BEAR STEARNS COMPANIES INC, S-4/A, 1997-03-18

BEAR STEARNS COMPANIES INC
S-4/A, 1997-03-18
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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As filed with the Securities and Exchange Commission on March 18, 1997
Registration Nos. 333-21215 and 333-21215-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1
TO
FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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<TABLE>
<S> <C>
THE BEAR STEARNS BEAR STEARNS
COMPANIES INC. CAPITAL TRUST I
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its Trust Agreement)
Delaware Delaware
(State or other jurisdiction of incorporation or organization)(State or other jurisdiction of incorporation or organization)
6211 6719
(Primary standard industrial classification code number) (Primary standard industrial classification code number)

13-3286161 13-7108741
(l.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
245 Park Avenue c/o The Bear Stearns Companies Inc.
New York, New York 10167 245 Park Avenue
(212) 272-2000 New York, New York 10167
(Address, including zip code, and telephone number, (212) 272-2000
including area code, of registrant's (Address, including zip code, and telephone number,
principal executive offices) including area code, of registrant's
principal executive offices)

</TABLE>

William J. Montgoris
Chief Operating Officer
The Bear Stearns Companies Inc.
245 Park Avenue
New York, New York 10167
(212) 272-2000
(Name and Address, Including Zip Code,
and Telephone Number, Including Area Code, of Agent For Service)
Copies to:
Dennis J. Block, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.

If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, please check the following box. [x]

<PAGE>

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE OR UNTIL THE
REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.

SUBJECT TO COMPLETION, DATED MARCH 18, 1997

PROSPECTUS

$200,000,000
BEAR STEARNS CAPITAL TRUST I
OFFER TO EXCHANGE ITS FIXED/ADJUSTABLE RATE CAPITAL SECURITIES
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING FIXED/ADJUSTABLE
RATE CAPITAL SECURITIES

(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
THE BEAR STEARNS COMPANIES INC.

The Exchange Offer and Withdrawal Rights will
expire at 5:00 p.m., New York City time, on April __, 1997,
unless extended.

Bear Stearns Capital Trust I, a statutory business trust
created under the laws of the State of Delaware (the "Issuer" or the "Trust"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus (as the same may be amended or supplemented from time to time, the
"Prospectus") and in the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange up to $200,000,000 aggregate
Liquidation Amount (as defined herein) of its Fixed/Adjustable Rate Capital
Securities (Liquidation Amount $1,000 per Capital Security) (the "New Capital
Securities"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement (as defined
herein) of which this Prospectus constitutes a part, for a like Liquidation
Amount of its outstanding Fixed/Adjustable Rate Capital Securities (Liquidation
Amount $1,000 per Capital Security) (the "Old Capital Securities"), of which
$200,000,000 aggregate Liquidation Amount is outstanding. Pursuant to the
Exchange Offer, The Bear Stearns Companies Inc., a Delaware corporation (the
"Company"), is also exchanging (i) its guarantee with respect to the payment of
Distributions (as defined herein) and other payments on liquidation or
redemption of the Old Capital Securities (the "Old Guarantee") for a like
guarantee with respect to the New Capital Securities (the "New Guarantee"), and
(ii) all of its outstanding Fixed/Adjustable Rate Junior Subordinated Deferrable
Interest Debentures (the "Old Subordinated Debentures"), of which $206,186,000
aggregate principal amount is outstanding, for a like aggregate principal amount
of its Fixed/Adjustable Rate Junior Subordinated Deferrable Interest Debentures
(the "New Subordinated Debentures"), which New Guarantee and New Subordinated
Debentures also have been registered under the Securities Act. The Old Capital
Securities, the Old Guarantee and the Old Subordinated Debentures are
collectively referred to herein as the "Old Securities" and the New Capital
Securities, the New Guarantee and the New Subordinated Debentures are
collectively referred to herein as the "New Securities."

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The terms of the New Securities are identical in all material
respects to the respective terms of the Old Securities, except that (i) the New
Securities have been registered under the Securities Act and therefore will not
be subject to certain restrictions on transfer applicable to the Old Securities,
(ii) the New Capital Securities will not provide for any increase in the
Distribution rate thereon, and (iii) the New Subordinated Debentures will not
provide for any increase in the interest rate thereon. See "Description of New
Securities" and "Description of Old Securities." The New Capital Securities are
being offered for exchange in order to satisfy certain obligations of the
Company and the Issuer under the Registration Rights Agreement, dated as of
January 29, 1997 (the "Registration Rights Agreement"), among the Company, the
Issuer and the Initial Purchasers (as defined herein) of the Old Capital
Securities. In the event that the Exchange Offer is consummated, any Old Capital
Securities which remain outstanding after consummation of the Exchange Offer and
the New Capital Securities issued in the Exchange Offer will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Trust Agreement (as defined herein).

SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE NEW CAPITAL SECURITIES, INCLUDING
THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENT OF DISTRIBUTIONS ON
THE NEW CAPITAL SECURITIES MAY BE DEFERRED AND CERTAIN RELATED UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is March __, 1997.

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The New Capital Securities represent undivided beneficial
interests in the assets of the Issuer. The Company is the owner of all of the
beneficial interests represented by common securities of the Issuer (the "Common
Securities" and, collectively with the Capital Securities (as defined herein),
the "Trust Securities"). The Issuer exists for the sole purpose of issuing the
Trust Securities and investing the proceeds thereof in the Subordinated
Debentures (as defined herein). The Subordinated Debentures will mature on
January 15, 2027 (the "Stated Maturity"). The Capital Securities will have a
preference over the Common Securities under certain circumstances with respect
to Distributions (as defined herein) and amounts payable on liquidation,
redemption or otherwise over the Common Securities. See "Description of New
Securities--Description of Capital Securities" and "Subordination Of Common
Securities."

As used herein, (i) the "Indenture" means the Junior
Subordinated Indenture relating to the Subordinated Debentures, as amended and
supplemented from time to time, between the Company and The Chase Manhattan
Bank, as trustee (the "Debenture Trustee"), (ii) the "Trust Agreement" means the
Amended and Restated Trust Agreement relating to the Issuer among the Company,
as Depositor, The Chase Manhattan Bank, as Property Trustee (the "Property
Trustee"), and Chase Manhattan Bank Delaware, as Delaware Trustee (the "Delaware
Trustee") (the Property Trustee and Delaware Trustee collectively, the "Issuer
Trustees"), the Administrators named therein and the holders from time to time
of the Trust Securities and (iii) the "Guarantee Agreement" or the "Guarantee"
means the Guarantee Agreement between the Company and The Chase Manhattan Bank,
as trustee (the "Guarantee Trustee"), providing a guarantee, on the terms and
conditions described herein, for the benefit of holders of the Capital
Securities. In addition, as the context may require, unless expressly stated
otherwise, (i) the "Capital Securities" means the Old Capital Securities and the
New Capital Securities, (ii) the "Subordinated Debentures" means the Old
Subordinated Debentures and the New Subordinated Debentures, and (iii) the
"Guarantee" means the Old Guarantee and the New Guarantee.

Except as provided below, the Capital Securities will be
represented by a global certificate in fully registered form, deposited with a
custodian for and registered in the name of Cede & Co., as nominee for The
Depository Trust Company ("DTC"). Beneficial interests in the Capital Securities
will be shown on, and transfers thereof will be effected through, records
maintained by DTC and its participants. Beneficial interests in such Capital
Securities will trade in DTC's Same-Day Funds Settlement System and secondary
market trading activity in such interests will therefore settle in immediately
available funds. The Capital Securities will be issued, and may be transferred,
only in blocks having a Liquidation Amount of not less than $100,000 (100
Capital Securities). Accordingly, any holder must own at least 100 Capital
Securities. See "Description of New Securities-Restrictions on Transfer."

Holders of the Capital Securities will be entitled to receive
preferential cumulative cash distributions, and the holder of the Common
Securities will be entitled to receive cumulative cash distributions, arising
from the payment of interest on the Subordinated Debentures accumulating from
the date of original issuance and payable semi-annually in arrears on the
fifteenth day of January and July of each year, commencing July 15, 1997, at the
annual rate of 7.00% of the Liquidation Amount of $1,000 per Capital Security
(the "Liquidation Amount") and at the annual rate of 7.00% of the Liquidation
Amount of $1,000 per Common Security ("Distributions") through January 15, 2002.
Thereafter, holders of the Capital Securities will be entitled to receive
preferential cumulative cash distributions and the holder of the Common
Securities will be entitled to receive cumulative cash

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distributions arising from the payment of interest on the Subordinated
Debentures accumulating from January 15, 2002 and payable semi-annually in
arrears on the fifteenth day of January and July at the Applicable Rate from
time to time in effect. The Applicable Rate will be reset quarterly as described
herein based on the three-month London Interbank Offered Rate ("LIBOR"), plus a
margin of 1.75%. Subject to certain exceptions described herein, the Company has
the right to defer payments of interest on the Subordinated Debentures at any
time or from time to time for a period not exceeding ten consecutive semi-annual
periods with respect to each deferral period (each, an "Extension Period"),
provided that no Extension Period may extend beyond the Stated Maturity. Upon
the termination of any such Extension Period and the payment of all amounts then
due, the Company may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest payments on the Subordinated
Debentures are so deferred, Distributions on the Capital Securities and on the
Common Securities will also be deferred and the Company will not be permitted,
subject to certain exceptions described herein, to declare or pay any cash
distributions with respect to the Company's capital stock (which includes common
and preferred stock) or to make any payment with respect to debt securities of
the Company that rank pari passu with or junior to the Subordinated Debentures.
During an Extension Period, interest on the Subordinated Debentures will
continue to accrue (and the amount of Distributions to which holders of the
Capital Securities are entitled will accumulate) at the rate of 7.00% per annum
until January 15, 2002, and at the Applicable Rate thereafter, compounded
semi-annually, and holders of Capital Securities will be required to accrue
interest income for United States Federal income tax purposes. See "Description
of Subordinated Debentures--Option to Defer Interest Payments" and "Certain
Federal Income Tax Consequences--Interest, Original Issue Discount, Premium and
Market Discount."

The Company has, through the Guarantee Agreement, the Trust Agreement,
the Subordinated Debentures and the Indenture (each as defined herein), taken
together, fully, irrevocably and unconditionally guaranteed on a subordinated
basis all of the Issuer's obligations under the Capital Securities. See
"Relationship Among the Capital Securities, the Subordinated Debentures and the
Guarantee--Full and Unconditional Guarantee." The Guarantee of the Company
guarantees the payment of Distributions and payments on liquidation or
redemption of the Capital Securities, but only in each case to the extent of
funds held by the Issuer, as described herein (the "Guarantee"). See
"Description of New Securities" and "Description of Guarantee." If the Company
does not make interest payments on the Subordinated Debentures held by the
Issuer, the Issuer will have insufficient funds to pay Distributions on the
Capital Securities. The Guarantee does not cover payment of Distributions when
the Issuer does not have sufficient funds to pay such Distributions. In such
event, a holder of Capital Securities may institute a legal proceeding directly
against the Company to enforce
payment of such Distributions to such holder. See "Description of Subordinated
Debentures--Enforcement of Certain Rights by Holders of Capital Securities." The
obligations of the Company under the Guarantee and the Subordinated Debentures
are unsecured and are subordinate and junior in right of payment to all Senior
Indebtedness (as defined in "Description of New Securities," "Description of
Subordinated Debentures" and "Subordination") of the Company.

The Capital Securities are subject to mandatory redemption (i) at the
Stated Maturity upon repayment of the Subordinated Debentures at a redemption
price equal to the principal amount of, plus accrued interest on, the
Subordinated Debentures (the "Maturity Redemption Price"), (ii) in whole but not
in part, contemporaneously with the prepayment of the Subordinated Debentures
upon the occurrence and continuation of a Tax Event (as defined herein) (a "Tax
Event Prepayment") at a

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redemption price equal to the Tax Event Prepayment Price (as defined below) and
(iii) in whole or in part on or after January 15, 2002 contemporaneously with
the optional prepayment by the Company of the Subordinated Debentures at a
redemption price equal to the principal amount then outstanding plus accrued
interest thereon to the date of such prepayment (the "Optional Redemption
Price"). Any of the Maturity Redemption Price, the Tax Event Redemption Price
and the Optional Redemption Price may be referred to herein as the "Redemption
Price." See "Description of New Securities--Description of Capital
Securities--Redemption." The Subordinated Debentures are prepayable prior to the
Stated Maturity at the option of the Company (i) on or after January 15, 2002,
in whole or in part at the Optional Redemption Price or (ii) at any time, in
whole but not in part, upon the occurrence and continuation of a Tax Event, at a
prepayment price (the "Tax Event Prepayment Price") equal to (a) if the Tax
Event occurs before January 15, 2002, the greater of (x) 100% of the principal
amount thereof and (y) as determined by a Calculation Agent, the sum of the
present values of the principal amount that would be payable as part of the
Redemption Price with respect to an optional redemption of such Subordinated
Debentures on January 15, 2002, together with the present values of scheduled
payments of interest from the prepayment date to January 15, 2002, in each case
discounted to the prepayment date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted CMT Rate (as defined
herein), plus, in each case, accrued interest thereon to but excluding the date
of prepayment, or (b) if the Tax Event occurs on or after January 15, 2002, the
Optional Redemption Price that would be payable on optional redemption of the
Subordinated Debentures on the date of prepayment. Either of the Optional
Redemption Price or the Tax Event Prepayment Price may be referred to herein as
the "Prepayment Price." See "Description of Subordinated Debentures--Optional
Prepayment" and "--Tax Event Prepayment."

The Company, as the holder of the outstanding Common Securities, will
have the right at any time (including, without limitation upon the occurrence of
a Tax Event), to dissolve the Issuer and, after satisfaction of liabilities to
creditors of the Issuer as provided by applicable law, cause a Like Amount (as
defined herein) of the Subordinated Debentures to be distributed to the holders
of the Capital Securities upon liquidation of the Issuer. See "Description of
Capital Securities--Liquidation of the Issuer and Distribution of Subordinated
Debentures."

The Issuer is making the Exchange Offer of the New Capital
Securities in reliance on the position of the staff of the Division of
Corporation Finance of the Securities and Exchange Commission (the "Commission")
as set forth in certain no-action letters addressed to third parties in other
transactions. However, neither the Company nor the Issuer has sought
its own no-action letter, and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such no-action
letters to third parties. Based on these interpretations by the staff of the
Division of Corporation Finance, and subject to the two immediately following
sentences, the Company and the Issuer believe that New Capital Securities issued
pursuant to this Exchange Offer in exchange for Old Capital Securities may be
offered for resale, resold and otherwise transferred by a holder thereof (other
than holders who are broker-dealers) without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such New Capital Securities are acquired in the ordinary course of
such holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such New Capital Securities.

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However, any holder of Old Capital Securities who is an "affiliate" of the
Company or the Issuer within the meaning of Rule 405 under the Securities Act
(an "Affiliate") or who intends to participate in the Exchange Offer for the
purpose of distributing New Capital Securities, or any broker-dealer who
purchased Old Capital Securities from the Issuer to resell pursuant to Rule 144A
under the Securities Act ("Rule 144A") or any other available exemption under
the Securities Act, (i) will not be able to rely on the interpretations of the
staff of the Division of Corporation Finance of the Commission set forth in the
above-mentioned no-action letters, (ii) will not be entitled to tender such Old
Capital Securities in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Capital Securities unless
such sale is made pursuant to an exemption from such requirements. In addition,
as described below, if any broker-dealer (a "Participating Broker-Dealer") holds
Old Capital Securities acquired for its own account as a result of market-making
or other trading activities and exchanges such Old Capital Securities for New
Capital Securities, then such Participating Broker-Dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such New Capital Securities. See "Plan of Distribution" and "The
Exchange Offer-Resales of New Capital Securities."

Prior to the Exchange Offer, there has been only a limited
secondary market and no public market for the Old Capital Securities. The New
Capital Securities will be a new issue of securities for which there currently
is no market. The Company has filed an application for listing of the New
Capital Securities on the New York Stock Exchange, Inc. ("NYSE"). However, there
can be no assurance as to the development or liquidity of any market for the New
Capital Securities.

Any Old Capital Securities not tendered and accepted in the
Exchange Offer will remain outstanding and will be entitled to all the same
rights and will be subject to the same limitations applicable thereto under the
Trust Agreement (except for those rights which terminate upon consummation of
the Exchange Offer). Following consummation of the Exchange Offer, the holders
of Old Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither the Company nor the Issuer will
have any further obligation to such holders (other than under certain limited
circumstances) to provide for registration under the Securities Act of the Old
Capital Securities held by them. To the extent that Old Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Capital Securities could be adversely affected. See "Risk
Factors-Consequences of Failure to Exchange Old Capital Securities."

THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.

Old Capital Securities may be tendered for exchange on or
prior to 5:00 p.m., New York City time, on April __, 1997 (such time on such
date being hereinafter called the "Expiration Date"), unless the Exchange Offer
is extended by the Company and the Issuer (in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended). Tenders of Old Capital Securities may be withdrawn at any time on or
prior to the Expiration Date. The Exchange Offer is not conditioned upon any
minimum Liquidation Amount of Old Capital

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Securities being tendered for exchange. However, the Exchange Offer is subject
to certain events and conditions which may be waived by the Company or the
Issuer and to the terms and provisions of the Registration Rights Agreement. Old
Capital Securities may be tendered in whole or in part having a Liquidation
Amount of not less than $100,000 (100 Capital Securities) and or any integral
multiple of $1,000 Liquidation Amount (one Capital Security) in excess thereof.
The Company has agreed to pay all expenses of the Exchange Offer, except as
otherwise specified herein. See "The Exchange Offer-Fees and Expenses." Each New
Capital Security will pay cumulative Distributions from the most recent
Distribution Date (as defined herein) on the Old Capital Securities surrendered
in exchange for such New Capital Securities or, if no Distributions have been
paid on such Old Capital Securities, from January 29, 1997. Holders of the Old
Capital Securities whose Old Capital Securities are accepted for exchange will
not receive accumulated Distributions on such Old Capital Securities for any
period from and after the last Distribution Date on such Old Capital Securities
prior to the original issue date of the New Capital Securities or, if no such
Distributions have been paid, will not receive any accumulated Distributions on
such Old Capital Securities, and will be deemed to have waived the right to
receive any Distributions on such Old Capital Securities accumulated from and
after such Distribution Date or, if no such interest has been paid or duly
provided for, from and after January 29, 1997. This Prospectus, together with
the Letter of Transmittal, is being sent to all registered holders of Old
Capital Securities as of January 29, 1997.

Neither the Company nor the Issuer will receive any proceeds
from the issuance of the New Capital Securities offered hereby. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."

This Prospectus may be used by Bear, Stearns & Co. Inc., an
affiliate of the Company, in connection with offers and sales related to
market-making transactions in New Securities effected from time to time after
the commencement of the offering to which this Prospectus relates. Bear, Stearns
& Co. Inc. may act as principal or agent in such transactions, including as
agent for the counterparty when acting as principal or as agent for both
counterparties, and may receive compensation in the form of discounts and
commissions, including from both counterparties when it acts as agent for both.
Such sales will be made at prevailing market prices at the time of sale, at
prices related thereto or at negotiated prices.

THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM CORPORATE COMMUNICATIONS DEPARTMENT, THE BEAR STEARNS COMPANIES
INC., 245 PARK AVENUE, NEW YORK, NEW YORK 10167, TELEPHONE NUMBER (212)
272-2000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS. ANY REQUEST
SHOULD BE MADE BY APRIL __ 1997.

THE NEW CAPITAL SECURITIES WILL BE ISSUED, AND CAPITAL
SECURITIES MAY BE TRANSFERRED, ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT
LESS THAN $100,000. ANY TRANSFER, SALE OR OTHER DISPOSITION OF CAPITAL
SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL
BE DEEMED NOT TO BE THE HOLDER OF SUCH CAPITAL SECURITIES FOR ANY PURPOSE,
INCLUDING BUT NOT LIMITED TO THE

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RECEIPT OF DISTRIBUTIONS ON SUCH CAPITAL SECURITIES, AND SUCH TRANSFEREE
SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL
SECURITIES.

NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"), NO ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN
THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY
PLAN, MAY ACQUIRE OR HOLD THE CAPITAL SECURITIES OR ANY INTEREST THEREIN, UNLESS
SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER
U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23,
95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY
PURCHASER OR HOLDER OF THE CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL BE
DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT EITHER
(A) IS NOT A PLAN OR A PLAN ASSET ENTITY AND IS NOT PURCHASING SUCH SECURITIES
ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN OR (B) IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH
RESPECT TO SUCH PURCHASE OR HOLDING.

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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"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained at prescribed rates by writing to the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C, 20549. Such
material may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov. In addition, such reports, proxy
statements and other information can be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.

The Company and the Issuer have filed with the Commission a
Registration Statement on Form S-4 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the securities offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement and the exhibits and the financial statements, notes
and schedules filed as part thereof or incorporated by reference therein, which
may be inspected at the public reference facilities of the Commission, at the
addresses set forth above. Statements made in this Prospectus concerning the
contents of any documents referred to herein are not necessarily complete, and
in each instance are qualified in all respects by reference to the copy of such
document filed as an exhibit to the Registration Statement.

No separate financial statements of the Issuer have been included
herein. The Company and the Issuer do not consider that such financial
statements would be material to holders of the Capital Securities because the
Issuer is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Subordinated Debentures and
issuing the Trust Securities. See "The Bear Stearns Companies Inc.,"
"Description of New Securities--Description of Capital Securities," "Description
of Subordinated Debentures" and "Description of Guarantee." In addition, the
Company does not expect that the Issuer will file reports under the Exchange Act
with the Commission.

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 and Proxy Statement incorporated
by reference therein) for the fiscal year ended June 30, 1996 (the "1996 Form
10-K"), (ii) the Quarterly Reports on Form 10-Q for the quarters ended September
27, 1996 and December 31, 1996, and (iii) the Current Reports on Form 8-K, dated
July 30, 1996, October 16, 1996, October 29, 1996, November 12, 1996, January
22, 1997 and January 29, 1997. 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 Capital
Securities shall be

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<PAGE>

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.

As used herein, the terms "Prospectus" and "herein" mean this
Prospectus, including the documents incorporated or deemed to be incorporated
herein by reference, as the same may be amended, supplemented or otherwise
modified from time to time. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein do not purport to
be complete, and where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document.

SUMMARY

THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED
HEREIN AND SHOULD BE READ IN CONJUNCTION WITH SUCH INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO, SUCH INFORMATION. CAPITALIZED TERMS USED HEREIN HAVE THE
RESPECTIVE MEANINGS ASCRIBED TO THEM ELSEWHERE IN THIS PROSPECTUS.

EXCHANGE OFFER

Up to $200,000,000 aggregate Liquidation Amount of New Capital
Securities are being offered in exchange for a like aggregate Liquidation Amount
of Old Capital Securities. Old Capital Securities may be tendered for exchange
in whole or in part in a Liquidation Amount of $100,000 (100 Capital Securities)
or any integral multiple of $1,000 in excess thereof provided that if any Old
Capital Securities are tendered in exchange for part, the untendered Liquidation
Amount must be $100,000 or any integral multiple of $1,000 in excess thereof.
The Company and the Issuer are making the Exchange Offer in order to satisfy
their obligations under the Registration Rights Agreement relating to the Old
Capital Securities. For a description of the procedures for tendering Old
Capital Securities, see "The Exchange Offer-Procedures for Tendering Old Capital
Securities."

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<PAGE>
EXPIRATION DATE

The Expiration Date of the Exchange Offer will be 5:00 p.m.,
New York City time, on April __, 1997, unless the Exchange Offer is extended by
the Company and the Issuer. See "The Exchange Offer-Expiration Date; Extensions;
Amendments."

CONDITIONS TO EXCHANGE OFFER

The Exchange Offer is subject to certain conditions, which may
be waived by the Company and the Issuer in their sole discretion. The Exchange
Offer is not conditioned upon any minimum Liquidation Amount of Old Capital
Securities being tendered. See "The Exchange Offer --Conditions to Exchange
Offer". The Company and the Issuer reserve the right in their sole discretion,
subject to applicable law, at any time and from time to time, (i) to delay the
acceptance of the Old Capital Securities for exchange, (ii) to terminate the
Exchange Offer if certain specified conditions have not been satisfied, (iii) to
extend the Expiration Date of the Exchange Offer and retain all Old Capital
Securities tendered pursuant to the Exchange Offer, subject, however, to the
right of holders of Old Capital Securities to withdraw their tendered Old
Capital Securities, or (iv) to waive any condition or otherwise amend the terms
of the Exchange Offer in any respect. See "The Exchange Offer-Expiration Date;
Extensions; Amendments."

WITHDRAWAL RIGHTS

Tenders of Old Capital Securities may be withdrawn at any time
on or prior to the Expiration Date by delivering a written notice of such
withdrawal to The Chase Manhattan Bank, as Exchange Agent (the "Exchange
Agent"), in conformity with certain procedures set forth below under "The
Exchange Offer-Withdrawal Rights."

PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES

Tendering holders of Old Capital Securities must complete and
sign a Letter of Transmittal in accordance with the instructions contained
therein and forward the same by mail, facsimile or hand delivery, together with
any other required documents, to the Exchange Agent, either with the Old Capital
Securities to be tendered or in compliance with the specified procedures for
guaranteed delivery of Old Capital Securities. Certain brokers, dealers,
commercial banks, trust companies and other nominees may also effect tenders by
book-entry transfer, including an Agent's Message in lieu of the Letter of
Transmittal. Holders of Old Capital Securities registered in the name of a
broker, dealer, commercial bank, trust company or other nominee are urged to
contact such person promptly if they wish to tender Old Capital Securities
pursuant to the Exchange Offer. See "The Exchange Offer -- Procedures for
Tendering Old Capital Securities." Letters of Transmittal and certificates
representing Old Capital Securities should not be sent to the Company or the
Issuer. Such documents should only be sent to the Exchange Agent. Questions
regarding how to tender and requests for information should be directed to the
Exchange Agent. See "The Exchange Offer-Exchange Agent."

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<PAGE>

RESALES OF NEW CAPITAL SECURITIES

The Company and the Issuer are making the Exchange Offer in
reliance on the position of the staff of the Division of Corporation Finance of
the Commission as set forth in certain no-action letters addressed to third
parties in other transactions. However, neither the Company nor the
Issuer has sought its own no-action letter and there can be no assurance that
the staff of the Division of Corporation Finance of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
no-action letters to third parties. Based on these interpretations by the staff
of the Division of Corporation Finance, and subject to the two immediately
following sentences, the Company and the Issuer believe that New Capital
Securities issued pursuant to this Exchange Offer in exchange for Old Capital
Securities may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Capital Securities are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Capital Securities. However, any holder of Old Capital Securities who
is an Affiliate or who intends to participate in the Exchange Offer for the
purpose of distributing the New Capital Securities, or any broker-dealer who
purchased the Old Capital Securities from the Issuer to resell pursuant to Rule
144A or any other available exemption under the Securities Act, (i) will not be
able to rely on the interpretations of the staff of the Division of Corporation
Finance of the Commission set forth in the above-mentioned no-action letters,
(ii) will not be permitted or entitled to tender such Old Capital Securities in
the Exchange Offer, and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or other
transfer of such Old Capital Securities unless such sale is made pursuant to an
exemption from such requirements. In addition, as described below, any
Participating Broker-Dealer must deliver a prospectus meeting the requirements
of the Securities Act in connection with any resales of such New Capital
Securities.

Each holder of Old Capital Securities that wishes to exchange
Old Capital Securities for New Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an Affiliate, (ii) any New Capital
Securities to be received by it are being acquired in the ordinary course of its
business, (iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
New Capital Securities, and (iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such New Capital Securities. The
Letter of Transmittal contains the foregoing representations. Each Participating
Broker-Dealer will be deemed to have acknowledged by execution of the Letter of
Transmittal or delivery of an Agent's Message (as defined herein) that it
acquired the Old Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Capital Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Based on the position
taken by the staff of the Division of Corporation Finance of the Commission in
the interpretive letters referred to above, the Company and the Issuer believe
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the New Capital Securities received upon exchange
of such Old Capital Securities (other than Old Capital Securities which
represent an unsold

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<PAGE>

allotment from the original sale of the Old Capital Securities) with a
prospectus meeting the requirements of the Securities Act, which may be the
prospectus prepared for an exchange offer so long as it contains a description
of the plan of distribution with respect to the resale of such New Capital
Securities. Accordingly, this Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer in connection
with resales of New Capital Securities received in exchange for Old Capital
Securities where such Old Capital Securities were acquired by such Participating
Broker-Dealer for its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the Registration Rights
Agreement and to the limitations described below under "The Exchange
Offer-Resales of New Capital Securities," the Company and the Issuer have agreed
that this Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in connection with resales of such
New Capital Securities for a period ending 180 days after the Expiration Date
or, if earlier, when all such New Capital Securities have been disposed of by
such Participating Broker-Dealer. See "Plan of Distribution." Any person,
including any Participating Broker-Dealer, who is an Affiliate may not rely on
such interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer-Resales of New Capital Securities."

EXCHANGE AGENT

The Exchange Agent is The Chase Manhattan Bank. The address
and telephone and facsimile numbers of the Exchange Agent are set forth under
"The Exchange Offer-Exchange Agent" and in the Letter of Transmittal.

USE OF PROCEEDS

Neither the Company nor the Issuer will receive any proceeds
from the issuance of the New Capital Securities offered hereby. See "Use of
Proceeds."

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS; CERTAIN ERISA CONSIDERATIONS

Holders of Old Capital Securities should review the
information set forth under "Certain Federal Income Tax Considerations" and
"Certain ERISA Considerations" prior to tendering Old Capital Securities in the
Exchange Offer.

NEW SECURITIES

GENERAL

The Capital Securities represent undivided beneficial
interests in the assets of the Issuer and will have a preference over the Common
Securities under certain circumstances with respect to Distributions and amounts
payable on liquidation, redemption or otherwise over the Common Securities. See
"Description of New Securities-Description of Capital Securities" and
"-Subordination Of Common Securities." The sole assets of the Issuer are the
Subordinated Debentures, and payments under the Subordinated Debentures will be
the sole revenue of the Issuer. The Subordinated Debentures are unsecured
subordinated debt securities issued under the Indenture between the Company and
The Chase Manhattan Bank, as trustee.

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<PAGE>

SECURITIES OFFERED

The Issuer is offering up to $200,000,000 aggregate
Liquidation Amount of the Issuer's Fixed/Adjustable Rate Capital Securities
which have been registered under the Securities Act (Liquidation Amount $1,000
per Capital Security). The New Capital Securities will be issued, and the Old
Capital Securities were issued, under the Trust Agreement. The New Capital
Securities and any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer will constitute a single series of Capital
Securities under the Trust Agreement and, accordingly, will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Trust Agreement. See "Description of New
Securities-Description of Capital Securities" and "-General." The terms of the
New Capital Securities are identical in all material respects to the terms of
the Old Capital Securities, except that the New Capital Securities have been
registered under the Securities Act and therefore are not subject to certain
restrictions on transfer applicable to the Old Capital Securities and will not
provide for any increase in the Distribution rate thereon. See "The Exchange
Offer-Purpose and Effect of Exchange Offer," "Description of New Securities" and
"Description of Old Securities."

DISTRIBUTIONS

Holders of the Capital Securities will be entitled to receive
preferential cumulative cash Distributions accruing from the date of original
issuance of the Old Capital Securities and payable semi-annually in arrears on
January 15 and July 15 of each year (the "Distribution Dates"), commencing July
15, 1997, at the annual rate of 7.00% through January 15, 2002 and thereafter at
the Applicable Rate from time to time in effect, to the persons in whose names
the Capital Securities are registered at the close of business on the relevant
record dates. See "Description of New Securities-Description of Capital
Securities" and "-Distributions."

Holders of Old Capital Securities whose Old Capital Securities
are accepted for exchange will not receive accumulated Distributions on such Old
Capital Securities for any period from and after the last Distribution Date with
respect to such Old Capital Securities prior to the original issue date of the
New Capital Securities or, if no such Distributions have been made, will not
receive any accumulated Distributions on such Old Capital Securities, and will
be deemed to have waived the right to receive any Distributions on such Old
Capital Securities accumulated from and after such Distribution Date or, if no
such Distributions have been made, from and after January 29, 1997.

