<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-31980
PROSPECTUS SUPPLEMENT
(To Prospectus Dated March 17, 2000)
US$1,250,000,000
THE BEAR STEARNS COMPANIES INC.
FLOATING RATE GLOBAL NOTES DUE 2003
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 floating annual rate of three-month LIBOR plus 0.35%, which
will be paid every three months on March 29, June 29, September 29 and
December 29.
- - MATURITY
The Notes will mature on March 28, 2003.
- - 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 US
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............................... 99.9727% $1,249,658,750
Underwriting discount....................................... 0.200% $ 2,500,000
Proceeds, before expenses, to us............................ 99.7727% $1,247,158,750
</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, Clearstream Banking
Luxembourg S.A. and Morgan Guaranty Trust Company of New York, Brussels office,
as operator of the Euroclear system against payment on or about March 29, 2000.
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.
<TABLE>
<S> <C>
ABN AMRO INCORPORATED BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC. BARCLAYS CAPITAL
CHASE SECURITIES INC. LEHMAN BROTHERS
J.P. MORGAN & CO. SALOMON SMITH BARNEY
WACHOVIA SECURITIES, INC. WARBURG DILLON READ LLC
</TABLE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE
The date of this prospectus supplement is March 22, 2000
<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 US. 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
- "US dollars," "dollars," "US $" and "$" 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 Bear Stearns Companies
Inc.
S-3
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual and quarterly 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 we file 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. Our 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 us 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, 1999;
(ii) the Quarterly Reports on Form 10-Q for the quarters ended
September 24, 1999 and December 31, 1999 and for the five-month period
ended November 26, 1999 and the Quarterly Report on Form 10-Q/A for the
quarter ended December 31, 1999; and
(iii) the Current Reports on Form 8-K dated July 21, 1999, July 22, 1999,
August 5, 1999, August 9, 1999, October 13, 1999, October 29, 1999,
December 1, 1999, January 19, 2000, January 25, 2000, March 15, 2000 and
March 17, 2000.
We 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 us 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..................... US $1,250,000,000 aggregate principal amount of Floating
Rate Global Notes due 2003.
SPECIFIED CURRENCY..................... The Notes will be denominated in US dollars and all
payments on the Notes will be made in US dollars.
OFFERING PRICE......................... The Notes are being offered at a price of 99.9727% of par.
DATE OF ORIGINAL ISSUANCE (SETTLEMENT
DATE)................................ March 29, 2000.
MATURITY DATE.......................... March 28, 2003.
INTEREST PAYMENT DATES................. March 29, June 29, September 29 and December 29 in each
year, beginning June 29, 2000.
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, 1999:
- we had outstanding (on an unconsolidated basis)
approximately $34.8 billion of debt and other
obligations, including approximately $34.2 billion
of senior debt, none of which is secured; and
- our subsidiaries had outstanding (after
consolidation and eliminations) approximately
$134.7 billion of debt and other obligations
(including $63.1 billion related to securities sold
under repurchase agreements, $43.5 billion related
to payables to customers, $21.5 billion related to
financial instruments sold, but not yet purchased,
and $6.6 billion of other liabilities, including
$5.2 billion of debt).
MANDATORY REDEMPTION OR SINKING FUND... None.
OPTIONAL REDEMPTION.................... The Notes may only be redeemed prior to maturity if
certain events involving US taxation occur. See
"Redemption Upon Certain Tax 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 us or a paying agent of
the principal of and interest on the Notes to a person
that is not a US Holder (as defined under "Certain US
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 UPON CERTAIN TAX 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 Upon Certain Tax
Events" below.
USE OF PROCEEDS........................ We will use the net proceeds before expenses from the sale
of the Notes of approximately $1.247 billion 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
Clearstream Banking Luxembourg S.A. ("Clearstream
Luxembourg") 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 Clearstream Luxembourg 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 1.3 for the six months ended
December 31, 1999 and for the fiscal year ended June 30, 1999. 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 investment
banking, securities trading and brokerage firm serving corporations, governments
and institutional and individual investors worldwide. Our business includes:
- market-making and trading in US government, government agency, corporate
debt and equity, mortgage-related, asset-backed and municipal securities;
- trading in options, futures, foreign currencies, interest rate swaps and
other derivative products;
- securities and futures arbitrage;
- securities, options and futures brokerage;
- underwriting and distributing securities;
- providing securities clearance services;
- financing customer activities;
- securities lending;
- arranging for the private placement of securities;
- assisting 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 and the
American Stock Exchange;
- providing fiduciary and other services, such as real estate brokerage,
investment management and investment advisory; and
- financial market and securities research.
We are incorporated in the State of Delaware. Our principal executive office
is located at 245 Park Avenue, New York, New York 10167, USA, and our telephone
number is (212) 272-2000. Our Internet address is http://www.bearstearns.com.
S-8
<PAGE>
DIRECTORS OF THE COMPANY
The following table sets forth certain information concerning the directors
of the Company.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED TO
SERVE AS
AGE DIRECTOR OF
NAME (AS OF SEPTEMBER 8, 1999) PRINCIPAL OCCUPATION AND DIRECTORSHIPS HELD THE COMPANY
- ---- -------------------------- ------------------------------------------- -----------
<S> <C> <C> <C>
James E. Cayne.............. 65 President and Chief Executive Officer of 1985
the Company and Bear Stearns and member of
the Executive Committee
Carl D. Glickman............ 73 Private Investor; In the United States, 1985
Director, Lexington Capital Properties
Trust and Office Max Inc.; In Israel,
Director, Alliance Tire and Rubber Company
(1992) Ltd. and The Jerusalem Economic
Corporation Ltd.; Trustee, Cleveland State
University
Alan C. Greenberg........... 72 Chairman of the Board of the Company and 1985
Bear Stearns and Chairman of the Executive
Committee
Donald J. Harrington........ 53 President, St. John's University; Director, 1993
The Reserve Fund, Reserve Institutional
Trust, Reserve Tax-Exempt Trust, Reserve
New York Tax-Exempt Trust and Reserve
Special Portfolios Trust
William L. Mack............. 59 President and Senior Managing Partner, The 1997
Mack 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............ 52 President and Chief Executive Officer of 1993
Kelso & Company; Director, Earle M.
Jorgensen Company and Peebles Inc.
Frederic V. Salerno......... 56 Senior Executive Vice President and 1992
CFO/Strategy and Business Development and
Director of Bell Atlantic Corporation;
Director, Avnet, Inc., KeySpan Energy
Corp., The Hartford and Viacom, Inc.
Alan D. Schwartz............ 49 Executive Vice President and Head of the 1987(1)
Investment Banking Group of Bear Stearns;
Director, Unique Casual Restaurants, Inc.,
Young & Rubicam, Inc.
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED TO
SERVE AS
AGE DIRECTOR OF
NAME (AS OF SEPTEMBER 8, 1999) PRINCIPAL OCCUPATION AND DIRECTORSHIPS HELD THE COMPANY
- ---- -------------------------- ------------------------------------------- -----------
<S> <C> <C> <C>
Warren J. Spector........... 41 Executive Vice President and Head of the 1990(1)
Fixed Income Group of Bear Stearns
Vincent Tese................ 56 Chairman and Director of Wireless Cable 1994
International Inc.; Director, Allied Waste
Industries Inc., Angram, Inc., Bowne & Co.,
Inc., Cablevision International, Custodial
Trust Co., Mack-Cali Realty Corp. and
KeySpan Energy Corp.
Fred Wilpon................. 62 Chairman of the Board of Directors of 1993
Sterling Equities, Inc.; Chairman of
Executive Committee and Director of
Pathogenesis Corporation; President and
Chief Executive Officer of the New York
Mets
</TABLE>
- ------------------------
(1) Did not serve as director during 1997 and 1998.
Mr. Cayne has been Chief Executive Officer of the Company and Bear Stearns
since July 1993. Mr. Cayne 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) and a founder and Managing Partner of the
Apollo Real Estate Investment Funds for more than the past five years. 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. Schwartz has been an Executive Vice President of Bear Stearns for more
than the past five years. Prior to June 30, 1999, Mr. Schwartz was an Executive
Vice President of the Company and a
S-10
<PAGE>
member of the Executive Committee for more than the past five years.
Mr. Schwartz is responsible for all of the investment banking activities of Bear
Stearns.
Mr. Spector has been an Executive Vice President of Bear Stearns for more
than the past five years. Prior to June 30, 1999, Mr. Spector was an Executive
Vice President of the Company and a member of the Executive Committee for more
than the past five years. Mr. Spector is responsible for all of the fixed income
activities of Bear Stearns.
Mr. Tese has been Chairman of Wireless Cable International Inc. since
April 1995. Mr. Tese was Chairman of Cross Country Wireless Inc. 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.
All directors hold office until our 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, USA.
USE OF PROCEEDS
We will use the net proceeds before expenses from the sale of the Notes of
approximately $1.247 billion 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-11
<PAGE>
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
December 31, 1999 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. It is
important that you read the following information along with the consolidated
financial statements and notes thereto incorporated by reference in this
prospectus supplement and the accompanying prospectus. See "Where You Can Find
More Information" and "General Information."
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
----------- -----------
<CAPTION>
(UNAUDITED, IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Short-Term Borrowings(1)(3):
Bank Borrowings........................................... $ 1,930,289 $ 1,930,289
Commercial Paper.......................................... 11,931,199 11,931,199
Medium-Term Notes......................................... 4,082,194 4,082,194
----------- -----------
Total Short-Term Borrowings............................. $17,943,682 $17,943,682
=========== ===========
Long-Term Borrowings(2)(3):
Floating Rate Notes due 2001 to 2005...................... $ 2,313,081 $ 3,562,740
Fixed Rate Senior Notes due 2000 to 2009; interest rates
ranging from 5.75% to 9.375%............................ 7,392,416 7,392,416
Medium-Term Notes......................................... 7,082,352 7,082,352
----------- -----------
Total Long-Term Borrowings.............................. 16,787,849 18,037,508
----------- -----------
Guaranteed Preferred Beneficial Interests in Company
Subordinated Debt Securities(4)........................... 500,000 500,000
----------- -----------
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: 184,805,848 shares issued................... 184,806 184,806
Paid-in Capital............................................. 2,510,569 2,510,569
Retained Earnings........................................... 2,033,656 2,033,656
Capital Accumulation Plan................................... 1,174,690 1,174,690
Treasury Stock:
Adjustable Rate Cumulative Preferred Stock, Series
A--2,520,750 shares..................................... (103,421) (103,421)
Common Stock--69,441,402 shares........................... (1,670,303) (1,670,303)
----------- -----------
Total Stockholders' Equity.............................. 4,929,997 4,929,997
----------- -----------
Total Long-Term Borrowings, Guaranteed Preferred Beneficial
Interests in Company Subordinated Debt Securities and
Stockholders' Equity...................................... $22,217,846 $23,467,505
=========== ===========
</TABLE>
- ------------------------
(1) Between December 31, 1999 and February 25, 2000, there were $3.9 billion in
net issuances of short-term borrowings.
(2) Between December 31, 1999 and February 25, 2000, the Company issued
$1.3 billion in
long-term borrowings and retired $290.3 million of its long-term borrowings.
(3) By virtue of the nature of our business and that of our subsidiaries, our
borrowings, particularly our short-term borrowings, fluctuate from day to
day in the ordinary course of business. Except as disclosed in Notes (1) and
(2), since December 31, 1999, there has been no material change in our
consolidated capitalization.
(4) 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 of our subordinated debentures
as its sole asset.
S-12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The financial data in the following table for the six months ended
December 31, 1999 and December 31, 1998 and the five month periods ended
November 26, 1999 and November 27, 1998 has been derived from our unaudited
consolidated financial statements for those periods. The financial data in the
following table for the fiscal years ended June 30, 1999, 1998, 1997, 1996 and
1995 has been derived from our audited consolidated financial statements for
those years. See "Where You Can Find More Information" and "General
Information."
<TABLE>
<CAPTION>
FIVE MONTHS ENDED* SIX MONTHS ENDED
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
NOVEMBER 26, NOVEMBER 27, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
OPERATING RESULTS:
Revenues................................................... $ 3,470,290 $ 2,975,181 $ 4,429,493 $ 3,613,331
Interest expense........................................... 1,531,787 1,650,885 1,957,794 1,851,638
------------ ------------ ------------ ------------
Revenues, net of interest expense.......................... 1,938,503 1,324,296 2,471,699 1,761,693
------------ ------------ ------------ ------------
Non-interest expenses
Employee compensation and benefits......................... 973,990 732,884 1,190,133 958,225
Other...................................................... 510,921 401,684 641,957 502,681
------------ ------------ ------------ ------------
Total non-interest expenses................................ 1,484,911 1,134,568 1,832,090 1,460,906
------------ ------------ ------------ ------------
Income before provision for income taxes................... 453,592 189,728 639,609 300,787
Provision for income taxes................................. 167,778 59,460 236,655 100,764
------------ ------------ ------------ ------------
Net income................................................. $ 285,814 $ 130,268 $ 402,954 $ 200,023
============ ============ ============ ============
Net income applicable to common shares..................... $ 269,517 $ 113,654 $ 383,398 $ 180,150
============ ============ ============ ============
FINANCIAL POSITION:
Total assets............................................... $162,037,962 $177,392,594 $151,130,499
Long-term borrowings....................................... $ 15,911,392 $ 16,787,849 $ 13,843,516
Stockholders' equity(1).................................... $ 5,441,947 $ 5,429,997 $ 5,016,603
Common shares and common share equivalents
outstanding(2)........................................... 165,956,810 163,904,102 167,183,025
PER SHARE DATA:
Earnings per share(2)...................................... $ 1.78 $ 0.73 $ 2.58 $ 1.16
Cash dividends declared per common share(2)................ $ 0.29 $ 0.27 $ 0.29 $ 0.27
Book value per common share(2)............................. $ 26.93 $ 27.49 $ 22.56
OTHER DATA:
Return on average common equity............................ 19.9% 10.7%
Profit margin(3)........................................... 23.4% 14.3% 25.9% 17.1%
Employees.................................................. 10,081 9,416 10,098 9,532
</TABLE>
- ------------------------
* On January 18, 2000, our board of directors approved a change in our fiscal
year-end to November 30 from June 30, effective with the year beginning
November 27, 1999 and accordingly, the table includes certain supplemental
financial information.
(1) As of December 31, 1999, November 26, 1999 and June 30, 1999, stockholders'
equity includes $500 million of Guaranteed Preferred Beneficial Interests in
Company Subordinated Debt Securities, which reflects preferred securities of
Bear Stearns Capital Trust I and Bear Stearns Capital Trust II. As of
December 31, 1998 stockholders' equity includes $650 million of Preferred
Stock issued by our subsidiaries which consists of $500 million of
Guaranteed Preferred Beneficial Interests in Company Subordinated Debt
Securities and $150 million of Exchangeable Preferred Income Cumulative
Shares ("EPICs"). As of June 30, 1998 and 1997, stockholders' equity
includes $350 million of Preferred Stock issued by our subsidiaries, which
consists of $150 million of EPICs and $200 million of Guaranteed Preferred
Beneficial Interests in Company Subordinated Debt Securities. As of
June 30, 1996 and 1995, stockholders' equity includes $150 million of EPICs,
which were issued by one of our subsidiaries.
(2) Reflects all stock dividends declared through October 29, 1999.
(3) Represents the ratio of income before provision for income taxes to
revenues, net of interest expense.
