Filed Pursuant to Rule 424(b)(5)
File No. 33-60065
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 28, 1995)
1,000,000 WARRANTS
THE BEAR STEARNS COMPANIES INC.
JAPANESE YEN PUT WARRANTS
EXPIRING AUGUST 21, 1997
Each Warrant will entitle the holder thereof to receive from The Bear
Stearns Companies Inc. (the "Company"), upon exercise (including automatic
exercise), an amount in U.S. dollars calculated by reference to decreases in the
value of the Japanese yen relative to the U.S. dollar. Such amount (the "Cash
Settlement Value") will equal the greater of (i) zero or (ii) the amount
(rounded down to the nearest cent) computed by subtracting from U.S. $50 an
amount equal to the product of U.S. $50 times a fraction, the numerator of which
is 92.11 Japanese yen per U.S. $1.00 (the "Strike Rate") and the denominator of
which is the spot exchange rate of the Japanese yen for the U.S. dollar,
expressed as a number of Japanese yen per U.S. dollar and determined by the Spot
Rate Reference Agent (as hereinafter defined), on the applicable valuation date
(the "Spot Rate"). If the Spot Rate for such valuation date is equal to or below
the Strike Rate, the Cash Settlement Value will be zero, in which case, the
Warrantholder will be permitted, subject to certain exceptions, to re-exercise
such Warrant prior to the Expiration Date (as hereinafter defined) or the
Delisting Date (as hereinafter defined). The Strike Rate is equal to the spot
exchange rate of the Japanese yen for the U.S. dollar quoted by the Spot Rate
Reference Agent at approximately 10:04 A.M., New York City time, on August 22,
1995 (96.72 Japanese yen per U.S. dollar), divided by 1.05. If the Spot Rate on
August 22 ,1995 is 96.72 Japanese yen per U.S. dollar, the Cash Settlement Value
per Warrant on that date will be $2.38.
The Warrants have been approved for listing on the American Stock Exchange
(the "AMEX"). The AMEX symbol for the Warrants is BYE.WS.
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING FOREIGN EXCHANGE RISKS
AND THE RISK OF EXPIRING WORTHLESS IF THE U.S. DOLLAR DEPRECIATES AGAINST THE
JAPANESE YEN. IN ADDITION, IN THE ABSENCE OF COUNTERVAILING FACTORS, SUCH AS AN
APPRECIATION OF THE U.S. DOLLAR AGAINST THE JAPANESE YEN, THE MARKET VALUE OF
THE WARRANTS IS EXPECTED TO DECREASE AS THE TIME REMAINING TO THE EXPIRATION
DATE DECREASES. PURCHASERS SHOULD BE PREPARED TO SUSTAIN A TOTAL LOSS OF THE
PURCHASE PRICE OF THEIR WARRANTS AND ARE ADVISED TO CONSIDER CAREFULLY THE
INFORMATION UNDER "RISK FACTORS" COMMENCING ON PAGE S-9 HEREIN AND "EXCHANGE
RATES" HEREIN, AS WELL AS THE OTHER INFORMATION HEREIN AND IN THE PROSPECTUS.
THE AMEX RECOMMENDS THAT THE WARRANTS BE SOLD ONLY TO INVESTORS WHOSE ACCOUNTS
HAVE BEEN APPROVED FOR OPTIONS TRADING. SEE "RISK FACTORS--INVESTOR SUITABILITY"
HEREIN.
(Continued on next page)
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSIONS(1) COMPANY(2)(3)
--------------------------------------------------------------------------------
Per Warrant................ $5.00 $.35 $4.65
--------------------------------------------------------------------------------
Total...................... $5,000,000 $350,000 $4,650,000
================================================================================
(1) The Price to Public and Underwriting Discounts and Commissions for investors
purchasing 100,000 or more Warrants in any single transaction in this
offering will be $4.85 and $.20 per Warrant, respectively, subject to the
holding period requirement described under "Underwriting" herein. Should
investors who are subject to the holding period requirement sell their
Warrants once the holding period requirement is no longer applicable, the
market price of the Warrants may be adversely affected. See "Underwriting"
herein.
(2) Before deducting expenses estimated at $150,000, which are payable by the
Company.
(3) The Company has granted to the Underwriter an option, exercisable within 30
days of the date hereof, to purchase up to 150,000 additional Warrants, on
the same terms, solely to cover over-allotments, if any. If the option is
exercised in full, the total Price to Public and Underwriting Discounts and
Commissions (subject to reduction as described above) and Proceeds to
Company will be $5,750,000, $402,500 and $5,347,500, respectively. See
"Underwriting" herein.
------------------------
The Warrants are offered by the Underwriter, subject to prior sale, when, as
and if delivered to and accepted by the Underwriter, and subject to its right to
reject orders in whole or in part. It is expected that delivery of the Warrants
will be made in New York City on or about August 25, 1995.
------------------------
BEAR, STEARNS & CO. INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS AUGUST 22, 1995.
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The Warrants will be exercisable immediately upon issuance and may be
exercised until 3:00 P.M., New York City time, on the New York Business Day (as
hereinafter defined) immediately preceding the expiration date for the Warrants,
which is August 21, 1997 (the "Expiration Date"), or until their earlier
expiration on the last New York Business Day prior to the effective date of
their delisting from, or permanent suspension from trading on, the American
Stock Exchange and failure to list the Warrants on another national securities
exchange (the "Delisting Date"). Any Warrant not exercised at or before 3:00
P.M., New York City time, on such New York Business Day will be automatically
exercised on such date. See "Description of Warrants--Exercise and Settlement of
Warrants" herein.
The valuation of and payment for any exercised Warrant may be postponed as a
result of the exercise of a number of Warrants exceeding the limits on exercise
described herein under "Description of the Warrants-- Maximum Exercise Amount",
in which case the Warrantholder will receive a Cash Settlement Value for such
Warrant determined as of a later date. See "Description of the Warrants--Maximum
Exercise Amount" herein.
A Warrantholder may exercise no fewer than 500 Warrants at any one time,
except in the event of an automatic exercise of the Warrants, which would occur
as a result of the Warrantholder not having exercised his Warrants on or before
the earlier of (i) the New York Business Day immediately preceding the
Expiration Date or (ii) the Delisting Date. See "Description of the
Warrants--Exercise and Settlement of the Warrants" herein. A Warrantholder
tendering Warrants for exercise will have the option of specifying that such
Warrants are not to be exercised if the Spot Rate for the applicable valuation
date has declined by five or more Japanese yen per U.S. dollar from the Spot
Rate for the applicable exercise date. All exercises of Warrants (other than on
the Expiration Date for the Warrants or on the Delisting Date) are subject, at
the Company's option, in its sole discretion, to the limitation that not more
than 1,000,000 Warrants in total may be exercised on any exercise date for the
Warrants and not more than 250,000 Warrants may be exercised by or on behalf of
any person or entity, either individually or in concert with any other person or
entity, on any exercise date for the Warrants. See "Risk Factors" and
"Description of the Warrants" herein and "Description of Warrants" in the
Prospectus.
As discussed in greater detail under "Risk Factors--Certain Factors
Affecting Value and Trading Price of Warrants" and "--Effect of Credit Rating
Reduction" herein, the trading price of a Warrant at any time is expected to be
affected by the creditworthiness of the Company and a number of interrelated
factors including, among others, (i) the prevailing Spot Rate, (ii) the
volatility of the exchange rate of the Japanese yen per U.S. dollar, (iii) the
time remaining to the Expiration Date of the Warrants and (iv) the interest rate
differential between U.S. dollar and Japanese yen fixed income instruments.
The Warrants are unsecured contractual obligations of the Company and rank
pari passu with all other unsecured and unsubordinated contractual obligations
and indebtedness of the Company. Since the Company is a holding company, the
Warrants will be effectively subordinated to the claims of creditors of its
subsidiaries with respect to the assets of those subsidiaries. At March 31,
1995, the Company had outstanding approximately $12.2 billion of indebtedness,
none of which was secured, and subsidiaries of the Company had outstanding
approximately $492 million of indebtedness (excluding $26.3 billion relating to
securities sold under repurchase agreements).
REFERENCES
References herein to "U.S. dollar", "dollar", "U.S. $" or "$" are to the
lawful currency of the United States of America. References to "Japanese yen" or
"yen" are to the lawful currency of Japan. As used herein, "New York Business
Day" means any day other than a Saturday or Sunday or a day on which either the
AMEX or the New York Stock Exchange is not open for securities trading or
commercial banks in New York City are required or authorized by law or executive
order to remain closed.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE WARRANTS
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in the Prospectus and this Prospectus Supplement
and in the documents incorporated therein and herein by reference. Appendix A
hereto ("Index of Terms") contains a listing of defined terms and pages on which
they are defined in this Prospectus Supplement.
THE OFFERING
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Securities Offered........................... 1,000,000 Japanese Yen Put Warrants Expiring
August 21, 1997 (the "Warrants").
Price........................................ $5.00 per Warrant. The initial public
offering price for the Warrants will be $5.00
per Warrant, except that the price will be
$4.85 per Warrant for investors purchasing
100,000 or more Warrants in a single
transaction in this offering subject to a
30-day holding period. See "Underwriting"
herein.
Determination of Cash Settlement Value of
Warrants................................... Each Warrant will entitle the holder thereof
to receive from the Company, upon exercise
(including automatic exercise), an amount
in U.S. dollars calculated by reference to
decreases in the value of the Japanese yen
relative to the U.S. dollar. Such amount
(the "Cash Settlement Value") will equal
the greater of (i) zero or (ii) the amount
(rounded down to the nearest cent) computed
by subtracting from U.S. $50 an amount
equal to the product of U.S. $50 times a
fraction, the numerator of which is 92.11
yen per U.S. dollar (the "Strike Rate") and
the denominator of which (the "Spot Rate")
is the Noon Buying Rate (as hereinafter
defined) on the applicable valuation date,
as determined by the Spot Rate Reference
Agent as described herein, or if such Noon
Buying Rate is not available, such other
rate as described herein on such valuation
date. See "Exchange Rates" herein. This
amount is described by the following
formula:
CASH SETTLEMENT VALUE = THE GREATER OF
(I) $0 or
STRIKE RATE
(II) $50 - [ $50 x ( ----------- )]
SPOT RATE
If the Spot Rate for suc h Valuation Date
equals or is below the Strike Rate, the
Cash Settlement
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Value will be zero, in which case the
Warrantholder will be permitted, subject
to certain exceptions, to re-exercise such
Warrant prior to the Expiration Date or the
Delisting Date. The Strike Rate is equal to
the spot exchange rate of the Japanese yen
for the U.S. dollar quoted by the Spot Rate
Reference Agent at approximately 10:04 A.M.,
New York City time, on August 22, 1995 (96.72
Japanese yen per U.S. dollar), divided by
1.05. If the Spot Rate on August 22, 1995
is 96.72 Japanese yen per U.S. dollar, the
Cash Settlement Value per Warrant on that
date will be $2.38. The Warrants are
expected to be "out-of-the-money" if the
U.S. dollar depreciates against the
Japanese yen to the extent that one U.S.
dollar is worth less than the Strike Rate
of 92.11 yen. See "Description of the
Warrants--Determination of Cash Settlement
Value of Warrants" herein for the method by
which the Spot Rate and the Cash Settlement
Value will be calculated.
Exercise of Warrants......................... The Warrants will be exercisable immediately
upon issuance and may be exercised until
3:00 P.M., New York City time, on August
20, 1997, which is the New York Business
Day immediately preceding the Expiration
Date for the Warrants, which is August 21,
1997, or until their earlier expiration on
the last New York Business Day prior to the
effective date of their delisting from, or
permanent suspension from trading on, the
AMEX and failure to list the Warrants on
another United States national securities
exchange (the "Delisting Date"). Any
Warrant not exercised on or before the
earlier of (i) the New York Business Day
immediately preceding the Expiration Date
or (ii) the Delisting Date will be
automatically exercised on that date. A
Warrantholder may exercise certificated
Warrants by delivering or causing to be
delivered to the Warrant Agent the Warrant
Certificate representing such Warrants with
the irrevocable notice of exercise on the
reverse thereof duly completed and
executed. A Warrantholder may exercise
book-entry Warrants held through the
facilities of DTC by causing such Warrants
to be transferred to the Warrant Agent on
the records of DTC and a duly completed and
executed Exercise Notice to be delivered on
behalf of the Warrantholder by a Par-
ticipant (as hereinafter defined) to the
Warrant
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Agent. See"Description of the Warrants--
Exercise and Settlement of Warrants"
herein.
Exercise Amount.............................. A Warrantholder may exercise no fewer than
500 Warrants at any one time, except in the
event of automatic exercise. See
"Description of the Warrants--Minimum
Exercise Amount" herein. All exercises of
Warrants (other than on the Expiration Date
or the Delisting Date) are subject, at the
Company's option, in its sole discretion,
to the limitation that not more than
1,000,000 Warrants in total may be
exercised on any Exercise Date and not more
than 250,000 Warrants may be exercised by
or on behalf of any person or entity,
either individually or in concert with any
other person or entity, on any Exercise
Date. See "Description of the
Warrants--Maximum Exercise Amount" herein.
Except for Warrants subject to automatic
exercise, each Warrantholder, in connec-
tion with any exercise of Warrants, will
have a Limit Option to specify that such
Warrants are not to be exercised if the
Spot Rate that would otherwise be used to
determine the Cash Settlement Value of such
Warrants has declined by five or more
Japanese yen per U.S. dollar from the Spot
Rate on the date of exercise. See
"Description of the Warrants--Limit Option"
herein.
Certain Risk Factors......................... The Warrants are highly speculative and
involve a high degree of risk, including (but
not limited to) foreign exchange risks and
the risk of expiring worthless if the U.S.
dollar depreciates against the Japanese
yen. In addition, in the absence of
countervailing factors, such as the
appreciation of the U.S. dollar against the
Japanese yen, the trading value of the
Warrants is expected to decrease as the
time remaining to the Expiration Date
decreases. See "Risk Factors--Certain
Factors Affecting Value and Trading Price
of Warrants" herein. If a Warrant is not
previously exercised, and if at expiration
one U.S. dollar is worth 92.11 yen or less,
the Warrant will expire worthless.
As discussed in greater detail under "Risk
Factors--Certain Factors Affecting Value
and Trading Price of Warrants" and
"--Effect of Credit Rating Reduction"
herein, the trading price of a Warrant at
any time is expected to be
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S-5
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affected by the creditworthiness of the
Company and a number of interrelated
factors including, among others, (i) the
prevailing Spot Rate, (ii) the volatility
of the exchange rate of the Japanese yen
per the U.S. dollar, (iii) the time
remaining to the Expiration Date of the
Warrants and (iv) the interest rate
differential between U.S. dollar and
Japanese yen fixed income instruments.
Warrantholders will be subject to a foreign
exchange risk that may have important eco-
nomic and tax consequences to them. See
"Exchange Rates" and "Certain United States
Federal Income Tax Considerations" herein.
It is not possible to predict how the
Warrants will trade in the secondary market
or whether such market will be liquid or
illiquid. To the extent Warrants are
exercised, the number of Warrants
outstanding will decrease, resulting in a
decrease in the liquidity of the Warrants.
In addition, the Company or one or more of
its affiliates may from time to time
purchase Warrants, resulting in a decrease
in the liquidity of the Warrants.
The Warrants have been approved for listing
on the AMEX. In the event the Warrants are
delisted from, or permanently suspended
from trading on (within the meaning of the
Securities Exchange Act of 1934 and the
rules and regulations thereunder), the AMEX
and are not accepted at the same time for
listing on another United States national
securities exchange, Warrants not
previously exercised will be deemed
automatically exercised on the Delisting
Date, and the Cash Settlement Value, if
any, shall be calculated and settled as
provided below under "Description of the
Warrants-- Delisting of Warrants". In the
event of a delisting or suspension of
trading on the AMEX, the Company will use
its best efforts to list the Warrants on
another United States national securities
exchange.
Except in the event of automatic exercise, a
Warrantholder must tender at least 500
Warrants at any one time in order to
exercise his Warrants. Thus, except in the
event of an automatic exercise, a
Warrantholder with fewer than 500 Warrants
will need either to sell his Warrants or to
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S-6
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purchase additional Warrants, incurring
transaction costs in each case, in order to
realize upon his investment.
A Warrantholder will not be able to
determine, at the time of exercise of a
Warrant, the Spot Rate that will be used in
calculating the Cash Settlement Value of
such Warrant (and will thus be unable to
determine that Cash Settlement Value). In
addition, the Valuation Date for exercised
Warrants may be postponed as a result of
the exercise of a number of Warrants
exceeding the limits on exercise described
below under "Description of the
Warrants--Maximum Exercise Amount". Any
downward movement in the value of the U.S.
dollar relative to the Japanese yen between
the time a Warrantholder submits an
Exercise Notice and the time the Spot Rate
for such exercise is determined (which
period will, at a minimum, represent an
entire New York Business Day (as
hereinafter defined) and, in the case of a
postponement of a Valuation Date resulting
from the exercise of a number of Warrants
exceeding limits on exercise described
below under "Description of the
Warrants--Maximum Exercise Amount", may be
substantially longer) will result, subject
to the Warrantholder's previous election to
use the Limit Option (as hereinafter
defined; see "Description of the
Warrants--Limit Option" herein), in the
receipt by the Warrantholder of a Cash
Settlement Value (including a zero Cash
Settlement Value) that is less than the
Cash Settlement Value anticipated by such
Warrantholder based on the Spot Rate most
recently reported prior to submission for
exercise.
PROSPECTIVE PURCHASERS OF THE WARRANTS SHOULD
RECOGNIZE THAT THEIR WARRANTS MAY EXPIRE
WORTHLESS AND SHOULD BE PREPARED TO SUSTAIN
A TOTAL LOSS OF THE PURCHASE PRICE OF THEIR
WARRANTS. WARRANTHOLDERS WILL BEAR THE
FOREIGN EXCHANGE RISKS OF THE U.S. DOLLAR
AS COMPARED TO THE JAPANESE YEN. THE
WARRANTS ARE APPROPRIATE INVESTMENTS ONLY
FOR INVESTORS WHO ARE ABLE TO UNDERSTAND
AND BEAR THE RISK OF A SPECULATIVE
INVESTMENT. SEE "RISK FACTORS",
"DESCRIPTION OF THE WARRANTS", "EXCHANGE
RATES" AND "CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS" HEREIN.
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S-7
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Who Should Invest............................ The AMEX recommends that the Warrants be sold
only to investors whose accounts have been
approved for options trading, and further
requires that its members and member
organizations and registered employees
thereof make certain suitability
determinations before recommending
transactions in Warrants. As indicated
above, investors should be prepared to
sustain a total loss of the purchase price
of the Warrants.
