PRICING SUPPLEMENT NO. 1A |
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Rule 424(b)(3)
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DATED: August
16, 2006 +
September
10, 2007 ++
(To
Prospectus dated August 16, 2006,
and
Prospectus Supplement dated August 16, 2006)
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File
No. 333-136666
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THE
BEAR STEARNS COMPANIES INC.
Medium-Term
Notes, Series B
Bear
Extendible Notes (BENs)
The
floating rate Bear Extendible Notes described in this Pricing Supplement, which
we refer to as the BENs, will mature on the initial maturity date, unless the
maturity of all or any portion of the principal amount of the BENs is extended
in accordance with the procedures described below. In no event will the maturity
of the BENs be extended beyond the final maturity date.
Except
with respect to the final election, during the notice period for each election
date, you may elect to extend the maturity of all or any portion of the
principal amount of your BENs so that the maturity of your BENs will be extended
to the date occurring 1 year from and including the 14th
day of
the next succeeding month. However, if that 1 year extension date is not a
Business Day, the maturity of your BENs will be extended to the immediately
preceding Business Day. The election dates will be the 14th
calendar
day of each month from September 2006 to July 2010 inclusive, whether or not
any
such day is a Business Day. If you make the final election on July 14, 2010,
the
maturity of your BENs will be extended to August 12, 2011, or if such day is
not
a Business Day, the immediately preceding Business Day.
You
may
elect to extend the maturity of all of your BENs or of any portion thereof
having a principal amount of $25,000 or any multiple of $1,000 in excess
thereof. To make your election effective on any election date, you must deliver
a notice of election during the notice period for that election date. The notice
period for each election date will begin on the 5th
Business
Day prior to the election date and end on the election date; however, if that
election date is not a Business Day, the notice period will be extended to
the
next day that is a Business Day. Your notice of election must be delivered
to
the Trustee for the BENs, through the normal clearing system channels described
in more detail below, no later than the last Business Day of the notice period.
Upon delivery to the Trustee of a notice of election to extend the maturity
of
the BENs or any portion thereof during a notice period, that election will
be
revocable during each day of such notice period, until 12:00 noon (New York
City
time) on the last Business Day in such notice period, at which time such notice
will become irrevocable.
If
on any
election date you do not make an election to extend the maturity of all or
any
portion of the principal amount of your BENs, the principal amount of the BENs
for which you have failed to make such an election will become due and payable
on the initial maturity date, or any later date to which the maturity of your
BENs has previously been extended. The principal amount of the BENs for which
such election is not exercised will be represented by a note issued on such
election date. Except with respect to the final election, the new note so issued
will have the same terms as the BENs, except that it will not be extendible,
will have a separate CUSIP number and its maturity date will be the date that
is
1 year from and including such election date or, if such 1 year extension date
is not a Business Day, the immediately preceding Business Day. If you make
the
final election on July 14, 2010, the new note will mature on August 12, 2011,
or
if such day is not a Business Day, the immediately preceding Business Day.
The
failure to elect to extend the maturity of all or any portion of the BENs will
be irrevocable and will be binding upon any subsequent holder of such
BENs.
The
BENs
will bear interest from the date of issuance until the principal amount thereof
is paid or made available for payment at a rate determined for each Interest
Reset Period by reference to the Interest Rate Basis, based on the Index
Maturity, plus the applicable Spread for the relevant Interest Reset Date.
We
describe how floating rates are determined and calculated in the section
captioned “Description of Notes - Floating Rate Notes” in the Prospectus
Supplement, subject to and as modified by the provisions described
below.
(continued
on next page)
The
BENs
will be issued in registered global form and will remain on deposit with The
Depository Trust Company (“DTC”), as depositary for the BENs. Therefore, you
must exercise the option to extend the maturity of your BENs through DTC. To
ensure that DTC will receive timely notice of your election to extend the
maturity of all or a portion of your BENs, so that it can deliver notice of
your
election to the Trustee prior to the close of business on the last Business
Day
in the notice period, you must instruct the direct or indirect participant
through which you hold an interest in the BENs to notify DTC of your election
to
extend the maturity of your BENs in accordance with the then applicable
operating procedures of DTC. Notice of any decision to revoke your election
must
be made through the same clearing system channels.