The Subordinated Debentures are unsecured and rank subordinate
and junior in right of payment to all Senior Indebtedness of the Company. The
ability of the Issuer to pay amounts due on the Capital Securities is solely
dependent upon the Company making payments on the Subordinated Debentures as and
when required. See "Risk Factors-Ranking of Obligations Under the Guarantee and
the Subordinated Debentures."

OPTION TO EXTEND INTEREST PAYMENT PERIOD

So long as no Debenture Event of Default (as defined herein)
has occurred and is continuing, the Company has the right to defer payments of
interest on the Subordinated Debentures at any time or from time to time for a
period not exceeding ten consecutive semi-annual periods with respect to each
such Extension Period; provided, however, that no Extension Period may extend
beyond

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<PAGE>

the Stated Maturity. If interest payments on the Subordinated Debentures are
deferred, Distributions on the Capital Securities also will be deferred and the
Company will not be permitted, subject to certain exceptions set forth herein,
to declare or pay any cash distributions with respect to the Company's capital
stock or debt securities of the Company that rank pari passu with or junior to
the Subordinated Debentures. During an Extension Period, Distributions on the
Capital Securities will continue to accumulate and Distributions that are in
arrears will bear interest on the amount thereof at the annual rate of 7.00%
through January 15, 2002 and at the Applicable Rate thereafter, compounded
semi-annually, and holders of the Capital Securities, regardless of their
regular method of accounting, will be required to accrue income (in the form of
original issue discount) for United States Federal income tax purposes in
advance of receipt of the cash related to such income. Upon the termination of
any Extension Period and the payment of all amounts then due, the Company may
elect to begin a new Extension Period, subject to the requirements set forth
herein.

The Company believes that, as a result of its inability to pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock during an
Extension Period to the extent set forth herein and subject to certain
exceptions, the likelihood of its exercising its right to defer payments of
interest is remote. However, should the Company elect to exercise such right,
the market price of the Capital Securities is likely to be adversely affected. A
holder that disposes of its Capital Securities during an Extension Period,
therefore, might not receive the same return on its investment as a holder that
continues to hold its Capital Securities. See "Risk Factors- Option to Extend
Interest Payment Period; Tax Consequences; Price Consequences," "Description of
New Securities," "Description of Subordinated Debentures-Option to Defer
Interest Payments" and "Certain Federal Income Tax Consequences-Interest,
Original Issue Discount, Premium and Market Discount."

REDEMPTION; TAX EVENT

The Capital Securities are subject to mandatory redemption,
(i) at the Stated Maturity upon repayment of the Subordinated Debentures. The
Subordinated Debentures are redeemable, at the option of the Company, (i) on or
after January 15, 2002, in whole at any time or in part from time to time, or
(ii) at any time in whole (but not in part), upon the occurrence and
continuation of a Tax Event (as defined herein). See "Risk Factors-Tax Event
Redemption" and "Description of New Securities-Description of Capital
Securities" and "-Redemption."

See "Risk Factors-Possible Tax Law Changes Affecting the
Capital Securities" for a discussion of certain legislative proposals that, if
adopted, could give rise to a Tax Event, which may permit the Company to cause a
redemption of the Capital Securities prior to January 15, 2002.

No sinking fund will be established for the benefit of the
Capital Securities.

EXCHANGE OF CAPITAL SECURITIES FOR SUBORDINATED DEBENTURES

The holder of the Common Securities (i.e., the Company) has
the right to dissolve the Issuer at any time and, after satisfaction of
liabilities to creditors of the Issuer in accordance with applicable law cause
the Subordinated Debentures to be distributed to the holders of the Capital
Securities in liquidation of the Issuer, subject to the Issuer having received
an opinion of counsel to the effect that such distribution will not be a taxable
event to holders of Capital Securities. See "Description of New
Securities-Description of Capital Securities," "-Liquidation of Issuer and

17
<PAGE>

Distribution of Subordinated Debentures" and "Certain Federal Income Tax
Consequences-Receipt of Subordinated Debentures Upon Liquidation of the Issuer."

GUARANTEE

The payment of Distributions and payments on the liquidation
of the Issuer or the redemption of the Capital Securities are guaranteed by the
Company to the extent that the Issuer has sufficient funds available therefor.
Such guarantee is subordinate and junior in right of payment to all Senior Debt
of the Company. See "Risk Factors-Rights Under the Guarantee," "Description of
New Securities" and "Description of Guarantee."

TRANSFER

The Capital Securities will be issued, and may be transferred,
only in blocks having a Liquidation Amount of not less than $100,000 (100
Capital Securities). Any transfer, sale or other disposition of Capital
Securities resulting in a block having a Liquidation Amount of less than
$100,000 shall be deemed to be void and of no legal effect whatsoever.

ABSENCE OF MARKET FOR NEW CAPITAL SECURITIES

The New Capital Securities will be a new issue of securities
for which there currently is no market. Although Bear, Stearns & Co. Inc., Chase
Securities Inc., Goldman, Sachs & Co., J.P. Morgan Securities Inc. and
NationsBanc Capital Markets, Inc., the initial purchasers of the Old Capital
Securities (the "Initial Purchasers"), informed the Company and the Issuer in
connection with the offering of the Old Capital Securities that they each
intended to make a market in the Old Capital Securities, they are not obligated
to make a market in the Old Capital Securities or the New Capital Securities,
and any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the New Capital Securities. The Company has filed an application for
listing of the New Capital Securities on the NYSE.

<PAGE>

RISK FACTORS

Holders of the Old Capital Securities should carefully review the
information contained elsewhere in this Prospectus and should particularly
consider the following matters prior to tendering Old Capital Securities in the
Exchange Offer.

RANKING OF OBLIGATIONS UNDER THE GUARANTEE AND THE SUBORDINATED DEBENTURES

The obligations of the Company under the Guarantee and the Subordinated
Debentures are unsecured and rank subordinate and junior in right of payment to
all Senior Indebtedness of the Company. At December 31, 1996, the Company had
outstanding approximately $18.3 billion of Senior Indebtedness, none of which
was secured, and subsidiaries of the Company had outstanding approximately $1.3
billion of indebtedness (excluding $39.7 billion relating to securities sold
under repurchase agreements). None of the Indenture, the Guarantee or the Trust
Agreement places any limitation on the amount of secured or unsecured debt,
including Senior Indebtedness, that may be incurred by the Company. See
"Description of Guarantee-Status of the Guarantee" and "Description of
Subordinated Debentures-Subordination." Since the Company is a holding company,
the right of the Company to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the Capital Securities to benefit indirectly
from such distribution) is subject to the prior claims of creditors of that
subsidiary, except to the extent that the Company may itself be a creditor of
that subsidiary. Accordingly, the Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of Subordinated Debentures should look only to the
assets of the Company for payments on the Subordinated Debentures. See "The Bear
Stearns Companies Inc."

The ability of the Issuer to pay amounts due on the Capital Securities
is solely dependent upon the Company making payments on the Subordinated
Debentures as and when required.

OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; PRICE CONSEQUENCES

<PAGE>

(a) dividends or distributions in capital stock of the Company, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) purchases of common stock related to the
issuance of common stock or rights under any of the Company's benefit plans for
its directors, officers or employees and (e) payments of interest pursuant to
the EPICS Loan Agreement (as defined herein). Prior to the termination of any
such Extension Period, the Company may further extend such Extension Period
provided that such extension does not cause such Extension Period to exceed 10
consecutive semi-annual periods or to extend beyond the Stated Maturity. Upon
the termination of any Extension Period and the payment of all interest then
accrued and unpaid on the Subordinated Debentures (together with interest
thereon at the annual rate of 7.00% until January 15, 2002, and at the
Applicable Rate thereafter, compounded semi-annually, to the extent permitted by
applicable law), the Company may elect to begin a new Extension Period subject
to the above requirements. There is no limitation on the number of times that
the Company may elect to begin an Extension Period. See "Description of Capital
Securities-Distributions" and "Description of Subordinated Debentures-Option to
Defer Interest Payments."

Should an Extension Period occur, a holder of Capital Securities will,
regardless of its regular method of accounting, continue to accrue income for
United States Federal income tax purposes (in the form of original issue
discount) in respect of its pro rata share of the Subordinated Debentures held
by the Trust. As a result, a holder of Capital Securities will include such
income in gross income for United States Federal income tax purposes in advance
of the receipt of cash, and will not receive the cash related to such income
from the Trust if the holder disposes of the Capital Securities prior to the
record date for the payment of Distributions. See "Certain Federal Income Tax
Consequences-Interest, Original Issue Discount, Premium and Market Discount" and
"-Sale or Redemption of Capital Securities."

The Company believes that, as a result of its inability to pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock during an
Extension Period to the extent described in the second preceding paragraph, or
the other limitations described in the second preceding paragraph, the
likelihood of its exercising its right to defer payments of interest is remote.
However, should the Company elect to exercise such right, the market price of
the Capital Securities is likely to be adversely affected. A holder that
disposes of its Capital Securities during an Extension Period, therefore, might
not receive the same return on its investment as a holder that continues to hold
its Capital Securities. In addition, as a result of the existence of the
Company's right to defer interest payments, the market price of the Capital
Securities (which represent preferred beneficial interests in the Issuer) may be
more volatile than the market prices of other securities on which original issue
discount accrues that are not subject to such deferrals.

TAX EVENT REDEMPTION

Upon the occurrence and continuation of a Tax Event, the Company has
the right to prepay the Subordinated Debentures in whole (but not in part)
within 90 days following the occurrence of such Tax Event, and therefore cause a
mandatory redemption of the Capital Securities at the Tax Event Redemption
Price. See "Description of Capital Securities-Redemption."

<PAGE>

A "Tax Event" means the receipt by the Issuer of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Capital Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Issuer is, or will be within 90 days of the date
of such opinion, subject to United States Federal income tax with respect to
income received or accrued on the Subordinated Debentures, (ii) interest payable
by the Company on the Subordinated Debentures is not, or within 90 days of such
opinion, will not be, deductible by the Company, in whole or in part, for United
States Federal income tax purposes, or (iii) the Issuer is, or will be within 90
days of the date of the opinion, subject to more than a de minimis amount of
taxes, duties or governmental charges.

See "-Possible Tax Law Changes Affecting the Capital Securities" for a
discussion of certain legislative proposals that, if adopted, could give rise to
a Tax Event, which may permit the Company to cause a redemption of the Capital
Securities prior to January 15, 2002.

EXCHANGE OF CAPITAL SECURITIES FOR SUBORDINATED DEBENTURES

The Company will have the right at any time to dissolve the Issuer and,
after satisfaction of liabilities to creditors as required by applicable law,
cause the Subordinated Debentures to be distributed to the holders of the
Capital Securities in liquidation of the Issuer. See "Description of New
Securities-Liquidation of the Issuer and Distribution of Subordinated
Debentures."

Under current United States Federal income tax law and interpretations
thereof and assuming, as expected, that the Issuer is treated as a grantor trust
for United States Federal income tax purposes, a distribution by the Issuer of
the Subordinated Debentures pursuant to a liquidation of the Issuer will not be
a taxable event to the Issuer or to holders of the Capital Securities and will
result in a holder of the Capital Securities receiving directly such holder's
pro rata share of the Subordinated Debentures (previously held indirectly
through the Issuer). If, however, the liquidation of the Issuer were to occur
because the Trust is subject to United States Federal income tax with respect to
income accrued or received on the Subordinated Debentures as a result of the
occurrence of a Tax Event or otherwise, the distribution of Subordinated
Debentures to holders of the Capital Securities by the Issuer would be a taxable
event to the Issuer and each holder, and holders of the Capital Securities would
recognize gain or loss as if they had exchanged their Capital Securities for the
Subordinated Debentures they received upon the liquidation of the Issuer. See
"Certain Federal Income Tax Consequences-Receipt of Subordinated Debentures Upon
Liquidation of the Issuer."

Because holders of Capital Securities may receive Subordinated
Debentures on termination of the Issuer and because Distributions are otherwise
limited to payments on the Subordinated Debentures, prospective purchasers of
Capital Securities are also making an investment decision with regard to the
Subordinated Debentures and should carefully review all the information
regarding the Subordinated Debentures contained herein. See "Description of New
Securities" and "Description of Subordinated Debentures."

<PAGE>

PRICES FOR CAPITAL SECURITIES OR SUBORDINATED DEBENTURES

There can be no assurance as to the market prices for Capital
Securities or Subordinated Debentures that may be distributed in exchange for
Capital Securities if a liquidation of the Issuer occurs. Accordingly, the
Capital Securities that an investor may hold, or the Subordinated Debentures
that a holder of Capital Securities may receive on liquidation of the Issuer,
may trade at a discount to the price that the investor paid to purchase the
Capital Securities.

RIGHTS UNDER THE GUARANTEE

The Chase Manhattan Bank will act as the Guarantee Trustee and will
hold the Guarantee for the benefit of the holders of the Capital Securities. The
Chase Manhattan Bank will also act as Debenture Trustee for the Subordinated
Debentures and as Property Trustee under the Trust Agreement and its affiliate
Chase Manhattan Bank Delaware will act as Delaware Trustee under the Trust
Agreement. The Guarantee guarantees to the holders of the Capital Securities the
following payments, to the extent not paid by the Issuer: (i) any accumulated
and unpaid Distributions required to be paid on the Capital Securities, to the
extent that the Issuer has funds on hand available therefor at such time, (ii)
the redemption price with respect to any Capital Securities called for
redemption, to the extent that the Issuer has funds on hand available therefor
at such time, and (iii) upon a voluntary or involuntary termination, winding-up
or liquidation of the Issuer (unless the Subordinated Debentures are distributed
to holders of the Capital Securities), the lesser of (a) the aggregate of the
Liquidation Amount and all accumulated and unpaid Distributions to the date of
payment to the extent that the Issuer has funds on hand available therefor at
such time and (b) the amount of assets of the Issuer remaining available for
distribution to holders of the Capital Securities. The holders of not less than
a majority in aggregate Liquidation Amount of the Capital Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust power conferred upon the Guarantee Trustee
under the Guarantee. Any holder of the Capital Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Issuer, the
Guarantee Trustee or any other person or entity. If the Company were to default
on its obligation to pay amounts payable under the Subordinated Debentures, the
Trust would lack funds for the payment of Distributions or amounts payable on
redemption of the Capital Securities or otherwise, and, in such event, holders
of the Capital Securities would not be able to rely upon the Guarantee for
payment of such amounts. Instead, in the event a Debenture Event of Default
shall have occurred and be continuing and such event is attributable to the
failure of the Company to pay interest on or principal of the Subordinated
Debentures on the payment date on which such payment is due and payable, then a
holder of Capital Securities may institute a legal proceeding directly against
the Company for enforcement of payment to such holder of the principal of and
interest on such Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Capital Securities of such holder (a "Direct
Action"). Notwithstanding any payments made to a holder of Capital Securities by
the Company in connection with a Direct Action, the Company shall remain
obligated to pay the principal of and interest on the Subordinated Debentures,
and the Company shall be subrogated to the rights of the holder of such Capital
Securities with respect to payments on the Capital Securities to the extent of
any payments made by the Company to such holder in any Direct Action. Except as
described herein, holders of Capital Securities will not be able to exercise
directly any other remedy available to the holders of the Subordinated
Debentures or assert directly any other rights in respect of the Subordinated
Debentures. See "Description of Subordinated Debentures-Enforcement of Certain
Rights by Holders of Capital Securities," "Description of Subordinated
Debentures-Debenture Events

<PAGE>
of Default" and "Description of Guarantee." The Trust Agreement provides that
each holder of Capital Securities by acceptance thereof agrees to the provisions
of the Guarantee Agreement and the Indenture.

LIMITED VOTING RIGHTS

Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities and the exercise of
the Issuer's rights as holder of Subordinated Debentures. Holders of Capital
Securities will have limited authority to vote to remove or replace the Issuer
Trustees. The Property Trustee and the holders of a majority of the Common
Securities may amend the Trust Agreement without the consent of holders of
Capital Securities to ensure that the Trust will be classified for United States
Federal income tax purposes as a grantor trust even if such action adversely
affects the interests of such holders. See "Description of New Securities-Voting
Rights: Amendment of the Trust Agreement" and "Description of New
Securities-Removal of Issuer Trustees."

POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES

On February 6, 1997, President Clinton submitted to Congress a proposal to
implement certain tax legislation (the "Proposal"). As explained in the Joint
Committee on Taxation Staff Description of the Revenue Provisions contained in
the President's Fiscal 1998 Budget Proposals, issued March 11, 1997 (the "Joint
Committee Description"), the Proposal contains a provision which generally would
deny a deduction for interest on an instrument which (a) is issued by a
corporation, (b) has a maximum term of more than 15 years and (c) is not shown
as indebtedness on the separate balance sheet of the issuer (or, if the
instrument is issued to a related party other than a corporation and the holder
or some other related party issues a related instrument, such instrument is not
shown as indebtedness on the issuer's consolidated balance sheet). If such
provision were to apply to the Subordinated Debentures, the Company would be
unable to deduct interest on the Subordinated Debentures, which, under current
law, the Company believes it will be able to do. As explained in the Joint
Committee Description, such provision generally would be effective for
instruments issued on or after the date of first congressional committee action.
To date there has been no congressional committee action on the Proposal. There
can be no assurance that the Proposal will not result in legislation having a
retroactive effect which would apply to the Subordinated Debentures.
Furthermore, there can be no assurance that other legislation enacted after the
date hereof will not otherwise adversely affect the ability of the Company to
deduct the interest payable on the Subordinated Debentures. Accordingly, there
can be no assurance that the Proposal or any other such legislation will not
result in a Tax Event, which would permit the Company to cause a redemption of
the Capital Securities before, as well as after, January 15, 2002. See
"Description of New Securities-Redemption" and "Certain Federal Income Tax
Consequences-Possible Tax Law Changes."

CONSEQUENCES OF FAILURE TO EXCHANGE OLD CAPITAL SECURITIES

The Old Capital Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not subject thereto, and
in each case in compliance with certain other conditions and restrictions. Old
Capital Securities which remain outstanding after consummation of the Exchange
Offer will continue to bear a legend reflecting such restrictions on transfer.
In addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights

23
<PAGE>

Agreement (subject to certain limited exceptions). The Company and the Issuer do
not intend to register under the Securities Act any Old Capital Securities which
remain outstanding after consummation of the Exchange Offer (subject to such
limited exceptions, if applicable).

To the extent that Old Capital Securities are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered Old Capital Securities
could be adversely affected. In addition, although the Old Capital Securities
have been designated for trading in the Private Offerings, Resale and Trading
through Automatic Linkages ("PORTAL") market, to the extent that Old Capital
Securities are tendered and accepted in connection with the Exchange Offer, any
trading market for Old Capital Securities which remain outstanding after the
Exchange Offer could be adversely affected.

The New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will constitute a single
series of Capital Securities under the Trust Agreement and, accordingly, will
vote together as a single class for purposes of determining whether holders of
the requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Trust Agreement. See
"Description of New Securities--Description of Capital Securities; General."

The Old Capital Securities provide that, if the Exchange Offer is not
consummated by July 28, 1997, the Distribution rate borne by the Old Capital
Securities will increase by 0.25% per annum commencing on July 29, 1997, until
the Exchange Offer is consummated. See "Description of Old Capital Securities."
Following consummation of the Exchange Offer, the Old Capital Securities will
not be entitled to any increase in the Distribution rate thereon. The New
Capital Securities will not be entitled to any such increase in the Distribution
rate thereon.

ABSENCE OF PUBLIC MARKET

The Old Capital Securities were issued to, and the Company believes are
currently owned by, a relatively small number of beneficial owners. The Old
Capital Securities have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for the New Capital Securities. Although the New Capital Securities
will generally be permitted to be resold or otherwise transferred by the holders
(who are not Affiliates) without compliance with the registration requirements
under the Securities Act, they will constitute a new issue of securities with no
established trading market. Capital Securities may be transferred by the holders
thereof only in blocks having a Liquidation Amount of not less than $100,000
(100 Capital Securities). The Company and the Issuer were advised by the Initial
Purchasers in connection with the offering of the Old Capital Securities that
the Initial Purchasers intended to make a market in the Old Capital Securities.
However, the Initial Purchasers are not obligated to make a market in the Old
Capital Securities or the New Capital Securities and any market-making activity
with respect to the New Capital Securities may be discontinued at any time
without notice. In addition, such market-making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act and may be limited
during the Exchange Offer. The Company has filed an application for listing of
the New Capital Securities on the NYSE. However, there can be no assurance that
an active public or other market will develop for the New Capital Securities or
the Old Capital Securities or as to the liquidity of or the trading market for
the New Capital Securities or the Old Capital Securities. If an active public
market does not develop, the market price and liquidity of the New Capital
Securities may be adversely affected.

<PAGE>

If a public trading market develops for the New Capital Securities,
future trading prices of such securities will depend on many factors, including,
among other things, prevailing interest rates, results of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the New Capital Securities may trade at a discount.

Each Participating Broker-Dealer that receives New Capital
Securities for its own account must acknowledge that it will deliver a
prospectus in connection with any resale of such New Capital Securities. See
"Plan of Distribution."

EXCHANGE OFFER PROCEDURES

Issuance of the New Capital Securities in exchange for Old Capital
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Exchange Agent of such Old Capital Securities, a properly
completed and duly executed Letter of Transmittal or Agent's Message in lieu
thereof and all other required documents. Therefore, holders of the Old Capital
Securities desiring to tender such Old Capital Securities in exchange for New
Capital Securities should allow sufficient time to ensure timely delivery.
Neither the Company, the Issuer, nor the Exchange Agent is under any duty to
give notification of defects or irregularities with respect to the tenders of
Old Capital Securities for exchange.

25
<PAGE>

RATIOS OF EARNINGS TO FIXED CHARGES

The following sets forth the historical ratios of earnings to fixed
charges and the historical ratios of earning to fixed charges and preferred
stock dividends of the Company for the periods indicated:

SIX MONTHS SIX MONTHS FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, 1996 DEC. 31, 1995 JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993 JUNE 30, 1992
------------- ------------- ------------- ------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT FOR RATIO)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings before taxes on income. $ 469,072 $ 337,291 $ 834,926 $ 388,082 $ 642,799 $ 614,398 $ 507,625
========== =========== ========== =========== ========== ========== ============
Added Fixed Charges: Interest.. 1,163,865 959,348 1,981,171 1,678,515 1,023,866 710,086 834,859
Interest factor in rents........ 13,144 12,853 25,672 24,594 21,772 20,084 20,874
----------- ------------ ---------- ------------ ----------- ---------- ------------
Total Fixed Charges............. 1,177,099 972,201 2,006,843 1,703,109 1,045,638 730,170 855,733
---------- ----------- ---------- ----------- ----------- ---------- ------------
Earnings before fixed charges and
taxes on income.............. $1,646,081 $ 1,309,492 $2,841,769 $2,091,191 $ 1,688,437 $1,344,568 $ 1,363,358
Ratio of Earnings to Fixed Charges 1.4 1.3 1.4 1.2 1.6 1.8 1.6
</TABLE>

USE OF PROCEEDS

Neither the Company nor the Issuer will receive any proceeds from the
issuance of New Capital Securities offered hereby. The Old Capital Securities
surrendered in exchange for the New Capital Securities will be retired and
cancelled.

The net proceeds to the Issuer from the offering of the Old Capital
Securities was approximately $200,000,000 (before deducting expenses associated
with the offering). All of the proceeds from the sale of Old Capital Securities
were invested by the Issuer in Old Subordinated Debentures. The net proceeds
from the sale of the Old Subordinated Debentures were used by the Company for
general corporate purposes. Specific allocations of the proceeds to such
purposes have not been determined. The net proceeds may be used to reduce
outstanding short-term indebtedness of the Company. Based upon the anticipated
future funding requirements of the Company and its subsidiaries, the Company
expects that it will, from time to time, engage in additional equity or debt
financings.

26
<PAGE>

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company and its subsidiaries as of December 31, 1996 and as adjusted to give
effect to the consummation of the offering of the Old Capital Securities and the
application of the proceeds thereof. The following data should be read in
conjunction with the consolidated financial statements and notes thereto of the
Company and its subsidiaries incorporated herein by reference. See
"Incorporation of Certain Documents by Reference."

December 31, 1996
Actual As Adjusted
------ -----------
(in thousands)
(unaudited)

<S> <C> <C>
SHORT-TERM BORROWINGS:
Bank Borrowings................................................................. 673,359 673,359
Commercial Paper................................................................ 6,280,880 6,280,880
Medium-Term Notes & Other....................................................... 5,666,672 5,666,672
--------- ---------
TOTAL SHORT-TERM BORROWINGS........................................................ 12,620,911 12,620,911
========== ==========

LONG-TERM BORROWINGS:
Floating Rate Notes due 1998 to 2004............................................ 624,144 624,144
Fixed Rate Senior Notes due 1998 to 2006; interest rates
ranging from 5.75% to 9.375%.................................................. 2,719,708 2,719,708
Medium-Term Notes and Other..................................................... 3,085,369 3,085,369
--------- ---------
TOTAL LONG-TERM BORROWINGS................................................. 6,429,221 6,429,221
========= =========

Preferred Stock Issued by Subsidiary............................................... 150,000 150,000
Company-obligated mandatorily redeemable preferred
securities of subsidiary trust (1).............................................. -0- 200,000
STOCKHOLDERS' EQUITY:...........................................................
Preferred Stock, $1.00 par value, 10,000,000 shares authorized:
Adjustable Rate Cumulative Preferred Stock,
Series A--$50 liquidation preference; 3,000,000 shares issued................. 150,000 150,000
Cumulative Preferred Stock, Series B--$200 liquidation preference;
937,500 shares issued and outstanding......................................... 187,500 187,500
Cumulative Preferred Stock, Series C--$200 liquidation preference;
500,000 shares issued and outstanding......................................... 100,000 100,000
Common Stock, $1.00 par value; 200,000,000 shares
authorized; 159,803,764 shares issued......................................... 159,804 159,804
Paid-in Capital.................................................................... 1,696,419 1,696,419
Retained Earnings.................................................................. 931,969 931,969
Capital Accumulation Plan.......................................................... 460,477 460,477
Treasury Stock:
Adjustable Rate Cumulative Preferred Stock,
Series A--2,512,350 shares.................................................... (103,043) (103,043)
Common Stock--44,859,306 shares................................................. (680,936) (690,936)
Note Receivable from ESOP Trust.................................................... ( 13,701) ( 13,701)
--------- --------
Total Stockholders' Equity................................................. 2,888,489 2,888,489
========= =========
TOTAL LONG-TERM BORROWINGS, PREFERRED STOCK
ISSUED BY SUBSIDIARY, COMPANY-OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUST AND STOCKHOLDERS' EQUITY 9,467,710 9,667,710
<FN>
- -----------
Notes:
(1) The "company-obligated mandatorily redeemable preferred securities of
subsidiary trust" reflects the Capital Securities. The Issuer is a
wholly-owned subsidiary of the Company and will hold the Subordinated
Debentures as its sole asset.

</FN>
</TABLE>

27
<PAGE>

BEAR STEARNS CAPITAL TRUST I

Bear Stearns Capital Trust I is a statutory business trust created under
Delaware law pursuant to (i) the Trust Agreement executed by the Company, as
Depositor and the Delaware Trustee and (ii) the filing of a certificate of trust
with the Delaware Secretary of State on January 14, 1997. The Issuer exists for
the exclusive purposes of (i) issuing and selling the Capital Securities and
Common Securities, (ii) using the proceeds from the sale of Capital Securities
and Common Securities to acquire Subordinated Debentures issued by the Company,
and (iii) engaging in only those other activities necessary, advisable or
incidental thereto (such as registering the transfer of the Capital Securities).
Accordingly, the Subordinated Debentures are the sole assets of the Issuer, and
payments by the Company under the Subordinated Debentures and the expense
provisions in the indenture are the sole revenue of the Issuer. All of the
Common Securities are owned by the Company. The Common Securities rank pari
passu, and payments will be made thereon pro rata, with the Capital Securities
except that upon the occurrence and continuance of an event of default under the
Trust Agreement resulting from a Debenture Event of Default, the rights of the
Company as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Capital Securities. See
"Description of New Securities--Subordination of Common Securities." The Company
acquired Common Securities in an aggregate liquidation amount equal to 3% (i.e.,
$6,186,000) of the total capital of the Issuer.

The Issuer has a term of 55 years, but may dissolve earlier as provided in
the Trust Agreement. The Issuer's business and affairs are conducted by the
Administrators and its trustees, each appointed by the Company as holder of the
Common Securities. Under the Amended and Restated Trust Agreement of the Issuer
(the "Trust Agreement"), the trustees for the Issuer are The Chase Manhattan
Bank as the Property Trustee and Chase Manhattan Bank Delaware as the Delaware
Trustee (collectively, the "Issuer Trustees"). In addition, three individuals
who are initially employees or officers of or affiliated with the holder of a
majority of the Common Securities act as administrators with respect to the
Issuer (the "Administrators"). The Administrators will be selected from time to
time by the holders of a majority of the Common Securities. The Chase Manhattan
Bank also acts as trustee under the Guarantee and the Indenture (each as defined
herein). See "Description of Guarantee" and "Description of Subordinated
Debentures." The holders of a majority in Liquidation Amount of outstanding
Capital Securities may remove the Property Trustee and the Delaware Trustee, if
a Debenture Event of Default has occurred and is continuing. If an Issuer
Trustee is removed by the holders of Capital Securities, the successor may be
appointed by the holders of a majority in Liquidation Amount of Capital
Securities. If an Issuer Trustee resigns, such Issuer Trustee shall appoint its
successor. The duties and obligations of each Issuer Trustee are governed by the
Trust Agreement. The Company will pay all fees and expenses relating to the
Issuer and the offering of the Capital Securities and will pay, directly or
indirectly, all ongoing costs, expenses and liabilities of the Issuer.

The principal executive office of the Issuer is 245 Park Avenue, New York,
New York 10167 and its telephone number is (212) 272-2000.

THE BEAR STEARNS COMPANIES INC.

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 and institutional and
individual investors worldwide. The business of the Company includes
market-making and trading in

<PAGE>

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; and acting as
specialist on the floor of the 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, Lugano and Shanghai; through international subsidiaries in Buenos Aires,
Dublin, Hong Kong, London, Paris, Sao Paulo, Singapore and Tokyo; and through
joint ventures with other firms in 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 Commission.
They also are members of the NYSE, all other principal United States securities
and commodities exchanges, 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.

ACCOUNTING TREATMENT

For financial reporting purposes, the Issuer will be treated as a
subsidiary of the Company and, accordingly, the accounts of the Issuer will be
included in the consolidated financial statements of the Company. The Capital
Securities will be presented as a separate line item in the consolidated balance
sheet of the Company, and appropriate disclosures about the Capital Securities,
the Guarantee and the Subordinated Debentures will be included in the notes to
the consolidated financial statements. For financial reporting purposes, the
Company will record Distributions paid and payable on the Capital Securities as
an expense in the consolidated statement of income.

THE EXCHANGE OFFER

PURPOSE AND EFFECT OF EXCHANGE OFFER

In connection with the sale of the Old Capital Securities, the Company
and the Issuer entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Company and the Issuer agreed to file and to
use their reasonable best efforts to cause to be declared effective by the
Commission a registration statement with respect to the exchange of the Old
Capital Securities for capital securities with terms identical in all material
respects to the terms of the Old Capital Securities.

<PAGE>

A copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

The Exchange Offer is being made to satisfy the contractual obligations
of the Company and the Issuer under the Registration Rights Agreement. The form
and terms of the New Capital Securities are the same as the form and terms of
the Old Capital Securities, except that the New Capital Securities (i) have been
registered under the Securities Act and therefore will not be subject to certain
restrictions on transfer applicable to the Old Capital Securities, and (ii) will
not provide for any increase in the Distribution rate thereon. In that regard,
the Old Capital Securities provide, among other things, that, if the Exchange
Offer is not consummated within a specified period after the date the Old
Capital Securities were issued, the Distribution rate borne by the Old Capital
Securities will increase by 0.25% per annum until the Exchange Offer is
consummated. Upon consummation of the Exchange Offer, holders of Old Capital
Securities will not be entitled to any increase in the Distribution rate thereon
or any further registration rights under the Registration Rights Agreement,
except under limited circumstances. See "Risk Factors-Consequences of Failure to
Exchange Old Capital Securities" and "Description of Old Securities."

