Filed Pursuant to Rule 424(b)(5)
Registration No. 333-52902
PROSPECTUS SUPPLEMENT
(To Prospectus Dated January 11, 2001)
US$1,000,000,000
THE BEAR STEARNS COMPANIES INC.
5.70% GLOBAL NOTES DUE 2007
SET FORTH BELOW IS A SUMMARY OF THE TERMS OF THE NOTES OFFERED BY THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. FOR MORE DETAIL, SEE
"DESCRIPTION OF THE NOTES."
- GLOBAL OFFERING
We are offering the Notes in the United States and in parts of Europe and Asia
where it is legal to offer the Notes.
- INTEREST
The Notes have a fixed annual rate of 5.70%, which will be paid every six
months on January 15 and July 15.
- MATURITY
The Notes will mature on January 15, 2007.
- 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 Financial Services Authority in its capacity as
competent authority under the Financial Services and Markets Act 2000 for the
Notes to be admitted to the official list of the UK Listing Authority and to
the London Stock Exchange plc for such Notes to be admitted to trading on the
London Stock Exchange's market for listed 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 SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PER NOTE TOTAL
-------- -------------
Initial public offering price............................... 99.743% $997,430,000
Underwriting discount....................................... 0.350% $ 3,500,000
Proceeds, before expenses, to us............................ 99.393% $993,930,000
Bear, Stearns & Co. Inc. is the Global Coordinator for the offering of the
Notes. Bear, Stearns International Limited is the International Coordinator for
all Notes to be sold to purchasers in Europe. The Underwriters expect to deliver
the Notes in book-entry form only through the facilities of The Depository Trust
Company, Clearstream Banking, societe anonyme and Euroclear Bank S.A./N.V., as
operator of the Euroclear System against payment on or about January 15, 2002.
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.
BEAR, STEARNS INTERNATIONAL LIMITED
ABN AMRO INCORPORATED BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC. BB&T CAPITAL MARKETS
BNP PARIBAS FLEET SECURITIES, INC.
JPMORGAN KBC IG
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
U.S. BANCORP PIPER JAFFRAY WACHOVIA SECURITIES
WELLS FARGO BROKERAGE SERVICES, LLC WESTDEUTSCHE LANDESBANK GIROZENTRALE
The date of this prospectus supplement is January 8, 2002
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 HIGHER THAN THAT WHICH MIGHT 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 STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME AND IN ANY EVENT SHALL BE DISCONTINUED WITHIN A LIMITED
PERIOD. NO OTHER PARTY MAY ENGAGE IN STABILIZATION.
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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 OUR 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;
- "AMEX" refers to the American Stock Exchange;
- "Bear Stearns" refers to Bear, Stearns & Co. Inc.;
- "BSB" refers to Bear Stearns Bank plc;
- "BSSC" refers to Bear, Stearns Securities Corp.;
- "BSIL" refers to Bear, Stearns International Limited;
- "NYSE" refers to the New York Stock Exchange; 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, BSB, BSSC and BSIL are subsidiaries of The Bear Stearns
Companies Inc.
S-3
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 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 November 30, 2000;
(ii) the Quarterly Report on Form 10-Q for the quarters ended February 23,
2001, May 25, 2001 and August 31, 2001; and
(iii) the Current Reports on Form 8-K dated December 13, 2000, January 4,
2001, January 11, 2001, February 15, 2001, February 15, 2001, March 21,
2001, March 30, 2001, April 20, 2001, May 3, 2001, May 4, 2001, June 20,
2001, June 26, 2001, September 26, 2001, October 19, 2001, December 20,
2001 and January 8, 2002.
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., 383
Madison Avenue, New York, New York 10179, U.S.A.; telephone number
(212) 272-2000. In addition, once the Notes are admitted to the Official List of
the UK Listing Authority (as defined below), 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
SUMMARY OF THE OFFERING
ISSUER................................. The Bear Stearns Companies Inc.
SECURITIES OFFERED..................... US $1,000,000,000 aggregate principal amount of 5.70%
Global Notes due 2007.
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 99.743% of par.
DATE OF ORIGINAL ISSUANCE (SETTLEMENT
DATE)................................ January 15, 2002.
MATURITY DATE.......................... January 15, 2007.
INTEREST PAYMENT DATES................. January 15 and July 15 in each year, beginning July 15,
2002.
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 August 31,
2001:
- we had outstanding (on an unconsolidated basis)
approximately $33.7 billion of debt and other
obligations, including approximately $32.0 billion
of senior debt, none of which is secured; and
- our subsidiaries had outstanding (after
consolidation and eliminations) approximately
$131.2 billion of debt and other obligations
(including $45.3 billion related to securities sold
under repurchase agreements, $54.1 billion related
to payables to customers, $19.9 billion related to
financial instruments sold, but not yet purchased,
and $11.9 billion of other liabilities, including
$6.5 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.
S-5
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 $993.9 million for general
corporate purposes. These purposes may include additions
to working capital, the repayment of short-term and
long-term debt and making investments in or extending
credit to our subsidiaries.
S-6
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, societe anonyme ("Clearstream") or
Euroclear Bank S.A./N.V., as operator of the Euroclear
System ("Euroclear") (in Europe). Interests will be held
on behalf of the participants of Clearstream 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 Financial Services
Authority in its capacity as competent authority under the
Financial Services and Markets Act 2000 (the "UK Listing
Authority") for the Notes to be admitted to the official
list of the UK Listing Authority (the "Official List") and
to the London Stock Exchange plc (the "London Stock
Exchange") for such Notes to be admitted to trading on the
London Stock Exchange's market for listed securities. We
cannot guarantee that our application will be approved,
and settlement of the Notes is not conditional on
obtaining the listing.
GOVERNING LAW.......................... New York.
SELLING RESTRICTIONS................... There are selling restrictions for certain jurisdictions,
including the United Kingdom. See "Underwriting" below.
S-7
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges was 1.2 for the nine months ended
August 31, 2001 and 1.2 for the fiscal year ended November 30, 2000. 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.
We are a holding company that, through our subsidiaries, principally Bear
Stearns, BSSC, BSIL and BSB, 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. 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;
- involvement in specialist activity on both 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;
- investment management and advisory services; 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,
Denver, Los Angeles, San Francisco and San Juan;
- from representative offices in Beijing, Herzliya, Hong Kong, Milan, Sao
Paulo, Seoul and Shanghai;
- through international offices in Dublin, London, Lugano, Singapore and
Tokyo; and
- through joint ventures with other firms in Belgium, Greece and Spain.
We are incorporated in the State of Delaware. Our principal executive office
is located at 383 Madison, New York, New York 10179, USA, and our telephone
number is (212) 272-2000. Our internet address is http://www.bearstearns.com.
S-8
DIRECTORS OF THE COMPANY
The following table sets forth certain information concerning the directors
of the Company.
YEAR FIRST
ELECTED TO
AGE SERVE AS
(AS OF NOVEMBER 30, DIRECTOR OF
NAME 2001) PRINCIPAL OCCUPATION AND DIRECTORSHIPS HELD THE COMPANY
---- -------------------- ------------------------------------------- -----------
James E. Cayne................. 67 Chairman of the Board and Chief Executive 1985
Officer of the Company and Bear Stearns and
member of the Executive Committee of the
Company (the "Executive Committee")
Carl D. Glickman............... 75 Private Investor; Trustee, Lexington 1985
Corporate Property Trust; Director, Office
Max Inc.
