Filed
pursuant to Rule 424(b)(2)
Registration
No. 333-136666
Subject
to Completion, dated March 6, 2008
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, 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.
$[l]
Accelerated Market Participation Securities
Linked
to
the Nikkei
225SM,
due
January [l],
2010
|
·
|
The
Notes are linked to the performance of the Nikkei 225SM
(the “Index”) and are not principal protected. When we refer to Notes in
this pricing supplement, we mean Notes with a principal amount of
$1,000.00. On the Maturity Date, you will receive the “Cash Settlement
Value,” an amount in cash depending on the relation of the Final Index
Level to the Initial Index Level.
|
|
·
|
If,
at maturity, the Final Index Level is greater than or equal to the
Initial
Index Level, the Cash Settlement Value is equal to, per Note, the
principal amount of the Note, plus the lesser of:
|
|
·
|
[300.00]%
of the percentage increase in the Index, multiplied by the principal
amount of the Note, and
|
|
·
|
[40.00]%
(the maximum return on the Notes) multiplied by the principal amount
of
the Note.
|
Thus,
if
the Final Index Level is greater than [113.33]% of the Initial Index Level,
regardless of the extent to which the Final Index Level is greater than the
Initial Index Level, we will pay you $[1,400.00] per Note, which represents
a
maximum return of [40.00]%.
|
·
|
If,
at maturity, the Final Index Level is less than the Initial Index
Level,
you will receive less, and possibly significantly less, than your
initial
investment in the Notes. In this case, the Cash Settlement Value
is equal
to, per Note:
|
|
·
|
$1,000.00
multiplied by the amount, in percentage terms, equal to the Final
Index
Level divided by the Initial Index
Level.
|
|
·
|
The
CUSIP number for the Notes is
0739283D3.
|
INVESTMENT
IN THE NOTES INVOLVES CERTAIN RISKS. THE
NOTES ARE NOT PRINCIPAL PROTECTED. THEREFORE, INVESTORS MAY RECEIVE LESS, AND
POSSIBLY SIGNIFICANTLY LESS, THAN THEIR INITIAL INVESTMENT IN THE
NOTES.
THERE MAY NOT BE A SECONDARY MARKET IN THE NOTES, AND IF THERE WERE TO BE A
SECONDARY MARKET, IT MAY NOT BE LIQUID. YOU SHOULD REFER TO “RISK FACTORS”
BEGINNING ON PAGE PS-11.
“Nikkei,”
“Nikkei Stock Average” and “Nikkei 225” are service marks of Nihon Keizai
Shimbun, Inc. and have been licensed for use for certain purposes by The Bear
Stearns Companies Inc. The Notes are not sponsored, endorsed, sold or promoted
by Nihon Keizai Shimbun, Inc., and Nihon Keizai Shimbun, Inc. makes no
representations regarding the advisability of investing in the
Notes.
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.
|
Per
Note
|
|
Total
|
Initial
public offering price1
|
[l]%
|
|
$[l]
|
Agent’s
discount
|
[l]%
|
|
$[l]
|
Proceeds,
before expenses, to us
|
[l]%
|
|
$[l]
|
1
Investors who purchase an aggregate amount of at least $1,000,000 of Notes
will
be entitled to purchase such Notes for 99.00% of the principal
amount.
Any
additional reissuances will be offered at a price to be determined at the time
of pricing of each offering of Notes, which will be a function of the prevailing
market conditions and the level of the Index at the time of the relevant
sale.
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 March [l],
2008,
against payment in immediately available funds. The distribution of the Notes
will conform to the requirements set forth in Rule 2720 of the Financial
Industry Regulatory Authority, Inc. (“FINRA”) Conduct Rules.
We
may
grant our affiliate Bear, Stearns & Co. Inc. a 30-day option from the date
of this pricing supplement to purchase from us up to an additional $[l]
of Notes
at the public offering price to cover any over-allotments.
_______________
Bear,
Stearns & Co. Inc.
March
[l],
2008
This
summary highlights selected information from the accompanying prospectus,
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
“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, Accelerated Market
Participation Securities (“AMPS”), Linked to the Nikkei 225SM,
due
January [l],
2010
(the “Notes”) are Notes whose return is tied or “linked” to the performance of
the Index. When we refer to Note or Notes in this pricing supplement, we mean
$1,000.00 principal amount of Notes. The Notes are not principal protected.
On
the Maturity Date, you will receive the Cash Settlement Value, an amount in
cash
depending on the relation of the Final Index Level to the Initial Index Level.
If, at maturity, the Final Index Level is greater than or equal to the Initial
Index Level, the Cash Settlement Value is equal to, per Note, the principal
amount of the Note, plus the lesser of (i) [300.00]% of the percentage increase
in the Index multiplied by the principal amount of the Note, and (ii) [40.00]%
(the maximum return on the Notes) multiplied by the principal amount of the
Note. Thus, if the Final Index Level is greater than [113.33%] of the Initial
Index Level, regardless of the extent to which the Final Index Level is greater
than the Initial Index Level, we will pay you $[1,400.00] per Note, which
represents a maximum return of [40.00]%. If, at maturity, the Final Index Level
is less than the Initial Index Level, you will receive less, and possibly
significantly less, than your initial investment in the Notes. In this case,
we
will pay you $1,000.00 multiplied by an amount, in percentage terms, equal
to
the Final Index Level divided by the Initial Index Level.
Selected
Investment Considerations
|
·
|
Growth
potential—The return, if any, on the Notes is based upon whether the Final
Index Level is greater than the Initial Index
Level.
|
|
·
|
Potential
leverage in the increase, if any, of the Index—The Notes may be an
attractive investment for investors who have a bullish view of the
Index
in the short-term. If held to maturity, the Notes allow you to participate
in [300.00]% of the potential increase in the Index, not to exceed
the
maximum return of [40.00]%, representing a [13.33]% increase in the
Initial Index Level.
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|
·
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Diversification—Because
the Index represents a broad spectrum of the Japanese equity market,
the
Notes may allow you to diversify an existing
portfolio.
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|
·
|
Taxes—The
U.S. federal income tax consequences of an investment in the Notes
are
complex and uncertain. We intend to treat the Notes for all tax purposes
as pre-paid cash-settled executory contracts linked to the level
of the
Index and, where required, to file information returns with the Internal
Revenue Service in accordance with such treatment. Prospective investors
are urged to consult their tax advisors regarding the U.S. federal
income
tax consequences of an investment in the Notes. Assuming the Notes
are
treated as pre-paid cash-settled executory contracts, you should
be
required to 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). However, certain
of the
entities included in the Index could be treated as a “real estate
investment trust” (“REIT”), partnership, trust, or “passive foreign
investment company” (“PFIC”) for U.S. federal income tax purposes, or
otherwise as a “pass-thru entity” for purposes of section 1260 of the
Code, in which case it is possible that the Notes will be subject
to the
“constructive ownership” rules of section 1260 of the Code. If so, the
portion of any gain that relates to a pass-thru entity that would
otherwise be treated as long-term capital gain recognized on the
sale,
exchange, maturity, or other taxable disposition of the Notes could
be
treated as ordinary income and subject to an interest charge. See
“Certain
U.S. Federal Income Tax Considerations” herein.
|
Selected
Risk Considerations
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·
|
Possible
loss of principal—The Notes are not principal protected. If the Final
Index Level is less than the Initial Index Level, there will be no
principal protection on the Notes and the Cash Settlement Value you
will
receive will be less than the initial offering price in proportion
to the
percentage decline in the Index. In that case, you will receive less,
and
possibly significantly less, than your initial investment in the
Notes.
|
|
·
|
Maximum
return of [40.00]%—You will not receive more than the maximum return of
[40.00]% at maturity. Because the maximum return on the Notes is
[40.00]%,
the maximum Cash Settlement Value is $[1,400.00]. Therefore, the
Cash
Settlement Value will not reflect the increase in the value of the
Notes
if the Initial Index Level increases by more than [13.33]%.
|
|
·
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No
interest, dividend or other payments—You will not receive any interest,
dividend payments or other distributions on the stocks underlying
the
Index, nor will such payments be included in the calculation of the
Cash
Settlement Value you will receive at
maturity.
|
|
·
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Not
exchange listed—The Notes will not be listed on any securities exchange or
quotation system, and we do not expect a trading market to develop,
which
may affect the price that you receive for your Notes upon any sale
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.
|
|
·
|
Liquidity—Because
the Notes will not be listed on any securities exchange or quotation
system, we do not expect a trading market to develop, and, if such
a
market were to develop, it may not be liquid. 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 in the future; nor can we predict the price at which those
bids
will be made. In any event, Notes will cease trading as of the close
of
business on the Maturity Date.