DTC
must
receive any notice of election from its participants no later than 12:00 noon
(New York City time) on the last Business Day in the notice period for any
election date. Different firms have different deadlines for accepting
instructions from their customers. You should consult the direct or indirect
participant through which you hold an interest in the BENs to ascertain the
deadline for ensuring that timely notice will be delivered to DTC. If the
election date is not a Business Day, notice of your election to extend the
maturity date of your BENs must be delivered to DTC by its participants no
later
than 12:00 noon (New York City time) on the first Business Day following the
election date.
The
BENs
will initially be limited to $1,000,000,000 in aggregate principal amount.
We
may create and issue additional floating rate extendible notes with the same
terms as the BENs so that such additional floating rate extendible notes will
be
combined with this initial issuance of BENs.
For
purposes of your exercise of an election to extend the maturity of all or any
portion of your BENs, “Business Day” means any day that is not a Saturday or
Sunday, and that is neither a legal holiday nor a day on which banking
institutions or trust companies in New York City are authorized or obligated
by
law to close.
Principal
Amount: $632,000,000 +++
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Floating
Rate Notes [x]
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Book
Entry Notes [x]
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Original
Issue Date: 8/21/2006
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Fixed
Rate Notes [ ]
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Certificated
Notes [ ]
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Initial
Maturity Date: 9/14/2007, or if such day is not a Business Day,
the immediately preceding
Business Day
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CUSIP#:
073902PM4
New
CUSIP numbers
will
be assigned to
BENs
maturing prior to
the
Final Maturity Date
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Option
to Extend Maturity:
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No [
]
Yes [x]
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Final
Maturity Date: 8/12/2011, or if such
day is not a Business Day, the immediately
preceding Business Day
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Minimum
Denominations:
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$25,000,
increased in multiples of $1,000.
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Redeemable
On
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Redemption
Price(s)
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Optional
Repayment
Date(s)
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Optional
Repayment
Price(s)
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N/A
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N/A
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N/A
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N/A
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Applicable
Only to Fixed Rate Notes:
Interest
Rate:
Interest
Payment Dates:
Applicable
Only to Floating Rate Notes:
Interest
Rate Basis:
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Maximum
Interest Rate: N/A
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[
] Commercial
Paper Rate
[
] Federal
Funds Effective Rate
[
] Federal
Funds Open Rate
[
] Treasury
Rate
[
] LIBOR
Reuters
[X] LIBOR
Telerate
[
] Prime
Rate
[
] CMT
Rate
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Minimum
Interest Rate: N/A
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On
August 16, 2006 (the date of Pricing Supplement No. 1), $1,000,000
principal amount of BENs were traded.
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The
amendments set forth in this Pricing Supplement No. 1A are effective
as of
September 14, 2007.
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+++ |
$632,000,000
principal amount of the $1,000,000,000 principal amount of the BENs
traded
on August 16, 2006, are currently
outstanding.
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Interest
Reset Date(s):
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The
initial interest rate will be set on August 17, 2006. Interest Reset
Dates
will commence September 14, 2006 and will occur on the 14th
day of each month thereafter prior to the relevant maturity
date.
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Interest
Reset Period:
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The
first Interest Reset Period will be the period from and including
August
21, 2006 to but excluding September 14, 2006. Thereafter, the Interest
Reset Periods will be the periods from and including an Interest
Reset
Date to but excluding the immediately succeeding Interest Reset Date;
provided that the final Interest Reset Period for the BENs, or any
BENs
maturing prior to the Final Maturity Date, will be the period from
and
including the Interest Reset Date in the month immediately preceding
the
maturity of the BENs, or any portion of the BENs, to but excluding
the
relevant maturity date.