Alan C. Greenberg.............. 74 Chairman of the Executive Committee 1985
Donald J. Harrington, C.M...... 56 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................ 61 Founder and Managing Partner, The Apollo 1997
Real Estate Investment Funds; President and
Senior Managing Partner, The Mack
Organization; Chairman of the Board of
Mack-Cali Realty Corporation and Metropolis
Realty Trust, Inc.; Director, Koger Equity,
Inc., Vail Resorts, Inc. and Wyndham
International, Inc.
Frank T. Nickell............... 54 President and Chief Executive Officer of 1993
Kelso & Company; Director, Blackrock Inc.,
Earle M. Jorgensen Company and Peebles Inc.
Frederic V. Salerno............ 58 Vice Chairman and CFO of Verizon 1992
Communications; Director, Avnet, Inc.,
Orion Power Holdings and Viacom, Inc.
Alan D. Schwartz............... 51 Co-President and Co-Chief Operating Officer 1987(1)
of the Company and Bear Stearns, member of
the Executive Committee and Head of the
Investment Banking Group of Bear Stearns;
Director, Champps Entertainment Inc.
S-9
YEAR FIRST
ELECTED TO
AGE SERVE AS
(AS OF NOVEMBER 30, DIRECTOR OF
NAME 2001) PRINCIPAL OCCUPATION AND DIRECTORSHIPS HELD THE COMPANY
---- -------------------- ------------------------------------------- -----------
Warren J. Spector.............. 43 Co-President and Co-Chief Operating Officer 1990(1)
of the Company and Bear Stearns, member of
the Executive Committee and Head of the
Fixed Income Group of Bear Stearns
Vincent Tese................... 58 Chairman and Director of Wireless Cable 1994
International Inc.; Director, Allied Waste
Industries Inc., Angram, Inc., Bowne & Co.
Inc., Xanboo Inc., Cablevision Inc.,
Mack-Cali Realty Corp., Orion Power
Holdings, Inc., National Wireless Holdings
Inc. and Lynch Interactive Corp.
Fred Wilpon.................... 65 Chairman of the Board of Directors of 1993
Sterling Equities, Inc.; Director, Loews
Corporation; President and Chief Executive
Officer of the New York Mets
------------------------
(1) Did not serve as director during 1997 and 1998.
Mr. Cayne became Chairman of the Board on June 25, 2001. Mr. Cayne has been
Chief Executive Officer of the Company and Bear Stearns for more than the past
five years and prior to June 25, 2001, was President of the Company and Bear
Stearns 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 Executive Committee for more than the
past five years and prior to June 25, 2001, was 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 Managing Partner of the Apollo Real Estate
Investment Funds for more than the past five years. Mr. Mack is Chairman of the
Board 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 Vice Chairman and CFO of Verizon Communications (formerly
Bell Atlantic Corporation). Prior to June 2000, Mr. Salerno was the Senior
Executive Vice President and CFO/ Strategy and Business Development of Bell
Atlantic Corporation. Prior to the merger of NYNEX Corp. ("NYNEX") and Bell
Atlantic Corporation, Mr. Salerno was the Vice Chairman of the Board of
S-10
NYNEX for more than five years. Mr. Salerno served as Chairman of the Board of
the State University of New York from 1990 to 1996.
Mr. Schwartz became Co-President and Co-Chief Operating Officer and a member
of the Executive Committee on June 25, 2001 and was 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 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 became Co-President and Co-Chief Operating Officer and a member
of the Executive Committee on June 25, 2001 and was 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.
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 383 Madison Avenue, New York, New
York 10179, USA.
USE OF PROCEEDS
We will use the net proceeds before expenses from the sale of the Notes of
approximately $993.9 million for general corporate purposes. These purposes may
include additions to working capital, the repayment of short-term and long-term
debt and making investments in or extending credit to our subsidiaries.
S-11
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
August 31, 2001 and as adjusted to give effect to 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".
AUGUST 31, 2001
-------------------------
ACTUAL AS ADJUSTED
----------- -----------
(UNAUDITED, IN THOUSANDS)
Short-Term Borrowings(1)(3):
Bank Borrowings........................................... $ 2,472,058 $ 2,472,058
Commercial Paper.......................................... 4,862,976 4,862,976
Medium-Term Notes......................................... 3,792,045 3,792,045
----------- -----------
Total Short-Term Borrowings............................. $11,127,079 $11,127,079
=========== ===========
Long-Term Borrowings(2)(3):
Floating Rate Notes due 2002 to 2007...................... $ 4,010,063 $ 4,010,063
Fixed Rate Senior Notes due 2002 to 2009; interest rates
ranging from 5.70% to 8.75%............................. 7,592,040 8,589,470
Medium-Term Notes......................................... 11,142,972 11,142,972
----------- -----------
Total Long-Term Borrowings.............................. $22,745,075 $23,742,505
----------- -----------
Guaranteed Preferred Beneficial Interests in Company
Subordinated Debt Securities(4)........................... 762,500 762,500
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; 500,000,000 shares
authorized; 184,805,848 shares issued................... 184,806 184,806
Paid-in Capital............................................. 2,589,425 2,589,425
Retained Earnings........................................... 2,987,350 2,987,350
Employee Stock Compensation Plans........................... 1,843,263 1,843,263
Unearned Compensation....................................... (210,659) (210,659)
Treasury Stock:
Adjustable Rate Cumulative Preferred Stock; Series A:
2,520,750 shares........................................ (103,421) (103,421)
Common Stock: 90,675,936 shares........................... (2,942,370) (2,942,370)
----------- -----------
Total Stockholders' Equity.............................. 5,148,394 5,148,394
----------- -----------
Total Long-Term Borrowings, Guaranteed Preferred Beneficial
Interests in Company Subordinated Debt Securities and
Stockholders' Equity...................................... $28,655,969 $29,653,399
=========== ===========
------------------------
(1) Between August 31, 2001 and January 4, 2002, there was a net increase in
short-term borrowings of approximately $487.9 million.
(2) Between August 31, 2001 and January 4, 2002, the Company issued
approximately $1.5 billion in long-term borrowings and retired/matured
approximately $817.4 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 August 31, 2001, 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, Bear Stearns Capital Trust II and Bear Stearns Capital Trust III.
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
SELECTED CONSOLIDATED FINANCIAL DATA
The financial data in the following table for the nine months ended
August 31, 2001 and August 25, 2000 has been derived from our unaudited
consolidated financial statements for those periods. The financial data in the
following table for the fiscal year ended November 30, 2000, the five months
ended November 26, 1999, and the fiscal years ended June 30, 1999, 1998, 1997
and 1996 has been derived from our audited consolidated financial statements for
those periods. See "Where You Can Find More Information" and "General
Information".
