THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND IS SUBJECT TO COMPLETION OR
AMENDMENT.
SUBJECT TO COMPLETION, DATED FEBRUARY 8, 1994
PRELIMINARY PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 7, 1994)
6,000,000 SHARES
BEAR STEARNS FINANCE LLC
% EXCHANGEABLE PREFERRED INCOME
CUMULATIVE SHARES ("EPICS"*), SERIES A
(LIQUIDATION PREFERENCE $25 PER SHARE)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
THE BEAR STEARNS COMPANIES INC.
------------------------------
The % Exchangeable Preferred Income Cumulative Shares, Series A (the
"Series A Shares"), offered hereby are being issued by Bear Stearns Finance LLC,
an exempted company with limited duration incorporated under the laws of the
Cayman Islands (the "Company"). All of the Common Shares of the Company are
owned, directly and indirectly, by The Bear Stearns Companies Inc., a Delaware
corporation (the "Guarantor"). The net proceeds from the sale of the Company's
shares, including the Series A Shares, will be loaned by the Company to the
Guarantor in exchange for a note of the Guarantor (the "Loan Note"). Interest
and principal payments on the Loan Note will fund the payment of dividends and
redemption and liquidation distributions on the Series A Shares, which payments
are guaranteed by the Guarantor to the extent described in the accompanying
Prospectus.
Holders of the Series A Shares will be entitled to cumulative cash
dividends, at an annual rate of % of the liquidation preference of $25 per
share, accruing from the date of original issuance and payable monthly in
arrears on the last day of each calendar month, commencing February 28, 1994.
The Series A Shares are redeemable as provided herein at the option of the
Company (with the Guarantor's consent) at any time after February 28, 1999 (or
sooner if the Company or the Guarantor is or would be required to pay, withhold
or deduct certain amounts), and will be redeemed, under certain circumstances,
from the proceeds of any cash prepayment or repayment of the Loan Note, in each
case at a cash redemption price of $25 per share, plus accrued and unpaid
dividends to the redemption date. See "Certain Terms of the Series A
Shares--Optional Redemption."
- ---------------
* An application is being filed by Bear, Stearns & Co. Inc with the United
States Patent and Trademark Office for registration of the EPICS servicemark.
[Continued on page 2]
------------------------
Application has been made to list the Series A Shares on the New York Stock
Exchange (the "NYSE").
------------------------
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 UNDERWRITING PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(4)
<S> <C> <C> <C>
Per Series A Share.................................... $25.00 (3) $25.00
Total(4).............................................. $150,000,000 (3) $150,000,000
</TABLE>
(1) Plus accrued dividends, if any, from the date of issue.
(2) The Company and the Guarantor have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(3) Because the proceeds from the sale of the Series A Shares will be loaned to
the Guarantor, the Guarantor will pay to the Underwriters, as compensation
for their services under the Underwriting Agreement, a commission of $
per Series A Share (or $ in the aggregate). See "Underwriting".
(4) Before deducting expenses payable by the Guarantor, estimated at $ .
------------------------
The Series A Shares are offered by the several Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, subject to
approval of certain legal matters by counsel. The Underwriters reserve the right
to reject orders in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that delivery of the Series A Shares will be made
only in book-entry form through the facilities of The Depository Trust Company
on or about February , 1994.
------------------------
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY SHEARSON INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS FEBRUARY , 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------
[Continued from page 1]
In the event of the liquidation of the Company, holders of Series A Shares
will be entitled to receive for each Series A Preferred Share a liquidation
preference of $25 plus accrued and unpaid dividends to the date of payment,
subject to certain limitations. See "Certain Terms of the Series A
Shares--Liquidation Distribution".
Subject to certain conditions, on any dividend payment date on or after
August 31, 1994, the Guarantor may issue and deliver to the Company, in exchange
for the Loan Note, Depositary Shares representing a new issue of the Guarantor's
% Cumulative Preferred Stock Series D (the "Guarantor Preferred Stock"),
having a liquidation preference of $200 per share and an aggregate fair value,
as determined by the Guarantor's financial advisor (which may be an affiliate of
the Guarantor), equal to the unpaid principal amount of the Loan Note and any
unpaid interest accrued to the date of such exchange. Each Depositary Share will
represent one-eighth of a share of the Guarantor Preferred Stock, will have a
proportionate liquidation preference of $25, and will entitle the holder to all
proportional rights and preferences of the Guarantor Preferred Stock. In the
event of such exchange, the Company shall be obligated to redeem the Series A
Shares, as an entirety, solely in exchange for Depositary Shares at a rate of
one Depositary Share for each outstanding Series A Share (or, under certain
circumstances, 1.2 Depositary Shares for each Series A Share). See "Certain
Terms of the Series A Shares--Mandatory Redemption" and "Certain Terms of the
Depositary Shares."
<PAGE>
BEAR STEARNS FINANCE LLC
The Company is an exempted company with limited duration incorporated under
the laws of the Cayman Islands. The Guarantor owns, directly and indirectly, all
of the Common Shares of the Company, which shares are nontransferable. The
Company exists solely for the purpose of issuing preferred and common shares and
lending the net proceeds thereof to the Guarantor.
THE BEAR STEARNS COMPANIES INC.
The Guarantor 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 Guarantor 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 restructuring 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 Guarantor'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 Guarantor's foreign offices
provide services and engage in investment activities involving foreign clients
and international transactions. The Guarantor's trust company subsidiary,
Custodial Trust Company, operates from offices in Princeton, New Jersey.
Bear Stearns and BSSC are broker-dealers registered with the Securities and
Exchange Commission (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 Dealer, 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.
CERTAIN TERMS OF THE SERIES A SHARES
GENERAL
The following summary of certain terms and provisions of the Series A
Shares supplements the description of certain terms and provisions of the
Preferred Shares of any series set forth in the accompanying Prospectus under
the heading "Description of Preferred Shares", to which description reference is
hereby made. As indicated therein, Preferred Shares of the Company may be issued
from time to time in one or more series with such dividend rights, liquidation
preference per share, redemption provisions, voting rights and other rights,
preferences, privileges, limitations and restrictions as are established by the
Memorandum of Association of the Company (the "Memorandum"), the Articles of
Association of the Company (the "Articles") and resolutions adopted, or to be
adopted, by the Guarantor, in its capacity as the direct and indirect owner (the
"Common Shareholder") of all of the outstanding Common Shares of the Company.
The Series A Shares constitute one such series of
S-3
<PAGE>
Preferred Shares of the Company. The summary of certain terms and provisions of
the Series A Shares set forth below does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Memorandum, the
Articles and the resolutions adopted by the Common Shareholder establishing the
rights, preferences, privileges, limitations and restrictions relating to the
Series A Shares, a copy of which resolutions will have been filed with the
Commission at or prior to the time of the sale of the Series A Shares.
DIVIDENDS
Cumulative dividends on the Series A Shares will accrue at a rate per annum
of % of the liquidation preference thereof (or $ per Series A
Share per annum) from the date of original issuance thereof and will be payable
monthly in arrears on the last day of each calendar month of each year,
commencing February 28, 1994, when, as and if declared by the Company, except as
otherwise described under "Description of Preferred Shares--Dividends" in the
accompanying Prospectus, to holders of record on the fifth Business Day
preceding the relevant payment date. Payment of dividends is limited in relation
to the amount of funds held by the Company and legally available therefor. See
"Description of Preferred Shares--Dividends" in the accompanying Prospectus.
Dividends will be computed on the basis of twelve 30-day months and a 360-day
year and, for any dividend period shorter than a full calendar month, will be
computed on the basis of the actual number of days elapsed in such period.
Dividends on the Series A Shares will be declared by the Company in any
calendar year or portion thereof to the extent that the Company reasonably
anticipates that at the time of payment it will have, and will be paid by the
Company to the extent that at the time of proposed payment it has, (x) earnings
legally available for the payment of such dividends and (y) cash in hand
sufficient to permit such payments. It is anticipated that the Company's
earnings will result from payments by the Guarantor of interest on the Loan
Note. See "Description of the Loans."
MANDATORY REDEMPTION
The proceeds from any prepayment or repayment in cash of the principal of
the Loans shall be applied to redeem Series A Shares at a redemption price of
$25 per share plus accrued and unpaid dividends to the date fixed for
redemption, provided that the principal amount prepaid (if such prepayment
related to the entire principal amount of the Loans) or repaid by the Guarantor
may be loaned or reloaned to the Guarantor, and not used for such redemption, if
at the time of each such new loan, and as determined in the judgment of the
Guarantor, as Common Shareholder, and its financial advisor (which may be an
affiliate of the Guarantor), (i) the Guarantor is not the subject of a pending
case under the United States Bankruptcy Code, (ii) the Guarantor is not in
default on any loan pertaining to Preferred Shares of any series ranking pari
passu with the Series A Shares, (iii) the Guarantor has timely made all required
monthly payments of interest on the loan for the immediately preceding nine
months, (iv) the Company is not in arrearage on payments of dividends on the
Series A Shares, (v) the Guarantor is expected to be able to make timely payment
of principal and interest on such new loan, (vi) such new loan is being made on
terms, and under circumstances, that are no less favorable to the Company than
those that a lender would require for a similar loan to an unrelated party,
(vii) such new loan is being made at a rate of interest sufficient to provide
monthly payments of interest equal to or greater than the amount of monthly
dividend payments required in respect of the Series A Shares, (viii) such new
loan is being made for a fixed term that is consistent with market circumstances
and the Guarantor's financial condition, and (ix) in any event, no new loan
shall have a final maturity later than the ninetieth anniversary of the original
issuance of the Series A Shares.
As more fully described under "Description of the Loans--Optional
Exchange," on any dividend payment date on or after August 31, 1994, the
Guarantor may issue and deliver to the Company, in exchange for the Loan Note,
Depositary Shares representing Guarantor Preferred Stock having an aggregate
fair value, as determined by the Guarantor's financial advisor (which may be an
affiliate of
S-4
<PAGE>
the Guarantor) equal to the unpaid principal amount of the Loan Note plus all
accrued and unpaid interest thereon. In the event of such exchange, the Company
will be obligated to redeem all of the Series A Shares as an entirety solely in
exchange for Depositary Shares, each representing a one-eighth interest in a
share of Guarantor Preferred Stock at a rate of one Depositary Share for each
Series A Share to be redeemed; provided, however, that if, on the date that
notice of the redemption is mailed to holders of Series A Shares, the rating
assigned to any outstanding publicly held long-term senior unsecured debt
obligation of the Guarantor by either Standard & Poor's Ratings Group or Moody's
Investors Services, Inc. is not at least BBB-and Baa3 (or the equivalent
ratings), respectively, then the rate of exchange shall be 1.2 Depositary Shares
for each Series A Share to be redeemed. See "Certain Terms of the Guarantor
Preferred Stock" and "Certain Terms of the Depositary Shares" below. On the
redemption date, all dividends on the Series A Shares so redeemed will cease to
accrue and all rights of the holders of the Series A Shares as shareholders of
the Company shall cease, except the right to receive the Depositary Shares.
Notice of such redemption will be given by the Company by mail to each record
holder of Series A Shares not fewer than 30 nor more than 60 days prior to the
date fixed for such redemption. If, in connection with such redemption, a holder
of Series A Shares would otherwise be entitled to a fractional Depositary Share,
such holder will receive, in lieu of such fractional Depositary Share, a cash
payment in an amount representing such holder's proportionate interest in the
net proceeds from the sale on behalf of such holder and all other holders who
otherwise would be entitled to a fractional Depositary Share, of whole
Depositary Shares representing the aggregate of such fractional Depositary
Shares. The Company shall appoint an agent (which may be an affiliate of the
Company) to conduct such sale.
OPTIONAL REDEMPTION
The Series A Shares are redeemable for cash, at the option of the Company
(with the prior consent of the Guarantor), in whole or in part, at any time and
from time to time, after February 28, 1999, upon not less than 30 nor more than
60 days' notice, at the redemption price of $25, plus accrued and unpaid
dividends to the date fixed for redemption.
Notwithstanding the foregoing, if at any time after the issuance of the
Series A Shares the Company or the Guarantor is or would be required to pay
Additional Amounts or would be required to withhold or deduct certain amounts as
described under "Additional Amounts" herein and "Description of the
Guarantee--Additional Amounts" in the accompanying Prospectus, respectively,
then, subject to the prior consent of the Guarantor, the Company may, at its
option, upon not less than 30 nor more than 60 days' notice to the holders of
the Series A Shares (which notice shall be irrevocable), redeem the Series A
Shares in whole (or, if such requirement relates to only certain of the Series A
Shares, the Series A Shares subject to such requirement) at the liquidation
preference of $25 per share plus accrued and unpaid dividends to the date fixed
for redemption, whether or not declared.
LIQUIDATION DISTRIBUTION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Series A Shares at the time
outstanding will be entitled to receive out of the assets of the Company
available for distribution to shareholders, before any distribution of assets is
made to holders of common shares or any other class of shares of the Company
ranking junior to the Series A Shares as regards participation in assets of the
Company, but together with the holders of every other series of preferred or
preference stock of the Company outstanding, if any, ranking pari passu with the
Series A Shares as regards participation in the assets of the Company ("Company
Liquidation Parity Shares"), an amount equal, in the case of the holders of the
Series A Shares, to the aggregate of the liquidation preference of $25 per
Series A Share and all accumulated arrears and accruals of unpaid dividends
(whether or not declared) to the date of payment (the "Liquidation
Distribution"). If, upon any such liquidation, the Liquidation Distribution can
be paid only in part because the Company has insufficient assets available to
pay in full the aggregate Liquidation Distribution and the aggregate maximum
Liquidation Distribution on the Company Liquidation Parity Shares, then the
amounts
S-5
<PAGE>
payable directly by the Company on the Series A Shares and on such Company
Liquidation Parity Shares shall be paid on a pro rata basis, so that
(i) (x) the aggregate amount paid as the Liquidation Distribution on
the Series A Shares bears to (y) the aggregate amount paid as the
Liquidation Distribution on the Company Liquidation Parity Shares the same
ratio as
(ii) (x) the aggregate Liquidation Distribution bears to (y) the
aggregate maximum Liquidation Distribution on the Company Liquidation
Parity Shares.
