<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-61437
PROSPECTUS SUPPLEMENT
(To Prospectus Dated August 26, 1998)
U.S.$750,000,000
THE BEAR STEARNS COMPANIES INC.
6.15% GLOBAL NOTES DUE 2004
SET FORTH BELOW IS A SUMMARY OF THE TERMS OF THE NOTES OFFERED BY THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. FOR MORE DETAIL, SEE
"DESCRIPTION OF THE NOTES."
- - GLOBAL OFFERING
We are offering the Notes in the United States and in parts of Europe and Asia
where it is legal to offer the Notes.
- - INTEREST
The Notes have a fixed annual rate of 6.15%, which will be paid every six
months on March 2 and September 2.
- - MATURITY
The Notes will mature on March 2, 2004.
- - RANKING
The Notes will be our unsecured senior debt and will rank equally with all of
our other unsecured and unsubordinated debt.
- - REDEMPTION
The Notes are only redeemable prior to maturity if certain events involving
U.S. taxation occur.
- - NO SINKING FUND
The Notes will not be subject to any sinking fund.
- - BOOK-ENTRY NOTES
The Notes will be represented by one or more global securities registered in
the name of Cede & Co., as nominee of The Depository Trust Company.
- - LISTING
We will make application to the London Stock Exchange Limited to admit the
Notes to its Official List.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER NOTE TOTAL
----------- ----------------
<S> <C> <C>
Initial public offering price............................................................. 99.809% $ 748,567,500
Underwriting discount..................................................................... 0.350% $ 2,625,000
Proceeds, before expenses, to us.......................................................... 99.459% $ 745,942,500
</TABLE>
Bear, Stearns & Co. Inc. is the Global Coordinator for the offering of the
Notes. The Underwriters expect to deliver the Notes in book-entry form only
through the facilities of The Depository Trust Company, Cedelbank and Morgan
Guaranty Trust Company of New York, Brussels office, as operator of the
Euroclear system against payment on or about March 2, 1999.
After this offering is complete, the Underwriters may use this prospectus
supplement and the accompanying prospectus in connection with market-making
transactions at negotiated prices related to the prevailing market prices at the
time of sale. The Underwriters may act as principal or agent in these
transactions.
BEAR, STEARNS & CO. INC.
ABN AMRO CHASE SECURITIES INC.
DRESDNER KLEINWORT BENSON FIRST CHICAGO CAPITAL MARKETS, INC.
LEHMAN BROTHERS J.P. MORGAN & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC SALOMON SMITH BARNEY
SG WARBURG DILLON READ LLC
WESTDEUTSCHE LANDESBANK GIROZENTRALE
The date of this prospectus supplement is February 23, 1999
<PAGE>
OFFERS AND SALES OF THE NOTES ARE SUBJECT TO RESTRICTIONS IN CERTAIN
JURISDICTIONS. IN PARTICULAR, THERE ARE RESTRICTIONS ON THE DISTRIBUTION OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE OFFER OR SALE OF
THE NOTES IN THE UNITED KINGDOM, AND DETAILS OF THESE RESTRICTIONS ARE SET OUT
IN "UNDERWRITING" IN THIS PROSPECTUS SUPPLEMENT. THE DISTRIBUTION OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE OFFER OR SALE OF
THE NOTES IN CERTAIN OTHER JURISDICTIONS MAY BE RESTRICTED BY LAW. PERSONS WHO
COME INTO POSSESSION OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS OR ANY NOTES MUST INFORM THEMSELVES ABOUT AND OBSERVE ANY APPLICABLE
RESTRICTIONS ON THE DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS AND THE OFFER AND SALE OF THE NOTES.
WE ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. TO THE BEST OF OUR KNOWLEDGE AND
BELIEF (HAVING TAKEN ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE) THE
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING LIKELY TO
AFFECT THE IMPORT OF THE INFORMATION.
YOU MUST READ THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AS
ONE ALONG WITH ALL THE DOCUMENTS WHICH ARE DEEMED TO BE INCORPORATED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BY REFERENCE (SEE "WHERE
YOU CAN FIND MORE INFORMATION"). THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS MUST BE READ AND CONSTRUED ON THE BASIS THAT THE INCORPORATED
DOCUMENTS ARE SO INCORPORATED AND FORM PART OF THIS DOCUMENT, EXCEPT AS
SPECIFIED IN THIS DOCUMENT.
WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR REPRESENT
ANYTHING NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
IN ORDER TO FACILITATE THE OFFERING OF THE NOTES, BEAR STEARNS, IN ITS
CAPACITY AS GLOBAL COORDINATOR OF THE OFFERING OF THE NOTES, MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT
A LEVEL WHICH MIGHT NOT OTHERWISE PREVAIL IN THE OPEN MARKET. SPECIFICALLY, BEAR
STEARNS, ON BEHALF OF THE UNDERWRITERS, MAY OVER-ALLOT OR OTHERWISE CREATE A
SHORT POSITION IN THE NOTES FOR THE ACCOUNT OF THE UNDERWRITERS BY SELLING MORE
NOTES THAN HAVE BEEN SOLD TO THEM BY THE COMPANY. BEAR STEARNS, ON BEHALF OF THE
UNDERWRITERS, MAY ELECT TO COVER ANY SUCH SHORT POSITION BY PURCHASING NOTES IN
THE OPEN MARKET. IN ADDITION, BEAR STEARNS, ON BEHALF OF THE UNDERWRITERS, MAY
STABILIZE OR MAINTAIN THE PRICE OF THE NOTES BY BIDDING FOR OR PURCHASING NOTES
IN THE OPEN MARKET AND MAY IMPOSE PENALTY BIDS, UNDER WHICH SELLING CONCESSIONS
ALLOWED TO SYNDICATE MEMBERS OR OTHER BROKER-DEALERS PARTICIPATING IN THE
OFFERING ARE RECLAIMED IF NOTES PREVIOUSLY DISTRIBUTED IN THE OFFERING ARE
REPURCHASED IN CONNECTION WITH STABILIZATION TRANSACTIONS OR OTHERWISE. THE
EFFECT OF THESE TRANSACTIONS MAY BE TO STABILIZE OR MAINTAIN THE MARKET PRICE OF
THE NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. THE IMPOSITION OF A PENALTY BID MAY ALSO AFFECT THE PRICE OF THE NOTES
TO THE EXTENT THAT IT DISCOURAGES RESALES OF NOTES. NO REPRESENTATION IS MADE AS
TO THE MAGNITUDE OR EFFECT OF ANY SUCH STABILIZATION OR OTHER TRANSACTIONS. SUCH
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS INCLUDE AND
INCORPORATE BY REFERENCE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
SECURITIES LAWS. ALL STATEMENTS REGARDING OUR EXPECTED FINANCIAL POSITION,
BUSINESS AND FINANCING PLANS ARE FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING
STATEMENTS ALSO INCLUDE REPRESENTATIONS OF OUR EXPECTATIONS OR BELIEFS
CONCERNING FUTURE EVENTS THAT INVOLVE RISKS AND UNCERTAINTIES, INCLUDING THOSE
ASSOCIATED WITH THE EFFECT OF INTERNATIONAL, NATIONAL AND REGIONAL ECONOMIC
CONDITIONS AND THE PERFORMANCE OF BEAR STEARNS' AND BSSC'S PRODUCTS WITHIN THE
PREVAILING ECONOMIC ENVIRONMENT. ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS
REFLECTED IN THOSE FORWARD-LOOKING STATEMENTS ARE REASONABLE, THOSE EXPECTATIONS
MAY PROVE TO BE INCORRECT. CAUTIONARY STATEMENTS DESCRIBING IMPORTANT FACTORS
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM OUR EXPECTATIONS ARE
DISCLOSED IN THIS PROSPECTUS SUPPLEMENT ALONG WITH THE FORWARD-LOOKING
STATEMENTS INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO US OR PERSONS ACTING ON OUR BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY SUCH CAUTIONARY STATEMENTS. THESE FORWARD-LOOKING
STATEMENTS SPEAK ONLY AS OF THE DATE OF THE DOCUMENT IN WHICH THEY ARE MADE. WE
DISCLAIM ANY OBLIGATION OR UNDERTAKING TO PROVIDE ANY UPDATES OR REVISIONS TO
ANY FORWARD-LOOKING STATEMENT TO REFLECT ANY CHANGE IN OUR EXPECTATIONS OR ANY
CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH THE FORWARD-LOOKING
STATEMENT IS BASED.
CERTAIN DEFINITIONS
Unless otherwise stated in this prospectus supplement:
- the "Company," "we," "us" and "our" refer to The Bear Stearns Companies
Inc. and its subsidiaries;
- "Bear Stearns" refers to Bear, Stearns & Co. Inc.;
- "BSSC" refers to Bear, Stearns Securities Corp.;
- "BSIL" refers to Bear, Stearns International Limited; and
- "U.S. dollars," "dollars," "U.S. $" and "$" refer to the lawful currency
of the United States of America.
Other capitalized terms that are used but not defined in this prospectus
supplement have the meanings given to them in the accompanying prospectus.
Bear Stearns, BSSC and BSIL are subsidiaries of the Company.
S-3
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information required by the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with the Securities and Exchange Commission (the "SEC"). You
may read and copy any document the Company files at the SEC's public reference
rooms located at 450 Fifth Street, N.W., Washington, D.C. 20549, at Seven World
Trade Center, 13th Floor, New York, New York 10048, U.S.A. and at Northwest
Atrium Center, 5000 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, U.S.A. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. The Company's SEC filings are also available to
the public from the SEC's web site at http://www.sec.gov. Copies of these
reports, proxy statements and other information can also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005, U.S.A.
The SEC allows the Company to "incorporate by reference" the information
that we file with them, which means that we can disclose important information
to you by referring you to the other information we have filed with the SEC. The
information that we incorporate by reference is considered to be part of this
prospectus supplement, and information that we file later with the SEC will
automatically update and supersede this information.
The following documents filed by us with the SEC pursuant to Section 13 of
the Exchange Act (File No. 1-8989) and any future filings under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act made before the termination of the
offering of the Notes are incorporated 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, 1998;
(ii) the Quarterly Reports on Form 10-Q for the quarterly periods ended
September 25, 1998 and December 31, 1998 and the Quarterly Report on Form
10-Q/A for the quarterly period ended December 31, 1998 to be filed; and
(iii) the Current Reports on Form 8-K dated July 21, 1998, August 26, 1998,
October 14, 1998, October 30, 1998, December 9, 1998, December 16, 1998,
December 21, 1998, January 19, 1999 and January 20, 1999.
The Company will provide to you without charge, a copy of any or all
documents incorporated by reference into this prospectus supplement except the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). You may request copies by writing or
telephoning the Company at the Corporate Communications Department, The Bear
Stearns Companies Inc., 245 Park Avenue, New York, New York 10167, U.S.A.;
telephone number (212) 272-2000. In addition, once the Notes are listed on the
London Stock Exchange Limited, these documents will be available from BSIL in
its capacity as listing agent for the Notes at its principal office at One
Canada Square, London E14 5AD, England.
S-4
<PAGE>
SUMMARY OF THE OFFERING
<TABLE>
<S> <C>
ISSUER.......................... The Bear Stearns Companies Inc.
SECURITIES OFFERED.............. U.S. $750,000,000 aggregate principal amount of 6.15%
Global Notes due 2004.
SPECIFIED CURRENCY.............. The Notes will be denominated in U.S. dollars and all
payments on the Notes will be made in U.S. dollars.
OFFERING PRICE.................. The Notes are being offered at a price of 99.809% of par.
DATE OF ORIGINAL ISSUANCE
(SETTLEMENT DATE)............. March 2, 1999.
MATURITY DATE................... March 2, 2004.
INTEREST PAYMENT DATES.......... March 2 and September 2 in each year, beginning September
2, 1999.
RANKING......................... The Notes will be unsecured and will rank equally with all
our other unsecured and unsubordinated debt. Because we
are a holding company, the Notes will be effectively
subordinated to the claims of creditors of our
subsidiaries with respect to their assets. At December 31,
1998:
- we had outstanding (on an unconsolidated basis)
approximately $25.4 billion of debt, including
approximately $23.5 billion of senior debt, none of
which is secured; and
- our subsidiaries had outstanding (on an
unconsolidated basis) approximately $118.6 billion of
debt and other obligations (including $50.0 billion
related to securities sold under repurchase
agreements, $46.8 billion related to payables to
customers, $16.4 billion related to financial
instruments sold, but not yet purchased, and $5.4
billion of other liabilities, including $1.9 billion
of debt).
MANDATORY REDEMPTION OR SINKING
FUND.......................... None.
OPTIONAL REDEMPTION............. The Notes may only be redeemed prior to maturity if
certain events involving U.S. taxation occur. See
"Redemption by the Company Upon Certain Events" below.
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
PAYMENT OF ADDITIONAL AMOUNTS... Subject to the various exceptions and limitations set
forth in this prospectus supplement, we will pay as
additional interest or, as the case may be, principal on
the Notes all such additional amounts that are necessary
in order that the net payment by the Company or a paying
agent of the principal of and interest on the Notes to a
person that is not a U.S. Holder (as defined under
"Certain U.S. Federal Income Tax Considerations"), after
deduction for any present or future tax, assessment or
governmental charge of the United States or a political
subdivision or taxing authority of the United States or in
the United States, imposed by withholding with respect to
the payment, will not be less than the amount provided in
the Notes to be then due and payable. See "Description of
the Notes-- Payment of Additional Amounts" below.
REDEMPTION BY THE COMPANY UPON
CERTAIN EVENTS................ If (a) as a result of any change in, or amendment to, the
laws (or any regulations or rulings promulgated under
those laws) of the United States (or any political
subdivision or taxing authority of the United States or in
the United States), or any change in, or amendments to,
the official position regarding the application or
interpretation of these laws, regulations or rulings,
which is announced or becomes effective on or after the
date of this prospectus supplement, we become or will
become obligated to pay additional amounts as described in
this prospectus supplement under the heading "Description
of the Notes-- Payment of Additional Amounts" below or (b)
any act is taken by a taxing authority of the United
States on or after the date of this prospectus supplement,
whether that act is taken with respect to us or any
affiliate, that results in a substantial probability that
we will or may be required to pay such additional amounts,
then we may, at our option, redeem, in whole but not in
part, the Notes on any interest payment date on not less
than 30 nor more than 60 days' prior notice, at a
redemption price equal to 100% of their principal amount,
together with interest accrued on the Notes to the date
fixed for redemption; provided that we determine, in our
business judgment, that the obligation to pay such
additional amounts cannot be avoided by the use of
reasonable measures available to us, not including
substitution of the obligor under the Notes. See
"Description of the Notes-- Redemption by the Company Upon
Certain Tax Events" below.
USE OF PROCEEDS................. We will use the net proceeds before expenses from the sale
of the Notes of approximately $745.9 million for general
corporate purposes. These purposes may include additions
to working capital, the repayment of short-term debt and
making investment in or extending credit to our
subsidiaries.
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
BOOK-ENTRY FORM................. The Notes will be issued only in book-entry form. This
means that we will not issue certificates to you. Instead,
the Notes will be issued in the form of one or more fully
registered global securities, which will be deposited with
a custodian. The Notes will be registered in the name of
Cede & Co., as the nominee for The Depository Trust
Company. You will not receive a definitive note
representing your interest. This form will be referred to
as "book-entry only." You may elect to hold your interests
in the global securities through either The Depository
Trust Company ("DTC") (in the United States) or Cedelbank
or Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system ("Euroclear")
(in Europe). Interests will be held on behalf of the
participants of Cedelbank and Euroclear on the books of
their respective depositaries. See "Description of Debt
Securities--Global Securities" in the accompanying
prospectus and "Description of the Notes--Book-Entry,
Delivery and Form--Global Clearance and Settlement
Procedures" below.
EVENTS OF DEFAULT............... See "Description of Debt Securities--Events of Default" in
the accompanying prospectus.
LIMITATION ON LIENS............. See "Description of Debt Securities--Limitation on Liens"
in the accompanying prospectus.
LISTING......................... We will make application to the London Stock Exchange
Limited (the "London Stock Exchange") to admit the Notes
to its Official List. We cannot guarantee that our
application will be approved, and settlement of the Notes
is not conditioned on obtaining the listing.
GOVERNING LAW................... New York.
SELLING RESTRICTIONS............ There are selling restrictions for certain jurisdictions,
including the United Kingdom. See "Underwriting" below.
