Filed
pursuant to Rule 424(b)(2)
Registration
No. 333-136666
Subject
to Completion, dated May 30, 2007
PRELIMINARY
PRICING SUPPLEMENT
(To
Prospectus Dated August 16, 2006 and
Prospectus
Supplement Dated August 16, 2006)
This
preliminary pricing supplement relates to an effective registration statement
under the Securities Act of 1933, but is not complete and may be changed. We
may
not sell these securities until we deliver a final pricing supplement. This
preliminary pricing supplement and the accompanying prospectus supplement and
prospectus are not an offer to sell these securities and are not soliciting
an
offer to buy these securities in any state where such an offer or sale would
not
be permitted.
The
Bear Stearns Companies Inc.
$[●]
Medium-Term Notes, Series B, Linked to the Performance of the Alerian MLP Select
Index Due [June ●, 2027]
·
|
The
Notes are linked to the performance of the Alerian MLP Select Index
(the
“Index”). The
Notes are not principal protected.
When we refer to Notes in this pricing supplement, we mean Notes
with a
principal amount of $[●] (the “Principal Amount”).
|
·
|
The
Index measures the composite performance of energy oriented Master
Limited
Partnerships (“MLPs”), and is calculated by Standard & Poor’s using a
float-adjusted, market capitalization-weighted methodology, as described
herein.
|
·
|
The
initial price of the Notes will be determined by the Calculation
Agent (as
defined herein) based upon the quotient of (1) the arithmetic mean
of the
sum of the products of (i) the volume-weighted average price and
(ii) the
published share weighting of each underlying constituent in the Index,
each measured daily over a specified period of Index Business Days
(as
defined herein) following the Closing Date (as defined herein) pursuant
to
the following schedule (the “VWAP Schedule”), divided by (2) the product
of the Index Divisor (as defined herein) and the number
ten:
|
Aggregate
Size of the Issuance
|
|
Initial
Measurement Period
|
Less
than $100 Million
|
|
[6]
Index Business Days
|
Equal
to or greater than $100 million and less than $200 million
|
|
[10]
Index Business Days
|
Equal
to or greater than $200 million and less than $300 million
|
|
[18]
Index Business Days
|
Equal
to or greater than $300 million and less than $500 million
|
|
[25]
Index Business Days
|
$500
million or greater
|
|
[50]
Index Business Days
|
·
|
We
plan to apply to list the Notes on the New York Stock Exchange.
If
an active secondary market in the Notes develops, we expect that
investors
will purchase and sell the Notes in the secondary
market.
|
·
|
As
further described herein, the Notes will pay a coupon on a monthly
basis
in an amount per Note in U.S. dollars equal to the difference between
the
gross cash dividend proceeds that a Reference Holder (as defined
herein)
would have received from the constituents underlying the Index for
such
month less a tracking fee. To the extent the gross cash dividend
proceeds
for any month would be less than the tracking fee, no coupon will
be paid,
and the difference between the tracking fee and the gross cash dividend
proceeds in such month will be added to the tracking fee for the
following
month.
|
·
|
On
the Maturity Date, you will receive the Cash Settlement Amount, an
amount
per Note in U.S. dollars equal to (i) the Principal Amount multiplied
by
the Index Ratio minus (ii) the accrued tracking fee, if any, where:
|
|
o
|
“Index
Ratio” means the Final VWAP Level divided by the Initial VWAP Level;
|
|
o
|
“Initial
VWAP Level” means [●], the arithmetic mean of the VWAP Levels measured on
each Index Business Day during the initial measurement period set
in
accordance with the VWAP Schedule above, as determined by the Calculation
Agent;
|
|
o
|
“Final
VWAP Level” means the arithmetic mean of the VWAP Levels measured over a
period of five Index Business Days from and including the Calculation
Date
(as defined herein), as determined by the Calculation Agent; and
|
|
o
|
“VWAP
Level,” means, as of any date of determination and with respect to the
Index, an amount equal to the quotient of (1) the arithmetic mean
of the
sum of the products of (i) the volume-weighted average price as
of such
date and (ii) the published share weighting of each underlying
constituent
in the Index as of such date, divided by (2) the Index Divisor
as of such
date, as determined by the Calculation Agent.
|
·
|
The
Notes may be redeemed on the last business day of each week during
the
term of the Notes. If you redeem your Notes you will receive a payment
in
U.S. dollars equal to the Cash Settlement Amount minus a redemption
fee
and plus a coupon payment, if any. The Notes may be redeemed only
in
amounts of [75,000] Notes or more, subject to adjustment by the
Calculation Agent.
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·
|
The
Notes are not principal protected. Therefore, you
may receive less, and possibly significantly less, than the principal
you
invested.
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·
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The
CUSIP number for the Notes is
073928V83
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INVESTMENT
IN THE NOTES INVOLVES CERTAIN RISKS. THERE MAY NOT BE AN ACTIVE SECONDARY MARKET
IN THE NOTES, AND IF THERE WERE TO BE AN ACTIVE SECONDARY MARKET, IT MAY NOT
BE
LIQUID. YOU SHOULD REFER TO “RISK FACTORS” BEGINNING ON PAGE PS-14.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of the Notes or determined that this pricing supplement,
or the accompanying prospectus supplement and prospectus, is truthful or
complete. Any representation to the contrary is a criminal
offense.
We
expect
that the Notes will be ready for delivery in book-entry form only through the
book-entry facilities of The Depository Trust Company in New York, New York,
on
or about [June __, 2007], against payment in immediately available funds. The
distribution of the Notes will conform to the requirements set forth in Rule
2720 of the Conduct Rules of the National Association of Securities Dealers,
Inc.
Bear,
Stearns & Co. Inc.
[June
●,
2007]
This
summary highlights selected information from the accompanying prospectus and
prospectus supplement and this pricing supplement to help you understand the
Notes linked to the Index. You should carefully read this entire pricing
supplement and the accompanying prospectus supplement and prospectus to fully
understand the terms of the Notes, as well as certain tax and other
considerations that are important to you in making a decision about whether
to
invest in the Notes. You should carefully review the section “Risk Factors” in
this pricing supplement and “Risk Factors” in the accompanying prospectus
supplement which highlight a number of significant risks, to determine whether
an investment in the Notes is appropriate for you. All of the information set
forth below is qualified in its entirety by the more detailed explanation set
forth elsewhere in this pricing supplement and the accompanying prospectus
supplement and prospectus. If information in this pricing supplement is
inconsistent with the prospectus or prospectus supplement, this pricing
supplement will supersede those documents. In this pricing supplement, the
terms
“Company,” “we,” “us” and “our” refer only to The Bear Stearns Companies Inc.
excluding its consolidated subsidiaries.
The
Bear
Stearns Companies Inc. Medium-Term Notes, Series B, Linked to the Performance
of
the Alerian MLP Select Index, due [June ●, 2027] (the “Notes”), are notes whose
return is tied or “linked” to the performance of the Alerian MLP Select Index
(the “Index”). The Index measures the composite performance of energy oriented
Master Limited Partnerships (“MLPs”), and will be calculated by Standard and
Poor’s using a float-adjusted, market capitalization-weighted methodology. The
Notes are not principal protected, therefore
you may receive less, and possibly significantly less, than the principal you
invested.
When we
refer to the Note or Notes in this pricing supplement, we mean $[●] principal
amount of Notes.
The
Notes
will pay a coupon, if any, on each Coupon Payment Date. For each Note you
hold,
on each Coupon Payment Date you will receive an amount in U.S. dollars equal
to
the difference between the Reference Dividend Amount minus the Tracking Fee.
If
the Reference Dividend Amount is less than the Tracking Fee on any Coupon
Valuation Date, there will be no coupon payment on the corresponding Coupon
Payment Date, and an amount equal to the Tracking Fee Shortfall in respect
of
such period will be added to the Tracking Fee for the next Coupon Payment
Date.
This process will be repeated until such time as the Reference Dividend Amount
for any period of calculation is sufficient to cover the accrued Tracking
Fee
for all prior months.
On
the
Maturity Date, you will receive the Cash Settlement Amount, an amount per Note
in U.S. dollars equal to (i) the Principal Amount multiplied by the Index Ratio
minus (ii) the accrued Tracking Fee, if any. The Index Ratio is equal to the
Final VWAP Level divided by the Initial VWAP Level. If
the Final VWAP Level is less than the Initial VWAP Level, you will receive
less,
and possibly significantly less, at maturity, than the principal you
invested.
The
Notes
may be redeemed prior to maturity on the last Business Day of each week during
the term of the Notes. In order to redeem your Notes, you must comply with
the
Notice Procedures described herein. Upon compliance with the Notice Procedures,
the Calculation Date will be accelerated to the Redemption Valuation Date,
which
shall automatically accelerate the final Coupon Valuation Date and the Maturity
Date in accordance with the terms specified herein. On the accelerated Maturity
Date, you will receive an amount equal to the Redemption Amount, which equals
the sum of (i) the Cash Settlement Amount minus the Redemption Fee Amount plus
(ii) the Coupon Amount, if any.
Selected
Investment Considerations
|
·
|
Growth
potential - The Notes offer the possibility to participate in the
potential appreciation of the Index. The return, if any, on the Notes
is
based upon the extent to which the Final VWAP Level is greater than
the
Initial VWAP Level.
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|
·
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Index
access - The Notes represent a unique opportunity to invest in a
security
that tracks the Alerian MLP Select Index. Due to our exclusive licensing
agreement (see “Description of the Index - License Agreement”) this Note
is the only security at present that will allow a Noteholder to track
the
Index.
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|
·
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Exchange
listed - We intend to list the Notes on the New York Stock Exchange.
If an
active secondary market in the Notes develops, we expect that investors
will purchase and sell the Notes in the secondary
market.
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|
·
|
Coupon
- The Notes will pay a coupon on a monthly basis to the extent that
the
gross cash dividend proceeds that would be received by a Reference
Holder
in the Index Components in such month exceed the tracking fee for
such
month.
|
|
·
|
Early
redemption - The Notes may be redeemed prior to maturity on the last
Business Day of each week in a minimum amount of [75,000]
Notes.
|
Selected
Risk Considerations
|
·
|
Possible
loss of principal - The Notes are not principal protected, therefore
you
may receive less, and possibly significantly less, than the principal
you
invested. If the Final VWAP Level is less than the Initial VWAP Level,
the
Cash Settlement Amount you will receive at maturity will be less
than the
principal you invested. In that case, you will receive less, and
possibly
significantly less, than the principal you
invested.
|
|
·
|
Limited
portfolio diversification - The Index Components are concentrated
in the
energy oriented Master Limited Partnership sector. Your investment
may,
therefore, carry risks similar to a concentrated investment in a
limited
number of industries or sectors.
|
|
·
|
The
level of the Index cannot be predicted - The future performance of
the
Index is impossible to predict and, therefore, no future performance
of
the Notes or the Cash Settlement Amount may be inferred from any
of the
historical data or any other information set forth herein. Because
it is
impossible to predict the level of the Index or the performance of
any of
the Index Components, it is possible that the level of the Index
and the
VWAP Level will decline and you will lose all or part of the principal
you
invested.
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|
·
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Liquidity
- Although we plan to apply to list the Notes on the New York Stock
Exchange, a trading market for your Notes does not currently exist
and may
not develop. In addition, our subsidiary, Bear, Stearns & Co. Inc. has
advised us that they intend under ordinary market conditions to indicate
prices for the Notes on request. However, we cannot guarantee that
bids
for outstanding Notes will be made; nor can we predict the price
at which
such bids will be made. If you sell your Notes prior to maturity,
you may
receive less than the principal you
invested.
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|
·
|
Possible
loss of value in the secondary market - If you sell your Notes prior
to
maturity, you may receive less than the principal you
invested.
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|
·
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Coupon
payments are not guaranteed - You will not receive a coupon payment
to the
extent that, for any period of calculation, the amount of dividends
that
would be received by a Reference Holder of the Index Components would
be
less than the Tracking Fee. The yield on the Notes, therefore, may
be less
than the overall return you would earn if you purchased a conventional
debt security at the same time and with the same
maturity.
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·
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Taxes
- The U.S. federal income tax consequences of an investment in the
Notes
are uncertain. The Issuer and the holders agree (in the absence of
an
administrative or judicial ruling to the contrary) to treat the Notes
for
federal income tax purposes as pre-paid cash-settled executory contracts
linked to the value of the Index and, where required, to file information
returns with the Internal Revenue Service (the “IRS”) in accordance with
such treatment. Assuming the Notes are treated as pre-paid cash-settled
executory contracts, you should generally recognize capital gain
or loss
to the extent that the cash you receive on the Maturity Date or upon
a
sale or exchange of the Notes prior to the Maturity Date differs
from your
tax basis on the Notes (which will generally be the amount you paid
for
the Notes) and you agree with the Issuer to currently recognize as
ordinary income any coupon received in respect of the Notes. However,
other treatments are possible. Prospective investors are urged to
consult
their tax advisors regarding the U.S. federal income tax consequences
of
an investment in the Notes.
|
Key
Terms
Issuer:
|
The
Bear Stearns Companies Inc.
|
Index:
|
The
Alerian MLP Select Index (ticker “AMZS”), as published by Standard &
Poor’s, a division of The McGraw-Hill Companies, Inc. (“Sponsor”), in
consultation with Alerian Capital Management LLC
(“Alerian”).
|
|
The
Index measures the composite performance of energy oriented Master
Limited
Partnerships (“MLPs”), and is calculated by the Sponsor using a
float-adjusted, market capitalization-weighted methodology. The objective
of the Index is to provide investors with an unbiased, comprehensive
benchmark for the performance of the energy Master Limited Partnership
universe. The MLPs underlying the Index are generally limited partnerships
engaged in the exploration, marketing, mining, processing, production,
storage or transportation of any mineral or natural resource. The
Index
itself will be disseminated real-time and may be listed on the Chicago
Mercantile Exchange.
|
Index
Components:
|
As
of any date of determination, the constituents underlying the
Index.
|
Principal
Amount:
|
The
Notes will be denominated in U.S. dollars. Each Note will be issued
in
minimum denominations to be determined by the Calculation Agent
based upon
the quotient of (i) the arithmetic mean of the VWAP Levels measured
daily
over a period of days following the Closing Date (the “Initial Measurement
Period”) in accordance with the following schedule (the “VWAP Schedule”),
divided by (ii) the number ten:
|
Aggregate
Size of the Issuance
|
|
Initial
Measurement Period
|
Less
than $100 Million
|
|
[6]
Index Business Days
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Equal
to or greater than $100 million and less than $200 million
|
|
[10]
Index Business Days
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Equal
to or greater than $200 million and less than $300 million
|
|
[18]
Index Business Days
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Equal
to or greater than $300 million and less than $500 million
|
|
[25]
Index Business Days
|
$500
million or greater
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|
[50]
Index Business Days
|
|
The
minimum purchase for any purchaser domiciled in a Member state
of the
European Economic Area shall be $100,000. The aggregate principal
amount
of the Notes being offered is $[●].
When we refer to Note or Notes in this pricing supplement, we mean
Notes
with a principal amount of $[●].
|
VWAP
Level:
|
As
of any date of determination and with respect to the Index, the
quotient
of (1) the arithmetic mean of the sum of the products of (i)
the volume
weighted-average price of each Index Component as of such date
and (ii)
the published share weighting of such Index Component as of such
date
divided by (2) the Index Divisor as of such date, as determined
by the
Calculation Agent.
|
Index
Divisor:
|
As
of any date of determination, the divisor used by the Sponsor
to calculate
the level of the Index, as further described under “Description of the
Index - Computation of the Index” herein.
|
Further
Issuances:
|
We
may, without your consent, offer further issuances of the Notes
at
offering prices based upon market conditions and VWAP Levels at
that time.
If there is substantial demand for the Notes, we may issue additional
Notes frequently. These further issuances, if any, will be consolidated
to
form a single series with the Notes and will have the same CUSIP
number
and will trade interchangeably with the Notes immediately upon
settlement.
|
Coupon:
|
The
Notes will pay a coupon, if any, on each Coupon Payment Date.
For each
Note you hold, on each Coupon Payment Date you will receive an
amount in
U.S. dollars equal to the difference between the Reference Dividend
Amount
minus the Tracking Fee (the “Coupon Amount”). To the extent the Reference
Dividend Amount is less than the Tracking Fee on any Coupon Valuation
Date, there will be no coupon payment made on the corresponding
Coupon
Payment Date, and an amount equal to the difference between the
Tracking
Fee and the Reference Dividend Amount in respect of such period
(the
“Tracking Fee Shortfall”) will be added to the Tracking Fee deducted from
the Reference Dividend Amount in respect of the next Coupon Payment
Date.