S-13
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
OPERATING RESULTS:
Revenues............................................ $ 7,882,038 $ 7,979,936 $ 6,077,278 $ 4,963,863 $ 3,753,572
Interest expense.................................... 3,379,914 3,638,513 2,551,364 1,981,171 1,678,515
------------ ------------ ------------ ------------ ------------
Revenues, net of interest expense................... 4,502,124 4,341,423 3,525,914 2,982,692 2,075,057
Non-interest expenses
Employee compensation and benefits.................. 2,285,594 2,111,741 1,726,931 1,469,448 1,080,487
Other............................................... 1,152,422 1,166,190 785,293 678,318 606,488
------------ ------------ ------------ ------------ ------------
Total non-interest expenses......................... 3,438,016 3,277,931 2,512,224 2,147,766 1,686,975
------------ ------------ ------------ ------------ ------------
Income before provision for income taxes............ 1,064,108 1,063,492 1,013,690 834,926 388,082
Provision for income taxes.......................... 391,060 403,063 400,360 344,288 147,471
------------ ------------ ------------ ------------ ------------
Net income.......................................... $ 673,048 $ 660,429 $ 613,330 $ 490,638 $ 240,611
============ ============ ============ ============ ============
Net income applicable to common shares.............. $ 633,618 $ 629,417 $ 589,497 $ 466,145 $ 215,474
============ ============ ============ ============ ============
FINANCIAL POSITION:
Total assets........................................ $153,894,340 $154,495,895 $121,433,535 $ 92,085,157 $ 74,597,160
Long-term borrowings................................ $ 14,647,092 $ 13,295,952 $ 8,120,328 $ 6,043,614 $ 4,059,944
Stockholders' equity(1)............................. $ 5,455,509 $ 4,641,533 $ 3,626,371 $ 2,895,414 $ 2,502,461
Common shares and common share equivalents
outstanding(2).................................... 167,265,996 167,173,826 167,096,515 166,780,371 166,991,227
PER SHARE DATA:
Earnings per share(2)............................... $ 4.26 $ 4.17 $ 3.81 $ 2.96 $ 1.40
Cash dividends declared per common share(2)......... $ 0.56 $ 0.54 $ 0.52 $ 0.50 $ 0.47
Book value per common share(2)...................... $ 25.60 $ 21.64 $ 17.74 $ 14.54 $ 12.10
OTHER DATA:
Return on average common equity..................... 18.8% 21.7% 27.9% 25.6% 13.5%
Profit margin(3).................................... 23.6% 24.5% 28.7% 28.0% 18.7%
Employees........................................... 9,808 9,180 8,309 7,749 7,481
</TABLE>
- ------------------------
(1) As of December 31, 1999, November 26, 1999 and June 30, 1999, stockholders'
equity includes $500 million of Guaranteed Preferred Beneficial Interests in
Company Subordinated Debt Securities, which reflects preferred securities of
Bear Stearns Capital Trust I and Bear Stearns Capital Trust II. As of
December 31, 1998 stockholders' equity includes $650 million of Preferred
Stock issued by our subsidiaries which consists of $500 million of
Guaranteed Preferred Beneficial Interests in Company Subordinated Debt
Securities and $150 million of Exchangeable Preferred Income Cumulative
Shares ("EPICs"). As of June 30, 1998 and 1997, stockholders' equity
includes $350 million of Preferred Stock issued by our subsidiaries, which
consists of $150 million of EPICs and $200 million of Guaranteed Preferred
Beneficial Interests in Company Subordinated Debt Securities. As of
June 30, 1996 and 1995, stockholders' equity includes $150 million of EPICs,
which were issued by one of our subsidiaries.
(2) Reflects all stock dividends declared through October 29, 1999.
(3) Represents the ratio of income before provision for income taxes to
revenues, net of interest expense.
S-14
<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 US
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, 1999:
- we had outstanding (on an unconsolidated basis) approximately
$34.8 billion of debt and other obligations, including approximately
$34.2 billion of senior debt, none of which is secured; and
- our subsidiaries had outstanding (after consolidation and eliminations)
approximately $134.7 billion of debt and other obligations (including
$63.1 billion related to securities sold under repurchase agreements,
$43.5 billion related to payables to customers, $21.5 billion related to
financial instruments sold, but not yet purchased, and $6.6 billion of
other liabilities, including $5.2 billion of debt).
S-15
<PAGE>
PRINCIPAL, MATURITY AND INTEREST
The Notes will be issued in the offering and will mature on March 28, 2003.
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 described in this Prospectus
Supplement will constitute a single series of debt securities 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 a rate per annum equal to LIBOR plus a
margin of 0.35%. Interest on the Notes will be paid every three months on each
March 29, June 29, September 29 and December 29 (each, an "Interest Payment
Date"), beginning June 29, 2000 (which first payment includes interest from the
date of issuance), to the persons who are registered Holders at the close of
business on the March 15, June 15, September 15 and December 15 immediately
before the applicable Interest Payment Date. If any Interest Payment Date falls
on a day that is not a London Business Day, the interest payment will be made on
the next London Business Day, and the Holder is not entitled to any additional
interest for the delay.
LIBOR will be determined by The Chase Manhattan Bank, as calculation agent
(the "Calculation Agent"), for each applicable Interest Period in accordance
with the following provisions:
(1) For each applicable Interest Period, LIBOR will be determined on the
applicable Interest Determination Date on the basis of the offered rate for
deposits of U.S. dollars having a maturity of three months, commencing on
the second London Business Day immediately following such Interest
Determination Date, which appears on Telerate page 3750 (or such other page
as may replace Telerate page 3750 for the purpose of displaying London
interbank rates of major banks), as of 11:00 A.M., London time, on such
Interest Determination Date. If no such rate appears on Telerate page 3750
(or such other page as may replace such page), LIBOR in respect of such
Interest Determination Date will be determined as if the parties had
specified the rate described in (2) below.
(2) On any applicable Interest Determination Date on which no offered
rates for deposits of U.S. dollars having a maturity of three months appear
on Telerate page 3750 (or such other page as may replace such page) as
described in (1) above, LIBOR will be determined on the basis of the rates
at approximately 11:00 A.M., London time, on such Interest Determination
Date at which deposits in U.S. dollars having a maturity of three months are
offered to prime banks in the London interbank market by four major banks in
the London interbank market selected by the Calculation Agent commencing on
the second London Business Day immediately following such Interest
Determination Date and in a principal amount equal to an amount of not less
than U.S. $1,000,000 that is representative for a single transaction in such
market at such time. The Calculation Agent will request the principal London
office of such banks to provide a quotation of its rate. If at least two
such quotations are provided, LIBOR for such Interest Determination Date
will be the arithmetic mean of such quotations. If fewer than two quotations
are provided, LIBOR for such Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 A.M., New York
City time, on such Interest Determination Date by three major banks in New
York City, selected by the Calculation Agent for loans in U.S. dollars to
leading European banks, having a maturity of three months commencing on the
second London Business Day immediately following such Interest Determination
Date and in a principal amount equal to an amount of not less than
U.S. $1,000,000 that is representative for a single transaction in such
market at such time; provided, however, that if the banks selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR will be LIBOR in effect on such Interest Determination Date.
S-16
<PAGE>
The following terms have the following meanings:
"Interest Determination Date" for any Interest Period means the second
London Business Day preceding the Interest Payment Date on which such Interest
Period commences.
"Interest Period" means the period beginning on and including the most
recent date on which interest is payable (with the first such period commencing
on and including July 29, 1999) and ending on but excluding the next Interest
Payment Date.
"London Business Day" means any day (1) that is a New York Business Day and
(2) on which dealings in deposits in U.S. dollars are transacted in the London
interbank market.
"New York Business Day" means any day that is not a Saturday or Sunday and
that, in New York City, is not a day on which banking institutions generally are
authorized or required by law or executive order to close.
Interest on the Notes will accrue during the applicable Interest Period.
Interest will be computed by multiplying (1) the face amount of a Note by
(2) an accrued interest factor computed by multiplying (a) the per annum rate of
interest for the applicable Interest Period by (b) a fraction (x) the numerator
of which is the actual number of days elapsed in that Interest Period and
(y) the denominator of which is 360.
All percentages resulting from any calculations on Notes will be rounded, if
necessary, to the nearest one hundred-thousandth of a percent, with five
one-millionths of a percent being rounded upward (for example, 6.876545% (or
.06876545) being rounded to 6.87655% (or .0687655) and 6.876544% (or .06876544)
being rounded to 6.87654% or (.0687654)), and all U.S. dollar amounts used in or
resulting from such calculation on Notes will be rounded to the nearest cent
(with one-half cent being rounded upward).
The interest rate on the Notes will not be higher than the maximum rate
permitted by New York law, as modified by federal law. Current New York law
provides a maximum interest rate of 25% per annum. This limit does not apply to
Notes with principal amounts of $2,500,000 or more.
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"). We have also agreed that as long as the Notes
are listed on the London Stock Exchange and its rules require, we will appoint
and maintain a transfer agent and paying agent in London. We have 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 us. 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 US dollar check drawn on a
bank in New York City and mailed on the business day immediately before the
interest due date.
S-17
<PAGE>
PAYMENT OF ADDITIONAL AMOUNTS
Subject to the various exceptions and limitations set forth below, we will
pay as additional interest or principal, as the case may be, on the Notes, all
such additional amounts that are necessary in order that the net payment by us
or a paying agent of the principal of and interest on the Notes to a person that
is not a US Holder (as defined under "Certain US 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 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 a 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;
S-18
<PAGE>
(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;
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 Upon Certain Tax
Events," we are 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 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, we
determine that we 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 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, 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 we
determine, in our business judgement, 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. No redemption pursuant to
clause (b) above may be made unless we have 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 we are therefore entitled to redeem the Notes
pursuant to their terms.
S-19
<PAGE>
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 us, and the Holder of the Note will after that time look, as an
unsecured creditor, only to us 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 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 Clearstream Luxembourg and DTC, publication in the specified newspapers
may be replaced with the delivery of the relevant notice to Euroclear and/or
Clearstream Luxembourg 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 Clearstream Luxembourg 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 Clearstream Luxembourg or Euroclear (in
Europe). Interests will be held on behalf of Clearstream Luxembourg 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.
S-20
<PAGE>
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.
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."
CLEARSTREAM LUXEMBOURG AND EUROCLEAR SERVICES
Clearstream Luxembourg is incorporated under the laws of Luxembourg as a
professional depositary. Clearstream Luxembourg holds securities for its
participating organizations ("Clearstream Luxembourg Participants") and
facilitates the clearance and settlement of securities transactions between
Clearstream Luxembourg Participants through electronic book-entry charges in
accounts of Clearstream Luxembourg Participants, which eliminates the need for
physical movement of certificates. Clearstream Luxembourg provides to
Clearstream Luxembourg 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, Clearstream Luxembourg is regulated by the Luxembourg
Monetary Institute. Clearstream Luxembourg 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
Clearstream Luxembourg is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream Luxembourg Participant either directly or
indirectly.
Distributions with respect to the Notes that are held beneficially through
Clearstream Luxembourg will be credited to cash accounts of Clearstream
Luxembourg Participants in accordance with its rules and procedures, and to the
extent received by the US depositary for Clearstream Luxembourg.
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.
S-21
<PAGE>
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.
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 US depositary
for Euroclear.
DEFINITIVE NOTES
Definitive Notes may be issued upon:
(i) Euroclear and/or Clearstream Luxembourg 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 us or the Trustee duly executed by the holder or his
attorney duly authorized in writing. We 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, Clearstream Luxembourg 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 Clearstream Luxembourg Participants and/or Euroclear
Participants will occur in the ordinary way in accordance with the applicable
rules and operating procedures of Clearstream Luxembourg and Euroclear and will
be settled using the procedures applicable to conventional eurobonds in
registered form in same day funds.
S-22
<PAGE>
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 CLEARSTREAM LUXEMBOURG
PARTICIPANTS. Secondary market trading between Euroclear Participants and/or
Clearstream Luxembourg Participants will be settled using the procedures
applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND EUROCLEAR OR CLEARSTREAM LUXEMBOURG
PURCHASER. When Notes are to be transferred from the account of a DTC
Participant to the account of a Euroclear or Clearstream Luxembourg Participant,
the purchaser will send instructions to Euroclear or Clearstream Luxembourg
through a Euroclear or Clearstream Luxembourg Participant, as the case may be,
at least one business day before settlement. Euroclear or Clearstream Luxembourg
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 Clearstream Luxembourg 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 Clearstream Luxembourg cash debit will be valued as of
the actual settlement date.
Euroclear and Clearstream Luxembourg 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 Clearstream Luxembourg until the interests in the Global Security
are credited to their accounts one day later.
As an alternative, if Euroclear or Clearstream Luxembourg has extended a
line of credit to a Euroclear or Clearstream Luxembourg 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 Clearstream Luxembourg 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 Clearstream Luxembourg for the benefit
of Euroclear or Clearstream Luxembourg 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 CLEARSTREAM LUXEMBOURG SELLER AND DTC
PURCHASER. Because the time zone difference operates in their favor, Euroclear
and Clearstream Luxembourg 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 Clearstream Luxembourg through a Euroclear or
Clearstream Luxembourg Participant at least one business day before settlement.
In these cases, Euroclear or Clearstream
S-23
<PAGE>
Luxembourg 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 Clearstream Luxembourg Participant on the
following day, and receipt of the cash proceeds in the Euroclear or Clearstream
Luxembourg 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 Clearstream Luxembourg 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
Clearstream Luxembourg Participant's account would instead be valued as of the
actual settlement date.
Finally, day traders that use Euroclear or Clearstream Luxembourg to
purchase Notes from DTC Participants for delivery to Euroclear or Clearstream
Luxembourg Participants should note that these trades automatically fail on the
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 Clearstream Luxembourg for one day
(until the purchase side of the day trade is reflected in their Euroclear or
Clearstream Luxembourg 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 Clearstream Luxembourg 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 Clearstream
Luxembourg Participant.
Although DTC, Clearstream Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of Notes among
participants of DTC, Clearstream Luxembourg 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, Clearstream Luxembourg,
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, Clearstream Luxembourg'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.
S-24
<PAGE>
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. We are a holding company that through our
subsidiaries, principally Bear Stearns, BSSC and BSIL is a leading investment
banking, securities trading and brokerage firm serving corporations,
governments, institutional and individual investors worldwide. BSSC, a
subsidiary of Bear Stearns, provides professional and correspondent clearing
services, in addition to clearing and settling our proprietary and customer
transactions. We succeeded on October 29, 1985, to the business of Bear,
Stearns & Co., a New York limited partnership (the "Partnership"). As used in
this section, "we," "us" or "our" refer (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
We are primarily engaged in business as a securities broker and dealer
operating in three principal segments: Capital Markets, Execution Services and
Wealth Management. These segments are strategic business units analyzed
separately due to the distinct nature of the products they provide and the
clients they serve. Certain Capital Markets products are distributed by the
Wealth Management and Execution Services distribution network with related
revenue of such intersegment services allocated to the respective segments
through transfer pricing policies.
The Capital Markets segment is comprised of the Equities, Fixed Income and
Investment Banking areas with over 2,600 directly attributable employees.
Equities combines the efforts of sales, trading and research professionals to
offer in-depth expertise in areas such as block trading, convertible bonds,
over-the-counter ("OTC") equities, equity derivatives and risk arbitrage. Fixed
Income provides distribution power for issuers in the primary market, liquidity
for investors in the secondary market, research for institutional clients and
offers expertise in products such as mortgage-backed and asset-backed
securities, corporate and government bonds, municipal and high yield securities,
foreign exchange and derivatives. Investment Banking provides a variety of
services to our clients, including capital raising, strategic advisory, mergers
and acquisitions and merchant banking capabilities. Capital raising encompasses
our underwriting of equity, investment grade debt and high yield debt
securities.
The Execution Services segment is comprised of clearance and predominately
commission-related areas, including institutional equity sales, institutional
futures sales and specialists activities. At June 30, 1999, approximately 2,700
dedicated employees serve these business areas.
