<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-17985
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 22, 1997)
$4,800,000
THE BEAR STEARNS COMPANIES INC.
S&P 500 LINKED NOTES DUE MAY 20, 2003
The Bear Stearns Companies Inc. (the "Company") is offering $4,800,000
principal amount of S&P 500 Linked Notes due May 20, 2003 (the "Notes"). The
Notes are debt securities of the Company, which are being issued, and will be
tradeable and transferable, in denominations of $4 and integral multiples
thereof. The Notes will have no periodic payments of interest and will mature on
May 20, 2003. The Notes will be transferable by the Depositary (as defined
below), as more fully described below.
At maturity, a holder of a Note will be entitled to receive, with respect to
that Note, the principal amount thereof plus an interest payment, if any (the
"Supplemental Redemption Amount"), based on the percentage increase, if any, in
the S&P 500 Composite Stock Price Index (the "Index") over the Starting Index
Value (as defined below). The Supplemental Redemption Amount will in no event be
less than zero. The Notes are not redeemable or callable by the Company prior to
maturity. At maturity, a holder of a Note will receive the principal amount of
such Note plus the Supplemental Redemption Amount, if any; however, there will
be no other payment of interest, periodic or otherwise.
The Supplemental Redemption Amount payable with respect to a Note at
maturity will equal the product of (A) the principal amount of the applicable
Note, (B) the percentage increase from the Starting Index Value to the Ending
Index Value (as defined below), and (C) the Participation Rate. The
Participation Rate will equal a factor of 106%. The Starting Index Value equals
841.88, which was the closing value of the Index on the date the Notes were
priced by the Company for initial sale to the public (the "Pricing Date"). The
Ending Index Value, as more particularly described herein, will be the average
(arithmetic mean) of the closing values of the Index on certain days, or, if
certain events occur, the closing value of the Index on a single day prior to
the maturity of the Notes. See "Description of the Notes--Payment at Maturity"
in this Prospectus Supplement.
The Notes will be unsecured and will rank PARI PASSU with all other
unsecured and unsubordinated indebtedness of the Company. Because the Company is
a holding company, the Notes will be effectively subordinated to the claims of
creditors of its subsidiaries with respect to the assets of those subsidiaries.
At March 27, 1997, the Company had outstanding approximately $19.3 billion of
indebtedness, none of which was secured, and subsidiaries of the Company had
outstanding approximately $1.7 billion of indebtedness (excluding $42.1 billion
relating to securities sold under repurchase agreements).
The Notes will be represented by one or more global securities ("Global
Securities") registered in the name of the nominee of The Depositary Trust
Company ("DTC" or the "Depositary"). Interests in the Global Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by the Depositary and its participants. Except as provided in the
accompanying Prospectus, Notes in definitive form will not be issued. Settlement
for the Notes will be made in immediately available funds. The Notes will trade
in the Depositary's Same-Day Funds Settlement System, and settlement of any
secondary market trading activity for the Notes will therefore settle in
immediately available funds. See "Description of Debt Securities--Global
Securities" in the Prospectus. The Notes have been approved for listing on the
Chicago Board Options Exchange, Inc. (the "CBOE") under the symbol "BSL,"
subject to official notice of issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE S-5 OF THIS PROSPECTUS SUPPLEMENT FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE
PURCHASERS.
FOR INFORMATION AS TO THE CALCULATION OF THE SUPPLEMENTAL REDEMPTION AMOUNT
TO BE PAID AT MATURITY, THE CALCULATION AND THE COMPOSITION OF THE INDEX AND
CERTAIN TAX CONSEQUENCES TO HOLDERS OF THE NOTES, SEE "DESCRIPTION OF THE
NOTES," "THE INDEX" AND "CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS," RESPECTIVELY, IN THE PROSPECTUS SUPPLEMENT.
------------------------------
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 SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
<S> <C> <C> <C>
Per Note........................................ $4.00 $0.10 $3.90
Total........................................... $4,800,000 $120,000 $4,680,000
</TABLE>
(1) The Company has agreed to indemnify the Underwriter against certain
liabilities under the Securities Act of 1933, as amended.
(2) Before deduction of expenses payable by the Company.
------------------------------
The Notes are offered subject to prior sale, when, as, and if delivered to
and accepted by Bear, Stearns & Co. Inc. ("Bear Stearns" or the "Underwriter")
and subject to its right to reject an order in whole or in part and to withdraw,
cancel or modify the order without notice. It is expected that delivery of the
Notes in book-entry form will be made through the facilities of DTC in New York,
New York on or about May 21, 1997.
This Prospectus Supplement and the accompanying Prospectus may be used by
Bear Stearns in connection with offers and sales of the Notes in market-making
transactions at negotiated prices related to prevailing market prices at the
time of sale. Bear Stearns may act as principal or agent in such transactions.
------------------------------
BEAR, STEARNS & CO. INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MAY 16, 1997
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
<TABLE>
<S> <C>
ISSUER............................ The Bear Stearns Companies Inc.
SECURITIES........................ S&P 500 Linked Notes due May 20, 2003. The Notes are to
be issued as a single series of debt securities under
the Indenture described herein. See "Description of the
Notes" in this Prospectus Supplement and "Description of
Debt Securities" in the accompanying Prospectus. As of
the date of this Prospectus Supplement, $11,050,529,575
aggregate principal amount of debt securities have been
previously issued under the Indenture and are
outstanding.
LISTING........................... The Notes have been approved for listing on the CBOE
under the symbol "BSL," subject to official notice of
issuance.
DENOMINATIONS..................... Notes will be issued in denominations of $4 principal
amounts and integral multiples thereof.
MATURITY.......................... May 20, 2003.
PAYMENT AT MATURITY............... At maturity, a holder of a Note will be entitled to
receive (i) the principal amount thereof, plus (ii) the
Supplemental Redemption Amount. The Supplemental
Redemption Amount shall be equal to the product of the
principal amount of the Note multiplied by the following
amount:
</TABLE>
<TABLE>
<S> <C>
(Ending Index Value - Starting Index x Participation
Value) Rate
Starting Index Value
</TABLE>
<TABLE>
<S> <C>
provided, however, that in no event will the
Supplemental Redemption Amount be less than zero. The
Starting Index Value equals 841.88, which was the
closing value of the Index (the "Index Value") on the
Pricing Date. The Ending Index Value will equal the
average (arithmetic mean) of the Index Values on certain
days prior to the maturity of the Notes, or, if a Market
Disruption Event (as defined below) occurs, then the
Ending Index Value will equal the Index Value on a
single day. See "Description of the Notes" and "The
Index" in this Prospectus Supplement.
INDEX............................. The Index is published by Standard & Poor's ("S&P") and
is intended to provide an indication of the pattern of
common stock price movement. The calculation of the
value of the Index is based on the relative value of the
aggregate market value of the common stock of 500
companies at a particular time as compared to the
aggregate average market value of the common stocks of
500 similar companies during the base period from the
years 1941 through 1943. S&P may from time to time, in
its sole
</TABLE>
S-2
<PAGE>
<TABLE>
<S> <C>
discretion, add companies to, or delete companies from,
the Index to fulfill the above-stated intention of
providing an indication of common stock price movement.
"Standard & Poor's-Registered Trademark-,"
"S&P-Registered Trademark-," "S&P
500-Registered Trademark-," "Standard & Poor's 500," are
trademarks of The McGraw-Hill Companies, Inc. and have
been licensed for use by the Company. See "The Index" in
this Prospectus Supplement.
RISK FACTORS...................... Prospective investors should be aware that the Notes are
subject to certain special considerations. Investors
should be aware that if the Ending Index Value does not
exceed the Starting Index Value, holders of the Notes
will receive only the principal amount thereof at
maturity, even if the value of the Index at some point
between the issue date and the maturity date of the
Notes exceeded the Starting Index Value. A holder of the
Notes may receive no Supplemental Redemption Amount at
maturity or a Supplemental Redemption Amount which is
below what the Company would pay as interest as of the
date hereof if the Company issued non-callable senior
debt securities with a similar maturity as that of the
Notes. The return of principal of the Notes at maturity
and the payment of the Supplemental Redemption Amount
may not reflect the full opportunity costs implied by
inflation or other factors relating to the time value of
money and will not produce the same yield as if the
stocks underlying the Index were purchased and held for
the same period as the Notes.
The Index does not reflect the payment of dividends on
the stocks underlying it and, therefore, the yield to
the maturity of the Notes will not produce the same
yield as if such underlying stocks were purchased and
held for a similar period.
There can be no assurance as to whether there will be a
secondary market in the Notes, or whether Bear Stearns
will make a secondary market in the Notes, or, if there
were to be any such secondary market, whether that
market would be liquid or illiquid. It is expected that
any secondary market for the Notes will be affected by
the creditworthiness of the Company and by a number of
other factors, including, but not limited to, the level
of the Index, the volatility of the Index, dividend
rates on the stocks underlying the Index, the time
remaining to the maturity of the Notes and market
interest rates. The value of the Notes prior to maturity
is expected to depend on market factors which include,
but may not be limited to, those factors listed above.
If, however, the Notes are sold prior to the maturity
date, the sale price may be at a substantial discount
from the amount expected to be payable to the holder
upon the maturity of the Notes as a result of, but not
limited to, the factors mentioned above. The price at
which a holder will be able to sell the Notes prior to
maturity may be at a discount, which could be
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
substantial, from the principal amount thereof. The
value of the Notes may not necessarily bear a direct
relationship to the value of the Index. In addition, the
Ending Index Value depends on a number of interrelated
factors, including economic, financial and political
events, over which the Company has no control.
Trading prices of the stocks underlying the Index will
be influenced by both the complex and interrelated
political, economic, financial and other factors that
can affect the capital markets generally and the equity
trading markets on which the underlying stocks are
traded, and by various circumstances that can influence
the values of the underlying stocks in a specific market
segment or a particular underlying stock.
It is suggested that prospective investors who consider
purchasing the Notes should reach an investment decision
only after carefully considering the suitability of the
Notes in light of their particular circumstances. See
"Risk Factors" in this Prospectus Supplement.
Investors should also consider the tax consequences of
investing in the Notes. See "Certain United States
Federal Income Tax Considerations" in this Prospectus
Supplement.
</TABLE>
S-4
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, THE FOLLOWING RISK FACTORS RELATING TO THE NOTES.
PAYMENT AT MATURITY
SUPPLEMENTAL REDEMPTION AMOUNT MAY BE ZERO. Investors should be aware that
if the Ending Index Value does not exceed the Starting Index Value, holders of
the Notes will receive only the principal amount thereof at maturity, even if
the value of the Index at some point between the Pricing Date and the maturity
date of the Notes exceeded the Starting Index Value.
YIELD MAY BE BELOW MARKET INTEREST RATES ON THE PRICING DATE. A holder of
the Notes may receive no Supplemental Redemption Amount at maturity, or a
Supplemental Redemption Amount that is below what the Company would pay as
interest as of the Pricing Date if the Company issued non-callable senior debt
securities with a similar maturity as that of the Notes. The return of principal
of the Notes at maturity and the payment of the Supplemental Redemption Amount,
if any, may not reflect the full opportunity costs implied by inflation or other
factors relating to the time value of money.
YIELD ON NOTES WILL NOT REFLECT DIVIDENDS. The Index does not reflect the
payment of dividends on the stocks underlying it and therefore the yield based
on the Index to the maturity of the Notes will not produce the same yield as if
such underlying stocks were purchased and held for a similar period. See
"Description of the Notes" below.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET; VOLATILITY
The Notes have been approved for listing on the CBOE under the symbol "BSL,"
subject to official notice of issuance. However, there can be no assurance as to
whether there will be a secondary market in the Notes, or whether Bear Stearns
will make a secondary market in the Notes, or, if there were to be any such
secondary market, whether that market would be liquid or illiquid.
It is expected that any secondary market for the Notes will be affected by
the creditworthiness of the Company and by a number of factors, including, but
not limited to, the level of the Index, the volatility of the Index, dividend
rates on the stocks underlying the Index, the time remaining to the maturity of
the Notes and market interest rates. The value of the Notes prior to maturity is
expected to depend on market factors which include, but may not be limited to,
those factors listed above. If, however, the Notes are sold prior to the
maturity date, the sale price may be at a substantial discount from the amount
expected to be payable to the holder upon the maturity of the Notes as a result
of, but not limited to, the factors mentioned above. The price at which a holder
will be able to sell the Notes prior to maturity may be at a discount, which
could be substantial, from the principal amount thereof. The value of the Notes
may not necessarily bear a direct relationship to the value of the Index. In
addition, the Ending Index Value depends on a number of interrelated factors,
including economic, financial and political events, over which the Company has
no control. See "Description of the Notes" and "The Index" below.