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Issuer:
|
The
Bear Stearns Companies Inc.
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|
|
Index:
|
Nikkei
225SM
Index (“NKY”), as published by Nihon Keizai Shimbun, Inc. (“Nihon Keizai,”
or the “Sponsor”).
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|
|
Face
amount:
|
Each
Note will be issued in minimum denominations of $1,000.00 and $1,000.00
multiples thereafter; provided, however, that the minimum purchase
for any
purchaser domiciled in a Member state of the European Economic Area
shall
be $100,000.00. The aggregate principal amount of the Notes being
offered
is $[l].
When we refer to “Note” or “Notes” in this pricing supplement, we mean
Notes each with a principal amount of $1,000.00.
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|
|
Further
issuances:
|
Under
certain limited circumstances, and at our sole discretion, we may
offer
further issuances of the Notes. 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.
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|
|
Cash
Settlement Value:
|
On
the Maturity Date, you will receive the Cash Settlement Value, an
amount
in cash that depends upon the relation of the Final Index Level to
the
Initial Index Level. If, at maturity, the Final Index Level is greater
than or equal to the Initial Index Level, the Cash Settlement Value
is
equal to, per Note, the principal amount of the Notes, plus the lesser
of:
|
|
|
|
,
and
|
|
|
|
$[400.00].
|
|
|
|
Thus,
if the Final Index Level is greater than [113.33]% of the Initial
Index
Level, regardless of the extent to which the Final Index Level is
greater
than the Initial Index Level, we will pay you $[1,400.00] per Note,
which
represents a maximum return of [40.00]%.
|
|
|
|
If,
at maturity, the Final Index Level is less than the Initial Index
Level,
you will receive less, and possibly significantly less, than the
principal
you invested. In this case, the Cash Settlement Value is equal to,
per
Note:
|
|
|
|
|
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Interest:
|
The
Notes will not bear interest.
|
|
|
Upside
Participation Rate:
|
[300.00]%
|
|
|
Initial
Index Level:
|
Equals
[l],
the closing level of the Index on March [l],
2008.
|
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|
Final
Index Level:
|
The
Final Index Level will be determined by the Calculation Agent and
will
equal the closing level of the Index on the Calculation Date.
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|
|
Calculation
Date:
|
January
[l],
2010 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 - Market Disruption Events.”
|
|
|
Maturity
Date:
|
The
Notes are expected to mature on January [l],
2010 unless such date is not an Index Business Day, in which case
the
Maturity Date shall be the next Index Business Day. If the Calculation
Date is adjusted due to the occurrence of a Market Disruption Event,
the
Maturity Date will be three Index Business Days following the adjusted
Calculation Date.
|
Exchange
listing:
|
The
Notes will not be listed on any securities exchange or quotation
system.
|
|
|
Index
Business Day:
|
Means
any day on which the Primary Exchange (as defined below) and each
Related
Exchange (as defined below) are scheduled to be open for
trading.
|
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 $1,000.00, the minimum purchase for any purchaser
domiciled in a member state of the European Economic Area shall be $100,000.00.
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. The Notes will not bear interest, and no other
payments will be made prior to maturity. See the section “Risk Factors” for
selected risk considerations prior to making an investment in the Notes.
The
Notes
will mature on January [l],
2010.
The Notes do not provide for earlier redemption. When we refer to Notes in
this
pricing supplement, we mean Notes each with a principal amount of $1,000.00.
You
should refer to the section “Description of Notes” for a detailed description of
the Notes prior to making an investment in the Notes.
Are
the Notes principal
protected?
No.
The
Notes are not principal protected and your principal investment in the Notes
is
at risk of loss. If the Final Index Level is less than the Initial Index Level,
the Cash Settlement Value you will receive will be proportionally less than
the
initial offering price, in proportion to the percentage decline in the Index.
In
this case your investment will result in a loss.
Are
the Notes equity or debt securities?
The
Notes
are our unsecured, unsubordinated debt securities. However, the Notes differ
from traditional debt securities in that the Notes are not principal protected
and offer the opportunity to participate in [300.00]% of the positive
performance of the Index, if any, subject to a maximum return of [40.00]%.
If,
at maturity, the Final Index Level is less than the Initial Index Level, you
will receive less, and possibly significantly less, than your initial investment
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 the section “Risk
Factors” in this pricing supplement and the section “Risk Factors” in the
accompanying prospectus supplement.
What
will I receive at maturity of the Notes?
The
Notes
are not principal protected. On the Maturity Date, you will receive the Cash
Settlement Value, an amount in cash that depends upon the relation of the Final
Index Level to the Initial Index Level. At maturity, if the Final Index Level
is
less than the Initial Index Level, the Cash Settlement Value will be less,
and
possibly significantly less, than your initial investment in the Notes. In
this
case, we will pay you, per Note:
If,
at
maturity, the Final Index Level is greater than or equal to the Initial Index
Level, the Cash Settlement Value is equal to the principal amount of the
Notes,
plus the lesser of:
,
and
$[400.00].
Thus,
if
the Final Index Level is greater than [113.33]% of the Initial Index Level,
regardless of the extent to which the Final Index Level is greater than the
Initial Index Level, we will pay you $[1,400.00] per Note, which represents
a
maximum return of [40.00]%.
The
“Upside Participation Rate” equals [300.00]%.
The
“Initial Index Level” equals [l],
the
closing level of the Index on March [l],
2008.
The
“Final Index Level” will be determined by the Calculation Agent and will equal
the closing level of the Index on the Calculation Date.
The
“Calculation Date” will be January [l],
2010
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 - Market Disruption
Events.”
The
“Maturity Date” is expected to be January [l],
2010
unless such date is not an Index Business Day, in which case the Maturity Date
shall be the next Index Business Day. If the Calculation Date is adjusted due
to
the occurrence of a Market Disruption Event, the Maturity Date will be three
Index Business Days following the adjusted Calculation Date.
“Related
Exchange” means 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 the Index.
“Primary
Exchange” means the primary exchange or market of trading of any security then
included in the Index.
“Index
Business Day” means any day on which the Primary Exchange and each Related
Exchange are scheduled to be open for trading.
For
more
specific information about the Cash Settlement Value and for illustrative
examples, you should refer to the section “Description of the
Notes.”
Will
there be an additional offering of the Notes?
Under
certain limited circumstances, and at our sole discretion, we may offer further
issuances of the Notes. 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 (i) any 30-day option we
grant
to Bear, Stearns & Co. Inc., and (ii) 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 will be a function of the
prevailing market conditions and level of the Index at the time of the relevant
sale.
Will
I receive
interest on the Notes?
You
will
not receive any periodic interest payments on the Notes. The only payment you
will receive, if any, will be the Cash Settlement Value upon the maturity of
the
Notes.
What
is the Index?
The
Nikkei 225SM
is a
modified, price-weighted stock index calculated, published and disseminated
by
Nihon Keizai Shimbun, Inc. that measures the composite price performance
of
selected Japanese stocks. The Nikkei 225SM
is
currently comprised of 225 stocks that trade on the Tokyo Stock Exchange
and
represents a broad cross-section of Japanese industry. All 225 of the
stocks
underlying the Nikkei 225SM
are
stocks listed in the First Section of the Tokyo Stock Exchange. The
Nikkei
225SM
is
quoted in Japanese yen. You can obtain the level of the NKY from the
Bloomberg
Professional® service
(“Bloomberg”) under the symbol NKY <Index> or from the Tokyo Stock
Exchange website at http://www.tse.or.jp/english/index.shtml. Any such
levels
are not endorsed by us and are provided without independent verification.
Other
information on the Tokyo Stock Exchange website is not incorporated
into this
document.
For
more
information, see the section “Description of the Index.”
How
has the Index performed historically?
We
have
provided tables and graphs depicting the monthly performance of the Index from
January 1998 through February 2008. You can find these tables and graphs in
the
section “Description of the Index - Historical Data on 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 the manner in which the Index will perform in the future. You
should refer to the section “Risk Factors - The historical performance of the
Index is not an indication of the future performance of the Index.”
Will
the Notes be listed on a securities exchange?