</TABLE>
S-7
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges was 1.2 for the six months ended
December 31, 1998. 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.
THE BEAR STEARNS COMPANIES INC.
The Bear Stearns Companies Inc. is a holding company that, through its
principal subsidiaries, Bear Stearns, BSSC and BSIL, is a leading United States
investment banking, securities trading and brokerage firm serving corporations,
governments and institutional and individual investors worldwide. The Company's
business includes:
- market-making and trading in corporate, United States government,
government-agency, mortgage-related, asset-backed and municipal
securities;
- trading in corporate equity and debt securities, 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;
- advising clients 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;
- providing fiduciary and other services, such as real estate brokerage,
investment management and investment advisory; and
- financial market and securities research.
The principal executive office of the Company is located at 245 Park Avenue,
New York, New York 10167, U.S.A.; the telephone number of the Company is (212)
272-2000. The Company's Internet address is http://www.bearstearns.com.
S-8
<PAGE>
DIRECTORS OF THE COMPANY
The following table sets forth certain information as of February 15, 1999
concerning the directors of the Company.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED TO
SERVE AS
DIRECTOR OF
NAME AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS HELD THE COMPANY
- ----------------------------- ----------------- ------------------------------------------------------ ---------------
<S> <C> <C> <C>
James E. Cayne............... 65 President and Chief Executive Officer of the Company 1985
and Bear Stearns, member of the Executive Committee
and Chairman of the Management and Compensation
Committee
Carl D. Glickman............. 72 Private Investor; In the United States, Director, 1985
Continental Health Affiliates, Inc., Infutech, Inc.,
Lexington Capital Properties Trust and Office Max
Inc.; In Israel, Director, Alliance Tire Company
(1992) Ltd. and The Jerusalem Economic Corporation
Ltd.
Alan C. Greenberg............ 71 Chairman of the Board of the Company and Bear Stearns 1985
and Chairman of the Executive Committee
Donald J. Harrington......... 53 President, St. John's University; Director, The 1993
Reserve Fund, Reserve Institutional Trust, Reserve
Tax-Exempt Trust, Reserve New York Tax-Exempt Trust
and Reserve Special Portfolios Trust
William L. Mack.............. 58 President and Senior Managing Partner, The Mack 1997
Organization; Founder and Managing Partner, The Apollo
Real Estate Investment Funds; Chairman of the Board of
Metropolis Realty Trust, Inc.; Director, Mack-Cali
Realty Corporation, Koger Equity, Inc. and Vail
Resorts, Inc.
Frank T. Nickell............. 51 President and Chief Executive Officer of Kelso & 1993
Company; Director, Earle M. Jorgensen Company and
Peebles Inc.
Frederic V. Salerno.......... 55 Senior Executive Vice President and CFO/ Strategy and 1992
Business Development and Director of Bell Atlantic
Corporation; Director, Avnet, Inc., MarketSpan Corp.,
and Viacom, Inc.
Vincent Tese................. 56 Chairman and Director of Wireless Cable International 1994
Inc.; Director, Allied Waste Industries Inc., Angram,
Inc., Bowne & Co., Inc., Cablevision International,
Custodial Trust Co., Mack-Cali Realty Corp. and
MarketSpan Corp.
Fred Wilpon.................. 62 Chairman of the Board of Directors of Sterling 1993
Equities, Inc.; Chairman of Executive Committee and
Director of Pathogenesis Corporation; President and
Chief Executive Officer of the New York Mets
</TABLE>
S-9
<PAGE>
Mr. Cayne has been Chief Executive Officer of the Company and Bear Stearns
and has been President of the Company for more than the past five years.
Mr. Glickman has been a private investor for more than the past five years.
Mr. Glickman is also currently Chairman of the Compensation Committee of the
Board of Directors of the Company.
Mr. Greenberg has been Chairman of the Board of the Company for more than
the past five years.
Father Harrington has been the President of St. John's University for more
than the past five years.
Mr. Mack has been President and Senior Managing Partner of The Mack
Organization (a national owner, developer and investor in office and industrial
buildings and other real estate) for more than the past five years, and a
founder and Managing Partner of the Apollo Real Estate Investment Funds since
April 1993. In 1997, Mr. Mack was appointed Chairman of the Executive Committee
and Director of Mack-Cali Realty Corporation (a publicly traded real estate
investment trust). Mr. Mack is Chairman of the Board of Metropolis Realty Trust,
Inc. (the owner of high rise office buildings).
Mr. Nickell has been President of Kelso & Company, a privately held merchant
banking firm, for more than the past five years. Mr. Nickell was appointed Chief
Executive Officer of Kelso & Company in 1998.
Mr. Salerno is the Senior Executive Vice President and CFO/Strategy and
Business Development of Bell Atlantic Corporation ("Bell Atlantic"). Prior to
the merger of NYNEX Corp. ("NYNEX") and Bell Atlantic, Mr. Salerno was the Vice
Chairman of the Board of NYNEX for more than the past five years. Mr. Salerno
served as Chairman of the Board of the State University of New York from 1990 to
1996.
Mr. Tese has been Chairman of Wireless Cable International Inc. (a wireless
cable company) since April 1995. Mr. Tese was Chairman of Cross Country Wireless
Inc. (a wireless cable company) from October 1994 to July 1995 and was a
corporate officer and a general partner of Cross Country Wireless Inc.'s
predecessors, Cross Country Wireless Cable--I, L.P. and Cross Country Wireless
Cable West, L.P., from 1990 until October 1994. Mr. Tese was the Director of
Economic Development for the State of New York from June 1987 to December 1994.
Mr. Tese is currently Chairman of the Audit Committee of the Board of Directors
of the Company.
Mr. Wilpon has been Chairman of the Board of Directors of Sterling Equities,
Inc., a privately held entity, and certain affiliates thereof, which are
primarily real estate development/owner management companies, for more than the
past five years. Mr. Wilpon has also been President and Chief Executive Officer
of the New York Mets baseball team for more than the past five years. Mr. Wilpon
has been a Director of Pathogenesis Corporation, a publicly held
bio-pharmaceutical company, for more than the past five years and currently
serves as Chairman of its Executive Committee.
There is no family relationship among any of the directors or executive
officers of the Company.
All directors hold office until the next Annual Meeting of Stockholders or
until their successors have been duly elected and qualified. Officers serve at
the discretion of the Board of Directors.
The business address for each director is 245 Park Avenue, New York, New
York 10167, U.S.A.
USE OF PROCEEDS
We will use the net proceeds before expenses from the sale of the Notes of
approximately $745.9 million for general corporate purposes. These purposes may
include additions to working capital, the repayment of short-term debt and
making investment in or extending credit to our subsidiaries.
S-10
<PAGE>
CAPITALIZATION
The consolidated capitalization of the Company and its subsidiaries as of
December 31, 1998 and as adjusted to give effect to the offering of the Notes
and the application of the net proceeds of the offering of the Notes is as
follows. It is important that you read the following information along with the
consolidated financial statements and notes thereto of the Company and its
subsidiaries incorporated by reference in this prospectus supplement and the
accompanying prospectus. See "Where You Can Find More Information" and "General
Information." There has been no material change in the consolidated
capitalization of the Company since December 31, 1998.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------
AS
ACTUAL ADJUSTED
---------- ----------
(UNAUDITED, IN
THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Short-Term Borrowings:
Bank Borrowings.................................................. $ 357,116 $ 357,116
Commercial Paper................................................. 3,727,120 3,727,120
Medium-Term Notes and Other...................................... 5,936,062 5,936,062
---------- ----------
Total Short-Term Borrowings.................................... $10,020,298 $10,020,298
---------- ----------
---------- ----------
Long-Term Borrowings:
Floating Rate Notes due 1999 to 2005............................. $1,922,285 $1,922,285
Fixed Rate Senior Notes due 1999 to 2007; interest rates ranging
from 5.75% to 9.375%........................................... 5,269,667 6,018,235
Medium-Term Notes................................................ 6,651,564 6,651,564
---------- ----------
Total Long-Term Borrowings..................................... $13,843,516 $14,592,084
---------- ----------
Guaranteed Preferred Beneficial Interests in Company Subordinated
Debt Securities(1)............................................... 500,000 500,000
Preferred Stock Issued by Subsidiary............................... 150,000 150,000
Stockholders' Equity:
Preferred stock, $1.00 par value, Series A, E, F and G,
10,000,000 shares authorized, 6,250,000 shares issued.......... 800,000 800,000
Common Stock, $1.00 par value; 200,000,000 shares authorized:
167,784,941 shares issued...................................... 167,785 167,785
Paid-in Capital.................................................... 1,964,391 1,964,391
Retained Earnings.................................................. 1,736,663 1,736,663
Capital Accumulation Plan.......................................... 987,212 987,212
Treasury Stock:
Adjustable Rate Cumulative Preferred Stock, Series A--2,520,750
shares......................................................... (103,421) (103,421)
Common Stock--56,150,592 shares.................................. (1,186,027) (1,186,027)
---------- ----------
Total Stockholders' Equity..................................... $4,366,603 $4,366,603
---------- ----------
Total Long-Term Borrowings, Preferred Stock Issued by Subsidiary,
Guaranteed Preferred Beneficial Interests in Company Subordinated
Debt Securities and Stockholders' Equity......................... $18,860,119 $19,608,687
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(1) The "Guaranteed Preferred Beneficial Interests in Company Subordinated Debt
Securities" reflects the preferred securities of Bear Stearns Capital Trust
I and Bear Stearns Capital Trust II. Each of the trusts is a wholly-owned
subsidiary of the Company and holds certain subordinated debentures of the
Company as its sole asset.
S-11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The financial data in the following table for the fiscal years ended June
30, 1998, 1997, 1996, 1995 and 1994 has been derived from our audited
consolidated financial statements for those years. The financial data in the
following table for the six months ended December 31, 1998 and 1997 has been
derived from our unaudited consolidated financial statements for those periods.
See "Where You Can Find More Information" and "General Information."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, FISCAL YEAR ENDED JUNE 30,
------------------------ ---------------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Revenues................... $ 3,726,331 $ 3,806,072 $ 7,979,936 $ 6,077,278 $ 4,963,863 $ 3,753,572 $ 3,440,638
Interest expense........... 1,964,638 1,736,219 3,638,513 2,551,364 1,981,171 1,678,515 1,023,866
----------- ----------- ----------- ----------- ----------- ----------- -----------
Revenues, net of interest
expense.................. 1,761,693 2,069,853 4,341,423 3,525,914 2,982,692 2,075,057 2,416,772
Non-interest expenses
Employee compensation and
benefits................. 958,225 1,034,990 2,111,741 1,726,931 1,469,448 1,080,487 1,227,061
Other...................... 502,681 503,120 1,166,190 785,293 678,318 606,488 546,912
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total non-interest
expenses................. 1,460,906 1,543,110 3,277,931 2,512,224 2,147,766 1,686,975 1,773,973
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before provision for
income taxes............. 300,787 526,743 1,063,492 1,013,690 834,926 388,082 642,799
Provision for income
taxes.................... 100,764 204,903 403,063 400,360 344,288 147,471 255,834
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income................. $ 200,023 $ 321,840 $ 660,429 $ 613,330 $ 490,638 $ 240,611 $ 386,965
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income applicable to
common shares............ $ 180,150 $ 309,991 $ 629,417 $ 589,497 $ 466,145 $ 215,474 $ 362,592
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
FINANCIAL POSITION:
Total assets............... $151,130,499 $154,495,895 $121,433,535 $92,085,157 $74,597,160 $67,392,018
Long-term borrowings....... $13,843,516 $13,295,952 $ 8,120,328 $ 6,043,614 $ 4,059,944 $ 3,408,096
Stockholders' equity(1).... $ 5,016,603 $ 4,641,533 $ 3,626,371 $ 2,895,414 $ 2,502,461 $ 2,316,566
Common shares and common
share equivalents
outstanding(2)........... 159,221,929 159,213,168 159,139,538 158,838,449 159,039,264 156,668,841
PER SHARE DATA:
Earnings per share(2)...... $ 1.22 $ 2.11 $ 4.38 $ 4.00 $ 3.11 $ 1.47 $ 2.38
Cash dividends declared per
common share(2).......... $ 0.29 $ 0.29 $ 0.57 $ 0.55 $ 0.52 $ 0.49 $ 0.46
Book value per common
share(2)................. $ 23.69 $ 20.41 $ 22.72 $ 18.63 $ 15.27 $ 12.70 $ 11.72
OTHER DATA:
Return on average common
equity................... 10.7% 21.9% 21.7% 27.9% 25.6% 13.5% 23.3%
Profit margin(3)........... 17.1% 25.4% 24.5% 28.7% 28.0% 18.7% 26.6%
Employees.................. 9,532 8,697 9,180 8,309 7,749 7,481 7,321
</TABLE>
- ------------------------
(1) For the fiscal years ended June 30, 1996, 1995 and 1994, stockholders'
equity includes $150 million of Exchangeable Preferred Income Cumulative
Shares ("EPICS"), which were issued by a subsidiary of the Company. For the
fiscal years ended June 30, 1998 and 1997 and the six months ended December
31, 1997, stockholders' equity includes the $150 million of EPICS and $200
million of Guaranteed Preferred Beneficial Interests in Company Subordinated
Debt Securities, which were issued by a subsidiary of the Company. For the
six months ended December 31, 1998, stockholders' equity includes the $150
million of EPICS and $500 million of Guaranteed Preferred Beneficial
Interests in Company Subordinated Debt Securities, which were issued by
subsidiaries of the Company.
(2) Adjusted to reflect all stock dividends declared through January 20, 1999.
(3) Represents the ratio of income before provision for income taxes to
revenues, net of interest expense.
S-12
<PAGE>
DESCRIPTION OF THE NOTES
The following discussion of the terms of the Notes and the Indenture
supplements the general terms and provisions of the debt securities contained in
the accompanying prospectus under the heading "Description of Debt Securities"
and identifies any general terms and provisions described in the accompanying
prospectus that will not apply to the Notes.
You can find the definitions of certain capitalized terms used in this
section under "Description of Debt Securities" in the accompanying prospectus.
For purposes of this section only, references to "we," "us" and "our" include
only The Bear Stearns Companies Inc. and not its subsidiaries. We will issue the
Notes under the Indenture, dated as of May 31, 1991, as supplemented by the
First Supplemental Indenture, dated January 29, 1998 (as supplemented, the
"Indenture"), between us and The Chase Manhattan Bank (formerly known as
Chemical Bank and successor by merger to Manufacturers Hanover Trust Company),
as trustee (the "Trustee").
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended. A copy of the Indenture has been filed as an exhibit to the
Registration Statement and is available as set forth under "Where You Can Find
More Information" and "General Information."
The following description along with the description in the accompanying
prospectus is a summary of the material provisions of the Indenture. It does not
restate the Indenture in its entirety. We urge you to read the Indenture because
it, and not these descriptions, defines your rights as a holder of the Notes (a
"Holder").
BRIEF DESCRIPTION OF THE NOTES
The Notes will:
- be a single series of our debt securities under the Indenture;
- be our unsecured senior debt;
- rank equally with all of our other unsecured and unsubordinated debt;
- only be redeemable before their maturity if certain events involving U.S.
taxation occur as discussed under "--Redemption by the Company Upon
Certain Tax Events";
- be subject to defeasance in compliance with the Indenture, see
"Description of Debt Securities--Defeasance" in the accompanying
prospectus; and
- be issued in denominations of $1,000 increased in multiples of $1,000.
Because we are a holding company, the Notes will be effectively subordinated
to the claims of creditors of our subsidiaries with respect to their assets. At
December 31, 1998:
- we had outstanding (on an unconsolidated basis) approximately $25.4
billion of debt, including approximately $23.5 billion of senior debt,
none of which is secured; and
- our subsidiaries had outstanding (on an unconsolidated basis)
approximately $118.6 billion of debt and other obligations (including
$50.0 billion related to securities sold under repurchase agreements,
$46.8 billion related to payables to customers, $16.4 billion related to
financial instruments sold, but not yet purchased, and $5.4 billion of
other liabilities, including $1.9 billion of debt).
S-13
<PAGE>
PRINCIPAL, MATURITY AND INTEREST
Notes in the aggregate principal amount of $750.0 million will be issued in
this offering and will mature on March 2, 2004. We may, without your consent,
issue additional notes having the same ranking and the same interest rate,
maturity and other terms as the Notes. Any of these additional notes, together
with the Notes, will constitute a single series of Notes under the Indenture.