The Exchange Offer is not being made to, nor will the Issuer or the
Company accept tenders for exchange from, holders of Old Capital Securities in
any jurisdiction in which the Exchange Offer or the acceptance thereof would not
be in compliance with the securities or blue sky laws of such jurisdiction.

Unless the context requires otherwise, the term "holder" with respect
to the Exchange Offer means any person in whose name the Old Capital Securities
are registered on the books of the Issuer or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Capital Securities are held of record by DTC who desires to deliver such Old
Capital Securities by book entry transfer at DTC.

Pursuant to the Exchange Offer, the Company will exchange as soon as
practicable after the date hereof, the Old Guarantee for the New Guarantee and
all of the Old Subordinated Debentures, of which $206,186,000 aggregate
principal amount is outstanding, for a like aggregate principal amount of the
New Subordinated Debentures. The New Guarantee and New Subordinated Debentures
have been registered under the Securities Act.

TERMS OF EXCHANGE

The Issuer hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $200,000,000 aggregate Liquidation Amount of New Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
properly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with the procedures described below. The Issuer will issue,
promptly after the Expiration Date, an aggregate Liquidation Amount of up to
$200,000,000 of New Capital Securities in exchange for a like aggregate
Liquidation Amount of outstanding Old Capital Securities tendered and accepted
in connection with the Exchange Offer. Holders may tender their Old Capital
Securities in whole or in part in a Liquidation Amount of not less than $100,000
or any integral multiple of $1,000 in excess thereof.

<PAGE>

The Exchange Offer is not conditioned upon any minimum Liquidation
Amount of Old Capital Securities being tendered. As of the date of this
Prospectus, $200,000,000 aggregate Liquidation Amount of the Old Capital
Securities is outstanding.

Holders of Old Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Old Capital Securities
which are not tendered for or are tendered but not accepted in connection with
the Exchange Offer will remain outstanding and be entitled to the benefits of
the Trust Agreement, but will not be entitled to any further registration rights
under the Registration Rights Agreement, except under limited circumstances. See
"Risk Factors-Consequences of Failure to Exchange Old Capital Securities" and
"Description of Old Securities."

If any tendered Old Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
therein or otherwise, certificates for any such unaccepted Old Capital
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.

Holders who tender Old Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Old Capital Securities in connection with the
Exchange Offer. The Company will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the Exchange Offer.
See "-Fees and Expenses."

NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR ANY ADMINISTRATOR OR
ANY TRUSTEE OF THE ISSUER MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL
SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO
ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL
SECURITIES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE
EXCHANGE OFFER AND, IF SO, THE AGGREGATE LIQUIDATION AMOUNT OF OLD CAPITAL
SECURITIES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL
AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL
POSITION AND REQUIREMENTS.

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The term "Expiration Date" means 5:00 p.m., New York City time, on
April __, 1997, unless the Exchange Offer is extended by the Company and the
Issuer (in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended).

The Company and the Issuer expressly reserve the right in their sole
discretion, subject to applicable law, at any time and from time to time, (i) to
delay the acceptance of the Old Capital Securities for exchange, (ii) to
terminate the Exchange Offer (whether or not any Old Capital Securities have
theretofore been accepted for exchange) if the Company and the Issuer determine,
in their sole discretion, that any of the events or conditions referred to under
"-Conditions to the Exchange Offer" have occurred or exist or have not been
satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain
all Old Capital Securities tendered pursuant to the Exchange Offer, subject,
however, to the right of holders of Old Capital Securities to withdraw their
tendered Old Capital Securities as

31
<PAGE>

described under "-Withdrawal Rights," and (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in any respect. If the Exchange
Offer is amended in a manner determined by the Company and the Issuer to
constitute a material change, or if the Company and the Issuer waive a material
condition of the Exchange Offer, the Company and the Issuer will promptly
disclose such amendment by means of an amended or supplemented Prospectus that
will be distributed to the registered holders of the Old Capital Securities, and
the Company and the Issuer will extend the Exchange Offer to the extent required
by Rule 14e-l under the Exchange Act.

Any such delay in acceptance, extension, termination or amendment will
be followed promptly by oral (promptly confirmed in writing) or written notice
thereof to the Exchange Agent and by making a public announcement thereof, and
such announcement in the case of an extension will be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Company and
the Issuer may choose to make any public announcement and subject to applicable
law, the Company and the Issuer shall have no obligation to publish, advertise
or otherwise communicate any such public announcement other than by issuing a
release to an appropriate news agency.

ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW CAPITAL SECURITIES

Upon the terms and subject to the conditions of the Exchange Offer, the
Issuer will exchange, and will issue to the Exchange Agent, New Capital
Securities for Old Capital Securities validly tendered and not withdrawn
(pursuant to the withdrawal rights described under "-Withdrawal Rights")
promptly after the Expiration Date.

In all cases, delivery of New Capital Securities in exchange for Old
Capital Securities tendered and accepted for exchange pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of (i) Old
Capital Securities or a book-entry confirmation of a book-entry transfer of Old
Capital Securities into the Exchange Agent's account at DTC, including an
Agent's Message if the tendering holder has not delivered a Letter of
Transmittal, (ii) the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees or (in the
case of a book-entry transfer) an Agent's Message in lieu of the Letter of
Transmittal, and (iii) any other documents required by the Letter of
Transmittal.

The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's account
at DTC. The term "Agent's Message" means a message, transmitted by DTC to and
received by the Exchange Agent and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgement from the tendering
participant, which acknowledgement states that such participant has received and
agrees to be bound by the Letter of Transmittal and that the Issuer and the
Company may enforce such Letter of Transmittal against such participant.

Subject to the terms and conditions of the Exchange Offer, the Company
and the Issuer will be deemed to have accepted for exchange, and thereby
exchanged, Old Capital Securities validly tendered and not withdrawn as, if and
when the Issuer gives oral (promptly confirmed in writing) or written notice to
the Exchange Agent of the Company's and the Issuer's acceptance of such Old
Capital Securities for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Company and the Issuer for the purpose of
receiving tenders of Old Capital Securities, Letters of

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<PAGE>

Transmittal and related documents, and as agent for tendering holders for the
purpose of receiving Old Capital Securities, Letters of Transmittal and related
documents and transmitting New Capital Securities to validly tendering holders.
Such exchange will be made promptly after the Expiration Date. If for any reason
whatsoever, acceptance for exchange or the exchange of any Old Capital
Securities tendered pursuant to the Exchange Offer is delayed (whether before or
after the Company's and the Issuer's acceptance for exchange of Old Capital
Securities) or the Company and the Issuer extend the Exchange Offer or are
unable to accept for exchange or exchange Old Capital Securities tendered
pursuant to the Exchange Offer, then, without prejudice to the Company's and the
Issuer's rights set forth herein, the Exchange Agent may, nevertheless, on
behalf of the Company and the Issuer and subject to Rule 14e- 1(c) under the
Exchange Act, retain tendered Old Capital Securities and such Old Capital
Securities may not be withdrawn except to the extent tendering holders are
entitled to withdrawal rights as described under "-Withdrawal Rights."

Pursuant to the Letter of Transmittal or Agent's Message in lieu
thereof, a holder of Old Capital Securities will warrant and agree in the Letter
of Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Old Capital Securities, that the Issuer will acquire good,
marketable and unencumbered title to the tendered Old Capital Securities, free
and clear of all liens, restrictions, charges and encumbrances, and that the Old
Capital Securities tendered for exchange are not subject to any adverse claims
or proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Company, the Issuer
or the Exchange Agent to be necessary or desirable to complete the exchange,
sale, assignment, and transfer of the Old Capital Securities tendered pursuant
to the Exchange Offer.

PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES

Valid Tender. Except as set forth below, in order for Old Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees, or (in the case of a book-entry tender) an
Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must be received by the Exchange Agent at its address set forth under
"-Exchange Agent," and either (i) tendered Old Capital Securities must be
received by the Exchange Agent, or (ii) such Old Capital Securities must be
tendered pursuant to the procedures for book-entry transfer set forth below and
a book-entry confirmation, including an Agent's Message if the tendering holder
has not delivered a Letter of Transmittal, must be received by the Exchange
Agent, in each case on or prior to the Expiration Date, or (iii) the guaranteed
delivery procedures set forth below must be complied with.

If less than all of the Old Capital Securities are tendered, a
tendering holder should fill in the amount of Old Capital Securities being
tendered in the appropriate box on the Letter of Transmittal or so indicate in
an Agent's Message in lieu of the Letter of Transmittal and the untendered
Liquidation Amount must be $100,000 or any integral multiple of $1,000 in excess
thereof. The entire amount of Old Capital Securities delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated.

THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY

<PAGE>

SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED
TO ENSURE TIMELY DELIVERY.

Book Entry Transfer. The Exchange Agent will establish an account with
respect to the Old Capital Securities at DTC for purposes of the Exchange Offer
within two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book entry delivery of the Old Capital Securities by causing DTC to
transfer such Old Capital Securities into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfers. However, although delivery of
Old Capital Securities may be effected through book entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any
other required documents, must in any case be delivered to and received by the
Exchange Agent at its address set forth under "-Exchange Agent" on or prior to
the Expiration Date, or the guaranteed delivery procedure set forth below must
be complied with.

DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT

Signature Guarantees. Certificates for the Old Capital Securities need
not be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (i) a certificate for the Old Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (ii) such registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (i) or (ii) above, such certificates for Old Capital Securities
must be duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the Letter of Transmittal
guaranteed by a firm or other entity identified in Rule l7Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association (an "Eligible Institution"), unless surrendered
on behalf of such Eligible Institution. See Instruction 1 to the Letter of
Transmittal.

Guaranteed Delivery. If a holder desires to tender Old Capital
Securities pursuant to the Exchange Offer and the certificates for such Old
Capital Securities are not immediately available or time will not permit all
required documents to reach the Exchange Agent on or before the Expiration Date,
or the procedures for book-entry transfer cannot be completed on a timely basis,
such Old Capital Securities may nevertheless be tendered, provided that all of
the following guaranteed delivery procedures are complied with:

(i) such tenders are made by or through an Eligible Institution;

(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided below, on or prior to
Expiration Date; and

(iii) the certificates (or a book-entry confirmation) representing all
tendered Old Capital Securities, in proper form for transfer, together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof or Agent's Message in lieu thereof), with any required signature

34
<PAGE>

guarantees and any other documents required by the Letter of Transmittal
are received by the Exchange Agent within three New York Stock Exchange
trading days after the date of execution of such Notice of Guaranteed
Delivery.

The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.

Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a
book-entry confirmation with respect to such Old Capital Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile thereof
or Agent's Message in lieu thereof), together with any required signature
guarantees and any other documents required by the Letter of Transmittal.
Accordingly, the delivery of New Capital Securities might not be made to all
tendering holders at the same time, and will depend upon when Old Capital
Securities, book-entry confirmations with respect to Old Capital Securities and
other required documents are received by the Exchange Agent.

The Company's and the Issuer's acceptance for exchange of Old Capital
Securities tendered pursuant to any of the procedures described above will
constitute a binding agreement among the tendering holder, the Company and the
Issuer upon the terms and subject to the conditions of the Exchange Offer.

Determination Of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Capital Securities will be determined by the Company and the
Issuer, in their sole discretion, whose determination shall be final and binding
on all parties. The Company and the Issuer reserve the absolute right, in their
sole discretion, to reject any and all tenders determined by them not to be in
proper form or the acceptance of which, or exchange for, may, in the view of
counsel to the Company or the Issuer, be unlawful. The Company and the Issuer
also reserve the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer as set forth under "-Conditions to the Exchange
Offer" or any condition or irregularity in any tender of Old Capital Securities
of any particular holder whether or not similar conditions or irregularities are
waived in the case of other holders.

The Company's and the Issuer's interpretation of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Old Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the Company, the
Issuer, any affiliates or assigns of the Company or the Issuer, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in tenders or incur any liability for failure to give any
such notification.

If any Letter of Transmittal, endorsement, bond power, power of
attorney, or any other document required by the Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Issuer,
proper evidence satisfactory to the Company and the Issuer, in their sole
discretion, of such person's authority to so act must be submitted.

35
<PAGE>

A beneficial owner of Old Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.

RESALES OF NEW CAPITAL SECURITIES

The Issuer is making the Exchange Offer for the Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance of
the Commission as set forth in certain no-action letters addressed to third
parties in other transactions. However, neither the Company nor the
Issuer sought its own no-action letter, and there can be no assurance that the
staff of the Division of Corporation Finance of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
no-action letters to third parties. Based on these interpretations by the staff
of the Division of Corporation Finance, and subject to the two immediately
following sentences, the Company and the Issuer believe that New Capital
Securities issued pursuant to this Exchange Offer in exchange for Old Capital
Securities may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Capital Securities are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Capital Securities. However, any holder of Old Capital Securities who
is an Affiliate or who intends to participate in the Exchange Offer for the
purpose of distributing New Capital Securities, or any broker-dealer who
purchased Old Capital Securities from the Issuer to resell pursuant to Rule 144A
or any other available exemption under the Securities Act, (i) will not be able
to rely on the interpretations of the staff of the Division of Corporation
Finance of the Commission set forth in the above-mentioned no-action letters,
(ii) will not be permitted or entitled to tender such Old Capital Securities in
the Exchange Offer, and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or other
transfer of such Old Capital Securities unless such sale is made pursuant to an
exemption from such requirements. In addition, as described below, Participating
Broker-Dealers must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of New Capital Securities.

Each holder of Old Capital Securities who wishes to exchange Old
Capital Securities for New Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an Affiliate, (ii) any New Capital
Securities to be received by it are being acquired in the ordinary course of its
business, (iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
New Capital Securities, and (iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such New Capital Securities. The
Letter of Transmittal contains the foregoing representations. In addition, the
Company and the Issuer may require such holder, as a condition to such holder's
eligibility to participate in the Exchange Offer, to furnish to the Company and
the Issuer (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act) on
behalf of whom such holder holds the Capital Securities to be exchanged in the
Exchange Offer. Each Participating Broker-Dealer will be deemed to have
acknowledged by execution of the Letter of Transmittal or delivery of an Agent's
Message that it acquired the Old Capital Securities for its own account as the
result of market-making activities or other trading activities and must agree
that it will deliver a prospectus meeting the

<PAGE>

requirements of the Securities Act in connection with any resale of such New
Capital Securities. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation Finance
of the Commission in the interpretive letters referred to above, the Company and
the Issuer believe that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the New Capital Securities
received upon exchange of such Old Capital Securities (other than Old Capital
Securities which represent an unsold allotment from the original sale of the Old
Capital Securities) with a prospectus meeting the requirements of the Securities
Act, which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale of
such New Capital Securities. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Capital
Securities received in exchange for Old Capital Securities where such Old
Capital Securities were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the Company
and the Issuer have agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such New Capital Securities for a period ending 180
days after the Expiration Date or, if earlier, when all such New Capital
Securities have been disposed of by such Participating Broker-Dealer. See "Plan
of Distribution." Any person, including any Participating Broker-Dealer, who is
an Affiliate may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.

In that regard, each Participating Broker-Dealer who surrenders Old
Capital Securities pursuant to the Exchange Offer will be deemed to have agreed,
by execution of the Letter of Transmittal or delivery of an Agent's Message in
lieu thereof, that, upon receipt of notice from the Company or the Issuer of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of New
Securities pursuant to this Prospectus until the Company or the Issuer has
amended or supplemented this Prospectus to correct such misstatement or omission
and has furnished copies of the amended or supplemented Prospectus to such
Participating Broker-Dealer or the Company or the Issuer has given notice that
the sale of the New Securities may be resumed, as the case may be.

WITHDRAWAL RIGHTS

Except as otherwise provided herein, tenders of Old Capital Securities
may be withdrawn at any time on or prior to the Expiration Date.

In order for a withdrawal to be effective a written, telegraphic, telex
or facsimile transmission of such notice of withdrawal must be timely received
by the Exchange Agent at its address set forth under "-Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Capital Securities to be withdrawn, the
aggregate principal amount of Old Capital Securities to be withdrawn, and (if
certificates for such Old Capital

<PAGE>

Securities have been tendered) the name of the registered holder of the Old
Capital Securities as set forth on the Old Capital Securities, if different from
that of the person who tendered such Old Capital Securities. If Old Capital
Securities have been delivered or otherwise identified to the Exchange Agent,
then prior to the physical release of such Old Capital Securities, the tendering
holder must submit the certificate numbers shown on the particular Old Capital
Securities to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Capital
Securities tendered for the account of an Eligible Institution. If Old Capital
Securities have been tendered pursuant to the procedures for book-entry transfer
set forth in "-Procedures for Tendering Old Capital Securities," the notice of
withdrawal must specify the name and number of the account at DTC to be credited
with the withdrawal of Old Capital Securities, in which case a notice of
withdrawal will be effective if delivered to the Exchange Agent by written,
telegraphic, telex or facsimile transmission. Withdrawals of tenders of Old
Capital Securities may not be rescinded. Old Capital Securities properly
withdrawn will not be deemed validly tendered for purposes of the Exchange
Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described above under
"-Procedures for Tendering Old Capital Securities."

All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Company and the
Issuer, in their sole discretion, whose determination shall be final and binding
on all parties. Neither the Company, the Issuer, any affiliates or assigns of
the Company or the Issuer, the Exchange Agent nor any other person shall be
under any duty to give any notification of any irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification. Any
Old Capital Securities which have been tendered but which are withdrawn will be
returned to the holder thereof promptly after withdrawal.

DISTRIBUTIONS ON NEW CAPITAL SECURITIES

Holders of Old Capital Securities whose Old Capital Securities are
accepted for exchange will not receive accumulated Distributions on such Old
Capital Securities for any period from and after the last Distribution Date with
respect to such Old Capital Securities prior to the original issue date of the
New Capital Securities or, if no such Distributions have been made, will not
receive any accumulated Distributions on such Old Capital Securities, and will
be deemed to have waived the right to receive any Distributions on such Old
Capital Securities accumulated from and after such Distribution Date or, if no
such Distributions have been made, from and after January 29, 1997.

CONDITIONS TO THE EXCHANGE OFFER

Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company and the Issuer will not be required
to accept for exchange, or to exchange, any Old Capital Securities for any New
Capital Securities, and, as described below, may terminate the Exchange Offer
(whether or not any Old Capital Securities have theretofore been accepted for
exchange) or may waive any conditions to or amend the Exchange Offer, if any of
the following conditions have occurred or exists or have not been satisfied:

(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the New Capital Securities issued
pursuant to the Exchange Offer in exchange for Old Capital Securities to be
offered for resale, resold and otherwise transferred by holders thereof
(other than broker-dealers and any such holder which is an Affiliate)
without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New

38
<PAGE>

Capital Securities are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any
person to participate in the distribution of such New Capital Securities;

(b) any action or proceeding shall have been instituted or threatened
in any court or by or before any governmental agency or body with respect
to the Exchange Offer which, in the Company's and the Issuer's judgment,
would reasonably be expected to impair the ability of the Issuer or the
Company to proceed with the Exchange Offer;

(c) any law, statute, rule or regulation shall have been adopted or
enacted which, in the Company's and the Issuer's judgment, would reasonably
be expected to impair the ability of the Issuer or the Company to proceed
with the Exchange Offer;

(d) a banking moratorium shall have been declared by United States
Federal or New York State authorities which, in the Company's and the
Issuer's judgment, would reasonably be expected to impair the ability of
the Issuer or the Company to proceed with the Exchange Offer;

(e) trading on the New York Stock Exchange or generally in the United
States over-the-counter market shall have been suspended by order of the
Commission or any governmental authority which, in the Company's and the
Issuer's judgment, would reasonably be expected to impair the ability of
the Issuer or the Company to proceed with the Exchange Offer;

(f) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Company or the Issuer, threatened for that purpose any governmental
approval has not been obtained, which approval the Company and the Issuer
shall deem necessary for the consummation of the Exchange Offer as
contemplated hereby; or

(g) any change, or any development involving a prospective change, in
the business or financial affairs of the Issuer or the Company or any of
its subsidiaries has occurred which, in the judgment of the Company and the
Issuer, might materially impair the ability of the Issuer or the Company to
proceed with the Exchange Offer.

If the Company and the Issuer determine in their sole discretion that
any of the foregoing events or conditions has occurred or exists or has not been
satisfied, the Company and the Issuer may, subject to applicable law, terminate
the Exchange Offer (whether or not any Old Capital Securities have theretofore
been accepted for exchange) or may waive any such condition or otherwise amend
the terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Company and the Issuer
will promptly disclose such waiver by means of an amended or supplemented
Prospectus that will be distributed to the registered holders of the Old Capital
Securities, and the Company and the Issuer will extend the Exchange Offer to the
extent required by Rule 14e-1 under the Exchange Act.

EXCHANGE AGENT

The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for

39
<PAGE>

assistance, and requests for additional copies of this Prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent as follows:

THE CHASE MANHATTAN BANK

BY MAIL, HAND OR OVERNIGHT DELIVERY:

55 Water Street
Room 234
North Building
New York, New York 10041
Attention: Carlos Esteves

BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):

(212) 638-7375
(212) 344-9367

CONFIRM BY TELEPHONE

Carlos Esteves: (212) 638-0828

Delivery to other than the above address or facsimile number will not
constitute a valid delivery.

FEES AND EXPENSES

The Company has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Company will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Old Capital Securities, and in
handling or tendering for their customers.

Holders who tender their Old Capital Securities for exchange will not
be obligated to pay any transfer taxes in connection therewith. If, however, New
Capital Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Capital Securities
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Capital Securities in connection with the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.

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<PAGE>

DESCRIPTION OF NEW SECURITIES

DESCRIPTION OF CAPITAL SECURITIES

Pursuant to the terms of the Trust Agreement, the Issuer has issued the
Capital Securities and the Common Securities and will issue the New Capital
Securities. The New Capital Securities will represent undivided beneficial
interests in the assets of the Issuer and the holders thereof will be entitled
to a preference over the Common Securities in certain circumstances with respect
to Distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Issuer. See "-Subordination of Common Securities." The Trust
Agreement has been qualified under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). This summary of certain provisions of the Capital
Securities, the Common Securities and the Trust Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Trust Agreement, including the definitions therein of
certain terms.

GENERAL

The Capital Securities (including the Old Capital Securities and the New
Capital Securities) will be limited to $200,000,000 aggregate Liquidation Amount
at any one time outstanding, including, any Exchange Capital Securities that may
be issued from time to time in exchange for the Capital Securities as described
under "Exchange Offer; Registration Rights." The Capital Securities rank pari
passu, and payments will be made thereon pro rata, with the Common Securities
except as described under "-Subordination of Common Securities." Legal title to
the Subordinated Debentures is held by the Property Trustee in trust for the
benefit of the holders of the Capital Securities and Common Securities. The
Guarantee executed by the Company for the benefit of the holders of the Capital
Securities is a guarantee on a subordinated basis but does not guarantee payment
of Distributions or amounts payable on redemption of the Capital Securities or
on liquidation of the Issuer when the Issuer does not have funds on hand
available to make such payments. See "Description of New Securities--Description
of Guarantee."

DISTRIBUTIONS

Distributions on the Capital Securities are cumulative from the date of
original issuance of the Old Capital Securities and are payable at the annual
rate (the "Coupon Rate") of 7.00% of the Liquidation Amount until January 15,
2002, and at the Applicable Rate of the Liquidation Amount thereafter, and are
payable semi-annually in arrears on January 15 and July 15 of each year,
commencing July 15, 1997, to the holders of the Capital Securities on the
relevant record dates. The record dates are the first day of the month in which
the relevant Distribution Date (as defined below) occurs. The "Applicable Rate"
with respect to Distributions on the Capital Securities shall be the rate
determined by Bear Stearns, as Calculation Agent (the "Calculation Agent"), on
any Applicable Rate Determination Date (as hereinafter defined) to be a rate
equal to three-month LIBOR plus 1.75%. For this purpose, LIBOR shall be
calculated in accordance with the following provisions: (i) with respect to an
Applicable Rate Determination Date, LIBOR will be determined by the Calculation
Agent on the basis of the offered rate for three-month deposits in U.S. dollars,
commencing on the second London Banking Day immediately following such
Applicable Rate Determination Date, which appears on Telerate page 3750 (or such
other page as may replace such Telerate page 3750 for the purpose of displaying
London interbank rates of major banks), as of 11:00 A.M., London time, on such
Applicable Rate

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<PAGE>

Determination Date. If no rate appears on Telerate page 3750 (or such other page
as may replace such page), LIBOR in respect of that Applicable Rate
Determination Date will be determined as if the parties had specified the rate
described in (ii) below; (ii) with respect to an Applicable Rate Determination
Date on which no offered rate appears on Telerate page 3750 (or such other
page), as applicable, as described in (i) above, LIBOR will be determined by the
Calculation Agent on the basis of the rates at approximately 11:00 A.M., London
time, on such Applicable Rate Determination Date at which three-month deposits
in U.S. dollars are offered to prime banks in the London interbank market by
four major banks in the London interbank market selected by the Calculation
Agent commencing on the second London Banking Day immediately following such
Applicable Rate Determination Date and in a principal amount equal to an amount
of not less than $1,000,000 that is representative of a single transaction in
such market at such time. The Calculation Agent will request the principal
London office of each of such banks to provide a quotation of its rate. If at
least two such quotations are provided, LIBOR for such Applicable Rate
Determination Date will be the arithmetic mean of such quotations. If fewer than
two quotations are provided, LIBOR for such Applicable Rate Determination Date
will be the arithmetic mean of the rates quoted at approximately 11:00 A.M., New
York City time, on such Applicable Rate Determination Date by three major banks
in the City of New York, selected by the Calculation Agent for loans in U.S.
dollars to leading European banks, having a maturity of three months and
commencing on the second London Banking Day immediately following such
Applicable Rate Determination Date and in a principal amount equal to an amount
of not less than $1,000,000 that is representative of a single transaction in
such market at such time; provided, however, that if the banks selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the annual rate at which Distributions are payable will be the annual
rate in effect on such Applicable Rate Determination Date; provided further,
however, that if the banks selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence and such Applicable Rate Determination
Date is prior to January 15, 2002 or prior to the first Applicable Rate
Determination Date on which LIBOR can be determined as aforesaid, the Applicable
Rate for the following Applicable Rate Reset Date shall be the Coupon Rate.

The amount of Distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months until January 15, 2002, and
thereafter on the basis of a 360-day year and the actual number of days elapsed.
In the event that any date on which Distributions are payable on the Capital
Securities is not a Business Day (as defined below), payment of the Distribution
payable on such date will be made on the next succeeding day that is a Business
Day except that, if such Business Day is in the next succeeding calendar year,
payment of such Distribution shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date (each
date on which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). Until January 15, 2002, in the event that any Distribution
Date is not a Business Day, Distributions will be paid on the next succeeding
Business Day, without any interest or other payment with respect to any such
delay. After January 15, 2002, Distributions shall be the amount of
Distributions accumulated from, and including, the last date on which
Distributions have previously been paid, to, but excluding, the Distribution
Date (or, if such date is not a Business Day, the next succeeding Business Day).
A "Business Day" shall mean any day other than a Saturday or a Sunday, or a day
on which banking institutions in The City of New York are authorized or required
by law or executive order to remain closed or a day on which the corporate trust
office of the Property Trustee or the Debenture Trustee is closed for business.
The "Applicable Rate Determination Date" shall mean the second London Banking
Day preceding each Applicable Rate Reset Date. An "Applicable Rate Reset Date"
shall mean January 15, 2002 and on the 15th of each April, July, October and
January thereafter

<PAGE>

until October 15, 2026. A "London Banking Day" shall mean any day on which
dealings in deposits in U.S. dollars are transacted in the London interbank
market.

So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer the payment of interest
on the Subordinated Debentures at any time or from time to time for a period not
exceeding 10 consecutive semi-annual periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated Maturity.
As a consequence of any such election, semi-annual Distributions on the Capital
Securities will be deferred by the Issuer during any such Extension Period.
Distributions to which holders of the Capital Securities are entitled will
accumulate additional Distributions thereon at the rate per annum of 7.00% until
January 15, 2002 and at the Applicable Rate thereafter compounded semi-annually
from the relevant Distribution Date, but not exceeding the interest rate then
accruing on the Subordinated Debentures. The term "Distributions" as used herein
shall include any such additional Distributions. During any such Extension
Period, the Company may not, and may not permit any subsidiary of the Company
to, (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock (which includes common and preferred stock) or (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company (including Other Debentures) that rank
pari passu with or junior in interest to the Subordinated Debentures or (iii)
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company (including Other Guarantees) if
such guarantee ranks pari passu with or junior in interest to the Subordinated
Debentures (other than (a) dividends or distributions in capital stock of the
Company, (b) any declaration of a dividend in connection with the implementation
of a stockholders' rights plan, or the issuance of stock under any such plan in
the future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee, (d) purchases of common stock related to the
issuance of common stock or rights under any of the Company's benefit plans for
its directors, officers or employees and (e) payments of interest pursuant to
the EPICS Loan Agreement). Prior to the termination of any such Extension
Period, the Company may further extend such Extension Period, provided that such
extension does not cause such Extension Period to exceed 10 consecutive
semi-annual periods or to extend beyond the Stated Maturity. Upon the
termination of any such Extension Period and the payment of all amounts then
due, and subject to the foregoing limitations, the Company may elect to begin a
new Extension Period. There is no limitation on the number of times that the
Company may elect to begin an Extension Period. See "Description of Subordinated
Debentures-Option to Defer Interest Payments" and "Certain Federal Income Tax
Consequences-Interest, Original Issue Discount, Premium and Market Discount."

The revenue of the Issuer available for distribution to holders of the
Capital Securities will be limited to payments under the Subordinated Debentures
in which the Issuer will invest the proceeds from the issuance and sale of the
Trust Securities. See "Description of Subordinated Debentures-General." If the
Company does not make interest payments on the Subordinated Debentures, the
Property Trustee will not have funds available to pay Distributions on the
Capital Securities. The payment of Distributions (if and to the extent the
Issuer has funds available for the payment of such Distributions and cash
sufficient to make such payments) is guaranteed by the Company on a subordinated
basis as set forth herein under "Description of Guarantee."

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<PAGE>

REDEMPTION

Upon the repayment in full at the Stated Maturity or prepayment in whole
(but not in part) of the Subordinated Debentures (other than following the
distribution of the Subordinated Debentures to the holders of the Trust
Securities), the proceeds from such repayment or prepayment shall be applied by
the Property Trustee to redeem the Trust Securities, upon not less than 30 nor
more than 60 days' notice of a date of redemption (the "Redemption Date"), at
the applicable Redemption Price, which shall be equal to (i) in the case of the
repayment of the Subordinated Debentures at the Stated Maturity, the Maturity
Redemption Price (equal to the principal of, and accrued interest on, the
Subordinated Debentures), (ii) in the case of the prepayment of the Subordinated
Debentures upon the occurrence and continuation of a Tax Event, the Tax Event
Redemption Price (which is equal to the Tax Event Prepayment Price in respect of
the Subordinated Debentures) (see "Description of Subordinated Debentures-Tax
Event Prepayment") and (iii) in the case of the optional prepayment of the
Subordinated Debentures, the Optional Redemption Price. See "Description of
Subordinated Debentures-Optional Prepayment" and "Certain Federal Income Tax
Consequences-Sale or Redemption of Capital Securities."

Upon the optional prepayment in part of the Subordinated Debentures on or
after January 15, 2002, the proceeds from such partial prepayment shall be
applied by the Property Trustee to redeem a portion of the Trust Securities upon
not less than 30 nor more than 60 days' notice of a Redemption Date, at the
Optional Redemption Price. The Trust Securities shall be redeemed pro rata as
between the Capital Securities and the Common Securities.

The Company has the right to prepay the Subordinated Debentures (i) on or
after January 15, 2002, in whole at any time or in part from time to time at the
Optional Redemption Price (as defined under "Description of Subordinated
Debentures-Optional Prepayment"), and (ii) at any time, in whole (but not in
part) upon the occurrence of a Tax Event, at the Tax Event Prepayment Price.

LIQUIDATION OF THE ISSUER AND DISTRIBUTION OF SUBORDINATED DEBENTURES

The Company has the right at any time (including upon the occurrence of a
Tax Event) to dissolve the Issuer and, after satisfaction of liabilities to
creditors of the Issuer as provided by applicable law, cause a Like Amount of
the Subordinated Debentures to be distributed to the holders of the Trust
Securities in liquidation of the Issuer.

