1
REGISTRATION NO. 333-
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 2001
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<Table>
SALOMON SMITH BARNEY NEW YORK 11-2418067
HOLDINGS INC. DELAWARE 13-4105722
TARGETS TRUST XII DELAWARE 13-4105724
TARGETS TRUST XIII DELAWARE 13-4105725
TARGETS TRUST XIV DELAWARE 13-4105726
TARGETS TRUST XV DELAWARE 13-4105728
TARGETS TRUST XVI DELAWARE 13-7235205
TARGETS TRUST XVII DELAWARE 13-7303518
TARGETS TRUST XVIII DELAWARE 52-7211962
TARGETS TRUST XIX DELAWARE 52-7211963
TARGETS TRUST XX DELAWARE 52-7211964
TARGETS TRUST XXI DELAWARE 52-7211965
TARGETS TRUST XXII DELAWARE 52-7211966
TARGETS TRUST XXIII DELAWARE 52-7211968
TARGETS TRUST XXIV DELAWARE 52-7211969
TARGETS TRUST XXV DELAWARE 52-7211970
TARGETS TRUST XXVI DELAWARE 52-7211972
TARGETS TRUST XXVII
(EXACT NAME OF REGISTRANT AS (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
SPECIFIED IN CHARTER) OF IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
</Table>
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
(212) 816-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
JOAN GUGGENHEIMER, ESQ.
GENERAL COUNSEL
SALOMON SMITH BARNEY HOLDINGS INC.
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
(212) 816-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<Table>
MICHAEL A. ROSS, ESQ. ALAN L. BELLER, ESQ.
CITIGROUP INC. CLEARY, GOTTLIEB, STEEN & HAMILTON
399 PARK AVENUE ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10043 NEW YORK, NEW YORK 10006
</Table>
Approximate date of commencement of proposed sale to public: At such time
(from time to time) after the effective date of this Registration Statement as
agreed upon by Salomon Smith Barney Holdings Inc. and the underwriters in light
of market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ] _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ] _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
Targeted Growth Enhanced Terms Securities of the
Trusts(2).................................................
- ------------------------------------------------------------------------------------------------------------------------------
Forward Contracts of Salomon Smith Barney Holdings
Inc.(2)...................................................
- ------------------------------------------------------------------------------------------------------------------------------
Guarantees of Salomon Smith Barney Holdings Inc. with
respect to the Targeted Growth Enhanced Terms Securities
of the Trusts(3)..........................................
- ------------------------------------------------------------------------------------------------------------------------------
Totals.............................................. $1,000,000,000 $250,000
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Subject to the Proposed Maximum Aggregate Offering Price, there is being
registered hereunder an indeterminate number of Targeted Growth Enhanced
Terms Securities ("TARGETS") of TARGETS Trust XII, TARGETS Trust XIII,
TARGETS Trust XIV, TARGETS Trust XV, TARGETS Trust XVI, TARGETS Trust XVII,
TARGETS Trust XVIII, TARGETS Trust XIX, TARGETS Trust XX, TARGETS Trust XXI,
TARGETS Trust XXII, TARGETS Trust XXIII, TARGETS Trust XXIV, TARGETS Trust
XXV, TARGETS Trust XXVI and TARGETS Trust XXVII (each, a "Trust") and
forward contracts of Salomon Smith Barney Holdings Inc. as may from time to
time be issued at indeterminate prices. Includes TARGETS which may be
purchased by underwriters to cover over-allotments, if any.
(3) Includes the rights of holders of the TARGETS under any guarantees and
certain back-up undertakings, comprised of the obligations of Salomon Smith
Barney Holdings Inc. to provide certain indemnities in respect of, and pay
and be responsible for certain costs, expenses, debts and liabilities of,
each Trust (other than with respect to the TARGETS) and such obligations of
Salomon Smith Barney Holdings Inc. as set forth in the amended and restated
declaration of trust of each Trust and the indenture, in each case as
further described in the Registration Statement. The Guarantees, when taken
together with Salomon Smith Barney Holdings Inc.'s obligations under the
forward contracts, the indenture and the amended and restated declarations
of trust, will provide a full and unconditional guarantee by Salomon Smith
Barney Holdings Inc. of the Trusts' obligations under the TARGETS. No
separate consideration will be received for any guarantees or such back-up
obligations.
------------------------
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE
PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT ALSO RELATES TO THE TARGETS,
FORWARD CONTRACTS AND GUARANTEES PREVIOUSLY REGISTERED UNDER REGISTRATION
STATEMENT NO. 333-32792 ON FORM S-3. THIS REGISTRATION STATEMENT ALSO
CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 2 TO REGISTRATION STATEMENT NO.
333-32792 ON FORM S-3. THE $24,561,486 OF TARGETS, FORWARD CONTRACTS AND
GUARANTEES REMAINING UNSOLD FROM REGISTRATION STATEMENT 333-32792 WILL BE
COMBINED WITH THE $1,000,000,000 AGGREGATE AMOUNT OF TARGETS, FORWARD CONTRACTS
AND GUARANTEES TO BE REGISTERED PURSUANT TO THIS REGISTRATION STATEMENT TO
ENABLE SALOMON SMITH BARNEY HOLDINGS INC. AND THE TRUSTS TO OFFER AN AGGREGATE
AMOUNT OF $1,024,561,486 OF TARGETS, FORWARD CONTRACTS AND GUARANTEES. A FILING
FEE OF $132,000 WAS PAID IN CONNECTION WITH $24,561,486 OF SECURITIES THAT
REMAIN ELIGIBLE TO BE SOLD UNDER THE REGISTRATION STATEMENT ON FORM S-3 (NO.
333-32792) OF SALOMON SMITH BARNEY HOLDINGS INC. AS OF SEPTEMBER 10, 2001.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT RELATING TO
THESE SECURITIES THAT HAS BEEN FILED WITH THE SECURITIES AND EXHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED __________________
[Cover Page Background: Salomon Smith Barney trading floor]
TARGETS
TRUST [XII]
- ------------------------------------------------------------------------------
TARGETED GROWTH
ENHANCED TERMS SECURITIES
(TARGETS(R))
PROSPECTUS
With respect to the common stock of
Due on
$[10.00] per TARGETS
Payments Due From
TARGETS Trust [XII]
Guaranteed by
Salomon Smith Barney Holdings Inc.
- -- Preferred securities of a trust paying:
1. Quarterly distributions in the amount of $___ (except $____
_________________, and
2. A maturity payment based on the market price of the common stock of
______________________
- -- We will apply to list he TARGETS on ____________________ under
the symbol "___".
INVESTING IN THE TARGETS INVOLVES A NUMBER OF RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 13.
______________________ is not involved in any way in this offering and
has no obligations relating to the TARGETS or to holders of the TARGETS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the TARGETS or determined that this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
<Table>
<Caption>
Per TARGETS Total
- ----------------------------------------------------------------------------------------------------
Public Offering Price $ $
- ----------------------------------------------------------------------------------------------------
Underwriting Discount to be paid by Salomon Smith Barney Holdings $ $
- ----------------------------------------------------------------------------------------------------
Proceeds to TARGETS Trust [XII] before expenses $ $
- ----------------------------------------------------------------------------------------------------
</Table>
TARGETS Trust [XII] has granted to Salomon Smith Barney Inc., as underwriter,
an option, exercisable for 30 days from the date of this prospectus, to
purchase up to_____additional TARGETS at the public offering price.
Salomon Smith Barney Inc. expects to deliver the TARGETS to purchasers
on or about _______ ,[2001].
[SALOMONSMITHBARNEY LOGO]
-------------------------
A member of citigroup(umbrella logo)
,2001
3
TARGETS(R) (TARGETED GROWTH ENHANCED TERMS SECURITIES)
SUMMARY
This summary highlights selected information from this prospectus to help
you understand the TARGETS with respect to the common stock of ________________.
You should carefully read the entire prospectus to fully understand the terms
of the TARGETS as well as the principal tax and other considerations that are
important to you in making a decision about whether to invest in the TARGETS.
You should, in particular, carefully review the section entitled "Risk Factors",
which highlights a number of risks, to determine whether an investment in the
TARGETS 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 prospectus.
GENERAL
TARGETS are preferred securities issued by a trust that offer a potential
growth and income investment opportunity. TARGETS provide the growth potential
of a particular stock in any given monthly period up to an appreciation cap of
approximately [5%] subject to automatic resets. Although the growth potential
of an investment in the TARGETS is capped, TARGETS investors receive quarterly
distributions with a yield greater than the underlying stock's current dividend
yield. TARGETS have a term of approximately 3 years.
SELECTED PURCHASE CONSIDERATIONS
- - Growth Potential -- TARGETS allow you to participate in approximately the
first [5%] of appreciation in the price of the stock on which they are based
in the period between the issue date and the 15th day of the following month
and in any subsequent monthly period during the term of the TARGETS.
- - Current Income -- TARGETS pay quarterly distributions with a yield set at a
rate that is significantly higher than the dividend yield currently paid by
the company on whose stock the TARGETS are based.
- - Tax Advantage -- For most investors, a significant portion of the TARGETS'
quarterly distributions will be considered a return of principal. This tax
advantage of the TARGETS has the potential effect of producing a higher
after-tax return than would be produced by a more conventional income-
generating security. In addition, the TARGETS generally will give rise to a
capital gain or loss upon sale or at maturity.
- - Exchange Listing -- Although the TARGETS are expected to be "buy and hold"
investments, they are listed on a major exchange.
SELECTED RISK CONSIDERATIONS
An investment in the TARGETS involves significant risks. These risks are
explained in more detail in the "Risk Factors" section of this prospectus. Some
are summarized here.
- - Your Investment in the TARGETS Will Result in a Loss if the Price of the
Common Stock Declines -- Since the maturity payment on the TARGETS will depend
on the price of the underlying stock, if the price of the underlying stock
at maturity is less than its price at issuance, the maturity payment will be
less than your initial investment, and may be zero, even if the price of the
underlying stock at some point over the life of the TARGETS exceeds the price
of the underlying stock at the time of your initial investment.
- - Your Investment in the TARGETS May Result in a Loss even if the Price of the
Common Stock Rises -- The maturity payment on the TARGETS is dependent on the
compounded value of the periodic capped returns on the common stock for each
reset period during the term of the TARGETS. The first reset period begins on
the date the TARGETS are issued and ends on the 15th day of the following
month. Subsequent reset periods end on the 15th day of each month, with the
last reset period ending at maturity. If the price of the common stock
declines in any reset period, the periodic capped return for that reset
period will be negative, and the compounded value of the periodic capped
returns will decrease. If the price of the common stock declines in enough
reset periods, or if the decrease in the price of the common stock in any
reset period is sufficiently large, the compounded value will be negative. As
a result, the amount of any maturity payments may be less than the amount you
paid for your TARGETS even if the price of the common stock increases during
one or more reset periods or the price of the common stock at maturity is
equal to, or higher than, the price of the common stock at the time you bought
your TARGETS.
- - The Appreciation of Your Investment in the TARGETS Will be Capped -- TARGETS
provide less opportunity for equity appreciation than a direct investment in
the common stock because the periodic capped return will operate to limit the
portion of any appreciation in the price of the common stock in which you will
share to the first [5%] of the increase in the period between the
issue date and the first quarterly distribution date and in any subsequent
quarter, but will not limit your exposure in any period to any depreciation in
the price of the common stock. If the price of the common stock increases by
more than [5%] in any such period during the term of the TARGETS,
your return on the TARGETS may be less than your return on a similar security
that was directly linked to the common stock but was not subject to a cap on
appreciation.
- - You Have No Rights Against ________________ even though the Maturity Payment
on the TARGETS Is Based on the Price of __________________ Stock -- The market
price of the TARGETS at any time will be affected primarily by changes in the
price of the underlying stock. The yield on the TARGETS is set at a rate that
is higher than the current dividend yield on the underlying stock, but may
not remain higher through the term of the TARGETS if _______________ increases
its dividends. __________________ is not involved in this offering and has no
obligations relating to the TARGETS.
- - You May Not Be Able to Sell Your TARGETS if an Active Trading Market for the
TARGETS Does Not Develop -- TARGETS will be listed on a major exchange, but
there can be no guarantee of liquidity in the secondary market. Although
Salomon Smith Barney Inc. intends to make a market in the TARGETS, it is not
obligated to do so.
- - The Price at Which You Will Be Able to Sell Your TARGETS Prior to Maturity May
Be Substantially Less Than the Amount You Originally Invest -- Due to changes
in the price of and the dividend yield on the underlying stock, interest
rates, other economic conditions and Salomon Smith Barney Holdings' perceived
creditworthiness, the TARGETS may trade at prices below their initial issue
price and you could receive substantially less than the amount of your
original investment if you sell your TARGETS prior to maturity.
2
4
TARGETS TRUST [XII]
TARGETS Trust [XII] is a Delaware business trust. Salomon Smith Barney
Holdings will own all of the common securities of Trust [XII]. The common
securities will comprise at least 3% of Trust [XII]'s capital.
Trust [XII] will not engage in any activities except:
- issuing its trust securities, which are limited to TARGETS and
common securities,
- investing approximately 85% to 90% of the proceeds of the offering in a
forward contract of Salomon Smith Barney Holdings relating to the common
stock of ,
- investing approximately 10% to 15% of the proceeds of the offering in
stripped self-amortizing U.S. treasury securities, and
- activities incidental to the above.
Trust [XII] will not issue any securities except the common securities and
the TARGETS.
Trust [XII] will be managed by trustees elected by Salomon Smith Barney
Holdings, as the holder of the common securities. The holders of the TARGETS
have no right to elect or remove trustees. Salomon Smith Barney Holdings will
pay all costs, expenses, debts and liabilities of Trust [XII], including fees
and expenses related to the offering of the TARGETS, but not including payments
under the TARGETS.
The address and telephone number of Trust [XII] are:
TARGETS Trust [XII]
c/o Salomon Smith Barney Holdings Inc.
388 Greenwich Street
New York, NY 10013
(212) 816-6000
THE TARGETS
The TARGETS are preferred undivided interests in Trust [XII]. The TARGETS
mature on , but will be subject to acceleration to an accelerated
maturity date upon the occurrence of one of the acceleration events described
below. If an acceleration event occurs or Salomon Smith Barney Holdings defaults
on its guarantee, holders of the TARGETS will have a preference over holders of
the common securities for payments.
The TARGETS are designed to provide you with a higher yield than the
current dividend yield paid on the common stock of while also
providing the opportunity for you to share in approximately the first [5%] of
any appreciation in the price of the common stock in the period between the
issue date and the first reset date and in any subsequent monthly period during
the term of the TARGETS, but will not limit your exposure to any depreciation in
the price of the common stock.
QUARTERLY DISTRIBUTIONS
You will receive cash distributions of $ per quarter on each
TARGETS (except that the quarterly distribution payment payable on
will be $ per TARGETS), payable on each February 15, May
15, August 15 and November 15, beginning .
Trust [XII] will make quarterly distribution payments out of:
- payments received on the treasury securities, and
- any yield enhancement payments received from Salomon Smith Barney
Holdings under the forward contract.