VOTING RIGHTS
If (i) the Company fails to pay dividends in full on the Series A Shares
for nine consecutive monthly dividend periods or (ii) the Guarantor breaches any
of its obligations under the Loans or the Guarantor breaches any of its
obligations under the Guarantee (as defined in "Description of the Guarantee" in
the accompanying Prospectus), then the holders of the outstanding Series A
Shares, together with the holders of any other shares of preferred or preference
stock of the Company having the right to vote for the appointment of a trustee
in such event, acting as a single class, will be entitled, by ordinary
resolution passed by the holders of a majority in liquidation preference (plus
all accumulated arrears and accruals of dividends per share) of such shares
present in person or by proxy at a separate general meeting of such holders
convened for such purpose, to appoint and authorize a trustee to enforce against
the Guarantor the Company's rights as a creditor in respect of the Loan Note, to
enforce the obligations undertaken by the Guarantor under the Guarantee and to
declare and pay dividends. Not later than 30 days after such entitlement arises,
the Common Shareholder will convene a separate general meeting for the above
purpose. If the Common Shareholder fails to convene such meeting within such
30-day period, the holders of 10% in aggregate liquidation preference (plus all
accumulated arrears and accruals of dividends per share) of the outstanding
Series A Shares and such other preferred or preference stock will be entitled to
convene such separate general meeting. The provisions of the Articles relating
to the convening and conduct of the general meetings of shareholders will apply
with respect to any such separate general meeting. Any trustee so appointed
shall vacate office, subject to the terms of such other preferred or preference
stock, if the Company (or the Guarantor pursuant to the Guarantee) shall have
paid in full all accumulated arrears and accruals of unpaid dividends on the
Series A Shares (if the event that gave rise to such appointment was clause (i)
of this paragraph) or such breach by the Guarantor shall have been cured (if the
event that gave rise to such appointment was clause (ii) of this paragraph).
If any resolution is proposed for adoption by the shareholders of the
Company providing for, or the Common Shareholder proposes to take any action
that will (x) amend, alter or repeal the provisions of the Memorandum, the
Articles or the resolutions creating the Series A Shares so as to materially and
adversely affect any power, preference or privilege of the Series A Shares or
the holders thereof or result in the authorization or issuance of any shares of
the Company ranking, as to participation in the profits or assets of the
Company, senior to the Series A Shares), (y) result in the liquidation,
dissolution or winding up of the Company or (z) modify Regulation 16 of the
Articles which absolutely prohibits transfers of shares of the Company's common
stock, then the holders of outstanding Preferred Shares of all series (and, in
the case of a resolution described in clause (x) above that would, to a like
extent, materially and adversely affect the rights, preferences or privileges of
any Company Dividend Parity Shares or any Company Liquidation Parity Shares,
such Company Dividend Parity Shares or such Company Liquidation Parity Shares,
as the case may be, or, in the case of any resolution described in clause (y) or
(z) above, all Company Liquidation Parity Shares) will be entitled to vote
together as a class on such resolution (but not on any other resolution) (i) at
a separate meeting of such holders, (ii) at the general meeting of shareholders
of the Company called for the purpose of adopting such resolution or (iii)
without a meeting but in writing, and such resolution shall not be effective
except with the approval, in the case of clauses (i) and (ii), of the holders of
66 2/3% in liquidation preference (plus all accumulated arrears and accruals of
dividends) of such outstanding shares present in person or by
S-6
<PAGE>
proxy at a meeting at which 66 2/3% in liquidation preference (plus all
accumulated arrears and accruals of dividends) of such shares are so present or,
in the case of clause (iii), by the holders of 66 2/3% in liquidation preference
(plus all accumulated arrears and accruals of dividends) of such shares;
provided, however, that no such approval shall be required under clauses (x) and
(y) if the liquidation, dissolution and winding up of the Company is proposed or
initiated upon the initiation of proceedings, or after proceedings have been
initiated, for the liquidation, dissolution, or winding up of the Guarantor.
The rights attached to the Series A Shares will be deemed not to be varied
by the creation or issue of, and no vote will be required for the creation of,
any further series of preference shares or any further shares of the Company
ranking as regards participation in the profits or assets of the Company pari
passu with or junior to the Series A Shares.
The Company will cause a notice of any meeting at which holders of the
Series A Shares are entitled to vote to be mailed to each holder of record of
the Series A Shares. Each such notice will include a statement setting forth (i)
the date of such meeting, (ii) a description of any resolution proposed for
adoption at such meeting on which such holders are entitled to vote and (iii)
instructions for the delivery of proxies.
No vote of the holders of the Series A Shares will be required for the
Company to redeem and cancel Series A Shares in accordance with the Articles.
Notwithstanding that holders of Series A Shares are entitled to vote under
any of the circumstances described above, any of the Series A Shares and such
other preference shares entitled to vote with such Series A Shares as a single
class outstanding at such time that are owned by the Guarantor or any entity
owned 20% or more by the Guarantor, either directly or indirectly, shall not be
entitled to vote and shall, for the purposes of such vote, be treated as if they
were not outstanding.
ADDITIONAL AMOUNTS
All payments by the Company in respect of the Series A Shares will be made
without withholding or deduction for or on account of any present or future
taxes, duties, assessments or governmental charges of whatever nature imposed or
levied upon or as a result of such payment by or on behalf of the Cayman Islands
or any authority therein or thereof having power to tax, unless the withholding
or deduction of such taxes, duties, assessments or governmental charges is
required by law. In that event, the Company will pay as a dividend such
Additional Amounts (as defined in the accompanying Prospectus) as may be
necessary in order that the net amounts received by the holders of the Series A
Shares after such withholding or deduction will equal the amount which would
have been receivable in respect of such Series A Shares in the absence of such
withholding or deduction, except that no such Additional Amounts will be payable
to a holder of Series A Shares (or a third party on such holder's behalf) with
respect to Series A Shares:
(a) if such holder is liable for such taxes, duties, assessments or
governmental charges in respect of such Series A Shares by reason of such
holder's having some connection with the Cayman Islands other than being a
holder of such Series A Shares, or
(b) if the Company has notified such holder of the obligation to
withhold taxes and requested but not received from such holder a
declaration of nonresidence or other similar claim for exemption, and such
withholding or deduction would not have been required had such declaration
or similar claim been received.
TRANSFER RESTRICTIONS
The Company will not register Series A Shares in the name of, or record the
transfer of Series A Shares to, or pay any dividend or distribution on or with
respect to the Series A Shares to, any holder, if such holder, or any person for
whom such holder is acting as a nominee, (a) has an address of record outside
the United States or (b) is known by the Company or its transfer agent to be
other than (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity organized under
S-7
<PAGE>
the laws of the United States or any of its states or the District of Columbia
or (iii) an estate or trust that is subject to United States federal income tax
on its worldwide income without regard to source. The foregoing transfer
restrictions shall not preclude the settlement of any transaction in the Series
A Shares entered into through the facilities of the NYSE.
DESCRIPTION OF THE LOANS
Set forth below is condensed information concerning the loans from the
Company to the Guarantor of the net proceeds of the issuance of the Series A
Shares and the Company's Common Shares. The loans will be made pursuant to a
loan agreement between the Company and the Guarantor (the "Loan Agreement").
This summary description of the Loan Agreement does not purport to be complete
and is subject to and qualified in its entirety by reference to the form of such
Loan Agreement filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
GENERAL
Pursuant to the Loan Agreement, the Company has agreed to make loans (the
"Loans") to the Guarantor in the aggregate principal amount of $ ,
such amount being the sum of (i) the aggregate Liquidation Preference of the
Series A Shares issued and sold by the Company and (ii) the aggregate
consideration paid by the Common Shareholder for the outstanding Common Shares
of the Company.
The entire principal amount of the Loans shall become due and payable
(together with any accrued and unpaid interest thereon, including any Additional
Interest (as hereinafter defined), on the earliest of the Maturity Date (as
hereinafter defined) or the date upon which the Guarantor shall be dissolved or
liquidated or the date upon which the Company shall be dissolved or liquidated.
The Loans shall mature on , 2024 (the "Maturity Date"), subject to
relending under conditions described under "Certain Terms of the Series A
Shares--Mandatory Redemption." The Loans will be evidenced by the Loan Note.
OPTIONAL PREPAYMENT
The Guarantor shall have the right to prepay the Loans, without premium or
penalty,
(i) in whole or in part (together with any accrued but unpaid
interest, including Additional Interest, if any, on the portion being
prepaid) at any time after February 28, 1999; or
(ii) in whole (together with all accrued and unpaid interest,
including Additional Interest, if any, thereon) at any time after the date
hereof if the Guarantor is or would be required to pay any Additional
Interest pursuant to the terms of the Loan Agreement or, if such
requirement shall relate only to a portion of the Loans, the portion of the
Loans affected by any such requirement; provided that the Guarantor shall
not have the right to prepay the loan as a result of the payment of
Additional Interest pursuant to clause (ii) of the paragraph under
"Additional Interest" below unless the payment of such Additional Interest
is imposed by reason of a change in law or regulation, or a written change
in interpretation of law or regulation, by any legislative body, court,
governmental agency or regulatory authority;
all such prepayments to be made by remittance to the account of the Company of
immediately available funds in U.S. Dollars.
S-8
<PAGE>
OPTIONAL EXCHANGE
On any dividend payment date on or after August 31, 1994, the Guarantor
shall have the right, subject to certain conditions, to issue and deliver to the
Company, in exchange for the Loan Note, freely transferable Depositary Shares
representing shares of Guarantor Preferred Stock having an aggregate fair value,
as determined by the Guarantor's financial advisor (which may be an affiliate of
the Guarantor), equal to the unpaid principal balance of the Loan Note plus any
accrued and unpaid interest (including Additional Interest, if any) thereon to
the date of such exchange. The Guarantor shall give the Company written notice
of its intention to effect such exchange not less than seventy-five (75) days
nor more than ninety (90) days prior to the intended date of such exchange.
Notwithstanding the foregoing, such exchange of the Depositary Shares for
the Loan Note may be made only if, on the date that the Guarantor gives to the
Company notice of its intention to effect such exchange and on the date of such
exchange, (i) the Guarantor is not in default on any loan made by the Company to
the Guarantor, (ii) the Guarantor is not in default under any mortgage,
indenture or other instrument in respect of indebtedness for borrowed money in
excess of $10,000,000 that has been or could be declared due and payable prior
to maturity, (iii) there have not occurred certain events of bankruptcy,
insolvency or reorganization, and (iv) the total consolidated stockholders'
equity of the Guarantor, as shown on the most recent publicly available
consolidated balance sheet of the Guarantor, is at least $500,000,000. Prior to
the delivery of the Depositary Shares in exchange for the Loan Note, the
Guarantor will use its best efforts to list the Depositary Shares on the NYSE.
If the Guarantor is unable to list the Depositary Shares on the NYSE, it will
use its best efforts to list the Depositary Shares on another national
securities exchange or to include the Depositary Shares for trading on an inter-
dealer quotation system.
INTEREST
The Loans shall bear interest at an annual rate of % from the date they
are made until maturity. Such interest shall be payable on the last day of each
calendar month of each year, commencing February 28, 1994. Interest will be
computed on the basis of twelve 30-day months and a 360-day year and, for any
interest period that is shorter than a full calendar month, will be calculated
on the basis of the actual number of days elapsed in such period. If any date on
which interest is payable on the Loans is not a day on which banks in The City
of New York are open for business and on which foreign exchange dealings may be
conducted in The City of New York (a "Business Day"), then payment of the
interest due on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date; provided,
however, that the Guarantor shall have the right at any time or times during the
term of the Loans, so long as the Guarantor is not in default in the payment of
interest on the Loans, to extend the interest payment period by a further
period, not to exceed nine months; and provided further that, at the end of such
further period the Guarantor shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Loans to the
extent permitted by applicable law); and provided further that, during any such
extended interest period, or at any time during which there is an uncured Event
of Default under the Loans, the Guarantor shall not pay any dividends on any of
its shares of equity stock. The Guarantor shall give the Company at least five
Business Days' prior notice of its selection of such longer interest payment
period.
ADDITIONAL INTEREST
If at any time following the date of the Loan Agreement (i) the Company
shall be required to pay any Additional Amounts (as defined in the Prospectus)
in respect of the Series A Shares, (ii) the Guarantor shall be required to
withhold or deduct any amounts, for or on account of any taxes, duties or
governmental charges of whatever nature imposed by the United States of America
(or any political subdivision thereof or therein), from the interest payments to
be made by the Guarantor on the Loans or
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(iii) the Company shall be required to pay, with respect to its income derived
from the interest payments on the Loans, any amounts, for or on account of any
taxes, duties or governmental charges of whatever nature imposed by the Cayman
Islands (or any political subdivision thereof or therein), or any other taxing
authority, then, in any such case, the Guarantor will pay as interest such
additional amounts ("Additional Interest") as may be necessary in order that the
net amounts received and retained by the Company after paying such Additional
Amounts, or after such withholding or deduction or the payment of such taxes,
duties, assessments or governmental charges, as the case may be, shall result in
the Company's having such funds as it would have had in the absence of the
obligation to pay such Additional Amounts, or such withholding or deduction or
the payment of such taxes, duties, assessments or governmental charges, as the
case may be. The obligation to pay Additional Interest as a consequence of
circumstances described in clauses (ii) or (iii) above shall be reduced
proportionately to the extent that (x) the Guarantor or the Company has notified
holders of Series A Shares of the obligation to withhold taxes and requested but
not received from such holders declarations of nonresidence or other similar
claim for exemption and (y) such withholding or deduction would not have been
required had such declaration or similar claim been received.
METHOD AND DATE OF PAYMENT
Each payment by the Guarantor of principal and interest (including
Additional Interest, if any) on the Loans shall be made to the Company in lawful
money of the United States, at such place and to such account as may be
designated by the Company.
SET-OFF
Notwithstanding anything to the contrary in the Loan Agreement, the
Guarantor shall have the right to set off any payment it is otherwise required
to make thereunder with and to the extent the Guarantor has theretofore made, or
is concurrently on the date of such payment making, a payment under the
Guarantee.
SUBORDINATION
The Guarantor and the Company covenant and agree that each of the Loans is
subordinate and junior in right of payment to all Senior Indebtedness as
provided in the Loan Agreement. The term "Senior Indebtedness" shall mean the
principal, premium, if any, and interest on (i)all indebtedness of the
Guarantor, whether outstanding on the date of the Loan Agreement or thereafter
created, incurred or assumed, which is for money borrowed, or evidenced by a
note or similar instrument given in connection with the acquisition of any
business, properties or assets, including securities, (ii) any indebtedness of
others of the kinds described in the preceding clause (i) for the payment of
which the Guarantor is responsible or liable as guarantor or otherwise and (iii)
amendments, renewals, extensions and refundings of any such indebtedness, unless
in any instrument or instruments evidencing or securing such indebtedness or
pursuant to which the same is outstanding, or in any such amendment, renewal,
extension or refunding, it is expressly provided that such indebtedness is not
superior in right of payment to the Loans. The Senior Indebtedness shall
continue to be Senior Indebtedness and entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of the Senior Indebtedness or extension or renewal of the Senior
Indebtedness.
If (i) the Guarantor defaults in the payment of any principal, or premium,
if any, or interest on any Senior Indebtedness when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or declaration or
otherwise or (ii) an event of default occurs with respect to any Senior
Indebtedness permitting the holders thereof to accelerate the maturity thereof
and written notice of such event of default is given to the Guarantor by the
holders of Senior Indebtedness, then unless and until such default in payment or
event of default shall have been cured or waived or shall have ceased to exist,
no direct or indirect payment (in cash, property, securities, by set-off or
otherwise) shall be made or agreed to be made on account of the Loans or
interest thereon or in respect of any repayment, redemption, retirement,
purchase or other acquisition of the Loans.