Investment decisions relating to exchange
rate currency warrants, such as the
Warrants offered hereby, require an
investor to predict the direction of
movements in the relevant currency exchange
rate as well as the amount and timing of
those movements. Exchange rate currency
warrants may change substantially in value,
or lose all of their value, with relatively
small movements in the relevant currency
exchange rate. Moreover, an exchange rate
currency warrant is a "wasting asset" in
that, in the absence of countervailing
factors, such as an offsetting movement in
the level of the relevant currency exchange
rate, the market value of an exchange rate
currency warrant will tend to decrease over
time and may be valueless on the expiration
date. Accordingly, exchange rate currency
warrants, such as the Warrants offered
hereby, involve a high degree of risk and
are not appropriate for every investor.
Investors who are considering purchasing
the Warrants should be able to understand
and bear the risk of a speculative
investment, be experienced with respect to
options and option transactions and
understand the risks of foreign exchange
transactions. Such investors should reach
an investment decision only after careful
consideration with their advisers of the
suitability of any investments in the
Warrants in light of their particular
financial circumstances and the information
set forth in this Prospectus Supplement and
the Prospectus. See "Risk Factors" herein.
As indicated above, investors should be
prepared to sustain a total loss of the
purchase price of the Warrants.
Listing...................................... American Stock Exchange.
Warrant Trading Symbol....................... BYE.WS.
Warrant Agent................................ Chemical Bank.
Spot Rate Reference Agent.................... Bear, Stearns & Co. Inc. ("Bear Stearns").
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USE OF PROCEEDS
All or a portion of the net proceeds from the sale of the Warrants will be
used by the Company or one or more of its subsidiaries in connection with
hedging the Company's obligations in respect of the Warrants. Any remaining net
proceeds will be used for general corporate purposes. See "Use of Proceeds" in
the Prospectus.
Prior to the pricing of the Warrants, the Company, through Bear Stearns and
its affiliates, hedged its anticipated exposure in connection with the Warrants,
and the Company expects, from time to time following the initial offering of the
Warrants, to continue to hedge its exposure. Depending on future market
conditions (including the prevailing Japanese yen/U.S. dollar exchange rate from
time to time) and the actual amount of Warrants outstanding from time to time,
among other things, the Company expects that it or its subsidiaries may (i) take
positions in listed and over-the-counter Japanese yen or U.S. dollar currency
option contracts, (ii) take positions in Japanese yen or U.S. dollar currency
forward contracts, (iii) take positions in Japanese yen or U.S. dollar currency
spot contracts and (iv) enter into currency swap arrangements, in each case
(other than for exchange traded options) in privately negotiated transactions
with institutional counterparties.
RISK FACTORS
GENERAL MARKET AND TIMING RISKS
The beneficial owner of a Warrant (a "Warrantholder") will receive a cash
payment from the Company, upon exercise (including automatic exercise), only if
such Warrant has a Cash Settlement Value greater than zero at such time. The
"Cash Settlement Value" of a Warrant will equal the greater of (i) zero or (ii)
the amount (rounded down to the nearest cent) computed by subtracting from U.S.
$50 an amount equal to the product of U.S. $50 times a fraction, the numerator
of which is the Strike Rate and the denominator of which is the Spot Rate. If
the Spot Rate for such Valuation Date is equal to or below the Strike Rate, the
Cash Settlement Value will be zero, in which case, the Warrantholder will be
permitted, except in the event of automatic exercise, to re-exercise such
Warrant prior to the Expiration Date or the Delisting Date (both as hereinafter
defined). See "Description of the Warrants-- Exercise and Settlement of the
Warrants" herein. The Strike Rate is equal to the spot exchange rate of the
Japanese yen for the U.S. dollar quoted by the Spot Rate Reference Agent at
approximately 10:04 A.M., New York City time, on August 22, 1995 (96.72 Japanese
yen per U.S. dollar), divided by 1.05. If the Spot Rate on August 22, 1995 is
96.72 Japanese yen per U.S. dollar, the Cash Settlement Value per Warrant on
that date will be $2.38. The Warrants are expected to become "out-of-the-money"
if the U.S. dollar depreciates against the Japanese yen to the extent that one
U.S. dollar is worth less than the Strike Rate of 92.11 yen. See "Description of
the Warrants--Determination of Cash Settlement Value of Warrants" herein.
Warrantholders will be subject to foreign exchange risk which may have
important economic and tax consequences to them. See "Exchange Rates" and
"Certain United States Federal Income Tax Considerations" herein.
Investment decisions relating to exchange rate currency warrants, such as
the Warrants offered hereby, require the investor to predict the direction of
movements in the relevant currency exchange rate as well as the amount and
timing of those movements. Exchange rate currency warrants may change
substantially in value, or lose all of their value, with relatively small
movements in the relevant currency exchange rate. Moreover, an exchange rate
currency warrant is a "wasting asset" in that, in the absence of countervailing
factors, such as an offsetting movement in the relevant currency exchange rate,
the market value of an exchange rate currency warrant will tend to decrease over
time and may be valueless on the expiration date. Accordingly, exchange rate
currency warrants, such as the Warrants offered hereby, involve a high degree of
risk and are not appropriate for every investor. Investors who
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<PAGE>
are considering purchasing the Warrants must be able to understand and bear the
risk of a speculative investment, be experienced with respect to options and
option transactions and understand the risks of foreign exchange transactions.
Those investors should reach an investment decision only after careful
consideration, with their advisers, of the suitability of the Warrants in light
of their particular financial circumstances and the information set forth in
this Prospectus Supplement and in the Prospectus.
RISKS ASSOCIATED WITH EXCHANGE RATE OF JAPANESE YEN PER U.S. DOLLAR
The spot exchange rate of the Japanese yen as compared to the U.S. dollar
will be used in calculating the Cash Settlement Value of a Warrant upon
exercise. Appreciation of the U.S. dollar against the Japanese yen (i.e.,
depreciation of the Japanese yen against the U.S. dollar) will have a positive
impact on the Cash Settlement Value. Conversely, depreciation of the U.S. dollar
against the Japanese yen (i.e., appreciation of the Japanese yen against the
U.S. dollar) will have a negative impact on the Cash Settlement Value.
Warrantholders will thus bear the foreign exchange risk of the U.S. dollar as
compared to the Japanese yen. Significant and unpredictable fluctuations in the
Japanese yen/U.S. dollar exchange rate have occurred in the past, and it is
impossible to predict the direction, magnitude or frequency of any fluctuations
in that rate that may occur over the term of the Warrants. See "Exchange Rates"
herein.
The value of any currency, including the U.S. dollar and the Japanese yen,
may be affected by complex political and economic factors. The spot exchange
rate of the Japanese yen as compared to the U.S. dollar is at any moment a
result of the supply of and demand for the two currencies, and changes in the
rate result over time from the interaction of many diverse factors directly or
indirectly affecting economic and political conditions in Japan and the United
States, including, without limitation, economic and political developments in
other countries. Of particular importance are the relative rates of inflation,
interest rate levels, the balance of payments and the extent of governmental
surpluses or deficits in Japan and the United States, all of which are in turn
sensitive to the monetary, fiscal and trade policies pursued by the governments
of Japan, the United States and other countries important to international trade
and finance.
Such information relating to any relevant foreign country may not be as well
known or as rapidly or thoroughly reported in the United States as comparable
United States developments. Prospective purchasers of Warrants should be aware
of the possible lack of availability of important information that can affect
the value of the Japanese yen in relation to the U.S. dollar and must be
prepared to make special efforts to obtain such information on a timely basis.
Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed nations, including Japan,
are permitted to fluctuate in value relative to the U.S. dollar. Governments,
however, sometimes do not allow their currencies to float freely in response to
economic forces. Sovereign governments in fact use a variety of techniques, such
as intervention by a country's central bank or imposition of regulatory controls
or taxes, to affect the exchange rates of their currencies. Governments may also
issue a new currency to replace an existing currency or alter the exchange rate
or relative exchange characteristics by devaluation or revaluation of a
currency. Thus, a special risk in purchasing Warrants is that their liquidity,
trading value and Cash Settlement Value could be affected by governmental
actions which could change or interfere with theretofore freely determined
currency valuation, fluctuations in response to other market forces and the
movement of currencies across borders. There will be no adjustment or change in
the terms of the Warrants in the event that exchange rates should become fixed,
or in the event of any devaluation or revaluation or imposition of exchange or
other regulatory controls or taxes, or in the event of other developments
affecting the Japanese yen, the U.S. dollar or any other currency. In contrast,
the OCC has reserved the authority to adjust the terms of its standardized
options for certain governmental actions and to impose special exercise
settlement procedures. See "--Warrants are Unsecured Obligations".
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The interbank market in foreign currencies is a global, around-the-clock
market. Therefore, the hours of trading for the Warrants will not conform to the
hours during which the Japanese yen and the U.S. dollar are traded. To the
extent that the AMEX is closed while the market for the Japanese yen remains
open, significant price and rate movements may take place in the underlying
foreign exchange markets that will not be reflected immediately in the price of
the Warrants on such exchange. The possibility of such movements should be taken
into account in relating closing prices for the Warrants on such exchange to
prices and rates in the underlying foreign exchange markets.
There is no systematic reporting of last-sale information for foreign
currencies. Reasonably current bid and offer information is available on the
floor of any exchange where foreign currency is traded, in certain brokers'
offices, in bank foreign currency trading offices, and to others who wish to
subscribe for this quoted rate information, but such information will not
necessarily reflect the particular quoted rate used to calculate the Spot Rate.
There is no regulatory requirement that available bid and offer information be
firm or revised on a timely basis. The absence of last-sale information and the
limited availability of quotations to individual investors may make it difficult
for many investors to obtain timely, accurate data about the state of the
underlying foreign exchange market. In addition, the actual exchange rate for
Japanese yen per U.S. $1.00 and, in certain circumstances, the Spot Rate
determined pursuant to the Warrant Agreement on any given Valuation Date upon
exercise of the Warrants could materially differ from the Noon Buying Rate as
reported by the Federal Reserve Bank.
The Spot Rate on any Valuation Date will determine whether the Warrants have
a Cash Settlement Value greater than zero on that day. The Warrants are expected
to be "in-the-money" (i.e., their Cash Settlement Value will exceed zero) when
initially sold and on any Valuation Date at which the Spot Rate exceeds the
Strike Rate and will be "out-of-the-money" on any Valuation Date at which the
Spot Rate is below the Strike Rate. An increase in the amount, if any, by which
the Spot Rate exceeds the Strike Rate will result in a greater Cash Settlement
Value, and a decrease in such amount, if any, will result in a lesser or zero
Cash Settlement Value. Potential profit or loss upon exercise (including
automatic exercise) of a Warrant will be a function of the Cash Settlement Value
of such Warrant upon exercise, the purchase price of that Warrant and any
related transaction costs.
RISKS DUE TO DELAY OR POSTPONEMENT OF VALUATION OF WARRANTS
Except under the circumstances described in the next paragraph, the
Valuation Date for an exercised Warrant will be the first New York Business Day
after the related Exercise Date. The Exercise Date for an exercised Warrant,
subject to certain exceptions described under "Exercise and Settlement of
Warrants", "Limit Option" and "Automatic Exercise" under "Description of the
Warrants" herein, will be the New York Business Day on which such Warrant and an
Exercise Notice in proper form are received by the Warrant Agent if received at
or prior to 3:00 P.M., New York City time, on such day; if such Warrant and
Exercise Notice are received after such time, the Exercise Date will be the next
succeeding New York Business Day. See "Description of the Warrants--Exercise and
Settlement of Warrants" herein.
The Valuation Date for an exercised Warrant will occur after the Exercise
Date (see "Description of the Warrants--Exercise and Settlement of Warrants"
herein). Therefore, a Warrantholder will not be able to determine, at the time
of exercise of a Warrant, the Spot Rate that will be used in calculating the
Cash Settlement Value of such Warrant (and will thus be unable to determine such
Cash Settlement Value). In addition, the Valuation Date for exercised Warrants
may be postponed as a result of the exercise of a number of Warrants exceeding
the limits on exercise described below under "Description of the
Warrants--Maximum Exercise Amount".
Any downward movement in the value of the U.S. dollar relative to the
Japanese yen between the time a Warrantholder submits an Exercise Notice and the
time the Spot Rate for such exercise is determined (which period will, at a
minimum, represent an entire New York Business Day and, in the
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case of a Valuation Date postponed as a result of there being exercised a number
of Warrants exceeding the maximum permissible amount, may be substantially
longer) will, subject to the Limit Option described in the next paragraph and
under "Description of the Warrants-- Limit Option" herein, result in such
Warrantholder receiving a Cash Settlement Value that is less than the Cash
Settlement Value anticipated by such Warrantholder (including a zero Cash
Settlement Value) based on the Spot Rate most recently reported prior to
submission for exercise.
Except in the event of automatic exercise, a Warrantholder may be able to
limit to some extent the risk associated with any downward movement in the value
of the U.S. dollar relative to the Japanese yen between an Exercise Date and the
applicable Valuation Date if such Warrantholder, in connection with an exercise
of Warrants, elects the Limit Option. Pursuant to the Limit Option, Warrants
tendered for exercise will not be exercised if the Spot Rate for the applicable
Valuation Date has declined by five or more Japanese yen per U.S. dollar from
the Spot Rate for the applicable Exercise Date. See "Description of the
Warrants--Limit Option" herein.
RISKS AND COSTS ASSOCIATED WITH CONVERSION AND EXERCISE OF WARRANTS
The Warrants initially will be issued as certificates in registered form.
Warrantholders cannot, however, hold certificated positions through CEDEL or
Euroclear (as such terms are hereinafter defined). In the case of a beneficial
owner of Warrants holding such Warrants indirectly (for instance, through a
broker that holds such Warrants in "street" name) may exercise such Warrants
only through such owner's registered holder. In the case of a beneficial owner
holding Warrants through his broker in "street" name, such beneficial owner must
direct his broker, who may in turn need to direct another intermediary, to
deliver an Exercise Notice (as hereinafter defined) and the related Warrants to
the Warrant Agent (as hereinafter defined). To ensure that an Exercise Notice
and the related Warrants will be delivered to the Warrant Agent before 3:00
P.M., New York City time, on a given New York Business Day, a beneficial holder
of Warrants may have to give exercise instructions to his broker or other
intermediary substantially earlier than 3:00 P.M., New York City time, on such
day. Different brokerage firms may have different cut-off times for accepting
and implementing exercise instructions from their customers. Therefore,
Warrantholders should consult with their brokers or other intermediaries, if
applicable, as to applicable cut-off times and other exercise mechanics. See
"Description of the Warrants--Exercise and Settlement of Warrants" and "--Limit
Option" herein.
One hundred eighty (180) calendar days after the closing of this offering
(which is expected to occur on August 25, 1995), each registered holder of a
Warrant will have the option to convert the form in which such holder holds his
Warrants from certificated to book-entry form (the "Conversion Option"), which
option may be exercised within a forty-five calendar day period. Such conversion
will occur only through the facilities of The Depository Trust Company, New
York, New York ("DTC", which term, as used herein and in the Prospectus,
includes any successor depository selected by the Company). See "Description of
the Warrants--Book-Entry Conversion" and "Description of the
Warrants--Book-Entry Procedures and Settlement" herein. To exercise Warrants, a
registered holder of a Warrant who has utilized the Conversion Option must
direct a broker, who may, in turn, need to direct a participating organization
in DTC (a "Participant"), to transfer Warrants held by DTC on behalf of such
Warrantholder and to submit an Exercise Notice to the Warrant Agent. A
Warrantholder may desire that the New York Business Day on which his Warrants
and an Exercise Notice are delivered on his behalf to the Warrant Agent will
constitute the Exercise Date for the Warrants being exercised (for example, to
utilize the Limit Option most effectively). To achieve such objective, a
Warrantholder holding Warrants in book-entry form must cause such Warrants to be
transferred free on the records of DTC to, and such Exercise Notice to be
received by, the Warrant Agent at or prior to 3:00 P.M., New York City time, on
such New York Business Day; provided, however, that in the case of Warrants in
book-entry form held through CEDEL or Euroclear, the Warrants must be
transferred to the Warrant Agent prior to 3:00 P.M., New York City time, on the
applicable Valuation Date. To ensure that such Warrants and Exercise Notice will
be received by the Warrant Agent at or prior to such time,
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such Warrantholder must give the appropriate direction to his broker before such
broker's (and, if such broker is not a Participant, the applicable
Participant's) cut-off time for accepting exercise instructions from customers
for that day. Different brokerage firms may have different cut-off times for
accepting and implementing exercise instructions from their customers.
Therefore, Warrantholders holding their Warrants in book-entry form should
consult with their brokers or other intermediaries, if applicable, as to
applicable cut-off times and other exercise mechanics. Under no circumstances
may Warrants in certificated form be exercised through the facilities of CEDEL
or Euroclear. The Company has been informed by CEDEL and Euroclear that such
clearing agencies will only clear, and facilitate exercises of, Warrants in
book-entry form. See "Description of the Warrants--Exercise and Settlement of
Warrants", "--CEDEL and Euroclear" and "--Limit Option" herein. Forms of
Exercise Notice for Warrants held in book-entry form may be obtained at the
Warrant Agent's Office (as hereinafter defined) during the Warrant Agent's
normal business hours. See "Description of the Warrants-- General" herein.
A Warrantholder may exercise no fewer than 500 Warrants at any time, except
in the event of automatic exercise of the Warrants which would occur as a result
of the Warrantholder not having exercised his Warrants on or before the earlier
of (i) the New York Business Day immediately preceding the Expiration Date or
(ii) the Delisting Date. Accordingly, except in the event of automatic exercise
of the Warrants, a Warrantholder with fewer than 500 Warrants will need either
to sell his Warrants or to purchase additional Warrants, thereby incurring
transaction costs, in order to realize upon his investment. Furthermore, such
Warrantholder will incur the risk that additional Warrants may not be available
in order to permit him to satisfy the minimum exercise amount and, even if
additional Warrants are available, there may be a difference between the Cash
Settlement Value of the Warrants and the actual trading prices of those
Warrants.
If a Warrant is not exercised prior to 3:00 P.M., New York City time, on the
earlier of (i) the New York Business Day preceding the Expiration Date or (ii)
the Delisting Date, and if on the appropriate Valuation Date the Spot Rate
equals or is below the Strike Rate, the Warrant will expire worthless and the
Warrantholder will have sustained a total loss of the purchase price of the
Warrant.
INVESTOR SUITABILITY
The AMEX recommends that the Warrants be sold only to investors whose
accounts have been approved for options trading. In addition, the AMEX requires
that its members and member organizations and registered employees thereof make
certain suitability determinations before recommending transactions in the
Warrants. Before making any investment in the Warrants, it is important that a
prospective investor become informed about and understand the nature of the
Warrants in general, the specific terms of the Warrants and the nature of the
relevant currency exchange rate. An investor should understand the consequences
of liquidating his investment in a Warrant by exercising it as opposed to
selling it. It is especially important for an investor to be familiar with the
procedures governing the exercise of Warrants, since a failure to properly
exercise a Warrant prior to its expiration could result in the loss of his
entire investment. This includes knowing when Warrants are exercisable and how
to exercise them.