However, no additional notes may be issued if an Event of Default has occurred
and is continuing with respect to the Notes.
Interest on the Notes will accrue at the rate of 6.15% per annum and will be
paid every six months on each March 2 and September 2, beginning on September 2,
1999, to the persons who are registered Holders at the close of business on the
February 15 and August 15 immediately before the applicable interest payment
date. If an interest payment date is not a business day, the interest payment
will be made on the next business day, and the Holder is not entitled to any
additional interest for the delay.
Interest on the Notes will accrue from the most recent date to which
interest has been paid, or if no interest has been paid, from and including
March 2, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Notes will not be entitled to the benefit of any
mandatory sinking fund.
PRINCIPAL PAYING AGENT, PAYING AGENTS, REGISTRAR AND TRANSFER AGENT
The Chase Manhattan Bank, the Trustee under the Indenture, will initially
act as the principal office or agency where Notes may be presented for payment
(the "Principal Paying Agent"). The Company has also agreed that as long as the
Notes are listed on the London Stock Exchange and its rules require, it will
appoint and maintain a transfer agent and paying agent in London. The Company
has appointed The Chase Manhattan Bank to serve as registrar (the "Registrar")
under the Indenture. The terms "paying agent" and "transfer agent" include the
Principal Paying Agent and the Registrar and any additional or successor agents
appointed by the Company. The names of the initial Paying Agents and Transfer
Agents and their initial specified offices are set out below.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
The Principal Paying Agent will pay interest to DTC, or its nominee, by wire
transfer of same day funds for credit to the accounts of DTC's participants and
subsequent distribution to the beneficial owners of the Notes, or, if the Notes
are issued in certificated form under the circumstances described below in
"--Book-Entry, Delivery and Form--Definitive Notes," the Principal Paying Agent
will pay the registered Holder of the Notes against presentation and surrender
by such Holder of its Note to any paying agent, by U.S. dollar check drawn on a
bank in New York City and mailed on the business day immediately before the
interest due date.
PAYMENT OF ADDITIONAL AMOUNTS
Subject to the various exceptions and limitations set forth below, the
Company will pay as additional interest or, as the case may be, principal on the
Notes, all such additional amounts that are necessary in order that the net
payment by the Company or a paying agent of the principal of and interest on the
Notes to a person that is not a U.S. Holder (as defined under "Certain U.S.
Federal Income Tax Considerations," below), after deduction for any present or
future tax, assessment or governmental charge of the United States or a
political subdivision or taxing authority thereof or therein, imposed by
withholding with respect to the payment, will not be less than the amount
provided
S-14
<PAGE>
in the Notes to be then due and payable. However, the obligation to pay
additional amounts shall not apply:
(1) to a tax, assessment or governmental charge that is imposed or
withheld solely by reason of the holder, or a fiduciary, settlor,
beneficiary, member or shareholder of the holder, if the holder is an
estate, trust, partnership or corporation for federal income tax purposes,
or a person holding a power over such an estate, trust, partnership or
corporation, or a person holding a power over such an estate or trust
administered by a fiduciary holder, being considered as:
(a) being or having been present or engaged in trade or business in
the United States or having or having had a permanent establishment in
the United States;
(b) having a current or former connection with the United States,
including a connection as a citizen or resident thereof;
(c) being or having been a foreign or domestic personal holding
company, a passive foreign investment company or a controlled foreign
corporation with respect to the United States or a corporation that has
accumulated earnings to avoid United States federal income tax;
(d) being or having been a private foundation or other tax-exempt
organization;
(e) being or having been a "10-percent shareholder" of the Company as
defined in Section 871(h)(3) of the United States Internal Revenue Code
or any successor provision; or
(f) being a bank receiving payments on an extension of credit made
pursuant to a loan agreement entered into in the ordinary course of its
trade or business;
(2) to any holder that is not the sole beneficial owner of the Notes, or
a portion thereof, or that is a fiduciary or partnership, but only to the
extent that a beneficiary or settlor with respect to the fiduciary, a
beneficial owner or member of the partnership would not have been entitled
to the payment of an additional amount had the beneficiary, settlor,
beneficial owner or member received directly its beneficial or distributive
share of the payment;
(3) to a tax, assessment or governmental charge that is imposed or
withheld solely by reason of the failure of the holder or any other person
to comply with certification, identification or information reporting
requirements concerning the nationality, residence, identity or connection
with the United States of the holder or beneficial owner of such Note, if
compliance is required by statute or regulation of the United States or of
any political subdivision or taxing authority thereof or therein, or by an
applicable income tax treaty to which the United States is a party as a
precondition to exemption from such tax, assessment or other governmental
charge;
(4) to a tax, assessment or governmental charge that is imposed
otherwise than by withholding by the Company or a paying agent from payments
on or in respect of a Note;
(5) to a tax, assessment or governmental charge that is imposed or
withheld by reason of the presentation by or on behalf of the beneficial
owner of any Note for payment on a date more than 15 days after the payment
becomes due or is duly provided for, whichever occurs later;
(6) to an estate, inheritance, gift, sales, excise, transfer, wealth or
personal property tax or a similar tax, assessment or governmental charge;
(7) to any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal of or interest on
any Note, if such payment can be made without such withholding by any other
paying agent; or
(8) in the case of any combination of any of the above items;
S-15
<PAGE>
nor shall additional amounts be paid with respect to any payment on a Note to a
Holder who is a fiduciary or partnership or other than the sole beneficial owner
of such payment to the extent such payment would be required by the laws of the
United States (or any political subdivision thereof) to be included in the
income, for tax purposes, of a beneficiary or settlor with respect to such
fiduciary or a member of such partnership or a beneficial owner who would not
have been entitled to the additional amounts had such beneficiary, settlor,
member or beneficial owner held its interest in the Note directly.
The Notes are subject in all cases to any tax, fiscal or other law or
regulation or administrative or judicial interpretation that is applicable to
them. Except as specifically provided under this heading "--Payment of
Additional Amounts" and under the heading "--Redemption by the Company Upon
Certain Tax Events," the Company is not required to make any payments with
respect to any tax, assessment or governmental charge imposed by any government
or a political subdivision or taxing authority thereof or therein.
REDEMPTION BY THE COMPANY UPON CERTAIN TAX EVENTS
If,
(a) as a result of any change in, or amendment to, the laws (or any
regulations or rulings promulgated thereunder) of the United States (or any
political subdivision or taxing authority thereof or therein), or any change
in, or amendment to, the official position regarding the application or
interpretation of such laws, regulations or rulings, which is announced or
becomes effective on or after the date of this prospectus supplement, the
Company determines that it will be or will become obligated to pay
additional amounts as described in this prospectus supplement under the
heading "--Payment of Additional Amounts"; or
(b) any act is taken by a taxing authority of the United States on or
after the date of this prospectus supplement, whether such act is taken with
respect to the Company or any affiliate, that results in a substantial
probability that the Company will or may be required to pay such additional
amounts;
then the Company may, at its option, redeem, as a whole, but not in part, the
Notes on any interest payment date on not less than 30 nor more than 60 days'
prior notice, at a redemption price equal to 100% of their principal amount,
together with interest accrued thereon to the date fixed for redemption;
provided that the Company determines, in its business judgement, that the
obligation to pay such additional amounts cannot be avoided by the use of
reasonable measures available to it, not including substitution of the obligor
under the Notes. No redemption pursuant to clause (b) above may be made unless
the Company has delivered to the Trustee a written opinion of independent legal
counsel of recognized legal standing to the effect that an act taken by a taxing
authority of the United States has resulted or will result in a substantial
probability that it will or may be required to pay the additional amounts
described herein under the heading "--Payment of Additional Amounts" and that
the Company is therefore entitled to redeem the Notes pursuant to their terms.
UNCLAIMED AMOUNTS
The Indenture provides that any payments in respect of principal and any
interest remaining that are unclaimed for two years after their due date will be
paid to the Company, and the Holder of the Note will after that time look, as an
unsecured creditor, only to the Company for payment of those amounts.
NOTICES
All notices regarding the Notes will be valid if published (i) in a leading
English language daily newspaper of general circulation in London, and (ii) in a
leading English language daily newspaper of
S-16
<PAGE>
general circulation in New York. However, it is expected that that publication
will be made in (i) the FINANCIAL TIMES or another daily newspaper in London
approved by the Trustee or, if this is not possible, in one other English
language daily newspaper approved by the Trustee with general circulation in
Europe, and (ii) THE WALL STREET JOURNAL (Eastern Edition) in New York. Any
notice will be deemed to have been given on the date of the first publication in
all the relevant newspapers.
Until the time any definitive Notes are issued under the circumstances
described below in "--Book-Entry, Delivery and Form--Definitive Notes," and as
long as the Global Securities are held in their entirety on behalf of Euroclear
and/or Cedelbank and DTC, publication in the specified newspapers may be
replaced with the delivery of the relevant notice to Euroclear and/or Cedelbank
and DTC for communication by them to the Holders of the Notes. Any notice shall
be deemed to have been given to the Holders of the Notes on the seventh day
after the day on which the notice was given to Euroclear and/or Cedelbank or
DTC.
BOOK-ENTRY, DELIVERY AND FORM
The Notes will be issued only in book-entry form. This means that we will
not issue certificates to you. Instead, the Notes will be issued in the form of
one or more fully registered global notes (the "Global Securities"), which will
be deposited with a custodian. The Notes will be registered in the name of Cede
& Co., as the nominee for DTC. You will not receive a definitive note
representing your interest. This form will be referred to as "book-entry only."
You may elect to hold your interests in the Global Securities either through
DTC (in the United States) or through Cedelbank or Euroclear (in Europe).
Interests will be held on behalf of Cedelbank and Euroclear participants on the
books of their respective depositaries.
DENOMINATIONS
Beneficial interests in the Global Securities will be held in denominations
of $1,000 increased in multiples of $1,000. Except as set forth below, the
Global Securities may be transferred, in whole and not in part, only to another
nominee of DTC or to a successor of DTC or its nominee.
DTC SERVICES
DTC has informed us that DTC is:
- a limited purpose trust company organized under the New York Banking Law;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934.
DTC holds securities that its participants ("DTC Participants") deposit with
DTC. DTC Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC also
facilitates the settlement among these DTC Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, which
eliminates the need for the physical movement of securities certificates.
DTC's book-entry system is also available for use by other organizations
such as securities brokers and dealers, banks and trust companies that work
through a DTC Participant, either directly or indirectly. The rules applicable
to DTC and the DTC Participants are on file with the SEC.
S-17
<PAGE>
DTC is owned by a number of DTC Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc.
A further description of DTC's procedures with respect to the Global
Securities is set forth in the accompanying prospectus under "Description of
Debt Securities--Global Securities."
CEDELBANK AND EUROCLEAR SERVICES
Cedelbank is incorporated under the laws of Luxembourg as a professional
depositary. Cedelbank holds securities for its participating organizations
("Cedelbank Participants") and facilitates the clearance and settlement of
securities transactions between Cedelbank Participants through electronic
book-entry charges in accounts of Cedelbank Participants, which eliminates the
need for physical movement of certificates. Cedelbank provides to Cedelbank
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing.
Conducting business in the domestic markets of several countries as a
professional depositary, Cedelbank is regulated by the Luxembourg Monetary
Institute. Cedelbank Participants are recognized financial institutions around
the world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may include
some of the Underwriters. Indirect access to Cedelbank is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Cedelbank Participant either
directly or indirectly.
Distributions with respect to the Notes that are held beneficially through
Cedelbank will be credited to cash accounts of Cedelbank Participants in
accordance with its rules and procedures, and to the extent received by the U.S.
depositary for Cedelbank.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries.
Euroclear is operated by the Brussels, Belgium office of Morgan Guaranty
Trust Company of New York (the "Euroclear Operator"), under contract with
Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include some of the
Underwriters.
Indirect access to Euroclear is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian Branch of a New York banking
corporation which is a member bank of the Federal Reserve System and is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission. The Terms and Conditions Governing Use of Euroclear and the related
Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Euroclear Terms and Conditions") govern securities clearance
accounts and cash accounts with the Euroclear Operator. The Euroclear Terms and
Conditions govern transfers of securities and cash within Euroclear, withdrawals
of securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear.
S-18
<PAGE>
All securities in Euroclear are held on a fungible basis and no certificates
are apportioned to specific securities clearance accounts. The Euroclear
Operator acts under the Euroclear Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Notes held beneficially through Euroclear will
be credited to the cash accounts of Euroclear Participants in accordance with
the Euroclear Terms and Conditions, to the extent received by the U.S.
depositary for Euroclear.
DEFINITIVE NOTES
Definitive Notes may be issued upon:
(i) Euroclear and/or Cedelbank being closed for a continuous period of
14 days (other than by reason of public holidays); and/or
(ii) in the limited circumstances set forth in "Description of the Debt
Securities--Global Securities" in the accompanying prospectus.
If definitive Notes are issued, payment of principal of and interest on the
Notes will be made as set forth under "--Methods of Receiving Payments on the
Notes" above. Definitive Notes can be transferred by presentation for
registration to the Registrar or other transfer agent at any of their specified
offices and must be duly endorsed by the holder or his attorney duly authorized
in writing, or accompanied by a written instrument or instruments of transfer in
form satisfactory to the Company or the Trustee duly executed by the holder or
his attorney duly authorized in writing. The Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any exchange or registration of transfer of definitive Notes.
For the purposes of this description, "business day" means any day, other
than a Saturday or Sunday, that is not a day on which banks are authorized or
required by law or regulation to close in New York and, where definitive Notes
have been issued, the relevant place of presentation.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for the Notes will be made in same day funds. Secondary
market trading and transfers within DTC, Cedelbank or Euroclear, as the case may
be, will be made in accordance with the usual rules and operating procedures of
those systems. Secondary market trading between DTC Participants will occur in
the ordinary way in accordance with DTC rules and will be settled in same day
funds using DTC's Same-Day Funds Settlement System. Secondary market trading
between Cedelbank Participants and/or Euroclear Participants will occur in the
ordinary way in accordance with the applicable rules and operating procedures of
Cedelbank and Euroclear and will be settled using the procedures applicable to
conventional eurobonds in registered form in same day funds.
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PURCHASERS AND SELLERS. Secondary market trading
between DTC Participants will be settled using the procedures applicable to
global bonds in same-day funds.
TRADING BETWEEN EUROCLEAR AND/OR CEDELBANK PARTICIPANTS. Secondary market
trading between Euroclear Participants and/or Cedelbank Participants will be
settled using the procedures applicable to conventional eurobonds in same-day
funds.
TRADING BETWEEN DTC SELLER AND EUROCLEAR OR CEDELBANK PURCHASER. When Notes
are to be transferred from the account of a DTC Participant to the account of a
Euroclear or Cedelbank
S-19
<PAGE>
Participant, the purchaser will send instructions to Euroclear or Cedelbank
through a Euroclear or Cedelbank Participant, as the case may be, at least one
business day before settlement. Euroclear or Cedelbank will instruct its
respective depositary to receive those Notes against payment. Payment for the
Notes will then be made by the depositary to the DTC Participant's account
against delivery of the Notes. After settlement has been completed, the Notes
will be credited to the respective clearing systems, and by the clearing system,
in accordance with its usual procedures, to the Euroclear or Cedelbank
Participant's account. The securities credit will appear the next day (European
time) and the cash debit will be back-valued to the value date, which would be
the preceding day when settlement occurred in New York. If settlement is not
completed on the intended value date and the trade fails, the Euroclear or
Cedelbank cash debit will be valued as of the actual settlement date.
Euroclear and Cedelbank Participants will need to make available to the
respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit. However, under
this approach, DTC Participants may take on credit exposure to Euroclear and
Cedelbank until the interests in the Global Security are credited to their
accounts one day later.
As an alternative, if Euroclear or Cedelbank has extended a line of credit
to a Euroclear or Cedelbank Participant, as the case may be, that Participant
may elect not to preposition funds and allow that credit line to be drawn upon
to finance settlement. Under this procedure, Euroclear or Cedelbank Participants
purchasing Notes would incur overdraft charges for one day, assuming they
cleared the overdraft when the Notes were credited to their accounts. However,
interest on the Notes would accrue from the value date. Therefore, in many cases
the investment income on Notes earned during that one-day period may
substantially reduce or offset the amount of such overdraft charges, although
this result will depend on each Participant's particular cost of funds.