Institutional equity sales involves the execution of transactions in US
equity securities for domestic and foreign institutional customers and providing
these customers with liquidity, trading expertise, trade execution, research and
investment advice. We provide transaction services for institutional customers
who trade in futures and futures-related instruments. We are also involved in
specialist activities on both the New York Stock Exchange ("NYSE") and the
American Stock Exchange ("AMEX").
We also provide clearing, margin lending and securities borrowing to
facilitate customer short sales to over 2,700 clearing clients worldwide. Such
clients include approximately 2,300 prime brokerage clients including hedge fund
managers, money managers, short sellers, arbitrageurs and other professional
investors and approximately 400 fully disclosed clients, who engage in either
the retail or institutional brokerage business. We process trades in over 70
countries and account for approximately 10% of the average daily NYSE volume,
processing an average of in excess of 175,000 trades per day.
Wealth Management provides fee-based products and services through the
Private Client Services ("PCS") and Asset Management areas to both individual
and institutional investors.
S-25
<PAGE>
PCS provides high-net-worth individuals with an institutional level of
service, including access to our resources and professionals. PCS maintains a
select team of approximately 500 account executives in seven regional offices.
These account executives averaged approximately $1.0 million in production in
fiscal 1999. PCS had over $39 billion in client assets at June 30, 1999.
The Asset Management area, through Bear Stearns Asset Management Inc., had
$12.2 billion in assets under management at June 30, 1999 which reflected a
greater than 24% increase over the prior year. The largest component of the
increase was attributable to equities and alternative investments. Asset
Management serves the diverse investment needs of corporations, municipal
governments, multi-employer plans, foundations, endowments, family groups and
high-net-worth individuals. Innovation in products and services enables Asset
Management to serve clients in an increasingly competitive financial
marketplace.
Financial information regarding our industry segments and foreign operations
for the three successive fiscal years ended June 30, 1999 is set forth under the
Notes to the Consolidated Financial Statements in Footnote 13, entitled "Segment
and Geographic Area Data," in our Annual Report on Form 10-K for the fiscal year
ended June 30, 1999. See "Where You Can Find More Information" and "General
Information."
NARRATIVE DESCRIPTION OF BUSINESS
We are a holding company which through our principal subsidiaries, Bear
Stearns, BSSC and BSIL, is a leading investment banking, securities trading and
brokerage firm serving corporations, governments, institutional and individual
investors worldwide. Our business includes:
- market-making and trading in US government, government agency, corporate
debt and equity, mortgage-related, asset-backed and municipal securities;
trading in options, futures, foreign currencies, interest rate swaps and
other derivative products;
- securities, options and futures brokerage;
- providing securities clearance services;
- managing equity and fixed income assets for institutional and individual
clients; financing customer activities; securities lending; securities and
futures arbitrage;
- acting as specialist on the floor of the NYSE and the AMEX;
- underwriting and distributing securities;
- arranging for the private placement of securities;
- assisting in mergers, acquisitions, restructurings and leveraged
transactions; making principal investments in leveraged acquisitions;
- engaging in commercial real estate activities; and
- investment management and advisory; fiduciary, custody, agency and
securities research services.
Our business is conducted:
- from our 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, Hong Kong and Shanghai; through
international offices in Buenos Aires, Dublin, London, Lugano, Sao Paulo,
Singapore and Tokyo; and
- through joint ventures with other firms in Belgium, Greece and Madrid.
S-26
<PAGE>
Our international offices provide services and engage in investment activities
involving foreign clients and international transactions. Additionally, certain
of these foreign offices provide services to US clients. We provide trust
company services through our subsidiary, Custodial Trust Company ("CTC"),
located in Princeton, New Jersey.
Bear Stearns and BSSC are broker-dealers registered with the SEC.
Additionally, Bear Stearns is registered as an investment adviser with the SEC.
Bear Stearns and BSSC are also members of the NYSE, all other principal US
securities and futures exchanges, the National Association of Securities Dealers
("NASD"), the Commodity Futures Trading Commission ("CFTC") and the National
Futures Association ("NFA"). Bear Stearns is a "primary dealer" in US government
securities as designated by the Federal Reserve Bank of New York.
BSIL is a full service broker-dealer based in London and is a member of
Eurex (formerly the Deutsche Terminborse), the International Petroleum Exchange
("IPE"), the London Commodity Exchange ("LCE"), the London International
Financial Futures and Options Exchange ("LIFFE"), OMLX, The London Securities &
Derivatives Exchange ("OMLX"), Marche a Terme International de France, SA
("MATIF") and the London Clearing House ("LCH"). BSIL is supervised by and
regulated in accordance with the rules of the Securities and Futures Authority
("SFA").
As of December 31, 1999, we had approximately 10,098 employees.
INSTITUTIONAL EQUITIES
GENERAL. We provide customers with liquidity, trading expertise, equity
research and extensive expertise in products such as domestic and international
equities and convertible securities.
OPTION AND INDEX PRODUCTS. We provide an array of equity and index
option-related execution services to institutional and individual clients. We
utilize sophisticated research and computer modeling to formulate for clients
specific recommendations relating to options and index trading.
ARBITRAGE. We engage for our own account in both "classic" and "risk"
securities-arbitrage. Our risk arbitrage activities generally involve the
purchase of securities at a discount from a value that is expected to be
realized if a proposed or anticipated merger, recapitalization, tender or
exchange offer is consummated. In classic arbitrage, we seek 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 are, or will be, exchangeable at a later
date, and (iv) between the prices of securities with contracts settling on
differing dates.
STRATEGIC STRUCTURING AND TRANSACTIONS (SST). We target mispriced assets
using sophisticated models and proprietary quantitative methods. We maintain
substantial proprietary trading and investment positions in domestic and foreign
markets traversing a wide spectrum of equity and futures products including
listed and OTC options and swaps.
OTC EQUITY SECURITIES. We make 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 OTC 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.
EQUITY RESEARCH. The Equity Research Department provides in-depth research
including economic forecasts, industry and company analyses, overall strategic
guidance and recommendations. The department provides comprehensive industry and
company coverage on approximately 1,200 stocks in over 100 industries, or 57% of
the stocks in the S&P 500. Approximately ninety-three equity analysts provide
coverage and recommendations on domestic stocks as well as European, Latin
American and Asian stocks, complemented by the output of our economists and
strategists. Some of our larger global research teams are concentrated in the
health care, media, technology and telecommunications sectors.
S-27
<PAGE>
FIXED INCOME
GENERAL. We make inter-dealer markets and trade on a principal basis in a
wide range of instruments including:
- corporate debt and equity securities;
- US 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 US in fixed income securities,
including US government and agency securities, mortgage-backed securities, and
corporate and municipal securities. Inventories of fixed income securities are
generally carried to facilitate sales to customers and other dealers.
US GOVERNMENT AND AGENCY OBLIGATIONS. We are recognized by the Federal
Reserve Bank of New York as a primary dealer in US government obligations. We
participate in the auction of, and maintain proprietary positions in, US
Treasury bills, notes, bonds, and stripped-coupon securities. We also
participate as a selling group member and/or underwriter in the distribution of
various US government-agency and sponsored-corporation securities and maintain
proprietary positions in such securities. In connection with these activities,
we enter into transactions in options, futures and forward contracts to hedge
our proprietary positions. As a primary dealer, Bear Stearns furnishes weekly
reports of its inventory positions and market transactions in US 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. In addition, we engage 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 rates.
CORPORATE FIXED INCOME SECURITIES. We act as a dealer in sovereign and
corporate fixed income securities and preferred stocks in New York, London and
Tokyo. We buy and sell these securities for our own account in principal
transactions with institutional and individual customers, as well as other
dealers. We conduct trading in the full spectrum of dollar and non-dollar debt
securities. We offer hedging and arbitrage services to domestic and foreign
institutional and individual customers utilizing financial futures and other
instruments. Moreover, we offer quantitative, strategic, and research services
relating to fixed income securities to our domestic and international clients.
We participate in the trading of high yield, non-investment grade securities and
the securities and bank loans of companies, sovereigns and sovereign agencies.
MORTGAGE-RELATED SECURITIES AND PRODUCTS. We trade and make 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;
S-28
<PAGE>
- 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.
We also trade real estate mortgage loans originated by unaffiliated mortgage
lenders, both on a securitized and non-securitized basis. We act as underwriter
and placement agent in transactions involving rated and unrated mortgage-related
securities issued by affiliated and unaffiliated parties. We enter 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.
We trade GNMA, FNMA and FHLMC "to be announced" securities (i.e., 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). We buy and sell such securities for our own account in
transactions with institutional and individual customers, as well as with other
dealers.
Through various special purpose subsidiaries, we purchase, sell, and service
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 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
vehicles issue REMIC and non-REMIC collateralized mortgage obligations directly
or through trusts that are established for this purpose.
We also operate a commercial mortgage conduit that originates and
accumulates commercial mortgage loans for the purpose of securitizing our
portfolio. 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. We do not retain any exposure to real estate risk subsequent to
securitizing and selling the deal, but do have exposure to the performance of
the underlying real estate after the closing of the loan and prior to
securitization.
ASSET-BACKED SECURITIES. We act as underwriter and placement agent with
respect to investment grade 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.
S-29
<PAGE>
We also trade and make markets in these asset-backed securities. While there are
ready markets for the investment grade asset-backed securities described above,
non-investment grade securities and related varieties thereof may lack
liquidity.
MUNICIPAL SECURITIES AND RELATED PRODUCTS. We are 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 local
governmental authorities.
We are active as a managing underwriter of negotiated and competitive new
security issuances and on a select basis, provide financial advisory services.
We make markets in a broad spectrum of long-term and short-term municipal
securities, mainly to facilitate transactions with institutional and individual
customers, as well as other dealers. As agent for issuers, we earn fees by
remarketing short-term debt instruments to investors in the variable rate,
demand bond market. We periodically use both municipal and treasury bond futures
to hedge our cash-market bond inventory. In addition, we maintain a municipal
arbitrage portfolio for our own account consisting of municipal futures and cash
bond positions. Our underwriting, trading and sales activities are supported by
a municipal research group.
DERIVATIVES. We offer to customers, and trades for our own account, a
variety of exchange-traded and OTC derivative products, including fixed income,
credit, and equity derivatives. These products are transacted, as principal,
with customers for hedging, risk management, asset/liability management,
investment, financing and other purposes. These transactions are in the form of
swaps, options, swaptions, asset swaps, and structured notes, as well as more
complex, structured trades which are customized to meet customers' specific
needs. We also enter into derivative transactions for various purposes and to
manage risks to which we are exposed in our businesses and funding activities.
We manage our market and counterparty derivatives risks in a manner consistent
with our overall risk-management policies.
FOREIGN EXCHANGE. We trade foreign exchange products with clients as
principal; for our own account; and to hedge our securities positions or other
assets and liabilities. Foreign exchange products include major and minor
currencies on a spot and forward basis, listed and OTC foreign currency options,
and foreign exchange futures contracts. Foreign exchange trading desks are
maintained in New York and London and clients can trade or leave orders
24 hours per day. We serve a select list of funds, major corporations, and
mid-size commercial banks. Currency option strategies are made available to
customers to help them meet their specific risk management objectives.
FIXED INCOME RESEARCH. We are a leader in the distribution, trading and
underwriting of corporate, government, high yield, emerging markets, municipal
debt, and mortgage-backed and asset-backed securities. The Fixed Income Research
Department is comprised of economists, industry analysts and strategists
covering the full range of research disciplines: quantitative, economic,
strategic, credit portfolio, relative value and market-specific analysis. The
Fixed Income Research Department provides ongoing support for our sales and
trading efforts, producing reports, studies, and technical market analyses.
Fixed Income Research is comprised of the following three units:
(1) FINANCIAL ANALYTICS AND STRUCTURED TRANSACTIONS GROUP ("F.A.S.T."), a
unique firm-wide resource, has developed innovative fixed income
strategies through the application of its advanced and fully integrated
technology. Through F.A.S.T., we afford our clients financial
engineering and securitization capabilities, investment research, fixed
income portfolio management and analytical systems and trading
technology for mortgage-related and fixed
S-30
<PAGE>
income securities. F.A.S.T. offers the means to create and implement
financial strategies designed to maximize portfolio returns.
(2) HIGH GRADE RESEARCH consists of approximately 18 analysts and
researchers, and provides coverage for over 30 industries and 700
companies.
(3) HIGH YIELD RESEARCH consists of 28 analysts and researchers for domestic
issues and 15 analysts and researchers for international issues,
providing coverage for over 600 corporate and sovereign issuers whose
fixed income securities are non-investment grade.
EMERGING MARKETS
We provide financial services in various emerging markets worldwide
including: securities brokerage, equity and fixed income trading and sales, and
securities research; besides offering a full range of investment banking,
capital formation and advisory services. As part of these activities, we manage
and participate in public offerings and arrange the private placement of debt
and equity securities with institutional investors. The markets currently
covered by us include Latin America, Asia, and Europe.
EQUITY SALES
We are one of the leading firms in the US in providing brokerage services to
institutional investors. Institutional equity sales involves the execution of
transactions in US equity securities for domestic and foreign institutional
customers and providing these customers with liquidity, trading expertise, trade
execution, research and investment advice. We provide transaction services for
institutional customers who trade in futures and futures-related instruments. We
are also involved in specialist activities on both the NYSE and the AMEX.
CLEARANCE ACTIVITIES
We provide a full range of 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 client called "fully-disclosed
correspondents." In addition, we have 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 clearing activities,
we also earn substantial amounts of interest income. We extend credit directly
to the customers of correspondent firms in order to facilitate the conduct of
customer securities transactions on a margin basis. Correspondents indemnify us
against margin losses on customer accounts. We also extend margin credit
directly to correspondents to the extent that such firms pledge proprietary
assets as collateral. Since we must rely on the guarantees and general credit of
the correspondents, we 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, specialists, arbitrageurs and other
professional traders can require a substantial commitment of our capital
involving varying degrees of risk. We have developed computerized control
systems to monitor and analyze risk on a daily basis.
In addition to clearing trades, we provide other products and services to
our correspondents such as recordkeeping, trading reports, accounting, general
back-office support, securities lending, reorganization and custody of
securities. Our 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 our clearing
relationships are allocated in accordance with
S-31
<PAGE>
agreements with correspondents. To the extent that the correspondent has
available resources, we are 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 us.
We attempt to broaden, wherever possible, our relationships with
broker-dealer and prime broker clients. In addition to performing
administrative, operational and settlement functions, we also advise clients on
communications systems and provide a variety of non-brokerage products and
services on favorable terms, enabling them to benefit from our centralized
purchasing power.
FUTURES
Through BSSC and other subsidiaries, we provide, directly or through
third-party brokers, futures commission merchant services for customers and
other Bear Stearns affiliates who trade contracts in futures on financial
instruments and physical commodities, including options on futures. Exchange-
traded futures and options derive their values from the values of selected stock
indices, fixed income securities, currencies, agricultural and energy products
and precious metals.
Domestic futures and options trading is subject to extensive regulation by
the CFTC pursuant to the Commodity Exchange Act and the Commodity Futures
Trading Commission Act of 1974. International futures and options trading
activities are subject to regulation by the respective regulatory authorities in
the locations where futures exchanges reside, including the SFA in the United
Kingdom.
Margin requirements (good faith deposits) covering substantially all
transactions in futures and options contracts are subject to each particular
exchange's regulations in addition to other regulations. In the US, we are 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, we are a member of the IPE, the LCE, the LIFFE and OMLX. We also
have non-clearing memberships with MATIF and Eurex in Europe. In Japan
memberships are held with the Tokyo Stock Exchange, the Osaka Stock Exchange and
the Tokyo International Financial Futures Exchange ("TIFFE") for clearing
Japanese government bond futures, for clearing Japanese stock index products,
and for executing financial futures, respectively.