POSSIBLE ILLIQUIDITY OF SECONDARY MARKET
It is not possible to predict the price at which the Warrants will trade in
the secondary market or whether such market will be liquid or illiquid. If
additional warrants or options relating to particular non-U.S. currencies or
particular currency indices are subsequently offered to the public, the supply
of warrants and options relating to such non-U.S. currencies or currency
indices, as applicable, in the market will increase, which could cause the price
at which the Warrants and such other warrants and options trade in the secondary
market to decline significantly. The Warrants have been approved for listing on
the AMEX. In the event of a delisting or suspension of trading on the AMEX, the
Company
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will use its best efforts to list the Warrants on another national securities
exchange. To the extent Warrants are exercised, the number of Warrants
outstanding will decrease, resulting in a lessening of the liquidity of the
Warrants. A lessening of the liquidity of the Warrants may cause, in turn, an
increase in volatility associated with the price of the Warrants.
CERTAIN FACTORS AFFECTING VALUE AND TRADING PRICE OF WARRANTS
The Cash Settlement Value of the Warrants at any time prior to expiration is
expected typically to be less than the trading price of the Warrants at that
time. The difference between the trading price and the Cash Settlement Value
will reflect, among other things, a "time value" for the Warrants. The "time
value" of the Warrants will depend partly upon the length of the period
remaining to expiration and expectations concerning the value of the Japanese
yen as compared to the U.S. dollar during such period. The expiration date of
the Warrants will be accelerated should the Warrants be delisted from, or should
there be a permanent suspension of their trading on, any national securities
exchange on which such Warrants are traded, unless such Warrants simultaneously
are accepted for listing on another national securities exchange. Any such
acceleration would result in the total loss of any otherwise remaining "time
value", and could occur when such Warrants are out-of-the-money, thus resulting
in the total loss of the purchase price of such Warrants.
Warrantholders should be aware that Bear Stearns and its affiliates take
positions in the Japanese yen to facilitate client transactions and as principal
positions for Bear Stearns or such affiliates' own accounts. Through such
activities, Bear Stearns and its affiliates may take positions in the Japanese
yen that are inconsistent with an investment in the Warrants.
Before exercising or selling Warrants, Warrantholders should carefully
consider, among other things, (i) the trading price of the Warrants, (ii) the
exchange rate or rates of the Japanese yen as compared to the U.S. dollar at
such time, (iii) the time remaining to expiration, (iv) the probable range of
Cash Settlement Values and (v) any related transaction costs.
The trading price of the Warrants at any time is expected to be dependent on
(i) the relationship between the Strike Rate and the Spot Rate at such time and
(ii) a number of other interrelated factors, including those listed below. The
relationship among these factors is complex. However, the expected effect on the
trading price of the Warrants of each of the factors listed below, assuming in
each case that all other factors are held constant, is as follows:
(1) The prevailing Spot Rate of the Japanese yen. If the value of the
Japanese Yen rises in relation to the U.S. dollar, the trading price of the
Warrants is expected to decrease; if the value of the Japanese yen falls in
relation to the U.S. dollar, the trading price of the Warrants is expected
to increase.
(2) The volatility of the exchange rate of the Japanese yen. If the
volatility of the exchange rate of the Japanese yen as compared to the U.S.
dollar, increases, the trading price of the Warrants is expected to
increase; if such volatility decreases, the trading price of the Warrants is
expected to decrease.
(3) The time remaining to the expiration date of the Warrants. As the
time remaining to the expiration date of the Warrants decreases, the trading
price of the Warrants is expected to decrease.
(4) The interest rate differential between U.S. dollar and Japanese yen
fixed instruments. If (a) Japanese yen interest rates decrease, (b) U.S.
dollar interest rates increase or (c) both, then the trading value of a
Warrant is expected to decrease.
As noted above, these hypothetical scenarios are based on the assumption
that all other factors are held constant. In reality, it is unlikely that only
one factor would change in isolation, because changes in
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one factor usually cause, or result from, changes in others. Some of the factors
referred to above are in turn influenced by various political, economic and
other factors referred to herein.
LIMITATIONS ON EXERCISE
All exercises of Warrants (other than on the Expiration Date for the
Warrants or on the Delisting Date) are subject, at the Company's option, in its
sole discretion, to the limitation that not more than 1,000,000 Warrants in
total may be exercised on any exercise date for the Warrants and not more than
250,000 Warrants may be exercised by or on behalf of any person or entity,
either individually or in concert with any other person or entity, on any
Exercise Date for the Warrants. In the event that the total number of Warrants
being exercised on any date exceeds such maximum number and the Company elects
to limit the number of Warrants exercisable on such date, a Warrantholder may
not be able to exercise on such date all Warrants that such holder desires to
exercise.
Warrants to be exercised on such date will be selected on a pro rata basis.
See "Description of the Warrants--Maximum Exercise Amount" herein. The Warrants
tendered for exercise but not exercised on such date will be automatically
exercised on the next date on which Warrants may be exercised, subject to the
same daily maximum limitation and delayed exercise provisions described in this
paragraph. Any such limitation will not apply in the event of automatic
exercise, including at expiration.
OFFERING PRICE OF WARRANTS
The initial offering price of the Warrants may be in excess of the price
that a commercial user of the Japanese yen might pay for a comparable option in
a private transaction.
EFFECT OF CREDIT RATING REDUCTION
The value of the Warrants is expected to be affected, in part, by investors'
general appraisal of the Company's creditworthiness. Such perceptions are
generally influenced by the ratings accorded to the Company's outstanding
securities by the standard statistical rating services, such as Moody's
Investors Service, Inc. and Standard & Poor's Corporation. A reduction in the
rating, if any, accorded to outstanding debt securities of the Company by one of
these rating agencies could result in a reduction in the trading value of the
Warrants.
WARRANTS ARE UNSECURED OBLIGATIONS
The Warrants are unsecured contractual obligations of the Company and will
rank on a parity with the Company's other unsecured contractual obligations and
with the Company's unsecured and unsubordinated debt. The Warrants are not
standardized foreign currency options of the type issued by the Options Clearing
Corporation (the "OCC"), a clearing agency regulated by the Commission. For
example, unlike purchasers of OCC standardized options who have the credit
benefits of guarantees and margin and collateral deposits by OCC clearing
members to protect the OCC from a clearing member's failure, purchasers of
Warrants must look solely to the Company for performance of its obligations to
pay the Cash Settlement Value upon the exercise or expiration of the Warrants.
In addition, OCC standardized options provide for physical delivery of the
underlying foreign currency (rather than cash settlement in U.S. dollars), and
permit immediate determination of value upon exercise. Further, the market for
the Warrants is not expected to be generally as liquid as the market for some
OCC standardized options.
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CERTAIN CONSIDERATIONS REGARDING HEDGING
Prospective purchasers intending to purchase Warrants to hedge against the
market risk associated with investing in the Japanese yen should recognize the
complexities of utilizing Warrants in this manner. For example, the value of the
Warrants may not exactly correlate with the value of the Japanese yen. Due to
fluctuating supply and demand for the Warrants and the other factors described
under "Certain Information Concerning the Warrants" below, there is no assurance
as to how closely changes in the value of the Warrants will correlate with
movements of the Japanese yen.
OTHER CONSIDERATIONS
The Warrants have been approved for listing on the AMEX. In the event the
Warrants are delisted from, or permanently suspended from trading on (within the
meaning of the Securities Exchange Act of 1934 and the rules and regulations
thereunder), the AMEX and not accepted at the same time for listing on another
United States national securities exchange, Warrants not previously exercised
will be deemed automatically exercised on the Delisting Date, and the Cash
Settlement Value, if any, shall be calculated and settled as provided under
"Description of the Warrants--Delisting of Warrants" herein. In the event of a
delisting or suspension of trading on the AMEX, the Company will use its best
efforts to list the Warrants on another United States national securities
exchange.
The Underwriters propose initially to offer the Warrants at a price that
reflects a discount from the maximum price to public referred to on the cover of
this Prospectus Supplement for the purchase of 100,000 or more warrants in a
single transaction in this offering, subject to the 30-day holding period
requirement referred to under "Underwriting" herein. Should investors who are
subject to the holding period requirement sell their Warrants immediately
following the expiration of the holding period, the market price of the Warrants
may be adversely affected. See "Underwriting" herein.
INVESTORS ARE ADVISED TO CONSIDER CAREFULLY THE FOREGOING RISK FACTORS AND
THE DISCUSSION OF "CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS"
HEREIN, AS WELL AS THE OTHER INFORMATION IN THE PROSPECTUS AND HEREIN, PRIOR TO
PURCHASING THE WARRANTS.
CERTAIN IMPORTANT INFORMATION CONCERNING THE WARRANTS
Each Warrantholder will receive a cash payment upon exercise (including
automatic exercise) only if such Warrant has a Cash Settlement Value greater
than zero at such time. The Cash Settlement Value of a Warrant will be an amount
in U.S. dollars equal to the greater of (i) zero or (ii) the amount (rounded
down to the nearest cent) computed by subtracting from U.S. $50 an amount equal
to the product of U.S. $50 times a fraction, the numerator of which is the
Strike Rate and the denominator of which is the Spot Rate. See "Description of
the Warrants." The Spot Rate Reference Agent will not be responsible for good
faith errors or omissions in calculating or disseminating information regarding
the Spot Rate or the Cash Settlement Value.
Warrantholders will be subject to foreign exchange risk which may have
important economic and tax consequences to them. See "Exchange Rates," "Certain
United States Federal Income Tax Considerations" and "Risk Factors" herein.
Except under the circumstances described in the next paragraph, the
Valuation Date for an exercised Warrant will be the first New York Business Day
after the related Exercise Date. The Exercise Date for an exercised Warrant,
subject to certain exceptions described under "Description of the
Warrants--Automatic Exercise" herein, will be the New York Business day on which
such Warrant and an Exercise Notice in proper form are received by the Warrant
Agent if received at or prior to 3:00 P.M., New York city time, on such day; if
such Warrant and Exercise Notice are received after such
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time, the Exercise Date will be the next succeeding New York Business Day. See
"Description of the Warrants--Exercise and Settlement of the Warrants" herein.
The Valuation Date for an exercised Warrant will occur after the Exercise
Date (see "Description of the Warrants--Exercise and Settlement of Warrants").
Therefore, a Warrantholder will not be able to determine, at the time of
exercise of a Warrant, the Spot Rate that will be used in calculating the Cash
Settlement Value of such Warrant (and will thus be unable to determine such Cash
Settlement Value). Any downward movement in the value of the U.S. dollar
relative to the Japanese yen between the time a Warrantholder submits an
Exercise Notice and the time the Spot Rate for such exercise is determined
(which period will, at a minimum, represent an entire New York Business Day)
will result in such Warrantholder being entitled to a Cash Settlement Value
(which may be zero) that is less than the Cash Settlement Value anticipated by
such Warrantholder based on the Spot Rate most recently reported prior to
submission for exercise. Except for Warrants subject to automatic exercise,
however, each Warrantholder, in connection with any exercise of Warrants, will
have a Limit Option to specify that such Warrants are not to be exercised if the
Spot Rate that would otherwise be used to determine the Cash Settlement Value of
such Warrants has declined by five or more Japanese yen per U.S. dollar from the
Spot Rate on the date of exercise. See "Description of the Warrants--Limit
Option." In addition, the Valuation Date for exercised Warrants may be postponed
as a result of the exercise of a number of Warrants exceeding the limits on
exercise described herein under "Description of the Warrants--Maximum Exercise
Amount."
The Warrants will initially be evidenced by certificates in registered form
(each a "Warrant Certificate"). To exercise a Warrant in certificated form the
registered holder of such Warrant must deliver to the Warrant Agent the Warrant
Certificate representing such Warrant, with the Exercise Notice on the reverse
thereof (or an Exercise Notice in substantially identical form delivered
therewith) duly completed and executed. Accordingly, a beneficial owner of
Warrants holding such Warrants indirectly (for instance, through a broker that
holds such warrants in "street name") may exercise such Warrants only through
such owner's registered holder. In the case of a beneficial owner holding
Warrants through his broker, who may in turn need to direct another intermediary
to deliver an Exercise Notice and the related Warrant Certificates to the
Warrant Agent in order to ensure that an Exercise Notice and the related Warrant
Certificates will be delivered to the Warrant Agent before 3:00 P.M., New York
City time, on a given New York Business Day, a beneficial owner of the Warrants
may have to give exercise instructions to his broker or other intermediary
substantially earlier than 3:00 P.M., New York City time, on such day. Different
firms may have different cut-off times for accepting and implementing exercise
instructions from their customers. Therefore, Warrantholders should consult
their brokers or other intermediaries, if applicable, as to applicable cut-off
times and other exercise mechanics. See "Description of the Warrants--Exercise
and Settlement of Warrants" herein.
One hundred eighty (180) calendar days after the closing of this offering
(which is expected to occur on August 25, 1995), each registered Warrantholder
will have the option to convert the form of such Warrantholder's Warrant from
certificated to book-entry form, which option may be exercised within a
forty-five calendar day period as described herein. See "Description of the
Warrants--Book Entry Conversion" herein. To exercise a Warrant in book-entry
form, (i) the Participant through which the Warrant is held must transfer such
Warrant free on the records of the Depository to the account of the Warrant
Agent and (ii) a duly completed and executed Exercise Notice on behalf of the
Warrantholder must be delivered to the Warrant Agent by the Participant. A
Warrantholder that is not a Participant must therefore instruct the broker or
other intermediary that maintains the Warrantholder's account to take such
action, and if that firm is not a Participant, that firm must forward such
instructions to the Participant which ultimately holds the relevant Warrants for
the Depository. In order to ensure that such Warrants and exercise Notice will
be received by the Warrant Agent on a particular day, such warrantholder must
give exercise instructions to the broker or other intermediary through which it
holds the Warrant (which may, in turn, need to direct a Participant) before that
firm's (and, if
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that firm is not a Participant, the applicable participant's) cut-off time for
accepting exercise instructions for that day. Different firms may have different
cut-off times for accepting exercise instructions from their customers.
Therefore, Warrantholders should consult their brokers or other intermediaries,
if applicable, as to applicable cut-off times and other exercise mechanics. See
"Description of the Warrants--Exercise and Settlement of Warrants" herein.
FORMS OF EXERCISE NOTICES APPEAR ON THE REVERSE OF THE WARRANT CERTIFICATES
OR MAY BE OBTAINED AT THE WARRANT AGENT'S OFFICE, DURING THE WARRANT AGENT'S
NORMAL BUSINESS HOURS. SEE "DESCRIPTION OF THE WARRANTS--GENERAL."
If a Warrant is not exercised prior to its expiration and if at expiration
the Spot Rate equals or is below the Strike Rate, the Warrant will expire
worthless and the Warrantholder will have sustained a total loss of the purchase
price of the Warrant. See "Risk Factors" herein.
Investors considering purchasing Warrants should be experienced with respect
to options and option transactions and understand the risks of foreign exchange
transactions and reach an investment decision only after careful consideration
with their advisers, of the suitability of the Warrants in light of their
particular financial circumstances and the information set forth in this
Prospectus Supplement and in the Prospectus. The AMEX recommends that the
Warrants be sold only to investors whose accounts have been approved for options
trading, and requires that its members and member organizations and the
registered employees thereof make certain suitability determinations before
recommending transactions in Warrants.
A Warrantholder may exercise no fewer than 500 Warrants at any time, except
in the case of automatic exercise of the Warrants, which would occur as a result
of the Warrantholder not having exercised his Warrants on or before the earlier
of (i) the New York Business Day immediately preceding the Expiration Date or
(ii) the Delisting Date. Accordingly, except in the case of automatic exercise
of the Warrants, a Warrantholder with fewer than 500 Warrants will need either
to sell his Warrants or to purchase additional Warrants, thereby incurring
transaction costs, in order to realize upon his investment. Furthermore, such
Warrantholder will incur the risk that additional Warrants may not be available
in order to permit him to satisfy the minimum exercise amount and, even if
additional Warrants are available, there may be a difference between the Cash
Settlement Value of the Warrants and the actual trading prices of those
Warrants.
DESCRIPTION OF THE WARRANTS
GENERAL
The Warrants will be issued pursuant to a Warrant Agreement (the "Warrant
Agreement"), to be dated as of August 25, 1995, between the Company, Chemical
Bank, as Warrant Agent (the "Warrant Agent"), and Bear, Stearns & Co. Inc., as
Spot Rate Reference Agent. The following summaries of certain provisions of the
Warrants and the Warrant Agreement do not purport to be complete and reference
is made to all the provisions of the Warrant Agreement (including the form of
Warrant Certificate and global Warrant certificate attached as exhibits
thereto). The Warrant Agreement will be available for inspection by any
Warrantholder at the office of the Warrant Agent (the "Warrant Agent's Office")
which is currently located at 450 West 33rd Street, New York, New York 10001,
during the Warrant Agent's normal business hours.
A Warrant will not require or entitle a Warrantholder to purchase U.S.
dollars from, or sell Japanese yen to, the Company. Upon exercise of a Warrant,
the Company will make only a U.S. dollar cash payment in the amount of the Cash
Settlement Value, if any, of such Warrant. The Company is under no obligation
to, nor will it, sell U.S. dollars to, or purchase Japanese yen from,
Warrantholders in connection with the exercise of any Warrants. Warrantholders
will not receive any interest on any Cash Settlement Value.
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DETERMINATION OF CASH SETTLEMENT VALUE OF WARRANTS
Each Warrant will entitle the Warrantholder to receive, upon exercise
(including automatic exercise), the Cash Settlement Value of such Warrant. The
"Cash Settlement Value" of a Warrant will equal an amount in U.S. dollars
(rounded down to the nearest cent) which is the greater of (i) zero or (ii) the
amount computed by subtracting from U.S. $50 an amount equal to the product of
U.S. $50 times a fraction, the numerator of which is the Strike Rate and the
denominator of which is the Spot Rate. This amount is described by the following
formula:
CASH SETTLEMENT VALUE = THE GREATER OF
(I) $0 or
STRIKE RATE
(II) $50 - [$50 X (---------------------)]
SPOT RATE
The "Spot Rate" on any Valuation Date will be determined by the Spot Rate
Reference Agent and will equal (i) the noon buying rate per U.S. $1.00 in The
City of New York on such Valuation Date for cable transfers in Japanese yen as
certified for customs purposes by the Federal Reserve Bank of New York (the
"Noon Buying Rate"), as reported on page 1FEE of The Reuter Monitor Money Rates
Service (or such page as may replace that page), or (ii) if the Noon Buying Rate
does not appear on such page by 1:00 P.M., New York City time, on such Valuation
Date, the Noon Buying Rate on such Valuation Date as otherwise announced by the
Federal Reserve Bank of New York, or (iii) if the Federal Reserve Bank of New
York has not quoted such Noon Buying Rate by 1:30 P.M., New York City time, on
such Valuation Date, the offered spot rate of Japanese yen per U.S. $1.00 on
such Valuation Date, which offered spot rate shall be calculated by the Spot
Rate Reference Agent by (a) obtaining at approximately 1:30 P.M., New York City
time, a quote from each of five leading market makers (other than Bear Stearns)
in the foreign exchange markets for Japanese yen selected by the Spot Rate
Reference Agent for a transaction amount approximately equivalent to U.S. $50
times the aggregate number of Warrants which were properly exercised on the
related Exercise Date, (b) discarding the highest and lowest quotes obtained and
(c) averaging the three remaining quotes to determine such offered spot rate.
