment with respect to a particular Note, the beneficial owner of
such Note must instruct the broker or other direct or indirect
participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment.
Different firms have different deadlines for accepting instructions
from their customers and, accordingly, each beneficial owner should
consult the broker or other direct or indirect participant through
which it holds an interest in a Note in order to ascertain the time by
which such an instruction must be given in order for timely notice to
be delivered to the Depositary.
The applicable Pricing Supplement may provide that the maturity
of a Floating Rate Note will be automatically extended for a specified
period or periods, unless the Holder thereof elects during a
designated period to terminate the automatic extension of the maturity
of such Floating Rate Note by following the procedures set forth in
the applicable Pricing Supplement and in such Floating Rate Note.
The Company may at any time purchase Notes at any price in the
open market or otherwise. Notes so purchased by the Company may be
held or resold or, at the discretion of the Company, may be
surrendered to the Trustee for cancellation.
BOOK-ENTRY SYSTEM
Book-Entry Notes may be issued in whole or in part in the form of
one or more fully-registered Global Securities which will be deposited
with, or on behalf of, the Depositary and registered in the name of
its nominee. Except as set forth below, a Global Security may not be
transferred except as a whole by the Depositary to its nominee or by
its nominee to such Depositary or another nominee of the Depositary or
by the Depositary or its nominee to a successor of the Depositary or a
nominee of such successor.
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The Depositary has advised the Company and the Underwriters as
follows: the Depositary is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. The Depositary was created to hold securities of
its participating organizations ("participants") and to facilitate the
clearance and settlement of securities transactions, such as transfers
and pledges, among its participants in such securities through
electronic computerized book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
securities certificates. Participants include securities brokers and
dealers (including the Agents), banks, trust companies, clearing
companies, clearing corporations and certain other organizations, some
of whom (and/or their representatives) own the Depositary. Access to
the Depositary's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly
or indirectly. Persons who are not participants may beneficially own
securities held by the Depositary only through participants.
Upon issuance of any Notes by the Company that will be
represented by a Global Security, the Depositary will credit on its
book-entry system the respective principal amounts of the Notes
represented by such Global Security to the accounts of participants.
The accounts to be credited shall be designated by the Agents, or by
the Company if such Notes are offered and sold directly by the
Company. Ownership of beneficial interest in a Global Security will
be limited to participants or persons that may hold 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 may hold interests through participants. The laws of
some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits
and such laws may impair the ability to transfer beneficial interest
in a Global Security.
So long as the Depositary for a Global Security, or its nominee,
is the registered owner of a Global Security, such Depositary or
nominee, as the case may be, will be considered the sole owner or
Holder of the Note represented by such 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
Notes represented by Global Securities registered in their names, will
not receive or be entitled to receive physical delivery of Notes in
definitive form and will not be considered the owners or Holders
thereof under the Indenture.
Principal and interest payments on the Notes registered in the
name of the Depositary or its nominee will be made by the Company to
the Depositary or its nominee, as the case may be, as the registered
owner of a 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 such beneficial ownership interests and each of
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 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.
Unless otherwise specified in the applicable Pricing Supplement,
a Note will be issued initially as a Book-Entry Note. Except as set
forth in this paragraph, Book-Entry Notes will only be issued in the
form of Global Securities. If the Depositary is at any time unwilling
or unable or ineligible to continue
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as depositary and a successor depositary is not appointed by the Company
within 90 calendar days, the Company will issue Notes in definitive form
in exchange for all outstanding Global Securities. In addition, the
Company (but not a Holder) may at any time determine not to have Notes
represented by a Global Security and, in such event, will issue Notes in
definitive form in exchange for all such Global Securities. In any such
instance, an owner of a beneficial interest in the one or more Global
Securities to be exchanged will be entitled to physical delivery in
definitive form of Notes equal in principal amount to such beneficial
interest and to have such Notes registered in its name. Notes so
issued in definitive form will be issued in denominations of $25,000
and integral multiples of $1,000 in excess thereof, except as
otherwise specified in the applicable Pricing Supplement, and will be
issued in registered form only, without coupons.
FOREIGN CURRENCY RISKS
An investment in Notes that are denominated in a Specified
Currency other than U.S. dollars, or the principal, premium and/or any
interest of which are determined by reference to a currency or
currency index or indices, entails significant risks that are not
associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of
significant changes in rates of exchange between the U.S. dollar and
the various foreign currencies or composite currencies and the
possibility of the imposition or modification of foreign exchange
controls by either the United States or foreign governments. Such
risks generally depend on factors over which the Company has no
control, such as economic and political events and/or the supply of
and demand for the relevant currencies. In recent years, rates of
exchange between the U.S. dollar and certain foreign currencies have
been highly volatile and such volatility may be expected in the
future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any Note.
Depreciation of a Specified Currency other than U.S. dollars against
the U.S. dollar could result in a decrease in the effective yield of
such Note below its coupon rate, and in certain circumstances could
result in a loss to the investor on a U.S. dollar basis.
Governments have imposed from time to time, and may in the future
impose, exchange controls which could affect exchange rates as well as
the availability of a specified foreign currency for making payments
with respect to a Note. There can be no assurance that exchange
controls will not restrict or prohibit payments in any such currency
or currency unit. Even if there are no actual exchange controls, it
is possible that the Specified Currency for any particular Note would
not be available to make payments when due. In that event, the
Company will repay in U.S. dollars on the basis of the most recently
available Exchange Rate. See "Description of the Notes-Payment of
Principal and Interest."
THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS AND
PRICING SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN
NOTES DENOMINATED IN A SPECIFIED CURRENCY OTHER THAN UNITED STATES
DOLLARS, OR THE PRINCIPAL, PREMIUM AND/OR ANY INTEREST OF WHICH ARE
DETERMINED BY REFERENCE TO A CURRENCY OR CURRENCY INDEX OR INDICES.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN NOTES
DENOMINATED IN A SPECIFIED CURRENCY OTHER THAN UNITED STATES DOLLARS,
OR THE PRINCIPAL, PREMIUM AND/OR ANY INTEREST OF WHICH ARE DETERMINED
BY REFERENCE TO A CURRENCY OR CURRENCY INDEX OR INDICES. SUCH NOTES
ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Currently, there are limited facilities in the United States for
conversion of U.S. dollars into foreign currencies, and vice versa.
