Filed Pursuant to Rule 424(b)(5)
Registration No. 33-63561
Subject to Completion, Dated January 30, 1996
PROSPECTUS SUPPLEMENT
(to Prospectus Supplement dated February __, 1996
to Prospectus dated December 18, 1995)
Vantage Point Portfolio
Call Warrants
This brochure must be attached to the Prospectus Supplement
and Prospectus that provides a description of, and the risks
associated with an investment in, the Warrants, including the
information under "Risk Factors" commencing on page S-9 of the
Prospectus Supplement.
This prospectus supplement, which relates to securities that are the subject of
an effective Registration Statement under the Securities Act of 1933, as
amended, is subject to completion and amendment.
<PAGE>
The Vantage Point Portfolio Call Warrants expiring, August __, 1997, offered
hereby are obligations of The Bear Stearns Companies Inc. The Warrants are
designed to permit investors to participate in the appreciation, if any, of the
Vantage Point Portfolio, a diversified static portfolio of the common stocks of
43 corporations listed on the New York Stock Exchange or traded on the NASDAQ
Stock Market.
The Warrants Offer Investors
- - Leveraged Participation: The purchase of a Warrant will permit investors to
benefit from the performance of a larger notional investment in the Vantage
Point Portfolio with a smaller initial investment in the Warrants.
- - Fixed Maturity: The Warrants expire on August __, 1997. Subject to the
limitations described in the Prospectus Supplement, a holder of the Warrants
may exercise the Warrants on any Business Day (as defined in the Prospectus
Supplement) from the date of issuance until 3:00 p.m., New York City time,
on the business Day preceding the expiration date of the Warrants.
- - American Stock Exchange Listing: Application has been made to list the
Warrants on the American Stock Exchange ("AMEX"), subject to the receipt of
requisite regulatory approvals. The AMEX symbol for the Warrants will be
BVP.WS.
- - Special Considerations: Consult the attached Prospectus Supplement and
Prospectus for a detailed description of, and the risks associated with an
investment in, the Warrants, including the possibility that the Warrants
will expire worthless if the Vantage Point Portfolio is at or below its
initial level.
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 30, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 18, 1995)
1,000,000 WARRANTS
THE BEAR STEARNS COMPANIES INC.
VANTAGE POINT PORTFOLIO CALL WARRANTS
EXPIRING AUGUST , 1997
Each Vantage Point Portfolio Call Warrant (the "Warrant") will entitle the
holder thereof, upon exercise (including automatic exercise), to receive from
The Bear Stearns Companies Inc. (the "Company") an amount (the "Cash Settlement
Value") calculated by reference to increases in the Vantage Point Portfolio,
which consists of a diversified basket of the common stocks of 43 corporations
operating in several industry groups (the "Portfolio", as more fully defined
herein on page S-4). The Cash Settlement Value will equal the product (rounded
down to the nearest cent) of (A) the quotient obtained by dividing (i) the
amount, if any, by which the Spot Portfolio Value (as defined herein on page
S-15) for the applicable Valuation Date (as defined herein on page S-24) exceeds
the Original Portfolio Value (as defined herein on page S-4) by (ii) the
Original Portfolio Value and (B) 35. If the Original Portfolio Value is equal to
or exceeds the Spot Portfolio Value on such Valuation Date, the Cash Settlement
Value will be zero, in which case the holder will be permitted, subject to
certain exceptions, to re-exercise the Warrant prior to the Expiration Date or
the Delisting Date (each as defined herein on pages S-21 and S-34,
respectively). The Original Portfolio Value, which shall remain constant
throughout the term of the Warrants, has been set at 100. On the date of this
Prospectus Supplement, the Cash Settlement Value of the Warrants is zero.
Application has been made to list the Warrants on the American Stock Exchange
(the "AMEX"), subject to the receipt of requisite regulatory approvals. The AMEX
symbol for the Warrants will be BVP.WS.
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF EXPIRING
WORTHLESS IF THE SPOT PORTFOLIO VALUE IS EQUAL TO OR LESS THAN THE ORIGINAL
PORTFOLIO VALUE. 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, AS WELL AS THE
OTHER INFORMATION CONTAINED HEREIN AND IN THE ACCOMPANYING PROSPECTUS.
(continued on next page)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. ANY REPRE-SENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE UNDERWRITING PROCEEDS TO COMPANY
TO PUBLIC(1) DISCOUNTS(1)(2) (2)(3)
<S> <C> <C> <C>
Per Warrant......................... $ $ $
Total(4)............................ $ $ $
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(1) For investors purchasing 50,000 or more Warrants in any single transaction,
the Price to Public will be $ per Warrant, and Underwriting Discounts
will be $ per Warrant, subject to a minimum 30-day holding period
requirement as described herein under "Underwriting". Resales of Warrants by
those investors upon expiration of the holding period may adversely affect
the market price of the Warrants. See "Underwriting".
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting expenses payable by the Company estimated at $ .
(4) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to an additional 150,000 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
(subject to reduction as described above) and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting"herein.
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The Warrants are offered by the Underwriters, subject to prior sale, when, as
and if delivered to and accepted by the Underwriters, and subject to their right
to reject orders in whole or in part. It is expected that delivery of the
Warrants will be made in New York City on or about February , 1996.
------------------------
BEAR, STEARNS & CO. INC.
The date of this Prospectus Supplement is , 1996.
THIS PROSPECTUS SUPPLEMENT, WHICH RELATES TO SECURITIES THAT ARE THE SUBJECT OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IS SUBJECT TO COMPLETION AND AMENDMENT.
<PAGE>
(continued from cover page)
The valuation of and payment for any exercised Warrant (including in the
case of automatic exercise) may be postponed as a result of an Extraordinary
Event or an Exercise Limitation Event (each as defined herein on pages S-27 and
S-29, respectively) or as a result of the exercise of a number of Warrants
exceeding the maximum permissible amount as described herein, in which case the
Warrantholder (as defined herein on page S-9) will receive a Cash Settlement
Value or, under certain circumstances, the Alternative Settlement Amount (as
defined herein on page S-28) for such Warrant, in either case determined as of a
later date. In addition, following the occurrence of an Extension Event (as
defined herein on page S-6), exercises of Warrants will be suspended and, under
certain circumstances, any Warrants will be deemed to be worthless. See
"Description of the Warrants--Extension Events, Extraordinary Events and
Exercise Limitation Events" herein. As a result, investors may suffer a total
loss of their investment in the Warrants even though the Cash Settlement Value
of the Warrants if calculated using the fair value of the Portfolio Securities
(as defined herein on page S-3) at the time the Warrants are deemed to be
worthless, would be greater than zero.
The Warrants will be exercisable on any Business Day (as defined herein on
page S-2) from the date of issuance until 3:00 P.M., New York City time, on the
Business Day immediately preceding the earlier of (i) August , 1997, the
Expiration Date for the Warrants, and (ii) the Delisting Date. Any Warrant not
exercised at or before 3:00 P.M., New York City time, on such Business Day will
be automatically exercised on the Expiration Date, subject to an automatic
extension of the term of the Warrants as described herein, or on the Delisting
Date, as the case may be. All exercises of Warrants (other than exercises on the
Expiration Date or the Delisting Date or following the occurrence of an
Extension Event, all of which would be automatic exercises) are subject, at the
Company's option, to the limitation that not more than 750,000 Warrants in total
may be exercised on any Exercise Date (as defined herein on page S-22) 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--Exercise of
Warrants--Maximum Exercise Amount" herein. As used herein, "Business Day" means
any day other than a Saturday or Sunday or day on which either the AMEX 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.
A Warrantholder may exercise no fewer than 500 Warrants at any one time,
except in the case of automatic exercise. See "Description of the
Warrants--Exercise of Warrants--Minimum Exercise Amount" herein. A Warrantholder
tendering Warrants for exercise (and, therefore, not in the case of an automatic
exercise) will have the option of specifying that, unless an Alternative
Settlement Amount is payable in respect of such Warrants, such Warrants are not
to be exercised if the Spot Portfolio Value as of the applicable Valuation Date
is three or more points lower than the closing level of the Spot Portfolio Value
on the relevant Exercise Date. Warrants that are not exercised will be treated
as not having been tendered for exercise and will be returned to the
Warrantholder. See "Description of the Warrants-- Limit Option" herein.
The AMEX requires that the Warrants be sold only to investors whose accounts
have been approved for options trading. In addition, the AMEX requires that its
members and member organizations and registered employees thereof make certain
suitability determinations before recommending transactions in the Warrants.
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 the
Company's subsidiaries with respect to the assets of those subsidiaries. At
December 31, 1995, the Company had outstanding approximately $13.3 billion of
indebtedness, none of which was secured, and the subsidiaries of the Company had
outstanding approximately $731 million of indebtedness (excluding $36.5 billion
relating to securities sold under repurchase agreements).
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE WARRANTS
OFFERED HEREBY AT A LEVEL BELOW THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
S-2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement and in the related
Prospectus and in the documents incorporated by reference herein and therein.
Appendix A hereto (the "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 Vantage Point Portfolio Call Warrants
expiring August , 1997.
PRICE PER WARRANT................... The initial public offering price for the Warrants
will be $ per Warrant, except that the
price will be $ per Warrant for investors
purchasing 50,000 or more Warrants, in a single
transaction, subject to a 30-day minimum holding
period requirement. See "Underwriting".
CASH SETTLEMENT VALUE............... Upon exercise (including automatic exercise), each
Warrant will entitle the holder thereof to receive
from the Company an amount (the "Cash Settlement
Value") computed by reference to increases in the
basket of Portfolio Securities comprising the
Portfolio. The Cash Settlement Value will equal the
product (rounded down to the nearest cent) of (A)
the quotient obtained by dividing (i) the amount,
if any, by which the Spot Portfolio Value for the
applicable Valuation Date exceeds the Original
Portfolio Value, by (ii) the Original Portfolio
Value and (B) 35. The Original Portfolio Value has
been set at 100. If, however, the Original
Portfolio Value is equal to or exceeds the Spot
Portfolio Value for the applicable Valuation Date
(i.e., if the Spot Portfolio Value is equal to or
less than 100), the Cash Settlement Value will be
zero, in which case (except in the case of
automatic exercise), the Warrantholder will be
permitted, subject to certain exceptions, to
re-exercise the Warrant at a later date. The Spot
Portfolio Value for any date will be determined by
the Determination Agent (as defined herein) and
will equal the sum of the products of the Market
Price (as defined herein) of each security in the
Portfolio (each, a "Portfolio Security", and,
collectively, the "Portfolio Securities") on that
day and the then applicable Multiplier (as defined
herein) for that specific Portfolio Security. The
applicable multiplier (the "Multiplier") for each
Portfolio Security is specified under the caption
"Description of Warrant--Portfolio Securities"
herein and indicates the number of shares (or the
fraction of one share) of that Portfolio Security
included in the calculation of the Spot Portfolio
Value. Each Multiplier will remain constant for the
term of the Warrants unless adjusted for certain
corporate events, including a stock split, reverse
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S-3
<PAGE>
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stock split or stock dividend or distribution. In
the event of a merger or consolidation of an issuer
of a Portfolio Security in which that issuer is not
the surviving entity, the value of that Portfolio
Security will be based on the value of the
consideration received in exchange for that
Portfolio Security, as adjusted for the accrual of
interest. See "Description of Warrants--Adjustments
to the Multiplier and Portfolio" and "Description
of Warrants-- Cash Settlement Value" herein.
THE PORTFOLIO....................... The Portfolio consists of a diverse basket of the
common stocks of 43 corporations operating in several
industry groups, including computers, aerospace,
retail, banking, cellular telecommunications,
pharmaceuticals, medical supplies, petroleum
products, hotel/motel, toys and retail stationary.
See "Description of Warrants--Portfolio Securities"
herein. The Company believes that the Portfolio
Securities in the Portfolio represent potentially
attractive investments in these industry groups.
Ownership of the Warrants will not entitle
Warrantholders to receive any of the Portfolio
Securities. Each of the Portfolio Securities have
significantly different levels of market value
(i.e., the number of shares of a particular
security outstanding multiplied by the current
market price of that security). The original
Multipliers will be determined so that each
Portfolio Security represents an equal percentage
of the Original Portfolio Value on the date the
Warrants are priced for initial sale to the public,
which is the date of this Prospectus Supplement.
See "Description of Warrants--Portfolio Securities"
herein. The inclusion of any particular Portfolio
Security in the Portfolio is not a recommendation
to buy or sell that Portfolio Security, and neither
the Company nor any of its affiliates makes any
representation as to the future performance of the
Portfolio or any of the Portfolio Securities.
CALCULATION AND DISSEMINATION OF THE
SPOT PORTFOLIO VALUE.............. As long as the Warrants are listed on the AMEX, the
AMEX intends to calculate and disseminate the value
of the Portfolio based on the most recently
reported prices of the Portfolio Securities at
approximately 15-second intervals during AMEX
business hours and the Spot Portfolio Value at the
end of such day to vendors via the facilities of
the AMEX Tape under the symbol "XVP." See
"Description of Warrants--Portfolio Securities"
herein.
ORIGINAL PORTFOLIO VALUE............ Based on the individual prices of the Portfolio
Securities on the date that the Warrants are priced
for initial offering to the public, which is the
date of this Prospectus Supplement, the Multiplier
for each Portfolio Security initially will be set
so that the Spot Portfolio Value on that date will
equal 100 (the "Original Portfolio Value").
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S-4
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EXERCISE OF WARRANTS................ The Warrants will be exercisable on any Business Day
from the date of issuance (subject to postponement
as described herein under "Description of the
Warrants-- Extension Events, Extraordinary Events
and Exercise Limitation Events" or as a result of
the exercise of a number of Warrants exceeding the
maximum permissible amount) until 3:00 P.M., New
York City time, on the Business Day immediately
preceding the earlier of (i) the Expiration Date
and (ii) the Delisting Date. The Warrants will
expire on the Expiration Date, subject to an
automatic extension of the term of the Warrants as
described herein under "Description of the
Warrants-- Extension Events, Extraordinary Events
and Exercise Limitation Events" herein. Unless the
term of the Warrants is extended, all Warrants not
previously exercised will be automatically
exercised on the earlier of the Expiration Date or
the Delisting Date, as the case may be. See
"Description of the Warrants--Exercise of Warrants"
herein.
EXERCISE AMOUNT..................... A Warrantholder may exercise no fewer than 500
Warrants at any one time, except in the case of
automatic exercise. See "Description of the
Warrants--Exercise of Warrants--Minimum Exercise
Amount" herein. All exercises of Warrants (other
than on the Expiration Date or the Delisting Date
or upon the cancellation of Warrants or following
the occurrence of an Extension Event) are subject,
at the Company's option, to the limitation that not
more than 750,000 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--Exercise of Warrants--Maximum Exercise
Amount" herein.
LIMIT OPTION........................ Except for Warrants subject to automatic exercise and
except with respect to payments of any Alternative
Settlement Amount and except following an Extension
Event, each Warrantholder, in connection with any
exercise of Warrants (including a postponed
exercise following an Extraordinary Event or an
Exercise Limitation Event), will have the option
(the Limit Option, as more fully described herein)
to specify that such Warrants are not to be
exercised if the Spot Portfolio Value that would
otherwise be used to determine the Cash Settlement
Value of such Warrants is three or more points
lower than the closing level of the Spot Portfolio
Value on the relevant Exercise Date (the "Limit
Option Reference Index"). Warrants that are not
exercised will be treated as not having been
tendered for exercise and will be returned to the
Warrantholder. See "Description of the
Warrants--Limit Option."
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S-5
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EXTENSION EVENTS, EXTRAORDINARY
EVENTS AND EXERCISE LIMITATION
EVENTS............................ See "Description of the Warrants--Extension Events,
Extraordinary Events and Exercise Limitation
Events" herein for a description of such events and
the consequences of the declaration of such an
event by the Company.
RISK FACTORS........................ The Warrants are speculative and involve a high
degree of risk, including (but not limited to) risks
arising from fluctuations in the prices of the
stocks comprising the Portfolio. The Warrants are
subject to certain risk factors that are distinct
from those associated with a direct investment in
any of the Portfolio Securities that comprise the
Portfolio. First, the amounts payable upon the
exercise of the Warrants will not reflect the
payment of any dividends on the Portfolio
Securities. Second, there can be no assurance as to
how the Warrants will trade in the secondary market
or whether the market for the Warrants will be
liquid. The prices at which the Warrants trade in
the secondary market are expected to depend on a
combination of factors, including the relationship
between the Spot Portfolio Value at the time to the
Original Portfolio Value, the time remaining to the
Expiration Date, prevailing interest rates, the
dividend rates of the various Portfolio Securities
and the volatility of the Spot Portfolio Value. In
addition, the Company or one of its affiliates may
from time to time purchase Warrants resulting in a
decrease in the liquidity of the Warrants. In
addition, if a Market Price is no longer available
for a particular Portfolio Security for whatever
reason, including the liquidation or dissolution of
the issuer of that Portfolio Security or the
subjection of the issuer to a proceeding under any
applicable bankruptcy, insolvency or similar law,
then, for so long as a Market Price is unavailable
for that Portfolio Security, the value of that
particular Portfolio Security will be deemed to be
zero for the purposes of calculating the Spot
Portfolio Value. See "Risk Factors" herein.
Investors should recognize that their Warrants may
expire worthless and should be prepared to sustain
a total loss of the purchase price of their
Warrants. The Warrants are appropriate investments
only for investors with options approved accounts
who are able to understand and bear the risk of a
speculative investment in the Warrants.
Because the Determination Agent is an affiliate of
the Company, potential conflicts of interest may
exist between the Determination Agent and the War-
rantholders.
In the event that a suspension, material limitation
or absence of trading on the AMEX, the New York
Stock Exchange (the "NYSE") or the Nasdaq Stock
Market ("NASDAQ"), or any other securities
exchange, of 20%
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S-6
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or more of the Portfolio Securities is continuing
on the Expiration Date (an "Extension Event"), the
term of the Warrants will be extended for a period
of thirty (30) days (the "Extended Expiration
Date"), except that if the Cash Settlement Value or
the Intrinsic Value (as defined herein) used in
calculating the Alternative Settlement Amount (as
defined herein) of the Warrants would have been
zero if the Warrants had been exercised such that
the Valuation Date for such exercise was the
Measurement Date (as defined herein), then the term
of the Warrants will not be extended and the
Warrants will be deemed to be worthless. See
"Description of the Warrants--Extension Events,
Extraordinary Events and Exercise Limitation
Events" herein. The Warrants also will be deemed to
be worthless if the Expiration Date of the Warrants
is extended but an Extension Event is continuing on
the Extended Expiration Date or any earlier
Delisting Date. As a result, investors may suffer a
total loss of their investment in the Warrants even
though the Cash Settlement Value of the Warrants,
if calculated using the fair value of the Portfolio
Securities at the time the Warrants are deemed to
be worthless, would be greater than zero.
Investors should consider carefully the risks and
other matters discussed under "Risk Factors",
"Description of the Warrants" and "Certain United
States Federal Income Tax Considerations" herein
prior to purchasing the Warrants.
WHO SHOULD INVEST................... The AMEX requires that the Warrants be sold only to
investors whose accounts have been approved for
options trading. In addition, the AMEX requires
that its members and member organizations and
registered employees thereof make certain
suitability determinations before recommending
transactions in the Warrants.
Investment decisions relating to warrants that are
indexed to a portfolio of stocks require an
investor to predict the direction of movements in
the portfolio as well as the amount and timing of
those movements. Such warrants may change
substantially in value, or lose all of their value,
with relatively small movements in the portfolio.
Moreover, in the absence of countervailing factors,
such as an offsetting movement in the level of the
portfolio, the market value of a warrant that is
indexed to a portfolio of stocks will tend to
decrease over time and the warrant will have no
market value after the time for exercise has
expired. Accordingly, 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 have an
options approved account, be able to understand and
bear the risk of an investment in the Warrants, be
experienced with respect to options
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S-7
<PAGE>
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<S> <C>
and option transactions and understand the risks of
stock index transactions. Such investors should
reach an investment decision only after careful
consideration with their advisers of the
suitability of the Warrants in light of their
particular financial circumstances and the
information set forth in this Prospectus Supplement
and the Prospectus. See "Risk Factors" herein. As
indicated above, investors should be prepared to
sustain a total loss of the purchase price of the
Warrants.