For the avoidance of doubt, the process will be repeated to the
extent
necessary until such time as the accrued Tracking Fee has been
deducted
from the appropriate Reference Dividend Amount in all prior months.
|
Coupon
Payment Date:
|
Means
the [fifth] Business Day following each Coupon Valuation Date,
subject to
adjustment as described herein.
|
Coupon
Valuation Date:
|
Means
the first Business Day of each calendar month during the term
of the Notes
beginning on [●], and the last Coupon Valuation Date shall be the
Calculation Date, subject to adjustment as described herein.
|
Reference
Dividend Amount:
|
As
of any date of determination, an amount per Note equal to the
gross cash
dividend proceeds that would have been received by a Reference
Holder
during the period from and
excluding the
prior Coupon Valuation Date through such date of determination;
provided,
that in the event that no prior Coupon Valuation Date has occurred
as of
such date of determination, the applicable period will begin
as of the
Pricing Date.
Any non-cash dividends that would have been received by a Reference
Holder
during any period of determination will be converted into cash
by the
Calculation Agent and will be included in the gross cash dividend
proceeds
for purposes of this calculation.
|
Tracking
Fee:
|
As
of any date of determination, an amount per Note equal to the
product of [0.070834]%
(representing [0.85]% per annum) multiplied by the Current NAV.
|
Current
NAV:
|
As
of any date of determination, an amount per Note equal to the
product of
(i) the Principal Amount multiplied by (ii) a fraction, the numerator
of
which is equal to the VWAP Level as of such date and the denominator
of
which is equal to the Initial VWAP Level, as determined by the
Calculation
Agent.
|
Cash
Settlement Amount:
|
An
amount per Note payable in U.S. dollars on the Maturity Date equal
to (i)
the Principal Amount multiplied by the Index Ratio minus (ii) the
accrued
Tracking Fee, if any.
|
Index
Ratio:
|
As
of any date of determination, an amount
equal to the quotient of the Final VWAP Level divided by the Initial
VWAP
Level.
|
Initial
VWAP Level:
|
[●],
representing the arithmetic mean of the VWAP Levels measured
daily during
the Initial Measurement Period determined in accordance with
the VWAP
Schedule set forth above, as determined by the Calculation Agent.
|
Final VWAP
Level: |
The arithmetic mean of the VWAP Levels measured
daily
during the Final Measurement Period, as determined by the Calculation
Agent. |
Final
Measurement Period:
|
The
five Index Business Days from and including the Calculation Date.
The
Final Measurement Period is subject to adjustment as described
under
“Description of the Notes - Redemption; Defeasance” and “Description of
the Notes - Market Disruption
Events”.
|
Calculation
Date:
|
[June
●, 2027],
unless such day is not an Index Business Day, in which case the
Calculation Date shall be the next Index Business Day. The Calculation
Date is subject to adjustment as described under “Description of the Notes
- Redemption; Defeasance” and “Description of the Notes - Market
Disruption Events”.
|
Maturity
Date:
|
The
third Business Day following the final Index Business Day in the
Final
Measurement Period.
|
Early
Redemption Event:
|
You
may redeem your Notes on the last Business Day of each week during
the
term of the Notes (each, a “Redemption Valuation Date”) by delivering a
Redemption Notice to us via email no later than 10:00 a.m. New
York City
time on the Business Day prior to such Redemption Valuation Date.
If we
receive your Redemption Notice in accordance with the foregoing,
we or our
affiliate will send a form of Redemption Confirmation to you via
return
email, which you must complete, execute and return to us via facsimile
by
no later than 4:00 p.m. New York City time on the same Business
Day. We or
our affiliate must acknowledge receipt of your completed Redemption
Confirmation in order for your redemption to be effective. The
procedures
described in the foregoing paragraph are referred to herein as
the “Notice
Procedures.”
|
|
Upon
compliance with the Notice Procedures, the Calculation Agent will
accelerate the Calculation Date with respect to the Notes being
redeemed
to the relevant Redemption Valuation Date, which will automatically
accelerate the final Coupon Valuation Date and the Maturity Date
with
respect to the Notes being redeemed in accordance with the terms
set forth
herein. On the accelerated Maturity Date you will receive an amount
per
Note in U.S. dollars equal to (i) the Cash Settlement Amount minus
Redemption Fee Amount plus (ii) the Coupon Amount, if any (the
“Redemption
Amount”).
|
|
The
Tracking Fee applicable to the Notes subject to an Early Redemption
Event
shall be an amount equal to the sum of (i) the Tracking Fee Shortfall
as
of the last Coupon Valuation Date (if any) plus (ii) the Tracking
Fee as
of the next Coupon Valuation Date multiplied by a percentage,
the
numerator of which is the total number of days since the prior
Coupon
Valuation Date, and the denominator of which is 30 (the “Adjusted Tracking
Fee”). To the extent the Reference Dividend Amount as of the accelerated
Calculation Date is greater than the Adjusted Tracking Fee, the
Redemption
Amount will include a coupon payment equal to the Coupon Amount
(with the
Calculation Agent using the Adjusted Tracking Fee in calculating
such
Coupon Amount). To the extent the Reference Dividend Amount as
of the
accelerated Calculation Date is less than the Adjusted Tracking
Fee, the
Redemption Amount will not include any coupon payment, and an
amount equal
to the difference between the Adjusted Tracking Fee less the
Reference
Dividend Amount will be subtracted from the Index Ratio in determining
the
Cash Settlement Amount payable on the accelerated Maturity Date.
|
|
We
will inform you of the Redemption Amount on the first Business
Day
following the final Index Business Day in the Final Measurement
Period.
Upon receipt, you must instruct your custodian at The Depositary
Trust
Company (“DTC”) to book a delivery vs. payment trade with respect to your
Notes on such date at a price equal to the Redemption Amount, facing
Bear
Stearns DTC 052, and cause your DTC custodian to deliver the trade
as
booked for settlement via DTC at or prior to 10:00 a.m. New York
City
time, on the applicable accelerated Maturity Date.
|
|
You
may redeem your Notes only in amounts of [75,000] Notes or greater,
subject to adjustment by the Calculation Agent.
You may not redeem your Notes in the week in which the Notes
mature.
|
Redemption
Notice:
|
Means
the form of redemption notice attached hereto as Appendix
1.
|
Redemption
Confirmation:
|
Means
the form of redemption confirmation attached hereto as Appendix
2.
|
Redemption
Fee Amount:
|
As
of any date of determination, an amount per Note in U.S. dollars
equal to
the product of the Redemption Fee multiplied by the applicable
Cash
Settlement Amount.
|
Reference
Holder:
|
As
of any date of determination, a hypothetical holder of shares
of each of
the Index Components in the then current weightings within the
Index as if
such holder had invested an amount equal to the Principal Amount
in the
Index in
each
of
the Index
Business Days during the Initial Measurement Period,
as determined by the Calculation Agent.
|
Exchange
Listing:
|
The
Notes will be listed on the New York Stock
Exchange.
|
Business
Day:
|
Any
day other than a Saturday or Sunday, on which banking institutions
in New
York, New York, are not authorized or obligated by law or executive
order
to close.
|
Index
Business Day:
|
Any
day on which each Primary Exchange and each Related Exchange are
scheduled
to be open for trading.
|
Primary
Exchange:
|
With
respect to each Index Component, the primary exchange or market
of trading
of such Index Component.
|
Related
Exchange:
|
With
respect to each Index Component, each exchange or quotation system
where
trading has a material effect (as determined by the Calculation
Agent) on
the overall market for futures or options contracts relating to
such Index
Component.
|
Calculation
Agent:
|
Bear,
Stearns & Co. Inc.
|
Offers
and sales of the Notes are subject to restrictions in certain jurisdictions.
The
distribution of this pricing supplement, the accompanying prospectus supplement
and 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 pricing
supplement, and the accompanying prospectus supplement and prospectus or any
Notes must inform themselves about and observe any applicable restrictions
on
the distribution of this pricing supplement, the accompanying prospectus
supplement and prospectus and the offer and sale of the Notes. Notwithstanding
the minimum denomination of $[●],
the minimum purchase for any purchaser domiciled in a member state of the
European Economic Area shall be $100,000.
What
are the Notes?
The
Notes
are a series of our senior debt securities, the value of which is linked to
the
performance of the Index. Unless redeemed earlier, the Notes will mature on
the
Maturity Date. When we refer to Notes in this pricing supplement, we mean Notes
with a principal amount of $[●]. You should refer to the section “Description of
the Notes.”
Are
the Notes
equity or debt securities?
The
Notes
are our unsecured debt securities. However, the Notes differ from traditional
debt securities in that the Notes are not principal protected. If, at maturity
or upon redemption, the Final VWAP Level is less than the Initial VWAP Level,
you will receive less, and possibly significantly less, than the principal
you
invested.
Are
the Notes principal protected?
The
Notes are not principal protected, therefore, you may lose up to 100% of the
principal amount of your Notes. If, at maturity, the Final VWAP Level is less
than the Initial VWAP Level, you will receive less, and possibly significantly
less, than the principal you invested. You should understand that the future
performance of the Index is impossible to predict and therefore no future
performance of the Notes and the Index may be inferred from the past historical
performance of the Index.
Will
I receive interest on the Notes?
On
the
first Business Day of each calendar month during the term of the Notes, the
Calculation Agent will determine the amount gross cash dividend proceeds that
a
Reference Holder would have received for the period from and
excluding the
prior
Coupon Valuation Date through such date of determination, and divide such amount
by the Principal Amount. If such amount is greater than the tracking fee equal
to [0.070834]% of the current value of a Note measured as the relevant date
of
determination, you will receive a coupon payment on the [fifth] Business Day
following such Coupon Valuation Date in an amount per Note in U.S. dollars
equal
to the product of (i) the Principal Amount multiplied by (ii) the amount of
such
excess. No coupon payment will be made for any period of calculation in which
the tracking fee is greater than the amount of gross cash dividend proceeds
that
would have been received by a Reference Holder for such period, and the amount
of such tracking fee shortfall will be added by the Calculation Agent to the
tracking fee to be deducted from the gross cash dividend proceeds in respect
of
the following period. This process will be repeated until such time as the
gross
cash dividend proceeds for any period of calculation are sufficient to cover
the
amount of the accrued tracking fee for all prior months. You should see
“Description of the Notes - Coupon Payments” for further information.
What
will I receive at maturity on the Notes?
On
the
Maturity Date you will receive the Cash Settlement Amount, an amount in cash
that depends upon the relation of the Final VWAP Level to the Initial VWAP
Level. The Notes are not principal protected. Therefore,
you may receive less, and possibly significantly less, than the principal you
invested.
If
you
hold your notes to maturity, on the Maturity Date you will receive the Cash
Settlement Amount, an amount per Note in U.S. dollars equal to (i) the Principal
Amount multiplied by the Index Ratio minus (ii) the accrued Tracking Fee, if
any.
The
“Index Ratio,” as of any date of determination, is an amount equal to the
quotient of the Final VWAP Level divided by the Initial VWAP Level.
The
“Initial
VWAP Level”
equals
[●], representing the arithmetic mean of the VWAP Levels measured daily during
the measurement period determined in accordance with the VWAP Schedule, as
determined by the Calculation Agent.
The
“Final
VWAP Level”
will
equal the arithmetic mean of the VWAP Levels measured daily during the Final
Measurement Period, as determined by the Calculation Agent.
The
“VWAP
Level” means, as of any date of determination and with respect to the Index, the
quotient of (1) the arithmetic mean of the sum of the products of (i) the
volume
weighted-average price of each Index Component as of such date and (ii) the
published share weighting of each such Index Component as of such date, divided
by (2) the Index Divisor as of such date, as determined by the Calculation
Agent.
The
“Index Divisor” means, as of any date of determination, the divisor used by the
Sponsor to calculate the level of the Index, as further described under
“Description of the Index - Computation of the Index” herein.
The
“Final Measurement Period” means the five Index Business Days from and including
the Calculation Date. The Final Measurement Period is subject to adjustment
as
described under “Description of the Notes -Redemption; Defeasance” and
“Description of the Notes - Market Disruption Events.”
The
“Calculation Date” is [June ●, 2027], unless such day is not an Index Business
Day, in which case the Calculation Date shall be the next Index Business Day.
The Calculation Date is subject to adjustment as described under “Description of
the Notes -Redemption; Defeasance” and “Description of the Notes - Market
Disruption Events.”
The
“Maturity Date” of the Notes will be the third Business Day following the final
Index Business Day in the Final Measurement Period.
For
more
specific information about the Cash Settlement Amount, you should refer to
“Description of the Notes.”
May
the Notes be redeemed prior to maturity?
You
may
redeem your Notes on the last Business Day of each week during the term of
the
Notes by following the Notice Procedures, which generally require you to send
us
an email by no later than 10:00 a.m. New York City time on the date immediately
prior to the applicable Redemption Valuation Date and to subsequently complete,
execute and deliver to us a redemption confirmation via email by 4:00 p.m.
New
York City time on the same day. Once the Notice Procedures have been effectively
complied with, the Calculation Agent will accelerate the Calculation Date to
the
relevant Redemption Valuation Date, which will have the effect of automatically
accelerating the final Coupon Valuation Date and the Maturity Date with respect
to the Notes being redeemed. On the first Business Day following the final
Index
Business Day of the Final Measurement Period, we or an affiliate will notify
you
of the Redemption Amount that you will receive with respect to the Notes being
redeemed, at which time you must take certain actions with respect to your
Depositary Trust Company custodian to complete the redemption process, as
further described herein. On the accelerated Maturity Date you will receive
an
amount per Note in U.S. dollars equal to the Cash Settlement Amount minus a
redemption fee of [0.125]% of the Cash Settlement Amount, plus a final coupon
payment, if any. You may redeem Notes only in amounts of [75,000]
Notes or
more.
For additional information see “Description of the Notes - Redemption;
Defeasance.”
Will
there be additional offerings of the Notes?
We
may,
at our sole discretion, offer further issuances of the Notes. If there is
substantial demand for the Notes, we may issue additional Notes frequently.
These further issuances, if any, will be consolidated to form a single series
with the Notes and will have the same CUSIP number and will trade
interchangeably with the Notes immediately upon settlement. Any additional
issuance will increase the aggregate principal amount of the outstanding Notes
of this series to include the aggregate principal amount of any Notes bearing
the same CUSIP number that are issued pursuant to any future issuances of Notes
bearing the same CUSIP number. The price of any additional offerings will be
determined at the time of pricing of each offering, which price will be a
function of the VWAP Levels and prevailing market price of the Notes at the
time
of the relevant sale.
What
is the Index and who publishes it?
Standard
& Poor’s, the Sponsor, computes and publishes the Index in consultation with
Alerian Capital Management, LLC, which has contracted with the Sponsor to
maintain and calculate the Index. Neither the Sponsor nor Alerian shall have
any
liability for any errors or omissions in calculating the Index. The Notes,
which
are linked to the performance of the Index, are not sponsored, endorsed, sold
or
promoted by the Sponsor or Alerian, and neither the Sponsor nor Alerian makes
any representations regarding the advisability of investing in the
Notes.
The
Index
measures the composite performance of energy oriented Master Limited
Partnerships (“MLPs”), and is calculated by the Sponsor using a float-adjusted,
market capitalization-weighted methodology. The objective of the Index is to
provide investors with an unbiased, comprehensive benchmark for the performance
of the energy MLP universe. MLPs are limited partnerships engaged in the
exploration, marketing, mining, processing, production, storage or
transportation of any mineral or natural resource. The Index will be
disseminated real-time on a price return basis and is listed on the New York
Stock Exchange (ticker “AMZS”).
For
more
specific information about the Index, please see the sections “Description
of the Index” and “Hypothetical Historical Performance Data.”
How
has the Index performed historically?
The
Index
began publishing on [●]. We have provided a table depicting the monthly
performance of the Index from January 2002 to April 2007, and a graph depicting
the monthly performance of the Index from December 1995 to April 2007, each
based on the application of the index methodology described herein. You can
find
this table and graph in the section “Description of the Index - Historical
Performance of the Index.” We have provided this historical information to help
you evaluate the behavior of the Index in various economic environments;
however, past performance is not indicative of how the Index will perform
in the
future. You should refer to the section “Risk Factors - The hypothetical Index
performance does not represent actual performance.”
Will
the Notes
be listed on a securities exchange?
We
plan
to apply to list the Notes on the New York Stock Exchange. If our application
is
approved and an active secondary market in the Notes develops, we expect
that
investors will purchase and sell the Notes primarily in this secondary market.
In addition, our subsidiary, Bear, Stearns & Co. Inc. (“Bear Stearns”) has
advised us that they intend under ordinary market conditions to indicate
prices
for the Notes on request. However, we cannot guarantee that bids for outstanding
Notes will be made; nor can we predict the price at which any such bids will
be
made. If you sell your Notes prior to maturity, you may receive less than
the
principal you invested. You should refer to the section “Risk
Factors.”
What
is the role of Bear Stearns?
Bear
Stearns will be our agent for the offering and sale of the Notes (the “Agent”).
After the initial offering, Bear Stearns intends to buy and sell the Notes
to
create a secondary market for holders of the Notes, and may stabilize or
maintain the market price of the Notes during the initial distribution of the
Notes. However, Bear Stearns will not be obligated to engage in any of these
market activities or to continue them once they are begun.