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Interest
Payment Date(s):
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Commencing
September 14, 2006 and on the 14th
day of each month thereafter, including the Final Maturity Date.
The final
Interest Payment Date for the BENs, or any portion of the BENs maturing
prior to the Final Maturity Date, will be the maturity date, and
interest
for the final Interest Payment Period will accrue from and including
the
Interest Payment Date in the month immediately preceding such maturity
date to but excluding the maturity date.
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Interest
Payment Period:
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Monthly
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Election
Dates:
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Commencing
September 14, 2006, the election dates shall be the 14th
calendar day of each month from September 2006 to July 2010 inclusive,
whether or not such day is a Business Day.
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Initial
Interest Rate:
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5.315%
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Notice
Period(s):
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The
notice period for each election date will begin on the 5th
Business Day prior to but not including the election date and end
on the
election date; however, if that election date is not a Business Day,
the
notice period will be extended to the following Business
Day.
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Index
Maturity:
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One
Month
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Spread
(plus or minus): ++++
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The
table below indicates the applicable Spread for the Interest Reset
Dates
occurring during each of the indicated
periods.
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For
Interest Reset Dates occurring:
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Spread:
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From
the Original Issue Date to but excluding 8/14/2007:
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-
.01%
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From
and including 8/14/2007 to but excluding 8/14/2008:
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flat
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From
and including 8/14/2008 to but excluding 8/14/2009:
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+
.01%
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From
and including 8/14/2009 to but excluding 8/14/2010:
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+
.02%
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From
and including 8/14/2010 to but excluding 8/12/2011:
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+
.03%
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++++ These
Spreads applied to the BENs from August 21, 2006 to September 13,
2007.
Spread
(plus or minus): +++++
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The
table below indicates the applicable Spread for the Interest Reset
Dates
occurring during each of the indicated
periods.
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For
Interest Reset Dates occurring:
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Spread:
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From
the Original Issue Date to but excluding 8/14/2007:
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-
.01%
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From
and including 8/14/2007 to but excluding 9/14/2007:
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flat
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From
and including 9/14/2007 to but excluding 8/14/2008:
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+
.14%
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From
and including 8/14/2008 to but excluding 8/14/2009:
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+
.15%
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From
and including 8/14/2009 to but excluding 8/14/2010:
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+
.16%
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From
and including 8/14/2010 to but excluding 8/12/2011:
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+
.17%
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+++++ These
Spreads apply to the BENs from and after September 14, 2007.
CERTAIN
US FEDERAL INCOME TAX CONSIDERATIONS
The
following discussion summarizes certain US federal income tax consequences
of
the purchase, beneficial ownership and disposition of the BENs. This discussion
supplements the section captioned “Certain US Federal Income Tax Considerations”
in the Prospectus Supplement dated August 16, 2006. This summary deals only
with
a beneficial owner of BENs that is:
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an
individual who is a citizen or a resident of the United States for
U.S.
federal income tax purposes;
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a
corporation (or other entity that is treated as a corporation for
U.S.
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);
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·
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an
estate whose income is subject to U.S. federal income taxation regardless
of its source; or
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·
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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 U.S. federal income tax purposes, have the
authority to control all of its substantial decisions (each a “U.S.
holder”).
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An
individual may, subject to certain exceptions, be deemed to be a resident of
the
United States by reason of being present in the United States for at least
31
days in the calendar year and for an aggregate of at least 183 days during
a
three-year period ending in the current calendar year (counting for such
purposes all of the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days present
in
the second preceding year).
This
summary is based on interpretations of the Internal Revenue Code of 1986, as
amended (the “Code”), regulations issued thereunder, and rulings and decisions
currently in effect (or in some cases proposed), all of which are subject to
change. Any such change may be applied retroactively and may adversely affect
the U.S. federal income tax consequences described herein. This summary
addresses only U.S. holders that purchase BENs at initial issuance and
beneficially own such BENs as capital assets and not as part of a “straddle,”
“hedge,” “synthetic security” or a “conversion transaction” for U.S. 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
U.S.