RELATIONSHIP OF THE NOTES AND THE INDEX
The historical Index values should not be taken as an indication of the
future performance of the Index during the term of the Notes. While the trading
prices of the stocks underlying the Index will determine the value of the Index,
it is impossible to predict whether the value of the Index will fall or rise.
Moreover, the value of the Notes may not necessarily bear a direct relationship
to the value of the Index. Trading prices of the stocks underlying the Index
will be influenced by both the complex and interrelated political, economic,
financial and other factors that can affect the capital markets generally and
the equity
S-5
<PAGE>
trading markets on which the underlying stocks are traded, and by various
circumstances that can influence the values of the underlying stocks in a
specific market segment or a particular underlying stock.
The policies of S&P concerning additions, deletions and substitutions of the
stocks underlying the Index and the manner in which S&P takes account of certain
changes affecting such underlying stocks may affect the value of the Index. The
policies of S&P with respect to the calculation of the Index could also affect
the value of the Index. S&P may discontinue or suspend calculation or
dissemination of the Index. Any such actions could affect the value of the
Notes. See "The Index" and "Description of the Notes-- Discontinuance of the
Index" and "--Adjustments to the Index; Market Disruption Events" below.
AFFILIATION OF THE COMPANY AND CALCULATION AGENT
Bear Stearns will act as the calculation agent (the "Calculation Agent").
The Calculation Agent will make certain determinations and judgments in
connection with calculating the Index Values or deciding whether a Market
Disruption Event has occurred. See "Description of the Notes--Discontinuance of
the Index" and "--Adjustments to the Index; Market Disruption Events" below.
Because Bear Stearns is an affiliate of the Company, conflicts of interest may
arise in connection with Bear Stearns performing its role as Calculation Agent.
Bear Stearns, as a registered broker-dealer, is required to maintain policies
and procedures regarding the handling and use of confidential proprietary
information, and such policies and procedures will be in effect throughout the
term of the Notes to restrict the use of information relating to the calculation
of the Index Values that the Calculation Agent may be required to make prior to
the dissemination of such Index Values. Bear Stearns is obligated to carry out
its duties and functions as Calculation Agent in good faith and using its
reasonable judgment.
Bear Stearns and its affiliates may from time to time engage in transactions
involving the stocks underlying the Index for their proprietary accounts and for
other accounts under their management, which may influence the value of such
stocks and therefore the value of the Index. Bear Stearns and its affiliates
will also be the counterparties to the hedge of the Company's obligations under
the Notes. See "Use of Proceeds" in the Prospectus and "Use of Proceeds and
Hedging" below. Accordingly, under certain circumstances, conflicts of interest
may arise between Bear Stearns's responsibilities as Calculation Agent with
respect to the Notes and its obligations under its hedge.
OTHER CONSIDERATIONS
If a case under the United States Bankruptcy Code is commenced in respect of
the Company, the claim of a holder of the Notes may, under Title 11 of the
United States Code, be limited to the principal amount of the Notes and may not
include any claim for any Supplemental Redemption Amount.
It is suggested that prospective investors who consider purchasing the Notes
should reach an investment decision only after carefully considering the
suitability of the Notes in light of their particular circumstances.
Investors should also consider the tax consequences of investing in the
Notes. See "Certain United States Federal Income Tax Consequences" below.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was 1.4 for the nine months ended
March 27, 1997. The ratio was calculated by dividing the sum of the fixed
charges into the sum of the earnings before taxes and fixed charges. Fixed
charges for purposes of the ratio consist of interest expense and certain other
immaterial expenses.
S-6
<PAGE>
DESCRIPTION OF THE NOTES
THE FOLLOWING DESCRIPTION OF THE TERMS OF THE NOTES OFFERED HEREIN (REFERRED
TO IN THE PROSPECTUS AS THE "DEBT SECURITIES") SUPPLEMENTS THE DESCRIPTION OF
THE GENERAL TERMS OF NOTES SET FORTH IN THE PROSPECTUS, TO WHICH DESCRIPTION
REFERENCE IS HEREBY MADE. THE FOLLOWING SUMMARY OF THE NOTES IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE THERETO AND TO THE INDENTURE REFERRED TO THEREIN.
GENERAL
The Notes are to be issued as a single series of debt securities under the
Indenture described in the accompanying Prospectus. The principal amount of
Notes that will be issued will be limited to $4,800,000. The Notes will mature
on May 20, 2003 and will be general unsecured obligations of the Company. The
Notes will be issued only in fully registered form and in minimum denominations
of $4 and integral multiples thereof. Initially the Notes will be issued in the
form of one or more Global Securities registered in the name of DTC or its
nominee, as described below. The Notes will not be subject to redemption prior
to maturity.
Reference should be made to the accompanying Prospectus for a detailed
summary of additional provisions of the Notes and of the Indenture under which
the Notes will be issued. For a discussion of certain federal income tax
consequences to holders of the Notes, see "Certain United States Federal Income
Tax Consequences" below.
INTEREST
Holders of the Notes will not be entitled to receive periodic payments of
interest.
PAYMENT AT MATURITY
At maturity, a holder of a Note will be entitled to receive the principal
amount thereof plus a Supplemental Redemption Amount, if any, all as provided
below. If the Ending Index Value does not exceed the Starting Index Value, a
holder of a Note will be entitled to receive only the principal amount thereof.
At maturity, a Holder of a Note will be entitled to receive, with respect to
that Note, (i) the principal amount thereof, plus (ii) the Supplemental
Redemption Amount. The Supplemental Redemption Amount shall be the product of
the principal amount of that Note multiplied by the following amount:
<TABLE>
<C> <S>
(Ending Index Value-Starting Index
Value) X Participation Rate
Starting Index Value
</TABLE>
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero. The Starting Index Value equals 841.88, which was the Index
Value on the Pricing Date. The Ending Index Value will be determined by the
Calculation Agent and will equal the average (arithmetic mean) of the Index
Values determined on each of the first five Calculation Days (as defined below)
during the Calculation Period (as defined below). If there are fewer than five
Calculation Days, then the Ending Index Value will equal the average (arithmetic
mean) of the Index Values on such Calculation Days, and if there is only one
Calculation Day, then the Ending Index Value will equal the Index Value on such
Calculation Day. If no Calculation Days occur during the Calculation Period
because of Market Disruption Events, then the Ending Index Value will equal the
Index Value determined on the last scheduled Business Day (as defined below) in
the Calculation Period, regardless of the occurrence of a Market Disruption
Event on such day. The "Calculation Period" means the period from and including
the seventh scheduled Business Day prior to the maturity date to and including
the second scheduled Business Day prior to the
S-7
<PAGE>
maturity date. "Calculation Day" means any Business Day during the Calculation
Period on which a Market Disruption Event has not occurred. For purposes of
determining the Ending Index Value, a "Business Day" is a day on which the New
York Stock Exchange and the American Stock Exchange are open for trading and the
Index or any Successor Index (as defined below) is calculated and published. All
determinations made by the Calculation Agent shall be at the sole discretion of
the Calculation Agent and, absent manifest error by the Calculation Agent, shall
be conclusive for all purposes and binding on the Company and holders of the
Notes.
The following table illustrates, for a range of hypothetical Ending Index
Values, (i) the total amount payable at maturity for each $4 principal amount of
Notes, (ii) the total rate of return to holders of Notes assuming a 106%
participation rate, (iii) the pretax annualized rate of return to holders of
Notes, and (iv) the pretax annualized rate of return of an investment in the
stocks underlying the Index (which includes an assumed aggregate dividend yield
of 1.93% per annum, as more fully described below).
<TABLE>
<CAPTION>
TOTAL AMOUNT PRETAX
PAYABLE AT ANNUALIZED RATE
MATURITY PER TOTAL RATE PRETAX OF RETURN ON
PERCENTAGE HYPOTHETICAL $4 PRINCIPAL OF ANNUALIZED RATE STOCKS
CHANGE OF ENDING AMOUNT RETURN ON OF RETURN ON UNDERLYING
INDEX VALUE INDEX VALUE OF NOTES THE NOTES THE NOTES(1) THE NOTES(1)(2)
- --------------- ---------------- ----------------- ------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
-50.0% 420.94 $ 4.00 0.00% 0.00% -9.27%
-40.0% 505.13 $ 4.00 0.00% 0.00% -6.40%
-30.0% 589.32 $ 4.00 0.00% 0.00% -3.93%
-20.0% 673.50 $ 4.00 0.00% 0.00% -1.76%
-10.0% 757.69 $ 4.00 0.00% 0.00% 0.18%
0.0% 841.88(3) $ 4.00 0.00% 0.00% 1.93%
10.0% 926.07 $ 4.42 10.60% 1.69% 3.54%
20.0% 1,010.26 $ 4.85 21.20% 3.23% 5.02%
30.0% 1094.44 $ 5.27 31.80% 4.66% 6.39%
40.0% 1178.63 $ 5.70 42.40% 5.98% 7.67%
50.0% 1262.82 $ 6.12 53.00% 7.21% 8.87%
60.0% 1347.01 $ 6.54 63.60% 8.37% 10.00%
70.0% 1431.20 $ 6.97 74.20% 9.47% 11.07%
80.0% 1515.38 $ 7.39 84.80% 10.50% 12.08%
90.0% 1599.57 $ 7.82 95.40% 11.48% 13.04%
100.0% 1683.76 $ 8.24 106.00% 12.42% 13.96%
110.0% 1767.95 $ 8.66 116.60% 13.31% 14.84%
120.0% 1852.14 $ 9.09 127.20% 14.16% 15.69%
</TABLE>
- ------------------------
(1) The annualized rates of return specified in this table are calculated on a
semiannual bond equivalent basis.
(2) This rate of return assumes (i) an investment of a fixed amount in the
stocks underlying the Index with the allocation of such amount reflecting
the relative weight of such stocks in the Index; (ii) a percentage change in
the aggregate price of such stocks that equals the percentage change in the
Index from the Starting Index Value to the applicable hypothetical Ending
Index Value; (iii) a constant dividend yield of 1.93% per annum, paid
quarterly from the date of initial delivery of Notes, applied to the value
of the Index at the beginning of such quarter assuming such value increases
or decreases linearly from the Starting Index Value to the applicable
hypothetical Ending Index Value; (iv) no transaction fees or expenses; (v) a
six-year term for the Notes; and (vi) a final Index Value equal to the
hypothetical Ending Index Value.
(3) The Starting Index Value.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount (if any) received by investors and the total and
pretax annualized rate of return resulting therefrom will depend entirely on the
actual Ending Index Value determined by the Calculation Agent as provided
herein. Historical data regarding the Index is included in this Prospectus
Supplement under "The Index-- Historical Data on the Index."
S-8
<PAGE>
DISCONTINUANCE OF THE INDEX
If S&P discontinues publication of the Index and S&P or another entity
publishes a successor or substitute index that the Calculation Agent determines,
in its sole discretion, to be comparable to such Index (any such index being
referred to hereinafter as a "Successor Index"), then the relevant Index Value
shall be determined by reference to the value of such Successor Index at the
close of trading on the relevant exchange or market for the Successor Index on
the applicable Calculation Day. Upon any selection by the Calculation Agent of a
Successor Index, the Company shall cause written notice thereof to be furnished
to the Trustee and to holders of the Notes.
If S&P discontinues publication of the Index prior to, and such
discontinuance is continuing on, any Calculation Day and the Calculation Agent
determines that no Successor Index is available at such time, then on such
Calculation Day, the Calculation Agent shall determine the Index Value on such
Calculation Day. The Index Value shall be computed by the Calculation Agent in
accordance with the formula for and method of calculating the Index last in
effect prior to such discontinuance, using the closing price (or, if trading in
the relevant securities has been materially suspended or materially limited, its
good faith estimate of the closing price that would have prevailed but for such
suspension or limitation) on such Calculation Day of each security most recently
comprising the Index. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Index may adversely affect the value of
the Notes. If a Successor Index is selected or the Calculation Agent calculates
a value as a substitute for the Index as described below, such Successor Index
or value shall be substituted for the Index for all purposes, including for
purposes of determining whether a Market Disruption Event exists.