In addition, banks do not offer non-U.S. dollar denominated checking
or savings account facilities in the United States. Accordingly,
payments on Notes made in a Specified Currency other than U.S. dollars
will be made from an account with a bank located in the country
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issuing the Specified Currency (or, with respect to Notes denominated
in ECUs, in Brussels, Belgium). See "Description of the Notes--
Payment of Principal and Interest."
Unless otherwise specified in the applicable Pricing Supplement,
Notes denominated in a Specified Currency other than U.S. dollars or
ECUs will not be sold in, or to residents of, the country issuing the
Specified Currency in which particular Notes are denominated. Except
as set forth under "Certain United States Federal Tax Consequences,"
the information set forth in this Prospectus Supplement is directed to
prospective purchasers who are U.S. residents, and the Company
disclaims any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to
any matters that may affect the purchase, holding or receipt of
payments of principal (and premium, if any) and any interest with
respect to the Notes. Such persons should consult their own financial
and legal advisors with regard to such matters.
The Notes will be governed by and construed in accordance with
the laws of the State of New York. If an action based on the Notes
were commenced in a court in the United States, it is likely that such
court would grant judgment relating to the Notes only in U.S. dollars.
It is not clear, however, whether in granting such judgment, the rate
of conversion into U.S. dollars would be determined with reference to
the date of default, the date judgment is rendered or some other date.
New York statutory law provides, however, that a court shall render a
judgment or decree in the foreign currency of the underlying
obligation and that the judgment or decree shall be converted into
U.S. dollars at the exchange rate prevailing on the date of entry of
the judgment.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes certain U.S. federal
income tax aspects of the acquisition, ownership and disposition of
the Notes. This discussion is a summary for general information only
and does not consider all aspects of U.S. federal income tax that may
be relevant to the purchase, ownership and disposition of the Notes by
a prospective investor in light of his or her personal circumstances.
This discussion also does not address the federal income tax
consequences of ownership of Notes not held as capital assets within
the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986,
as amended (the "Code"), or the federal income tax consequences to
investors subject to special treatment under the federal income tax
laws, such as dealers in securities or foreign currency, tax-exempt
entities, banks, thrifts, insurance companies, persons that hold the
Notes as part of a "straddle," as part of a "hedge" against currency
risk, or as a part of a "conversion transaction," persons that have a
"functional currency" other than the U.S. dollar, and investors in
pass-through entities. In addition, the discussion is generally limited
to the tax consequences to initial holders. It does not describe any tax
consequences arising out of the tax laws of any state, local or
foreign jurisdiction. This discussion also does not address the
special rules that apply if the holder receives principal in
installment payments or if the Note is called before the maturity
date.
This summary is based upon the Code, existing and proposed
regulations thereunder, and current administrative rulings and court
decisions. All of the foregoing are subject to change, and any such
change could affect the continuing validity of this discussion.
PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR
OWN TAX ADVISORS CONCERNING THE APPLICATION OF FEDERAL INCOME TAX
LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING
JURISDICTION TO THEIR PARTICULAR SITUATIONS. ADDITIONAL FEDERAL
INCOME TAX CONSEQUENCES APPLICABLE TO PARTICULAR NOTES MAY BE SET
FORTH IN THE APPLICABLE PRICING SUPPLEMENT.
Special considerations relevant to the U.S. federal income
taxation of payments on Notes denominated in a Specified Currency
other than the U.S. dollar or indexed to changes in exchange rates
("Foreign Currency Notes") are discussed separately below under the
heading "Foreign Currency Notes." Special considerations relevant to
the U.S. Federal income taxation of payments on Notes, the interest
and/or principal of which is indexed to property other than foreign
currency and which is not a "variable rate debt instrument" (discussed
below under the heading "Stated Interest; Original
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Issue Discount") will be discussed in the applicable Pricing Supplement.
The discussion below assumes that the Notes will be treated as debt for
U.S. federal income tax purposes. However, it is possible that some
contingent payment arrangements would not be treated as debt for U.S.
federal income tax purposes. Holders should consult their own tax
advisors with respect to whether any contingent payment obligations
are debt.
U.S. HOLDERS
The following discussion is limited to the U.S. federal income
tax consequences relevant to a holder of a note that is (i) a citizen
or resident of the United States, (ii) a corporation organized under
the laws of the United States or any political subdivision thereof or
therein, or (iii) an estate or trust, the income of which is subject
to U.S. federal income tax regardless of the source (a "U.S. Holder").
Certain aspects of U.S. federal income tax relevant to a holder other
than a U.S. Holder (a "Non-U.S. Holder") are discussed separately
below.
STATED INTEREST; ORIGINAL ISSUE DISCOUNT
Except as set forth below, interest on a Note will be taxable to
a U.S. Holder as ordinary interest income at the time it accrues or is
received in accordance with such holder's method of accounting for tax
purposes. U.S. Holders of Notes that bear original issue discount
("OID") generally will be subject to the special tax accounting rules
for original issue discount obligations. U.S. Holders of Notes that
bear OID and that mature more than one year from the date of issuance
will generally be required to include OID in income as it accrues in
advance of the receipt of cash attributable to such income, whether
such Holder uses the cash or accrual method of accounting.
On February 2, 1994, the Internal Revenue Service (the "Service")
issued final regulations (the "OID Regulations") concerning the
federal income tax treatment of debt instruments issued with OID. In
general, the OID regulations apply to debt instruments issued on or
after April 4, 1994. Special rules for computing OID or a "variable rate
debt instrument" are considered below under the heading "Variable Rate
Debt Instrument."
The amount of OID, if any, on a Note is the excess of its "stated
redemption price at maturity" over its "issue price," subject to a
statutory de minimis exception. For this purpose, de minimis OID is
OID that is less than 1/4 of 1 percent of the stated redemption
price at maturity multiplied by the number of complete years to its
maturity from the issue date.
Generally, the issue price of a Note will be the initial offering
price to the public. A U.S. Holder may elect in certain circumstances
to decrease the issue price by an amount equal to the portion of the
initial purchase price of the Note equal to pre-issuance accrued
interest.