Since the settlement occurs during New York business hours, DTC Participants
can employ their usual procedures for transferring global bonds to the
respective depositaries of Euroclear or Cedelbank for the benefit of Euroclear
or Cedelbank Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC seller, a cross-market sale transaction
will settle no differently than a trade between two DTC Participants.
TRADING BETWEEN EUROCLEAR OR CEDELBANK SELLER AND DTC PURCHASER. Because
the time zone difference operates in their favor, Euroclear and Cedelbank
Participants may employ their customary procedures for transactions in which
Notes are to be transferred by the respective clearing system, through its
respective depositary, to a DTC Participant. The seller will send instructions
to Euroclear or Cedelbank through a Euroclear or Cedelbank Participant at least
one business day before settlement. In these cases, Euroclear or Cedelbank will
instruct its respective depositary to credit the Notes to the DTC Participant's
account against payment. The payment will then be reflected in the account of
the Euroclear or Cedelbank Participant on the following day, and receipt of the
cash proceeds in the Euroclear or Cedelbank Participant's account would be
back-valued to the value date (which would be the preceding day, when settlement
occurred in New York).
If the Euroclear or Cedelbank Participant has a line of credit in its
respective clearing system and elects to be in a debt position in anticipation
of receipt of the sale proceeds in its account, the back-valuation may
substantially reduce or offset any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date (that is, the
trade fails), receipt of the cash proceeds in the Euroclear or Cedelbank
Participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use Euroclear or Cedelbank to purchase Notes from
DTC Participants for delivery to Euroclear or Cedelbank Participants should note
that these trades automatically fail on the
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sale side unless some form of affirmative action is taken. At least three
techniques should be readily available to eliminate this potential problem:
(i) borrowing through Euroclear or Cedelbank for one day (until the
purchase side of the day trade is reflected in their Euroclear or Cedelbank
accounts) in accordance with the clearing system's customary procedures;
(ii) borrowing the Notes in the United States from a DTC Participant no
later than one day before settlement, which would give the Notes sufficient
time to be reflected in their Euroclear or Cedelbank account in order to
settle the sale side of the trade; or
(iii) staggering the value date for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day before the value date for the sale to the Euroclear or Cedelbank
Participant.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Notes among participants of DTC,
Cedelbank and Euroclear, they are not obligated to perform or continue to
perform these procedures. As a result, these procedures may be discontinued at
any time.
The information in this section concerning DTC, Cedelbank, Euroclear and
their book-entry systems has been obtained from sources that we believe to be
accurate, but we assume no responsibility for the accuracy of this information.
We are not responsible for DTC's, Cedelbank's, Euroclear's or their
participants' performance of their respective obligations, as they are described
above or under the rules and procedures governing their respective operations.
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DESCRIPTION OF THE COMPANY
GENERAL DEVELOPMENT OF THE BUSINESS
The Bear Stearns Companies Inc. was incorporated under the laws of the State
of Delaware on August 21, 1985. The Company is a holding company that through
its subsidiaries, principally Bear Stearns and BSSC, is a leading United States
investment banking, securities trading and brokerage firm serving corporations,
governments, institutional and individual investors worldwide. BSSC, a wholly
owned subsidiary of Bear Stearns, provides professional and correspondent
clearing services, in addition to clearing and settling the Company's
proprietary and customer transactions. The Company succeeded on October 29,
1985, to the business of Bear, Stearns & Co., a New York limited partnership
(the "Partnership"). As used in this section, the "Company" refers (unless the
context requires otherwise) to The Bear Stearns Companies Inc., its subsidiaries
and the prior business activities of the Partnership.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company's business activities are highly integrated and constitute a
single industry segment. During each of the three successive fiscal years ended
June 30, 1998, classes of similar products or services represented less than 10%
of consolidated revenues, operating profit, and assets. Financial information
regarding the Company's foreign operations for each of these fiscal years is set
forth under the Notes to the Consolidated Financial Statements in Footnote 13,
entitled "Segment and Geographic Area Data" in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1998. See "Where You Can Find More
Information" and "General Information."
NARRATIVE DESCRIPTION OF BUSINESS
The Company is a holding company which through its principal subsidiaries,
Bear Stearns and 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;
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- from representative offices in Beijing, 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 Belgium, Madrid, Paris and the
Philippines.
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
("CTC"), located in Princeton, New Jersey.
Bear Stearns and BSSC are broker dealers registered with the SEC. They are
also members of the NYSE, all other principal United States securities and
commodities exchanges, the National Association of Securities Dealers, Inc.
("NASD") and the National Futures Association ("NFA"). Bear Stearns is a
"primary dealer" in United States government securities, as designated by the
Federal Reserve Bank of New York.
As of December 31, 1998, the Company had 9,532 employees.
SECURITIES TRADING ACTIVITIES
GENERAL. The Company makes inter-dealer markets and trades on a principal
basis in a wide range of instruments including:
- corporate debt and equity securities;
- United States and foreign government securities;
- government agency securities, mortgages and mortgage-backed securities;
- other asset-backed securities;
- municipal and other tax-exempt securities; and
- interest rate swaps and other derivative products.
Bear Stearns is one of the largest dealers in the United States in fixed income
securities, including United States government and agency securities,
mortgage-backed securities, and corporate and municipal securities. Inventories
of fixed income, listed-equity, and over-the-counter equity securities are
carried to facilitate sales to customers and other dealers.
UNITED STATES GOVERNMENT AND AGENCY OBLIGATIONS. The Company is recognized
by the Federal Reserve Bank of New York as a primary dealer in United States
Government, government-guaranteed and agency obligations, and similar
instruments. The Company participates in the auction of, and maintains
proprietary positions in, United States Treasury bills, notes, bonds, and
stripped-coupon securities. The Company also participates as a selling group
member and/or underwriter in the distribution of various United States
government-agency and sponsored-corporation securities and maintains proprietary
positions in such securities. In connection with these activities, the Company
enters into transactions in options, futures and forward contracts to hedge its
proprietary positions. As a primary dealer, Bear Stearns furnishes weekly
reports of its inventory positions and market transactions in United States
government securities to the Federal Reserve Bank of New York. Bear Stearns also
buys and sells government securities directly with the Federal Reserve Bank of
New York as part of the Bank's open-market activities. The Company's daily
trading inventory in United States government, government-guaranteed and agency
obligations is mainly financed through the use of repurchase agreements. In
addition, the Company engages in matched book activities, which involve acting
as an intermediary between borrowers and lenders of short-term funds, mainly via
repurchase agreements, reverse repurchase agreements and securities borrowed.
The objective of this matched book activity is to earn a positive spread between
interest rate differentials.
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CORPORATE FIXED INCOME SECURITIES. The Company acts as a dealer in
sovereign and corporate fixed income securities and preferred stocks in New
York, London, Hong Kong and Tokyo. It buys and sells these securities for its
own account in principal transactions with institutional and individual
customers, as well as other dealers. The Company conducts trading in the full
spectrum of dollar and non-dollar debt securities. The Company offers hedging
and arbitrage services to domestic and foreign institutional and individual
customers utilizing financial futures and other instruments. Moreover, the
Company offers quantitative, strategic, and research services relating to fixed
income securities to its domestic and international clients. The Company
participates in the trading and sales of high yield, non-investment-grade
securities and the securities and bank loans of companies subject to pending
bankruptcy proceedings.
MORTGAGE-RELATED SECURITIES AND PRODUCTS. The Company trades and makes
markets in the following mortgage-related securities and products:
- Government National Mortgage Association ("GNMA") securities;
- Federal Home Loan Mortgage Corporation ("FHLMC") Participation
Certificates;
- Federal National Mortgage Association ("FNMA") mortgage-backed securities;
- Small Business Administration loans;
- loans guaranteed by the Farmers Home Loan Administration;
- Federal Housing Authority insured multi-family loans;
- real estate mortgage investment conduit ("REMIC") and non-REMIC
collateralized mortgage obligations, including residual interests; and
- other derivative mortgage-backed securities and products.
The Company also trades real estate mortgage loans originated by unaffiliated
mortgage lenders, both on a securitized and non-securitized basis. The Company
acts as underwriter and placement agent in transactions involving rated and
unrated mortgage-related securities issued by affiliated and unaffiliated
parties. The Company enters into significant commitments--such as forward
contracts--on GNMA, FNMA, and FHLMC securities, and on other rated and unrated
mortgage-related securities. Certain rated and unrated mortgage-related
securities are considered to be liquid, while other such securities, and
non-securitized mortgage loans, are considered to be less readily marketable.
The Company trades GNMA, FNMA and FHLMC "to be announced
securities"--securities having a stated coupon and the original term to
maturity, although the issuer and/or the specific pool of mortgage loans is not
known at the time of the transaction. The Company buys and sells such securities
for its own account in transactions with institutional and individual customers,
as well as with other dealers. Under the Company's trading agreements, the
Company generally has the right to request margin from its counterparty.
The Company, through various special-purpose subsidiaries, purchases, sells,
and services entire loan portfolios of varying quality. These portfolios are
generally purchased from financial institutions and other secondary
mortgage-market sellers. Prior to bidding on a portfolio of loans, an analysis
of the portfolio is performed by experienced mortgage-loan underwriters. Upon
acquisition of a loan portfolio, the loans are classified as either
investment-grade or non-investment-grade. Loan collection is emphasized for the
non-investment-grade segment of the loan portfolio. A collection department
employs a staff of workout specialists and loan counselors who assist delinquent
borrowers. If collection efforts are unsuccessful, the foreclosure unit will
commence and monitor the foreclosure process until either the borrower makes the
loan current, or the property securing the loan is foreclosed or otherwise
acquired. The portfolio may include real estate that has been foreclosed or was
in the process of foreclosure at the time of its acquisition. The foreclosure
unit maintains and markets
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properties through regional real estate brokers. Investment-grade mortgage loans
are sold to other institutional investors in either securitized or
non-securitized form. In addition, special-purpose subsidiaries issue REMIC and
non-REMIC collateralized mortgage obligations directly or through trusts that
are established for this purpose.
The Company also operates a commercial mortgage conduit that originates and
accumulates commercial mortgage loans for the purpose of securitizing its
production. After receipt of loan applications, extensive credit underwriting
reviews are conducted. After completing pricing analysis and successful
negotiations, the loan will "close" and be included in an ensuing
securitization. The Company does not retain any exposure to real estate risk
subsequent to securitizing and selling the deal, but does have exposure to the
performance of the underlying real estate after closing and prior to
securitization.
ASSET-BACKED SECURITIES. The Company acts as underwriter and placement
agent with respect to investment- and non-investment-grade, asset-backed
securities issued by unaffiliated third parties. These asset-backed securities
include:
- securities backed by consumer automobile receivables originated by the
captive finance subsidiaries of automobile manufacturers, commercial banks
and finance companies;
- credit card receivables; and
- home-equity lines of credit or second mortgages.
The Company also trades and makes markets in these asset-backed securities.
While there are ready markets for the investment-grade, asset-backed securities
described above, other varieties may lack liquidity.
MUNICIPAL SECURITIES AND RELATED PRODUCTS. The Company is a dealer in
tax-exempt and taxable municipal securities and instruments including:
- general obligation and revenue bonds;
- notes;
- leases; and
- variable-rate obligations issued by states, counties, cities, and state
and local governmental authorities.
The Company is active as a managing underwriter of negotiated and competitive
new security issuances and on a select basis, provides financial advisory
services. The Company makes markets in a broad spectrum of long-and short-term
municipal securities, mainly to facilitate transactions with institutional and
individual customers, as well as other dealers. As agent for issuers and for a
fee, the Company remarkets short-term debt instruments to investors in the
variable rate, demand bond market. The Company periodically uses both municipal
and treasury bond futures to hedge its cash-market bond inventory. In addition,
the Company maintains a municipal arbitrage portfolio for its own account
consisting of municipal futures and cash bond positions. The Company's
underwriting, trading and sales activities are supported by a municipal research
group.
ARBITRAGE. The Company engages for its own account in both "classic" and
"risk" securities-arbitrage. The Company's risk arbitrage activity generally
involves the purchase of a security at a discount from a value which is expected
to be realized if a proposed or anticipated merger, recapitalization, tender or
exchange offer is consummated. In classic arbitrage, the Company seeks to profit
from temporary discrepancies (i) between the price of a security in two or more
markets, (ii) between the price of a convertible security and its underlying
security, (iii) between securities that
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are, or will be, exchangeable at a later date, and (iv) between the prices of
securities with contracts settling on differing dates.
BLOCK TRADING. The Company effects transactions in large blocks of
securities exceeding 50,000 shares, mainly with institutional customers. The
Company also provides customers execution capabilities for baskets of equity
securities using sophisticated computer systems. Transactions are handled on an
agency basis whenever possible, but the Company may be required to take a long
or short position in a security to the extent that an offsetting purchaser or
seller is not immediately available.
STRATEGIC STRUCTURING AND TRANSACTIONS (SST). The Company targets mispriced
assets using sophisticated models and proprietary quantitative methods. The
Company maintains substantial proprietary trading and investment positions in
domestic and foreign markets across a wide spectrum of equity and commodity
securities including listed and over-the-counter ("OTC") options, futures and
swaps.
FOREIGN EXCHANGE. The Company trades in foreign exchange, including: major
and minor currencies on a spot and forward basis, listed and over-the-counter
foreign currency options, and foreign currency futures. Currency option
strategies are made available to customers to help them meet their specific risk
management objectives.
DERIVATIVES. The Company runs a customer driven business that focuses on
individually-negotiated derivative instruments across the fixed income,
currency, credit, and equity markets. Among the products in which the Company is
most active are interest rate swaps and options, equity swaps and options,
currency swaps and options, credit derivatives, and tax-exempt derivatives. The
Company also structures products that combine derivatives having both privately-
and publicly-placed debt and/or equity components. By tailoring products across
the spectrum of derivatives markets, the Company designs solutions to meet
customer asset-liability management, investment, and capital market needs.
OVER-THE-COUNTER EQUITY SECURITIES. The Company makes markets on a
principal basis in common and preferred stocks, warrants, and other securities
traded on the NASD's Automated Quotation System and otherwise in the
over-the-counter market. Principal transactions with customers are effected at a
net price equal to the prevailing inter-dealer price, plus or minus a mark-up or
mark-down.
EMERGING MARKETS. The Company provides financial services in various
emerging markets worldwide including: securities brokerage, equity and fixed
income trading and sales, securities research; and a full range of investment
banking, capital formation and advisory services. As part of these activities,
the Company manages and participates in public offerings and arranges the
private placement of debt and equity securities with institutional investors.
The markets currently covered by the Company include Latin America, Asia, and
Europe.
SPECIALIST ACTIVITIES. The Company is a participant in a specialist unit on
the NYSE that performs specialist functions in 146 NYSE-listed stocks. This
market-making operation is conducted through a joint venture with a member
organization pursuant to a joint-account agreement. The market-making function
of the specialist involves risk of loss during periods of market fluctuation,
since specialists are obliged to take positions in their issues counter to the
direction of the market in order to minimize short-term imbalances in the
auction market.
BROKERAGE ACTIVITIES
A major portion of the Company's revenues is derived from customer
commissions on brokerage transactions in equity and debt securities. The Company
is one of the leading firms in the United States in providing brokerage services
to institutional investors. The Company's brokerage clients include United
States and foreign institutional investors such as investment advisors, mutual
funds, hedge funds, commercial banks, insurance companies, pension and
profit-sharing funds, and high
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net-worth individuals. A significant portion of the Company's commission
business is generated by institutional clients--often in block trades requiring
special marketing and trading expertise--and from transactions originated by the
correspondent organizations for whom the Company provides securities-clearance
services. The largest portion of the Company's commission revenue is derived
from brokerage transactions in listed securities.
INSTITUTIONAL. A substantial portion of the Company's commission business
involves the execution of transactions in corporate securities for domestic and
foreign institutional investors. The primary source of revenue from equity
activities is negotiated commission revenue earned from providing customers with
liquidity, trading expertise, trade-processing capability, and investment
advice. Investment advice includes economic forecasts, industry and company
analyses, overall strategic guidance and Company recommendations.
INDIVIDUAL INVESTORS. The Company's individual investor sales force
concentrates on servicing individual clients possessing a high net-worth and on
servicing corporations engaging in securities transactions of a size sufficient
to benefit from the Company's full range of institutional-caliber services.