BLOCK TRADING
We effect transactions in large blocks of securities, generally exceeding
50,000 shares, mainly with institutional customers. We also provide customers
execution capabilities for baskets of equity securities using sophisticated
computer systems. Transactions are handled on an agency basis whenever possible,
but we 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.
SPECIALIST ACTIVITIES
We are a participant in specialist units on the NYSE and the AMEX that as of
June 30, 1999 perform specialist functions in approximately 180 NYSE-listed
stocks in addition to approximately 100 stocks and 80 options on the AMEX. These
market-making operations are conducted through joint ventures with a member
organization pursuant to joint-account agreements. The market-making functions
of a specialist involve 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.
S-32
<PAGE>
CUSTODIAL TRUST COMPANY
We offer a range of trust company and securities-clearance services through
our wholly owned subsidiary CTC. CTC provides us 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; clearance of government securities for institutions and dealers;
processing of mortgage and mortgage-related products, including derivatives and
collateralized mortgage obligations products; and margin lending. At June 30,
1999, CTC held approximately $140 billion of assets for clients such as pension
funds, mutual funds, endowment funds, religious organizations and insurance
companies.
INVESTMENT BANKING
We are a major global investment banking firm providing a full range of
capital formation and advisory services to a broad spectrum of clients. We
manage and participate in public offerings and arrange the private placement of
debt and equity securities directly with institutional investors. We provide
advisory services to clients on a wide range of financial matters and assist
with mergers, acquisitions, leveraged buyouts, divestitures, corporate
reorganizations, and recapitalizations.
Our strategy is to concentrate a major portion of our corporate finance
business development efforts within those industries in which we have
established a leadership position in providing investment banking services.
Industry specialty groups include financial services, general industrial
services and products, health care/pharmaceuticals, media/entertainment,
merchandising, natural resources, real estate, gaming and lodging, technology
and telecommunications. We also have a group that focuses on financial sponsors.
These groups are responsible for initiating, developing and maintaining client
relationships, and for executing transactions involving these clients. We have
focused primarily on those industries in which we also have a strong research
capability.
In addition to being structured according to distinct industry groups, we
have a number of professionals who specialize in specific types of transactions.
These include mergers and acquisitions ("M&A"), equity offerings, high yield
securities, syndicated bank loans, and other transaction specialties.
MERGERS AND ACQUISITIONS. We are active in arranging various M&A
transactions for our clients. We participate 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 often assists with the origination, but is primarily
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 LOAN ORIGINATION AND SYNDICATION. This area integrates the
origination, structuring, underwriting, distribution and trading of bank loans.
Such loans include both funded and unfunded and investment grade and
non-investment grade loans.
LEVERAGED ACQUISITIONS. As part of our investment banking activities, we
make investments as principal in leveraged acquisitions and in leveraged buy-out
funds as a limited partner. Our investments generally take the form of equity
securities, either common or preferred stock. Equity securities
S-33
<PAGE>
purchased in these transactions generally are held for appreciation and are not
readily marketable. While we believe 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 we will realize the value of these
investments.
COMMERCIAL REAL ESTATE. We are 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.
PCS
PCS provides high-net-worth individuals with an institutional level of
service, including access to our resources and professionals. PCS maintains a
select team of approximately 500 account executives in seven regional offices.
These account executives averaged approximately $1.0 million in production in
fiscal 1999. PCS had over $39 billion in client assets at June 30, 1999.
ASSET MANAGEMENT
Our asset management department manages equity and fixed income assets for
some of the leading domestic corporate pension plans, public systems,
endowments, foundations, multi-employer plans, insurance companies,
corporations, families and high net-worth individuals in the US. With over
$12 billion under management, the asset management department provides its
clients with diverse products, expertise and experience for enhancing investment
returns by identifying, and capitalizing on, investment opportunities in the
financial markets. Institutional and high-net-worth products include: large and
small cap value equity and growth 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 department 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.
OTHER
We derive 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, we extend credit to a
customer for a portion of the purchase price that is collateralized by
securities and cash in the customer's account, in accordance with regulatory and
internal requirements. We receive 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, broker's call rate or LIBOR.
SECURITIES LENDING ACTIVITIES. In connection with both our trading and
brokerage activities, we borrow and lend securities to broker-dealers and other
trading entities to cover short sales and to complete transactions in which
customers have failed to deliver securities by settlement date.
ADMINISTRATION AND OPERATIONS
Administration and operations personnel are responsible for processing of
securities transactions; receipt, identification and delivery of funds and
securities; internal financial controls; accounting functions; office services;
custody of customer securities; and overseeing our margin accounts and
correspondent organizations. The processing, settlement, and accounting for
transactions for the
S-34
<PAGE>
Company, correspondent organizations, and the customers of correspondent
organizations is handled by a staff of approximately 5,000 employees located in
separate operations offices in New York City and Whippany, New Jersey and, to a
lesser extent, in our offices worldwide.
We execute our own and correspondent transactions on US exchanges and in the
OTC market. We clear all of our domestic and international transactions (i.e.,
delivery of securities sold, receipt of securities purchased, and transfer of
related funds) through our own facilities, unaffiliated commercial banks, other
broker-dealers, and through memberships in various clearing corporations.
There can be significant fluctuation in the volume of transactions we
process, clear and settle. Operations personnel monitor day-to-day operations to
assure compliance with applicable laws, rules and regulations.
INTERNATIONAL
Outside the US, we, through our international subsidiaries, provide various
services including investment banking, securities trading and brokerage and
clearance activities to corporations, governments, institutions and individuals
throughout the world. These international subsidiaries have memberships on
various foreign securities and futures exchanges.
BSIL is based in London and provides investors and issuers with a full range
of products and services in both international and US equities, fixed income,
exchange-traded futures and options, and foreign exchange. In addition, BSIL is
a major sales and trading center within our global fixed income and
equity-related derivative businesses. BSIL has a growing investment banking
capability and is also enhancing its service to our growing clearance business
in Europe.
Bear Stearns Japan Limited ("BSJL"), based in Tokyo, serves the diverse
needs of Japanese corporations, financial institutions and government agencies
by offering a range of international fixed income and equity products as well as
listed futures. BSJL also offers a range of derivative products within Japan
with special focus on credit and equity derivatives. Mergers and acquisitions,
corporate finance and restructuring services are also available for local and
cross-border business. Over the past year, BSJL became active in the local
mortgage-backed securities and distressed debt markets.
Bear Stearns Asia Limited ("BSAL"), based in Hong Kong, acts as the regional
headquarters for our activities in the Asia-Pacific region, excluding Japan.
This office provides equity and fixed income sales and trading, international
equity and fixed income research, and investment banking services to
institutional and individual clients in Asia. The representative offices of Bear
Stearns located in Beijing and Shanghai support the efforts of BSAL.
Bear Stearns Bank plc (the "Bank") based in Dublin, allows our existing and
prospective clients the choice of dealing with a banking counterparty. The Bank
also serves as a platform from which we direct our international banking
activities, gaining easier access to worldwide markets, and thereby expanding
our client base and product range.
COMPETITION
We encounter intense competition in all aspects of the securities business
and compete 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 we do. Besides competition from firms in
the securities business, in recent years we have experienced increasing
competition from other sources, such as commercial banks and insurance
companies. We believe that the principal factors affecting competition involve
the caliber and ability of professional personnel, the relative price of the
service and products being offered, and the quality of service.
S-35
<PAGE>
REGULATIONS AND OTHER FACTORS AFFECTING THE COMPANY AND THE SECURITIES
INDUSTRY
The securities industry in the US is subject to extensive regulation under
both federal and state laws. Moreover, 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 our subsidiaries, including Bear Stearns and BSSC. These
self-regulatory organizations (i) adopt rules, subject to approval by the SEC,
that govern the industry and (ii) conduct periodic examinations of our
operations. Securities firms are also subject to regulation by state securities
administrators in those states where they conduct business.
US 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 our subsidiaries have been subject to 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 us or our business.
The Market Reform Act of 1990 (the "Market Reform Act") was adopted to
strengthen the SEC's regulatory oversight of the national securities markets and
to increase the efficacy and stability of such markets by, among other things:
(i) providing the SEC with discretion to halt securities trading on any national
exchange for the protection of investors; (ii) requiring broker-dealers and
other registrants to regularly provide information to the SEC regarding holding
companies and other affiliated entities whose activities can impact their
financial condition; (iii) requiring broker-dealers and other registrants who
execute large-trade orders to provide information to the SEC regarding such
transactions; and (iv) allowing the SEC to prosecute market participants who
violate SEC rules and regulations designed to maintain fair and orderly markets.
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. The Risk Assessment Rules require that broker-dealers: (i) have an
organizational chart; (ii) maintain risk-management procedures or standards for
monitoring and controlling risks; (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 was adopted
to strengthen the SEC's ability to deter, detect, and punish insider trading by,
among other things: (i) increasing civil penalties that can be assessed against
controlling persons who purposefully or recklessly fail to take adequate
measures to prevent insider trading; (ii) allowing the SEC to provide cash
rewards to individuals who provide evidence of insider trading; (iii) affirming
the government's ability to obtain criminal sanctions against those found guilty
of insider trading; and (iv) requiring broker-dealers and investment advisors to
establish and enforce written procedures reasonably designed to prevent the
misuse of material, non-public information.
S-36
<PAGE>
The Government Securities Act of 1986 (the "Government Securities Act") was
adopted to decrease volatility and increase investor confidence and liquidity in
the government securities market by creating a coordinated and comprehensive
regulatory structure for the market where none had previously existed. In
particular, the Government Securities Act: (i) requires broker-dealers solely
involved in government securities to register with the SEC; (ii) allows the
Secretary of the Treasury to adopt rules regarding the custody, use, transfer,
and control of government securities; and (iii) bestows upon the SEC the
authority to enforce such rules as to broker-dealers and other SEC registrants.
The futures industry in the US 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 futures exchanges. Bear Stearns' and BSSC's 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 assets be kept in relatively liquid form.
Bear Stearns and BSSC are also subject to the net capital requirements of
the CFTC and various futures exchanges, which generally require Bear Stearns and
BSSC to maintain 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 our ability to withdraw
capital from Bear Stearns or BSSC, which in turn could limit our ability to pay
dividends, pay interest, repay debt, or redeem or purchase shares of our
outstanding capital stock. Additional information regarding net capital
requirements is set forth in Footnote 7, entitled "Regulatory Requirements" in
our Annual Report on Form 10-K for the fiscal year ended June 30, 1999. See
"Where You Can Find More Information" and "General Information."
Bear Stearns and BSSC are members of the Securities Investor Protection
Corporation ("SIPC"), which provides insurance protection for customer accounts
held by these entities of up to $500,000 for each 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 fully protected by an
excess securities bond, issued by the Travelers Casualty and Surety Company, up
to the amount of total net equity (both cash and securities) in excess of the
underlying SIPC protection.
The activities of our 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. The Competitive Banking Act 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.
S-37
<PAGE>
BSIL is a full service broker-dealer based in London and is a member of the
Eurex, IPE, LCE, LIFFE, OMLX, MATIF and LCH. Another London subsidiary, Bear,
Stearns International Trading Limited ("BSIT"), is a market-maker in various
non-dollar denominated equity securities and is a member of the London Stock
Exchange. 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 supervised by and are regulated in accordance with
the rules of the SFA.
BSJL is a Tokyo broker-dealer registered with the Japanese Ministry of
Finance. BSJL sells equity and fixed income securities to Japanese institutional
customers. BSJL has a membership on the Tokyo Stock Exchange, TIFFE and the
Osaka Stock Exchange. Bear Stearns Hong Kong Ltd. is a member of the Securities
and Futures Commission and sells US futures to retail customers. BSAL is a
member of the Shanghai Stock Exchange and 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.
Bear Stearns Bank plc is an Dublin-based bank incorporated in 1996 and
subsequently granted a banking license under 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 derivatives products.
We, like other securities firms, are 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, fluctuating currency values,
the level and volatility of interest rates, and fluctuations in the volume and
the price levels in the securities and futures markets. These and other factors
can affect our volume of security new issues, mergers and acquisitions, and
business restructurings; the stability and liquidity of securities and futures
markets; and the ability of issuers, other securities firms and counterparties
to perform on their obligations. Decrease in the volume of security new issues,
mergers and 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 futures transactions, and reduced market
liquidity, generally results 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
reduced sales and trading, or investment banking activity, profitability may be
adversely affected because certain expenses remain relatively fixed.
Our securities trading, derivatives, arbitrage, market-making, specialist,
leveraged buyout and underwriting activities are conducted by us on a principal
basis and expose us to significant risk of loss. Such risks include market,
counterparty credit, and liquidity risks.
S-38
<PAGE>
CERTAIN US FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Cadwalader, Wickersham & Taft, special tax counsel to us,
the following discussion summarizes certain of the US federal income tax
consequences of the purchase, beneficial ownership and disposition of Notes.
Except as provided below under "--Federal Income Tax Consequences to Non-US
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 US 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 "US Holder").
As used in this summary, the term "Non-US Holder" means a Holder that is not a
"US 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 US dollar).
Persons considering the purchase of Notes should consult their own tax advisors
concerning the application of US 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 US HOLDERS
TREATMENT OF INTEREST
Stated interest on the Notes will be taxable to a US Holder as ordinary
interest income as the interest accrues or is paid (in accordance with the US
Holder's method of tax accounting).
TREATMENT OF DISPOSITIONS OF NOTES
Upon the sale, exchange, retirement or other taxable disposition of a Note,
a US 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 US
Holder's tax basis in a Note will be, in general, such US 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
S-39
<PAGE>
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-US HOLDERS
The following is a summary of the US federal income tax consequences
generally applicable to Non-US 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 "US 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-US Holder will not be subject to US federal income or withholding tax
in respect of interest income on the Notes if:
- the interest is not US trade or business income;
- the Non-US Holder provides an appropriate statement on IRS Form W-8 or
Form W-8BEN, together with all appropriate attachments, signed under
penalties of perjury, identifying the Non-US Holder and stating, among
other things, that the Non-US Holder is not a United States person; and
- the Non-US Holder is not a "10-percent shareholder" or a "related
controlled foreign corporation" with respect to the Company (as specially
defined for US federal income tax purposes).
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, Form W-8BEN 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 US trade or business income and
the Non-US Holder provides an appropriate statement to that effect. In the
latter case, such Non-US Holder generally will be subject to US federal income
tax with respect to all income from the Notes in the same manner as US Holders,
as described above. Additionally, in such event, Non-US 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-US 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 US trade or business income. In the latter event, generally Non-US
Holders will be subject to US federal income tax with respect to such gain, in
the same manner as US Holders, as described above. Additionally, in such event,
Non-US Holders that are corporations could be subject to a branch profits tax on
such income as well.
S-40
<PAGE>
TREATMENT OF NOTES FOR US FEDERAL ESTATE TAX PURPOSES
A Note will not be subject to US federal estate tax, provided the Non-US
Holder is not at the time of death a "10-percent shareholder" of the Company (as
specially defined for US federal income tax purposes) and payments of interest
on such Notes would not have been considered US trade or business income.
US 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 US Holder
only if the US 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-US Holder that provides an IRS Form W-8 or Form W-8BEN, together with
all appropriate attachments, signed under penalties of perjury, identifying the
Non-US Holder and stating that the Non-US Holder is not a United States person
will not be subject to IRS reporting requirements and US backup withholding.
With respect to interest paid on or after January 1, 2001, IRS Forms W-8BEN
generally will be required from the beneficial owners of interests in a Non-US
Holder that is treated as a partnership for US federal income tax purposes.