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In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Guarantor, its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding up of the Guarantor, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by the Guarantor for the benefit of creditors, or (iv) any
other marshalling of the assets of the Guarantor, all Senior Indebtedness shall
first be paid in full before any payment or distribution, whether in cash,
securities or other property, shall be made by the Guarantor on account of the
Loans. Any payment or distribution, whether in cash, securities or other
property (other than securities of the Guarantor or any other corporation
provided for by a plan of reorganization or a readjustment, the payment of which
is subordinate, at least to the extent provided in the subordination provisions
of the Loan Agreement with respect to the indebtedness evidenced by the Loans,
to the payment of all Senior Indebtedness at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for the subordination provisions) be
payable or deliverable in respect to the Loans shall be paid or delivered
directly to the holders of Senior Indebtedness in accordance with the priorities
then existing among such holders until all Senior Indebtedness shall have been
paid in full. No present or future holder of any Senior Indebtedness shall be
prejudiced in the right to enforce subordination of the indebtedness
constituting the Loans by any act or failure to act on the part of the
Guarantor.
Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash, securities or other property equal
to the amount of such Senior Indebtedness then outstanding. Upon the payment in
full of all Senior Indebtedness, the Company shall be subrogated to all the
rights of any holders of Senior Indebtedness to receive any further payments or
distributions applicable to the Senior Indebtedness until the Loans shall have
been paid in full, and such payments or distributions received by the Company,
by reason of such subrogation, of cash, securities or other property which
otherwise would be paid or distributed to the holders of Senior Indebtedness,
shall, as between the Guarantor and its creditors other than the holders of
Senior Indebtedness, on the one hand, and the Company, on the other, be deemed
to be a payment by the Guarantor on account of Senior Indebtedness, and not on
account of the Loans.
COVENANTS
The Guarantor will agree (i) that it shall not declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of its capital stock, or make any guarantee payments with respect to the
foregoing (other than payments pursuant to any guarantee of the Series A Shares)
if at such time (x) there shall have occurred any event that, with the giving of
notice or the lapse of time or both, would constitute an Event of Default (as
defined below) or (y) the Guarantor shall be in default with respect to its
payment or other obligations under any guarantee of the Series A Shares, (ii) to
maintain ownership, directly and indirectly, of all of the Common Shares of the
Company, (iii) to cause at least 21% of the total value (initially measured by
shareholders' equity determined in accordance with generally accepted accounting
principles) of the Company and at least 21% of all interest in the capital,
income, gain, loss, deduction and credit of the Company to be represented by
Common Shares, (iv) not to voluntarily dissolve, wind-up or liquidate the
Company so long as any Series A Shares are outstanding, (v) to timely perform
all of its duties as Common Shareholder of the Company and (vi) to use its
reasonable efforts to cause the Company to remain an exempted company with
limited duration under the laws of the Cayman Islands and otherwise continue to
be treated as a partnership for United States federal income taxes.
EVENTS OF DEFAULT
If one or more of the following events (each an "Event of Default") shall
occur and be continuing:
(a) default in the payment of interest on the Loans (including any
Additional Interest) when due that continues for 10 days; provided,
however, that a valid extension of the interest payment
S-11
<PAGE>
period by the Guarantor shall not constitute a default in the payment of
interest for this purpose (see "--Interest" above);
(b) default in the payment of principal on the Loans;
(c) dissolution or winding-up or liquidation of the Company;
(d) the bankruptcy, insolvency or liquidation of the Guarantor; or
(e) the breach by the Guarantor of any of its covenants in the Loan
Agreement;
then (i) in the case of clauses (a), (b) and (e), and at any time thereafter
during the continuance of such event, the Company will have the right to declare
the principal of and the interest on the Loan (including any Additional Interest
and any interest subject to an extension of the interest payment period) and any
other amounts payable on the Loan to be forthwith due and payable, and (ii) in
the case of clauses (c) and (d) the principal of and interest on the Loan
(including any Additional Interest and any interest subject to an extension of
the interest payment period) and any other amounts payable on the Loan shall
automatically become due and payable, whereupon the Loans and all other amounts
payable under the Loan Agreement shall be forthwith due and payable and the
Company will have the right to enforce its other rights as a defaulted creditor
with respect to the Loans. Under the terms of the Series A Shares, the holders
of outstanding Series A Shares will have the rights referred to under "Certain
Terms of the Series A Shares--Voting Rights", including the right to appoint a
trustee, which trustee shall be authorized to exercise the Company's right to
accelerate the principal amount of the Loans and to enforce the Company's other
rights as a creditor in respect of the Loans.
MISCELLANEOUS
The Guarantor shall have the right at all times to assign any of its rights
or obligations under the Loan Agreement to a direct or indirect wholly owned
subsidiary of the Guarantor; provided, however, that, in the event of any such
assignment, the Guarantor shall remain jointly and severally liable for all such
obligations. The Company may not assign any of its rights under the Loan
Agreement without the prior written consent of the Guarantor. Subject to the
foregoing, the Loan Agreement shall be binding upon and inure to the benefit of
the Guarantor and the Company and their respective successors and assigns. Any
assignment by the Guarantor or the Company in contravention of these provisions
will be null and void.
Except as to matters relating to the authorization, execution and delivery
of the Loan Agreement by the Company, which will be governed by the laws of the
Cayman Islands, the Loan Agreement will be governed by and construed in
accordance with the laws of the State of New York.
The Loan Agreement may be amended by mutual consent of the parties in the
manner the parties shall agree; provided, however, that, so long as any of the
Series A Shares remain outstanding, no such amendment that materially and
adversely affects the rights of the holders of the Series A Shares shall be
made, and no termination of the Loan Agreement shall occur, without the prior
consent of at least 66 2/3% of the holders of the Series A Shares, in writing or
at a duly constituted meeting of such holders, unless and until the Loans and
all accrued and unpaid interest thereon (including Additional Interest, if any)
shall have been paid in full.
CERTAIN TERMS OF THE DEPOSITARY SHARES
The following summary description of the Depositary Shares supplements the
description of the terms of the Depositary Shares set forth under the heading
"Description of Depositary Shares" in the accompanying Prospectus, to which
description reference is hereby made. The summary description of the Depositary
Shares set forth below does not purport to be complete and is subject to and
qualified in its entirety by reference to the Deposit Agreement referred to
below, the form of which (including the form of Depositary Receipt (as defined
below)) is incorporated by reference as an exhibit to the Registration Statement
of which this Prospectus Supplement forms a part.
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Each Depositary Share represents a one-eighth interest in a share of
Guarantor Preferred Stock. The shares of the Guarantor Preferred Stock
underlying the Depositary Shares will be deposited with Chemical Bank, as
Depositary (the "Depositary"), under a Deposit Agreement (the "Deposit
Agreement") among the Guarantor, the Depositary and the holders from time to
time of the depositary receipts issued by the Depositary thereunder (the
"Depositary Receipts"). The Depositary Receipts so issued will evidence the
Depositary Shares and will be eligible for book-entry trading through the
facilities of The Depositary Trust Company. Subject to the terms of the Deposit
Agreement, each owner of a Depositary Share will be entitled through the
Depositary, in proportion to the one-eighth interest in a share of the Guarantor
Preferred Stock underlying such Depositary Share, to all rights and preferences
of a share of Guarantor Preferred Stock (including dividend, voting, redemption
and liquidation rights). Since each share of Guarantor Preferred Stock entitles
the holder thereof to one vote on all matters on which the Guarantor Preferred
Stock is entitled to vote, each Depositary Share will in effect entitle the
holder thereof to one-eighth of a vote thereon, rather than one full vote. The
Guarantor does not expect that there will be any trading market for the shares
of Guarantor Preferred Stock except as represented by the Depositary Shares. The
principal office of the Depositary is currently located at 450 West 33rd Street,
New York, New York. See "Certain Terms of the Guarantor Preferred Stock-- Voting
Rights" below, "Description of Guarantor Preferred Stock--Voting Rights",
"Description of Depositary Shares" and "Book-Entry Procedures and Settlement" in
the accompanying Prospectus.
Chemical Bank will be the transfer agent and registrar for the Depositary
Shares.
CERTAIN TERMS OF THE GUARANTOR PREFERRED STOCK
The following description of certain terms of the Guarantor Preferred Stock
supplements the description of the general terms and provisions of the preferred
stock of the Company set forth under the heading "Description of Guarantor
Preferred Stock" in the accompanying Prospectus. The Guarantor Preferred Stock
is a series of the preferred stock, $1.00 par value, of the Guarantor, which
preferred stock may be issued from time to time in one or more series with such
rights, preferences and limitations as are determined by the Guarantor's Board
of Directors (the "Guarantor Board of Directors") or a duly authorized committee
thereof. The description of certain provisions of the Guarantor Preferred Stock
set forth below does not purport to be complete and is subject to and qualified
in its entirety by reference to the Certificate of Designations relating to the
Guarantor Preferred Stock, which is incorporated by reference in the
Registration Statement of which this Prospectus Supplement forms a part.
GENERAL
The Guarantor Preferred Stock on the date of original issue will rank on a
parity as to payment of dividends and distribution of assets upon dissolution,
liquidation or winding up of the Guarantor with each other then outstanding
series of preferred stock of the Guarantor. See "Description of Guarantor
Preferred Stock" in the accompanying Prospectus. The Guarantor Preferred Stock
will rank prior to the Guarantor's Common Stock, $1.00 par value (the "Guarantor
Common Stock"). The Guarantor is authorized by its Certificate of Incorporation
to issue 10,000,000 shares of preferred stock, $1.00 par value. As of January
25, 1994, there were outstanding 881,450 shares of the Guarantor's Adjustable
Rate Cumulative Preferred Stock, Series A, 937,500 shares of its 7.88%
Cumulative Preferred Stock, Series B, and 500,000 shares of its 7.60% Cumulative
Preferred Stock, Series C, with an aggregate liquidation preference of
$331,573,000. See "Description of Guarantor Preferred Stock--General" in the
accompanying Prospectus.
DIVIDENDS AND DISTRIBUTIONS
The holders of shares of Guarantor Preferred Stock will be entitled to
receive, when and as declared by the Board of Directors of the Guarantor (or a
duly authorized committee thereof) out of net profits or net assets of the
Guarantor legally available for the payment of dividends, cumulative cash
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<PAGE>
dividends at the annual rate of % of the liquidation preference of $200 per
share of Guarantor Preferred Stock (equivalent to $ per annum per
share of Guarantor Preferred Stock and $ per annum per Depositary
Share), and no more, in equal monthly payments (rounded down to the nearest
cent) in arrears on the last day of each calendar month of each year, commencing
with the first full calendar month following the date of issue of the Guarantor
Preferred Stock. In the event that any date on which dividends are payable on
the Preferred Shares of any series is not a Business Day, then payment of the
dividend payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date. Dividends will
be payable to the holders of record on the fifth Business Day preceding the
relevant payment date. Dividends will be computed on the basis of twelve 30-day
months and, for any dividend period shorter than a full calendar month, will be
calculated on the basis of the actual number of days elapsed in such period.
Dividends payable on the Guarantor Preferred Stock will begin to accrue and be
cumulative from the date of original issue. Accrued but unpaid dividends will
not bear interest. Dividends paid on the shares of Guarantor Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable will be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding.
Whenever monthly dividends payable on shares of the Guarantor Stock are in
arrears, thereafter and until all accrued and unpaid dividends, whether or not
declared, on the outstanding shares of Guarantor Preferred Stock have been paid
in full or declared and set apart for payment, the Guarantor will not: (i)
declare or pay dividends, or make any other distribution, on any shares of
Guarantor Common Stock or other capital stock ranking junior (either as to
payment of dividends or distribution of assets upon liquidation, dissolution or
winding up) to the Guarantor Preferred Stock ("Guarantor Junior Stock"), other
than dividends or distributions payable in Guarantor Junior Stock; (ii) declare
or pay dividends, or make any other distributions, on any shares of capital
stock ranking on a parity (either as to payment of dividends or distribution of
assets upon liquidation, dissolution or winding up) with the Guarantor Preferred
Stock ("Guarantor Parity Stock"), other than dividends or distributions payable
in Guarantor Junior Stock, and other than dividends paid ratably on the
Guarantor Preferred Stock and all Guarantor Parity Stock on which dividends are
payable or in arrears, in proportion to the total amounts to which the holders
of all such shares are then entitled; (iii) redeem or purchase or otherwise
acquire for consideration any shares of Guarantor Junior Stock, provided that
the Guarantor may at any time redeem, purchase or otherwise acquire any shares
of Guarantor Junior Stock in exchange for shares of Guarantor Junior Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares of
Guarantor Preferred Stock or Guarantor Parity Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the Guarantor
Board of Directors) to all holders of such shares upon such terms as the
Guarantor Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes. See "Description of
Guarantor Preferred Stock--Dividends" in the accompanying Prospectus.
LIQUIDATION RIGHTS
Upon any liquidation, dissolution or winding up of the Guarantor (whether
voluntary or involuntary), no distribution will be made (i) to the holders of
shares of Guarantor Junior Stock, unless, prior thereto, the holders of shares
of Guarantor Preferred Stock shall have received $200 per share (equivalent to
$25 per Depositary Share), plus an amount per share equal to all accrued but
unpaid dividends thereon, whether or not declared, to the date of such payment
or (ii) to the holders of shares of Guarantor Parity Stock, except distributions
made ratably on the Guarantor Preferred Stock and all such Guarantor Parity
Stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up. After payment of
the full amount of the
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liquidating distribution to which holders of the Guarantor Preferred Stock are
entitled, such holders will have no right or claim to any of the remaining
assets of the Guarantor. See "Description of Guarantor Preferred
Stock--Liquidation Rights" in the accompanying Prospectus.
REDEMPTION
The shares of the Guarantor Preferred Stock may not be redeemed by the
Guarantor prior to March 1, 1999 (if issued prior thereto). The Guarantor, at
its option, may redeem shares of Guarantor Preferred Stock, as a whole or in
part, at any time or from time to time on or after , 1999 at a price
of $200 per share ($25 per Depositary Share), plus an amount per share equal to
all accrued but unpaid dividends thereon, whether or not declared, to the date
fixed for redemption. See "Description of Guarantor Preferred Stock--Redemption"
in the accompanying Prospectus.
VOTING RIGHTS
Holders of the Guarantor Preferred Stock will have no voting rights except
as set forth below or as otherwise from time to time required by law.