OPTION AND INDEX PRODUCTS. The Company provides an array of equity and
index option-related execution services to institutional and individual clients.
The Company utilizes sophisticated research and computer modeling to formulate
for clients specific recommendations relating to options and index trading.
FUTURES. The Company provides transaction services for customers who trade
contracts in futures, financial instruments and physical commodities, including
options on futures, and physical products. These products are based on selected
stock indices, fixed income securities, currencies, agricultural and energy
products and precious metals. Domestic trading is subject to extensive
regulation by the Commodity Futures Trading Commission ("CFTC") pursuant to the
Commodity Exchange Act and the Commodity Futures Trading Commission Act of 1974.
International trading activities are subject to regulation by the respective
regulatory authorities in the locations where the futures or commodity exchanges
reside, including the Securities and Futures Authority ("SFA") in the United
Kingdom.
The margin requirements covering substantially all transactions in futures
and options contracts are subject to the particular exchange's regulations. In
the United States, the Company is a clearing member of the Chicago Board of
Trade, the Chicago Mercantile Exchange, the New York Mercantile Exchange and
other principal futures exchanges. In the United Kingdom, the Company is a
member of the International Petroleum Exchange ("IPE"), the London Commodity
Exchange ("LCE"), the London International Financial Futures and Options
Exchange ("LIFFE") and OMLX, The London Securities & Derivatives Exchange
("OMLX"). The Company also has memberships with Marche a Terme International de
France, SA ("MATIF") and the Deutsche Terminborse in Europe. In Japan,
memberships are held with the Tokyo Stock Exchange, the Osaka Stock Exchange and
the Tokyo International Financial Futures Exchange for clearing Japanese
Government bond futures, for clearing Japanese stock index products and for
executing currency futures, respectively.
INTERNATIONAL. BSIL is a securities broker dealer based in London. Its
principal activities are dealing on both a principal and agency basis in bonds,
equities and derivatives, along with underwriting and investment banking. BSIL
is regulated by the SFA, and is a member of LIFFE, OMLX, the IPE and the LCE.
Another London subsidiary, Bear Stearns International Trading Limited ("BSIT"),
is a market-maker in various non-dollar-denominated equity securities. BSIT is a
member of the London Stock Exchange and Stock Exchange Automated Quotations
International ("SEAQ"). BSIT is also regulated by the SFA.
Bear Stearns Bank plc (the "Bank") is an Irish based bank, which was
incorporated in 1996 and subsequently granted a banking license under Section 9
of the Irish Central Bank Act, 1971. The Bank
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engages in capital markets activities with particular focus on the trading and
sales of OTC interest rate derivative products.
Bear Stearns (Japan) Ltd. ("BSJL") is a broker dealer registered with the
Japanese Ministry of Finance. BSJL sells equity and fixed income securities to
Japanese institutional customers. BSJL has a special membership on the Tokyo
Stock Exchange and is a regular member of the Osaka Stock Exchange. Bear Stearns
Hong Kong Ltd. is a member of the Securities and Futures Commission and sells
U.S. commodities to retail customers. Bear Stearns Asia Ltd. is a member of the
Stock Exchange of Hong Kong and sells equity and fixed income securities and
derivative products to institutional and retail customers in Asia (excluding
Japan) and also provides investment banking services to institutional clients.
Bear Stearns Singapore Pte. Limited is a broker dealer registered with the
Monetary Authority of Singapore and sells fixed income and equity securities,
including derivatives, to institutional investors in Singapore, Southeast Asia,
Australia and New Zealand.
INVESTMENT BANKING
The Company is a major global investment banking firm providing a full range
of capital formation and advisory services to a broad spectrum of clients. The
Company manages and participates in public offerings and arranges the private
placement of debt and equity securities directly with institutional investors.
The Company provides advisory services to clients on a wide range of financial
matters and assists with mergers, acquisitions, leveraged buyouts, divestitures,
corporate reorganizations, and recapitalizations.
The Company's strategy is to concentrate a major portion of its corporate
finance business development efforts within those industries in which the
Company has established a leadership position in providing investment banking
services. Industry specialty groups include financial services, health care,
media/entertainment, merchandising, natural resources, pharmaceuticals, real
estate, gaming and lodging, technology and telecommunications. These groups are
responsible for initiating, developing and maintaining client relationships, and
for executing transactions involving these clients. The Company has focused
primarily on those industries in which the Company also has a strong research
capability.
In addition to being structured according to distinct industry groups, the
Company has a number of professionals who specialize in specific types of
transactions. These include mergers and acquisitions ("M&A"), equity offerings,
high yield securities, and other transaction specialties.
MERGERS AND ACQUISITIONS. The Company is active in arranging various M&A
transactions for its clients. The Company participates in a broad range of
domestic and international assignments including acquisitions, divestitures,
strategic restructurings, proxy contests, leveraged buyouts, and defenses
against unsolicited takeovers.
EQUITY OFFERINGS. The equity capital markets group focuses on providing
financing for issuers of equity and convertible equity securities in the public
markets. The group assists in the origination, and is responsible for the
structuring and execution, of transactions for a broad range of clients.
HIGH YIELD SECURITIES. The high yield securities group focuses on providing
financing in the public and private capital markets. The group is responsible
for originating, structuring, and executing high yield transactions across a
wide range of companies and industries, as well as managing client relationships
with both high yield corporate issuers and financial sponsors of leveraged
transactions.
LEVERAGED ACQUISITIONS. As part of its investment banking activities, the
Company occasionally makes investments as principal in leveraged acquisitions
and in leveraged buy-out funds as a limited partner. The Company's investments
generally take the form of equity securities, either common or preferred stock.
Equity securities purchased in these transactions generally are held for
appreciation
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and are not readily marketable. While the Company believes that the current
carrying value of these instruments is at least equal to their eventual
realizable value, it is not possible to determine whether, or when, the Company
will realize the value of these investments.
COMMERCIAL REAL ESTATE. The Company is engaged in a variety of real estate
activities on a nationwide basis. It provides comprehensive real estate-related
investment banking, capital markets and financial advisory services.
SECURITIES CLEARANCE ACTIVITIES
The Company provides a full range of securities clearing services to
clients. Organizations that are engaged in the retail or institutional brokerage
business and are members of the NYSE and/or NASD comprise one category of
correspondent clearing clients called "fully-disclosed correspondents." In
addition, the Company has extensive involvement in the clearing of securities
transactions for "professional clearing clients" such as: hedge funds,
market-makers, specialists, arbitrageurs, money managers, and other professional
investors trading at multiple securities firms.
Besides commissions and service charges realized from securities clearing
activities, the Company also earns substantial amounts of interest income. The
Company extends credit directly to the customers of correspondent firms in order
to facilitate the conduct of customer securities transactions on a margin basis.
The correspondents indemnify the Company against margin losses on customer
accounts. The Company also extends margin credit directly to correspondents to
the extent that such firms pledge proprietary assets as collateral. Since the
Company must rely on the guarantees and general credit of the correspondents,
the Company may be exposed to significant risk of loss if correspondents are
unable to meet their financial commitments should there be a substantial adverse
change in the value of margined securities. The clearing business for hedge
funds, market-makers, arbitrageurs, specialists, and other professional traders
can require a substantial commitment of the Company's capital involving varying
degrees of risk. The Company has developed computerized control systems to
monitor and analyze risk on a daily basis.
In addition to clearing trades, the Company provides other products and
services to its correspondents such as recordkeeping, trading reports,
accounting, general back-office support, securities lending, reorganization and
custody of securities. The Company's Prime Broker Plus system provides
consolidated reporting and securities processing for professional investors
executing trades at more than one securities firm. The financial
responsibilities arising from the Company's clearing relationships are allocated
in accordance with agreements with correspondents. To the extent that the
correspondent has available resources, the Company is protected against claims
by customers of the correspondent when the latter has been allocated
responsibility for a function giving rise to a claim. However, if the
correspondent is unable to meet its obligations, dissatisfied customers may
attempt to seek recovery from the Company.
The Company attempts to broaden, wherever possible, its relationships with
correspondent clearing clients. In addition to performing administrative,
operational and settlement functions, the Company also advises correspondents on
communications systems and makes available to them a variety of non-brokerage
products and services on favorable terms enabling them to benefit from the
Company's centralized purchasing power.
INTEREST
The Company derives substantial net-interest income from customer margin
loans and securities lending.
CUSTOMER FINANCING. Securities transactions are effected for customers on
either a cash or margin basis. In a margin transaction, the Company extends
credit to a customer for a portion of the purchase
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price, subject to various regulatory and internal requirements, which is
collateralized by securities and cash in the customer's account. The Company
receives income from interest charged on the extension of credit; the rate of
interest charged to customers for margin financing is based upon the Federal
funds rate, brokers call rate or LIBOR. By allowing a customer to purchase
securities on margin, the Company assumes the risk of loss if an adverse market
movement reduces the value of the collateral below the amount of a customer's
indebtedness. The Company's net interest income is impacted by the volume of
customer borrowings and by the prevailing levels of interest rates.
SECURITIES LENDING ACTIVITIES. In connection with both its trading and
brokerage activities, the Company borrows and lends securities to brokers and
dealers and other trading entities to cover short sales and to complete
transactions in which customers have failed to deliver securities by settlement
date. The borrower of securities is required to deposit cash or other collateral
or to post a letter of credit with the lender. The borrower of securities
generally receives a rebate (based on the amount of cash deposited) or pays a
fee calculated to yield a negotiated rate-of-return for the lender. Stock borrow
and stock loan transactions are generally executed pursuant to written
agreements with counterparties which require that (i) securities borrowed and
loaned be marked-to-market on a daily basis, (ii) excess collateral be refunded,
and (iii) deficit collateral be furnished. Mark-to-market adjustments are
usually made on a daily basis through the facilities of various clearing houses
to reflect changes in the market value of loaned securities.
OTHER ACTIVITIES
ASSET MANAGEMENT. The Company's asset management division manages equity
and fixed income assets for some of the United States' leading corporate pension
plans, public systems, endowments, foundations, multi-employer plans, insurance
companies, corporations, families and high net-worth individuals. With nearly
$10 billion under management, the asset management division provides its clients
with diverse products, expertise and experience for enhancing investment returns
by identifying, and taking advantage of, investment opportunities in the
financial markets. Institutional and high-net-worth products include:
- Large, Mid and Small Cap Value Equity;
- Global and Emerging Markets Fixed Income;
- Cash Management;
- Alternative Investment Strategies, including Hedge Funds, Private Equity,
Venture Capital and Collateralized Bond Obligations; and
- Wrap Accounts.
In addition, the asset management division serves individual investors
through its management of The Bear Stearns Funds, a family of mutual funds which
include: S&P STARS, Large Cap Value, Small Cap Value, The Insiders Select, Focus
List, International Equity, Balanced, Total Return Bond, High Yield Total
Return, and The Emerging Markets Debt Portfolios.
EQUITY RESEARCH. The Equity Research Department provides comprehensive
industry and company coverage on over 1,100 stocks in more than 100 industries.
The focus of the Department's 90 analysts is fundamental research on domestic
and international stocks.
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FIXED INCOME RESEARCH is comprised of the following three units:
(i) FINANCIAL ANALYTICS AND STRUCTURED TRANSACTIONS GROUP (F.A.S.T.)
provides financial engineering and securitization capabilities, investment
research, fixed income portfolio management and analytical systems and
trading technology for mortgage-related and fixed income securities. This
unit also performs original research on valuation techniques and provides
consulting services.
(ii) HIGH GRADE RESEARCH consists of approximately 15 analysts and
researchers and provides coverage of over 28 industries and 700 companies.
(iii) HIGH YIELD RESEARCH consists of 28 analysts and researchers for
domestic issues and 15 analysts and researchers for international issues,
provides coverage on over 600 corporate and sovereign issuers of below
investment grade fixed income securities.
CUSTODIAL TRUST COMPANY. The Company offers a range of trust company and
securities-clearance services through its wholly owned subsidiary CTC. CTC
provides the Company with banking powers, such as access to the securities and
funds-wire services of the Federal Reserve System. CTC provides fiduciary,
custody and agency services for institutional accounts; the clearance of
government securities for institutions and dealers; the processing of mortgage
and mortgage-related products, including derivatives and CMO products; and
commercial lending. At December 31, 1998, CTC held $136 billion of assets for
clients, including institutional clients such as pension funds, mutual funds,
endowment funds, religious organizations and insurance companies.
ADMINISTRATION AND OPERATIONS
Administration and operations personnel are responsible for the processing
of securities transactions; the receipt, identification and delivery of funds
and securities; internal financial controls; accounting functions; office
services; the custody of customer securities; and the overseeing of margin
accounts of the Company and correspondent organizations. The processing,
settlement, and accounting for transactions for the Company, correspondent
organizations, and the customers of correspondent organizations is handled by a
staff of approximately 4,100 employees located in separate operations offices in
New York City and Whippany, New Jersey and, to a lesser extent, the Company's
offices worldwide.
The Company executes its own and correspondent transactions on all United
States exchanges and in the over-the-counter market. The Company clears all of
its domestic and international transactions (i.e., delivery of securities sold,
receipt of securities purchased, and transfer of related funds) through its own
facilities, unaffiliated commercial banks and through memberships in various
clearing corporations. However, certain government, government-agency and
mortgage-related securities transactions are cleared through CTC.
There is considerable fluctuation in the volume of transactions the Company
processes, clears and settles. Operations personnel monitor day-to-day
operations to assure compliance with applicable laws, rules and regulations. The
Company records transactions and posts its books on a daily basis. Failure to
keep current and accurate books and records can render the Company liable to
disciplinary action by governmental and self-regulatory organizations.
The Company maintains its own data processing facilities, which have been
expanded significantly in recent years.
The Company believes its internal controls and safeguards are adequate, but
recognizes that fraud and misconduct by customers and employees, including the
possible theft of securities, are risks inherent in the securities industry. As
required by the NYSE and certain other authorities, the Company carries a
broker's blanket-bond insurance covering the loss or theft of securities, check-
and draft-forgery, embezzlement, and the misplacement of securities. This
blanket-bond policy provides
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fidelity coverage and coverage for loss or theft of securities, fraudulent
trading, and securities forgery of up to $200 million annual aggregate, subject
to a deductible of $2.5 million per occurrence.
COMPETITION
The Company encounters intense competition in all aspects of the securities
business and competes directly with other securities firms--both domestic and
foreign--many having substantially greater capital and resources and offering a
wider range of financial services than does the Company. Besides competition
from firms in the securities business, in recent years the Company has
experienced increasing competition from other sources, such as commercial banks
and insurance companies. The Company believes that the principal factors
affecting competition involve the caliber and abilities of professional
personnel, the relative prices of the services and products being offered, and
the quality of its services.
REGULATIONS AND OTHER FACTORS AFFECTING THE COMPANY AND THE SECURITIES
INDUSTRY
The securities industry in the United States is subject to extensive
regulation under both federal and state laws. The SEC is the federal agency
responsible for the administration of the federal securities laws. Bear Stearns
and BSSC are registered as broker dealers with the SEC and are registered as
broker dealers in all 50 states and the District of Columbia. Additionally, Bear
Stearns is registered as an investment adviser with the SEC. Much of the
regulation of broker dealers has been delegated to self-regulatory
organizations, principally the NASD, the Municipal Securities Rulemaking Board,
and national securities exchanges such as the NYSE, which has been designated by
the SEC as the primary regulator of certain of the Company's subsidiaries,
including Bear Stearns and BSSC. These self-regulatory organizations (i) adopt
rules, subject to approval by the SEC, which govern the industry and (ii)
conduct periodic examinations of the Company's operations. Securities firms are
also subject to regulation by state securities administrators in those states in
which they conduct business.
Broker dealers are subject to regulations which cover all aspects of the
securities business including: sales methods; trade practices; use and
safekeeping of customer funds and securities; capital structures; recordkeeping;
and the conduct of directors, officers and employees. The types of regulations
to which investment advisers are subject include: recordkeeping; fee
arrangements; client disclosure; and the conduct of directors, officers and
employees. The mode of operation and profitability of broker dealers or
investment advisers may be directly affected by new legislation; changes in
rules promulgated by the SEC and self-regulatory organizations; and changes in
the interpretation or enforcement of existing laws and rules. The SEC,
self-regulatory organizations and state securities commissions may conduct
administrative proceedings that can result in censures, fines, the issuance of
cease-and-desist orders, and the suspension or expulsion of a broker dealer or
an investment adviser, its officers or employees. The principal purpose of
regulation and discipline of broker dealers and investment advisers is the
protection of customers and the securities markets, rather than the protection
of creditors and stockholders of broker dealers or investment advisers. On
occasion the Company's subsidiaries have been subject to routine investigations
and proceedings, and sanctions have been imposed for infractions of various
regulations, none of which, to date, has had a material adverse effect on the
Company or its business.