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the method of calculating the Index or a Successor Index, or
the value thereof, is changed in any material respect, or if the Index or a
Successor Index is in any other way modified so that such index does not, in the
opinion of the Calculation Agent, fairly represent the value of the Index or
such Successor Index had such changes or modifications not been made, then, from
and after such time, the Calculation Agent shall, at the close of business in
New York, New York, on each Calculation Day, make such calculations and
adjustments as, in the good faith judgment of the Calculation Agent, may be
necessary in order to arrive at a value of a stock index comparable to the Index
as if such changes or modifications had not been made, and calculate the Index
Value with reference to the Index or such Successor Index, as adjusted.
Accordingly, if the method of calculating the Index or a Successor Index is
modified so that the value of such index is a fraction or a multiple of what it
would have been if it had not been modified (e.g., due to a split in the index),
then the Calculation Agent shall adjust such index in order to arrive at a value
of the Index or such Successor Index as if it had not been modified (e.g., as if
such split had not occurred).
"Market Disruption Event" means either of the following events, as
determined by the Calculation Agent:
(i) the suspension or material limitation (limitations pursuant to New
York Stock Exchange Rule 80A (or any applicable rule or regulation enacted
or promulgated by the New York Stock Exchange or any other self-regulatory
organization or the Securities and Exchange Commission of similar scope as
determined by the Calculation Agent) on trading during significant market
fluctuations shall be considered "material" for purposes of this
definition), in each case, for more than two hours of trading, in 100 or
more of the securities included in the Index, or
(ii) the suspension or material limitation, in each case, for more than
two hours of trading (whether by reason of movements in price otherwise
exceeding levels permitted by the relevant exchange or otherwise) in (A)
futures contracts related to the Index which are traded on the Chicago
Mercantile Exchange or (B) option contracts related to the Index which are
traded on the CBOE.
S-9
<PAGE>
For the purposes of this definition, a limitation on the hours in a trading day
and/or number of days of trading will not constitute a Market Disruption Event
if it results from an announced change in the regular business hours of the
relevant exchange.
REDEMPTION; DEFEASANCE
The Notes are not subject to redemption prior to maturity and are not
subject to the defeasance provisions described in the accompanying Prospectus
under "Description of Debt Securities-- Defeasance."
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default (as defined in the accompanying Prospectus) with
respect to any Notes shall have occurred and be continuing, the amount payable
to a beneficial owner of a Note upon any acceleration permitted by the Notes,
with respect to each $4 principal amount thereof, will be equal to: (i) the
principal amount thereof, plus (ii) a Supplemental Redemption Amount calculated
as though the date of early repayment were the maturity date of the Notes. See
"Description of the Notes--Payment at Maturity" above. If a case under the
United States Bankruptcy Code is commenced in respect of the Company, the claim
of the holder of a Note may be limited, under Title 11 of the United States
Code, to the principal amount of the Note, and may not include any claim for any
Supplemental Redemption Amount.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriter in immediately
available funds. All payments of principal and the Supplemental Redemption
Amount, if any, will be made by the Company in immediately available funds so
long as the Notes are maintained in book-entry form.
THE INDEX
All disclosure contained in this Prospectus Supplement regarding the Index,
including, without limitation, its make-up, method of calculation and changes in
its components, is derived from publicly available information prepared by S&P.
Neither the Company nor the Underwriter takes any responsibility for the
accuracy or completeness of such information.
GENERAL
The Index is published by S&P and is intended to provide a performance
benchmark for the U.S. equity markets. The calculation of the value of the Index
(discussed below in further detail) is based on the relative value of the
aggregate Market Value (as defined below) of the common stocks of 500 companies
(the "Component Stocks") as of a particular time as compared to the aggregate
average Market Value of the common stocks of 500 similar companies during the
base period of the years 1941 through 1943. The "Market Value" of any Component
Stock is the product of the market price per share and the number of the then
outstanding shares of such Component Stock. The 500 companies are not the 500
largest companies listed on the New York Stock Exchange and not all 500
companies are listed on such exchange. S&P chooses companies for inclusion in
the Index with an aim of achieving a distribution by broad industry groupings
that approximates the distribution of these groupings in the common stock
population of the U.S. equity market. Relevant criteria employed by S&P include
the viability of the particular company, the extent to which that company
represents the industry group to which it is assigned, the extent to which the
market price of that company's common stock is generally responsive to changes
in the affairs of the respective industry and the Market Value and trading
activity of the common stock of that company. As of April 3, 1997, the 500
companies included in the Index were divided into 103 individual groups and 11
economic sectors. Financials, Utilities, and Transportation account for 3 of the
11 sectors. The Industrials
S-10
<PAGE>
are broken into 8 sectors--Basic Materials, Capital Goods, Communication
Services, Consumer Cyclicals, Consumer Staples, Energy, Health Care and
Technology. S&P may from time to time, in its sole discretion, add companies to,
or delete companies from, the Index to achieve the objectives stated above.
COMPUTATION OF THE S&P 500 INDEX
S&P currently computes the Index as of a particular time as follows:
(1) the Market Value of each Component Stock is determined as of such
time;
(2) the Market Value of all Component Stocks as of such time is
aggregated;
(3) the mean average of the Market Values as of each week in the base
period of the years 1941 through 1943 of the common stock of each company in
a group of 500 substantially similar companies is determined;
(4) the mean average Market Values of all such common stocks over such
base period (as determined under clause (3) above) is aggregated (such
aggregate amount being referred to as the "Base Value");
(5) the aggregate Market Value of all Component Stocks as of such time
as determined under clause (2) above) is divided by the Base Value; and
(6) the resulting quotient (expressed in decimals) is multiplied by ten.
While S&P currently employs the above methodology to calculate the Index, no
assurance can be given that S&P will not modify or change such methodology in a
manner that may affect the Supplemental Redemption Amount, if any, payable to
holders of Notes upon maturity or otherwise.
S&P adjusts the foregoing formula to negate the effect of changes in the
Market Value of a component stock that are determined by S&P to be arbitrary or
not due to true market fluctuations. Such changes may result from such causes as
the issuance of stock dividends, the granting to shareholders of rights to
purchase additional shares of such stock, the purchase thereof by employees
pursuant to employee benefit plans, certain consolidations and acquisitions, the
granting to shareholders of rights to purchase other securities of the company,
the substitution by S&P of particular component stocks in the Index, and other
reasons. In all such cases, S&P first recalculates the aggregate Market Value of
all component stocks (after taking account of the new market price per share of
the particular component stock or the new number of outstanding shares thereof
or both, as the case may be) and then determines the New Base Value in
accordance with the following formula:
<TABLE>
<S> <C> <C>
New Market Value
Old Base Value X Old Market Value = New Base Value
</TABLE>
The result is that the Base Value is adjusted in proportion to any change in
the aggregate Market Value of all Component Stocks resulting from the causes
referred to above to the extent necessary to negate the effects of such causes
upon the Index.
S-11
<PAGE>
HISTORICAL DATA ON THE INDEX
The following table sets forth the closing values of the Index on the last
business day of each year from 1947 through 1988, as published by S&P. The
historical experience of the Index should not be taken as an indication of
future performance and no assurance can be given that the value of the Index
will not decline and thereby reduce the Supplemental Redemption Amount that may
be payable to holders of Notes at maturity or otherwise.
YEAR-END VALUE OF THE INDEX
<TABLE>
<CAPTION>
YEAR CLOSING VALUE YEAR CLOSING VALUE
- ----------------------------------- ------------------- ----------------------------------- -----------------
<S> <C> <C> <C>
1947............................... 15.30 1968............................... 103.86
1948............................... 15.20 1969............................... 92.06
1949............................... 16.79 1970............................... 92.15
1950............................... 20.43 1971............................... 102.09
1951............................... 23.77 1972............................... 118.05
1952............................... 26.57 1973............................... 97.55
1953............................... 24.81 1974............................... 68.56
1954............................... 35.98 1975............................... 90.19
1955............................... 45.48 1976............................... 107.46
1956............................... 46.67 1977............................... 95.10
1957............................... 39.99 1978............................... 96.11
1958............................... 55.21 1979............................... 107.94
1959............................... 59.89 1980............................... 135.76
1960............................... 58.11 1981............................... 122.55
1961............................... 71.55 1982............................... 140.64
1962............................... 63.10 1983............................... 164.93
1963............................... 75.02 1984............................... 167.24
1964............................... 84.75 1985............................... 211.28
1965............................... 92.43 1986............................... 242.17
1966............................... 80.33 1987............................... 247.08
1967............................... 96.47 1988............................... 277.72
</TABLE>
The following table sets forth the level of the Index at the end of each
month, in the period from January 1989 through April 1997. These historical data
on the Index are not necessarily indicative of the future performance of the
Index or what the value of the Notes may be. Any historical upward or downward
trend in the level of the Index during any period set forth below is not any
indication that the Index is more or less likely to increase or decrease at any
time during the term of the Notes.
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-----------------
<S> <C>
1989:
January...................................................................................... 297.47
February..................................................................................... 288.86
March........................................................................................ 294.87
April........................................................................................ 309.64
May.......................................................................................... 320.52
June......................................................................................... 317.98
July......................................................................................... 346.08
August....................................................................................... 351.45
September.................................................................................... 349.15
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-----------------
<S> <C>
October...................................................................................... 340.36
November..................................................................................... 345.99
December..................................................................................... 353.40
1990:
January...................................................................................... 329.08
February..................................................................................... 331.89
March........................................................................................ 339.94
April........................................................................................ 330.80
May.......................................................................................... 361.23
June......................................................................................... 358.02
July......................................................................................... 356.15
August....................................................................................... 322.56
September.................................................................................... 306.05
October...................................................................................... 304.00
November..................................................................................... 322.22
December..................................................................................... 330.22
1991:
January...................................................................................... 343.93
February..................................................................................... 367.07
March........................................................................................ 375.22
April........................................................................................ 375.35
May.......................................................................................... 389.83
June......................................................................................... 371.16
July......................................................................................... 387.81
August....................................................................................... 395.43
September.................................................................................... 387.86
October...................................................................................... 392.45
November..................................................................................... 375.22
December..................................................................................... 417.09
1992:
January...................................................................................... 408.78
February..................................................................................... 412.70
March........................................................................................ 403.69
April........................................................................................ 414.95
May.......................................................................................... 415.35
June......................................................................................... 408.14
July......................................................................................... 424.22
August....................................................................................... 414.03
September.................................................................................... 417.80
October...................................................................................... 418.68
November..................................................................................... 431.35
December..................................................................................... 435.71
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-----------------
<S> <C>
1993:
January...................................................................................... 438.78
February..................................................................................... 443.38
March........................................................................................ 451.67
April........................................................................................ 440.19
May.......................................................................................... 450.19
June......................................................................................... 450.53
July......................................................................................... 448.13
August....................................................................................... 463.56
September.................................................................................... 458.93
October...................................................................................... 467.83
November..................................................................................... 461.79
December..................................................................................... 466.45
1994:
January...................................................................................... 481.61
February..................................................................................... 467.14
March........................................................................................ 445.76
April........................................................................................ 450.91
May.......................................................................................... 456.50
June......................................................................................... 444.27
July......................................................................................... 458.26
August....................................................................................... 475.49
September.................................................................................... 462.69
October...................................................................................... 472.35
November..................................................................................... 453.69
December..................................................................................... 459.27
1995:
January...................................................................................... 470.42
February..................................................................................... 487.39
March........................................................................................ 500.71
April........................................................................................ 514.71
May.......................................................................................... 533.40
June......................................................................................... 544.75
July......................................................................................... 562.06
August....................................................................................... 561.88
September.................................................................................... 584.41
October...................................................................................... 581.50
November..................................................................................... 605.37
December..................................................................................... 615.93
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-----------------
<S> <C>
1996:
January...................................................................................... 636.02
February..................................................................................... 640.43
March........................................................................................ 645.50
April........................................................................................ 654.17
May.......................................................................................... 669.12
June......................................................................................... 670.63
July......................................................................................... 639.95
August....................................................................................... 651.99
September.................................................................................... 687.31
October...................................................................................... 705.27
November..................................................................................... 757.02
December..................................................................................... 740.74
1997:
January...................................................................................... 786.16
February..................................................................................... 790.82
March........................................................................................ 757.12
April........................................................................................ 801.34
</TABLE>
The following graph sets forth the historical performance of the Index at
the end of each year from 1947 through 1996. Past movements of the Index are not
necessarily indicative of the future Index values. On May 15, 1997 the closing
level of the Index was 841.88.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
YEAR CLOSING VALUE
<S> <C>
1947 15.30
1948 15.20
1949 16.79
1950 20.43
1951 23.77
1952 26.57
1953 24.81
1954 35.98
1955 45.48
1956 46.67
1957 39.99
1958 55.21
1959 59.89
1960 58.11
1961 71.55
1962 63.10
1963 75.02
1964 84.75
1965 92.43
1966 80.33
1967 96.47
1968 103.86
1969 92.06
1970 92.15
1971 102.09
1972 118.05
1973 97.55
1974 68.56
1975 90.19
1976 107.46
1977 95.10
1978 96.11
1979 107.94
1980 135.76
1981 122.55
1982 140.64
1983 164.93
1984 167.24
1985 211.28
1986 242.17
1987 247.08
1988 277.72
1989 353.40
1990 330.22
1991 417.09
1992 435.71
1993 466.45
1994 459.27
1995 615.93
1996 740.74
</TABLE>
S-15
<PAGE>
LICENSE AGREEMENT
S&P and the Company have entered into an agreement providing for the
non-exclusive license to the Company and any of its affiliated or subsidiary
companies, in exchange for a fee, of the right to use the Index, which is owned
and published by S&P, in connection with certain securities, including the
Notes. The agreement between S&P and the Company provides that the following
language must be stated in this Prospectus Supplement:
"The Notes are not sponsored, endorsed, sold or promoted by S&P. S&P
makes no representation or warranty, express or implied, to the holders
of the Notes or any member of the public regarding the advisability of
investing in securities generally or in the Notes particularly or the
ability of the Index to track general stock market performance. S&P's
only relationship to the Company (other than transactions entered into
in the ordinary course of business) is the licensing of certain
trademarks and trade names of S&P and of the Index which is determined,
composed and calculated by S&P without regard to the Company or the
Notes. S&P has no obligation to take the needs of the Company or the
holders of the Notes into consideration in determining, composing or
calculating the Index. S&P is not responsible for, and has not
participated in, the determination of the timing of the sale of the
Notes, prices at which the Notes are to initially be sold, or quantities
of the Notes to be issued or in the determination or calculation of the
equation by which the Notes are to be converted into cash. S&P has no
obligation or liability in connection with the administration, marketing
or trading of the Notes.