A Note's stated redemption price at maturity includes all
payments required to be made over the term of the Note other than the
payment of "qualified stated interest," which is defined as interest
that is unconditionally payable in cash or property (other than debt
instruments of the Issuer) at least annually at a single fixed rate,
or in the circumstances described below, a floating rate or objective
rate on a variable rate note. If a debt instrument provides for
alternate payment schedules upon the occurrence of one or more
contingencies, the determination of whether a debt instrument provides
for qualified stated interest is made by analyzing each alternative
payment schedule (including the stated payment schedule) as if it were
the debt instrument's sole payment schedule. The debt instrument will
be considered to provide for qualified stated interest to the extent
of the lowest fixed rate at which qualified interest would be payable
under any payment schedule.
Interest is considered unconditionally payable only if late
payment (other than late payment within a reasonable grace period) or
nonpayment is expected to be penalized or reasonable remedies exist to
compel payment. Interest is payable at a single fixed rate only if
the rate appropriately takes into account the length of the interval
between stated interest payments. Thus, if the interval between
payments varies during the term of the instrument, the value of the
fixed rate on which payment is based
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generally must be adjusted to reflect a compounding assumption consistent
with the length of the interval preceding the payment.
A U.S. Holder (whether on the cash or accrual method of
accounting) must include in income for the taxable year the sum of the
daily portions of OID for each day of the taxable year on which the
U.S. Holder held the Note with an original maturity of more than one
year. The daily portions of OID are determined by determining the OID
attributable to each accrual period and allocating a ratable portion
of such amount to each day in the accrual period. The accrual period
may be of any length and may vary in length over the term of the Note,
provided that each accrual period is no longer than one year and each
scheduled payment of principal and interest occurs on the final day of
an accrual period or on the first day of an accrual period. In
general, OID allocable to an accrual period equals the product of the
(i) the adjusted issue price at the beginning of the accrual period
(i.e., the original issue price plus previously accrued OID minus
previous payments other than payments of qualified stated interest)
multiplied by the original yield to maturity of the Note (determined
on the basis of compounding at the end of each accrual period) minus
(ii) the amount of qualified stated interest allocable to the accrual
period.
The OID Regulations provide special rules for determining the
amount of OID allocable to a period when there is unpaid qualified
stated interest, for short initial accrual periods and final accrual
periods, and for determining the yield to maturity for debt
instruments subject to certain contingencies as to the timing of
payments, debt instruments that provide for options to accelerate or
defer any payments, and debt instruments with indefinite maturities.
Under the OID Regulations, options to convert debt into stock of the
issuer or into stock or debt of certain related parties or to cash or
other property in an amount equal to the approximate value of such
stock or debt are disregarded in determining OID. Under the Code and
the OID Regulations, U.S. Holders generally will have to include in
income increasingly greater amounts of OID in successive accrual
periods.
VARIABLE RATE NOTES
The OID Regulations contain special rules for determining the
accrual of OID and the amount of qualified stated interest on a
"variable rate debt instrument." For purposes of these regulations, a
variable rate debt instrument is a debt instrument that: (1) has an
issue price that does not exceed total noncontingent principal
payments by more than a specified amount; (2) provides for stated
interest (compounded or paid at least annually) at (a) one or more
"qualified floating rates;" (b) a single fixed rate and one or more
qualified floating rates, (c) a single "objective rate," or (d) a
single fixed rate and a single objective rate that is a "qualified
inverse floating rate;" and (3) provides that a qualified floating
rate or objective rate in effect at any time during the term of the
instrument is set at a current value of that rate.
For purposes of determining if a Note is a variable rate debt
instrument, a floating rate is a "qualified floating rate," if
variation in the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the
currency in which the debt instrument is denominated. A multiple of a
qualified floating rate is generally not a qualified floating rate,
unless it is either (a) a product of a qualified rate times a fixed
multiple greater than zero but not more than 1.35 or (b) a multiple of
the type described in (a) increased or decreased by a fixed rate. If
a debt instrument provides for two or more qualified floating rates
that can reasonably be expected to have approximately the same value
throughout the term of the instrument, the qualified rates will be
considered a single qualified rate. Two or more rates will be
considered to have approximately the same value throughout the term of
the instrument, if the values of the rates on the date of issuance are
within 25 basis points of each other.
An "objective rate" is a rate, other than a qualified floating
rate, that is determined using a single fixed formula and that is
based on (i) the yield or changes in the price of property that is
actively traded within the meaning of section 1092 of the Code (other
than stock or debt of the issuer or a related party) or an index of
prices of such property, (ii) one or more qualified floating rates,
(iii) one or more rates if
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each rate would be a qualified floating rate for a debt instrument
denominated in a currency other than the currency in which the debt
instrument is denominated, or (iv) some combination of (i), (ii), or
(iii). In addition, the IRS may designate other variable rates as
objective rates. Restrictions on a minimum interest rate ("floor")
or maximum interest rate ("cap"), or the amount of increase or decrease
in the stated interest rate ("governor") generally will not result in
the rate failing to be treated as a qualified floating rate or an
objective rate if the restriction is fixed throughout the term of the
instrument and the cap, floor, or governor is "at the money" as of the
date of issuance. However, a rate is not an objective rate if it results
in an average value of a rate of interest over the first half of the
instrument's term that is significantly less or more, than the average
value of the rate during the final half of the instrument's term, i.e.,
if there is a significant front loading or back loading of interest.
A "qualified inverse floating rate" is a rate that is equal to a
fixed rate minus a qualified floating rate if variations in the rate
can reasonably be expected to inversely reflect contemporaneous
variations in the cost of newly borrowed funds.
Under the OID Regulations, a debt instrument providing for a
qualified floating rate or qualified inverse floating rate is converted
to an equivalent fixed rate debt instrument by assuming that each
qualified floating rate, or qualified inverse floating rate,
respectively, will remain at its value as of the issue date. A debt
instrument providing for an objective rate is converted to an equivalent
fixed rate debt instrument by assuming that the objective rate will equal
a fixed rate that reflects the yield that is reasonably expected for the
instrument. The rules applicable to fixed rate debt instruments are then
applied to determine the OID accruals and the qualified stated interest
payments on the equivalent fixed rate debt instruments.