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; mutual funds or real estate
investment trusts; small business investment companies; S corporations;
investors that hold their BENs through a partnership or other entity treated
as
a partnership for U.S. 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 BENs in tax-deferred or
tax-advantaged accounts; or “controlled foreign corporations” or a “passive
foreign investment companies” for U.S. 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 of BENs, or any state, local
or
foreign tax consequences of the purchase, ownership or disposition of the
BENs.
PROSPECTIVE
PURCHASERS OF BENS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE U.S. FEDERAL,
STATE, LOCAL, AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND
DISPOSITION OF BENS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
OTHER TAXING JURISDICTION TO WHICH THEY MAY BE SUBJECT.
U.S.
Federal Income Tax Treatment of U.S. Holders.
General
There
are
no statutory provisions, regulations, rulings or other authorities addressing
the U.S. federal income tax treatment of debt instruments with terms that are
substantially similar to the BENs, and therefore the U.S. federal income tax
treatment of the BENs is subject to some uncertainty. As discussed below, we
intend to take the position that the election by a U.S. holder to extend the
maturity of BENs through the Final Maturity Date will not be a taxable event
for
us or the U.S. holder, and we intend to take the position that the Final
Maturity Date is the maturity date of the BENs for U.S. federal income tax
purposes. However, this position is not free from doubt.
Tax
Treatment of the BENs
Under
the
Treasury regulations governing original issue discount on debt instruments
(the
“OID Regulations”), for purposes of determining the yield and maturity of a debt
instrument, a U.S. holder is generally deemed to exercise an option or
combination of options if the exercise would maximize the yield on the debt
instrument. Because the Spread will periodically increase during the term of
the
BENs, for purposes of the OID Regulations, as of the issue date, we intend
to
take the position that U.S. holders should be deemed to elect on each election
date, through and including July 14, 2010, to extend the maturity of the BENs
through the Final Maturity Date, and therefore that the Final Maturity Date
is
the maturity date of the BENs for U.S. federal income tax purposes.
Under
the
Treasury regulations governing modifications to the terms of debt instruments
(the “Modification Regulations”), the exercise of an option by a U.S. holder of
a debt instrument to defer any scheduled payment of principal is a taxable
event
if, based on all the facts and circumstances, the deferral is considered
material under the Modification Regulations. The Modification Regulations do
not
specifically address the unique features of the BENs (including their economic
equivalence to a five-year debt instrument containing put options).
Because
we will take the position under the OID Regulations that the Final Maturity
Date
is the maturity date of the BENs, we intend to take the position that the
election by a U.S. holder to extend the maturity of BENs through the Final
Maturity Date will not give rise to a taxable event for us or U.S. holders.
U.S.
holders, by purchasing the BENs, will agree to this treatment and will agree
not
to take a contrary position for U.S. federal income tax purposes unless required
by law.
It
is
unclear how the OID Regulations apply in conjunction with the Modification
Regulations, and therefore no assurance can be given that the IRS will accept,
or that the courts will uphold, this position. For example, the IRS may assert
that a U.S. holder should not be treated as exercising all options that maximize
its yield for purposes of the Modification Regulations, and therefore each
extension of BENs may be treated as a modification for U.S. federal income
tax
purposes. Under a safe harbor in the Modification Regulations, a deferral that
extends the maturity of a debt instrument for the lesser of five years or 50%
of
the original term of the debt instrument does not give rise to a taxable event.
Because the BENs mature pursuant to their terms in 389 days, an election to
extend the maturity of BENs through March 2008 (i.e., 50% of 389 days) should
not be treated as a taxable event in any case. However, the IRS may view any
election to extend the maturity of the BENs by more than 194 days as giving
rise
to a taxable event.
In
this
event, a U.S. holder would generally be required to recognize any gain inherent
in the BENs. We do not expect that any such gain would be significant (but
the
amount of any such gain recognized will depend upon all the facts and
circumstances present at the time of the taxable event).