Depending on market conditions at the time of pricing the TARGETS for
initial sale to the public, the amount of the yield enhancement payments may be
zero or a nominal amount.
3
5
The ability of Trust [XII] to make quarterly distributions on the TARGETS
is entirely dependent on receipt by Trust [XII] of payments under the treasury
securities and yield enhancement payments, if any, under the forward contract.
Salomon Smith Barney Holdings may elect not to make yield enhancement payments,
if any, on the date they are due under the forward contract, and is permitted to
delay making those payments, with interest, until maturity. You should refer to
the sections "Risk Factors -- You may not receive yield enhancement payments on
the date they are due because they can be deferred" and "Description of the
TARGETS -- Quarterly Distributions" in this prospectus.
MATURITY PAYMENT
At maturity, you will receive for each TARGETS the maturity payment and the
final quarterly distribution.
The maturity payment per TARGETS will equal the sum of (A) the initial
principal amount of $[10.00] per TARGETS and (B) the stock return payment, which
may be positive, zero or negative.
The stock return payment will equal the product of:
Initial Principal Amount of $[10.00] per TARGETS x Stock Return
The stock return will equal the compounded value of the periodic capped
returns for each reset period computed in the following manner, and is presented
in this prospectus as a percentage:
Product of [(1.00 + the periodic capped return) for each reset period] -
1.00
The periodic capped return for any reset period (including the reset period
ending at maturity) will equal the following fraction:
Ending Value - Starting Value
---------------------------------
Starting Value
Reset dates occur on the 15th day of each month beginning ,
and we refer to the period between any two consecutive reset dates (or the issue
date and the first reset date) as reset periods. The periodic capped return for
any reset period will not in any circumstances be greater than a value to be
determined on the date the TARGETS are priced, which value is expected to be
approximately [5%].
The stock return will be calculated by compounding the product of the
periodic capped returns for each reset period.
The ending value for any reset period other than the reset period ending at
maturity will be the closing sale price of the common stock on the reset date at
the end of the period or, if that day is not a trading day, the closing sale
price of the common stock on the most recent trading day. The ending value for
the reset period ending at maturity will be the average daily closing sale price
of the common stock for the 10 trading days immediately prior to but not
including the date one business day before the maturity date.
The starting value for the initial reset period will be the closing sale
price of the common stock on the date the TARGETS are priced for initial sale to
the public. We will disclose the initial starting value to you in the final
prospectus delivered to you in connection with sales of the TARGETS. The
starting value for each subsequent reset period (including the reset period
ending on maturity) will equal the ending value for the immediately preceding
reset period.
The periodic capped return is subject to adjustment upon the occurrence of
certain events involving and its capital structure.
The stock return payment payable to you at maturity is dependent on the
return on the common stock during the period between the issue date and the
first reset date and during each subsequent monthly period. The stock return
payment that you receive on the maturity date may be positive, zero or negative.
If the stock return is negative, the maturity payment you receive will be less
than the amount of your original investment, and may be zero. If the stock
return is zero, the maturity payment you receive will equal the amount of your
original investment.
If the closing sale price of the common stock over the 10-day calculation
period prior to maturity is less than the price of the common stock upon
issuance of the TARGETS, the maturity payment on each
4
6
TARGETS will be less than the amount you originally invested. As demonstrated by
some of the hypothetical examples provided below, the possibility exists that an
investment in the TARGETS will result in a loss even if the closing sale price
of the common stock over the 10-day calculation period prior to maturity is
greater than the price of the common stock when the TARGETS are issued.
The TARGETS provide less opportunity for appreciation than a direct
investment in the common stock because the periodic capped returns will operate
to limit the portion of any appreciation in the price of the common stock in
which you will share to approximately the first [5%] of any increase in the
price of the common stock during any reset period, but there is no limit on your
exposure to any depreciation in the price of the common stock in any given reset
period.
The maturity payment with respect to each TARGETS will be paid by Trust
[XII] out of the funds received by Trust [XII] from Salomon Smith Barney
Holdings under the forward contract. Trust [XII]'s ability to make the maturity
payments is entirely dependent upon Trust [XII] receiving payments under the
forward contract from Salomon Smith Barney Holdings.
Maturity Payment -- Hypothetical Examples
Because the stock return is dependent on the price of the common stock on
each reset date and over the 10-day calculation period prior to maturity, and
the value of the common stock may be subject to significant variations over the
term of the TARGETS, it is not possible to present a chart or table illustrating
a complete range of possible payments at maturity. The examples of hypothetical
maturity payment calculations that follow are intended to illustrate the effect
of possible general trends in the price of the common stock on the amount
payable on the TARGETS at maturity. All of the hypothetical examples assume that
the initial price to the public of each TARGETS is $10, that the price of the
common stock on the date of issuance is $40, that the periodic capped return
cannot exceed 5% and that the maturity date is August 15, 2004.
EXAMPLE 1: THE PRICE OF THE COMMON STOCK AT MATURITY IS GREATER THAN ITS
PRICE AT ISSUANCE AND THE COMMON STOCK APPRECIATED BY 4% (AN
AMOUNT LESS THAN THE 5% PERIODIC APPRECIATION CAP) DURING EACH
RESET PERIOD THROUGHOUT THE TERM OF THE TARGETS:
<Table>
<Caption>
2001 2002 2003 2004
------------------------ ------------------------ ------------------------ ------------------------
CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC
OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED
STOCK RETURN STOCK RETURN STOCK RETURN STOCK RETURN
------------- -------- ------------- -------- ------------- -------- ------------- --------
January............... 48.67 4.00% 77.92 4.00% 124.75 4.00%
February.............. 50.61 4.00% 81.03 4.00% 129.74 4.00%
March................. 52.64 4.00% 84.27 4.00% 134.93 4.00%
April................. 54.74 4.00% 87.64 4.00% 140.32 4.00%
May................... 56.93 4.00% 91.15 4.00% 145.94 4.00%
June.................. 59.21 4.00% 94.80 4.00% 151.77 4.00%
July.................. 61.58 4.00% 98.59 4.00% 157.84 4.00%
August................ 64.04 4.00% 102.53 4.00% 164.16 4.00%
September............. 41.60 4.00% 66.60 4.00% 106.63 4.00%
October............... 43.26 4.00% 69.27 4.00% 110.90 4.00%
November.............. 44.99 4.00% 72.04 4.00% 115.33 4.00%
December.............. 46.79 4.00% 74.92 4.00% 119.95 4.00%
</Table>
STOCK RETURN = [(1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X
(1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X
(1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X
(1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X
(1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X
(1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X
(1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X (1.00 + 0.04) X
(1.00 + 0.04) X (1.00 + 0.04)] - 1 = 310.39%.
STOCK RETURN PAYMENT = $10.00 X 3.1039 = $31.04
5
7
MATURITY PAYMENT = $10.00 + $31.04 = $41.04 PER TARGETS.
EXAMPLE 2: THE PRICE OF THE COMMON STOCK AT MATURITY IS GREATER THAN ITS
PRICE AT ISSUANCE AND THE COMMON STOCK APPRECIATED BY 5% (AN
AMOUNT EQUAL TO THE PERIODIC APPRECIATION CAP) DURING EACH RESET
PERIOD THROUGHOUT THE TERM OF THE TARGETS:
<Table>
<Caption>
2001 2002 2003 2004
------------------------ ------------------------ ------------------------ ------------------------
CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC
OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED
STOCK RETURN STOCK RETURN STOCK RETURN STOCK RETURN
------------- -------- ------------- -------- ------------- -------- ------------- --------
January............... 51.05 5.00% 91.68 5.00% 164.65 5.00%
February.............. 53.60 5.00% 96.26 5.00% 172.88 5.00%
March................. 56.28 5.00% 101.08 5.00% 181.52 5.00%
April................. 59.10 5.00% 106.13 5.00% 190.60 5.00%
May................... 62.05 5.00% 111.44 5.00% 200.13 5.00%
June.................. 65.16 5.00% 117.01 5.00% 210.13 5.00%
July.................. 68.41 5.00% 122.86 5.00% 220.64 5.00%
August................ 71.83 5.00% 129.00 5.00% 231.67 5.00%
September............. 42.00 5.00% 75.43 5.00% 135.45 5.00%
October............... 44.10 5.00% 79.20 5.00% 142.23 5.00%
November.............. 46.31 5.00% 83.16 5.00% 149.34 5.00%
December.............. 48.62 5.00% 87.31 5.00% 156.81 5.00%
</Table>
STOCK RETURN = [(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05)] - 1 = 479.18%.
STOCK RETURN PAYMENT = $10.00 X 4.7918 = $47.92
MATURITY PAYMENT = $10.00 + $47.92 = $57.92 PER TARGETS, WHICH IS THE MAXIMUM
POSSIBLE MATURITY PAYMENT.
EXAMPLE 3: THE PRICE OF THE COMMON STOCK AT MATURITY IS GREATER THAN ITS
PRICE AT ISSUANCE AND THE COMMON STOCK APPRECIATED BY 8% (AN
AMOUNT GREATER THAN THE 5% PERIODIC APPRECIATION CAP) DURING
EACH RESET PERIOD THROUGHOUT THE TERM OF THE TARGETS:
<Table>
<Caption>
2001 2002 2003 2004
------------------------ ------------------------ ------------------------ ------------------------
CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC
OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED
STOCK RETURN STOCK RETURN STOCK RETURN STOCK RETURN
------------- -------- ------------- -------- ------------- -------- ------------- --------
January............... 58.77 5.00% 148.00 5.00% 372.69 5.00%
February.............. 63.47 5.00% 159.84 5.00% 402.51 5.00%
March................. 68.55 5.00% 172.63 5.00% 434.71 5.00%
April................. 74.04 5.00% 186.44 5.00% 469.48 5.00%
May................... 79.96 5.00% 201.35 5.00% 507.04 5.00%
June.................. 86.36 5.00% 217.46 5.00% 547.61 5.00%
July.................. 93.27 5.00% 234.86 5.00% 591.41 5.00%
August................ 100.73 5.00% 253.65 5.00% 638.73 5.00%
September............. 43.20 5.00% 108.78 5.00% 273.94 5.00%
October............... 46.66 5.00% 117.49 5.00% 295.85 5.00%
November.............. 50.39 5.00% 126.89 5.00% 319.52 5.00%
December.............. 54.42 5.00% 137.04 5.00% 345.08 5.00%
</Table>
6
8
STOCK RETURN = [(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05)] - 1 = 479.18%.
STOCK RETURN PAYMENT = $10.00 X 4.7918 = $47.92
MATURITY PAYMENT = $10.00 + $47.92 = $57.92 PER TARGETS, THE MAXIMUM POSSIBLE
MATURITY PAYMENT.
EXAMPLE 4: SIGNIFICANT DECLINES IN THE PRICE OF THE COMMON STOCK IN A SMALL
NUMBER OF RESET PERIODS CAN RESULT IN A MATURITY PAYMENT THAT IS
LESS THAN YOUR INVESTMENT, EVEN IF THE PRICE INCREASES STEADILY
IN OTHER RESET PERIODS. AS AN EXTREME EXAMPLE, THE PRICE OF THE
COMMON STOCK AT MATURITY IS GREATER THAN ITS PRICE AT ISSUANCE,
THE PRICE OF THE COMMON STOCK INCREASED THROUGHOUT ALL BUT ONE
OF THE RESET PERIODS DURING THE TERM OF THE TARGETS, BUT THERE
WAS A DECLINE IN THE PRICE OF THE COMMON STOCK RESULTING IN A
PERIODIC CAPPED RETURN OF APPROXIMATELY -82% DURING ONE RESET
PERIOD (IF THIS OCCURS, THE MATURITY PAYMENT WILL ALWAYS BE LESS
THAN THE AMOUNT OF YOUR INITIAL INVESTMENT):
<Table>
<Caption>
2001 2002 2003 2004
------------------------ ------------------------ ------------------------ ------------------------
CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC
OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED
STOCK RETURN STOCK RETURN STOCK RETURN STOCK RETURN
------------- -------- ------------- -------- ------------- -------- ------------- --------
January............... 51.05 5.00% 91.68 5.00% 164.65 5.00%
February.............. 53.60 5.00% 96.26 5.00% 172.88 5.00%
March................. 56.28 5.00% 101.08 5.00% 31.12 -82.00%
April................. 59.10 5.00% 106.13 5.00% 32.67 5.00%
May................... 62.05 5.00% 111.44 5.00% 34.31 5.00%
June.................. 65.16 5.00% 117.01 5.00% 36.02 5.00%
July.................. 68.41 5.00% 122.86 5.00% 37.82 5.00%
August................ 71.83 5.00% 129.00 5.00% 40.09 5.00%
September............. 42.00 5.00% 75.43 5.00% 135.45 5.00%
October............... 44.10 5.00% 79.20 5.00% 142.23 5.00%
November.............. 46.31 5.00% 83.16 5.00% 149.34 5.00%
December.............. 48.62 5.00% 87.31 5.00% 156.81 5.00%
</Table>
STOCK RETURN = [(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 - 0.82) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05)] - 1 = -0.71%.
STOCK RETURN PAYMENT = $10.00 X -0.0071 = -$0.07
MATURITY PAYMENT = $10.00 - $0.07 = $9.93 PER TARGETS, LESS THAN THE AMOUNT OF
YOUR INITIAL INVESTMENT (EVEN THOUGH THE PRICE OF THE COMMON STOCK AT MATURITY
IS GREATER THAN ITS PRICE AT ISSUANCE).
The following two examples 5 and 6 show that if the price of the common
stock fluctuates over the term of the TARGETS and is greater at maturity than at
issuance, the maturity payment on the TARGETS may be less or more than the
amount of your initial investment, depending on the size of the increases and
decreases in the price of the TARGETS during each reset period.
7
9
EXAMPLE 5: THE PRICE OF THE COMMON STOCK AT MATURITY IS GREATER THAN ITS
PRICE AT ISSUANCE AND THE PRICE OF THE COMMON STOCK FLUCTUATED
DURING THE TERM OF THE TARGETS, ENDING BELOW THE INITIAL
STARTING VALUE ON MORE THAN ONE RESET DATE:
<Table>
<Caption>
2001 2002 2003 2004
------------------------ ------------------------ ------------------------ ------------------------
CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC
OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED
STOCK RETURN STOCK RETURN STOCK RETURN STOCK RETURN
------------- -------- ------------- -------- ------------- -------- ------------- --------
January............... 41.79 5.00% 37.25 5.00% 40.55 5.00%
February.............. 43.88 5.00% 39.11 5.00% 42.58 5.00%
March................. 41.69 -5.00% 41.06 -5.00% 40.45 -5.00%
April................. 39.60 -5.00% 43.12 5.00% 38.43 -5.00%
May................... 37.62 -5.00% 40.96 -5.00% 36.51 -5.00%
June.................. 35.74 -5.00% 38.91 -5.00% 38.33 5.00%
July.................. 37.53 5.00% 36.97 -5.00% 36.42 -5.00%
August................ 39.40 5.00% 38.82 5.00% 40.79 5.00%
September............. 42.00 5.00% 37.43 5.00% 40.76 5.00%
October............... 44.10 5.00% 39.31 -5.00% 38.72 -5.00%
November.............. 41.90 -5.00% 41.27 -5.00% 36.78 -5.00%
December.............. 39.80 -5.00% 39.21 5.00% 38.62 5.00%
</Table>
STOCK RETURN = [(1.00 + 0.05) X (1.00 + 0.05) X (1.00 - 0.05) X (1.00 - 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 - 0.05) X (1.00 - 0.05) X (1.00 - 0.05) X
(1.00 - 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 - 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 - 0.05) X (1.00 - 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 - 0.05) X (1.00 - 0.05) X (1.00 - 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 - 0.05) X (1.00 - 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 - 0.05) X (1.00 - 0.05) X (1.00 - 0.05) X (1.00 + 0.05) X
(1.00 - 0.05) X (1.00 + 0.05)] - 1 = -4.41%.