ELECTIONS TO TREAT ALL INTEREST AS OID
Under the OID Regulations, a U.S. Holder may elect for a Note
acquired after April 4, 1994 to account for all income on a Note
(other than foreign currency gain or loss), including stated interest,
OID, de minimis OID, market discount, de minimis market discount,
amortizable bond premium, or acquisition premium in the same manner as
OID. If this election is made, the U.S. Holder may be subject to the
conformity requirements of section 171(c) or 1278(b), respectively,
which may require the amortization of bond premium and the accrual of
market discount on other debt instruments held by the same U.S.
Holder.
SHORT-TERM NOTES
In general, an individual or other cash method U.S. Holder of a
Note that has an original maturity of not more than one year from the
date of issuance (a "short-term Note") is not required to accrue OID
unless he or she elects to do so). Such an election applies to all
short-term Notes acquired by the U.S. Holders during the first taxable
year for which the election is made, and all subsequent taxable years
of the U.S. Holder unless the Service consents to a revocation. U.S.
Holders who report income for federal income tax purposes on the
accrual method and certain other U.S. Holders and electing cash method
U.S. Holders, are required to include OID on such short-term Notes on
a straight-line basis, unless an irrevocable election with respect to
any short-term Note is made to accrue the OID according to a constant
interest rate based on daily compounding. In the case of a U.S.
Holder who is not required, and does not elect, to include OID in
income currently, any gain realized on the sale, exchange or
retirement of the short-term Note will be ordinary income to the
extent of the OID accrued on a straight-line basis (or, if elected,
according to the constant yield method based on daily compounding)
through the date of sale, exchange or retirement. In addition, such
non-electing U.S. Holders who are not subject to the current inclusion
requirement described above will be required to defer deductions for
any interest paid on indebtedness incurred or continued to purchase or
carry such short-term Notes.
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MARKET DISCOUNT
If a Note (other than a short-term Note described above) is
acquired at a "market discount," some or all of any gain realized upon
a sale or other disposition, or payment at maturity, or some or all of
a partial principal payment of such Note may be treated as ordinary
income, as described below. For this purpose, "market discount" is
the excess (if any) of the stated redemption price at maturity over
the purchase price, subject to a statutory de minimis exception. In
the case of a Note issued with OID, in lieu of using stated redemption
price, revised issue price is used. Unless a U.S. Holder has elected
to include the market discount in income as it accrues, any gain
realized on any subsequent disposition of such Note (other than in
connection with certain nonrecognition transactions) or payment at
maturity, or some or all of any partial principal payment with respect
to such Note will be treated as ordinary income to the extent of the
market discount that is treated as having accrued during the period
such Note was held.
The amount of market discount treated as having accrued will be
determined either (i) on a ratable basis by multiplying the market
discount times a fraction, the numerator of which is the number of
days the Note was held by the U.S. Holder and the denominator of which
is the total number of days after the date such U.S. Holder acquired
the Note up to and including the date of its maturity, or (ii) if the
U.S. Holder so elects, on a constant interest rate method. A U.S.
Holder may make that election with respect to any Note, and such
election is irrevocable.
In lieu of recharacterizing gain upon disposition as ordinary
income to the extent of accrued market discount income at the time of
disposition, a U.S. Holder of such Note acquired at a market discount
may elect to include market discount in income currently, through the
use of either the ratable inclusion method or the elective constant
interest method. Once made, the election to include market discount
in income currently applies to all Notes and other obligations of the
U.S. Holder that are purchased at a market discount during the taxable
year for which the election is made, and all subsequent taxable years
of the U.S. Holder, unless the Service consents to a revocation of the
election. If an election is made to include market discount in income
currently, the basis of the Note in the hands of the U.S. Holder will
be increased by the market discount thereon as it is includible in
income.
If the U.S. Holder makes the election to treat as OID all
interest on a debt instrument that has market discount, the U.S.
Holder is deemed to have made the election to accrue currently market
discount on all other debt instruments with market discount. In
addition, if the U.S. Holder has previously made the election to
accrue market discount currently, the conformity requirements of that
election are met for debt instruments with respect to which the U.S.
Holder elects to treat all interest as OID.
Unless a U.S. Holder who acquires a Note at a market discount
elects to include market discount in income currently, such U.S.
Holder may be required to defer a portion of any interest expense that
may otherwise be deductible on any indebtedness incurred or maintained
to purchase or carry such Note.
PREMIUM
If a subsequent U.S. Holder purchases a Note issued with OID at
an "acquisition premium," the U.S. Holder reduces the amount of OID
includible in income in each taxable year by that portion of
acquisition premium allocable to that year. A Note is purchased at an
acquisition premium if, immediately after the purchase, the
purchaser's adjusted basis in the Note is greater than the adjusted
issue price but not greater than all amounts payable on the instrument
after the purchase date (other than qualified stated interest) (i.e.,
the Note is not purchased at a "bond premium"). In general, the
reduction in OID allocable to acquisition premium is determined by
multiplying the daily portion of OID by a fraction the numerator of
which is the excess of the U.S. Holder's adjusted basis in the Note
immediately after the acquisition over the adjusted issue price of the
Note and the denominator of
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which is the excess of the sum of all amounts payable on the Note after
the purchase date, other than payments of qualified stated interest, over
the Note's adjusted issue price. Rather than apply the above fraction,
the U.S. Holder who, as discussed above, elects to treat all interest as
OID would treat the purchase at an acquisition premium as a purchase at
original issuance and calculate OID accruals on a constant yield to
maturity basis.
If a U.S. Holder purchases a Note and immediately, after the
purchase the adjusted basis of the Note exceeds the sum of all amounts
payable on the instrument after the purchase date, other than
qualified stated interest, the Note has "bond premium." A U.S. Holder
that purchases a Note at a bond premium is not required to include OID
in income. In addition, a U.S. Holder may elect to amortize such bond
premium over the remaining term of such Note (or, in certain
circumstances, until an earlier call date).
If bond premium is amortized, the amount of interest that must be
included in the U.S. Holder's income for each period ending on an
interest payment date or stated maturity, as the case may be, will be
reduced by the portion of premium allocable to such period based on
the Note's yield to maturity. If such an election to amortize bond
premium is not made, a U.S. Holder must include the full amount of
each interest payment in income in accordance with its regular method
of accounting and will receive a tax benefit from the premium only in
computing its gain or loss upon the sale or other disposition or
payment of the principal amount of the Note.