Under current United States Federal income tax law and interpretations and
assuming, as expected, that the Issuer is treated as a grantor trust, a
distribution of the Subordinated Debentures will not be a taxable event to
holders of the Capital Securities. Should there be a change in law, a change in
legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Capital Securities. See
"Certain Federal Income Tax Consequences-Receipt of Subordinated Debentures Upon
Liquidation of the Issuer."

The Issuer shall automatically dissolve upon the first to occur of: (i)
certain events of bankruptcy, or dissolution or liquidation of the Company; (ii)
the written direction to the Property Trustee from the Depositor to dissolve the
Issuer (which direction is optional and, except as provided above, wholly within
the discretion of the Company, as Depositor); (iii) redemption of all of the
Trust Securities as described above under "-Redemption"; (iv) expiration of the
term of the Issuer; and (v) the entry of an order for the dissolution of the
Issuer by a court of competent jurisdiction.

<PAGE>

If an early dissolution occurs as described in clause (i), (ii), (iv), or
(v) above, the Issuer shall be liquidated by the Issuer Trustees as
expeditiously as the Issuer Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of the Issuer as provided by
applicable law, to the holders of the Trust Securities a Like Amount (as defined
below) of the Subordinated Debentures, unless such distribution is determined by
the Property Trustee not to be practical, in which event such holders will be
entitled to receive out of the liquidation of the assets of the Issuer available
for distribution to holders, after satisfaction of liabilities to creditors of
the Issuer as provided by applicable law, an amount equal to the aggregate of
the Liquidation Amount plus accrued and unpaid Distributions thereon to the date
of payment (such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because the Issuer has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by the Issuer on the Trust
Securities shall be paid on a pro rata basis. The holder(s) of the Common
Securities will be entitled to receive distributions upon any such liquidation
pro rata with the holders of the Capital Securities, except that if a Debenture
Event of Default has occurred and is continuing, the Capital Securities shall
have a priority over the Common Securities. See "-Subordination of Common
Securities." If an early dissolution occurs as described in clause (v) above,
the Subordinated Debentures will be subject to optional prepayment in whole (but
not in part).

"Like Amount" means (i) with respect to a redemption of Capital Securities,
Capital Securities having a Liquidation Amount equal to that portion of the
principal amount of Subordinated Debentures to be contemporaneously redeemed in
accordance with the Indenture, allocated to the Capital Securities based upon
the relative Liquidation Amounts of the Common Securities and the Capital
Securities and the proceeds of which will be used to pay the Redemption Price of
the Capital Securities and (ii) with respect to a distribution of Subordinated
Debentures to holders of Capital Securities in connection with a dissolution or
liquidation of the Issuer, Subordinated Debentures having a principal amount
equal to the Liquidation Amount of the Trust Securities of the holder to whom
such Subordinated Debentures are distributed.

If the Company elects not to prepay the Subordinated Debentures prior to
the Stated Maturity and there is no early dissolution of the Issuer, the Capital
Securities will remain outstanding until the repayment of the Subordinated
Debentures at the Stated Maturity.

After the liquidation date is fixed for any distribution of Subordinated
Debentures to holders of the Trust Securities (i) the Capital Securities will no
longer be deemed to be outstanding, (ii) DTC or its nominee, as the record
holder of the Capital Securities, will receive a registered global certificate
or certificates representing the Subordinated Debentures to be delivered upon
such distribution and (iii) any certificates representing Capital Securities not
held by DTC or its nominee will be deemed to represent Subordinated Debentures
having a principal amount equal to the Liquidation Amount of such Capital
Securities, and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid Distributions on such Capital Securities until such
certificates are presented to the Property Trustee or its agent for cancellation
whereupon the Company will issue to such holder, and the Debenture Trustee will
authenticate, a certificate representing such Subordinated Debentures.

There can be no assurance as to the market prices for the Capital
Securities or the Subordinated Debentures that may be distributed in exchange
for the Trust Securities if a dissolution and liquidation of the Issuer were to
occur. Accordingly, the Capital Securities that an investor may purchase, or the
Subordinated Debentures that the investor may receive on dissolution and
liquidation of the Issuer, may trade at a discount to the price that the
investor paid to purchase the Capital Securities offered hereby.

<PAGE>

REDEMPTION PROCEDURES

Trust Securities shall be redeemed, if at all, at the applicable Redemption
Price with the proceeds from the contemporaneous repayment or prepayment of the
Subordinated Debentures. Redemptions of the Trust Securities shall be made and
the applicable Redemption Price shall be payable on the Redemption Date only to
the extent that the Issuer has funds on hand available for the payment of such
applicable Redemption Price. See "-Subordination of Common Securities."

If the Issuer gives a notice of redemption in respect of the Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are available, with respect to the Capital Securities held in
global form, the Property Trustee will deposit irrevocably with DTC funds
sufficient to pay the applicable Redemption Price and will give DTC irrevocable
instructions and authority to pay the applicable Redemption Price to the holders
of the Capital Securities. See "-Form, Denomination, Book-Entry Procedures and
Transfer" and "-Payment and Paying Agency." Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date shall be payable to the
holders of such Capital Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of the Capital Securities will cease, except the right of the holders of
the Capital Securities to receive the applicable Redemption Price, but without
interest on such Redemption Price, and the Capital Securities will cease to be
outstanding. In the event that any date fixed for redemption of Capital
Securities is not a Business Day, then payment of the applicable Redemption
Price payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day. In the event
that payment of the applicable Redemption Price is improperly withheld or
refused and not paid either by the Trust or by the Company pursuant to the
Guarantee as described under "--Description of Guarantee," Distributions on
Capital Securities will continue to accumulate at the then applicable rate, from
the Redemption Date originally established by the Trust to the date such
applicable Redemption Price is actually paid, in which case the actual payment
date will be the date fixed for redemption for purposes of calculating the
applicable Redemption Price.

Subject to applicable law (including, without limitation, United States
Federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Capital Securities by tender, in the open
market or by private agreement.

Payment of the applicable Redemption Price on, and any distribution of
Subordinated Debentures to holders of, the Trust Securities shall be made to the
applicable recordholders thereof as they appear on the register therefor on the
relevant record date, which shall be a date not more than 60 days nor less than
30 days prior to the Redemption Date or liquidation date, as applicable.

Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Company defaults in payment of the applicable
Prepayment Price on, or in the repayment of, the Subordinated Debentures, on and
after the Redemption Date Distributions will cease to accrue on the Trust
Securities called for redemption.

<PAGE>

SUBORDINATION OF COMMON SECURITIES

Payment of Distributions on, and the Redemption Price of, the Capital
Securities and Common Securities, as applicable, shall be made pro rata based on
the Liquidation Amounts of the Capital Securities and Common Securities;
provided, however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default shall have occurred and be continuing, no payment of
any Distribution on, or applicable Redemption Price of, any of the Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of the Common Securities, shall be made unless payment in full
in cash of all accumulated and unpaid Distributions on all of the outstanding
Capital Securities for all Distribution periods terminating on or prior thereto,
or in the case of payment of the applicable Redemption Price the full amount of
such Redemption Price on all of the outstanding Capital Securities then called
for redemption, shall have been made or provided for, and all funds available to
the Property Trustee shall first be applied to the payment in full in cash of
all Distributions on, or Redemption Price of, the Capital Securities then due
and payable.

In the case of any Event of Default under the Trust Agreement resulting
from a Debenture Event of Default, the Company as holder of the Common
Securities will be deemed to have waived any right to act with respect to any
such Event of Default until the effect of all such Events of Default has been
cured, waived or otherwise eliminated. Until any such Events of Default have
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of the Capital Securities and not on behalf of
the Company as holder of the Common Securities, and only the holders of the
Capital Securities will have the right to direct the Property Trustee to act on
their behalf.

EVENTS OF DEFAULT; NOTICE

Any one of the following events constitutes an Event of Default under the
Trust Agreement (an "Event of Default") (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

(i) the occurrence of a Debenture Event of Default (see "Description
of Subordinated Debentures--Debenture Events of Default"); or

(ii) default by the Issuer in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of
30 days; or

(iii) default by the Issuer in the payment of any Redemption Price of
any Trust Security when it becomes due and payable; or

(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Issuer Trustees in the Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is addressed in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Trustees by the holders of at least 25% in aggregate Liquidation
Amount of the outstanding Capital Securities, a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" under the Trust Agreement; or

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<PAGE>

(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.

Within five Business Days after the occurrence of any Event of Default
actually known to an officer of the Property Trustee assigned to its corporate
trust office, the Property Trustee shall transmit notice of such Event of
Default to the holders of the Capital Securities, the Administrators and the
Company, as Depositor, unless such Event of Default shall have been cured or
waived. The Company, as Depositor, and the Administrators are required to file
annually with the Property Trustee a certificate as to whether or not they are
in compliance with all the conditions and covenants applicable to them under the
Trust Agreement.

If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities upon termination
of the Issuer as described above. See "-Liquidation of the Issuer and
Distribution of Subordinated Debentures." The existence of an Event of Default
does not entitle the holders of the Capital Securities to accelerate the
maturity thereof.

REMOVAL OF ISSUER TRUSTEES

Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrators, which voting
rights are vested exclusively in the Company as the holder of the Common
Securities. No resignation or removal of an Issuer Trustee and no appointment of
a successor trustee shall be effective until the acceptance of appointment by
the successor trustee in accordance with the provisions of the Trust Agreement.

CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE

Unless a Debenture Event of Default shall have occurred and be continuing,
at any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Issuer's
property may at the time be located, the Company, as the holder of a majority of
the Common Securities, and the Administrators, shall have power to appoint one
or more persons either to act as a co-trustee, jointly with the Property
Trustee, of all or any part of such Trust's property, or to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the Trust Agreement. In case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.

MERGER OR CONSOLIDATION OF ISSUER TRUSTEES

Any entity into which the Property Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any entity
resulting from any merger, conversion or consolidation to which such Issuer
Trustee shall be a party, or any entity succeeding to all or substantially all
of the

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corporate trust business of such Issuer Trustee, shall be the successor of such
Issuer Trustee under the Trust Agreement, provided such entity shall be
otherwise qualified and eligible.

MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUER

The Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other entity, except as
described below or pursuant to a liquidation as described above in "-Liquidation
of the Issuer and Distribution of Subordinated Debentures." The Issuer may, at
the request of the holders of a majority of the Common Securities, without the
consent of the holders of the Capital Securities, merge with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any State; provided, that (i) such successor entity either (a)
expressly assumes all of the obligations of the Issuer with respect to the
Capital Securities or (b) substitutes for the Capital Securities other
securities having substantially the same terms as the Capital Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Capital Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) the Company expressly appoints
a trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Subordinated Debentures, (iii) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not cause the Capital Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (iv)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Capital Securities (including any Successor Securities) in any
material respect, (v) such successor entity has a purpose substantially
identical to that of the Issuer, (vi) prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, the Company has
received an opinion from independent counsel to the Issuer experienced in such
matters to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Capital Securities (including
any Successor Securities) in any material respect, and (b) following such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Issuer nor such successor entity will be required to register as an
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and (vii) the Company or any permitted successor or
assignee owns all of the common securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding the
foregoing, the Issuer shall not, except with the consent of holders of 100% in
Liquidation Amount of the Trust Securities, consolidate, amalgamate, merge with
or into, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Issuer or the successor entity to be classified as other than a
grantor trust for United States Federal income tax purposes.

VOTING RIGHTS: AMENDMENT OF THE TRUST AGREEMENT

Except as provided below and under "Description of Guarantee-Amendments and
Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Capital Securities will have no voting rights.

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<PAGE>

The Trust Agreement may be amended from time to time by the Issuer Trustees
and the holders of a majority of the Common Securities without the consent of
the holders of the Capital Securities (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement, or (ii) to modify, eliminate
or add to any provisions of the Trust Agreement to such extent as shall be
necessary to ensure that the Issuer will be classified for United States Federal
income tax purposes as a grantor trust at all times that any Trust Securities
are outstanding or to ensure that the Trust will not be required to register as
an "investment company" under the Investment Company Act; provided, however,
that in the case of clause (i), such action shall not adversely affect in any
material respect the interests of any holder of Trust Securities, and any
amendments of the Trust Agreement shall become effective when notice thereof is
given to the holders of the Trust Securities. The Trust Agreement may be amended
by the Issuer Trustees and the holders of a majority of the Common Securities
with (i) the consent of holders representing not less than a majority (based
upon Liquidation Amounts) of the outstanding Capital Securities, and (ii)
receipt by the Issuer Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not affect the Issuer's status as a grantor
trust for United States Federal income tax purposes or the Issuer's exemption
from status as an "investment company" under the Investment Company Act,
provided that without the consent of each holder of Trust Securities, the Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.

So long as any Subordinated Debentures are held by the Issuer, the Property
Trustee shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or execute any
trust or power conferred on such Debenture Trustee with respect to the
Subordinated Debentures, (ii) waive any past default that is waivable under the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debentures shall be due and payable or (iv)
consent to any amendment, modification or termination of the Indenture or the
Subordinated Debentures, where such consent shall be required, without, in each
case, obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Capital Securities; provided, however,
that where a consent under the Indenture would require the consent of each
holder of Subordinated Debentures affected thereby, no such consent shall be
given by the Property Trustee without the prior consent of each holder of the
Capital Securities. The Property Trustee shall not revoke any action previously
authorized or approved by a vote of the holders of the Capital Securities except
by subsequent vote of such holders. The Property Trustee shall notify each
holder of Capital Securities of any notice of default with respect to the
Subordinated Debentures. In addition to obtaining the foregoing approvals of
such holders of the Capital Securities, prior to taking any of the foregoing
actions, the Property Trustee shall obtain an opinion of counsel experienced in
such matters to the effect that the Trust will not be classified as an
association taxable as a corporation for United States Federal income tax
purposes on account of such action.

Any required approval of holders of Capital Securities may be given at a
meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Capital Securities are entitled to vote, or of any matter upon which

<PAGE>

action by written consent of such holders is to be taken, to be given to each
holder of record of Capital Securities in the manner set forth in the Trust
Agreement.

No vote or consent of the holders of Capital Securities will be required
for the Issuer to redeem and cancel the Capital Securities in accordance with
the Trust Agreement.

Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Issuer Trustees or any affiliate
of the Company or any Issuer Trustees, shall, for purposes of such vote or
consent, be treated as if they were not outstanding.

EXPENSES

In the Indenture, the Company, as borrower, has agreed to pay all debts and
other obligations (other than with respect to the Capital Securities) and all
costs and expenses of the Issuer (including costs and expenses relating to the
organization of the Issuer, the fees and expenses of the Issuer Trustees and the
costs and expenses relating to the operation of the Issuer) and the offering of
the Capital Securities and to pay any and all taxes and all costs and expenses
with respect to the foregoing (other than United States withholding taxes) to
which the Issuer might become subject. The foregoing obligations of the Company
under the Indenture are for the benefit of, and shall be enforceable by, any
person to whom any such debts, obligations, costs, expenses and taxes are owed
(a "Creditor") whether or not such Creditor has received notice thereof. Any
such Creditor may enforce such obligations of the Company directly against the
Company and the Company has irrevocably waived any right or remedy to require
that any such Creditor take any action against the Issuer or any other person
before proceeding against the Company. The Company has also agreed in the
Indenture to execute such additional agreement(s) as may be necessary or
desirable to give full effect to the foregoing.

FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER

The Capital Securities will be in blocks having a Liquidation Amount of not
less than $100,000 (100 Capital Securities) and may be transferred or exchanged
in such blocks in the manner and at the offices described below.

The New Capital Securities initially will be represented by one or more
Capital Securities in registered, global form (collectively, the "Global Capital
Securities"). The Global Capital Securities will be deposited upon issuance with
the Property Trustee, as custodian for DTC in New York, New York, and registered
in the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below.

Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to DTC, to another nominee of DTC or
to a successor of DTC or its nominee and only in amounts that would not cause a
holder to own less than 100 Capital Securities. Beneficial interests in the
Global Capital Securities may not be exchanged for Capital Securities in
certificated form except in the limited circumstances described below. See
"-Exchange of Book-Entry Capital Securities for Certificated Capital
Securities."

<PAGE>

Depositary Procedures. DTC has advised the Issuer and the Company that DTC
is a limited-purpose trust company created to hold securities for its
participating organizations (collectively, the "Participants") and to facilitate
the clearance and settlement of transactions in those securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers (including
the Initial Purchasers), banks, trust companies, clearing corporations and
certain other organizations. Access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interest
and transfer of ownership interest of each actual purchaser of each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.

DTC has also advised the Issuer and the Company that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital Securities,
DTC will credit the accounts of Participants designated by the Initial
Purchasers with portions of the principal amount of the Global Capital
Securities and (ii) ownership of such interests in the Global Capital Securities
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Capital Securities).

Investors in the Global Capital Securities may hold their interests therein
directly through DTC if they are Participants in such system, or indirectly
through organizations which are Participants in such system. All interest in a
Global Capital Security may be subject to the procedures and requirements of
DTC. The laws of some states require that certain persons take physical delivery
in certificated form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Capital Security to such persons will
be limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in a Global Capital Security to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests. For certain
other restrictions on the transferability of the Capital Securities, see
"--Exchange of Book-Entry Capital Securities for Certificated Capital
Securities."

EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL CAPITAL
SECURITIES WILL NOT HAVE CAPITAL SECURITIES REGISTERED IN THEIR NAME, WILL NOT
RECEIVE PHYSICAL DELIVERY OF CAPITAL SECURITIES IN CERTIFICATED FORM AND WILL
NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE TRUST
AGREEMENT FOR ANY PURPOSE.

Payments in respect of the Global Capital Security registered in the name
of DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms of
the Trust Agreement, the Property Trustee will treat the persons in whose names
the Capital Securities, including the Global Capital Securities, are registered
as the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Property Trustee nor
any agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
Global Capital Securities, or for maintaining, supervising or reviewing any of
DTC's records or any Participant's or

<PAGE>

Indirect Participant's records relating to the beneficial ownership interests in
the Global Capital Securities or (ii) any other matter relating to the actions
and practices of DTC or any of its Participants or Indirect Participants. DTC
has advised the Issuer and the Company that its current practice, upon receipt
of any payment in respect of securities such as the Capital Securities, is to
credit the accounts of the relevant Participants with the payment on the payment
date, in amounts proportionate to their respective holdings in Liquidation
Amount of beneficial interests in the relevant security as shown on the records
of DTC unless DTC has reason to believe it will not receive payment on such
payment date. Payments by the Participants and the Indirect Participants to the
beneficial owners of Capital Securities will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility of
DTC, the Property Trustee or the Issuer. Neither the Issuer nor the Property
Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the Capital Securities, and the Trust and
the Property Trustee may conclusively rely on and will be protected in relying
on instructions from DTC or its nominee for all purposes.

Interests in the Global Capital Securities will trade in DTC's Same-Day
Funds Settlement System and secondary market trading activity in such interests
will therefore settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its participants.

Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.

DTC has advised the Issuer and the Company that it will take any action
permitted to be taken by a holder of Capital Securities only at the direction of
one or more Participants to whose account with DTC interests in the Global
Capital Securities are credited and only in respect of such portion of the
aggregate Liquidation Amount of the Capital Securities as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Trust Agreement, DTC reserves the right to
exchange the Global Capital Securities for legended Capital Securities in
certificated form and to distribute such Capital Securities to its Participants.

The information in this section concerning DTC and its book-entry systems
has been obtained from sources that the Issuer and the Company believe to be
reliable, but none of the Issuer or the Company or any of the Initial Purchasers
takes responsibility for the accuracy thereof.

Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Capital Securities among participants in DTC, it is
under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Issuer nor the
Property Trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.

Exchange of Book-Entry Capital Securities for Certificated Capital
Securities

A Global Capital Security is exchangeable for Capital Securities in
registered certificated form if (i) DTC (x) notifies the Issuer that it is
unwilling or unable to continue as Depositary for the Global Capital Security
and the Issuer thereupon fails to appoint a successor Depositary or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company in its sole discretion elects to cause the issuance of the Capital
Securities in certificated form or (iii) there shall have occurred and be

<PAGE>

continuing an Event of Default or any event which after notice or lapse of time
or both would be an Event of Default under the Trust Agreement. In all cases,
certificated Capital Securities delivered in exchange for any Global Capital
Security or beneficial interests therein will be registered in the names, and
issued in any approved denominations, requested by or on behalf of the
Depositary (in accordance with its customary procedures).

PAYMENT AND PAYING AGENCY

Payments in respect of the Capital Securities held in global form shall be
made to the Depositary, which shall credit the relevant accounts at the
Depositary on the applicable Distribution Dates. The paying agent (the "Paying
Agent") shall initially be the Property Trustee and any co-paying agent chosen
by the Property Trustee and acceptable to the Administrators. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee and the Company. In the event that the Property Trustee shall
no longer be the Paying Agent, the Administrators shall appoint a successor
(which shall be a bank or trust company acceptable to the Administrators and the
Company) to act as Paying Agent.

RESTRICTIONS ON TRANSFER

The Capital Securities will be issued, and may be transferred only, in
blocks having a Liquidation Amount of not less than $100,000 (100 Capital
Securities). Any attempted transfer, sale or other disposition of Capital
Securities in a block having a Liquidation Amount of less than $100,000 shall be
deemed to be void and of no legal effect whatsoever. Any such transferee shall
be deemed not to be the holder of such Capital Securities for any purpose,
including but not limited to the receipt of Distributions on such Capital
Securities, and such transferee shall be deemed to have no interest whatsoever
in such Capital Securities.

REGISTRAR AND TRANSFER AGENT

The Property Trustee will act as registrar and transfer agent for the
Capital Securities.

Registration of transfers of the Capital Securities will be effected
without charge by or on behalf of the Issuer, but upon payment of any tax or
governmental charges that may be imposed in connection with any transfer or
exchange. The Issuer will not be required to register or cause to be registered
the transfer of the Capital Securities (i) during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of Capital Securities and ending at the close of business on the day
of such mailing or (ii) that have been selected for redemption in whole or in
part, except the unredeemed portion of any Capital Security redeemed in part.

INFORMATION CONCERNING THE PROPERTY TRUSTEE

The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the Trust Agreement and, after such Event of Default, must exercise
the same degree of care and skill as a prudent person would exercise or use in
the conduct of his or her own affairs. The Property Trustee is under no
obligation to exercise any of the powers vested in it by the Trust Agreement at
the request of any holder of Trust Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby. If no Event of Default has occurred and is continuing and the Property
Trustee is

<PAGE>

required to decide between alternative causes of action, construe ambiguous
provisions in the Trust Agreement or is unsure of the application of any
provision of the Trust Agreement, and the matter is not one on which holders of
the Capital Securities or the Common Securities are entitled under the Trust
Agreement to vote, then the Property Trustee shall take such action as is
directed by the Company and if not so directed, shall take such action as it
deems advisable and in the best interests of the holders of the Trust Securities
and will have no liability except for its own bad faith, negligence or willful
misconduct.

MISCELLANEOUS

The Administrators and the Property Trustee are authorized and directed to
conduct the affairs of and to operate the Issuer in such a way that the Trust
will not be deemed to be an "investment company" required to be registered under
the Investment Company Act or fail to be classified as a grantor trust for
United States Federal income tax purposes and so that the Subordinated
Debentures will be treated as indebtedness of the Company for United States
Federal income tax purposes. In this connection, the Administrators, the
Property Trustee and the holders of a majority of the Common Securities are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Issuer or the Trust Agreement, that the
Administrators, the Property Trustee and such holders determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
Trust Securities.

Holders of the Trust Securities have no preemptive or similar rights.

The Issuer may not borrow money or issue debt or mortgage or pledge any of
its assets.

DESCRIPTION OF SUBORDINATED DEBENTURES

The Old Subordinated Debentures were issued, and the New Subordinated
Debentures will be issued, as a separate series under the Indenture. The
Indenture has been qualified under the Trust Indenture Act. This summary of
certain terms and provisions of the Subordinated Debentures and the Indenture
does not purport to be complete, and where reference is made to particular
provisions of the Indenture, such provisions, including the definitions of
certain terms, some of which are not otherwise defined herein, are qualified in
their entirety by reference to all of the provisions of the Indenture.

GENERAL

Concurrently with the issuance of the Old Capital Securities, the Issuer
invested the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in Old Subordinated Debentures issued by the
Company. Pursuant to the Exchange Offer, the Company will exchange the Old
Subordinated Debentures for the New Subordinated Debentures as soon as
practicable after the date hereof. No Old Subordinated Debentures will remain
outstanding after such exchange. The Subordinated Debentures bear interest at
the annual rate of 7.00% of the principal amount thereof until January 15, 2002
and at the Applicable Rate thereafter, payable semi-annually in arrears on the
fifteenth day of January and July of each year (each, an "Interest Payment
Date"), commencing July 15, 1997, to the person in whose name each Subordinated
Debenture is registered, subject to certain exceptions, at the close of business
on the Business Day next preceding such Interest Payment Date. It is anticipated
that until the liquidation, if any, of the Issuer, each Subordinated Debenture
will be held in the name of the Property Trustee in trust for the benefit of the
holders of the Trust Securities. The

<PAGE>

"Applicable Rate" with respect to interest on the Subordinated Debentures shall
be the rate determined by the Calculation Agent on any Applicable Rate
Determination Date (as hereinafter defined) equal to three-month LIBOR plus
1.75%. For this purpose, LIBOR shall be calculated in accordance with the
provisions set forth under "Description of Capital Securities-Distributions."
The amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months until January 15, 2002 and thereafter on
the basis of a 360-day year and the actual number of days elapsed. In the event
that any date on which interest is payable on the Subordinated Debentures is not
a Business Day, then payment of the interest payable on such date will be made
on the next succeeding day that is a Business Day, except that, if such Business
Day is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date such payment was originally payable. Until January 15,
2002, in the event that any Interest Payment Date is not a Business Day,
interest will be paid on the next succeeding Business Day, without any interest
or other payment with respect to any such delay. After January 15, 2002,
interest shall be the amount of interest accrued from, and including, the last
date on which interest has previously been paid to, but excluding, the Interest
Payment Date (or, if such date is not a Business Day, the next succeeding
Business Day). Accrued interest that is not paid on the applicable Interest
Payment Date will bear additional interest on the amount thereof (to the extent
permitted by law) at the rate per annum of 7.00% until January 15, 2002, and at
the Applicable Rate thereafter, compounded semi-annually. The term "interest" as
used herein shall include semi-annual interest payments, interest on semi-annual
interest payments not paid on the applicable Interest Payment Date and
Additional Sums (as defined below), as applicable.

The Subordinated Debentures will mature on January 15, 2027.

The Subordinated Debentures are unsecured and rank junior and subordinate
in right of payment to all Senior Indebtedness of the Company. Because the
Company is a holding company, the right of the Company to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of holders of the Capital
Securities to benefit indirectly from such distribution) is subject to the prior
claims of creditors of that subsidiary, except to the extent that the Company
may itself be recognized as a creditor of that subsidiary. Accordingly, the
Subordinated Debentures are subordinated to all Senior Indebtedness of the
Company and effectively subordinated to all existing and future liabilities of
the Company's subsidiaries, and holders of Subordinated Debentures should look
only to the assets of the Company for payments on the Subordinated Debentures.
The Indenture does not limit the incurrence or issuance of other secured or
unsecured debt of the Company, including Senior Indebtedness whether under the
Indenture or any existing or other indenture that the Company may enter into in
the future or otherwise, including the Company's Senior Indenture entered into
with The Chase Manhattan Bank. See "-Subordination."

The Subordinated Debentures will rank pari passu with all Other Debentures
which may be issued and sold (if at all) to Other Trusts, and will be unsecured
and subordinate and junior in right of payment to the extent and in the manner
set forth in the Indenture to all Senior Indebtedness.

DENOMINATIONS, REGISTRATION AND TRANSFER

The Subordinated Debentures will be represented by one or more global
certificates registered in the name of Cede & Co. as the nominee of DTC if, and
only if, distributed to the holders of the Trust Securities. Until such time,
the Subordinated Debentures will be registered in the name of the trust and held
by the Property Trustee. Should the Subordinated Debentures be distributed to
holders of the

<PAGE>

Trust Securities, beneficial interests in the Subordinated Debentures will be
shown on, and transfers thereof will be effected only through, records
maintained by Participants in DTC. Except as described below, Subordinated
Debentures in certificated form will not be issued in exchange for the global
certificates.

A global security shall be exchangeable for Subordinated Debentures
registered in the names of persons other than Cede & Co. only if (i) DTC
notifies the Company that it is unwilling or unable to continue as a depositary
for such global security and no successor depositary shall have been appointed,
or if at any time DTC ceases to be a "clearing agency" registered under the
Exchange Act, at a time when DTC is required to be so registered to act as such
depositary, (ii) the Company in its sole discretion determines that such global
security shall be so exchangeable, or (iii) there shall have occurred and be
continuing a Debenture Event of Default. Any global security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
certificates registered in such names as DTC shall direct. It is expected that
such instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such global
security. In the event that Subordinated Debentures are issued in certificated
form, such Subordinated Debentures will be in minimum denominations of $100,000
and integral multiples of $1,000 in excess thereof and may be transferred or
exchanged only in such minimum denominations and in the manner and at the
offices described below.

Payments on Subordinated Debentures represented by a global security will
be made to DTC, as the depositary for the Subordinated Debentures. In the event
Subordinated Debentures are issued in certificated form, principal and interest
will be payable, the transfer of the Subordinated Debentures will be
registrable, and Subordinated Debentures will be exchangeable for Subordinated
Debentures of other denominations of a like aggregate principal amount, at the
corporate office of the Debenture Trustee in New York, New York, or at the
offices of any paying agent or transfer agent appointed by the Company, provided
that payment of interest may be made at the option of the Company by check
mailed to the address of the persons entitled thereto or by wire transfer. In
addition, if the Subordinated Debentures are issued in certificated form, the
record dates for payment of interest will be the 1st day of the first month of
each semi-annual period.

For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Description of New Securities-Form, Denomination,
Book-Entry Procedures and Transfer." If the Subordinated Debentures are
distributed to the holders of the Trust Securities upon the termination of the
Issuer, the form, denomination, book-entry and transfer procedures with respect
to the Capital Securities as described under "Description of New
Securities-Form, Denomination, Book-Entry Procedures and Transfer," shall apply
to the Subordinated Debentures mutatis mutandis.

PAYMENT AND PAYING AGENTS

Payment of principal of (and premium, if any) and any interest on
Subordinated Debentures will be made at the principal office of the Debenture
Trustee in the City of New York or at the office of such Paying Agent or Paying
Agents as the Company may designate from time to time, except that at the option
of the Company payment of any interest may be made, except in the case of
Subordinated Debentures in global form, (i) by check mailed to the address of
the Person entitled thereto as such address shall appear in the register for
Subordinated Debentures or (ii) by transfer to an account maintained by the
Person entitled thereto as specified in such register, provided that proper
transfer

<PAGE>

instructions have been received by the preceding Record Date. Payment of any
interest on any Subordinated Debenture will be made to the Person in whose name
such Subordinated Debenture is registered at the close of business on the Record
Date for such interest, except in the case of defaulted interest. The Company
may at any time designate additional Paying Agents or rescind the designation of
any Paying Agent; however the Company will at all times be required to maintain
a Paying Agent in each Place of Payment for the Subordinated Debentures.

Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of (and
premium, if any) or interest on any Subordinated Debenture and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall, at the request of the Company, be repaid to
the Company and the holder of such Subordinated Debenture shall thereafter look,
as a general unsecured creditor, only to the Company for payment thereof.

OPTION TO DEFER INTEREST PAYMENTS

So long as no Debenture Event of Default has occurred or is continuing, the
Company has the right under the Indenture at any time during the term of the
Subordinated Debentures to defer the payment of interest at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity. At the end of such Extension Period, the Company
must pay all interest then accrued and unpaid (together with interest thereon at
the annual rate of 7.00% until January 15, 2002 and at the Applicable Rate
thereafter, compounded semi-annually, to the extent permitted by applicable
law). During an Extension Period, interest will continue to accrue and holders
of Subordinated Debentures (and holders of the Capital Securities while Capital
Securities are outstanding) will be required to accrue interest income for
United States Federal income tax purposes. See "Certain Federal Income Tax
Consequences-Interest, Original Issue Discount, Premium and Market Discount."