NINE MONTHS ENDED
---------------------------------------
AUGUST 31, 2001 AUGUST 25, 2000
------------------ ------------------
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE,
PER SHARE AND OTHER DATA)
OPERATING RESULTS:
Revenues.................................................... $ 6,887,363 $ 7,584,498
Interest Expense............................................ 3,100,160 3,485,648
------------ ------------
Revenues, net of interest expense........................... 3,787,203 4,098,850
------------ ------------
Non-interest expenses
Employee compensation and benefits.......................... 2,005,800 2,069,523
Other....................................................... 1,056,924 1,140,122
------------ ------------
Total non-interest expenses................................. 3,062,724 3,209,645
------------ ------------
Income before provision for income taxes and cumulative
effect of change in accounting principle.................. 724,479 889,205
Provision for income taxes.................................. 254,460 311,211
------------ ------------
Income before cumulative change in accounting principle..... 470,019 577,994
Cumulative effect of change in accounting principle, net of
tax (1)................................................... (6,273) --
------------ ------------
Net income.................................................. $ 463,746 $ 577,994
============ ============
Net income applicable to common shares...................... $ 434,411 $ 548,659
============ ============
FINANCIAL POSITION:
Total assets................................................ $171,105,308 $174,852,518
Long-term borrowings........................................ $ 22,745,075 $ 19,356,873
Stockholders' equity (2).................................... $ 5,910,894 $ 5,411,600
Common shares and common share equivalents outstanding
(3)....................................................... 149,669,365 159,098,866
PER SHARE DATA: (3)
Basic earnings per share:
Before change in accounting principle....................... $ 3.39 $ 4.00
Cumulative effect of change in accounting principle......... (0.05) --
------------ ------------
$ 3.34 $ 4.00
============ ============
Diluted earnings per share:
Before change in accounting principle....................... $ 3.24 $ 4.00
Cumulative effect of change in accounting principle......... (0.04) --
------------ ------------
$ 3.20 $ 4.00
============ ============
Cash dividends declared per common share.................... $ 0.45 $ 0.40
Book value per common share................................. $ 32.34 $ 29.58
OTHER DATA:
Return on average common equity............................. 13.7% 19.3%
Profit margin (4)........................................... 19.1% 21.7%
Employees................................................... 11,147 10,807
------------------------------
(1) At December 1, 2000, the Company recognized a cumulative after-tax loss of
$6.3 million as a result of adopting Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities."
(2) As of August 31, 2001, stockholders' equity includes $762.5 million of
Guaranteed Preferred Beneficial Interests in Company Subordinated Debt
Securities, which reflects preferred securities of Bear Stearns Capital
Trust I, Bear Stearns Capital Trust II and Bear Stearns Capital Trust III.
As of August 25, 2000, 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.
(3) Reflects all stock dividends prior to August 31, 2001.
(4) Represents the ratio of income before provision for income taxes to
revenues, net of interest expense.
S-13
FISCAL YEAR FIVE MONTHS
ENDED ENDED FISCAL YEAR ENDED JUNE 30,
NOVEMBER 30, NOVEMBER 26, ---------------------------------------------------------
2000 1999 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE, PER SHARE AND OTHER DATA)
OPERATING RESULTS:
Revenues.............................. $10,276,569 $ 3,470,290 $ 7,882,038 $ 7,979,936 $ 6,077,278 $ 4,963,863
Interest expense...................... 4,800,891 1,531,787 3,379,914 3,638,513 2,551,364 1,981,171
------------ ------------ ------------ ------------ ------------ ------------
Revenues, net of interest expense..... 5,475,678 1,938,503 4,502,124 4,341,423 3,525,914 2,982,692
------------ ------------ ------------ ------------ ------------ ------------
Non-interest expenses
Employee compensation and benefits.... 2,814,193 973,990 2,285,594 2,111,741 1,726,931 1,469,448
Other................................. 1,489,962 510,921 1,152,422 1,166,190 785,293 678,318
------------ ------------ ------------ ------------ ------------ ------------
Total non-interest expenses........... 4,304,155 1,484,911 3,438,016 3,277,931 2,512,224 2,147,766
------------ ------------ ------------ ------------ ------------ ------------
Income before provision for income
taxes............................... 1,171,523 453,592 1,064,108 1,063,492 1,013,690 834,926
Provision for income taxes............ 398,340 167,778 391,060 403,063 400,360 344,288
------------ ------------ ------------ ------------ ------------ ------------
Net income............................ $ 773,183 $ 285,814 $ 673,048 $ 660,429 $ 613,330 $ 490,638
============ ============ ============ ============ ============ ============
Net income applicable to common
shares.............................. $ 734,070 $ 269,517 $ 633,618 $ 629,417 $ 589,497 $ 466,145
============ ============ ============ ============ ============ ============
FINANCIAL POSITION:
Total assets.......................... $171,166,473 $162,037,962 $153,894,340 $154,495,895 $121,433,535 $ 92,085,157
Long-term borrowings.................. $20,095,888 $15,911,392 $ 14,647,092 $ 13,295,952 $ 8,120,328 $ 6,043,614
Stockholders' equity (1).............. $ 6,154,288 $ 5,441,947 $ 5,455,509 $ 4,641,533 $ 3,626,371 $ 2,895,414
Common shares and common share
equivalents outstanding (2)......... 158,039,960 165,956,810 167,265,996 167,173,826 167,096,515 166,780,371
PER SHARE DATA: (2)
Basic earnings per share.............. $ 5.37 $ 1.78 $ 4.26 $ 4.17 $ 3.81 $ 2.96
Diluted earnings per share............ $ 5.35 $ 1.78 $ 4.26 $ 4.17 $ 3.81 $ 2.96
Cash dividends declared per common
share............................... $ 0.55 $ 0.29 $ 0.56 $ 0.54 $ 0.52 $ 0.49
Book value per common share........... $ 31.51 $ 26.93 $ 25.60 $ 21.64 $ 17.74 $ 14.54
OTHER DATA:
Return on average common equity....... 19.1% 16.6% 18.8% 21.7% 27.9% 25.6%
Profit margin (3)..................... 21.4% 23.4% 23.6% 24.5% 28.7% 28.0%
Employees............................. 11,201 10,081 9,808 9,180 8,309 7,749
------------------------------
(1) As of November 30, 2000, November 26, 1999 and June 30, 1999, stockholders'
equity includes $500 million of Guaranteed Preferred Beneficial Interests in
Company Subordinated Debt Securities, which consists of $200 million of
Capital Securities issued by Bear Stearns Capital Trust I and $300 million
of Preferred Securities issued by Bear Stearns Capital Trust II. 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 Exchangeable Preferred Income Cumulative Shares ("EPICS") and
$200 million of Guaranteed Preferred Beneficial Interests in Company
Subordinated Debt Securities. As of June 30, 1996, stockholders' equity
includes $150 million of EPICS, which were issued by one of our
subsidiaries.
(2) Reflects all stock dividends prior to August 31, 2001.
(3) Represents the ratio of income before provision for income taxes to
revenues, net of interest expense.
S-14
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 JPMorgan Chase Bank (formerly, The Chase Manhattan
Bank), 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
August 31, 2001:
- we had outstanding (on an unconsolidated basis) approximately
$33.7 billion of debt and other obligations, including approximately
$32.0 billion of senior debt, none of which is secured; and
- our subsidiaries had outstanding (after consolidation and eliminations)
approximately $131.2 billion of debt and other obligations (including
$45.3 billion related to securities sold under repurchase agreements,
$54.1 billion related to payables to customers, $19.9 billion related to
financial instruments sold, but not yet purchased, and $11.9 billion of
other liabilities, including $6.5 billion of debt).