An election to amortize premium will apply to amortizable bond
premium on all Notes and other bonds, the interest on which is
includible in the U.S. Holder's gross income, held at the beginning of
the U.S. Holder's first taxable year to which the election applies or
thereafter acquired, and may be revoked only with the consent of the
Service. The election to treat all interest, including for this
purpose amortizable premium, as OID is deemed to be an election to
amortize premium under section 171(c) of the Code for purposes of the
conformity requirements of that section. In addition, if the U.S.
Holder has already made an election to amortize premium, the
conformity requirements will be deemed satisfied with respect to any
Notes for which the U.S. Holder makes an election to treat all
interest as OID.
SALE, EXCHANGE, REDEMPTION OR REPAYMENT OF THE NOTES
Upon the disposition of a Note by sale, exchange, redemption, or
repayment, the U.S. Holder will generally recognize gain or loss equal
to the difference between (i) the amount realized on the disposition
(other than amounts attributable to accrued interest) and (ii) the
U.S. Holder's tax basis in the Note. A U.S. Holder's tax basis in a
Note generally will equal the cost of the Note (net of accrued
interest) to the U.S. Holder increased by amounts includible in income
as OID or market discount (if the holder elects to include market
discount on a current basis) and reduced by any amortized premium and
any payments other than payments of qualified stated interest (or
fixed periodic interest) made on such Note.
Because the Note is held as a capital asset, such gain or loss
(except to the extent that the market discount rules or rules relating
to certain short-term OID notes otherwise provide) will generally
constitute capital gain or loss and will be long-term capital gain or
loss if the U.S. Holder has held such Note for longer than one year.
In certain circumstances, if an Issuer were found to have an
intention, at the time its debt obligations were issued, to call such
obligations before maturity, gain would be ordinary income to the
extent of any unamortized OID. The OID Regulations clarify that this
rule will not apply to publicly offered debt instruments.
FOREIGN CURRENCY NOTES
The following discussion applies to Foreign Currency Notes if
such Notes are not denominated in or indexed to a currency that is
considered a "hyperinflationary" currency. Special U.S. tax
considerations apply to obligations denominated in or indexed to a
hyperinflationary currency.
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In general, a U.S. Holder that uses the cash method of accounting
and holds a Foreign Currency Note will be required to include in
income the dollar value of the amount of interest income received
whether or not the payment is received in dollars or converted into
dollars. The dollar value of the amount of interest received is the
amount of foreign currency interest paid translated at the spot rate
on the date of receipt. The U.S. Holder will not have exchange gain
or loss on the interest payment but may have exchange gain or loss
when it disposes of any foreign currency received.
A U.S. Holder on the accrual method of accounting is generally
required to include in income the dollar value of interest accrued
during the accrual period. Accrual basis U.S. Holders may determine
the amount of income recognized with respect to such interest in
accordance with either of two methods. Under the first method, the
dollar value of accrued interest is translated at the average rate for
the interest accrual period (or, with respect to an accrual period
that spans two taxable years, the partial period within the taxable
year). For this purpose, the average rate is the simple average of
spot rates of exchange for each business day of such period or other
average exchange rate for the period reasonably derived and
consistently applied by the U.S. Holder. Under the second method, a
U.S. Holder can elect to accrue interest at the spot rate on the last
day of an accrual period (in the case of a partial accrual period, the
last date of the taxable year) or if the last day of an accrual period
is within five business days of the receipt, the spot rate on the date of
receipt. Any such election will apply to all debt instruments held by
the U.S. Holder at the beginning of the first taxable year to which
the election applies or thereafter acquired and will be irrevocable
without the consent of the Service. An accrual basis U.S. Holder will
recognize exchange gain or loss, as the case may be, on the receipt of
a foreign currency interest payment if the exchange rate on the date
payment is received differs from the rate applicable to the previous
accrual of interest income. The foreign currency gain or loss will
generally be treated as U.S. source ordinary income or loss.
Original issue discount on a Note denominated in a foreign
currency is determined in foreign currency and is translated into
dollars in the same manner that an accrual basis U.S. Holder accrues
stated interest. Exchange gain or loss will be determined when OID is
considered paid to the extent the exchange rate on the date of payment
differs from the exchange rate at which the OID was accrued.
The amount of market discount on a Foreign Currency Note
includible in income will generally be determined by computing the
market discount in foreign currency and translating that amount into
dollars on the spot rate on the date the Foreign Currency Note is
retired or otherwise disposed of. If the U.S. Holder accrues market
discount currently, the amount of market discount which accrues during
any accrual period is determined in the foreign currency and
translated into dollars on the basis of the average exchange rate in
effect during the accrual period. Exchange gain or loss may be
recognized to the extent that the rate of exchange on the date of the
retirement or disposition of the Note differs from the rate of
exchange at which the market discount was accrued.
Amortizable premium on a Foreign Currency Note is also computed
in units of foreign currency and, if the U.S. Holder elects, will
reduce interest income in units of foreign currency. At the time
amortized bond premium offsets interest income, exchange gain or loss
with respect to amortized bond premium is recognized measured by the
difference between exchange rates at that time and at the time of the
acquisition of the Note.
In the case of a Note denominated in foreign currency, the cost
of the Note to the U.S. Holder will be the dollar value of the foreign
currency purchase price translated at the spot rate for the date of
purchase (or, in some cases, the settlement date). The conversion of
dollars to a foreign currency and the immediate use of that currency
to purchase a Foreign Currency Note generally will not result in a
taxable gain or loss for a U.S. Holder.
With respect to the sale, exchange, retirement or repayment of a
Note denominated in a foreign currency, the foreign currency amount
realized will be considered to be the payment of accrued but unpaid
interest (on which exchange gain or loss is recognized as described
above), accrued but unpaid
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original issue discount (on which exchange gain or loss is recognized as
described above), and finally as a payment of principal. With respect to
such payment of principal, (i) gain or loss is computed in foreign
currency and translated on the date of retirement or disposition and (ii)
exchange gain or loss is separately computed on the foreign currency
amount of principal (reduced by amortizable premium) that is repaid to
the extent that the rate of exchange on the date of retirement or
disposition differs from the rate of exchange on the date the Note was
acquired, or deemed acquired. Exchange gain or loss computed on accrued
interest, OID, market discount and principal shall be recognized, however,
only to the extent of total gain or loss on the transaction. For purposes
of determining the total gain or loss on the transaction, a U.S. Holder's
tax basis in the Note generally will equal the dollar cost of the Note
(as determined above) increased by the dollar amounts includible in
income as accrued interest, OID, or market discount (if the Holder
elects to include such market discount on a current basis) and reduced
by the dollar amount of amortized premium and of any payments other
than payments of qualified stated interest. A U.S. Holder will have a
tax basis in any foreign currency received on the sale, exchange or
retirement of a Note equal to the dollar value of such currency on the
date of receipt.