Because more favorable rates are generally obtained in large transactions, the
offered Spot Rate that will be calculated, if necessary, pursuant to clause
(iii) above in the event the Noon Buying Rate is not available in connection
with the exercise of a small aggregate number of Warrants, may be less favorable
than the rate that will be calculated if a greater number of Warrants were
exercised. No assurance can be given as to the aggregate number of Warrants
which may be exercised on any day.
The Spot Rate used to determine the Cash Settlement Value on any Valuation
Date will be rounded to the second decimal place (e.g., 90.26), rounding up if
the next succeeding decimal place, without regard to rounding, is five or
higher. Any such Cash Settlement Value will be rounded down, if necessary, to
the nearest cent.
HYPOTHETICAL WARRANT VALUES ON EXERCISE
Set forth below is an illustrative example demonstrating the Cash Settlement
Values of a Warrant based on various hypothetical Spot Rates and a Strike Rate
of 92.11. The illustrative Cash Settlement Values in the table do not reflect
any "time value" for a Warrant, which may be reflected in trading
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value, and are not necessarily indicative of potential profit or loss, which are
also affected by purchase price and transaction costs.
HYPOTHETICAL
SPOT RATE CASH SETTLEMENT VALUE
(YEN/U.S. $1.00) OF A WARRANT
------------------- ---------------------
130.00............................................... U.S.$ 14.57
127.00............................................... 13.74
124.00............................................... 12.86
121.00............................................... 11.94
118.00............................................... 10.97
115.00............................................... 9.95
112.00............................................... 8.88
109.00............................................... 7.75
106.00............................................... 6.55
103.00............................................... 5.29
102.35............................................... 5.00
100.00............................................... 3.95
99.00................................................ 3.48
96.00................................................ 2.03
92.11 or below....................................... 0.00
WARRANT CERTIFICATES
The Warrants initially will be issued as certificates in registered form
(each, a "Warrant Certificate"). The Warrant Agent will from time to time
register the transfer of any outstanding Warrant Certificate upon surrender
thereof at the Warrant Agent's Office duly endorsed by, or accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Warrant Agent duly executed by, the registered holder thereof, a duly appointed
legal representative or a duly authorized attorney. Such signature must be
guaranteed by a bank or trust company having a correspondent office in New York
City or by a member of a national securities exchange. A new Warrant Certificate
will be issued to the transferee upon any such registration of transfer.
At the option of a registered holder of a Warrant, Warrant Certificates may
be exchanged for other Warrant Certificates representing an equal number of
Warrants, upon surrender to the Warrant Agent at the Warrant Agent's Office of
the Warrant Certificates to be exchanged. The Company will thereupon execute,
and the Warrant Agent will countersign and deliver, one or more new Warrant
Certificates representing such equal number of Warrants.
In the event that, after any exercise of Warrants evidenced by a Warrant
Certificate, the number of Warrants exercised is fewer than the total number of
Warrants evidenced by such Certificate, a new Warrant Certificate evidencing the
number of Warrants not exercised will be issued to the registered holder or his
assignee. See "Minimum Exercise Amount" below.
If any Warrant Certificate is mutilated, lost, stolen or destroyed, the
Company may in its discretion execute, and the Warrant Agent may countersign and
deliver, in exchange and substitution for such mutilated Warrant Certificate or
in replacement for such lost, stolen or destroyed Warrant Certificate, a new
Warrant Certificate representing an equal number of Warrants, but only (in the
case of loss, theft or destruction) upon receipt of evidence satisfactory to the
Company and the Warrant Agent of loss, theft or destruction of such Warrant
Certificate and security or indemnity, if requested, satisfactory to them.
Warrantholders requesting replacement Warrant Certificates must also comply with
such other reasonable regulations and pay such reasonable charges as the Company
or the Warrant Agent may prescribe. In the event that all the Warrants
represented by any such mutilated, lost, stolen or destroyed Warrant Certificate
have been or are about to be exercised (including upon automatic exercise), the
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Company in its discretion may, instead of issuing a new Warrant Certificate,
direct the Warrant Agent to treat such Warrant Certificate as if the Warrant
Agent had received an Exercise Notice in proper form in respect thereof or as
being subject to automatic exercise, as the case may be.
No service charge will be made for any registration of transfer or exchange
of Warrant Certificates, but the Company may require the payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection therewith, other than exchanges not involving any transfer. In the
case of the replacement of mutilated, lost, stolen or destroyed Warrant
Certificates, the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Warrant Agent)
connected therewith.
Warrantholders may not hold certificated positions through CEDEL or
Euroclear, but may hold Warrants in book-entry form through the facilities of
CEDEL or Euroclear after they have been converted from certificated to
book-entry form. See "--Book-Entry Conversion" and "--CEDEL and Euroclear"
herein.
BOOK-ENTRY CONVERSION
One hundred eighty (180) calendar days after the closing of this offering
(which is expected to occur on August 25, 1995), each registered holder of a
Warrant will have the option to convert the form in which such holder holds his
Warrants from certificated to book-entry form by utilizing the Conversion
Option. The Conversion Option will be available for forty-five calendar days
(the "Conversion Option Period") and is expected to run from February 21, 1996
through April 5, 1996.
In order to be exchanged for a Warrant in book-entry form, the Warrant
Certificate evidencing such certificated Warrant must be delivered to DTC, in
proper form for deposit, by a Participant. Accordingly, a registered holder of a
Warrant who is not a Participant must deliver his Warrant Certificate, in proper
form for deposit, to a Participant, either directly or through an indirect
participant in DTC (such as a bank, brokerage firm, dealer or trust company that
clears through, or maintains a custodial relationship with, a Participant) or a
brokerage firm which maintains an account with a Participant, in order to have
his certificated Warrant exchanged for a Warrant in book-entry form.
Warrantholders who desire to exchange their certificated Warrants for Warrants
in book-entry form should contact their brokers or other Participants or
indirect participants to obtain information on procedures for submitting their
Warrant Certificates to DTC, including the proper form for submission, and
(during the Conversion Option Period) the cut-off times for same day and next
day exchange. Certificated Warrants which are held by a Warrantholder in nominee
or "street" name may be automatically exchanged into book-entry form by the
broker or other entity in whose name the Warrant Certificates evidencing such
certificated Warrants are registered, without action of, or consent by, the
beneficial owner of such certificated Warrants. Under no circumstances may
certificated Warrants be converted into Warrants in book-entry form through the
facilities of CEDEL or Euroclear.
Certificated Warrants received by DTC for exchange during the Conversion
Option Period will be exchanged for Warrants in book-entry form by the close of
business on the New York Business Day that the Warrant Certificates evidencing
such certificated Warrants are received by DTC (if received by DTC at or before
its then applicable cut-off time for same day credit) or on the following New
York Business Day (if received by DTC at or before its then applicable cut-off
time for next day credit). After the last day of the Conversion Option Period,
DTC will not be required to accept delivery of certificated Warrants for
exchange for book-entry Warrants, but may permit certificated Warrants to be so
exchanged on a case-by-case basis. However, there can be no assurance that such
certificated Warrants would be accepted for exchange. Certificated Warrants
surrendered at any time for exchange for book-entry Warrants may not be
exercised or delivered for settlement or transfer until such exchange has been
effected. Accordingly, if an increase in the Spot Rate were to occur after a
certificated Warrant had been surrendered for exchange into book-entry form, a
Warrantholder would not be able to take
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advantage of the increase by exercising his Warrant until such exchange had been
effected. Because certificated Warrants are not required to be exchanged for
Warrants in book-entry form, it is likely that not all certificated Warrants
will be so exchanged. Accordingly, a Warrantholder purchasing Warrants in
secondary market trading after commencement of the Conversion Option Period may
wish to consult with his broker or another Participant or indirect participant
if he wishes to purchase Warrants only in book-entry form and not certificated
form.
The Company has been informed by CEDEL and Euroclear that such clearing
agencies will only clear Warrants in book-entry form.
Once a registered holder of a Warrant has elected the Conversion Option,
such holder may hold his Warrants only in book-entry form and will not be able
to change his election or withdraw from the book-entry system during the
Conversion Option Period or thereafter. Accordingly, except in certain limited
circumstances described in the Prospectus under "Description of Warrants--Book
Entity Procedures and Settlement", ownership of the Warrants in certificated
form will no longer be available to investors who have elected the Conversion
Option.
DTC
DTC is a limited-purpose trust company which was created to hold securities
for its participating organizations (the "Participants") and to facilitate the
clearance and settlement of securities transactions between Participants in such
securities through electronic book-entry changes in accounts of its
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, 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 may beneficially own securities held by DTC only
through Participants or indirect participants.
Neither the Company nor the Warrant Agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in Warrants held in book-entry form, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
A Warrantholder's ownership of a Warrant will be recorded on or through the
records of the brokerage firm or other entity that maintains such
Warrantholder's account. In turn, the total number of Warrants held by an
individual brokerage firm for its clients will be maintained on the records of
DTC in the name of such brokerage firm (or in the name of a Participant or
indirect participant that acts as agent for the Warrantholder's brokerage firm
if such firm is not a Participant or indirect participant). Therefore, a
Warrantholder must rely upon the foregoing procedures to evidence such
Warrantholder's ownership of a Warrant. Transfer of ownership of any Warrant may
be effected only through the selling Warrantholder's brokerage firm or other
entity that maintains the Warrantholder's account.
The Cash Settlement Value payable in respect of the Warrants will be paid by
the Warrant Agent to DTC. DTC will be responsible for crediting the amount of
such payments to the accounts of the Participants or indirect participants in
accordance with its standard procedures, which currently provide for payments in
next-day funds settled through the New York Clearing House. Each Participant or
indirect participant will be responsible for disbursing such payments to the
beneficial owners of the Warrants that it represents and to each brokerage firm
for which it acts as agent. Each such brokerage firm will be responsible for
disbursing funds to the owners of the Warrants that it represents. It is
suggested that any purchaser of Warrants with accounts at more than one
brokerage firm only effect transactions in the Warrants, including exercises,
through the brokerage firm or firms that hold such purchaser's Warrants.
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If DTC is at any time unwilling or unable to continue as depository and a
successor depository is not appointed by the Company within 90 days, the Company
will issue Warrants in definitive form in exchange for the Warrants held in
book-entry form. In addition, the Company may at any time determine not to have
the Warrants held in book-entry form and, in such event, will issue Warrants in
definitive form in exchange therefor. In either instance, an owner of a
beneficial interest in Warrants held in book-entry form will be entitled to have
Warrants equal in aggregate amount to such beneficial interest registered in its
name and will be entitled to physical delivery of such Warrants in definitive
form.
CEDEL AND EUROCLEAR
Warrantholders may hold their Warrants only in book-entry form through CEDEL
or Euroclear if they are participants of such systems, or indirectly through
organizations which are participants in such systems. Certificated ownership of
Warrants will not be available through such systems.
CEDEL and Euroclear will hold omnibus book-entry positions on behalf of
their participants through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositaries which in turn
will hold such positions in customers' securities accounts in the names of the
nominees of the depositaries on the books of DTC. Citibank, N.A., New York
Office ("Citibank"), will act as depositary for CEDEL and Morgan Guaranty Trust
Company of New York, New York Office ("Morgan"), will act as depositary for
Euroclear (in such capacities, the "Depositaries"). All securities in CEDEL or
Euroclear are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts.
Exercises of book-entry Warrants by persons holding through CEDEL or
Euroclear participants will be effected through DTC, in accordance with DTC
rules, on behalf of the relevant European international clearing system by its
Depositary; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participant in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the exercise meets its requirements,
deliver instructions to its Depositary to take action to effect its exercise of
the Warrants on its behalf by delivering Warrants through DTC and receiving
payment in accordance with its normal procedures for next-day funds settlement.
Payments with respect to the Warrants held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL participants or Euroclear participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. See "--Exercise and Settlement of the Warrants"
herein.
Centrale de Livraison de Valeurs Mobilieres S.A. ("CEDEL") is incorporated
under the laws of Luxembourg as a professional depository. CEDEL holds
securities for its participating organizations and facilitates the clearance and
settlement of securities transactions between CEDEL participants through
electronic book-entry changes in accounts of CEDEL participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 28 currencies, including U.S. dollars. CEDEL provides
to its participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. CEDEL interfaces with domestic markets in
several countries. As a professional depository, CEDEL is subject to regulation
by the Luxembourg Monetary Institute. CEDEL participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the Underwriters (as hereinafter defined).
Indirect access to CEDEL is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a CEDEL participant, either directly or indirectly.
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The Euroclear System was created in 1968 to hold securities for participants
in the Euroclear System and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 30 currencies, including U.S. dollars.
The Euroclear System includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by Morgan's Brussels, Belgium
office (the "Euroclear Operator" or "Euroclear"), under contract with Euroclear
Clearance System S.C., a Belgian cooperative corporation (the "Cooperative").
Morgan is a member bank of the United States Federal Reserve System. All
operations are conducted by the Euroclear Operator, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
Operator, not the Cooperative. The Cooperative establishes policy for the
Euroclear System on behalf of Euroclear participants. Euroclear participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the Underwriters.
Indirect access to the Euroclear System is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear participant,
either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipt of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
All information herein on CEDEL and Euroclear is derived from CEDEL or
Euroclear, as the case may be, and reflects the policies of such organizations;
such policies are subject to change without notice.
EXERCISE AND SETTLEMENT OF WARRANTS
The Warrants will be immediately exercisable upon issuance and will expire
on August 21, 1997 (the "Expiration Date"). Warrants not exercised (including by
reason of any postponed exercise) at or before 3:00 P.M., New York City time, on
the earlier of (i) the New York Business Day immediately preceding the
Expiration Date and (ii) the Delisting Date will be automatically exercised as
described under "Automatic Exercise" below.
A Warrantholder may exercise certificated Warrants on any New York Business
Day during the period from the date of issuance of such Warrants until 3:00
P.M., New York City time, on the earlier of (i) the New York Business Day
immediately preceding the Expiration Date and (ii) the Delisting Date, by
delivering or causing to be delivered to the Warrant Agent in New York City the
Warrant Certificate representing such Warrants with the irrevocable notice of
exercise on the reverse thereof (or a notice of exercise in substantially
identical form delivered therewith) (such notice, an "Exercise Notice") duly
completed and executed. The Warrant Agent's telephone number and facsimile
transmission number for this purpose are (212) 946-7655 and (212) 422-7682,
respectively.
In the case of book-entry Warrants held through the facilities of DTC, a
Warrantholder may exercise such Warrants on any New York Business Day during the
period from the date on which his certificated Warrants have been effectively
converted into book-entry form during the Conversion Option Period (which will
begin 180 calendar days following the closing of this offering) until 3:00 P.M,
New York City time, on the earlier of (i) the New York Business Day immediately
preceding the
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Expiration Date and (ii) the Delisting Date, by causing (a) such Warrants to be
transferred free to the Warrant Agent on the records of DTC and (b) a duly
completed and executed Exercise Notice to be delivered on behalf of the
Warrantholder by a Participant to the Warrant Agent. Forms of Exercise Notice
for Warrants held through the facilities of DTC may be obtained from the Warrant
Agent at the Warrant Agent's Office. The Warrant Agent's telephone number and
facsimile transmission number for this purpose are (212) 946-7655 and (212)
422-6782, respectively.
In the case of book-entry Warrants held through the facilities of CEDEL or
Euroclear, a Warrantholder may exercise such Warrants on any New York Business
Day during the period from the date on which his certificated Warrants have been
effectively converted into book-entry form during the Conversion Option Period
(which will begin 180 calendar days following the closing of this offering)
until 3:00 P.M., New York City time, on the earlier of (i) the New York Business
Day immediately preceding the Expiration Date and (ii) the Delisting Date, by
causing (a) such Warrants to be transferred free to the Warrant Agent on the
records of DTC, by giving appropriate instructions to the participant holding
such Warrants in either the CEDEL or Euroclear system, as the case may be, and
(b) a duly completed and executed Exercise Notice to be delivered on behalf of
the Warrantholder by CEDEL or Euroclear, as the case may be, to the Warrant
Agent. Forms of Exercise Notice for Warrants held through the facilities of
either CEDEL or Euroclear may be obtained from the Warrant Agent at the Warrant
Agent's Office or from CEDEL or Euroclear.
Except for Warrants subject to automatic exercise or held in book-entry form
through the facilities of CEDEL or Euroclear, and subject to the Limit Option,
the "Exercise Date" for a Warrant will be (i) the New York Business Day on which
the Warrant Agent receives the Warrant and Exercise Notice in proper form with
respect to such Warrant, if received at or prior to 3:00 P.M., New York City
time, on such day, or (ii) if the Warrant Agent receives such Warrant and
Exercise Notice after 3:00 P.M, New York City time, on a New York Business Day,
then the New York Business Day next succeeding such New York Business Day.
In the case of Warrants held in book-entry form through the facilities of
CEDEL or Euroclear, except for Warrants subject to automatic exercise, and
subject to the Limit Option, the "Exercise Date" for a Warrant will be (i) the
New York Business Day on which the Warrant Agent receives the Exercise Notice in
proper form with respect to such Warrant if such Exercise Notice is received at
or prior to 3:00 P.M., New York City time, on such day, provided that the
Warrant is received by the Warrant Agent by 3:00 P.M., New York City time, on
the Valuation Date, or (ii) if the Warrant Agent receives such Exercise Notice
after 3:00 P.M., New York City time, on a New York Business Day, then the New
York Business Day next succeeding such New York Business Day, provided that the
Warrant is received by 3:00 P.M., New York City time, on the Valuation Date
relating to exercises of Warrants on such succeeding New York Business Day. In
the event that the Warrant is received after 3:00 P.M., New York City time, on
the Valuation Date, then the Exercise Date for such Warrant will be the day on
which such Warrant is received or, if such day is not a New York Business Day,
the next succeeding New York Business Day. In the case of Warrants held in
book-entry form through the facilities of CEDEL or Euroclear, in order to ensure
proper exercise on a given New York Business Day, participants in CEDEL or
Euroclear must submit exercise instructions to CEDEL or Euroclear, as the case
may be, by 10:00 A.M., Luxembourg time, in the case of CEDEL and by 10:00 A.M.,
Brussels time (by telex), or 11:00 A.M., Brussels time (by EUCLID), in the case
of Euroclear. In addition, in the case of book-entry exercises through
Euroclear, (a) participants must also transmit, by facsimile (facsimile number
(212) 422-7682), to the Warrant Agent a copy of the Exercise Notice submitted to
Euroclear by 3:00 P.M., New York City time, on the desired Exercise Date and (b)
Euroclear must confirm by telex to the Warrant Agent by 9:00 A.M., New York City
time, on the Valuation Date that the Warrants will be received by the Warrant
Agent on such date; provided, that if such telex communication is received after
9:00 A.M., New York City time, on the Valuation Date, the Company will be
entitled to direct the Warrant Agent to reject the related Exercise Notice or
waive the requirement for timely delivery of such telex communication.