PRINCIPAL, MATURITY AND INTEREST
The Notes will be issued in the offering and will mature on January 15,
2007. We may, without your consent, issue additional notes having the same
ranking and the same interest rate, maturity and
S-15
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 the rate of 5.70% per annum and will be
paid every six months on each January 15 and July 15, beginning on July 15, 2002
(which first payment includes interest from the date of issuance), to the
persons who are registered Holders at the close of business on the January 1 and
July 1 immediately before the applicable interest payment date. If an interest
payment date is not a business day, the interest payment will be made on the
next business day, and the Holder is not entitled to any additional interest for
the delay.
Interest on the Notes will accrue from the most recent date to which
interest has been paid, or if no interest has been paid, from and including
January 15, 2002. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Notes will not be entitled to the benefit of any
mandatory sinking fund.
PRINCIPAL PAYING AGENT, PAYING AGENTS, REGISTRAR AND TRANSFER AGENT
JPMorgan Chase Bank (formerly, 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 JPMorgan Chase Bank (formerly, 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.
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
S-16
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 us or a paying agent from payments on or in
respect of a Note;
(5) to a tax, assessment or governmental charge that is imposed or
withheld by reason of the presentation by or on behalf of the beneficial
owner of any Note for payment on a date more than 15 days after the payment
becomes due or is duly provided for, whichever occurs later;
(6) to an estate, inheritance, gift, sales, excise, transfer, wealth or
personal property tax or a similar tax, assessment or governmental charge;
(7) to any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal of or interest on
any Note, if such payment can be made without such withholding by any other
paying agent; or
(8) in the case of any combination of any of the above items;
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.
S-17
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.
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 and DTC, publication in the specified
S-18
newspapers may be replaced with the delivery of the relevant notice to Euroclear
and/or Clearstream 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 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 or Euroclear (in Europe).
Interests will be held on behalf of Clearstream and Euroclear participants on
the books of their respective depositaries.
DENOMINATIONS
Beneficial interests in the Global Securities will be held in denominations
of $1,000 increased in multiples of $1,000. Except as set forth below, the
Global Securities may be transferred, in whole and not in part, only to another
nominee of DTC or to a successor of DTC or its nominee.
DTC SERVICES
DTC has informed us that DTC is:
- a limited purpose trust company organized under the New York Banking Law;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934.
DTC holds securities that its participants ("DTC Participants") deposit with
DTC. DTC Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC also
facilitates the settlement among these DTC Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, which
eliminates the need for the physical movement of securities certificates.
DTC's book-entry system is also available for use by other organizations
such as securities brokers and dealers, banks and trust companies that work
through a DTC Participant, either directly or indirectly. The rules applicable
to DTC and the DTC Participants are on file with the SEC.
DTC is owned by a number of DTC Participants and by the NYSE, the AMEX 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."
S-19
CLEARSTREAM AND EUROCLEAR SERVICES
Clearstream is incorporated under the laws of Luxembourg as a professional
depositary. Clearstream holds securities for its participating organizations
("Clearstream Participants") and facilitates the clearance and settlement of
securities transactions between Clearstream Participants through electronic
book-entry charges in accounts of Clearstream Participants, which eliminates the
need for physical movement of certificates. Clearstream provides to Clearstream
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 is regulated by the Luxembourg Monetary
Institute. Clearstream 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 is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Clearstream Participant either
directly or indirectly.
Distributions with respect to the Notes that are held beneficially through
Clearstream will be credited to cash accounts of Clearstream Participants in
accordance with its rules and procedures, and to the extent received by the US
depositary for Clearstream.
Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") and to clear and settle transactions between
Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. The Euroclear System is owned by Euroclear Clearance System Public Limited
Company ("ECSplc") and operated through a license agreement by Euroclear Bank
S.A./N.V., a bank incorporated under the laws of the Kingdom of Belgium (the
"Euroclear Operator").
The Euroclear Operator holds securities and book-entry interests in
securities for participating organizations and facilitates the clearance and
settlement of securities transactions between Euroclear Participants, and
between Euroclear Participants and participants of certain other securities
intermediaries through electronic book-entry changes in accounts of such
participants or other securities intermediaries.
The Euroclear Operator provides Euroclear Participants, among other things,
with safekeeping, administration, clearance and settlement, securities lending
and borrowing and related services.
Non-participants of Euroclear may hold and transfer book-entry interests in
securities through accounts with a direct Euroclear Participant or any other
securities intermediary that holds a book-entry interest in securities through
one or more securities intermediaries standing between such other securities
intermediary and the Euroclear Operator.
The Euroclear Operator is regulated and examined by the Belgian Banking and
Finance Commission and the National Bank of Belgium. Securities clearance
accounts and cash accounts with the Euroclear Operator are governed by the Terms
and Conditions Governing Use of Euroclear and the related Operating Procedures
of the Euroclear System and applicable Belgian law (collectively, the "Euroclear
Terms and Conditions"). 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 without attribution
of specific certificates to specific securities clearance accounts. The
Euroclear Operator acts under the Euroclear Terms and
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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 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 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 Participants and/or Euroclear Participants will occur in the
ordinary way in accordance with the applicable rules and operating procedures of
Clearstream and Euroclear and will be settled using the procedures applicable to
conventional eurobonds in registered form in same day funds.
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PURCHASERS AND SELLERS. Secondary market trading
between DTC Participants will be settled using the procedures applicable to
global bonds in same-day funds.
TRADING BETWEEN EUROCLEAR AND/OR CLEARSTREAM PARTICIPANTS. Secondary market
trading between Euroclear Participants and/or Clearstream Participants will be
settled using the procedures applicable to conventional eurobonds in same-day
funds.
TRADING BETWEEN DTC SELLER AND EUROCLEAR OR CLEARSTREAM PURCHASER. When
Notes are to be transferred from the account of a DTC Participant to the account
of a Euroclear or Clearstream Participant, the purchaser will send instructions
to Euroclear or Clearstream through a Euroclear or Clearstream Participant, as
the case may be, at least one business day before settlement. Euroclear or
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Clearstream 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 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 cash debit will be valued as of the actual
settlement date.
Euroclear and Clearstream 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 until the interests in the Global Security are credited to their
accounts one day later.
As an alternative, if Euroclear or Clearstream has extended a line of credit
to a Euroclear or Clearstream 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
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 for the benefit of Euroclear
or Clearstream 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 SELLER AND DTC PURCHASER. Because
the time zone difference operates in their favor, Euroclear and Clearstream
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 through a Euroclear or Clearstream Participant at
least one business day before settlement. In these cases, Euroclear or
Clearstream 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 Participant on the following day,
and receipt of the cash proceeds in the Euroclear or Clearstream 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 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
Participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use Euroclear or Clearstream to purchase Notes
from DTC Participants for delivery to Euroclear or Clearstream Participants
should note that these trades automatically fail on
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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 for one day (until the
purchase side of the day trade is reflected in their Euroclear or
Clearstream 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 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
Participant.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Notes among participants of DTC,
Clearstream 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, 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'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.