The Market Reform Act of 1990 was adopted for the following reasons: (i) to
strengthen regulatory oversight of the securities markets, (ii) to improve the
financial condition of market participants and (iii) to improve the safety and
efficiency of market mechanisms by creating a system for providing information
and oversight for the parents and other affiliates of broker dealers. The SEC
has adopted the Risk Assessment Reporting Requirements for Brokers and Dealers
(the "Risk Assessment Rules") to implement the provisions of the Market Reform
Act of 1990. The Risk Assessment Rules require that broker dealers: (i) develop
an organizational chart; (ii) maintain risk management procedures or standards
for monitoring and controlling the risks resulting from activities
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of material associated persons; (iii) maintain and preserve records and other
information; and (iv) file quarterly reports covering the risk-management
procedures and the financial and securities activities of the holding companies
of broker dealers, or broker dealer affiliates or subsidiaries that are
reasonably likely to have a material impact on the financial and operational
condition of the broker dealer.
The Insider Trading and Securities Fraud Enforcement Act of 1988 augments
enforcement of the securities laws through a variety of measures designed to
provide greater deterrence, detection, and punishment of insider-trading
violations. Among other things, the law: (i) expands the scope of civil
penalties to controlling persons who fail to take adequate steps to prevent
insider trading; (ii) initiates a bounty program by giving the SEC discretion to
reward informants who provide assistance to the agency; and (iii) requires
broker dealers and investment advisors to establish and enforce written policies
and procedures reasonably designed to prevent the misuse of inside information.
The Government Securities Act of 1986 (the "Government Securities Act")
established a comprehensive and coordinated pattern for the regulation of
brokers, dealers and financial institutions who trade in government securities,
which includes Bear Stearns. Under the Government Securities Act, Bear Stearns
is subject to Department of Treasury regulations covering among other things:
custody and use of government securities, and transfers and control of
government securities subject to repurchase transactions.
The commodities industry in the United States is subject to regulation under
the Commodity Exchange Act, as amended. The CFTC is the federal agency charged
with the administration of the Commodity Exchange Act and the regulations
thereunder. Bear Stearns and BSSC are registered with the CFTC as futures
commission merchants and are subject to regulation as such by the CFTC and
various domestic boards of trade and other commodity exchanges. Bear Stearns'
and BSSC's commodity-futures business is also regulated by the NFA, a
not-for-profit membership corporation, which has been designated a registered
futures association by the CFTC.
As registered broker dealers and member firms of the NYSE, both Bear Stearns
and BSSC are subject to the Net Capital Rule (Rule 15c3-1) (the "Net Capital
Rule") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which has been adopted through incorporation by reference in NYSE Rule
325. The Net Capital Rule, which specifies minimum net capital requirements for
registered broker dealers, is designed to measure the general financial
integrity and liquidity of broker dealers and requires that at least a minimal
portion of its assets be kept in relatively liquid form.
Bear Stearns and BSSC are also subject to the net capital requirements of
the CFTC and various commodity exchanges which generally require that Bear
Stearns and BSSC maintain a minimum net capital equal to the greater of the
alternative net capital requirement provided for under the Exchange Act or 4% of
the funds required to be segregated under the Commodity Exchange Act and the
regulations promulgated thereunder.
Compliance with the Net Capital Rule could limit those operations of Bear
Stearns and/or BSSC that require significant capital usage, such as
underwriting, trading and the financing of customer margin-account debit
balances. The Net Capital Rule could also restrict the Company's ability to
withdraw capital from Bear Stearns or BSSC, which in turn could limit the
Company's ability to pay dividends, pay interest, repay debt, or redeem or
purchase shares of its outstanding capital stock. Additional information
regarding net-capital requirements is set forth under the Notes to the
Consolidated Financial Statements in Footnote 7, entitled "Regulatory
Requirements" in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998. See "Where You Can Find More Information" and "General
Information."
Bear Stearns and BSSC are members of the Securities Investor Protection
Corporation, which provides insurance protection for customer accounts held by
these entities of up to $500,000 for each
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customer, subject to a limitation of $100,000 for cash balance claims in the
event of the liquidation of a broker dealer. In addition, all customer accounts
are protected by an excess securities bond issued by a private company,
providing protection for the entire net equity of the accounts.
The activities of the Company's bank and trust company subsidiary, CTC, are
regulated by the New Jersey Department of Banking and Insurance and the Federal
Deposit Insurance Corporation ("FDIC"). FDIC regulations applicable to CTC limit
the extent to which CTC and Bear Stearns may have common directors or may share
physical facilities. FDIC regulations require certain disclosures in connection
with joint advertising or promotional activities conducted by Bear Stearns and
CTC. Such regulations also restrict certain activities of CTC in connection with
the securities business of Bear Stearns. Federal legislation limits (i) an
expansion in the scope of the activities of CTC, (ii) the cross-marketing of
certain services with its affiliates and (iii) the use of overdrafts at Federal
Reserve banks on behalf of affiliates.
The Company does a substantial volume of business in the international fixed
income and equity markets through BSIL and is a market-maker in certain
non-dollar-denominated securities and engages in index and derivative arbitrage
through BSIT. BSIL and BSIT are subject to the United Kingdom Financial Services
Act 1986, which governs all aspects of the investment business in the United
Kingdom including: regulatory capital, sales and trading practices, use and
safekeeping of customer funds, securities recordkeeping, margin practices and
procedures, registration standards for individuals, periodic reporting and
settlement procedures. BSIL and BSIT are subject to supervision by and are
regulated in accordance with the rules of the SFA. BSIT is a member of the
London Stock Exchange and SEAQ International.
Bear Stearns Bank plc is an Irish based bank, which was incorporated in 1996
and subsequently granted a banking license under Section 9 of the Irish Central
Bank Act, 1971. The Bank engages in capital markets activities with particular
focus on the trading and sales of OTC interest rate derivative products.
BSJL is a broker dealer registered with the Japanese Ministry of Finance.
BSJL sells equity and fixed income securities to Japanese institutional
customers. BSJL has a special membership on the Tokyo Stock Exchange and is a
regular member of the Osaka Stock Exchange. Bear Stearns Hong Kong Ltd. is a
member of the Securities and Futures Commission and sells U.S. commodities to
retail customers. Bear Stearns Asia Ltd. is a member of the Stock Exchange of
Hong Kong and sells equity and fixed income securities and derivative products
to institutional and retail customers in Asia (excluding Japan) and also
provides investment banking services to institutional clients. Bear Stearns
Singapore Pte. Limited is a broker dealer registered with the Monetary Authority
of Singapore and sells fixed income and equity securities, including
derivatives, to institutional investors in Singapore, Southeast Asia, Australia
and New Zealand.
The Company, like other securities firms, is directly affected by such
things as: national and international economic and political conditions, broad
trends in business and finance, legislation and regulations affecting the
national and international financial and business communities, currency values,
the level and volatility of interest rates, and fluctuations in the volume and
the price levels in the securities and commodities markets. These and other
factors can affect the Company's volume of security new-issues, mergers,
acquisitions, and business restructurings; stability and liquidity of securities
and commodities markets; and ability of issuers, other securities firms and
counterparties to perform on their obligations. Decreases in the volume of
security new-issues, merger, acquisitions or restructurings generally results in
lower revenues from investment banking and, to a lesser extent, reduced
principal transactions. A reduced volume of securities and commodities
transactions and reduced market liquidity generally result in lower revenues
from principal transactions and commissions. Lower price levels for securities
may result in a reduced volume of transactions, and may also result in losses
from declines in the market value of securities held in proprietary trading and
underwriting accounts. In periods of
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reduced sales and trading or investment banking activity, profitability may be
adversely affected because certain expenses remain relatively fixed. Sudden and
sharp declines in the market values of securities and/or the failure of issuers
and counterparties to perform on their obligations can result in illiquid
markets. In such markets, the Company may not be able to sell securities and/or
may have difficulty in hedging its securities positions. Such market conditions,
if prolonged, may also lower the Company's revenues from investment banking and
principal transactions.
The Company's securities trading, derivatives, arbitrage, market-making,
specialist, leveraged buyout and underwriting activities are conducted by the
Company on a principal basis and expose the Company to significant risk of loss.
Such risks include market, counterparty credit, and liquidity risks.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Cadwalader, Wickersham & Taft, special tax counsel to the
Company, the following discussion summarizes certain of the U.S. federal income
tax consequences of the purchase, beneficial ownership and disposition of Notes.
Except as provided below under "--Federal Income Tax Consequences to Non-U.S.
Holders," this summary deals only with a Holder that is:
- a citizen or resident of the United States;
- a corporation, partnership or other business entity created or organized
in or under the laws of the United States or any State or political
subdivision thereof (including the District of Columbia);
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust with respect to which a court within the United States is able to
exercise primary supervision over its administration, and one or more
United States persons have the authority to control all of its substantial
decisions (each, a "U.S. Holder").
As used in this summary, the term "Non-U.S. Holder" means a Holder that is not a
"U.S. Holder."
An individual may, subject to certain exceptions, be deemed to be a resident
of the United States by reason of being present in the United States for at
least 31 days in the calendar year and for an aggregate of at least 183 days
during a three-year period ending in the current calendar year (counting for
such purposes all of the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days present in
the second preceding year).
This summary is based on interpretations of the Internal Revenue Code of
1986, as amended (the "Code"), regulations issued thereunder, and rulings and
decisions currently in effect (or in some cases proposed), all of which are
subject to change. Any such change may be applied retroactively and may
adversely affect the federal income tax consequences described herein. This
summary addresses only Holders that purchase Notes at initial issuance, and own
Notes as capital assets and not as part of a "straddle" or a "conversion
transaction" for federal income tax purposes, or as part of some other
integrated investment. This summary does not discuss all of the tax consequences
that may be relevant to particular investors or to investors subject to special
treatment under the federal income tax laws (such as life insurance companies,
retirement plans, regulated investment companies, securities dealers,
expatriates or investors whose functional currency is not the U.S. dollar).
Persons considering the purchase of Notes should consult their own tax advisors
concerning the application of U.S. federal income tax laws to their particular
situations as well as any consequences of the purchase, beneficial ownership and
disposition of Notes arising under the laws of any other taxing jurisdiction.
FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
TREATMENT OF INTEREST
Stated interest on the Notes will be taxable to a U.S. Holder as ordinary
interest income as the interest accrues or is paid (in accordance with the U.S.
Holder's method of tax accounting).
TREATMENT OF DISPOSITIONS OF NOTES
Upon the sale, exchange, retirement or other taxable disposition of a Note,
a U.S. Holder will recognize gain or loss equal to the difference between the
amount received (other than amounts in respect of accrued and unpaid interest,
which will be taxable as such) and the adjusted tax basis of the Note. A U.S.
Holder's tax basis in a Note will be, in general, such U.S. Holder's cost
therefor. Gain or loss realized on the sale, exchange or retirement of a Note
generally will be capital gain or loss, and
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will be long-term capital gain or loss if, at the time of such sale, exchange or
retirement, the Note had been held for more than one year.
FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a summary of the U.S. federal income tax consequences
generally applicable to Non-U.S. Holders of the Notes. For purposes of the
following discussion, interest and gain on the sale, exchange or other
disposition of the Note will be considered "U.S. trade or business income" if
such income or gain is (i) effectively connected with the conduct of a trade or
business in the United States, or (ii) in the case of a treaty resident,
attributable to a permanent establishment (or in the case of an individual, to a
fixed base) in the United States.
TREATMENT OF INTEREST
A Non-U.S. Holder will not be subject to U.S. federal income or withholding
tax in respect of interest income on the Notes if:
- the interest is not U.S. trade or business income;
- the Non-U.S. Holder provides an appropriate statement on IRS Form W-8,
together with all appropriate attachments, signed under penalties of
perjury, identifying the Non-U.S. Holder and stating, among other things,
that the Non-U.S. Holder is not a United States person; and
- the Non-U.S. Holder is not a "10-percent shareholder" or a "related
controlled foreign corporation" with respect to the Company.
If a Note is held through a securities clearing organization or certain other
financial institutions, the organization or institution may provide a signed
statement accompanied by a copy of the IRS Form W-8 or the substitute form
provided by the beneficial owner to the organization or institution.
To the extent these conditions are not met, a 30% withholding tax will apply
to interest income on the Notes, unless an income tax treaty reduces or
eliminates such tax or unless the interest is U.S. trade or business income and
the Non-U.S. Holder provides an appropriate statement to that effect. In the
latter case, such Non-U.S. Holder generally will be subject to U.S. federal
income tax with respect to all income from the Notes in the same manner as U.S.
Holders, as described above. Additionally, in such event, Non-U.S. Holders that
are corporations could be subject to a branch profits tax on such income as
well.
TREATMENT OF DISPOSITIONS OF NOTES
Generally, a Non-U.S. Holder will not be subject to federal income tax on
any amount which constitutes capital gain upon the sale, exchange, retirement or
other disposition of a Note unless such Holder is an individual present in the
United States for 183 days or more in the taxable year of the sale, exchange,
retirement or other disposition and certain other conditions are met, or unless
the gain is U.S. trade or business income. In the latter event, generally
Non-U.S. Holders will be subject to U.S. federal income tax with respect to such
gain, in the same manner as U.S. Holders, as described above. Additionally, in
such event, Non-U.S. Holders that are corporations could be subject to a branch
profits tax on such income as well.
TREATMENT OF NOTES FOR U.S. FEDERAL ESTATE TAX PURPOSES
A Note will not be subject to U.S. federal estate tax, provided the Non-U.S.
Holder does not at the time of death actually or constructively own 10% or more
of the combined voting power of all classes of stock of the Company and payments
of interest on such Notes would not have been considered U.S. trade or business
income.
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U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
Under certain circumstances, the Code requires "information reporting"
annually to the Internal Revenue Service (the "IRS") and to each Holder, and
"backup withholding" at a rate of 31% with respect to certain payments made on
or with respect to the Notes. Backup withholding and information reporting
generally do not apply with respect to certain Holders, including corporations,
tax-exempt organizations, qualified pension and profit sharing trusts and
individual retirement accounts. Backup withholding will apply to a U.S. Holder
only if the U.S. Holder:
- fails to furnish its Taxpayer Identification Number ("TIN"), which for an
individual would be his or her Social Security Number;
- furnishes an incorrect TIN;
- is notified by the IRS that it has failed to properly report payments of
interest and dividends; or
- under certain circumstances, fails to certify, under penalty of perjury,
that it has furnished a correct TIN and has not been notified by the IRS
that it is subject to backup withholding for failure to report interest
and dividend payments. The application for exemption is available by
providing a properly completed IRS Form W-9.
A Non-U.S. Holder that provides an IRS Form W-8, together with all
appropriate attachments, signed under penalties of perjury, identifying the
Non-U.S. Holder and stating that the Non-U.S. Holder is not a United States
person will not be subject to IRS reporting requirements and U.S. backup
withholding. With respect to interest paid on or after January 1, 2000, IRS
Forms W-8 will be required from the beneficial owners of interests in a Non-U.S.
Holder that is treated as a partnership for U.S. federal income tax purposes.
The payment of the proceeds on the disposition of a Note by a Holder to or
through the U.S. office of a broker generally will be subject to information
reporting and backup withholding at a rate of 31% unless the Holder either
certifies its status as a Non-U.S. Holder under penalties of perjury on IRS Form
W-8 (as described above) or otherwise establishes an exemption. The payment of
the proceeds on the disposition of a Note by a Non-U.S. Holder to or through a
non-U.S. office of a non-U.S. broker will not be subject to backup withholding
or information reporting unless the non-U.S. broker is a "U.S. related person"
(as defined below). The payment of proceeds on the disposition of a Note by a
Non-U.S. Holder to or through a Non-U.S. office of a U.S. broker or a U.S.
related person generally will be subject to information reporting and backup
withholding unless the Holder certifies its status as a Non-U.S. Holder under
penalties of perjury or the broker has certain documentary evidence in its files
as to the Non-U.S. Holder's foreign status and the broker has no actual
knowledge to the contrary.