During any such Extension Period, the Company may not, and may not permit
any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock) or (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company that
rank pari passu with or junior to the Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Subordinated Debentures (other than (a)
dividends or distributions in capital stock of the Company, (b) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c) payments under
the Guarantee, (d) purchases of common stock related to the issuance of common
stock or rights under any of the Company's benefit plans for its directors,
officers or employees and (e) payments of interest pursuant to the EPICS Loan
Agreement). Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity. Upon the termination of any such Extension
Period and the payment of all amounts then due on any Interest Payment Date, the
Company may elect to begin a new Extension Period subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof. The Company must give the Property Trustee and the
Debenture Trustee notice of its election

<PAGE>

of any Extension Period (or an extension thereof) at least five Business Days
prior to the earlier of (i) the date the Distributions on the Trust Securities
would have been payable except for the election to begin or extend such
Extension Period or (ii) the date the Property Trustee is required to give
notice to any applicable self- regulatory organization or to holders of Capital
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record date. The
Property Trustee shall give notice of the Company's election to begin or extend
a new Extension Period to the holders of the Capital Securities. There is no
limitation on the number of times that the Company may elect to begin an
Extension Period.

OPTIONAL PREPAYMENT

The Subordinated Debentures are prepayable, in whole or in part, at the
option of the Company at any time on or after January 15, 2002, at a prepayment
price (the "Optional Redemption Price") equal to the outstanding principal
amount of the Subordinated Debentures plus accrued interest thereon to the date
of prepayment.

TAX EVENT PREPAYMENT

If a Tax Event (as defined below) shall occur and be continuing, the
Company may, at its option, prepay the Subordinated Debentures in whole (but not
in part) at any time within 90 days of the occurrence of such Tax Event, at the
Tax Event Prepayment Price equal to the greater of (i) 100% of the principal
amount of such Subordinated Debentures and (ii) as determined by the Calculation
Agent, the sum of the present values of the principal amount that would be
payable as part of the Redemption Price with respect to an optional redemption
of such Subordinated Debentures on January 15, 2002, together with the present
values of scheduled payments of interest from the prepayment date to January 15,
2002 (the "Remaining Life"), in each case discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted CMT Rate, plus, in each case, accrued interest thereon to but
excluding the date of prepayment. However, if the Company prepays Subordinated
Debentures as a result of a Tax Event which occurs on or after January 15, 2002,
then the Tax Event Prepayment Price shall be the Optional Redemption Price that
would be payable on optional redemption of the Subordinated Debentures on the
date of prepayment, which includes interest to the date of prepayment.

"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by the Trust on the
outstanding Capital Securities and Common Securities shall not be reduced as a
result of any additional taxes, duties and governmental charges to which the
Trust has become subject as a result of a Tax Event.

"Adjusted CMT Rate" means, with respect to any prepayment date, the CMT
Rate plus 0.475%.

"Calculation Agent" means Bear, Stearns & Co. Inc.

The "CMT Rate" will be determined by the Calculation Agent in accordance
with the following provisions:

(i) the CMT Rate will be determined on the basis of the latest rate
displayed at the close of business 10 Business Days before the date of such
Tax Event Prepayment on (x) Telerate page 7055 for "Yields on Treasury
Constant Maturities-Federal Reserve Board Statistical Release H.15(519)-

<PAGE>

Mondays approximately 3:45 p.m. "EST" (or "EDT" as the case may be) for
U.S. Treasury Securities with a maturity corresponding to the Remaining
Life (or, if no maturity is within three months before or after the
Remaining Life, yields for the two published maturities most closely
corresponding to the Remaining Life shall be determined and the CMT Rate
shall be interpolated or extrapolated from such yields on a straight-line
basis, rounded to the nearest month), or (y) such other page as may replace
page 7055, as provided by the Telerate News Service, for the purpose of
displaying rates or prices that are comparable, as determined by the
Calculation Agent (after consultation with the Company), to the Constant
Maturity Treasury rates formerly displayed on Telerate page 7055;

(ii) if the information specified in subparagraph (i) above is not
available at the date 10 Business Days before such Tax Event Prepayment,
then the CMT Rate shall be determined on the basis of the Treasury Constant
Maturity rate with a maturity corresponding to the Remaining Life (adjusted
as aforesaid) (or other United States Treasury rate, with a maturity that
is closest to January 15, 2002) published as of that date by either the
Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent (after consultation
with the Company) determines to be comparable to the rate formerly
displayed on Telerate page 7055 and published in the Federal Reserve Board
Statistical Release H.15 (519);

(iii) if the information specified in subparagraphs (i) and (ii) is not
available at the date 10 Business Days before the date of such Tax Event
Prepayment then the CMT Rate shall be the yield to maturity of the then
most recently issued direct non-callable fixed rate United States Treasury
Note with an original maturity corresponding to the Remaining Life
(adjusted as aforesaid) (the "Reference Treasury Note"), such yield to
maturity to be calculated by the Calculation Agent on the basis of the
arithmetic mean of the secondary market bid side prices for such Reference
Treasury Note quoted as of 3:00 p.m., New York City time (or the closing of
the market, if earlier), on the date 10 Business Days, before the date of
such Tax Event Prepayment, by (and appearing in the written records of)
three leading primary United States government securities dealers in New
York City selected by the Calculation Agent; and

(iv) if the information specified in subparagraphs (i) and (ii) above
is not available at the date 10 Business Days before such Tax Event
Prepayment and at least three price quotations for the Reference Treasury
Note are not available at that date from leading primary dealers in New
York City as provided in subparagraph (iii) above, then the CMT Rate shall
be the yield to maturity of the Reference Treasury Note, as calculated by
the Calculation Agent on the basis of the arithmetic mean of the secondary
market bid side prices for such Reference Treasury Note quoted as of 3:00
p.m., New York City time (or the closing of the market, if earlier), on
that date, by (and appearing in the written records of) any three primary
United States government securities dealers selected by the Calculation
Agent (irrespective of where such dealers may be located).

"Tax Event" means the receipt by the Issuer of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the Issue Date, there is more
than an insubstantial risk that (i) the Issuer is, or will be within 90 days of
the date of such opinion, subject to United States Federal income tax with
respect to income received or accrued on the

<PAGE>

Subordinated Debentures, (ii) interest payable by the Company on the
Subordinated Debentures is not, or within 90 days of the date of such opinion,
will not be, deductible by the Company, in whole or in part, for United States
Federal income tax purposes, or (iii) the Issuer is, or will be within 90 days
of the date of such opinion, subject to more than a de minimis amount of taxes,
duties or governmental charges.

For purposes of a Tax Event and the redemption procedures applicable
thereto, reference to Subordinated Debentures shall include any Exchange
Securities issued in exchange therefor.

Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Subordinated Debentures to
be prepaid at its registered address. Unless the Company defaults in payment of
the prepayment price, on and after the prepayment date interest ceases to accrue
on such Subordinated Debentures called for prepayment.

If the Issuer is required to pay any additional taxes, duties or
governmental charges as a result of a Tax Event, the Company will also pay any
Additional Sums on the Subordinated Debentures.

RESTRICTIONS ON CERTAIN PAYMENTS

The Company has agreed (and in connection with the New Subordinated
Debentures will agree) that it will not, and will not permit any subsidiary of
the Company to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock (which includes common and preferred stock) or (ii) make
any payment of principal, interest or premium, if any, on or repay or repurchase
or redeem any debt securities of the Company that rank pari passu with or junior
in interest to the Subordinated Debentures or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any subsidiary
of the Company if such guarantee ranks pari passu with or junior in interest to
the Subordinated Debentures (other than (a) dividends or distributions in
capital stock of the Company, (b) any declaration of a dividend in connection
with the implementation of a stockholder's rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) purchases of
common stock related to the issuance of common stock or rights under any of the
Company's benefit plans for its directors, officers or employees) if at such
time (i) there shall have occurred any event of which the Company has actual
knowledge that (a) with the giving of notice or the lapse of time, or both,
would constitute a "Debenture Event of Default" and (b) in respect of which the
Company shall not have taken reasonable steps to cure, (ii) if such Subordinated
Debentures are held by the Trust, the Company shall be in default with respect
to its payment of any obligations under the Guarantee or (iii) the Company shall
have given notice of its election of an Extension Period as provided in the
Indenture and shall not have rescinded such notice, or such Extension Period, or
any extension thereof, shall be continuing.

MODIFICATION OF INDENTURE

From time to time, the Company and the Debenture Trustee may, without the
consent of the holders of any series of Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interest of the holders of any series
of Subordinated Debentures or the holders of Capital Securities so long as they
remain

<PAGE>

outstanding) and qualifying, or maintaining the qualification of, the Indenture
under the Trust Indenture Act.

The Indenture contains a provision permitting the Company and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Subordinated Debentures, to modify the Indenture in a
manner affecting the rights of the holders of Subordinated Debentures; provided,
however, that no such modification may, among other things, (i) change the fixed
maturity of any Subordinated Debentures, or reduce the rate or extend the time
of payment of any interest thereon or reduce the principal amount thereof,
without the consent of the holders of all Subordinated Debentures so affected,
(ii) modify the provisions with respect to the subordination of the Subordinated
Debentures in a manner adverse to the holders thereof, without the consent of
the holders of all Subordinated Debentures so affected, or (iii) reduce the
percentage of principal amount of Subordinated Debentures the holders of which
are required to consent to any such modification, without the consent of holders
of all of the Subordinated Debentures.

In addition, the Company and the Debenture Trustee may execute, without the
consent of any holder of Subordinated Debentures, any supplemental indenture for
the purpose of creating any new series of Subordinated Debentures ("Other
Debentures").

DEBENTURE EVENTS OF DEFAULT

A Debenture Event of Default with respect to the Subordinated Debentures is
defined in the Indenture as being: (a) default for 30 days in payment of any
interest on the Subordinated Debentures (subject to the deferral of any due date
in the case of an Extension Period); (b) default in payment of any principal or
premium, if any, on Subordinated Debentures; (c) default by the Company in
performance in any material respect of any of the covenants or agreements in the
Indenture specifically contained therein for the benefit of the Subordinated
Debentures which shall not have been remedied for a period of 90 days after
written notice to the Company by the Debenture Trustee or to the Company and the
Debenture Trustee by the holders of not less than 25% in principal amount of the
Subordinated Debentures outstanding; or (d) certain events of bankruptcy,
insolvency or reorganization.

The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee. The
Debenture Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of the Subordinated Debentures may declare the principal due
and payable immediately upon a Debenture Event of Default and, should the
Debenture Trustee or such holders of Subordinated Debentures fail to make such
declaration, the holders of at least 25% in aggregate Liquidation Amount of the
Capital Securities shall have such right. The holders of a majority in aggregate
outstanding principal amount of the Subordinated Debentures may annul such
declaration and waive the default if the default (other than the non-payment of
the principal of the Subordinated Debentures which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee. Should the holders of Subordinated
Debentures fail to annul such declaration and waive such default, the holders of
a majority in aggregate Liquidation Amount of the Capital Securities shall have
such right.

The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures affected thereby may, on behalf of the holders of all
the Subordinated Debentures, waive any past

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default, except a default in the payment of principal or interest (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration has been deposited
with the Debenture Trustee) or a default in respect of a covenant or provision
which under the Indenture cannot be modified or amended without the consent of
the holder of each outstanding Subordinated Debenture. Should the holders of
such Subordinated Debentures fail to annul such declaration and waive such
default, the holders of a majority in aggregate Liquidation Amount of the
Capital Securities shall have such right. The Company is required to file
annually with the Debenture Trustee a certificate as to whether or not the
Company is in compliance with all the conditions and covenants applicable to it
under the Indenture.

In case a Debenture Event of Default shall occur and be continuing, the
Property Trustee will have the right to declare the principal of and the
interest on the Subordinated Debentures, and any other amount payable under the
Indenture, to be forthwith due and payable and to enforce its other rights as a
creditor with respect to the Subordinated Debentures.

ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES

If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or principal
on the Subordinated Debentures on the date such interest or principal is
otherwise payable, a holder of Capital Securities may institute a Direct Action
against the Company for enforcement of payment to such holder of the principal
of or interest on such related Subordinated Debentures having a principal amount
equal to the aggregate Liquidation Amount of the related Capital Securities of
such holder. The Company may not amend the Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of the holders
of all of the Capital Securities. If the right to bring a Direct Action is
removed, the Issuer may become subject to reporting obligations under the
Securities Exchange Act of 1934, as amended. Notwithstanding any payments made
to a holder of Capital Securities by the Company in connection with a Direct
Action, the Company shall remain obligated to pay the principal of or interest
on the Subordinated Debentures, and the Company shall be subrogated to the
rights of the holder of such Capital Securities with respect to payments on the
Capital Securities to the extent of any payments made by the Company to such
holder in any Direct Action.

The holders of the Capital Securities would not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Subordinated Debentures unless there shall have
been an Event of Default under the Trust Agreement. See "Description of New
Securities-Events of Default; Notice."

CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS

The Indenture provides that the Company may not merge or consolidate or
sell or convey all or substantially all of its assets unless (i) the successor
entity (if other than the Company) is a U.S. entity that assumes the Company's
obligations under such Indenture and on the Subordinated Debentures issued under
such Indenture, and, after giving effect to such transaction, the Company or the
successor would not be in default under such Indenture; and (ii) certain other
conditions as prescribed in the Indenture are met.

<PAGE>

The general provisions of the Indenture do not afford holders of the
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the
Subordinated Debentures.

SATISFACTION AND DISCHARGE

The Indenture provides that when, among other things, all Subordinated
Debentures not previously delivered to the Debenture Trustee for cancellation
(i) have become due and payable or (ii) will become due and payable at their
Stated Maturity within one year, and the Company deposits or causes to be
deposited with the Debenture Trustee funds, in trust, for the purpose and in an
amount sufficient to pay and discharge the entire indebtedness on the
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation, for the principal (and premium, if any) and interest to the date
of the deposit or to the Stated Maturity, as the case may be, then the Indenture
will cease to be of further effect (except as to the Company's obligations to
pay all other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Company will be
deemed to have satisfied and discharged the Indenture.

SUBORDINATION

In the Indenture, the Company has covenanted and agreed that any
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Indebtedness of the Company to the extent
described in the Indenture. Upon any payment or distribution of assets of the
Company upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any bankruptcy,
insolvency, debt restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding of the Company, the holders of Senior
Indebtedness will first be entitled to receive payment in full of principal of
(and premium, if any) and interest, if any, on such Senior Indebtedness before
the holders of Subordinated Debentures will be entitled to receive or retain any
payment in respect of the principal of (and premium, if any) or interest, if
any, on the Subordinated Debentures; provided, however, that holders of Senior
Indebtedness shall not be entitled to receive payment of any such amounts to the
extent that such holders would be required by the subordination provisions of
such Senior Indebtedness to pay such amounts over to the obligees on trade
accounts payable or other liabilities arising in the ordinary course of the
Company's business.

In the event of the acceleration of the maturity of any Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full of all
amounts due thereon (including any amounts due upon acceleration) before the
holders of Subordinated Debentures will be entitled to receive or retain any
payment in respect of the principal of or premium, if any, or interest, if any,
on the Subordinated Debentures; provided, however, that holders of Senior
Indebtedness shall not be entitled to receive payment of any such amounts to the
extent that such holders would be required by the subordination provisions of
such Senior Indebtedness to pay such amounts over to the obligees on trade
accounts payable or other liabilities arising in the ordinary course of the
Company's business.

No payments on account of principal or premium, if any, or interest in
respect of the Subordinated Debentures may be made if there shall have occurred
and be continuing a default in any payment with respect to Senior Indebtedness
or an event of default with respect to any Senior Indebtedness resulting

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<PAGE>

in the acceleration of the maturity thereof, or if any judicial proceeding shall
be pending with respect to any such default.

"Indebtedness" means with respect to any person, whether recourse is to all
or a portion of the assets of such person and whether or not contingent, (i)
every obligation of such person for money borrowed; (ii) every obligation of
such person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (iv) every obligation of such person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such person; (vi) every
obligation of such person for claims in respect of derivative products such as
interest and foreign exchange rate contracts, commodity contracts and similar
arrangements; and (vii) every obligation of the type referred to in clauses (i)
through (vi) of another person and all dividends of another person the payment
of which, in either case, such person has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise.

"Senior Indebtedness" means the principal of and premium, if any, and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Indebtedness, whether incurred on or prior to the date of the Indenture or
thereafter incurred, unless, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Subordinated Debentures
or to other Indebtedness which is pari passu with, or subordinated to, the
Subordinated Debentures; provided, however, that Senior Indebtedness shall not
be deemed to include (i) any Indebtedness of the Company which when incurred and
without respect to any election under Section 1111(b) of the United States
Bankruptcy Code of 1978, as amended, was without recourse to the Company, (ii)
any Indebtedness of the Company to any of its subsidiaries, (iii) Indebtedness
to any employee of the Company, (iv) Indebtedness which by its terms is
subordinated to trade accounts payable or accrued liabilities arising in the
ordinary course of business to the extent that payments made to the holders of
such Indebtedness by the holders of the Subordinated Debentures as a result of
the subordination provisions of the Indenture would be greater than such
payments otherwise would have been as a result of any obligation of such holders
of such Indebtedness to pay amounts over to the obligees on such trade accounts
payable or accrued liabilities arising in the ordinary course of business as a
result of subordination provisions to which such Indebtedness is subject, and
(v) any other debt securities issued pursuant to the Indenture. Except as
described in the next sentence, the Subordinated Debentures will rank pari passu
with, and will not be superior in right of payment to, the obligations of the
Company under the Loan Agreement (the "EPICS Loan Agreement"), dated as of March
24, 1994, between the Company and Bear Stearns Finance LLC ("BS Finance") in the
aggregate principal amount of $189,875,000 (the "EPICS Loan") entered into in
connection with the issuance by BS Finance of 6,000,000 shares of 8%
Exchangeable Preferred Income Cumulative Shares ("EPICS"), Series A (having an
aggregate liquidation preference of $150,000,000). However, the Company will be
permitted to make payments of interest pursuant to the EPICS Loan Agreement
during an Extension Period. The EPICS Loan equals the sum of (i) the aggregate
liquidation preference of $150,000,000 of the EPICS and (ii) the consideration
paid by the Company, directly or indirectly, for all the outstanding common
shares of BS Finance.

<PAGE>

The Indenture places no limitation on the amount of Senior Indebtedness
that may be incurred by the Company. The Company expects from time to time to
incur additional indebtedness and other obligations constituting Senior
Indebtedness.

RESTRICTIONS ON TRANSFER

The New Subordinated Debentures will be issued, and may be transferred
only, in minimum denominations of not less than $100,000 and multiples of $1,000
in excess thereof. Any transfer, sale or other disposition of Subordinated
Debentures in a denomination of less than $100,000 shall be deemed to be void
and of no legal effect whatsoever. Any such transferee shall be deemed not to be
the holder of such Subordinated Debentures for any purpose, including but not
limited to the receipt of payments on such Subordinated Debentures, and such
transferee shall be deemed to have no interest whatsoever in such Subordinated
Debentures.

GOVERNING LAW

The Indenture and the Subordinated Debentures are governed by and construed
in accordance with the laws of the State of New York.

INFORMATION CONCERNING THE DEBENTURE TRUSTEE

The Debenture Trustee has and is subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Debenture Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties if the Debenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.

DESCRIPTION OF GUARANTEE

The Old Guarantee was entered into by the Company concurrently with the
issuance by the Issuer of the Old Capital Securities for the benefit of the
holders from time to time of the Old Capital Securities. As soon as practicable
after the date hereof, the Old Guarantee will be exchanged by the Company for
the New Guarantee. The New Guarantee has been qualified under the Trust
Indenture Act. The Chase Manhattan Bank acts as Guarantee Trustee. This summary
of certain provisions of the Guarantee Agreement does not purport to be complete
and is subject to, and qualified in its entirety by reference to, all of the
provisions of the Guarantee Agreement, including the definitions therein of
certain terms, and the Trust Indenture Act. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Capital Securities.

GENERAL

The Company will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Capital Securities, as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert other than
the defense of payment. The following payments with respect to the Capital
Securities, to the

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extent not paid by or on behalf of the Issuer (the "Guarantee Payments"), will
be subject to the Guarantee: (i) any accumulated and unpaid Distributions
required to be paid on Capital Securities, to the extent that the Issuer has
funds on hand available therefor at such time, (ii) the applicable Redemption
Price with respect to Capital Securities called for redemption to the extent
that the Issuer has funds on hand available therefor at such time, or (iii) upon
a voluntary or involuntary termination, dissolution, winding up or liquidation
of the Issuer, (unless the Subordinated Debentures are distributed to holders of
Capital Securities) the lesser of (a) the Liquidation Distribution and (b) the
amount of assets of the Issuer remaining available for distribution to holders
of Capital Securities. The Company's obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts by the Company to the
holders of the Capital Securities or by causing the Issuer to pay such amounts
to such holders.

The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Issuer's obligations under the Capital Securities, but will apply only to
the extent that the Issuer has funds sufficient to make such payments, and is
not a guarantee of collection. If the Company does not make interest payments on
the Subordinated Debentures held by the Issuer, the Issuer will not be able to
pay Distributions on its Capital Securities and will not have funds legally
available therefor. In such event, holders of the Capital Securities would not
be able to rely on the Guarantee for such payments.

The Guarantee ranks subordinate and junior in right of payment to all
Senior Indebtedness of the Company. See "-Status of the Guarantee." Because the
Company is a holding company, the right of the Company to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of that
subsidiary, except to the extent the Company may itself be recognized as a
creditor of that subsidiary. Accordingly, the Company's obligations under the
Guarantee will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, and claimants should look only to the
assets of the Company for payments thereunder. See "The Bear Stearns Companies
Inc." The Guarantee does not limit the incurrence or issuance of other secured
or unsecured debt of the Company, including Senior Indebtedness, whether under
the Indenture, any other indenture that the Company may enter into in the future
or otherwise.

The Company has, through the Guarantee Agreement, the Trust Agreement, the
Subordinated Debentures and the Indenture taken together, fully, irrevocably and
unconditionally guaranteed on a subordinated basis all of the Issuer's
obligations under the Capital Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
Issuer's obligations under the Capital Securities. See "Relationship Among the
Capital Securities, the Subordinated Debentures and the Guarantee."

The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Issuer with respect to the Common Securities
(the "Common Securities Guarantee") to the same extent as the Guarantee, except
that upon the occurrence and continuance of an Event of Default under the Trust
Agreement, holders of Capital Securities shall have priority over holders of
Common Securities with respect to payments made by the Company on or in respect
of the Trust Securities under the Guarantee and the Common Securities Guarantee.

<PAGE>

STATUS OF THE GUARANTEE

The Guarantee constitutes an unsecured obligation of the Company and ranks
subordinate and junior in right of payment to all Senior Indebtedness of the
Company.

The Guarantee ranks pari passu with all Other Guarantees issued by the
Company. The Guarantee constitutes a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first instituting
a legal proceeding against any other person or entity). The Guarantee is held
for the benefit of the holders of the Capital Securities. The Guarantee will not
be discharged except by payment of the Guarantee Payments in full to the extent
not paid by the Issuer or upon distribution to the holders of the Capital
Securities of the Subordinated Debentures. The Guarantee does not place a
limitation on the amount of additional Senior Indebtedness that may be incurred
by the Company. The Company expects from time to time to incur additional
indebtedness constituting Senior Indebtedness.

AMENDMENTS AND ASSIGNMENT

Except with respect to any changes which do not materially adversely affect
the rights of holders of the Capital Securities (in which case no vote will be
required), the Guarantee Agreement may not be amended without the prior approval
of the holders of not less than a majority of the aggregate Liquidation Amount
of such outstanding Capital Securities. The manner of obtaining any such
approval will be as set forth under "Description of New Securities-Voting
Rights: Amendment of the Trust Agreement." All guarantees and agreements
contained in the Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Capital Securities then outstanding.

EVENTS OF DEFAULT

An event of default under the Guarantee Agreement will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
Amount of the Capital Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Guarantee Agreement.

Any holder of the Capital Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Issuer, the Guarantee Trustee
or any other person or entity.

The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee Agreement.

CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS

The Guarantee Agreement provides that the Company shall not consolidate
with or merge into any other entity or convey, transfer or lease its properties
and assets substantially as an entirety to any entity, and no entity shall
consolidate with or merge into the Company or convey, transfer or lease its

<PAGE>

properties and assets substantially as an entirety to the Company, unless (i) in
case the Company consolidates with or merges into another entity or conveys or
transfers its properties and assets substantially as an entirety to any entity,
the successor entity is organized under the laws of the United States or any
state or the District of Columbia, and such successor entity expressly assumes
the Company's obligations under the Guarantee; (ii) immediately after giving
effect thereto, no event of default under the Guarantee Agreement, and no event
which, after notice or lapse of time or both, would become an event of default
under the Guarantee Agreement, shall have happened and be continuing; and (iii)
certain other conditions as prescribed in the Guarantee Agreement are met.

INFORMATION CONCERNING THE GUARANTEE TRUSTEE

The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee Agreement and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. The Guarantee Trustee is under no obligation to exercise any
of the powers vested in it by the Guarantee Agreement at the request of any
holder of the Capital Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.

TERMINATION OF THE GUARANTEE

The Guarantee will terminate and be of no further force and effect upon
full payment of the applicable Redemption Price of the Capital Securities, upon
full payment of the amounts payable upon liquidation of the Trust or upon
distribution of Subordinated Debentures to the holders of the Capital
Securities. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the Capital Securities must
restore payment of any sums paid under the Capital Securities or the Guarantee.

GOVERNING LAW

The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.

DESCRIPTION OF OLD SECURITIES

The terms of the Old Securities are identical in all material respects to
the New Securities, except that (i) the Old Securities have not been registered
under the Securities Act, are subject to certain restrictions on transfer and
are entitled to certain rights under the Registration Rights Agreement (which
rights will terminate upon consummation of the Exchange Offer, except under
limited circumstances); (ii) the New Capital Securities will not provide for any
increase in the Distribution rate thereon; and (iii) the New Subordinated
Debentures will not provide for any increase in the interest rate thereon. The
Old Securities provide that, in the event that the Exchange Offer is not
consummated on or prior to July 28, 1997, or, in certain limited circumstances,
in the event a shelf registration statement (the "Shelf Registration Statement")
with respect to the resale of the Old Capital Securities is not declared
effective on or prior to July 28, 1997, then interest will accrue (in addition
to the interest rate on the Subordinated Debentures) at the rate of 0.25% per
annum on the principal amount of the Subordinated Debentures, and Distributions
will accrue (in addition to the stated Distribution rate on the Capital
Securities) at the rate of 0.25% per annum on the Liquidation Amount of the
Capital Securities, for the

<PAGE>

period from the occurrence of such event until such time as the Exchange Offer
is consummated or any required Shelf Registration Statement is effective. The
New Securities are not, and upon consummation of the Exchange Offer the Old
Securities will not be, entitled to any such additional interest or
Distributions. Accordingly, holders of Old Capital Securities should review the
information set forth under "Risk Factors-Consequences of Failure to Exchange
Old Capital Securities" and "Description of New Securities."

RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE
SUBORDINATED DEBENTURES AND THE GUARANTEE

FULL AND UNCONDITIONAL GUARANTEE

Payments of Distributions and other amounts due on the Capital Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of Guarantee." Taken together, the Company's
obligations under the Subordinated Debentures, the Indenture, the Trust
Agreement, the Guarantee Agreement and the Guarantee provide, in the aggregate,
a full, irrevocable and unconditional guarantee of payments of distributions and
other amounts due on the Capital Securities. No single document standing alone
or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the Issuer's obligations under the Capital Securities. If and to the extent
that the Company does not make payments on the Subordinated Debentures, the
Issuer will not pay Distributions or other amounts due on the Capital
Securities. The Guarantee does not cover payment of Distributions when the
Issuer does not have sufficient funds to pay such Distributions. In such event,
the remedy of a holder of Capital Securities is to institute a Direct Action.
The obligations of the Company under the Guarantee are subordinate and junior in
right of payment to all Senior Indebtedness.

SUFFICIENCY OF PAYMENTS

As long as payments of interest and other payments are made when due on the
Subordinated Debentures such payments will be sufficient to cover Distributions
and other payments due on the Capital Securities, primarily because (i) the
aggregate principal amount or Prepayment Price of the Subordinated Debentures
will be equal to the sum of the aggregate Liquidation Amount or Redemption
Price, as applicable, of the Capital Securities and Common Securities; (ii) the
interest rate and interest and other payment dates on the Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Trust Securities; (iii) under the Indenture, the Company shall pay
for all and any costs, expenses and liabilities of the Issuer except the
Issuer's obligations to holders of Trust Securities under such Trust Securities;
and (iv) the Trust Agreement further provides that the Issuer will not engage in
any activity that is not consistent with the limited purposes thereof.

ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES

A holder of any Capital Security may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer or any
other person or entity.

<PAGE>

A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Trust Agreement. However, in
the event of payment defaults under, or acceleration of, Senior Indebtedness,
the subordination provisions of the Indenture provide that no payments may be
made in respect of the Subordinated Debentures until such Senior Indebtedness
has been paid in full or any payment default thereunder has been cured or
waived. Failure to make required payments on Subordinated Debentures would
constitute an Event of Default under the Trust Agreement.

LIMITED PURPOSE OF THE ISSUER

The Capital Securities are beneficial interests in the Issuer, and the
Issuer exists for the sole purpose of issuing the Capital Securities and Common
Securities and investing the proceeds of the Trust Securities in Subordinated
Debentures pursuant to the Indenture. A principal difference between the rights
of a holder of a Capital Security and a holder of a Subordinated Debenture is
that a holder of a Subordinated Debenture is entitled to receive from the
Company the principal amount of and interest accrued on Subordinated Debentures
held, while a holder of Capital Securities is entitled to receive Distributions
from the Issuer (or from the Company under the Guarantee) if and to the extent
the Issuer has funds available for the payment of such Distributions.

RIGHTS UPON DISSOLUTION

Upon any voluntary or involuntary dissolution, winding-up or liquidation of
the Issuer involving the liquidation of the assets of the Issuer, after
satisfaction of liabilities to creditors as required by applicable law the
holders of the Trust Securities will be entitled to receive, out of assets held
by the Issuer, the Liquidation Distribution in cash. See "Description of New
Securities-Liquidation of the Issuer and Distribution of Subordinated
Debentures." Upon any voluntary or involuntary liquidation or bankruptcy of the
Company, the Property Trustee, as holder of the Subordinated Debentures, would
be a subordinated creditor of the Company, subordinated in right of payment to
all Senior Indebtedness as set forth in the Indenture, but entitled to receive
payment in full of principal and interest, before any stockholders of the
Company receive payments or distributions. Since the Company is the guarantor
under the Guarantee and has agreed to pay for all costs, expenses and
liabilities of the Issuer (other than the Issuer's obligations to the holders of
its Trust Securities), the positions of a holder of Capital Securities and a
holder of Subordinated Debentures relative to other creditors and to
stockholders of the Company in the event of liquidation or bankruptcy of the
Company are expected to be substantially the same.

<PAGE>

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of certain of the principal United States
Federal income tax consequences of the purchase, ownership and disposition of
the Capital Securities to a holder that is a citizen or resident of the United
States, a corporation, partnership or other entity created or organized under
the laws of the United States or any state thereof or the District of Columbia
or an estate or trust the income of which is subject to United States Federal
income taxation regardless of source (a "U.S. Holder"). This summary does not
address the United States Federal income tax consequences to persons other than
U.S. Holders.

This summary is based on the United States Federal income tax laws,
regulations and rulings and decisions now in effect, all of which are subject to
change, possibly on a retroactive basis. This summary does not address the tax
consequences applicable to investors that may be subject to special tax rules
such as banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors or persons that will hold the Capital Securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment, or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of Capital
Securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the Capital Securities.

PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF CAPITAL SECURITIES, AS WELL AS THE
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.

EXCHANGE OF CAPITAL SECURITIES

The exchange of Old Capital Securities for New Capital Securities pursuant
to the Exchange Offer should not constitute an "exchange" for United States
Federal income tax purposes. Accordingly, there should be no United States
Federal income tax consequences to U.S. Holders as a result of the consummation
of the Exchange Offer.

CLASSIFICATION OF THE TRUST

Upon the issuance of the Old Capital Securities, Weil, Gotshal & Manges LLP
issued its opinion (the "Tax Opinion") to the effect that, under then current
law and assuming full compliance with the terms of the Trust Agreement (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Issuer will be classified, for United States Federal income
tax purposes, as a grantor trust and not as an association taxable as a
corporation. As a result, each holder of Capital Securities will be treated as
owning an undivided beneficial interest in the Subordinated Debentures and each
holder will be required to include in its gross income the items of income
realized with respect to its allocable share of those Subordinated Debentures.
Investors should be aware that the Tax Opinion does not address any other issue
and is not binding on the Internal Revenue Service (the "Service") or the
courts.