STANDARD & POOR'S ("S&P") DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE
COMPANY, BEAR STEARNS, HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THE RIGHTS LICENSED UNDER THE LICENSE AGREEMENT
DESCRIBED HEREIN OR FOR ANY OTHER USE. S&P MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE
INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes certain material U.S. federal
income tax aspects of the acquisition, ownership and disposition of the Notes.
This discussion is a summary for general information only and does not consider
all aspects of U.S. federal income taxation that may be relevant to the
purchase, ownership and disposition of the Notes by a prospective investor in
light of his or her personal circumstances. This discussion also does not
address the U.S. federal income tax consequences of ownership of Notes either
not held as capital assets within the meaning of Section 1221 of the U.S.
Internal Revenue Code of 1986, as amended (the "Code"), or by investors subject
to special treatment under the federal income tax laws, such as dealers in
securities or foreign currency, tax-exempt entities, banks, thrifts, insurance
companies, persons that hold the Notes as part of a "straddle," "hedge" against
currency risk, or, "conversion transaction," persons that have a "functional
currency" other than the U.S. dollar, and investors in pass-through entities. In
addition, the discussion is generally limited to the tax consequences to initial
holders. It does not describe any tax consequences arising out of the tax laws
of any state, local or foreign jurisdiction or under U.S. federal estate or gift
tax principles.
S-16
<PAGE>
This summary is based upon the Code, existing and proposed regulations
thereunder, and current administrative rulings and court decisions. All of the
foregoing are subject to change, possibly on a retroactive basis, and any such
change could affect the continuing validity of this discussion.
PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE APPLICATION OF U.S. FEDERAL INCOME TAX LAWS, AS WELL AS
THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION TO THEIR PARTICULAR
SITUATIONS.
The Company intends to treat the Notes as debt for U.S. federal income tax
purposes. However, as some contingent payment arrangements may not be treated as
debt for U.S. federal income tax purposes, holders should consult their own tax
advisors with respect to whether these contingent payment obligations are debt.
U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a Note that is (i) a citizen or resident of
the United States, (ii) a corporation organized under the laws of the United
States or any political subdivision thereof or therein, or (iii) an estate or
trust, the income of which is subject to U.S. federal income tax regardless of
the source (a "U.S. Holder"). For taxable years beginning after December 31,
1996 (and if the trustee so elects for taxable years beginning after August 20,
1996) a trust is a U.S. trust if a U.S. court is able to exercise primary
supervision over the administration of such trust and one or more U.S.
fiduciaries has the authority to control all substantial decisions of such
trust.
Under recent regulations (the "Contingent Debt Regulations") the amount of
interest on the Notes that must be taken into account by a U.S. holder for each
accrual period is determined by constructing a projected payment schedule for
the Notes instrument and applying rules similar to those for accruing original
issue discount ("OID") on a non-contingent debt instrument.
In general, the Contingent Debt Regulations provide that the yield on a
contingent debt instrument is determined by reference to the comparable yield at
which the issuer would issue a fixed rate debt instrument with terms and
conditions similar to those of the contingent debt instrument, including the
level of subordination, term, timing of payments, and general market conditions.
If a hedge is available and the combined cash flows of the hedges and the
non-contingent payments permit the calculations of a yield to maturity such that
the debt instrument and hedge could be integrated into a synthetic fixed-rate
instrument, the comparable yield is the yield that the synthetic fixed rate
instrument would have.
The Company has determined that the comparable yield for a fixed rate debt
instrument similar to the Notes would be 6.93% compounded semi-annually. The
projected payment schedule for the Notes consists of both a principal repayment
amount at maturity and a projected Supplemental Redemption Amount of $2.02 at
maturity. This projected payment schedule is based on the Company's
determination of the comparable yield of the Notes as of the issue date. This
projected payment schedule has been determined solely for U.S. federal income
tax purposes (I.E., for the purpose of complying with the Contingent Debt
Regulations) and is to be utilized to determine the amount of interest to be
included in income annually by the holders. Accordingly, the calculation of the
projected payment schedule and the comparable yield is based on a number of
assumptions and estimates and is not a prediction either of the actual amount,
if any, which may be paid to holders of the Notes at maturity or of the actual
yield on the Notes.
Subject to the adjustments described below, a U.S. Holder, whether on the
cash or accrual basis, must include in income each year as interest an amount
equal to the portion of the projected contingent payment allocable to the
accrual period determined by treating the projected Supplemental Redemption
Amount as OID.
The Company's projected payment schedule must be used to determine the U.S.
Holder's interest accruals on the Notes, unless the U.S. Holder determines that
the Company's projected payment schedule
S-17
<PAGE>
is unreasonable, in which case the U.S. Holder must disclose its own schedule
and the reason why it is not using the Company's projected payment schedule. The
Company believes that the comparable yield and projected payment schedule
discussed above are reasonable and, therefore, will be respected by the Internal
Revenue Service (the "Service"). The Company's determination is not binding on
the Service, and it is possible that the Service could conclude that some other
projected payment schedule or comparable yield should be used for the Notes.
Under the Contingent Debt Regulations, if the actual Supplemental Redemption
Amount differs from the projected contingent payment, an adjustment must be made
for such difference. Thus, at the earlier of maturity or the date the Notes are
otherwise cancelled, if the U.S. Holder receives an amount that differs from
amounts taken into account as the projected contingent payment, such holder will
also take into account a positive or negative adjustment to reflect such
difference. A positive adjustment, I.E., the amount by which the actual
Supplemental Redemption Amount exceeds the projected payment, is treated as
additional interest. A negative adjustment first reduces the amount of interest
required to be accrued on the Notes in the current year, with any excess treated
as an ordinary loss to the U.S. Holder.
A U.S. Holder's basis in the Note is increased by the portion of the
projected contingent payment accrued by the holder under the projected payment
schedule. Gain on the sale of the Note will be treated as ordinary interest
income. Losses, on the other hand, would be treated as ordinary only to the
extent of the U.S. Holder's prior net inclusions of income and capital to the
extent in excess thereof.
BACKUP WITHHOLDING
A U.S. Holder of a Note may be subject to U.S. backup withholding at the
rate of 31% with respect to the Supplemental Redemption Amount, unless such U.S.
Holder (i) is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with the applicable requirements of the
backup withholding rules. U.S. Holders of Notes should consult their tax
advisors as to their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption. Any amount paid as backup withholding
will be creditable against the U.S. Holder's federal income tax liability,
provided the requisite information is supplied to the service.
ERISA CONSIDERATIONS
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
prohibits the borrowing of money, the sale of property and certain other
transactions involving the assets of plans that are qualified under the Code
("Qualified Plans") or individual retirement accounts ("IRAs") and persons who
have certain specified relationships to them. Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), prohibits similar
transactions involving employee benefit plans that are subject to ERISA ("ERISA
Plans"). Qualified Plans, IRAs and ERISA Plans are hereinafter collectively
referred to as "Plans."
Persons who have such specified relationships are referred to as "parties in
interest" under ERISA and as "disqualified persons" under the Code. "Parties in
interest" and "disqualified persons" encompass a wide range of persons,
including any fiduciary (E.G., investment manager, trustee or custodian), any
person providing services (E.G., a broker), the Plan sponsor, an employee
organization any of whose members are covered by the Plan, and certain persons
related to or affiliated with any of the foregoing.
The Company and Bear Stearns are each considered a "party in interest" or
"disqualified person" with respect to many Plans, including IRAs established
with any of them. The purchase and/or holding of Notes by a Plan with respect to
which the Company and/or Bear Stearns is a fiduciary and/or a service provider
(or otherwise is a "party in interest" or "disqualified person") would
constitute or result in a
S-18
<PAGE>
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code,
unless such Notes are acquired or held pursuant to and in accordance with an
applicable statutory or administrative exemption.
Applicable exemptions may include the exemption for services under Section
408(b)(2) of ERISA and certain prohibited transaction class exemptions
(E.G.,Prohibited Transaction Class Exemption 84-14 relating to qualified
professional asset managers, Prohibited Transaction Class Exemption 96-23
relating to certain in-house asset managers and Prohibited Transaction Class
Exemptions 75-1 and 86-128 relating to securities transactions involving
employee benefit plans and broker-dealers).
A fiduciary who causes an ERISA Plan to engage in a non-exempt prohibited
transaction may be subject to a penalty under ERISA. Code Section 4975 generally
imposes an excise tax on Disqualified Persons who engage, directly or
indirectly, in similar types of transactions with the assets of Plans subject to
such Section.
In accordance with ERISA's general fiduciary requirement, a fiduciary with
respect to any ERISA Plan who is considering the purchase of Notes on behalf of
such plan should determine whether such purchase is permitted under the
governing plan document and is prudent and appropriate for the ERISA Plan in
view of its overall investment policy and the composition and diversification of
its portfolio. Plans established with, or for which services are provided by,
the Company and/or Bear Stearns should consult with counsel prior to making any
such acquisition.
USE OF PROCEEDS AND HEDGING
The net proceeds to be received by the Company from the sale of the Notes
will be used for general corporate purposes and, in part, by the Company or one
or more of its subsidiaries in connection with hedging the Company's obligations
under the Notes. On or prior to the date of this Prospectus Supplement, the
Company, through its subsidiaries and others, will hedge its anticipated
exposure in connection with the Notes by the purchase and sale of
exchange-traded and over-the-counter options on, or other derivative or
synthetic instruments related to, the Index, individual stocks included in the
Index, futures contracts on the Index and/or options on such futures contracts.