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, BSIL and BSB, 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, Global Clearing 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 Global Clearing Services distribution network with related
revenues of such intersegment services allocated to the respective segments.
The Capital Markets segment is comprised of the Equities, Fixed Income and
Investment Banking areas. Equities combines the efforts of sales, trading and
research in such areas as block trading, convertible bonds, over-the-counter
("OTC") equities, equity derivatives and risk arbitrage. Fixed Income includes
the efforts of sales, trading and research for institutional clients in a
variety of products such as mortgage-backed and asset-backed securities,
corporate and government bonds, municipal and high yield instruments, foreign
exchange and derivatives. Investment Banking offers a variety of services to our
clients, that include capital raising, strategic advice, mergers and
acquisitions and merchant banking. Capital raising encompasses our underwriting
of equity, investment grade debt and high yield debt securities.
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The Global Clearing Services segment provides clearing, operational and
administrative services to approximately 2,900 clients worldwide at August 31,
2001. These clients include approximately 2,500 prime brokerage clients
including hedge funds, clients of money managers, short sellers, arbitrageurs
and other professional investors. In addition, there are approximately 400 fully
disclosed introducing brokers who engage in either the retail or the
institutional brokerage business. The Company processed an average of more than
251,000 trades per day during the twelve months ended November 30, 2000.
Wealth Management provides fee-based products and services through the
Private Client Services ("PCS") and Asset Management areas to both individual
and institutional investors. 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 450 account
executives in its principal office and six regional offices. The Asset
Management area had approximately $23.5 billion in assets under management at
August 31, 2001, which reflected a 41.6% increase over August 25, 2000. The
largest components of the increase were attributable to alternative investments
and mutual funds. Asset Management serves the diverse investment needs of
corporations, municipal governments, multi-employer plans, foundations,
endowments, family groups and high-net-worth individuals.
Financial information regarding our business segments and foreign operations
as of November 30, 2000, November 26, 1999, June 30, 1999 and 1998 and the
fiscal years ended November 30, 2000, June 30, 1999 and 1998 and the five months
ended November 26, 1999 is set forth under the Notes to the Consolidated
Financial Statements in Footnote 14, entitled "Segment and Geographic Area
Data," in our Annual Report on Form 10-K for the fiscal year ended November 30,
2000. See "Where You Can Find More Information" and "General Information."
NARRATIVE DESCRIPTION OF BUSINESS
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;
- involvement in specialist activity on both 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;
- investment management and advisory services; and
- advisory, fiduciary, custody, agency and securities research services.
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Our business is conducted:
- from our principal offices in New York City;
- from domestic regional offices in Atlanta, Boston, Chicago, Dallas,
Denver, Los Angeles, San Francisco and San Juan;
- from representative offices in Beijing, Herzliya, Hong Kong, Milan, Sao
Paulo, Seoul and Shanghai;
- through international offices in Dublin, London, Lugano, Singapore and
Tokyo; and
- through joint ventures with other firms in Belgium, Greece and Spain.
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/or 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"), the National
Futures Association ("NFA") and the International Stock Exchange ("ISE"). 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"), 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 is
regulated in accordance with the rules of the Financial Services Authority
("FSA").
BSB is an Irish-based bank, which was incorporated in 1996 and subsequently
granted a banking license under the Irish Central Bank Act, 1971. BSB allows our
existing and prospective clients the choice of dealing with a banking
counterparty.
As of November 30, 2001, we had 10,452 employees.
INSTITUTIONAL EQUITIES
GENERAL. We provide customers with liquidity, sales and trading expertise
and equity research 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
future date, and (iv) between the prices of securities with contracts settling
on differing dates.
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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 covering 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.
EQUITY RESEARCH.
We provide innovative, in-depth analysis of the global investment
environment. Known for theme-oriented research underpinned by meticulous
financial modeling, we offer detailed information on over 1,200 companies in
roughly 100 industries (including approximately 55% of the S&P 500). We also
have a group of distinguished economists and strategists that maintain a close
watch on domestic and international markets, and are known for the quality of
their strategic guidance. Our broad-based domestic coverage is complemented by
extensive research teams in Latin America, Asia and Europe, giving our clients a
crucial advantage in a world where national boundaries are becoming more porous.
This breadth of coverage allows the Department to maintain a particularly
wide-ranging recommended list, and gives clients a steady stream of new
investment ideas and insights into the more obscure corners of the financial
world.
EQUITY SALES. We believe that 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.
BLOCK TRADING. We effect transactions in large blocks of securities 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 participants in a specialist unit on the NYSE
and the AMEX that performs specialist functions in NYSE-listed stocks as well as
stocks and options traded 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.
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;
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- 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.
Inventories of fixed income securities are generally carried to facilitate sales
to customers and other dealers.
US GOVERNMENT AND AGENCY OBLIGATIONS. We are designated 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 principal and 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 and reverse repurchase agreements. 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;
- 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
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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.
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 and local governmental
authorities, as well as not-for-profit institutions.
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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 trade 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 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 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 23 analysts and
researchers, and provides coverage for over 25 industries and 500
companies.
(3) HIGH YIELD RESEARCH consists of 28 analysts and researchers for domestic
issues and 23 analysts and researchers for international issues,
providing coverage for over 650 corporate and sovereign issuers whose
fixed income securities are non-investment grade.
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
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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, leveraged and syndicated bank loans, leveraged acquisitions,
commercial real estate, 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 assists in the origination, and is responsible for the
structuring and execution of transactions for a broad range of clients.
HIGH YIELD SECURITIES. The high yield securities group focuses on providing
financing in the public and private capital markets. The group is responsible
for originating, structuring, and executing high yield transactions across a
wide range of companies and industries, as well as managing client relationships
with both high yield corporate issuers and financial sponsors of leveraged
transactions.
LEVERAGED LOAN ORIGINATION AND SYNDICATION. This area integrates the
origination, structuring, underwriting, distribution and trading of 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 or warrants. Equity securities
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. We provide comprehensive real estate-related
investment banking, capital markets and financial advisory services.
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
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securities with institutional investors. The markets currently covered by us
include Latin America, Asia, and Eastern Europe.
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. We also extend margin credit
directly to correspondents to the extent that such firms pledge proprietary
assets as collateral.
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 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.
CUSTOMER FINANCING AND SECURITIES LENDING ACTIVITIES
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 securities from 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.
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
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products; and margin lending. At November 30, 2000, CTC held approximately
$150 billion of assets for clients, including institutional clients such as
pension funds, mutual funds, endowment funds, religious organizations and
insurance companies.
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 FSA 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.
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 450 account executives in its principal office and
six regional offices.
ASSET MANAGEMENT
Our asset management department manages equity and fixed income assets for
some of the leading corporate pension plans, public systems, endowments,
foundations, multi-employer plans, insurance companies, corporations, families
and high net-worth individuals in the US. With approximately $23.5 billion under
management at August 31, 2001, 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 core equity; emerging markets fixed income; high
yield fixed income; leveraged loan portfolios; 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, Income, High Yield Total Return, and
Emerging Markets Debt Portfolios.