LISTING............................. The American Stock Exchange
WARRANT TRADING SYMBOL.............. BVP.WS
WARRANT AGENT....................... Chemical Bank
DETERMINATION AGENT................. Bear, Stearns & Co. Inc. ("Bear Stearns")
</TABLE>
S-8
<PAGE>
USE OF PROCEEDS AND HEDGING
All or a portion of the net proceeds from the sale of the Warrants will be
used by the Company or one or more of the Company's subsidiaries in connection
with hedging the obligations represented by the Warrants. Any remaining net
proceeds will be used for general corporate purposes. See "Use of Proceeds" in
the Prospectus.
Prior to the pricing of the Warrants, the Company, through its subsidiaries,
hedged its anticipated exposure under the Warrants and, subject to market
conditions, the Company expects that it will continue to hedge its exposure
under the Warrants from time to time following this offering by taking long or
short positions in several or all of the Portfolio Securities or in listed or
over-the-counter options contracts in, or other derivative or synthetic
instruments related to, several or all of the Portfolio Securities. Although the
Company has no reason to believe that its hedging activity had such an impact,
there can be no assurance that the Company did not affect the prices of the
Portfolio Securities as a result of its hedging activities. In addition, the
Company, through its subsidiaries, may purchase or otherwise acquire a long or
short position in the Warrants from time to time and may, in its sole
discretion, hold or resell the Warrants. The Company, through its subsidiaries,
also may take positions in other types of appropriate financial instruments that
may become available in the future. To the extent that the Company, through its
subsidiaries, has a long hedge position in several or all of the Portfolio
Securities or options contracts in, or other derivative or synthetic instruments
related to, several or all of the Portfolio Securities, the Company, through its
subsidiaries, may liquidate a portion of its holdings at or about the time of
the maturity of the Warrants. Depending, among other things, on future market
conditions, the aggregate amount and the composition of those positions are
likely to vary over time. Profits or losses from any such position cannot be
ascertained until that position is closed out and any offsetting position or
positions are taken into account.
RISK FACTORS
RISKS DUE TO DELAY OR POSTPONEMENT OF VALUATION OF WARRANTS
Because the Valuation Date for an exercised Warrant will occur after the
Exercise Date, an owner of a Warrant (a "Warrantholder") will not be able to
determine at the time of exercise of a Warrant the Spot Portfolio Value 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 level of the Spot Portfolio Value between the time a Warrantholder submits
an Exercise Notice (as defined herein) and the time the Spot Portfolio Value is
determined with respect to such exercise (which period will represent, at a
minimum, an entire Business Day (and, in the case of a postponed Valuation Date
following an Extraordinary Event or an Exercise Limitation Event or as a result
of there being exercised a number of Warrants exceeding the maximum permissible
amount, may be substantially longer) and will, subject to the Limit Option
described herein and under "Description of the Warrants--Limit Option" herein,
result in such Warrantholder receiving a Cash Settlement Value or Alternative
Settlement Amount that is less than the Cash Settlement Value anticipated by
such Warrantholder based on the level of the Spot Portfolio Value most recently
reported prior to submission of the Exercise Notice.
Except in the case of an automatic exercise, a Warrantholder may be able to
limit to some extent the risk associated with any such downward movement in the
closing level of the Spot Portfolio Value 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 Portfolio Value as of
the applicable Valuation Date is three or more points lower than the Spot
Portfolio Value calculated immediately prior to the applicable Exercise
S-9
<PAGE>
Date. See "Description of the Warrants--Limit Option" herein. However, in the
event of the occurrence of an Extraordinary Event or Exercise Limitation Event
resulting in the payment to Warrantholders of an Alternative Settlement Amount
in lieu of the Cash Settlement Value or in the case of certain events following
the occurrence of an Extension Event, the Limit Option will not preclude the
exercise of Warrants as described under "Description of the Warrants--Extension
Events, Extraordinary Events and Exercise Limitation Events" herein.
EXTRAORDINARY EVENTS; EXERCISE LIMITATION EVENTS; MAXIMUM EXERCISE AMOUNT
The Valuation Date for an exercised Warrant may be postponed upon the
occurrence and continuation of an Extraordinary Event or an Exercise Limitation
Event (See "Description of the Warrants--Extension Events, Extraordinary Events
and Exercise Limitation Events" herein) or as a result of the exercise of a
number of Warrants exceeding the limits on exercise described under "Description
of the Warrants--Exercise of Warrants--Maximum Exercise Amount" herein. If the
Company determines that an Extraordinary Event or an Exercise Limitation Event
has occurred and is continuing on any day that would otherwise be a Valuation
Date for any exercised Warrant, then the Valuation Date for such Warrant will be
postponed to the next Business Day on which there is no Extraordinary Event or
Exercise Limitation Event; provided that, subject to an automatic extension of
the term of the Warrants or to a determination that the Warrants are worthless,
as described under "Description of the Warrants--Extension Events, Extraordinary
Events and Exercise Limitation Events" herein, if the postponed Valuation Date
has not occurred on or prior to the Expiration Date or any Delisting Date, the
Warrantholders will receive the Alternative Settlement Amount (as described
herein) in lieu of the Cash Settlement Value; provided, further, that, in the
case of an Extraordinary Event, if the Company determines that such
Extraordinary Event is expected to continue and the Company notifies the Warrant
Agent (as defined herein) that it is cancelling the Warrants, then the date on
which such notice is given (whether or not such date is a Business Day) will
become the Valuation Date for such Warrants, in which case such Warrantholder
will receive, in lieu of the Cash Settlement Value of such Warrant, the
Alternative Settlement Amount thereof, which is equal to the sum of the Cash
Settlement Value of the Warrants on such Valuation Date (determined as provided
under "Description of the Warrants--Extension Events, Extraordinary Events and
Exercise Limitation Events" herein) and a ratable portion of 50% of the initial
offering price of the Warrants, subject to certain exceptions and adjustments.
The Cash Settlement Value or the Alternative Settlement Amount of a Warrant
determined as of any such postponed Valuation Date may be substantially lower
(including zero) than the otherwise applicable Cash Settlement Value thereof.
See "Description of the Warrants--Extension Events, Extraordinary Events and
Exercise Limitation Events" herein, which includes a description of events,
circumstances or causes constituting Extraordinary Events or an Exercise
Limitation Event.
NON-COMPARABILITY OF WARRANTS TO DIRECT INVESTMENT IN PORTFOLIO SECURITIES
The Warrants are subject to certain risk factors that are distinct from
those associated with a direct investment in the common stocks that comprise the
Portfolio Securities. The Cash Settlement Amount will not include the payment of
any dividends on the Portfolio Securities.
CERTAIN FACTORS AFFECTING VALUE AND TRADING PRICE OF WARRANTS
The Spot Portfolio Value will determine whether the Warrants have a Cash
Settlement Value greater than zero on any particular day. The Warrants are
"at-the-money" (i.e., their Cash Settlement Value is zero) as of the date of
this Prospectus Supplement. A Spot Portfolio Value greater than the Original
Portfolio Value will result in a Cash Settlement Value greater than zero, and a
Spot Portfolio Value less than or equal to the Original Portfolio Value will
result in a Cash Settlement Value
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<PAGE>
continuing to be zero. Potential profit or loss upon exercise (including
automatic exercise) of a Warrant will be a function of the Cash Settlement Value
(or, if applicable, the Alternative Settlement Amount) of such Warrant, the
purchase price of such Warrant and any related transaction costs.
The Cash Settlement Value at any time prior to the Expiration Date is
expected typically to be less than the Warrants' market value at that time. The
difference between the market value and the Cash Settlement Value will reflect a
number of factors, including the "time value" of the Warrants, and the supply
and demand for the Warrants. The "time value" of the Warrants will depend upon
the length of the period remaining to expiration of the Warrants. The Expiration
Date of the Warrants will be accelerated should the Warrants be delisted or
should there be a permanent suspension of trading of the Warrants on the AMEX or
another self-regulatory organization (an "SRO"), as the case may be. Any such
acceleration could result in the total loss of any otherwise remaining "time
value" and could occur when the Warrants are "out-of-the-money" (i.e., when the
Spot Portfolio Value is less than or equal to the Original Portfolio Value),
thus resulting in total loss of the purchase price of the Warrants. In addition,
other factors such as changes in interest rates and dividend rates on the
Portfolio Securities will affect both the Cash Settlement Value and the
Warrant's market value. In general, if interest rates increase, the value of the
Warrants is expected to increase due to the increased carrying costs in an
investment in the underlying Portfolio Securities, which makes an investment in
the Warrants relatively more attractive, and, accordingly, if interest rates
decrease, the value of the Warrants is expected to decrease. Similarly, if
dividend rates on the Portfolio Securities increase, the value of the Warrants
is expected to decrease, and if such dividend rates decrease, the value of the
Warrants is expected to increase. In addition, if the volatility of the
Portfolio Securities increases, the trading value of the Portfolio Securities is
expected to increase. If the volatility of the Portfolio Securities decreases,
the trading value of the Portfolio Securities is expected to decrease.
Investment decisions relating to the Warrants require the investor to
predict the direction of movements in the Portfolio as well as the amount and
timing of those movements. Warrants which are indexed to a portfolio of stocks
may change substantially in value, or lose all of their value, with relatively
small movements in the portfolio. Moreover, an index warrant is a "wasting
asset" in that in the absence of countervailing factors, such as an offsetting
movement in the level of the index, the market value of an index warrant will
tend to decrease over time and the warrant will have no market value after the
time for exercise has expired. Accordingly, the Warrants involve a high degree
of risk and are not appropriate for every investor. As such, investors who are
considering purchasing the Warrants must be able to understand and bear the risk
of a speculative investment in the Warrants and be experienced with respect to
options and options transactions and understand the risks of stock index
transactions. Such 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.
INVESTOR SUITABILITY
The AMEX requires that the Warrants be sold only to investors with options
approved accounts. In addition, the AMEX requires that its members and member
organizations and registered employees thereof make certain suitability
determinations before recommending transactions in warrants. Before making any
investment in the Warrants, it is important that a prospective investor become
informed about and understand the nature of the Warrants in general, the
specific terms of the Warrants and the nature of the Portfolio. 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 the
Warrants, since the Cash Settlement Value of the Warrants will fluctuate over
the life of the Warrants and a failure to properly exercise a Warrant prior to
its expiration could result in the loss of the opportunity to realize a Cash
Settlement Value that is higher than the Cash Settlement Value that might
otherwise be realized on the Expiration Date. To properly
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<PAGE>
exercise the Warrants, an investor must know when the Warrants are exercisable
and how to exercise them. Investors considering the purchase of the Warrants
should be experienced with respect to options and options transactions, should
understand the risks of stock index transactions and 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 DUE TO COMPANY'S INABILITY TO TRADE IN THE PORTFOLIO SECURITIES
In the event that a suspension, material limitation or absence of trading on
the AMEX, NYSE or NASDAQ, or any other securities exchange, as the case may be,
of 20% or more of the Portfolio Securities is continuing on the Expiration Date
(an "Extension Event"), the term of the Warrants will be extended for a period
of thirty (30) days (the "Extended Expiration Date"), except that if the Cash
Settlement Value or the Intrinsic Value (as defined herein) used in calculating
the Alternative Settlement Amount, as the case may be, of the Warrants would
have been zero if the Warrants had been exercised such that the Valuation Date
for such exercise was the Measurement Date, then the term of the Warrants will
not be extended and the Warrants will be deemed to be worthless. See
"Description of the Warrants--Extension Events, Extraordinary Events and
Exercise Limitation Events" herein. The Warrants will also be deemed to be
worthless if the Expiration Date of the Warrants is extended but an Extension
Event is continuing on the Extended Expiration Date or any earlier Delisting
Date. As a result, investors may suffer a total loss of their investment in the
Warrants even though the Cash Settlement Value of the Warrants, if calculated
using the fair value of the Portfolio Securities at the time the Warrants are
deemed to be worthless, would be greater than zero.
RISKS AND COSTS ASSOCIATED WITH CONVERSION AND EXERCISE OF WARRANTS
The Warrants will be issued as certificates in registered form. Accordingly,
a beneficial owner of Warrants holding certificated Warrants indirectly (for
instance, through a broker that holds such Warrants in "street name") may
exercise such Warrants only through his registered holder. In the case of a
beneficial owner holding certificated Warrants through his broker in "street
name", such beneficial owner must direct his broker, who may in turn need to
direct another intermediary, to submit an Exercise Notice and the related
Warrants to the Warrant Agent. To ensure that an Exercise Notice and the related
Warrants will be delivered to the Warrant Agent before 3:00 P.M., New York City
time, on a given Business Day, a beneficial holder of Warrants must give the
appropriate direction to his broker or other intermediary before such broker'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 should consult with their brokers, or other intermediaries, as to
applicable cut-off times and other exercise mechanics. See "Description of the
Warrants--Exercise of Warrants" and "Description of the Warrants--Limit Option"
herein.
Commencing on the one hundred eightieth calendar day (or if such day is not
a Business Day, the next succeeding Business Day) after the closing of the
offering, each Warrantholder will have the option, for 45 calendar days
thereafter, to convert the form in which such Warrantholder holds his Warrants
from certificated to book-entry form (the "Conversion Option"). Such conversion
will occur through the facilities of The Depository Trust Company, New York, New
York ("DTC", which term, as used herein and in the Prospectus, includes any
successor depository selected by the Company). To exercise the Warrants, a
Warrantholder 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 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
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<PAGE>
such objective, the Warrantholder must cause such Warrants to be transferred 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 Business Day. To ensure that such
Warrants and Exercise Notice will be received by the Warrant Agent at or prior
to such time, such Warrantholder must give the appropriate directions to his
broker before such broker's and, if such broker is not a Participant, the
applicable Participant's cut-off time for accepting exercise instructions from
customers for that day. Different brokerage firms may have different cut-off
times for accepting and implementing exercise instructions from their customers.
Therefore, Warrantholders holding their Warrants in book-entry form should
consult with their brokers or other intermediaries, if applicable, as to
applicable cut-off times and other exercise mechanics. See "Description of the
Warrants--Exercise of Warrants", "Description of the Warrants--Settlement" and
"Description of the Warrants--Limit Option" herein. Forms of Exercise Notice for
Warrants held in book-entry form may be obtained from the Warrant Agent's Office
(as defined herein) 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 case of an automatic exercise. Accordingly, except in the case of an
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Potential investors also should be aware that Bear Stearns, in its capacity
as Determination Agent, is under no obligation to take the interests of the
Warrantholders into consideration in the event it determines the Cash Settlement
Value. Because Bear Stearns is an affiliate of the Company, conflicts of
interest may arise in connection with Bear Stearns performing its role as
Determination Agent. Bear Stearns, as a registered broker-dealer, is required to
maintain policies and procedures regarding the handling and use of confidential
proprietary information, and such policies and procedures will be in effect
throughout the term of the Warrants to restrict the use of information relating
to the calculation of the Cash Settlement Value prior to its dissemination. Bear
Stearns is obligated to carry out its duties and functions as Determination
Agent in good faith and using its reasonable judgment.
Bear Stearns and its affiliates may from time to time engage in transactions
involving the Portfolio Securities for their proprietary accounts and for other
accounts under their management, which may influence the value of such Portfolio
Securities and, therefore, the value of the Warrants. Bear Stearns and its
affiliates will also be the writers of the hedge of the Company's obligations
under the Warrants and will be obligated to pay to the Company upon exercise of
Warrants an amount equal to the value of the exercised Warrants. See "Use of
Proceeds" in the Prospectus and "Use of Proceeds and Hedging" herein.
Accordingly, under certain circumstances, conflicts of interest may arise
between Bear Stearns's responsibilities as Determination Agent with respect to
the Warrants and its obligations under its hedge.
OFFERING PRICE OF WARRANTS
The initial offering price of the Warrants may be in excess of the price
that a commercial user of options on the Portfolio might pay for a comparable
option in a private transaction.
POSSIBLE ILLIQUIDITY OF SECONDARY MARKET
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, during the life of the
Warrants, the Company or its affiliates may from time to time purchase and
exercise the Warrants, resulting in a decrease in the liquidity of the Warrants.
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<PAGE>
LIQUIDATION, DISSOLUTION OR BANKRUPTCY OF A PORTFOLIO SECURITY ISSUER
If the issuer of a Portfolio Security is being liquidated or dissolved or is
subject to a proceeding under any applicable bankruptcy, insolvency or similar
law, that Portfolio Security will continue to be included in the Portfolio so
long as a Market Price for that Portfolio Security is available. If a Market
Price is no longer available for a Portfolio Security due to the liquidation or
dissolution of the issuer of that Portfolio Security or the subjection of the
issuer to a proceeding under any applicable bankruptcy, insolvency or similar
law, then, for so long as a Market Price is unavailable for that Portfolio
Security, the value of that Portfolio Security will be deemed to be zero for the
purposes of calculating the Spot Portfolio Value, and no attempt will be made to
find a replacement Portfolio Security or reduce the Original Portfolio Value to
compensate for the deletion of such Portfolio Security.
DELISTING OF THE WARRANTS
Application has been made to list the Warrants on the AMEX. In the event
that the Warrants are delisted from, or permanently suspended from trading on,
the AMEX, and not accepted at the same time for trading pursuant to the rules of
another SRO that are filed with the Securities and Exchange Commission (the
"Commission") under the Securities and Exchange Act, as amended (the "Exchange
Act"), Warrants not previously exercised will be deemed automatically exercised
on the last Business Day prior to the effective date of such delisting or
suspension, and if such delisting or suspension occurs on or prior to the
Expiration Date, the Cash Settlement Value, if any, will be calculated and
settled as provided under "Description of the Warrants--Automatic Exercise"
herein, subject to a determination that the Warrants are worthless, as described
herein under "Description of the Warrants--Extension Events, Extraordinary
Events and Exercise Limitation Events" herein. If such delisting or suspension
occurs after the Expiration Date and prior to any Extended Expiration Date, the
Warrants will be deemed to be worthless. See "Description of the
Warrants--Delisting of Warrants" herein. In the event the Company becomes aware
that a delisting or suspension of trading of the Warrants on the AMEX is likely
to occur, the Company will use its best efforts to list the Warrants on another
SRO at or prior to the time such delisting or suspension of trading occurs.
OTHER CONSIDERATIONS
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 50,000 or more Warrants in any
single transaction, 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 once the holding period is no longer
applicable, the market price of the Warrants may be adversely affected. See
"Underwriting" herein. It is suggested that prospective investors who consider
purchasing the Warrants reach an investment decision only after carefully
considering with their advisers the suitability of the Warrants in the light of
their particular circumstances.
DESCRIPTION OF THE WARRANTS
GENERAL
The Warrants will be issued pursuant to a Warrant Agreement (the "Warrant
Agreement"), to be dated as of February , 1996, among the Company, Chemical
Bank, as Warrant Agent (the "Warrant Agent"), and Bear Stearns, as Determination
Agent (the "Determination Agent"). The following summaries of certain provisions
of the Warrants and the Warrant Agreement do not purport to be complete and are
subject to, and qualified in their entirety by reference to, all of the
provisions of the Warrant Agreement (including the form of Warrant Certificate
(as defined herein) attached as an
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<PAGE>
exhibit thereto). The Warrant Agreement will be available from the Warrant Agent
by contacting its office (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.
The aggregate number of Warrants to be issued will be 1,000,000, subject to
the over-allotment option granted by the Company to the Underwriters and to the
right of the Company to issue additional Warrants with substantially identical
terms at a later time.
A Warrant will not require or entitle a Warrantholder to purchase or take
delivery from the Company of any shares of any of the Portfolio Securities or
any other securities. Upon exercise of a Warrant, the Company will make only a
cash payment in the amount of the Cash Settlement Value or Alternative
Settlement Amount, if any and as applicable, of such Warrant. The Company is
under no obligation to, nor will it, sell or deliver to any Warrantholder any
shares of any of the Portfolio Securities or any other securities in connection
with the exercise of any Warrants. Warrantholders will not receive any interest
on any Cash Settlement Value or Alternative Settlement Amount, and the Warrants
will not entitle the Warrantholders to any of the rights of holders of any of
the Portfolio Securities or any other securities.