From time to time after the initial offering and prior to the maturity of the
Notes, depending on market conditions (including the value of the Index), in
connection with hedging with respect to the Notes, the Company expects that it
and/or one or more of its subsidiaries will increase or decrease their initial
hedging positions using dynamic hedging techniques and may take long or short
positions in the Index, individual stocks included in the Index, listed or over-
the-counter options contracts in, or other derivative or synthetic instruments
related to, the Index and such individual stocks. In addition, the Company
and/or one or more of its subsidiaries may purchase or otherwise acquire a long
or short position in the Notes from time to time and may, in their sole
discretion, hold or resell such Notes. The Company or one or more of its
subsidiaries may also take positions in other types of appropriate financial
instruments that may become available in the future. To the extent that the
Company or one or more of its subsidiaries has a long hedge position in the
Index, individual stocks included in the Index or options contracts in, or other
derivative or synthetic instruments related to, the Index and such underlying
stocks, the Company or one or more of its subsidiaries may liquidate a portion
of its holdings at or about the time of the maturity of the Notes. Depending,
among other things, on future market conditions, the aggregate amount and the
composition of such positions are likely to vary over time. Profits or losses
from any such position cannot be ascertained until such position is closed out
and any offsetting position or positions is taken into account. Although the
Company has no reason to believe that such hedging activity will have a material
impact on the price of such options, stocks, futures contracts and options on
futures contracts or on the value of the Index, there can be no assurance that
the Company and its subsidiaries will not affect such prices or value as a
result of their hedging activities. See also "Use of Proceeds" in the
accompanying Prospectus.
S-19
<PAGE>
UNDERWRITING
Subject to the terms and condition of the underwriting agreement, dated the
date hereof (the "Underwriting Agreement"), the Company has agreed to sell to
the Underwriter, and the Underwriter has agreed to purchase, $4,800,000
aggregate principal amount of Notes.
The nature of the obligations of the Underwriter is such that all of the
Notes must be purchased if any are purchased. This obligation is subject,
however, to various conditions, including the approval of certain matters by
counsel. The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
and, where such indemnification is unavailable, to contribute to payments that
the Underwriter may be required to make in respect of such liabilities.
The Company has been advised by the Underwriter that it proposes to offer
the Notes to the public initially at the offering price set forth on the cover
page of this Prospectus Supplement. In addition, the Underwriter proposes to
offer the Notes to certain selected dealers at a price that represents a
concession not to exceed 1.5% of the principal amount of the Notes. The
Underwriter may allow, and such selected dealers may reallow, a concession not
to exceed .75% of the principal amount of the Notes. After the commencement of
the offering, the public offering price and the concessions may be changed.
The Notes have been approved for listing on the CBOE under the symbol "BSL,"
subject to official notice of issuance. However, there can be no assurance as to
whether there will be a secondary market in the Notes or, if there were to be
such a secondary market, whether such market would be liquid or illiquid. The
Notes will be a new issue of securities with no established trading market. The
Underwriter intends to make a market in the Notes, subject to applicable laws
and regulations. However, the Underwriter is not obligated to do so and any such
market-making may be discontinued at any time at the sole discretion of the
Underwriter without notice. Accordingly, no assurance can be given as to the
liquidity of such market.
The Company and/or one or more of its subsidiaries may from time to time
purchase or acquire a position in the Notes and may, at its option, hold or
resell such Notes. Bear Stearns expects to offer and sell previously-issued
Notes in the course of its business as a broker-dealer. Bear Stearns may act as
principal or agent in such transactions. This Prospectus Supplement and the
accompanying Prospectus may be used by the Company or any of its subsidiaries,
including Bear Stearns, in connection with such transactions. Such sales, if
any, will be made at varying prices related to prevailing market prices at the
time of sale.
Bear Stearns, a member of the National Association of Securities Dealers,
Inc. (the "NASD") and a wholly owned subsidiary of the Company, may participate
in distributions of the Notes. Accordingly, the offerings of Notes will conform
with the requirements of Section 2720 of the NASD Conduct Rules regarding a NASD
member firm's underwriting of Notes of an affiliate.
LEGAL OPINIONS
The validity of the Notes offered hereby will be passed upon for the Company
by Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153.
S-20
<PAGE>
PROSPECTUS
$5,434,620,162
THE BEAR STEARNS COMPANIES INC.
DEBT SECURITIES AND WARRANTS
------------------
The Company may issue and sell from time to time, in one or more series with
an aggregate initial public offering price of up to $5,434,620,162 (or the
equivalent in foreign denominated currency or units based on or relating to such
currencies), debt securities ("Debt Securities"), consisting of debentures,
notes and/or other unsecured evidences of indebtedness, and warrants
("Warrants") to purchase Debt Securities or to buy and sell government debt
securities, currencies, currency units, currency indices or currency baskets,
stock indices, stock baskets, commodities, commodity indices or other indices or
references. The Debt Securities and Warrants are herein collectively referred to
as the "Securities." The Debt Securities and Warrants may be offered
independently or together for sale directly to purchasers or through dealers,
underwriters or agents. The Company will offer the Securities to the public on
terms determined by market conditions. The Securities may be sold for, and
principal of and interest on Debt Securities and the cash settlement value of
the Warrants may be payable in, United States dollars, foreign denominated
currency or currency units, in each case, as the Company specifically
designates.
The accompanying Prospectus Supplement sets forth the specific designation,
aggregate principal amount, purchase price, maturity, interest rate (or manner
of calculation thereof), time of payment of interest (if any), currency or
currency units in which payments will be made (if other than United States
dollars), terms for any conversion or exchange (including any provisions for
adjustment of such terms), listing (if any) on a securities exchange and any
other specific terms of the Debt Securities, the purchase price, exercise price,
exercise period, detachability and any other specific terms of any Warrants and
the name of and compensation to each dealer, underwriter or agent (if any)
involved in the sale of the Securities. The managing underwriters with respect
to each series sold to or through underwriters will be named in the accompanying
Prospectus Supplement. Such underwriters (and any representative thereof),
dealers or agents may include Bear, Stearns & Co. Inc., a wholly owned
subsidiary of the Company.
There are no restrictions in the Indenture (as defined in the Prospectus) on
the ability of the Company or its subsidiaries to incur additional unsecured
indebtedness or on the ability of the Company to incur additional secured
indebtedness except that the Indenture restricts the Company from incurring any
indebtedness for borrowed money that is secured by a pledge of the Voting Stock
of any Restricted Subsidiary (each as defined in the Prospectus) without
effectively providing that the Notes and other indebtedness of the Company under
the Indenture will be secured equally and ratably with such secured
indebtedness.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS OR ANY SUPPLEMENT
HERETO. ANY REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL
OFFENSE.
------------------------
The Securities may be offered through dealers, through underwriters or
through agents designated from time to time, as set forth in the accompanying
Prospectus Supplement. The net proceeds to the Company will be, in the case of a
dealer, the sales price to such dealer, in the case of an underwriter, the
public offering price less the applicable underwriting discount or commission,
and, in the case of an agent, the public offering price less the applicable
agency commission, in each case, less other expenses attributable to issuance
and distribution. See "Plan of Distribution" for possible indemnification
arrangements for dealers, underwriters and agents.
This Prospectus and the accompanying Prospectus Supplement may be used by
Bear, Stearns & Co. Inc. in connection with offers and sales of Debt Securities
and Warrants in market-making transactions at
<PAGE>
negotiated prices related to prevailing market prices at the time of sale or
otherwise. Bear, Stearns & Co. Inc. may act as a principal or agent in such
transactions.
------------------------
BEAR, STEARNS & CO. INC.
January 22, 1997
<PAGE>
IN CONNECTION WITH THE OFFERING OF CERTAIN SECURITIES HEREUNDER, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICES OF THOSE SECURITIES, OR OTHER SECURITIES OF THE COMPANY, AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or any underwriter, dealer or agent. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy securities by
anyone in any jurisdiction in which such offer or solicitation is not authorized
or in which the person making such offer or solicitation is not qualified to do
so or to any person to whom it is unlawful to make such offer or solicitation.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at its Regional
Offices located at the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, 13th Floor, New York, New
York 10048, and copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such information may also be accessed electronically
by means of the Commission's home page on the Internet at http://www.sec.gov.
Reports, proxy statements and other information concerning the Company can also
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the Securities.
Statements contained herein concerning the provisions of any document are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
Section 13 of the Exchange Act (File No. 1-8989), are incorporated herein by
reference: (i) the Annual Report on Form 10-K (including the portions of the
Company's Annual Report to Stockholders and Proxy Statement incorporated by
reference therein) for the fiscal year ended June 30, 1996 (the "1996 Form
10-K"), (ii) the Quarterly Report on Form 10-Q for the quarter ended September
27, 1996, and (iii) the Current Reports on Form 8-K, dated, July 30, 1996,
October 16, 1996, October 29, 1996 and November 12, 1996. All documents filed by
the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Securities shall be deemed to be incorporated by reference into
this Prospectus and to be a part hereof from the date of filing of such
documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all documents incorporated by reference into this Prospectus
except the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to Corporate Communications Department, The Bear Stearns Companies
Inc., 245 Park Avenue, New York, New York 10167; telephone number (212)
272-2000.
------------------------
3
<PAGE>
THE COMPANY
The Company is a holding company that, through its principal subsidiaries,
Bear, Stearns & Co. Inc. ("Bear Stearns") and Bear, Stearns Securities Corp.
("BSSC"), is a leading United States investment banking, securities trading and
brokerage firm serving corporations, governments, institutional and individual
investors worldwide. The business of the Company includes market-making and
trading in corporate, United States Government, government-agency,
mortgage-related, asset-backed and municipal securities; trading in options,
futures, foreign currencies, interest-rate swaps and other derivative products;
securities and commodities arbitrage; securities, options and commodities
brokerage; underwriting and distributing securities; providing securities
clearance services; financing customer activities; securities lending; arranging
for the private placement of securities; assisting in mergers, acquisitions,
restructurings and leveraged transactions; providing other financial advisory
services; making principal investments in leveraged acquisitions; acting as
specialist on the floor of the New York Stock Exchange ("NYSE"); providing
fiduciary and other services, such as real estate brokerage, investment
management and investment advisory and securities research.
The Company's business is conducted from its principal offices in New York
City; from domestic regional offices in Atlanta, Boston, Chicago, Dallas, Los
Angeles and San Francisco; from representative offices in Beijing, Geneva, Hong
Kong, 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 National Association of Securities Dealers, Inc.
(the "NASD") and the National Futures Association. Bear Stearns is a "primary
dealer" in United States government securities, as designated by the Federal
Reserve Bank of New York.
The Company is incorporated in Delaware. The principal executive office of
the Company is located at 245 Park Avenue, New York, New York 10167; its
telephone number is (212) 272-2000.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, which may include additions to working capital, the
repayment of short-term indebtedness and investments in, or extensions of credit
to, subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was 1.3 for the three months ended
September 27, 1996 and 1.4, 1.2, 1.6, 1.8 and 1.6 for the fiscal years ended
June 30, 1996, 1995, 1994, 1993 and 1992, respectively. These ratios were
calculated by dividing the sum of fixed charges into the sum of earnings before
taxes and fixed charges. Fixed charges for these purposes consist of all
interest expense and certain other immaterial expenses.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
GENERAL
THE FOLLOWING DESCRIPTION SETS FORTH CERTAIN GENERAL TERMS AND PROVISIONS OF
THE DEBT SECURITIES TO WHICH ANY PROSPECTUS SUPPLEMENT MAY RELATE. THE
PARTICULAR TERMS OF THE DEBT SECURITIES OFFERED BY ANY PROSPECTUS SUPPLEMENT AND
THE EXTENT, IF ANY, TO WHICH SUCH GENERAL TERMS AND PROVISIONS WILL NOT APPLY TO
THE DEBT SECURITIES SO OFFERED WILL BE DESCRIBED IN THE PROSPECTUS SUPPLEMENT
RELATING TO THOSE DEBT SECURITIES.
The Debt Securities will be issued under an Indenture, dated as of May 31,
1991 (the "Indenture"), between the Company and The Chase Manhattan Bank
(formerly known as Chemical Bank and successor by merger to Manufacturers
Hanover Trust Company), as trustee (the "Trustee"). A copy of the Indenture is
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part (the "Registration Statement"). The following summaries of certain
provisions of the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
Indenture, including the definitions therein of certain terms.