Bear
Stearns also will be our Calculation Agent for purposes of calculating coupons
and the Cash Settlement Amount hereunder. Under certain circumstances, these
duties could result in a conflict of interest between Bear Stearns’ status as
our subsidiary and its responsibilities as Calculation Agent. You should refer
to “Risk Factors - The Calculation Agent is one of our affiliates, which could
result in a conflict of interest.”
Can
you tell me more about The Bear Stearns Companies Inc.?
We
are a
holding company that, through our broker-dealer and international bank
subsidiaries, principally Bear Stearns, Bear, Stearns Securities Corp., Bear,
Stearns International Limited (“BSIL”) and Bear Stearns Bank plc, is a leading
investment banking, securities and derivatives trading, clearance and brokerage
firm serving corporations, governments, institutional and individual investors
worldwide. For more information about us, please refer to the section “The Bear
Stearns Companies Inc.” in the accompanying prospectus. You should also read the
other documents we have filed with the SEC, which you can find by referring
to
the section “Where You Can Find More Information” in the accompanying
prospectus.
Who
should consider purchasing the Notes?
In
general, because the Notes are tied or “linked” to the level of the Index, they
may be appropriate for investors with specific investment horizons who seek
to
participate in the potential appreciation of the Index. In particular, the
Notes
may be an attractive investment for you if you:
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want
potential upside exposure to the Index;
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believe
that the level of the Index and VWAP Level will increase over the
term of
the Notes by an amount sufficient to offset the Tracking Fee and,
if
applicable, the Redemption Fee;
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want
the potential to receive dividend income during the term of the Notes;
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seek
an investment with an active secondary market; and
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want
the flexibility to redeem the Notes prior to
maturity.
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The
Notes
may not be a suitable investment for you if:
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do
not want to place your principal at
risk;
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believe
that the VWAP Level will decrease or will not increase by an amount
to
offset the Tracking Fee and the Redemption Fee, if applicable, over
the
term of the Notes; or
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seek
an investment with a fixed return or that makes guaranteed interest
payments.
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What
are the U.S. federal income tax consequences of investing in the
Notes?
The
U.S.
federal income tax consequences of an investment in the Notes are uncertain.
The
Issuer and the holders agree (in the absence of an administrative or judicial
ruling to the contrary) to treat the Notes for all tax purposes as pre-paid
cash-settled executory contracts linked to the value of the Index and, where
required, to file information returns with the IRS in accordance with such
treatment. Assuming the Notes are treated as pre-paid cash-settled executory
contracts, you should generally recognize capital gain or loss to the extent
that the cash you receive on the Maturity Date or upon a sale or exchange of
the
Notes prior to the Maturity Date differs from your tax basis on the Notes (which
will generally be the amount you paid for the Notes) and you agree with the
Issuer to currently recognize as ordinary income any coupon received in respect
of the Notes. However, other treatments are possible. You should review the
discussion under the section “Certain U.S. Federal Income Tax Considerations,”
and consult with your tax advisor regarding the U.S. federal income tax
consequences of an investment in the Notes.
Does
ERISA impose any limitations on purchases of the Notes?
An
employee benefit plan subject to the fiduciary responsibility provisions of
the
Employee Retirement Income Security Act of 1974 (“ERISA”), a plan that is
subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the
“Code”), including individual retirement accounts, individual retirement
annuities or Keogh plans, a governmental plan subject to any similar law or
any
entity the assets of which are deemed to be “plan assets” under ERISA, relevant
regulations or otherwise, will be permitted to purchase, hold and dispose of
the
Notes, subject to certain conditions. Such investors should carefully review
the
discussion under “Certain ERISA Considerations” in this pricing supplement
before investing in the Notes.
Are
there any risks associated with my investment?
Yes.
The
Notes are subject to a number of risks. You should refer to “Risk Factors” in
this pricing supplement and “Risk Factors” in the accompanying prospectus
supplement.
RISK
FACTORS
Your
investment in the Notes involves a degree of risk similar to investing in the
Index. You will be subject to significant risks not associated with conventional
fixed-rate or floating-rate debt securities. Prospective purchasers should
recognize the possibility of a substantial loss with respect to their investment
in the Notes. Prospective purchasers of the Notes should understand the risks
of
investing in the Notes and should reach an investment decision only after
careful consideration, with their advisers, of the suitability of the Notes
in
light of their particular financial circumstances, the following risk factors
and the other information set forth in this pricing supplement and the
accompanying prospectus supplement and prospectus. These risks include the
possibility that the VWAP Levels will fluctuate, and the possibility that you
will receive a substantially lower amount of principal than the amount you
invested. We have no control over a number of matters that may affect the value
of the Notes, including economic, financial, regulatory, geographic, tax,
judicial and political events, and that are important in determining the
existence, magnitude, and longevity of these risks and their influence on the
value of, or the payment made on, the Notes.
The
Notes are not principal protected. At
maturity or upon redemption, the Notes may pay less than the principal
amount.
The
Notes
are not principal protected. If the Final VWAP Level is less than the Initial
VWAP Level on the Calculation Date, there will be no principal protection on
the
Notes and the Cash Settlement Amount you will receive at maturity or upon
redemption will be less than the initial offering price. In addition, fees
payable to the Issuer will increase any downward performance of the Index.
You
may receive less, and possibly significantly less, than your initial investment
in the Notes.
Even
if the Final VWAP Level is greater than the Initial VWAP Level, you may receive
less than the principal amount of your Notes.
If
the
monthly dividend proceeds that a Reference Holder would be entitled to receive
from the Index Components are not sufficient to cover the annualized Tracking
Fee of [0.85]%, the amount of Tracking Fee Shortfall will be subtracted from
the
Cash Settlement Amount and will reduce the amount of your return at maturity.
In
addition, if you redeem your Notes prior to maturity you will be charged a
Redemption Fee equal to [0.125]% of the value of your Notes. If the VWAP Level
decreases or does not increase sufficiently during the term of the Notes to
offset any accrued Tracking Fee and any applicable Redemption Fee, you will
receive less than the principal amount of your investment at maturity or upon
redemption of your Notes.
You
will not benefit from any increase in the VWAP Level if such increase is not
reflected in the VWAP Level as it is calculated during the Final Measurement
Period
The
Cash
Settlement Amount will be based on the Index Ratio, representing the Final
VWAP
Level divided by the Initial VWAP Level. Even if the VWAP Level as of some
date
or dates prior to the Final Measurement Period would have been higher than
the
Initial VWAP Level, you may receive less than the principal amount of your
Notes
at maturity or upon redemption if the VWAP Level as of such date is lower than
the Initial VWAP Level.
There
are restrictions on the minimum number of Notes you may redeem and on the dates
on which you may redeem them.
You
must
redeem at least [75,000] Notes at one time in order to exercise your right
to
redeem your Notes prior to maturity. You may only redeem your Notes if you
comply with the Notice Procedures described in the section “Description of the
Notes -Redemption; Defeasance.” If you fail to comply with the Notice
Procedures, the Calculation Date will not be accelerated to the relevant
Redemption Valuation Date. See “Description of the Notes -Redemption;
Defeasance” for more information. You have no right to redeem your Notes in the
week in which the Notes mature.
You
are not guaranteed a coupon payment.
You
will
not receive a coupon payment to the extent that, for any period of calculation,
the amount of dividends that would be received by a Reference Holder of the
Index Components would be less than the Tracking Fee for such month. Any
shortfall in the Tracking Fee will accrue from month to month, until such
time
as the accrued Tracking Fee has been deducted from the appropriate Reference
Dividend Amount in all prior months. The yield on the Notes, therefore, may
be
less than the overall return you would earn if you purchased a conventional
debt
security at the same time and with the same maturity.
You
must rely on your own evaluation of the merits of an investment linked to the
Index.
In
the
ordinary course of our business, we may from time to time express views on
expected movements in the Index and any of the Index Components. These views
may
vary over differing time horizons and are subject to change without notice.
Moreover, other professionals who deal in the equity markets may at any time
have views that differ significantly from ours. In connection with your purchase
of the Notes, you should investigate the Index and the Index Components and
not
rely on our views with respect to future movements of the Index or the Index
Components. You should make such investigation as you deem appropriate as to
the
merits of an investment linked to the Index.
Because
the treatment of the Notes is uncertain, the material U.S.
federal income tax consequences of an investment in the Notes are
uncertain.
Although
the Issuer and the holders agree (in the absence of an administrative or
judicial ruling to the contrary) to treat the Notes for all tax purposes as
pre-paid cash-settled executory contracts linked to the Index, there is no
direct legal authority as to the proper tax treatment of the Notes, and
therefore significant aspects of the tax treatment of the Notes are uncertain.
In particular, it is possible that you will be required to recognize additional
income for U.S. federal tax purposes with respect to the Notes beyond the amount
of any coupon received on the Notes prior to the sale, exchange or maturity
of
the Notes, and it is possible that any gain or income recognized with respect
to
the Notes will be treated as ordinary income rather than capital gain.
Prospective investors are urged to consult their tax advisors regarding the
U.S.
federal income tax consequences of an investment in the Notes. Please read
carefully the section “Certain U.S. Federal Income Tax
Considerations.”
Energy
MLP market risks may affect the trading value of the Notes and the amount you
will receive at maturity.
We
expect
that the level of the Index and the VWAP Level will fluctuate in accordance
with
changes in the financial condition of the Index Components and certain other
factors. The financial condition of the Index Components may become impaired
or
the general condition of the energy MLP market may deteriorate, either of which
may cause a decrease in the level of the Index or the VWAP Level and thus in
the
value of the Notes. Securities are susceptible to general market fluctuations
and to volatile increases and decreases in value, as market confidence in and
perceptions regarding the Index Components change. Investor perceptions
regarding the Index Components are based on various and unpredictable factors,
including expectations regarding government, economic, monetary, tax and fiscal
policies, inflation and interest rates, economic expansion or contraction,
and
global or regional political, economic, and banking crises. The level of the
Index and the VWAP Level is expected to fluctuate until the Maturity
Date.
The
historical performance of the Index is not an indication of the future
performance of the Index.
The
historical performance of the Index, which is included in this pricing
supplement, should not be taken as an indication of the future performance
of
the Index. While the trading prices of the Index Components will determine
the
level of the Index, and the VWAP Level it is impossible to predict whether
the
level of the Index will fall or rise. Trading prices of the underlying
securities comprising the Index will be influenced by the complex and
interrelated economic, financial, regulatory, geographic, judicial, tax,
political and other factors that can affect the capital markets generally and
the equity trading markets on which the underlying securities are traded, and
by
various circumstances that can influence the levels of the underlying securities
in a specific market segment or the level of a particular underlying
security.
The
liquidity of the market for the Notes may vary materially over
time.
We
intend
to sell a portion of the Notes on the Closing Date, and the remainder of the
Notes will be offered and sold from time to time through Bear Stearns, our
affiliate, as agent. Also, the number of Notes outstanding or held by persons
other than our affiliates could be reduced at any time due to early redemptions
of the Notes. Accordingly, the liquidity of the market for the Notes could
vary
materially over the term of the Notes. While you may elect to redeem your Notes
prior to maturity, early redemption is subject to the conditions and procedures
described elsewhere in this pricing supplement, including the condition that
you
must redeem at least [75,000] Notes at one time in order to exercise you right
to redeem your Notes.
The
price at which you will be able to sell your Notes on the secondary market
prior
to maturity will depend on a number of factors, and may be substantially less
than the amount you had originally invested.
If
you
wish to sell your Notes prior to maturity, there are many factors outside
of our
control that may affect their value. We believe that the value of your Notes
will be primarily affected by the level of the Index, whether the level of
the
Index is greater than or equal to the level of the Index as of the Pricing
Date,
changes in U.S. interest rates, the supply of and demand for the Notes and
a
number of other factors. Some of these factors are interrelated in complex
ways;
as a result, the effect of any one factor may be offset or magnified by the
effect of another factor. The price, if any, at which you will be able to
sell
your Notes on the secondary market prior to maturity may be substantially
less
than the principal you invested if, at such time, the level of the Index
is less
than, equal to or not sufficiently above the level of the Index on the Pricing
Date. If you sell your Notes on the secondary market prior to maturity, you
may
receive less, and possibly significantly less, than your initial investment
in
the Notes. The following paragraphs describe the manner in which we expect
the
value of the Notes will be affected in the event of a change in a specific
factor, assuming all other conditions remain constant.
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Index
performance.
We expect that the value of the Notes prior to maturity will depend
substantially on whether the level of the Index is greater than the
level
of the Index on the Pricing Date. If you decide to sell your Notes
on the
secondary market when the level of the Index exceeds the level of
the
Index on the Pricing Date, you may nonetheless receive substantially
less
than the amount that would be payable at maturity because of expectations
that the level of the Index will continue to fluctuate until the
Notes
mature. Economic, financial, regulatory, geographic, judicial, tax,
political, and other developments that affect the Index Components
may
also affect the level of the Index and, thus, the value of the
Notes.
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Our
credit ratings, financial condition and results of
operations.
Actual or anticipated changes in our current credit ratings, A1 by
Moody’s
Investor Service, Inc. and A+ by Standard & Poor’s Rating Services, as
well as our financial condition or results of operations may significantly
affect the trading value of the Notes. However, because the return
on the
Notes is dependent upon factors in addition to our ability to pay
our
obligations under the Notes, such as the level of the Index, an
improvement in our credit ratings, financial condition or results
of
operations is not expected to have a positive effect on the trading
value
of the Notes.
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Events
involving the Index Components.
General economic conditions and earnings results of the Index Components,
and real or anticipated changes in those conditions or results, may
affect
the value of the Notes. For example, some of the Index Components
may be
affected by mergers and acquisitions, which can contribute to the
volatility of the Index. As a result of a merger or acquisition,
one or
more Index Components may be replaced with a surviving or acquiring
entity’s securities. The surviving or acquiring entity’s securities may
not have the same characteristics as the Index Components originally
included in the Index.
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Size
and liquidity of the trading market.
We intend to list the Notes on the New York Stock Exchange. However,
a
secondary market in the Notes may not develop, which may affect the
price
that you receive for your Notes upon any sale prior to maturity.
If a
trading market does develop, there can be no assurance that there
will be
liquidity in the trading market. If the trading market for the Notes
is
limited, there may be a limited number of buyers for your Notes if
you do
not wish to hold your investment until maturity. This may affect
the price
you receive upon any sale of the Notes prior to maturity. If you
sell the
Notes prior to maturity, you may receive less, and possibly significantly
less, than your initial investment in the
Notes.
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Inclusion
of commission.
The inclusion of commissions and projected profit from hedging in
the
initial public offering price of the Notes is likely to adversely
affect
secondary market prices. Assuming no change in the market conditions
or
any other relevant factors, the price, if any, at which Bear Stearns
may
be willing to purchase the Notes in secondary market transactions
may be
lower than the original price of the Notes, because the original
price
included, and secondary market prices are likely to exclude, commissions
paid with respect to the Notes, as well as the projected profit included
in the cost of hedging our obligations under the Notes. In addition,
any
such prices may differ from values determined by pricing models used
by
Bear Stearns as a result of dealer discounts, mark-ups or other
transaction costs.
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We
want
you to understand that the effect of one of the factors specified above, such
as
an increase in interest rates, may offset some or all of any change in the
value
of the Notes attributable to another factor, such as an increase in the level
of
the Index. You should also understand that one or more of the factors specified
above may have a negative effect on the Redemption Amount that would be received
if you were to redeem your Notes prior to maturity.
Suspensions
or disruptions of market trading in the securities markets may adversely affect
the Cash Settlement Amount and/or the market value of the
Notes.
The
securities markets are subject to temporary distortions or other disruptions
due
to various factors, including a lack of liquidity in the markets, the
participation of speculators and potential government regulation and
intervention. Suspension or other disruptions of market trading in the
securities of the Index Components could adversely affect the value of those
Index Components and, therefore, the amount of the Cash Settlement Amount and/or
the trading value of the Notes.
You
have no partnerships rights or rights to receive any
securities.
Investing
in the Notes will not make you a holder of any of the Index Components. Neither
you nor any other holder or owner of the Notes will have any voting rights,
any
right to receive dividends or other distributions or any other rights with
respect to the underlying securities. The Cash Settlement Amount, if any, will
be paid in U.S. dollars, and you will have no right to receive delivery of
any
securities of the Index Components.
The
Calculation Agent is one of our affiliates, which could result in a conflict
of
interest.