INDEXED NOTES
Under draft proposed regulations that were released by the
Service but were withdrawn pending review (the "draft regulations"),
certain debt instruments calling for one or more contingent payments
are subject to the special rules discussed below. It is not clear to
what extent such rules will apply to the Notes, because they are
neither proposed nor final and as drafted would be effective only with
respect to obligations that are issued on or after the date that is 60
days after the regulations are finalized. In addition, the draft
regulations are subject to change and are substantially different from
existing proposed regulations. The draft regulations, however,
represent the most recent indication of the IRS's view of the
treatment of certain contingent payment debt obligations. Investors
should be aware that under the existing proposed regulations, which
are proposed to be retroactive, Indexed Notes would be treated in a
different manner than as described below and such treatment may be
adverse to a particular U.S. Holder.
Under the draft regulations, the rules for contingent payment
debt obligations do not apply to a Note that is variable rate debt
instrument, a Note that is a debt instrument that is contingent only
as to the timing of payments, or a Foreign Currency Note subject to
the rules of section 988 of the Code (except to the extent provided in
regulations not yet issued). 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.
In general, under the draft regulations, the treatment of
contingent payment obligations not subject to the proposed hedging
regulations 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" is any payment: (1) that is based on
the price or yield of personal property that is actively traded
(within the meaning of section 1092(d)(1) of the Code) or an index of
the prices or yields of such property, (2) that is based on one or
more qualified floating rates, or (3) the variations on which can be
substantially offset through the use of personal property that is
actively traded within the meaning of section 1092(d)(1). The
Company's determination of whether the rules for market-based
contingent payments apply to an Indexed Note 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 a Note provides for market-based contingent payments, the
draft regulations provide five alternative methods for accruing
interest on the Note. Two of the methods are available generally for
any Indexed Note with certain additional requirements. Although
several alternative methods are provided, all of the methods require
that interest accrue on the basis of a reasonable estimate of the
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performance of the contingencies each year. 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 Note's acquisition. However, a U.S. Holder that is a
natural person and that acquires a Note other than in connection with
his or her trade or business can choose a method on his or her 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 of debt instruments 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 Note in all
subsequent years.
If an Indexed Note provides for payments that are not market-
based contingent payments, the Indexed Note will be separated into its
contingent and noncontingent components. Except to the extent
described below (and except to the extent a special rule for small
issues applies), the noncontingent payments are treated as a separate
debt instrument, the issue price of which is the present value of all
noncontingent payments determined using a discount rate that is the
greater of the applicable federal rate (the "AFR") or the yield to
maturity disregarding contingent payments. Interest accrues with
respect to the noncontingent component in the same manner as OID would
accrue. If a debt instrument provides for stated interest (compounded
or fixed at least annually) at a single qualified floating rate or a
single objective rate over its entire term and also provides for
additional contingent payments, any noncontingent payments and stated
interest payments at a qualified floating rate or objective rate are
treated as a separate debt instrument (the variable interest
component) the issue price of which is determined under the rules for
variable rate instruments subject to section 1274 (relating generally
to debt instruments issued in exchange for property). Interest
accrues in the same manner as OID would accrue if the component were a
variable rate instrument.
Contingent payments that are not market-based are generally
treated as a separate debt instrument, the issue price of which is the
price of the Note minus the issue price determined for the
noncontingent component, or the variable interest component, as
determined above. In general, interest accrues on the contingent
component in the same manner as on the noncontingent component but is
taken into account only when the amount of the contingent payment is
fixed. Any contingent payment that is fixed prior to maturity is
considered first to be a payment of accrued but unpaid interest. Any
amount of such contingent payment in excess of accrued but unpaid
interest is first treated as a reduction of the issue price of the
instrument and then as interest. Any contingent payment that is fixed
at maturity is first treated as a return of basis and then as a
payment of interest. If at maturity the holder's adjusted basis in
the overall instrument exceeds the amount of payment received at
maturity, the holder realizes a loss. The loss is ordinary to the
extent that it does not exceed the issue price originally allocated to
the contingent component and any interest accrued and recognized
thereon.
For any Note to which the draft regulations apply, any gain on
the sale, exchange or retirement of a contingent interest obligation
is treated as interest income. Special rules apply if the payment of
contingent amounts on a contingent payment obligation is deferred more
than six months after such payment becomes fixed.
EXTENDIBLE NOTES
A Note may provide that the Company has the option to extend the
maturity of a Note on its maturity date and, in connection therewith,
to reset the interest rate or spread and establish new interest reset
dates, new interest payment dates and new provisions for redemption or
optional repayment.
Although there is no specific authority on this issue dealing
with instruments substantially similar to the Notes, for federal
income tax purposes, the extension of the maturity date of an
outstanding Note may be considered to be an exchange on the maturity
date of the original Note (the "Original Note") for a new Note (the
"New Note"), in what generally will be treated as a taxable sale,
exchange or
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redemption, as described above. Alternatively, the extension might
be viewed as a repayment of the Original Note for cash equal to the
principal amount of the Original Note, and a purchase of the New Note
for cash in such amount.
The consequences to the U.S. Holder of treating the extension of
a maturity date or a change in the terms of the Notes as a sale or
exchange of the Original Note for a New Note will depend upon the
facts and circumstances, including, for example, whether the Note is a
"security" for tax purposes, whether the Note is publicly traded,
whether section 368(a)(1)(E) of the Code applies to the exchange, and
whether the fair market value of the Note is less than par (or, if
issued at OID, less than the adjusted issue price.)