STOCK RETURN PAYMENT = $10.00 X -0.0441 = -$0.44
MATURITY PAYMENT = $10.00 - $0.44 = $9.56 PER TARGETS, LESS THAN THE AMOUNT OF
YOUR INITIAL INVESTMENT (EVEN THOUGH THE PRICE OF THE COMMON STOCK AT MATURITY
IS GREATER THAN ITS PRICE AT ISSUANCE).
EXAMPLE 6: THE PRICE OF THE COMMON STOCK AT MATURITY IS GREATER THAN ITS
PRICE AT ISSUANCE, AND THE PRICE OF THE COMMON STOCK FLUCTUATED
DURING THE TERM OF THE TARGETS, ENDING BELOW THE INITIAL
STARTING VALUE ON AT LEAST ONE RESET DATE:
<Table>
<Caption>
2001 2002 2003 2004
------------------------ ------------------------ ------------------------ ------------------------
CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC
OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED
STOCK RETURN STOCK RETURN STOCK RETURN STOCK RETURN
------------- -------- ------------- -------- ------------- -------- ------------- --------
January............... 39.59 -10.00% 63.88 5.00% 84.78 5.00%
February.............. 41.57 5.00% 67.07 5.00% 89.02 5.00%
March................. 43.65 5.00% 70.42 5.00% 93.47 5.00%
April................. 45.83 5.00% 63.38 -10.00% 88.80 -5.00%
May................... 41.25 -10.00% 66.55 5.00% 93.24 5.00%
June.................. 43.31 5.00% 69.88 5.00% 97.90 5.00%
July.................. 46.78 5.00% 67.78 -3.00% 88.11 -10.00%
August................ 49.11 5.00% 71.17 5.00% 92.51 5.00%
September............. 42.00 5.00% 51.57 5.00% 74.73 5.00%
October............... 44.10 5.00% 54.15 5.00% 78.47 5.00%
November.............. 46.31 5.00% 56.86 5.00% 82.39 5.00%
December.............. 43.99 -5.00% 59.70 5.00% 80.74 -2.00%
</Table>
8
10
STOCK RETURN = [(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 - 0.05) X
(1.00 - 0.10) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 - 0.10) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 - 0.10) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 - 0.03) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 - 0.02) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 - 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 - 0.10) X (1.00 + 0.05)] - 1 = 120.66%.
STOCK RETURN PAYMENT = $10.00 X 1.2066 = $12.07
MATURITY PAYMENT = $10.00 + $12.07 = $22.07 PER TARGETS, MORE THAN THE AMOUNT OF
YOUR INITIAL INVESTMENT.
EXAMPLE 7: THE PRICE OF THE COMMON STOCK AT MATURITY IS GREATER THAN ITS
PRICE AT ISSUANCE, THE PRICE OF THE COMMON STOCK FLUCTUATES
DURING THE TERM OF THE TARGETS AND THE FLUCTUATIONS IN EACH
RESET PERIOD EXCEED 5%:
<Table>
<Caption>
2001 2002 2003 2004
------------------------ ------------------------ ------------------------ ------------------------
CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC
OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED
STOCK RETURN STOCK RETURN STOCK RETURN STOCK RETURN
------------- -------- ------------- -------- ------------- -------- ------------- --------
January............... 43.42 5.00% 48.11 5.00% 52.71 5.00%
February.............. 40.81 -6.00% 45.22 -6.00% 49.02 -7.00%
March................. 44.89 5.00% 49.74 5.00% 53.92 5.00%
April................. 42.20 -6.00% 46.76 -6.00% 50.69 -6.00%
May................... 45.58 5.00% 50.50 5.00% 54.74 5.00%
June.................. 41.93 -8.00% 46.96 -7.00% 50.36 -8.00%
July.................. 46.12 5.00% 51.66 5.00% 55.40 5.00%
August................ 43.36 -6.00% 48.56 -6.00% 52.07 -6.00%
September............. 43.20 5.00% 46.82 5.00% 52.45 5.00%
October............... 38.88 -10.00% 43.08 -8.00% 47.20 -10.00%
November.............. 42.77 5.00% 47.39 5.00% 51.92 5.00%
December.............. 40.20 -6.00% 44.54 -6.00% 48.81 -6.00%
</Table>
STOCK RETURN = [(1.00 + 0.05) X (1.00 - 0.10) X (1.00 + 0.05) X (1.00 - 0.06) X
(1.00 + 0.05) X (1.00 - 0.06) X (1.00 + 0.05) X (1.00 - 0.06) X (1.00 + 0.05) X
(1.00 - 0.08) X (1.00 + 0.05) X (1.00 - 0.06) X (1.00 + 0.05) X (1.00 - 0.08) X
(1.00 + 0.05) X (1.00 - 0.06) X (1.00 + 0.05) X (1.00 - 0.06) X (1.00 + 0.05) X
(1.00 - 0.06) X (1.00 + 0.05) X (1.00 - 0.07) X (1.00 + 0.05) X (1.00 - 0.06) X
(1.00 + 0.05) X (1.00 - 0.10) X (1.00 + 0.05) X (1.00 - 0.06) X (1.00 + 0.05) X
(1.00 - 0.07) X (1.00 + 0.05) X (1.00 - 0.06) X (1.00 + 0.05) X (1.00 - 0.08) X
(1.00 + 0.05) X (1.00 - 0.06)] - 1 = -33.53%.
STOCK RETURN PAYMENT = $10.00 X -0.3353 = -$3.35
MATURITY PAYMENT = $10.00 - $3.35 = $6.65 PER TARGETS LESS THAN THE AMOUNT OF
YOUR INITIAL INVESTMENT (EVEN THOUGH THE PRICE OF THE COMMON STOCK AT MATURITY
IS GREATER THAN ITS PRICE AT ISSUANCE).
9
11
EXAMPLE 8: THE PRICE OF THE COMMON STOCK AT MATURITY IS LESS THAN ITS PRICE
AT ISSUANCE:
<Table>
<Caption>
2001 2002 2003 2004
------------------------ ------------------------ ------------------------ ------------------------
CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC CLOSING VALUE PERIODIC
OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED OF COMMON CAPPED
STOCK RETURN STOCK RETURN STOCK RETURN STOCK RETURN
------------- -------- ------------- -------- ------------- -------- ------------- --------
January............... 41.82 -3.00% 44.69 -5.00% 48.76 5.00%
February.............. 40.99 -2.00% 43.35 -3.00% 46.32 -5.00%
March................. 40.58 -1.00% 42.48 -2.00% 44.93 -3.00%
April................. 40.98 1.00% 42.06 -1.00% 44.04 -2.00%
May................... 37.70 -8.00% 42.48 1.00% 43.59 -1.00%
June.................. 35.82 -5.00% 39.08 -8.00% 44.03 1.00%
July.................. 36.54 2.00% 37.13 -5.00% 41.83 -5.00%
August................ 37.63 3.00% 37.87 2.00% 38.48 -8.00%
September............. 40.80 2.00% 39.14 4.00% 39.01 3.00%
October............... 42.02 3.00% 41.09 5.00% 40.57 4.00%
November.............. 45.39 5.00% 43.56 5.00% 42.59 5.00%
December.............. 43.12 -5.00% 47.04 5.00% 45.15 5.00%
</Table>
STOCK RETURN = [(1.00 + 0.02) X (1.00 + 0.03) X (1.00 + 0.05) X (1.00 - 0.05) X
(1.00 - 0.03) X (1.00 - 0.02) X (1.00 - 0.01) X (1.00 + 0.01) X (1.00 - 0.08) X
(1.00 - 0.05) X (1.00 + 0.02) X (1.00 + 0.03) X (1.00 + 0.04) X (1.00 + 0.05) X
(1.00 + 0.05) X (1.00 + 0.05) X (1.00 - 0.05) X (1.00 - 0.03) X (1.00 - 0.02) X
(1.00 - 0.01) X (1.00 + 0.01) X (1.00 - 0.08) X (1.00 - 0.05) X (1.00 + 0.02) X
(1.00 + 0.03) X (1.00 + 0.04) X (1.00 + 0.05) X (1.00 + 0.05) X (1.00 + 0.05) X
(1.00 - 0.05) X (1.00 - 0.03) X (1.00 - 0.02) X (1.00 - 0.01) X (1.00 + 0.01) X
(1.00 - 0.05) X (1.00 - 0.08)] - 1 = - 13.25%.
STOCK RETURN PAYMENT = $10.00 X -0.1325 = -$1.32
MATURITY PAYMENT = $10.00 - $1.32 = $8.68 PER TARGETS, LESS THAN THE AMOUNT OF
YOUR INITIAL INVESTMENT. THE PAYMENT AT MATURITY WILL ALWAYS BE LESS THAN THE
AMOUNT OF YOUR INITIAL INVESTMENT IF, AT MATURITY, THE PRICE OF THE COMMON STOCK
IS LESS THAN ITS PRICE AT ISSUANCE.
ACCELERATION OF MATURITY
If one of the acceleration events described below occurs, the treasury
securities will be sold and Trust [XII] will be liquidated. You will receive for
each TARGETS the accelerated maturity payment and a pro rata portion of the
proceeds of the sale of the treasury securities, plus any accrued and unpaid
yield enhancement payments.
The accelerated maturity payment per TARGETS will be calculated in the same
manner as the maturity payment and as though the date on which the acceleration
event occurred were the maturity date.
You will receive payment before holders of the common securities if an
acceleration event occurs or Salomon Smith Barney Holdings defaults on any of
its obligations under its guarantee.
Any of the following will constitute an acceleration event:
- the occurrence of certain adverse tax consequences to Trust [XII],
- the classification of Trust [XII] as an "investment company" under the
Investment Company Act, or
- the initiation of bankruptcy proceedings regarding Salomon Smith Barney
Holdings.
TARGETS PAYMENTS GUARANTEE
Salomon Smith Barney Holdings has guaranteed that if a payment on the
forward contract or the treasury securities is made to Trust [XII] but, for any
reason, Trust [XII] does not make the corresponding payment to you, then Salomon
Smith Barney Holdings will make the payment directly to you. You should refer to
the section "Description of the Guarantee" in this prospectus.
10
12
VOTING RIGHTS
You will have limited voting rights with respect to Trust [XII] and will
not be entitled to vote to appoint, remove or replace, or increase or decrease
the number of, the trustees. These voting rights will be held exclusively by
Salomon Smith Barney Holdings, as the holder of the common securities. You will,
however, have the right to direct The Chase Manhattan Bank, as trustee of Trust
[XII] and as holder of the forward contract and the treasury securities, to
exercise its rights as trustee and to direct the time, method and place of any
proceeding for any remedy available to the trustee.
You will have no voting rights and no ownership interest in any common
stock of .
HISTORICAL PERFORMANCE OF THE COMMON STOCK
We have provided a table showing the high and low sales prices for the
common stock of and the cash dividends per share of common
stock for each quarter since the first quarter of 1996. You can find this table
in the section "Historical Data on the Common Stock" in this prospectus. We have
provided this historical information to help you evaluate the behavior of the
common stock in recent years. However, past performance is not necessarily
indicative of how the common stock will perform in the future. You should also
refer to the section "Risk Factors -- You have no rights against
even though the maturity payment on the TARGETS is based on the price
of common stock" in this prospectus.
The TARGETS are obligations of Trust [XII] and, to the extent of the
guarantee, of Salomon Smith Barney Holdings. Even though the maturity payment
will reflect the market price of the common stock of at
maturity, has no obligations under the TARGETS or Salomon
Smith Barney Holdings' guarantee.
THE FORWARD CONTRACT
The forward contract will be issued under an indenture between Salomon
Smith Barney Holdings and The Chase Manhattan Bank, as trustee. Salomon Smith
Barney Holdings conducts other business with The Chase Manhattan Bank.
Trust [XII] will purchase the forward contract from Salomon Smith Barney
Holdings on the date the TARGETS are issued. Under the forward contract, Salomon
Smith Barney Holdings will be required to pay to Trust [XII] the total maturity
payments, or the total accelerated maturity payments, and any yield enhancement
payments. The forward contract is a prepaid "cash-settled" forward contract
under which Salomon Smith Barney Holdings will settle its obligations in cash
rather than in securities. The proceeds from the sale of the forward contract
will be used by Salomon Smith Barney Holdings for general corporate purposes.
You should refer to the sections in this prospectus "Use of Proceeds and Hedging
Activities", "Description of the Forward Contract" and "Risk Factors -- Because
purchases and sales by affiliates of Salomon Smith Barney Holdings may reduce
the price of the common stock, your maturity payment or the price you receive if
you sell your TARGETS may be reduced".
U.S. FEDERAL INCOME TAXES
If you are a U.S. individual or taxable entity, you generally will be
required to pay taxes on only a portion of each quarterly cash distribution you
receive from Trust [XII], which will be ordinary income. The remaining portion
of each quarterly cash distribution that you receive from Trust [XII] will be
treated as a tax-free return of your investment in the TARGETS and will reduce
your tax basis in them. If you hold your TARGETS until they mature or if you
sell your TARGETS, you will have a capital gain or loss equal to the difference
between your tax basis in the TARGETS and the cash you receive. You should refer
to the section "United States Federal Income Tax Considerations" in this
prospectus.
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13
THE ROLE OF SALOMON SMITH BARNEY HOLDINGS' SUBSIDIARY, SALOMON SMITH BARNEY INC.
Salomon Smith Barney Holdings' subsidiary, Salomon Smith Barney Inc., is
the underwriter for the offering and sale of the TARGETS. After the initial
offering, Salomon Smith Barney Inc. and/or other broker-dealer affiliates of
Salomon Smith Barney Holdings intend to buy and sell TARGETS to create a
secondary market for holders of the TARGETS, and may engage in other activities
described below in the section "Underwriting". However, neither Salomon Smith
Barney Inc. nor any of these affiliates will be obligated to engage in any
market-making activities, or continue them once it has started.
SALOMON SMITH BARNEY HOLDINGS
Salomon Smith Barney Holdings Inc. is a holding company that provides
investment banking, securities and commodities trading, brokerage, asset
management and other financial services through its subsidiaries. Salomon Smith
Barney Holdings is a subsidiary of Citigroup Inc., a diversified financial
services holding company.