CASH SETTLEMENT VALUE
Each Warrant will entitle the Warrantholder to receive, upon exercise
(including automatic exercise), the Cash Settlement Value of such Warrant,
except that, under the circumstances described under "--Extension Events,
Extraordinary Events and Exercise Limitation Events" herein, such Warrantholder
may instead receive the Alternative Settlement Amount for such Warrant or, in
certain circumstances following an Extension Event, the Warrants will be deemed
to be worthless. The Cash Settlement Value of a Warrant will be an amount equal
to the product (rounded down to the nearest cent) of (A) the quotient obtained
by dividing (i) the amount, if any, by which the Spot Portfolio Value for the
applicable Valuation Date for such Warrant exceeds the Original Portfolio Value
by (ii) the Original Portfolio Value and (B) 35. The Original Portfolio Value
has been set initially at 100. The Cash Settlement Value is described by the
following formula:
Cash Settlement Value = the greater of (i) $0 and
(ii) Spot Portfolio Value - 100
-------------------------- x 35
100
The value of the portfolio for any particular day (the "Spot Portfolio
Value") will equal the sum of the products of the Market Price of each Portfolio
Security on that day and the then applicable Multiplier for that Portfolio
Security. The applicable Multiplier for each Portfolio Security is specified
under the caption "--Portfolio Securities" herein and indicates the number of
shares (or the fraction of one share) of that Portfolio Security included in the
calculation of the Spot Portfolio Value. Each Multiplier will remain constant
for the term of the Warrants unless adjusted for certain corporate events,
including a stock split, reverse stock split or stock dividend. See "--Portfolio
Securities" and "--Adjustments to the Multiplier and Portfolio" herein. If a
Market Disruption Event (as defined herein) occurs or is continuing with respect
to a Portfolio Security on a Valuation Date, then the calculation of the Market
Price of that Portfolio Security will be based on the Business Day immediately
preceding that Valuation Date that does not have a Market Disruption Event with
respect to that Portfolio Security.
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<PAGE>
"Market Price", which will be determined by the Determination Agent based on
information reasonably available to it, means for a Valuation Date the
following:
(i) If the Portfolio Security is listed on a national securities
exchange or is a NASDAQ security, Market Price means the last reported sale
price of that Portfolio Security on the Valuation Date (or the preceding
Business Day if that Portfolio Security is not traded on the Valuation Date)
on the principal national securities exchange on which such Portfolio
Security is listed or admitted to trading or NASDAQ, as the case may be.
(ii) If the Portfolio Security is not listed on a national securities
exchange or is not a NASDAQ security, Market Price means the last reported
bid price of that Portfolio Security in the over-the-counter market on the
Valuation Date.
"Market Disruption Event" with respect to a Portfolio Security means any of
the following events, in each case as determined by the Determination Agent:
(i) the suspension of or material limitation in trading in that
Portfolio Security for more than two hours of trading or during the one-half
hour period immediately preceding the time that Portfolio Security is to be
priced (for purposes of this definition, limitations pursuant to NYSE Rule
80A (or any applicable rule or regulation enacted or promulgated by the
NYSE, any other SRO or the Commission that is deemed of similar scope by the
Determination Agent) on trading during significant market fluctuations shall
be considered "material").
(ii) the suspension of or material limitation (whether by reason of
movements in price that exceed levels permitted by the relevant exchange or
otherwise) in trading in option contracts related to a Portfolio Security
traded on any exchange for more than two hours of trading or during the
one-half hour period immediately preceding the time that Portfolio Security
is to be priced.
(iii) a banking moratorium has been declared by federal or any state
authorities.
For the purposes of this definition, a limitation on the hours in a trading
day and/or number of days of trading will not constitute a Market Disruption
Event if it results from an announced change in the regular business hours of
the relevant exchange.
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<PAGE>
PORTFOLIO SECURITIES
The 43 common stocks listed below, comprising the entire Portfolio, will be
used to calculate the Spot Portfolio Value. Warrantholders will not have any
right to receive any of these Portfolio Securities. The following table sets
forth the Portfolio Securities, the primary market on which the Portfolio
Securities are traded (i.e., AMEX, NYSE or NASDAQ), the Market Price of each
Portfolio Security and the initial Multipliers. Each Portfolio Security will
represent initially 2.3256% (or 1/43) of the Original Portfolio Value of 100.
<TABLE>
<CAPTION>
APPROXIMATE
AGGREGATE MARKET
PRIMARY VALUE OF
ISSUER OF THE TRADING PORTFOLIO INITIAL
PORTFOLIO SECURITY MARKET SECURITY(1) MULTIPLIER
- -------------------------------------------------------- -------- ---------------- -----------
<S> <C> <C> <C>
(MM)
Aluminum Company of America............................. NYSE
Biomet, Inc............................................. NASDAQ
The Boeing Company...................................... NYSE
Cardinal Health, Inc.................................... NYSE
Citicorp................................................ NYSE
Compaq Computer Corporation............................. NYSE
CUC International, Inc.................................. NYSE
Donnkenny, Inc.......................................... NASDAQ
Electronic Arts Inc..................................... NASDAQ
Enserch Exploration, Inc................................ NYSE
Federal Home Loan Mortgage Corporation.................. NYSE
First USA, Inc.......................................... NYSE
Green Tree Financial Corporation........................ NYSE
Hershey Foods Corporation............................... NYSE
H. F. Ahmanson & Company................................ NYSE
Intel Corporation....................................... NASDAQ
Kerr-McGee Corporation.................................. NYSE
Kimberly-Clark Corporation.............................. NYSE
Ligand Pharmaceuticals.................................. NASDAQ
Luxottica Group S.p.A................................... NYSE
Manville Corporation.................................... NYSE
Mattel, Inc............................................. NYSE
Maxxim Medical, Inc..................................... NYSE
MCI Communications Corporation.......................... NASDAQ
MFS Communications Company.............................. NASDAQ
Mirage Resorts, Inc..................................... NYSE
Mobile Telecommunication Technologies Corp.............. NASDAQ
Monsanto Company........................................ NYSE
News Corporation Ltd.................................... NYSE
Nine West Group, Inc.................................... NYSE
Nordstrom, Inc.......................................... NASDAQ
OfficeMax, Inc.......................................... NYSE
Oracle Corporation...................................... NASDAQ
Parker Hannifin Corporation............................. NYSE
Patriot American Hospitality, Inc....................... NYSE
Pharmacia & Upjohn, Inc................................. NYSE
Seagate Technology, Inc................................. NYSE
Seitel, Inc............................................. NYSE
USF&G Corporation....................................... NYSE
Viacom Inc.............................................. AMEX
Wells Fargo & Company................................... NYSE
Wendy's International, Inc.............................. NYSE
WMX Technologies, Inc................................... NYSE
</TABLE>
- ------------
(1) The approximate aggregate market value of each Portfolio Security was
calculated by multiplying the most recent publicly available number of
outstanding shares of that Portfolio Security by the Market Price for those
shares on February , 1996.
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The initial Multiplier relating to each Portfolio Security indicates the
number of shares (or the fraction of one share) of that Portfolio Security, in
light of the market price of that Portfolio Security on , 1996,
required to be included in the calculation of the Original Portfolio Value so
that each Portfolio Security represents an equal percentage (i.e., 2.3256%) of
the Original Portfolio Value. The market price of each Portfolio Security used
to calculate the initial Multiplier relating to that Portfolio Security was the
last reported sale price of that Portfolio Security on the date the Warrants
were priced by the Company for initial sale to the public, which is the date of
this Prospectus Supplement. The respective Multipliers will remain constant for
the entire term of the Warrants, unless adjusted for certain corporate events as
described herein.
The AMEX has informed the Company that, as long as the Warrants are listed
on the AMEX, it intends to calculate and disseminate the value of the Portfolio
based on the most recently reported prices at approximately 15 second intervals
during AMEX business hours and the Spot Portfolio Value at the end of that day
to vendors via the facilities of the AMEX Tape under the symbol "XVP". In the
event a Portfolio Security is converted into a Cash Component (as defined
herein), the interest that has accrued on any given day will only be reflected
in the Spot Portfolio Value quoted by the AMEX at the end of such day and not in
the values disseminated at interim periods during the day.
ADJUSTMENTS TO THE MULTIPLIER AND PORTFOLIO
The Multiplier with respect to any Portfolio Security and the Portfolio will
be adjusted by the Determination Agent as follows:
1. If a Portfolio Security is subject to a stock split or reverse stock
split then, once the split has become effective, the Multiplier relating to
that Portfolio Security will be adjusted to equal the product of (i) the
number of shares of the Portfolio Security outstanding after the split has
become effective with respect to each share of such Portfolio Security
outstanding immediately prior to the effectiveness of such split and (ii)
the prior Multiplier.
2. If a Portfolio Security is subject to a stock dividend or stock
distribution (other than a stock dividend elected by a holder of that
Portfolio Security in lieu of an ordinary cash dividend) that is given
equally to all holders of that Portfolio Security, then, once that Portfolio
Security is trading ex-dividend, the Multiplier will be adjusted so that the
new Multiplier shall equal the former Multiplier plus the product of (i) the
number of shares of that Portfolio Security issued with respect to one such
share of that Portfolio Security and (ii) the prior Multiplier.
3. If the issuer of a Portfolio Security is being liquidated or
dissolved or is subject to a proceeding under any applicable bankruptcy,
insolvency or similar law, that Portfolio Security will continue to be
included in the Portfolio so long as a Market Price for that Portfolio
Security is available. Subject to paragraph 7 below, if a Market Price is no
longer available for a Portfolio Security for whatever reason, including the
liquidation or dissolution of the issuer of that Portfolio Security or the
subjection of the issuer to a proceeding under any applicable bankruptcy,
insolvency or similar law, then, for so long as a Market Price is
unavailable for that Portfolio Security, the value of that Portfolio
Security will be deemed to be zero for the purposes of calculating the Spot
Portfolio Value, and no attempt will be made to find a replacement Portfolio
Security or increase the value of the Portfolio to compensate for the
deletion of such Portfolio Security.
4. If the issuer of a Portfolio Security has been subject to a merger or
consolidation and is not the surviving entity and holders of that Portfolio
Security are entitled to receive cash or securities in exchange for that
Portfolio Security, then a value for that Portfolio Security will be
determined (i) in the case of cash, at the time of receipt by those holders
and will equal the amount of such cash, and (ii) in the case of securities,
on the first Business Day on which those securities are traded regular way,
and will equal the Market Price of those securities (in each of (i) and
(ii), the "Cash
S-18
<PAGE>
Component"); provided, that if those securities do not have a Market Price,
the Cash Component shall be the fair market value of those securities, as
determined by the Determination Agent. The Cash Component, as adjusted for
the accrual of interest described below, will be constant for the remaining
term of the Warrants. No adjustment will be made to the Multiplier relating
to the Portfolio Security.
The Cash Component will accrue interest at a rate equal to the London
Inter-Bank Offered Rate ("LIBOR"), with a term equal to the period of time
from the Interest Commencement Date (as defined herein) to the LIBOR
Maturity Date (the "Specified Maturity"), determined and fixed on the first
London Business Day (the "LIBOR Determination Date") that is immediately
following the date of determination of such Cash Component. LIBOR will
accrue on such Cash Component commencing (i) in the case of cash, on the
second London Business Day following such LIBOR Determination Date and (ii)
in the case of securities, on the third London Business Day following such
LIBOR Determination Date (in each of (i) and (ii), the "Interest
Commencement Date") up to and including the Specified Maturity.
LIBOR will be determined by the Determination Agent in accordance with
the following provisions:
(i) On the relevant LIBOR Determination Date, LIBOR will be
determined through the application of linear interpolation by reference
to the offered rates for deposits of not less than $l,000,000 having a
maturity immediately before and immediately after the Specified Maturity,
commencing on the Interest Commencement Date, which appear either (a) if
the Specified Maturity is one year or less from the relevant LIBOR
Determination Date, on the display designated as Page 3750 on the Dow
Jones Telerate Service (or such other page as may replace Page 3750 on
that service for the purpose of displaying London Interbank offered rates
of major banks) ("Telerate Page 3750"), or (b) if the Specified Maturity
is more than one year from the relevant LIBOR Determination Date, on each
of Telerate Page 3750 and on the display designated as page "SWAP" on the
Reuter Monitor Money Rates Service (or such other page as may replace the
SWAP page on that service for the purpose of displaying London Interbank
offered rates of major banks) ("Reuters--SWAP"), in each case as of 11:00
A.M., London time; provided that if there is an offered rate for the
Specified Maturity, then LIBOR will be such offered rate. If such offered
rates do not appear, LIBOR with respect to such LIBOR Determination Date
will be determined as described in (ii) below.
(ii) With respect to a LIBOR Determination Date on which no such
offered rates appear on Telerate Page 3750 or Reuters SWAP as described
in (i) above, LIBOR will be determined on the basis of the rates at
approximately 11:00 A.M., London time, on such LIBOR Determination Date,
at which deposits in U.S. dollars having the Specified Maturity are
offered to prime banks in the London Interbank market by four major banks
in the London Interbank market selected by the Determination Agent
commencing on the Interest Commencement Date and in a principal amount
equal to an amount not less than $1,000,000 that in the Determination
Agent's judgment is representative for a single transaction in such
market at such time (a "Representative Amount"). The Determination Agent
will request the principal London office of each of such banks to provide
a quotation of its rate. If at least two such quotations are provided,
LIBOR with respect to such LIBOR Determination Date will be calculated by
reference to the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR with respect to such LIBOR Determination
Date will be calculated by reference to the arithmetic mean of the rates
quoted at approximately 11:00 A.M., New York City time, on such LIBOR
Determination Date by three major banks in New York City, selected by the
Determination Agent, for loans in U.S. dollars to leading European banks
having the Specified Maturity commencing on the Interest Commencement
Date and in a Representative Amount; provided, however, that if fewer
than three banks selected as
S-19
<PAGE>
aforesaid by the Determination Agent are quoting as mentioned in this
sentence, LIBOR with respect to such Cash Component will be the LIBOR as
last in effect.
"London Business Day" means any day on which dealings in deposits in
U.S. dollars are transacted in the London interbank market.
The value as of any given day of any Portfolio Security converted into a
Cash Component will equal the sum of the Cash Component and all interest accrued
thereon through that day. The interest that has accrued on any given day will be
reflected only in the Spot Portfolio Value quoted by the AMEX at the end of that
day and not in the values disseminated at interim periods during the day.
Interest will be compounded
5. If all the Portfolio Securities of any class or series of an issuer
are converted into or exchanged for the same or a different number of shares
of any class or classes of equity security of that issuer other than such
Portfolio Security, whether by capital reorganization, recapitalization,
reclassification or otherwise, then, once that conversion or exchange has
become effective, the former Portfolio Security will be removed from the
Portfolio and the new equity securities will be added to the Portfolio as
new Portfolio Securities. The Multiplier relating to each such new Portfolio
Security will equal the product of (i) the last value of the Multiplier with
respect to the former Portfolio Security and (ii) the number of shares of
the new Portfolio Security issued with respect to one share of the former
Portfolio Security.
6. If the issuer of a Portfolio Security distributes to all of its
shareholders equity securities of any other issuer, then such new equity
securities will be added to the Portfolio as a new Portfolio Security. The
Multiplier for the new Portfolio Security will equal the product of (i) the
last value of the Multiplier relating to the Portfolio Security in respect
of which the new Portfolio Security is being distributed and (ii) the number
of shares of the new Portfolio Security distributed with respect to one
share of the former Portfolio Security.
7. If a Portfolio Security is subject to an extraordinary dividend or an
extraordinary distribution (including upon liquidation or dissolution) of
cash or other property of any kind (other than any such dividend or
distribution otherwise addressed in the preceding paragraphs) that is
received equally by all holders of that Portfolio Security, then the
Determination Agent shall determine the fair market value, if any, of the
cash or other property received in respect of each share of that Portfolio
Security and the Portfolio shall thereafter be deemed to include an amount
equal to the product of the Multiplier relating to that Portfolio Security
on that date and the fair market value as so determined.
No adjustments of any Multiplier of a Portfolio Security will be required
unless that adjustment would require a change of at least 1% in the Multiplier
in effect. The Multiplier resulting from any of the adjustments specified above
will be rounded to the nearest one thousandth with five ten-thousandths being
rounded upward.
DETERMINATION AGENT
All determinations made by the Determination Agent shall be at the sole
discretion of the Determination Agent and, in the absence of manifest error,
shall be conclusive for all purposes and binding on the Company and the holders
of the Warrants, and the Determination Agent shall have no liability therefor.
HYPOTHETICAL WARRANT VALUES ON EXERCISE
Set forth below is an illustrative example demonstrating the Cash Settlement
Values of a hypothetical Warrant at the Original Portfolio Value and at various
hypothetical levels of the Spot
S-20
<PAGE>
Portfolio Value. The illustrative hypothetical Cash Settlement Values in the
table do not reflect any reduction of the Original Portfolio Value or any "time
value" for a Warrant, which may be reflected in the trading value, and are not
necessarily indicative of potential profit or loss, which are also affected by
purchase price and transaction costs. The hypothetical Cash Settlement Values in
the table have been rounded to two decimal places.
<TABLE>
<CAPTION>
HYPOTHETICAL CASH
HYPOTHETICAL SETTLEMENT VALUE OF
SPOT PORTFOLIO VALUE WARRANT ($)
- -------------------- -------------------
<S> <C>
100 0
103 1.05
106 2.10
109 3.15
112 4.20
115 5.25
118 6.30
121 7.35
124 8.40
127 9.45
130 10.50
133 11.55
136 12.60
139 13.65
142 14.70
145 15.75
</TABLE>
EXERCISE OF WARRANTS
Exercise of Warrants. The Warrants will be exercisable on any Business Day
from the date of issuance, subject to postponement as described under
"--Extension Events, Extraordinary Events and Exercise Limitation Events" herein
or as a result of the exercise of a number of Warrants exceeding the maximum
permissible amount. The Warrants will expire on August , 1997 (the
"Expiration Date"), subject to an automatic extension of the term of the
Warrants as described under "--Extension Events, Extraordinary Events and
Exercise Limitation Events" herein. Unless the term of the Warrants is extended,
all Warrants not exercised (including by reason of any such postponed exercise)
at or before 3:00 P.M., New York City time, on the Business Day immediately
preceding the earlier of (i) the Expiration Date and (ii) the Delisting Date,
will be exercised automatically as described under "-- Automatic Exercise"
herein.
A Warrantholder may exercise definitive Warrants on any Business Day during
the period from the date of issuance until 3:00 P.M., New York City time, on the
Business Day immediately preceding the earlier of (i) the Expiration Date and
(ii) the Delisting Date by delivering or causing to be delivered to the Warrant
Agent at the location designated for such purpose (the "Warrant Agent's
Window"), 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 current address of the Warrant Agent's
Window is: Chemical Bank/Geoserve, Corporate Trust Securities Window, 55 Water
Street, Room 234, North Building, New York, New York 10041, Attention: Tender
Department.
In the case of book-entry Warrants held through the facilities of DTC, a
Warrantholder may exercise such Warrants on any Business Day during the period
from the beginning of the Conversion Option Period (which will be one hundred
eighty calendar days from the closing of the offering) (as defined herein) until
3:00 P.M., New York City time, on the earlier of the Business Day immediately
S-21
<PAGE>
preceding (i) the Expiration Date and (ii) any Delisting Date, by causing (x)
such Warrants to be transferred free to the Warrant Agent on the records of DTC
and (y) a duly completed and executed Exercise Notice to be received by the
Warrant Agent from a Participant acting on behalf of the Warrantholder. 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
facsimile transmission number for this purpose is (212) 946-7682.