Bear
Stearns will act as the Calculation Agent. The Calculation Agent will make
certain determinations and judgments in connection with calculating the coupons,
the Final VWAP Level, or deciding whether a Market Disruption Event (as defined
herein) has occurred. You should refer to the sections “Description of the Notes
- Discontinuance of the Index,” “- Adjustments to the Index” and “- Market
Disruption Events.” Because Bear Stearns is our affiliate, conflicts of interest
may arise in connection with Bear Stearns performing its role as Calculation
Agent. Rules and regulations regarding broker-dealers (such as Bear Stearns)
require Bear Stearns to maintain policies and procedures regarding the handling
and use of confidential proprietary information, and such policies and
procedures will be in effect throughout the term of the Notes. Bear Stearns
is
obligated to carry out its duties and functions as Calculation Agent in good
faith, and using its reasonable judgment. See the section “Description of the
Notes - Calculation Agent.”
Our
affiliates, including Bear Stearns, may, at various times, engage in
transactions involving the stocks underlying the Index for their proprietary
accounts, and for other accounts under their management. These transactions
may
influence the value of such stocks, and therefore the level of the Index. BSIL,
an affiliate of Bear Stearns, or one of its subsidiaries will also be the
counterparty to the hedge of our obligations under the Notes. You should refer
to the section “Use of Proceeds and Hedging.” Accordingly, under certain
circumstances, conflicts of interest may arise between Bear Stearns’
responsibilities as Calculation Agent with respect to the Notes and its
obligations under our hedge.
Changes
that affect the calculation of the Index will affect the value of the Notes
and
the amount you will receive at maturity.
The
Sponsor is responsible for calculating and maintaining the Index. The policies
of the Sponsor concerning the calculation of the Index will affect the level
of
the Index and, therefore, will affect the value of the Notes and the Cash
Settlement Amount.
If
the
Sponsor discontinues or suspends calculation or publication of the Index, it
may
become difficult to determine the value of the coupons, the Notes or the Cash
Settlement Amount. If this occurs, the Calculation Agent will determine the
value of the Notes. As a result, the Calculation Agent’s determination of the
value of the Notes will affect the amount you will receive at maturity. In
addition, if the Sponsor discontinues or suspends calculation of the Index
at
any time prior to the Maturity Date and a Successor Index (as defined herein)
is
not available or is not acceptable to the Calculation Agent, then the
Calculation Agent will determine the amount payable on the Maturity Date by
reference to a group of stocks and a computation methodology that the
Calculation Agent determines will (as closely as reasonably possible) replicate
the Index. The level of the Index is only one of the factors that will affect
this determination and the value of the Notes prior to maturity. See the
sections “Description of the Notes - Discontinuance of the Index” and
“Description of the Index.”
The
Sponsor may change the Index Components in a way that adversely affects the
level of the Index and/or the Final VWAP Level and consequently the value of
the
Notes.
The
Sponsor can add, delete or the Index Components or make other methodological
changes that could adversely change the level of the Index, the Final VWAP
Level
and the value of the Notes. You should realize that changes in the Index
Components may affect the Index, as a newly added Index Component may perform
significantly better or worse than the Index Component it replaces.
We
cannot control actions by any
of the Index Components.
We
are
not affiliated with any of the Index Components. Actions by any Index Component
may have an adverse effect on the price of its securities, the level of the
Index, the Final VWAP Level, and the trading value of the Notes. None of the
Index Components are involved in this offering and have no obligations with
respect to the Notes, including any obligation to take our or your interests
into consideration for any reason. None of the Index Components will receive
any
of the proceeds of this offering and are not responsible for, and have not
participated in, the determination of the timing of, prices for, or quantities
of, the Notes to be issued. None of the Index Components are involved with
the
administration, marketing or trading of the Notes and have no obligations with
respect to the amount to be paid to you under the Notes on the Maturity
Date.
We
are
not affiliated with any of the Index Components and are not responsible for
any
disclosure by any such Index Component. However, we may currently, or in the
future, engage in business with such Index Components. Neither we nor any of
our
affiliates, including Bear Stearns, assumes any responsibility for the adequacy
or accuracy of any publicly available information about the Index or any Index
Component. You should make your own investigation into the Index and each Index
Component.
We
and our affiliates have no affiliation with the Sponsor and are not responsible
for its public disclosure of information.
We
and
our affiliates are not affiliated in any way with the Sponsor or Alerian (except
for the licensing arrangements discussed in the section “Description of the
Index—License Agreement”) and have no ability to control or predict the actions
of the Sponsor or Alerian, including any errors in or discontinuation of
disclosure regarding its methods or policies relating to the calculation of
the
Index. Neither we nor any or our affiliates assumes any responsibility for
the
adequacy or accuracy of the information about the Index, the Sponsor or Alerian
contained in this pricing supplement. You, as an investor in the Notes, should
make your own investigation into the Index, the Sponsor and Alerian. Neither
the
Sponsor nor Alerian is involved in any way in the offering of the Notes and
has
no obligation to consider your interests as an owner of Notes when it takes
any
actions that might affect the value of the Notes.
Trading
and other transactions by us or our affiliates could affect the prices of the
Index Components, the level of the Index, the trading value of the Notes or
the
Cash Settlement Amount.
We
and
our affiliates may from time to time buy or sell shares of Index Components
or
derivative instruments related to those stocks for our own accounts in
connection with our normal business practices or in connection with hedging
our
obligations under the Notes and other instruments. These trading activities
may
present a conflict of interest between your interest in the Notes and the
interests we and our affiliates may have in our proprietary accounts, in
facilitating transactions, including block trades, for our other customers
and
in accounts under our management. The transactions could affect the prices
of
those stocks or the level of the Index in a manner that would be adverse to
your
investment in the Notes. See the section “Use of Proceeds and
Hedging.”
The
original issue price of the Notes includes the cost of hedging our obligations
under the Notes. Such cost includes BSIL’s expected cost of providing such hedge
and the profit BSIL expects to realize in consideration for assuming the risks
inherent in providing such hedge. As a result, assuming no change in market
conditions or any other relevant factors, the price, if any, at which Bear
Stearns will be willing to purchase Notes from you in secondary market
transactions, if at all, will likely be lower than the original issue price.
In
addition, any such prices may differ from values determined by pricing models
used by Bear Stearns as a result of transaction costs. If you sell the Notes
prior to maturity, you may receive less, and possibly significantly less, than
your initial investment in the Notes.
Hedging
activities we or our affiliates may engage in may affect the level of the Index,
and accordingly, increase or decrease the trading value of the Notes prior
to
maturity and the Cash Settlement Amount you would receive at maturity. To the
extent that we or any of our affiliates has a hedge position in any of the
Index
Components, or derivative or synthetic instruments related to those stocks
or
the Index, we or any of our affiliates may liquidate a portion of such holdings
at or about the time of the maturity of the Notes or at or about the time of
a
change in the Index Components. Depending on, among other things, future market
conditions, the aggregate amount and the composition of such hedge positions
are
likely to vary over time. Profits or losses from any of those positions cannot
be ascertained until the position is closed out and any offsetting position
or
positions are taken into account. Although we have no reason to believe that
any
of those activities will have a material effect on the level of the Index,
we
cannot assure you that these activities will not affect such level and the
trading value of the Notes prior to maturity or the Cash Settlement Amount
payable at maturity.
In
addition, we or any of our affiliates may purchase or otherwise acquire a long
or short position in the Notes. We or any of our affiliates may hold or resell
the Notes. We or any of our affiliates may also take positions in other types
of
appropriate financial instruments that may become available in the
future.
Research
reports and other transactions may create conflicts of interest between you
and
us.
We
or one
or more of our affiliates have published, and may in the future publish,
research reports on the Index or the Index Components. This research may be
modified from time to time without notice and may express opinions or provide
recommendations that are inconsistent with purchasing or holding the Notes.
Any
of these activities may affect the market price of the Index Components and,
therefore, the Final VWAP Level and the value of the Notes.
We
or any
of our affiliates may also issue, underwrite or assist unaffiliated entities
in
the issuance or underwriting of other securities or financial instruments with
returns indexed to the Index. By introducing competing products into the
marketplace in this manner, we or our affiliates could adversely affect the
value of the Notes.
We
and
our affiliates, at present or in the future, may engage in business with any
of
the Index Components, including making loans to, equity investments in, or
providing investment banking, asset management or other advisory services to
such Index Component or Index Components. In
connection with these activities, we may receive information about such Index
Component or Index Components that we will not divulge to you or other third
parties.
The
Cash Settlement Amount you receive on the Notes may be delayed or reduced upon
the occurrence of a Market Disruption Event, or an Event of
Default.
If
the
Calculation Agent determines that, on the Calculation Date, a Market Disruption
Event has occurred or is continuing, the determination of the Final VWAP Level
by the Calculation Agent may be deferred. You should refer to the section
“Description of the Notes - Market Disruption Events.”
If
the
Calculation Agent determines that an Event of Default (as defined below) has
occurred, a holder of the Notes will only receive an amount equal to the trading
value of the Notes on the date of such Event of Default, adjusted by an amount
equal to any losses, expenses and costs to us of unwinding any underlying
hedging or funding arrangements, all as determined by the Calculation Agent.
You
should refer to the section “Description of the Notes—Event of Default and
Acceleration.”
You
should decide to purchase the Notes only after carefully considering the
suitability of the Notes in light of your particular financial circumstances.
You should also carefully consider the tax consequences of investing in the
Notes. You should refer to the section “Certain U.S. Federal Income Tax
Considerations” and discuss the tax implications with your own tax
advisor.
The
following description of the Notes (referred to in the accompanying prospectus
supplement as the “Other Indexed Notes”) supplements the description of the
Notes in the accompanying prospectus supplement and prospectus. This is a
summary and is not complete. You should read the indenture, dated as of May
31,
1991, as amended (the “Indenture”), between us and The Bank of New York as
successor in interest to JPMorgan Chase Bank, N.A., as trustee (the “Trustee”).
A copy of the Indenture is available as set forth under the section of the
prospectus “Where You Can Find More Information.”
General
The
Notes
are part of a single series of debt securities under the Indenture described
in
the accompanying prospectus supplement and prospectus designated as Medium-Term
Notes, Series B. The Notes are unsecured and will rank equally with all of
our
unsecured and unsubordinated debt, including the other debt securities issued
under the Indenture. Because we are a holding company, the Notes will be
structurally subordinated to the claims of creditors of our subsidiaries.
The
aggregate principal amount of the Notes will be $[●].
The
Notes are expected to mature on [●]. The Notes will be issued only in fully
registered form, and in minimum denominations of $[●]; provided, however, that
the minimum purchase for any purchaser domiciled in a member state of the
European Economic Area shall be $100,000. Initially, the Notes will be issued
in
the form of one or more global securities registered in the name of The
Depositary Trust Company (“DTC”) or its nominee, as described in the
accompanying prospectus supplement and prospectus. When we refer to Note or
Notes in this pricing supplement, we mean $[●] principal amount of Notes.
You
should refer to the section “Certain U.S. Federal Income Tax Considerations,”
for a discussion of certain federal income tax considerations to you as a holder
of the Notes.
Further
Issuances
We
may,
at our sole discretion, offer further issuances of the Notes at offering prices
based upon market conditions and VWAP Levels at that time. If there is
substantial demand for the Notes, we may issue additional Notes frequently.
These further issuances, if any, will be consolidated to form a single series
with the Notes and will have the same CUSIP number and will trade
interchangeably with the Notes immediately upon settlement. Any additional
issuances will increase the aggregate principal amount of the outstanding Notes
of this series, plus the aggregate principal amount of any Notes bearing the
same CUSIP number that are issued pursuant to any future issuances of Notes
bearing the same CUSIP number. The prices of any additional offerings will
be
determined at the time of pricing of each offering, which price will be a
function of the prevailing market conditions and VWAP Levels at the time of
the
relevant sale.
Coupon
Payments
The
Notes
will pay a coupon, if any, on each Coupon Payment Date. For each Note you
hold,
on each Coupon Payment Date you will receive an amount per Note in U.S. dollars
equal to the difference between the Reference Dividend Amount minus the Tracking
Fee (the “Coupon Amount”).
The
“Coupon Payment Date” means the [fifth] Business Day following each Coupon
Valuation Date, subject to adjustment as described herein.
The
“Coupon Valuation Date” means the first Business Day of each calendar month
during the term of the Notes beginning on [●],
and the
last Coupon Valuation Date shall be the Maturity Date, subject to adjustment
as
described herein.
The
“Reference Dividend Amount” means, as of any date of determination, an amount
equal to the gross cash dividend proceeds that would have been received
by a
Reference Holder during the period from and excluding the prior Coupon
Valuation
Date through such date of determination; provided, that in the event that
no
prior Coupon Valuation Date has occurred as of such date of determination,
the
applicable period will begin as of the Pricing Date. Any non-cash dividends
that
would be received by a Reference Holder during any period of determination
will
be converted into cash by the Calculation Agent and will be included in
the
gross cash dividend proceeds for purposes of this calculation.
The
“Tracking Fee” means, as of any date of determination, an amount per Note equal
to the product of [0.070834]% (representing [0.85]% per annum) multiplied
by the
Current NAV.
The
“Current NAV” means, as of any date of determination, an amount per Note equal
to the product of (i) the Principal Amount multiplied by (ii) a fraction,
the
numerator of which is equal to the VWAP Level as of such date and the
denominator of which is equal to the Initial VWAP Level, as determined by
the
Calculation Agent.
The
“Reference Holder” is, as of any date of determination, a hypothetical holder of
shares of each of the Index Components in the then current weightings as
if such
holder had invested an amount equal to the Principal Amount in the Index
in each
of the Index Business Days in the Initial Measurement Period (as defined
above),
as determined by the Calculation Agent.
To
the
extent the Reference Dividend Amount is less than the Tracking Fee on any
Coupon
Valuation Date, there will be no coupon payment made on the corresponding
Coupon
Payment Date, and an amount equal to the difference between the Tracking
Fee and
the Reference Dividend Amount (the “Tracking Fee Shortfall”) in respect of such
period will be added to the Tracking Fee for the next Coupon Valuation Date.
For
the avoidance of doubt, the process will be repeated to the extent necessary
until such time as the accrued Tracking Fee has been deducted from the
appropriate Reference Dividend Amount in all prior months.
Illustrative
Coupon Example
The
following example illustrates hypothetical coupon calculations. The example
is
for illustrative purposes only and is not indicative of the future performance
of the Index, the Index Components or any coupon payment that may be paid
with
respect to the Notes. It is impossible to predict what coupon payments will
be
paid under the Notes. You should not construe this example as an indication
or
assurance of the expected performance of the Notes or of any coupon payment
made
thereunder.
The
following example is based upon a hypothetical five month term. The example
demonstrates how the Tracking Fee will accrue from month to month to the
extent
the there is Tracking Fee Shortfall. The Tracking Fee will accrue until such
time as the Reference Dividend Amount is sufficient to cover the accrued
Tracking Fee for all prior months.
Coupon
Valuation
Date
|
Current
NAV
|
Reference
Dividend
Amount
|
Tracking
Fee
|
Coupon
Payment
|
Tracking
Fee
Shortfall
|
Month
1
|
$37.70
|
$0.19
|
$0.02670
|
$0.1633
|
$0.00
|
Month
2
|
$40.00
|
$0.00
|
$0.02833
|
$0.00
|
$0.02833
|
Month
3
|
$45.00
|
$0.00
|
$0.03188
|
$0.00
|
$0.06021
|
Month
4
|
$35.00
|
$0.25
|
$0.02479
|
$0.165
|
$0.00
|
Month
5
|
$30.00
|
$0.30
|
$0.02125
|
$0.2788
|
$0.00
|
Payment
at Maturity
Your
investment may result in a loss because the Notes are not principal protected.
On the Maturity Date, you will receive the Cash Settlement Amount, an amount
in
cash that depends upon the relation of the Final VWAP Level to the Initial
VWAP
Level. At maturity, if the Final VWAP Level is less than the Initial VWAP Level,
the Cash Settlement Amount will be less than the initial offering price, in
proportion to the percentage decline in the Index (not taking into consideration
the Tracking Fee). In such a case, the principal amount of your investment
is
not protected and you will receive less, and possibly significantly less, than
the principal you invested.
The
“Cash
Settlement Amount” is an amount per Note in U.S. dollars equal to (i) the
Principal Amount times the Index Ratio (ii) minus the accrued Tracking Fee,
if
any.
The
“Index Ratio” is an amount equal to the quotient of the Final VWAP Level divided
by the Initial VWAP Level.
The
“Initial VWAP Level” equals [●], representing the arithmetic mean of the VWAP
Levels measured daily during the Initial Measurement Period specified in
accordance with the VWAP Schedule, as determined by the Calculation
Agent.
The
“Final VWAP Level” will be the arithmetic mean of the VWAP Levels measured daily
during the Final Measurement Period, as determined by the Calculation Agent.
The
“VWAP
Level,” as of any date of determination and with respect to the Index, is equal
to the quotient of (1) the arithmetic mean of the sum of the products of
(i) the
volume weighted-average price of each Index Component as of such date and
(ii)
the published share weighting of such Index Component as of such date divided
by
(2) the Index Divisor as of such date, as determined by the Calculation Agent.
The
“Index Divisor,” as of any date of determination, is the devisor used by the
Sponsor to calculate the level of the Index, as further described under
“Description of the Index - Computation of the Index” herein.