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To ensure that an Exercise Notice and the related Warrants will be delivered
to the Warrant Agent before 3:00 P.M., New York City time, on a given New York
Business Day, a Warrantholder may have to give exercise instructions to his
broker or other intermediary substantially earlier than 3:00 P.M., New York City
time, on such day. Different brokerage firms may have different cut-off times
for accepting and implementing exercise instructions from their customers.
Therefore, Warrantholders should consult with their brokers or other
intermediaries, if applicable, as to applicable cut-off times and other exercise
mechanics. See "Risk Factors--Risks and Costs Associated with Conversion and
Exercise of Warrants" herein.
Except in the case of Warrants subject to automatic exercise, if on any
Valuation Date the Cash Settlement Value for any Warrants then exercised would
be zero, then the attempted exercise of such Warrants will be void and of no
effect and, in the case of certificated Warrants, the Warrant Certificate
evidencing such Warrants will be returned to the registered holder by first
class mail at the Company's expense or, in the case of Warrants held through the
facilities of DTC, CEDEL or Euroclear, such Warrants will be transferred back to
the Participant (including the Depositaries) that submitted them free to the
Warrant Agent on the records of DTC, and, in any such case, such Warrantholder
will be permitted to re-exercise such Warrants prior to the Expiration Date or
on or prior to the Delisting Date, as the case may be.
The "Valuation Date" for a Warrant will be the first New York Business Day
following the Exercise Date, subject to postponement as a result of the exercise
of a number of Warrants exceeding the limits on exercise described below under
"Maximum Exercise Amount". The following is an illustration of the timing of an
Exercise Date, the ensuing Valuation Date and the Limit Option Reference Rate
(as hereinafter defined), assuming (i) all relevant dates are New York Business
Days and (ii) the number of exercised Warrants does not exceed the maximum
permissible amount. If, for example, the Warrant Agent receives a
Warrantholder's Warrants and Exercise Notice in proper form at or prior to 3:00
P.M., New York City time, on Thursday, August 15, 1996, the Exercise Date for
such Warrants will be Thursday, August 15, 1996, and the Valuation Date for such
Warrants will be Friday, August 16, 1996 (except that in the case of Warrants
held through the facilities of CEDEL or Euroclear, the Warrants must be received
by 3:00 P.M., New York City time, on the Valuation Date; if such Warrants are
received after such time, then the Exercise Date for such Warrants will be the
day on which such Warrants are received or, if such day is not a New York
Business Day, the next succeeding New York Business Day, and the Valuation Date
for such Warrants will be the first New York Business Day following such
Exercise Date and the Limit Option Reference Rate will be the Spot Rate on such
Exercise Date). For the purposes of the foregoing example, the Spot Rate used to
determine the Cash Settlement Value of such Warrants will be the Spot Rate on
Friday, August 16, 1996. If the Warrantholder elected the Limit Option in
connection with the exercise of such Warrants, the Limit Option Reference Rate
would be the Spot Rate on Thursday, August 15, 1996. If the Warrant Agent were
to receive such Warrantholder's Warrants and Exercise Notice after 3:00 P.M.,
New York City time, on Thursday, August 15, 1996 (except that in the case of
Warrants held through the facilities of CEDEL or Euroclear, if the Warrants are
received after 3:00 P.M, New York City time, on Friday, August 16, 1996), then
the Exercise Date for such Warrants would instead be Friday, August 16, 1996,
the Valuation Date would be Monday, August 19, 1996 and the applicable Limit
Option Reference Rate would be the Spot Rate on Friday, August 16, 1996.
Following receipt of Warrants and the related Exercise Notice in proper
form, the Warrant Agent will, not later than 5:00 P.M, New York City time, on
the applicable Valuation Date, (i) obtain from the Spot Rate Reference Agent the
Spot Rate, (ii) determine the Cash Settlement Value of such Warrants and (iii)
advise the Company of the aggregate Cash Settlement Value of the exercised
Warrants. In the case of certificated Warrants, the Company will be required to
make available to the Warrant Agent, not later than 3:00 p.m., New York City
time, on the fifth New York Business Day following the Valuation Date, funds in
an amount sufficient to pay the aggregate Cash Settlement Value of the exercised
Warrants. If the Company has made adequate funds available to the Warrant Agent
in a
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timely manner as required by the Warrant Agreement, the Warrant Agent will
thereafter be responsible for making payment available to each registered holder
of a Warrant on the fifth New York Business Day following the Valuation Date in
the form of a cashier's check or official bank check, or (in the case of
payments of at least $100,000) by wire transfer to a U.S. dollar bank account
maintained by such holder in the United States (at such holder's election as
specified in the applicable Exercise Notice), in an amount equal to the
aggregate Cash Settlement Value of such holder's exercised Warrants. In the case
of book-entry Warrants, the Company will be required to make available to the
Warrant Agent, no later than 3:00 P.M., New York City time, on the fifth New
York Business Day following the Valuation Date, funds in an amount sufficient to
pay the aggregate Cash Settlement Value of the exercised Warrants. If the
Company has made such funds available by such time, the Warrant Agent will
thereafter be responsible for making funds available to each appropriate
Participant (including Citibank and Morgan, who, in turn, will disburse payments
to CEDEL and Euroclear, respectively, who will be responsible for disbursing
such payments to each of their respective participants, who, in turn, will be
responsible for disbursing payments to the Warrantholders they represent), and
such Participant will be responsible for disbursing such payments to the
Warrantholders it represents and to each brokerage firm for which it acts as
agent. Each such brokerage firm will be responsible for disbursing funds to the
Warrantholders that it represents.
"Spot Rate Reference Agent" means Bear Stearns or, in lieu thereof, another
firm selected by the Company to perform the functions of the Spot Rate Reference
Agent in connection with the Warrants.
MINIMUM EXERCISE AMOUNT
No fewer than 500 Warrants may be exercised by a Warrantholder at any one
time, except in the event of an automatic exercise of the Warrants. Accordingly,
except in such event a Warrantholder with fewer than 500 Warrants will need
either to sell his Warrants or to purchase additional Warrants, thereby
incurring transaction costs, in order to realize upon his investment.
Warrantholders must satisfy the minimum exercise amount requirement described
above separately with respect to both certificated and book-entry Warrants even
if both kinds of Warrants are to be exercised at the same time. Thus, a
Warrantholder seeking to exercise both certificated and book-entry Warrants at
the same time must still exercise a minimum of 500 of each kind of Warrant in
order to satisfy such requirement. In addition, book-entry Warrants held through
one Participant (including participants in CEDEL or Euroclear) may not be
combined with book-entry Warrants held through another Participant in order to
satisfy the minimum exercise requirement. Furthermore, such Warrantholder will
incur the risk that additional Warrants may not be available in order to permit
him to satisfy the minimum exercise amount and, even if additional Warrants are
available, there may be a difference between the Cash Settlement Value of the
Warrants and the actual trading prices of those Warrants.
MAXIMUM EXERCISE AMOUNT
All exercises of Warrants (other than on the Expiration Date or the
Delisting Date) are subject, at the Company's option, in its sole discretion, to
the limitation that not more than 1,000,000 Warrants in total may be exercised
on any Exercise Date and not more than 250,000 Warrants may be exercised by or
on behalf of any person or entity, either individually or in concert with any
other person or entity, on any Exercise Date. If any New York Business Day would
otherwise, under the terms of the Warrant Agreement, be the Exercise Date in
respect of more than 1,000,000 Warrants, then at the Company's election, in its
sole discretion, 1,000,000 of such Warrants shall be deemed exercised on such
Exercise Date (selected by the Warrant Agent on a pro rata basis, but if, as a
result of such pro rata selection, any registered holders of Warrants would be
deemed to have exercised fewer than 500 Warrants, then the Warrant Agent shall
first select additional Warrants of such holders so that no such holder shall be
deemed to have exercised fewer than 500 Warrants), and the remainder of such
Warrants (the "Remaining Warrants") shall be deemed exercised on the following
New York Business Day (notwithstanding the minimum exercise requirement and
subject to successive applications of this provision);
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provided that any Remaining Warrant for which an Exercise Notice was delivered
on a given Exercise Date shall be deemed exercised before any other Warrants for
which an Exercise Notice was delivered on a later Exercise Date. If any
Warrantholder, either individually or in concert with any other person or
entity, attempts to exercise more than 250,000 Warrants on any New York Business
Day, then at the Company's election, in its sole discretion, 250,000 of such
Warrants shall be deemed exercised on such New York Business Day and the
remainder shall be deemed exercised on the following New York Business Day
(subject to successive applications of this provision). As a result of any
postponed exercise as described above, Warrantholders will receive a Cash
Settlement Value determined as of a date later than the otherwise applicable
Valuation Date. In any such case, as a result of any such postponement and
subject to the Limit Option, the Cash Settlement Value actually received by
Warrantholders may be lower than the otherwise applicable Cash Settlement Value
if the Valuation Date of the Warrants had not been postponed.
LIMIT OPTION
Except for Warrants subject to automatic exercise, each Warrantholder, in
connection with any exercise of Warrants, will have the option (the "Limit
Option") to specify that such Warrants are not to be exercised if the Spot Rate
that would otherwise be used to determine the Cash Settlement Value of such
Warrants has declined by five or more Japanese yen per U.S. dollar from the Spot
Rate for the day specified below (such Rate, the "Limit Option Reference Rate").
A Warrantholder's election of the Limit Option must be specified in the
applicable Exercise Notice delivered to the Warrant Agent. Except in the case of
Warrants held through the facilities of CEDEL or Euroclear, if such Exercise
Notice in proper form, together with the related Warrants, is received by the
Warrant Agent by 3:00 P.M., New York City time, on a given day (which must be a
New York Business Day), the Limit Option Reference Rate will be the Spot Rate
for that day; if the Exercise Notice and the related Warrants are received after
3:00 P.M., New York City time, on a given day, the applicable Limit Option
Reference Rate will be the Spot Rate for the next day that is also a New York
Business Day. In the case of Warrants held through the facilities of CEDEL or
Euroclear, if the Exercise Notice is received by the Warrant Agent by 3:00 p.m.,
New York City time, on a given day (which must be a New York Business Day), the
Limit Option Reference Rate will be the Spot Rate for that day, so long as the
related Warrants are received by the Warrant Agent by 3:00 p.m., New York City
time, on the next succeeding New York Business Day, failing which the Limit
Option Reference Rate will be the Spot Rate for the New York Business Day on
which the related Warrants are received by the Warrant Agent.
To ensure that the Limit Option will have its intended effect of limiting
the risk of any downward movement in the value of the U.S. dollar relative to
the Japanese yen between the date on which a Warrantholder submits an Exercise
Notice and the related Valuation Date, such Exercise Notice and the related
Warrants must be received by the Warrant Agent not later than 3:00 P.M., New
York City time, on the New York Business Day on which they are submitted. See
the illustration under "Exercise and Settlement of Warrants" above and "Risk
Factors Relating to the Warrants--Risks Due to Delay or Postponement of
Valuation of Warrants" herein.
Following receipt of an Exercise Notice and the related Warrants subject to
the Limit Option, the Warrant Agent will obtain the applicable Limit Option
Reference Rate from the Spot Rate Reference Agent and will determine whether
such Warrants will not be exercised because of the Limit Option. Warrants that
are not exercised will be treated as not having been tendered for exercise, and
either the Warrant Certificate evidencing such Warrants will be returned to the
registered holder by first-class mail at the Company's expense or, in the case
of Warrants held through the facilities of DTC, CEDEL or Euroclear, such
Warrants will be transferred to the account at DTC, CEDEL or Euroclear, as the
case may be, from which they were transferred to the Warrant Agent. To exercise
such Warrants, a Warrantholder will be required to cause the Warrants and a
related Exercise Notice to be submitted again to the Warrant Agent.
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Once elected by a Warrantholder in connection with an exercise of Warrants,
the Limit Option will continue to apply, on the basis of the Limit Option
Reference Rate as initially determined for such Warrants, even if the Valuation
Date for such Warrants is postponed, except when such Valuation Date is
postponed until the Expiration Date or the Delisting Date. Pursuant to the Limit
Option, such Warrants will either (i) be exercised on a delayed basis if the
Spot Rate on any applicable postponed Valuation Date is not less than the Limit
Option Reference Rate by five or more Japanese yen per U.S. dollar or (ii) be
excluded from being exercised if, on any applicable postponed Valuation Date,
the Spot Rate is less than the Limit Option Reference Rate by five or more
Japanese yen per U.S. dollar.
In connection with any exercise of Warrants, a Warrantholder may elect to
subject the exercise of only a portion of such Warrants to the Limit Option,
provided that the number of Warrants subject to the Limit Option and the number
of Warrants not subject to the Limit Option shall in each case not be less than
500. A Warrantholder may not combine certificated and book-entry Warrants in
order to meet the 500-Warrant minimum requirement. See "Minimum Exercise Amount"
above.
AUTOMATIC EXERCISE
All Warrants for which the Warrant Agent has not received a valid Exercise
Notice at or prior to 3:00 P.M., New York City time, on the earlier of (i) the
New York Business Day immediately preceding the Expiration Date or (ii) the
Delisting Date, or for which the Warrant Agent has received a valid Exercise
Notice but with respect to which timely delivery of the relevant Warrants has
not been made, will be automatically exercised on that date. The Exercise Date
for those Warrants will be (i) the New York Business Day immediately preceding
the Expiration Date or (ii) the Delisting Date, as the case may be. The Warrant
Agent will obtain from the Spot Rate Reference Agent the Spot Rate as of the
first New York Business Day following the Exercise Date (the date as of which
such Spot Rate is so determined being the Valuation Date for those Warrants) and
will calculate the Cash Settlement Value, if any, of those Warrants.
In the case of certificated Warrants subject to automatic exercise, the
Company will be required to make available to the Warrant Agent, not later than
3:00 p.m., New York City time, on the fifth New York Business Day following the
Valuation Date, funds in an amount sufficient to pay the aggregate Cash
Settlement Value of the exercised Warrants. If the Company has made adequate
funds available to the Warrant Agent in a timely manner as required by the
Warrant Agreement, the Warrant Agent will thereafter be responsible for making a
payment available to each registered holder of a Warrant in the form of a
cashier's check or official bank check, or (in the case of payments of at least
$100,000) by wire transfer to a U.S. dollar account maintained by the holder in
the United States (at such holder's election) after 3:00 P.M., New York City
time, on the fifth New York Business Day after the Valuation Date against
receipt of the holder's Warrant certificates by the Warrant Agent at the Warrant
Agent's Office. Such payment will be in an amount equal to the aggregate Cash
Settlement Value of the Warrants evidenced by those Warrant certificates.
In the case of book-entry Warrants subject to automatic exercise, the
Company will be required to make available to the Warrant Agent, no later than
3:00 P.M., New York City time, on the fifth New York Business Day after the
Valuation Date, funds in an amount sufficient to pay the aggregate Cash
Settlement Value of those Warrants. If the Company has made those funds
available by that time, the Warrant Agent will thereafter be responsible for
making a like amount of funds available to DTC. DTC will be responsible for
disbursing those funds to each appropriate Participant (including Citibank and
Morgan, who, in turn, will disburse payments to CEDEL and Euroclear,
respectively, who will be responsible for disbursing payments to each of their
respective participants, who, in turn, will be responsible for disbursing
payments to the Warrantholders they represent), and each Participant will be
responsible for disbursing payments to the Warrantholders it represents and to
each brokerage firm for which it acts as agent. Each such brokerage firm will be
responsible for disbursing funds to the Warrantholders it represents.
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LISTING
The Warrants have been approved for listing on the AMEX. The AMEX symbol for
the Warrants is BYE.WS. The AMEX expects to cease trading the Warrants on such
Exchange as of the close of business on the Expiration Date. See "Risk
Factors--Other Considerations" herein.
DELISTING OF WARRANTS
In the event the Warrants are delisted from, or permanently suspended from
trading on (within the meaning of the Securities Exchange Act of 1934 and the
rules and regulations thereunder), the AMEX and not accepted at the same time
for listing on another United States national securities exchange, Warrants not
previously exercised will be deemed automatically exercised on the last New York
Business Day prior to the effective date of such delisting or trading suspension
(the "Delisting Date"), and the Cash Settlement Value, if any, shall be
calculated and settled as provided above under "Automatic Exercise". The Company
will use its best efforts to notify Warrantholders, or cause the Warrantholders
to be notified, as soon as practicable of such delisting or trading suspension.
However, if the Company first receives notice of the delisting or suspension on
the same day on which the Warrants are delisted or suspended, such day will be
deemed the Delisting Date. The Company will covenant in the Warrant Agreement
that it will not seek delisting of the Warrants from, or suspension of their
trading on, the AMEX unless the Company has, at the same time, arranged for
listing of the Warrants on another United States national securities exchange.
EXCHANGE RATES
EXCHANGE RATES
The following table sets forth the average for the months (and partial
month) indicated of the daily Noon Buying Rates per U.S $1.00 for Japanese yen
in New York City as calculated by the Spot Rate Reference Agent based on data
obtained from the Federal Reserve Bank of New York:
YEN/U.S. $1.00
--------------
1990: January.............................................. 144.98
February............................................. 145.70
March................................................ 153.31
April................................................ 158.46
May.................................................. 154.04
June................................................. 153.74
July................................................. 149.04
August............................................... 147.68
September............................................ 138.45
October.............................................. 129.59
November............................................. 129.22
December............................................. 133.89
1991: January.............................................. 133.70
February............................................. 130.54
March................................................ 137.39
April................................................ 137.12
May.................................................. 138.22
June................................................. 139.75
July................................................. 137.83
August............................................... 136.82
September............................................ 134.30
October.............................................. 130.77
November............................................. 129.63
December............................................. 128.04
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YEN/U.S. $1.00
--------------
1992: January.............................................. 125.46
February............................................. 127.70
March................................................ 132.86
April................................................ 133.49
May.................................................. 130.77
June................................................. 126.84
July................................................. 125.88
August............................................... 126.23
September............................................ 122.60
October.............................................. 121.17
November............................................. 123.88
December............................................. 124.04
1993: January.............................................. 124.99
February............................................. 120.76
March................................................ 117.02
April................................................ 112.41
May.................................................. 110.34
June................................................. 107.41
July................................................. 107.69
August............................................... 103.77
September............................................ 105.57
October.............................................. 107.02
November............................................. 107.88
December............................................. 109.87
1994: January.............................................. 111.44
February............................................. 106.30
March................................................ 105.10
April................................................ 103.48
May.................................................. 103.75
June................................................. 102.53
July ................................................ 98.45
August............................................... 99.94
September............................................ 98.77
October.............................................. 98.35
November............................................. 98.04
December............................................. 100.18
1995: January.............................................. 99.72
February............................................. 98.24
March................................................ 90.52
April................................................ 83.69
May.................................................. 85.11
June................................................. 84.64
July................................................. 87.39
August (through August 21)........................... 93.44
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The following graph illustrates the movement in the foregoing average Noon
Buying Rates for the aggregate period presented above:
JAPANESE YEN PER U.S. DOLLAR--MONTHLY AVERAGE NOON BUYING RATES
[ GRAPHIC MATERIAL (1) OMITTED ]
The actual exchange rate for the Japanese yen per the U.S. dollar, and, in
certain circumstances, the Spot Rate determined pursuant to the Warrant
Agreement on any given Valuation Date, could materially differ from the Noon
Buying Rates as reported by the Federal Reserve Bank. See "Description of the
Warrants--Determination of Cash Settlement Value of the Warrants".