The
Notes
will not be listed on any securities exchange or quotation system, and we do
not
expect a trading market to develop, which may affect the price that you receive
for your Notes upon any sale prior to maturity. 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 in the future; nor can we predict the price at which those bids will be
made. In any event, the Notes will cease trading as of the close of business
on
the Maturity Date. You should refer generally to the section “Risk Factors.” If
you sell the Notes prior to maturity, you may receive less, and possibly
significantly less, than your initial investment in the Notes.
What
is the role of Bear,
Stearns & Co. Inc.?
Bear
Stearns will be our agent for the offering and sale of the Notes. 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 the
Cash
Settlement Value. 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 Securities and Exchange Commission,
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?
Because
the Notes are tied to the price performance of an underlying equity index,
they
may be appropriate for investors with specific investment horizons who seek
to
participate in the potential price appreciation of the underlying stocks
comprising the Index. In particular, the Notes may be an attractive investment
for investors who:
|
·
|
want
potential upside exposure to stocks underlying the
Index;
|
|
·
|
believe
that the Index will increase over the term of the Notes and that
such
increase will not exceed [40.00]%, the maximum return on the Notes;
|
|
·
|
are
willing to risk the possible loss of 100.00% of their investment
in
exchange for the opportunity to participate in [300.00]% of the
appreciation, if any, of the Index of up to [13.33]% (which represents
a
maximum return per Note of [40.00]%),
and
|
|
·
|
are
willing to forgo income in the form of interest payments on the Notes
or
dividend payments on the stocks underlying the
Index.
|
The
Notes
may not be a suitable investment for you if:
|
·
|
you
seek principal protection;
|
|
·
|
you
seek current income or dividend payments from your
investment;
|
|
·
|
you
seek an investment that offers the possibility to fully participate
in the
potential appreciation of the Index (since the return on the Notes
is
capped at [40.00]%);
|
|
·
|
you
seek an investment with an active secondary
market;
|
|
·
|
you
are unable or unwilling to hold the Notes until maturity;
or
|
|
·
|
you
do not have a bullish view of the Index over the term of the
Notes.
|
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 complex and
uncertain. We intend 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 Internal Revenue Service in
accordance with such treatment. Prospective investors are urged to consult
their
tax advisors regarding the U.S. federal income tax consequences of an investment
in the Notes. Assuming the Notes are treated as pre-paid cash-settled executory
contracts, you should be required to 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). However, certain
of
the entities included in the Index could be treated as a REIT, partnership,
trust, or PFIC for U.S. federal income tax purposes, or otherwise as a
“pass-thru entity” for purposes of section 1260 of the Code, in which case it is
possible that the Notes will be subject to the “constructive ownership” rules of
section 1260 of the Code. If so, the portion of any gain that relates to a
pass-thru entity that would otherwise be treated as long-term capital gain
recognized on the sale, exchange, maturity, or other taxable disposition of
the
Notes could be treated as ordinary income and subject to an interest charge.
You
should review the discussion under the section “Certain U.S. Federal Income Tax
Considerations.”
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, as amended (“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 or other plan subject to any similar
law or any entity the assets of which are deemed to be “plan assets” under
ERISA, Section 4975 of the Code, any applicable 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” herein before investing in the Notes.
RISK
FACTORS
Your
investment in the Notes involves a degree of risk similar to investing in the
Index. However, your ability to participate in the appreciation of the Index
is
limited. The maximum return on the Notes is [40.00]%. Therefore, the maximum
Cash Settlement Value is $[1,400.00] and the Cash Settlement Value will not
reflect the increase in the Index if the Initial Index Level increases by more
than [13.33]%. 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 Index 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, 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, the Notes may pay less than the principal
amount.
The
Notes are not principal protected. If the Final Index Level is less than the
Initial Index Level, there will be no principal protection on the Notes and
the
Cash Settlement Value you will receive will be less than the initial offering
price, in proportion to the percentage decline in the Index. You may receive
less, and possibly significantly less, than your initial investment in the
Notes.
You
will not receive any interest payments on the Notes.
Your yield may be lower than the yield on a conventional debt security of
comparable maturity.
You
will
not receive any periodic payments of interest or any other periodic payments
on
the Notes. On the Maturity Date, you will receive a payment per Note, if any,
equal to the Cash Settlement Value. Thus, the overall return you earn on your
Notes may be less than that you would have earned by investing in a non-indexed
debt security of comparable maturity that bears interest at a prevailing market
rate and is principal protected. For more specific information about the Cash
Settlement Value and for illustrative examples, you should refer to the section
“Description of the Notes.”
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 in the stocks underlying the Index. 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 stocks that
underlie the Index and not rely on our views with respect to future movements
in
these industries and stocks. You should make such investigation as you deem
appropriate as to the merits of an investment linked to the Index.
Your
yield will not reflect dividends on the underlying stocks that comprise the
Index.
The
Index
does not reflect the payment of dividends on the stocks underlying it.
Therefore, the yield based on the Index to the maturity of the Notes will not
produce the same yield as if you had purchased such underlying stocks and held
them for a similar period. You
should refer to the section “Description of the Notes” for a detailed
description of the Notes prior to making an investment in the Notes.
Your
return on the Notes will not exceed [40.00]% over the term of the Notes,
regardless of the positive percentage increase of the Final Index Level over
the
Initial Index Level.
If
the
Final Index Level appreciates by more than [13.33]%, the Cash Settlement Value
you will receive will equal the
principal amount of the Notes, plus the product
of the principal amount of Notes and [40.00]%. Under these circumstances, the
Cash Settlement Value you receive at maturity will not fully reflect the
performance of 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
we intend 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 income for U.S. federal tax purposes with
respect to 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.”
Equity
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 will fluctuate in accordance with changes in the
financial condition of the companies issuing the common stocks comprising the
Index, the level of the underlying common stocks comprising the Index generally
and other factors. The financial condition of the companies issuing the common
stocks comprising the Index may become impaired or the general condition of
the
equity market may deteriorate, either of which may cause a decrease in the
level
of the Index and thus in the value of the Notes. Common stocks are susceptible
to general equity market fluctuations and to volatile increases and decreases
in
value, as market confidence in and perceptions regarding the underlying common
stocks comprising the Index change. Investor perceptions regarding the companies
issuing the common stocks comprising the Index are based on various and
unpredictable factors, including expectations regarding government, economic,
monetary 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 is expected to fluctuate until the Maturity
Date.
Your
return may be affected by factors affecting non-U.S. securities markets.
The
securities underlying
the
Index are issued by Japanese companies. Investors should be aware that
investments linked to the value of non-U.S. equity securities might involve
particular risks. Non-U.S. securities markets may have less liquidity and could
be more volatile than U.S securities markets. Direct or indirect government
intervention to stabilize non.-U.S. securities markets, as well as
cross-shareholdings in non-U.S. companies, may affect trading prices and volumes
in those markets. Also, there is generally less publicly available information
about non-U.S. companies than about those U.S. companies that are subject to
the
reporting requirements of the Securities and Exchange Commission (the “SEC”);
and non-U.S. companies are often subject to accounting, auditing and financial
reporting standards and requirements that differ from those applicable to U.S.
reporting companies. The other special risks associated with investments linked
to the value of non-U.S. equity securities may include, but are not necessarily
limited to: the imposition of taxes; higher transaction and custody costs;
settlement delays and risk of loss; difficulties in enforcing contracts; less
liquidity and smaller market capitalizations; less rigorous regulation of
securities markets; governmental interference; greater inflation or deflation;
and social, economic and political uncertainties. These factors may adversely
affect the performance of certain of the companies whose securities comprise
the
Index and, as a result, the Cash Settlement Value may be adversely affected.
The
prices and performance of securities underlying the Index also may be affected
by political, economic, financial and social factors. In addition, recent or
future changes in the government, economic and fiscal policies, the possible
imposition of, or changes in, currency exchange laws or other laws or
restrictions, and possible fluctuations in the rate of exchange between
currencies, are factors that could negatively affect the non-U.S. securities
markets. Moreover, the applicable non-U.S. economies may differ favorably or
unfavorably from
that of
the United States.
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 underlying common stocks comprising
the Index will determine the level of the Index, it is impossible to predict
whether the level of the Index will fall or rise. Trading prices of the
underlying common stocks comprising the Index will be influenced by the complex
and interrelated economic, financial, regulatory, geographic, judicial,
political and other factors that can affect the capital markets generally and
the equity trading markets on which the underlying common stocks are traded,
and
by various circumstances that can influence the levels of the underlying common
stocks in a specific market segment or the level of a particular underlying
stock.