The
“Final Measurement Period” is the date that is five Index Business Days from and
including the Calculation Date, subject to adjustment as described
herein.
The
“Calculation Date” will be [June ●, 2027], unless such date is not an Index
Business Day, in which case the Calculation Date shall be the next Index
Business Day. The Calculation Date is subject to adjustment as described under
“Description of the Notes - Redemption; Defeasance” and “Description of the
Notes - Market Disruption Events”.
The
“Maturity Date” will be the third Business Day following the final Index
Business Day in the Final Measurement Period.
“Index
Business Day” means any day on which the Primary Exchange and each Related
Exchange are scheduled to be open for trading.
“Primary
Exchange” means, with respect to each Index Component, the primary exchange or
market of trading such Index Component.
“Related
Exchange” means, with respect to each Index Component, each exchange or
quotation system where trading has a material effect (as determined by the
Calculation Agent) on the overall market for futures or options contracts
relating to such Index Component.
Illustrative
Cash Settlement Amount Examples
The
following tables and graphs are for illustrative purposes and are not indicative
of the future performance of the Index or the future values of the Notes.
Because
the VWAP Level may be subject to significant fluctuation over the term of the
Notes, it is not possible to present a chart or table illustrating the complete
range of all Cash Settlement Amounts. Therefore, the examples do not purport
to
be representative of every possible scenario concerning increases or decreases
in the VWAP Level. You should not construe these examples or the data included
in herein as an indication or assurance of the expected performance of the
Notes.
The
examples demonstrating the hypothetical Cash Settlement Amount of a Note are
based on the following assumptions:
|
·
|
Investor
purchases $37.70 aggregate principal amount of Notes at the initial
offering price of $37.70.
|
|
·
|
Investor
holds the Notes to maturity or redeems the Notes prior to
Maturity.
|
|
·
|
There
is no accrued Tracking Fee.
|
|
·
|
The
Initial VWAP Level is equal to
377.00.
|
|
·
|
No
Market Disruption Events occur during the Final Measurement
Period.
|
Example
1: The Final VWAP Level is greater than the Initial VWAP Level.
In
this
example, the level of the Index rises over the term of the Notes. The Final
VWAP
Level is 471.25, representing a 25% gain from the Initial VWAP Level. In this
example using, the formula below, the Cash Settlement Amount will equal $47.13.
=
$37.70
x Final VWAP Level / Initial VWAP Level
=
$37.70
x 471.25 / 377.00
=
$37.70
x 1.25
=
$47.13
Example
2: The Final VWAP Level is equal to the Initial VWAP
Level.
In
this
example, the Index remains unchanged over the term of the Notes. The Final
VWAP
Level is 333.00, equal to the Initial VWAP Level. In this example, using the
formula below, the Cash Settlement Amount will equal $37.70.
=
$37.70
x Final VWAP Level / Initial VWAP Level
=
$37.70
x 377.00 / 377.00
=
$37.70
x 1
=
$37.70
Example
3: The Final VWAP Level is less than the Initial VWAP Level.
In
this
example, the level of the Index decreases over the term of the Notes. The Final
VWAP Level is 282.37, representing a 25% decrease in the level of the Index
from
the Initial VWAP Level. The Cash Settlement Amount, using the formula below,
will equal $28.28.
=
$37.70
x Final VWAP Level / Initial VWAP Level
=
$37.70
x 282.75 / 377.00
=
$37.70
x .75
=
$28.28
Table
of Hypothetical Cash Settlement Amounts
Initial
VWAP Level
|
Final
VWAP Level
|
Principal
Amount
|
Cash
Settlement Amount
|
Percent
Change in Note Value
|
377.00
|
150.80
|
$37.70
|
$15.08
|
-60.00%
|
377.00
|
169.65
|
$37.70
|
$16.97
|
-55.00%
|
377.00
|
188.50
|
$37.70
|
$18.85
|
-50.00%
|
377.00
|
207.35
|
$37.70
|
$20.74
|
-45.00%
|
377.00
|
226.20
|
$37.70
|
$22.62
|
-40.00%
|
377.00
|
245.05
|
$37.70
|
$24.51
|
-35.00%
|
377.00
|
263.90
|
$37.70
|
$26.39
|
-30.00%
|
377.00
|
282.75
|
$37.70
|
$28.28
|
-25.00%
|
377.00
|
301.60
|
$37.70
|
$30.16
|
-20.00%
|
377.00
|
320.45
|
$37.70
|
$32.05
|
-15.00%
|
377.00
|
339.30
|
$37.70
|
$33.93
|
-10.00%
|
377.00
|
358.15
|
$37.70
|
$35.82
|
-5.00%
|
377.00
|
377.00
|
$37.70
|
$37.70
|
0.00%
|
377.00
|
395.85
|
$37.70
|
$39.59
|
5.00%
|
377.00
|
414.70
|
$37.70
|
$41.47
|
10.00%
|
377.00
|
433.55
|
$37.70
|
$43.36
|
15.00%
|
377.00
|
452.40
|
$37.70
|
$45.24
|
20.00%
|
377.00
|
471.25
|
$37.70
|
$47.13
|
25.00%
|
377.00
|
490.10
|
$37.70
|
$49.01
|
30.00%
|
377.00
|
508.95
|
$37.70
|
$50.90
|
35.00%
|
377.00
|
527.80
|
$37.70
|
$52.78
|
40.00%
|
377.00
|
546.65
|
$37.70
|
$54.67
|
45.00%
|
377.00
|
565.50
|
$37.70
|
$56.55
|
50.00%
|
377.00
|
584.35
|
$37.70
|
$58.44
|
55.00%
|
377.00
|
603.20
|
$37.70
|
$60.32
|
60.00%
|
377.00
|
622.05
|
$37.70
|
$62.21
|
65.00%
|
377.00
|
640.90
|
$37.70
|
$64.09
|
70.00%
|
377.00
|
659.75
|
$37.70
|
$65.98
|
75.00%
|
377.00
|
678.60
|
$37.70
|
$67.86
|
80.00%
|
377.00
|
697.45
|
$37.70
|
$69.75
|
85.00%
|
377.00
|
716.30
|
$37.70
|
$71.63
|
90.00%
|
377.00
|
735.15
|
$37.70
|
$73.52
|
95.00%
|
377.00
|
754.00
|
$37.70
|
$75.40
|
100.00%
|
377.00
|
772.85
|
$37.70
|
$77.29
|
105.00%
|
377.00
|
791.70
|
$37.70
|
$79.17
|
110.00%
|
377.00
|
810.55
|
$37.70
|
$81.06
|
115.00%
|
377.00
|
829.40
|
$37.70
|
$82.94
|
120.00%
|
377.00
|
848.25
|
$37.70
|
$84.83
|
125.00%
|
377.00
|
867.10
|
$37.70
|
$86.71
|
130.00%
|
377.00
|
885.95
|
$37.70
|
$88.60
|
135.00%
|
377.00
|
904.80
|
$37.70
|
$90.48
|
140.00%
|
377.00
|
923.65
|
$37.70
|
$92.37
|
145.00%
|
377.00
|
942.50
|
$37.70
|
$94.25
|
150.00%
|
Redemption;
Defeasance
The
Notes
may be redeemed in amounts of at least [75,000] Notes (subject to adjustment
by
the Calculation Agent) on the last Business Day of each week during the term
of
the Notes (each, a “Redemption Valuation Date”) by delivering a Redemption
Notice in the form attached hereto as Appendix 1 to us via email no later than
10:00 a.m. New York City time on the Business Day prior to such Redemption
Valuation Date. If we receive your Redemption Notice in accordance with the
foregoing, we or an affiliate will send a Redemption Confirmation in the form
attached hereto as Appendix 2 to you via return email, which you must complete,
execute and deliver to us via facsimile by no later than 4:00 p.m. New York
City
time on the same Business Day. We or our affiliate must acknowledge receipt
of
the completed Redemption Confirmation in order for your redemption to be
effective. The procedures described in the foregoing paragraph are referred
to
herein as the “Notice Procedures.”
Upon
compliance with the Notice Procedures, the Calculation Agent will accelerate
the
Calculation Date with respect to the Notes being redeemed to the relevant
Redemption Valuation Date, which shall automatically accelerate the final Coupon
Valuation Date and the Maturity Date with respect to the Notes being redeemed
pursuant to the terms set forth herein. On the accelerated Maturity Date you
will receive an amount per Note in U.S. dollars equal to the sum of (i) the
Cash
Settlement Amount minus the Redemption Fee Amount, plus (ii) the Coupon Amount,
if any (the “Redemption Amount”). The Redemption Fee Amount, as of any date of
determination, is an amount per Note in U.S. dollars equal to the product of
the
Redemption Fee of [0.125]% multiplied by the applicable Cash Settlement Amount.
The
Tracking Fee applicable to the Notes subject to an Early Redemption Event
shall
be an amount equal to the sum of (i) the Tracking Fee Shortfall as of the
last
Coupon Valuation Date (if any) plus (ii) the Tracking Fee as of the next
Coupon
Valuation Date multiplied by a percentage, the numerator of which is the
total
number of days from and excluding the last Coupon Valuation Date, and the
denominator of which is 30 (the “Adjusted Tracking Fee”). To the extent the
Reference Dividend Amount as of the accelerated Calculation Date is greater
than
Adjusted Tracking Fee, the Redemption Amount will include a coupon payment
equal
to the Coupon Amount. For the avoidance of doubt, the Calculation Agent shall
use the Adjusted Tracking Fee in calculating such Coupon Amount. To the extent
the Reference Dividend Amount as of the accelerated Calculation Date is less
than the Adjusted Tracking Fee, the Redemption Amount will not include any
coupon payment, and an amount equal to the difference between the Adjusted
Tracking Fee less the Reference Dividend Amount will be subtracted from the
Index Ratio in determining the Cash Settlement Amount payable on the accelerated
Maturity Date.
We
will
inform you of the Redemption Amount on the first Business Day following the
final Index Business Day in the Final Measurement Period. Upon receipt, you
must
instruct your DTC custodian to book a delivery vs. payment trade with respect
to
your Notes on such date at a price equal to the Redemption Amount, facing Bear
Stearns DTC 052, and cause your DTC custodian to deliver the trade as books
for
settlement via DTC at or prior to 10:00 a.m. New York City time on the
applicable accelerated Maturity Date.
Different
brokerage firms may have different deadlines for accepting instructions from
their customers. Accordingly, you should consult the brokerage firm through
which you own your interest in the Notes in respect of such deadlines. If
we do
not receive your Redemption Notice by 10:00 a.m. New York City time, or your
completed and executed Confirmation Notice by 4:00 p.m. New York City time,
on
the Business Day prior to the applicable Valuation Date, your notice will
not be
effective and we will not redeem your Notes at such time. Any redemption
instructions for which we receive a valid executed Confirmation Notice in
accordance with the procedures described above will be irrevocable.
The
Notes
are not subject to the defeasance provisions described in the Article 15 of
the
Indenture.
Discontinuance
of the Index
If
the
Sponsor discontinues publication of or otherwise fails to publish the Index
and
such Sponsor or another entity publishes a successor or substitute index that
the Calculation Agent determines to be comparable to the discontinued Index
(such index being referred to herein as a “Successor Index”), then the Final
VWAP Level for such Successor Index will be determined by reference to the
volume weighted-average prices of the components underlying such Successor
Index
on the relevant exchanges or markets for such components multiplied by each
such
component’s respective weighting within the Successor Index on the dates and at
the times as of which the Final VWAP Level for such components of the Successor
Index are to be determined.
Upon
any
selection by the Calculation Agent of a Successor Index, the Calculation Agent
will cause notice thereof to be furnished to us and the Trustee. If a Successor
Index is selected by the Calculation Agent, the Successor Index will be used
as
a substitute for the Index for all purposes, including for purposes of
determining whether a Market Disruption Event exists with respect to the
Index.
If
the
Index is discontinued or if the Sponsor fails to publish the Index prior to,
and
such discontinuance is continuing on, the Calculation Date and the Calculation
Agent determines that no Successor Index is available at such time, then in
connection with its calculation of the Cash Settlement Amount, the Calculation
Agent will determine the VWAP Levels to be used in calculating the Final VWAP
Level. The Final VWAP Level will be computed by the Calculation Agent using
the
Index Components that comprised the Index immediately prior to such
discontinuance, failure or modification. In such event, the Calculation Agent
will cause notice thereof to be furnished to us and the Trustee.
Notwithstanding
these alternative arrangements, discontinuance of the publication of the Index
may adversely affect the value of, and trading in, the Notes.
Adjustments
to the Index
If
at any
time the method of calculating the Index or a Successor Index, or the value
thereof, is changed in a material respect, or if the Index or a Successor Index
is in any other way modified so that such index does not, in the opinion of
the
Calculation Agent, fairly represent the level of the Index or such Successor
Index had such changes or modifications not been made, then, for purposes of
calculating the level of the such index, the Index Ratio or any of its
components or the Cash Settlement Amount or making any other determinations
as
of or after such time, the Calculation Agent will make such calculations and
adjustments as the Calculation Agent determines may be necessary in order to
arrive at a level of an index comparable to the Index or such Successor Index,
as the case may be, as if such changes or modifications had not been made,
and
calculate the Cash Settlement Amount (including the components thereof) with
reference to such Index or such Successor Index, as adjusted. Accordingly,
if
the method of calculating the Index or a Successor Index is modified so that
the
level of such index is a fraction of what it would have been if it had not
been
modified (e.g., due to a split in the index), then the Calculation Agent will
adjust such index in order to arrive at a level for the Index or such Successor
Index as if it had not been modified (e.g., as if such split had not occurred).
In such event, the Calculation Agent will cause notice thereof to be furnished
to us and the Trustee.
In
the
event that, on the Calculation Date, the Index is not calculated by the Sponsor
but is calculated by a third party acceptable to the Calculation Agent, the
Calculation Agent will use such third party’s calculation as its reference for
determining the level of the Index during the Final Measurement
Period.
Market
Disruption Events
To
the
extent a Disrupted Day (as defined below) exists with respect to an Index
Component on an Averaging Date (as defined below), the volume weighted-average
price with respect to such Index Component (and only with respect to such
Index
Component) for such Averaging Date will be determined by the Calculation
Agent
on the first succeeding Index Business Day that is not a Disrupted Day (the
“Deferred Averaging Date”) with respect to such Index Component irrespective of
whether pursuant to such determination, the Deferred Averaging Date would
fall
on a date originally scheduled to be an Averaging Date. For the avoidance
of
doubt, if the postponement described in the preceding sentence results in
the
volume weighted-average price of a particular Index Component being calculated
on a day originally scheduled to be an Averaging Date, for purposes of
determining the Final VWAP Level the Calculation Agent will apply the volume
weighted-average price and the published share weighting with respect to
such
Index Component for such Deferred Averaging Date to (i) the VWAP Level of
the
date(s) of the original disruption with respect to such Index Component and
(ii)
the VWAP Level of such Averaging Date. In no event, however, shall any
postponement pursuant to this paragraph result in the final Averaging Date
with
respect to any Index Component occurring more than three Index Business Days
following the day originally scheduled to be the final Averaging Date. In
such
case, any volume weighted-average price and share weighting with respect
to any
Index Component required to be determined in respect of the Final VWAP Level
calculation will be determined by the Calculation Agent based upon its estimate
of the price and share weighting that would have prevailed on the Primary
Exchange for such Index Component but for such suspension or limitation.
An
“Averaging Date” means the each of the five Index Business Days during the Final
Measurement Period, subject to adjustment as described herein.
A
“Disrupted Day” with respect to any Index Component is any Index Business Day on
which the Primary Exchange or any Related Exchange fails to open for trading
during its regular trading session or on which a Market Disruption Event has
occurred and is continuing, in both cases, which the Calculation Agent
determines is material.
For
purposes of the foregoing definition, “Market Disruption Event” means, with
respect to an Index Component:
(a) the
occurrence or existence of a condition specified below:
(i) any
suspension of or limitation imposed on trading by the Primary Exchange or any
Related Exchange or otherwise, and whether by reason of movements in price
exceeding limits permitted by the Primary Exchange or any Related Exchanges
or
otherwise, (A) relating to the Index Component or (B) in futures or options
contracts relating to the Index Component, on any Related Exchange; or
(ii) any
event
(other than an event described in (b) below) that disrupts or impairs (as
determined by the Calculation Agent) the ability of market participants in
general (A) to effect transactions in, or obtain market values for the relevant
Index Component or (B) to effect transactions in, or obtain market values for,
futures or options contracts relating to the relevant Index Component, on any
Related Exchange; or
(b) the
closure on any Business Day of the Primary Exchange or any Related Exchange
prior to its Scheduled Closing Time unless such earlier closing time is
announced by the Primary Exchange or such Related Exchange at least one hour
prior to the earlier of (i) the actual closing time for the regular trading
session on the Primary Exchange or such Related Exchange on such Index Business
Day for the Primary Exchange or such Related Exchange and (ii) the submission
deadline for orders to be entered into the Primary Exchange system for execution
at the close of trading on such Index Business Day for the Primary Exchange
or
such Related Exchange.