In
addition, it is possible that the IRS could assert that the BENs are subject
to
special rules governing “contingent payment debt instruments.” If the IRS were
successful in this assertion, U.S. holders may be required to accrue original
issue discount income, subject to adjustments, at a “comparable yield” on the
issue price of the BENs and any gain recognized with respect to the BENs
generally would be treated as ordinary income. However, because the BENs bear
a
variable interest rate that is reset periodically throughout the term of the
BENs and provide for current payment of interest, we expect that the adverse
tax
consequences of such treatment, if any, should not be significant. The U.S.
federal income tax treatment of contingent payment debt instruments is
summarized in the Prospectus Supplement dated August 16, 2006 under the caption
“Certain US Federal Income Tax Considerations - Contingent Payment Debt
Instruments.” Each U.S. holder is urged to consult its tax advisors regarding
its tax treatment in the event it elects to extend the maturity of the
BENs.
The
remainder of this summary assumes that the Final Maturity Date is the maturity
date of the BENs, elections to extend the maturity of all or a portion of the
principal amount of the BENs through the Final Maturity Date will not be taxable
events and that the BENs are not contingent payment debt instruments for U.S.
federal income tax purposes.
Interest
Interest
paid to a U.S. holder on the BENs will be includible in gross income as ordinary
interest income when paid or accrued in accordance with the U.S. holder’s usual
method of accounting.
In
addition, any increase on a particular Interest Reset Date in the Spread that
is
added to LIBOR to determine the interest rate for the ensuing interest period
for the BENs should be considered “de minimis” under the original issue discount
rules, and therefore the BENs should not be considered to have original issue
discount for U.S. federal income tax purposes as a result of the increase in
the
Spread.
Sale,
Exchange, Redemption, Repayment or Other Disposition of the
BENs
Upon
the
disposition of BENs by sale, exchange, redemption, repayment or other
disposition, a U.S. holder will generally recognize taxable gain or loss equal
to the difference, if any, between (i) the amount realized on the disposition
(other than amounts attributable to accrued but unpaid interest, which would
be
treated as such) and (ii) the U.S. holder’s adjusted tax basis in the BENs. A
U.S. holder’s adjusted tax basis in a BEN will generally equal the cost of the
BEN to the U.S. holder. Capital gains of individual taxpayers from the sale,
exchange, redemption, repayment or other disposition of BENs held for more
than
one year may be eligible for reduced rates of taxation. The deductibility of
a
capital loss realized on the sale, exchange, redemption, repayment or other
disposition of a BEN is subject to limitations.
Information
Reporting and Backup Withholding.
Information
reporting will apply to certain payments on BENs (including interest and OID)
and proceeds of the sale of BENs held by a U.S. holder that is not an exempt
recipient (such as a corporation). Backup withholding may apply to payments
made
to a U.S. holder if (a) the U.S. holder has failed to provide its correct
taxpayer identification number on IRS Form W-9, or (b) we have been notified
by
the IRS of an underreporting by the U.S. holder (underreporting generally refers
to a determination by the IRS that a payee has failed to include in income
on
its tax return any reportable dividend and interest payments required to be
shown on a tax return for a taxable year).
Backup
withholding is not an additional tax and may be refunded (or credited against
your U.S. federal income tax liability, if any), provided, that certain required
information is furnished. The information reporting requirements may apply
regardless of whether withholding is required.
THE
PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX IMPLICATIONS OF
AN
INVESTMENT IN BENS. PROSPECTIVE PURCHASERS ARE URGED TO CONSULT WITH THEIR
TAX
ADVISORS PRIOR TO INVESTING TO DETERMINE THE TAX IMPLICATIONS OF SUCH INVESTMENT
IN LIGHT OF EACH SUCH INVESTOR’S PARTICULAR CIRCUMSTANCES.
* * *
The
distribution of BENs will conform to the requirements set forth in Rule 2720
of
the NASD Conduct Rules.