The
price at which you will be able to sell your Notes 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 liquidate your investment in the Notes prior to maturity, your only
alternative would be to sell them. At that time, there may be an illiquid market
for Notes or no market at all. Even if you were able to sell your Notes, there
are many factors outside of our control that may affect their trading value.
We
believe that the value of your Notes will be affected by the level and
volatility of the Index, whether the level of the Index is greater than or
equal
to the Initial Index Level, changes in U.S. and foreign 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 prior to maturity may be
substantially less than the amount you originally invested if, at such time,
the
level of the Index is less than, equal to or not sufficiently above the Initial
Index Level. If you sell the Notes 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 trading 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 Final Index Level is greater than the
Initial
Index Level. If you decide to sell your Notes when the level of the
Index
exceeds the Initial Index Level, you may nonetheless receive substantially
less than the amount that would be payable at maturity based on that
Index
Level because of expectations that the Index Level will continue
to
fluctuate until the Final Index Level is determined. Economic, financial,
regulatory, geographic, judicial, political and other developments
that
affect the common stocks in the Index may also affect the level of
the
Index and, thus, the value of the
Notes.
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Volatility
of the Index.
Volatility is the term used to describe the size and frequency of
market
fluctuations. If the volatility of the Index increases or decreases,
the
trading value of the Notes may be adversely affected. This volatility
may
increase the risk that the level of the Index will decline, which
could
negatively affect the trading value of Notes. The effect of the volatility
of the Index on the trading value of the Notes may not necessarily
decrease over time during the term of the
Notes.
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Interest
rates.
We expect that the trading value of the Notes will be affected by
changes
in U.S. interest rates. In general, if U.S. interest rates increase,
the
value of the Notes may decrease, and if U.S. interest rates decrease,
the
value of the Notes is expected to increase. Interest rates in Japan
may
also affect the Japanese economy and, in turn, the level of the Index,
which would affect the value of the Notes. Rising interest rates
may lower
the level of the Index and, thus, the value of the Notes. Falling
interest
rates may increase 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, A2 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, it is
uncertain whether an improvement in our credit ratings, financial
condition or results of operations will have a positive effect on
the
trading value of the Notes.
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Time
remaining to maturity.
As the time remaining to maturity of the Notes decreases, the “time
premium” associated with the Notes will decrease. A “time premium” results
from expectations concerning the level of the Index during the period
prior to the maturity of the Notes. As the time remaining to the
maturity
of the Notes decreases, this time premium will likely decrease,
potentially adversely affecting the trading value of the Notes. As
the
time remaining to maturity decreases, the trading value of the Notes
and
the supplemental return may be less sensitive to the volatility of
the
Index.
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Dividend
yield.
The value of the Notes may also be affected by the dividend yields
on the
stocks in the Index. In general, because the Index does not incorporate
the value of dividend payments, higher dividend yields is expected
to
reduce the value of the Notes and, conversely, lower dividend yields
is
expected to increase the value of the
Notes.
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Events
involving the companies issuing the common stocks comprising the
Index.
General economic conditions and earnings results of the companies
whose
stocks comprise the Index, and real or anticipated changes in those
conditions or results, may affect the trading value of the Notes.
For
example, some of the stocks included in the Index may be affected
by
mergers and acquisitions, which can contribute to volatility of the
Index.
As a result of a merger or acquisition, one or more stocks in the
Index
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 stock originally included in the
Index.
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Size
and liquidity of the trading market.
The Notes will not be listed on any securities exchange or quotation
system, and we do not expect a trading market to develop. There may
not be
a secondary market in the Notes, 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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The
inclusion of commissions and projected profit from hedging in the
original
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.
|
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 in the future, nor can we predict the price
at which any such bids will be made.
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
have no shareholder rights or rights to receive any stock.
Investing
in the Notes will not make you a holder of any of the stocks underlying the
Index. 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 stocks. The Cash Settlement Value,
if any, will be paid in cash, and you will have no right to receive delivery
of
any stocks underlying the Index.
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 Final
Index 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, for their proprietary
accounts and for other accounts under their management, engage in transactions
involving the stocks underlying the Index, exchange-traded and over-the-counter
options on, or other derivative or synthetic instruments related to, the Index,
individual futures contracts on the Index and on stocks included in the Index,
futures contracts on the Index and/or options on these futures contracts. 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 trading
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 trading value of the Notes and the
Cash Settlement Value.
If
the
Sponsor discontinues or suspends calculation or publication of the Index, it
may
become difficult to determine the trading value of the Notes or the Cash
Settlement Value. 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 companies underlying the Index in a way that adversely
affects the level of the Index and consequently the value of the
Notes.
The
Sponsor can add, delete or substitute the stocks underlying the Index or make
other methodological changes that could adversely change the level of the Index,
the Final Index Level and the value of the Notes. You should realize that
changes in the companies included in the Index may affect the Index, as a newly
added company may perform significantly better or worse than the company or
companies it replaces.
We
cannot control actions
by any of the other companies whose stocks are included in the
Index.
We
are
not affiliated with any of the other companies whose stock underlies the Index.
Actions by any company whose stock is part of the Index may have an adverse
effect on the price of its stock, the Final Index Level, and the trading value
of the Notes. These companies are not 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. These companies will not
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. These companies are not 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 companies included in the Index and are not
responsible for any disclosure by any such companies. However, we may currently,
or in the future, engage in business with such companies. 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 company included in the Index. You should make your own investigation into
the Index and the companies underlying the Index.
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 (except for the
licensing arrangements discussed in the section “Description of the
Index—License Agreement”) and have no ability to control or predict the
Sponsor’s actions, 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 or the Sponsor contained in
this
pricing supplement. You, as an investor in the Notes, should make your own
investigation into the Index and the Sponsor. The Sponsor is not 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
stocks underlying the Index, the level of the Index, the trading value of the
Notes or the amount you may receive at maturity.
We
and
our affiliates may from time to time buy or sell shares of the stocks underlying
the Index 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,
including the Final Index Level, and, accordingly, increase or decrease the
trading value of the Notes prior to maturity and the Cash Settlement Value
you
would receive at maturity. To the extent that we or any of our affiliates has
a
hedge position in any of the stocks that comprise the Index, 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 stocks that
underlie the Index. 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 Value
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 companies issuing the common stock included
in the Index. 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 common stocks included in the Index and, therefore, the Final Index
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 the
companies issuing the common stock included in the Index, including making
loans
to, equity investments in, or providing investment banking, asset management
or
other advisory services to those companies. In
connection with these activities, we may receive information about those
companies that we will not divulge to you or other third parties.
The
Cash Settlement Value 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 level of the
Index
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 $[l].
The
Notes are expected to mature on January [l],
2010
and do not provide for earlier redemption. The Notes will be issued only in
fully registered form, and in minimum denominations of $1,000.00; provided,
however, that the minimum purchase for any purchaser domiciled in a member
state
of the European Economic Area shall be $100,000.00. Initially, the Notes will
be
issued in the form of one or more global securities registered in the name
of
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
$1,000.00 principal amount of Notes. The Notes will not be listed on any
securities exchange or quotation system.
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.
Interest
We
will
not make any periodic payments of interest on the Notes. The only payment you
will receive, if any, will be the Cash Settlement Value upon the maturity of
the
Notes.
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 Value, an amount
in
cash that depends upon the relation of the Final Index Level to the Initial
Index Level. At maturity, if the Final Index Level is less than the Initial
Index Level, the Cash Settlement Value will be less, and possibly significantly
less, than the initial public offering price of $1,000.00 per Note. In this
case, the Cash Settlement Value is equal to, per Note:
If,
at
maturity, the Final Index Level is greater than or equal to the Initial Index
Level, the Cash Settlement Value is equal to, per Note, the principal amount
of
the Note, plus the lesser of:
,
and
$[400.00].
Thus,
if
the Final Index Level is greater than [113.33]% of the Initial Index Level,
regardless of the extent to which the Final Index Level is greater than the
Initial Index Level, we will pay you $[1,400.00] per Note, which represents
a
maximum return of [40.00]%.
The
“Upside Participation Rate” is [300.00]%.
The
“Initial Index Level” equals [l],
the
closing level of the Index on March [l],
2008.
The
“Final Index Level” will be determined by the Calculation Agent and will equal
the closing level of the Index on the Calculation Date.
The
“Calculation Date” will be January [l],
2010
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 - Market Disruption
Events.”