Salomon Smith Barney Holdings' ratios of earnings to fixed charges (Salomon
Smith Barney Holdings has no outstanding preferred stock) since 1996 are as
follows:
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ------------------------------------
2001 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges..... 1.32 1.32 1.46 1.11 1.17 1.37
</Table>
ERISA
Employee benefit plans subject to ERISA, individual retirement accounts,
Keogh plans and other similar plans subject to Section 4975 of the Internal
Revenue Code, entities the assets of which may be deemed to be "plan assets"
under ERISA regulations, and governmental plans subject to any substantially
similar laws (collectively, "Pension Type Accounts") can generally purchase the
TARGETS. However, each such Pension Type Account should consider whether
purchase of the TARGETS is prudent and consistent with the documents governing
such account. The fiduciary rules governing Pension Type Accounts are complex
and individual considerations may apply to a particular account. Accordingly,
any fiduciary of a Pension Type Account should consult with its legal advisers
to determine whether purchase of the TARGETS is permissible under the fiduciary
rules. Each Purchaser will be deemed to have made certain representations
concerning its purchase or other acquisition of the TARGETS. You should refer to
the section "ERISA Considerations" in this prospectus.
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14
RISK FACTORS
You should carefully consider the following risk factors in addition to the
other information contained in this prospectus before investing in the TARGETS.
Hypothetical examples illustrating certain of the risks described in each of the
first four risk factors can be found above in the section "Maturity Payment --
Hypothetical Examples".
YOUR INVESTMENT IN THE TARGETS WILL RESULT IN A LOSS IF THE PRICE OF THE COMMON
STOCK DECLINES
The amount that you receive at maturity will depend on the price of the
common stock on the first and last day of each reset period and over the 10-day
calculation period prior to maturity. The amount of the maturity payment may be
less than the amount you paid for your TARGETS, and may be zero, except to the
extent of any quarterly distributions. For example, if the price of the common
stock over the 10-day calculation period prior to maturity is less than the
price of the common stock at the time the TARGETS are issued (even if the price
of the common stock had been greater than that value at some time during the
term of the TARGETS), the maturity payment for each TARGETS will be less than
the initial offering amount of each TARGETS, in which case your investment in
the TARGETS will result in a loss, except to the extent of any quarterly
distributions. If the value of the stock return is zero on the final scheduled
distribution date, you will receive only the principal amount per TARGETS. If
becomes insolvent or bankrupt, an investment in the TARGETS
could result in a loss of the amount invested, except to the extent of any
quarterly distributions.
YOUR INVESTMENT IN THE TARGETS MAY RESULT IN A LOSS EVEN IF THE PRICE OF THE
COMMON STOCK RISES
If the price of the common stock declines during the period between the
issue date and the first reset date or in any subsequent monthly period during
the term of the TARGETS, the value of the periodic capped return for that reset
period will be negative. Because the amount of the payment to you at maturity is
based on the compounded value of the periodic capped return for the reset
periods during the term of the TARGETS, the likelihood that the value of the
stock return will be negative increases as the number of periodic capped returns
with negative values increases and as the size of the decline in the price of
the common stock in any reset period increases. As demonstrated by some of the
hypothetical examples in the section "Maturity Payment" above, the maturity
payment may be less than the amount of your investment even if the price of the
common stock has increased during one or more monthly periods during the term of
the TARGETS or if the price of the common stock as of the maturity date is
greater than its price at issuance. In fact, assuming a [5%] cap on appreciation
in each reset period and a total of [36] reset periods, if the common stock
declines in any single reset period by approximately [82%] or more, the maturity
payment amount will be less than the amount of your investment, even if the
price of the common stock increases in every other reset period.
THE APPRECIATION OF YOUR INVESTMENT IN THE TARGETS WILL BE CAPPED
The TARGETS provide less opportunity for equity appreciation than a direct
investment in the common stock because the periodic capped return will operate
to limit the portion of any appreciation in the price of the common stock in
which you will share to approximately the first [5%] of the increase in any
reset period, but will not limit your exposure in any reset period to any
depreciation in the price of the common stock. If the price of the common stock
increases by more than approximately [5%] in any reset period during the term of
the TARGETS, your return on the TARGETS will be less than your return on a
similar security that was directly linked to the common stock but was not
subject to a cap on appreciation. There is no cap or limit on the amount of
depreciation during any reset period.
YOU HAVE NO RIGHTS AGAINST EVEN THOUGH THE MATURITY PAYMENT
ON THE TARGETS IS BASED ON THE PRICE OF 'S COMMON STOCK
The historical common stock price is not an indicator of the future
performance of the common stock during the term of the TARGETS. Changes in the
price of the common stock will affect the trading price of the TARGETS, but it
is impossible to predict whether the price of the common stock will rise or
fall.
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15
The yield on the TARGETS is higher than the current dividend yield on the
common stock. However, it may not remain higher through the term of the TARGETS
if increases its dividends. In addition, you will not
receive dividends or other distributions paid on the common stock.
is not in any way involved with this offering and has
no obligations relating to the TARGETS or holders of the TARGETS. In addition,
you will have no voting rights with respect to the common stock of
.
is currently subject to SEC reporting requirements, and
distributes reports, proxy statements and other information to its stockholders.
In the event that ceases to be subject to these reporting
requirements, pricing information for the TARGETS may be more difficult to
obtain and the value, trading price and liquidity of the common stock and the
TARGETS may be reduced.
THE PRICE AT WHICH YOU WILL BE ABLE TO SELL YOUR TARGETS PRIOR TO MATURITY MAY
BE SUBSTANTIALLY LESS THAN THE AMOUNT YOU ORIGINALLY INVEST
We believe that the trading value of the TARGETS will depend on the price
of the common stock and on 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 at which you will
be able to sell the TARGETS prior to maturity may be substantially less than the
amount you originally invest if the value of the common stock at that time is
less than the price of the common stock when the TARGETS are purchased. The
following paragraphs describe what we expect to be the impact on the market
value of the TARGETS of a change in a specific factor, assuming all other
conditions remain constant.
Common Stock Price. We expect that the market value of the TARGETS will
depend substantially on the amount, if any, by which the common stock price
changes from the price of the common stock when the TARGETS are issued. If you
choose to sell your TARGETS when the common stock price exceeds the common stock
price at the time the TARGETS were issued, you may receive substantially less
than the amount that would be payable at maturity based on that common stock
price because of expectations that the common stock will continue to fluctuate
until the maturity payment is determined. Increases in the price of the common
stock above the cap of approximately [5%] on monthly appreciation may not be
reflected in the trading price of the TARGETS. If you choose to sell your
TARGETS when the common stock price is below the common stock price at the time
the TARGETS were issued, you can expect to receive less than the amount you
originally invested, except to the extent of any quarterly distributions.
Because of the cap on monthly appreciation, the price at which you will be able
to sell your TARGETS prior to maturity may be substantially less than the amount
originally invested, even if the price of the common stock when you sell your
TARGETS is equal to, or higher than, the price of the common stock at the time
you bought your TARGETS.
Trading prices of the common stock will be influenced by
's results of operations and by complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, 's market segment and the stock exchange on which
the common stock is traded. Salomon Smith Barney Holdings' hedging activities in
the common stock of its obligations under the forward contract, the issuance of
securities similar to the TARGETS and other trading activities by Salomon Smith
Barney Holdings, its affiliates and other market participants can affect the
price of the common stock.
The price of 's common stock has been volatile in
recent months. You should refer to the section "Historical Data on the Common
Stock" in this prospectus.
Interest Rates. Because the TARGETS pay quarterly distributions, we expect
that the trading value of the TARGETS will be affected by changes in interest
rates. In general, if U.S. interest rates increase, the trading value of the
TARGETS may decrease. If U.S. interest rates decrease, the trading value of the
TARGETS may increase. Interest rates may also affect the U.S. economy and, in
turn, the price of the common stock, which, for the reasons discussed above,
would affect the value of the TARGETS. Rising U.S. interest rates may result in
a lower common stock price and, thus, a lower value of the TARGETS. Falling U.S.
interest rates may result in a higher common stock price and, thus, a higher
value of the TARGETS.
Dividend Yields. If the dividend yield on the common stock increases, we
expect that the value of the TARGETS may decrease, since the TARGETS do not
incorporate the value of such payments. Conversely, if the dividend yield on the
common stock decreases, the value of the TARGETS may increase.
14
16
Salomon Smith Barney Holdings' Credit Ratings, Financial Condition and
Results. Actual or anticipated changes in Salomon Smith Barney Holdings' credit
ratings, financial condition or results may affect the market value of the
TARGETS.
Economic Conditions and Earnings Performance of . General
economic conditions and the earnings results of and real or
anticipated changes in such conditions or results may affect the market value of
the TARGETS.
The impact of one of the factors specified above, such as an increase in
interest rates, may offset some or all of any change in the trading value of the
TARGETS attributable to another factor, such as an increase in the price of the
common stock.
In general, assuming all relevant factors are held constant, we expect that
the effect on the trading value of the TARGETS of a given change in most of the
factors listed above may be less if it occurs later in the term of the TARGETS
than if it occurs earlier in the term of the TARGETS.
BECAUSE THE MATURITY OF THE TARGETS CAN BE ACCELERATED, THE TRADING PRICE OF THE
TARGETS MAY BE LESS THAN YOU WOULD OTHERWISE EXPECT
If an acceleration event occurs, the maturity of the TARGETS will be
accelerated and you will receive with respect to each TARGETS the accelerated
maturity payment and a pro rata portion of the proceeds of the sale of the
treasury securities. Because the amount that would be payable on the accelerated
maturity date is uncertain, since it would depend on when an acceleration event
occurs, the trading price of the TARGETS may be less than what you would
otherwise expect based on the price of the common stock and the level of
interest rates at a particular time.
YOU MAY NOT RECEIVE YIELD ENHANCEMENT PAYMENTS ON THE DATE THEY ARE DUE BECAUSE
THEY CAN BE DEFERRED
The failure by Salomon Smith Barney Holdings to make any yield enhancement
payments on the date they are due will not constitute an acceleration event.
Salomon Smith Barney Holdings will be allowed under the forward contract to
delay making any unpaid yield enhancement payments until the maturity date or
the accelerated maturity date.
YOU WILL HAVE LIMITED VOTING RIGHTS WITH RESPECT TO TRUST [XII] AND THE TRUSTEES
You will have limited voting rights with respect to Trust [XII] and will
not be entitled to vote to appoint, remove or replace, or increase or decrease
the number of, the trustees. These voting rights will be held exclusively by
Salomon Smith Barney Holdings, as the holder of the common securities of Trust
[XII]. You should refer to the section "Description of the TARGETS -- Voting
Rights" in this prospectus.
THE MATURITY PAYMENT ON THE TARGETS MAY BE REDUCED IF THE COMMON STOCK IS
DILUTED BECAUSE THE MATURITY PAYMENT WILL NOT BE ADJUSTED FOR ALL EVENTS THAT
DILUTE THE COMMON STOCK
The maturity payment and accelerated maturity payment are subject to
adjustment for a number of events arising from stock splits and combinations,
stock dividends, a number of other actions of that modify
its capital structure and a number of other transactions involving
, as well as for a liquidation, dissolution or winding up of
. You should refer to the section "Description of the
TARGETS -- Dilution Adjustments". The maturity payment and accelerated maturity
payment will not be adjusted for other events that may adversely affect the
price of the common stock, such as offerings of common stock for cash or in
connection with acquisitions. Because of the relationship of the maturity
payment and accelerated maturity payment to the price of the common stock, such
other events may reduce the maturity payment on the TARGETS.
IF THE INTERNAL REVENUE SERVICE ASSERTS THAT OUR TAX CHARACTERIZATION OF THE
TARGETS IS INCORRECT, YOU MAY BE REQUIRED TO PAY TAXES ON INCOME BEFORE YOU
ACTUALLY RECEIVE IT OR AT A HIGHER RATE THAN YOU WOULD OTHERWISE EXPECT
No statutory, judicial or administrative authority directly addresses the
characterization of the TARGETS or instruments similar to the TARGETS for U.S.
federal income tax purposes. As a result, significant aspects of the U.S.
federal income tax consequences of an investment in the TARGETS are not
15
17
certain. There is no ruling from the Internal Revenue Service with respect to
the TARGETS and the Internal Revenue Service may not agree with the conclusions
expressed under the section "United States Federal Income Tax Considerations" in
this prospectus.
YOU MAY NOT BE ABLE TO SELL YOUR TARGETS IF AN ACTIVE TRADING MARKET FOR THE
TARGETS DOES NOT DEVELOP
We will apply to list the TARGETS on . However,
there may not be a secondary market in the TARGETS and, if there is a secondary
market, it may not be liquid. If the secondary market for the TARGETS is
limited, there may be few buyers should you choose to sell your TARGETS prior to
maturity. This may affect the price you receive.
In addition, any market that develops for the TARGETS may influence and is
likely to be influenced by the market for the common stock. For example, the
price of the common stock could be affected by
- sales of common stock by investors who view the TARGETS as a more
attractive means of equity participation in and
- hedging or arbitrage trading activity that may develop involving the
TARGETS and the common stock.
BECAUSE PURCHASES AND SALES BY AFFILIATES OF SALOMON SMITH BARNEY HOLDINGS MAY
REDUCE THE PRICE OF THE COMMON STOCK, YOUR MATURITY PAYMENT OR THE PRICE YOU
RECEIVE IF YOU SELL YOUR TARGETS MAY BE REDUCED
Salomon Smith Barney Holdings' affiliates, including Salomon Smith Barney
Inc., may from time to time buy or sell the common stock or derivative
instruments relating to the common stock for their own accounts in connection
with their normal business practices or in connection with hedging Salomon Smith
Barney Holdings' obligations under the forward contract. These transactions
could affect the price of the common stock. You should refer to the section "Use
of Proceeds and Hedging Activities" in this prospectus.
Salomon Smith Barney Inc. or an affiliate may enter into a swap agreement
with one of Salomon Smith Barney Holdings' other affiliates in connection with
the sale of the TARGETS and may earn additional income as a result of payments
pursuant to the swap or related hedge transactions.
THE PAYMENTS YOU RECEIVE ON THE TARGETS WILL LIKELY BE DELAYED OR REDUCED IN THE
EVENT OF A BANKRUPTCY OF SALOMON SMITH BARNEY HOLDINGS
Although the TARGETS are securities of Trust [XII], the ability of Trust
[XII] to make payments under the TARGETS depends upon its receipt from Salomon
Smith Barney Holdings under the forward contract of (1) the total maturity
payments or total accelerated maturity payments and (2) any yield enhancement
payments. The ability of Salomon Smith Barney Holdings to meet its obligations
under the forward contract and, in turn, the ability of Trust [XII] to meet its
obligations under the TARGETS, therefore depends on the solvency and
creditworthiness of Salomon Smith Barney Holdings. In the event of a bankruptcy
of Salomon Smith Barney Holdings, any recovery by the holders of TARGETS will
likely be substantially delayed and may be less than each holder's pro rata
portion of the forward contract.