The payment of the proceeds on the disposition of a Note by a Holder to or
through the US 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-US Holder under penalties of perjury on IRS
Form W-8 or Form W-8BEN (as described above) or otherwise establishes an
exemption. The payment of the proceeds on the disposition of a Note by a Non-US
Holder to or through a non-US office of a non-US broker will not be subject to
backup withholding or information reporting unless the non-US broker is a "US
related person" (as defined below). The payment of proceeds on the disposition
of a Note by a Non-US Holder to or through a Non-US office of a US broker or a
US related person generally will be subject to information reporting and backup
withholding unless the Holder certifies its status as a Non-US Holder under
penalties of perjury or the broker has certain documentary evidence in its files
as to the Non-US Holder's foreign status and the broker has no actual knowledge
to the contrary.
For this purpose, a "US related person" is:
- a "controlled foreign corporation" (as specially defined for US 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 US trade or business; or
S-41
<PAGE>
- for payments made on or after January 1, 2001, 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 US trade or business.
Backup withholding is not an additional tax and may be refunded (or credited
against the Holder's US federal income tax liability, if any), provided that
certain required information is furnished. The 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-US 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.
S-42
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated March 22, 2000 (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, and not jointly,
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..................................... $1,063,000,000
ABN AMRO Incorporated....................................... 17,000,000
Banc of America Securities LLC.............................. 17,000,000
Banc One Capital Markets, Inc............................... 17,000,000
Barclays Bank PLC........................................... 17,000,000
Chase Securities Inc........................................ 17,000,000
Lehman Brothers Inc......................................... 17,000,000
J.P. Morgan Securities Inc.................................. 17,000,000
Salomon Smith Barney Inc.................................... 17,000,000
Wachovia Securities, Inc.................................... 17,000,000
Warburg Dillon Read LLC..................................... 17,000,000
Westdeutsche Landesbank Girozentrale........................ 17,000,000
--------------
Total................................................... $1,250,000,000
==============
</TABLE>
The Underwriters have advised us 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 0.100% 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 $300,000.
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.
S-43
<PAGE>
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 we 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 we intend to cause the Notes to be listed on the London Stock Exchange,
no guarantees can be given that the application will be approved, and we do not
intend to apply for listing of the Notes on a national securities exchange in
the United States. We have 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 29, 2000, 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.
The Underwriting Agreement provides that we 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.
S-44
<PAGE>
Bear Stearns, in its capacity as an Underwriter, has committed to purchase
from us 85% of the principal amount of the Notes being underwritten by the
Underwriters, on the same basis as the other Underwriters. Bear Stearns is our
wholly-owned subsidiary. 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 our sale of the Notes on a consolidated basis may be
reduced, because we 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
us to BSIL, our wholly-owned subsidiary. We 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 us and our 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 us. 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.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this prospectus supplement by reference from our 1999
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.
S-45
<PAGE>
GENERAL INFORMATION
We are incorporated with shares and limited liability under the laws of the
State of Delaware, the United States. Our registered office is at The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, USA. Our principal executive office is 245 Park
Avenue, New York, New York 10167, USA.
So long as the Notes are outstanding, copies of the following documents will
be available from our principal executive office and from the specified offices
of the paying agents in London:
(i) our Certificate of Incorporation and By-laws;
(ii) our published audited consolidated financial statements contained
in our Annual Report on Form 10-K for the two financial years ended
June 30, 1999;
(iii) our published unaudited consolidated financial statements
contained in our Quarterly Report on Form 10-Q, as amended by Form 10-Q/A,
for the three and six month periods ended December 31, 1999 and
December 31, 1998 and the Transition Report on Form 10-Q for the five month
periods ended November 26, 1999 and November 27, 1998;
(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.
Our consolidated financial statements for each of the three financial years
ended June 30, 1999 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 material
change in our financial or trading position or material adverse change in our
financial position or prospects since June 30, 1999.
In the normal course of our business, we have been named as defendant in
numerous civil actions arising out of our 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 our management, after consultation with relevant counsel, that the resolution
of these actions will not have a material adverse effect on our consolidated
financial condition. Subject to the foregoing, there are no legal or arbitration
proceedings (including any such proceedings which are pending or threatened) of
which we are aware which may have or have had during the 12 months before the
date of this document a material effect on our consolidated financial condition.
The Notes have been assigned Euroclear and Clearstream Luxembourg Common
Code 010969794, International Security Identification Number (ISIN) US073902BT44
and CUSIP No. 073902BT4.
S-46
<PAGE>
PROSPECTUS
THE BEAR STEARNS COMPANIES INC.
DEBT SECURITIES
WARRANTS
PREFERRED STOCK
DEPOSITARY SHARES
---------------------------------------------------
By this Prospectus, we intend to offer at one or more times--
Debt Securities
Warrants to Purchase Debt Securities
Preferred Stock
Depositary Shares
in one or more series with an aggregate initial public
offering price of up to $9,027,683,162 (as described in the
applicable Prospectus Supplement).
----------------------------------------------------------------------------
We will provide the specific terms of these securities in
supplements to this Prospectus. You should read this Prospectus and
any supplements carefully before you invest in the securities.
----------------------------------------------------------------------------
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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BEAR, STEARNS & CO. INC.
THE DATE OF THIS PROSPECTUS IS MARCH 17, 2000.
<PAGE>
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. YOU SHOULD ONLY RELY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY SUPPLEMENT TO THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THESE
SECURITIES ARE NOT BEING OFFERED IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY SUPPLEMENT
TO THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT
OF THOSE DOCUMENTS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Where You Can Find More Information......................... 3
Certain Definitions......................................... 4
The Bear Stearns Companies Inc.............................. 4
Use of Proceeds............................................. 5
Ratio Information........................................... 5
Description of Debt Securities.............................. 6
Description of Warrants..................................... 13
Limitations on Issuance of Bearer Debt Securities and Bearer
Warrants.................................................. 16
Description of Preferred Stock.............................. 17
Description of Depositary Shares............................ 20
Book-Entry Procedures and Settlement........................ 24
Plan of Distribution........................................ 25
ERISA Considerations........................................ 27
Experts..................................................... 28
Validity of the Securities.................................. 28
</TABLE>
2
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual and quarterly 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 of these filed documents 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 and at Northwest Atrium Center, 5000 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our 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.
We have filed with the SEC a registration statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities. This Prospectus, which
constitutes a part of that Registration Statement, does not include all the
information contained in that Registration Statement and its exhibits. For
further information with respect to the securities, you should consult the
Registration Statement and its exhibits.
Statements contained in this Prospectus concerning the provisions of any
documents are necessarily summaries of those documents, and each statement is
qualified in its entirety by reference to the copy of the document filed with
the SEC. The Registration Statement and any of its amendments, including
exhibits filed as a part of the Registration Statement or an amendment to the
Registration Statement, are available for inspection and copying through the
entities listed above.
The SEC allows us 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, 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 are incorporated by reference:
(1) the Annual Report on Form 10-K (including the portions of our Annual
Report to Stockholders and Proxy Statement incorporated by reference
therein) for the fiscal year ended June 30, 1999;
(2) the Quarterly Reports on Form 10-Q for the quarters ended
September 24, 1999 and December 31, 1999 and for the five-month period ended
November 26, 1999 and the Quarterly Report on Form 10-Q/A for the quarter
ended December 31, 1999; and
(3) the Current Reports on Form 8-K dated July 21, 1999, July 22, 1999,
August 5, 1999, August 9, 1999, October 13, 1999, October 29, 1999,
December 1, 1999, January 19, 2000, January 25, 2000 and March 15, 2000.
We will provide to you without charge, a copy of any or all documents
incorporated by reference into this Prospectus except the exhibits to those
documents (unless they are specifically incorporated by reference in those
documents). You may request copies by writing or telephoning us at our Corporate
Communications Department, The Bear Stearns Companies Inc., 245 Park Avenue, New
York, New York 10167; telephone number (212) 272-2000.
3
<PAGE>
CERTAIN DEFINITIONS
Unless otherwise stated in this Prospectus:
- "we," "us" and "our" refer to The Bear Stearns Companies Inc. and its
subsidiaries;
- "AMEX" refers to the American Stock Exchange;
- "Bear Stearns" refers to Bear, Stearns & Co. Inc.;
- "BSSC" refers to Bear, Stearns Securities Corp.;
- "BSIL" refers to Bear, Stearns International Limited;
- "NYSE" refers to the New York Stock Exchange;
- "NASD" refers to the National Association of Securities Dealers, Inc.; and
- "securities" refers to the notes, warrants, preferred stock and depositary
shares described in this prospectus.
Bear Stearns, BSSC and BSIL are subsidiaries of The Bear Stearns
Companies Inc.
THE BEAR STEARNS COMPANIES INC.
We are a holding company that, through our principal subsidiaries, Bear
Stearns, BSSC and BSIL, is a leading US investment banking, securities trading
and brokerage firm serving corporations, governments and institutional and
individual investors worldwide. Our business includes:
- market-making and trading in US government, government agency, corporate
debt and equity, mortgage-related, asset-backed and municipal securities;
- trading in options, futures, foreign currencies, interest rate swaps and
other derivative products;
- securities and futures arbitrage;
- securities, options and futures 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 NYSE and the AMEX;
- providing fiduciary and other services, such as real estate brokerage,
investment management and investment advisory; and
- financial market and securities research.
Our business is conducted:
- from our principal offices in New York City;
4
<PAGE>
- from domestic regional offices in Atlanta, Boston, Chicago, Dallas, Los
Angeles and San Francisco;
- from representative offices in Beijing, Hong Kong and Shanghai;
- through international offices in Buenos Aires, Dublin, London, Lugano, Sao
Paulo, Singapore and Tokyo; and
- through joint ventures with other firms in Belgium, Greece and Madrid.
Our international offices provide services and engage in investment activities
involving foreign clients and international transactions. We provide
trust-company services through our subsidiary, Custodial Trust Company, located
in Princeton, New Jersey.
Bear Stearns and BSSC are broker-dealers registered with the SEC.
Additionally, Bear Stearns is registered as an investment advisor with the SEC.
Bear Stearns and BSSC also are members of the NYSE, all other principal US
securities and futures exchanges, the NASD, the Commodity Futures Trading
Commission and the National Futures Association. Bear Stearns is a "primary
dealer" in US government securities, as designated by the Federal Reserve Bank
of New York. BSIL is a full service broker-dealer based in London. BSIL is
supervised by and regulated in accordance with the rules of the Securities and
Futures Authority in the United Kingdom and is a member of Eurex, the
International Petroleum Exchange, the London Commodity Exchange, the London
International Financial Futures and Options Exchange (LIFFE), the London
Securities and Derivatives Exchange (OMLX), Marche a Terme International de
France, SA (MATIF) and the London Clearing House.
We are incorporated in the State of Delaware. Our principal executive office
is located at 245 Park Avenue, New York, New York 10167 and our telephone number
is (212) 272-2000. Our Internet address is http://www.bearstearns.com.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, we
intend 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 debt and investments in, or extensions of credit to,
subsidiaries.
RATIO INFORMATION
The ratio of earnings to fixed charges was calculated by dividing the sum of
the fixed charges into the sum of the earnings before taxes and fixed charges.
The ratio of earnings to combined fixed charges and preferred dividends was
calculated by dividing the sum of fixed charges and preferred dividends into the
sum of earnings before taxes and fixed charges. Fixed charges for purposes of
the ratios consist of interest expense and certain other immaterial expenses.
Preferred dividends represent the pre-tax earnings necessary to cover the
dividends on our preferred stock, assuming such earnings are taxed at our
consolidated effective tax rate.
The table below presents the ratio of earnings to fixed charges and the
ratio of earnings to combined fixed charges and preferred dividends for the
fiscal years ended June 30, 1995, 1996, 1997, 1998 and 1999 and the six months
ended December 31, 1998 and December 31, 1999.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, SIX MONTHS ENDED
---------------------------------------------------- ---------------------------
DECEMBER 31, DECEMBER 31,
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges...... 1.2 1.4 1.4 1.3 1.3 1.2 1.3
Ratio of earnings to combined fixed
charges and preferred dividends....... 1.2 1.4 1.4 1.3 1.3 1.1 1.3
</TABLE>
5
<PAGE>
DESCRIPTION OF DEBT SECURITIES
This section describes certain general terms and provisions of the debt
securities to which any Prospectus Supplement may relate. The particular terms
of any debt securities offered by a Prospectus Supplement and the extent to
which these general terms and provisions will not apply to the particular series
of debt securities being offered, will be described in the Prospectus Supplement
relating to that particular series of debt securities.
We will issue the debt securities under the Indenture, dated as of May 31,
1991, as amended (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 debt securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended. We have filed a copy of the Indenture as an exhibit to the
Registration Statement of which this Prospectus forms a part. A copy of the
Indenture is available as set forth under the section entitled "Where You Can
Find More Information."
This section, along with the description in the applicable Prospectus
Supplement, is a summary of the material provisions of the Indenture and is not
complete. 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 debt securities.
GENERAL
We may offer debt securities for an aggregate principal amount of up to
$9,027,683,162 under this Prospectus. As of the date of this Prospectus, we have
issued approximately $52,716,489,650 aggregate principal amount of debt
securities under the Indenture, of which $19,843,881,045 is outstanding. The
Indenture permits us to:
- issue debt securities at various times in one or more series;
- issue an unlimited principal amount of debt securities;
- provide for the issuance of other debt securities under the Indenture
other than those authorized on the date of this Prospectus at various
times and without your consent; and
- "reopen" a previous issue of a series of debt securities and issue
additional debt securities of the series.
Unless we provide otherwise in an applicable Prospectus Supplement, we will
issue debt securities only in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000, and in bearer form with or without
coupons in the denomination of $5,000. If we issue bearer debt securities of a
series, we will describe the federal income tax consequences and other special
considerations applicable to those bearer debt securities in the Prospectus
Supplement relating to that series.
Unless we provide otherwise in the applicable Prospectus Supplement and
subject to any limitations in the Indenture, you may transfer or exchange your
registered securities at the corporate trust office or agency of the Trustee in
the City and State of New York without paying a service charge, other than
applicable tax or governmental charges. Bearer debt securities will be
transferable by delivery. We will describe the provisions relating to the
exchange of bearer debt securities of any series in the Prospectus Supplement
relating to that series.
If the principal, any premium or interest on the debt securities of any
series is payable in a foreign or composite currency, the applicable Prospectus
Supplement will describe any restrictions, elections, federal income tax
consequences, specific terms and other information that apply to those debt
securities and the currency.
6
<PAGE>
We may sell one or more series of debt securities at a substantial discount
below the stated principal amount, bearing either 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 exchanged for
fixed rate debt securities. We will describe the federal income tax consequences
and other special considerations applicable to a series in the Prospectus
Supplement relating to that series.
RANKING
The debt securities will be unsecured and will rank equally with all of our
other unsecured and unsubordinated indebtedness. We extend credit to our
subsidiaries at various times. Any credit we may extend to our subsidiaries may
be subordinated to the claims of unaffiliated creditors of those subsidiaries.
We are a holding company and depend on the earnings and cash flow of our
subsidiaries to meet our obligations under the debt securities. Because the
creditors of our subsidiaries generally would have a right to receive payment
superior to our right to receive payment from the assets of our subsidiaries,
the holders of our debt securities will effectively be subordinated to the
creditors of our subsidiaries. If we were to liquidate or reorganize, your right
to participate in any distribution of our subsidiaries' assets is necessarily
subject to the senior claims of the subsidiaries' creditors. Furthermore, the
Exchange Act and the rules of certain exchanges and other regulatory bodies, as
well as covenants governing certain indebtedness of our subsidiaries, impose net
capital requirements on some of our subsidiaries that limit their ability to pay
dividends or make loans and advances to us.