The
“Maturity Date” is expected to be January [l],
2010
unless such date is not an Index Business Day, in which case the Maturity Date
shall be the next Index Business Day. If the Calculation Date is adjusted due
to
the occurrence of a Market Disruption Event, the Maturity Date will be three
Index Business Days following the adjusted Calculation Date.
“Related
Exchange” means 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 the Index.
“Primary
Exchange” means the primary exchange or market of trading of any security then
included in the Index.
“Index
Business Day” means any day on which the Primary Exchange and each Related
Exchange are scheduled to be open for trading.
Illustrative
Examples
The
following tables and graphs are for illustrative purposes and are not indicative
of the future performance of the Index or the future value of the
Notes.
Because
the level of the Index 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 possible Cash Settlement Values. Therefore, the examples
do not purport to be representative of every possible scenario concerning
increases or decreases in the Index during the term of the Notes. You should
not
construe these examples or the data included in any table or graph below as
an
indication or assurance of the expected performance of the Notes.
You
can
review the historical levels of the Index in the section of this pricing
supplement called “Description of the Index.” The historical performance of the
Index included in this pricing supplement should not be taken as an indication
of the future performance of the Index during the term of the Notes. It is
impossible to predict whether the Final Index Level will be greater than or
less
than the Initial Index Level.
The
examples demonstrating the hypothetical Cash Settlement Value of a Note are
based on the following assumptions:
|
·
|
Investor
purchases $1,000.00 aggregate principal amount of Notes at the initial
public offering price of $1,000.00.
|
|
·
|
Investor
holds the Notes to maturity.
|
|
·
|
The
Initial Index Level is equal to
14,000.00.
|
|
·
|
The
Upside Participation Rate is
300.00%.
|
|
·
|
The
maximum return on the Notes is
40.00%.
|
|
·
|
All
returns are based on an 22-month term; pre-tax
basis.
|
|
·
|
No
Market Disruption Events occur during the term of the
Notes.
|
Example
1: The Final Index Level is greater than the Initial Index
Level.
In
this
example, the Index rises over the term of the Notes. On the Calculation Date,
the Final Index Level is 14,420.00, representing a 3.00% gain from the Initial
Index Level. In this example, using the formula, the Cash Settlement Value
will
equal $1,090.00.
In
this
example, although the level of the Index rises 3.00%, your return on investment
will be 9.00% because the Upside Participation Rate allows you to benefit from
leverage as a result of the higher Final Index Level.
Example
2: The Final Index Level is greater than 113.33% of the Initial Index Level,
exceeding the maximum return on the Notes of 40.00%.
In
this
example, the Index rises over the term of the Notes. On the Calculation Date,
the Final Index Level is 18,900.00 representing a 35.00% increase from the
Initial Index Level. In this example, using the formula below, the Cash
Settlement
Value will equal $1,400.00.
In
this
example, although the level of the Index rises 35.00%, your return on investment
will be 40.00% because the benefit you may receive from the Upside Participation
Rate is limited to a maximum return of 40.00%.
Example
3: The Final Index Level is equal to the Initial Index
Level.
In
this
example, the Index remains unchanged over the term of the Notes. On the
Calculation Date, the Final Index Level is 14,000.00, equal to the Initial
Index
Level. In this example, using the formula below, the Cash Settlement Value
will
equal $1,000.00.
In
this
example, the Index remains unchanged and your return on investment would be
0.00%.
Example
4: The Final Index Level is less than the Initial Index
Level.
In
this
example, the Index declines over the term of the Notes. On the Calculation
Date,
the Final Index Level is 13,125.00, representing a 25.00% decrease in the level
of the Index from the Initial Index Level. The Cash Settlement Value, using
the
formula below, will equal $750.00.
In
this
example, the level of the index declines by 25.00% and you will suffer a loss
of
25.00% of the value of your original investment.
Summary
of Examples 1 Through 4
Reflecting
the Cash Settlement Value
|
Example
1
|
|
Example
2
|
|
Example
3
|
|
Example
4
|
Initial
Index Level
|
14,000.00
|
|
14,000.00
|
|
14,000.00
|
|
14,000.00
|
Hypothetical
Final Index Level
|
14,420.00
|
|
18,900.00
|
|
14,000.00
|
|
10,500.00
|
Value
of Final Index Level relative to the Initial Index Level
|
Higher
|
|
Higher
|
|
Equal
|
|
Lower
|
Principal
fully repaid?
|
Yes
|
|
Yes
|
|
Yes
|
|
No
|
Cash
Settlement Value per Note
|
$1,090.00
|
|
$1,400.00
|
|
$1,000.00
|
|
$750.00
|
Table
of Hypothetical Cash Settlement Values
Initial
Index
Level
|
Final
Index
Level
|
Percentage
Change
in
Index
|
Cash
Settlement Value Per
Note
|
Return
if
Held
to Maturity
|
|
Initial
Index
Level
|
Final
Index
Level
|
Percentage
Change in Index
|
Cash
Settlement Value Per Note
|
Return
if Held to Maturity
|
14,000.00
|
21,000.00
|
+50.00%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
13,750.00
|
-1.79%
|
$982.14
|
-1.79%
|
14,000.00
|
20,750.00
|
+48.21%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
13,500.00
|
-3.57%
|
$964.29
|
-3.57%
|
14,000.00
|
20,500.00
|
+46.43%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
13,250.00
|
-5.36%
|
$946.43
|
-5.36%
|
14,000.00
|
20,250.00
|
+44.64%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
13,000.00
|
-7.14%
|
$928.57
|
-7.14%
|
14,000.00
|
20,000.00
|
+42.86%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
12,750.00
|
-8.93%
|
$910.71
|
-8.93%
|
14,000.00
|
19,750.00
|
+41.07%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
12,500.00
|
-10.71%
|
$892.86
|
-10.71%
|
14,000.00
|
19,500.00
|
+39.29%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
12,250.00
|
-12.50%
|
$875.00
|
-12.50%
|
14,000.00
|
19,250.00
|
+37.50%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
12,000.00
|
-14.29%
|
$857.14
|
-14.29%
|
14,000.00
|
19,000.00
|
+35.71%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
11,750.00
|
-16.07%
|
$839.29
|
-16.07%
|
14,000.00
|
18,750.00
|
+33.93%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
11,500.00
|
-17.86%
|
$821.43
|
-17.86%
|
14,000.00
|
18,500.00
|
+32.14%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
11,250.00
|
-19.64%
|
$803.57
|
-19.64%
|
14,000.00
|
18,250.00
|
+30.36%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
11,000.00
|
-21.43%
|
$785.71
|
-21.43%
|
14,000.00
|
18,000.00
|
+28.57%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
10,750.00
|
-23.21%
|
$767.86
|
-23.21%
|
14,000.00
|
17,750.00
|
+26.79%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
10,500.00
|
-25.00%
|
$750.00
|
-25.00%
|
14,000.00
|
17,500.00
|
+25.00%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
10,250.00
|
-26.79%
|
$732.14
|
-26.79%
|
14,000.00
|
17,250.00
|
+23.21%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
10,000.00
|
-28.57%
|
$714.29
|
-28.57%
|
14,000.00
|
17,000.00
|
+21.43%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
9,750.00
|
-30.36%
|
$696.43
|
-30.36%
|
14,000.00
|
16,750.00
|
+19.64%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
9,500.00
|
-32.14%
|
$678.57
|
-32.14%
|
14,000.00
|
16,500.00
|
+17.86%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
9,250.00
|
-33.93%
|
$660.71
|
-33.93%
|
14,000.00
|
16,250.00
|
+16.07%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
9,000.00
|
-35.71%
|
$642.86
|
-35.71%
|
14,000.00
|
16,000.00
|
+14.29%
|
$1,400.00
|
40.00%
|
|
14,000.00
|
8,750.00
|
-37.50%
|
$625.00
|
-37.50%
|
14,000.00
|
15,750.00
|
+12.50%
|
$1,375.00
|
37.50%
|
|
14,000.00
|
8,500.00
|
-39.29%
|
$607.14
|
-39.29%
|
14,000.00
|
15,500.00
|
+10.71%
|
$1,321.43
|
32.14%
|
|
14,000.00
|
8,250.00
|
-41.07%
|
$589.29
|
-41.07%
|
14,000.00
|
15,250.00
|
+8.93%
|
$1,267.86
|
26.79%
|
|
14,000.00
|
8,000.00
|
-42.86%
|
$571.43
|
-42.86%
|
14,000.00
|
15,000.00
|
+7.14%
|
$1,214.29
|
21.43%
|
|
14,000.00
|
7,750.00
|
-44.64%
|
$553.57
|
-44.64%
|
14,000.00
|
14,750.00
|
+5.36%
|
$1,160.71
|
16.07%
|
|
14,000.00
|
7,500.00
|
-46.43%
|
$535.71
|
-46.43%
|
14,000.00
|
14,500.00
|
+3.57%
|
$1,107.14
|
10.71%
|
|
14,000.00
|
7,250.00
|
-48.21%
|
$517.86
|
-48.21%
|
14,000.00
|
14,250.00
|
+1.79%
|
$1,053.57
|
5.36%
|
|
14,000.00
|
7,000.00
|
-50.00%
|
$500.00
|
-50.00%
|
14,000.00
|
14,000.00
|
0.00%
|
$1,000.00
|
0.00%
|
|
14,000.00
|
6,750.00
|
-51.79%
|
$482.14
|
-51.79%
|
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
Index Level for such Index will be determined by reference to the level of
such
Successor Index at the close of trading on the relevant exchanges or markets
for
the Successor Index on the date as of which such Final Index Level for such
Index is 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 Value, the Calculation
Agent will determine the level to be used for the Final Index Level for the
Index. The level to be used for the Final Index Level will be computed by the
Calculation Agent in accordance with the formula for and method of calculating
the Index last in effect prior to the discontinuance, failure or modification
but using only those securities that comprised the Index immediately prior
to
that 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 Initial Index Level, the Final Index Level or the Cash
Settlement Value 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 Value (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.