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18
AVAILABLE INFORMATION
Salomon Smith Barney Holdings files annual, quarterly and special reports,
proxy statements and other information (File No. 1-4346) with the SEC. You may
read and copy any document Salomon Smith Barney Holdings files at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Salomon Smith Barney Holdings' SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov.
Separate financial statements of Trust [XII] have not been included in this
prospectus. Salomon Smith Barney Holdings does not believe that these financial
statements would be material to you because
- Salomon Smith Barney Holdings, an SEC reporting company, owns all the
voting securities of Trust [XII],
- Trust [XII] has no independent operations,
- Salomon Smith Barney Holdings is the obligor under the forward contract,
and
- Salomon Smith Barney Holdings has fully and unconditionally guaranteed
Trust [XII]'s obligations under the TARGETS to the extent that Trust
[XII] has funds available to meet its obligations.
In its future filings under the Securities Exchange Act of 1934, a footnote
to Salomon Smith Barney Holdings' annual financial statements will state
- that Trust [XII] is consolidated with Salomon Smith Barney Holdings,
- that the sole assets of Trust [XII] are the forward contract and the
treasury securities, and
- that the guarantee, when taken together with the forward contract, the
related indenture, the declaration of trust of Trust [XII] and Salomon
Smith Barney Holdings' obligations to pay all fees and expenses of Trust
[XII], constitutes a full and unconditional guarantee by Salomon Smith
Barney Holdings of Trust [XII]'s obligations under the TARGETS.
Salomon Smith Barney Holdings and Trust [XII] have filed with the SEC a
registration statement (No. 333- ) which contains additional information
not included in this prospectus. A copy of the registration statement can be
obtained from the SEC as described above or from Salomon Smith Barney Holdings.
The SEC allows Salomon Smith Barney Holdings to "incorporate by reference"
the information it files, which means that Salomon Smith Barney Holdings can
disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and later information filed with the SEC will update and supersede
this information. We incorporate by reference the documents filed by Salomon
Smith Barney Holdings listed below and any future filings made by Salomon Smith
Barney Holdings with the SEC under Section 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act until the later of the completion of the offering of the
TARGETS and the cessation of market-making activities in the TARGETS by Salomon
Smith Barney Inc. and its broker-dealer affiliates:
- Annual Report on Form 10-K for the year ended December 31, 2000,
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001
and June 30, 2001, and
- Current Reports on Form 8-K filed on January 17, 2001, February 2,
2001, February 28, 2001, March 6, 2001 (as amended on March 29, 2001),
March 23, 2001, April 17, 2001, May 30, 2001 and July 17, 2001.
17
19
You may request a copy of these filings, at no cost, by writing or
telephoning Salomon Smith Barney Holdings at the following address:
Treasurer
Salomon Smith Barney Holdings Inc.
388 Greenwich Street
New York, NY 10013
212-816-6000
You should rely only on the information incorporated by reference or
provided in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of the document.
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20
SALOMON SMITH BARNEY HOLDINGS
Salomon Smith Barney Holdings operates through its subsidiaries in two
business segments, Investment Services and Asset Management. Salomon Smith
Barney Holdings provides investment banking, securities and commodities trading,
capital raising, asset management, advisory, research and brokerage services to
its customers, other financial services and executes proprietary trading
strategies on its own behalf. As used in this section, unless the context
otherwise requires, Salomon Smith Barney Holdings refers to Salomon Smith Barney
Holdings Inc. and its consolidated subsidiaries.
Citigroup Inc., Salomon Smith Barney Holdings' parent, is a diversified
holding company whose businesses provide a broad range of financial services to
consumer and corporate customers around the world. Citigroup Inc.'s activities
are conducted through Global Consumer, Global Corporate, Global Investment
Management and Private Banking, and Investment Activities.
Salomon Smith Barney Holdings is a global, full-service investment banking
and securities brokerage firm. Salomon Smith Barney Holdings provides a full
range of financial advisory, research and capital raising services to
corporations, governments and individuals. The firm's more than 12,100 Financial
Consultants, located in more than 510 offices across the United States, service
approximately 7.3 million client accounts, representing approximately $977
billion in assets.
Salomon Smith Barney Holdings' global investment banking services encompass
a full range of capital market activities, including the underwriting and
distribution of debt and equity securities for United States and foreign
corporations and for state, local and other governmental and government
sponsored authorities. Salomon Smith Barney Holdings frequently acts as an
underwriter or private placement agent in corporate and public securities
offerings and provides alternative financing options. It also provides financial
advice to investment banking clients on a wide variety of transactions including
mergers and acquisitions, divestitures, leveraged buyouts, financial
restructurings and a variety of cross-border transactions.
The Private Client Division provides investment advice and financial
planning and brokerage services for approximately 7.3 million client accounts,
primarily through the network of Salomon Smith Barney Financial Consultants.
The Asset Management segment is comprised of two primary asset management
business platforms: Salomon Brothers Asset Management and Smith Barney Asset
Management. These platforms offer a broad range of asset management products and
services from global investment centers, including mutual funds, closed-end
funds, and managed accounts. In addition, the Asset Management group offers a
broad range of unit investment trusts.
The principal offices of Salomon Smith Barney Holdings are located at 388
Greenwich Street, New York, New York 10013, and its telephone number is (212)
816-6000. Salomon Smith Barney Holdings, a New York corporation, was
incorporated in 1977.
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USE OF PROCEEDS AND HEDGING ACTIVITIES
Trust [XII] will use approximately 85% to 90% of the total proceeds from
the sale of the TARGETS and the common securities to buy the forward contract
from Salomon Smith Barney Holdings, and approximately 10% to 15% of the proceeds
to buy the treasury securities. Salomon Smith Barney Holdings will use a portion
of the net proceeds from the sale of the forward contract for general corporate
purposes, which may include capital contributions to subsidiaries of Salomon
Smith Barney Holdings and/or the reduction or refinancing of borrowings of
Salomon Smith Barney Holdings or its subsidiaries. In order to fund its
business, Salomon Smith Barney Holdings expects to incur additional debt in the
future. To the extent that any TARGETS the underwriter is purchasing for resale
are not sold, the aggregate proceeds to Salomon Smith Barney Holdings and its
subsidiaries would be reduced. Salomon Smith Barney Holdings or an affiliate may
enter into a swap agreement with one of Salomon Smith Barney Holdings'
affiliates in connection with the sale of the TARGETS and may earn additional
income as a result of payments pursuant to such swap or related hedge
transactions.
Salomon Smith Barney Holdings or one or more of its subsidiaries will use
the remainder of the net proceeds from the sale of the forward contract for
hedging activities related to Salomon Smith Barney Holdings' obligations under
the forward contract. On or prior to the closing date of the TARGETS offering,
Salomon Smith Barney Holdings, directly or through its subsidiaries, will hedge
its anticipated exposure under the forward contract by the purchase or sale of
common stock of or options, futures contracts, forward contracts
or swaps or options on the foregoing, or other derivative or synthetic
instruments related to, the common stock.
From time to time after the initial sale of the TARGETS and prior to the
maturity date or accelerated maturity date, depending on market conditions,
including the price of the common stock, Salomon Smith Barney Holdings expects
that it or its subsidiaries will increase or decrease their initial hedge
positions through various transactions and may purchase or sell common stock or
options, swaps, futures contracts, forward contracts or other derivative or
synthetic instruments related to the common stock. In addition, Salomon Smith
Barney Holdings and its subsidiaries may purchase or sell the TARGETS from time
to time. Salomon Smith Barney Holdings or its subsidiaries may also take
positions in other types of appropriate financial instruments that may become
available in the future.
To the extent that Salomon Smith Barney Holdings or its subsidiaries have a
long or short hedge position in the common stock or options, swaps, futures
contracts, forward contracts or other derivative or synthetic instruments
related to the common stock, they may liquidate all or a portion of their
holdings close to maturity of the forward contract and the TARGETS. Depending
on, among other things, future market conditions, the aggregate amount and
composition of those positions are likely to vary over time. Profits or losses
from any of those positions cannot be determined until the position is closed
out and any offsetting position or positions are taken into account. Although
Salomon Smith Barney Holdings has no reason to believe that this hedging
activity will have a material effect on the price of the TARGETS or options,
swaps, futures contracts, forward contracts or other derivative or synthetic
instruments, or on the value of the common stock, the hedging activities of
Salomon Smith Barney Holdings and its subsidiaries may affect those prices or
value.
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ISSUER OF THE COMMON STOCK
According to publicly available documents, is [brief
description of issuer of the common stock]. is currently subject
to the informational requirements of the Securities Exchange Act. Accordingly,
files reports (including its Annual Report on Form 10-K for the
fiscal year ended and its Quarterly Reports on Form 10-Q for the
fiscal quarters ended ), proxy statements and other information
with the SEC. Copies of 's registration statements, reports,
proxy statements and other information may be inspected and copied at offices of
the SEC at the locations listed above under "Available Information".
is not affiliated with Trust [XII], will not receive any of
the proceeds from the sale of the TARGETS and will have no obligations with
respect to the TARGETS, the treasury securities or the forward contract. This
prospectus relates only to the TARGETS offered hereby and does not relate to
or the common stock.
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HISTORICAL DATA ON THE COMMON STOCK
The common stock is listed on under the symbol " ". The
following table sets forth, for each of the quarterly periods indicated, the
high and low sales prices for the common stock, as reported on
and adjusted to reflect stock splits and stock dividends.
<Table>
<Caption>
DIVIDEND
DECLARED
HIGH LOW PER SHARE
---- --- ---------
1996
Quarter
First.................................................. $ $ $
Second.................................................
Third..................................................
Fourth.................................................
1997
Quarter
First..................................................
Second.................................................
Third..................................................
Fourth.................................................
1998
Quarter
First..................................................
Second.................................................
Third..................................................
Fourth.................................................
1999
Quarter
First..................................................
Second.................................................
Third..................................................
Fourth.................................................
2000
Quarter
First..................................................
Second.................................................
Third..................................................
Fourth.................................................
2001
Quarter
First..................................................
Second.................................................
Third (through , 2001)..........................
</Table>
The closing price of the common stock on , 2001 was $ .
According to 's Quarterly Report on Form 10-Q for the fiscal
quarter ended , as of , there were
shares of common stock outstanding. During the period reflected in the above
table, split its common stock for on . The
data appearing in the above table has been adjusted to reflect this split.
Holders of the TARGETS will not be entitled to any rights with respect to
the common stock (including, without limitation, voting rights or rights to
receive dividends or other distributions in respect thereof).
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24
TARGETS TRUST [XII]
Trust [XII] is a statutory business trust formed under Delaware law
pursuant to a declaration of trust executed by Salomon Smith Barney Holdings, as
sponsor, and the trustees of TARGETS Trust [XII] (as described below), and the
filing of a certificate of trust with the Secretary of State of the State of
Delaware. The declaration will be amended and restated in its entirety
substantially in the form filed as an exhibit to the registration statement of
which this prospectus forms a part. The amended and restated declaration of
trust will be qualified as an indenture under the Trust Indenture Act of 1939.
Upon issuance of the TARGETS, the purchasers thereof will own all the TARGETS.
Salomon Smith Barney Holdings will directly or indirectly acquire all of the
common securities in an aggregate amount equal to 3% or more of the total
capital of Trust [XII].
Trust [XII] will use all the proceeds derived from the issuance of the
TARGETS and the common securities to purchase the forward contract and treasury
securities and, accordingly, the assets of Trust [XII] will consist solely of
the forward contract and treasury securities. Of the total proceeds from the
sale of the trust securities, approximately 85% to 90% will be invested by Trust
[XII] in the forward contract and approximately 10% to 15% will be invested by
Trust [XII] in the treasury securities. Trust [XII] exists for the exclusive
purposes of
- issuing its trust securities representing undivided beneficial interests
in the assets of Trust [XII],
- investing the gross proceeds of its trust securities in the forward
contract and the treasury securities, and
- engaging only in activities incidental to the above.
Trust [XII]'s business and affairs are conducted by its trustees, each
appointed by Salomon Smith Barney Holdings as holder of the common securities.
Pursuant to the declaration, the number of trustees of Trust [XII] will be five:
- The Chase Manhattan Bank, a New York banking corporation that is
unaffiliated with Salomon Smith Barney Holdings, as the institutional
trustee,
- Chase Manhattan Bank USA, National Association, a Delaware state banking
corporation with its principal place of business in the State of
Delaware, as the Delaware trustee, and
- three individual trustees who are employees or officers of, or who are
affiliated with, Salomon Smith Barney Holdings. Initially, the individual
trustees will be Barbara A. Yastine, Michael J. Day and Mark I. Kleinman,
each of whom is an officer of Salomon Smith Barney Holdings.
The institutional trustee will act as the sole indenture trustee under the
declaration for purposes of compliance with the Trust Indenture Act until it is
removed or replaced by the holder of the common securities. The Chase Manhattan
Bank will also act as indenture trustee under each of the forward contract, and
the guarantee that Salomon Smith Barney Holdings will execute and deliver for
the benefit of the holders of TARGETS.
The institutional trustee will hold title to the forward contract for the
benefit of the holders of Trust [XII]'s trust securities and, in its capacity as
the holder, the institutional trustee will have the power to exercise all
rights, powers and privileges under the indenture pursuant to which the forward
contract is issued. In addition, the institutional trustee will maintain
exclusive control of a segregated non-interest bearing bank account to hold all
payments made in respect of the forward contract and the treasury securities for
the benefit of the holders of Trust [XII]'s trust securities. The institutional
trustee will make payments of distributions and payments on liquidation and
otherwise to the holders of the trust securities out of funds from the
segregated bank account.
The indenture trustee will act as trustee for the forward contract under
the indenture for purposes of compliance with the provisions of the Trust
Indenture Act.
The guarantee trustee will hold the guarantee for the benefit of the
holders of the TARGETS. Salomon Smith Barney Holdings, as direct or indirect
holder of all the common securities, will have the right, subject to certain
restrictions contained in the declaration, to appoint, remove or replace any
trustees and to increase or
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decrease the number of trustees. Salomon Smith Barney Holdings will pay all fees
and expenses related to Trust [XII] and the offering of Trust [XII]'s trust
securities.
The rights of the holders of the TARGETS, including economic rights, rights
to information and voting rights, are set forth in the declaration, the Delaware
Business Trust Act and the Trust Indenture Act.
The location of the principal executive office of Trust [XII] is c/o
Salomon Smith Barney Holdings Inc., 388 Greenwich Street, New York, New York
10013 and its telephone number is (212) 816-6000.