<PAGE>

INTEREST, ORIGINAL ISSUE DISCOUNT, PREMIUM AND MARKET DISCOUNT

Final Treasury Regulations issued on June 16, 1996 generally provide that
stated interest on a debt instrument is not "qualified stated interest" and,
therefore, will give rise to original issue discount ("OID") unless such
interest is unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually at a single fixed rate. Interest is
considered to be unconditionally payable only if reasonable legal remedies exist
to compel timely payment or the debt instrument otherwise provides terms and
conditions that make the likelihood of late payment (other than late payment
that occurs within a reasonable grace period) or non-payment a "remote
contingency."

The Company has the right, at any time and from time to time during the
term of the Subordinated Debentures, to defer payments of interest by extending
the interest payment period for a period not exceeding 10 consecutive
semi-annual periods, provided that no Extension Period may extend beyond the
Stated Maturity of the Subordinated Debentures. Unless the likelihood of
exercise of such right to defer is remote, the Subordinated Debentures would be
issued with OID. During any such Extension Period, the Company may not, and may
not permit any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock) or (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company
(including Other Debentures) that rank pari passu with or junior in interest to
the Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in interest to the Subordinated Debentures (other than (a) dividends or
distributions in capital stock of the Company, (b) any declaration of a dividend
in connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, (d) purchases of common stock related to the issuance of common stock
or rights under any of the Company's benefit plans for its directors, officers
or employees and (e) payments of interest pursuant to the EPICS Loan Agreement).
See "Description of Subordinated Debentures-Option to Defer Interest Payments."
The Company currently believes that the adverse impact that the imposition of
such restrictions would have on the Company and on the value of its equity
securities makes the likelihood of its exercising its right to defer payments of
interest on the Subordinated Debentures remote. Accordingly, the Company
believes that the stated interest on the Subordinated Debentures should be
considered unconditionally payable for purposes of the Code and that the
Subordinated Debentures should not be considered to have been issued with OID.
If so, stated interest paid or payable prior to the exercise, if any, by the
Company, of its right to defer interest payments, will be taxable to a holder as
ordinary interest income, generally at the time it is received or accrued, in
accordance with such holder's regular method of accounting for Federal income
tax purposes. In addition, because of the Company's entitlement to redeem the
Subordinated Debentures at any time on or after January 15, 2002, the Company
believes that any increase in interest rate occurring at such time should not
result in the Subordinated Debentures being issued with OID. There can be no
assurance, however, that the Service will agree with these determinations.

Moreover, if, notwithstanding the foregoing, the Company does exercise its
right to defer payments of interest thereon, the Subordinated Debentures will be
considered to be retired and reissued for their adjusted issue price at such
time, and the Subordinated Debentures thereafter will be considered to have been
issued with OID. In such case, all the interest payments thereafter payable will
be treated as OID. If the payments were treated as OID (either because the
Company exercises the right to defer interest

<PAGE>

payments or because the exercise of such right was not remote at the time of
issuance), holders must include that discount in income on an economic accrual
basis before the receipt of cash attributable to the interest, regardless of
their method of tax accounting, and any holders who dispose of Capital
Securities prior to the record date for payment of Distributions thereon
following such Extension Period will include OID in gross income but will not
receive any cash related thereto from the Issuer. The amount of OID that accrues
in any semi-annual period will approximately equal the amount of the interest
that accrues in that semi-annual period at the stated interest rate. In the
event that the interest payment period is extended, holders will accrue OID
approximately equal to the amount of the interest payment due at the end of the
extended interest payment period on an economic accrual basis over the length of
the extended interest period.

Holders of Capital Securities will not be entitled to a dividends-received
deduction with respect to any income earned on the Capital Securities.

Holders of Capital Securities other than a holder who purchased the Capital
Securities upon original issuance may be considered to have acquired their
undivided interests in the Subordinated Debentures with market discount or
acquisition premium, as such phrases are defined for United States Federal
income tax purposes. Such holders are advised to consult their tax advisors as
to the income tax consequences of the acquisition, ownership and disposition of
Capital Securities.

RECEIPT OF SUBORDINATED DEBENTURES UPON LIQUIDATION OF THE ISSUER

As described under "Description of New Securities-Liquidation of the Issuer
and Distribution of Subordinated Debentures," Subordinated Debentures may be
distributed to holders in exchange for the Capital Securities and in liquidation
of the Issuer. Under current law, such a distribution would be treated as a
non-taxable event to each holder and each holder's aggregate tax basis in the
Subordinated Debentures would be equal to such holder's aggregate tax basis in
its Capital Securities. A holder's holding period in the Subordinated Debentures
so received in liquidation of the Issuer would include the period for which the
Capital Securities were held by such holder. If, however, the liquidation of the
Issuer were to occur because the Issuer is subject to United States Federal
income tax with respect to income accrued or received on the Subordinated
Debentures, the distribution of Subordinated Debentures to the holders of
Capital Securities by the Issuer would be a taxable event to the Issuer and a
holder of Capital Securities would recognize gain or loss as if such holder had
exchanged its Capital Securities for the Subordinated Debentures it received
upon the liquidation of the Issuer. A holder will be taxable on interest or OID
in respect of Subordinated Debentures received from the Issuer in the manner
described above under "-Interest, Original Issue Discount, Premium and Market
Discount."

SALE OR REDEMPTION OF CAPITAL SECURITIES

A holder that sells Capital Securities (including a redemption for cash)
will recognize gain or loss equal to the difference between the amount realized
on the sale (other than amounts attributable to accrued but unpaid interest
which has not yet been included in income, which will be treated as ordinary
income) and its adjusted tax basis in the securities sold or redeemed. A
holder's adjusted tax basis in the Capital Securities generally will be its
initial purchase price increased by OID (if any) previously includible in such
holder's gross income to the date of disposition (and the accrual of market
discount, if any, if an election to accrue market discount in income currently
is made) and decreased by payments received on the Capital Securities (other
than payments of qualified stated interest). Except to the extent noted above
and subject to the market discount rules of the Code, any such gain or loss

<PAGE>

generally will be long-term capital gain or loss if the Capital Securities were
held for more than one year.

The Capital Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying Subordinated
Debentures. A holder who uses the accrual method of accounting for tax purposes
(and a cash method holder, if the Subordinated Debentures are deemed to have
been issued with OID) and who disposes of its Capital Securities between record
dates for payments of distributions thereon will be required to include accrued
but unpaid interest on the Subordinated Debentures through the date of
disposition in income as ordinary income (i.e., interest or, possibly, OID), and
to add such amount to its adjusted tax basis in its Capital Securities disposed
of. To the extent the selling price (which may not fully reflect the value of
accrued but unpaid interest) is less than such holder's adjusted tax basis
(which will include all OID and accrued but unpaid interest), a holder will
recognize a capital loss. Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States Federal income tax
purposes.

BACKUP WITHHOLDING TAX AND INFORMATION REPORTING

Subject to the qualifications discussed below, income on the Capital
Securities will be reported to holders on Forms 1099, which forms are expected
to be mailed to holders of Capital Securities by January 31 following each
calendar year.

The Issuer will be obligated to report annually to Cede & Co., as holder of
record of the Capital Securities, the interest (or OID) related to the
Subordinated Debentures for that year. The Issuer currently intends to report
such information on Form 1099 prior to January 31 following each calendar year
even though the Issuer is not legally required to report to record holders until
April 15 following each calendar year. The Initial Purchasers have indicated to
the Issuer that, to the extent that they hold Capital Securities as nominees for
beneficial holders, they currently expect to report to such beneficial holders
on Forms 1099 by January 31 following each calendar year. Under current law,
holders of Capital Securities who hold as nominees for beneficial holders will
not have any obligation to report information regarding the beneficial holders
to the Issuer. The Issuer, moreover, will not have any obligation to report to
beneficial holders who are not also record holders. Thus, beneficial holders of
Capital Securities who hold their Capital Securities through the Initial
Purchasers will receive Forms 1099 reflecting the income on their Capital
Securities from such nominee holders rather than the Issuer.

Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies with
certain identification requirements. Any withheld amounts will be allowed as a
credit against the holder's Federal income tax liability, provided the required
information is provided to the Service.

POSSIBLE TAX LAW CHANGES

On February 6, 1997, President Clinton submitted to Congress the Proposal
to implement certain tax legislation that would, as explained in the Joint
Committee Description, generally deny interest deductions for interest on an
instrument which (a) is issued by a corporation, (b) has a maximum term of more
than 15 years and (c) is not shown as indebtedness on the separate balance sheet
of the issuer (or, if the instrument is issued to a related party other than a
corporation, where the holder or some other related party issues a related
instrument that is not shown as indebtedness on the issuer's consolidated
balance sheet). If such provision were to apply to the Subordinated Debentures,
the Company would be unable to deduct

<PAGE>

interest on the Subordinated Debentures, which, under current law, the Company
believes it will be able to deduct. However, as explained in the Joint Committee
Description, legislation enacted under the Proposal would be effective generally
for instruments issued on or after the date of first congressional committee
action. To date there has been no congressional committee action on the
Proposal. There can be no assurance that the Proposal will not result in
legislation having a retroactive effect and applicable to the Subordinated
Debentures. Furthermore, there can be no assurance that other legislation
enacted after the date hereof will not be otherwise adversely affect the ability
of the Company to deduct the interest payable on the Subordinated Debentures.
Accordingly, there can be no assurance that the Proposal or any other such
legislation will not result in a Tax Event, which would permit the Company to
cause a redemption of the Capital Securities before, as well as after, January
15, 2002. See "Description of New Securities-Redemption".

THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE EXCHANGE OFFER AND THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
FEDERAL OR OTHER TAX LAWS.

ERISA CONSIDERATIONS

The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain responsibilities and limitations on fiduciaries of employee
benefit plans subject to Part 4 of Title I of ERISA and persons deemed to hold
plan assets of such employee benefit plans by reason of Department of Labor
regulation 29 C.F.R. ss. 2510.3-101 ("Plan Assets Regulation") or applicable law
("ERISA Plans"). When considering an investment in Capital Securities by an
ERISA Plan, such fiduciaries should also consider, among other matters, whether
such investment is prudent, is permitted by the documents governing the ERISA
Plan, and is appropriate in view of the ERISA Plan's investment policy and
portfolio.

The prohibited transaction provisions of ERISA and Section 4975 of the Code
impose limitations upon a broad range of direct or indirect transactions
involving the assets of an ERISA Plan or other plan subject to such provisions
(collectively, "Plans"), and a "party in interest" (as defined in ERISA) or a
"disqualified person" (as defined in such Section), unless an exemption applies.
By virtue of the activities of the Company and its subsidiaries, the Company is
a party in interest and disqualified person with respect to many Plans from time
to time.

Under a look-through rule set forth in the Plan Assets Regulation, the
assets of the Issuer could be treated as if they were "plan assets" of any Plan
acquiring a Capital Security, unless for purposes of the Plan Assets Regulation
(i) the Capital Securities constitute "publicly offered securities" or (ii)
immediately after any acquisition of a Capital Security, Plans and other
"benefit plan investors" own less than 25% of the Capital Securities (excluding
any Capital Securities owned by the Property Trustee, Delaware Trustee,
Administrators or any of their affiliates). The acquisition of Capital
Securities (i) by at least 100 persons who are independent of one another (at
the completion of the public offering or otherwise) for purposes of satisfying
the definition of a publicly offered security or (ii) by "benefit plan
investors" (as defined in the Plan Assets Regulation) will not be monitored.
Thus,

<PAGE>

there are no assurances that the assets of the Issuer could not be construed as
"plan assets" of any Plan acquiring a Capital Security.

If the assets of the Issuer were treated as plan assets, the fiduciary
standards in ERISA and the prohibited transaction provisions of ERISA and
Section 4975 of the Code would likely apply to the assets owned by and the
operations of the Trust. In particular, the loan between the Trust and the
Company, as evidenced by the Subordinated Debentures, might constitute a
non-exempt prohibited transaction unless the Company is not a party in interest
or a disqualified person with respect to any ERISA Plan which owns a Trust
Security. Furthermore, the Property Trustee, Delaware Trustee and Administrators
would likely be treated as "parties in interest" and "disqualified persons"
subject to the prohibited transaction provisions and could be construed as
fiduciaries for purposes of ERISA with respect to each ERISA Plan owning a
Capital Security.

Moreover, due to the narrow purpose of the Issuer, the extension of credit
between the Issuer and the Company could be construed as an indirect prohibited
transaction for which an exemption is required with respect to any Plan
acquiring Capital Securities and as to which the Company is a party in interest
or disqualified person, regardless of whether the assets of the Issuer are
treated as plan assets of any Plan acquiring a Capital Security.

As a result, no Plan should acquire Capital Securities unless one or more
prohibited transaction exemptions applies to its acquisition and holding of such
Securities, including the operation of the Issuer and the loan between the
Issuer and the Company. The acquisition of a Capital Security by an ERISA Plan
shall constitute a representation and warranty by such Plan and its fiduciary
responsible for such acquisition that such security is being acquired and held
pursuant to an applicable prohibited transaction exemption.

There are a number of prohibited transaction exemptions which could
reasonably be construed as applying to the acquisition and holding of a Capital
Security by a Plan (including the loan between the Issuer and the Company, and
the services provided by the Property Trustee, Delaware Trustee and
Administrators) depending upon the circumstances, including, but not limited to,
the following prohibited transaction class exemptions ("PTCEs"): PTCE 84-14
relating to qualified professional asset managers; PTCE 90-1 relating to
insurance company pooled separate accounts; PTCE 91-38 relating to bank
collective trust funds; PTCE 95-60 relating to insurance company general
accounts; and PTCE 96-23 relating to in-house asset managers.

The foregoing discussion with respect to Plans is general in nature and is
not intended to be all-inclusive. Any Plan considering a purchase of Capital
Securities should consult with its counsel regarding the potential consequences
of such purchase. In particular, Plans should consider the potential
consequences if the assets of the Issuer were treated as "plan assets" and the
availability and extent of exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1
or 84-14, or other exemption.

77
<PAGE>
PLAN OF DISTRIBUTION

Each broker-dealer that receives New Capital Securities for its own
account in connection with the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Capital
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by Participating Broker-Dealers during the period referred to
below in connection with resales of New Capital Securities received in exchange
for Old Capital Securities if such Old Capital Securities were acquired by such
Participating Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities. The Issuer has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such New Capital
Securities for a period ending 180 days after the Expiration Date (subject to
extension under certain limited circumstances described herein) or, if earlier,
when all such New Capital Securities have been disposed of by such Participating
Broker-Dealer. See "The Exchange Offer-Resales of New Capital Securities." The
Issuer will not receive any proceeds from the issuance of the New Capital
Securities offered hereby. New Capital Securities received by broker-dealers for
their own accounts in connection with the Exchange Offer may be sold from time
to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New Capital
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such New Capital Securities. Any broker-dealer that resells
New Capital Securities that were received by it for its own account in
connection with the Exchange Offer and any broker or dealer that participates in
a distribution of such New Capital Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New Capital Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.

This Prospectus may be used by Bear, Stearns & Co. Inc., an affiliate
of the Company, in connection with offers and sales related to market-making
transactions in New Securities effected from time to time after the commencement
of the offering to which this Prospectus relates. Bear, Stearns & Co. Inc. may
act as principal or agent in such transactions, including as agent for the
counterparty when acting as principal or as agent for both counterparties, and
may receive compensation in the form of discounts and commissions, including
from both counterparties when it acts as agent for both. Such sales will be made
at prevailing market prices at the time of sale, at prices related thereto or at
negotiated prices.

The Company has been advised by Bear, Stearns & Co. Inc. that, subject
to applicable laws and regulations, Bear, Stearns & Co. Inc. may make a market
in New Securities. However, they are not obligated to do so and any
market-making may be discounted at any time without notice. In addition, such
market-making activity is subject to the limits imposed by the Securities Act,
the Exchange Act. There can be no assurance that an active trading market will
be sustained.

The Company has indemnified Bear, Stearns & Co. Inc. with respect to
certain liabilities in connection with this Prospectus, including liabilities
under the Securities Act.

<PAGE>

VALIDITY OF NEW CAPITAL SECURITIES

Certain matters of Delaware law relating to the validity of the New Capital
Securities, the enforceability of the Trust Agreement and the creation of the
Issuer will be passed upon by Richards, Layton & Finger, special Delaware
counsel to the Company and the Issuer. The validity of the New Capital
Securities will be passed upon for the Company by Weil, Gotshal & Manges LLP,
New York, New York. Weil, Gotshal & Manges LLP will rely on the opinion of
Richards, Layton & Finger as to matters of Delaware law. Certain matters
relating to United States Federal income tax considerations will be passed upon
for the Company by Weil, Gotshal & Manges LLP.

INDEPENDENT PUBLIC ACCOUNTANTS

The consolidated financial statements and the related financial statement
schedules incorporated by reference from the Company's 1996 Annual Report on
Form 10-K in this Prospectus 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.

79
<PAGE>

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE ISSUER OR
BY THE INITIAL PURCHASERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE ISSUER SINCE THE DATE HEREOF
OR THAT ANY INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE. THIS PROSPECTUS DOES 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 ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

TABLE OF CONTENTS PROSPECTUS
PAGE

Available Information............................. 11
Incorporation of Certain Documents
by Reference.................................... 11
Summary........................................... 12
Risk Factors...................................... 19
Ratios of Earnings to Fixed Charges............... 26
Use of Proceeds................................... 26
Capitalization.................................... 27
Bear Stearns Capital Trust I...................... 28
The Bear Stearns Companies Inc.................... 28
Accounting Treatment.............................. 29
The Exchange Offer................................ 29
Description of New Securities..................... 40
Description of Subordinated Debentures............ 55
Description of Guarantee.......................... 66
Description of Old Securities..................... 70
Relationship Among the Capital
Securities, the Subordinated
Debentures and the Guarantee.................... 69
Certain Federal Income Tax
Consequences.................................... 71
ERISA Considerations.............................. 75
Plan of Distribution.............................. 77
Validity of New Capital Securities................ 78
Independent Public Accountants.................... 78

$200,000,000

BEAR STEARNS CAPITAL TRUST I

FIXED/ADJUSTABLE RATE
CAPITAL SECURITIES

(LIQUIDATION AMOUNT $1,000
PER CAPITAL SECURITY)

FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED HEREIN

THE BEAR STEARNS COMPANIES INC.

_____________________

PROSPECTUS
_____________________

MARCH __, 1997

<PAGE>

Item 20. Indemnification of Directors and Officers.

Reference is made to section 145 of the Delaware General Corporation
Law which provides for indemnification of directors and officers of the Company
in certain circumstances.

Article VIII of the Company's Restated Certificate of Incorporation
provides for indemnification of directors and officers of the registrant against
certain liabilities incurred as a result of their duties as such and also
provides for the elimination of the monetary liability of directors for certain
actions as such. The Company's Restated Certificate of Incorporation, as
amended, is filed as Exhibit 4(a) to the Registration Statement on Form S-8 (No.
33-49979) filed August 13, 1993.

The registrant has in effect reimbursement insurance for directors' and
officers' liability claims and directors' and officers' liability insurance
indemnifying, respectively, the registrant and its directors and officers within
specific limits for certain liabilities incurred by them, subject to the
conditions and exclusions and deductible provisions of the policies.

Under the Amended and Restated Trust Agreement, the Company has agreed
to indemnify each of the Issuer Trustees and Administrators, and to hold such
Issuer Trustees and Administrators harmless, against any loss, damage, claims,
liability or expense incurred without negligence or bad faith on their part,
arising out of or in connection with the acceptance of administration of such
Trust Agreement, including the costs and expenses of defense against any claim
or liability in connection with the exercise or performance of any of their
powers or duties under the Trust Agreement or the Amended and Restated Trust
Agreement each of which is filed as an exhibit to this Registration Statement.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
each Registrant pursuant to the provisions described under Item 15 above, or
otherwise (other than insurance), each Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than insurance or the payment by each Registrant of expenses incurred or paid by
a director, officer or controlling person of each Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, each
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

ITEM 21. EXHIBITS.

EXHIBIT NO. DESCRIPTION OF EXHIBIT

<TABLE>

<S> <C>
4.1 Indenture, dated as of January 29, 1997, between the Company and The Chase Manhattan
Bank, as Debenture Trustee*
4.2 First Supplemental Indenture, dated as of January 29, 1997 between the Company and The
Chase Manhattan Bank, as Debenture Trustee*
4.3 Certificate of Trust of Bear Stearns Capital Trust I*
4.4 Amended and Restated Trust Agreement of Bear Stearns Capital Trust*
4.5 Form of Capital Security Certificate for Bear Stearns Capital Trust I (included in Exhibit 4.4)
4.6 Form of Junior Subordinated Debenture due January 15, 2027 (included in Exhibit 4.2)
4.7 Capital Securities Guarantee Agreement dated as of January 29, 1997*

81
<PAGE>

EXHIBIT NO. DESCRIPTION OF EXHIBIT

4.8 Registration Rights Agreement, dated as of January 29, 1997, among the Company, the Issuer
and Chase Securities Inc., Goldman, Sachs & Co., J.P. Morgan Securities Inc. and
NationsBanc Securities, Inc.*
4.9 All instruments defining the rights of holders of long-term debt of
the Company and its subsidiaries (Not filed pursuant to clause 4
(iii) of Item 601(b) of Regulation S-K; to be furnished upon request
of the Commission)
5.1 Opinion of Richards, Layton & Finger as to validity of the New Capital Securities*
5.2 Opinion of Weil, Gotshal & Manges LLP as to validity of the Guarantee and the New
Subordinated Debentures to be issued by the Company*
8 Opinion of Weil, Gotshal & Manges LLP as to certain federal income tax matters*
12 Computations of Ratios of Earnings to Fixed Charges**
23.1 Consent of Deloitte & Touche LLP*
23.2 Consent of Richards, Layton & Finger (Included in Exhibit 5.1)
23.3 Consent of Weil, Gotshal & Manges LLP (Included in Exhibit 5.2)
23.4 Consent of Weil, Gotshal & Manges LLP (Included in Exhibit 8)
24 Powers of Attorney (Included in the signature pages to the Registration Statement)*
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under the
Indenture**
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under the
Amended and Restated Trust Agreement**
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank under the Guarantee for the
benefit of the holders of Capital Securities**
99.1 Form of Letter of Transmittal and instructions thereto**
99.2 Form of Notice of Guaranteed Delivery**
99.3 Form of Exchange Agent Agreement**
<FN>
* Previously filed.
** Filed herewith.
</FN>
</TABLE>

82
<PAGE>

ITEM 22. UNDERTAKINGS.

Each of the undersigned Registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, as
amended, each filing of a Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

Each of the undersigned Registrants hereby also undertakes:

(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;

(ii) to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereto) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission; and

(iii) to respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4,
10(b), 11 or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
required in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant, The Bear Stearns Companies, Inc., has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
18th day of March, 1997.

THE BEAR STEARNS COMPANIES INC.

By: /s/ William J. Montgoris
----------------------------
William J. Montgoris
Chief Operating Officer

We, the undersigned officers and directors of The Bear Stearns Companies
Inc., hereby severally constitute Alan C. Greenberg, James E. Cayne and William
J. Montgoris, and any of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our name in the
capacities indicated below, any and all amendments to this registration
statement on Form S-4 filed by The Bear Stearns Companies Inc. with the
Securities and Exchange Commission, and generally to do all such things in our
name and behalf in such capacities to enable The Bear Stearns Companies Inc. to
comply with the provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, and we hereby ratify and
confirm our signatures as they may be signed by our said attorneys, or any of
them, to any and all such amendments.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.

84
<PAGE>

SIGNATURE TITLE DATE
<S> <C> <C>

* Chairman of the Board and Director March 18, 1997
- ----------------------------------
Alan C. Greenberg

President and Chief March 18, 1997
* Executive Officer (Principal Executive
- ----------------------------------
James E. Cayne Officer); Director

/s/ William J. Montgoris Chief Operating Officer; Director March 18, 1997
- ----------------------------------
William J. Montgoris

* Executive Vice President; Director March 18, 1997
- ----------------------------------
Mark E. Lehman

March 18, 1997
* Executive Vice President; Director
- ----------------------------------
Alan D. Schwartz

* Executive Vice President; Director March 18, 1997
- ----------------------------------
Warren J. Spector

* Treasurer; Director March 18, 1997
- ----------------------------------
Michael Minikes

* Director March 18, 1997
- ----------------------------------
E. Garrett Bewkes III

Director
- ----------------------------------
Denis A. Bovin

85
<PAGE>
<CAPTION>
SIGNATURE TITLE DATE

<S> <C> <C>
Director
- ----------------------------------
Peter D. Cherasia

* Director March 18, 1997
- ----------------------------------
Ralph R. Cioffi

* Director March 18, 1997
- ----------------------------------
Barry J. Cohen

* Director March 18, 1997
- ----------------------------------
Wendy L. de Monchaux

* Director March 18, 1997
- ----------------------------------
Bruce E. Geismar

* Director March 18, 1997
- ----------------------------------
Carl D. Glickman

* Director March 18, 1997
- ----------------------------------
Thomas R. Green

* Director March 18, 1997
- ----------------------------------
Donald J. Harrington

86
<PAGE>
<CAPTION>

SIGNATURE TITLE DATE

<S> <C> <C>
* Director March 18, 1997
- ----------------------------------
Richard Harriton

* Director March 18, 1997
- ----------------------------------
Daniel L. Keating

* Director March 18, 1997
- ----------------------------------
John W. Kluge

* Director March 18, 1997
- ----------------------------------
David A. Liebowitz

* Director March 18, 1997
- ----------------------------------
Bruce M. Lisman

* Director March 18, 1997
- ----------------------------------
Roland N. Livney

* Director March 18, 1997
- ----------------------------------
Donald R. Mullen, Jr.

Director
- ----------------------------------
Frank T. Nickell

87
<PAGE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>

Director
- ----------------------------------
Craig M. Overlander

Director
- ----------------------------------
Stephen E. Raphael

* Vice-Chairman of the Board; Director March 18, 1997
- ----------------------------------
E. John Rosenwald Jr.

Director
- ----------------------------------
Lewis A. Sachs

Director
- ----------------------------------
Richard Sachs

Director
- ----------------------------------
Frederic V. Salerno

* Director March 18, 1997
- ----------------------------------
David M. Solomon

* Director March 18, 1997
- ----------------------------------
Robert M. Steinberg

SIGNATURE TITLE DATE
<S> <C> <C>

* Vice-Chairman of the Board; Director March 18, 1997
- ----------------------------------
Michael L. Tarnopol

Director
- ---------------------------------
Vincent Tese

* Director March 18, 1997
- ----------------------------------
Michael J. Urfirer

* Director March 18, 1997
- ----------------------------------
Fred Wilpon

* Director March 18, 1997
- ----------------------------------
Uzi Zucker

* Controller March 18, 1997
- ----------------------------------
Michael J. Abatemarco

* Senior Vice President- Finance and March 18, 1997
- ---------------------------------- Chief Financial Officer (Principal
Samuel L. Molinaro Jr. Accounting Officer and Principal
Financial Officer)

<FN>
* Signed on behalf of each of the above-mentioned individuals by
their attorney-in-fact
</FN>
</TABLE>

By: /s/ William J. Montgoris
----------------------------
William J. Montgoris
Attorney-in-Fact

89
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant, Bear Stearns Capital Trust I, has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on the 18th day of
March, 1997.

BEAR STEARNS CAPITAL TRUST I
By: The Bear Stearns Companies Inc.,
as Sponsor

By: /s/ William J. Montgoris
----------------------------
William J. Montgoris
Chief Operating Officer

90
<PAGE>
EXHIBIT INDEX

<TABLE>
<S> <C>
4.1 Indenture, dated as of January 29, 1997, between the Company and The Chase Manhattan
Bank, as Debenture Trustee*
4.2 First Supplemental Indenture, dated as of January 29, 1997 between the Company and The
Chase Manhattan Bank, as Debenture Trustee*
4.3 Certificate of Trust of Bear Stearns Capital Trust I*
4.4 Amended and Restated Trust Agreement of Bear Stearns Capital Trust*
4.5 Form of Capital Security Certificate for Bear Stearns Capital Trust I (included in Exhibit 4.4)
4.6 Form of Junior Subordinated Debenture due January 15, 2027 (included in Exhibit 4.2)
4.7 Capital Securities Guarantee Agreement dated as of January 29, 1997*
4.8 Registration Rights Agreement, dated as of January 29, 1997, among the Company, the Issuer
and Chase Securities Inc., Goldman, Sachs & Co., J.P. Morgan Securities Inc. and
NationsBanc Securities, Inc.*
4.9 All instruments defining the rights of holders of long-term debt of
the Company and its subsidiaries (Not filed pursuant to clause 4
(iii) of Item 601(b) of Regulation S-K; to be furnished upon request
of the Commission)
5.1 Opinion of Richards, Layton & Finger as to validity of the New Capital Securities*
5.2 Opinion of Weil, Gotshal & Manges LLP as to validity of the Guarantee and the New
Subordinated Debentures to be issued by the Company*
8 Opinion of Weil, Gotshal & Manges LLP as to certain federal income tax matters*
12 Computations of Ratios of Earnings to Fixed Charges**
23.1 Consent of Deloitte & Touche LLP*
23.2 Consent of Richards, Layton & Finger (Included in Exhibit 5.1)
23.3 Consent of Weil, Gotshal & Manges LLP (Included in Exhibit 5.2)
23.4 Consent of Weil, Gotshal & Manges LLP (Included in Exhibit 8)
24 Powers of Attorney (Included in the signature pages to the Registration Statement)*
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under the
Indenture**
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under the
Amended and Restated Trust Agreement**
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank under the Guarantee for the
benefit of the holders of Capital Securities**
99.1 Form of Letter of Transmittal and instructions thereto**
99.2 Form of Notice of Guaranteed Delivery**
99.3 Form of Exchange Agent Agreement**
<FN>
* Previously filed.
** Filed herewith.
</FN>
</TABLE>

91
NYFS04...:\25\22625\0313\1824\FRM2137P.35A

EXHIBIT 12

THE BEAR STEARNS COMPANIES INC.
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except for ratio)

(Unaudited) (Unaudited)
Six Months Six Months Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended Ended Ended Ended Ended
Dec. 31, 1996 Dec. 31, 1995 June 30, 1996 June 30, 1995 June 30, 1994 June 30, 1993 June 30, 1992
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings before taxes
on income $ 469,072 $ 337,291 $ 834,926 $ 388,082 $ 642,799 $ 614,398 $ 507,625
---------- ---------- ---------- ---------- ---------- ---------- ---------

Added Fixed Charges:
Interest 1,163,865 959,348 1,981,171 1,678,515 1,023,866 710,086 834,859

Interest factor in rents 13,144 12,853 25,672 24,594 21,772 20,084 20,874
---------- ---------- ---------- ---------- ---------- ---------- ----------

Total Fixed Charges 1,177,099 972,201 2,006,843 1,703,109 1,045,638 730,170 855,733
---------- ---------- ---------- ---------- ---------- ---------- ----------

Earnings before fixed charges
and taxes on income $1,646,081 $1,309,492 $2,841,769 $2,091,191 $1,688,437 $1,344,568 $1,363,358
========== ========== ========== ========== ========== ========== ==========

Ratio of Earnings to Fixed Charges 1.4 1.3 1.4 1.2 1.6 1.8 1.6
========== ========== ========== ========== ========== ========== ==========

</TABLE>

NYFS04...:\25\22625\0122\1773\CHTD126J.57B

EXHIBIT 25.1

________________________________________________________________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________

FORM T-1

STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________

THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)

NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)

270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)

William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
_____________________________________________
THE BEAR STEARNS COMPANIES INC.
(Exact name of obligor as specified in its charter)

DELAWARE 13-3286161
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)

245 PARK AVENUE
NEW YORK, N.Y. 10167
(Address of principal executive offices) (Zip Code)

---------------------------------------------
JUNIOR SUBORDINATED DEBENTURES
(Title of the indenture securities)
_____________________________________________

<PAGE>

GENERAL

Item 1. General Information.

Furnish the following information as to the trustee:

(a) Name and address of each examining or supervising authority
to which it is subject.