The information presented in this Prospectus Supplement relating to the
exchange rate of the Japanese yen as compared to the U.S. dollar is furnished as
a matter of information only. Significant and unpredictable fluctuations in the
Japanese yen/U.S. dollar exchange rate have occurred in the past, and it is
impossible to predict the direction, magnitude or frequency of any fluctuations
in that rate that may occur over the term of the Warrants.
The spot exchange rate of the Japanese yen as compared to the U.S. dollar is
at any moment a result of the supply of and demand for the two currencies, and
changes in the rate result over time from the interaction of many diverse
factors directly or indirectly affecting economic and political conditions in
Japan and the United States, including, without limitation, economic and
political developments in other countries. Of particular importance are the
relative rates of inflation, interest rate levels, the balance of payments and
the extent of governmental surpluses or deficits in Japan and the United States,
all of which are in turn sensitive to the monetary, fiscal and trade policies
pursued by the governments of Japan, the United States and other countries
important to international trade and finance. See "Risk Factors--Risks
Associated with Exchange Rate of Japanese Yen per U.S. Dollar" herein.
The Spot Rate of the Japanese yen as compared to the U.S. dollar on the
relevant Valuation Date will be used in calculating the Cash Settlement Value of
a Warrant upon exercise. Appreciation of the U.S dollar against the Japanese yen
(i.e., depreciation of the Japanese yen against the U.S. dollar) will result in
a greater Cash Settlement Value. Conversely, depreciation of the U.S. dollar
against the Japanese yen (i.e., appreciation of the Japanese yen against the
U.S. dollar) will result in a lesser or zero
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Cash Settlement Value. Warrantholders will thus bear the foreign exchange risk
of the U.S. dollar as compared to the Japanese yen. In addition, in the absence
of countervailing factors, such as an appreciation of the U.S. dollar against
the Japanese yen, the trading value of the Warrants is expected to decrease as
the time remaining to the Expiration Date decreases. See "Risk Factors --Certain
Factors Affecting Value and Trading Price of Warrants" herein.
EXCHANGE CONTROLS
The amended Foreign Exchange and Foreign Trade Control Law of Japan, which
came into effect in 1980, has deregulated external transactions in principle.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material United States Federal income
tax consequences of the ownership and disposition of a Warrant as of the date
hereof and is based on the advice of Weil, Gotshal & Manges, special tax counsel
to the Company. Such summary generally deals only with Warrants held as capital
assets by United States Holders (as defined below) and does not consider holders
in special situations, such as dealers in options, securities or currencies,
tax-exempt entities, S corporations or persons who hold a Warrant in the
ordinary course of business, financial institutions or life insurance companies.
Furthermore, the discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified, possibly on a retroactive basis, so as to result
in Federal income tax consequences different from those discussed below.
This summary does not address every U.S. Federal income tax issue raised by
the ownership of Warrants. In particular, this summary does not consider (i) the
U.S. Federal income tax consequences of holding Warrants as a hedge against
currency or security price risks or the hedging of the Warrants themselves, or
(ii) the possible application of the "straddle" rules of the Code to a
Warrantholder as a result of holding other "positions" (within the meaning of
Section 1092 of the Code) or (iii) whether a Warrantholder is holding Warrants
as part of a "conversion transaction" within the meaning of Section 1258 of the
Code. Any of these factors might substantially alter the tax consequences
described below and may require specific identification of positions in the
Warrants before the close of the date on which they are acquired. This
discussion also does not address the tax consequences to shareholders, partners
or beneficiaries of a Warrantholder or any U.S. alternative minimum tax, gift
tax or estate tax consequences. ACCORDINGLY, PROSPECTIVE PURCHASERS OF WARRANTS
ARE URGED TO CONSULT THEIR OWN TAX ADVISERS CONCERNING THE U.S. FEDERAL, STATE
AND LOCAL TAX CONSEQUENCES, IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES
(INCLUDING WHETHER THEY WOULD BE TREATED AS A DEALER FOR FEDERAL TAX PURPOSES),
OF OWNING WARRANTS.
As used herein, a "United States Holder" of a Warrant means a holder that is
a citizen or resident of the United States, a domestic corporation or an estate
or trust the income of which is subject to United States Federal income taxation
regardless of its source.
TAXATION OF WARRANTS HELD AT THE CLOSE OF TAXABLE YEAR
Each Warrant will be treated as a "section 1256 contract" which must be
"marked-to-market" (i.e., treated as sold at fair market value) on the last
business day of each taxable year. Under these mark-to-market rules, a United
States Holder of a Warrant will recognize gain or loss equal to the difference
between the fair market value of the Warrant on the last business day of each
taxable year (as determined by the Warrant's trading price) and the United
States Holder's tax basis for the Warrant. A United States Holder's tax basis in
a Warrant will equal the amount paid for the Warrant, plus or minus the net gain
or loss recognized under the mark-to-market rules by the United States Holder in
respect of the Warrant in prior taxable years. As a result of these
mark-to-market rules, a United States Holder
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might incur Federal income tax liability on an annual basis in respect of an
increase in the value of the Warrant without the receipt of cash attributable
thereto.
SALE, EXCHANGE AND EXERCISE OF WARRANTS
Upon sale, exchange or exercise (including automatic exercise) of a Warrant,
a United States Holder will recognize gain or loss equal to the difference
between the amount realized, if any, and the United States Holder's tax basis in
the Warrant.
CHARACTER OF GAIN OR LOSS
In the absence of a section 988 election as (described below), any gain or
loss with respect to a Warrant--either under the mark-to-market rules or on a
sale, exchange or exercise--will be capital gain or loss and will be 60%
long-term capital gain or loss and 40% short-term capital gain or loss.
With respect to a corporate United States Holder, capital losses for a
taxable year are allowed only to the extent of the holder's capital gains for
such year, but may be carried back for three taxable years and carried forward
for five taxable years. With respect to individual United States Holders, in
general, capital losses for the taxable year are allowed only to the extent of
the holder's capital gains for the taxable year plus a maximum of $3,000, but
may be carried forward indefinitely against net capital gains. An individual may
elect, however, to carry net capital losses from section 1256 contracts for the
taxable year back against net capital gains from section 1256 contracts for the
three preceding taxable years, provided such carryback does not increase or
produce a net operating loss for such years. For individuals with significant
ordinary income, capital gains are generally taxed at lower rates than items of
ordinary income.
A United States Holder may elect under Section 988 of the Code (a "section
988 election") to treat any gain or loss described above as ordinary income or
loss. If made, this election will apply to certain other section 1256 contracts,
such as regulated futures contracts and other nonequity options, held by such
United States Holder during the taxable year for which the election is made and
any succeeding taxable year and may not be revoked without the consent of the
Internal Revenue Service. Such election for any taxable year should be made on
or before the first day of such year or, if later, on or before the first day
during such year on which the United States Holder holds a section 1256
contract. United States Holders should consult with their own tax advisers
concerning the procedures for, and consequences of, making this election.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNERSHIP OF A WARRANT BY A NON-U.S.
HOLDER
Subject to the discussion below of backup withholding, in general, a holder
of a Warrant who or which is (i) a non-resident alien individual or (ii) a
foreign corporation, partnership, estate or trust which is not subject to U.S.
Federal income tax on a net income basis in respect of a Warrant (each such
person or entity, a "Non-U.S. Holder") will not be subject to U.S. Federal
withholding tax with respect to amounts received, if any, with respect to a
Warrant.
BACKUP WITHHOLDING
In general, the proceeds received from a sale, exchange, cancellation or
exercise of a Warrant by a United States Holder will be subject to information
reporting, and may be subject to a U.S. "backup" withholding at a rate of 31% if
the United States Holder thereof fails to supply an accurate taxpayer
identification number or otherwise comply with applicable U.S. information
reporting or certification requirements. Such payment made to a Non-U.S. Holder
will not be subject to information reporting or back-up withholding if the
Non-U.S. Holder certifies its status as a Non-U.S. Holder under penalty of
perjury, provided that the payor does not have actual knowledge that the holder
is a United States holder. Any amounts so withheld would be refundable or
allowed as a credit against such holder's U.S. Federal income tax liability.
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UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated the date hereof (the "Underwriting Agreement"), the Company has agreed to
sell to Bear, Stearns & Co. Inc. (the "Underwriter"), and the Underwriter has
agreed to purchase, 1,000,000 Warrants.
The Underwriter has advised the Company that it proposes to offer the
Warrants to the public initially at the offering price set forth on the cover
page of this Prospectus Supplement, except that the price will be $4.85 per
Warrant for the purchase of 100,000 or more Warrants in any single transaction
in this offering, subject to the holding period requirements described below. In
addition, the Underwriter proposes to offer the Warrants to certain dealers at a
price that represents a concession not in excess of $.21 per Warrant. The
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $.05 per Warrant to certain other dealers. After the initial public offering,
the public offering price and such concessions may be changed.
Any investor who purchases at least 100,000 Warrants in a single transaction
in this offering and agrees with the Underwriter not to sell such Warrants for a
period of 30 days following the date of this Prospectus Supplement without the
consent of the Underwriter will be entitled to purchase the Warrants at the
reduced price as discussed above. If the Underwriter determines that an investor
failed to comply with this 30-day holding period, such investor will be
obligated to pay to the Underwriter the difference between the offering price
and the reduced price paid for the Warrants purchased by such investor. Should
investors who are subject to the holding period requirement sell their Warrants
immediately following the expiration of the holding period, the market price of
the Warrants may be adversely affected.
The Company has granted the Underwriter an option, exercisable within thirty
days of the date of this Prospectus Supplement, to purchase up to 150,000
additional Warrants from the Company at the same price per Warrant as described
above. This option may be exercised only for the purpose of covering
over-allotments, if any, made in the sale of the Warrants offered hereby.
The Underwriting Agreement provides that the obligation of the Underwriter
is subject to certain conditions precedent and that the Underwriter will
purchase all of the Warrants if any are purchased.
The Company has agreed to indemnify the Underwriter and the "qualified
independent underwriter" against, and to contribute to losses arising out of,
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
Bear Stearns is a wholly owned subsidiary of the Company. The participation
of Bear Stearns in the offer and sale of the Warrants complies with the
requirements of Schedule E of the By-Laws of the National Association of
Securities Dealers, Inc. (the "NASD") regarding underwriting securities of an
affiliate. Under the provisions of Schedule E, when a NASD member such as Bear
Stearns distributes warrants of an affiliate, the price of the warrants can be
no higher than that recommended by a "qualified independent underwriter," as
such term is defined in Schedule E, meeting certain standards. In accordance
with such requirements, Cowen & Company has agreed to serve as a "qualified
independent underwriter" and has conducted due diligence and will recommend a
price for the Warrants in compliance with the requirements of Schedule E.
VALIDITY OF THE WARRANTS
The validity of the Warrants will be passed upon for the Company by Weil,
Gotshal & Manges, New York, New York, a partnership including professional
corporations, and for the Underwriter by Kramer, Levin, Naftalis, Nessen, Kamin
& Frankel, New York, New York.
S-35
<PAGE>
APPENDIX A
INDEX OF TERMS
PAGE ON WHICH
TERM TERM IS DEFINED
-------------------------------------------------------------- ---------------
AMEX.......................................................... S-1
Bear Stearns.................................................. S-8
Cash Settlement Value......................................... S-19
CEDEL......................................................... S-23
Code.......................................................... S-33
Company....................................................... S-1
Conversion Option............................................. S-12
Conversion Option Period...................................... S-21
Cooperative................................................... S-24
Delisting Date................................................ S-4
Depositaries.................................................. S-23
DTC........................................................... S-12
Euroclear..................................................... S-24
Euroclear Operator............................................ S-24
Exercise Date................................................. S-25
Exercise Notice............................................... S-24
Expiration Date............................................... S-2
Limit Option.................................................. S-28
Limit Option Reference Rate................................... S-28
Morgan........................................................ S-23
NASD.......................................................... S-35
New York Business Day......................................... S-2
Noon Buying Rate.............................................. S-19
Participant................................................... S-12
Remaining Warrants............................................ S-27
Spot Rate..................................................... S-19
Spot Rate Reference Agent..................................... S-8
Strike Rate................................................... S-3
Underwriters.................................................. S-35
Underwriting Agreement........................................ S-35
Valuation Date................................................ S-26
Warrant Agent................................................. S-8
Warrant Agent's Office........................................ S-18
Warrant Agreement............................................. S-18
Warrant Certificate........................................... S-17
Warrantholder................................................. S-9
Warrants...................................................... S-3
A-1
<PAGE>
PROSPECTUS
$2,399,571,350
THE BEAR STEARNS COMPANIES INC.
DEBT SECURITIES AND WARRANTS
The Company may issue and sell from time to time, in one or more series with
an aggregate initial public offering price of up to $2,399,571,350 (or the
equivalent in foreign denominated currency or units based on or relating to such
currencies), debt securities ("Debt Securities"), consisting of debentures,
notes and/or other unsecured evidences of indebtedness, and warrants
("Warrants") to purchase Debt Securities or to buy and sell government debt
securities, currencies, currency units, currency indices or currency baskets,
stock indices, stock baskets, commodities, commodity indices or other indices or
references. The Debt Securities and Warrants are herein collectively referred to
as the "Securities." The Debt Securities and Warrants may be offered
independently or together for sale directly to purchasers or through dealers,
underwriters or agents. The Company will offer the Securities to the public on
terms determined by market conditions. The Securities may be sold for, and
principal of and interest on Debt Securities and the cash settlement value of
the Warrants may be payable in, United States dollars, foreign denominated
currency or currency units, in each case, as the Company specifically
designates.
The accompanying Prospectus Supplement sets forth the specific designation,
aggregate principal amount, purchase price, maturity, interest rate (or manner
of calculation thereof), time of payment of interest (if any), currency or
currency units in which payments will be made (if other than United States
dollars), listing (if any) on a securities exchange and any other specific terms
of the Debt Securities, the purchase price, exercise price, exercise period,
detachability and any other specific terms of any Warrants and the name of and
compensation to each dealer, underwriter or agent (if any) involved in the sale
of the Securities. The managing underwriters with respect to each series sold to
or through underwriters will be named in the accompanying Prospectus Supplement.
Such underwriters (and any representative thereof), dealers or agents may
include Bear, Stearns & Co. Inc., a wholly-owned subsidiary of the Company.
There are no restrictions in the Indenture (as defined in the Prospectus) on
the ability of the Company or its subsidiaries to incur additional unsecured
indebtedness or on the ability of the Company to incur additional secured
indebtedness except that the Indenture restricts the Company from incurring any
indebtedness for borrowed money that is secured by a pledge of the Voting Stock
of any Restricted Subsidiary (each as defined in the Prospectus) without
effectively providing that the Notes and other indebtedness of the Company under
the Indenture will be secured equally and ratably with such secured
indebtedness.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-------------------
The Securities may be offered through dealers, through underwriters or
through agents designated from time to time, as set forth in the accompanying
Prospectus Supplement. The net proceeds to the Company will be, in the case of a
dealer, the sales price to such dealer, in the case of an underwriter, the
public offering price less the applicable underwriting discount or commission,
and, in the case of an agent, the public offering price less the applicable
agency commission, in each case, less other expenses attributable to issuance
and distribution. See "Plan of Distribution" for possible indemnification
arrangements for dealers, underwriters and agents.
This Prospectus and the accompanying Prospectus Supplement may be used by
Bear, Stearns & Co. Inc. in connection with offers and sales of Debt Securities
and Warrants in market-making transactions at negotiated prices related to
prevailing market prices at the time of sale or otherwise. Bear, Stearns & Co.
Inc. may act as a principal or agent in such transactions.
-------------------
BEAR, STEARNS & CO. INC.
JULY 28, 1995
<PAGE>
IN CONNECTION WITH THE OFFERING OF CERTAIN SECURITIES HEREUNDER, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICES OF THOSE SECURITIES, OR OTHER SECURITIES OF THE COMPANY, AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at its Regional
Offices located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, 13th Floor,
New York, New York 10048, and copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Reports, proxy statements and other
information concerning the Company can also be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the Securities.
Statements contained herein concerning the provisions of any document are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
Section 13 of the Exchange Act (File No. 1-8989), are incorporated herein by
reference: (i) the Annual Report on Form 10-K (including the portions of the
Company's Annual Report to Stockholders incorporated by reference therein) for
the fiscal year ended June 30, 1994 (the "1994 Form 10-K") and (ii) the
Quarterly Reports on Form 10-Q for the quarterly periods ended September 30,
1994, December 31, 1994 and March 31, 1995. All documents filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the offering of the
Securities shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all documents incorporated by reference into this Prospectus
except the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to Corporate Communications Department, The Bear Stearns Companies
Inc., 245 Park Avenue, New York, New York 10167; telephone number (212)
272-2000.
-------------------
3
<PAGE>
THE COMPANY
The Company is a holding company that, through its subsidiaries, principally
Bear, Stearns & Co. Inc. ("Bear Stearns") and Bear, Stearns Securities Corp.
("BSSC") is a leading United States investment banking, securities trading and
brokerage firm serving United States and foreign corporations, governments and
institutional and individual investors. The business of the Company and its
subsidiaries includes market-making and trading in corporate, United States
government and agency, mortgage-related, asset-backed and municipal securities
and trading in options, futures, foreign currencies, interest rate swaps and
other derivative products; securities and commodities arbitrage; securities,
options and commodities brokerage for domestic and international institutional
and individual clients; underwriting and distribution of securities, arranging
for the private placement of securities, assisting in mergers and acquisitions
and restructurings and providing other financial advisory services, including
advising on, and participating in principal investments in, leveraged
acquisitions; providing securities clearance services; specialist activities in
securities on the floors of the New York Stock Exchange (the "NYSE"); customer
financing activities; securities lending activities; fiduciary services; and
providing other services, including real estate brokerage, investment management
and advisory activities, and securities research.