Market
Disruption Events
If
there
is a Market Disruption Event on the Calculation Date, the Final Index Level
will
be determined on the first succeeding Index Business Day on which there is
no
Market Disruption Event. In no event, however, will the Calculation Date be
a
date that is postponed by more than three Index Business Days following the
original date that, but for the Market Disruption Event, would have been the
Calculation Date. In that case, the third Index Business Day will be deemed
to
be the Calculation Date, notwithstanding the Market Disruption Event, and the
Calculation Agent will determine the Final Index Level on that third Index
Business Day in accordance with the formula for and method of calculating the
Index in effect prior to the Market Disruption Event using the price of each
security in the Index on the primary exchange or trading system on which such
security is then listed or admitted to trading (or, if trading in any such
security has been materially suspended or materially limited, the Calculation
Agent’s estimate of the price that would have prevailed on the primary exchange
or trading system on which such security is then listed or admitted to trading
but for such suspension or limitation) as of that third Index Business
Day.
A
“Market
Disruption Event” means the occurrence or existence at any time of a condition
specified below that the Calculation Agent determines to be
material:
(a) any
suspension of or limitation imposed on trading by any Primary Exchange or
Related Exchange or otherwise, and whether by reason of movements in price
exceeding limits permitted by the Primary Exchanges or Related Exchanges or
otherwise, (A) relating to securities that, in the aggregate, comprise 20.00%
or
more of the level of the Index or (B) in futures or options contracts relating
to the Index on any Related Exchange;
(b) any
event
(other than an event described in (c) 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, securities
that, in the aggregate, comprise 20.00% or more of the level of the Index or
(B)
to effect transactions in, or obtain market values for, futures or options
contracts relating to the Index on any Related Exchange;
(c) the
closure on any Index Business Day of any Primary Exchange relating to securities
that comprise, in the aggregate, 20.00% or more of the level of the Index or
any
Related Exchange prior to its weekday closing time, without regard to after
hours or any other trading outside of the regular trading session hours, unless
such earlier closing time is announced by such Primary Exchange or Related
Exchange at least one hour prior to the earlier of (i) the actual closing time
for the regular trading session on such Primary Exchange or Related Exchange
on
such Index Business Day for such Primary Exchange or Related Exchange and (ii)
the submission deadline for orders to be entered into the relevant exchange
system for execution at the close of trading on such Index Business Day for
such
Primary Exchange or Related Exchange; or
(d) any
Index
Business Day on which any Primary Exchange or Related Exchange fails to open
for
trading during its regular trading session.
For
the
purposes of determining whether a Market Disruption Event in respect of the
Index exists at any time, if a Market Disruption Event occurs in respect of
a
security included in the Index at any time, then the relevant percentage
contribution of that security to the level of the Index shall be based on a
comparison of (x) the portion of the level of the Index attributable to that
security and (y) the overall level of the Index, in each case immediately before
the occurrence of such Market Disruption Event.
“Related
Exchange” means 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 the Index.
“Primary
Exchange” means the primary exchange or market of trading of any security then
included in the Index.
“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, FINRA Rule 4120 or any analogous
rule or regulation enacted or promulgated by the NYSE, the FINRA or any
other self regulatory organization or the SEC of similar scope as determined
by
the Calculation Agent, will be considered “material.”
Redemption;
Defeasance
The
Notes
are not subject to redemption before maturity, and are not subject to the
defeasance provisions described in the section “Description of Debt Securities -
Defeasance” in the accompanying prospectus.
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 Value 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.
Same-Day
Settlement and Payment
Settlement
for the Notes will be made by Bear Stearns in immediately available funds.
Payments of the Cash Settlement Value 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 the Cash Settlement Value
or
interest or principal to holders of the Notes, 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
Nikkei 225SM
Stock Index
(“NKY”)
The
NKY
is a stock index calculated, published and disseminated by Nihon Keizai that
measures the composite price performance of selected Japanese stocks. Nihon
Keizai first calculated and published the NKY in 1970. The Nikkei 225 Stock
Index currently is based on 225 underlying stocks (the “Nikkei Underlying
Stocks”) trading on the Tokyo Stock Exchange (the “TSE”) representing a broad
cross-section of Japanese industries. All 225 Nikkei Underlying Stocks are
stocks listed in the First Section of the TSE. Stocks listed in the First
Section of the TSE are among the most actively traded stocks on the TSE. Nihon
Keizai rules require that the 75 most liquid issues (one-third of the component
count of the NKY) be included in the NKY.
The
225
companies included in the NKY are divided into six sector categories:
Technology, Financials, Consumer Goods, Materials, Capital Goods/Others and
Transportation and Utilities. These six sector categories are further divided
into 36 industrial classifications as follows:
·
Technology
— Pharmaceuticals, Electrical Machinery, Automobiles, Precision Machinery,
Telecommunications;
·
Financials
— Banks, Miscellaneous Finance, Securities, Insurance;
·
Consumer
Goods — Marine Products, Food, Retail, Services;
·
Materials
— Mining, Textiles, Paper and Pulp, Chemicals, Oil, Rubber, Ceramics, Steel,
Nonferrous Metals, Trading House;
·
Capital
Goods/Others — Construction, Machinery, Shipbuilding, Transportation Equipment,
Miscellaneous Manufacturing, Real Estate; and
·
Transportation
and Utilities — Railroads and Buses, Trucking, Shipping, Airlines, Warehousing,
Electric Power, Gas.
The
NKY
is a modified, price-weighted index (i.e., a Nikkei Underlying Stock’s weight in
the index is based on its price per share rather than the total market
capitalization of the issuer) that is calculated by (i) multiplying the
per-share price of each Nikkei Underlying Stock by the corresponding weighting
factor for such Nikkei Underlying Stock (a “Weight Factor”), (ii) calculating
the sum of all these products and (iii) dividing such sum by a divisor (the
“Divisor”). The Divisor was initially set at 225 for the date of May 16, 1949
using historical numbers from May 16, 1949, the date on which the TSE was
reopened. The Divisor was 24.336 as of March 6, 2008 and is subject to periodic
adjustments as set forth below. Each Weight Factor is computed by dividing
¥50
by the par value of the relevant Nikkei Underlying Stock, so that the share
price of each Nikkei Underlying Stock, when multiplied by its Weight Factor,
corresponds to a share price based on a uniform par value of ¥50. The stock
prices used in the calculation of the NKY are those reported by a primary market
for the Nikkei Underlying Stocks (currently the TSE). The level of the NKY
is
calculated once per minute during TSE trading hours.
In
order
to maintain continuity in the NKY in the event of certain changes due to
non-market factors affecting the Nikkei Underlying Stocks, such as the addition
or deletion of stocks, substitution of stocks, stock splits or distributions
of
assets to stockholders, the Divisor used in calculating the NKY is adjusted
in a
manner designed to prevent any instantaneous change or discontinuity in the
level of the NKY. Thereafter, the Divisor remains at the new value until a
further adjustment is necessary as the result of another change. As a result
of
such change affecting any Nikkei Underlying Stock, the Divisor is adjusted
in
such a way that the sum of all share prices immediately after such change
multiplied by the applicable Weight Factor and divided by the new Divisor (i.e.,
the level of the NKY immediately after such change) will equal the level of
the
NKY immediately prior to the change.