In the case of book-entry Warrants held through the facilities of CEDEL or
Euroclear (both terms as defined herein), a Warrantholder may exercise such
Warrants on any 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 until 3:00 P.M., New York City time, on the
earlier of the Business Day immediately preceding (i) 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 subject to the Limit
Option and except following an Extension Event, the "Exercise Date" for a
Warrant will be (i) the Business Day on which the Warrant Agent receives at the
Warrant Agent's Window the Warrant (or transfer of such Warrant through DTC in
the case of book-entry Warrants) and Exercise Notice (by facsimile transmission
in the case of Exercise Notices for book-entry Warrants) 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 (or
transfer of such Warrant through DTC in the case of book-entry Warrants) and
Exercise Notice after 3:00 P.M., New York City time, on a Business Day, then the
next succeeding 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
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 Business Day, then the Business Day next
succeeding such 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 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 Business Day, the next succeeding 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 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) 946-7682), 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.
S-22
<PAGE>
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 Business Day, a Warrantholder
may need to give exercise instructions to his broker or other intermediary
substantially earlier than 3:00 P.M., New York City time, on 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 and other intermediaries, if applicable, as to
applicable cut-off times and other exercise mechanics.
Except in the case of Warrants subject to automatic exercise and for
Warrants that upon exercise will entitle the holder thereof to receive an
Alternative Settlement Amount in lieu of the Cash Settlement Value and except
following an Extension Event, if on any Valuation Date the Cash Settlement Value
for any Warrants would be zero, then the attempted exercise of any such Warrants
will be void and of no effect and, in the case of definitive 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
book-entry Warrants held through the facilities of DTC, such Warrants will be
transferred back to the Participant that submitted them free 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 any Delisting Date, as the case
may be.
Minimum Exercise Amount. No fewer than 500 Warrants may be exercised by a
Warrantholder at any one time (other than on automatic exercise). Accordingly,
Warrantholders with fewer than 500 Warrants will need either to sell their
Warrants or to purchase additional Warrants, thereby incurring transaction
costs, in order to realize upon their investment. Warrantholders must satisfy
the minimum exercise amount requirement described herein 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 may not be combined
with book-entry Warrants held through another Participant in order to satisfy
the minimum exercise requirement.
Maximum Exercise Amount. All exercises of Warrants (other than on automatic
exercise or following an Extension Event) are subject, at the Company's option,
to the limitation that not more than 750,000 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 beneficial owner, either individually or in concert with any
other beneficial owner, on any Exercise Date. If any Business Day would
otherwise, under the terms of the Warrant Agreement, be the Exercise Date in
respect of more than 750,000 Warrants, then at the Company's election, 750,000
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
less than 500 Warrants, then the Warrant Agent shall first select an additional
amount of such holders' Warrants so that no holder shall be deemed to have
exercised less than 500 Warrants), and the remainder of such Warrants (the
"Remaining Warrants") shall be deemed exercised on the following Business Day
(notwithstanding the minimum exercise requirement and subject to successive
applications of this provision); provided that any Remaining Warrants 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 beneficial owner of Warrants attempts to
exercise more than 250,000 Warrants on any Business Day individually or in
concert as provided above, then at the Company's election, 250,000 of such
Warrants shall be deemed exercised on such Business Day and the remainder shall
be deemed exercised on the following Business Day (notwithstanding the minimum
exercise requirement and subject to successive applications of this provision).
As a result of any postponed exercise as described herein, 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, the Cash
S-23
<PAGE>
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.
VALUATION OF WARRANTS
The "Valuation Date" for a Warrant will be the first Business Day following
the applicable Exercise Date, subject to postponement upon the occurrence of an
Extraordinary Event or Exercise Limitation Event as described under "--Extension
Events, Extraordinary Events and Exercise Limitation Events" herein or as a
result of the exercise of a number of Warrants exceeding the limits on exercise
described under "--Exercise of Warrants--Maximum Exercise Amount" herein.
The following is an illustration of the timing of an Exercise Date, the
ensuing Valuation Date and the Limit Option Reference Index (as described herein
under "--Limit Option"), assuming (i) that all relevant dates are Business Days,
(ii) the absence of any intervening Extraordinary Event or Exercise Limitation
Event and (iii) the number of exercised Warrants does not exceed the maximum
permissible amount. If the Warrant Agent receives a Warrantholder's Warrants and
the related Exercise Notice in proper form at or prior to 3:00 P.M., New York
City time, on Wednesday, March 20, 1996, the Exercise Date for such Warrants
will be March 20 and the Valuation Date for such Warrants will be Thursday,
March 21. The Cash Settlement Value of such Warrants will be determined by using
the closing Spot Portfolio Value on March 21. If the Warrantholder elected the
Limit Option in connection with the exercise of such Warrants, the Limit Option
Reference Index would be the Spot Portfolio Value on March 20.
If the Warrant Agent were to receive such Warrantholder's Warrants and the
related Exercise Notice after 3:00 P.M., New York City time, on March 20, then
the Exercise Date for such Warrants would instead be March 21, the Valuation
Date would be Friday, March 22 and the applicable Limit Option Reference Index
would be the Spot Portfolio Value on March 21.
SETTLEMENT
Following receipt of Warrants and the related Exercise Notice in proper
form, the Warrant Agent will: (i) not later than 10:00 A.M., New York City time,
on the Business Day next succeeding the applicable Valuation Date, determine the
Cash Settlement Value of such Warrants based on the Spot Portfolio Value on such
Valuation Date provided by the Determination Agent and (ii) not later than 12:00
Noon, New York City time, on the Business Day next succeeding the applicable
Valuation Date, advise the Company of the aggregate Cash Settlement Value of the
exercised Warrants. The Determination Agent will not be responsible for good
faith errors or omissions in determining or disseminating information regarding
the Spot Portfolio Value. Except for Warrants subject to automatic exercise or
that upon exercise entitle the Warrantholder to an Alternative Settlement
Amount, 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 second Business Day following
the Valuation Date for such Warrants, (the "Funding Date"), New York Clearing
House or next day funds in an amount sufficient to pay such aggregate Cash
Settlement Value. If the Company has made such funds available by such time, the
Warrant Agent will thereafter be responsible for making payment available (i) in
respect of certificated Warrants to each registered holder of an exercised
certificated Warrant prior to the close of business on the Business Day
following the Funding Date (the "Settlement 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 Warrantholder
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 or (ii) in respect of book-entry Warrants held
through the facilities of DTC, prior to the close of business on the Settlement
Date to each appropriate Participant in the form of a cashier's check or an
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 such Participant in the United
States (at the Participant's election as specified in
S-24
<PAGE>
the Exercise Notice) in an amount equal to the aggregate Cash Settlement Value
of the exercised Warrants held through such Participant. Each Participant will
be responsible for disbursing payments to the Warrantholders it represents, 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 it represents.
LIMIT OPTION
Except for Warrants subject to automatic exercise and as described below
with respect to payments of any Alternative Settlement Amount and except
following an Extension Event, each Warrantholder, in connection with any
exercise of Warrants (including a postponed exercise following an Extraordinary
Event or an Exercise Limitation Event), will have the option (the "Limit
Option") to specify that such Warrants are not to be exercised if the Spot
Portfolio Value that would otherwise be used to determine the Cash Settlement
Value of such Warrants is three or more points lower than the Spot Portfolio
Value for the day specified below (such closing level, the "Limit Option
Reference Index"). A Warrantholder's election of the Limit Option must be
specified in the applicable Exercise Notice delivered to the Warrant Agent. The
Limit Option Reference Index will be the closing level of the Spot Portfolio
Value on the relevant Exercise Date. If an 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 Index will be determined as of the next day
that is also a Business Day.
To ensure that the Limit Option will have its intended effect of limiting
the risk of any downward movement in the level of the Spot Portfolio Value
between the date on which a Warrantholder submits an Exercise Notice and the
related Valuation Date, such Exercise Notice and the related Warrants generally
must be received by the Warrant Agent not later than 3:00 P.M., New York City
time, on the Business Day on which it is submitted (except as permitted in the
case of Warrants held through the facilities of CEDEL or Euroclear). See the
illustration under "--Exercise 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 Index from the Determination 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, such Warrants will be
transferred to the account at DTC from which they were transferred to the
Warrant Agent. To exercise such Warrants, a Warrantholder will be required to
cause an Exercise Notice and the related Warrants to be submitted again to the
Warrant Agent.
In the case of a postponed Valuation Date, the Limit Option will continue to
apply once elected by a Warrantholder in connection with an exercise of Warrants
on the basis of the Limit Option Reference Index as initially determined for
such Warrants, except when such Valuation Date is postponed until the Expiration
Date, any Delisting Date or the Cancellation Date (as defined herein) or
following an Extension Event, all as described under "--Extension Events,
Extraordinary Events and Exercise Limitation Events" herein. Such Warrants will
either (i) be exercised on a delayed basis if the applicable Spot Portfolio
Value on the postponed Valuation Date is not three or more points lower than the
Limit Option Reference Index or (ii) be excluded from being exercised if, on any
applicable postponed Valuation Date, the applicable Spot Portfolio Value is
three or more points lower than the Limit Option Reference Index.
In connection with any exercise of 1,000 or more 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 definitive Warrants and
book-entry Warrants in order to meet the 500 Warrant minimum requirements. See
"Exercise of Warrants-- Minimum Exercise Amount" herein.
S-25
<PAGE>
AUTOMATIC EXERCISE
All Warrants for which the Warrant Agent has not received a valid Exercise
Notice at or prior to 3:00 P.M., New York City time, on the Business Day
immediately preceding (i) the Expiration Date or (ii) any Delisting Date, as the
case may be, or for which the Warrant Agent has received a valid Exercise Notice
but with respect to which timely delivery of the relevant Warrants has not been
made, together with any Warrants the Valuation Date for which has at such time
been postponed as described under "--Extension Events, Extraordinary Events and
Exercise Limitation Events" herein, will be automatically exercised on such
Expiration Date or Delisting Date, as the case may be, subject to an automatic
extension of the term of the Warrants or to a determination that the Warrants
are worthless, as described herein. The "Exercise Date" for such Warrants will
be the Expiration Date or any Delisting Date, as the case may be, or, if such
date is not a Business Day, the next succeeding Business Day. The Warrant Agent
will obtain the Spot Portfolio Value (determined as of the first Business Day
following such date, which will be the Valuation Date for such Warrants, except
in the case of an exercise following the occurrence of an Extraordinary Event or
an Exercise Limitation Event as described under "--Extension Events,
Extraordinary Events and Exercise Limitation Events" herein) and will determine
the Cash Settlement Value, if any, of such Warrants.
In the case of certificated Warrants subject to automatic exercise, except
in the case of an exercise following the occurrence of an Extraordinary Event or
an Exercise Limitation Event as described under "--Extension Events,
Extraordinary Events and Exercise Limitation Events" herein, the Company will be
required to make New York Clearing House or next day funds available to the
Warrant Agent, no later than 3:00 P.M., New York City time, on the second
Business Day following the Valuation Date for such Warrants (the "Automatic
Funding Date"). If the Company has made such funds available by such time, the
Warrant Agent will thereafter be responsible for making a payment available to
each registered holder of a certificated 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 such Warrantholder in
the United States (at such holder's election) prior to the close of business on
the Automatic Funding Date (or, in the case of payments made by wire transfer,
prior to the close of business on the Business Day next succeeding the Automatic
Funding Date) against receipt by the Warrant Agent at the Warrant Agent's Window
of such holder's Warrant Certificates. Such payment will be in an amount equal
to the aggregate Cash Settlement Value of the Warrants evidenced by such Warrant
Certificates.
In the case of book-entry Warrants held through DTC subject to automatic
exercise, except in the case of an exercise following the occurrence of an
Extraordinary Event or an Exercise Limitation Event, 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 Automatic Funding Date, New York Clearing House or next
day funds in an amount sufficient to pay such aggregate Cash Settlement Value.
If the Company has made such funds available by such time, the Warrant Agent
will thereafter be responsible for making funds available to DTC prior to the
close of business on the Automatic Funding Date in an amount sufficient to pay
the aggregate Cash Settlement Value of the Warrants. DTC will be responsible for
disbursing such funds to each appropriate Participant 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 it represents.
EXTENSION EVENTS, EXTRAORDINARY EVENTS AND EXERCISE LIMITATION EVENTS
Extension Events. If an event described in clause (i) of the definition of
Exercise Limitation Event is continuing on the Expiration Date (an "Extension
Event") the term of any outstanding Warrants will be extended for a period of 30
days (the thirtieth day following the Expiration Date being the "Extended
Expiration Date"), except that if the Cash Settlement Value or the Intrinsic
Value used in calculating the Alternative Settlement Amount, as the case may be,
of the Warrants would have been
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zero if the Warrants had been exercised such that the Valuation Date for such
exercise was the Measurement Date, then the term of the Warrants will not be
extended and the Warrants will be deemed to be worthless. Any such automatic
extension shall be deemed to have been revoked and the Warrants shall expire on
the earlier of (i) the next Business Day on which there is no Extension Event
(such Business Day, the "Early Extended Expiration Date") and (ii) any Delisting
Date occurring on or after the Expiration Date. The Company will give the
Warrant Agent prompt notice by telephone or facsimile transmission and will give
prompt notice to the Warrantholders by publication in a newspaper with a
national circulation (currently expected to be The Wall Street Journal) of the
occurrence of an Extension Event, any Extended Expiration Date, any Early
Extended Expiration Date and any Delisting Date occurring on or after the
Expiration Date.
Any Warrants that expire on an Early Extended Expiration Date (i.e., due to
there no longer being any Extension Event after the Expiration Date) will be
deemed to be exercised on the Early Extended Expiration Date (even if such
Warrants would not otherwise be exercisable on such date because of the Limit
Option) on the basis that the Valuation Date for such exercise shall be such
Early Extended Expiration Date, and the holder of each such Warrant will receive
the Alternative Settlement Amount, calculated using the value of the Portfolio
Securities on such Early Extended Expiration Date, whether or not an
Extraordinary Event or an Exercise Limitation Event is then continuing.
If the term of the Warrants has been extended but an Extension Event is
continuing (A) when the Warrants expire on the Extended Expiration Date or (B)
on any Delisting Date occurring on or after the Expiration Date, the Warrants
will be deemed to be worthless and the Company shall not be required to make any
payments in respect thereof, whether or not an Extraordinary Event or an
Exercise Limitation Event is then continuing. The Company will give prompt
notice of any such determination to the Warrant Agent by telephone or facsimile
transmission and to the Warrantholders by publication in a newspaper with a
national circulation. In such a case, the holders of such Warrants will lose
their entire investment, even though the Cash Settlement Value of the Warrants,
if calculated using the fair value of the Portfolio Securities at the time the
Warrants are deemed to be worthless, would be greater than zero.
"Measurement Date" means the Business Day occurring most recently prior to
the Expiration Date on which none of the events described in clause (i) of the
definition of Exercise Limitation Event had occurred or was continuing.
Extraordinary Events. The Warrant Agreement will provide that if the Company
determines that an Extraordinary Event has occurred and is continuing on the
Business Day on which a Spot Portfolio Value is to be determined (i.e., a
Valuation Date) (the "Applicable Business Day"), then the Cash Settlement Value
with respect to an exercise of Warrants shall be calculated on the basis that
the Valuation Date shall be the next Business Day following an Applicable
Business Day on which there is no Extraordinary Event or Exercise Limitation
Event; provided that, subject to an automatic extension of the term of the
Warrants or to a determination that the Warrants are worthless, as described
under "--Extension Events" herein, if the Valuation Date has not occurred on or
prior to the Expiration Date or any Delisting Date, the Warrantholders will
receive the Alternative Settlement Amount in lieu of the Cash Settlement Value
which shall be calculated as if the Warrants had been cancelled on the
Expiration Date or any Delisting Date, as the case may be. The Company shall
promptly give notice to Warrantholders, by publication in a newspaper with a
national circulation, if an Extraordinary Event shall have occurred.
"Extraordinary Event" means any of the following events:
(i) a suspension, material limitation or absence of trading of all of
the Portfolio Securities;
(ii) the enactment, publication, decree or other promulgation of any
statute, regulation, rule or order of any court of any jurisdiction, any
administrative agency or any other governmental
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authority that would make it unlawful for the Company to perform any of its
obligations under the Warrant Agreement or the Warrants or that has had or
is reasonably expected to have a material adverse effect on the ability of
(A) the Company to perform its obligations under the Warrants or to hedge or
modify the hedge of its position with respect to the Portfolio or (B) any
affiliate of the Company to hedge or modify the hedge of its position with
respect to any hedging transaction entered into with the Company in
connection with the Company's obligations under the Warrants; or
(iii) any outbreak or escalation of hostilities or other national or
international calamity or crisis (including, without limitation, natural
calamities that in the opinion of the Company may materially and adversely
affect the economy of the United States or the trading of securities
generally on the AMEX, NYSE or NASDAQ, or any other securities exchange)
that has had or is reasonably expected to have a material adverse effect on
the ability of (A) the Company to perform its obligations under the Warrants
or to modify the hedge of its position with respect to the Portfolio or (B)
any affiliate of the Company to hedge or modify the hedge of its position
with respect to any hedging transaction entered into with the Company in
connection with the Company's obligations under the Warrants.
For the purpose of determining whether an Extraordinary Event has occurred:
(1) a limitation on the hours or number of days of trading will not constitute
an Extraordinary Event if it results from an announced change in the regular
business hours of the AMEX, NYSE or NASDAQ, or any other securities exchange on
which a Portfolio Security is traded, as the case may be, and (2) an "absence of
trading" on the AMEX, NYSE or NASDAQ, or any other securities exchange on which
a portfolio Security is traded, will not include any time when the AMEX, NYSE or
NASDAQ, or such other securities exchange, as the case may be, is closed for
trading under ordinary circumstances.
If the Company determines that an Extraordinary Event has occurred and is
continuing, and if the Extraordinary Event is expected by the Company to
continue, the Company, prior to the Expiration Date, may immediately cancel the
Warrants by notifying the Warrant Agent of such cancellation (the date such
notice is given being the "Cancellation Date"), and each Warrantholder's rights
under the Warrants and the Warrant Agreement shall thereupon cease; provided
that each Warrant shall be exercised (even if such Warrant would not otherwise
be exercisable on such date because of the Limit Option) on the basis that the
Valuation Date for such Warrant shall be the Cancellation Date and the holder of
each such Warrant will receive, in lieu of the Cash Settlement Value of such
Warrant, the Alternative Settlement Amount, determined by the Determination
Agent.
The "Alternative Settlement Amount" is equal to the amount calculated using
the formula set forth below:
[ T A ]
Alternative Settlement Amount = Intrinsic Value + [ - x - ]
[ 2 B ]
Intrinsic Value = the Cash Settlement Value of the Warrants determined as
described under "--Cash Settlement Value" herein, but calculated with a Spot
Portfolio Value determined by the Determination Agent which, subject to approval
by the Company (such approval not to be unreasonably withheld), in the
reasonable opinion of the Determination Agent, fairly reflects the value of the
Portfolio Securities on the Cancellation Date, Expiration Date, Delisting Date
or Early Extended Expiration Date, whichever has given rise to the payment of
the Alternative Settlement Amount;
T = , the maximum initial offering price per Warrant;
A = the total number of days from, but excluding the Cancellation Date,
Expiration Date, Delisting Date or Early Extended Expiration Date, whichever has
given rise to the payment of the Alternative Settlement Amount for such
Warrants, to and including the Expiration Date; and
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B = the total number of days from, but excluding the date on which sales of
the Warrants were initially confirmed, to and including the Expiration Date.
For the purposes of determining "Intrinsic Value" in the above formula, in
the event that the Determination Agent and the Company are required, but have
not, after good faith consultation with each other and within five days
following the first day upon which such Alternative Settlement Amount may be
calculated in accordance with the above formula, agreed upon a Spot Portfolio
Value which fairly reflects the value of the Portfolio Securities on the
Cancellation Date, Expiration Date, Delisting Date or Early Extended Expiration
Date, whichever gives rise to the payment of the Alternative Settlement Amount,
then the Determination Agent shall promptly nominate a third party, subject to
approval by the Company (such approval not to be unreasonably withheld), to
determine such figure and calculate the Alternative Settlement Amount in
accordance with the above formula. Such party shall act as an independent expert
and not as an agent of the Company or the Determination Agent, and its
calculation and determination of the Alternative Settlement Amount shall, absent
manifest error, be final and binding on the Company, the Warrant Agent, the
Determination Agent and the Warrantholders. Any such calculations will be made
available to a Warrantholder for inspection at the Warrant Agent's Office.