Whenever dividends payable on the shares of Guarantor Preferred Stock shall
be in arrears for eighteen monthly dividend periods, whether or not consecutive,
including any periods in which dividends on the Series A Shares were not paid in
cash, the holders of the outstanding shares of Guarantor Preferred Stock (voting
separately as a class with all other series of Guarantor Preferred Stock upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two of the authorized number of directors
of the Guarantor at the earlier of (i) the next annual meeting of stockholders
or (ii) a special meeting of holders of the Guarantor Preferred Stock called for
the purpose, and at each subsequent annual meeting of stockholders until all
dividends accumulated on the Guarantor Preferred Stock have been fully paid or
set apart for payment. The term of office of all directors elected by the
holders of shares of Guarantor Preferred Stock shall terminate immediately upon
the termination of the right of the holders of the Guarantor Preferred Stock to
vote for directors. Whenever the shares of Guarantor Preferred Stock become
entitled to vote, each holder of the Guarantor Preferred Stock will have one
vote for each share held.
So long as any shares of the Guarantor Preferred Stock remain outstanding,
the Guarantor shall not without the consent of the holders of at least 66 2/3%
of the shares of Guarantor Preferred Stock outstanding at the time (voting
separately as a class with any other series of preferred stock of the Guarantor
upon which like voting rights have been conferred and are exercisable), (i)
issue or increase the authorized amount of any class or series ranking senior to
the Guarantor Preferred Stock as to dividends or upon liquidation or (ii) amend,
alter or repeal the provisions of the Certificate of Incorporation or the
resolutions contained in the Certificate of Designation, whether by merger,
consolidation or otherwise so as to materially and adversely affect any power,
preference or special right of the shares of Guarantor Preferred Stock or of the
holders thereof; provided, however, that any increase in the amount of
authorized Guarantor Common Stock or authorized preferred stock of the
Guarantor, any increase or decrease in the number of shares of any series of
preferred stock of the Guarantor or the creation and issuance of Guarantor
Common Stock or other series of preferred stock of the Guarantor, in each case
ranking on a parity with or junior to the shares of Guarantor Preferred Stock as
to dividends and upon liquidation, shall not be deemed to materially and
adversely affect the powers, preferences or special rights of the shares of
Guarantor Preferred Stock.
The foregoing voting provisions shall not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of Guarantor Preferred Stock shall have been
redeemed or called for redemption and sufficient funds shall have been deposited
in trust to effect such a redemption. See "Description of Guarantor Preferred
Stock--Voting Rights" in the accompanying Prospectus.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
among the Company and the Underwriters (the "Underwriting Agreement"), the
Company has agreed to sell to each of the Underwriters named below, and each of
the Underwriters has severally agreed to purchase from the Company, the number
of Series A Shares set forth opposite its name below:
<TABLE> <CAPTION>
<S> <C>
NUMBER OF
UNDERWRITERS SHARES
- ---------------------------------------------------------------------------------------- -------------
Bear, Stearns & Co. Inc.................................................................
Goldman, Sachs & Co.....................................................................
Lehman Brothers Inc.....................................................................
Morgan Stanley & Co. Incorporated.......................................................
PaineWebber Incorporated................................................................
Prudential Securities Incorporated......................................................
Salomon Brothers Inc....................................................................
Smith Barney Shearson Inc...............................................................
-------------
Total............................................................................ 6,000,000
-------------
-------------
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the Series A Shares if any are purchased.
The Underwriters have advised the Company that they propose to offer the
Series A Shares to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $
per share to certain other dealers. After the initial public offering, the
public offering price and such concessions may be changed from time to time.
Because the proceeds from the sale of the Series A Shares will be loaned to
the Guarantor, the Guarantor has agreed to pay to the Underwriters a commission
of $ per Series A Share as compensation for the services of the
Underwriters under the Underwriting Agreement.
Prior to this offering, there has been no market for the Series A Shares.
Application has been made to list the Series A Shares on the NYSE. The Company
will use its best efforts to maintain the listing of the Series A Shares on the
NYSE or another national securities exchange. Nevertheless, no assurances can be
given as to the liquidity of the market for the Series A Shares.
The Company and the Guarantor have agreed to indemnify the Underwriters
against, and to contribute to losses arising as a result of, certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Bear, Stearns & Co. Inc. is a wholly-owned subsidiary of the Guarantor. The
offer and sale of the Series A Shares with respect to which this Prospectus
Supplement relates complies with the requirements of Schedule E of the By-laws
of the NASD regarding underwriting securities of an affiliate of an NASD member.
This Prospectus Supplement, together with the accompanying Prospectus, also may
be used by Bear, Stearns & Co. Inc. in connection with offers and sales of
Series A Shares 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.
S-16
<PAGE>
PROSPECTUS
BEAR STEARNS FINANCE LLC
EXCHANGEABLE PREFERRED INCOME CUMULATIVE SHARES ("EPICS"*)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
THE BEAR STEARNS COMPANIES INC.
Bear Stearns Finance LLC (the "Company"), an exempted company with limited
duration incorporated under the laws of the Cayman Islands, all of the
outstanding Common Shares of which are owned, directly and indirectly, by The
Bear Stearns Companies Inc. (the "Guarantor"), may offer from time to time, in
one or more series, its authorized but unissued Exchangeable Preferred Income
Cumulative Shares, par value $.01 per share (the "Preferred Shares"). Under
certain circumstances, but subject to certain conditions, the Company may redeem
all, but not less than all, of the Preferred Shares of any series solely in
exchange for Depositary Shares (the "Depositary Shares"), each representing a
fractional interest in a share of a series of Preferred Stock, par value $1.00
per share (the "Guarantor Preferred Stock"), of the Guarantor. See "Description
of Preferred Shares--Mandatory Redemption." The total number of Preferred Shares
of all series to be issued under this Prospectus will not exceed 20,000,000.
The payment of dividends, if and to the extent declared out of moneys held
by the Company and lawfully available therefor, and payments on liquidation or
redemption with respect to the Preferred Shares will be guaranteed (the
"Guarantee") by the Guarantor to the extent set forth herein. The Guarantee will
rank junior to all liabilities of the Guarantor and pari passu with the most
senior preferred or preference stock issued by the Guarantor. See "Bear Stearns
Finance LLC", "Description of Preferred Shares--Mandatory Redemption" and
"Description of the Guarantee" for a description of various contractual backup
obligations of the Guarantor.
The Preferred Shares may be issued in amounts, at prices and on other terms
to be determined in light of market conditions at the time of sale. Information
relating to the specific number of shares, title, stated value and liquidation
preference of each share, issuance price, dividend rate or method of
calculation, dividend periods, dividend payment dates, any redemption or sinking
fund provisions, any national securities exchange or other trading market on
which the Preferred Shares may be listed or registered, the terms of any
Depositary Shares representing shares in a series of Guarantor Preferred Stock
that may be issuable in exchange for the Preferred Shares and other specific
terms of each series of Preferred Shares in respect of which this Prospectus is
being delivered shall be set forth in the applicable Prospectus Supplement (the
"Prospectus Supplement").
------------------------
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. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------------------
The Preferred Shares may be offered through dealers, through underwriters
or through agents designated from time to time, as set forth in the applicable
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 applicable Prospectus Supplement may be used by
Bear, Stearns & Co. Inc. in connection with offers and sales of Preferred Shares
and Depositary Shares 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.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 7, 1994
- ---------------
* An application is being filed by Bear, Stearns & Co. Inc. with the United
States Patent and Trademark Office for registration of the EPICS servicemark.
<PAGE>
IN CONNECTION WITH THE OFFERING OF PREFERRED SHARES 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 Guarantor is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Guarantor 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 Guarantor can also be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a joint Registration Statement filed
by the Company and the Guarantor 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 Guarantor. 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.
No separate financial statements of the Company have been included herein.
The Company and the Guarantor do not consider that such financial statements
would be material to holders of the Preferred Shares because the Company is a
newly organized special purpose entity, has no operating history and no
independent operations and is not engaged in any activity other than the
issuance of the Preferred Shares and its common shares, and the lending of the
net proceeds thereof to the Guarantor. The Company is an exempted company with
limited duration incorporated under the laws of the Cayman Islands and will be
managed by the Guarantor which directly and indirectly owns all of the Company's
outstanding ordinary shares (the "Common Shares"), which shares are
nontransferable. The Company has no physical assets located within the United
States. As a result, it may not be possible for investors to effect service of
process within the United States upon the Company or to enforce against it in
the United States courts judgments obtained in such courts predicated upon civil
liability provisions of the federal securities laws of the United States. The
Company has been advised by its
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Cayman Islands legal counsel, Maples and Calder, that there may be doubt as to
the enforceability, in the Cayman Islands in original actions or in actions for
enforcement of judgments of United States courts, of liabilities predicated
solely upon the federal securities laws of the United States.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Guarantor 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
Guarantor'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 Current Report on Form 8-K dated January 13, 1994. All documents filed by
the Guarantor 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 offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Guarantor 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.
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<PAGE>
THE BEAR STEARNS COMPANIES INC.
The Guarantor 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 Guarantor 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 restructuring 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 Guarantor'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 Guarantor's foreign offices
provide services and engage in investment activities involving foreign clients
and international transactions. The Guarantor'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 Guarantor is incorporated in Delaware. The principal executive office
of the Guarantor is located at 245 Park Avenue, New York, New York 10167; its
telephone number is (212) 272-2000.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
The ratio of earnings to combined fixed charges and preferred dividends of
the Guarantor 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 and preferred dividends 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. Preferred dividends represent the pretax
earnings necessary to cover the dividends on the Guarantor's preferred stock
assuming such earnings are taxed at the Guarantor's consolidated effective tax
rate.
BEAR STEARNS FINANCE LLC
The Company is an exempted company with limited duration incorporated under
the laws of the Cayman Islands. The Company's registered offices are located c/o
Maples and Calder, Ugland House, P.O. Box 309, George Town, Grand Cayman, Cayman
Islands, British West Indies, telephone: (809) 949-8066. The Guarantor owns,
directly and indirectly, all of the outstanding Common Shares of the
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<PAGE>
Company, which shares are nontransferable. The Company exists solely for the
purpose of issuing preferred and common shares and lending the net proceeds
thereof to the Guarantor.
Pursuant to the Company's Memorandum of Association (the "Memorandum") and
the applicable provisions of the Companies Law (Revised) of the Cayman Islands,
the Guarantor, as the direct and indirect owner of all of the Common Shares of
the Company, has unlimited liability for the debts and obligations of the
Company, to the extent not fully satisfied and discharged by the Company. That
liability on the part of the Guarantor is enforceable by the liquidator of the
Company in the event of its insolvent liquidation and is for the benefit of
third parties to whom the Company owes such debts and obligations.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to lend to the Guarantor the net proceeds from the issuance and
sale of the Preferred Shares, together with the proceeds from the issuance and
sale of its Common Shares, to be used by the Guarantor for general corporate
purposes, which may include additions to working capital, repayment of
short-term indebtedness and investments in, or extensions of credit to,
subsidiaries of the Guarantor.
DESCRIPTION OF PREFERRED SHARES
The following description of terms of the Preferred Shares sets forth
certain general terms and provisions of the Preferred Shares to which any
Prospectus Supplement may relate. The particular terms of the Preferred Shares
of a series and the extent, if any, to which such general terms do not apply to
such series of Preferred Shares will be described in such Prospectus Supplement.
The Prospectus Supplement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Memorandum, the Articles of
Association of the Company (the "Articles") and the resolutions adopted, or to
be adopted, by the Guarantor, in its capacity as the direct and indirect owner
of all of the Company's Common Shares (the "Common Shareholder"), establishing
the rights, preferences, privileges, limitations and restrictions relating to
the Preferred Shares of any series or of a particular series. Copies of the
Memorandum and the Articles have been filed as exhibits to the Registration
Statement of which this Prospectus forms a part.
GENERAL
The Company is authorized to issue up to 20,000,000 preference shares, par
value $.01 per share, in one or more series or classes, with such dividend
rights, liquidation preference per share, redemption provisions, voting rights
and other rights, preferences, privileges, limitations and restrictions as shall
be set forth in the Articles and the resolutions providing for the issuance
thereof adopted by the Common Shareholder. All of the Preferred Shares, to be
issued in one or more series or classes, will rank pari passu with each other
with respect to participation in profits and assets. The Articles as currently
in effect do not permit the issuance of any preference shares ranking, as to
participation in the profits or the assets of the Company, senior to the
Preferred Shares.
The Preferred Shares of any series will be issued in registered form only
without dividend coupons. Registration of, and registration of transfers of, the
Preferred Shares of any series will be by book entry only. The Preferred Shares
shall have the dividend, liquidation, redemption and voting rights set forth
below unless otherwise specified in the applicable Prospectus Supplement.
Reference is made to the Prospectus Supplement relating to the particular series
of Preferred Shares offered thereby for specific terms, including: (i) the
designation, stated value and liquidation preference of such Preferred Shares
and the number of shares offered; (ii) the dividend rate or rates (or method of
calculation) and the date or dates from which dividends shall accrue; (iii) any
redemption or sinking fund provisions; (iv) the amount that shares of such
series shall be entitled to receive in the event of any liquidation, dissolution
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<PAGE>
or winding up of the Company; (v) the terms and conditions, if any, on which
shares of such series shall, at the option of the Company, be exchangeable, or
redeemable in exchange, for shares of stock of any other class or classes, or
other series of the same class, of the Company or for shares of stock of any
class, or series thereof, of the Guarantor; (vi) the voting rights, if any, of
shares of such series; (vii) the conditions and restrictions, if any, on the
payment of dividends or on the making of other distributions on, or the
purchase, redemption or other acquisition by the Company of a class of stock of
the Company ranking junior to the shares of such series as to dividends or upon
liquidation; (viii) any additional dividend, liquidation, redemption, sinking or
retirement fund and other rights, preferences, privileges, limitations and
restrictions of such Preferred Shares; and (ix) the terms upon which the
proceeds from the sale of the Preferred Shares of such series will be loaned to
the Guarantor. No series of Preferred Shares will be convertible, at the option
of the holders thereof, into shares of any other class or series, whether of the
Company or the Guarantor.
DIVIDENDS
Cumulative dividends on any series of Preferred Shares will accrue from the
date of original issue thereof and will be payable in arrears at the dates
specified in the Prospectus Supplement relating to each such series. Payment of
dividends is limited in relation to the amount of funds held by the Company and
legally available therefor. See "Description of the Loans" in the Prospectus
Supplement and "Description of the Guarantee--General" below.
Dividends declared on the Preferred Shares of any series will be payable to
the record holders thereof as they appear on the register for the Preferred
Shares of such series on the relevant record date, which, in each case, will be,
unless otherwise specified in the Prospectus Supplement relating to each such
series, five Business Days prior to the relevant payment date. Subject to any
applicable fiscal or other laws and regulations, each such payment will be made
as described under "Book-Entry Procedures and Settlement" below. In the event
that any date on which dividends are payable on the Preferred Shares of any
series is not a day on which banks in The City of New York are open for business
and on which foreign exchange dealings may be conducted in The City of New York
(a "Business Day"), then payment of the dividend payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
Dividends on the Preferred Shares of any series will be cumulative.