The Company's operations are conducted from its principal offices in New
York City, from domestic regional offices in Atlanta, Boston, Chicago, Dallas,
Los Angeles and San Francisco, from representative offices in Geneva, Hong Kong
and Shanghai, through international subsidiaries in Frankfurt, Hong Kong, London
and Paris, through a branch office in Tokyo and through joint ventures with
other firms in Karachi, Madrid and Paris. The Company's foreign offices provide
services and engage in investment activities involving foreign clients and
international transactions. The Company's trust company subsidiary, Custodial
Trust Company, operates from offices in Princeton, New Jersey.
Bear Stearns and BSSC are broker-dealers registered with the Commission,
futures commission merchants registered with the Commodity Futures Trading
Commission, members of the NYSE and all other principal United States securities
and commodities exchanges and members of the National Association of Securities
Dealers, Inc. (the "NASD") and the National Futures Association. Bear Stearns is
also recognized as a "primary dealer" in United States government securities
designated by the Federal Reserve Bank of New York.
The Company is incorporated in Delaware. The principal executive office of
the Company is located at 245 Park Avenue, New York, New York 10167; its
telephone number is (212) 272-2000.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, which may include additions to working capital, the
repayment of short-term indebtedness and investments in, or extensions of credit
to, subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was 1.2 for the nine months ended
March 31, 1995 and 1.6, 1.8, 1.6, 1.2 and 1.2 for the fiscal years ended June
30, 1994, 1993, 1992, 1991 and 1990, respectively. These ratios were calculated
by dividing the sum of fixed charges into the sum of earnings before taxes and
fixed charges. Fixed charges for these purposes consist of all interest expense
and certain other immaterial expenses.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
GENERAL
The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general terms and provisions will not apply to
the Debt Securities so offered will be described in the Prospectus Supplement
relating to those Debt Securities.
The Debt Securities will be issued under an Indenture, dated as of May 31,
1991 (the "Indenture"), between the Company and Chemical Bank (formerly
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of the
Indenture is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part (the "Registration Statement"). The following summaries
of certain provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all provisions
of the Indenture, including the definitions therein of certain terms.
The Indenture does not limit the principal amount of Debt Securities that
may be issued thereunder, and provides that Debt Securities may be issued
thereunder in one or more series up to the aggregate principal amount that may
be authorized from time to time by the Company. The Company from time to time
may, without the consent of the Holders of outstanding Debt Securities, provide
for the issuance of other debt securities under the Indenture in addition to the
Debt Securities authorized on the date of this Prospectus. The Indenture
provides the Company with the ability, in addition to the ability to issue Debt
Securities with terms different than those of Debt Securities previously issued,
to "reopen" a previous issue of a series of Debt Securities and issue additional
Debt Securities of such series. Debt Securities in an aggregate principal amount
of up to $2,399,571,350 may be offered pursuant to this Prospectus. As of the
date of this Prospectus, $7,512,003,425 aggregate principal amount of Debt
Securities have been issued under the Indenture and are outstanding.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Debt Securities offered thereby for the terms of those Debt
Securities, including, where applicable (1) the title of the Debt Securities and
the series of which those Debt Securities are a part; (2) the aggregate
principal amount of, or any limit on the aggregate principal amount of, those
Debt Securities; (3) the date or dates on which those Debt Securities will
mature; (4) the rate or rates per annum (which may be fixed or variable) at
which those Debt Securities will bear interest, if any; (5) the date or dates on
which such interest, if any, will be payable and the record date or dates
relating thereto; (6) the provisions, if any, for redemption of those Debt
Securities and the redemption price thereof; (7) the sinking fund requirements,
if any, with respect to those Debt Securities; (8) whether those Debt Securities
provide for payment in United States dollars, a foreign currency or a composite
currency; (9) any index, formula or other method used to determine the amount of
payments of principal (and premium, if any) or interest, if any, on those Debt
Securities; (10) the form (registered or bearer or both) in which those Debt
Securities may be issued and any restrictions applicable to the exchange of one
form for another and to the offer, sale and delivery of the Debt Securities in
either form; (11) whether those Debt Securities will be issued in book-entry
form (a "Global Security") or in certificated form; (12) whether and under what
circumstances the Company will pay additional amounts ("Additional Amounts")
relating to specified taxes, assessments or other governmental charges in
respect of those Debt Securities and whether the Company has the option to
redeem those Debt Securities rather than pay such Additional Amounts, and the
terms of any such redemption; (13) if the amount of payments of principal of
(and premium, if any) or interest, if any, on, and Additional Amounts in respect
of those Debt Securities may be determined with reference to an index, formula
or other method based on a coin or currency other than that in which the Debt
Securities are stated to be payable, the manner in which those amounts will be
determined; (14) the provisions, if any, for the defeasance of those Debt
5
<PAGE>
Securities; and (15) any other terms of those Debt Securities not inconsistent
with the provisions of the Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities will be issued only in registered form without coupons ("Registered
Securities") in denominations of $1,000 and integral multiples thereof, and in
bearer form with or without coupons ("Bearer Securities") in the denomination of
$5,000. If Bearer Securities of a series are issued, the federal income tax
consequences and other special considerations applicable to those Bearer
Securities will be described in the Prospectus Supplement relating to that
series.
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Securities may be transferred or exchanged at the corporate trust
office or agency of the Trustee in the City and State of New York, subject to
the limitations provided in the Indenture, without the payment of any service
charge, other than any tax or other governmental charge that may be imposed in
connection therewith. Bearer Securities will be transferable by delivery.
Provisions with respect to the exchange of Bearer Securities of any series will
be described in the Prospectus Supplement relating thereto.
If the amount of payments of principal of (and premium, if any) or any
interest on Debt Securities of any series is to be determined with reference to
any type of index, formula or other method, the federal income tax consequences
(if material), specific terms of and other information with respect to those
Debt Securities and that index, formula or other method will be described in the
Prospectus Supplement relating to that series.
If the principal of (and premium, if any) or any interest on Debt Securities
of any series are payable in a foreign or composite currency, the restrictions,
elections, federal income tax consequences, specific terms and other information
with respect to those Debt Securities and such currency will be described in the
Prospectus Supplement relating to that series.
One or more series of Debt Securities may be sold at a substantial discount
below its or their stated principal amount, bearing no interest or interest at a
rate that at the time of issuance is below market rate. One or more series of
Debt Securities may be variable rate debt securities that may be exchangeable
for fixed rate debt securities. Federal income tax consequences and other
special considerations applicable to any such series will be described in the
Prospectus Supplement relating thereto.
The Debt Securities will be unsecured and will rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. The Company
extends credit to its subsidiaries from time to time. Extensions of credit to
subsidiaries may be subordinated to the claims of unaffiliated creditors of
those subsidiaries. In addition, since the Company is a holding company, the
right of the Company and hence the right of creditors of the Company (including
the Holders of the Debt Securities) to participate in any distribution of the
assets of any subsidiary upon its liquidation or reorganization, or otherwise,
is necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. Furthermore, dividends, loans and advances to the
Company from certain of its subsidiaries, including Bear Stearns and BSSC, are
restricted by net capital requirements under the Exchange Act and under rules of
certain exchanges and other regulatory bodies and by covenants governing certain
indebtedness of those subsidiaries.
Unless otherwise provided in the applicable Prospectus Supplement, the
principal of (and premium, if any) and any interest on Debt Securities will be
payable (in the case of Registered Securities) at the corporate trust office or
agency of the Trustee in the City and State of New York or (in the case of
Bearer Securities) at the office of the Trustee located outside the United
States maintained for such purpose; provided, however, that payment of interest
other than interest payable at maturity (or on the date of redemption, if any,
if the Debt Securities are redeemable by the Company prior to maturity, or on
the date of repayment, if the Debt Securities are repayable at the option of the
Holder thereof prior
6
<PAGE>
to maturity) on Registered Securities may be made at the option of the Company
by check mailed to the address of the person entitled thereto or, at the option
of a Holder of at least $10,000,000 in principal amount of Registered
Securities, by wire transfer to an account designated by such Holder in writing
at least 16 days prior to the date on which such payment is due. Unless
otherwise provided in the applicable Prospectus Supplement, no payment on a
Bearer Security will be made by mail to an address in the United States or by
wire transfer to an account maintained by the Holder thereof in the United
States or will otherwise be made inside the United States.
NOTICES
Unless otherwise provided in the applicable Prospectus Supplement, any
notice required to be given to a Holder of a Debt Security of any series that is
a Registered Security will be mailed to the last address of such Holder set
forth in the applicable Security Register. Any notice required to be given to a
Holder of a Debt Security that is a Bearer Security will be published in a daily
newspaper of general circulation in the city or cities specified in the
Prospectus Supplement relating to such Bearer Security.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Depositary") identified in the Prospectus Supplement
relating to such series. Global Securities may be issued in either registered or
bearer form and in either temporary or definitive form. Unless and until it is
exchanged in whole or in part for the individual Debt Securities represented
thereby, a Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any nominee to a successor of the Depositary or a
nominee of the successor.
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will apply
to all depositary arrangements.
Upon the issuance of a Global Security, the Depositary will credit on its
book-entry system the respective principal amounts of the individual Debt
Securities represented by such Global Security to the accounts of institutions
that have accounts with the Depositary ("participants"). The accounts to be
credited shall be designated by the underwriters of the Debt Securities, or if
the Debt Securities are offered and sold directly by the Company or through
agents, by the Company or those agents. Ownership of beneficial interest in a
Global Security will be limited to participants or persons that may hold
beneficial interests through participants. Ownership of beneficial interest in a
Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary's participants or
persons that hold through participants. The laws of some states require that
certain purchasers of securities take physical delivery of securities. Such
limits and such laws may limit the market for beneficial interests in a Global
Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of a Global Security, the Depositary or nominee, as the case
may be, will be considered the sole owner or Holder of the Debt Securities
represented by the Global Security for all purposes under the Indenture. Except
as provided below, owners of beneficial interests in a Global Security will not
be entitled to have Debt Securities represented by Global Securities registered
in their names, will not receive or be entitled to receive physical delivery of
Debt Securities in definitive form and will not be considered the owners or
Holders thereof under the Indenture.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities and Bearer Warrants" below, payments of principal of (and
premium, if any) and any interest on the individual Debt Securities registered
in the name of the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the Holder of such Global Security. Neither
the
7
<PAGE>
Company nor the Trustee will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of a Global Security, or for maintaining, supervising or reviewing any
records relating to beneficial ownership interests and each of them may act or
refrain from acting without liability on any information provided by the
Depositary. The Company expects that the Depositary, upon receipt of any payment
of principal, premium or interest in respect of a Global Security, will credit
immediately the accounts of the participants with payment in amounts
proportionate to their respective holdings in principal amount of beneficial
interest in a Global Security as shown on the records of the Depositary. The
Company also expects that payments by participants to owners of beneficial
interests in a Global Security will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments of principal, premium or
interest in respect thereof will be subject to the restrictions discussed under
"Limitations on Issuance of Bearer Securities and Bearer Warrants" below.
If interest is paid on a bearer Global Security, or if no interest has been
paid but the bearer Global Security remains outstanding beyond a reasonable
period of time after the restricted period (as defined in applicable U.S.
Treasury regulations) has ended, the Depositary must provide the Company with a
certificate to the effect that the owners of the beneficial interests in the
Global Security are non-U.S. persons or U.S. persons that are permitted to hold
bearer securities under applicable U.S. Treasury regulations. In general, U.S.
persons that are permitted to hold bearer securities are U.S. persons who
acquire the securities through the foreign branch of certain U.S. financial
institutions and certain U.S. financial institutions that hold the securities
for resale to non-U.S. persons or who hold the securities on their own account
through a foreign branch. The certificate must be provided within a reasonable
period of time after the end of the restricted period, but in no event later
than the date when interest is paid. The certificate must be based on statements
provided to the Depositary by the owners of the beneficial interests.
If the Depositary is at any time unwilling or unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 calendar days, then the Company will issue Debt Securities in
certificated form in exchange for all outstanding Global Securities. In
addition, the Company (but not a Holder) may at any time determine not to have
Debt Securities represented by a Global Security and, in that event, will issue
Debt Securities in definitive form in exchange for all Global Securities. In any
such instance, an owner of a beneficial interest in the Global Securities to be
exchanged will be entitled to delivery in definitive form of Debt Securities
equal in principal amount to such beneficial interest and to have such Debt
Securities registered in its name. Individual Debt Securities of the series so
issued will be issued (a) as Registered Securities in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof if
the Debt Securities of that series are issuable as Registered Securities, (b) as
Bearer Securities in the denomination or denominations specified by the Company
if the Debt Securities of that series are issuable as Bearer Securities or (c)
as either Registered or Bearer Securities, if the Debt Securities of that series
are issuable in either form. See, however, "Limitations on Issuance of Bearer
Securities and Bearer Warrants" below for a description of certain restrictions
on the issuance of individual Bearer Securities in exchange for beneficial
interests in a Global Security.
LIMITATION ON LIENS
The Indenture provides that the Company may not, and may not permit any
Restricted Subsidiary to, issue, incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money secured by a pledge of, lien on or security
interest in any shares of Voting Stock of any Restricted Subsidiary without
effectively providing that the securities issued under the Indenture, including
the Debt Securities, will be secured equally and ratably with such secured
indebtedness. The term "Restricted Subsidiary" as defined in the Indenture means
Bear Stearns, Custodial Trust Company, BSSC and any other
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subsidiary of the Company owning, directly or indirectly, any of the common
stock of, or succeeding to a significant portion of the business, property or
assets of a Restricted Subsidiary, or with which a Restricted Subsidiary is
merged or consolidated.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation, and the Company may sell, lease or convey all or
substantially all of its assets to any corporation, organized and existing under
the laws of the United States of America or any state thereof, provided that (a)
the corporation (if other than the Company) formed by or resulting from any such
consolidation or merger or that shall have received such assets shall expressly
assume payment of the principal of, and premium, if any, and interest on, (and
any Additional Amounts payable in respect of) the Debt Securities and the
performance and observance of all of the covenants and conditions of the
Indenture to be performed or observed by the Company, and (b) the Company or
such successor corporation shall not immediately thereafter be in default under
the Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, the
Indenture does not restrict (i) a consolidation, merger, sale of assets or other
similar transaction that may adversely affect the creditworthiness of the
Company or a successor or combined entity, (ii) a change in control of the
Company or (iii) a highly leveraged transaction involving the Company, whether
or not involving a change in control, and the Indenture therefore will not
protect holders of the Debt Securities from the substantial impact that any of
the foregoing transactions may have on the value of the Debt Securities.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the Company
and the Trustee with the consent of the Holders of 66 2/3% in principal amount
of the outstanding Debt Securities of each series affected thereby, provided
that no such modification or amendment may, without the consent of the Holder of
each outstanding Debt Security affected thereby (a) change the Stated Maturity
or the date of any installment of principal of, or interest on, any Debt
Security or change the Redemption Price or the Optional Redemption Price
thereof; (b) reduce the principal amount of, or the rate of interest on, or the
amount of any Additional Amount payable in respect of, any Debt Security or
reduce the amount of principal that could be declared due and payable prior to
the Stated Maturity of that Debt Security, or change the obligation of the
Company to pay any Additional Amounts (except as contemplated or permitted under
the Indenture), or reduce the amount of the principal of a Discount Security
that would be due and payable upon a declaration of acceleration of the maturity
of that Debt Security pursuant to the Indenture; (c) change the place or
currency of any payment of principal, premium, if any, or interest on any Debt
Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security; (e) reduce the percentage in
principal amount of the outstanding Debt Securities of any series, the consent
of whose Holders is required to modify or amend the Indenture; or (f) modify the
foregoing requirements or reduce the percentage of outstanding Debt Securities
necessary to waive any past default to less than a majority. Except with respect
to certain fundamental provisions, the Holders of at least a majority in
principal amount of outstanding Debt Securities of any series may, with respect
to that series, waive past defaults under the Indenture and waive compliance by
the Company with certain provisions of the Indenture.
EVENTS OF DEFAULT
Under the Indenture, the following will be Events of Default with respect to
any series of Debt Securities: (a) default in the payment of interest on, or any
Additional Amounts payable in respect of, any Debt Securities of that series
when due, which default has continued for 30 days; (b) default in the payment of
the principal of, and premium, if any, on, any Debt Security of that series when
due; (c) default in the deposit of any sinking fund payment, when due, in
respect of any Debt Security of that series; (d) default in the performance of
any other covenant of the Company contained in the Indenture
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or in the Debt Securities of that series, which default has continued for 60
days after written notice as provided in the Indenture; (e) default for 10 days
after notice as provided in the Indenture, in respect of any other indebtedness
for borrowed money of the Company or any Restricted Subsidiary in excess of
$10,000,000 that has been declared due and payable prior to maturity; (f)
certain events of bankruptcy, insolvency or reorganization; and (g) any other
Event of Default with respect to Debt Securities of that series. The Trustee or
the Holders of 25% in principal amount (or any lesser amount that may be
provided for in the Debt Securities of that series) of the outstanding Debt
Securities of that series may declare the principal amount of all outstanding
Debt Securities of that series due and payable immediately if an Event of
Default with respect to the Debt Securities of that series shall occur and be
continuing at the time of declaration. At any time after a declaration of
acceleration has been made with respect to the Debt Securities of any series,
but before a judgment or decree for payment of money due has been obtained by
the Trustee, the Holders of a majority in principal amount of the outstanding
Debt Securities of that series may rescind any declaration of acceleration and
its consequences, if all payments due (other than those due solely as a result
of acceleration) have been made and all Events of Default have been remedied or
waived. Any Event of Default with respect to Debt Securities of any series may
be waived by the Holders of a majority in principal amount of all outstanding
Debt Securities of that series, except in a case of failure to pay the principal
of, and premium, if any, or interest on, or any Additional Amounts payable in
respect of, any Debt Security of that series for which payment had not been
subsequently made or in respect of a covenant or provision that cannot be
modified or amended without the consent of the Holder of each outstanding Debt
Security of that series.
The Holders of a majority in principal amount of the outstanding Debt
Securities of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to Debt Securities of that series,
provided that this direction shall not be in conflict with any rule of law or
the Indenture. Before proceeding to exercise any right or power under the
Indenture at the direction of those Holders, the Trustee shall be entitled to
receive from those Holders reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction.
The Company will be required to furnish to the Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
Indenture.