New York State Banking Department, State House, Albany, New
York 12110.

Board of Governors of the Federal Reserve System,
Washington, D.C., 20551

Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.

Federal Deposit Insurance Corporation, Washington, D.C.,
20429.

(b) Whether it is authorized to exercise corporate trust powers.

Yes.

Item 2. Affiliations with the Obligor.

If the obligor is an affiliate of the trustee, describe each such
affiliation.

None.

<PAGE>

Item 16. List of Exhibits

List below all exhibits filed as a part of this Statement of
Eligibility.

1. A copy of the Articles of Association of the Trustee as now
in effect, including the Organization Certificate and the
Certificates of Amendment dated February 17, 1969, August 31, 1977,
December 31, 1980, September 9, 1982, February 28, 1985, December 2,
1991 and July 10, 1996 (see Exhibit 1 to Form T-1 filed in connection
with Registration Statement No. 333-06249, which is incorporated by
reference).

2. A copy of the Certificate of Authority of the Trustee to
Commence Business (see Exhibit 2 to Form T-1 filed in connection with
Registration Statement No. 33-50010, which is incorporated by
reference. On July 14, 1996, in connection with the merger of
Chemical Bank and The Chase Manhattan Bank (National Association),
Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).

3. None, authorization to exercise corporate trust powers
being contained in the documents identified above as Exhibits 1 and 2.

4. A copy of the existing By-Laws of the Trustee (see Exhibit
4 to Form T-1 filed in connection with Registration Statement No. 333-
06249, which is incorporated by reference).

5. Not applicable.

6. The consent of the Trustee required by Section 321(b) of
the Act (see Exhibit 6 to Form T-1 filed in connection with
Registration Statement No. 33-50010, which is incorporated by
reference. On July 14, 1996, in connection with the merger of Chemical
Bank and The Chase Manhattan Bank (National Association), Chemical
Bank, the surviving corporation, was renamed The Chase Manhattan
Bank).

7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or
examining authority.

8. Not applicable.

9. Not applicable.

<PAGE>

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939
the Trustee, The Chase Manhattan Bank, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York
and State of New York, on the 7TH day of FEBRUARY, 1997.

THE CHASE MANHATTAN BANK

By /s/ Anne G. Brenner
------------------------------
Anne G. Brenner
Vice President

<PAGE>

Exhibit 7 to Form T-1

Bank Call Notice

RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF

The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,

at the close of business September 30, 1996, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.

DOLLAR AMOUNTS
ASSETS IN MILLIONS

<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin . . . . . . . . . . . . . . . . . . . . . . $ 11,095
Interest-bearing balances . . . . . . . . . . . . . . . . . 4,998
Securities:
Held to maturity securities . . . . . . . . . . . . . . . . . . . 3,231
Available for sale securities . . . . . . . . . . . . . . . . . . 38,078
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold . . . . . . . . . . . . . . . . . . . . . 8,018
Securities purchased under agreements to resell . . . . . . . 731
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . . . . . . . $ 130,513
Less: Allowance for loan and lease losses . . . . . . . . . . 2,938
Less: Allocated transfer risk reserve . . . . . . . . . . . . 27
---------
Loans and leases, net of unearned income,
allowance, and reserve . . . . . . . . . . . . . . . . . . . 127,548
Trading Assets . . . . . . . . . . . . . . . . . . . . . . . . . 48,576
Premises and fixed assets (including capitalized
leases) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,850
Other real estate owned . . . . . . . . . . . . . . . . . . . . . 300
Investments in unconsolidated subsidiaries and
associated companies . . . . . . . . . . . . . . . . . . . . 92
Customer's liability to this bank on acceptances
outstanding . . . . . . . . . . . . . . . . . . . . . . . . 2,777
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . 1,361
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 12,204
---------

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 261,859

<PAGE>

LIABILITIES

<S> <C> <C>
Deposits
In domestic offices . . . . . . . . . . . . . . . . . . . . $ 80,163
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . $ 30,596
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . 49,567
---------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's . . . . . . . . . . . . . . . . . . . . . . . . . . 65,173
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . $ 3,616
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . 61,557

Federal funds purchased and securities sold under agree-
ments to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased . . . . . . . . . . . . . . . . . . 14,594
Securities sold under agreements to repurchase . . . . . . . 14,110
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . 2,200
Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . 30,136
Other Borrowed money:
With a remaining maturity of one year or less . . . . . . . . 16,895
With a remaining maturity of more than one year . . . . . . 449
Mortgage indebtedness and obligations under capitalized
leases . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Bank's liability on acceptances executed and outstanding . . . . 2,764
Subordinated notes and debentures . . . . . . . . . . . . . . . . 5,471
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 13,997

TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 246,001
---------
Limited-Life Preferred stock and related surplus . . . . . . . . 550

EQUITY CAPITAL

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . 1,209
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,176
Undivided profits and capital reserves . . . . . . . . . . . . . 4,385
Net unrealized holding gains (Losses)
on available-for-sale securities . . . . . . . . . . . . . . . . (481)
Cumulative foreign currency translation adjustments . . . . . . . 19

TOTAL EQUITY CAPITAL . . . . . . . . . . . . . . . . . . . . . . 15,308
---------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL . . . . . . . . . . . . . . . . . . $ 261,859

=========

</TABLE>

I, Joseph L. Sclafani, S.V.P. & Controller of the above-
named bank, do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and is true to the best of my
knowledge and belief.

JOSEPH L. SCLAFANI

We, the undersigned directors, attest to the correctness of
this Report of Condition and declare that it has been examined by us,
and to the best of our knowledge and belief has been prepared in
conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.

WALTER V. SHIPLEY
EDWARD D. MILLER DIRECTORS
THOMAS G. LABRECQUE

NYFS04...:\25\22625\0313\1824\FRM2177B.450

EXHIBIT 25.2

________________________________________________________________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________

FORM T-1

THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)

NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)

270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)

William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
_____________________________________________
THE BEAR STEARNS CAPITAL TRUST I
(Exact name of obligor as specified in its charter)

DELAWARE 13-7108741
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)

245 PARK AVENUE
NEW YORK, N.Y. 10167
(Address of principal executive offices) (Zip Code)

------------
CAPITAL SECURITIES
(Title of the indenture securities)

<PAGE>

GENERAL

Item 1. General Information.

Furnish the following information as to the trustee:

(a) Name and address of each examining or supervising authority
to which it is subject.

New York State Banking Department, State House, Albany, New
York 12110.

Board of Governors of the Federal Reserve System,
Washington, D.C., 20551

Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.

Federal Deposit Insurance Corporation, Washington, D.C.,
20429.

(b) Whether it is authorized to exercise corporate trust powers.

Yes.

Item 2. Affiliations with the Obligor.

If the obligor is an affiliate of the trustee, describe each such
affiliation.

None.

<PAGE>

Item 16. List of Exhibits

List below all exhibits filed as a part of this Statement of
Eligibility.

3. None, authorization to exercise corporate trust powers
being contained in the documents identified above as Exhibits 1 and 2.

4. A copy of the existing By-Laws of the Trustee (see Exhibit
4 to Form T-1 filed in connection with Registration Statement No. 333-
06249, which is incorporated by reference).

5. Not applicable.

7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or
examining authority.

8. Not applicable.

9. Not applicable.

<PAGE>

SIGNATURE

THE CHASE MANHATTAN BANK

By /s/ Anne G. Brenner
------------------------------
Anne G. Brenner
Vice President

<PAGE>

Exhibit 7 to Form T-1

Bank Call Notice

RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF

The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,

at the close of business September 30, 1996, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.

DOLLAR AMOUNTS
ASSETS IN MILLIONS

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 261,859
=========

<PAGE>

LIABILITIES

Deposits
<S> <C> <C>
In domestic offices . . . . . . . . . . . . . . . . . . . . $ 80,163
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . $ 30,596
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . 49,567
---------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's . . . . . . . . . . . . . . . . . . . . . . . . . . 65,173
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . $ 3,616
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . 61,557

TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 246,001
---------
Limited-Life Preferred stock and related surplus . . . . . . . . 550

EQUITY CAPITAL

TOTAL EQUITY CAPITAL . . . . . . . . . . . . . . . . . . . . . . 15,308
---------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL . . . . . . . . . . . . . . . . . . $ 261,859

=========

</TABLE>

JOSEPH L. SCLAFANI

WALTER V. SHIPLEY
EDWARD D. MILLER DIRECTORS
THOMAS G. LABRECQUE

NYFS04...:\25\22625\0313\1824\FRM2177N.530

EXHIBIT 25.3

________________________________________________________________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________

FORM T-1

THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)

NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)

270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)

DELAWARE 13-3286161
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)

245 PARK AVENUE
NEW YORK, N.Y. 10167
(Address of principal executive offices) (Zip Code)

------------
CAPITAL SECURITIES GUARANTEE
(BEAR STEARNS CAPITAL TRUST I)
(Title of the indenture securities)

<PAGE>

GENERAL

Item 1. General Information.

Furnish the following information as to the trustee:

(a) Name and address of each examining or supervising authority
to which it is subject.

New York State Banking Department, State House, Albany, New
York 12110.

Board of Governors of the Federal Reserve System,
Washington, D.C., 20551

Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.

Federal Deposit Insurance Corporation, Washington, D.C.,
20429.

(b) Whether it is authorized to exercise corporate trust powers.

Yes.

Item 2. Affiliations with the Obligor.

If the obligor is an affiliate of the trustee, describe each such
affiliation.

None.

<PAGE>

Item 16. List of Exhibits

List below all exhibits filed as a part of this Statement of
Eligibility.

3. None, authorization to exercise corporate trust powers
being contained in the documents identified above as Exhibits 1 and 2.

4. A copy of the existing By-Laws of the Trustee (see Exhibit
4 to Form T-1 filed in connection with Registration Statement No. 333-
06249, which is incorporated by reference).

5. Not applicable.

7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or
examining authority.

8. Not applicable.

9. Not applicable.

<PAGE>

SIGNATURE

THE CHASE MANHATTAN BANK

By /s/ Anne G. Brenner
------------------------------
Anne G. Brenner
Vice President

<PAGE>

Exhibit 7 to Form T-1

Bank Call Notice

RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF

The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,

at the close of business September 30, 1996, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.

DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C> <C>

Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin . . . . . . . . . . . . . . . . . . . . . . $ 11,095
Interest-bearing balances . . . . . . . . . . . . . . . . . 4,998
Securities:
Held to maturity securities . . . . . . . . . . . . . . . . . . . 3,231
Available for sale securities . . . . . . . . . . . . . . . . . . 38,078
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold . . . . . . . . . . . . . . . . . . . . . 8,018
Securities purchased under agreements to resell . . . . . . . 731
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . . . . . . . $ 130,513
Less: Allowance for loan and lease losses . . . . . . . . . . 2,938
Less: Allocated transfer risk reserve . . . . . . . . . . . . 27
---------
Loans and leases, net of unearned income,
allowance, and reserve . . . . . . . . . . . . . . . . . . . 127,548
Trading Assets . . . . . . . . . . . . . . . . . . . . . . . . . 48,576
Premises and fixed assets (including capitalized
leases) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,850
Other real estate owned . . . . . . . . . . . . . . . . . . . . . 300
Investments in unconsolidated subsidiaries and
associated companies . . . . . . . . . . . . . . . . . . . . 92
Customer's liability to this bank on acceptances
outstanding . . . . . . . . . . . . . . . . . . . . . . . . 2,777
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . 1,361
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 12,204
---------

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 261,859

<PAGE>

LIABILITIES

TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 246,001
---------
Limited-Life Preferred stock and related surplus . . . . . . . . 550

EQUITY CAPITAL

TOTAL EQUITY CAPITAL . . . . . . . . . . . . . . . . . . . . . . 15,308
---------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL . . . . . . . . . . . . . . . . . . $ 261,859

=========

</TABLE>

JOSEPH L. SCLAFANI

WALTER V. SHIPLEY
EDWARD D. MILLER DIRECTORS
THOMAS G. LABRECQUE

NYFS04...:\25\22625\0313\1824\FRM2177N.200

EXHIBIT 99.1

LETTER OF TRANSMITTAL
BEAR STEARNS CAPITAL TRUST I
Offer To Exchange Its
Fixed/Adjustable Rate Capital Securities
Which Have Been Registered Under The Securities Act Of 1933
For Any And All Of Its Outstanding
Fixed/Adjustable Rate Capital Securities
(Liquidation Amount $1,000 Per Capital Security)
Pursuant To The Prospectus
Dated ________, 1997

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON APRIL __, 1997
UNLESS THE OFFER IS EXTENDED

The Chase Manhattan Bank
(the "Exchange Agent")

By Mail, Hand or Overnight Delivery:

The Chase Manhattan Bank
55 Water Street
Room 234
North Building
New York, New York 10041
Attention: Carlos Esteves

By Facsimile Transmission
(For Eligible Institutions Only):

(212) 638-7375
(212) 344-9367

Confirm by Telephone:

Carlos Esteves: (212) 638-0828

Delivery of this instrument to an address other than as set forth
above or transmission of instructions via a facsimile number other
than the ones listed above will not constitute a valid delivery. The
instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed.

The undersigned hereby acknowledges receipt of the Prospectus
dated ________, 1997 (the "Prospectus") of Bear Stearns Capital Trust
I (the "Issuer") and this Letter of Transmittal, which together
constitute the Issuer's offer (the "Exchange Offer") to exchange up to
$200,000,000 aggregate

<PAGE>

liquidation amount of its Fixed/Adjustable Rate Capital Securities
(liquidation amount $1,000 per Capital Security) (the "New Capital
Securities"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration
Statement on Form S-4 of The Bear Stearns Companies Inc. and the
Issuer (File Nos. 333-21215 and 333-21215-01), of which the Prospectus
is a part, for a like liquidation amount of its outstanding
Fixed/Adjustable Rate Capital Securities (liquidation amount $1,000
per Capital Security) (the "Old Capital Securities" ), of which
$200,000,000 aggregate liquidation amount is outstanding. The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on
April______, 1997, unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest date and time to
which the Exchange Offer is extended. Capitalized terms used but not
defined herein have the meaning given to them in the Prospectus.

YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL
COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE
DIRECTED TO THE EXCHANGE AGENT.

Capitalized terms used but not defined herein shall have the same
meaning given them in the Prospectus.

This Letter of Transmittal is to be completed by holders of Old
Capital Securities either if (i) Old Capital Securities are to be
forwarded herewith or (ii) tenders of Old Capital Securities are to be
made by book-entry transfer to an account maintained by the Exchange
Agent at The Depository Trust Company ("DTC") pursuant to the
procedures set forth under "The Exchange Offer -- Procedures for
Tendering Old Capital Securities" in the Prospectus and an Agent's
Message (as defined herein) is not delivered.

Holders of Old Capital Securities whose certificates (the
"Certificates") for such Old Capital Securities are not immediately
available or who cannot deliver their Certificates and all other
required documents to the Exchange Agent on or prior to the Expiration
Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on or prior to the Expiration Date,
must tender their Old Capital Securities according to the guaranteed
delivery procedures set forth in "The Exchange Offer -- Procedures for
Tendering Old Capital Securities" in the Prospectus.

<PAGE>

DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.

NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.

<PAGE>

DESCRIPTION OF OLD CAPITAL SECURITIES TENDERED

AGGREGATE
LIQUIDATION
CERTIFICATE AMOUNT OF
NUMBER(S)* OLD CAPITAL LIQUIDATION AMOUNT NUMBER OF
(ATTACH SECURITIES TENDERED OF OLD CAPITAL BENEFICIAL HOLDERS
NAME(S) AND ADDRESS(ES) OF ADDITIONAL (ATTACH ADDITIONAL SECURITIES TENDERED FOR WHOM OLD
REGISTERED HOLDER LIST IF LIST IF NECESSARY) (IF LESS THAN CAPITAL SECURITIES
(PLEASE FILL IN, IF BLANK) NECESSARY) ALL)** ARE HELD
<S> <C> <C> <C> <C>

$ $

TOTAL AMOUNT TENDERED: $ $

</TABLE>

* Need not be completed by book-entry holders. Such holders should
check the appropriate box below and provide the requested
information.

** Need not be completed if tendering for exchange all Old Capital
Securities held. Old Capital Securities may be tendered in whole
or in part in denominations of $100,000 and integral multiples of
$1,000 in excess thereof, provided that if any Old Capital
Securities are tendered for exchange in part, the untendered
Liquidation Amount thereof must be $100,000 or any integral
multiple of $1,000 in excess thereof. All Old Capital Securities
held shall be deemed tendered unless a lesser number is specified
in this column.

(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS (defined in
Instruction 1) ONLY)

[ ] CHECK HERE IF TENDERED OLD CAPITAL SECURITIES ARE BEING DELIVERED
BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE
AGENT WITH DTC AND COMPLETE THE FOLLOWING:

Name of Tendering Institution_______________________________

DTC Account Number__________________________________________

Transaction Code Number_____________________________________

[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED
DELIVERY IF TENDERED OLD CAPITAL SECURITIES ARE BEING

<PAGE>

DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT
TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:

Name of Registered
Holder______________________________________________________

Window Ticket Number (if any)_______________________________

Date of Execution of Notice of Guaranteed
Delivery____________________________________________________

Name of Institution which Guaranteed Delivery
____________________________________________________________

If Guaranteed Delivery is to be made By Book-Entry Transfer:

Name of Tendering Institution________________________________________

DTC Account Number__________________________________________

Transaction Code Number_____________________________________

[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED
OLD CAPITAL SECURITIES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT
NUMBER SET FORTH ABOVE.

[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD
CAPITAL SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR
OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.

Name:_______________________________________________________

Address:____________________________________________________

Area Code and Telephone Number:_____________________________

Contact Person:_____________________________________________

<PAGE>

Ladies and Gentlemen:

The undersigned hereby tenders to Bear Stearns Capital Trust I, a
Delaware statutory business trust (the "Issuer"), and The Bear Stearns
Companies Inc., a Delaware corporation, as Depositor (the "Company"),
the above-described aggregate Liquidation Amount of the Issuer's
Fixed/Adjustable Rate Capital Securities (the "Old Capital
Securities") in exchange for a like aggregate Liquidation Amount of
the Issuer's Fixed/Adjustable Rate Capital Securities (the "New
Capital Securities") which have been registered under the Securities
Act of 1933 (the "Securities Act"), upon the terms and subject to the
conditions set forth in the Prospectus dated __________, 1997 (as the
same may be amended or supplemented from time to time, the
"Prospectus"), receipt of which is acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitutes the
"Exchange Offer").

Subject to and effective upon the acceptance for exchange of all
or any portion of the Old Capital Securities tendered herewith in
accordance with the terms and conditions of the Exchange Offer
(including, if the Exchange Offer is extended or amended, the terms
and conditions of any such extension or amendment), the undersigned
hereby sells, assigns and transfers to or upon the order of the Issuer
all right, title and interest in and to such Old Capital Securities as
are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-
in-fact (with full knowledge that the Exchange Agent is also acting as
agent of the Company and the Issuer in connection with the Exchange
Offer) with respect to the tendered Old Capital Securities, with full
power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), subject only to the right
of withdrawal described in the Prospectus to (i) deliver Certificates
for Old Capital Securities to the Issuer together with all
accompanying evidences of transfer and authenticity to, or upon the
order of, the Issuer, upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Capital Securities to be issued in
exchange for such Old Capital Securities, (ii) present Certificates
for such Old Capital Securities for transfer, and to transfer the Old
Capital Securities on the books of the Issuer, and (iii) receive for
the account of the Issuer all benefits and otherwise exercise all
rights of beneficial ownership of such Old Capital Securities, all in
accordance with the terms and conditions of the Exchange Offer.

THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE
UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL,
ASSIGN AND TRANSFER THE OLD CAPITAL SECURITIES TENDERED

<PAGE>

HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE ISSUER
WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT
THE OLD CAPITAL SECURITIES TENDERED HEREBY ARE NOT SUBJECT TO ANY
ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST,
EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY,
THE ISSUER OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD CAPITAL
SECURITIES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS
OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED
HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.

The name and address of the registered holder of the Old Capital
Securities tendered hereby should be printed above, if they are not
already set forth above, as they appear on the Certificates
representing such Old Capital Securities. The Certificate numbers and
the Old Capital Securities that the undersigned wishes to tender
should be indicated in the appropriate boxes above.

If any tendered Old Capital Securities are not exchanged pursuant
to the Exchange Offer for any reason, or if Certificates are submitted
for more Old Capital Securities than are tendered or accepted for
exchange, Certificates for such nonexchanged or nontendered Old
Capital Securities will be returned (or, in the case of Old Capital
Securities tendered by book-entry transfer, such Old Capital
Securities will be credited to an account maintained at DTC), without
expense to the tendering holder, promptly following the expiration or
termination of the Exchange Offer.

The undersigned understands that tenders of Old Capital
Securities pursuant to any one of the procedures described under "The
Exchange Offer -- Procedures for Tendering Old Capital Securities" in
the Prospectus and in the instructions herein will, upon the Company's
and the Issuer's acceptance for exchange of such tendered Old Capital
Securities, constitute a binding agreement between the undersigned,
the Company and the Issuer upon the terms and subject to the
conditions of the Exchange Offer. The undersigned recognizes that,
under certain circumstances set forth in the Prospectus, the Company
and the Issuer may not be required to accept for exchange any of the
Old Capital Securities tendered hereby.

Unless otherwise indicated herein in the box entitled "Special
Issuance Instructions" below, the undersigned hereby directs that the
New Capital Securities be issued in the name of the undersigned or, in
the case of a book-entry transfer of Old

<PAGE>

Capital Securities, that such New Capital Securities be credited to
the account indicated above maintained at DTC. If applicable,
substitute Certificates representing Old Capital Securities not
exchanged or not accepted for exchange will be issued to the
undersigned or, in the case of a book-entry transfer of Old Capital
Securities, will be credited to the account indicated above maintained
at DTC. Similarly, unless otherwise indicated under "Special Delivery
Instructions" below, please deliver New Capital Securities to the
undersigned at the address shown below the undersigned's signature.

BY TENDERING OLD CAPITAL SECURITIES AND EXECUTING THIS LETTER OF
TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE
UNDERSIGNED IS NOT AN "AFFILIATE" OF THE COMPANY OR THE ISSUER WITHIN
THE MEANING OF RULE 405 UNDER THE SECURITIES ACT, (II) ANY NEW CAPITAL
SECURITIES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE
ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO
ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW CAPITAL
SECURITIES TO BE RECEIVED IN THE EXCHANGE OFFER, AND (IV) IF THE
UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN,
AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING
OF THE SECURITIES ACT) OF SUCH NEW CAPITAL SECURITIES. BY TENDERING
OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING
THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD CAPITAL SECURITIES WHICH
IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN
NO-ACTION LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION
FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES,
THAT (A) SUCH OLD CAPITAL SECURITIES HELD BY THE BROKER-DEALER ARE
HELD ONLY AS A NOMINEE, OR (B) SUCH OLD CAPITAL SECURITIES WERE
ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF
MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL
DELIVER A PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME)
MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY
RESALE OF SUCH NEW CAPITAL SECURITIES (PROVIDED THAT, BY SO
ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL
NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING
OF THE SECURITIES ACT).

THE COMPANY AND THE ISSUER HAVE AGREED THAT, SUBJECT TO THE
PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT
MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A
PARTICIPATING BROKER-DEALER IN CONNECTION WITH RESALES OF NEW CAPITAL
SECURITIES RECEIVED IN EXCHANGE FOR OLD CAPITAL SECURITIES, WHERE SUCH
OLD CAPITAL SECURITIES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-
DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR
OTHER TRADING ACTIVITIES, FOR A PERIOD ENDING 180 DAYS AFTER THE
EXPIRATION DATE (SUBJECT TO

<PAGE>

EXTENSION UNDER CERTAIN LIMITED CIRCUMSTANCES DESCRIBED IN THE
PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH NEW CAPITAL SECURITIES HAVE
BEEN DISPOSED OF BY SUCH PARTICIPATING BROKER-DEALER. IN THAT REGARD,
EACH PARTICIPATING BROKER-DEALER WHO ACQUIRED OLD CAPITAL SECURITIES
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING
ACTIVITIES, BY TENDERING SUCH OLD CAPITAL SECURITIES AND EXECUTING
THIS LETTER OF TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM
THE COMPANY OR THE ISSUER OF THE OCCURRENCE OF ANY EVENT OR THE
DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED OR
INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL
RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL
FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR
INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER
WHICH THEY WERE MADE, NOT MISLEADING, OR OF THE OCCURRENCE OF CERTAIN
OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH
PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW CAPITAL
SECURITIES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY OR THE ISSUER
HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH
MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR
SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER, OR THE
COMPANY OR THE ISSUER HAS GIVEN NOTICE THAT THE SALE OF THE NEW
CAPITAL SECURITIES MAY BE RESUMED, AS THE CASE MAY BE. IF THE COMPANY
OR THE ISSUER GIVES SUCH NOTICE TO SUSPEND THE SALE OF THE NEW CAPITAL
SECURITIES, IT SHALL EXTEND THE 180-DAY PERIOD REFERRED TO ABOVE
DURING WHICH PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE THE
PROSPECTUS IN CONNECTION WITH THE RESALE OF NEW CAPITAL SECURITIES BY
THE NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE DATE OF
THE GIVING OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN PARTICIPATING
BROKER-DEALERS SHALL HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR
AMENDED PROSPECTUS NECESSARY TO PERMIT RESALES OF THE NEW CAPITAL
SECURITIES OR TO AND INCLUDING THE DATE ON WHICH THE COMPANY OR THE
ISSUER HAS GIVEN NOTICE THAT THE SALE OF NEW CAPITAL SECURITIES MAY BE
RESUMED, AS THE CASE MAY BE.

Holders of Old Capital Securities whose Old Capital Securities
are accepted for exchange will not receive accumulated Distributions
on such Old Capital Securities for any period from and after the last
Distribution date to which Distributions have been paid or duly
provided for on such Old Capital Securities prior to the original
issue date of the New Capital Securities or, if no such Distributions
have been paid or duly provided for, will not receive any accrued
Distributions on such Old Capital Securities, and the undersigned
waives the right to receive any interest on such Old Capital
Securities accrued from and after such Distribution date or, if no
such Distributions have been paid or duly provided for, from and after
January 29, 1997.

<PAGE>

All authority herein conferred or agreed to be conferred in this
Letter of Transmittal shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be
binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, legal representatives,
successors and assigns of the undersigned. Except as stated in the
Prospectus, this tender is irrevocable.

HOLDERS SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
(NOTE: SIGNATURES MUST BE GUARANTEED IF REQUIRED BY
INSTRUCTION 2)

Must be signed by registered holder exactly as name appears on
Certificate for the Old Capital Securities hereby tendered or on a
security position listing, or by any person authorized to become the
registered holder by endorsements and documents transmitted herewith
(including such opinions of counsel, certifications and other
information as may be required by the Issuer or the Exchange Agent for
the Old Capital Securities to comply with the restrictions on transfer
applicable to the Old Capital Securities). If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer
of a corporation or another acting in a fiduciary capacity or
representative capacity, please set forth the signer's full title.
See Instruction 5.

________________________
(Signature of Holder(s)
or Authorized Signatory)

Date:_______________________________, 1997

Name(s)_____________________________________________________
(Please Print)

Capacity (full title)_______________________________________

Address_____________________________________________________

____________________________________________________________
(Include Zip Code)

Area Code and Telephone
Number______________________________________________________

Tax Identification or Social Security Number________________

<PAGE>

SIGNATURE GUARANTEE
(If required --See Instructions 2 and 5)

______________________
(Authorized Signature)

Date:______________________________, 1997

Name of Eligible Institution Guaranteeing Signatures
------------------
Capacity (full title)
-------------------------------------------------
(Please Print)

Address
---------------------------------------------------------------

----------------------------------------------------------------------
(Include Zip Code)

Area Code and Telephone Number
----------------------------------------

<PAGE>

SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 5 and 6)

To be completed ONLY if the New Capital Securities or any Old Capital
Securities that are not tendered are to be issued in the name of
someone other than the registered holder of the Old Capital Securities
whose name appears above.

Issue

[ ] New Capital Securities and/or

[ ] Old Capital Securities not tendered

to:

Name___________________________________________________

Address________________________________________________

_______________________________________________________
(Include Zip Code)

Area Code and Telephone Number______________________________

Tax Identification or Social Security Number________________

<PAGE>

SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5 and 6)

To be completed ONLY if the New Capital Securities or any Old Capital
Securities that are not tendered are to be sent to someone other than
the registered holder of the Old Capital Securities whose name appears
above, or to such registered holder at an address other than that
shown above.

Mail

[ ] New Capital Securities and/or

[ ] Old Capital Securities not tendered

to:

Name________________________________________________________

Address_____________________________________________________

____________________________________________________________
(Include Zip Code)

Area Code and Telephone Number____________

Tax Identification or Social Security Number___________

<PAGE>

INSTRUCTIONS

FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER

1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed
either if (a) Certificates are to be forwarded herewith or (b) tenders
are to be made pursuant to the procedures for tender by book-entry
transfer set forth under "The Exchange Offer -- Procedures for
Tendering Old Capital Securities" in the Prospectus and an Agent's
Message is not delivered. Certificates, or book-entry confirmation of
a book-entry transfer of such Old Capital Securities into the Exchange
Agent's account at DTC, as well as this Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any
required signature guarantees, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at
its address set forth herein on or prior to the Expiration Date.
Tenders by book-entry transfer may also be made by delivering an
Agent's Message in lieu of this Letter of Transmittal. The term
"book-entry confirmation" means a timely confirmation of book-entry
transfer of Old Capital Securities into the Exchange Agent's account
at DTC. The term "Agent's Message" means a message, transmitted by
DTC to and received by the Exchange Agent and forming a part of a
book-entry confirmation, which states that DTC has received an express
acknowledgment from the tendering Participant, which acknowledgment
states that such participant has received and agrees to be bound by
the Letter of Transmittal and that the Issuer and the Company may
enforce the Letter of Transmittal against such participant. Old
Capital Securities may be tendered in whole or in part in the
Liquidation Amount of $100,000 (100 Capital Securities) and integral
multiples of $1,000 in excess thereof, provided that, if any Old
Capital Securities are tendered for exchange in part, the untendered
Liquidation Amount thereof must be $100,000 (100 Capital Securities)
or any integral multiple of $1,000 in excess thereof.

Holders who wish to tender their Old Capital Securities and (i)
whose Old Capital Securities are not immediately available or (ii) who
cannot deliver their Old Capital Securities, this Letter of
Transmittal and all other required documents to the Exchange Agent on
or prior to the Expiration Date or (iii) who cannot complete the
procedures for delivery by book-entry transfer on or prior to the
Expiration Date, may tender their Old Capital Securities by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant
to the guaranteed delivery procedures set forth under "The Exchange
Offer -- Procedures for Tendering Old Capital Securities" in the
Prospectus. Pursuant to

<PAGE>

such procedures: (i) such tender must be made by or through an
Eligible Institution (as defined below); (ii) a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form
made available by the Company and the Issuer, must be received by the
Exchange Agent on or prior to the Expiration Date; and (iii) the
Certificates (or a book-entry confirmation) representing all tendered
Old Capital Securities, in proper form for transfer, together with a
Letter of Transmittal (or facsimile thereof or Agent's Message in lieu
thereof), properly completed and duly executed, with any required
signature guarantees and any other documents required by this Letter
of Transmittal, must be received by the Exchange Agent within three
New York Stock Exchange trading days after the date of execution of
such Notice of Guaranteed Delivery, all as provided in "The Exchange
Offer -- Procedures for Tendering Old Capital Securities" in the
Prospectus.

The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent, and must
include a guarantee by an Eligible Institution in the form set forth
in such Notice. For Old Capital Securities to be properly tendered
pursuant to the guaranteed delivery procedure, the Exchange Agent must
receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein and in the Prospectus, "Eligible Institution"
means a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as "an eligible guarantor institution," including (as
such terms are defined therein) (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker
or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer
Association.

THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE
RISK OF THE TENDERING HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR
OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY ON OR PRIOR TO THE
EXPIRATION DATE.

Neither the Company nor the Issuer will accept any alternative,
conditional or contingent tenders. Each tendering holder, by
execution of a Letter of Transmittal (or facsimile thereof or Agent's
Message in lieu thereof), waives any right to receive any notice of
the acceptance of such tender.