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ADMINISTRATION AND OPERATIONS
Administration and operations personnel, beside performing other functions,
are responsible for processing of securities transactions; receipt,
identification and delivery of funds and securities; internal financial
controls; accounting functions; regulatory and financial reporting; office
services; the custody of customer securities; and the overseeing of our margin
accounts and correspondent organizations. The processing, settlement, and
accounting for transactions for us, correspondent organizations, and the
customers of correspondent organizations are handled by 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.
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 Ltd. ("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.
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, Shanghai and Seoul support the efforts of BSAL.
BSB, based in Dublin, allows our existing and prospective clients the choice
of dealing with a banking counterparty. BSB 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. BSB
engages in capital market activities with particular focus on the trading and
sales of OTC interest rate derivative products.
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.
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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.
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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 November 30, 2000. 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 BSSC security 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-35
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 and
Markets Act 2000, 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 FSA.
BSJL is a Tokyo broker-dealer registered with the Japanese Ministry of
Finance. 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. 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.
BSB is an Dublin-based bank incorporated in 1996 and subsequently granted a
banking license under the Irish Central Bank Act, 1971.
Our principal business activities, investment banking, securities trading
and brokerage, are, by their nature, highly competitive and subject to various
risks, in particular, volatile trading markets and fluctuations in the volume of
market activity. Consequently, our net income and revenues have been, and are
likely to continue to be, subject to wide fluctuations, reflecting the impact of
many factors, including general economic conditions, securities market
conditions, the level and volatility of interest rates, the level and volatility
of equity prices, competitive conditions, liquidity of global markets,
international and regional political conditions, regulatory developments,
monetary and fiscal policy, investor sentiment, availability and cost of
capital, technological changes and events and the size and timing of
transactions. 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 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.
In addition, while the financial services industry has recently been
characterized by extremely volatile conditions, the terrorist attack against the
United States on September 11, 2001 has resulted in additional economic and
financial disruption, as the United States securities markets were closed for
several days. These events may continue to cause additional weakness and
uncertainty in the general economic and business environment. Certain risk
factors noted above may now be more likely to have a greater impact on our
future results of operations.
Our securities trading, derivatives, arbitrage, market-making, specialist,
leveraged lending, 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.
Unless otherwise noted, all information contained under "Description of the
Company" is as of November 30, 2000.
S-36
CERTAIN US FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Cadwalader, Wickersham & Taft, special tax counsel to us,
the following discussion summarizes certain 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 for US federal income tax
purposes;
- a corporation (or other entity that is treated as a corporation for US
federal tax purposes) that is 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 if 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 (other than any
entity that is treated as a partnership or disregarded entity for US federal tax
purposes) that is not a "US Holder."
If a partnership (including any entity that is treated as a partnership for
US federal tax purposes) is a beneficial owner of Notes, the treatment of a
partner in the partnership will generally depend upon the status of the partner
and upon the activities of the partnership. A beneficial owner of Notes that is
a partnership, and partners in such a partnership, should consult their tax
advisors about the US federal income tax consequences of holding and disposing
of the Notes.
An individual may, subject to certain exceptions, be deemed to be a resident
of the United States for US federal income tax purposes 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).
S-37
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 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-8BEN or
Form W-8IMY, as the case may be, 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-8BEN or Form W-8IMY provided
by the beneficial owner to the organization or institution. If a Note is held by
a foreign partnership, unless the foreign partnership has entered into a
withholding agreement with the Internal Revenue Service (the "IRS"), the foreign
partnership will be required, in addition to providing an IRS Form W-8IMY, to
attach an appropriate statement made by each partner. Prospective investors,
including foreign partnerships and their partners, should consult their tax
advisors regarding possible additional reporting requirements.
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.
S-38
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.
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 IRS and to each Holder and "backup withholding" 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 non-exempt 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-8BEN or Form W-8IMY, 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, is not subject to US backup withholding. An IRS Form W-8BEN generally is
required from Non-US Holders that own interests in a Holder that is treated as a
partnership or disregarded entity. Interest paid to a Non-US Holder will be
reported annually on IRS Form 1042-S, which must be filed with the IRS and
furnished to the Non-US Holder.
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 unless the Holder either certifies its status
as a Non-US Holder under penalties of perjury on IRS Form W-8BEN or Form W-8IMY
(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
S-39
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
- 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-40
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated January 8, 2002 (the "Underwriting Agreement") between us and the
Underwriters named below, we have agreed to sell to each of the Underwriters,
and each of the Underwriters has severally, and not jointly, agreed to purchase
from us, the aggregate principal amount of Notes set forth opposite its name
below.
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
----------- --------------
Bear, Stearns & Co. Inc. ................................... $ 395,000,000
Bear, Stearns International Limited ........................ $ 395,000,000
ABN AMRO Incorporated ...................................... $ 15,000,000
Banc of America Securities LLC ............................. $ 15,000,000
Banc One Capital Markets, Inc. ............................. $ 15,000,000
BB&T Capital Markets (A Division of Scott &
Stringfellow) ............................................ $ 15,000,000
BNP Paribas Securities Corp. ............................... $ 15,000,000
First Union Securities, Inc. ............................... $ 15,000,000
Fleet Securities, Inc. ..................................... $ 15,000,000
J.P. Morgan Securities Inc. ................................ $ 15,000,000
KBC Bank NV ................................................ $ 15,000,000
Prudential Securities Incorporated ......................... $ 15,000,000
Salomon Smith Barney Inc. .................................. $ 15,000,000
U.S. Bancorp Piper Jaffray Inc. ............................ $ 15,000,000
Wells Fargo Institutional Brokerage Services, LLC .......... $ 15,000,000
Westdeutsche Landesbank Girozentrale ....................... $ 15,000,000
--------------
Total................................................... $1,000,000,000
==============
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 0.250% of the principal amount of the
Notes. Such dealers may reallow a concession to other dealers not in excess of
0.200% 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 we 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 and BSIL as the International
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. All Notes to be sold to
purchasers in Europe will be sold through BSIL, as the International
Coordinator. However, no action has been or, except in connection with the
application for the Notes to be admitted to the Official List of the UK Listing
Authority, will be taken in any jurisdiction by the Underwriters or us 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-41
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 (1) the expiry of the
period of six months from the payment date and (2) the admission of such
Notes to listing in accordance with Part VI of the Financial Services and
Markets Act 2000 except to 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 (as amended) or the Financial Services and Markets Act
2000;
(b) it has not offered or sold and will not offer or sell any Notes
other than to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or as agent) for
the purposes of their businesses or who it is reasonable to expect will
acquire, hold, manage or dispose of investments (as principal or agent) for
the purposes of their businesses where the issue of the Notes would
otherwise constitute a contravention of Section 19 of the Financial Services
and Markets Act 2000 by the Company;
(c) it has only communicated or caused to be communicated and will only
communicate or cause to be communicated an invitation or inducement to
engage in investment activity (within the meaning of Section 21 of the
Financial Services and Markets Act 2000) received by it in connection with
the issue of any Notes in circumstances in which Section 21(1) of the
Financial Services and Markets Act 2000 does not apply to the Company; and
(d) it has complied and will comply with all applicable provisions of
the Financial Services and Markets Act 2000 with respect to anything done by
it in relation to the Notes in, from or otherwise involving the United
Kingdom.