Dividends on the Preferred Shares of such series will be declared by the Common
Shareholder in any calendar year or portion thereof to the extent that the
Common Shareholder reasonably anticipates that at the time of payment it will
have, and will be paid by the Company to the extent that at the time of proposed
payment it has, (x) earnings legally available for the payment of such dividends
and (y) cash in hand sufficient to permit such payments.
If dividends can be paid only in part on the Preferred Shares of a
particular series in any calendar year or portion thereof as a result of the
lack of sufficient funds legally available for the payment of dividends, then
such partial dividends shall be paid on the respective dividend payment dates on
a pro rata basis to holders of such Preferred Shares.
If at any time dividends on the Preferred Shares are in arrears for any
dividend period, any dividend payments in respect thereof must be applied in
respect of all dividend periods in arrears, pro rata in accordance with the
respective amounts in arrears for each such period in equal amounts for each
such period.
Except as described herein and in the Prospectus Supplement relating to the
Preferred Shares of a particular series, holders of the Preferred Shares will
have no other right to participate in the profits of the Company.
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CERTAIN RESTRICTIONS ON THE COMPANY
If dividends have not been paid in full on the Preferred Shares of any
series, the Company shall not:
(i) pay, or declare and set aside for payment, any dividends on any
other preferred or preference shares of the Company ranking pari passu with
the Preferred Shares of such series as regards participation in profits of
the Company ("Company Dividend Parity Shares"), unless the amount of any
dividends declared on any Company Dividend Parity Shares is paid on the
Company Dividend Parity Shares and the Preferred Shares of such series on a
pro rata basis on the date such dividends are paid on such Company Dividend
Parity Shares, so that
(x)(A) the aggregate amount of dividends paid on the Preferred
Shares of such series bears to (B) the aggregate amount of dividends
paid on such Company Dividend Parity Shares the same ratio as
(y) (A) the aggregate of all accumulated arrears of unpaid
dividends in respect of the Preferred Shares of such series bears to (B)
the aggregate of all accumulated arrears of unpaid dividends in respect
of such Company Dividend Parity Shares;
(ii) pay, or declare and set aside for payment, any dividends on any
shares of the Company ranking junior to the Preferred Shares of such series
as to dividends ("Company Dividend Junior Shares"); or
(iii) redeem, purchase or otherwise acquire any Company Dividend
Parity Shares or Company Dividend Junior Shares;
until, in each case, such time as all accumulated arrears of unpaid dividends on
the Preferred Shares of such series shall have been paid in full for all
dividend periods terminating on or prior to, in the case of clauses (i) and
(ii), such payment, and in the case of clause (iii), the date of such
redemption, purchase or acquisition. As of the date of this Prospectus there are
no Company Dividend Parity Shares outstanding.
MANDATORY REDEMPTION
The proceeds from the repayment or any prepayment in cash of the principal
of any loan to the Guarantor of the proceeds from the issuance of any series of
Preferred Shares must be applied to redeem the Preferred Shares of such series
at the redemption price set forth in the applicable Prospectus Supplement;
provided that amounts so repaid or prepaid may be loaned or reloaned to the
Guarantor if at the time of such new loan, and as determined in the judgment of
the Guarantor, in its capacity as Common Shareholder, and its financial advisor
(which may be an affiliate of the Guarantor), (a) the Guarantor is not the
subject of a pending case under the United States Bankruptcy Code, (b) the
Guarantor is not in default on any loan pertaining to Preferred Shares of any
other series ranking pari passu with such series, (c) the Guarantor timely made
all required monthly payments on the repaid or prepaid loan for the immediately
preceding nine months, (d) the Company is not in arrearage on payments of
dividends on the Preferred Shares of such series, (e) the Guarantor is expected
to be able to make timely payment of principal and interest on the new loan, (f)
such new loan is being made on terms, and under circumstances, that are no less
favorable to the Company than those that a lender would require for a similar
loan to an unrelated party, (g) such new loan is being made at a rate of
interest sufficient to provide monthly payments equal to or greater than the
amount of monthly dividends on the Preferred Shares of such series and (h) such
new loan is being made for a fixed term that is consistent with market
circumstances and the Guarantor's financial condition.
The loan agreement governing the loan by the Company to the Guarantor of
the proceeds from the issuance of each series of Preferred Shares will accord to
the Guarantor the right, at its option but subject to certain conditions, to
issue and deliver to the Company, on any dividend payment date, in exchange for
the note evidencing such loan, shares of a newly-issued series of Guarantor
Preferred
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Stock (or Depositary Shares representing the same), all as more fully set forth
in the applicable Prospectus Supplement. Such exchange option may not be
exercised prior to the expiration of six months following the date of the
original issuance of such series. In the event of such exchange, the Company
shall be obligated to redeem, as an entirety, the series of Preferred Shares the
proceeds of which were the subject of such loan, solely in exchange for shares
of the same series of Guarantor Preferred Stock (or Depositary Shares
representing the same) so delivered to the Company in exchange for the
promissory note, all upon such terms, and subject to such conditions, as shall
be set forth in the resolutions creating such series of Preferred Shares and in
the applicable Prospectus Supplement.
OPTIONAL REDEMPTION
The Preferred Shares of any series will be redeemable, if at all, as
specified in the Prospectus Supplement relating to such series.
Notice of any redemption of the Preferred Shares of any series will be
given by the Company by mail to each record holder to be redeemed not fewer than
30 nor more than 60 days prior to the date fixed for redemption thereof.
In the event that fewer than all the outstanding Preferred Shares of a
particular series are to be redeemed, the Preferred Shares of such series to be
redeemed will be selected as described under "Book-Entry Procedures and
Settlement" below. The Company will not redeem fewer than all the outstanding
Preferred Shares of a particular series unless all accumulated arrears of unpaid
dividends have been paid on all Preferred Shares of such series for all dividend
periods terminating on or prior to the date of redemption.
If the Company gives a notice of redemption in respect of Preferred Shares
of a particular series, then, by 12:00 noon, New York time, on the redemption
date, the Company will irrevocably deposit with The Depository Trust Company
("DTC", which term as used herein, includes any successor or alternate
depository selected by the Company or the Guarantor) funds sufficient to pay the
applicable redemption price, including an amount equal to all accumulated
arrears and accruals of unpaid dividends (whether or not declared) to the date
fixed for redemption, and will give DTC irrevocable instructions and authority
to pay the redemption price to the holders thereof. See "Book-Entry Procedures
and Settlement". If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of holders
of such Preferred Shares of a series so called for redemption will cease, except
the right of the holders of such shares to receive the redemption price, plus
accumulated arrears and accruals of unpaid dividends, if any, but without
interest, and such shares will cease to be outstanding. In the event that any
date on which any payment in respect of the redemption of Preferred Shares of
any series is not a Business Day, then payment of the redemption price payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
redemption price in respect of Preferred Shares of any series is improperly
withheld or refused and not paid either by the Company or by the Guarantor
pursuant to the Guarantee, dividends on such shares will continue to accrue, at
the then applicable rate, from the redemption date to the date of payment of
such redemption price.
Subject to the foregoing and applicable law (including, without limitation,
U.S. federal securities laws) the Guarantor or its subsidiaries may at any time
and from time to time purchase outstanding Preferred Shares of any series by
tender, in the open market or by private agreement.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
Chemical Bank will act as registrar, transfer agent and paying agent for
the Preferred Shares (the "Paying Agent").
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Registration of transfers of Preferred Shares of any series will be
effected without charge by or on behalf of the Company, but upon payment (with
the giving of such indemnity as the Company or the Guarantor may require) in
respect of any tax or other governmental charges which may be imposed in
relation to it.
The Company will not be required to register or cause to be registered the
transfer of Preferred Shares of a particular series after such Preferred Shares
have been called for redemption.
Additional transfer restrictions, if any, relating to the Preferred Shares
of any series will be set forth in the Prospectus Supplement relating to such
series.
MISCELLANEOUS
Holders of Preferred Shares will have no preemptive rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is condensed information concerning the guarantee (the
"Guarantee"), which will be executed and delivered by the Guarantor for the
benefit of the holders from time to time of Preferred Shares. This summary
contains all material information concerning the Guarantee but does not purport
to be complete. References to provisions of the Guarantee are qualified in their
entirety by reference to the text of the Guarantee, a copy of which has been
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part.
GENERAL
The Guarantor will irrevocably and unconditionally agree, to the extent set
forth herein, to pay in full, to the holders of the Preferred Shares of any
series, the Guarantee Payments (as defined below) (except to the extent paid by
the Company), as and when due, regardless of any defense, right of set-off or
counterclaim which the Company may have or assert. The following payments to the
extent not paid by the Company (the "Guarantee Payments") will be subject to the
Guarantee (without duplication): (i) any accumulated arrears and accruals of
unpaid dividends which have been theretofore declared on the Preferred Shares of
such series out of moneys legally available therefor, (ii) the redemption price
(including all accumulated arrears and accruals of unpaid dividends) payable
with respect to Preferred Shares of any series called for redemption by the
Company as an optional redemption or otherwise out of funds available to the
Company, (iii) the lesser of (a) the aggregate of the liquidation preference and
all accumulated arrears and accruals of unpaid dividends (whether or not
declared) to the date of payment and (b) the amount of remaining assets of the
Company and (iv) any Additional Amounts payable by the Company (as defined below
and more fully described in the applicable Prospectus Supplement). The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the holders of Preferred
Shares of any series or by causing the Company to pay any such amounts to such
holders.
CERTAIN COVENANTS
If, at any time that the Guarantor fails to comply with its obligations
under the Guarantee, any proposal by the management of the Guarantor is made to
declare dividends on any shares of the Guarantor ranking junior to the
Guarantor's obligations under the Guarantee as to participation in profits, the
Guarantor shall, or shall cause the Company to, set aside for payment in a
segregated account at the office of the Paying Agent an amount equal to all
accumulated arrears of dividends payable on the Preferred Shares of such series
out of moneys held and legally available therefor and irrevocably instruct the
Paying Agent to pay such amounts as dividends payable on the Preferred Shares of
such series on the day following the date on which such proposal is approved by
all necessary persons. The Paying Agent shall make such payment on such day
unless it shall have received, prior to
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10:00 a.m., New York time, on such day, a certificate from the Guarantor
certifying that such proposal has not been approved by all necessary persons. In
such case, the amounts deposited in such account shall be remitted forthwith to
the Guarantor or the Company, as the case may be. In all cases, any interest
accrued on the amounts deposited in such account shall be remitted by the Paying
Agent to the Guarantor or the Company, as the case may be.
In addition, if, at any time that the Guarantor fails to comply with its
obligations under the Guarantee, the Guarantor (or any subsidiary of the
Guarantor using funds provided by the Guarantor) redeems or purchases or
otherwise acquires any shares of the Guarantor ranking junior to the Guarantor's
obligations under the Guarantee as to participation in assets of the Guarantor
upon liquidation, all accumulated arrears of dividends payable on the Preferred
Shares of such series out of moneys held and legally available therefor shall
immediately become due and payable under the Guarantee; provided, however, that
no such payment shall be required if any such shares of the Guarantor are
redeemed, purchased or otherwise acquired pursuant to any employee stock option
plan of the Guarantor.
Neither the Guarantor, nor any subsidiary of the Guarantor using funds
provided by the Guarantor, shall redeem, purchase or acquire, or pay a
liquidation preference with respect to, any preferred or preference stock of the
Guarantor ranking pari passu with the Guarantee, any preferred or preference
stock of affiliates of the Guarantor (including the Company) entitled to the
benefits of a guarantee of the Guarantor ranking pari passu with the Guarantee
or any preferred or preference stock of affiliates of the Guarantor entitled to
the benefits of a guarantee ranking junior to the Guarantee as to participation
in assets of the Guarantor upon liquidation if at such time the Guarantor shall
be in default with respect to its obligations under the Guarantee.
Neither the Guarantor, nor any subsidiary of the Guarantor using funds
provided by the Guarantor, shall pay dividends, or make guarantee payments with
respect to dividends, on any preferred or preference stock of affiliates of the
Guarantor entitled to the benefits of a guarantee ranking junior to the
Guarantee as to participation in profits of the Guarantor if at such time the
Guarantor shall be in default with respect to its obligations under the
Guarantee.
Pursuant to the Guarantee, the Guarantor will agree (i) to maintain
ownership, directly and indirectly, of 100% of the Common Shares of the Company,
(ii) not to voluntarily dissolve, wind-up or liquidate the Company so long as
any Preferred Shares are outstanding and (iii) to use its reasonable efforts to
cause the Company to remain an exempted company with limited duration under the
laws of the Cayman Islands and otherwise continue to be treated as a partnership
for United States federal income tax purposes.
If the Guarantor issues, following the date of this Prospectus, any
preferred or preference shares ranking senior to its obligations under the
Guarantee or enters into any guarantee in respect of any preferred or preference
shares of any affiliate of the Guarantor, which guarantee would rank junior to
all liabilities of the Guarantor but senior to the Guarantee as regards rights
in respect of dividends, liquidation preference and distributions, and rights
upon redemption, then the Guarantee will be deemed to give the holders of
Preferred Shares such rights and entitlements as are contained in or attached to
such other preferred or preference stock or guarantee such that the Guarantee
ranks pari passu as to such rights and entitlements with any such preferred or
preference stock or other guarantee.
ADDITIONAL AMOUNTS
All Guarantee Payments will be made without withholding or deduction for or
on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied upon or as a result of such payment
by or on behalf of the Cayman Islands, or any authority therein or thereof
having power to tax, unless the withholding or deduction of such taxes, duties,
assessments or governmental charges is required by law. In that event, the
Guarantor will pay such additional amounts as may be necessary in order that the
net amounts received by the holders of the
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Preferred Shares after such withholding or deduction will equal the amount which
would have been receivable in respect of the Preferred Shares in the absence of
such withholding or deduction (the "Additional Amounts"), except that no such
Additional Amounts will be payable to a holder of the Preferred Shares (or a
third party on his behalf) with respect to any of the Preferred Shares:
(a) if such holder is liable for such taxes, duties, assessments or
governmental charges for which the withholding or deduction was imposed in
respect of the income from the Preferred Shares by reason of such holder's
having some connection with the Cayman Islands, other than being a holder
of the Preferred Shares; or
(b) if the Company or the Guarantor has notified such holder of the
obligation to withhold taxes and requested but not received from such
holder a declaration of non-residence or other similar claim for exemption,
and such withholding or deduction would not have been required had such
declaration or similar claim been received.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially and adversely
affect the rights of holders of Preferred Shares (in which case no vote will be
required), the Guarantee may be changed only with the prior approval of the
holders of not less than 66 2/3% of the outstanding Preferred Shares given
either in writing or by vote at a duly constituted meeting of such holders. All
guarantees and agreements contained in the Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Guarantor and shall
inure to the benefit of the holders of the Preferred Shares. The quorum for any
such meeting and the determination of the Preferred Shares of each series
entitled to vote shall be as set forth in the Prospectus Supplement relating to
that series.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect as to
the Preferred Shares of any series upon either (i) full payment of the
redemption price (including all accumulated arrears and accruals of unpaid
dividends) for all Preferred Shares of that series, including any redemption in
exchange for Guarantor Preferred Stock (or Depositary Shares representing the
same) or (ii) upon full payment of the amounts payable upon liquidation of the
Company. The Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of Preferred Shares of any series
must restore payment of any sums paid under the Preferred Shares of such series
or under the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Guarantor and
will rank (i) junior to all liabilities of the Guarantor, (ii) pari passu with
the most senior preferred or preference stock issued by the Guarantor and with
any guarantee entered into by the Guarantor in respect of any preferred or
preference stock of any affiliate of the Guarantor and (iii) senior to the
Guarantor's common shares.