Neither the Company nor such third party shall have any responsibility for good
faith errors or omissions in calculating the Alternative Settlement Amount.
Exercise Limitation Events. The Warrant Agreement will provide that if the
Company determines that on an Applicable Business Day an Exercise Limitation
Event has occurred and is continuing, then the Cash Settlement Value in respect
of an exercise shall be calculated on the basis that the Valuation Date shall be
the next Business Day following such Applicable Business Day on which there is
no Exercise Limitation Event or Extraordinary Event; provided that, subject to
an automatic extension of the term of the Warrants or to a determination that
the Warrants are worthless, as described under "--Extension Events" herein, if
the Valuation Date has not occurred on or prior to the Expiration Date or any
Delisting Date, the Warrantholders will receive the Alternative Settlement
Amount in lieu of the Cash Settlement Value, which shall be calculated as if the
Warrants had been cancelled on the Expiration Date or any Delisting Date, as the
case may be. The Company shall promptly give notice to Warrantholders, by
publication in a newspaper with a national circulation, if an Exercise
Limitation Event shall have occurred.
"Exercise Limitation Event" means any of the following events:
(i) a suspension, material limitation or absence of trading on the AMEX,
NYSE or NASDAQ, or any other securities exchange on which a Portfolio
security is traded, of 20% or more in number of the Portfolio Securities; or
(ii) the suspension or material limitation on the AMEX or any other
major futures, options or securities market (which as of the date of this
Prospectus Supplement includes only the AMEX, but which in the Company's
judgment may change in the future) of trading in futures or options
contracts related to the Portfolio.
For purposes of determining whether an Exercise Limitation Event has
occurred: (1) a limitation on the hours or number of days of trading will not
constitute an Exercise Limitation Event if it results from an announced change
in the regular business hours of the relevant exchange; (2) a decision to
permanently discontinue trading in the relevant futures or options contract will
not constitute an Exercise Limitation Event; (3) a suspension of trading in a
Portfolio Security or in a futures or options contract referred to in clauses
(i) and (ii) above, by reason of (x) a price change violating limits set by the
AMEX or other futures or securities market on which futures or options contracts
related to the Portfolio are traded or such other futures or securities market
or (y) an imbalance of orders relating to Portfolio Securities or such contracts
will constitute a suspension or material limitation of trading; (4) an "absence
of trading" on the AMEX, NYSE or NASDAQ, or any other securities exchange, will
not include any time when the AMEX, NYSE or NASDAQ, or such other securities
exchange, is closed
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for trading under ordinary circumstances; and (5) the occurrence of an
Extraordinary Event described in clause (i) of the definition of Extraordinary
Event will not constitute, and will supersede the occurrence of, an Exercise
Limitation Event.
In the case of Warrants as to which there has been a postponed Valuation
Date resulting from an Extraordinary Event or an Exercise Limitation Event
(including an Extension Event) or as a result of a number of Warrants exceeding
the maximum permissible amounts, 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 second
Business Day following the date on which the Cash Settlement Value or
Alternative Settlement Amount, as the case may be, has been calculated (the
"Alternative Funding Date") New York Clearing House or next day funds in an
amount equal to, and for the payment of, the aggregate Cash Settlement Value or
Alternative Settlement Amount, as applicable, for such Warrants. The Warrant
Agent will thereafter be responsible for making payment available to each
registered holder who holds Warrants in certificated form in the form of a
cashier's check or official bank check, or (in the case of payments of at least
$100,000) by wire transfer to a U.S. dollar bank account maintained by such
Warrantholder in the United States (at such holder's election), in an amount
equal to the aggregate Cash Settlement Value or Alternative Settlement Amount,
as applicable, of such holder's exercised Warrants prior to the close of
business on the Alternative Funding Date (or, in the case of payments made by
wire transfer, prior to the close of business on the Business Day next
succeeding the Alternative Funding Date). In the case of Warrants held through
the facilities of DTC, if the Company has made such funds available by such time
as noted above, the Warrant Agent will thereafter be responsible for making
funds available to DTC in an amount sufficient to pay the Cash Settlement Value
or Alternative Settlement Amount of the Warrants, if applicable, prior to the
close of business on the Alternative Funding Date. DTC will be responsible for
disbursing such funds to each appropriate Participant 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 it represents.
Certain of the Extraordinary Events and Exercise Limitation Events may be
events that would tend to decrease the level of the Spot Portfolio Value, and
accordingly decrease the Cash Settlement Value for the Warrants following the
occurrence of any such Extraordinary Event or Exercise Limitation Event.
However, as a result of any postponed exercise as described above,
Warrantholders would not receive such Cash Settlement Value, but would receive
instead a Cash Settlement Value (or, if applicable, an Alternative Settlement
Amount) determined as of a later date. In any such case, any immediate impact of
the related Extraordinary Event or Exercise Limitation Event on the Spot
Portfolio Value may have been negated by interim market and other developments
and, as a result of any such postponement, the Cash Settlement Value (or
Alternative Settlement Amount) actually received by Warrantholders may be
substantially different than the otherwise applicable Cash Settlement Value if
the valuation of the Warrants had not been postponed.
WARRANT CERTIFICATES
The Warrants originally 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 Window duly endorsed by, or accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Warrant Agent and the Company duly executed by, the registered holder thereof, a
duly appointed legal representative or a duly authorized attorney. Such
signature must be guaranteed by a bank or trust company having a correspondent
office in New York City or by a broker or dealer which is a member of the
National Association of Securities Dealers, Inc. (the "NASD") 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.
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At the option of a Warrantholder, unexercised Warrant Certificates may be
exchanged for other Warrant Certificates representing a like number of Warrants,
upon surrender to the Warrant Agent at the Warrant Agent's Window, of the
Warrant Certificates to be exchanged. The Company thereupon will execute, and
the Warrant Agent will countersign and deliver, one or more new Warrant
Certificates representing such like number of unexercised Warrants.
In the event that upon 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 "--Exercise of Warrants--Minimum Exercise Amount" herein.
If any Warrant Certificate is mutilated, lost, stolen or destroyed, the
Company may in its discretion execute, and the Warrant Agent may countersign and
deliver, in exchange and substitution for such mutilated Warrant Certificate or
in replacement for such lost, stolen or destroyed Warrant Certificate, a new
Warrant Certificate representing a like number 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 case all of 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 Company in
its discretion may, instead of issuing a new Warrant Certificate, direct the
Warrant Agent to treat such Warrant Certificate the same 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 thereto, 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.
BOOK-ENTRY CONVERSION
One hundred eighty calendar days after the consummation of the sale of the
Warrants pursuant to this Prospectus Supplement, each Warrantholder will have
the option to convert the form in which such Warrantholder holds his Warrants
from certificated to book-entry form by utilizing the Conversion Option. The
Conversion Option will be available for 45 calendar days (the "Conversion Option
Period") and is expected to run from , 1996 through , 1996.
In order to be exchanged for a Warrant in book-entry form, a Warrant
Certificate must be delivered to DTC, in proper form for deposit, by a
Participant. Accordingly, a Warrantholder who is not a Participant (other than a
Warrantholder holding Warrants through CEDEL or Euroclear) must deliver the
Warrant Certificate, in proper form for deposit, to a Participant, either
directly or through an indirect participant (such as a bank, brokerage firm,
dealer or trust company that clears through, or maintains a custodial
relationship with, a Participant) or brokerage firm which maintains an account
with a Participant, in order to have its Warrant Certificate exchanged for a
Warrant in book-entry form. Warrantholders who desire to exchange their Warrant
Certificates for Warrants in book-entry form should contact their brokers or
other Participants or indirect participants to obtain information on procedures
for submitting their Warrant Certificate to DTC, including the proper form for
submission and (during the Conversion Option Period) the cut-off times for same
day and next day exchange. A Warrant Certificate held by the Warrantholder in
nominee or "street" name may be automatically
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exchanged into book-entry form by the broker or other entity in whose name such
Warrant Certificate is registered, without action of, or consent by, the
beneficial owner of the related Warrant. In addition, a Warrant Certificate held
through the facilities of CEDEL or Euroclear will automatically be exchanged
into book-entry form by CEDEL or Euroclear, as the case may be, pursuant to the
Conversion Option on the last day of the Conversion Option Period without action
of, or consent by, the beneficial owner of the related Warrants. Accordingly,
Warrantholders holding their Warrants through CEDEL or Euroclear who do not wish
to convert the form in which they hold such Warrants to book-entry form must
arrange to transfer their Warrants out of the CEDEL or Euroclear systems, as the
case may be, prior to the last day of the Conversion Option Period. Thereafter,
Warrantholders may no longer hold certificated Warrants through the facilities
of CEDEL or Euroclear.
Warrant Certificates received by DTC for exchange during the Conversion
Option Period will be exchanged for Warrants in book-entry form by the close of
business on the Business Day that those Warrant Certificates are received by DTC
(if received by DTC at its then applicable cut-off time for same day credit) or
on the following Business Day (if received by DTC at its then applicable cut
off-time for next day credit). After the last day of the Conversion Option
Period, DTC will not be required to accept delivery of Warrant Certificates in
exchange for book-entry Warrants, but may permit Warrant Certificates to be so
exchanged on a case-by-case basis. However, there can be no assurance that such
Warrant Certificates will be accepted for exchange. Warrant Certificates
surrendered at any time for exchange for book-entry Warrants may not be
exercised or delivered for settlement or transfer until such exchange has been
effected. Accordingly, if a change in the Spot Portfolio Value were to occur
after a Warrant Certificate had been surrendered for exchange into book-entry
form, a Warrantholder would not be able to take advantage of the changes by
exercising the related Warrant until such exchange had been effected. Since
Warrant Certificates are not required to be exchanged for Warrants in book-entry
form, it is likely that not all Warrant Certificates will be so exchanged.
Accordingly, Warrantholders purchasing Warrants in secondary market trading
after commencement of the Conversion Option Period may wish specific
arrangements with brokers or other Participants or indirect participants if they
wish to purchase only Warrants in book-entry form and not Warrant Certificates.
The Company has been informed by CEDEL and Euroclear that they will only clear
Warrants in book-entry form after the Conversion Option Period.
Once a Warrantholder has elected the Conversion Option, such Warrantholder
may hold his Warrants only in book-entry form and will not be able to change his
election or withdraw from the book-entry system. Accordingly, ownership of the
Warrants in certificated form will no longer be available to investors who have
elected the Conversion Option.
CEDEL AND EUROCLEAR
Initially, Warrantholders may hold their Warrants in either book-entry or
certificated form through Centrale de Livraison de Valeurs Mobiliees S.A.
("CEDEL") or Euroclear if they are participants in those systems, or indirectly
through organizations which are participants in such systems. However, as
described above under "--Book Entry Conversion", it is anticipated that Warrant
Certificates held through those systems will be converted into book-entry form
on the last day of the Conversion Option Period and, accordingly, certificated
ownership of Warrants will no longer be available through those systems after
such day.
CEDEL and Euroclear will hold omnibus certificated positions and omnibus
book-entry positions on behalf of their participants through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective depositaries which in turn will, in the case of certificated
positions only, hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank, 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
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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 certificated Warrants by persons holding through CEDEL or
Euroclear participants will be effected through Citibank or Morgan, as the case
may be; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participants in that system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the exercise meets its requirements,
deliver instructions to the depositary to take action to effect the exercise of
the Warrants on its behalf by delivering Warrants to the Warrant Agent and
receiving payment in accordance with its normal procedures for next day funds
settlement. Payments with respect to the certificated Warrants held through
CEDEL or Euroclear will be credited to the cash accounts of CEDEL participants
or Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. See "--Exercise of
Warrants" and "--Settlement" herein.
Exercises of book-entry Warrants by persons holding through CEDEL or
Euroclear participants will be effected through DTC, in accordance with DTC
rules, on behalf of the relevant European international clearing system by its
Depositary; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participant in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the exercise meets its requirements,
deliver instructions to its Depositary to take action to effect its exercise of
the Warrants on its behalf by delivering Warrants through DTC and receiving
payment in accordance with its normal procedures for next day funds settlement.
Payments with respect to the Warrants held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL participants or Euroclear participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. See "--Exercise of Warrants" and "--Settlement"
herein.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between
CEDEL participants through electronic book-entry changes in accounts of CEDEL
participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in CEDEL in any of 28 currencies,
including U.S. dollars. CEDEL provides to its participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. CEDEL
interfaces with domestic markets in several countries. As a professional
depository, CEDEL is subject to regulation by the Luxembourg Monetary Institute.
CEDEL participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations and may include the
Underwriters. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for its
participants and to clear and settle transactions between its participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 27 currencies, including U.S. dollars. The Euroclear System
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan's Brussels, Belgium office (the "Euroclear
Operator" or "Euroclear"), under contract with Euroclear Clearance System S.C.,
a Belgian cooperative corporation (the "Cooperative"). Morgan is a member bank
of the United States Federal Reserve System. All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are
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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 (as defined herein). Indirect access to the Euroclear
System is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipt of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
All information herein on CEDEL and Euroclear is derived from CEDEL or
Euroclear, as the case may be, and reflects the policies of those organizations,
which are subject to change without notice.
LISTING
Application has been made to list the Warrants on the AMEX, subject to the
receipt of requisite regulatory approvals. The AMEX symbol for the Warrants is
BVP.WS. The AMEX expects to cease trading the Warrants on such Exchange as of
the close of business on the later of the Expiration Date or any Early Extended
Expiration Date or Extended Expiration Date. See "Risk Factors--Delisting of the
Warrants" herein.
DELISTING OF WARRANTS
In the event that the Warrants are delisted from, or permanently suspended
from trading (within the meaning of the Exchange Act) on the AMEX, and not
accepted at the same time for listing on another SRO, Warrants not previously
exercised will be deemed automatically exercised on the last Business Day prior
to the effective date of such delisting or trading suspension (such last
Business Day prior to the effective date of delisting, the "Delisting Date"),
and if such Delisting Date occurs prior to the Expiration Date, the Cash
Settlement Value, if any, shall be calculated and settled as provided herein
under "--Automatic Exercise", subject to a determination that the Warrants are
worthless, as described above. If such Delisting Date occurs on or after the
Expiration Date and prior to any Extended Expiration Date, the Warrants will be
deemed to be worthless. See "--Extension Events, Extraordinary Events and
Exercise Limitation Events" herein. The Company will notify Warrantholders 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 the Warrants to be
traded pursuant to the rules of another SRO that are filed with the Commission
under the Exchange Act.
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<PAGE>
THE PORTFOLIO
GENERAL
The Portfolio consists of a diverse basket of the common stocks of 43
corporations operating in several industry groups, including: computers,
aerospace, retail, banking, cellular communications, pharmaceuticals, medical
supplies, petroleum products, hotels/motels, toys and retail stationary. The
Company believes that the Portfolio Securities in the Portfolio represent
potentially attractive investments in these industry groups. The inclusion of a
Portfolio Security in the Portfolio is not a recommendation to buy or sell that
Portfolio Security, and neither the Company nor any of its affiliates makes any
representation to any purchaser of Warrants as to the future performance of the
Portfolio or any Portfolio Security.
THIS PROSPECTUS SUPPLEMENT RELATES ONLY TO THE WARRANTS OFFERED HEREBY AND
DOES NOT RELATE TO THE PORTFOLIO SECURITIES. ALL SUMMARY DISCLOSURES CONTAINED
IN THIS PROSPECTUS SUPPLEMENT REGARDING THE ISSUERS OF THE PORTFOLIO SECURITIES
ARE DERIVED FROM THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED BELOW. THUS, THERE
CAN BE NO ASSURANCE THAT ALL EVENTS OCCURRING PRIOR OR SUBSEQUENT TO THE DATE
HEREOF (INCLUDING EVENTS THAT WOULD AFFECT THE ACCURACY OR COMPLETENESS OF THE
PUBLICLY AVAILABLE DOCUMENTS DESCRIBED BELOW) THAT WOULD AFFECT THE TRADING
PRICE OF THE PORTFOLIO SECURITIES HAVE BEEN PUBLICLY DISCLOSED BY THE ISSUERS OF
THOSE PORTFOLIO SECURITIES. THE COMPANY DOES NOT INTEND TO FURNISH TO HOLDERS OF
WARRANTS SUBSEQUENT INFORMATION WITH RESPECT TO THE ISSUERS OF THE PORTFOLIO
SECURITIES.
The Company or its affiliates may from time to time engage in business with
one or more of the issuers of the Portfolio Securities or with persons seeking
to acquire those issuers, including providing advisory services to those issuers
or other persons, including merger and acquisition advisory services. In the
course of such business, the Company or its affiliates may acquire non-public
information with respect to those issuers and, in addition, one or more
affiliates of the Company may publish research reports with respect to those
issuers. Bear Stearns may also from time to time make a market in one or more
Portfolio Securities. The actions described in the preceding sentences,
including merger and acquisition advisory services and market-making
transactions, may directly adversely affect the Market Prices of the Portfolio
Securities. The Company does not make any representation to any purchaser of
Warrants with respect to any matters whatsoever relating to those issuers. Any
prospective purchaser of Warrants should undertake such independent
investigation of the issuers of the Portfolio Securities as the purchaser deems
appropriate to make an informed decision with respect to an investment in the
Warrants.
THE PORTFOLIO SECURITIES
Each issuer of a Portfolio Security files certain information reports with
the Commission pursuant to the Exchange Act. Based upon publicly available
information, the following is a summary description of the business of the
issuer of each Portfolio Security in each of the indicated industry groups:
ALUMINUM COMPANY OF AMERICA Aluminum Company of America ("ALCOA") produces
alumina, primary aluminum products and finished products, components and systems
for industrial applications. ALCOA sells its products to packaging,
transportation, building and industrial customers worldwide. In addition, ALCOA
produces aluminum-based chemicals, vinyl products and plastic products.
BIOMET, INC. Biomet, Inc. ("Biomet") designs, develops, produces and markets
products used primarily by orthopedic medical specialists in both surgical and
non-surgical therapy. Biomet's products
S-35
<PAGE>
include reconstructive and trauma devices, electrical bone growth stimulators,
orthopedic support devices, operating room supplies, powered surgical
instruments and other products sold in approximately 100 countries.
THE BOEING COMPANY The Boeing Company ("Boeing") is one of the world's major
aerospace firms. Boeing operates primarily in two industry segments: (i)
commercial aircraft, which involves the development, production and marketing of
commercial jet transports and providing related support services principally to
commercial customers and (ii) defense and space, which involves research,
development, production, modification and support of military aircraft and
helicopters and related systems.
CARDINAL HEALTH, INC. Cardinal Health, Inc. ("Cardinal") is a full-service
wholesaler distributing a broad line of pharmaceuticals, surgical and hospital
supplies, health and beauty aids and other items. These products are typically
sold by retail drug stores, hospitals and other health care providers.
CITICORP ("Citicorp"), the parent company of Citibank, is a global financial
services organization. Citicorp's operations include commercial, mortgage and
investment banking, trust services, consumer finance and credit card services.
Clients include individuals, businesses, institutions and governments in the
United States and in approximately 94 other countries and territories.
COMPAQ COMPUTER CORPORATION Compaq Computer Corporation ("Compaq") designs,
develops, manufactures and markets personal computers, PC systems and related
products for business, government, home and educational customers. Compaq's
products include portable, desktop, personal computers and servers that are
compatible with IBM and all standardized applications software. Manufacturing
operations are located in the United States, Scotland, Singapore, Brazil and
China.
CUC INTERNATIONAL, INC. CUC International, Inc. ("CUC") is a
membership-based consumer services company offering a variety of services to
members. The Company's database programs and marketing services provide
customers with savings in shopping, travel, dining, auto, financial products,
insurance and banking. CUC provides its services through credit unions,
financial institutions, retailers, fundraisers and other organizations.