<PAGE>

2. GUARANTEE OF SIGNATURES. No signature guarantee on this
Letter of Transmittal is required if:

(i) this Letter of Transmittal is signed by the registered
holder (which term, for purposes of this document, shall include
any Participant in DTC whose name appears on a security position
listing as the owner of the Old Capital Securities) of Old
Capital Securities tendered herewith, unless such holder has
completed either the box entitled "Special Issuance Instructions"
or the box entitled "Special Delivery Instructions" above, or

(ii) such Old Capital Securities are tendered for the
account of a firm that is an Eligible Institution.

In all other cases, an Eligible Institution must guarantee the
signature on this Letter of Transmittal. See Instruction 5.

3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Capital Securities" is inadequate, the Certificate
numbers and/or the Liquidation Amount of Old Capital Securities and
any other required information should be listed on a separate signed
schedule which is attached to this Letter of Transmittal.

4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Capital
Securities will be accepted only in the Liquidation Amount of $100,000
(100 Capital Securities) and integral multiples of $1,000 in excess
thereof, provided that if any Old Capital Securities are tendered for
exchange in part, the untendered Liquidation Amount thereof must be
$100,000 (100 Capital Securities) or any integral multiple of $1,000
in excess thereof. If less than all of the Old Capital Securities
evidenced by any Certificate submitted are to be tendered, fill in the
Liquidation Amount of Old Capital Securities which are to be tendered
in the box entitled "Liquidation Amount of Old Capital Securities
Tendered (If Less than All)." In such case, a new Certificate for the
remainder of the Old Capital Securities that were evidenced by your
Old Certificate will be sent to the holder of the Old Capital
Securities, promptly after the Expiration Date unless the appropriate
boxes on this Letter of Transmittal are completed. All Old Capital
Securities represented by Certificates delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.

Except as otherwise provided herein, tenders of Old Capital
Securities may be withdrawn at any time on or prior to the Expiration
Date. In order for a withdrawal to be effective, a written,
telegraphic, telex or facsimile transmission of such notice of
withdrawal must be timely received by the Exchange

<PAGE>

Agent at one of its addresses set forth above or in the Prospectus on
or prior to the Expiration Date. Any such notice of withdrawal must
specify the name of the person who tendered the Old Capital Securities
to be withdrawn, the aggregate Liquidation Amount of Old Capital
Securities to be withdrawn, and (if Certificates for Old Capital
Securities have been tendered) the name of the registered holder of
the Old Capital Securities as set forth on the Certificate for the Old
Capital Securities, if different from that of the person who tendered
such Old Capital Securities. If Certificates for the Old Capital
Securities have been delivered or otherwise identified to the Exchange
Agent, then prior to the physical release of such Certificates for the
Old Capital Securities, the tendering holder must submit the serial
numbers shown on the particular Certificates for the Old Capital
Securities to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution, except in
the case of Old Capital Securities tendered for the account of an
Eligible Institution. If Old Capital Securities have been tendered
pursuant to the procedures for book-entry transfer set forth under
"The Exchange Offer--Procedures for Tendering Old Capital Securities,"
the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of Old Capital
Securities, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written, telegraphic, telex or
facsimile transmission on or prior to the Expiration Date.
Withdrawals of tenders of Old Capital Securities may not be rescinded.
Old Capital Securities properly withdrawn will not be deemed validly
tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following
any of the procedures described in the Prospectus under "The Exchange
Offer -- Procedures for Tendering Old Capital Securities."

All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the
Company and the Issuer, in their sole discretion, whose determination
shall be final and binding on all parties. Neither the Company and
the Issuer, any affiliates or assigns of the Company and the Issuer,
the Exchange Agent nor any other person shall be under any duty to
give any notification of any irregularities in any notice of
withdrawal or incur any liability for failure to give any such
notification. Any Old Capital Securities which have been tendered but
which are withdrawn on or prior to the Expiration Date will be
returned to the holder thereof without cost to such holder promptly
after withdrawal.

5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the

<PAGE>

registered holder of the Old Capital Securities tendered hereby, the
signature must correspond exactly with the name as written on the face
of the Certificates or on a security position listing without
alteration, enlargement or any change whatsoever.

If any of the Old Capital Securities tendered hereby are owned of
record by two or more joint owners, all such owners must sign this
Letter of Transmittal.

If any tendered Old Capital Securities are registered in
different names on several Certificates, it will be necessary to
complete, sign and submit as many separate Letters of Transmittal (or
facsimiles thereof or Agent's Message in lieu thereof) as there are
different registrations of Certificates.

If this Letter of Transmittal or any Certificates or bond powers
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate
when signing and must submit proper evidence satisfactory to the
Company and the Issuer, in their sole discretion, of such persons'
authority to so act.

When this Letter of Transmittal is signed by the registered owner
of the Old Capital Securities listed and transmitted hereby, no
endorsement of Certificates or separate bond powers are required
unless New Capital Securities are to be issued in the name of a person
other than the registered holder. Signatures on such Certificates or
bond powers must be guaranteed by an Eligible Institution.

If this Letter of Transmittal is signed by a person other than
the registered owner of the Old Capital Securities listed, the
Certificates must be endorsed or accompanied by appropriate bond
powers, signed exactly as the name of the registered owner appears on
the Certificates, and also must be accompanied by such opinions of
counsel, certifications and other information as the Company, the
Issuer or the Exchange Agent may require in accordance with the
restrictions on transfer applicable to the Old Capital Securities.
Signatures on such Certificates or bond powers must be guaranteed by
an Eligible Institution.

6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Capital
Securities are to be issued in the name of a person other than the
signer of this Letter of Transmittal, or if New Capital Securities are
to be sent to someone other than the signer of this Letter of
Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Capital Securities not exchanged will be returned
by mail or, if tendered by book-entry

<PAGE>

transfer, by crediting the account indicated above maintained at DTC
unless the appropriate boxes on this Letter of Transmittal are
completed. See Instruction 4.

7. IRREGULARITIES. The Company and the Issuer will determine, in
their sole discretion, all questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for
exchange of any tender of Old Capital Securities, which determination
shall be final and binding on all parties. The Company and the Issuer
reserve the absolute right to reject any and all tenders determined by
either of them not to be in proper form or the acceptance of which, or
exchange for, may, in the view of counsel to the Company or the
Issuer, be unlawful. The Company and the Issuer also reserve the
absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer set forth in the Prospectus under
"The Exchange Offer -- Conditions to the Exchange Offer," or any
conditions or irregularities in any tender of Old Capital Securities
of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders. The Company
and the Issuer's interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the
instructions hereto) will be final and binding. No tender of Old
Capital Securities will be deemed to have been validly made until all
irregularities with respect to such tender have been cured or waived.
The Company, the Issuer, any affiliates or assigns of the Company, the
Issuer, the Exchange Agent, or any other person shall not be under a
duty to give notification of any irregularities in tenders or incur
any liability for failure to give such notification.

8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Exchange
Agent at its address and telephone number set forth on the front of
this Letter of Transmittal. Additional copies of the Prospectus, the
Notice of Guaranteed Delivery and the Letter of Transmittal may be
obtained from the Exchange Agent or from your broker, dealer,
commercial bank, trust company or other nominee.

9. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificates
representing Old Capital Securities have been lost, destroyed or
stolen, the holder should promptly notify the Exchange Agent. The
holder will then be instructed as to the steps that must be taken in
order to replace the Certificates. This Letter of Transmittal and
related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificates have been followed.

10. SECURITY TRANSFER TAXES. Holders who tender their Old
Capital Securities for exchange will not be obligated to pay any

<PAGE>

transfer taxes in connection therewith. If, however, New Capital
Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Capital
Securities tendered, or if a transfer tax is imposed for any reason
other than the exchange of Old Capital Securities in connection with
the Exchange Offer, then the amount of any such transfer tax (whether
imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.

IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND
ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT AT
OR PRIOR TO THE EXPIRATION DATE.

<PAGE>

IMPORTANT TAX INFORMATION

Under federal income tax law, a holder whose tendered Old Capital
Securities are accepted for exchange is required by law to provide the
Exchange Agent with such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 included herein or otherwise
establish a basis for exemption from backup withholding. If such
holder is an individual, the TIN is his social security number. If
the Exchange Agent is not provided with the correct TIN, the Internal
Revenue Service may subject the holder or transferee to a $50 penalty.
In addition, delivery of such holder's New Capital Securities may be
subject to backup withholding. Failure to comply truthfully with the
backup withholding requirements also may result in the imposition of
severe criminal and/or civil fines and penalties.

Certain holders (including, among others, all corporations and
certain foreign persons) are not subject to these backup withholding
and reporting requirements. Exempt holders should furnish their TIN,
write "Exempt" on the face of the Substitute Form W-9, and sign, date
and return the Substitute Form W-9 to the Exchange Agent. A foreign
person, including entities, may qualify as an exempt recipient by
submitting to the Exchange Agent a properly completed Internal Revenue
Service Form W-8, signed under penalties of perjury, attesting to that
holder's foreign status. A Form W-8 can be obtained from the Exchange
Agent. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional
instructions.

If backup withholding applies, the Exchange Agent is required to
withhold 31% of any payments made to the holder or other transferee.
Backup withholding is not an additional federal income tax. Rather,
the federal income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.

Purpose of Substitute Form W-9

To prevent backup withholding on payments made with respect to
Old Capital Securities exchanged in the Exchange Offer, the holder is
required to provide the Exchange Agent with either: (i) the holder's
correct TIN by completing the form included herein, certifying that
the TIN provided on Substitute Form W-9 is correct (or that such
holder is awaiting a TIN) and that (A) the holder has not been
notified by the Internal Revenue Service that the holder is subject to
backup withholding as a result of

<PAGE>

failure to report all interest or dividends or (B) the Internal
Revenue Service has notified the holder that the holder is no longer
subject to backup withholding; or (ii) an adequate basis for
exemption.

Number to Give the Depositary

The holder is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the
registered holder of the Old Capital Securities. If the Old Capital
Securities are held in more than one name or are held not in the name
of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-
9" for additional guidance on which number to report.

<PAGE>

EXCHANGE AGENT'S NAME: THE CHASE MANHATTAN BANK

<S> <C> <C>
SUBSTITUTE Part 1-PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY Social Security Number or
Form W-9 BY SIGNING AND DATING BELOW. Employer
Identification Number

. . . . . . . . . . . . . .

Department of the Treasury Part 2-Certification-Under penalties of perjury, I certify that:
Internal Revenue Service (1) The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me) and
(2) I am not subject to backup withholding either because I have not been notified by the
Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or the IRS has notified me that I am no
Payer's Request for longer subject to backup withholding.
Taxpayer Identification Certification Instructions-You must cross out item (2) above if you have been notified by
Number ("TIN") the IRS that you are currently subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after being notified by the IRS
that you were subject to backup withholding you received another notification from the
IRS that you are no longer subject to backup withholding, do not cross out such item (2).

Part 3
SIGNATURE . . . . . . . . . . . . DATE . . . . . . . . . . . Awaiting TIN

NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I
have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future.
I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments
made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number
within 60 days.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , 1997
Signature Date

</TABLE>

NYFS04...:\25\22625\0313\1824\EXH2057K.54B

EXHIBIT 99.2

NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
FIXED/ADJUSTABLE RATE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
OF
BEAR STEARNS CAPITAL TRUST I

As set forth in the Exchange Offer, this Notice of Guaranteed
Delivery, or one substantially equivalent to this form, must be used
to accept the Exchange Offer (as defined below) if (i) certificates
for the Issuer's (as defined below) Fixed/Adjustable Rate Capital
Securities (the "Old Capital Securities") are not immediately avail-
able, (ii) the Old Capital Securities, the Letter of Transmittal and
all other required documents cannot be delivered to The Chase
Manhattan Bank (the "Exchange Agent") on or prior to the Expiration
Date (as defined in the Prospectus referred to below) or (iii) the
procedures for delivery by book-entry transfer cannot be completed on
or prior to the Expiration Date. This Notice of Guaranteed Delivery
may be delivered by hand, overnight courier or mail, or transmitted by
facsimile transmission, to the Exchange Agent on or prior to the
Expiration Date. See "The Exchange Offer -- Procedures for Tendering
Old Capital Securities" in the Prospectus.

The Chase Manhattan Bank, Exchange Agent

By Mail, Hand or Overnight Delivery:

The Chase Manhattan Bank
55 Water Street
Room 234
North Building
New York, New York 10041
Attn: Carlos Esteves

Facsimile Transmission
(For Eligible Institutions Only):

(212) 638-7375
(212) 344-9367

Confirm By Telephone:

Carlos Esteves: (212) 638-0828

<PAGE>

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.

THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO
BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS
THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE
PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.

<PAGE>

Ladies and Gentlemen:

The undersigned hereby tenders to Bear Stearns Capital Trust I, a
Delaware statutory business trust, upon the terms and subject to the
conditions set forth in the Prospectus dated __________, 1997 (as the
same may be amended or supplemented from time to time, the
"Prospectus"), and the related Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, the aggregate liquidation amount of Old Capital
Securities set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange
Offer -- Procedures for Tendering Old Capital Securities."

Aggregate Liquidation Name of Registered Holder:
---------------
Amount Tendered: _________

Certificate Nos. Address:
---------------------------------
(if available): ____________

--------------------------------

Area Code and Telephone Number:
-----------

If Old Capital Securities will be tendered by book-entry transfer,
provide the following information:

Signature:
-----------------------------------------------------------
DTC Account Number:
--------------------------------------------------
Date:
---------------------
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED

<PAGE>

GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)

The undersigned, a firm or other entity identified in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, as an "eligible
guarantor institution," including (as such terms are defined therein):
(i) a bank; (ii) a broker, dealer, municipal securities broker,
municipal securities dealer, government securities broker, government
securities dealer; (iii) a credit union; (iv) a national securities
exchange, registered securities association clearing agency; or (v) a
savings association that is a participant in a Securities Transfer
Association recognized program (each of the foregoing being referred
to as an "Eligible Institution") , hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the
Old Capital Securities tendered hereby in proper form for transfer, or
confirmation of the book-entry transfer of such Old Capital Securities
to the Exchange Agent's account at The Depository Trust Company
("DTC"), pursuant to the procedures for book-entry transfer set forth
in the Prospectus, in either case together with one or more properly
completed and duly executed Letters of Transmittal (or facsimile
thereof or Agent's Message in lieu thereof) and any other required
documents within three business days after the date of execution of
this Notice of Guaranteed Delivery.

The undersigned acknowledges that it must deliver the Letters of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof)
and the Old Capital Securities tendered hereby (or a book-entry
confirmation) to the Exchange Agent within the time period set forth
above and that failure to do so could result a financial loss to the
undersigned.

Name of Firm
----------------------------------------------------
(Authorized Signature)
------------------------------------------
Title:

Address
---------------------------------------------------------

---------------------------------------------------------
(Include Zip Code)

Area Code and Telephone Number
----------------------------------
Date
--------------------------

<PAGE>

NOTE: DO NOT SEND OLD CAPITAL SECURITIES WITH THIS NOTICE OF
GUARANTEED DELIVERY. ACTUAL SURRENDER OF OLD CAPITAL SECURITIES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS.

NYFS04...:\25\22625\0313\1824\EXH2057K.36B

EXHIBIT 99.3

March __, 1997

EXCHANGE AGENT AGREEMENT
------------------------

The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001

Ladies and Gentlemen:

Bear Stearns Capital Trust I, a Delaware statutory business
trust (the "Issuer") proposes to make an offer (the "Exchange Offer")
to exchange up to $200,000,000 aggregate liquidation amount of its
Fixed/Adjustable Rate Capital Securities (liquidation amount $1,000
per Capital Security) (the "New Capital Securities"), which have been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like liquidation amount of its outstanding
Fixed/Adjustable Rate Capital Securities (liquidation amount $1,000
per Capital Security) (the "Old Capital Securities"), of which
$200,000,000 aggregate liquidation amount is outstanding. The terms
and conditions of the Exchange Offer as currently contemplated are set
forth in a prospectus, dated , 1997 (the "Prospectus"), a copy
------
of which is attached to this Agreement as Attachment A, proposed to be
distributed to all record holders of the Old Capital Securities.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Prospectus.

The Issuer hereby appoints The Chase Manhattan Bank to act
as exchange agent (the "Exchange Agent") in connection with the
Exchange Offer. References hereinafter to "you" shall refer to The
Chase Manhattan Bank.

The Exchange Offer is expected to be commenced by the Issuer
on or about , 1997. The Letter of Transmittal
-------------
accompanying the Prospectus is to be used by the holders of the Old
Capital Securities to accept the Exchange Offer, and contains certain
instructions with respect to the Exchange Offer.

The Exchange Offer shall expire at 5:00 p.m., New York City
time, on April __, 1997 or on such later date or time to which the
Issuer or The Bear Stearns Companies Inc. (the "Company") may extend
the Exchange Offer (the "Expiration Date"). Subject to the terms and
conditions set forth in the Prospectus, the Issuer and the Company
expressly reserve the right to extend
<PAGE>

the Exchange Offer from time to time and may extend the Exchange Offer
by giving oral (promptly confirmed in writing) or written notice to
you no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date.

The Issuer and the Company expressly reserve the right to
amend or terminate the Exchange Offer, and not to accept for exchange
any Old Capital Securities not theretofore accepted for exchange, upon
the occurrence of any of the conditions of the Exchange Offer
specified in the Prospectus under the caption "Conditions to the
Exchange Offer." The Issuer or the Company will give oral (promptly
confirmed in writing) or written notice of any amendment, termination
or nonacceptance to you as promptly as practicable.

In carrying out your duties as Exchange Agent, you are to
act in accordance with the following instructions:

1. You will perform such duties and only such duties as
are specifically set forth in the section of the Prospectus captioned
"The Exchange Offer" and as specifically set forth herein and such
duties which are necessarily incidental thereto; provided, however,
-------- -------
that in no way will your general duty to act in good faith be
discharged by the foregoing.

2. You will establish an account with respect to the Old
Capital Securities at The Depository Trust Company (the "Book-Entry
Transfer Facility") for purposes of the Exchange Offer within two
business days after the date of the Prospectus, and any financial
institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the Old Capital
Securities by causing the Book-Entry Transfer Facility to transfer
such Old Capital Securities into your account in accordance with the
Book-Entry Transfer Facility's procedure for such transfer.

3. You are to examine each of the Letters of Transmittal,
certificates for Old Capital Securities and confirmations of book-
entry transfers into your account at the Book-Entry Transfer Facility
and any Agent's Message or other documents delivered or mailed to you
by or for holders of the Old Capital Securities to ascertain whether:
(i) the Letters of Transmittal and any such other documents are duly
executed and properly completed in accordance with instructions set
forth therein and (ii) the Old Capital Securities have otherwise been
properly tendered. In each case where the Letter of Transmittal or
any other document has been improperly completed or executed or any of
the certificates for Old Capital Securities are not in

<PAGE>

proper form for transfer or some other irregularity in connection with
the acceptance of the Exchange Offer exists, you will endeavor to
inform the presenters of the need for fulfillment of all requirements
and to take any other action as may be necessary or advisable to cause
such irregularity to be corrected.

4. With the approval of the Issuer or the Chairman of the
Board, the Chief Executive Officer, the Chief Financial Officer or the
Secretary of the Company (such approval, if given orally, to be
confirmed in writing) or any other party designated by the Issuer or
such officer of the Company in writing, you are authorized to waive
any irregularities in connection with any tender of Old Capital
Securities pursuant to the Exchange Offer.

5. Tenders of Old Capital Securities may be made only as
set forth in the section of the Prospectus captioned "The Exchange
Offer -- Procedures for Tendering Old Capital Securities" or in the
Letter of Transmittal and Old Capital Securities shall be considered
properly tendered to you only when tendered in accordance with the
procedures set forth therein.

Notwithstanding the provisions of this paragraph 5, Old
Capital Securities which the Issuer or any other party designated by
the Issuer in writing shall approve as having been properly tendered
shall be considered to be properly tendered (such approval, if given
orally, shall be confirmed in writing).

6. You shall advise the Issuer with respect to any Old
Capital Securities delivered subsequent to the Expiration Date and
accept its instructions with respect to disposition of such Old
Capital Securities.

7. You shall accept tenders:

(a) in cases where the Old Capital Securities are
registered in two or more names only if signed by all named holders;

(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative
capacity only when proper evidence of his or her authority to so act
is submitted; and

(c) from persons other than the registered holder of Old
Capital Securities provided that customary transfer requirements,
including any applicable transfer taxes, are fulfilled.

<PAGE>

You shall accept partial tenders of Old Capital Securities
where so indicated and as permitted in the Letter of Transmittal and
deliver certificates for Old Capital Securities to the transfer agent
for split-up and return any untendered Old Capital Securities to the
holder (or to such other person as may be designated in the Letter of
Transmittal) as promptly as practicable after expiration or
termination of the Exchange Offer.

8. Upon satisfaction or waiver of all of the conditions to
the Exchange Offer, the Issuer will notify you (such notice if given
orally, to be promptly confirmed in writing) of the Company's and
Issuer's acceptance, promptly after the Expiration Date, of all Old
Capital Securities properly tendered and you, on behalf of the Issuer,
will exchange such Old Capital Securities for New Capital Securities
and cause such Old Capital Securities to be canceled. Delivery of New
Capital Securities will be made on behalf of the Issuer by you at the
rate of $1,000 principal amount at maturity of New Capital Securities
for each $1,000 principal amount at maturity of the Old Capital
Securities tendered promptly after notice (such notice if given
orally, to be promptly confirmed in writing) of acceptance of said Old
Capital Securities by the Issuer; provided, however, that in all
-------- -------
cases, Old Capital Securities tendered pursuant to the Exchange Offer
will be exchanged only after timely receipt by you of certificates for
such Old Capital Securities (or confirmation of book-entry transfer
into your account at the Book-Entry Transfer Facility), a properly
completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees (or in lieu thereof an
Agent's Message) and any other required document. You shall issue New
Capital Securities only in denominations of $1,000 or any integral
multiple thereof.

9. Tenders pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and upon the conditions set forth in
the Prospectus and the Letter of Transmittal, Old Capital Securities
tendered pursuant to the Exchange Offer may be withdrawn at any time
on or prior to the Expiration Date.

10. The Company and the Issuer shall not be required to
exchange any Old Capital Securities tendered if any of the conditions
set forth in the Exchange Offer are not met. Notice of any decision
by the Company and the Issuer not to exchange any Old Capital
Securities tendered shall be given (such notice, if given orally,
shall be promptly confirmed in writing) by the Company or the Issuer
to you.

<PAGE>

11. If, pursuant to the Exchange Offer, the Company or the
Issuer does not accept for exchange all or part of the Old Capital
Securities tendered because of an invalid tender, the occurrence of
certain other events set forth in the Prospectus under the caption
"The Exchange Offer -- Conditions to the Exchange Offer" or otherwise,
you shall as soon as practicable after the expiration or termination
of the Exchange Offer return those certificates for unaccepted Old
Capital Securities (or effect the appropriate book-entry transfer of
the unaccepted Old Capital Securities), and return any related
required documents and the Letters of Transmittal relating thereto
that are in your possession, to the persons who deposited them.

12. All certificates for reissued Old Capital Securities or
for unaccepted Old Capital Securities shall be forwarded by (a)
first-class mail, return receipt requested, under a blanket surety
bond protecting you, the Issuer and the Company from loss or liability
arising out of the non-receipt or non-delivery of such certificates or
(b) by registered mail insured separately for the replacement value of
such certificates.

13. You are not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer,
bank or other persons or to engage or utilize any person to solicit
tenders.

14. As Exchange Agent hereunder you:

(a) will be regarded as making no representations and
having no responsibilities as to the validity, sufficiency, value or
genuineness of Old Capital Securities, and will not be required to and
will make no representation as to the validity, value or genuineness
of the Exchange Offer; provided, however, that in no way will your
-------- -------
general duty to act in good faith be discharged by the foregoing;

(b) shall not be obligated to take any legal action
hereunder which might in your reasonable judgment involve any expense
or liability, unless you shall have been furnished with reasonable
indemnity.

(c) shall not be liable to the Company or the Issuer for
any action taken or omitted by you, or any action suffered by you to
be taken or omitted, without negligence, misconduct or bad faith on
your part, by reason of or as a result of the administration of your
duties hereunder in accordance with the terms and conditions of this
Agreement or by reason of your

<PAGE>

compliance with the instructions set forth herein or with any written
or oral instructions delivered to you pursuant hereto, and may
reasonably rely on and shall be protected in acting in good faith in
reliance upon any certificate, instrument, opinion, notice, letter,
facsimile or other document or security delivered to you and
reasonably believed by you to be genuine and to have been signed by
the proper party or parties;

(d) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its
due execution and validity and the effectiveness of its provisions,
but also as to the truth and accuracy of any information contained
therein, which you shall in good faith reasonably believe to be
genuine or to have been signed or represented by a proper person or
persons;

(e) may rely on and shall be protected in acting upon
written or oral instructions from the Issuer or any officer of the
Company with respect to the Exchange Offer;

(f) shall not advise any person tendering Old Capital
Securities pursuant to the Exchange Offer as to the wisdom of making
such tender or as to the market value or decline or appreciation in
market value of any Old Capital Securities; and

(g) may consult with your counsel with respect to any
questions relating to your duties and responsibilities and the written
opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by you
hereunder in good faith and in accordance with such written opinion of
such counsel.

15. You shall take such action as may from time to time be
requested by the Company, the Issuer or their counsel (and such other
action as you may reasonably deem appropriate) to furnish copies of
the Prospectus, Letter of Transmittal and the Notice of Guaranteed
Delivery, or such other forms as may be approved from time to time by
the Company or the Issuer, to all persons requesting such documents
and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information shall
relate only to the procedures for accepting (or withdrawing from) the
Exchange Offer. The Company or the Issuer will furnish you with
copies of such documents at your request. All other requests for
information relating to the Exchange Offer shall be directed to the
Secretary of the Company at: 245 Park Avenue, New York, New York
10167.

<PAGE>

16. You shall advise by facsimile transmission or
telephone, and promptly thereafter confirm in writing to the Issuer,
the Company and Weil, Gotshal & Manges LLP, counsel for the Company
and the Issuer, and such other person or persons as they may request,
daily, and more frequently if reasonably requested, up to and
including the Expiration Date, as to the principal amount of the Old
Capital Securities which have been tendered pursuant to the Exchange
Offer and the items received by you pursuant to this Agreement,
separately reporting and giving cumulative totals as to items properly
received and items improperly received and items covered by Notices of
Guaranteed Delivery. In addition, you will also inform, and cooperate
in making available to, the Company and the Issuer or any such other
person or persons as the Company or the Issuer request from time to
time prior to the Expiration Date of such other information as they,
or he reasonably requests. Such cooperation shall include, without
limitation, the granting by you to the Company, the Issuer and such
person as the Company or the Issuer may request of access to those
persons on your staff who are responsible for receiving tenders, in
order to ensure that immediately prior to the Expiration Date, the
Company and the Issuer shall have received information in sufficient
detail to enable them to decide whether to extend the Exchange Offer.
You shall prepare a list of persons who failed to tender or whose
tenders were not accepted and the aggregate principal amount of Old
Capital Securities not tendered or Old Capital Securities not accepted
and deliver said list to the Company and the Issuer at least seven
days prior to the Expiration Date. You shall also prepare a final
list of all persons whose tenders were accepted, the aggregate
principal amount of Old Capital Securities tendered and the aggregate
principal amount of Old Capital Securities accepted and deliver said
list to the Company.

17. Letters of Transmittal and Notices of Guaranteed
Delivery shall be stamped by you as to the date and the time of
receipt thereof and shall be preserved by you for a period of time at
least equal to the period of time you preserve other records
pertaining to the transfer of securities. You shall dispose of unused
Letters of Transmittal and other surplus materials by returning them
to the Company.

18. For services rendered as Exchange Agent hereunder you
shall be entitled to a fee of [$____] and you shall be entitled to
reimbursement of your expenses (including fees and expenses of your
counsel, which fees are expected under normal circumstances to be not
in excess of [$____]) incurred in connection with the Exchange Offer.
The obligations under this

<PAGE>

Section 18 shall constitute joint and several obligations of the
Issuer and the Company.

19. You hereby acknowledge receipt of the Prospectus and
the Letter of Transmittal attached hereto and further acknowledge that
you have examined each of them to the extent necessary to perform your
duties hereunder. Any inconsistency between this Agreement, on the
one hand, and the Prospectus and the Letter of Transmittal (as they
may be amended from time to time), on the other hand, shall be
resolved in favor of the latter two documents, except with respect to
the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.

20. The Company and the Issuer jointly and severally agree
to indemnify and hold you harmless in your capacity as Exchange Agent
hereunder against any liability, cost or expense, including reasonable
attorneys's fees, arising out of or in connection with the acceptance
or administration of your duties hereunder, including, without
limitation, in connection with any act, omission, delay or refusal
made by you in reasonable reliance upon any signature, endorsement,
assignment, certificate, order, request, notice, instruction or other
instrument or document reasonably believed by you to be valid, genuine
and sufficient and in accepting any tender or effecting any transfer
of Old Capital Securities reasonably believed by you in good faith to
be authorized, and in delaying or refusing in good faith to accept any
tenders or effect any transfer of Old Capital Securities; provided,
--------
however, that the Company and the Issuer shall not be liable for
-------
indemnification or otherwise for any loss, liability, cost or expense
to the extent arising out of your negligence, willful breach of this
Agreement, willful misconduct or bad faith. In no case shall the
Company and the Issuer be liable under this indemnity with respect to
any claim against you unless the Company and the Issuer shall be
notified by you, by letter or cable or by facsimile confirmed by
letter, of the written assertion of a claim against you or of any
other action commenced against you, promptly after you shall have
received any such written assertion or commencement of action. The
Company and the Issuer shall be entitled to participate at their own
expense in the defense of any such claim or other action, and, if the
Company and the Issuer so elect, the Company and the Issuer shall
assume the defense of any suit brought to enforce any such claim. In
the event that the Company and the Issuer shall assume the defense of
any such suit, the Company and the Issuer shall not be liable for the
fees and expenses of any additional counsel thereafter retained by you
so long as the Company and the Issuer shall retain counsel reasonably

<PAGE>

satisfactory to you to defend such suit. You shall not compromise or
settle any such action or claim without the consent of the Company and
the Issuer.

21. This Agreement and your appointment as Exchange Agent
hereunder shall be construed and enforced in accordance with the laws
of the State of New York applicable to agreements made and to be
performed entirely within such state, and without regard to conflicts
of law principles, and shall inure to the benefit of, and the
obligations created hereby shall be binding upon, the successors and
assigns of each of the parties hereto.

22. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all
of which taken together constitute one and the same agreement.

23. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

24. This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part,
except by a written instrument signed by a duly authorized
representative of the party to be charged. This Agreement may not be
modified orally.

25. Unless otherwise provided herein, all notices, requests
and other communications to any party hereunder shall be in writing
(including facsimile) and shall be given to such party, addressed to
it, at its address or telecopy number set forth below:

If to the Company or the Issuer:

The Bear Stearns Companies Inc.
245 Park Avenue
New York, New York 10167

Facsimile: (212) 272-8239
Attention: William J. Montgoris

With a copy to:

Weil, Gotshal & Manges LLP
767 Fifth Avenue

<PAGE>

New York, New York 10153

Facsimile: (212) 310-8007
Attention: Dennis J. Block

If to the Exchange Agent:

The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001

Facsimile: (212) 946-8159
Attention: Anne Brenner

26. Unless terminated earlier by the parties hereto, this
Agreement shall terminate 90 days following the Expiration Date.
Notwithstanding the foregoing, Paragraphs 18 and 20 shall survive the
termination of this Agreement. Except as provided in Section 17, upon
any termination of this Agreement, you shall promptly deliver to the
Company any funds or property (including, without limitation, Letters
of Transmittal and any other documents relating to the Exchange Offer)
then held by you as Exchange Agent under this Agreement.

27. This Agreement shall be binding and effective as of the
date hereof.

<PAGE>

Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed
copy.

THE BEAR STEARNS COMPANIES INC.

By:
---------------------------
Name:
Title:

BEAR STEARNS CAPITAL TRUST I

By:
---------------------------
Name:
Title:

Accepted as the date
first above written:

The Chase Manhattan Bank

By:
---------------------------
Name:
Title:

NYFS04...:\25\22625\0313\1824\AGR2127C.10B