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 admitted to the Official List of the
UK Listing Authority, 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 January 15, 2002, which is the fifth business day following
the date hereof (such settlement cycle being herein referred to as "T+5").
Purchasers of Notes should note that the ability to settle secondary market
trades of the Notes executed on the date of pricing may be affected by the T+5
settlement.
S-42
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.
Bear Stearns and BSIL, in their capacity as Underwriters, have committed to
purchase from us 79% of the principal amount of the Notes being underwritten by
the Underwriters, on the same basis as the other Underwriters. Bear Stearns and
BSIL are our wholly-owned subsidiaries. To the extent that part or all of the
Notes so purchased by Bear Stearns or BSIL are not resold by them 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 or BSIL and not resold. Bear Stearns and BSIL intend
to resell any Notes that they are unable to resell from time to time, at
prevailing market prices, subject to applicable prospectus delivery and other
legal requirements.
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 J.P. Morgan 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 higher than that which might 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 stabilizing, if commenced, may be discontinued at any time
and in any event shall be discontinued within a limited period. No other party
may engage in stabilization.
Bear Stearns will make the Notes available for distribution on the Internet
through a proprietary web site and/or a third-party system operated by Market
Axess Inc., an Internet-based communications technology provider. We own less
than 10% of Market Axess Inc. Market Axess Inc. is providing the system as a
conduit for communications between Bear Stearns and its customers and is not a
party to any transactions. We do not believe that Market Axess Inc. will
function as our underwriter or agent of the issuer, nor do we believe that
Market Axess Inc. will act as a broker for any customer of Bear Stearns. Market
Axess Inc., a registered broker-dealer, will receive compensation from Bear
Stearns based on transactions Bear Stearns conducts through the system. Bear
Stearns will make the Notes available to its customers through the Internet
distributions, whether through a proprietary or third-party system, on the same
terms as distributions made through other channels.
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 Allen & Overy, London, England.
S-43
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated by reference in this prospectus supplement from our 2000
Annual Report on Form 10-K have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
GENERAL INFORMATION
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 383 Madison
Avenue, New York, New York 10179, 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 fiscal years ended
November 30, 2000 and June 30, 1999;
(iii) our published unaudited consolidated financial statements
contained in our Quarterly Report on Form 10-Q for the three and nine month
periods ended August 31, 2001 and August 25, 2000;
(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 the fiscal year ended
November 30, 2000, the five-month period ended November 26, 1999 and fiscal
years ended June 30, 1999 and 1998 were audited, without qualification, by
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
U.S.A., independent certified public accountants, in accordance with auditing
standards generally accepted in the United States.
Cadwalader, Wickersham & Taft have given and have not withdrawn their
written agreement to the inclusion of their tax summary in this prospectus
supplement in the form and context in which it appears.
Other than as disclosed or contemplated herein, there has been no material
change in our financial or trading position or material adverse change in our
financial position or prospects since November 30, 2000.
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 effect on our consolidated financial
condition; such resolution may, however, have a material effect on the operating
results in any future period, depending upon the level of such results in such
period. 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 Common Code
014155864, International Security Identification Number (ISIN) US073902BZ04 and
CUSIP No. 073902BZ0.
S-44
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 $9,015,893,162 (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 JANUARY 11, 2001.
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
PAGE
--------
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
2
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, December 31, 1999, February 25, 2000, May 26, 2000 and
August 25, 2000, the Transition Report on Form 10-Q 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, March 15, 2000,
March 17, 2000, March 22, 2000, April 6, 2000, May 17, 2000, June 14, 2000,
July 14, 2000, August 10, 2000, September 14, 2000, September 20, 2000,
September 28, 2000, December 13, 2000 and January 4, 2001.
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
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.;
- "BSB" refers to Bear Stearns Bank plc;
- "BSSC" refers to Bear, Stearns Securities Corp.;
- "BSIL" refers to Bear, Stearns International Limited;
- "DAISS-SM-" refers to Dutch Auction Internet Syndication System-SM-;
- "NASD" refers to the National Association of Securities Dealers, Inc.;
- "NYSE" refers to the New York Stock Exchange; and
- "securities" refers to the notes, warrants, preferred stock and depositary
shares described in this prospectus.
Bear Stearns, BSB, BSSC and BSIL are subsidiaries of The Bear Stearns
Companies Inc.
THE BEAR STEARNS COMPANIES INC.
We are a holding company that, through our subsidiaries, principally Bear
Stearns, BSSC, BSIL and BSB, 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. 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;
- involvement in specialist activity on both 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;
- investment management and advisory; and
- 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,
Denver, Los Angeles, San Francisco and San Juan;
- from representative offices in Beijing, Buenos Aires, Sao Paulo, Seoul and
Shanghai;
4
- through international offices in Dublin, Hong Kong, London, Lugano,
Singapore and Tokyo; and
- through joint ventures with other firms in Belgium, Greece and Spain.
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 and clearance services through our subsidiary, Custodial Trust
Company, which is 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/or BSSC are also members of the NYSE, all other principal US
securities and futures exchanges, the NASD, the Commodity Futures Trading
Commission, the National Futures Association and the International Securities
Exchange. 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,
the London Commodity Exchange, the London International Financial Futures and
Options Exchange, the London Securities and Derivatives Exchange, Marche a Terme
International de France, SA and the London Clearing House. BSIL is supervised by
and regulated in accordance with the rules of the Securities and Futures
Authority.
BSB is an Irish-based bank, which was incorporated in 1996 and subsequently
granted a banking license under the Irish Central Bank Act, 1971. BSB allows our
existing and prospective clients the opportunity of dealing with a banking
counterparty.
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 and long-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 nine
months ended August 25, 2000 and August 27, 1999, the five months ended
November 26, 1999 and November 27, 1998 and the fiscal years ended June 30,
1999, 1998, 1997, 1996 and 1995.
NINE MONTHS ENDED FIVE MONTHS ENDED YEAR ENDED JUNE 30,
----------------------- --------------------------- -------------------
AUGUST 25, AUGUST 27, NOVEMBER 26, NOVEMBER 27,
2000 1999 1999 1998 1999 1998
---------- ---------- ------------ ------------ -------- --------
Ratio of earnings to fixed charges... 1.3 1.4 1.3 1.1 1.3 1.3
Ratio of earnings to combined fixed
charges and preferred dividends.... 1.2 1.4 1.3 1.1 1.3 1.3
YEAR ENDED JUNE 30,
------------------------------
1997 1996 1995
-------- -------- --------
Ratio of earnings to fixed charges... 1.4 1.4 1.2
Ratio of earnings to combined fixed
charges and preferred dividends.... 1.4 1.4 1.2
5
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
$9,015,893,162 under this Prospectus. As of the date of this Prospectus, we have
issued approximately $60,878,279,650 aggregate principal amount of debt
securities under the Indenture, of which $22,428,294,622 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.
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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.
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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
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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.
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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
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- 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,
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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.
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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;
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(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).