A
Nikkei
Underlying Stock may be deleted or added by Nihon Keizai. Any stock becoming
ineligible for listing in the First Section of the TSE due to any of the
following reasons will be deleted from the Nikkei Underlying Stocks: (i)
bankruptcy of the issuer, (ii) merger of the issuer with, or acquisition of
the
issuer by, another company, (iii) delisting of such stock, (iv) transfer of
such
stock to the “Seiri-Post” because of excess debt of the issuer or because of any
other reason or (v) transfer of such stock to the Second Section. In addition,
a
component stock transferred to the “Kanri-Post” (Posts for stocks under
supervision) is in principle a candidate for deletion. Nikkei Underlying Stocks
with relatively low liquidity, based on trading value and rate of price
fluctuation over the past five years, may be deleted by Nihon Keizai. Upon
deletion of a stock from the Nikkei Underlying Stocks, Nihon Keizai will select
a replacement for such deleted Nikkei Underlying Stock in accordance with
certain criteria. In an exceptional case, a newly listed stock in the First
Section of the TSE that is recognized by Nihon Keizai to be representative
of a
market may be added to the Nikkei Underlying Stocks. In such a case, an existing
Underlying Stock with low trading volume and deemed not to be representative
of
a market will be deleted by Nihon Keizai.
A
list of
the issuers of the Nikkei Underlying Stocks constituting the NKY is available
from the Nikkei Economic Electronic Databank System and from the Stock Market
Indices Data Book published by Nihon Keizai.
License
Agreement with Nihon Keizai
We
have
entered or expect to enter into a non-exclusive license agreement with Nihon
Keizai, whereby we and our affiliates, in exchange for a fee, will be permitted
to use the NKY in connection with the offer and sale of the Notes.
The
copyright relating to the NKY and intellectual property rights as to “Nikkei”
(including in combination with other words) and the NKY and any other rights
will belong to Nihon Keizai.
Nihon
Keizai will be entitled to change the details of the NKY and to suspend the
announcement thereof.
All
the
businesses and implementation relating to the use of the NKY and related
intellectual property rights will be conducted exclusively at our risk and
Nihon
Keizei assumes no obligation or responsibility therefor.
The
Tokyo Stock Exchange
The
TSE
is one of the world’s largest securities exchanges in terms of market
capitalization. Trading hours are currently from 9:00 a.m. to 11:00 a.m. and
from 12:30 p.m. to 3:00 p.m., Tokyo time, Monday through Friday.
Due
to
the time zone difference, on any normal trading day the TSE will close prior
to
the opening of business in New York City on the same calendar day. Therefore,
the closing level of the NKY on a trading day will generally be available in
the
United States by the opening of business on the same calendar day.
The
TSE
has adopted certain measures, including daily price floors and ceilings on
individual stocks, intended to prevent any extreme short-term price fluctuations
resulting from order imbalances. In general, any stock listed on the TSE cannot
be traded at a price lower than the applicable price floor or higher than the
applicable price ceiling. These price floors and ceilings are expressed in
absolute Japanese yen, rather than percentage limits based on the closing price
of the stock on the previous trading day. In addition, when there is a major
order imbalance in a listed stock, the TSE posts a “special bid quote” or a
“special asked quote” for that stock at a specified higher or lower price level
than the stock’s last sale price in order to solicit counter orders and balance
supply and demand for the stock. The TSE may suspend the trading of individual
stocks in certain limited and extraordinary circumstances, including, for
example, unusual trading activity in that stock. As a result, changes in the
NKY
may be limited by price limitations or special quotes, or by suspension of
trading, on individual stocks that make up the NKY, and these limitations,
in
turn, may adversely affect the value of the Notes.
Historical
Data
on the NKY
The
following table sets forth the month-end closing levels of the Index for each
month in the period beginning with January 1998 through February 2008. The
NKY
closing index levels listed below were obtained from Bloomberg without
independent verification by the Company. The
historical values of the NKY should not be taken as an indication of future
performance, and no assurance can be given that the level of the NKY will
increase relative to its the Initial Index Level during the term of the
Notes.
The
closing index level of the NKY on March 6, 2008 was 13,215.42.
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
January
|
16,628.47
|
14,499.25
|
19,539.70
|
13,843.55
|
9,997.80
|
8,339.94
|
February
|
16,831.67
|
14,367.54
|
19,959.52
|
12,883.54
|
10,587.83
|
8,363.04
|
March
|
16,527.17
|
15,836.59
|
20,337.32
|
12,999.70
|
11,024.94
|
7,972.71
|
April
|
15,641.26
|
16,701.53
|
17,973.70
|
13,934.32
|
11,492.54
|
7,831.42
|
May
|
15,670.78
|
16,111.65
|
16,332.45
|
13,262.14
|
11,763.70
|
8,424.51
|
June
|
15,830.27
|
17,529.74
|
17,411.05
|
12,969.05
|
10,621.84
|
9,083.11
|
July
|
16,378.97
|
17,861.86
|
15,727.49
|
11,860.77
|
9,877.94
|
9,563.21
|
August
|
14,107.89
|
17,436.56
|
16,861.26
|
10,713.51
|
9,619.30
|
10,343.55
|
September
|
13,406.39
|
17,605.46
|
15,747.26
|
9,774.68
|
9,383.29
|
10,219.05
|
October
|
13,564.51
|
17,942.08
|
14,539.60
|
10,366.34
|
8,640.48
|
10,559.59
|
November
|
14,883.70
|
18,558.23
|
14,648.51
|
10,697.44
|
9,215.56
|
10,100.57
|
December
|
13,842.17
|
18,934.34
|
13,785.69
|
10,542.62
|
8,578.95
|
10,676.64
|
|
2004
|
2005
|
2006
|
2007
|
2008
|
|
January
|
10,783.61
|
11,387.59
|
16,649.82
|
17,383.42
|
13,592.47
|
|
February
|
11,041.92
|
11,740.60
|
16,205.43
|
17,604.12
|
13,603.02
|
|
March
|
11,715.39
|
11,668.95
|
17,059.66
|
17,287.65
|
|
|
April
|
11,761.79
|
11,008.90
|
16,906.23
|
17,400.41
|
|
|
May
|
11,236.37
|
11,276.59
|
15,467.33
|
17,875.75
|
|
|
June
|
11,858.87
|
11,584.01
|
15,505.18
|
18,138.36
|
|
|
July
|
11,325.78
|
11,899.60
|
15,456.81
|
17,248.89
|
|
|
August
|
11,081.79
|
12,413.60
|
16,140.76
|
16,569.09
|
|
|
September
|
10,823.57
|
13,574.30
|
16,127.58
|
16,785.69
|
|
|
October
|
10,771.42
|
13,606.50
|
16,399.39
|
16,737.63
|
|
|
November
|
10,899.25
|
14,872.15
|
16,274.33
|
15,680.67
|
|
|
December
|
11,488.76
|
16,111.43
|
17,225.83
|
15,307.78
|
|
|
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 January 1998
through January 2008.
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 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 persons that own in the aggregate,
directly or indirectly (including by reason of investing in the Notes) more
than
5.00% of any entity included in the Index, or 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.
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.
In
General
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. The
Issuer intends
to treat
the Notes consistent with this approach, and pursuant to the terms of the Notes,
you agree to treat the Notes consistent with this approach. Except as otherwise
provided in “—Alternative Characterizations and Treatments,” the balance of this
summary assumes that the Notes are so treated.
Federal
Income Tax Treatment of U.S. Holders
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. 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.
If
one or more of the entities included in the Index are treated as a REIT,
partnership or trust, or PFIC for U.S. federal income tax purposes, or otherwise
as a “pass-thru entity” for purposes of section 1260 of the Code, it is possible
that the Notes will be subject to the “constructive ownership” rules of section
1260 of the Code. If so, the portion of any gain that relates to a pass-thru
entity that would otherwise be treated as long-term capital gain recognized
on
the sale, exchange, maturity, or other taxable disposition of the Notes could
be
treated as ordinary income and subject to an interest charge. Prospective
investors in the Notes should consult the offering documents for the entities
included in the Index and their tax advisors as to the possibility that one
or
more of the entities included in the Index is treated as a REIT, a partnership
or trust, or a PFIC for U.S. federal income tax purposes, or otherwise as a
“pass-thru entity” for purposes of section 1260 of the Code, and section 1260
applies to their Notes.