METHODS OF RECEIVING PAYMENT ON THE DEBT SECURITIES
REGISTERED DEBT SECURITIES. Unless we otherwise provide in the applicable
Prospectus Supplement, if the debt securities are in registered form, then the
principal, any premium and interest will be payable at the corporate trust
office or agency of the Trustee in the City and State of New York.
Interest payments made before maturity or redemption on registered debt
securities may be made:
- at our option, by check mailed to the address of the person entitled to
payment; or
- at your option, if you hold at least $10 million in principal amount of
registered debt securities, by wire transfer to an account you have
designated in writing at least 16 days before the date on which the
payment is due.
BEARER DEBT SECURITIES. Unless we provide otherwise in the applicable
Prospectus Supplement, if the debt securities are in bearer form, then the
principal, any premium and interest will be payable at the Trustee's office
located outside the United States that is maintained for this purpose. No
payment on a bearer debt security will be made by mail to a US address or by
wire transfer to an account maintained in the United States, or will otherwise
be made inside the United States, unless otherwise provided in the applicable
Prospectus Supplement.
NOTICES
REGISTERED DEBT SECURITIES. Unless otherwise provided in the applicable
Prospectus Supplement, any notice given to a holder of a registered debt
security will be mailed to the last address of such holder set forth in the
applicable security register.
BEARER DEBT SECURITIES. Any notice given to a holder of a bearer debt
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
debt security.
7
<PAGE>
GLOBAL SECURITIES
The debt securities 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 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 a global security is exchanged in whole or in part for the
applicable definitive debt securities, a global security may only be transferred
as a whole by:
- the depositary for the global security to a nominee of the depositary;
- a nominee of the depositary to the depositary or another nominee of the
depositary; or
- the depositary or any nominee of the depositary to a successor of the
depositary or a nominee of the successor.
Each Prospectus Supplement relating to a series will describe the specific
terms of the depositary arrangement with respect to the applicable debt
securities of that series. We anticipate that the following provisions will
apply to all depositary arrangements.
Once a global security is issued, the depositary will credit on its
book-entry system the respective principal amounts of the individual debt
securities represented by that global security to the accounts of institutions
that have accounts with the depositary. These institutions are known as
participants. The underwriters for the debt securities will designate the
accounts to be credited. However, if we have offered or sold the debt securities
either directly or through agents, we or the agents will designate the
appropriate accounts to be credited.
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 of these securities under the
Indenture.
Subject to the restrictions discussed under the section entitled
"Limitations on Issuance of Bearer Debt Securities and Bearer Warrants,"
payments of principal, any premium and 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 we 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 us and the Trustee may act or refrain from acting without liability
on any information provided by the depositary.
We expect that the depositary, after receiving any payment of principal, any
premium or interest in respect of a global security, will immediately credit the
accounts of the participants with payment in
8
<PAGE>
amounts proportionate to their respective holdings in principal amount of
beneficial interest in a global security as shown on the records of the
depositary. We also expect 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, any premium or interest relating to their interests will
be subject to the restrictions discussed under the section entitled "Limitations
on Issuance of Bearer Debt Securities and Bearer Warrants."
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 US Treasury
regulations) has ended, the depositary must provide us with a certificate to the
effect that the owners of the beneficial interests in the bearer global security
are non-US persons or US persons that are permitted to hold bearer debt
securities under applicable US Treasury regulations.
In general, US persons that are permitted to hold bearer debt securities are
US persons who acquire the securities through the foreign branch of certain US
financial institutions and certain US financial institutions that hold the
bearer debt securities for resale to non-US persons or who hold the bearer debt
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 we have not appointed a successor depositary within
90 calendar days, we will issue debt securities in certificated form in exchange
for all outstanding global securities.
In addition, we may at any time determine not to have debt securities
represented by a global security. In that event, we will issue debt securities
in definitive form in exchange for all global securities. 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 as:
(1) registered debt securities in denominations, unless we specify
otherwise, of $1,000 and integral multiples of $1,000 if the debt
securities of that series are issuable as registered debt securities;
(2) bearer debt securities in the denomination or denominations we have
specified if the debt securities of that series are issuable as bearer
debt securities; or
(3) either registered or bearer debt securities, if the debt securities of
that series are issuable in either form.
You should read the section entitled "Limitations on Issuance of Bearer
Securities and Bearer Warrants" for a description of certain restrictions on the
issuance of individual bearer debt securities in exchange for beneficial
interests in a global security.
LIMITATION ON LIENS
We may not, and may not permit any of our Restricted Subsidiaries to, issue,
incur, assume, guarantee or suffer to exist any indebtedness for borrowed money
secured by a pledge of, lien on or security interest in any shares of voting
stock of any Restricted Subsidiary without effectively providing that the
securities issued under the Indenture, including the debt securities, will be
secured equally and ratably with such secured indebtedness.
9
<PAGE>
The term "Restricted Subsidiary" as defined in the Indenture means Bear
Stearns, Custodial Trust Company, BSSC and any of our other subsidiaries 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
We may consolidate or merge with or into any other corporation, and may
sell, lease or convey all or substantially all of our assets to any corporation,
organized and existing under the laws of the United States or any US state, if:
(1) we or any other successor corporation shall not immediately after the
merger or consolidation be in default under the Indenture; and
(2) the continuing corporation (if other than us), or the resulting entity
that receives substantially all of our assets, shall expressly assume:
(a) payment of the principal of, and premium, if any, and interest on,
(and any additional amounts payable in respect of) the debt
securities and
(b) performance and observance of all of the covenants and conditions of
the Indenture to be performed or observed by us.
Unless otherwise provided in the applicable Prospectus Supplement, the
Indenture permits:
- a consolidation, merger, sale of assets or other similar transaction that
may adversely affect our creditworthiness or that of a successor or
combined entity;
- a change in control; or
- a highly leveraged transaction involving us, 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 transactions described above may
have on the value of the debt securities.
MODIFICATION AND WAIVER
With the consent of the holders of 66 2/3% in principal amount of the
outstanding debt securities of each series affected, we and the Trustee may
modify or amend the Indenture, without the consent of each holder of the
outstanding debt security affected, unless the modification or amendment:
- changes the stated maturity or the date of any installment of principal
of, or interest on, any debt security or changes its redemption price or
optional redemption price;
- reduces the principal amount of, or the rate of interest on, or the amount
of any additional amount payable on, any debt security, or reduces the
amount of principal that could be declared due and payable before the
stated maturity of that debt security, or changes our obligation to pay
any additional amounts (except as permitted under the Indenture), or
reduces the amount of principal of a discount security that would be due
and payable if accelerated under the Indenture;
- changes the place or currency of any payment of principal, premium, if
any, or interest on any debt security;
- impairs the right to institute suit for the enforcement of any payment on
or with respect to any debt security;
- reduces 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
10
<PAGE>
- modifies the foregoing requirements or reduces the percentage of
outstanding debt securities necessary to waive any past default to less
than a majority.
We may make any of these amendments or modifications, however, with the consent
of the holder of each outstanding debt security affected.
Except with respect to certain fundamental provisions of which a default
would require the consent of the holders of each outstanding security of a
series affected to waive, 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 with certain
provisions of the Indenture, either in a specific instance or generally.
EVENTS OF DEFAULT
Under the Indenture, an "Event of Default" with respect to any series of
debt securities means:
(1) a failure to pay any interest, or any additional amounts payable, on any
debt securities of that series for 30 days after payment is due;
(2) a failure to pay the principal of, and premium, if any, on any debt
security of that series when due;
(3) a failure to deposit any sinking fund payment when due relating to that
series;
(4) a failure to perform any other covenant contained in the Indenture or
relating to that series that has continued for 60 days after written
notice was provided;
(5) a failure lasting 10 days after notice relating to any of our other
indebtedness for borrowed money or indebtedness of any Restricted
Subsidiary in excess of $10 million, that results in such indebtedness
becoming due and payable before maturity;
(6) certain events of bankruptcy, insolvency or reorganization; and
(7) any other Event of Default with respect to debt securities of that
series.
CONCERNING THE TRUSTEE
Within 90 days after any default, the Trustee will notify you of the
default, unless the default is cured or waived.
The Trustee may withhold notice of a default (except a default relating to
the payment of principal, premium or interest, or any additional amounts related
to any debt security or the payment of any sinking fund installment), if the
Trustee in good faith determines that withholding notice is in your interests.
If a default in the performance or breach of any covenant in the Indenture
or relating to that series occurs and continues for 60 days after written notice
has been given to us or the Trustee by the holders of at least 25% in principal
amount of the outstanding debt securities of a series, the Trustee will not give
notice to the holders for at least an additional 30 days after such default.
If an event of default for any series of debt securities occurs and
continues, the Trustee or the holders of 25% of the aggregate principal amount
(or any lesser amount that the series may provide) of the outstanding debt
securities affected by the default may require us to immediately repay the
entire principal amount (or any lesser amount that the series may provide) of
the outstanding debt securities of such series.
So long as the Trustee has not yet obtained a judgment or decree for payment
of money due, and we have paid all amounts due (other than those due solely as a
result of acceleration) and have remedied all Events of Default, the holders of
a majority in principal amount of the outstanding debt securities of the
affected series may rescind any acceleration or may waive any past default.
However,
11
<PAGE>
the holders of a majority in principal amount of all outstanding debt securities
of the affected series may not waive any Event of Default with respect to any
series of debt securities in the following two circumstances:
- a 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
- a covenant or provision that cannot be modified or amended without the
consent of each holder of 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 is not 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 will 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.
We are required to deliver to the Trustee an annual statement as to our
fulfillment of all of our obligations under the Indenture.
DEFEASANCE
If provided for under the Indenture with respect to debt securities of any
series that are registered debt securities denominated and payable only in US
dollars (except as otherwise provided under the Indenture), we 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
- not be subject to provisions of the Indenture described above under the
subsections entitled "--Limitation on Liens" and "--Merger and
Consolidation" with respect to the debt securities of that series;
in each case if we deposit with the Trustee, in trust, money or US government
obligations that, through the payment of interest and principal 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, we are required to deliver to the Trustee an
opinion of counsel to the effect that:
(1) 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 US federal income tax purposes; and
(2) if the debt securities of that series are then listed on the NYSE, the
exercise of the option would not result in delisting.
We may specify defeasance provisions with respect to any series of debt
securities.
12
<PAGE>
DESCRIPTION OF WARRANTS
This section 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 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.
We 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 in this Prospectus and in any applicable Prospectus Supplement.
Each series of warrants will be issued under a separate warrant agreement to
be entered into between us and a bank or a trust company, as warrant agent, all
as described in the Prospectus Supplement relating to that series of warrants.
The warrant agent will act solely as our agent under the applicable warrant
agreement and in connection with the certificates for any warrants 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.
This section, along with the description in the applicable Prospectus
Supplement, is a summary of certain provisions of the forms of warrant
agreements and warrant certificates and is not complete. We urge you to read the
warrant agreements and the warrant certificates, because those documents, and
not these descriptions, define your rights as a holder of warrants. We have
filed copies of the forms of the warrant agreements and warrant certificates as
exhibits to the Registration Statement of which this Prospectus is a part.
Copies of the forms of warrant agreements and warrant certificates are available
as set forth under the section entitled "Where You Can Find More Information."
GENERAL
The terms of any particular series of warrants will be described in the
Prospectus Supplement relating to that particular series of 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 described in the warrant;
(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 on which that right will expire;
(5) whether those warrants are to be issuable in registered or bearer form;
(6) whether those warrants are extendible and the period or periods of such
extendibility;
(7) the terms upon which bearer warrants of any series may be exchanged for
registered warrants of that series;
(8) whether those warrants will be issued in book-entry form, as a global
warrant certificate, or in certificated form;
13
<PAGE>
(9) US 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.
Before you exercise your warrants, you 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, any premium or interest 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; and
- 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,
they will provide for payment of an amount in cash that will be determined by
reference to increases or decreases in such stock index or stock basket. 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
- any market to which the commodity or commodity index relates.
You may exchange registered warrants of any series for registered warrants
of the same series representing in total the number of warrants that you have
surrendered for exchange. To the extent permitted, you may exchange warrant
certificates and transfer registered warrants 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).
14
<PAGE>
As the applicable Prospectus Supplement permits, a single global warrant
certificate, registered in the name of the nominee of the depository of the
warrants, or definitive certificates that may be exchanged on a fixed date, or
on a date or dates selected by us, for interests in a global warrant certificate
may be issued for:
- 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.
Bearer warrants will be transferable by delivery. The applicable Prospectus
Supplement will describe the terms of exchange applicable to any bearer
warrants.
EXERCISE OF WARRANTS
As set forth in, or calculable from, the Prospectus Supplement relating to
each series of warrants, each warrant you purchase will entitle you to:
- buy the equivalent amount of the debt securities;
- buy or sell the equivalent amount of Government debt securities;
- buy or sell the equivalent amount of a currency, currency unit, currency
index or currency basket, commodity or commodities at the exercise price;
- receive a settlement value for the equivalent amount of Government debt
securities; or
- receive a settlement value for the equivalent amount of a currency,
currency unit, currency index or currency basket, stock index or stock
basket, commodity or commodity index.
You may exercise your warrants at the corporate trust office of the warrant
agent (or any other office indicated in the Prospectus Supplement relating to
those warrants) up to 5:00 p.m., New York time, on the date stated in the
Prospectus Supplement relating to those warrants or as may be otherwise stated
in the Prospectus Supplement. If you do not exercise your warrants before the
time on that date (or such later date that we may set), your unexercised
warrants will become void.
Subject to any restrictions and additional requirements that may be set
forth in the Prospectus Supplement, you may exercise your warrants by:
- delivery to the warrant agent of the warrant certificate evidencing such
warrants properly completed and duly executed; and
- payment as provided in the applicable 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 debt securities will be issued and delivered upon exercise
of registered warrants. Warrants will be deemed to have been exercised upon
receipt of such warrant certificate and any payment, if applicable, at the
corporate trust office of the warrant agent or any other office indicated in the
applicable Prospectus Supplement and we will, as soon as practicable after such
receipt and payment, 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
15
<PAGE>
to the exercise of any bearer warrants or automatic exercise of warrants will be
described in the applicable Prospectus Supplement.
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS
In compliance with US federal income tax laws and regulations, we and any
underwriter, agent or dealer participating in the offering of any bearer debt
security will agree that, in connection with the original issuance of the bearer
debt security or during the restricted period (as defined in applicable US
Treasury regulations) of the bearer debt security, we will not offer, sell or
deliver such bearer debt security, directly or indirectly, to a US Person or to
any person within the United States, except to the extent permitted under US
Treasury regulations.
Each bearer debt security, including any bearer global securities that are
not exchangeable for definitive individual securities before their stated
maturity, will bear the following legend on the face of the security and on any
interest coupons that may be detachable:
"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 legend also will be evidenced on any book-entry system maintained with
respect to the bearer debt securities.
The sections referred to in this legend prohibit, with certain exceptions, a
US taxpayer who holds bearer debt securities to deduct any loss, and such US
taxpayer 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 debt securities.
As used in this Prospectus, "United States" means the United States of
America and its possessions, and "US 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 US federal income taxation regardless of its source.
Pending the availability of a definitive global security or individual
bearer debt securities, as the case may be, debt securities that are issuable as
bearer debt securities may initially be represented by a single temporary global
security. Subject to any further limitations described in the applicable
Prospectus Supplement, the temporary global security will be exchangeable for
interests in either a definitive global security or for such individual bearer
debt securities only upon receipt of a "Certificate of Non-US Beneficial
Ownership." However, if the 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, the
global security will not be exchangeable for interests in either a definitive
global security or individual bearer debt securities.