The Service has issued proposed regulations that are intended to
be effective with respect to modifications made 30 days or more after
final regulations are published. These proposed regulations provide
guidance as to when a significant modification of a debt instrument is
considered to be a deemed exchange. These proposed regulations have
not become final and may be changed. It is not certain to what extent
they will be applicable to the Notes.
Under the proposed regulations, a "modification" is any change in
any legal right of the issuer or a holder of a debt instrument that
does not occur by operation of the original terms of the instrument.
An alteration that occurs through one party's exercise or waiver of a
right under the instrument is by operation of the original terms and,
therefore, is not a modification, provided that the exercise or the
waiver is unilateral and the alteration does not result in an
instrument that is not debt for tax purposes. An exercise of a right
to alter the terms of the instrument is not unilateral if it: (1)
creates a right in the other party to alter or terminate the
instrument, or to put the instrument to a third party, (2) requires
consent of the other party, unless that consent may not be
unreasonably withheld, or (3) requires consideration other than an
amount fixed at the issue date. Therefore, under the proposed
regulations, the Company's exercise of a right provided for by the
original terms of the Note to extend the Maturity Date or change the
terms of the Note should not result in a "modification" if the
Company's exercise of the right is "unilateral" within the meaning of
the proposed regulations.
The proposed regulations also provide rules for purposes of
determining when a modification is significant. The regulations
provide that a change in the annual rate of current interest payments
is a significant modification if the rate varies from the original
rate by more than 1/4 of one percent or if the annual yield varies
more than 1/4 of one percent. In the case of variable rate
instruments, a change in the index formula or other mechanism that is
used to determine the interest rate is a significant change if the
change can be expected to affect the annual yield on an instrument by
more than 1/4 of one percent. An extension of final maturity is a
significant modification if it exceeds the lesser of five years or 50%
of the original term of the instrument.
BACKUP WITHHOLDING
A U.S. Holder of a Note may be subject to U.S. backup withholding
at the rate of 31% with respect to interest paid on the Note, unless
such U.S. Holder (i) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact or (ii)
provides a correct taxpayer identification number, certifies as to no
loss of exemption from backup withholding and otherwise complies with
the applicable requirements of the backup withholding rules. U.S.
Holders of Notes should consult their tax advisors as to their
qualification for exemption from U.S. backup withholding and the
procedure for obtaining such an exemption. Any amount paid as backup
withholding will be creditable against the U.S. Holder's federal
income tax liability.
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NON-U.S. HOLDERS
UNITED STATES INCOME AND ESTATE TAX CONSEQUENCES
The following is a summary of the United States federal income
tax consequences of the ownership and disposition of the Notes by Non-
U.S. Holders. This discussion does not deal with all aspects of
United States federal income and estate taxation that may be relevant
to the purchase, ownership or disposition of the Notes by such Non-
U.S. Holder in light of his personal circumstances. For example,
persons who are partners in foreign partnerships and beneficiaries of
foreign trusts or estates who are subject to United States federal
income tax because of their own status, such as United States residents
or foreign persons engaged in a trade or business in the United States,
may be subject to United States federal income tax even though the
entity is not subject to income tax on the disposition of its Note.
For purposes of the following discussion, interest (including
OID) and gain on the sale, exchange or other disposition of the Note
will be considered "U.S. trade or business income" if such income or
gain is (i) effectively connected with the conduct of a U.S. trade or
business or (ii) in the case of a treaty resident, attributable to a
permanent establishment (or to a fixed base) in the United States.
INTEREST AND ORIGINAL ISSUE DISCOUNT
Generally, any interest or OID paid to a Non-U.S. Holder of a
Note that is not "U.S. trade or business income" will not be subject
to United States tax if the interest (or OID) qualifies as "portfolio
interest." Generally, interest on registered Notes will qualify as
portfolio interest if (i) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total voting power of all voting
stock of the Company and is not a controlled foreign corporation with
respect to which the Company is a "related person" within the meaning
of the Code, and (ii) the beneficial owner, under penalty of perjury,
certifies that the beneficial owner is not a United States person and
such certificate provides the beneficial owner's name and address.
The gross amount of payments to a Non-U.S. Holder of interest or
OID that do not qualify for the portfolio interest exception and that
are not U.S. trade or business income will be subject to U.S. federal
income tax at the rate of 30% unless a U.S. income tax treaty applies
to reduce or eliminate withholding. U.S. trade or business income
will be taxed at regular U.S. rates rather than the 30% gross rate.
To claim the benefit of a tax treaty or to claim exemption from
withholding because the income is U.S. trade or business income, the
Non-U.S. Holder must provide a properly executed Form 1001 or 4224, as
applicable, prior to the payment of interest or OID. The Forms 1001
and 4224 must be periodically updated.
INDEXED NOTES
The Service has stated that it is considering various issues
relating to the treatment of Non-U.S. Holders of contingent payment
debt obligations, including "the possibility of tax avoidance that may
arise when a contingent payment debt obligation is structured with
payments that approximate the yield on an equity security or an index
and the proper characterization of gain recognized by a foreign holder
on the disposition of a debt instrument in certain cases" (including
coordination with the rules for taxation of foreign investment in U.S.
real property). Subject to certain exceptions, recently enacted
legislation provides that the portfolio interest exception from
withholding tax does not apply to certain payments of contingent
interest if: (1) the amount of interest is determined by reference to
(i) receipts, sales or other cash flows of the Company or a related
person, (ii) any income or profits of the Company or a related person,
(iii) any change in the value of any property of the Company or a
related person, or (iv) any dividend, partnership distributions, or
similar payments made by the Company or a related person; or (2) the
interest is identified in regulations not yet issued as contingent
interest for which the portfolio interest exception should be denied.
Gain from the sale of certain contingent payment debt obligations is
also treated as interest under the draft regulations.
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SALE OF NOTES
Except as described below and subject to the discussion
concerning backup withholding and Indexed Notes, any gain realized by
a Non-U.S. Holder on the sale or exchange of a Note generally will not
be subject to U.S. federal income tax, unless (i) such gain is U.S.
trade or business income, (ii) subject to certain exceptions,
the Non-U.S. Holder is an individual who holds the Note as a capital
asset and is present in the United States for 183 days or more in the
taxable year of the disposition, or (iii) the Non-U.S. Holder is
subject to tax pursuant to the provisions of U.S. tax law applicable
to certain U.S. expatriates.