DONNKENNY, INC. Donnkenny, Inc. ("Donnkenny") designs, manufactures and
markets women's sportswear under the brand name "Donnkenny Classics". Donnkenny
also produces the "Mickey & Co." line of sportswear for women, men and children
and the "Lewis Frimmel" line of girls' and women's sleepwear. Donnkenny operates
showrooms in New York City, Atlanta, Charlotte, Dallas, Denver, Elmont (NY),
Honolulu, Los Angeles, Minneapolis and Seattle and markets its products to
department stores.
ELECTRONIC ARTS INC. Electronic Arts Inc. ("Electronic Arts") creates,
markets and distributes interactive entertainment software for a variety of
hardware platforms. Electronic Arts' products are primarily developed for 16-bit
and 32-bit computer platforms, including Sega Genesis, the Super Nintendo
Entertainment System and floppy-disk based computers. These products are sold
throughout the United States and Europe and in Asia.
ENSERCH EXPLORATION, INC. Enserch Exploration, Inc. ("Enserch") explores,
develops, produces and sells crude oil and natural gas. Enserch's activities are
centered in Texas and the Gulf of Mexico.
FEDERAL HOME LOAN MORTGAGE CORPORATION Federal Home Loan Mortgage
Corporation ("Freddie Mac") is a stockholder owned corporation established by
the U.S. Congress in 1970. Freddie Mac buys mortgages from lenders throughout
the United States, then pools and packages them as securities and sells them to
investors.
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<PAGE>
FIRST USA, INC. First USA, Inc. is the fourth largest issuer of Visa and
Master Card credit cards in the United States, and the fourth largest processor
of credit card transactions on behalf of merchants accepting credit cards as
payment for goods and services.
GREEN TREE FINANCIAL CORPORATION Green Tree Financial Corporation ("Green
Tree") originates conditional sales contracts for manufactured homes and
site-built home improvements. Green Tree also markets physical damage and term
mortgage life insurance and services contracts it previously originated. Through
its principal offices in St. Paul, Minnesota and regional service centers, Green
Tree serves all 50 states in the United States.
HERSHEY FOODS CORPORATION Hershey Foods Corporation ("Hershey") is involved
in the manufacture, distribution and sale of a broad line of chocolate,
confectionery, grocery and pasta products. Hershey's brands include "Hershey's"
chocolate milk, syrup, milk chocolate bars and chocolate chips. Hershey's pasta
products include "Ronzoni" and "San Giorgio" . Hershey produces, distributes and
sells primarily in the United States, but also has international interests.
H. F. AHMANSON & COMPANY H. F. Ahmanson & Company ("H. F. Ahmanson") through
its subsidiary, Home Savings of America (the "Bank"), conducts savings and loan
activities and related financial services. The Bank operates through 359 savings
branches located in six states and 82 loan offices located in 12 states. H.F.
Ahmanson's lending activities primarily involve loans for residential real
estate.
INTEL CORPORATION Intel Corporation ("Intel") designs, develops,
manufactures and sells microcomputer components and related products. Intel's
products include microprocessors, embedded processors and microcontrollers,
memory chips, computer modules and boards, network and communication hardware
and software products, personal conferencing software and cards and parallel
supercomputers. Intel sells its products worldwide.
KERR-MCGEE CORPORATION Kerr-McGee Corporation ("Kerr-McGee") explores and
produces crude oil and natural gas, manufactures chemicals and mines coal and
minerals. Kerr-McGee's oil and gas exploration and production operations are
located in the North Sea, the Gulf of Mexico, Canada, China, South East Asia and
the United States.
KIMBERLY-CLARK CORPORATION Kimberly-Clark Corporation ("Kimberly-Clark")
manufactures facial tissue, disposable diapers, feminine pads, paper towels,
newsprint and paper for the office and tobacco industry. Trademarks include
"Huggies", "Kleenex", and "Kotex". Kimberly-Clark also offers aircraft and air
and transportation services.
LIGAND PHARMACEUTICALS INCORPORATED Ligand Pharmaceuticals Incorporated
("Ligand") develops small molecule drugs that regulate hormone activated
intracellular receptors. These receptors play a role in regulating the genetic
processes affecting diseases such as gynecological disorders, certain cancers
and cardiovascular, inflammatory and skin diseases.
LUXOTTICA GROUP S.P.A. Luxottica Group S.p.A. ("Luxottica") designs,
manufactures, and markets traditional and designer eyeglass frames and
sunglasses in the mid and premium price ranges. Luxottica offers over 1,700
styles of frames in a variety of fashions and colors. Luxottica sells its
products to opticians, optometrists, opthalmalogists, health maintenance
organizations and retail optical chains worldwide.
MANVILLE CORPORATION Manville Corporation ("Manville") is a building
products and forest products company. Through its subsidiaries, Riverwood
International Corporation and Schuller International Group, Inc., Manville
manufactures cartons, paperboard, lumber, plywood and insulation products.
Manville also has interests in mining operations in Montana.
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<PAGE>
MATTEL, INC. Mattel, Inc. ("Mattel") is a worldwide designer, manufacturer,
marketer and distributor of a broad variety of toy products. Mattel's core
product line includes "Barbie", "Fisher-Price", "Disney" and "Hot Wheels" toys
and accessories. Mattel markets its products on a world wide basis throughout
North and South America, Europe, Asia, Australia and Africa.
MAXXIM MEDICAL, INC. Maxxim Medical, Inc. ("Maxxim") develops, manufactures
and distributes physical therapy equipment, medical instruments and disposable
hospital products used in hospitals and surgery centers. Maxxim's products
include tubing, guidewires, gloves, infection control apparel, patient draping
systems and procedure trays.
MCI COMMUNICATIONS CORPORATION MCI Communications Corporation ("MCI") is a
diversified communications company. MCI offers consumers and businesses long
distance, wireless, local access, paging and advanced global telecommunications
services.
MFS COMMUNICATIONS COMPANY MFS Communications Company, Inc. ("MFS") provides
communications and network integration services for business and government. MFS
provides a wide range of high quality voice, data and other enhanced services
and systems specifically designed to meet the requirements of business and
government customers. Subsidiaries include MFS Telecom, Inc., MFS Datanet, Inc.,
MFS Intelenet Inc., MFS Network Technologies, Inc. and MFS International, Inc..
MIRAGE RESORTS, INC. Mirage Resorts, Inc. ("Mirage") owns and operates
several hotel-casino and destination resorts including "Treasure Island", a
pirate themed casino-hotel, in Las Vegas, Nevada and a hotel-casino in Laughlin,
Nevada. Mirage also has casino interests in Argentina and plans further
hotel-casino development in Las Vegas.
MOBILE TELECOMMUNICATION TECHNOLOGIES CORP. Mobile Telecommunication
Technologies Corporation ("Mobile") is a diversified communications company
providing nationwide paging services, telephone answering services and
air-to-ground and marine telecommunications. Mobile also is developing an
international paging and voice message network to link its US system with
similar systems worldwide.
MONSANTO COMPANY Monsanto Company ("Monsanto") is involved in the worldwide
manufacture and sale of a diversified line of chemical and agricultural
products, pharmaceuticals, low-calorie sweeteners, plastics and man-made fibers.
Monsanto's products are marketed under the brand names "Lasso", "Roundup",
"Nutrasweet" and "Searle."
NEWS CORPORATION LTD. News Corporation Ltd. ("News Corporation") is an
international media company. News Corporation, with operations in the United
States, the United Kingdom, Australia and the Pacific Rim, is involved in the
production and distribution of motion pictures and television programming,
television and satellite broadcasting, the publication of newspapers, magazines,
books and promotional inserts. In addition, News Corporation provides computer
on-line services.
NINE WEST GROUP, INC. Nine West Group, Inc. ("Nine West") designs, develops
and markets women's footwear. Nine West sells its shoes through department,
specialty and independent stores and through 406 of its own retail stores. Brand
names include "Nine West", "Enzo Angiolini", "9 & Co." and "Westies".
NORDSTROM, INC. Nordstrom, Inc. ("Nordstrom") is a specialty retailer of
apparel, shoes and accessories for men, women and children. Nordstrom operates
approximately 70 stores located in 10 states.
OFFICEMAX, INC. OfficeMax, Inc. ("OfficeMax") retails office products at
high-volume and deep discount. OfficeMax operates approximately 392 stores in
147 markets in 40 states and Puerto Rico. OfficeMax sells its merchandise to
small and medium-sized businesses and to home office and individual customers.
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<PAGE>
ORACLE CORPORATION Oracle Corporation ("Oracle") designs, develops, markets
and supports computer software products with a variety of uses, including
database management, applications development, decision support and end user
applications. Oracle's primary product, the ORACLE7 Oracle Relational Database
Management System, runs on a broad range of mainframes, minicomputers, and PC's.
PARKER HANNIFIN CORPORATION Parker Hannifin Corporation is a worldwide
manufacturer of motion control products, including fluid power systems,
electromechanical controls and related components. Fluid power systems move and
position materials, control machines, vehicles and equipment. Fluid power
systems are used in agricultural machinery, construction equipment, food
production, transportation and processing areas.
PATRIOT AMERICAN HOSPITALITY, INC. Patriot American Hospitality, Inc.
("Patriot") acquires, owns, redevelops and repositions hotels. Patriot presently
owns 15 full service and four limited service hotels and an executive conference
center. The hotels are primarily franchise licensed with hotel companies such as
"Marriot", "Hilton", "Sheraton", "Radisson", "Holiday Inn" and "Hampton Inn".
PHARMACIA & UPJOHN, INC. Pharmacia & Upjohn, Inc. ("Pharmacia & Upjohn") is
an international pharmaceutical and biotechnological group of companies.
Pharmacia & Upjohn manufactures and markets a wide assortment of prescription
and over-the-counter products. Several of the drugs made are anticancer drugs,
contraceptives and medicines for pain-relief and rheumatoid arthritis. The drugs
are produced in Europe and the United States and sold worldwide.
SEAGATE TECHNOLOGY, INC. Seagate Technology, Inc. ("Seagate") designs,
manufactures and markets approximately 100 rigid disc drive models with form
factors from 2.5 to 5.25 inches and memory capacities of up to 9 Gigabytes.
These drives record, store and retrieve digital information that cannot be
stored in its entirety in the central processing unit. Seagate's products are
distributed to original equipment manufacturers, value added resellers and
various dealers.
SEITEL, INC. Seitel, Inc. ("Seitel") operates a seismic database and
provides corollary geophysical services to the petroleum industry. Seitel's DDD
Energy subsidiary participates directly in petroleum exploration and production,
applying its seismic technology with oil and gas companies.
USF&G CORPORATION USF&G Corporation ("USF&G"), through approximately 3800
independent agents, sells property and casualty insurance, life insurance and
annuities in the United States. USF&G's subsidiary USFG Company is the 24th
largest property and casualty insurer in the United States based on 1993
statutory net premiums written.
VIACOM INC. Viacom Inc. ("Viacom") is a diversified entertainment and
communications company with operations in five principal segments: networks and
broadcasting, entertainment, video and music/theme parks, publishing and cable
television. Viacom's holdings through its subsidiaries include the "Nickelodeon"
cable channel, "Blockbuster" video stores, "Simon & Schuster" publishing and the
"Paramount Pictures" movie studio.
WELLS FARGO & COMPANY Wells Fargo & Company ("Wells Fargo") is a bank
holding company. Wells Fargo attracts deposits and offers real estate,
construction, consumer and commercial loans. Wells Fargo's non-banking
operations include leasing, mortgage banking, consumer and agricultural credit,
and credit life insurance.
WENDY'S INTERNATIONAL, INC. Wendy's International, Inc. ("Wendy's")
operates, develops and franchises a system of quick-service restaurants. The
Restaurants offer hamburgers, salads and chicken sandwiches. Wendy's operates or
franchises over 4,400 "Wendy's" restaurants in the United States and abroad.
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<PAGE>
WMX TECHNOLOGIES, INC. WMX Technologies, Inc. ("WMX") provides comprehensive
waste management services to commercial, industrial, municiple and residential
customers in North America. WMX's services include collecting, processing,
recovering and disposing of solid, chemical and radioactive wastes.
Environmental services are also offered abroad through a subsidiary.
HISTORICAL INFORMATION
The following table sets forth the high and low price for each of the
Portfolio Securities as reported on the principal market in which it trades,
during 1991, 1992, 1993, 1994, 1995 and through January 19, 1996, and the last
reported sale price on December 31, 1991, 1992, 1993, 1994, 1995 and on January
19, 1996. Historical prices of the Portfolio Securities should not be taken as
an indication of future performance. The historical prices set forth herein have
been adjusted to reflect certain corporate events that affected those prices,
including, but not limited to, stock splits and stock dividends. Certain
adjustments to the Multiplier and the Portfolio will be made by the
Determination Agent as set forth under "Description of Securities--Adjustments
to the Multiplier and Portfolio". These adjustments may not correspond to the
adjustments made in determining the historical stock prices set forth herein.
<TABLE>
<CAPTION>
PORTFOLIO SECURITIES HIGH LOW LAST
- ---------------------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Aluminum Company of America
1991.......................................................... $ 36 9/16 $ 26 7/8 $ 32 3/16
1992.......................................................... 40 5/16 30 1/2 35 13/16
1993.......................................................... 39 3/16 29 1/2 34 11/16
1994.......................................................... 45 1/8 32 1/8 43 5/16
1995.......................................................... 60 1/4 36 7/8 52 7/8
1996 (through January 25, 1996)............................... 56 1/2 49 1/8 52 3/4
Biomet, Inc.
1991.......................................................... 32 3/8 8 1/8 30 3/4
1992.......................................................... 30 1/2 13 3/4 16 1/4
1993.......................................................... 16 1/2 8 3/8 10 1/4
1994.......................................................... 14 1/4 9 14
1995 19 7/8 13 1/8 17 7/8
1996 (through January 25, 1996)............................... 20 5/8 17 3/8 20 1/8
The Boeing Company
1991.......................................................... 53 41 1/4 47 3/4
1992.......................................................... 54 5/8 33 1/8 40 1/8
1993.......................................................... 44 3/4 33 3/8 43 1/4
1994.......................................................... 50 1/8 42 1/8 47
1995.......................................................... 80 44 3/8 78 3/8
1996 (through January 25, 1996)............................... 81 3/8 75 3/8 77
Cardinal Health, Inc.
1991.......................................................... 31 16 24 13/32
1992.......................................................... 27 13/64 19 24 13/64
1993.......................................................... 38 19/32 19 19/32 38
1994.......................................................... 48 1/4 33 13/64 46 3/8
1995.......................................................... 58 1/8 41 1/2 54 3/4
1996 (through January 25, 1996)............................... 57 52 7/16 57
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO SECURITIES HIGH LOW LAST
- ---------------------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Citicorp
1991.......................................................... 17 1/2 8 1/2 10 3/8
1992.......................................................... 22 1/2 10 3/8 22 1/4
1993.......................................................... 39 3/4 20 1/2 36 7/8
1994.......................................................... 47 3/4 36 41 3/8
1995.......................................................... 74 38 1/2 67 1/4
1996 (through January 25, 1996)............................... 70 7/8 62 70 1/2
Compaq Computer Corporation
1991.......................................................... 24 3/4 7 3/8 8 51/64
1992.......................................................... 16 5/8 7 27/64 16 1/4
1993.......................................................... 25 1/4 13 59/64 24 5/8
1994.......................................................... 42 1/8 24 5/64 39 1/2
1995.......................................................... 56 3/4 31 1/8 48
1996 (through January 25, 1996)............................... 50 43 1/8 47 1/2
CUC International Inc.
1991.......................................................... 9 25/32 3 29/32 9 3/16
1992.......................................................... 12 57/64 7 43/64 12 57/64
1993.......................................................... 26 1/2 11 1/16 24
1994.......................................................... 23 59/64 16 43/64 22 11/64
1995.......................................................... 39 1/4 21 3/4 34 1/8
1996 (through January 25, 1996)............................... 34 5/8 30 7/8 35 5/8
Donnkenny, Inc.1
1991.......................................................... n/a n/a n/a
1992.......................................................... n/a n/a n/a
1993.......................................................... 9 11/16 5 3/4 9 3/8
1994.......................................................... 13 5/16 5 1/8 7 1/2
1995.......................................................... 18 1/4 6 3/4 18 1/8
1996 (through January 25, 1996)............................... 18 5/8 12 3/4 13 5/16
Electronic Arts Inc.
1991.......................................................... 9 5/8 2 7/32 9 9/16
1992.......................................................... 21 3/4 9 3/16 20 5/8
1993.......................................................... 42 19 3/4 30
1994.......................................................... 33 1/2 12 3/4 19 1/4
1995.......................................................... 42 1/4 15 3/8 26 1/8
1996 (through January 25, 1996)............................... 27 7/8 21 1/8 22 1/4
Enserch Exploration Inc.
1991.......................................................... 10 6 1/2 7
1992.......................................................... 8 1/4 6 1/4 7 3/8
1993.......................................................... 12 1/4 7 3/8 10 3/8
1994.......................................................... 11 5 3/4 9 7/8
1995.......................................................... 14 7/8 9 1/4 11 5/8
1996 (through January 25, 1996)............................... 12 9 5/8 9 3/4
Federal Home Loan Mortgage Corporation
1991.......................................................... 46 21/64 14 3/4 45 53/64
1992.......................................................... 49 1/4 33 3/4 48 3/8
1993.......................................................... 56 3/4 45 1/4 49 7/8
1994.......................................................... 62 7/8 47 50 1/2
1995.......................................................... 83 5/8 49 7/8 83 1/2
1996 (through January 25, 1996)............................... 83 1/2 76 1/4 81 5/8
</TABLE>
- ------------
(1) Donnkenny commenced trading on June 17, 1993, upon consummation of its
initial public offering.
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<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO SECURITIES HIGH LOW LAST
- ---------------------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
First USA, Inc.2
1991.......................................................... n/a n/a n/a
1992.......................................................... 11 3/4 5 1/16 11 5/8
1993.......................................................... 39 11/16 10 35 3/4
1994.......................................................... 46 5/8 26 1/2 32 7/8
1995.......................................................... 55 5/8 32 44 3/8
1996 (through January 25, 1996)............................... 50 1/8 42 3/8 49
Green Tree Financial Corporation
1991.......................................................... 5 59/64 1 1/8 4 7/8
1992.......................................................... 6 31/64 3 49/64 6
1993.......................................................... 15 5/8 5 51/64 12
1994.......................................................... 17 7/16 10 3/4 15 3/16
1995.......................................................... 32 3/8 14 11/16 26 3/8
1996 (through January 25, 1996)............................... 28 5/8 23 28
Hershey Foods Corporation
1991.......................................................... 44 1/2 35 1/8 44
1992.......................................................... 48 3/8 38 1/4 47
1993.......................................................... 55 7/8 43 1/2 49
1994.......................................................... 53 1/2 41 1/8 48 3/8
1995.......................................................... 67 7/8 48 65
1996 (through January 25, 1996)............................... 69 7/8 63 7/8 68 1/4
H. F. Ahmanson & Company
1991.......................................................... 20 7/8 12 17 3/8
1992.......................................................... 19 1/2 13 19 1/4
1993.......................................................... 22 1/8 16 3/4 19 5/8
1994.......................................................... 22 3/4 15 1/4 16 1/8
1995.......................................................... 28 3/8 16 26 1/2
1996 (through January 25, 1996)............................... 26 3/4 21 1/4 22 7/8
Intel Corporation
1991.......................................................... 14 13/16 9 7/16 12 1/4
1992.......................................................... 22 7/8 11 5/8 21 3/4
1993.......................................................... 37 1/4 21 3/8 31
1994.......................................................... 36 3/4 28 31 15/16
1995.......................................................... 78 3/8 31 1/2 56 3/4
1996 (through January 25, 1996)............................... 59 3/4 49 13/16 54 5/8
Kerr-McGee Corporation
1991.......................................................... 46 7/8 35 1/8 38 5/8
1992.......................................................... 46 3/8 35 5/8 45
1993.......................................................... 56 41 3/4 45 1/4
1994.......................................................... 51 40 46 1/4
1995.......................................................... 64 44 63 1/2
1996 (through January 25, 1996)............................... 65 5/8 60 1/2 62 7/8
Kimberly-Clark Corporation
1991.......................................................... 52 1/4 38 50 11/16
1992.......................................................... 63 1/4 46 1/4 59
1993.......................................................... 62 44 5/8 51 7/8
1994.......................................................... 60 47 50 3/8
1995.......................................................... 83 47 1/4 82 3/4
1996 (through January 25, 1996)............................... 83 77 7/8 81
</TABLE>
- ------------
(2) First USA commenced trading on May 28, 1992, upon consummation of its
initial public offering.