The Prospectus Supplement relating to bearer warrants will describe any
limitations on the offer, sale, delivery and exercise of bearer warrants
(including a requirement that a Certificate of Non-US Beneficial Ownership be
delivered once a bearer warrant is exercised).
16
<PAGE>
DESCRIPTION OF PREFERRED STOCK
This section sets forth certain general terms and provisions of the
preferred stock to which any Prospectus Supplement may relate. The particular
terms of the preferred stock offered by any Prospectus Supplement and the
extent, if any, to which such general terms will not apply to the preferred
stock so offered will be described in the Prospectus Supplement relating to such
preferred stock.
This section, along with the description in the applicable Prospectus
Supplement, is a summary of certain provisions of our restated certificate of
incorporation, including the applicable certificate of designations, and is not
complete.
We urge you to read the restated certificate of incorporation and the
certificate of designations for the relevant series of preferred stock in which
you are intending to invest, because those documents, and not these
descriptions, define your rights as a holder of preferred stock. We have filed a
copy of the restated certificate of incorporation and the certificates of
designations for our currently outstanding shares of preferred stock as exhibits
to the Registration Statement of which this Prospectus is a part. Copies of the
restated certificate of incorporation are available as set forth under the
section entitled "Where You Can Find More Information."
GENERAL
Our restated certificate of incorporation authorizes the issuance of
10,000,000 shares of preferred stock, $1.00 par value. We may issue preferred
stock from time to time in one or more series. The exact terms of each series
will be established by our board of directors or a duly authorized committee of
the board.
The terms of any particular series of preferred stock will be described in
the Prospectus Supplement relating to that particular series of preferred stock,
including, where applicable:
(1) the designation, stated value and liquidation preference of such
preferred stock and the number of shares offered;
(2) the offering price;
(3) the dividend rate or rates (or method of calculation), the date or dates
from which dividends shall accrue, and whether such dividends shall be
cumulative or noncumulative and, if cumulative, the dates from which
dividends shall commence to cumulate;
(4) any redemption or sinking fund provisions;
(5) the amount that shares of such series shall be entitled to receive in
the event of our liquidation, dissolution or winding up;
(6) the terms and conditions, if any, on which shares of such series shall
be exchangeable for shares of our stock of any other class or classes, or
other series of the same class;
(7) the voting rights, if any, of shares of such series in addition to those
set forth in "Voting Rights" below;
(8) the status as to reissuance or sale of shares of such series redeemed,
purchased or otherwise reacquired, or surrendered to us on conversion or
exchange;
(9) the conditions and restrictions, if any, on the payment of dividends or
on the making of other distributions on, or the purchase, redemption or
other acquisition by us or any subsidiary, of the common stock or of any
other class of our stock ranking junior to the shares of such series as
to dividends or upon liquidation;
(10) the conditions and restrictions, if any, on the creation of
indebtedness of us or of any subsidiary, or on the issue of any
additional stock ranking on a parity with or prior to the shares of such
series as to dividends or upon liquidation; and
17
<PAGE>
(11) any additional dividend, liquidation, redemption, sinking or retirement
fund and other rights, preferences, privileges, limitations and
restrictions of such preferred stock.
The preferred stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the applicable Prospectus Supplement, the shares
of each series of preferred stock will upon issuance rank senior to the common
stock and on a parity in all respects with each other outstanding series of
preferred stock. As of December 31, 1999, there were outstanding:
- 479,250 shares of Adjustable Rate Cumulative Preferred Stock, Series A;
- 5,000,000 depositary shares, each representing a one-fourth interest in a
share of 6.15% Cumulative Preferred Stock, Series E;
- 4,000,000 depositary shares, each representing a one-fourth interest in a
share of 5.72% Cumulative Preferred Stock, Series F; and
- 4,000,000 depositary shares, each representing a one-fourth interest in a
share of 5.49% Cumulative Preferred Stock, Series G.
The preferred stock will have no preemptive rights to subscribe for any
additional securities that may be issued by us.
DIVIDENDS
Unless otherwise specified in the applicable Prospectus Supplement, before
any dividends may be declared or paid to the holders of shares of our common
stock, par value $1.00 per share, or of any other of our capital stock ranking
junior to any series of the preferred stock as to the payment of dividends, the
holders of the preferred stock of that series will be entitled to receive, when
and as declared by the board of directors or a duly authorized committee of the
board, out of the our net profits or net assets legally available therefor,
dividends payable quarterly on January 15, April 15, July 15 and October 15, in
each year at such rates as will be specified in the applicable Prospectus
Supplement. Such rates may be fixed or variable or both. If variable, the
formula used for determining the dividend rate for each dividend period will be
specified in the applicable Prospectus Supplement. Dividends will be payable to
the holders of record as they appear on our stock transfer records on such dates
(not less than 15 days nor more than 60 days prior to a dividend payment date)
as will be fixed by the board of directors or a duly authorized committee
thereof. Dividends will be paid in the form of cash.
Dividends on any series of preferred stock may be cumulative or
noncumulative, as specified in the applicable Prospectus Supplement. If the
board of directors fails to declare a dividend payable on a dividend payment
date on any series of preferred stock for which dividends are noncumulative,
then the holders of the preferred stock of that series will have no right to
receive a dividend in respect of the dividend period relating to such dividend
payment date, and we will have no obligation to pay the dividend accrued for
such period, whether or not dividends on that series are declared or paid on any
future dividend payment dates. If dividends on any series of preferred stock are
not paid in full or declared in full and sums set apart for the payment thereof,
then no dividends shall be declared and paid on that series unless declared and
paid ratably on all shares of every series of preferred stock then outstanding,
including dividends accrued or in arrears, if any, in proportion to the
respective amounts that would be payable per share if all such dividends were
declared and paid in full.
The Prospectus Supplement relating to a series of preferred stock will
specify the conditions and restrictions, if any, on the payment of dividends or
on the making of other distributions on, or the purchase, redemption or other
acquisition by us or any of our subsidiaries of, the common stock or of any
other class of our stock ranking junior to the shares of that series as to
dividends or upon liquidation and any other preferences, rights, restrictions
and qualifications that are not inconsistent with the certification of
incorporation.
18
<PAGE>
LIQUIDATION RIGHTS
Unless otherwise specified in the Prospectus Supplement relating to a series
of preferred stock, upon our liquidation, dissolution or winding up (whether
voluntary or involuntary) the holders of preferred stock of that series will be
entitled to receive out of our assets available for distribution to our
stockholders, whether from capital, surplus or earnings, the amount specified in
the applicable Prospectus Supplement for that series, together with all
dividends accrued and unpaid, before any distribution of the assets will be made
to the holders of common stock or any other class or series of shares ranking
junior to that series of preferred stock upon liquidation, dissolution or
winding up, and will be entitled to no other or further distribution. If, upon
our liquidation, dissolution or winding up the assets distributable among the
holders of a series of preferred stock shall be insufficient to permit the
payment in full to the holders of that series of preferred stock of all amounts
payable to those holders, then the entire amount of our assets thus
distributable will be distributed ratably among the holders of that series of
preferred stock in proportion to the respective amounts that would be payable
per share if those assets were sufficient to permit payment in full.
Neither our consolidation, merger or other business combination with or into
any other individual, firm, corporation or other entity nor the sale, lease,
exchange or conveyance of all or any part of our property, assets or business
will be deemed to be a liquidation, dissolution or winding up.
REDEMPTION
If so specified in the applicable Prospectus Supplement, any series of
preferred stock may be redeemable, in whole or in part, at our option or
pursuant to a retirement or sinking fund or otherwise, on terms and at the times
and the redemption prices specified in that Prospectus Supplement. If less than
all shares of the series at the time outstanding are to be redeemed, the shares
to be redeemed will be selected pro rata or by lot, in such manner as may be
prescribed by resolution of the board of directors.
Notice of any redemption of a series of preferred stock will be given by
publication in a newspaper of general circulation in the Borough of Manhattan,
the City of New York, not less than 30 nor more than 60 days prior to the
redemption date. We will mail a similar notice, postage prepaid, not less than
30 nor more than 60 days prior to the redemption date, addressed to the
respective holders of record of shares of that series at the addresses shown on
our stock transfer records, but the mailing of such notice will not be a
condition of such redemption. In order to facilitate the redemption of shares of
preferred stock, the board of directors may fix a record date for the
determination of the shares to be redeemed. Such record date will be not more
than 60 days nor less than 30 days prior to the redemption date.
Prior to the redemption date, we will deposit money for the payment of the
redemption price with a bank or trust company doing business in the Borough of
Manhattan, the City of New York, and having a capital and surplus of at least
$10,000,000. Unless we fail to make such deposit, on the redemption date, all
dividends on the series of preferred stock called for redemption will cease to
accrue and all rights of the holders of shares of that series as our
stockholders shall cease, except the right to receive the redemption price (but
without interest). Unless otherwise specified in the applicable Prospectus
Supplement, any monies so deposited which remain unclaimed by the holders of the
shares of that series at the end of six years after the redemption date will
become our property, and will be paid by the bank or trust company with which it
has been so deposited to us.
CONVERSION RIGHTS
No series of preferred stock will be convertible into common stock.
19
<PAGE>
VOTING RIGHTS
Unless otherwise determined by the board of directors and indicated in the
applicable Prospectus Supplement, holders of the preferred stock of that series
will not have any voting rights except as set forth below or as otherwise from
time to time required by law. Whenever dividends on any series of preferred
stock or any other class or series of stock ranking on a parity with that series
with respect to the payment of dividends shall be in arrears for dividend
periods, whether or not consecutive, containing in the aggregate a number of
days equivalent to six calendar quarters, the holders of shares of that series
(voting separately as a class with all other series of preferred stock upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two of the authorized number of our
directors at the next annual meeting of stockholders and at each subsequent
meeting until all dividends accumulated on that series have been fully paid or
set apart for payment. The term of office of all directors elected by the
holders of a series of preferred stock shall terminate immediately upon the
termination of the right of the holders of that series to vote for directors.
Whenever the shares of a series are or become entitled to vote, each holder of
shares of that series will have one vote for each share held.
So long as shares of any series of preferred stock remain outstanding, we
shall not, without the consent of the holders of at least two-thirds of the
shares of that series outstanding at the time (voting separately as a class with
all other series of preferred stock upon which like voting rights have been
conferred and are exercisable):
(1) issue or increase the authorized amount of any class or series of stock
ranking senior to the shares of that series as to dividends or upon
liquidation; or
(2) amend, alter or repeal the provisions of our certificate of
incorporation or of the resolutions contained in the certificate of
designation, whether by merger, consolidation or otherwise, so as to
materially and adversely affect any power, preference or special right of
the outstanding shares of that series or the holders thereof. Any
increase in the amount of the authorized common stock or authorized
preferred stock or the creation and issuance of common stock or any other
series of preferred stock ranking on a parity with or junior to a series
of preferred stock as to dividends and upon liquidation shall not be
deemed to materially and adversely affect the powers, preferences or
special rights of the shares of that series.
Unless otherwise indicated in the applicable Prospectus Supplement, the
transfer agent, dividend disbursing agent and registrar for each series of
preferred stock will be Chase Mellon Shareholder Services L.L.C.
DESCRIPTION OF DEPOSITARY SHARES
This section sets forth certain general terms and provisions of the
depositary shares and depositary receipts which we may elect to issue.
This section, along with the description in the applicable Prospectus
Supplement, is a summary of certain provisions of the deposit agreement relating
to the applicable series of Preferred Stock and is not complete. Any such
deposit agreement will be filed as an exhibit to or incorporated by reference in
the Registration Statement of which this Prospectus is a part.
GENERAL
We may, at our option, elect to offer fractional interests in shares of a
series of preferred stock, rather than whole shares. If we exercise our option,
we will provide for the issuance by a depositary of depositary receipts
evidencing depositary shares, each of which will represent a fractional interest
(to be specified in the applicable Prospectus Supplement) in a share of a
particular series of the Preferred Stock as more fully described below.
20
<PAGE>
If we offer fractional shares of any series of preferred stock, those shares
will be deposited under a separate deposit agreement among us, a depositary bank
or trust company selected by us and having its principal office in the United
States and having a combined capital and surplus of at least $50,000,000 and the
holders from time to time of the depositary receipts issued thereunder by that
depositary. The applicable Prospectus Supplement will set forth the name and
address of the depositary. Subject to the terms of the deposit agreement, each
owner of a depositary share will be entitled, in proportion to the applicable
fractional interest in a share of preferred stock underlying such depositary
share, to all the rights and preferences of the fractional share of preferred
stock underlying such depositary share (including dividend, voting, redemption
and liquidation rights).
Until definitive engraved depositary receipts are prepared, upon our written
order, the depositary may issue temporary depositary receipts substantially
identical to (and entitling the holders thereof to all the rights pertaining to)
the definitive depositary receipts but not in definitive form. Definitive
depositary receipts will be prepared thereafter without unreasonable delay.
Temporary depositary receipts will be exchangeable for definitive depositary
receipts at our expense.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute to the holders of depositary receipts
evidencing depositary shares all cash dividends or other cash distributions
received in respect of the underlying fractional shares of preferred stock in
proportion to their respective holdings of the depositary shares on the relevant
record date. The depositary will distribute only the amount that can be
distributed without attributing to any holder of depositary shares a fraction of
one cent. Any balance not so distributed will be held by the depositary (without
liability for interest thereon) and will be added to and treated as part of the
next sum received by the depositary for distribution to holders of depositary
receipts then outstanding.
If we distribute property other than cash in respect of shares of preferred
stock deposited under a deposit agreement, the depositary will distribute the
property received by it to the record holders of depositary receipts evidencing
the depositary shares relating to those shares of preferred stock, in
proportion, as nearly as may be practicable, to their respective holdings of the
depositary shares on the relevant record dates. If the depositary determines
that it is not feasible to make such a distribution, the depositary may, with
our approval, adopt such method as it deems equitable and practicable to give
effect to the distribution, including the sale of the property so received and
distribution of the net proceeds from such sale to the holders of the depositary
receipts.
Each deposit agreement will also contain provisions relating to the manner
in which any subscription or similar right offered by us to holders of the
preferred stock deposited under such deposit agreement will be made available to
holders of depositary shares.
REDEMPTION OF DEPOSITARY SHARES
If the shares of preferred stock deposited under a deposit agreement are
subject to redemption, in whole or in part, then, upon any such redemption, the
depositary shares relating to those deposited shares will be redeemed from the
proceeds received by the depositary as a result of the redemption. Whenever we
redeem shares of preferred stock held by a depositary, the depositary will
redeem as of the same redemption date the number of depositary shares
representing the shares of preferred stock so redeemed. The depositary will mail
the notice of redemption not less than 20 and not more than 50 days prior to the
date fixed for redemption to the record holders of the depositary shares to be
so redeemed. The redemption price per depositary share will be equal to the
applicable fraction of the per share redemption price of the preferred stock
underlying such depositary share. If less than all the depositary shares are to
be redeemed, the depositary shares to be redeemed will be selected by lot or pro
rata as may be determined by the depositary.
Once notice of redemption has been given, from and after the redemption
date, the depositary shares called for redemption will no longer be deemed to be
outstanding, unless we fail to redeem the
21
<PAGE>
shares of preferred stock so called for redemption. On the redemption date, all
rights of the holders of depositary shares will cease, except for the right to
receive the monies payable upon such redemption and any money or other property
to which the holders of depositary shares were entitled upon such redemption,
upon surrender to the depositary of the depositary receipts evidencing
depositary shares.