“Index
Business Day” means any day on which the Primary Exchange and each Related
Exchange are scheduled to be open for trading.
For
purposes of the above definition:
(a) a
limitation on the hours in a trading day and/or number of days of trading will
not constitute a Market Disruption Event if it results from an announced change
in the regular business hours of the Relevant Exchange, and
(b) for
purposes of clause (a) above, any limitations on trading during significant
market fluctuations, under NYSE Rule 80B, NASD Rule 4120 or any analogous rule
or regulation enacted or promulgated by the NYSE, NASD or any other self
regulatory organization or the SEC of similar scope as determined by the
Calculation Agent, will be considered “material.”
“Primary
Exchange” means, with respect to each Index Component, the primary exchange or
market of trading of the such Index Component.
“Related
Exchange” means, with respect to each Index Component, each exchange or
quotation system where trading has a material effect (as determined by the
Calculation Agent) on the overall market for futures or options contracts
relating to such Index Component.
“Scheduled
Closing Time” means, with respect to the Primary Exchange or the Related
Exchange, on any Index Business Day, the scheduled weekday closing time of
the
Primary Exchange or such Related Exchange on such Index Business Day, without
regard to after hours or any other trading outside of the regular trading
session hours.
Events
of Default and Acceleration
If
an
Event of Default (as defined in the accompanying prospectus) with respect to
any
Notes has occurred and is continuing, then the amount payable to you, as a
holder of a Note, upon any acceleration permitted by the Notes will be equal
to
the Cash Settlement Amount as though the date of early repayment were the
Maturity Date of the Notes, adjusted by an amount equal to any losses, expenses
and costs to us of unwinding any underlying or related hedging or funding
arrangements, all as determined by the Calculation Agent. If a bankruptcy
proceeding is commenced in respect of us, the claims of the holder of a Note
may
be limited under Title 11 of the United States Code.
Settlement
and Payment
Settlement
for the Notes will be made by Bear Stearns in immediately available funds.
Payments of the Cash Settlement Amount will be made by us in immediately
available funds, so long as the Notes are maintained in book-entry
form.
Calculation
Agent
The
Calculation Agent for the Notes will be Bear Stearns. All determinations made
by
the Calculation Agent will be at the sole discretion of the Calculation Agent
and will be conclusive for all purposes and binding on us and the holders of
the
Notes, absent manifest error and provided the Calculation Agent shall be
required to act in good faith in making any determination. Manifest error by
the
Calculation Agent, or any failure by it to act in good faith, in making a
determination adversely affecting the payment of principal, interest or premium
on principal to holders would entitle the holders, or the Trustee acting on
behalf of the holders, to exercise rights and remedies available under the
Indenture. If the Calculation Agent uses its discretion to make any
determination, the Calculation Agent will notify us and the Trustee, who will
provide notice to the registered holders of the Notes.
The
Index
We
have
derived all information relating to the Index, including, without limitation,
its make-up, performance, method of calculation and changes in its components,
from publicly available sources. That information reflects the policies of
and
is subject to change by the Sponsor and Alerian. The Sponsor is under no
obligation to continue to publish, and may discontinue or suspend the
publication of the Index at any time.
The
Sponsor maintains and calculates the Index in consultation with Alerian.
The
Index is a composite of energy MLPs and is calculated by the Sponsor using
a
float-adjusted, market capitalization-weighted methodology. The Index will
be
disseminated real-time and will be listed on the Chicago Mercantile Exchange
under the ticker symbol “AMZS”. The Index began publishing on [●]. In addition,
the Sponsor has calculated ten years of historical index data on both a price
and total return basis. Alerian publishes relevant constituent data points,
such
as total market capitalization and dividend yield, on a daily basis. MLPs
are
added or removed by Alerian based on the methodology described below. As
of May
29, 2007, shares of 25 of the Index Components are traded on the New York
Stock
Exchange and shares of 12 of Index Components are traded on The Nasdaq Stock
Market. Alerian will announce changes to the Index on its publicly available
website, www.alerian.com.
About
Alerian Capital Management LLC
Alerian
is a registered investment advisor that manages portfolios exclusively focused
on
midstream energy MLPs.
The company focuses on fundamental
analysis in this emerging asset class, combining its bottoms-up private equity
philosophy with risk management programs designed to preserve capital and
mitigate portfolio volatility. Investing in both the private and public equity
markets, the company concentrates on maximizing absolute total returns on a
risk-adjusted basis.
Construction
of the Index
All
of
the following requirements must be met in order for a MLP to be eligible for
inclusion in the Index:
|
·
|
The
constituent security must be US-based. The Index uses several factors
in
determining a MLP’s nationality, including, but not limited to,
registration location, accounting principles used for financial reporting,
and location of headquarters.
|
|
·
|
The
constituent security must be a “reported security” as defined in Rule
11Aa3-1 under the Exchange Act, and must be listed the New York Stock
Exchange (NYSE), American Stock Exchange (AMEX), or The Nasdaq Stock
Market (NASDAQ).
|
|
·
|
The
constituent security must have at least six months of trading history.
|
|
·
|
The
constituent security must be a publicly traded partnership or limited
liability company exempt from corporate taxation as a result of the
1986
Tax Reform Act, and engaged in the transportation, storage, processing,
or
production of energy commodities.
|
|
·
|
The
constituent security must represent either the limited or general
partner
interests, or both, of a partnership that is an operating company,
or
common units of a limited liability company that is an operating
company.
Closed-end funds, exchange-traded funds (ETFs), investment vehicles,
and
royalty or income trusts are not eligible for
inclusion.
|
Going
forward, additional market capitalization, trading liquidity, and financial
viability requirements must also be satisfied. These requirements have not
been
applied historically so as to eliminate any selection bias in the calculation
of
the Index. The Index has been created to provide a comprehensive benchmark
for
the historical performance of the energy MLP universe, necessitating the
objectivity and transparency of inclusion of all MLPs engaged in energy-related
businesses. All current Index Components will remain in future Index
calculations and will be exempt from additional Index criteria, subject to
review by the Index. New Index Components, however, in addition to the
requirements listed above, will also be subject to the following
conditions:
|
·
|
Market
capitalization.
Each constituent security must have a market capitalization of at
least
$500 million. This minimum requirement is reviewed from time to time
to
ensure consistency with market conditions.
|
|
·
|
Adequate
individual trading liquidity.
Each constituent security must maintain a ratio of annual dollar
value
traded to market capitalization of 0.30 or greater. Trading volume
of each
component security is required to have been in excess of 500,000
units per
month for each of the last six
months.
|
|
·
|
Comprehensive
liquidity.
No
more than 10% of the dollar weight of the Index may be comprised
of
constituent securities that had an aggregate trading volume greater
than
500,000 but less than 1,000,000 shares in each of the last six months.
|
|
·
|
Public
float.
Each constituent security must have a public float of at least 50%
of the
total outstanding units. Financial viability. Each constituent security
must maintain trailing twelve months distributable cash flow that
exceeds
cash distributions paid to unitholders, where distributable cash
flow is
defined as GAAP net income excluding discontinued operations and
extraordinary items, plus non-cash charges such as depreciation and
amortization, and minus maintenance capital
expenditures.
|
Continued
Index membership is not necessarily subject to these guidelines. Alerian will
announce changes to the Index on its publicly available website,
www.alerian.com.
The
Index
Components as of May 9, 2007 are attached hereto as Appendix 3.
Float
Adjustment
Index
Components the Index are float-adjusted to reflect the number of units
available
to investors according to the Sponsor’s proprietary methodology. The
float
adjustment for the Index is effective as of the December 2005
rebalancing.
The
float-adjusted number of units for each stock is determined by assigning each
stock
an availability factor. That factor represents the percentage of units deemed
available (i.e.,
tradable) on the open market, and is developed by excluding certain types
of holdings. Units may be excluded for three reasons: corporate cross-holdings,
private
control block holdings, or government holdings. A private control block is
considered to be any entity acting alone or in concert that possesses limited
partner units in addition to a general partner interest. Subordinated limited
partner units and any
other holdings not readily available to the public for investment are also
excluded.
Computation
of the Index
The
Sponsor currently computes the Index as of a particular time as
follows:
where:
|
·
|
l(t)
=
Index value at time (t)
|
|
·
|
D(t)
=
Divisor at time (t)
|
|
·
|
n
=
Number of stocks in the index
|
|
·
|
t
=
The time the index is calculated
|
|
·
|
Pi(t)
=
Price of stock (i)
at
time (t)
|
|
·
|
Si(t)
=
Number of float-adjusted units of stock (i)
at
time (t)
|
The
initial index divisor is determined using the following equation:
where:
|
·
|
l(o)
=
Base index value at base date (December 29,
1995)
|
|
·
|
D(o)
=
Initial divisor at base date
|
|
·
|
n
=
Number of stocks in the index
|
|
·
|
Pi(o)
=
Closing price of stock (i)
at
base date
|
|
·
|
Si(o)
=
Number of float-adjusted units of stock (i)
at
base date
|
Changes
to the index composition require divisor adjustments in order to retain index
continuity before and after specific events. Divisor changes are made according
to the following formula:
where:
D(t+1)
=
Divisor after changes are made to the index
Pi(t+i)=
Price
of each stock after index changes
Si(t+i)
= Number
of float-adjusted units of each stock after index changes
D(t)
=
Divisor before changes are made to the index
Pi(t) =
Price
of each stock prior to index changes
Si(t)
= Number
of float-adjusted units of each stock prior to index changes
Index
Rebalancing
The
Index
is market capitalization-weighted and rebalanced quarterly in March, June,
September, and December each year. Changes are made after the close
on
the third Friday of those months, and become effective at the opening on the
next
trading day. Changes will be announced on Alerian's publicly available website,
www.alerian.com.
If
an
event causes an Index Component’s total units to change by greater than 5% of
its total units
outstanding (e.g., an Index Component completes an equity issuance), the Index
will follow
an
interim rebalancing schedule that will account for such unit changes prior
to
the
next
quarterly rebalancing. Increases or decreases in an Index Component’s units of
greater
than 5% (whether effected by equity issuances or otherwise) are entered into
the
index on the third Friday of that given month, with the free float adjustment
for that constituent
recalculated at that time. For changes following the third Friday of that
given
month, the Index Component’s units and float adjustment will be amended on the
third Friday of the following month. Similar to the quarterly rebalancings,
all
changes will be made
at
the close of trading to be effective at the opening on the next trading day.
Changes
will be announced on Alerian’s publicly available website,
www.alerian.com.
Equity
offerings. Equity
offerings that constitute less than 5% of an Index Component’s total
units
outstanding are reflected at the time of the quarterly rebalancing. However,
if
an offering's
greenshoe is exercised before the quarterly rebalancing and its exercise
causes
the total units outstanding to increase by more than 5% as a result of the
total
offering, then the change is treated similarly to any change accounting for
greater than 5%
of an Index Component’s units outstanding and will be entered at the next third
Friday of the
month. If a greenshoe exercise does not cause the total offering to be account
for more
than 5% of the total units outstanding, it is included at the next quarterly
rebalancing.
Historical
Data
on the AMZS
The
following table sets forth the month-end closing index levels of the Index
for
each month in the period from January 2002 through April 2007, but does
not
include dividend payments made by the constituent members of the Index
during
this time period. We obtained the data in the following table from Bloomberg
Financial Service, without independent verification by us. The Index began
publishing on [●].
Therefore, all levels provided (in the chart and graph below) prior to
[●]
represent the Sponsor’s application of the index methodology, as described
above, beginning with the initial selection of the Index components on
[●], in
order to reconstruct historical data consistent with the Sponsor’s methodology
for the period prior to [●]. The
historical values of the Index should not be taken as an indication of
future
performance, and no assurance can be given that the level of the Index
will
increase relative to its the Initial VWAP Level during the term of the
Notes.
Month-End
Closing Level of the Index (does
not
include dividends)
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
January
|
203.54
|
195.14
|
244.75
|
285.54
|
284.37
|
338.48
|
February
|
186.50
|
196.46
|
246.15
|
285.75
|
279.97
|
345.40
|
March
|
198.65
|
199.16
|
253.15
|
274.93
|
282.38
|
360.04
|
April
|
202.12
|
211.94
|
231.51
|
281.19
|
285.28
|
379.74
|
May
|
195.85
|
216.11
|
229.09
|
281.94
|
289.74
|
|
June
|
180.54
|
223.59
|
233.80
|
293.48
|
285.51
|
|
July
|
181.41
|
224.45
|
239.75
|
305.97
|
296.32
|
|
August
|
192.09
|
224.67
|
246.00
|
295.88
|
301.11
|
|
September
|
184.91
|
228.60
|
259.82
|
297.22
|
296.96
|
|
October
|
183.51
|
230.78
|
256.81
|
290.78
|
310.02
|
|
November
|
183.53
|
239.00
|
267.31
|
278.06
|
320.88
|
|
December
|
190.35
|
251.50
|
273.29
|
270.90
|
325.37
|
|
The
following graph illustrates the historical performance of the Index based
on the
closing level on the last Index Business Day of each month from December
1995
through April 2007. The Index level displayed does not include dividends
paid by
the constituent members of the Index during this time period.
License
Agreement
We
have
entered into an exclusive license agreement with Gabriel Hammond (“Hammond”) and
Alerian providing for the license to us, in exchange for a fee, of the right
to
use the Index, which is owned by Hammond and licensed to Alerian, in connection
with certain securities, including the Notes.
The
license agreement between Hammond, Alerian and us provides that the following
language must be set forth in this pricing supplement:
“Alerian
MLP Select Index, Alerian MLP Select Total Return Index, Alerian MLP Index
and
Alerian MLP Total Return Index are trademarks of Alerian Capital Management
LLC
and their use is granted under a license from Alerian Capital Management
LLC.”
All
disclosures contained in this pricing supplement regarding the Index, including
its make-up, method of calculation and changes in its components, are derived
from publicly available information prepared by the Sponsor in consultation
with
Alerian. None of us, Bear Stearns or the Trustee assumes any responsibility
for
the accuracy or completeness of such information.
Certain
U.S. Federal Income Tax Considerations
The
following discussion summarizes certain of the material U.S. federal income
tax
consequences of the purchase, beneficial ownership, and disposition of the
Notes. For purposes of this summary, a “U.S. holder” is a beneficial owner of a
Note that is:
an
individual who is a citizen or a resident of the United States, for federal
income tax purposes;
a
corporation (or other entity that is treated as a corporation for federal tax
purposes) that is created or organized in or under the laws of the United States
or any State thereof (including the District of Columbia);
an
estate
whose income is subject to 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 (as defined for
federal income tax purposes) have the authority to control all of its
substantial decisions.
For
purposes of this summary, a “non-U.S. holder” is a beneficial owner of a Note
that is:
a
nonresident alien individual for federal income tax purposes;
a
foreign
corporation for federal income tax purposes;
an
estate
whose income is not subject to federal income tax on a net income basis;
or
a
trust
if no court within the United States is able to exercise primary jurisdiction
over its administration or if United States persons (as defined for federal
income tax purposes) do not have the authority to control all of its substantial
decisions.
An
individual may, subject to certain exceptions, be deemed to be a resident of
the
United States for 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 those 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 Code, regulations issued thereunder,
and rulings and decisions currently in effect (or in some cases proposed),
all
of which are subject to change. Any of those changes 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 that own Notes as capital assets and not as part of a
“straddle,” “hedge,” “synthetic security,” or “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 banks, thrifts or other financial institutions;
insurance companies; securities dealers or brokers, or traders in securities
electing mark-to-market treatment; regulated investment companies or real estate
investment trusts; small business investment companies; S corporations;
investors that hold their Notes through a partnership or other entity treated
as
a partnership for federal tax purposes; investors whose functional currency
is
not the U.S. dollar; certain former citizens or residents of the United States;
persons subject to the alternative minimum tax; retirement plans or other
tax-exempt entities, or persons holding the Notes in tax-deferred or
tax-advantaged accounts; or “controlled foreign corporations” or “passive
foreign investment companies” for federal income tax purposes). This summary
also does not address the tax consequences to shareholders, or other equity
holders in, or beneficiaries of, a holder, or any state, local or foreign tax
consequences of the purchase, ownership or disposition of the Notes.
Accordingly,
prospective investors are urged to consult their tax advisors with respect
to
the federal, state and local tax consequences of investing in the Notes, as
well
as any consequences arising under the laws of any other taxing jurisdiction
to
which they may be subject.
PROSPECTIVE
PURCHASERS OF NOTES SHOULD CONSULT THEIR TAX ADVISORS AS TO THE FEDERAL, STATE,
LOCAL, AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF NOTES.