FEDERAL ESTATE TAX
Except with respect to Notes that bear contingent interest that
is not eligible for the portfolio interest exception, Notes held (or
treated as held) by an individual who is a Non-U.S. Holder at the time
of his death will not be subject to United States federal estate tax
provided that the individual does not actually or constructively own
10% or more of the total voting power of all voting stock of the
Company.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Service and to each Non-
U.S. Holder any interest and original issue discount that is subject
to withholding or that is exempt from U.S. withholding tax pursuant to
a tax treaty or the portfolio interest exception. Copies of these
information returns may also be made available under the provisions of
a specific treaty or agreement to the tax authorities of the country
in which the Non-U.S. Holder resides.
In the case of payments of principal on the Notes by the Company
to a Non-U.S. Holder, the regulations provide that 31% backup
withholding and information reporting will not apply to payments if
the Holder certifies to its non-U.S. status under penalties of perjury
or otherwise establishes an exemption (provided that neither the
Company nor its paying agent has actual knowledge that the holder is a
United States person or that the conditions of any other exemption are
not, in fact, satisfied).
The payment of the proceeds from the disposition of Notes to or
through the U.S. office of any broker, U.S. or foreign, will be
subject to information reporting and possible backup withholding
unless the owner certifies its non-U.S. status under penalty of
perjury or otherwise establishes an exemption, provided that the
broker does not have actual knowledge that the Holder is a U.S. person
or that the conditions of any other exemption are not, in fact,
satisfied. The payment of the proceeds from the disposition of a Note
to or through a non-U.S. office of a non-U.S. broker will not be
subject to information reporting or backup withholding if the broker
is not a U.S. related person. For this purpose, a "U.S. related
person" is (i) a "controlled foreign corporation" for United States
federal income tax purposes, or (ii) a foreign person 50% 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 (or for such
part of the period that the broker has been in existence) is derived
from activities that are effectively connected with the conduct of a
United States trade or business.
In the case of the payment of proceeds from the disposition of
Notes through a non-U.S. office of a broker that is either a U.S.
person or a "U.S. related person," regulations require information
reporting on the payment, unless the broker has documentary evidence
in its files that the owner is a Non-U.S. Holder and the broker has no
knowledge to the contrary. Backup withholding will not apply to
payments made through foreign offices of a broker that is a U.S.
person or a U.S. related person (absent actual knowledge that the
payee is a U.S. person).
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Any amounts withheld under the backup withholding rules from a
payment to a Non-U.S. Holder will be allowed as a refund or a credit
against such Non-U.S. Holder's United States federal income tax
liability, provided that certain required information is furnished to
the Internal Revenue Service.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company
through the Agents, each of which has agreed to use its best efforts
to solicit purchases of the Notes. The Company also may sell Notes to
any Agent as principal at a discount to be agreed upon at the time of
sale, for resale to one or more investors and other purchasers at
varying prices related to prevailing market prices at the time of such
resale, to be determined by such Agent. The Company reserves the
right to sell Notes directly on its own behalf. The Company will have
the sole right to accept offers to purchase Notes and may reject any
proposed purchase of Notes in whole or in part. Each Agent will have
the right, in its discretion reasonably exercised, to reject any offer
to purchase Notes received by it in whole or in part. The Company
will pay each Agent a commission, in the form of a discount, ranging
from .125% to .750% of the Price to Public of Notes, depending upon
maturity, sold through such Agent. Any Agent may agree with the
Company, in respect of the sale of a Note, to accept a commission
other than one based upon maturity, in which case such commission will
be set forth in the Pricing Supplement applicable to such Note;
provided, however, that such commission shall range from .025% to
.750%.
Unless otherwise indicated in the applicable Pricing Supplement,
payment of the purchase price of Notes will be required to be made in
funds immediately available in the City of New York.
The Agents may be deemed to be "underwriters" within the meaning
of the Securities Act of 1933, as amended (the "Securities Act"). The
Company has agreed to indemnify the Agents against or to make
contributions relating to certain civil liabilities, including
liabilities under the Securities Act. The Company has agreed to
reimburse the Agents for certain expenses.
Each distribution of Notes will conform to the requirements set
forth in the applicable sections of Schedule E of the By-laws of the
NASD.
LEGAL OPINIONS
The validity of the Notes will be passed upon for the Company by
Weil, Gotshal & Manges (a partnership including professional
corporations), New York, New York, and for the Underwriter by Andrews
& Kurth L.L.P., New York, New York.
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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.
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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>
<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.
<PAGE>
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.
-------------------------
<PAGE>
<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.
<PAGE>
<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 outstand-
ing.
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.
<PAGE>
<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<PAGE>
<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<PAGE>
<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.
<PAGE>
<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<PAGE>
<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.
<PAGE>
<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<PAGE>
<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 <PAGE>
<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.
<PAGE>
<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.
<PAGE>
<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.
<PAGE>
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.
<PAGE>
<PAGE>
================================ =============================
NO DEALER, SALESPERSON OR ANY
OTHER PERSON HAS BEEN AUTHORIZED $2,873,608,750
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, ANY THE BEAR STEARNS
PRICING SUPPLEMENT OR THE COMPANIES INC.
PROSPECTUS IN CONNECTION WITH
THE OFFER MADE BY THIS
PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MEDIUM-TERM NOTES, SERIES B
MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE
DELIVERY OF THIS PROSPECTUS
SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR
THEREOF. THIS PROSPECTUS
SUPPLEMENT, ANY PRICING
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 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
-------------------------
PROSPECTUS SUPPLEMENT
PAGE
----
DESCRIPTION OF THE NOTES . S-3
FOREIGN CURRENCY RISKS . . S-18
CERTAIN UNITED STATES
FEDERAL INCOME TAX
CONSIDERATIONS . . . . . S-19
SUPPLEMENTAL PLAN OF
DISTRIBUTION . . . . . . . S-31
LEGAL OPINIONS . . . . . . S-31 BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
PROSPECTUS MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
AVAILABLE INFORMATION . . . 2 INCORPORATED
INCORPORATION OF CERTAIN SALOMON BROTHERS INC.
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 APRIL 8, 1994
ERISA CONSIDERATIONS . . . 14
EXPERTS . . . . . . . . . . 14
VALIDITY OF SECURITIES . . 14
================================ =============================