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<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO SECURITIES HIGH LOW LAST
- ---------------------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Ligand Pharmaceuticals Incorporated3
1991.......................................................... n/a n/a n/a
1992.......................................................... 14 1/2 9 1/2 10 1/2
1993.......................................................... 12 1/4 8 1/2 11 3/4
1994.......................................................... 14 1/2 6 8 1/4
1995.......................................................... 11 3/8 5 1/2 10 3/4
1996 (through January 25, 1996)............................... 13 1/2 9 3/4 12 7/8
Luxottica Group S.p.A.
1991.......................................................... 27 7/8 9 5/8 27 1/2
1992.......................................................... 32 13/16 21 1/2 25 1/8
1993.......................................................... 29 3/4 19 5/8 29 1/4
1994.......................................................... 36 5/8 27 5/8 34 1/8
1995.......................................................... 59 3/4 31 1/8 58 1/2
1996 (through January 25, 1996)............................... 65 7/8 55 3/4 65 1/4
Manville Corporation
1991.......................................................... 8 1/2 4 7 7/8
1992.......................................................... 10 7/8 7 5/8 8 5/8
1993.......................................................... 9 3/4 6 1/2 8 1/2
1994.......................................................... 10 1/8 7 9
1995.......................................................... 15 1/4 8 1/4 13
1996 (through January 25, 1996)............................... 13 3/8 12 1/2 12 7/8
Mattel, Inc.
1991.......................................................... 14 15/64 6 15/64 14 9/64
1992.......................................................... 17 9/32 12 11/16 16 15/64
1993.......................................................... 19 11/16 13 1/8 17 11/16
1994.......................................................... 23 19/32 16 9/16 20 3/32
1995.......................................................... 31 1/8 19 45/64 30 3/4
1996 (through January 25, 1996)............................... 33 3/8 29 1/8 31 1/2
Maxxim Medical, Inc.
1991.......................................................... 28 7/8 4 3/8 7 1/2
1992.......................................................... 33 1/2 11 1/2 13 7/8
1993.......................................................... 27 1/2 12 1/4 20
1994.......................................................... 20 1/2 11 1/2 14 1/2
1995.......................................................... 17 12 1/4 16 3/4
1996 (through January 25, 1996)............................... 20 3/8 16 1/8 19 3/8
MCI Communications Corporation
1991.......................................................... 15 15/16 8 15/16 15 1/8
1992.......................................................... 20 7/16 14 3/4 19 13/16
1993.......................................................... 29 7/8 18 13/16 28 1/4
1994.......................................................... 29 17 1/4 18 3/8
1995.......................................................... 27 1/2 17 3/8 26 1/8
1996 (through January 25, 1996)............................... 28 3/8 25 5/8 27
</TABLE>
- ------------
(3) Ligand commenced trading on November 18, 1992, upon consummation of its
initial public offering.
S-43
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO SECURITIES HIGH LOW LAST
- ---------------------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
MFS Communications Company, Inc.4
1991.......................................................... n/a n/a n/a
1992.......................................................... n/a n/a n/a
1993.......................................................... 57 3/4 23 1/2 32 1/2
1994.......................................................... 41 1/2 20 1/2 32 3/4
1995.......................................................... 53 3/4 28 3/4 53 1/4
1996 (through January 25, 1996)............................... 55 1/4 47 3/4 54 1/2
Mirage Resorts, Incorporated
1991.......................................................... 12 1/2 6 35/64 11 3/32
1992.......................................................... 14 27/32 8 51/64 13 3/32
1993.......................................................... 25 13 3/32 23 7/8
1994.......................................................... 27 16 5/8 20 1/2
1995.......................................................... 35 1/8 19 3/4 34 1/2
1996 (through January 25, 1996)............................... 39 5/8 33 1/8 38 1/8
Mobile Telecommunication Technologies Corp.
1991.......................................................... 12 5 5/8 10 3/8
1992.......................................................... 14 7/8 8 13 7/8
1993.......................................................... 39 13 1/2 24 1/4
1994.......................................................... 26 1/4 14 5/8 19 1/2
1995.......................................................... 36 3/8 18 3/4 21 3/8
1996 (through January 25, 1996)............................... 21 7/8 16 11/16 16 3/4
Monsanto Company
1991.......................................................... 76 46 67 7/8
1992.......................................................... 71 1/4 49 3/4 57 5/8
1993.......................................................... 75 48 7/8 73 3/8
1994.......................................................... 86 1/2 66 1/2 70 1/2
1995.......................................................... 124 3/4 68 1/4 122 1/2
1996 (through January 25, 1996)............................... 126 115 3/8 125 1/2
The News Corporation
1991.......................................................... 12 15/16 2 11/16 11 9/16
1992.......................................................... 21 1/4 10 5/8 20 3/8
1993.......................................................... 31 5/8 18 26 3/8
1994.......................................................... 30 1/2 15 15 5/8
1995.......................................................... 25 1/8 14 3/8 21 3/8
1996 (through January 25, 1996)............................... 22 1/4 20 7/8 21 1/4
Nine West Group Inc.5
1991.......................................................... n/a n/a n/a
1992.......................................................... n/a n/a n/a
1993.......................................................... 35 17 3/4 29 1/2
1994.......................................................... 35 23 3/4 28 3/8
1995.......................................................... 48 3/4 26 3/8 37 1/2
1996 (through January 25, 1996)............................... 39 3/8 28 1/2 30 1/2
</TABLE>
- ------------
(4) MFS commenced trading on May 20, 1993, upon consummation of its initial
public offering.
(5) Nine West commenced trading on February 3. 1993, upon consummation of its
initial public offering.
S-44
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO SECURITIES HIGH LOW LAST
- ---------------------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Nordstrom, Inc.
1991.......................................................... 53 22 36
1992.......................................................... 42 3/4 25 1/2 38 3/4
1993.......................................................... 43 1/2 25 1/4 33
1994.......................................................... 49 3/4 31 42
1995.......................................................... 45 1/4 35 40 1/2
1996 (through January 25, 1996)............................... 43 3/8 38 38 1/2
OfficeMax, Inc.6
1991.......................................................... n/a n/a n/a
1992.......................................................... n/a n/a n/a
1993.......................................................... n/a n/a n/a
1994.......................................................... 17 43/64 14 27/64 17 43/64
1995.......................................................... 26 1/2 14 37/64 22 3/8
1996 (through January 25, 1996)............................... 22 1/4 17 3/4 22 1/2
Oracle Corporation
1991.......................................................... 5 35/64 1 53/64 4 53/64
1992.......................................................... 9 35/64 4 9 29/64
1993.......................................................... 25 11/64 8 7/8 19 11/64
1994.......................................................... 31 17 1/2 29 27/64
1995.......................................................... 48 3/4 26 43/64 42 3/8
1996 (through January 25, 1996)............................... 49 1/2 39 1/2 45 1/2
Parker-Hannifin Corporation
1991.......................................................... 20 43/64 15 11/64 20 27/64
1992.......................................................... 24 11/64 17 27/64 19 3/4
1993.......................................................... 25 27/64 18 43/64 25 11/64
1994.......................................................... 31 27/64 22 43/64 30 21/64
1995.......................................................... 41 1/2 27 37/64 34 1/4
1996 (through January 25, 1996)............................... 36 1/2 31 7/8 33 3/4
Patriot American Hospitality, Inc.7
1991.......................................................... n/a n/a n/a
1992.......................................................... n/a n/a n/a
1993.......................................................... n/a n/a n/a
1994.......................................................... n/a n/a n/a
1995.......................................................... 25 3/4 23 1/4 25 3/4
1996 (through January 25, 1996)............................... 27 1/2 25 3/4 27 1/4
Pharmacia & Upjohn, Inc.8
1991.......................................................... n/a n/a n/a
1992.......................................................... n/a n/a n/a
1993.......................................................... n/a n/a n/a
1994.......................................................... n/a n/a n/a
1995.......................................................... 40 1/4 32 3/8 38 3/4
1996 (through January 25, 1996)............................... 40 1/8 35 7/8 38 3/8
</TABLE>
- ------------
(6) OfficeMax commenced trading on November 2, 1994, upon consummation of its
initial public offering.
(7) Patriot commenced trading on September 27, 1995, upon consummation of its
initial public offering.
(8) Pharmacia & Upjohn, the result of a merger between Pharmacia Aktienbolag and
The Upjohn Company, began trading on November 3, 1995.
S-45
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO SECURITIES HIGH LOW LAST
- ---------------------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Seagate Technology, Inc.
1991.......................................................... 19 7/8 7 1/8 9 1/8
1992.......................................................... 22 3/8 9 19 5/8
1993.......................................................... 25 1/8 13 1/8 23 3/4
1994.......................................................... 28 3/4 18 5/8 24
1995.......................................................... 54 3/4 23 5/8 47 1/2
1996 (through January 25, 1996)............................... 58 5/8 44 3/4 56 7/8
Seitel, Inc.
1991.......................................................... 15 5/64 8 10 3/64
1992.......................................................... 11 33/64 4 7/8 11 1/4
1993.......................................................... 14 3/8 6 1/2 13 3/4
1994.......................................................... 37 13 3/8 21 1/2
1995.......................................................... 35 1/2 18 7/8 35 3/8
1996 (through January 25, 1996)............................... 35 1/2 25 5/8 25 7/8
USF&G Corporation
1991.......................................................... 12 1/2 5 5/8 7 1/4
1992.......................................................... 15 7 1/8 12 3/8
1993.......................................................... 19 5/8 11 1/8 14 3/4
1994.......................................................... 16 1/8 11 11/16 13 5/8
1995.......................................................... 19 1/2 13 3/8 16 7/8
1996 (through January 25, 1996)............................... 17 1/2 15 1/4 16 1/4
Viacom, Inc. (Class B Common Stock)
1991.......................................................... 34 7/8 22 7/8 34 1/8
1992.......................................................... 41 7/8 27 41 7/8
1993.......................................................... 61 1/4 35 1/4 44 7/8
1994.......................................................... 45 21 3/4 40 3/4
1995.......................................................... 54 1/4 40 1/4 47 3/8
1996 (through January 25, 1996)............................... 47 5/8 37 1/8 39 3/8
Wells Fargo & Company
1991.......................................................... 98 3/4 48 58
1992.......................................................... 86 3/8 56 3/8 76 3/8
1993.......................................................... 133 1/2 74 3/4 129 3/8
1994.......................................................... 160 3/4 127 1/8 145
1995.......................................................... 230 1/4 141 216
1996 (through January 25, 1996)............................... 229 3/4 202 3/4 226 1/4
Wendy's International, Inc.
1991.......................................................... 11 5 7/8 9 7/8
1992.......................................................... 14 1/4 9 5/8 12 5/8
1993.......................................................... 17 3/8 12 3/8 17 3/8
1994.......................................................... 18 1/2 13 1/4 14 3/8
1995.......................................................... 22 3/4 14 3/8 21 1/4
1996 (through January 25, 1996)............................... 22 1/2 19 5/8 20 7/8
WMX Technologies, Inc.
1991.......................................................... 44 3/8 32 5/8 42 1/8
1992.......................................................... 46 5/8 32 40
1993.......................................................... 40 1/4 23 26 3/8
1994.......................................................... 30 3/4 22 5/8 26 1/8
1995.......................................................... 32 1/2 25 3/4 29 3/4
1996 (through January 25, 1996)............................... 31 1/8 29 1/4 29 1/2
</TABLE>
S-46
<PAGE>
The following table and graph set forth the historical Spot Portfolio Values
at March 31, June 30, September 30 and December 31 in each of 1991, 1992, 1993,
1994, 1995 and at January , 1996. Historical Portfolio Values should not be
taken as an indication of future performance. The historical values set forth
herein have been adjusted to reflect certain corporate events that affected
those values, including, but not limited to, stock splits and stock dividends.
Certain adjustments to the Multiplier and the Portfolio will be made by the
Determination Agent as set forth under "Description of Warrants-- Adjustments to
the Multiplier and Portfolio herein." Those adjustments may not correspond to
the adjustments made in determining the historical Spot Portfolio Values set
forth herein.
<TABLE>
<CAPTION>
DATE SPOT PORTFOLIO VALUE
- -------------------------------------------------------------------------- --------------------
<S> <C>
1991
March 31................................................................
June 31.................................................................
September 30............................................................
December 31.............................................................
1992
March 31................................................................
June 31.................................................................
September 30............................................................
December 31.............................................................
1993
March 31................................................................
June 31.................................................................
September 30............................................................
December 31.............................................................
1994
March 31................................................................
June 31.................................................................
September 30............................................................
December 31.............................................................
1995
March 31................................................................
June 31.................................................................
September 30............................................................
December 31.............................................................
1996
January ..............................................................
</TABLE>
S-47
<PAGE>
<TABLE><CAPTION>
Historical Spot Portfolio Values
(Spot Portfolio Values through January 1996)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
110.00 -
100.00 -
90.00 -
80.00 -
70.00 -
60.00 -
Mar 91 Jun 91 Sept 91 Dec 91 Mar 92 Jun 92 Sept 92 Dec 92 Mar 93 Jun 93 Sept 93 Dec 93 Mar 94
<CAPTION>
Historical Spot Portfolio Values
(Spot Portfolio Values through January 1996)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
110.00 -
100.00 -
90.00 -
80.00 -
70.00 -
60.00 -
Jun 94 Sept 94 Dec 94 Mar 95 Jun 95 Sept 95 Dec 95 Jan 96
</TABLE>
Source: Prepared by the Company from data obtained from the primary market
on which each Portfolio Security is traded.
S-48
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material U.S. Federal income tax
consequences of the ownership and disposition of a Warrant as of the date hereof
and is based on the opinion of Weil, Gotshal & Manges, special tax counsel to
the Company. Such summary generally considers only Warrants held as capital
assets by U.S. Holders (as defined herein) 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 "U.S. 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 U.S.
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 U.S. Holder's tax
basis for the Warrant. A U.S. 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 U.S. Holder in respect of the Warrant in prior
taxable years. As a result of these mark-to-market rules, a U.S. Holder 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, exercise (including automatic exercise) or lapse of a
Warrant, a U.S. Holder will recognize gain or loss equal to the difference
between the amount realized, if any, and the U.S. Holder's tax basis in the
Warrant.
S-49
<PAGE>
CHARACTER OF GAIN OR LOSS
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 U.S. 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 U.S. 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. An individual may elect, however, to carry net section
1256 contract losses for the taxable year back against net section 1256 contract
gains 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, long-term capital gains are generally taxed at
lower rates than items of ordinary income.
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, 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 U.S. Holder will be subject to information reporting,
and may be subject to a U.S. "backup" withholding at a rate of 31% if the U.S.
Holder thereof fails to supply an accurate taxpayer identification number or
otherwise comply with applicable U.S. information reporting or certification
requirements or otherwise establish an exemption. Such payment made to a
Non-U.S. Holder will not be subject to information reporting or backup
withholding if the Non-U.S. Holder certifies its status as a Non-U.S. Holder
under penalty of perjury, provided that the payor does not have actual knowledge
that the holder is a U.S. Holder. Any amounts so withheld would be refundable or
allowed as a credit against such Holder's U.S. Federal income tax liability.
S-50
<PAGE>
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 each of the Underwriters named below, and each of the Underwriters has
severally agreed to purchase, the number of Warrants set forth opposite its
name:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF WARRANTS
- --------------------------------------------------------- ------------------
<S> <C>
Bear, Stearns & Co., Inc.................................
Total.............................................. 1,000,000
----------
----------
</TABLE>
The Underwriters have advised the Company that they propose 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 $ per
Warrant for the purchase of 50,000 or more Warrants, in any single transaction
in this offering, subject to the holding period requirements described herein.
In addition, the Underwriters propose to offer the Warrants to certain dealers
at a price that represents a concession not in excess of $ per Warrant. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ 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 50,000 Warrants in a single transaction
in this offering and agrees with the Underwriters not to sell such Warrants for
a period of 30 days following the date of this Prospectus Supplement without the
consent of Bear Stearns, as representative of the Underwriters, will be entitled
to purchase the Warrants at the reduced price as discussed above. If Bear
Stearns determines that an investor failed to comply with this 30-day holding
period, such investor will be obligated to pay to the Underwriters 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 Underwriters 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 Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the Warrants if any are purchased.
The Company has agreed to indemnify the Underwriters 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 ("Schedule E") of the By-Laws of 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
S-51
<PAGE>
of the warrants can be no higher than that recommended by a "qualified
independent underwriter," as such term is defined in Schedule E, meeting certain
standards. In accordance with such requirements, has agreed to serve as a
"qualified independent underwriter" and has conducted due diligence and will
recommend a price for the Warrants in compliance with the requirements of
Schedule E.
VALIDITY OF THE WARRANTS
The validity of the Warrants will be passed upon for the Company by Weil,
Gotshal & Manges LLP, New York, New York, a limited liability partnership
including professional corporations, and for the Underwriters by Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel, New York, New York.
S-52
<PAGE>
APPENDIX A
INDEX OF KEY TERMS
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM IS DEFINED
---------------
<S> <C>
Alternative Funding Date...................................................... S-30
Alternative Settlement Amount................................................. S-28
AMEX.......................................................................... cover
Applicable Business Day....................................................... S-27
Automatic Funding Date........................................................ S-26
Bear Stearns.................................................................. S-8
Business Day.................................................................. S-2
Cancellation Date............................................................. S-28
Cash Component................................................................ S-18
Cash Settlement Value......................................................... cover
CEDEL......................................................................... S-32
Citibank...................................................................... S-32
Code.......................................................................... S-49
Commission.................................................................... S-14
Company....................................................................... cover
Conversion Option............................................................. S-12
Conversion Option Period...................................................... S-31
Cooperative................................................................... S-33
Delisting Date................................................................ S-34
Depositaries.................................................................. S-33
Determination Agent........................................................... S-14
DTC........................................................................... S-12
Early Extended Expiration Date................................................ S-27
Euroclear..................................................................... S-33
Euroclear Operator............................................................ S-33
Exchange Act.................................................................. S-14
Exercise Date................................................................. S-22
Exercise Limitation Event..................................................... S-29
Exercise Notice............................................................... S-21
Expiration Date............................................................... S-21
Extended Expiration Date...................................................... S-6
Extension Event............................................................... S-6
Extraordinary Event........................................................... S-27
Funding Date.................................................................. S-24
Interest Commencement Date.................................................... S-19
Intrinsic Value............................................................... S-28
LIBOR......................................................................... S-19
LIBOR Determination Date...................................................... S-19
Limit Option.................................................................. S-25
Limit Option Reference Index.................................................. S-25
London Business Day........................................................... S-20
Market Price.................................................................. S-16
Measurement Date.............................................................. S-27
Morgan........................................................................ S-32
Multiplier.................................................................... S-3
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM IS DEFINED
---------------
<S> <C>
NASD.......................................................................... S-30
NASDAQ........................................................................ S-6
Non-U.S. Holder............................................................... S-50
NYSE.......................................................................... S-6
Original Portfolio Value...................................................... S-4
Participant................................................................... S-12
Portfolio..................................................................... cover
Portfolio Security............................................................ S-3
Remaining Warrants............................................................ S-23
Representative Amount......................................................... S-19
Reuters-Swap.................................................................. S-19
Schedule E.................................................................... S-51
Settlement Date............................................................... S-24
Specified Maturity............................................................ S-19
Spot Portfolio Value.......................................................... S-15
SRO........................................................................... S-10
Telerate Page 3750............................................................ S-19
Terms and Conditions.......................................................... S-34
Underwriting Agreement........................................................ S-51
Valuation Date................................................................ S-24
Warrant....................................................................... cover
Warrant Agent................................................................. S-14
Warrant Agent's Office........................................................ S-15
Warrant Agent's Window........................................................ S-21
Warrant Agreement............................................................. S-14
Warrant Certificate........................................................... S-30
Warrantholder................................................................. S-9
</TABLE>
A-2
<PAGE>
PROSPECTUS
$3,650,742,350
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 $3,650,742,350 (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.