There
are
no statutory provisions, regulations, published rulings or judicial decisions
addressing the characterization for federal income tax purposes of securities
with terms that are substantially the same as those of the Notes. Accordingly,
the proper U.S. federal income tax treatment of the Notes is uncertain. Under
one approach, the Notes would be treated as pre-paid cash-settled executory
contracts with respect to the Index. We intend to treat the Notes consistent
with this approach, and pursuant to the terms of the Notes, you agree (in the
absence of an administrative or judicial ruling to the contrary) to treat the
Notes consistent with this approach. Except as otherwise provided in “-
Alternative Characterizations and Treatments” and “- Federal Income Tax
Treatment of Non-U.S. Holders,” the balance of this summary assumes that the
Notes are so treated. Additionally, the Issuer and the holders agree (in the
absence of an administrative or judicial ruling to the contrary) to treat the
payment of any coupon amount paid in respect of the Notes for federal income
tax
purposes as an item of current ordinary income to the holder at the time it
accrues or is received, in accordance with the holder’s regular method of tax
accounting. Except as otherwise provided in “- Alternative Characterizations and
Treatments” and “- Federal Income Tax Treatment of Non-U.S. Holders,” the
balance of this summary assumes that such payments are so
characterized.
Federal
Income Tax Treatment of U.S. Holders
Any
coupon amount paid in respect of the Notes will be taxable to a U.S. Holder
entirely as ordinary income at the time it accrues or is received, in accordance
with the U.S. holder’s regular method of tax accounting.
Upon
the
receipt of cash at maturity of a Note or upon the sale, exchange or other
disposition of a Note in a taxable transaction, a U.S. holder generally will
recognize gain or loss equal to the difference between the amount realized
at
maturity or upon the sale, exchange or other disposition and the U.S. holder’s
tax basis in the Note. A U.S. holder’s tax basis in a Note will generally be
equal to the U.S. holder’s cost for the Note. Except as discussed in the next
paragraph, any such gain or loss generally will constitute capital gain or
loss,
and if held for more than a year at the time of maturity, sale, exchange or
other disposition, generally should be long-term capital gain or loss. Long-term
capital gains of non-corporate taxpayers are generally eligible for reduced
rates of taxation. The ability of U.S. holders to use capital losses to offset
ordinary income is limited.
Under
section 1260 of the Code, if a taxpayer recognizes long-term capital gain from
a
“constructive ownership transaction” with respect to a “financial asset” (as
such terms are specifically defined therein), such gain would be recharacterized
in whole or part as ordinary income, and an interest charge would be imposed
on
the resulting tax liability as if such liability represented a tax liability
for
the past taxable years during the holders holding period. For this purpose,
a
taxpayer will be treated as having entered into a “constructive ownership
transaction” if, among other things, the taxpayer (i) enters into a forward
contract to acquire an “equity interest” in a “pass-thru entity” which includes
for this purpose a partnership, or (ii) to the extent provided in Treasury
regulations that have not yet been issued, enters into one or more other
transactions (or acquires one or more positions) that have “substantially the
same effect” as such a forward contract. In
this
regard, the Index Components are generally treated as partnerships for U.S.
federal income tax purposes. The application of section 1260 to the Notes is
unclear under current law. While substantial arguments can be made for not
applying section 1260 to assets like the Notes that reference a public index,
the IRS could assert that the Notes represent an equity interest in the Index
Components and therefore would be currently covered by section 1260.
In
the
event that the Notes were treated as giving rise to a constructive ownership
transaction under section 1260, all or a portion of any gain from the Notes
on
disposition or maturity that would otherwise be treated as long-term capital
gain would be recharacterized as ordinary income (but only to the extent such
long-term capital gain exceeds the long-term capital gain that a U.S. Holder
would have recognized if it had made a direct investment in the index
Components), and an interest charge would be imposed on the recharacterized
ordinary income, as described above. Notwithstanding
the foregoing, the Issuer believes
that even if a U.S. Holder is treated as having entered into a “constructive
ownership transaction” in respect of the Notes for purposes of section 1260, the
impact would be negligible since a U.S. Holder’s potential to convert ordinary
income and short-term capital gain (including any ordinary income and short
term
gains included as part of a distributive partnership share and including any
section 751 gains) that would have been reportable from a direct investment
in
the Index Components into capital gain through the Notes is largely eliminated
by treating all current coupon payments on the Notes as ordinary income.
Further,
even though some potential exists to convert short-term capital gain inherent
in
the periodic rebalancings of the Index into long-term capital gain upon
disposition of the Notes, based on the methodology of the Index the Issuer
expects the amount of such potential conversion to be de minimus. Prospective
investors in the Notes should be aware, however, that there can be no assurance
(i) that section 1260 does not apply to the Notes currently, (ii) that any
future Treasury regulations would not extend the reach of section 1260 to cover
the Notes retroactively, and (iii) that the ultimate impact of section 1260
applying to the Notes would actually be negligible to a particular U.S. Holder.
U.S. Holders of Notes should consult their own tax advisors regarding the
potential application of section 1260 to their ownership and disposition of
Notes.
Alternative
Characterizations and Treatments
Although
the Issuer and the holders have agreed (in the absence of an administrative
or
judicial ruling to the contrary) to treat each Note as a pre-paid cash-settled
executory contract as described above, there are no statutory provisions,
regulations, published rulings or judicial decisions addressing the
characterization of securities with terms that are substantially the same as
those of the Notes, and therefore the Notes could be subject to some other
characterization or treatment for federal income tax purposes. For example,
each
Note could be treated as a “contingent payment debt instrument” for federal
income tax purposes. In this event, a U.S. holder would be required to accrue
original issue discount income, subject to adjustments, at the “comparable
yield” of the Notes and any gain recognized with respect to the Note generally
would be treated as ordinary income. Prospective investors should consult their
tax advisors as to the federal income tax consequences to them if the Notes
are
treated as debt instruments for federal income tax purposes.
In
addition, certain proposed Treasury regulations require the accrual of income
on
a current basis for contingent payments made under certain “notional principal
contracts.” The preamble to the proposed regulations states that the “wait and
see” method of accounting does not properly reflect the economic accrual of
income on those contracts and requires current accrual of income for some
contracts already in existence. The IRS could take the position that these
rules
apply to the Notes by characterizing the Notes as notional principal contracts
rather than as pre-paid cash-settled executory contracts due, in part, to the
periodic coupon payments made on the Notes prior to maturity. Further, even
if
the Notes are respected as pre-paid cash-settled executory contracts to which
the proposed regulations would not apply, the preamble to the proposed
regulations indicates that similar timing issues exist in the case of pre-paid
forward contracts and therefore similar timing issues may exist in the case
of
executory contracts. If the IRS or the U.S. Treasury Department publishes future
guidance requiring current economic accrual for contingent payments on pre-paid
executory contracts, it is possible that a U.S. holder could be required to
accrue income over the term of the Notes.
Alternatively,
it is possible that the IRS might assert that U.S. Holders should be treated
as
owning an interest in some or all of the Index Components for federal income
tax
purposes. Under this characterization, U.S. Holders may be required to recognize
taxable gain upon a rebalancing of the Index. In addition, U.S. Holders would
be
subject to tax in respect of any income and gain realized as part of their
distributive partnership share from the Index Components. U.S. Holders should
consult the offering documents of the Index Components and their advisors
regarding the federal income tax consequences under this characterization.
Other
alternative federal income tax characterizations or treatments of the Notes
are
possible, and if applied could also materially affect the amount, timing and
character of the income, gain, or loss with respect to the Notes. For example,
it is possible that the IRS could attempt to characterize the Notes as subject
to special “mark-to-market” rules under Section 1256 of the Internal Revenue
Code.
Finally,
it is possible that the IRS could respect the Notes as pre-paid cash-settled
executory contracts, while recasting the treatment of the current coupon
payments as a return of investment or capital gain. In such a recast, it is
possible that the IRS would also assert that the constructive ownership rules
of
section 1260 (discussed above) then apply to recast some or all of such coupon
amounts and the ultimate capital gain on disposition or maturity of the Notes
as
ordinary income, the tax liability on which would be subject to an interest
charge. Prospective investors in the Notes should consult their tax advisors
as
to the tax consequences to them of purchasing Notes, including any alternative
characterizations and treatments.
Federal
Income Tax Treatment of Non-U.S. Holders
An
investment in a Note is generally not suitable for Non-U.S. Holders.
Accordingly, no interest in a Note should be acquired by or on behalf of any
such Non-U.S. Holder. Due to the uncertainty regarding the tax characterization
of the Notes there is a substantial uncertainty regarding the tax treatment
of
Non-U.S. Holders. If a Note is characterized as a pre-paid cash-settled
executory contract, then a Non-U.S. Holder that is not subject to United States
federal income tax as a result of any direct or indirect connection to the
United States other than its ownership of a Note should generally not be subject
to U.S. federal income or withholding tax in respect of the maturity or other
disposition of the Note. However, if the amount realized upon the maturity,
sale, exchange or settlement of a Note is effectively connected with a trade
or
business conducted by the Non-U.S. Holder in the United States, the Non-U.S.
Holder will generally be subject to United States federal income tax on any
income or gain in respect of the Note at the regular rates applicable to Unites
States taxpayers, and, for a foreign corporation, possibly branch profits tax,
unless an applicable treaty reduces or eliminates such tax. However, other
characterizations are possible. For instance, under one approach Non-U.S.
Holders that hold Notes could be considered to be engaged in business in the
United States on account of ownership of the Notes. In this situation such
Non-U.S. Holders would be required to file federal tax returns in respect of
their income from the Notes and pay tax thereon. Additionally, under some
characterizations of the Notes Non-U.S. Holders would be required to pay a
withholding tax on the portion of the distributive partnership share of each
Index Component which is effectively connected with the conduct of a United
States trade or business regardless of whether any actual distributions have
been made by such Index Component or made on the Notes. Further, in such a
situation a Non-U.S. Holder that is a foreign corporation would be subject
to
special information reporting requirements under Section 6038C of the Internal
Revenue Code and could potentially be subjected to the United States branch
profits tax at a rate of 30% (or any applicable lower treaty rate). Finally,
under certain characterizations a Non U.S. Holder might have a portion of any
gain on the disposition or maturity of its Notes subjected to US federal income
taxation.
Consequently,
in order to protect the Issuer from the possible adverse consequences of a
failure to withhold in light of the uncertain tax characterization of the Notes,
the Issuer intends to treat all payments other than the return of the principal
amount at maturity made in respect of the Notes to Non-U.S. Holders as “fixed,
determinable, annual and periodic income” under the Code and withhold U.S.
federal income tax on such payments at a rate of 30% unless a tax treaty between
the United States and the country of residence of the Non-U.S. Holder reduces
or
eliminates the withholding tax and the Non-U.S. Holder complies with the
applicable procedures for claiming treaty benefits. Prospective Non-U.S. Holders
should consult their tax advisors with respect to the federal, state, local
and
foreign income tax consequences to them of an investment in the Notes, including
any possible alternative characterizations and treatments.
Information
Reporting and Backup Withholding
Distributions
made on the Notes and proceeds from the sale of Notes to or through certain
brokers may be subject to a “backup” withholding tax on “reportable payments”
unless, in general, the holder of Notes complies with certain procedures or
is
an exempt recipient. Any amounts so withheld from distributions on the Notes
generally would be refunded by the IRS or allowed as a credit against the holder
of Notes federal income tax, provided the holder of Notes makes a timely filing
of an appropriate tax return or refund claim.
Reports
will be made to the IRS and to holders of Notes that are not exempt from the
reporting requirements.
CERTAIN
ERISA CONSIDERATIONS
Section
4975 of the Code prohibits the borrowing of money, the sale of property and
certain other transactions involving the assets of plans that are qualified
under the Code (“Qualified Plans”) or individual retirement accounts (“IRAs”)
and persons who have certain specified relationships to them. Section 406 of
the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), prohibits
similar transactions involving employee benefit plans that are subject to ERISA
(“ERISA Plans”). Qualified Plans, IRAs and ERISA Plans are referred to as
"Plans."
Persons
who have such specified relationships are referred to as “parties in interest”
under ERISA and as “disqualified persons” under the Code. “Parties in interest”
and “disqualified persons” encompass a wide range of persons, including any
fiduciary (for example, an investment manager, trustee or custodian) of a Plan,
any person providing services (for example, a broker) to a Plan, the Plan
sponsor, an employee organization any of whose members are covered by the Plan,
and certain persons related to or affiliated with any of the
foregoing.
The
purchase and/or holding of Notes by a Plan with respect to which we, Bear
Stearns and/or certain of our affiliates is a fiduciary and/or a service
provider (or otherwise is a “party in interest” or “disqualified person”) would
constitute or result in a prohibited transaction under Section 406 of ERISA
or
Section 4975 of the Code, unless such the Notes are acquired or held pursuant
to
and in accordance with an applicable statutory or administrative exemption.
Each
of us, Bear Stearns and BSSC is considered a “disqualified person” under the
Code or a “party in interest” under ERISA with respect to many Plans, although
neither we nor Bear Stearns can be a “party in interest” to any IRA other than
certain employer-sponsored IRAs, as only employer-sponsored IRAs are covered
by
ERISA.
Applicable
administrative exemptions may include certain prohibited transaction class
exemptions (for example, Prohibited Transaction Class Exemption (“PTCE”) 84−14
relating to qualified professional asset managers, PTCE 96−23 relating to
certain in-house asset managers, PTCE 91−38 relating to bank collective
investment funds, PTCE 90−1 relating to insurance company separate accounts and
PTCE 95−60 relating to insurance company general accounts).
It
should
also be noted that the recently enacted Pension Protection Act of 2006 contains
a new statutory exemption from the prohibited transaction provisions of Section
406 of ERISA and Section 4975 of the Code for transactions involving certain
parties in interest or disqualified persons who are such merely because they
are
a service provider to a Plan, or because they are related to a service provider.
Generally, the exemption would be applicable if the party to the transaction
with the Plan is a party in interest or a disqualified person to the Plan but
is
not (i) an employer, (ii) a fiduciary who has or exercises any discretionary
authority or control with respect to the investment of the Plan assets involved
in the transaction, (iii) a fiduciary who renders investment advice (within
the
meaning of ERISA and Section 4975 of the Code) with respect to those assets,
or
(iv) an affiliate of (i), (ii) or (iii). Any Plan fiduciary relying on this
statutory exemption (Section 408(b)(17) of ERISA and Section 4975(d)(20) of
the
Code) and purchasing Notes on behalf of a Plan will be deemed to represent
that
(x) the fiduciary has made a good faith determination that the Plan is paying
no
more than, and is receiving no less than, adequate consideration in connection
with the transaction and (y) neither we, Bear Stearns, nor any of our affiliates
directly or indirectly exercises any discretionary authority or control or
renders investment advice (as defined above) with respect to the assets of
the
Plan which such fiduciary is using to purchase the Notes, both of which are
necessary preconditions to utilizing this exemption. Any purchaser that is
a
Plan is encouraged to consult with counsel regarding the application of this
exemption.
A
fiduciary who causes a Plan to engage, directly or indirectly, in a non-exempt
prohibited transaction may be subject to a penalty under ERISA, and may be
liable for any losses to the Plan resulting from such transaction. Code Section
4975 generally imposes an excise tax on disqualified persons who engage,
directly or indirectly, in non-exempt transactions with the assets of Plans
subject to such Section. If an IRA engages in a prohibited transaction, the
assets of the IRA are deemed to have been distributed to the IRA
beneficiaries.
In
accordance with ERISA’s general fiduciary requirements, a fiduciary with respect
to any ERISA Plan who is considering the purchase of Notes on behalf of such
plan should consider the foregoing information and the information set forth
in
the prospectus and any applicable pricing supplement, and 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. Fiduciaries
of
Plans established with, or for which services are provided by, us, Bear Stearns,
and/or certain of our affiliates should consult with counsel before making
any
acquisition. Each purchaser of any Notes, 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 Notes, will be deemed to represent
that the purchase, holding and disposition of the Notes does not and will not
constitute a prohibited transaction under Section 406 of ERISA or Section 4975
of the Code for which an exemption is not available.
Certain
employee benefit plans, such as governmental plans (as defined in Section 3(32)
of ERISA) and, if no election has been made under Section 410(d) of the Code,
church plans (as defined in Section 3(33) of ERISA), are not subject to Section
406 of ERISA or Section 4975 of the Code. However, such plans may be subject
to
the provisions of applicable federal, state or local law (“Similar Law”) similar
to the foregoing provisions of ERISA or the Code. Fiduciaries of such plans
(“Similar Law Plans”) should consider applicable Similar Law when investing in
the Notes. Each fiduciary of a Similar Law Plan will be deemed to represent
that
the Similar Law Plan’s acquisition and holding of the Notes will not result in a
non-exempt violation of applicable Similar Law.
The
sale
of any Note to a Plan or a Similar Law Plan is in no respect a representation
by
us or any of our affiliates that such an investment meets all relevant legal
requirements with respect to investments by Plans or Similar Law Plans generally
or any particular Plan or Similar Law Plan, or that such an investment is
appropriate for a Plan or a Similar Law Plan generally or any particular Plan
or
Similar Law Plan.