The Indenture does not limit the principal amount of Debt Securities that
may be issued thereunder, and provides that Debt Securities may be issued
thereunder in one or more series up to the aggregate principal amount that may
be authorized from time to time by the Company. The Company from time to time
may, without the consent of the Holders of outstanding Debt Securities, provide
for the issuance of other debt securities under the Indenture in addition to the
Debt Securities authorized on the date of this Prospectus. The Indenture
provides the Company with the ability, in addition to the ability to issue Debt
Securities with terms different than those of Debt Securities previously issued,
to "reopen" a previous issue of a series of Debt Securities and issue additional
Debt Securities of such series. Debt Securities in an aggregate principal amount
of up to $5,434,620,162 may be offered pursuant to this Prospectus. As of the
date of this Prospectus, $10,688,599,725 aggregate principal amount of Debt
Securities have been issued under the Indenture and are outstanding.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Debt Securities offered thereby for the terms of those Debt
Securities, including, where applicable (1) the title of the Debt Securities and
the series of which those Debt Securities are a part; (2) the aggregate
principal amount of, or any limit on the aggregate principal amount of, those
Debt Securities; (3) the date or dates on which those Debt Securities will
mature; (4) the rate or rates per annum (which may be fixed or variable) at
which those Debt Securities will bear interest, if any; (5) the date or dates on
which such interest, if any, will be payable and the record date or dates
relating thereto; (6) the provisions, if any, for redemption of those Debt
Securities and the redemption price thereof; (7) the sinking fund requirements,
if any, with respect to those Debt Securities; (8) whether those Debt Securities
provide for payment in United States dollars, a foreign currency or a composite
currency; (9) the terms, if any, on which such Debt Securities may be converted
into or exchanged for stock or other securities of the Company or other
entities, including the period during which such Debt Securities may be so
converted or exchanged and any specific provisions for adjustment of such terms;
(10) the form (registered or bearer or both) in which those Debt Securities may
be issued and any restrictions applicable to the exchange of one form for
another and to the offer, sale and delivery of the Debt Securities in either
form; (11) whether those Debt Securities will be issued in book-entry form (a
"Global Security") or in certificated form; (12) whether and under what
circumstances the Company will pay additional amounts ("Additional Amounts")
relating to specified taxes, assessments or other governmental charges in
respect of those Debt Securities and whether the Company has the option to
redeem those Debt Securities rather than pay such Additional Amounts, and the
terms of any such redemption; (13) if the amount of payments of principal of
(and premium, if any) or interest, if any, on, and Additional Amounts in respect
of those Debt Securities may be determined with reference to an index, formula
or other method based on a coin or currency other than that in which the Debt
Securities are stated to be payable, the manner in which those amounts will be
determined; (14)
5
<PAGE>
the provisions, if any, for the defeasance of those Debt Securities; and (15)
any other terms of those Debt Securities not inconsistent with the provisions of
the Indenture.
From time to time Debt Securities may be issued that provide for
determination of the amount of payments of principal (and premium, if any), or
interest, if any, by reference to an index, exchange rate, formula, currency,
commodity, individual security, basket of securities or other method. Holders of
such Debt Securities may receive a payment of principal (and premium, if any) or
interest, if any, that is greater or less than the amount of principal (and
premium, if any) or interest, if any, that otherwise would be payable on the
dates of payment thereof but for such reference, depending on the value on such
dates of the applicable index, exchange rate, formula, currency, commodity,
individual security, basket of securities or other method. Information as to the
methods for determining the amount of principal (and premium, if any), and
interest, if any, payable on any date, the index, exchange rate, formula,
currency, commodity, individual security, basket of securities or other method
to which the amount payable on such date is linked and certain additional tax
considerations (if material) will be set forth in the applicable Prospectus
Supplement.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities will be issued only in registered form without coupons ("Registered
Securities") in denominations of $1,000 and integral multiples thereof, and in
bearer form with or without coupons ("Bearer Securities") in the denomination of
$5,000. If Bearer Securities of a series are issued, the federal income tax
consequences and other special considerations applicable to those Bearer
Securities will be described in the Prospectus Supplement relating to that
series.
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Securities may be transferred or exchanged at the corporate trust
office or agency of the Trustee in the City and State of New York, subject to
the limitations provided in the Indenture, without the payment of any service
charge, other than any tax or other governmental charge that may be imposed in
connection therewith. Bearer Securities will be transferable by delivery.
Provisions with respect to the exchange of Bearer Securities of any series will
be described in the Prospectus Supplement relating thereto.
If the principal of (and premium, if any) or any interest on Debt Securities
of any series are payable in a foreign or composite currency, the restrictions,
elections, federal income tax consequences, specific terms and other information
with respect to those Debt Securities and such currency will be described in the
Prospectus Supplement relating to that series.
One or more series of Debt Securities may be sold at a substantial discount
below its or their stated principal amount, bearing no interest or interest at a
rate that at the time of issuance is below market rate. One or more series of
Debt Securities may be variable rate debt securities that may be exchangeable
for fixed rate debt securities. Federal income tax consequences and other
special considerations applicable to any such series will be described in the
Prospectus Supplement relating thereto.
The Debt Securities will be unsecured and will rank PARI PASSU with all
other unsecured and unsubordinated indebtedness of the Company. The Company
extends credit to its subsidiaries from time to time. Extensions of credit to
subsidiaries may be subordinated to the claims of unaffiliated creditors of
those subsidiaries. In addition, since the Company is a holding company, the
right of the Company and hence the right of creditors of the Company (including
the Holders of the Debt Securities) to participate in any distribution of the
assets of any subsidiary upon its liquidation or reorganization, or otherwise,
is necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. Furthermore, dividends, loans and advances to the
Company from certain of its subsidiaries, including Bear Stearns and BSSC, are
restricted by net capital requirements under the Exchange Act and under rules of
certain exchanges and other regulatory bodies and by covenants governing certain
indebtedness of those subsidiaries.
6
<PAGE>
Unless otherwise provided in the applicable Prospectus Supplement, the
principal of (and premium, if any) and any interest on Debt Securities will be
payable (in the case of Registered Securities) at the corporate trust office or
agency of the Trustee in the City and State of New York or (in the case of
Bearer Securities) at the office of the Trustee located outside the United
States maintained for such purpose; provided, however, that payment of interest
other than interest payable at maturity (or on the date of redemption, if any,
if the Debt Securities are redeemable by the Company prior to maturity, or on
the date of repayment, if the Debt Securities are repayable at the option of the
Holder thereof prior to maturity) on Registered Securities may be made at the
option of the Company by check mailed to the address of the person entitled
thereto or, at the option of a Holder of at least $10,000,000 in principal
amount of Registered Securities, by wire transfer to an account designated by
such Holder in writing at least 16 days prior to the date on which such payment
is due. Unless otherwise provided in the applicable Prospectus Supplement, no
payment on a Bearer Security will be made by mail to an address in the United
States or by wire transfer to an account maintained by the Holder thereof in the
United States or will otherwise be made inside the United States.
NOTICES
Unless otherwise provided in the applicable Prospectus Supplement, any
notice required to be given to a Holder of a Debt Security of any series that is
a Registered Security will be mailed to the last address of such Holder set
forth in the applicable Security Register. Any notice required to be given to a
Holder of a Debt Security that is a Bearer Security will be published in a daily
newspaper of general circulation in the city or cities specified in the
Prospectus Supplement relating to such Bearer Security.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Depositary") identified in the Prospectus Supplement
relating to such series. Global Securities may be issued in either registered or
bearer form and in either temporary or definitive form. Unless and until it is
exchanged in whole or in part for the individual Debt Securities represented
thereby, a Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any nominee to a successor of the Depositary or a
nominee of the successor.
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will apply
to all depositary arrangements.
Upon the issuance of a Global Security, the Depositary will credit on its
book-entry system the respective principal amounts of the individual Debt
Securities represented by such Global Security to the accounts of institutions
that have accounts with the Depositary ("participants"). The accounts to be
credited shall be designated by the underwriters of the Debt Securities, or if
the Debt Securities are offered and sold directly by the Company or through
agents, by the Company or those agents. Ownership of beneficial interest in a
Global Security will be limited to participants or persons that may hold
beneficial interests through participants. Ownership of beneficial interest in a
Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary's participants or
persons that hold through participants. The laws of some states require that
certain purchasers of securities take physical delivery of securities. Such
limits and such laws may limit the market for beneficial interests in a Global
Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of a Global Security, the Depositary or nominee, as the case
may be, will be considered the sole owner or Holder of the Debt Securities
represented by the Global Security for all purposes under the Indenture. Except
as
7
<PAGE>
provided below, owners of beneficial interests in a Global Security will not be
entitled to have Debt Securities represented by Global Securities registered in
their names, will not receive or be entitled to receive physical delivery of
Debt Securities in definitive form and will not be considered the owners or
Holders thereof under the Indenture.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities and Bearer Warrants" below, payments of principal of (and
premium, if any) and any interest on the individual Debt Securities registered
in the name of the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the Holder of such Global Security. Neither
the Company nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of a Global Security, or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests and each of
them may act or refrain from acting without liability on any information
provided by the Depositary. The Company expects that the Depositary, upon
receipt of any payment of principal, premium or interest in respect of a Global
Security, will credit immediately the accounts of the participants with payment
in amounts proportionate to their respective holdings in principal amount of
beneficial interest in a Global Security as shown on the records of the
Depositary. The Company also expects that payments by participants to owners of
beneficial interests in a Global Security will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments of principal, premium or
interest in respect thereof will be subject to the restrictions discussed under
"Limitations on Issuance of Bearer Securities and Bearer Warrants" below.
If interest is paid on a bearer Global Security, or if no interest has been
paid but the bearer Global Security remains outstanding beyond a reasonable
period of time after the restricted period (as defined in applicable U.S.
Treasury regulations) has ended, the Depositary must provide the Company with a
certificate to the effect that the owners of the beneficial interests in the
Global Security are non-U.S. persons or U.S. persons that are permitted to hold
bearer securities under applicable U.S. Treasury regulations. In general, U.S.
persons that are permitted to hold bearer securities are U.S. persons who
acquire the securities through the foreign branch of certain U.S. financial
institutions and certain U.S. financial institutions that hold the securities
for resale to non-U.S. persons or who hold the securities on their own account
through a foreign branch. The certificate must be provided within a reasonable
period of time after the end of the restricted period, but in no event later
than the date when interest is paid. The certificate must be based on statements
provided to the Depositary by the owners of the beneficial interests.
If the Depositary is at any time unwilling or unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 calendar days, then the Company will issue Debt Securities in
certificated form in exchange for all outstanding Global Securities. In
addition, the Company (but not a Holder) may at any time determine not to have
Debt Securities represented by a Global Security and, in that event, will issue
Debt Securities in definitive form in exchange for all Global Securities. In any
such instance, an owner of a beneficial interest in the Global Securities to be
exchanged will be entitled to delivery in definitive form of Debt Securities
equal in principal amount to such beneficial interest and to have such Debt
Securities registered in its name. Individual Debt Securities of the series so
issued will be issued (a) as Registered Securities in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof if
the Debt Securities of that series are issuable as Registered Securities, (b) as
Bearer Securities in the denomination or denominations specified by the Company
if the Debt Securities of that series are issuable as Bearer Securities or (c)
as either Registered or Bearer Securities, if the Debt Securities of that series
are issuable in either form. See, however, "Limitations on Issuance of Bearer
Securities and Bearer Warrants" below for a description of certain restrictions
on the issuance of individual Bearer Securities in exchange for beneficial
interests in a Global Security.