VOTING RIGHTS
As soon as practicable after receipt of notice of any meeting at which the
holders of shares of preferred stock deposited under a deposit agreement are
entitled to vote, the depositary will mail the information contained in that
notice of meeting (and any accompanying proxy materials) to the holders of the
depositary shares relating to such preferred stock as of the record date for
such meeting. Each such holder will be entitled, subject to any applicable
restrictions, to instruct the depositary as to the exercise of the voting rights
of the preferred stock represented by such holder's depositary shares. The
depositary will attempt to vote the preferred stock represented by those
depositary shares in accordance with the holder's instructions, and we will
agree to take all action deemed necessary by the depositary to enable the
depositary to do so. The depositary will abstain from voting shares of preferred
stock deposited under a deposit agreement if it has not received specific
instructions from the holders of the depositary shares representing those
shares.
WITHDRAWAL OF STOCK
Upon surrender of depositary receipts at the principal office of the
depositary (unless the depositary shares evidenced by the depositary receipts
have previously been called for redemption), and subject to the terms of the
deposit agreement, the owner of the depositary shares shall be entitled to
delivery of whole shares of preferred stock and all money and other property, if
any, represented by those depositary shares. Fractional shares of preferred
stock will not be delivered. If the depositary receipts surrendered by the
holder evidence depositary shares in excess of those representing the number of
whole shares of preferred stock to be withdrawn, the depositary will deliver to
the holder at the same time a new depositary receipt evidencing the depositary
shares. Holders of shares of preferred stock which are withdrawn will not
thereafter be entitled to deposit such shares under a deposit agreement or to
receive depositary shares. We do not expect that there will be any public
trading market for the preferred stock, except as represented by depositary
shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
We may from time to time amend the form of depositary receipt evidencing any
depositary shares and any provision of a deposit agreement by agreement between
us and the depositary. However, any amendment that materially and adversely
alters the rights of the existing holders of depositary shares will not be
effective unless and until approved by the holders of at least a majority of the
depositary shares then outstanding under that deposit agreement. Each deposit
agreement will provide that each holder of depositary shares who continues to
hold those depositary shares at the time an amendment becomes effective will be
deemed to have consented to the amendment and will be bound by that amendment.
Except as may be necessary to comply with any mandatory provisions of applicable
law, no amendment may impair the right, subject to the terms of the deposit
agreement, of any holder of any depositary shares to surrender the depositary
receipt evidencing those depositary shares to the depositary together with
instructions to deliver to the holder the whole shares of preferred stock
represented by the surrendered depositary shares and all money and other
property, if any, represented thereby. A deposit agreement may be terminated by
us or the depositary only if:
(1) all outstanding depositary shares issued under the deposit agreement
have been redeemed; or
(2) there has been a final distribution in respect of the preferred stock
relating to those depositary shares in connection with any liquidation,
dissolution or winding up of the Company and the amount received by the
depositary as a result of that distribution has been distributed by the
Depositary to the holders of those depositary shares.
22
<PAGE>
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We will pay charges of
any depositary in connection with the initial deposit of preferred stock and the
initial issuance of the depositary shares and any redemption of such preferred
stock. Holders of depositary shares will pay any other taxes and charges
incurred for their accounts as are provided in the deposit agreement.
MISCELLANEOUS
Each depositary will forward to the holders of depositary shares issued by
that depositary all reports and communications from us that are delivered to the
depositary and that we are required to furnish to the holders of the preferred
stock held by the depositary. In addition, each depositary will make available
for inspection by the holders of those depositary shares, at the principal
office of such depositary and at such other places as it may from time to time
deem advisable, all reports and communications received from us that are
received by such depositary as the holder of preferred stock.
Neither we nor any depositary will assume any obligation or will be subject
to any liability under a deposit agreement to holders of the depositary shares
other than for its negligence or willful misconduct. Neither we nor any
depositary will be liable if it is prevented or delayed by law or any
circumstance beyond its control in performing its obligations under a deposit
agreement. The obligations of us and any depositary under a deposit agreement
will be limited to performance in good faith of their duties thereunder, and
they will not be obligated to prosecute or defend any legal proceeding in
respect of any depositary shares or preferred stock unless satisfactory
indemnity is furnished. We and any depositary may rely on written advice of
counsel or accountants, on information provided by persons presenting preferred
stock for deposit, holders of depositary shares or other persons believed in
good faith to be competent to give such information and on documents believed to
be genuine and to have been signed or presented by the proper party or parties.
RESIGNATION AND REMOVAL OF DEPOSITARY
A depositary may resign at any time by delivering to us notice of its
election to resign, and we may remove any depositary at any time. Any such
resignation or removal will take effect upon the appointment of a successor
depositary and its acceptance of such appointment. Such successor depositary
must be appointed within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the
United States of America and having a combined capital and surplus of at least
$50,000,000.
FEDERAL INCOME TAX CONSEQUENCES
Owners of the depositary shares will be treated for federal income tax
purposes as if they were owners of the preferred stock represented by such
depositary shares. Accordingly, the owners will be entitled to take into account
for federal income tax purposes income and deductions to which they would be
entitled if they were holders of the preferred stock. In addition:
- no gain or loss will be recognized for federal income tax purposes upon
the withdrawal of preferred stock in exchange for depositary shares;
- the tax basis of each share of preferred stock to an exchanging owner of
depositary shares will, when exchanged, be the same as the aggregate tax
basis of the depositary shares being exchanged; and
- the holding period for preferred stock in the hands of an exchanging owner
of depositary shares will include the period during which that person
owned the depositary shares.
23
<PAGE>
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Any series of preferred stock (and the depositary shares relating to such
series) may be issued in certificated or book-entry form, as specified in the
applicable Prospectus Supplement. Book-entry preferred stock or depositary
shares will be issued in the form of a single global stock certificate or a
single global depositary receipt (as the case may be) registered in the name of
the nominee of The Depository Trust Company or any successor or alternate
depositary we select.
The depositary has provided us the following information: The depositary 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. The depositary holds securities that have been deposited by its
participating organizations, which are called "participants." The depositary
also facilitates the settlement among participants of securities transactions,
such as transfers and pledges, in deposited securities through computerized
records for participants' accounts. This eliminates the need to exchange
certificates. Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. The
depositary is owned by a number of its participants and by the NYSE, the AMEX
and the NASD. The depositary's book-entry system also is used by other
organizations such as securities brokers and dealers, banks, and trust companies
that work through a participant. Persons who are not participants may
beneficially own securities held by the depositary only through participants.
The rules applicable to the depositary and its participants are on file with the
SEC.
Upon our issuance of any preferred stock or depositary shares that will be
represented by a global security, the depositary will immediately credit on its
book-entry system the respective amounts of preferred stock or depositary shares
represented by the global security to participants' accounts. The accounts to be
credited will be designated by our agents, or by us if we directly offer and
sell the preferred stock or depositary shares. Ownership of beneficial interests
in a global security will be limited to participants or persons that hold
interests through the participants. Beneficial ownership interests in a global
security will be shown on, and transfers of those interests will be made only
through, records maintained by the depositary's participants or persons holding
interests through participants. Please note, the laws of some states require
that certain purchasers of securities take physical delivery of these securities
in definitive form. These limits and laws may impair the ability to transfer
beneficial interest in a global security.
Unless the global security is exchanged in whole or in part for the relevant
definitive security representing preferred stock or depositary shares, the
global security cannot be transferred. However, the depositary, its nominees and
their successors may transfer a global security as a whole to one another. This
means we will not issue certificates to you. Until the relevant definitive
security representing preferred stock or depositary shares is issued, the
depositary, not you, will be considered the holder of preferred stock or
depositary shares represented by a global security. We have described below the
only circumstances where preferred stock or depositary shares represented by a
global security will be exchangeable for certificates representing preferred
stock or depositary shares.
We will pay dividends and other distributions on the preferred stock or
depositary shares to the depositary or its nominee. We and the depositary will
treat the nominee as the owner of the global securities for all purposes.
Neither we nor the depositary will have any responsibility or liability for any
aspect of the records relating to or payments made on account of your beneficial
ownership interests in a global security or for maintaining, supervising or
reviewing the records relating to you as the owner of a beneficial interest in
such global securities. We expect that the depositary will credit immediately
the respective accounts of the participants upon receipt of any dividend payment
or other distribution on a global security. We expect that participants'
payments to owners of the beneficial interests in a
24
<PAGE>
global security will be governed by standing customer instructions and customary
practices, and will be the participants' responsibility.
The depositary nominee is the only person who can exercise a right to
repayment of a global security. If you own a beneficial interest in a global
security and want to exercise a right to repayment, then you must instruct your
participant (for example, your broker) to notify the nominee of your desire to
exercise such right. Different participants have different procedures for
accepting instructions from their customers (for example, cut-off times for
notice), and accordingly, you should consult your participant to inform yourself
about their particular procedures.
Unless otherwise specified in the applicable Prospectus Supplement,
preferred stock or depositary shares will be issued initially as book-entry
preferred stock or depositary shares. Generally, we will issue book-entry
preferred stock or depositary shares only in the form of global securities.
Preferred stock or depositary shares represented by a global security may be
exchanged for the relevant definitive security with the same terms in authorized
denominations if:
- the depositary notified us that it is unwilling or unable to continue as a
depositary and a successor depositary is not appointed by us within 90
days; or
- we determine not to have any preferred stock or depositary shares
represented by a global security.
In these circumstances, you will be entitled to physical delivery of a
definitive certificate or other instrument evidencing such preferred stock or
depositary shares in an amount equal to your beneficial ownership interest and
registered in your name.
PLAN OF DISTRIBUTION
We may sell the securities in any of three ways:
- 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);
- through broker-dealers (including Bear Stearns) we have designated to act
on our behalf as agents; or
- directly to one or more purchasers.
Each Prospectus Supplement will set forth the manner and terms of an
offering of securities, including:
- whether that offering is being made to underwriters or through agents or
directly;
- any underwriting discounts, dealer concessions, agency commissions and any
other items that may be deemed to constitute underwriters', dealers' or
agents' compensation;
- the securities' purchase price or initial public offering price; and
- the proceeds we anticipate from the sale of the securities.
When securities are to be sold to underwriters, unless otherwise set forth
in the applicable Prospectus Supplement, the underwriters' obligations to
purchase those securities will be subject to certain conditions precedent. If
the underwriters purchase any of the securities, they will be obligated to
purchase all of the securities. The underwriters will acquire the securities for
their own accounts and may resell them, either directly to the public or to
securities dealers, at various times in one or more transactions, including
negotiated transactions, either at a fixed public offering price or at varying
prices determined at the time of sale.
Any initial public offering price and any concessions allowed or reallowed
to dealers may be changed intermittently.
25
<PAGE>
To the extent that any securities underwritten by Bear Stearns are not
resold by Bear Stearns for an amount at least equal to their public offering
price, the proceeds from the offering of those securities will be reduced. Until
resold, any such preferred stock and depositary shares will be treated as if
they were not outstanding. Bear Stearns intends to resell any of those
securities at various times after the 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 our account and will receive commissions from us as will be set
forth in the applicable Prospectus Supplement.
Securities bought in accordance with a redemption or repayment under their
terms also may be offered and sold, if so indicated in the applicable Prospectus
Supplement, in connection with a remarketing by one or more firms acting as
principals for their own accounts or as agents for us. Any remarketing firm will
be identified and the terms of its agreement, if any, with us 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, we 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 with the distribution may be
deemed to be underwriting compensation. Those underwriters and agents may be
entitled, under their agreements with us, to indemnification by us against
certain civil liabilities, including liabilities under the Securities Act, or to
contribution by us 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 us or our
affiliates in the ordinary course of business.
Following the initial distribution of any series of securities (and in the
case of shares of preferred stock, subject to obtaining approval or exemption
from the NYSE), Bear Stearns may offer and sell previously issued securities of
that series at various times in the course of its business as a broker-dealer.
Bear Stearns may act as principal or agent in those transactions. Bear Stearns
will use this Prospectus and the Prospectus Supplement applicable to those
securities 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 under this
Registration Statement or an applicable Prospectus Supplement, 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 the
applicable Prospectus Supplement permits, 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 us 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.
26
<PAGE>
The imposition of a penalty bid may also affect the price of securities to the
extent that it discourages resales of the securities. 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 our wholly owned subsidiary, 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 the assets of employee benefit plans that are subject to
ERISA ("ERISA Plans"). Qualified Plans, IRAs and ERISA Plans and entities
treated for purposes of ERISA and the Code as holding assets thereof are in this
Prospectus 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 (for example, investment manager, trustee or custodian),
any person providing services (for example, 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 us, Bear Stearns and BSSC may be considered a "party in interest" or
"disqualified person" with respect to many Plans, including, for example, IRAs
established with us or them. The purchase and/or holding of securities by a Plan
with respect to which we, Bear Stearns, BSSC and/or certain of our affiliates is
a fiduciary and/or a service provider (or otherwise is a "party in interest" or
"disqualified person") could 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 certain prohibited transaction class
exemptions ("PTCEs") (for example, 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 and PTCE 95-60 relating to insurance company
general accounts).
A fiduciary who is responsible for an ERISA Plan engaging in a non-exempt
prohibited transaction may be liable for any losses to the Plan resulting from
such transaction and may be subject to a penalty under ERISA. Also, 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,
us, Bear Stearns, BSSC and/or certain of our affiliates should consult with
counsel before making any acquisition. Each purchaser of any securities, the
assets of which constitute the assets of one or more Plans and each fiduciary
that directs such purchaser with respect to the purchase or holding of such
securities, will be deemed to represent that the purchase and holding of the
securities does not constitute a prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code for which an exemption is not available.
27
<PAGE>
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this prospectus by reference from our 1999 Annual
Report on Form 10-K have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated in this Prospectus
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, the warrants, the preferred stock and
the depositary shares will be passed on for us by Cadwalader, Wickersham & Taft,
New York, New York.
28
<PAGE>
PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY
THE BEAR STEARNS COMPANIES INC.
245 Park Avenue
New York, New York 10167
USA
TRUSTEE, REGISTRAR AND PRINCIPAL PAYING AGENT
THE CHASE MANHATTAN BANK
450 West 33rd Street
New York, New York 10001
USA
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 US Law To the Company as to US 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
USA USA
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
USA
LISTING AGENT
BEAR, STEARNS INTERNATIONAL LIMITED
One Canada Square
London E14 5AD
England
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 MARCH 22, 2000
AND THE INFORMATION IN THE ACCOMPANYING PROSPECTUS IS CURRENT AS OF MARCH 17,
2000.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<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-11
Capitalization........................ S-12
Selected Consolidated Financial
Data................................ S-13
Description of the Notes.............. S-15
Description of the Company............ S-25
Certain US Federal Income Tax
Considerations...................... S-39
Underwriting.......................... S-43
Legal Matters......................... S-45
Experts............................... S-45
General Information................... S-46
PROSPECTUS
Where You Can Find More Information... 3
Certain Definitions................... 4
The Bear Stearns Companies Inc........ 4
Use of Proceeds....................... 5
Ratio Information..................... 5
Description of Debt Securities........ 6
Description of Warrants............... 13
Limitations on Issuance of Bearer Debt
Securities and Bearer Warrants...... 16
Description of Preferred Stock........ 17
Description of Depositary Shares...... 20
Book-Entry Procedures and Settlement.. 24
Plan of Distribution.................. 25
ERISA Considerations.................. 27
Experts............................... 28
Validity of the Securities............ 28
</TABLE>
US$1,250,000,000
THE BEAR STEARNS
COMPANIES INC.
FLOATING RATE GLOBAL
NOTES DUE 2003
----------------------------------
PROSPECTUS SUPPLEMENT
----------------------------------
BEAR, STEARNS & CO. INC.
ABN AMRO INCORPORATED
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
BARCLAYS CAPITAL
CHASE SECURITIES INC.
LEHMAN BROTHERS
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
WACHOVIA SECURITIES, INC.
WARBURG DILLON READ LLC
WESTDEUTSCHE LANDESBANK GIROZENTRALE
MARCH 22, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