For this purpose, a "U.S. related person" is:
- a "controlled foreign corporation" for U.S. federal income tax purposes;
- a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding
the payment (or for such part of the period that the broker has been in
existence) is derived from activities that are effectively connected with
the conduct of a U.S. trade or business; or
- for payments made on or after January 1, 2000, a foreign partnership if at
any time during its tax year one or more of its partners are United States
persons who, in the aggregate, hold more than 50% of the income or capital
interest of the partnership or if, at any time during its taxable year,
the partnership is engaged in the conduct of a U.S. trade or business.
Backup withholding is not an additional tax and may be refunded (or credited
against the Holder's U.S. federal income tax liability, if any), provided that
certain required information is furnished. The
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information reporting requirements may apply regardless of whether withholding
is required. Copies of the information returns reporting such interest and
withholding also may be made available to the tax authorities in the country in
which a Non-U.S. Holder is a resident under the provisions of an applicable
income tax treaty or agreement.
STATE, LOCAL AND FOREIGN TAXES
Holders should consult their tax advisors with respect to state, local and
foreign tax considerations relevant to an investment in Notes.
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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated February 23, 1999 (the "Underwriting Agreement") between the Company and
the Underwriters named below, the Company has agreed to sell to each of the
Underwriters, and each of the Underwriters has severally agreed to purchase from
the Company, the aggregate principal amount of Notes set forth opposite its name
below.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
- ---------------------------------------------------------------------------------------- --------------
<S> <C>
Bear, Stearns & Co. Inc................................................................. $ 585,000,000
ABN AMRO Bank N.V....................................................................... 15,000,000
Chase Securities Inc.................................................................... 15,000,000
Dresdner Bank AG London Branch.......................................................... 15,000,000
First Chicago Capital Markets, Inc...................................................... 15,000,000
Lehman Brothers Inc..................................................................... 15,000,000
J.P. Morgan Securities Inc.............................................................. 15,000,000
NationsBanc Montgomery Securities LLC................................................... 15,000,000
Salomon Smith Barney Inc................................................................ 15,000,000
Societe Generale........................................................................ 15,000,000
Warburg Dillon Read LLC................................................................. 15,000,000
Westdeutsche Landesbank Girozentrale.................................................... 15,000,000
--------------
Total............................................................................... $ 750,000,000
--------------
--------------
</TABLE>
The Underwriters have advised the Company that they propose to offer some or
all of the Notes to the public at the offering price set forth on the cover page
of this prospectus supplement and any balance to certain dealers at a price that
reflects concessions not in excess of 0.175% of the principal amount of the
Notes. Such dealers may reallow a concession to other dealers not in excess of
0.100% of the principal amount of the Notes. After the initial offering to the
public, the public offering price and other selling terms may be changed. The
Underwriting Agreement provides that the Company will pay as underwriters'
compensation the amounts set forth as underwriting discount on the table on the
cover page of this prospectus supplement. The expenses of the offering of the
Notes are estimated to be approximately $260,000.
In the event of default by one or more Underwriters, the Underwriting
Agreement provides that in certain circumstances other underwriters may be
substituted or the commitment of each non-defaulting Underwriter may be
increased up to 10%. However, if the default involves more than 10% of the
aggregate principal amount of the Notes, the Underwriting Agreement may be
terminated.
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the Notes if any are purchased. The Underwriters reserve the
right to withdraw, cancel or modify the offering, and to reject orders in whole
or in part.
Bear Stearns is acting as Global Coordinator for the offering of the Notes.
The Underwriters propose initially to offer the Notes for sale in the United
States and in those jurisdictions in Europe and Asia where it is legal to make
such offers. However, no action has been or, except in connection with the
application for listing the Notes on the Official List of the London Stock
Exchange, will be taken in any jurisdiction by the Underwriters or the Company
that would permit a public offering of the Notes or possession or distribution
of this prospectus supplement and the accompanying prospectus in any
jurisdiction, other than the United States, where, or in any circumstances in
which, action for that purpose is required.
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Each Underwriter has represented and agreed that:
(a) it has not offered or sold and will not offer or sell any Notes to
persons in the United Kingdom, prior to the earlier of the expiry of the
period of six months from the Settlement Date and the admission of the Notes
to listing in accordance with Part IV of the Financial Services Act 1986,
except to those persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for
the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations
1995 or the Financial Services Act 1986;
(b) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to the Notes in, from or otherwise involving the United Kingdom;
and
(c) it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the issue
of the Notes, other than any document which consists of or any part of
listing particulars, supplementary listing particulars or any other document
required or permitted to be published by listing rules under Part IV of the
Financial Services Act 1986, to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom the document may otherwise
lawfully be issued or passed on.
Each Underwriter has agreed that it will (to the best of its knowledge and
belief) comply with all applicable securities laws and regulations in force in
any jurisdiction in which it offers, sells or delivers any of the Notes or
possesses or distributes this prospectus supplement and the accompanying
prospectus and will obtain any consent, approval or permission which is (to the
best of its knowledge and belief) required by it for the purchase, offer, sale
or delivery by it of the Notes under the laws and regulations in force in any
jurisdiction to which it is subject or in which it makes such purchases, offers,
sales or deliveries and neither the Company nor any other Underwriter shall have
any responsibility therefor.
You may be required to pay stamp taxes and other charges in accordance with
the laws and practices of the country of purchase in addition to the issue price
set forth on the cover page hereof.
The Notes are a new issue of securities with no established trading market.
Although the Company intends to cause the Notes to be listed on the London Stock
Exchange, no guarantees can be given that the application will be approved, and
the Company does not intend to apply for listing of the Notes on a national
securities exchange in the United States. The Company has been advised by Bear
Stearns that, following completion of the offering of the Notes, Bear Stearns
and its affiliates and certain of the other Underwriters intend to make a market
in the Notes, although they are under no obligation to do so and may discontinue
any market-making activities at any time without notice. Accordingly, no
guarantees can be given as to whether an active trading market for the Notes
will develop or, if such a trading market develops, as to the liquidity of such
trading market.
All secondary trading in the Notes will settle in same day funds. See
"Description of the Notes-- Book-Entry, Delivery and Form--Global Clearance and
Settlement Procedures."
It is expected that delivery of the Notes will be made against payment
therefor on or about March 2, 1999, which is the fifth business day following
the date hereof (such settlement cycle being herein referred to as "T+5").
Purchasers of Notes should note that the ability to settle secondary market
trades of the Notes executed on the date of pricing may be affected by the T+5
settlement.
S-41
<PAGE>
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the United
States Securities Act of 1933, as amended, or contribute to payments the
Underwriters may be required to make in respect thereof.
Bear Stearns, in its capacity as an Underwriter, has committed to purchase
from the Company 78% of the principal amount of the Notes being underwritten by
the Underwriters, on the same basis as the other Underwriters. Bear Stearns is a
wholly-owned subsidiary of the Company. To the extent that part or all of the
Notes so purchased by Bear Stearns are not resold by it at the initial offering
price, the funds derived from the sale of the Notes by the Company and its
subsidiaries on a consolidated basis may be reduced, because the Company and its
subsidiaries will not derive any additional funds from Notes purchased by Bear
Stearns and not resold. Bear Stearns intends to resell any Notes that it is
unable to resell from time to time, at prevailing market prices, subject to
applicable prospectus delivery and other legal requirements.
Bear Stearns intends to resell a portion of the Notes being purchased from
the Company to BSIL, a wholly-owned subsidiary of the Company. The Company and
its subsidiaries will not derive any additional funds from Notes purchased by
BSIL and not resold by BSIL.
Certain of the Underwriters and their affiliates engage from time to time in
general financing and banking transactions with the Company and its affiliates.
In addition, the Trustee is an affiliate of Chase Securities Inc., one of the
Underwriters.
The offer and sale of the Notes in respect of which this prospectus
supplement is delivered complies with the requirements set forth in Rule 2720 of
the Conduct Rules of the NASD regarding underwriting securities of an affiliate
of an NASD member.
In order to facilitate the offering of the Notes, Bear Stearns, in its
capacity as Global Coordinator of the offering of the Notes, may over-allot or
effect transactions which stabilize or maintain the market price of the Notes at
a level which might not otherwise prevail in the open market. Specifically, Bear
Stearns, on behalf of the Underwriters, may over-allot or otherwise create a
short position in the Notes for the account of the Underwriters by selling more
Notes than have been sold to them by the Company. Bear Stearns, on behalf of the
Underwriters, may elect to cover any such short position by purchasing Notes in
the open market. In addition, Bear Stearns, on behalf of the Underwriters, may
stabilize or maintain the price of the Notes by bidding for or purchasing Notes
in the open market and may impose penalty bids, under which selling concessions
allowed to syndicate members or other broker-dealers participating in the
offering are reclaimed if Notes previously distributed in the offering are
repurchased in connection with stabilization transactions or otherwise. The
effect of these transactions may be to stabilize or maintain the market price of
the Notes at a level above that which might otherwise prevail in the open
market. The imposition of a penalty bid may also affect the price of the Notes
to the extent that it discourages resales of Notes. No representation is made as
to the magnitude or effect of any such stabilization or other transactions. Such
transactions, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the Notes will be passed upon for us by Cadwalader,
Wickersham & Taft, New York, New York, U.S.A. Certain legal matters will be
passed upon for the Underwriters by Kramer Levin Naftalis & Frankel LLP, New
York, New York, U.S.A. Certain legal matters relating to the laws of England and
Wales are being passed upon for us by Cadwalader, Wickersham & Taft, London,
England, and for the Underwriters by Weil, Gotshal & Manges, London, England.
S-42
<PAGE>
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this prospectus supplement by reference from the
Company's 1998 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.
GENERAL INFORMATION
The Company is incorporated with shares and limited liability under the laws
of the State of Delaware, the United States. The Company's registered office is
at The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, U.S.A. The Company's principal executive office is
245 Park Avenue, New York, New York 10167, U.S.A.
So long as the Notes are outstanding, copies of the following documents will
be available from the principal executive office of the Company and from the
specified offices of the paying agents in London:
(i) the Certificate of Incorporation and By-laws of the Company;
(ii) the published audited consolidated financial statements of the
Company and its subsidiaries contained in the Company's Annual Report on
Form 10-K for the two financial years ended June 30, 1998;
(iii) the published unaudited consolidated financial statements of the
Company and its subsidiaries contained in the Company's Quarterly Report on
Form 10-Q for the six month periods ended December 31, 1998 and December 31,
1997;
(iv) the Underwriting Agreement and the Indenture;
(v) a copy of this prospectus supplement and accompanying prospectus;
(vi) the written agreement of Cadwalader, Wickersham & Taft referred to
below; and
(vii) any other documents incorporated herein by reference.
The consolidated financial statements of the Company and its subsidiaries
for each of the three financial years ended June 30, 1998 were audited, without
qualification, by Deloitte & Touche LLP, 2 World Financial Center, New York, New
York 10281, U.S.A., independent certified public accountants, in accordance with
auditing standards generally accepted in the United States.
Cadwalader, Wickersham & Taft have given and have not withdrawn their
written agreement to the inclusion of their tax summary in this prospectus
supplement in the form and context in which it appears.
Other than as disclosed or contemplated herein, there has been no
significant change in the financial or trading position of the Company or of the
Company and its subsidiaries or material adverse change in the financial
position or prospects of the Company or the Company and its subsidiaries since
June 30, 1998.
In the normal course of its business, the Company or its subsidiaries have
been named as defendant in numerous civil actions arising out of their
activities as broker and dealer in securities, as an underwriter, as an
investment banker, as employer or arising out of alleged employee misconduct.
Several of these actions are class actions that allege damages in large or
indeterminate amounts. Although the ultimate outcome of these actions cannot be
ascertained at this time, it is the opinion of management of the Company, after
consultation with relevant counsel, that the resolution of these actions will
not have a material adverse effect on the consolidated financial position of the
Company.
S-43
<PAGE>
Subject to the foregoing, there are no legal or arbitration proceedings
(including any such proceedings which are pending or threatened) of which the
Company is aware which may have or have had during the 12 months before the date
of this document a significant effect on the consolidated financial position of
the Company and its subsidiaries.
The Notes have been assigned Euroclear and Cedelbank Common Code 9531726,
International Security Identification Number (ISIN) US073902BM90 and CUSIP No.
073902 BM 9.
S-44
<PAGE>
PROSPECTUS
$7,315,045,162
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 $7,315,045,162 (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 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.
August 26, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING OF CERTAIN SECURITIES
HEREUNDER MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE
AFFECT THE PRICE OF THOSE SECURITIES, INCLUDING OVERALLOTMENT, STABILIZING AND
SHORT-COVERING TRANSACTIONS AND THE IMPOSITION OF PENALTY BIDS. SEE "PLAN OF
DISTRIBUTION."
------------------------
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, 5000 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, 1997 (the "1997 Form
10-K"), (ii) the Quarterly Report on Form 10-Q for the quarters ended September
26, 1997, December 31, 1997 and March 27, 1998 and (iii) the Current Reports on
Form 8-K, dated July 29, 1997, August 13, 1997, October 14, 1997, October 28,
1997, January 14, 1998, January 15, 1998, January 21, 1998, January 30, 1998,
April 1, 1998, April 6, 1998, April 15, 1998, June 10, 1998, June 19, 1998 and
July 21, 1998. 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 Belgium, Madrid, Paris and the Philippines.
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,
located in Princeton, New Jersey.
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, 1.4, 1.4, 1.2 and 1.6 for
the fiscal years ended June 30, 1998, 1997, 1996, 1995 and 1994, 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, as amended (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 $7,315,045,162 may be offered pursuant to this Prospectus. As of the
date of this Prospectus, $16,326,129,575 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, the title of the Debt Securities and
the series of which those Debt Securities are a part; the aggregate principal
amount of, or any limit on the aggregate principal amount of, those Debt
Securities; the date or dates on which those Debt Securities will mature; the
rate or rates per annum (which may be fixed or variable) at which those Debt
Securities will bear interest, if any; the date or dates on which such interest,
if any, will be payable and the record date or dates relating thereto; the
provisions, if any, for redemption of those Debt Securities and the redemption
price thereof; the sinking fund requirements, if any, with respect to those Debt
Securities; whether those Debt Securities provide for payment in United States
dollars, a foreign currency or a composite currency; 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; 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; whether those Debt Securities will be issued in
book-entry form (a "Global Security") or in certificated form; 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; 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; the provisions, if any, for the defeasance of those Debt Securities;
and any other terms of those Debt Securities not inconsistent with the
provisions of the Indenture.
5
<PAGE>
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.
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;
6
<PAGE>
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 provided below, owners of beneficial interests in a Global Security will not
be entitled to have Debt Securities represented by Global Securities registered
in their names, will not receive or be entitled to receive physical delivery of
Debt Securities in definitive form and will not be considered the owners or
Holders thereof under the Indenture.
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Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities and Bearer Warrants" below, payments of principal of (and
premium, if any) and any interest on the individual Debt Securities registered
in the name of the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the Holder of such Global Security. Neither
the Company nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of a Global Security, or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests and each of
them may act or refrain from acting without liability on any information
provided by the Depositary. The Company expects that the Depositary, upon
receipt of any payment of principal, premium or interest in respect of a Global
Security, will credit immediately the accounts of the participants with payment
in amounts proportionate to their respective holdings in principal amount of
beneficial interest in a Global Security as shown on the records of the
Depositary. The Company also expects that payments by participants to owners of
beneficial interests in a Global Security will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments of principal, premium or
interest in respect thereof will be subject to the restrictions discussed under
"Limitations on Issuance of Bearer Securities and Bearer Warrants" below.
If interest is paid on a bearer Global Security, or if no interest has been
paid but the bearer Global Security remains outstanding beyond a reasonable
period of time after the restricted period (as defined in applicable U.S.
Treasury regulations) has ended, the Depositary must provide the Company with a
certificate to the effect that the owners of the beneficial interests in the
Global Security are non-U.S. persons or U.S. persons that are permitted to hold
bearer securities under applicable U.S. Treasury regulations. In general, U.S.
persons that are permitted to hold bearer securities are U.S. persons who
acquire the securities through the foreign branch of certain U.S. financial
institutions and certain U.S. financial institutions that hold the securities
for resale to non-U.S. persons or who hold the securities on their own account
through a foreign branch. The certificate must be provided within a reasonable
period of time after the end of the restricted period, but in no event later
than the date when interest is paid. The certificate must be based on statements
provided to the Depositary by the owners of the beneficial interests.