DESCRIPTION OF THE TARGETS
The TARGETS will be issued pursuant to the terms of the amended and
restated declaration of trust. The amended and restated declaration of trust
will be qualified as an indenture under the Trust Indenture Act. The
institutional trustee, The Chase Manhattan Bank, will act as the institutional
trustee for the TARGETS under the amended and restated declaration of trust for
purposes of compliance with the provisions of the Trust Indenture Act. The terms
of the TARGETS will include those stated in the amended and restated declaration
of trust and those made part of the amended and restated declaration of trust by
the Trust Indenture Act. Pursuant to the amended and restated declaration of
trust, every holder of the TARGETS will be deemed to have expressly assented and
agreed to the terms of, and will be bound by, the amended and restated
declaration of trust. The following is a summary of the terms and provisions of
the TARGETS. This summary does not describe all of the terms and provisions of
the amended and restated declaration of trust and the guarantee. You should read
the forms of these documents, which are filed as exhibits to the registration
statement.
GENERAL
The amended and restated declaration of trust authorizes the individual
trustees to issue the trust securities on behalf of Trust [XII]. The trust
securities represent undivided beneficial interests in the assets of Trust
[XII]. All of the common securities of Trust [XII] will be owned, directly or
indirectly, by Salomon Smith Barney Holdings. The common securities rank pari
passu with the TARGETS and payments will be made on the common securities on a
pro rata basis with the TARGETS, except that upon the occurrence of an
acceleration event, the rights of the holders of the common securities to
receive payments will be subordinated to the rights of the holders of the
TARGETS. The amended and restated declaration does not permit the issuance by
Trust [XII] of any securities other than its trust securities or the incurrence
of any debt by Trust [XII]. Pursuant to the amended and restated declaration,
the institutional trustee will hold title to the forward contract and the
treasury securities for the benefit of the holders of the trust securities. The
payment of distributions out of money held by Trust [XII] and payments upon
maturity of the TARGETS out of money held by Trust [XII] are guaranteed by
Salomon Smith Barney Holdings to the extent described under "Description of the
Guarantee". The guarantee will be held by The Chase Manhattan Bank, the
guarantee trustee, for the benefit of the holders of the TARGETS. The guarantee
does not cover payment of distributions when Trust [XII] does not have
sufficient available funds to pay such distributions. In such event, the
remedies of a holder of the TARGETS are to
- vote to direct the institutional trustee to enforce the institutional
trustee's rights under the forward contract and treasury securities,
- if the institutional trustee fails to enforce its rights against Salomon
Smith Barney Holdings, initiate a proceeding against Salomon Smith Barney
Holdings to enforce the institutional trustee's rights under the forward
contract, or
- if the failure by Trust [XII] to pay distributions is attributable to the
failure of Salomon Smith Barney Holdings to pay amounts in respect of the
forward contract, institute a proceeding directly against Salomon Smith
Barney Holdings for enforcement of payment to such holder of the amounts
owed on such holder's pro rata interest in the forward contract.
The aggregate number of TARGETS to be issued will be , as described in
"Underwriting". The TARGETS will be issued in fully registered form. The TARGETS
will not be issued in bearer form. See "-- Book-Entry Only Issuance".
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MATURITY PAYMENT
The TARGETS will mature on , subject to acceleration
to the accelerated maturity date upon an acceleration event. See
"-- Acceleration of Maturity Date; Enforcement of Rights". On the maturity date,
holders of the TARGETS will be entitled to receive, to the extent Trust [XII]
has assets available, the maturity payment with respect to each TARGETS. On the
maturity date, holders of the TARGETS will also receive a final quarterly
distribution with respect to each TARGETS, plus any accrued and unpaid yield
enhancement payments.
The maturity payment per TARGETS will equal the sum of (A) the initial
principal amount of $[10.00] per TARGETS and (B) the stock return payment, which
may be positive, zero or negative.
The stock return payment will equal the product of:
Initial Principal Amount of $[10.00] per TARGETS X Stock Return.
The stock return will equal the compounded value of the capped returns for
each period, computed in the following manner, and expressed in this prospectus
as a percentage:
Product of [(1.00 + the periodic capped return) for each reset period] -
1.00
The periodic capped return for a reset period (including the period ending
at maturity) will equal the following fraction:
Ending Value - Starting Value
----------------------------------
Starting Value
Reset dates occur on the 15th day of each month, beginning , and we
refer to the period between any two consecutive reset dates (or the issue date
and the first reset date) as reset periods. The periodic capped return for any
reset period will not in any circumstance be greater than a value to be
determined on the date the TARGETS are priced, which value is expected to be
approximately [5%].
The stock return will be calculated by compounding the product of the
periodic capped returns for each reset period. Assuming a [5%] cap on
appreciation in each reset period and a total of [36] reset periods, the stock
return cannot be more than [479.18%] (a maximum value that represents an
increase in the price of the common stock of at least [5%] in each reset
period).
The ending value for any reset period other than the reset period ending at
maturity will be the closing price of the common stock on the reset date at the
end of the period or, if that day is not a trading day, the closing price on the
most recent trading day. The ending value for the reset period ending at
maturity will be the ten day closing price of the common stock.
The starting value for the initial reset period will be $ , which is
the closing price of the common stock on the date the TARGETS are priced for
initial sale to the public. The starting value for each subsequent reset period
(including the reset period ending on maturity) will equal the ending value for
the immediately preceding reset period.
The closing price of the common stock on any date of determination will be
the daily closing sale price or, if no closing sale price is reported, the last
reported sale price of the common stock as reported on the New York Stock
Exchange. If the common stock is not listed on the New York Stock Exchange on
that date of determination, the closing price will be the last reported sale
price as reported in the composite transactions for the principal United States
exchange on which the common stock is listed. If the common stock is not listed
on a United States national or regional securities exchange, the closing price
will be the last quoted bid price for the common stock in the over-the-counter
market as reported by the Nasdaq Stock Market, the National Quotation Bureau or
a similar organization. Upon the occurrence of certain events described under
" -- Dilution Adjustments" below, the closing price will be calculated by
substituting the relevant security for the common stock.
The ten day closing price used to calculate the ending value at maturity
will be the average daily closing sale price or, if no closing sale price is
reported, the last reported sale price of the common stock, as reported on the
New York Stock Exchange for the 10 trading days immediately prior to but not
including the date one business day before the maturity date or the accelerated
maturity date, as the case may be. If the common
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stock is not listed on the New York Stock Exchange on any of those dates, the
ten day closing price will be the last reported sale price as reported in the
composite transactions for the principal United States securities exchange on
which the common stock is listed. If the common stock is not listed on a United
States national or regional securities exchange, the ten day closing price will
be the last quoted bid price for the common stock in the over-the-counter market
as reported by the Nasdaq Stock Market, National Quotation Bureau or similar
organization. Upon the occurrence of certain events described under "-- Dilution
Adjustments" below, the ten day closing price will be calculated by substituting
the relevant security for the common stock.
The periodic capped return is subject to adjustment upon the occurrence of
a number of events involving and its capital structure as
described further under "-- Dilution Adjustments" below.
ACCELERATION OF MATURITY DATE; ENFORCEMENT OF RIGHTS
If at any time an acceleration event occurs, the individual trustees will
give written instructions to the institutional trustee to sell the treasury
securities, dissolve Trust [XII] and, after satisfaction of creditors of Trust
[XII], cause to be distributed, as soon as is practicable following the
occurrence of such acceleration event, to the holders of the TARGETS in
liquidation of such holders' interests in Trust [XII], the accelerated maturity
payment with respect to each TARGETS and a pro rata portion of the treasury
proceeds, plus any accrued and unpaid yield enhancement payments.
The accelerated maturity payment with respect to each TARGETS will be paid
out of amounts received by Trust [XII] from Salomon Smith Barney Holdings in
respect of the forward contract and will be equal to the sum of (A) the initial
principal amount of $[10.00] per TARGETS and (B) the stock return as of the
accelerated maturity date.
The accelerated maturity date will be the date of the occurrence of the
event or events constituting such acceleration event.
The treasury proceeds will be the amount received by Trust [XII] as
proceeds from the sale of the treasury securities upon the occurrence of an
acceleration event. The individual trustees will send the institutional trustee
written notice and instructions to liquidate the treasury securities on an
accelerated maturity date. Upon receiving such notice, the institutional trustee
will solicit at least three bids and sell and transfer the treasury securities
to the highest of the three bidders.
The amount of either any accelerated maturity payment or the treasury
proceeds which, in either case, may be distributed to holders of the TARGETS
upon a dissolution and liquidation of Trust [XII] is uncertain. Accordingly, the
amount that a holder of TARGETS may receive on the accelerated maturity date is
uncertain.
An acceleration event will occur upon the occurrence of (1) a "tax event",
(2) an "investment company event" or (3) a "bankruptcy event".
A tax event will occur if Salomon Smith Barney Holdings requests, receives
and delivers to the individual trustees an opinion of nationally recognized
independent tax counsel experienced in such matters indicating that:
(1) on or after the date of this prospectus, one or more of the following
has occurred:
- an amendment to, change in or announced proposed change in the laws, or
any regulations thereunder, of the United States or any political
subdivision or taxing authority thereof or therein,
- a judicial decision interpreting, applying, or clarifying such laws or
regulations,
- an administrative pronouncement or action that represents an official
position, including a clarification of an official position, of the
governmental authority or regulatory body making such administrative
pronouncement or taking such action, or
- a threatened challenge asserted in connection with an audit of Salomon
Smith Barney Holdings or any of its subsidiaries or Trust [XII], or a
threatened challenge asserted in writing against any other taxpayer that
has raised capital through the issuance of securities that are
substantially similar to the forward contract or the TARGETS; and
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(2) there is more than an insubstantial risk that:
- Trust [XII] is, or will be, subject to United States federal income tax
with respect to income accrued or received on the forward contract or the
treasury securities, or
- Trust [XII] is, or will be, subject to more than a de minimis amount of
other taxes, duties or other governmental charges.
An investment company event will occur if Salomon Smith Barney Holdings
requests, receives and delivers to the individual trustees an opinion of
nationally recognized independent legal counsel experienced in such matters
indicating that as a result of the occurrence on or after the date of this
prospectus of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, Trust [XII] is or will be considered an
investment company which is required to be registered under the Investment
Company Act of 1940.
A bankruptcy event will occur if either of the following takes place:
(1) the entry of a decree or order
- of relief in respect of Salomon Smith Barney Holdings by a court having
jurisdiction in the premises in an involuntary case under the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law,
- appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of Salomon Smith Barney Holdings
or of any substantial part of its property, or
- ordering the winding up or liquidation of its affairs, and, in each case,
the continuance of any such decree or order unstayed and in effect for a
period of 90 consecutive days; or
(2) an action by Salomon Smith Barney Holdings to:
- commence a voluntary case under the federal bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law, or
- consent to the entry of an order for relief in an involuntary case under
any such law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of Salomon
Smith Barney Holdings or of any substantial part of its property, or
- make an assignment for the benefit of its creditors, or
- admit in writing its inability to pay its debts generally as they become
due, or
- take corporate action in furtherance of any of the foregoing.
The phrase pro rata means, with respect to any payment, distribution, or
treatment, proportionately to each holder of trust securities according to the
aggregate beneficial interests in the assets of Trust [XII] represented by the
trust securities held by the relevant holder in relation to the aggregate
beneficial interests in the assets of Trust [XII] represented by all trust
securities outstanding. If an acceleration event has occurred and is continuing,
any funds available to make a payment will be paid first to each holder of the
TARGETS proportionately according to the aggregate beneficial interests in the
assets of Trust [XII] represented by the TARGETS held by the relevant holder
relative to the aggregate beneficial interests in the assets of Trust [XII]
represented by all TARGETS outstanding. Only after satisfaction of all amounts
owed to the holders of the TARGETS, will payment be paid to each holder of
common securities proportionately according to the aggregate beneficial
interests in the assets of Trust [XII] represented by the common securities held
by the relevant holder relative to the aggregate beneficial interests in the
assets of Trust [XII] represented by all common securities outstanding.
On the date fixed for any payment of the accelerated maturity payment or
the treasury proceeds, the TARGETS and the common securities will no longer be
deemed to be outstanding and each TARGETS and common security will be deemed to
represent the right to receive an accelerated maturity payment and a pro rata
portion of the treasury proceeds, plus any accrued and unpaid yield enhancement
payments. If the
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accelerated maturity payments or any accrued and unpaid yield enhancement
payments can be paid only in part because Trust [XII] has insufficient assets
available to pay in full such amounts, then the amounts payable directly by
Trust [XII] in respect of the TARGETS will be paid on a pro rata basis. In
addition, in the case of a default by Salomon Smith Barney Holdings on its
obligations under the guarantee, the holders of the TARGETS will have a
preference over the holders of the common securities with respect to amounts
owed on the trust securities.
Subject to the institutional trustee obtaining a tax opinion as described
below, the holders of a majority of the TARGETS have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the institutional trustee, or direct the exercise of any trust or power
conferred upon the institutional trustee under the amended and restated
declaration of trust, including the right to direct the institutional trustee,
as holder of the forward contract and the treasury securities, to:
- direct the time, method and place of conducting any proceeding for any
remedy available to the indenture trustee, or exercising any trust or
power conferred on the indenture trustee with respect to the forward
contract,
- direct the time, method and place of conducting any proceeding for any
remedy available to the institutional trustee or exercise any trust or
power conferred on the institutional trustee with respect to the treasury
securities,
- waive the consequences of any acceleration event under the indenture that
are waivable under the indenture,
- exercise any right to rescind or annul a declaration that any accelerated
maturity payment will be due and payable or
- consent to any amendment, modification or termination of the indenture or
the forward contract, where such consent shall be required.
If a consent or action under the indenture would require the consent or act of
holders of a majority of the beneficial interests in the forward contract, only
the holders of at least a super majority of the TARGETS can direct the
institutional trustee to give the consent or take the action. The institutional
trustee will notify all holders of TARGETS of any notice of default received
from the indenture trustee with respect to the forward contract. Except with
respect to directing the time, method and place of conducting a proceeding for a
remedy available to the institutional trustee, the institutional trustee, as
holder of the forward contract and the treasury securities, will not take any of
the actions described above unless it has obtained an opinion of a nationally
recognized independent tax counsel experienced in such matters to the effect
that as a result of such action, Trust [XII] will not fail to be classified as a
grantor trust for United States federal income tax purposes.
If the institutional trustee fails to enforce its rights under the forward
contract, any holder of TARGETS can directly institute a legal proceeding
against Salomon Smith Barney Holdings to enforce the institutional trustee's
rights under the forward contract, without first instituting a legal proceeding
against the institutional trustee or any other person or entity. If Salomon
Smith Barney Holdings fails to pay amounts owed on the forward contract on the
date they are otherwise payable, then a holder of TARGETS may also directly
institute a direct action in respect of the amounts owed on the holder's pro
rata interest in the forward contract on or after the due date specified in the
forward contract, without first directing the institutional trustee to enforce
the terms of the forward contract or instituting a legal proceeding directly
against Salomon Smith Barney Holdings to enforce the institutional trustee's
rights under the forward contract. The holders of TARGETS will not be able to
exercise directly any other remedy available to the holder of the forward
contract. In connection with a direct action, Salomon Smith Barney Holdings will
be subrogated to the rights of a holder of TARGETS under the declaration to the
extent of any payment made by Salomon Smith Barney Holdings to that holder of
TARGETS in such direct action.