USE
OF PROCEEDS AND HEDGING
We
will
use the net proceeds from the sale of the Notes for general corporate purposes.
We or one or more of our subsidiaries (including BSIL) may hedge our obligations
under the Notes by the purchase and sale of exchange-traded and over-the-counter
options on, or other derivative or synthetic instruments related to, the Index,
the Index Components, individual futures contracts on the Index, the Index
Components, and/or options on these futures contracts.
At
various times after the initial offering and before the maturity of the Notes,
depending on market conditions (including the values of the Index Components),
in connection with hedging with respect to the Notes, we expect that we and/or
one or more of our subsidiaries will increase or decrease those initial hedging
positions using dynamic hedging techniques and may take long or short positions
in these instruments.
In
addition, we and/or one or more of our subsidiaries may periodically purchase
or
otherwise acquire a long or short position in the Notes and may, in our or
its
discretion, hold or resell such Notes. We or one or more of our subsidiaries
may
also take positions in other types of appropriate financial instruments that
may
become available in the future. If we or one or more of our subsidiaries has
a
long hedge position in these instruments, then we or one or more of our
subsidiaries may liquidate a portion of these instruments at or about the time
of the maturity of the Notes. Depending on, among other things, future market
conditions, the total amount and the composition of such positions are likely
to
vary over time. We will not be able to ascertain our profits or losses from
any
hedging position until such position is closed out and any offsetting position
or positions are taken into account. Although we have no reason to believe
that
any such hedging activity will have a material effect on the price of these
instruments or on the level of the Index or the values of the Index Components,
we cannot guarantee that we and one or more of our subsidiaries will not affect
these levels as a result of its hedging activities. You should also refer to
“Use of Proceeds” in the accompanying prospectus.
SUPPLEMENTAL
PLAN OF
DISTRIBUTION
Subject
to the terms and conditions set forth in the Distribution Agreement dated as
of
June 19, 2003, as amended, we have agreed to sell to Bear Stearns & Co. Inc.
as principal, and Bear Stearns has agreed to purchase from us, the aggregate
principal amount of Notes set forth opposite its name below.
Agent
|
|
Principal
Amount
of
Notes
|
Bear,
Stearns & Co. Inc.
|
|
$[●]
|
Total
|
|
$[●]
|
The
Agent
intends to initially offer $[●] of the Notes to the public at the offering price
set forth on the cover page of this pricing supplement, and to subsequently
resell the remaining face amount of the Notes at prices related to the
prevailing market prices at the time of resale. In the future, the Agent may
repurchase and resell the Notes in market-making transactions, with resales
being made at prices related to prevailing market prices at the time of resale
or at negotiated prices.
An
intraday “indicative value” meant to approximate the intrinsic economic value of
the Notes will be calculated and published by Bloomberg L.P. or a successor
via
the facilities on the Consolidated Tape Association under the symbol [●].
Additionally, we or an affiliate expect to calculate and publish the closing
indicative value (also referred to as the daily indicative value) of your Notes
on each trading day at [●].
In
connection with your Notes, we used the term “indicative value” to refer to the
value at a given time equal to (a) (i) Principal Amount multiplied by the Index
Ratio as of such time less (ii) the accrued Tracking Fee, if any, as of such
time, plus (b) the Coupon Amount, if any, as of such time.
Bloomberg
L.P. is not affiliated with Bear Stearns and does not approve, endorse, review
or recommend Bear Stearns or the Notes. The indicative value will be derived
from sources deemed reliable, but Bloomberg L.P. and its suppliers do not
guarantee the correctness or completeness of the indicative value or other
information furnished in connection with the Notes. Bloomberg L.P. makes no
warranty, express or implied, as to results to be obtained by Bear Stearns,
Bear
Stearns’ customers, holders of the Notes, or any other person or entity from the
use of the indicative value or any data included therein. Bloomberg L.P. makes
no express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose with respect to the
indicative value or any data included therein.
Bloomberg
L.P., its employees, subcontractors, agents, suppliers and vendors shall have
no
liability or responsibility, contingent or otherwise, for any injury or damages,
whether caused by the negligence of Bloomberg L.P., its employees,
subcontractors, agents, suppliers or vendors or otherwise, arising in connection
with the indicative value or the Notes, and shall not be liable for any lost
profits, losses, punitive, incidental or consequential damages. Bloomberg L.P.
shall not be responsible for or have any liability for injuries or damages
caused by errors, inaccuracies, omissions or any other failure in, or delays
or
interruptions of, the indicative value, from whatever cause. Bloomberg L.P.
is
not responsible for the selection of or use of the Index or the Notes, the
accuracy and adequacy of the Notes or information used by Bear Stearns and
the
resultant output thereof.
The
indicative value calculation will be provided for reference purposes only.
It is
not intended as a price or quotation, or as an offer or solicitation for the
purpose, sale, redemption or termination of your Notes, nor will it reflect
hedging or other transactional costs, credit considerations, market liquidity
or
bid-offer spreads. Published Index levels from the Sponsor may occasionally
be
subject to delay or postponement. Any such delays or postponements will affect
the current Index level and therefore the indicative value of your Notes. Index
levels provided by the Sponsor will not necessarily reflect the depth and
liquidity of the Index Components. For this reason and others, the actual
trading price of the Notes may be different from their indicative value.
As
discussed in “Description of the Notes - Redemption; Defeasance,” you may,
subject to certain restrictions, choose to redeem your Notes on a weekly basis
during the term of the Notes. If you redeem your Notes you will receive a cash
payment on the accelerated Maturity Date equal to the Redemption Amount, which
is equal to the sum of (i) the Cash Settlement Amount less the Redemption Fee
Amount, plus (ii) the Coupon Amount, if any. You must redeem at least [75,000]
Notes at one time in order to exercise your early redemption right, subject
to
adjustment by the Calculation Agent. The weekly Redemption Amount is intended
to
induce arbitrageurs to counteract any trading of the Notes at a premium or
discount to their indicative value, though there can be no assurance that
arbitrageurs will employ the redemption feature in this manner.
Payment
of the purchase price shall be made in funds that are immediately available
in
New York City.
The
agents may be deemed to be “underwriters” within the meaning of the Securities
Act. We have agreed to indemnify the agents against or to make contributions
relating to certain civil liabilities, including liabilities under the
Securities Act. We have agreed to reimburse the agents for certain
expenses.
The
Notes
are a new issue of securities with no established trading market. We plan to
apply to list the Notes on the New York Stock Exchange; however, there is no
assurance that a trading market will develop. Bear Stearns has advised us that,
following completion of the offering of the Notes, it intends under ordinary
market conditions to indicate prices for the Notes on request, although it
is
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. We cannot guarantee that
bids for outstanding Notes will be made in the future; nor can we predict the
price at which any such bids will be made. The Notes will cease trading as
of
the close of business on the Maturity Date.
Because
Bear Stearns is our wholly-owned subsidiary, each distribution of the Notes
will
conform to the requirements set forth in Rule 2720 of the NASD Conduct
Rules.
LEGAL
MATTERS
The
validity of the Notes will be passed upon for us by Cadwalader, Wickersham
&
Taft LLP, New York, New York.
APPENDIX
1 -REDEMPTION NOTICE
Subject:
ETN Redemption Notice, CUSIP No. [●]
[BODY
OF
EMAIL]
Name
of
holder: []
Number
of
Notes to be redeemed: []
Applicable
Redemption Valuation Date: [day/month/date/year]
Contact
Name: []
Telephone
#: []
Acknowledgement:
I acknowledge that the Notes specified above will not be redeemed unless all
of
the requirements specified in the pricing supplement relating to the Notes
are
satisfied.
APPENDIX
2 - REDEMPTION CONFIRMATION
Dated:
The
Bear
Stearns Companies Inc
Calculation
Agent: Bear, Stearns & Co. Inc.
Fax:
[917-849-0549]
Dear
Sirs:
The
undersigned holder of The Bear Stearns Companies Inc. $[●] Medium-Term Notes,
Series B, Linked to the Performance of the Alerian MLP Select Index due [●]
CUSIP No. [●] (the “Notes”),
hereby irrevocably elects to exercise, with respect to the number of Notes
indicated below, as of the date hereof, the redemption right described in the
pricing supplement relating to the Notes (the “Pricing
Supplement”).
Terms
not defined herein have the meanings given to such terms in the Pricing
Supplement.
The
undersigned certifies to you that it will (i) instruct its DTC custodian with
respect to the Notes (specified below) to book a delivery vs. payment trade
on
the first Business Day following the final Index Business Day in the Final
Measurement Period with respect to the number of Notes specified below at a
price per Note equal to the Redemption Amount, facing Bear Stearns DTC 052
and
(ii) cause the DTC custodian to deliver the trade as booked for settlement
via
DTC at or prior to 10:00 a.m. New York City time on the Maturity Date.
Very
truly yours,
[NAME
OF
HOLDER]
_________________________________
Name:
Title:
Telephone:
Fax:
E-mail:
Number
of
Notes surrendered for redemption: __________________
DTC
#
(and any relevant sub-account): _______________________________
Contact
Name:
Telephone:
(You
must redeem at least [75,000] Notes at one time in order to exercise your right
to redeem your Notes in accordance with the terms set forth in the Pricing
Supplement)
APPENDIX
3 - INDEX COMPONENTS
As
of May
9, 2007:
Company
Name
|
Ticker
|
Price
|
Market
Cap
|
Float
Adjust
|
Weight
|
Alliance
Holdings GP LP
|
AHGP
|
$25.85
|
$1,547
|
$310
|
0.47%
|
Alliance
Resource Partners LP
|
ARLP
|
$39.88
|
$1,458
|
$824
|
1.24%
|
AmeriGas
Partners LP
|
APU
|
$34.24
|
$1,946
|
$1,093
|
1.65%
|
Atlas
Pipeline Partners LP
|
APL
|
$50.61
|
$662
|
$565
|
0.85%
|
Boardwalk
Pipeline Partners LP
|
BWP
|
$36.80
|
$4,278
|
$1,078
|
1.63%
|
Buckeye
GP Holdings LP
|
BGH
|
$23.30
|
$659
|
$244
|
0.37%
|
Buckeye
Partners LP
|
BPL
|
$52.10
|
$2,146
|
$2,010
|
3.04%
|
Copano
Energy LLC
|
CPNO
|
$38.97
|
$1,658
|
$1,467
|
2.22%
|
Crosstex
Energy Inc
|
XTXI
|
$29.32
|
$1,349
|
$834
|
1.26%
|
Crosstex
Energy LP
|
XTEX
|
$35.45
|
$1,538
|
$504
|
0.76%
|
Dorchester
Minerals LP
|
DMLP
|
$23.55
|
$665
|
$584
|
0.88%
|
Eagle
Rock Energy Partners LP
|
EROC
|
$20.99
|
$1,016
|
$282
|
0.43%
|
Enbridge
Energy Partners LP
|
EEP
|
$60.01
|
$4,250
|
$2,936
|
4.44%
|
Energy
Transfer Equity LP
|
ETE
|
$37.80
|
$8,423
|
$789
|
1.19%
|
Energy
Transfer Partners LP
|
ETP
|
$60.63
|
$8,305
|
$4,308
|
6.51%
|
Enterprise
Products Partners LP
|
EPD
|
$32.91
|
$14,231
|
$9,206
|
13.91%
|
Ferrellgas
Partners LP
|
FGP
|
$23.23
|
$1,462
|
$869
|
1.31%
|
Hiland
Holdings GP LP
|
HPGP
|
$31.81
|
$687
|
$223
|
0.34%
|
Inergy
LP
|
NRGY
|
$34.36
|
$1,659
|
$1,055
|
1.59%
|
Kinder
Morgan Energy Partners LP
|
KMP
|
$55.80
|
$9,382
|
$8,113
|
12.26%
|
Kinder
Morgan Management LLC
|
KMR
|
$53.42
|
$3,328
|
$2,676
|
4.04%
|
Linn
Energy LLC
|
LINE
|
$35.47
|
$2,047
|
$938
|
1.42%
|
Magellan
Midstream Holdings LP
|
MGG
|
$27.63
|
$1,731
|
$607
|
0.92%
|
Magellan
Midstream Partners LP
|
MMP
|
$48.02
|
$3,196
|
$3,122
|
4.72%
|
MarkWest
Energy Partners LP
|
MWE
|
$35.40
|
$1,292
|
$911
|
1.38%
|
Natural
Resource Partners LP
|
NRP
|
$34.75
|
$1,843
|
$846
|
1.28%
|
NuStar
Energy LP
|
NS
|
$67.66
|
$3,167
|
$2,426
|
3.66%
|
NuStar
GP Holdings LLC
|
NSH
|
$30.50
|
$1,296
|
$1,139
|
1.72%
|
ONEOK
Partners LP
|
OKS
|
$69.12
|
$5,729
|
$3,109
|
4.70%
|
Penn
Virginia Resource Partners LP
|
PVR
|
$29.58
|
$1,364
|
$759
|
1.15%
|
Plains
All American Pipeline LP
|
PAA
|
$59.01
|
$6,456
|
$4,848
|
7.32%
|
Regency
Energy Partners LP
|
RGNC
|
$25.89
|
$1,210
|
$552
|
0.83%
|
Star
Gas Partners LP
|
SGU
|
$4.00
|
$303
|
$250
|
0.38%
|
Suburban
Propane Partners LP
|
SPH
|
$46.25
|
$1,511
|
$1,404
|
2.12%
|
TC
Pipelines LP
|
TCLP
|
$39.95
|
$1,393
|
$602
|
0.91%
|
TEPPCO
Partners LP
|
TPP
|
$45.35
|
$4,073
|
$3,253
|
4.92%
|
Williams
Partners LP
|
WPZ
|
$47.46
|
$1,868
|
$1,446
|
2.19%
|
|
|
|
|
|
|
|
|
You
should only rely on the information contained in this pricing supplement
and the accompanying prospectus supplement and prospectus. We have
not
authorized anyone to provide you with information or to make any
representation to you that is not contained in this pricing supplement
or
the accompanying prospectus supplement and prospectus. If anyone
provides
you with different or inconsistent information, you should not rely
on it.
This pricing supplement and the accompanying prospectus supplement
and
prospectus are not an offer to sell these securities, and these documents
are not soliciting an offer to buy these securities, in any jurisdiction
where the offer or sale is not permitted. You should not under any
circumstances assume that the information in this pricing supplement
and
the accompanying prospectus supplement and prospectus is correct
on any
date after their respective dates.
|
|
The
Bear Stearns
Companies
Inc.
$[●]
Medium-Term
Notes, Series B
Note
Linked
to the Performance of the
Alerian
MLP Select Index
Due
[June ●, 2027]
PRICING
SUPPLEMENT
Bear,
Stearns & Co. Inc.
[June
●, 2007]
|
_________________
|
|
TABLE
OF CONTENTS
|
|
|
|
|
Pricing
Supplement
|
|
|
Page
|
|
Summary
|
PS-2
|
|
Key
Terms
|
PS-4
|
|
Questions
and Answers
|
PS-8
|
|
Risk
Factors
|
PS-13
|
|
Description
of the Notes
|
PS-20
|
|
Description
of the Index
|
PS-29
|
|
Certain
ERISA Considerations
|
PS-38
|
|
Use
of Proceeds and Hedging
|
PS-40
|
|
Supplemental
Plan of Distribution
|
PS-41
|
|
Legal
Matters
|
PS-42
|
|
Appendix
1 - Redemption Notice
|
PS-43
|
|
Appendix
2 - Redemption Confirmation
|
PS-44
|
|
Appendix
3 - Index Components
|
PS-45
|
|
Prospectus
Supplement
|
|
Risk
Factors
|
S-3
|
|
Pricing
Supplement
|
S-8
|
|
Description
of the Notes
|
S-8
|
|
Certain
U.S. Federal Income Tax Considerations
|
S-32
|
|
Supplemental
Plan of Distribution
|
S-46
|
|
Listing
|
S-47
|
|
Validity
of the Notes
|
S-47
|
|
Glossary
|
S-47
|
|
Prospectus
|
|
Where
You Can Find More Information
|
1
|
|
The
Bear Stearns Companies Inc.
|
2
|
|
Use
of Proceeds
|
4
|
|
Description
of Debt Securities
|
4
|
|
Description
of Warrants
|
16
|
|
Description
of Preferred Stock
|
21
|
|
Description
of Depositary Shares
|
25
|
|
Description
of Purchase Contracts
|
28
|
|
Description
of Units
|
31
|
|
Book-Entry
Procedures and Settlement
|
33
|
|
Limitations
on Issuance of Bearer Debt Securities and Bearer Warrants
|
43
|
|
Plan
of Distribution
|
44
|
|
ERISA
Considerations
|
48
|
|
Legal
Matters
|
49
|
|
Experts
|
49
|
|
|
|
|
|
|
|
|