Alternative
Characterizations and Treatments
Although
the
Issuer intends
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. Alternatively, it is
possible that each Note could be treated as consisting of a cash-settled forward
contract with respect to the Index and a deposit with us of cash in an amount
equal to the principal amount of a Note to secure the holder’s obligation to
settle the forward contract, in which case a U.S. Holder would be required
to
accrue interest income or original issue discount on a current basis in respect
of the deposit. 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
Notice 2008-2, the Internal Revenue Service (“IRS”) and the Treasury Department
requested comments as to whether the purchaser of certain securities (such
as
the Notes) should be required to accrue income under a mark-to-market, accrual
or other methodology, and whether income and gain on such a security should
be
ordinary or capital. Accordingly, it is possible that regulations or other
guidance could provide that a U.S. holder of a Note is required to accrue income
in respect of a Note prior to the receipt of payments under the Note or its
earlier sale. Moreover, it is possible that any such regulations or other
guidance could treat all income and gain of a U.S. holder in respect of a Note
as ordinary income (including gain on a sale). It is unclear whether any
regulations or other guidance would apply to the Notes (possibly on a
retroactive basis). You are urged to consult your own tax advisor regarding
Notice 2008-2 and the possible effect to you of the issuance of regulations
or
other guidance that affects the federal income tax treatment of the
Notes.
Other
alternative federal income tax characterizations or treatments of the Notes
are
possible, and if applied could also affect the timing and the character of
the
income, gain, or loss with respect to the Notes.
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
A
non-U.S. holder that is not subject to U.S. federal income tax as a result
of
any direct or indirect connection to the United States other than its ownership
of a Note and is not an individual present in the United States for 183 days
or
more in the year the gain is recognized should not be subject to U.S. federal
income or withholding tax in respect of the Notes so long as (1) the non-U.S.
holder provides an appropriate statement, signed under penalties of perjury,
identifying the non-U.S. holder and stating, among other things, that the
non-U.S. holder is not a United States person (as defined for federal income
tax
purposes), (2) the non-U.S. holder is not a bank that has purchased the Notes
in
the ordinary course of its trade or business of making loans, as described
in
section 881(c)(3)(A) of the Code, (3) the non-U.S. holder is not a “10-percent
shareholder” within the meaning of section 871(h)(3)(B) of the Code or a
“related controlled foreign corporation” within the meaning of section
881(c)(3)(C) of the Code with respect to us, and (4) the Index actively traded
within the meaning of section 871(h)(4)(C)(v) of the Code. We expect that the
Index will be treated as actively traded within the meaning of section
871(h)(4)(C)(v) of the Code.
If
any of
these conditions are not met, a 30.00% withholding tax may apply to payments
on
the Notes, unless an income tax treaty reduces or eliminates such tax or the
income is effectively connected with the conduct of a trade or business within
the United States by such non-U.S. holder. In the latter case, such non-U.S.
holder should be subject to U.S. federal income tax with respect to all income
from the Notes at regular rates applicable to U.S. taxpayers, and, for a foreign
corporation, possibly branch profits tax, unless an applicable treaty reduces
or
eliminates such tax.
If
the
non-U.S. holder is an individual that is present in the United States for 183
days or more in the taxable year of the maturity, sale, exchange or other
disposition and certain other conditions are satisfied. The non-U.S. holder
will
generally be subject to tax at a rate of 30.00% on the amount by which the
non-U.S. holder's capital gains derived from the maturity,
sale,
exchange, retirement
or
other
disposition
of the
Notes and other assets that are from U.S. sources exceed capital losses
allocable to U.S. sources.
In
Notice
2008-2, the IRS and the Treasury Department requested comments as to whether
foreign holders of certain securities (such as the Notes) should be subject
to
withholding tax on a deemed income accrual. Accordingly, it is possible that
regulations or other guidance could provide that a non-U.S. holder of a Note
will be subject to U.S. withholding tax in respect of the Note. It is unclear
whether any regulations or other guidance would apply to the Notes (possibly
on
a retroactive basis). You are urged to consult your own tax advisor regarding
Notice 2008-2 and the possible effect to you of the issuance of regulations
or
other guidance that could impose U.S. withholding tax in respect of the
Notes.
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 holder
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, 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 Notes are acquired or held pursuant to
and
in accordance with an applicable statutory or administrative exemption. Each
of
us and Bear Stearns are 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 Pension Protection Act of 2006 contains a 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 new
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 applicable prospectus supplement 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 the stocks included in the Index,
exchange-traded and over-the-counter options on, or other derivative or
synthetic instruments related to, the Index, individual futures contracts on
the
Index and on stocks included in the Index, futures contracts on the Index 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 level of the Index), 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 any of these instruments. 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 any of 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 such hedging activity will have
a
material effect on the price of any of these instruments or on the level of
the
Index, we cannot guarantee that we and one or more of our subsidiaries will
not
affect such 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, 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.
|
$[l]
|
Total
|
$[l]
|
The
Agent
intends to initially offer $[l]
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.
Potential investors should understand that, as described on the cover, investors
who purchase an aggregate amount of at least $1,000,000 of Notes in this initial
distribution will be entitled to purchase such Notes for 99.00% of the principal
amount. 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. We
will
offer the Notes to Bear Stearns at a discount of [l]%
of the
price at which the Notes are offered to the public. Bear Stearns may reallow
a
discount to other agents not in excess of [l]%
of the
public offering price.
In
order
to facilitate the offering of the Notes, we may grant the Agent a 30-day option
from the date of the final pricing supplement, to purchase from us up to an
additional $[l]
at the
public offering price, less the agent’s discount, to cover any over-allotments.
The Agent may over-allot or effect transactions which stabilize or maintain
the
market price of the Notes at a level higher than that which might otherwise
prevail in the open market. Specifically, the Agent may over-allot or otherwise
create a short position in the Notes for its own account by selling more Notes
than have been sold to it by us. If this option is exercised, in whole or in
part, subject to certain conditions, the Agent will become obligated to purchase
from us and we will be obligated to sell to the Agent an amount of Notes equal
to the amount of the over-allotment exercised. The Agent may elect to cover
any
such short position by purchasing Notes in the open market. No representation
is
made as to the magnitude or effect of any such stabilization or other
transactions. Such stabilizing, if commenced, may be discontinued at any time
and in any event shall be discontinued within a limited period. No other party
may engage in stabilization.
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 of 1933, as amended (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. The Notes
will
not be listed on any securities exchange or quotation system, and we do not
expect 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 FINRA Conduct
Rules.
LEGAL
MATTERS
The
validity of the Notes will be passed upon for us by Cadwalader, Wickersham
&
Taft LLP, New York, New York.
|
|
|
|
You
should only rely on the information contained in this pricing supplement,
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,
the accompanying prospectus supplement and prospectus. If anyone
provides
you with different or inconsistent information, you should not
rely on it.
This pricing supplement, the accompanying prospectus supplement
and
prospectus are not an offer to sell these Notes, and these documents
are
not soliciting an offer to buy these Notes, 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, the accompanying
prospectus supplement and prospectus is correct on any date after
their
respective dates.
|
|
The
Bear Stearns
Companies
Inc.
$[l]
Medium-Term
Notes, Series B
Accelerated
Market
Participation
Securities
Linked
to the Nikkei 225SM
Due
January [l],
2010
PRICING
SUPPLEMENT
Bear,
Stearns & Co. Inc.
March
[l],
2008
|
|
|
TABLE
OF CONTENTS
|
|
Pricing
Supplement
|
|
|
Page
|
|
Summary
|
PS-2
|
|
Key
Terms
|
PS-5
|
|
Questions
and Answers
|
PS-6
|
|
Risk
Factors
|
PS-11
|
|
Description
of the Notes
|
PS-18
|
|
Description
of the Index
|
PS-26
|
|
Certain
U.S. Federal Income Tax Considerations
|
PS-30
|
|
Certain
ERISA Considerations
|
PS-33
|
|
Use
of Proceeds and Hedging
|
PS-34
|
|
Supplemental
Plan of Distribution
|
PS-34
|
|
Legal
Matters
|
PS-35
|
|
Prospectus
Supplement
|
|
Risk
Factors
|
S-3
|
|
Pricing
Supplement
|
S-8
|
|
Description
of Notes
|
S-8
|
|
Certain
US 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 Depository 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
|
|
|