A waiver of an acceleration event under the indenture by the institutional
trustee at the direction of the holders of the TARGETS will constitute a waiver
of the corresponding acceleration event under the amended and restated
declaration of trust.
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30
Holders of TARGETS may give any required approval or direction at a
separate meeting of holders of TARGETS convened for this purpose, at a meeting
of holders of trust securities or by written consent. The individual trustees
will cause a notice of any meeting at which holders of TARGETS are entitled to
vote, or of any matter upon which action by written consent of the holders is to
be taken, to be mailed to each holder of record of TARGETS. Each notice will
include a statement setting forth the date of such meeting or the date by which
the action is to be taken, a description of any resolution proposed for adoption
at the meeting on which the holders are entitled to vote or of such matter upon
which written consent is sought and instructions for the delivery of proxies or
consents. No vote or consent of the holders of TARGETS will be required for
Trust [XII] to cancel TARGETS in accordance with the amended and restated
declaration of trust. It is anticipated that the only holder of TARGETS issued
in book-entry form will be Cede & Co., as nominee of DTC, and each beneficial
owner of TARGETS will be permitted to exercise the rights of holders of TARGETS
only indirectly through DTC and its participants.
Notwithstanding that holders of TARGETS are entitled to vote or consent
under any of the circumstances described above, any of the TARGETS that are
owned at that time by Salomon Smith Barney Holdings or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, Salomon Smith Barney Holdings, will not be entitled to vote or
consent and will, for purposes of such vote or consent, be treated as if they
were not outstanding.
QUARTERLY DISTRIBUTIONS
Holders of TARGETS will be entitled to receive quarterly distributions at
the rate per TARGETS of $ per quarter (except that the quarterly
distribution payment payable on will be $ per TARGETS),
payable on each February 15, May 15, August 15 and November 15, beginning
.
The quarterly distributions will be paid by Trust [XII] out of payments
under the treasury securities and the yield enhancement payments made to Trust
[XII] by Salomon Smith Barney Holdings under the forward contract. Of each
quarterly distribution payable to holders of the TARGETS, approximately %
will be paid out of payments received by Trust [XII] under the treasury
securities and approximately % will be paid out of yield enhancement
payments received by Trust [XII] from Salomon Smith Barney Holdings under the
forward contract.
The treasury securities and the forward contract will be the sole assets of
Trust [XII] and will be held by the institutional trustee on behalf of Trust
[XII]. The ability of Trust [XII] to make quarterly distributions on the TARGETS
is therefore entirely dependent on receipt by Trust [XII] of payments with
respect to both the treasury securities and the forward contract.
Under the forward contract, any yield enhancement payments which are
payable, but are not punctually paid, by Salomon Smith Barney Holdings on their
scheduled due date will cease to be due and payable and may instead be paid,
together with interest at % per annum compounded quarterly, on a future date
chosen by Salomon Smith Barney Holdings in its sole discretion. Any yield
enhancement payments that are not paid by Salomon Smith Barney Holdings prior to
maturity will become due and payable on the maturity date or the accelerated
maturity date, as the case may be.
Assuming quarterly distributions on the TARGETS with a hypothetical yield
of [11%] per annum, set forth below is an example of how the cash flows on the
TARGETS would be comprised. Trust [XII] will invest approximately 10% to 15% of
the proceeds of the offering in the treasury securities. Quarterly distributions
providing the assumed yield may require a larger cash flow than will be provided
by the treasury securities, in
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which case yield enhancement payments would be paid by the obligor of the
forward contract pursuant to the following schedule and based on the following:
<Table>
Hypothetical Offering Size:................................. $100,000,000
Hypothetical Annual Cash Flow:.............................. 11.00%
Hypothetical Payment Frequency:............................. Quarterly
Hypothetical Settlement Date:............................... August 15, 2001
Hypothetical Maturity Date:................................. August 15, 2004
</Table>
<Table>
<Caption>
TREASURY TREASURY TREASURY TREASURY YIELD
SECURITY SECURITY SECURITY SECURITY ENHANCEMENT ANNUALIZED
MATURITY UNIT PURCHASE CASH PAYMENTS TOTAL EQUIVALENT
DATE COST COST FLOW CASH FLOW CASH FLOW COUPON
- -------- -------- -------------- -------------- -------------- -------------- ----------
11/15/01 98.66% $ 1,322,312.13 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
02/15/02 98.03% $ 1,313,922.03 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
05/15/02 96.85% $ 1,298,080.02 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
08/15/02 95.92% $ 1,285,628.89 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
11/15/02 95.29% $ 1,277,104.76 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
02/15/03 93.79% $ 1,257,081.10 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
05/15/03 92.81% $ 1,243,933.04 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
08/15/03 91.75% $ 1,229,712.75 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
11/15/03 91.11% $ 1,221,068.00 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
02/15/04 89.43% $ 1,198,658.66 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
05/15/04 88.26% $ 1,182,923.87 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
08/15/04 87.26% $ 1,169,574.76 $ 1,340,271.77 $ 1,409,728.23 $ 2,750,000.00 11%
-------------- -------------- -------------- --------------
$15,000,000.00 $16,083,261.26 $16,916,738.74 $33,000,000.00
============== ============== ============== ==============
</Table>
A portion of each quarterly distribution should represent a return to you
of your initial investment in the TARGETS for tax purposes. In the final
prospectus, the following table will set forth information regarding the
distributions you will receive on the treasury securities to be acquired by
Trust [XII] with a portion of the proceeds received by Trust [XII] from the sale
of the TARGETS, the distributions you will receive from any yield enhancement
payments, the portion of each year's distributions that should constitute a
return of capital for U.S. federal income tax purposes, the amount of original
issue discount that should accrue on the treasury securities and the amount of
ordinary income that should accrue on any yield enhancement payments with
respect to a holder who acquires its trust securities at the issue price from
Salomon Smith Barney Inc. pursuant to the original offering. See "United States
Federal Income Tax Considerations".
<Table>
<Caption>
ANNUAL GROSS
DISTRIBUTIONS ANNUAL GROSS
FROM ANNUAL GROSS DISTRIBUTIONS FROM ANNUAL RETURN ANNUAL INCLUSION OF
ANNUAL GROSS YIELD DISTRIBUTIONS FROM YIELD ENHANCEMENT OF ORIGINAL ISSUE
DISTRIBUTIONS FROM ENHANCEMENT TREASURY SECURITIES PAYMENTS PER CAPITAL PER DISCOUNT IN INCOME
YEAR TREASURY SECURITIES PAYMENTS PER TARGETS TARGETS TARGETS PER TARGETS
- ---- ------------------- ----------------- ------------------- ------------------ ---------------- -------------------
<Caption>
ANNUAL INCLUSION OF
ORDINARY INCOME
FROM YIELD
ENHANCEMENT
PAYMENTS PER
YEAR TARGETS
- ---- -------------------
</Table>
DILUTION ADJUSTMENTS
The calculation of the periodic capped return will be subject to adjustment
from time to time in certain situations. Any such adjustments could have an
impact on the maturity payments or accelerated maturity payments to be paid by
Salomon Smith Barney Holdings to Trust [XII] upon maturity of the forward
contract and, therefore, on the maturity payments or accelerated maturity
payments to be paid by Trust [XII] to the holders of TARGETS.
If , after the closing date of the offering contemplated
hereby,
(1) pays a stock dividend or makes a distribution with respect to the
common stock in shares of such stock,
(2) subdivides or splits the outstanding shares of the common stock into a
greater number of shares,
(3) combines the outstanding shares of the common stock into a smaller
number of shares, or
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(4) issues by reclassification of shares of the common stock any shares of
other common stock of ,
then, in each such case, the starting value for the calculation of the periodic
capped return for the next occurring reset period after such event will be
multiplied by a dilution adjustment equal to a fraction, the numerator of which
will be the number of shares of common stock outstanding immediately before such
event and the denominator of which will be the number of shares of common stock
outstanding immediately after such event, plus, in the case of a
reclassification referred to in (4) above, the number of shares of other common
stock of . In the event of a reclassification referred to in (4) above as
a result of which no common stock is outstanding, the periodic capped return for
each subsequent reset period will be determined by reference to the other common
stock of issued in the reclassification.
If , after the closing date, issues, or declares a record date in
respect of an issuance of, rights or warrants to all holders of common stock
entitling them to subscribe for or purchase shares of common stock at a price
per share less than the then-current market price of the common stock, other
than rights to purchase common stock pursuant to a plan for the reinvestment of
dividends or interest, then, in each such case, the starting value for the
calculation of the periodic capped return for the next occurring reset period
after such event will be multiplied by a dilution adjustment equal to a
fraction, the numerator of which will be the number of shares of common stock
outstanding immediately before the adjustment is effected by reason of the
issuance of such rights or warrants, plus the number of additional shares of
common stock which the aggregate offering price of the total number of shares of
common stock so offered for subscription or purchase pursuant to such rights or
warrants would purchase at the then-current market price of the common stock,
which will be determined by multiplying the total number of shares so offered
for subscription or purchase by the exercise price of such rights or warrants
and dividing the product so obtained by such then-current market price, and the
denominator of which will be the number of shares of common stock outstanding
immediately before the adjustment is effected, plus the number of additional
shares of common stock offered for subscription or purchase pursuant to such
rights or warrants. To the extent that, after the expiration of such rights or
warrants, the shares of common stock offered thereby have not been delivered,
the starting value for the calculation of the periodic capped return for the
next occurring reset period after such event will be further adjusted to equal
the starting value which would have been in effect had such adjustment for the
issuance of such rights or warrants been made upon the basis of delivery of only
the number of shares of common stock actually delivered.
If , after the closing date, declares or pays a dividend or makes a
distribution to all holders of common stock of any class of its capital stock,
the capital stock of one or more of its subsidiaries, evidences of its
indebtedness or other non-cash assets, excluding any dividends or distributions
referred to above, or issues to all holders of common stock rights or warrants
to subscribe for or purchase any of its or one or more of its subsidiaries'
securities, other than rights or warrants referred to above, then, in each such
case, the starting value for the calculation of the periodic capped return for
the next occurring reset period after such event will be multiplied by a
dilution adjustment equal to a fraction, the numerator of which will be the
then-current market price of one share of the common stock, less the fair market
value (as determined by a nationally recognized independent investment banking
firm retained for this purpose by Salomon Smith Barney Holdings, whose
determination will be final) as of the time the adjustment is effected of the
portion of the capital stock, assets, evidences of indebtedness, rights or
warrants so distributed or issued applicable to one share of common stock, and
the denominator of which will be the then-current market price of one share of
the common stock.
Notwithstanding the foregoing, in the event that, with respect to any
dividend or distribution to which the above paragraph would otherwise apply, the
numerator in the fraction referred to in the above formula is less than $1.00 or
is a negative number, then Salomon Smith Barney Holdings may, at its option,
elect to have the adjustment provided by that paragraph not be made and in lieu
of such adjustment, on the maturity date, the holders of the TARGETS will be
entitled to receive an additional amount of cash equal to the product of the
number of the TARGETS held by such holder multiplied by the fair market value of
such indebtedness, assets, rights or warrants (determined, as of the date such
dividend or distribution is made, by a nationally recognized independent
investment banking firm retained for this purpose by Salomon Smith Barney
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Holdings, whose determination will be final) so distributed or issued applicable
to the number of shares of common stock underlying one TARGETS.
If , after the closing date, declares a record date in respect of a
distribution of cash, other than any permitted dividends described below, any
cash distributed in consideration of fractional shares of common stock and any
cash distributed in a reorganization event referred to below, by dividend or
otherwise, to all holders of the common stock, or makes an excess purchase
payment, then the starting value for the calculation of the periodic capped
return for the next occurring reset period after such event will be multiplied
by a dilution adjustment equal to a fraction, the numerator of which will be the
then-current market price of the common stock on such record date less the
amount of such distribution applicable to one share of common stock which would
not be a permitted dividend, or, in the case of an excess purchase payment, less
the aggregate amount of such excess purchase payment for which adjustment is
being made at such time divided by the number of shares of common stock
outstanding on such record date, and the denominator of which will be such
then-current market price of the common stock.
For purposes of these adjustments, a permitted dividend is any quarterly
cash dividend in respect of the common stock, other than a quarterly cash
dividend that exceeds the immediately preceding quarterly cash dividend, and
then only to the extent that the per share amount of such dividend results in an
annualized dividend yield on the common stock in excess of 10%. An excess
purchase payment is the excess, if any, of (x) the cash and the value (as
determined by a nationally recognized independent investment banking firm
retained for this purpose by Salomon Smith Barney Holdings, whose determination
will be final) of all other consideration paid by with respect to one
share of common stock acquired in a tender offer or exchange offer by ,
over (y) the then-current market price of the common stock.
Notwithstanding the foregoing, in the event that, with respect to any
dividend or distribution or excess purchase payment to which the sixth paragraph
in this section would otherwise apply, the numerator in the fraction referred to
in the formula in that paragraph is less than $1.00 or is a negative number,
then Salomon Smith Barney Holdings may, at its option, elect to have the
adjustment provided by that paragraph not be made and in lieu of such
adjustment, on the maturity date, the holders of the TARGETS will be entitled to
receive an additional amount of cash equal to the product of the number of the
TARGETS held by such holder multiplied by the sum of the amount of cash plus the
fair market value of such other consideration (determined, as of the date such
dividend or distribution is made, by a nationally recognized independent
investment banking firm retained for this purpose by Salomon Smith Barney
Holdings, whose determination will be final) so distributed or applied to the
acquisition of the common stock in such a tender offer or exchange offer
applicable to the number of shares of common stock underlying one TARGETS.
Each dilution adjustment will be effected as follows:
- in the case of any dividend, distribution or issuance, at the opening of
business on the business day next following the record date for
determination of holders of common stock entitled to receive such
dividend, distribution or issuance or, if the announcement of any such
dividend, distribution, or issuance is after such record date, at the
time such dividend, distribution or issuance was announced by ,
- in the case of any subdivision, split, combination or reclassification,
on the effective date of such transaction,
- in the case of any excess purchase payment for which announces, at
or prior to the time it commences the relevant share repurchase, the
repurchase price per share for shares proposed to be repurchased, on the
date of such announcement, and
- in the case of any other excess purchase payment, on the date that the
holders of the repurchased shares become entitled to payment in respect
thereof.
All dilution adjustments will be rounded upward or downward to the nearest
1/10,000th or, if there is not a nearest 1/10,000th, to the next lower
1/10,000th. No adjustment in the starting value for the calculation of the
periodic capped return for any reset period will be required unless such
adjustment would require an increase or decrease of at least one percent
therein, provided, however, that any adjustments which by reason of this
sentence are not required to be made will be carried forward (on a percentage
basis) and taken into
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account in any subsequent adjustment. If any announcement or declaration of a
record date in respect of a dividend, distribution, issuance or repurchase
requiring an adjustment as described herein is subsequently canceled by ,
or such dividend, distribution, issuance or repurchase fails to receive
requisite approvals or fails to occur for any other reason, then, upon such
cancellation, failure of approval or failure to occur, the periodic capped
return for the next occurring reset period after such event will be further
adjusted to the periodic capped return which would then have been in effect had
adjustment for such event not been made. If a reorganization event described
below occurs after the occurrence of one or more events requiring an adjustment
as described herein, the dilution adjustments previously applied to the periodic
capped return for the next occurring reset period after such events will not be
rescinded but will be applied to the new periodic capped return provided for
below.