The Guarantee will constitute a guarantee of payment and not of collection.
A holder of Preferred Shares may enforce the Guarantee directly against the
Guarantor, and the Guarantor will waive any right or remedy to require that any
action be brought against the Company or any other person or entity before
proceeding against the Guarantor. The Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Company
and by complete performance of all obligations under the Guarantee.
GOVERNING LAW
The Guarantee will be governed and construed in accordance with the laws of
the State of New York.
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DESCRIPTION OF GUARANTOR PREFERRED STOCK
The following description of the terms of the Guarantor Preferred Stock
sets forth certain general terms and provisions of the Guarantor Preferred Stock
to which any Prospectus Supplement may relate. The particular terms of the
Guarantor Preferred Stock and the extent, if any, to which such general terms do
not apply to such Guarantor Preferred Stock will be described in such Prospectus
Supplement. The description of the terms of the Guarantor Preferred Stock set
forth below and in any Prospectus Supplement does not purport to be complete and
is subject to and qualified in its entirety by reference to the Guarantor's
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
including the Certificate of Designations (the "Certificate of Designations")
relating to the Guarantor Preferred Stock. The Certificate of Incorporation and
any such Certificate of Designations are filed as exhibits to or will be
incorporated by reference in the Registration Statement of which this Prospectus
forms a part.
GENERAL
The Guarantor is authorized by its Certificate of Incorporation to issue
10,000,000 shares of Guarantor Preferred Stock which may be issued from time to
time in one or more series and, subject to the provisions of the Certificate of
Incorporation applicable to all series of Guarantor Preferred Stock, shall have
such designations, voting powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated in the resolution or resolutions
providing for the issue thereof adopted by the Guarantor's Board of Directors
(the "Board of Directors") or a duly authorized committee thereof.
The Guarantor Preferred Stock shall have the dividend, liquidation,
redemption and voting rights set forth below unless otherwise specified in the
applicable Prospectus Supplement. Reference is made to the Prospectus Supplement
relating to the particular series of Guarantor Preferred Stock for specific
terms, including: (i) the designation, stated value and liquidation preference
of such Guarantor Preferred Stock and the number of shares offered; (ii) the
dividend rate or rates (or method of calculation), the date or dates from which
dividends shall accrue, and whether such dividends shall be cumulative or
noncumulative and, if cumulative, the dates from which dividends shall commence
to cumulate; (iii) any redemption or sinking fund provisions; (iv) the amount
that shares of such series shall be entitled to receive in the event of any
liquidation, dissolution or winding up of the Guarantor; (v) the terms and
conditions, if any, on which shares of such series shall be exchangeable for
shares of stock of any other class or classes, or other series of the same
class, of the Guarantor; (vi) the voting rights, if any, of shares of such
series in addition to those set forth in "Voting Rights" below; (vii) the
conditions and restrictions, if any, on the payment of dividends or on the
making of other distributions on, or the purchase, redemption or other
acquisition by the Guarantor or any subsidiary, of the common stock or of any
other class of stock of the Guarantor ranking junior to the shares of such
series as to dividends or upon liquidation; (viii) the conditions and
restrictions, if any, on the creation of indebtedness of the Guarantor, or any
subsidiary, or on the issue of any additional stock ranking on a parity with or
prior to the shares of such series as to dividends or upon liquidation; and (ix)
any additional dividend, liquidation, redemption, sinking or retirement fund and
other rights, preferences, privileges, limitations and restrictions of such
Guarantor Preferred Stock.
The Guarantor Preferred Stock will, when issued, be fully paid and
nonassessable. Unless otherwise specified in the applicable Prospectus
Supplement, the shares of each series of Guarantor Preferred Stock will upon
issuance rank on a parity in all respects with the outstanding shares of the
Guarantor's Adjustable Rate Cumulative Preferred Stock, Series A, 7.88%
Cumulative Preferred Stock, Series B and 7.60% Cumulative Preferred Stock,
Series C. As of January 25, 1994, there were 881,450 shares of Adjustable Rate
Cumulative Preferred Stock, Series A, 937,500 shares of 7.88% Cumulative
Preferred Stock, Series B, and 500,000 shares of 7.60% Cumulative Preferred
Stock, Series C of the Guarantor outstanding with an aggregate liquidation
preference of $331,573,000. The
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Guarantor Preferred Stock will have no preemptive rights to subscribe for any
additional securities that may be issued by the Guarantor.
DIVIDENDS
Unless otherwise set forth in the applicable Prospectus Supplement, before
any dividends may be declared or paid to the holders of shares of the Common
Stock, par value $1.00 per share, of the Guarantor (the "Common Stock") or of
any other capital stock of the Guarantor ranking junior to any series of the
Guarantor Preferred Stock as to the payment of dividends, the holders of the
Guarantor Preferred Stock of that series will be entitled to receive, when and
as declared by the Board of Directors or a duly authorized committee thereof,
out of the net profits or net assets of the Guarantor legally available
therefor, dividends payable at such times and at such rates as will be specified
in the applicable Prospectus Supplement. Such rates may be fixed or variable or
both. If variable, the formula used for determining the dividend rate for each
dividend period will be specified in the applicable Prospectus Supplement.
Unless otherwise set forth in the applicable Prospectus Supplement, dividends
will be payable to the holders of record as they appear on the stock transfer
records of the Guarantor on such dates as may be fixed by the Board of Directors
or a duly authorized committee thereof.
Dividends on any series of Guarantor Preferred Stock may be cumulative or
noncumulative, as specified in the applicable Prospectus Supplement. If the
Board of Directors fails to declare a dividend payable on a dividend payment
date on any series of Guarantor Preferred Stock for which dividends are
noncumulative ("Noncumulative Guarantor Preferred Stock"), then the holders of
the Guarantor Preferred Stock of that series will have no right to receive a
dividend in respect of the dividend period relating to such dividend payment
date, and the Guarantor will have no obligation to pay the dividend accrued for
such period, whether or not dividends on that series are declared or paid on any
future dividend payment dates. If dividends on any series of Guarantor Preferred
Stock are not paid in full or declared in full and sums set apart for the
payment thereof, then no dividends shall be declared and paid on that series
unless declared and paid ratably on all shares of every series of Guarantor
Preferred Stock then outstanding, including dividends accrued or in arrears, if
any, in proportion to the respective amounts that would be payable per share if
all such dividends were declared and paid in full.
The Prospectus Supplement relating to a series of Guarantor Preferred Stock
will specify the conditions and restrictions, if any, on the payment of
dividends or on the making of other distributions on, or the purchase,
redemption or other acquisition by the Guarantor or any subsidiary thereof of,
the Common Stock or of any other class of stock of the Guarantor ranking junior
to the shares of that series as to dividends or upon liquidation and any other
preferences, rights, restrictions and qualifications that are not inconsistent
with the Certificate of Incorporation.
LIQUIDATION RIGHTS
Unless otherwise set forth in the applicable Prospectus Supplement, upon
any liquidation, dissolution or winding up of the Guarantor (whether voluntary
or involuntary), the holders of Guarantor Preferred Stock of that series will be
entitled to receive out of the assets of the Guarantor available for
distribution to its stockholders, whether from capital, surplus or earnings, the
amount specified in the applicable Prospectus Supplement for that series,
together with all dividends accrued and unpaid, before any distribution of the
assets will be made to the holders of Common Stock or any other class or series
of shares ranking junior to that series of Guarantor Preferred Stock upon
liquidation, dissolution or winding up, and will be entitled to no other or
further distribution. If, upon any liquidation, dissolution or winding up of the
Guarantor, the assets distributable among the holders of a series of Guarantor
Preferred Stock shall be insufficient to permit the payment in full to the
holders of that series of Guarantor Preferred Stock of all amounts payable to
those holders, then the entire assets of the Guarantor thus distributable will
be distributed ratably among the holders of that series in proportion to the
respective amounts that would be payable per share if those assets were
sufficient to permit payment in full.
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Neither the consolidation, merger or other business combination of the
Guarantor with or into any other individual, firm, corporation or other entity
nor the sale, lease, exchange or conveyance of all or any part of the property,
assets or business of the Guarantor will be deemed to be a liquidation,
dissolution or winding up of the Guarantor.
REDEMPTION
If so specified in the applicable Prospectus Supplement, any series of
Guarantor Preferred Stock may be redeemable, in whole or in part, at the option
of the Guarantor or pursuant to a retirement or sinking fund or otherwise, on
terms and at the times and the redemption prices specified in that Prospectus
Supplement. If less than all shares of the series at the time outstanding are to
be redeemed, the shares to be redeemed will be selected pro rata or by lot, in
such manner as may be prescribed by resolution of the Board of Directors.
Notice of any redemption of a series of Guarantor Preferred Stock will be
given by publication in a newspaper of general circulation in the Borough of
Manhattan, The City of New York, such publication to be made not less than 30
nor more than 60 days prior to the redemption date. A similar notice will be
mailed by the Guarantor, postage prepaid, not less than 30 nor more than 60 days
prior to the redemption date, addressed to the respective holders of record of
shares of that series at the addresses shown on the stock transfer records of
the Guarantor, but the mailing of such notice will not be a condition of such
redemption. In order to facilitate the redemption of shares of Guarantor
Preferred Stock, the Board of Directors may fix a record date for the
determination of the shares to be redeemed, and such record date will be not
more than 60 days nor less than 30 days prior to the redemption date.
Prior to the redemption date, the Guarantor will deposit money for the
payment of the redemption price with a bank or trust company doing business in
the Borough of Manhattan, The City of New York, and having a capital and surplus
of at least $10,000,000. Unless the Guarantor fails to make such deposit, on the
redemption date, all dividends on the series of Guarantor Preferred Stock called
for redemption will cease to accrue and all rights of the holders of shares of
that series as stockholders of the Guarantor shall cease, except the right to
receive the redemption price (but without interest). Unless otherwise specified
in the applicable Prospectus Supplement, any monies so deposited which remain
unclaimed by the holders of the shares of that series at the end of six years
after the redemption date will become the property of, and will be paid by the
bank or trust company with which it has been so deposited to, the Guarantor.
CONVERSION RIGHTS
Guarantor Preferred Stock will not be convertible into Common Stock.
VOTING RIGHTS
Unless otherwise determined by the Board of Directors of the Guarantor and
set forth in the Prospectus Supplement applicable to a particular series of
Guarantor Preferred Stock, holders of the Guarantor Preferred Stock of that
series will not have any voting rights except as set forth below or as otherwise
from time to time required by law. Whenever dividends on any series of Guarantor
Preferred Stock or any other class or series of stock ranking on a parity with
that series with respect to the payment of dividends shall be in arrears for
dividend periods, whether or not consecutive, containing in the aggregate a
number of months equivalent to six calendar quarters, the holders of shares of
that series (voting separately as a class with all other series of Guarantor
Preferred Stock upon which like voting rights have been conferred and are
exercisable) will be entitled to vote for the election of two of the authorized
number of directors of the Guarantor at the next annual meeting of stockholders
and at each subsequent meeting until all dividends accumulated on that series
have been fully paid or set apart for payment. The term of office of all
directors elected by the holders of a series of Guarantor Preferred Stock shall
terminate immediately upon the termination of the right of the holders of that
series to vote
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for directors. Whenever the shares of a series are or become entitled to vote,
each holder of shares of that series will have one vote for each share held.
So long as shares of any series of Guarantor Preferred Stock remain
outstanding, the Guarantor shall not, without the consent of the holders of at
least 66 2/3% of the shares of that series outstanding at the time (voting
separately as a class with all other series of Guarantor Preferred Stock upon
which like voting rights have been conferred and are exercisable), (i) issue or
increase the authorized amount of any class or series of stock ranking senior to
the shares of that series as to dividends or upon liquidation or (ii) amend,
alter or repeal the provisions of the Certificate of Incorporation or of the
resolutions contained in the Certificate of Designations, whether by merger,
consolidation or otherwise, so as to materially and adversely affect any power,
preference or special right of the outstanding shares of that series or the
holders thereof; provided however, that any increase in the amount of the
authorized Common Stock or authorized Guarantor Preferred Stock or the creation
and issuance of Common Stock or any other series of Guarantor Preferred Stock
ranking on a parity with or junior to a series of Guarantor Preferred Stock as
to dividends and upon liquidation shall not be deemed to materially and
adversely affect the powers, preferences or special rights of the shares of that
series.
Unless otherwise indicated in the applicable Prospectus Supplement, the
transfer agent, dividend disbursing agent and registrar for each series of
Guarantor Preferred Stock will be Security Trust Company, N.A.
DESCRIPTION OF DEPOSITARY SHARES
The following summary and the summary in any Prospectus Supplement of the
terms and provisions of the Depositary Shares and Depositary Receipts does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Deposit Agreement relating to the applicable series of
Guarantor Preferred Stock, which will be filed as an exhibit to or incorporated
by reference in the Registration Statement of which this Prospectus forms a
part.
GENERAL
The Guarantor, at its option, may elect to offer fractional interests in
shares of a series of Guarantor Preferred Stock, rather than whole shares. If
the option is exercised, the Guarantor will provide for the issuance by a
depositary of depositary receipts ("Depositary Receipts") evidencing depositary
shares ("Depositary Shares"), each of which will represent a fractional interest
(to be specified in the applicable Prospectus Supplement) in a share of a
particular series of the Guarantor Preferred Stock as more fully described
below.
If the Guarantor offers fractional shares of any series of Guarantor
Preferred Stock, those shares will be deposited under a separate deposit
agreement (a "Deposit Agreement") among the Guarantor, a bank or trust company
selected by the Guarantor and having its principal office in the United States
and having a combined capital and surplus of at least $50,000,000 (the
"Depositary") and the holders from time to time of the Depositary Receipts
issued thereunder by that Depositary. The applicable Prospectus Supplement will
set forth the name and address of the Depositary. Subject to the terms of the
Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fractional interest in a share of Guarantor
Preferred Stock underlying such Depositary Share, to all the rights and
preferences of the fractional share of Guarantor Preferred Stock underlying such
Depositary Share (including dividend, voting, redemption and liquidation
rights).