DEFEASANCE
If so established by the Company under the terms of the Indenture with
respect to Debt Securities of any series that are Registered Securities
denominated and payable only in United States dollars (except as otherwise
provided under the Indenture), the Company, at its option, (a) will be
discharged from any and all obligations in respect of the Debt Securities of
that series (except for certain obligations to register the transfer or exchange
of Debt Securities of that series, replace stolen, lost or mutilated Debt
Securities of that series, maintain paying agents and hold moneys for payment in
trust) on the 91st day after the applicable conditions described in this
paragraph have been satisfied or (b) will not be subject to provisions of the
Indenture described above under "Limitation on Liens" and "Merger and
Consolidation" with respect to the Debt Securities of that series, in each case
if the Company deposits with the Trustee, in trust, money or U.S. Government
Obligations that, through the payment of interest thereon and principal thereof
in accordance with their terms, will provide money in an amount sufficient to
pay all the principal (including any mandatory sinking fund payments) of, and
premium, if any, and any interest on, the Debt Securities of that series on the
dates such payments are due in accordance with the terms of those Debt
Securities. To exercise either option, the Company is required to deliver to the
Trustee an opinion of counsel to the effect that (i) the deposit and related
defeasance would not cause the Holders of the Debt Securities of the series
being defeased to recognize income, gain or loss for United States Federal
income tax purposes and (ii) if the Debt Securities of that series are then
listed on the NYSE, the exercise of the option would not result in delisting.
Defeasance provisions, if any, with respect to any series of Debt Securities may
be specified by the Company under the terms of the Indenture.
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DESCRIPTION OF WARRANTS
The following description sets forth certain general terms and provisions of
the Warrants to which any Prospectus Supplement may relate. The particular terms
of the Warrants offered by any Prospectus Supplement and the extent, if any, to
which such general terms and provisions will not apply to the Warrants so
offered will be described in the Prospectus Supplement relating to those
Warrants.
The Company may issue Warrants for the purchase of Debt Securities, Warrants
to buy or sell debt securities of or guaranteed by the United States or other
sovereign states ("Government Debt Securities"), Warrants to buy or sell
currencies, currency units or units of a currency index or currency basket,
Warrants to buy or sell units of a stock index or stock basket and Warrants to
buy and sell a commodity or a commodity index. Warrants may be offered
independently of or together with any series of Debt Securities and may be
attached to or separate from those Debt Securities. The Warrants will be settled
either through physical delivery or through payment of a cash settlement value
as set forth herein and in any applicable Prospectus Supplement. Each series of
Warrants will be issued under a separate warrant agreement (a "Warrant
Agreement") to be entered into between the Company and a bank or a trust
company, as warrant agent (the "Warrant Agent"), all as described in the
Prospectus Supplement relating to that series of Warrants. The Warrant Agent
will act solely as the agent of the Company under the applicable Warrant
Agreement and in connection with the certificates for the Warrants (the "Warrant
Certificates"), if any, of that series, and will not assume any obligation or
relationship of agency or trust for or with any holders of those Warrant
Certificates or beneficial owners of those Warrants. The following summaries of
certain provisions of the forms of Warrant Agreements and Warrant Certificates
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Warrant Agreements and the
Warrant Certificates, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
GENERAL
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Warrants, if any, offered thereby for the terms of those
Warrants, including, where applicable: (1) whether the Warrant is for Debt
Securities, Government Debt Securities, currencies, currency units, currency
indices or currency baskets, stock indices, stock baskets, commodities,
commodity indices or any other index or reference as therein described; (2) the
offering price; (3) the currency, currency unit, currency index or currency
basket based on or relating to currencies for which those Warrants may be
purchased; (4) the date on which the right to exercise those Warrants will
commence and the date (the "Expiration Date") on which that right will expire;
(5) whether those Warrants are to be issuable in registered form ("Registered
Warrants") or bearer form ("Bearer Warrants"); (6) whether those Warrants are
extendable and the period or periods of such extendibility; (7) the terms upon
which Bearer Warrants, if any, of any series may be exchanged for Registered
Warrants of that series; (8) whether those Warrants will be issued in book-entry
form (a "Global Warrant Certificate") or in certificated Form; (9) United States
federal income tax consequences applicable to those Warrants; and (10) any other
terms of those Warrants not inconsistent with the applicable Warrant Agreement.
If the offered Warrants are to purchase Debt Securities, the Prospectus
Supplement will also describe (1) the designation, aggregate principal amount,
currency, currency unit or currency basket and other terms of the Debt
Securities purchasable upon exercise of those Warrants; (2) the designation and
terms of the Debt Securities with which those Warrants are issued and the number
of those Warrants issued with each such Debt Security; (3) the date or dates on
and after which those Warrants and the related Debt Securities will be
separately transferable; and (4) the principal amount of Debt Securities
purchasable upon exercise of one offered Warrant and the price at which and
currency, currency unit or currency basket in which such principal amount of
Debt Securities may be purchased
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upon such exercise. Prior to exercising their Warrants, holders of those
Warrants will not have any of the rights of Holders of the Debt Securities of
the series purchasable upon such exercise, including the right to receive
payments of principal of, or premium, if any, or interest, if any, on, those
Debt Securities, or to enforce any of the covenants in the Indenture.
If the offered Warrants are to buy or sell Government Debt Securities or a
currency, currency unit, currency index or currency basket, the Prospectus
Supplement will describe the amount and designation of the Government Debt
Securities or currency, currency unit, currency index or currency basket, as the
case may be, subject to each Warrant, whether those Warrants provide for cash
settlement or delivery of the Government Debt Securities or currency, currency
unit, currency index or currency basket upon exercise.
If the offered Warrants are Warrants on a stock index or a stock basket,
those Warrants will provide for payment of an amount in cash determined by
reference to increases or decreases in such stock index or stock basket, and the
Prospectus Supplement will describe the terms of those Warrants, the stock index
or stock basket covered by those Warrants and the market to which the stock
index or stock basket relates.
If the offered Warrants are Warrants on a commodity or commodity index,
those Warrants will provide for cash settlement or delivery of the particular
commodity or commodity index. The Prospectus Supplement will describe the terms
of those Warrants, the commodity or commodity index covered by those Warrants
and the market, if any, to which the commodity or commodity index relates.
Registered Warrants of any series will be exchangeable for Registered
Warrants of the same series representing in the aggregate the number of Warrants
surrendered for exchange. Warrant Certificates, to the extent exchangeable, may
be presented for exchange, and Registered Warrants may be presented for
transfer, at the corporate trust office of the Warrant Agent for that series of
Warrants (or any other office indicated in the Prospectus Supplement relating to
that series of Warrants). Warrants to buy or sell Government Debt Securities or
a currency, currency unit, currency index or currency basket, and Warrants on
stock indices or stock baskets or on commodities or commodity indices, may be
issued in the form of a single Global Warrant Certificate, registered in the
name of the nominee of the depository of the Warrants, or may initially be
issued in the form of definitive certificates that may be exchanged, on a fixed
date, or on a date or dates selected by the Company, for interests in a Global
Warrant Certificate, as set forth in the applicable Prospectus Supplement.
Bearer Warrants will be transferable by delivery. The Prospectus Supplement will
describe the terms of exchange applicable to any Bearer Warrants.
EXERCISE OF WARRANTS
Each Warrant will entitle the Holder to purchase such principal amount of
the Debt Securities or buy or sell such amount of Government Debt Securities or
of a currency, currency unit, currency index or currency basket, commodity or
commodities at the exercise price, or receive a settlement value in respect of
such amount of Government Debt Securities or of a currency, currency unit,
currency index or currency basket, stock index or stock basket, commodity or
commodity index, as shall in each case be set forth in or calculable from, the
Prospectus Supplement relating to that series of Warrants or as otherwise set
forth in the Prospectus Supplement. Warrants may be exercised at the corporate
trust office of the Warrant Agent (or any other office indicated in the
Prospectus Supplement relating to those Warrants) at any time up to 5:00 p.m.
New York time on the date set forth in the Prospectus Supplement relating to
those Warrants or as may be otherwise set forth in the Prospectus Supplement.
After such time on that date (or such later date to which such date may be
extended by the Company), unexercised Warrants will become void.
Subject to any restrictions and additional requirements that may be set
forth in the Prospectus Supplement relating thereto, Warrants may be exercised
by delivery to the Warrant Agent of the
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Warrant Certificate evidencing such Warrants properly completed and duly
executed and of payment as provided in the Prospectus Supplement of the amount
required to purchase the Debt Securities, or (except in the case of Warrants
providing for cash settlement) payment for or delivery of the Government Debt
Securities or currency, currency unit, currency basket, stock index, stock
basket, commodity or commodity index, as the case may be, purchased or sold upon
such exercise. Only Registered Securities will be issued and delivered upon
exercise of Registered Warrants. Warrants will be deemed to have been exercised
upon receipt of such Warrant Certificate and any payment, if applicable, at the
corporate trust office of the Warrant Agent or any other office indicated in the
Prospectus Supplement and the Company will, as soon as practicable thereafter,
issue and deliver the Debt Securities purchasable upon such exercise, or buy or
sell such Government Debt Securities or currency, currency unit, currency
basket, commodity or commodities or pay the settlement value in respect of the
Warrants. If fewer than all of the Warrants represented by such Warrant
Certificate are exercised, a new Warrant Certificate will be issued for the
remaining amount of the Warrants. Special provisions relating to the exercise of
any Bearer Warrants or automatic exercise of Warrants will be described in the
related Prospectus Supplement.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES AND BEARER WARRANTS
In compliance with United States federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Security will agree that, in connection with the original issuance
of such Bearer Security or during the restricted period (as defined in
applicable U.S. Treasury regulations) of such Bearer Security, they will not
offer, sell or deliver such Bearer Security, directly or indirectly, to a U.S.
Person or to any person within the United States, except to the extent permitted
under U.S. Treasury regulations.
Each Bearer Security, including Bearer Global Securities that will not be
exchanged for definitive individual Securities prior to the stated maturity,
will bear on the face of the Security and on any interest coupons that may be
detachable therefrom a legend to the following effect: "Any United States Person
who holds this obligation will be subject to limitations under the United States
income tax laws, including the limitations provided in Sections 165(j) and
1287(a) of the Internal Revenue Code." The sections referred to in the legend
provide that, with certain exceptions, a United States taxpayer who holds Bearer
Securities will not be allowed to deduct any loss, and will not be eligible for
capital gain treatment with respect to any gain, realized on a sale, exchange,
redemption or other disposition of those Bearer Securities. The legend described
above will also be evidenced on any book-entry system maintained with respect to
the Bearer Securities.
As used herein, "United States" means the United States of America and its
possessions, and "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under the
laws of the United States, or an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
Pending the availability of a definitive Global Security or individual
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security. Following the availability of a definitive Global Security in bearer
form, or individual Bearer Securities, and subject to any further limitations
described in the applicable Prospectus Supplement, the temporary Global Security
will be exchangeable for interests in such definitive Global Security or for
such individual Bearer Securities, respectively, only upon receipt of a
"Certificate of Non-U.S. Beneficial Ownership" unless such a certificate has
already been provided by the Depositary because interest has been paid on the
Global Security or because a reasonable period of time after the end of the
restricted period has passed.
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Limitations on the offer, sale, delivery and exercise of Bearer Warrants
(including a requirement that a Certificate of Non-U.S. Beneficial Ownership be
delivered upon exercise of a Bearer Warrant) will be described in the Prospectus
Supplement relating to those Bearer Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) to
underwriters (including Bear Stearns) or dealers, who may act directly or
through a syndicate represented by one or more managing underwriters (including
Bear Stearns); (ii) through broker-dealers (including Bear Stearns) designated
by the Company to act on its behalf as agents; or (iii) directly to one or more
purchasers. Each Prospectus Supplement will set forth the manner and terms of
the offering of the Securities covered thereby, including (i) whether that
offering is being made to underwriters or through agents; (ii) any underwriting
discounts, dealer concessions, agency commissions and any other items that may
be deemed to constitute underwriters', dealers' or agents' compensation, and
(iii) the purchase price or initial public offering price of the Securities and
the anticipated proceeds to the Company from the sale of the Securities.
When Securities are to be sold to underwriters, unless otherwise set forth
in the applicable Prospectus Supplement, the obligations of the underwriters to
purchase those Securities will be subject to certain conditions precedent but
the underwriters will be obligated to purchase all of the Securities if any are
purchased. The Securities will be acquired by the underwriters for their own
account and may be resold by the underwriters, either directly to the public or
to securities dealers, from time to time in one or more transactions, including
negotiated transactions, either at fixed public offering price or at varying
prices determined at the time of sale. The initial public offering price, if
any, and any concessions allowed or reallowed to dealers, may be changed from
time to time.
To the extent that any Securities underwritten by Bear Stearns are not
resold by Bear Stearns for an amount at least equal to the public offering price
thereof, the proceeds from the offering of those Securities will be reduced.
Bear Stearns intends to resell any of those Securities from time to time
following termination of the offering at varying prices related to prevailing
market prices at the time of sale, subject to applicable prospectus delivery
requirements.
Unless otherwise indicated in the applicable Prospectus Supplement, when
Securities are sold through an agent, the designated agent will agree, for the
period of its appointment as agent, to use its best efforts to sell the
Securities for the Company's account and will receive commissions from the
Company as set forth in the applicable Prospectus Supplement.
Securities purchased in accordance with a redemption or repayment pursuant
to their terms may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing by one or more firms
("remarketing firms") acting as principals for their own accounts or as agents
for the Company. Any remarketing firm will be identified and the terms of its
agreement, if any, with the Company and its compensation will be described in
the Prospectus Supplement. Remarketing firms may be deemed to be underwriters in
connection with the Securities remarketed by them.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities at the public offering price set forth in
the Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in the Prospectus Supplement.
These contracts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and the Prospectus Supplement will set forth
the commissions payable for solicitation of these contracts.
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Underwriters and agents participating in any distribution of Securities may
be deemed "underwriters" within the meaning of the Securities Act and any
discounts or commissions they receive in connection therewith may be deemed to
be underwriting compensation for the purposes of the Securities Act. Those
underwriters and agents may be entitled, under their agreements with the
Company, to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution by the
Company to payments that they may be required to make in respect of those civil
liabilities. Various of those underwriters or agents may be customers of, engage
in transactions with or perform services for the Company or its affiliates in
the ordinary course of business.
Following the initial distribution of any series of Securities, Bear Stearns
may offer and sell previously issued Securities of that series from time to time
in the course of its business as a broker-dealer. Bear Stearns may act as
principal or agent in those transactions. This Prospectus and the Prospectus
Supplement applicable to those Securities will be used by Bear Stearns in
connection with those transactions. Sales will be made at prices related to
prevailing prices at the time of sale.
Each distribution of Securities will conform to the requirements set forth
in the applicable sections of Schedule E to the By-laws of the NASD.
ERISA CONSIDERATIONS
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
prohibits the borrowing of money, the sale of property and certain other
transactions involving the assets of plans that are qualified under the Code
("Qualified Plans") or individual retirement accounts ("IRAs") and persons who
have certain specified relationships to them. Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), prohibits similar
transactions involving employee benefit plans that are subject to ERISA ("ERISA
Plans"). Qualified Plans, IRAs and ERISA Plans are hereinafter collectively
referred to as "Plans."
Persons who have such specified relationships are referred to as "parties in
interest" under ERISA and as "disqualified persons" under the Code. "Parties in
interest" and "disqualified persons" encompass a wide range of persons,
including any fiduciary (e.g., investment manager, trustee or custodian), any
person providing services (e.g., a broker), the Plan sponsor, an employee
organization any of whose members are covered by the Plan, and certain persons
related to or affiliated with any of the foregoing.
The Company, Bear Stearns and/or BSSC each is considered a "party in
interest" or "disqualified person" with respect to many Plans, including IRAs
established with any of them. The purchase and/or holding of Securities by a
Plan with respect to which the Company, Bear Stearns and/or BSSC is a fiduciary
and/or a service provider (or otherwise is a "party in interest" or
"disqualified person") would constitute or result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code, unless such Securities
are acquired or held pursuant to and in accordance with an applicable statutory
or administrative exemption. An IRA that engages in a non-exempt prohibited
transaction could forfeit its tax-exempt status under Section 408 of the Code.
Applicable exemptions may include the exemption for services under Section
408(b)(2) of ERISA and certain prohibited transaction class exemptions (e.g.,
Prohibited Transaction Class Exemption 84-14 relating to qualified professional
asset managers and Prohibited Transaction Class Exemptions 75-1 and 86-128
relating to securities transactions involving employee benefit plans and
broker-dealers).
In accordance with ERISA's general fiduciary requirement, a fiduciary with
respect to any ERISA Plan who is considering the purchase of Securities on
behalf of such plan should determine whether such purchase is permitted under
the governing plan document and is prudent and appropriate for the ERISA Plan in
view of its overall investment policy and the composition and diversification of
its portfolio. No IRA established with, or for which services are provided by,
the Company, Bear Stearns,
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and/or BSSC should acquire any Securities and other Plans established with, or
for which services are provided by, the Company, Bear Stearns and/or BSSC should
consult with counsel prior to making any such acquisition.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this prospectus by reference from the Company's 1994
Annual Report on Form 10-K have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
VALIDITY OF THE SECURITIES
The validity of the Debt Securities and the Warrants will be passed upon for
the Company by Weil, Gotshal & Manges (a partnership including professional
corporations), New York, New York.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS
OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLE MENT 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 OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Prospectus Summary................... S-3
Use of Proceeds...................... S-9
Risk Factors......................... S-9
Certain Important Information
Concerning the Warrants.............. S-16
Description of the Warrants.......... S-18
Exchange Rates....................... S-30
Certain United States Federal Income
Tax Considerations................. S-33
Underwriting......................... S-35
Validity of the Warrants............. S-35
Appendix A: Index of Terms........... A-1
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference............................ 3
The Company.......................... 4
Use of Proceeds...................... 4
Ratio of Earnings to Fixed Charges... 4
Description of Debt Securities....... 5
Description of Warrants.............. 11
Limitations on Issuance of Bearer
Securities and Bearer Warrants....... 13
Plan of Distribution................. 14
ERISA Considerations................. 15
Experts.............................. 16
Validity of the Securities........... 16
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================================================================================
1,000,000 WARRANTS
THE BEAR STEARNS
COMPANIES INC.
JAPANESE YEN PUT WARRANTS
EXPIRING AUGUST 21, 1997
-------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------
BEAR, STEARNS & CO. INC.
AUGUST 22, 1995
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================================================================================
<PAGE>
GRAPHIC APPENDIX
----------------
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(Pursuant to Rule 304(a) of Regulation S-T)
GRAPHIC MATERIAL (1) - PAGE S-32:
In the paper-format version of this Prospectus Supplement to
The Bear Stearns Companies Inc. Prospectus, dated July 28,
1995, (Registration No. 33-60065), a line-graph titled
"JAPANESE YEN PER U.S. DOLLAR - MONTHLY AVERAGE NOON BUYING
RATE" appears in the section "EXCHANGE RATES". The table on
Pages S-30 and S-31 describes this graph and the same data
presented in the graph is presented in the aforementioned
table.