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LIMITATION ON LIENS
The Indenture provides that the Company may not, and may not permit any
Restricted Subsidiary to, issue, incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money secured by a pledge of, lien on or security
interest in any shares of Voting Stock of any Restricted Subsidiary without
effectively providing that the securities issued under the Indenture, including
the Debt Securities, will be secured equally and ratably with such secured
indebtedness. The term "Restricted Subsidiary" as defined in the Indenture means
Bear Stearns, Custodial Trust Company, BSSC and any other subsidiary of the
Company owning, directly or indirectly, any of the common stock of, or
succeeding to a significant portion of the business, property or assets of a
Restricted Subsidiary, or with which a Restricted Subsidiary is merged or
consolidated.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation, and the Company may sell, lease or convey all or
substantially all of its assets to any corporation, organized and existing under
the laws of the United States of America or any state thereof, provided that (a)
the corporation (if other than the Company) formed by or resulting from any such
consolidation or merger or that shall have received such assets shall expressly
assume payment of the principal of, and premium, if any, and interest on, (and
any Additional Amounts payable in respect of) the Debt Securities and the
performance and observance of all of the covenants and conditions of the
Indenture to be performed or observed by the Company, and (b) the Company or
such successor corporation shall not immediately thereafter be in default under
the Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, the
Indenture does not restrict (i) a consolidation, merger, sale of assets or other
similar transaction that may adversely affect the creditworthiness of the
Company or a successor or combined entity, (ii) a change in control of the
Company or (iii) a highly leveraged transaction involving the Company, whether
or not involving a change in control, and the Indenture therefore will not
protect holders of the Debt Securities from the substantial impact that any of
the foregoing transactions may have on the value of the Debt Securities.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the Company
and the Trustee with the consent of the Holders of 66 2/3% in principal amount
of the outstanding Debt Securities of each series affected thereby, provided
that no such modification or amendment may, without the consent of the Holder of
each outstanding Debt Security affected thereby (a) change the Stated Maturity
or the date of any installment of principal of, or interest on, any Debt
Security or change the Redemption Price or the Optional Redemption Price
thereof; (b) reduce the principal amount of, or the rate of interest on, or the
amount of any Additional Amount payable in respect of, any Debt Security or
reduce the amount of principal that could be declared due and payable prior to
the Stated Maturity of that Debt Security, or change the obligation of the
Company to pay any Additional Amounts (except as contemplated or permitted under
the Indenture), or reduce the amount of the principal of a Discount Security
that would be due and payable upon a declaration of acceleration of the maturity
of that Debt Security pursuant to the Indenture; (c) change the place or
currency of any payment of principal, premium, if any, or interest on any Debt
Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security; (e) reduce the percentage in
principal amount of the outstanding Debt Securities of any series, the consent
of whose Holders is required to modify or amend the Indenture; or (f) modify the
foregoing requirements or reduce the percentage of outstanding Debt Securities
necessary to waive any past default to less than a majority. Except with respect
to certain fundamental provisions, the Holders of at least a majority in
principal amount of outstanding Debt Securities of any series may, with respect
to that series, waive past defaults under the Indenture and waive compliance by
the Company with certain provisions of the Indenture.
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EVENTS OF DEFAULT
Under the Indenture, the following will be Events of Default with respect to
any series of Debt Securities: (a) default in the payment of interest on, or any
Additional Amounts payable in respect of, any Debt Securities of that series
when due, which default has continued for 30 days; (b) default in the payment of
the principal of, and premium, if any, on, any Debt Security of that series when
due; (c) default in the deposit of any sinking fund payment, when due, in
respect of any Debt Security of that series; (d) default in the performance of
any other covenant of the Company contained in the Indenture or in the Debt
Securities of that series, which default has continued for 60 days after written
notice as provided in the Indenture; (e) default for 10 days after notice as
provided in the Indenture, in respect of any other indebtedness for borrowed
money of the Company or any Restricted Subsidiary in excess of $10,000,000 that
has been declared due and payable prior to maturity; (f) certain events of
bankruptcy, insolvency or reorganization; and (g) any other Event of Default
with respect to Debt Securities of that series. Within 90 days after the
occurrence of any default, the Trustee shall notify all holders of Debt
Securities of such default, unless such default shall have been cured or waived;
PROVIDED, HOWEVER, that, except in the case of a default in the payment of the
principal of (and premium, if any) or interest on, or any additional amounts
with respect to, any Debt Security or in the payment of any sinking fund
installment with respect to any Debt Security, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or responsible officers of the
Trustee in good faith determine that the withholding of such notice is in the
interests of the holders of the Debt Securities; and PROVIDED FURTHER, that in
the case of any default of the character specified in clause (d) above, no such
notice shall be given until at least 30 days after the occurrence thereof. The
Trustee or the Holders of 25% in principal amount (or any lesser amount that may
be provided for in the Debt Securities of that series) of the outstanding Debt
Securities of that series may declare the principal amount of all outstanding
Debt Securities of that series due and payable immediately if an Event of
Default with respect to the Debt Securities of that series shall occur and be
continuing at the time of declaration. At any time after a declaration of
acceleration has been made with respect to the Debt Securities of any series,
but before a judgment or decree for payment of money due has been obtained by
the Trustee, the Holders of a majority in principal amount of the outstanding
Debt Securities of that series may rescind any declaration of acceleration and
its consequences, if all payments due (other than those due solely as a result
of acceleration) have been made and all Events of Default have been remedied or
waived. Any Event of Default with respect to Debt Securities of any series may
be waived by the Holders of a majority in principal amount of all outstanding
Debt Securities of that series, except in a case of failure to pay the principal
of, and premium, if any, or interest on, or any Additional Amounts payable in
respect of, any Debt Security of that series for which payment had not been
subsequently made or in respect of a covenant or provision that cannot be
modified or amended without the consent of the Holder of each outstanding Debt
Security of that series.
The Holders of a majority in principal amount of the outstanding Debt
Securities of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to Debt Securities of that series,
provided that this direction shall not be in conflict with any rule of law or
the Indenture. Before proceeding to exercise any right or power under the
Indenture at the direction of those Holders, the Trustee shall be entitled to
receive from those Holders reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction.
The Company will be required to furnish to the Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
Indenture.
DEFEASANCE
If so established by the Company under the terms of the Indenture with
respect to Debt Securities of any series that are Registered Securities
denominated and payable only in United States dollars (except as
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otherwise provided under the Indenture), the Company, at its option, (a) will be
discharged from any and all obligations in respect of the Debt Securities of
that series under the Indenture (except for certain obligations to register the
transfer or exchange of Debt Securities of that series, replace stolen, lost or
mutilated Debt Securities of that series, maintain paying agents and hold moneys
for payment in trust) on the 91st day after the applicable conditions described
in this paragraph have been satisfied or (b) will not be subject to provisions
of the Indenture described above under "Limitation on Liens" and "Merger and
Consolidation" with respect to the Debt Securities of that series, in each case
if the Company deposits with the Trustee, in trust, money or U.S. Government
Obligations that, through the payment of interest thereon and principal thereof
in accordance with their terms, will provide money in an amount sufficient to
pay all the principal (including any mandatory sinking fund payments) of, and
premium, if any, and any interest on, the Debt Securities of that series on the
dates such payments are due in accordance with the terms of those Debt
Securities. To exercise either option, the Company is required to deliver to the
Trustee an opinion of counsel to the effect that (i) the deposit and related
defeasance would not cause the Holders of the Debt Securities of the series
being defeased to recognize income, gain or loss for United States Federal
income tax purposes and (ii) if the Debt Securities of that series are then
listed on the NYSE, the exercise of the option would not result in delisting.
Defeasance provisions, if any, with respect to any series of Debt Securities may
be specified by the Company under the terms of the Indenture.
DESCRIPTION OF WARRANTS
THE FOLLOWING DESCRIPTION SETS FORTH CERTAIN GENERAL TERMS AND PROVISIONS OF
THE WARRANTS TO WHICH ANY PROSPECTUS SUPPLEMENT MAY RELATE. THE PARTICULAR TERMS
OF THE WARRANTS OFFERED BY ANY PROSPECTUS SUPPLEMENT AND THE EXTENT, IF ANY, TO
WHICH SUCH GENERAL TERMS AND PROVISIONS WILL NOT APPLY TO THE WARRANTS SO
OFFERED WILL BE DESCRIBED IN THE PROSPECTUS SUPPLEMENT RELATING TO THOSE
WARRANTS.
The Company may issue Warrants for the purchase of Debt Securities, Warrants
to buy or sell debt securities of or guaranteed by the United States or other
sovereign states ("Government Debt Securities"), Warrants to buy or sell
currencies, currency units or units of a currency index or currency basket,
Warrants to buy or sell units of a stock index or stock basket and Warrants to
buy and sell a commodity or units of a commodity index or basket. Warrants may
be offered independently of or together with any series of Debt Securities and
may be attached to or separate from those Debt Securities. The Warrants will be
settled either through physical delivery or through payment of a cash settlement
value as set forth herein and in any applicable Prospectus Supplement. Each
series of Warrants will be issued under a separate warrant agreement (a "Warrant
Agreement") to be entered into between the Company and a bank or a trust
company, as warrant agent (the "Warrant Agent"), all as described in the
Prospectus Supplement relating to that series of Warrants. The Warrant Agent
will act solely as the agent of the Company under the applicable Warrant
Agreement and in connection with the certificates for the Warrants (the "Warrant
Certificates"), if any, of that series, and will not assume any obligation or
relationship of agency or trust for or with any holders of those Warrant
Certificates or beneficial owners of those Warrants. The following summaries of
certain provisions of the forms of Warrant Agreements and Warrant Certificates
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Warrant Agreements and the
Warrant Certificates, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
GENERAL
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Warrants, if any, offered thereby for the terms of those
Warrants, including, where applicable: (1) whether the Warrant is for Debt
Securities, Government Debt Securities, currencies, currency units, currency
indices or currency baskets, stock indices, stock baskets, commodities,
commodity indices or any other index or reference as therein described; (2) the
offering price; (3) the currency, currency unit, currency index or currency
basket based on or relating to currencies for which those Warrants may be
purchased; (4) the date
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on which the right to exercise those Warrants will commence and the date (the
"Expiration Date") on which that right will expire; (5) whether those Warrants
are to be issuable in registered form ("Registered Warrants") or bearer form
("Bearer Warrants"); (6) whether those Warrants are extendable and the period or
periods of such extendibility; (7) the terms upon which Bearer Warrants, if any,
of any series may be exchanged for Registered Warrants of that series; (8)
whether those Warrants will be issued in book-entry form (a "Global Warrant
Certificate") or in certificated Form; (9) United States federal income tax
consequences applicable to those Warrants; and (10) any other terms of those
Warrants not inconsistent with the applicable Warrant Agreement.
If the offered Warrants are to purchase Debt Securities, the Prospectus
Supplement will also describe (1) the designation, aggregate principal amount,
currency, currency unit or currency basket and other terms of the Debt
Securities purchasable upon exercise of those Warrants; (2) the designation and
terms of the Debt Securities with which those Warrants are issued and the number
of those Warrants issued with each such Debt Security; (3) the date or dates on
and after which those Warrants and the related Debt Securities will be
separately transferable; and (4) the principal amount of Debt Securities
purchasable upon exercise of one offered Warrant and the price at which and
currency, currency unit or currency basket in which such principal amount of
Debt Securities may be purchased upon such exercise. Prior to exercising their
Warrants, holders of those Warrants will not have any of the rights of Holders
of the Debt Securities of the series purchasable upon such exercise, including
the right to receive payments of principal of, or premium, if any, or interest,
if any, on, those Debt Securities, or to enforce any of the covenants in the
Indenture.
If the offered Warrants are to buy or sell Government Debt Securities or a
currency, currency unit, currency index or currency basket, the Prospectus
Supplement will describe the amount and designation of the Government Debt
Securities or currency, currency unit, currency index or currency basket, as the
case may be, subject to each Warrant, whether those Warrants provide for cash
settlement or delivery of the Government Debt Securities or currency, currency
unit, currency index or currency basket upon exercise.
If the offered Warrants are Warrants on a stock index or a stock basket,
those Warrants will provide for payment of an amount in cash determined by
reference to increases or decreases in such stock index or stock basket, and the
Prospectus Supplement will describe the terms of those Warrants, the stock index
or stock basket covered by those Warrants and the market to which the stock
index or stock basket relates.
If the offered Warrants are Warrants on a commodity or commodity index,
those Warrants will provide for cash settlement or delivery of the particular
commodity or commodity index. The Prospectus Supplement will describe the terms
of those Warrants, the commodity or commodity index covered by those Warrants
and the market, if any, to which the commodity or commodity index relates.
Registered Warrants of any series will be exchangeable for Registered
Warrants of the same series representing in the aggregate the number of Warrants
surrendered for exchange. Warrant Certificates, to the extent exchangeable, may
be presented for exchange, and Registered Warrants may be presented for
transfer, at the corporate trust office of the Warrant Agent for that series of
Warrants (or any other office indicated in the Prospectus Supplement relating to
that series of Warrants). Warrants to buy or sell Government Debt Securities or
a currency, currency unit, currency index or currency basket, and Warrants on
stock indices or stock baskets or on commodities or commodity indices, may be
issued in the form of a single Global Warrant Certificate, registered in the
name of the nominee of the depository of the Warrants, or may initially be
issued in the form of definitive certificates that may be exchanged, on a fixed
date, or on a date or dates selected by the Company, for interests in a Global
Warrant Certificate, as set forth in the applicable Prospectus Supplement.