Pending the preparation of definitive engraved Depositary Receipts, upon
the written order of the Guarantor, the Depositary may issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay,
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and temporary Depositary Receipts will be exchangeable for definitive Depositary
Receipts at the Guarantor's expense.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute to the holders of Depositary Receipts
evidencing Depositary Shares all cash dividends or other cash distributions
received in respect of the underlying fractional shares of Guarantor Preferred
Stock in proportion to their respective holdings of the Depositary Shares on the
relevant record date. However, the Depositary will distribute only the amount
that can be distributed without attributing to any holder of Depositary Shares a
fraction of one cent, and any balance not so distributed will be held by the
Depositary (without liability for interest thereon) and will be added to and
treated as part of the next sum received by the Depositary for distribution to
holders of Depositary Receipts then outstanding.
If the Guarantor distributes property other than cash in respect of shares
of Guarantor Preferred Stock deposited under a Deposit Agreement, the Depositary
will distribute the property received by it to the record holders of Depositary
Receipts evidencing the Depositary Shares relating to those shares of Guarantor
Preferred Stock, in proportion, as nearly as may be practicable, to their
respective holdings of the Depositary Shares on the relevant record date, unless
the Depositary determines that it is not feasible to make such a distribution,
in which case the Depositary may, with the approval of the Guarantor, adopt such
method as it deems equitable and practicable to give effect to the distribution,
including the sale of the property so received and distribution of the net
proceeds from such sale to the holders of the Depositary Receipts.
Each Deposit Agreement will also contain provisions relating to the manner
in which any subscription or similar rights offered by the Guarantor to holders
of the Guarantor Preferred Stock deposited under such Deposit Agreement will be
made available to holders of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
If the shares of Guarantor Preferred Stock deposited under a Deposit
Agreement are subject to redemption, in whole or in part, then, upon any such
redemption, the Depositary Shares relating to those deposited shares will be
redeemed from the proceeds received by the Depositary as a result of the
redemption. Whenever the Guarantor redeems shares of Guarantor Preferred Stock
held by a Depositary, the Depositary will redeem as of the same redemption date
the number of Depositary Shares representing the shares of Guarantor Preferred
Stock so redeemed. The Depositary will mail the notice of redemption not less
than 20 and not more than 50 days prior to the date fixed for redemption to the
record holders of the Depositary Shares to be so redeemed. The redemption price
per Depositary Share will be equal to the applicable fraction of the per share
redemption price of the Guarantor Preferred Stock underlying such Depositary
Share. If less than all the Depositary Shares are to be redeemed, the Depositary
Shares to be redeemed will be selected by lot or pro rata as may be determined
by the Depositary.
If notice of redemption shall have been given as described above, from and
after the date fixed for redemption, unless the Guarantor shall have failed to
redeem the shares of Guarantor Preferred Stock so called for redemption, the
Depositary Shares so called for redemption will no longer be deemed to be
outstanding, and all rights of the holders of such Depositary Shares will cease,
except for the right to receive the monies payable upon such redemption and any
money or other property to which the holders of such Depositary Shares were
entitled upon such redemption, upon surrender to the Depositary of the
Depositary Receipts evidencing such Depositary Shares.
VOTING RIGHTS
As soon as practicable after receipt of notice of any meeting at which the
holders of shares of Guarantor Preferred Stock deposited under a Deposit
Agreement are entitled to vote, the Depositary
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will mail the information contained in that notice of meeting (and any
accompanying proxy materials) to the holders of the Depositary Shares relating
to such Guarantor Preferred Stock as of the record date for such meeting. Each
such holder will be entitled, subject to any applicable restrictions, to
instruct the Depositary as to the exercise of the voting rights of the Guarantor
Preferred Stock represented by such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the Guarantor Preferred Stock
represented by those Depositary Shares in accordance with the holder's
instructions, and the Guarantor will agree to take all action deemed necessary
by the Depositary to enable the Depositary to do so. The Depositary will abstain
from voting shares of Guarantor Preferred Stock deposited under a Deposit
Agreement as to which it has not received specific instructions from the holders
of the Depositary Shares representing those shares.
WITHDRAWAL OF STOCK
Upon surrender of Depositary Receipts at the principal office of the
relevant Depositary (unless the Depositary Shares evidenced thereby have
previously been called for redemption), and subject to the terms of the related
Deposit Agreement, the owner of the Depositary Shares evidenced thereby shall be
entitled to delivery of whole shares of Guarantor Preferred Stock and all money
and other property, if any, represented by those Depositary Shares. Fractional
shares of Guarantor Preferred Stock will not be delivered. If the Depositary
Receipts surrendered by the holder evidence Depositary Shares in excess of those
representing the number of whole shares of Guarantor Preferred Stock to be
withdrawn, the Depositary will deliver to the holder at the same time a new
Depositary Receipt evidencing the Depositary Shares. Holders of shares of
Guarantor Preferred Stock thus withdrawn will not thereafter be entitled to
deposit such shares under a Deposit Agreement or to receive Depositary Shares
therefor. The Guarantor does not expect that there will be any public trading
market for the Guarantor Preferred Stock, except as represented by Depositary
Shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing any Depositary Shares and any
provision of a Deposit Agreement may at any time and from time to time be
amended by agreement between the Guarantor and the Depositary. However, any
amendment that materially and adversely alters the rights of the existing
holders of Depositary Shares will not be effective unless and until approved by
the holders of at least a majority of the Depositary Shares then outstanding
under that Deposit Agreement. Each Deposit Agreement will provide that each
holder of Depositary Shares at the time an amendment becomes effective who
continues to hold those Depositary Shares will be deemed to have consented to
the amendment and will be bound thereby. Except as may be necessary to comply
with any mandatory provisions of applicable law, no amendment may impair the
right, subject to the terms of the related Deposit Agreement, of any holder of
any Depositary Shares to surrender the Depositary Receipt evidencing those
Depositary Shares to the Depositary together with instructions to deliver to the
holder the whole shares of Guarantor Preferred Stock represented by the
surrendered Depositary Shares and all money and other property, if any,
represented thereby. A Deposit Agreement may be terminated by the Guarantor or
the Depositary only if (i) all outstanding Depositary Shares issued thereunder
have been redeemed or (ii) there has been a final distribution in respect of the
Guarantor Preferred Stock relating to those Depositary Shares in connection with
any liquidation, dissolution or winding up of the Guarantor and the amount
received by the Depositary as a result of that distribution has been distributed
by the Depositary to the holders of those Depositary Shares.
CHARGES OF DEPOSITARY
The Guarantor will pay all transfer and other taxes and governmental
charges arising solely from the existence of the depositary arrangements. The
Guarantor will pay charges of any Depositary in connection with the initial
deposit of Guarantor Preferred Stock and the initial issuance of the relevant
Depositary Shares and any redemption of such Guarantor Preferred Stock. Holders
of Depositary
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Shares will pay any other taxes and charges incurred for their accounts as are
provided in the relevant Deposit Agreement.
MISCELLANEOUS
Each Depositary will forward to the holders of Depositary Shares issued by
that Depositary all reports and communications from the Guarantor that are
delivered to the Depositary and that the Guarantor is required to furnish to the
holders of the Guarantor Preferred Stock held by the Depositary. In addition,
each Depositary will make available for inspection by the holders of those
Depositary Shares, at the principal office of such Depositary and at such other
places as it may from time to time deem advisable, all reports and
communications received from the Guarantor that are received by such Depositary
as the holder of Guarantor Preferred Stock.
Neither any Depositary nor the Guarantor will assume any obligation or will
be subject to any liability under a Deposit Agreement to holders of the
Depositary Shares other than for its negligence or willful misconduct. Neither
any Depositary nor the Guarantor will be liable if it is prevented or delayed by
law or any circumstance beyond its control in performing its obligations under a
Deposit Agreement. The obligations of the Guarantor and any Depositary under a
Deposit Agreement will be limited to performance in good faith of their duties
thereunder, and they will not be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Guarantor Preferred Stock
unless satisfactory indemnity is furnished. The Guarantor and any Depositary may
rely on written advice of counsel or accountants, on information provided by
persons presenting Guarantor Preferred Stock for deposit, holders of Depositary
Shares or other persons believed in good faith to be competent to give such
information and on documents believed to be genuine and to have been signed or
presented by the proper party or parties.
RESIGNATION AND REMOVAL OF DEPOSITARY
A Depositary may resign at any time by delivering to the Guarantor notice
of its election to do so, and the Guarantor may at any time remove any
Depositary, any such resignation or removal to take effect upon the appointment
of a successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States of America and having a combined capital and surplus
of at least $50,000,000.
FEDERAL INCOME TAX CONSEQUENCES
Owners of the Depositary Shares will be treated for federal income tax
purposes as if they were owners of the Guarantor Preferred Stock represented by
such Depositary Shares.
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Each series of Preferred Shares and each series of Guarantor Preferred
Stock (or Depositary Shares representing the same) (collectively, the
"Securities") may be issued in certificated or book-entry form, as specified in
the applicable Prospectus Supplement. The Securities issued in book-entry form
from the perspective of the beneficial owners thereof (the "Securityholders")
will be issued in the form of a single global stock certificate or a single
global Depositary Receipt (as the case may be) registered in the name of the
nominee of DTC.
DTC is a limited-purpose trust company created to hold securities for its
participating organizations (the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in the accounts of the Participants. Participants
include securities brokers and dealers, banks and trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to others (such as banks,
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brokers, dealers and trust companies) that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). Persons who are not Participants or Indirect Participants may
beneficially own securities held by DTC only through Participants or Indirect
Participants.
DTC's nominee for all purposes will be considered the sole owner or holder
of the securities held in book-entry form. Owners of beneficial interests in the
global stock certificate or Depositary Receipt will not be entitled to have the
Securities registered in their names, will not receive or be entitled to receive
physical delivery of the Securities in definitive form, and will not be
considered the holders thereof under the Memorandum, Certificate of
Incorporation or any Deposit Agreement.
Neither the Guarantor nor the Depositary will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the global stock certificate or Depositary
Receipt, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
A Securityholder's ownership of the Securities issued in book-entry form
will be recorded on or through the records of the brokerage firm or other entity
that maintains that Securityholder's account. In turn, the total number of
shares of the Securities held by an individual brokerage firm or other entity
for its clients will be maintained on the records of DTC in the name of that
brokerage firm or other entity (or in the name of a Participant that acts as
agent for the Securityholder's brokerage firm or other entity if it is not a
Participant). Therefore, a Securityholder must rely upon the records of the
Securityholder's brokerage firm or other entity to evidence the Securityholder's
ownership of the Securities and transfer of ownership of those Securities may be
effected only through the brokerage firm or other entity that maintains the
Securityholder's account.
If less than all of the Preferred Shares of any series are being redeemed,
DTC's practice is to determine by lot the amount of the interest of each
participant in such series to be redeemed.
Dividends or other distributions payable in respect of the Securities will
be paid by the Guarantor or the Depositary, as the case may be, to DTC. DTC will
be responsible for crediting the amount of payments that it receives to the
accounts of the Participants in accordance with their respective standard
procedures, which currently provide for payment in next-day funds. Each
Participant will be responsible for disbursing the payments for which it is so
credited to the Securityholders that it represents and to each brokerage firm or
other entity for which it acts as agent. Each such brokerage firm or other
entity will be responsible for disbursing funds to the Securityholders that it
represents. It is suggested that any purchaser of the Securities with accounts
at more than one brokerage firm or other entity effect transactions in the
Securities only through the brokerage firm or firms or other entity or entities
that hold such purchaser's Securities.
If DTC is at any time unwilling or unable to continue as depository in
respect of a global certificate or global Depositary Receipt and a successor
depository is not appointed by the Guarantor or the Depositary, as the case may
be, within 90 days, the Guarantor will issue Securities, as the case may be, in
definitive form in exchange for the global stock certificate or global
Depositary Receipt. In addition, the Guarantor may determine at any time not to
have the Securities represented by a global stock certificate or global
Depositary Receipt (as the case may be), and, in such event, will issue the
Securities in definitive form in exchange for such global stock certificate or
global Depositary Receipt. In either instance, an owner of a beneficial interest
in the global stock certificate or global Depositary Receipt will be entitled to
have the Securities equal in aggregate amount to that beneficial interest
registered in its name and will be entitled to physical delivery of a definitive
certificate or other instrument evidencing such Securities. The registered
holder of the Securities will be entitled to receive the dividends or other
distributions or, if applicable, the redemption price payable in respect of such
Securities, upon surrender of the certificate (or Depositary Receipt) evidencing
such Securities to the Guarantor or the Depositary (as the case may be), in
accordance with the procedures set forth in the Memorandum, Certificate of
Incorporation or Deposit Agreement (as the case may be).
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LIMITATIONS AFFECTING SECURITIES HOLDERS
There are no exchange control laws or regulations in effect under current
Cayman Islands legislation.
TAXATION
UNITED STATES
The following is a summary of the principal U.S. federal income tax
consequences, based on the advice of Weil, Gotshal & Manges, of the purchase,
ownership, and disposition of the Preferred Shares, to a holder that is a
citizen or resident of the United States, a corporation, partnership, or other
entity created or organized under the laws of the United States or any state
thereof or the District of Columbia, an estate or trust the income of which is
subject to U.S. federal income taxation regardless of source, or a person that
is otherwise subject to U.S. federal income tax on a net income basis with
respect to the Preferred Shares (a "U.S. Holder"). Because the Preferred Shares
will be offered and sold only to investors that are U.S. Holders, this summary
does not address the U.S. federal income tax consequences to persons other than
U.S. Holders.
This summary is based on the U.S. federal income tax laws, regulations, and
ruling and decisions now in effect, all of which are subject to change, possibly
on a retroactive basis. This summary considers only initial U.S. Holders that
hold the Preferred Shares as capital assets, and does not address the tax
consequences applicable to subsequent purchasers of Preferred Shares or to
investors that may be subject to special tax rules such as banks, insurance
companies, dealers in stocks, tax exempt persons, persons that will hold the
Preferred Shares as a position in a "straddle," as part of a "synthetic
security" or "hedge," or as part of a "conversion transaction" or other
integrated investment. This summary also does not address the tax consequences
to persons that have a functional currency other than the U.S. dollar. It does
not include any description of the tax laws of any state or local government or
of any foreign government that may be applicable to the Preferred Shares or the
holders thereof. For a description of certain consequences with respect to the
tax laws of the Cayman Islands, see the discussion below under the heading
"Cayman Islands."
INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE U.S.
FEDERAL INCOME TAX CONSEQUENCES OF HOLDING THE PREFERRED SHARES AS WELL AS THE
APPLICATION OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
Income from the Preferred Shares
In the opinion of Weil, Gotshal & Manges, the Company will be treated as a
partnership for U.S. federal income tax purposes. Such opinion relies, in part,
upon the opinion of Maples and Calder as to certain matters of Cayman Islands
law. Copies of the opinions of Weil, Gotshal & Manges and Maples and Calder have
been filed as exhibits to the Registration Statement of which this Prospectus is
a part. Each holder of the Preferred Shares (a "Shareholder") will be required
to include in his gross income his distributive share of the Company's net
income, which generally will be an amount equal to the dividends on the
Preferred Shares held by such Shareholder. A Shareholder's distributive share of
such income should not exceed such dividends on the Preferred Shares, except in
the limited circumstances described below under "Potential Extension of the
Payment Period" and "Use of Convention." Any amount so included in a
Shareholder's gross income will increase his tax basis in the Preferred Shares
and the amount of cash dividends to the Shareholder will reduce his tax basis in
the Preferred Shares. No portion of such income will be eligible for the
dividends-received deduction.