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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
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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 U.S. federal income tax laws and regulations, bearer debt
securities, including bearer debt securities in global form, will not be
offered, sold, resold or delivered, directly or indirectly, in the United States
or its possessions or to "United States Persons," as defined below, except as
otherwise permitted by certain U.S. Treasury regulations. Any underwriters,
dealers or agents participating in the offerings of bearer debt securities,
directly or indirectly, must agree that they will not, in connection with the
original issuance of any bearer debt securities or during the "restricted
period" (as defined in the Treasury regulations) offer, sell, resell or deliver,
directly or indirectly, any bearer debt securities in the United States or to
United States Persons, other than as permitted by the Treasury regulations. In
addition, any underwriters, dealers or agents must have procedures reasonably
designed to ensure that their employees or agents who are directly engaged in
selling bearer debt securities are aware of the restrictions on the offering,
sale, resale or delivery of bearer debt securities.
We will not deliver a bearer debt security (other than a temporary global
bearer debt security) in connection with its original issuance or pay interest
on any bearer debt security until we have received the written certification
provided for in the indenture. Each bearer debt security, other than a temporary
global bearer debt security, 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 U.S. 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 the legend provide, in general, that a U.S.
taxpayer who holds a bearer security or coupon may not deduct any loss realized
on the sale, exchange or redemption of the bearer security and any gain which
otherwise would be treated as capital gain will be treated as ordinary income,
unless the taxpayer is, or holds the bearer security or coupon through, a
"financial institution" (as defined in the relevant Treasury regulations) and
certain other conditions are satisfied.
For these purposes, "United States" means the United States of America
(including the District of Columbia), and its possessions. "United States
Person" generally means:
- 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 whose income is subject to U.S. federal income taxation
regardless of its source; or
- a trust, if 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.
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-U.S. beneficial ownership be
delivered once a bearer warrant is exercised).
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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;
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(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
(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 August 25, 2000, 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
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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.
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.
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CONVERSION RIGHTS
No series of preferred stock will be convertible into common stock.
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
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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.
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
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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 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
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(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.
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
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- 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.
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
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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 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 four 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;
- directly to one or more purchasers; or
- directly to the public through Bear Stearns utilizing DAISS-SM- (Dutch
Auction Internet Syndication System-SM-), a rules-based, proprietary,
single-priced, modified Dutch Auction syndication system for the pricing
and allocation of securities.
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;
- the rules and procedures for the auction process through DAISS-SM-, if
used;
- 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
25
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.
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.
26
In addition, the underwriters may stabilize or maintain the price of those
securities by bidding for or purchasing those securities in the open market and
may impose penalty bids, under which selling concessions allowed to syndicate
members or other broker-dealers participating in the offering are reclaimed if
securities previously distributed in the offering are repurchased in connection
with stabilization transactions or otherwise. The effect of these transactions
may be to stabilize or maintain the market price of the securities at a level
above that which might otherwise prevail in the open market. The imposition of a
penalty bid may also affect the price of securities to the extent that it
discourages resales 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.
We may from time to time offer securities directly to the public through
Bear Stearns and may utilize DAISS-SM-, a rules-based, proprietary,
single-priced, modified Dutch Auction syndication system for the pricing and
allocation of such securities. DAISS-SM- allows bidders to directly participate,
through Internet access to an auction site, by submitting conditional offers to
buy (each, a "bid") that are subject to acceptance by the underwriter, and which
may directly affect the price at which such securities are sold.
The final offering price at which securities will be sold and the allocation
of securities among bidders will be based solely on the results of the auction,
subject to possible stabilization activity previously described.
During an auction, DAISS-SM- will present to each bidder, on a real-time
basis, the clearing spread at which the offering would be sold, based on the
bids submitted and not withdrawn, and whether a bidder's individual bids would
be accepted, prorated or rejected. Upon completion of the auction, the offering
price of the securities will be the lowest spread at which the aggregate dollar
amount of bids submitted, and not removed, at that spread and lower spreads
equals or exceeds the size of the offering as disclosed in the Prospectus
Supplement which is the final clearing spread. If DAISS-SM- is utilized, prior
to the auction we and Bear Stearns will establish minimum admissible bids,
maximum quantity restrictions and other specific rules governing the auction
process, all of which will be made available to bidders in the offering
cul-de-sac and described in the Prospectus Supplement.
Bids at a lower spread than the final clearing spread will be fully
allocated. Bids at the final clearing spread will be prorated based on the time
of submission and pursuant to the allocation procedures in the auction rules.
Bids above the final clearing spread will receive no allocation.
If an offering is made using DAISS-SM- you should review the auction rules,
as displayed in the offering cul-de-sac and described in the Prospectus
Supplement, for a more detailed description of the offering procedures.
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"
27
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.
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 and Current Report on Form 8-K dated September 28, 2000 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
PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY
THE BEAR STEARNS COMPANIES INC.
383 Madison Avenue
New York, New York 10179
USA
TRUSTEE, REGISTRAR AND PRINCIPAL PAYING AGENT
JPMORGAN CHASE BANK
450 West 33rd Street
New York, New York 10001
USA
PAYING AGENT AND TRANSFER AGENT
JPMORGAN CHASE BANK
Trinity Towers
9 Thomas More Street
London E1 9YT
England
LEGAL ADVISERS
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
ALLEN & OVERY CADWALADER, WICKERSHAM & TAFT
One New Change 55 Gracechurch Street, First Floor
London EC4M 9QQ London EC3V 0EE
England England
AUDITORS OF THE COMPANY
DELOITTE & TOUCHE LLP
2 World Financial Center
New York, New York 10281
USA
LISTING AGENT AND INTERNATIONAL COORDINATOR
BEAR, STEARNS INTERNATIONAL LIMITED
One Canada Square
London E14 5AD
England
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WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED
INFORMATION. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS NOT
AN OFFER TO SELL OR BUY ANY SECURITIES IN ANY JURISDICTION WHERE IT IS UNLAWFUL.
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS CURRENT AS OF JANUARY 8, 2002
AND THE INFORMATION IN THE ACCOMPANYING PROSPECTUS IS CURRENT AS OF JANUARY 11,
2001.
--------------
TABLE OF CONTENTS
PAGE
--------
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-23
Certain US Federal Income Tax
Considerations...................... S-37
Underwriting.......................... S-41
Legal Matters......................... S-43
Experts............................... S-44
General Information................... S-44
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
US$1,000,000,000
THE BEAR STEARNS
COMPANIES INC.
5.70% GLOBAL
NOTES DUE 2007
----------------------------------
PROSPECTUS SUPPLEMENT
----------------------------------
BEAR, STEARNS & CO. INC.
BEAR, STEARNS INTERNATIONAL LIMITED
ABN AMRO INCORPORATED
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
BB&T CAPITAL MARKETS
(A DIVISION OF SCOTT & STRINGFELLOW)
BNP PARIBAS
FLEET SECURITIES, INC.
JPMORGAN
KBC IG
PRUDENTIAL SECURITIES
SALOMON SMITH BARNEY
U.S. BANCORP PIPER JAFFRAY
WACHOVIA SECURITIES
WELLS FARGO BROKERAGE SERVICES, LLC
WESTDEUTSCHE LANDESBANK GIROZENTRALE
JANUARY 8, 2002
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