DECEMBER 18, 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 Citicorp 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.
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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, 1995 (the "1995 Form 10-K"), (ii) the Quarterly
Report on Form 10-Q for the quarter ended September 29, 1995 and (iii) the
Current Report on Form 8-K, dated October 16, 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
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THE COMPANY
The Company is a holding company that, through its principal subsidiaries,
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 corporations, governments, institutional and individual
investors worldwide. The business of the Company includes market-making and
trading in corporate, United States Government, government-agency,
mortgage-related, asset-backed and municipal securities; trading in options,
futures, foreign currencies, interest-rate swaps and other derivative products;
securities and commodities arbitrage; securities, options and commodities
brokerage; underwriting and distributing securities; providing securities
clearance services; financing customer activities; securities lending; arranging
for the private placement of securities; assisting in mergers, acquisitions,
restructurings and leveraged transactions; providing other financial advisory
services; making principal investments in leveraged acquisitions; acting as
specialist on the floor of the New York Stock Exchange ("NYSE"); providing
fiduciary and other services, such as real estate brokerage, investment
management and investment advisory and securities research.
The Company's business is 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 Beijing, Geneva, Hong
Kong and Shanghai; through international subsidiaries in Buenos Aires, Hong
Kong, London, Paris, Sao Paulo and 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 provides trust-company services through
its subsidiary, Custodial Trust Company.
Bear Stearns and BSSC are broker-dealers registered with the Securities and
Exchange Commission (the "SEC"). They also are members of the NYSE, all other
principal United States securities and commodities exchanges, the National
Association of Securities Dealers, Inc. (the "NASD") and the National Futures
Association. Bear Stearns is a "primary dealer" in United States government
securities, as 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 1.3 for the first quarter ended
September 29, 1995 and 1.2, 1.6, 1.8, 1.6 and 1.2 for the fiscal years ended
June 30, 1995, 1994, 1993, 1992 and 1991, 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 $3,650,742,350 may be offered pursuant to this Prospectus. As of the
date of this Prospectus, $7,800,884,825 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, basket, individual security, currency or
commodity 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,
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<PAGE>
for the defeasance of those Debt 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
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<PAGE>
on the date of repayment, if the Debt Securities are repayable at the option of
the Holder thereof prior to maturity) on Registered Securities may be made at
the option of the Company by check mailed to the address of the person entitled
thereto or, at the option of a Holder of at least $10,000,000 in principal
amount of Registered Securities, by wire transfer to an account designated by
such Holder in writing at 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.
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<PAGE>
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities and Bearer Warrants" below, payments of principal of (and
premium, if any) and any interest on the individual Debt Securities registered
in the name of the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the Holder of such Global Security. Neither
the Company nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of a Global Security, or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests and each of
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
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pledge of, lien on or security interest in any shares of Voting Stock of any
Restricted Subsidiary without effectively providing that the securities issued
under the Indenture, including the Debt Securities, will be secured equally and
ratably with such secured indebtedness. The term "Restricted Subsidiary" as
defined in the Indenture means Bear Stearns, Custodial Trust Company, BSSC and
any other subsidiary of the Company owning, directly or indirectly, any of the
common stock of, or succeeding to a significant portion of the business,
property or assets of a Restricted Subsidiary, or with which a Restricted
Subsidiary is merged or consolidated.
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.
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EVENTS OF DEFAULT
Under the Indenture, the following will be Events of Default with respect to
any series of Debt Securities: (a) default in the payment of interest on, or any
Additional Amounts payable in respect of, any Debt Securities of that series
when due, which default has continued for 30 days; (b) default in the payment of
the principal of, and premium, if any, on, any Debt Security of that series when
due; (c) default in the deposit of any sinking fund payment, when due, in
respect of any Debt Security of that series; (d) default in the performance of
any other covenant of the Company contained in the Indenture or in the Debt
Securities of that series, which default has continued for 60 days after written
notice as provided in the Indenture; (e) default for 10 days after notice as
provided in the Indenture, in respect of any other indebtedness for borrowed
money of the Company or any Restricted Subsidiary in excess of $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. Within 90 days after the
occurrence of any default, the Trustee shall notify all holders of Debt
Securities of such default, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default in the payment of the
principal of (and premium, if any) or interest on, or any additional amounts
with respect to, any Debt Security or in the payment of any sinking fund
installment with respect to any Debt Security, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or responsible officers of the
Trustee in good faith determine that the withholding of such notice is in the
interests of the holders of the Debt Securities; and provided further, that in
the case of any default of the character specified in clause (d) above, no such
notice shall be given until at least 30 days after the occurrence thereof. 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.
10
<PAGE>
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 under the Indenture (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.
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 units of a commodity index or basket. 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.
11
<PAGE>
GENERAL
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Warrants, if any, offered thereby for the terms of those
Warrants, including, where applicable: (1) whether the Warrant is for Debt
Securities, Government Debt Securities, currencies, currency units, currency
indices or currency baskets, stock indices, stock baskets, commodities,
commodity indices or any other index or reference as therein described; (2) the
offering price; (3) the currency, currency unit, currency index or currency
basket based on or relating to currencies for which those Warrants may be
purchased; (4) the date on which the right to exercise those Warrants will
commence and the date (the "Expiration Date") on which that right will expire;
(5) whether those Warrants are to be issuable in registered form ("Registered
Warrants") or bearer form ("Bearer Warrants"); (6) whether those Warrants are
extendable and the period or periods of such extendibility; (7) the terms upon
which Bearer Warrants, if any, of any series may be exchanged for Registered
Warrants of that series; (8) whether those Warrants will be issued in book-entry
form (a "Global Warrant Certificate") or in certificated Form; (9) United States
federal income tax consequences applicable to those Warrants; and (10) any other
terms of those Warrants not inconsistent with the applicable Warrant Agreement.
If the offered Warrants are to purchase Debt Securities, the Prospectus
Supplement will also describe (1) the designation, aggregate principal amount,
currency, currency unit or currency basket and other terms of the Debt
Securities purchasable upon exercise of those Warrants; (2) the designation and
terms of the Debt Securities with which those Warrants are issued and the number
of those Warrants issued with each such Debt Security; (3) the date or dates on
and after which those Warrants and the related Debt Securities will be
separately transferable; and (4) the principal amount of Debt Securities
purchasable upon exercise of one offered Warrant and the price at which and
currency, currency unit or currency basket in which such principal amount of
Debt Securities may be purchased upon such exercise. Prior to exercising their
Warrants, holders of those Warrants will not have any of the 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
12
<PAGE>
Warrants on stock indices or stock baskets or on commodities or commodity
indices, may be issued in the form of a single Global Warrant Certificate,
registered in the name of the nominee of the depository of the Warrants, or may
initially be issued in the form of definitive certificates that may be
exchanged, on a fixed date, or on a date or dates selected by the Company, for
interests in a Global Warrant Certificate, as set forth in the applicable
Prospectus Supplement. Bearer Warrants will be transferable by delivery. The
Prospectus Supplement will describe the terms of exchange applicable to any
Bearer Warrants.
EXERCISE OF WARRANTS
Each Warrant will entitle the Holder to purchase such principal amount of
the Debt Securities or buy or sell such amount of Government Debt Securities or
of a currency, currency unit, currency index or currency basket, commodity or
commodities at the exercise price, or receive a settlement value in respect of
such amount of Government Debt Securities or of a currency, currency unit,
currency index or currency basket, stock index or stock basket, commodity or
commodity index, as shall in each case be set forth in or calculable from, the
Prospectus Supplement relating to that series of Warrants or as otherwise set
forth in the Prospectus Supplement. Warrants may be exercised at the corporate
trust office of the Warrant Agent (or any other office indicated in the
Prospectus Supplement relating to those Warrants) at any time up to 5:00 p.m.
New York time on the date set forth in the Prospectus Supplement relating to
those Warrants or as may be otherwise set forth in the Prospectus Supplement.
After such time on that date (or such later date to which such date may be
extended by the Company), unexercised Warrants will become void.
Subject to any restrictions and additional requirements that may be set
forth in the Prospectus Supplement relating thereto, Warrants may be exercised
by delivery to the Warrant Agent of the Warrant Certificate evidencing such
Warrants properly completed and duly executed and of payment as provided in the
Prospectus Supplement of the amount required to purchase the Debt Securities, or
(except in the case 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.
13
<PAGE>
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES AND BEARER WARRANTS
In compliance with United States federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Security will agree that, in connection with the original issuance
of such Bearer Security or during the restricted period (as defined in
applicable U.S. Treasury regulations) of such Bearer Security, they will not
offer, sell or deliver such Bearer Security, directly or indirectly, to a U.S.
Person or to any person within the United States, except to the extent permitted
under U.S. Treasury regulations.
Each Bearer Security, including Bearer Global Securities that will not be
exchanged for definitive individual Securities prior to the stated maturity,
will bear on the face of the Security and on any interest coupons that may be
detachable therefrom a legend to the following effect: "Any United States Person
who holds this obligation will be subject to limitations under the United States
income tax laws, including the limitations provided in Sections 165(j) and
1287(a) of the Internal Revenue Code." The sections referred to in the legend
provide that, with certain exceptions, a United States taxpayer who holds Bearer
Securities will not be allowed to deduct any loss, and will not be eligible for
capital gain treatment with respect to any gain, realized on a sale, exchange,
redemption or other disposition of those Bearer Securities. The legend described
above will also be evidenced on any book-entry system maintained with respect to
the Bearer Securities.
As used herein, "United States" means the United States of America and its
possessions, and "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under the
laws of the United States, or an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
Pending the availability of a definitive Global Security or individual
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security. Following the availability of a definitive Global Security in bearer
form, or individual Bearer Securities, and subject to any further limitations
described in the applicable Prospectus Supplement, the temporary Global Security
will be exchangeable for interests in such definitive Global Security or for
such individual Bearer Securities, respectively, only upon receipt of a
"Certificate of Non-U.S. Beneficial Ownership" unless such a certificate has
already been provided by the Depositary because interest has been paid on the
Global Security or because a reasonable period of time after the end of the
restricted period has passed.
Limitations on the offer, sale, delivery and exercise of Bearer Warrants
(including a requirement that a Certificate of Non-U.S. Beneficial Ownership be
delivered upon exercise of a Bearer Warrant) will be described in the Prospectus
Supplement relating to those Bearer Warrants.
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.
14
<PAGE>
When Securities are to be sold to underwriters, unless otherwise set forth
in the applicable Prospectus Supplement, the obligations of the underwriters to
purchase those Securities will be subject to certain conditions precedent but
the underwriters will be obligated to purchase all of the Securities if any are
purchased. The Securities will be acquired by the underwriters for their own
account and may be resold by the underwriters, either directly to the public or
to securities dealers, from time to time in one or more transactions, including
negotiated transactions, either at fixed public offering price or at varying
prices determined at the time of sale. The initial public offering price, if
any, and any concessions allowed or reallowed to dealers, may be changed from
time to time.
To the extent that any Securities underwritten by Bear Stearns are not
resold by Bear Stearns for an amount at least equal to the public offering price
thereof, the proceeds from the offering of those Securities will be reduced.
Bear Stearns intends to resell any of those Securities from time to time
following termination of the offering at varying prices related to prevailing
market prices at the time of sale, subject to applicable prospectus delivery
requirements.
Unless otherwise indicated in the applicable Prospectus Supplement, when
Securities are sold through an agent, the designated agent will agree, for the
period of its appointment as agent, to use its best efforts to sell the
Securities for the Company's account and will receive commissions from the
Company as set forth in the applicable Prospectus Supplement.
Securities purchased in accordance with a redemption or repayment pursuant
to their terms may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing by one or more firms
("remarketing firms") acting as principals for their own accounts or as agents
for the Company. Any remarketing firm will be identified and the terms of its
agreement, if any, with the Company and its compensation will be described in
the Prospectus Supplement. Remarketing firms may be deemed to be underwriters in
connection with the Securities remarketed by them.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities at the public offering price set forth in
the Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in the Prospectus Supplement.
These contracts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and the Prospectus Supplement will set forth
the commissions payable for solicitation of these contracts.
Underwriters and agents participating in any distribution of Securities may
be deemed "underwriters" within the meaning of the Securities Act and any
discounts or commissions they receive in connection therewith may be deemed to
be underwriting compensation for the purposes of the Securities Act. Those
underwriters and agents may be entitled, under their agreements with the
Company, to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution by the
Company to payments that they may be required to make in respect of those civil
liabilities. Various of those underwriters or agents may be customers of, engage
in transactions with or perform services for the Company or its affiliates in
the ordinary course of business.
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.
15
<PAGE>
ERISA CONSIDERATIONS
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
prohibits the borrowing of money, the sale of property and certain other
transactions involving the assets of plans that are qualified under the Code
("Qualified Plans") or individual retirement accounts ("IRAs") and persons who
have certain specified relationships to them. Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), prohibits similar
transactions involving employee benefit plans that are subject to ERISA ("ERISA
Plans"). Qualified Plans, IRAs and ERISA Plans are hereinafter collectively
referred to as "Plans."
Persons who have such specified relationships are referred to as "parties in
interest" under ERISA and as "disqualified persons" under the Code. "Parties in
interest" and "disqualified persons" encompass a wide range of persons,
including any fiduciary (e.g., investment manager, trustee or custodian), any
person providing services (e.g., a broker), the Plan sponsor, an employee
organization any of whose members are covered by the Plan, and certain persons
related to or affiliated with any of the foregoing.
The Company, Bear Stearns and/or BSSC each is considered a "party in
interest" or "disqualified person" with respect to many Plans, including IRAs
established with any of them. The purchase and/or holding of Securities by a
Plan with respect to which the Company, Bear Stearns and/or BSSC is a fiduciary
and/or a service provider (or otherwise is a "party in interest" or
"disqualified person") would constitute or result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code, unless such Securities
are acquired or held pursuant to and in accordance with an applicable statutory
or administrative exemption. An IRA that engages in a non-exempt prohibited
transaction could forfeit its tax-exempt status under Section 408 of the Code.
Applicable exemptions may include the exemption for services under Section
408(b)(2) of ERISA and certain prohibited transaction class exemptions (e.g.,
Prohibited Transaction Class Exemption 84-14 relating to qualified professional
asset managers and Prohibited Transaction Class Exemptions 75-1 and 86-128
relating to securities transactions involving employee benefit plans and
broker-dealers).
In accordance with ERISA's general fiduciary requirement, a fiduciary with
respect to any ERISA Plan who is considering the purchase of Securities on
behalf of such plan should determine whether such purchase is permitted under
the governing plan document and is prudent and appropriate for the ERISA Plan in
view of its overall investment policy and the composition and diversification of
its portfolio. No IRA established with, or for which services are provided by,
the Company, Bear Stearns, and/or BSSC should acquire any Securities and other
Plans established with, or for which services are provided by, the Company, Bear
Stearns and/or BSSC should consult with counsel prior to making any such
acquisition.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this prospectus by reference from the Company's 1995
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.
16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR 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 UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary.............................. S-3
Use of Proceeds and Hedging.......... S-9
Risk Factors......................... S-9
Description of the Warrants.......... S-14
The Portfolio........................ S-35
Certain United States Federal Income
Tax Considerations................... S-49
Underwriting......................... S-51
Validity of the Warrants............. S-52
Appendix A: Index of Key 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....... 14
Plan of Distribution................. 14
ERISA Consideration.................. 16
Experts.............................. 16
Validity of the Securities........... 16
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,000,000 WARRANTS
THE BEAR STEARNS
COMPANIES INC.
VANTAGE POINT PORTFOLIO
CALL WARRANTS
EXPIRING AUGUST , 1997
--------------------------------------
PROSPECTUS SUPPLEMENT
--------------------------------------
BEAR STEARNS & CO. INC.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Delivery of this brochure without an attached Prospectus Supplement and
Prospectus which provides a description of the issuer and the Warrants,
including details on the risks associated with an investment in the Warrants,
is not authorized.
<PAGE>
Who Should Consider The Warrants
Since the Warrants are tied to the results of an underlying equity index or
portfolio, they may be appropriate for investors with specific investment
horizons who seek to participate in the potential price appreciation of stocks
in the Vantage Point Portfolio with their investment risk limited to the cost
of the Warrants. The AMEX requires that the Warrants be sold only to investors
whose accounts have been approved for options trading. In addition, the AMEX
requires that its members and member organizations and registered employees
thereof make certain suitability determinations before recommending
transactions in the Warrants.
In particular, the Warrants may be an attractive alternative for investors who:
- - Want to participate in the appreciation potential offered by the stocks in
the Vantage Point Portfolio, but are concerned about limiting their
investment risk to the cost of the Warrants.
- - Seek to add a leveraged equity-linked investment to balance out a portfolio
otherwise dominated by fixed income investments.
- - Desire to benefit from the potential appreciation and diversification
offered by the stocks in the Vantage Point Portfolio with a significantly
smaller initial investment.
- - Are willing to forego dividend payments on the stocks in the Vantage Point
Portfolio.
This offering of Warrants is made by the attached Prospectus Supplement and
Prospectus only, which provide a description of the issuer and the Warrants,
including details on the risks associated with an investment in the Warrants.
<PAGE>
How The Warrants Work
Purchase Price:
Warrants are purchased for $__ each
|
|
Payment Upon Exercise:
(Warrants may be exercised on any Business Day prior to the expiration date,
subject to certain limitations as described in the Prospectus Supplement)
Cash Settlement Value = the greater of (i) $0 and
(ii) P1 - P0 x 35
-------
P0
where:
P0 is 100, i.e., the Original Portfolio Value of the Vantage Point Portfolio on
the date that the Warrants are priced for initial offering to the public; P1 is
the Spot Portfolio Value of the Vantage Point Portfolio on the applicable
Valuation Date (as each such term is defined in the Prospectus Supplement)
Component Common Stocks of the Vantage Point Portfolio
Stock Ticker Stock Ticker
ALUM CO OF AMER AA KIMBERLY-CLARK KMB
BOEING CO BA LIGAND PHARM B LGND
COMPAQ COMPUTER CPQ LUXOTTICA GR LUX
FIRST USA INC FUS MAXXIM MED MAM
INTEL CORP INTC MIRAGE RESORTS MIR
MATTEL INC MAT NEWS CP LTD NWS
MFS COMMS MFST NORDSTROM NOBE
NINE WEST GP NIN PARKER-HANNIFIN PH
OFFICEMAX INC OMX PATRIOT AMER PAH
ORACLE CORP ORCL PHARMACIA UPJOHN PNU
SEAGATE TECH SEG SEITEL INC SEI
USF & G CORP FG WELLS FARGO & CO WFC
WENDYS INTL WEN WMX TECH WMX
GREEN TREE FIN GNT H F AHMANSON AHM
BIOMET INC BMET MOBILE TELEC MTEL
CARDINAL HLTH CAH MONSANTO CO MTC
CUC INTL CU CITICORP CCI
ELECTRONIC ART ERTS MCI COMMS CP MCIC
ENSERCH EXPL EEX DONNKENNY DNKY
FED HOME LOAN FRE MANVILLE CORP MVL
HERSHEY FOODS CP HSY VIACOM CL B VIAb
KERR MCGEE CORP KMG
The inclusion of a component stock in the Vantage Point Portfolio should not be
considered a recommendation to buy or sell such component stock, and neither
The Bear Stearns Companies Inc. nor any of its affiliates makes any
representation to any purchaser of securities as to the performance of the
portfolio or any component stock. Beneficial owners of the Warrants will not
have any right to receive any component stock or any dividends on the component
stocks. Each component stock will represent initially 2.3256% (or 1/43) of the
Original Portfolio Value of 100.