Disposition of the Preferred Shares
Except as described below under "Redemption of the Preferred Shares in
Exchange for Guarantor Preferred Stock," gain or loss will be recognized on a
sale, exchange or other disposition of the Preferred Shares (including a
distribution of cash in redemption of all of a Shareholder's Preferred Shares)
equal to the difference between the amount realized and the Shareholder's tax
basis in the Preferred Shares
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disposed of. In the case of a cash distribution in partial redemption of a
Shareholder's Preferred Shares, no loss will be recognized, the Shareholder's
tax basis in the Preferred Shares will be reduced by the amount of the
distribution, and the Shareholder will recognize gain to the extent, if any,
that the amount of the distribution exceeds his tax basis in the Preferred
Shares. Gain or loss recognized by a Shareholder on the sale or exchange (or on
a distribution of cash in redemption) of a Preferred Share held for more than
one year will generally be long-term capital gain or loss.
Redemption of the Preferred Shares in Exchange for Guarantor Preferred Stock
The Guarantor will have the right, subject to certain conditions, to issue
and deliver to the Company, in exchange for the note evidencing the loan of the
proceeds from the sale of each series of Preferred Shares (the "Loan Note"),
shares of a series of Guarantor Preferred Stock (or Depositary Shares
representing the same). As noted under "Description of Preferred
Shares--Mandatory Redemption," in the event of such exchange, the Company is
obligated to redeem such series of Preferred Shares, as an entirety, solely in
exchange for shares of the same series of Guarantor Preferred Stock (or
Depositary Shares representing the same) so delivered to the Company by the
Guarantor. Such exchange and redemption will not cause the Company to recognize
taxable gain or loss.
If the fair value of the Guarantor Preferred Stock (or Depositary Shares)
received by a Shareholder upon such redemption exceeds the Shareholder's tax
basis in the Preferred Shares so redeemed, the Shareholder may be required to
recognize taxable income or gain in an amount equal to such excess.
Alternatively, if the Shareholder's tax basis in the Preferred Shares exceeds
the fair value of the Guarantor Preferred Stock (or Depository Shares) received
upon such redemption, the Shareholder may recognize a loss (or expense item) in
an amount equal to such excess. If such a loss (or expense item) is recognized,
its deductibility by a Shareholder may be subject to limitations (such as the
limitation on deductibility of capital losses), the application of which will
depend upon the Shareholder's personal tax situation. A Shareholder's aggregate
tax basis in the Guarantor Preferred Stock (or Depositary Shares representing
the same) received upon such redemption should be equal to such Shareholder's
aggregate tax basis in the Preferred Shares so redeemed, increased by any gain
recognized upon the redemption exchange and reduced by any loss (or expense
item) referred to above recognized upon such redemption.
It is possible that the Internal Revenue Service could take the position
that the Company should be disregarded and that each Shareholder should be
treated as holding an interest in the Loan Note held by the Company, rather than
the Preferred Shares. In that event, upon the Company's redemption of Preferred
Shares in exchange for Guarantor Preferred Stock (or Depositary Shares
representing the same) following the Guarantor's delivery of such Guarantor
Preferred Stock (or Depositary Shares) in exchange for the Loan Note, each
Shareholder should be treated as exchanging debt of the Guarantor for stock in
the Guarantor. Such an exchange should be treated as a non-taxable exchange to
each Shareholder (except to the extent any stock received is allocable to
accrued but unpaid interest) and should result in the Shareholder receiving an
aggregate tax basis in the stock so received (other than any portion of such
stock allocable to accrued but unpaid interest) which should be equal to such
Shareholder's aggregate tax basis in its Preferred Shares. Any Guarantor
Preferred Stock (or Depositary Shares representing the same) received by a
Shareholder which is allocable to accrued but unpaid interest would be taxable
to such Shareholder as a payment of such interest in accordance with such
Shareholder's federal income tax accounting method and the Shareholder would
take a fair value tax basis in such Guarantor Preferred Stock (or Depositary
Shares).
A Shareholder's holding period in the Guarantor Preferred Stock received in
redemption of Preferred Shares will depend upon the appropriate characterization
of the redemption, as described in the two preceding paragraphs.
A Shareholder will recognize gain or loss measured by the difference, if
any, between cash received in respect of a fractional Depositary Share and the
Shareholder's tax basis in such fractional Depositary Share.
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If the Preferred Shares are redeemed in exchange for Guarantor Preferred
Stock (or Depositary Shares), any distributions paid on the Guarantor Preferred
Stock (or Depositary Shares) will be taxable to a U.S. Holder as ordinary
dividend income to the extent of the Guarantor's current and accumulated
earnings and profits. To the extent that the amount of distributions paid on
such Guarantor Preferred Stock (or Depositary Shares) exceeds the Guarantor's
current and accumulated earnings and profits (as determined for U.S. federal
income tax purposes), such excess distributions will be treated first as a
return of capital (reducing the U.S. Holder's adjusted tax basis in such
Guarantor Preferred Stock (or Depositary Shares)), and then as capital gain.
Such capital gain would be long-term capital gain if the U.S. Holder's holding
period for the Guarantor Preferred Stock (or Depositary Shares) exceeds one
year. To the extent that distributions on the Guarantor Preferred Stock (or
Depositary Shares) are treated as dividends, a U.S. Holder that is a corporation
may be eligible for the 70% dividends-received deduction, subject to certain
limitations and certain holding period requirements (although the benefit of
such deduction may be reduced or eliminated by the alternative minimum tax). The
dividends-received deduction may also be reduced if the Guarantor Preferred
Stock is considered "debt financed."
A U.S. Holder of Guarantor Preferred Stock (or Depositary Shares) will
recognize capital gain or loss on the sale or other disposition thereof equal to
the difference between the amount realized and the U.S. Holder's tax basis
therefor. Gain or loss recognized by a U.S. Holder on the sale or exchange of
Guarantor Preferred Stock (or Depositary Shares) held for more than one year
generally will be capital gain or loss. A redemption of the Guarantor Preferred
Stock (or Depositary Shares) for cash will generally be treated as a sale or
exchange resulting in capital gain or loss unless the U.S. Holder owns other
shares of stock of the Guarantor and certain other conditions apply, in which
case such redemption will be treated as a distribution (as described in the
preceding paragraph).
Potential Extension of the Payment Period
Under the terms of the agreement governing the Loan Note, the Guarantor may
be permitted to extend the interest payment period of the Loan Note. In the
event that the Guarantor exercises that right, the Guarantor may not declare
dividends on any shares of its preferred or common stock and, therefore, the
likelihood of extension of the payment period is, in the view of the Guarantor,
remote. If the payment period is extended, the Company will continue to accrue
income equal to the amount of the interest payment due at the end of the
extended payment period over the term of the extended payment period.
Accrued income for any month will be allocated but not distributed to
holders of record of the Preferred Shares on the record date for dividends in
respect of such month. As a result, Shareholders of record during an extended
interest payment period will be required to include in gross income an amount
equal to the dividends accrued on the Preferred Shares in advance of the receipt
of such dividend in cash. The subsequent receipt of cash in respect of such
dividend will not also be includible in gross income.
Use of Convention
The Company will adopt a convention under which all of the net income
accrued by the Company in any calendar month will be allocated to Shareholders
of record on the record date for dividends in respect of such month. It is
unclear whether this convention will be respected for federal income tax
purposes. If it is not respected, the distributive share of the Company's net
income allocable to Preferred Shares in respect of a month in which such shares
are sold may be allocated between the seller and the purchaser on some other
basis. Any amount so allocated to the Shareholder, whether as seller or
purchaser, would be includible in the Shareholder's income and would increase
his tax basis in the Preferred Shares.
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Company Information Returns and Audit Procedures
The Guarantor, in its capacity as Common Shareholder of the Company, will
furnish each holder with a Schedule K-1 setting forth each holder's allocable
share of the income of the Company. The Schedule K-1 will be furnished within 90
days after the close of the Company's taxable year.
Any person who holds Preferred Shares as a nominee for another person is
required by law to furnish to the Company: (a) the name, address, and taxpayer
identification number of the beneficial owners and the nominee; (b) notice of
whether the beneficial owner is (i) a person that is not a United States person,
(ii) a foreign government, an international organization, or any wholly owned
agency or instrumentality of either of the foregoing, or (iii) a tax-exempt
entity; (c) the amount and description of Preferred Shares held, acquired, or
transferred for the beneficial owners; and (d) certain information including the
dates of acquisitions and transfers, means of acquisitions and transfers, and
acquisition cost for purchases, as well as the amount of net proceeds from
sales. Brokers and financial institutions are required to furnish additional
information, including certain information on Preferred Shares that they
acquire, hold, or transfer for their own account. A penalty of $50 per failure
(up to a maximum of $100,000 per calendar year) is imposed by the Internal
Revenue Code for failure to report such information to the Company. The nominee
is required to supply the beneficial owner of the Preferred Shares with the
information furnished to the Company.
CAYMAN ISLANDS
The following discussion is a summary of certain Cayman Islands tax
consequences, based on the advice of Maples and Calder, of the purchase,
disposition or ownership of the Preferred Shares.
Payment of dividends on the Preferred Shares will not be subject to any
withholding under the tax laws of the Cayman Islands. There are no taxes in the
Cayman Islands on income, profits, capital gains or turnover, nor are there any
inheritance, estate, or gift taxes or duties in the Cayman Islands. There is no
applicable stamp duty on the issuance of any shares, and no stamp duty is
payable on the transfer or redemption of shares in the Company. The Company has
applied for and will be issued an undertaking by the Governor of the Cayman
Islands stating that the Company is exempt, for a period of twenty years from
the date of its incorporation, January 27, 1994, from the payment of any taxes
or duties which may be imposed in the future on profits, income, capital gains,
assets or appreciations and any such tax or duty or tax in the nature of estate
duty or inheritance tax payable on the shares, debentures or other obligations
of the Company.
PLAN OF DISTRIBUTION
The Company may sell the Preferred Shares 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 Preferred Shares 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 Preferred
Shares and the anticipated proceeds to the Company from the sale of the
Preferred Shares.
When Preferred Shares are to be sold to underwriters, unless otherwise set
forth in the applicable Prospectus Supplement, the obligations of the
underwriters to purchase those Preferred Shares will be subject to certain
conditions precedent but the underwriters will be obligated to purchase all of
the Preferred Shares if any are purchased. The Preferred Shares 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
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dealers, from time to time in one or more transactions, including negotiated
transactions, either at a 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 Preferred Shares 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 Preferred Shares will be
reduced. Bear Stearns intends to resell any of those Preferred Shares 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
Preferred Shares 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
Preferred Shares for the Company's account and will receive commissions from the
Company as set forth in the applicable Prospectus Supplement.
Underwriters and agents participating in any distribution of Preferred
Shares 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
and the Guarantor, to indemnification by the Company and the Guarantor against
certain civil liabilities, including liabilities under the Securities Act, or to
contribution by the Company and the Guarantor 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 Guarantor or its affiliates in the ordinary course of
business.
Following the initial distribution of any series of Preferred Shares, Bear
Stearns may offer and sell previously issued Preferred Shares 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 Preferred Shares 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 Preferred Shares 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 Guarantor, 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 Preferred Shares or
Depositary Shares representing a series of Guarantor Preferred Stock by a Plan
with respect to which the Guarantor, 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
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prohibited transaction under Section 406 of ERISA or Section 4975 of the Code,
unless such Preferred Shares or Depositary Shares representing a series of
Guarantor Preferred Stock 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 Preferred Shares 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 the Guarantor, Bear Stearns, and/or BSSC
should acquire any Preferred Shares or Depositary Shares representing a series
of Guarantor Preferred Stock and other Plans established with the Guarantor,
Bear Stearns and/or BSSC should consult with counsel prior to making any such
acquisition.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated by reference from the Company's 1993 Form 10-K have been
audited by Deloitte & Touche, independent auditors, as stated in their reports,
which are incorporated herein by reference, and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
VALIDITY OF SECURITIES
The validity of the Preferred Shares will be passed upon by Maples and
Calder, Cayman Islands counsel to the Company. The validity of the Guarantee
relating to the Preferred Shares and validity of the Guarantor Preferred Stock
(and Depositary Shares evidencing the same) will be passed upon on behalf of the
Company and the Guarantor by Weil, Gotshal & Manges (a partnership including
professional corporations), New York, New York, and on behalf of any
underwriters or agents by Andrews & Kurth L.L.P., New York, New York. As to all
matters of Cayman Islands law, Weil, Gotshal & Manges and Andrews & Kurth L.L.P.
will rely upon the opinion of Maples and Calder.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE GUARANTOR OR ANY UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENTAL AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY OR THE GUARANTOR SINCE
THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH AN OFFER OR SOLICITATION
IS NOT QUALIFIED TO DO SO OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------
TABLE OF CONTENTS
PAGE
---------
PROSPECTUS SUPPLEMENT
Bear Stearns Finance LLC...................... S-3
The Bear Stearns Companies Inc. .............. S-3
Certain Terms of the Series A Shares.......... S-3
Description of the Loans...................... S-8
Certain Terms of the Depositary
Shares...................................... S-12
Certain Terms of the Guarantor Preferred
Stock......................................... S-13
Underwriting.................................. S-16
PROSPECTUS
Available Information......................... 2
Incorporation of Certain Documents by
Reference..................................... 3
The Bear Stearns Companies Inc. .............. 4
Ratio of Earnings to Combined Fixed
Charges and Preferred Dividends............. 4
Bear Stearns Finance LLC...................... 4
Use of Proceeds............................... 5
Description of Preferred Shares............... 5
Description of the Guarantee.................. 9
Description of Guarantor Preferred
Stock....................................... 12
Description of Depositary Shares.............. 15
Book-Entry Procedures and Settlement.......... 18
Limitations Affecting Securities
Holders..................................... 20
Taxation...................................... 20
Plan of Distribution.......................... 23
ERISA Considerations.......................... 24
Experts....................................... 25
Validity of Securities........................ 25
<PAGE>
6,000,000 SHARES
BEAR STEARNS
FINANCE LLC
% EXCHANGEABLE
PROPREFERRED INCOME CUMULATIVE
SHARES ("EPICS"), SERIES A
(LIQUIDATION PREFERENCE $25 PER SHARE)
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
THE BEAR STEARNS
COMPANIES INC.
------------------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------------------
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY SHEARSON INC.
FEBRUARY , 1994
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