If the Depositary is at any time unwilling or unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 calendar days, then the Company will issue Debt Securities in
certificated form in exchange for all outstanding Global Securities. In
addition, the Company (but not a Holder) may at any time determine not to have
Debt Securities represented by a Global Security and, in that event, will issue
Debt Securities in definitive form in exchange for all Global Securities. In any
such instance, an owner of a beneficial interest in the Global Securities to be
exchanged will be entitled to delivery in definitive form of Debt Securities
equal in principal amount to such beneficial interest and to have such Debt
Securities registered in its name. Individual Debt Securities of the series so
issued will be issued (a) as Registered Securities in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof if
the Debt Securities of that series are issuable as Registered Securities, (b) as
Bearer Securities in the denomination or denominations specified by the Company
if the Debt Securities of that series are issuable as Bearer Securities or (c)
as either Registered or Bearer Securities, if the Debt Securities of that series
are issuable in either form. See, however, "Limitations on Issuance of Bearer
Securities and Bearer Warrants" below for a description of certain restrictions
on the issuance of individual Bearer Securities in exchange for beneficial
interests in a Global Security.
LIMITATION ON LIENS
The Indenture provides that the Company may not, and may not permit any
Restricted Subsidiary to, issue, incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money secured by a pledge
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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.
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DESCRIPTION OF WARRANTS
THE FOLLOWING DESCRIPTION SETS FORTH CERTAIN GENERAL TERMS AND PROVISIONS OF
THE WARRANTS TO WHICH ANY PROSPECTUS SUPPLEMENT MAY RELATE. THE PARTICULAR TERMS
OF THE WARRANTS OFFERED BY ANY PROSPECTUS SUPPLEMENT AND THE EXTENT, IF ANY, TO
WHICH SUCH GENERAL TERMS AND PROVISIONS WILL NOT APPLY TO THE WARRANTS SO
OFFERED WILL BE DESCRIBED IN THE PROSPECTUS SUPPLEMENT RELATING TO THOSE
WARRANTS.
The Company may issue Warrants for the purchase of Debt Securities, Warrants
to buy or sell debt securities of or guaranteed by the United States or other
sovereign states ("Government Debt Securities"), Warrants to buy or sell
currencies, currency units or units of a currency index or currency basket,
Warrants to buy or sell units of a stock index or stock basket and Warrants to
buy and sell a commodity or 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 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
extendible 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
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of, or premium, if any, or interest, if any, on, those Debt Securities, or to
enforce any of the covenants in the Indenture.
If the offered Warrants are to buy or sell Government Debt Securities or a
currency, currency unit, currency index or currency basket, the Prospectus
Supplement will describe the amount and designation of the Government Debt
Securities or currency, currency unit, currency index or currency basket, as the
case may be, subject to each Warrant, whether those Warrants provide for cash
settlement or delivery of the Government Debt Securities or currency, currency
unit, currency index or currency basket upon exercise.
If the offered Warrants are Warrants on a stock index or a stock basket,
those Warrants will provide for payment of an amount in cash determined by
reference to increases or decreases in such stock index or stock basket, and the
Prospectus Supplement will describe the terms of those Warrants, the stock index
or stock basket covered by those Warrants and the market to which the stock
index or stock basket relates.
If the offered Warrants are Warrants on a commodity or commodity index,
those Warrants will provide for cash settlement or delivery of the particular
commodity or commodity index. The Prospectus Supplement will describe the terms
of those Warrants, the commodity or commodity index covered by those Warrants
and the market, if any, to which the commodity or commodity index relates.
Registered Warrants of any series will be exchangeable for Registered
Warrants of the same series representing in the aggregate the number of Warrants
surrendered for exchange. Warrant Certificates, to the extent exchangeable, may
be presented for exchange, and Registered Warrants may be presented for
transfer, at the corporate trust office of the Warrant Agent for that series of
Warrants (or any other office indicated in the Prospectus Supplement relating to
that series of Warrants). Warrants to buy or sell Government Debt Securities or
a currency, currency unit, currency index or currency basket, and Warrants on
stock indices or stock baskets or on commodities or commodity indices, may be
issued in the form of a single Global Warrant Certificate, registered in the
name of the nominee of the depository of the Warrants, or may initially be
issued in the form of definitive certificates that may be exchanged, on a fixed
date, or on a date or dates selected by the Company, for interests in a Global
Warrant Certificate, as set forth in the applicable Prospectus Supplement.
Bearer Warrants will be transferable by delivery. The Prospectus Supplement will
describe the terms of exchange applicable to any Bearer Warrants.
EXERCISE OF WARRANTS
Each Warrant will entitle the Holder to purchase such principal amount of
the Debt Securities or buy or sell such amount of Government Debt Securities or
of a currency, currency unit, currency index or currency basket, commodity or
commodities at the exercise price, or receive a settlement value in respect of
such amount of Government Debt Securities or of a currency, currency unit,
currency index or currency basket, stock index or stock basket, commodity or
commodity index, as shall in each case be set forth in or calculable from, the
Prospectus Supplement relating to that series of Warrants or as otherwise set
forth in the Prospectus Supplement. Warrants may be exercised at the corporate
trust office of the Warrant Agent (or any other office indicated in the
Prospectus Supplement relating to those Warrants) at any time up to 5:00 p.m.
New York time on the date set forth in the Prospectus Supplement relating to
those Warrants or as may be otherwise set forth in the Prospectus Supplement.
After such time on that date (or such later date to which such date may be
extended by the Company), unexercised Warrants will become void.
Subject to any restrictions and additional requirements that may be set
forth in the Prospectus Supplement relating thereto, Warrants may be exercised
by delivery to the Warrant Agent of the Warrant Certificate evidencing such
Warrants properly completed and duly executed and of payment as provided in the
Prospectus Supplement of the amount required to purchase the Debt Securities, or
(except in the case of Warrants providing for cash settlement) payment for or
delivery of the Government Debt Securities or currency, currency unit, currency
basket, stock index, stock basket, commodity or commodity index, as the case may
be, purchased or sold upon such exercise. Only Registered Securities will be
issued and delivered upon exercise of Registered Warrants. Warrants will be
deemed to have been exercised upon receipt of
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such Warrant Certificate and any payment, if applicable, at the corporate trust
office of the Warrant Agent or any other office indicated in the Prospectus
Supplement and the Company will, as soon as practicable thereafter, issue and
deliver the Debt Securities purchasable upon such exercise, or buy or sell such
Government Debt Securities or currency, currency unit, currency basket,
commodity or commodities or pay the settlement value in respect of the Warrants.
If fewer than all of the Warrants represented by such Warrant Certificate are
exercised, a new Warrant Certificate will be issued for the remaining amount of
the Warrants. Special provisions relating to the exercise of any Bearer Warrants
or automatic exercise of Warrants will be described in the related Prospectus
Supplement.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES AND BEARER WARRANTS
In compliance with United States federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Security will agree that, in connection with the original issuance
of such Bearer Security or during the restricted period (as defined in
applicable U.S. Treasury regulations) of such Bearer Security, they will not
offer, sell or deliver such Bearer Security, directly or indirectly, to a U.S.
Person or to any person within the United States, except to the extent permitted
under U.S. Treasury regulations.
Each Bearer Security, including Bearer Global Securities that will not be
exchanged for definitive individual Securities prior to the stated maturity,
will bear on the face of the Security and on any interest coupons that may be
detachable therefrom a legend to the following effect: "Any United States Person
who holds this obligation will be subject to limitations under the United States
income tax laws, including the limitations provided in Sections 165(j) and
1287(a) of the Internal Revenue Code." The sections referred to in the legend
provide that, with certain exceptions, a United States taxpayer who holds Bearer
Securities will not be allowed to deduct any loss, and will not be eligible for
capital gain treatment with respect to any gain, realized on a sale, exchange,
redemption or other disposition of those Bearer Securities. The legend described
above will also be evidenced on any book-entry system maintained with respect to
the Bearer Securities.
As used herein, "United States" means the United States of America and its
possessions, and "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under the
laws of the United States, or an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
Pending the availability of a definitive Global Security or individual
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security. Following the availability of a definitive Global Security in bearer
form, or individual Bearer Securities, and subject to any further limitations
described in the applicable Prospectus Supplement, the temporary Global Security
will be exchangeable for interests in such definitive Global Security or for
such individual Bearer Securities, respectively, only upon receipt of a
"Certificate of Non-U.S. Beneficial Ownership" unless such a certificate has
already been provided by the Depositary because interest has been paid on the
Global Security or because a reasonable period of time after the end of the
restricted period has passed.
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.
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PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) to
underwriters (including Bear Stearns) or dealers, who may act directly or
through a syndicate represented by one or more managing underwriters (including
Bear Stearns); (ii) through broker-dealers (including Bear Stearns) designated
by the Company to act on its behalf as agents; or (iii) directly to one or more
purchasers. Each Prospectus Supplement will set forth the manner and terms of
the offering of the Securities covered thereby, including (i) whether that
offering is being made to underwriters or through agents; (ii) any underwriting
discounts, dealer concessions, agency commissions and any other items that may
be deemed to constitute underwriters', dealers' or agents' compensation, and
(iii) the purchase price or initial public offering price of the Securities and
the anticipated proceeds to the Company from the sale of the Securities.
When Securities are to be sold to underwriters, unless otherwise set forth
in the applicable Prospectus Supplement, the obligations of the underwriters to
purchase those Securities will be subject to certain conditions precedent but
the underwriters will be obligated to purchase all of the Securities if any are
purchased. The Securities will be acquired by the underwriters for their own
account and may be resold by the underwriters, either directly to the public or
to securities dealers, from time to time in one or more transactions, including
negotiated transactions, either at fixed public offering price or at varying
prices determined at the time of sale. The initial public offering price, if
any, and any concessions allowed or reallowed to dealers, may be changed from
time to time.
To the extent that any Securities underwritten by Bear Stearns are not
resold by Bear Stearns for an amount at least equal to the public offering price
thereof, the proceeds from the offering of those Securities will be reduced.
Bear Stearns intends to resell any of those Securities from time to time
following termination of the offering at varying prices related to prevailing
market prices at the time of sale, subject to applicable prospectus delivery
requirements.
Unless otherwise indicated in the applicable Prospectus Supplement, when
Securities are sold through an agent, the designated agent will agree, for the
period of its appointment as agent, to use its best efforts to sell the
Securities for the Company's account and will receive commissions from the
Company as set forth in the applicable Prospectus Supplement.
Securities purchased in accordance with a redemption or repayment pursuant
to their terms may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing by one or more firms
("remarketing firms") acting as principals for their own accounts or as agents
for the Company. Any remarketing firm will be identified and the terms of its
agreement, if any, with the Company and its compensation will be described in
the Prospectus Supplement. Remarketing firms may be deemed to be underwriters in
connection with the Securities remarketed by them.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities at the public offering price set forth in
the Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a future date specified in the Prospectus Supplement.
These contracts will be subject only to those conditions set forth in the
applicable Prospectus Supplement and the Prospectus Supplement will set forth
the commissions payable for solicitation of these contracts.
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.
15
<PAGE>
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.
In order to facilitate the offering of certain Securities hereunder, certain
persons participating in the offering of those Securities may engage in
transactions that stabilize, maintain or otherwise affect the price of those
Securities during and after the offering of those Securities. Specifically, if
so set forth in the applicable Prospectus Supplement, the underwriters of those
Securities may over-allot or otherwise create a short position in those
Securities for their own account by selling more of those Securities than have
been sold to them by the Company and may elect to cover any such short position
by purchasing those Securities in the open market. In addition, the underwriters
may stabilize or maintain the price of those Securities by bidding for or
purchasing those Securities in the open market and may impose penalty bids,
under which selling concessions allowed to syndicate members or other
broker-dealers participating in the offering are reclaimed if Securities
previously distributed in the offering are repurchased in connection with
stabilization transactions or otherwise. The effect of these transactions may be
to stabilize or maintain the market price of the Securities at a level above
that which might otherwise prevail in the open market. The imposition of a
penalty bid may also affect the price of Securities to the extent that it
discourages resales thereof. No representation is made as to the magnitude or
effect of any such stabilization or other transactions. Such transactions, if
commenced, may be discontinued at any time.
Because 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.
Each of the Company, Bear Stearns and BSSC 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.
Applicable exemptions may include the exemption for services under Section
408(b)(2) of ERISA and certain prohibited transaction class exemptions ("PTCEs")
(E.G., PTCE 84-14 relating to qualified professional asset managers, PTCE 96-23
relating to certain in-house asset managers, PTCE 90-1 relating to insurance
company pooled separate accounts, PTCE 91-38 relating to bank collective trust
funds, PTCE
16
<PAGE>
95-60 relating to insurance company general accounts and PTCEs 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 non-exempt 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 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. 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 1997
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, New York, New York.
17
<PAGE>
PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY
THE BEAR STEARNS COMPANIES INC.
245 Park Avenue
New York, New York 10167
U.S.A.
TRUSTEE, REGISTRAR AND PRINCIPAL PAYING AGENT
THE CHASE MANHATTAN BANK
450 West 33rd Street
New York, New York 10001
U.S.A.
PAYING AGENT AND TRANSFER AGENT
THE CHASE MANHATTAN BANK
Trinity Towers
9 Thomas More Street
London E1 9YT
England
LEGAL ADVISERS
<TABLE>
<S> <C>
To the Underwriters as to U.S. Law To the Company as to U.S. Law
KRAMER LEVIN NAFTALIS & FRANKEL LLP CADWALADER, WICKERSHAM & TAFT
919 Third Avenue 100 Maiden Lane
New York, New York 10022 New York, New York 10038
U.S.A. U.S.A.
To the Underwriters as to English Law To the Company as to English Law
WEIL, GOTSHAL & MANGES CADWALADER, WICKERSHAM & TAFT
One South Place 55 Gracechurch Street, First Floor
London EC2M 2WG London EC3V 0EE
England England
</TABLE>
AUDITORS OF THE COMPANY
DELOITTE & TOUCHE LLP
2 World Financial Center
New York, New York 10281
U.S.A.
LISTING AGENT
BEAR, STEARNS INTERNATIONAL LIMITED
One Canada Square
London E14 5AD
England
<PAGE>
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WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED
INFORMATION. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS NOT
AN OFFER TO SELL OR BUY ANY SECURITIES IN ANY JURISDICTION WHERE IT IS UNLAWFUL.
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS CURRENT AS OF FEBRUARY 23, 1999
AND THE INFORMATION IN THE ACCOMPANYING PROSPECTUS IS CURRENT AS OF AUGUST 26,
1998.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Forward-Looking Statements...................... S-3
Certain Definitions............................. S-3
Where You Can Find More Information............. S-4
Summary of the Offering......................... S-5
Ratio of Earnings to Fixed Charges.............. S-8
The Bear Stearns Companies Inc.................. S-8
Use of Proceeds................................. S-10
Capitalization.................................. S-11
Selected Consolidated Financial Data............ S-12
Description of the Notes........................ S-13
Description of the Company...................... S-22
Certain U.S. Federal Income Tax
Considerations................................ S-36
Underwriting.................................... S-40
Legal Matters................................... S-42
Experts......................................... S-43
General Information............................. S-43
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......................... 12
Limitations on Issuance of Bearer Securities and
Bearer Warrants............................... 14
Plan of Distribution............................ 15
ERISA Considerations............................ 16
Experts......................................... 17
Validity of Securities.......................... 17
</TABLE>
U.S.$750,000,000
THE BEAR STEARNS
COMPANIES INC.
6.15% GLOBAL NOTES DUE 2004
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PROSPECTUS SUPPLEMENT
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BEAR, STEARNS & CO. INC.
ABN AMRO
CHASE SECURITIES INC.
DRESDNER KLEINWORT BENSON
FIRST CHICAGO CAPITAL MARKETS, INC.
LEHMAN BROTHERS
J.P. MORGAN & CO.
NATIONSBANC MONTGOMERY
SECURITIES LLC
SALOMON SMITH BARNEY
SG
WARBURG DILLON READ LLC
WESTDEUTSCHE LANDESBANK GIROZENTRALE
FEBRUARY 23, 1999
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