Bearer Warrants will be transferable by delivery. The Prospectus Supplement will
describe the terms of exchange applicable to any Bearer Warrants.
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EXERCISE OF WARRANTS
Each Warrant will entitle the Holder to purchase such principal amount of
the Debt Securities or buy or sell such amount of Government Debt Securities or
of a currency, currency unit, currency index or currency basket, commodity or
commodities at the exercise price, or receive a settlement value in respect of
such amount of Government Debt Securities or of a currency, currency unit,
currency index or currency basket, stock index or stock basket, commodity or
commodity index, as shall in each case be set forth in or calculable from, the
Prospectus Supplement relating to that series of Warrants or as otherwise set
forth in the Prospectus Supplement. Warrants may be exercised at the corporate
trust office of the Warrant Agent (or any other office indicated in the
Prospectus Supplement relating to those Warrants) at any time up to 5:00 p.m.
New York time on the date set forth in the Prospectus Supplement relating to
those Warrants or as may be otherwise set forth in the Prospectus Supplement.
After such time on that date (or such later date to which such date may be
extended by the Company), unexercised Warrants will become void.
Subject to any restrictions and additional requirements that may be set
forth in the Prospectus Supplement relating thereto, Warrants may be exercised
by delivery to the Warrant Agent of the Warrant Certificate evidencing such
Warrants properly completed and duly executed and of payment as provided in the
Prospectus Supplement of the amount required to purchase the Debt Securities, or
(except in the case in the case of Warrants providing for cash settlement)
payment for or delivery of the Government Debt Securities or currency, currency
unit, currency basket, stock index, stock basket, commodity or commodity index,
as the case may be, purchased or sold upon such exercise. Only Registered
Securities will be issued and delivered upon exercise of Registered Warrants.
Warrants will be deemed to have been exercised upon receipt of such Warrant
Certificate and any payment, if applicable, at the corporate trust office of the
Warrant Agent or any other office indicated in the Prospectus Supplement and the
Company will, as soon as practicable thereafter, issue and deliver the Debt
Securities purchasable upon such exercise, or buy or sell such Government Debt
Securities or currency, currency unit, currency basket, commodity or commodities
or pay the settlement value in respect of the Warrants. If fewer than all of the
Warrants represented by such Warrant Certificate are exercised, a new Warrant
Certificate will be issued for the remaining amount of the Warrants. Special
provisions relating to the exercise of any Bearer Warrants or automatic exercise
of Warrants will be described in the related Prospectus Supplement.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES AND BEARER WARRANTS
In compliance with United States federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Security will agree that, in connection with the original issuance
of such Bearer Security or during the restricted period (as defined in
applicable U.S. Treasury regulations) of such Bearer Security, they will not
offer, sell or deliver such Bearer Security, directly or indirectly, to a U.S.
Person or to any person within the United States, except to the extent permitted
under U.S. Treasury regulations.
Each Bearer Security, including Bearer Global Securities that will not be
exchanged for definitive individual Securities prior to the stated maturity,
will bear on the face of the Security and on any interest coupons that may be
detachable therefrom a legend to the following effect: "Any United States Person
who holds this obligation will be subject to limitations under the United States
income tax laws, including the limitations provided in Sections 165(j) and
1287(a) of the Internal Revenue Code." The sections referred to in the legend
provide that, with certain exceptions, a United States taxpayer who holds Bearer
Securities will not be allowed to deduct any loss, and will not be eligible for
capital gain treatment with respect to any gain, realized on a sale, exchange,
redemption or other disposition of those Bearer Securities. The legend described
above will also be evidenced on any book-entry system maintained with respect to
the Bearer Securities.
As used herein, "United States" means the United States of America and its
possessions, and "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership or other entity created
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or organized in or under the laws of the United States, or an estate or trust
the income of which is subject to United States federal income taxation
regardless of its source.
Pending the availability of a definitive Global Security or individual
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security. Following the availability of a definitive Global Security in bearer
form, or individual Bearer Securities, and subject to any further limitations
described in the applicable Prospectus Supplement, the temporary Global Security
will be exchangeable for interests in such definitive Global Security or for
such individual Bearer Securities, respectively, only upon receipt of a
"Certificate of Non-U.S. Beneficial Ownership" unless such a certificate has
already been provided by the Depositary because interest has been paid on the
Global Security or because a reasonable period of time after the end of the
restricted period has passed.
Limitations on the offer, sale, delivery and exercise of Bearer Warrants
(including a requirement that a Certificate of Non-U.S. Beneficial Ownership be
delivered upon exercise of a Bearer Warrant) will be described in the Prospectus
Supplement relating to those Bearer Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) to
underwriters (including Bear Stearns) or dealers, who may act directly or
through a syndicate represented by one or more managing underwriters (including
Bear Stearns); (ii) through broker-dealers (including Bear Stearns) designated
by the Company to act on its behalf as agents; or (iii) directly to one or more
purchasers. Each Prospectus Supplement will set forth the manner and terms of
the offering of the Securities covered thereby, including (i) whether that
offering is being made to underwriters or through agents; (ii) any underwriting
discounts, dealer concessions, agency commissions and any other items that may
be deemed to constitute underwriters', dealers' or agents' compensation, and
(iii) the purchase price or initial public offering price of the Securities and
the anticipated proceeds to the Company from the sale of the Securities.
When Securities are to be sold to underwriters, unless otherwise set forth
in the applicable Prospectus Supplement, the obligations of the underwriters to
purchase those Securities will be subject to certain conditions precedent but
the underwriters will be obligated to purchase all of the Securities if any are
purchased. The Securities will be acquired by the underwriters for their own
account and may be resold by the underwriters, either directly to the public or
to securities dealers, from time to time in one or more transactions, including
negotiated transactions, either at fixed public offering price or at varying
prices determined at the time of sale. The initial public offering price, if
any, and any concessions allowed or reallowed to dealers, may be changed from
time to time.
To the extent that any Securities underwritten by Bear Stearns are not
resold by Bear Stearns for an amount at least equal to the public offering price
thereof, the proceeds from the offering of those Securities will be reduced.
Bear Stearns intends to resell any of those Securities from time to time
following termination of the offering at varying prices related to prevailing
market prices at the time of sale, subject to applicable prospectus delivery
requirements.
Unless otherwise indicated in the applicable Prospectus Supplement, when
Securities are sold through an agent, the designated agent will agree, for the
period of its appointment as agent, to use its best efforts to sell the
Securities for the Company's account and will receive commissions from the
Company as set forth in the applicable Prospectus Supplement.
Securities purchased in accordance with a redemption or repayment pursuant
to their terms may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing by one or more firms
("remarketing firms") acting as principals for their own accounts or as agents
for the Company. Any remarketing firm will be identified and the terms of its
agreement, if any,
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with the Company and its compensation will be described in the Prospectus
Supplement. Remarketing firms may be deemed to be underwriters in connection
with the Securities remarketed by them.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities at the public offering price set forth in
the Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in the Prospectus Supplement.
These contracts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and the Prospectus Supplement will set forth
the commissions payable for solicitation of these contracts.
Underwriters and agents participating in any distribution of Securities may
be deemed "underwriters" within the meaning of the Securities Act and any
discounts or commissions they receive in connection therewith may be deemed to
be underwriting compensation for the purposes of the Securities Act. Those
underwriters and agents may be entitled, under their agreements with the
Company, to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution by the
Company to payments that they may be required to make in respect of those civil
liabilities. Various of those underwriters or agents may be customers of, engage
in transactions with or perform services for the Company or its affiliates in
the ordinary course of business.
Following the initial distribution of any series of Securities, Bear Stearns
may offer and sell previously issued Securities of that series from time to time
in the course of its business as a broker-dealer. Bear Stearns may act as
principal or agent in those transactions. This Prospectus and the Prospectus
Supplement applicable to those Securities will be used by Bear Stearns in
connection with those transactions. Sales will be made at prices related to
prevailing prices at the time of sale.
As Bear Stearns is a wholly owned subsidiary of the Company, each
distribution of Securities will conform to the requirements set forth in Rule
2720 of the NASD Conduct Rules.
ERISA CONSIDERATIONS
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
prohibits the borrowing of money, the sale of property and certain other
transactions involving the assets of plans that are qualified under the Code
("Qualified Plans") or individual retirement accounts ("IRAs") and persons who
have certain specified relationships to them. Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), prohibits similar
transactions involving employee benefit plans that are subject to ERISA ("ERISA
Plans"). Qualified Plans, IRAs and ERISA Plans are hereinafter collectively
referred to as "Plans."
Persons who have such specified relationships are referred to as "parties in
interest" under ERISA and as "disqualified persons" under the Code. "Parties in
interest" and "disqualified persons" encompass a wide range of persons,
including any fiduciary (E.G., investment manager, trustee or custodian), any
person providing services (E.G., a broker), the Plan sponsor, an employee
organization any of whose members are covered by the Plan, and certain persons
related to or affiliated with any of the foregoing.
The Company, Bear Stearns and/or BSSC each is considered a "party in
interest" or "disqualified person" with respect to many Plans, including IRAs
established with any of them. The purchase and/or holding of Securities by a
Plan with respect to which the Company, Bear Stearns and/or BSSC is a fiduciary
and/or a service provider (or otherwise is a "party in interest" or
"disqualified person") would constitute or result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code, unless such Securities
are acquired or held pursuant to and in accordance with an applicable statutory
or administrative exemption. An IRA that engages in a non-exempt prohibited
transaction could forfeit its tax-exempt status under Section 408 of the Code.
Applicable exemptions may include the exemption for services under Section
408(b)(2) of ERISA and certain prohibited transaction class exemptions (E.G.,
Prohibited Transaction Class Exemption 84-14
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relating to qualified professional asset managers, Prohibited Transaction Class
Exemption 96-23 relating to certain in-house asset managers and Prohibited
Transaction Class Exemptions 75-1 and 86-128 relating to securities transactions
involving employee benefit plans and broker-dealers).
In accordance with ERISA's general fiduciary requirement, a fiduciary with
respect to any ERISA Plan who is considering the purchase of Securities on
behalf of such plan should determine whether such purchase is permitted under
the governing plan document and is prudent and appropriate for the ERISA Plan in
view of its overall investment policy and the composition and diversification of
its portfolio. No IRA established with, or for which services are provided by,
the Company, Bear Stearns, and/or BSSC should acquire any Securities and other
Plans established with, or for which services are provided by, the Company, Bear
Stearns and/or BSSC should consult with counsel prior to making any such
acquisition.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this prospectus by reference from the Company's 1996
Annual Report on Form 10-K have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
VALIDITY OF THE SECURITIES
The validity of the Debt Securities and the Warrants will be passed upon for
the Company by Weil, Gotshal & Manges LLP (a limited liability partnership
including professional corporations), New York, New York.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THEN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE AN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Summary....................................... S-2
Risk Factors.................................. S-5
Ratio of Earnings to Fixed Charges............ S-6
Description of the Notes...................... S-7
The Index..................................... S-10
Certain United States Federal Income Tax
Considerations............................... S-16
ERISA Considerations.......................... S-18
Use of Proceeds and Hedging................... S-19
Underwriting.................................. S-20
Legal Opinions................................ S-20
PROSPECTUS
Available Information......................... 2
Incorporation of Certain Documents by
Reference.................................... 3
The Company................................... 4
Use of Proceeds............................... 4
Ratio of Earnings to Fixed Charges............ 4
Description of Debt Securities................ 5
Description of Warrants....................... 11
Limitations on Issuance of Bearer Securities
and Bearer Warrants.......................... 13
Plan of Distribution.......................... 14
ERISA Considerations.......................... 15
Experts....................................... 16
Validity of the Securities.................... 16
</TABLE>
$4,800,000
THE BEAR STEARNS
COMPANIES INC.
S&P 500 LINKED NOTES
DUE MAY 20, 2003
---------------------
PROSPECTUS SUPPLEMENT
---------------------
BEAR, STEARNS & CO. INC.
May 16, 1997
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