The then-current market price of the common stock, for the purpose of
applying any dilution adjustment, means the average closing price per share of
common stock for the 10 trading days immediately before such adjustment is
effected or, in the case of an adjustment effected at the opening of business on
the business day next following a record date, immediately before the earlier of
the date such adjustment is effected and the related ex-date.
The ex-date with respect to any dividend, distribution or issuance is the
first date on which the shares of the common stock trade regular way on their
principal market without the right to receive such dividend, distribution or
issuance.
A trading day is a day on which the common stock or the relevant security
(1) is not suspended from trading on any national or regional securities
exchange, securities market or association or over-the-counter market at the
close of business and (2) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of such security.
In the event of any of the following reorganization events
- any consolidation or merger of , or any surviving entity or
subsequent surviving entity of , with or into another entity,
other than a merger or consolidation in which is the continuing
corporation and in which the common stock outstanding immediately before
the merger or consolidation is not exchanged for cash, securities or
other property of or another issuer,
- any sale, transfer, lease or conveyance to another corporation of the
property of or any successor as an entirety or substantially as an
entirety,
- any statutory exchange of securities of or any successor of
with another issuer, other than in connection with a merger or
acquisition, or
- any liquidation, dissolution or winding up of or any successor of
,
the ending value used to calculate the periodic capped return for the next
occurring reset period and the starting value and the ending value used to
calculate the period capped return for each reset period thereafter (other than
the reset period ending at maturity) will be based on the transaction value
described below rather than the closing price of the common stock, and the
ending value used to calculate the periodic capped return for the reset period
ending at maturity will be based on the transaction value rather than the ten
day closing price of the common stock.
The transaction value with respect to any reset period, will be the sum of:
(1) for any cash received in a reorganization event, the amount of cash
received per share of common stock,
(2) for any property other than cash or marketable securities received in a
reorganization event, an amount equal to the market value on the date
the reorganization event is consummated of that property received per
share of common stock, as determined by a nationally recognized
independent investment banking firm retained for this purpose by
Salomon Smith Barney Holdings, whose determination will be final, and
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(3) for any marketable securities received in a reorganization event, (A)
with respect to all reset periods other than the reset period ending at
maturity, an amount equal to the closing price per share of such
marketable securities on the reset date at the end of the relevant
reset period multiplied by the number of those marketable securities
received for each share of common stock or, if that day is not a
trading day, the closing price on the most recent trading day, and (B)
with respect to the reset period ending on maturity, an amount equal to
the average closing price per share of those marketable securities for
the 10 trading days immediately prior to but not including the date one
business day before the maturity date or accelerated maturity date
multiplied by the number of such marketable securities received for
each share of common stock.
Marketable securities are any perpetual equity securities or debt
securities with a stated maturity after the maturity date, in each case that are
listed on a U.S. national securities exchange or reported by the Nasdaq Stock
Market, Inc. The number of shares of any equity securities constituting
marketable securities included in the calculation of transaction value pursuant
to clause (3) above will be adjusted if any event occurs with respect to the
marketable securities or the issuer of the marketable securities between the
time of the reorganization event and the maturity date or accelerated maturity
date that would have required an adjustment as described above, had it occurred
with respect to the common stock of . Adjustment for those
subsequent events will be as nearly equivalent as practicable to the adjustments
described above.
Salomon Smith Barney Holdings will be responsible for the effectuation and
calculation of any adjustment described herein and will furnish the indenture
trustee with notice of any such adjustment.
PAYMENT PROCEDURES
Distributions on the TARGETS will be payable to the holders of the TARGETS
as they appear on the books and records of Trust [XII] at the close of business
on the relevant record dates. While the TARGETS remain in book-entry only form,
the relevant record dates for distributions of any maturity payments or
accelerated maturity payments and any accrued and unpaid yield enhancement
payments with respect to the TARGETS will be one business day prior to the date
Trust [XII] receives those maturity payments or accelerated maturity payments,
as the case may be, under the forward contract. While the TARGETS remain in
book-entry only form, the relevant record date for distribution of the treasury
proceeds to holders of TARGETS will be one business day prior to the date Trust
[XII] receives those treasury proceeds upon liquidation of the treasury
securities. While the TARGETS remain in book-entry only form, the relevant
record dates for any quarterly distributions will be one business day prior to
the relevant payment dates, which payment dates will correspond to the dates on
which Trust [XII] receives payments in respect of, and in accordance with the
terms of, the treasury securities and the forward contract. The relevant record
dates for the common securities will be the same record dates as for the
TARGETS.
If the TARGETS will not continue to remain in book-entry only form, the
relevant record dates will conform to the rules of any securities exchange on
which they are listed and, if none, will be 15 days before the relevant payment
dates, which payment dates will correspond to the dates on which payments are
made in respect of, and in accordance with the terms of, the treasury securities
and the forward contract.
Distributions payable on any TARGETS that are not punctually paid on any
payment date, as a result of either Salomon Smith Barney Holdings having failed
to make a payment under the forward contract or the U.S. Government having
failed to make a payment in respect of the treasury securities, will cease to be
payable to the person in whose name the TARGETS are registered on the relevant
record date. The defaulted distribution will instead be payable to the person in
whose name those TARGETS are registered on a special record date which will be
the date on which Trust [XII] actually receives the amount of the defaulted
distributions.
If any date on which distributions are payable on the TARGETS is not a
business day, then payment of the distribution payable on such date will be made
on the next succeeding day that is a business day and without any interest or
other payment in respect of any such delay, with the same force and effect as if
made on that date. If that business day is in the next succeeding calendar year,
the payment will be made on the immediately preceding business day, with the
same force and effect as if made on that date. A business day is
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any day other than a Saturday, Sunday or a day on which banking institutions in
The City of New York are authorized or required by law to close.
Payments in respect of the TARGETS represented by global certificates (as
defined below under "Book-Entry Only Issuance") will be made to DTC, which will
credit the relevant accounts at DTC on the scheduled payment dates. In the case
of TARGETS in the form of certificated securities, if any, the payments will be
made by check mailed to the holder's address as it appears on the register.
VOTING RIGHTS
Except as described in this prospectus under "-- Acceleration of Maturity
Date; Enforcement of Rights" and "Description of the Guarantee -- Modifications
of the Guarantee; Assignment", and except as provided under the Delaware
Business Trust Act, the Trust Indenture Act and as otherwise required by law and
the amended and restated declaration of trust, the holders of the TARGETS will
have no voting rights.
In the event the consent of the institutional trustee, as the holder of the
forward contract, is required under the indenture with respect to any amendment,
modification or termination of the indenture, the institutional trustee will
request the written direction of the holders of the trust securities with
respect to the amendment, modification or termination and will vote with respect
to the amendment, modification or termination as directed by a majority of the
trust securities voting together as a single class. If any amendment,
modification or termination under the indenture requires the consent of a super
majority, the institutional trustee may only give its consent at the direction
of the holders of at least the proportionate number of the trust securities
represented by the relevant super majority of the aggregate beneficial interests
in the forward contract. The institutional trustee will be under no obligation
to take any such action in accordance with the directions of the holders of the
trust securities unless the institutional trustee has obtained an opinion of a
nationally recognized independent tax counsel experienced in such matters to the
effect that for United States federal income tax purposes Trust [XII] will not
be classified as other than a grantor trust.
The procedures by which holders of the TARGETS may exercise their voting
rights are described below under "-- Book-Entry Only Issuance".
Holders of the TARGETS will have no rights to appoint or remove the
trustees, who may be appointed, removed or replaced solely by Salomon Smith
Barney Holdings as the indirect or direct holder of all of the common
securities.
MODIFICATION OF THE AMENDED AND RESTATED DECLARATION OF TRUST
The declaration may be modified and amended if approved by the individual
trustees, and in certain circumstances the institutional trustee and the
Delaware trustee, provided that, if any proposed amendment to the amended and
restated declaration of trust provides for, or the individual trustees otherwise
propose to effect,
(1) any action that would adversely affect the powers, preferences or
special rights of the trust securities, whether by way of amendment to
the amended and restated declaration of trust or otherwise, or
(2) the dissolution, winding-up or termination of Trust [XII] other than
pursuant to the terms of the amended and restated declaration of trust,
then the holders of the trust securities, voting together as a single class,
will be entitled to vote on the amendment or proposal and the amendment or
proposal will not be effective except with the approval of the holders of at
least a majority of the trust securities affected thereby. If any amendment or
proposal referred to in (1) above would adversely affect only the TARGETS or the
common securities, then only holders of the affected class will be entitled to
vote on the amendment or proposal and the amendment or proposal will not be
effective except with the approval of a majority of that class of trust
securities.
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Notwithstanding the foregoing, no amendment or modification may be made to
the amended and restated declaration of trust if the amendment or modification
would
- cause Trust [XII] to fail to be classified as a grantor trust for United
States federal income tax purposes,
- reduce or otherwise adversely affect the powers of the institutional
trustee in contravention of the Trust Indenture Act or
- cause Trust [XII] to be deemed an investment company which is required to
be registered under the Investment Company Act.
MERGER, CONSOLIDATION OR AMALGAMATION OF TARGETS TRUST [XII]
Trust [XII] may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity, except as
described below. Trust [XII] may, with the consent of the individual trustees
or, if there are more than two, a majority of the individual trustees and
without the consent of the holders of the trust securities, the Delaware trustee
or the institutional trustee consolidate, amalgamate, merge with or into, or be
replaced by a trust organized as such under the laws of any state, provided that
- the successor entity either (A) expressly assumes all of the obligations
of Trust [XII] under the trust securities or (B) substitutes for the
TARGETS other successor securities having substantially the same terms as
the trust securities, so long as the successor securities rank the same
as the trust securities with respect to distributions and payments upon
liquidation, maturity and otherwise,
- Salomon Smith Barney Holdings expressly acknowledges a trustee of such
successor entity possessing the same powers and duties as the
institutional trustee in its capacity as the holder of the forward
contract and the treasury securities,
- successor securities to the TARGETS are listed, or any successor
securities to the TARGETS will be listed upon notification of issuance,
on any national securities exchange or with any organization on which the
TARGETS are then listed or quoted,
- the merger, consolidation, amalgamation or replacement does not cause the
TARGETS, including any successor securities, to be downgraded by any
nationally recognized statistical rating organization,
- the merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the trust
securities, including any successor securities, in any material respect,
other than with respect to any dilution of the holder's interest in the
new entity,
- the successor entity has a purpose identical to that of Trust [XII],
- prior to the merger, consolidation, amalgamation or replacement, Trust
[XII] has received an opinion of a nationally recognized independent
counsel to Trust [XII] experienced in such matters to the effect that:
(A) the merger, consolidation, amalgamation or replacement will not
adversely affect the rights, preferences and privileges of the
holders of the trust securities, including any successor securities,
in any material respect, other than with respect to any dilution of
the holders' interest in the new entity,
(B) following the merger, consolidation, amalgamation or replacement,
neither Trust [XII] nor such successor entity will be required to
register as an investment company under the Investment Company Act,
and
(C) following the merger, consolidation, amalgamation or replacement,
Trust [XII] or the successor entity will continue to be classified
as a grantor trust for U.S. federal income tax purposes, and
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- Salomon Smith Barney Holdings guarantees the obligations of the successor
entity under the successor securities at least to the extent provided by
the guarantee.
Notwithstanding the foregoing, Trust [XII] will not, without the consent of
holders of all of the trust securities, consolidate, amalgamate, merge with or
into, or be replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if, in the opinion of
a nationally recognized independent tax counsel experienced in such matters, the
consolidation, amalgamation, merger or replacement would cause Trust [XII] or
the successor entity to be classified as other than a grantor trust for United
States federal income tax purposes. In addition, so long as any TARGETS are
outstanding and are not held entirely by Salomon Smith Barney Holdings, Trust
[XII] may not voluntarily liquidate, dissolve, wind-up or terminate except as
described above under "-- Acceleration of Maturity Date; Enforcement of Rights".
BOOK-ENTRY ONLY ISSUANCE
The Depository Trust Company will act as securities depositary for the
TARGETS. The TARGETS will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global TARGETS certificates, representing the total aggregate
number of TARGETS, will be issued and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. These laws
may impair the ability to transfer beneficial interests in the global TARGETS as
represented by a global certificate.
DTC has advised Salomon Smith Barney Holdings as follows: DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC holds securities that
its participants deposit with DTC. DTC also facilitates the settlement among
participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants in DTC include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its direct participants and by the
New York Stock Exchange, the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others, such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly. The rules applicable to DTC and its
participants are on file with the SEC.
Purchases of the TARGETS within the DTC system must be made by or through
direct participants, which will receive a credit for the TARGETS on DTC's
records. The ownership interest of each beneficial owner actually purchasing the
TARGETS will be recorded on the direct participants' and indirect participants'
records. Beneficial owners will not receive written confirmation from DTC of
their purchases, but beneficial owners are expected to receive written
confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the direct or indirect participants through
which the beneficial owners purchased the TARGETS. Transfers of ownership
interests in the TARGETS are to be accomplished by entries made on the books of
participants and indirect participants acting on behalf of beneficial owners.
Beneficial owners will not receive certificates representing their ownership
interests in the TARGETS, except in the event that use of the book-entry system
for the TARGETS is discontinued. Account holders in the Euroclear or
Clearstream, Luxembourg clearance systems may hold beneficial interests in the
TARGETS through the accounts each such system maintains as a participant in DTC.
To facilitate subsequent transfers, all the TARGETS deposited by
participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of the TARGETS with DTC and their registration in the name of Cede &
Co. effect no change in beneficial ownership, and DTC has no knowledge of the
actual beneficial owners of the TARGETS. DTC's records reflect only the identity
of the direct participants to whose
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accounts such TARGETS are credited, which may or may not be the beneficial
owners. The participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
Although voting with respect to the TARGETS is limited, in those cases
where a vote is required, neither DTC nor Cede & Co. will itself consent or vote
with respect to TARGETS. Under its usual procedures, DTC would mail an Omnibus
Proxy to Trust [XII] as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co. consenting or voting rights for those direct
participants to whose accounts the TARGETS are credited on the record date,
identified in a listing attached to the Omnibus Proxy. Salomon Smith Barney
Holdings and Trust [XII] believe that the arrangements among DTC, direct and
indirect participants, and beneficial owners will enable the beneficial owners
to exercise rights equivalent in substance to the rights that can be directly
exercised by a holder of a beneficial interest in Trust [XII].
Payments on the TARGETS will be made to DTC. DTC's practice is to credit
direct participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name," and such payments will
be the responsibility of such participant and not of DTC, Trust [XII] or Salomon
Smith Barney Holdings, subject to any statutory or regulatory requirements to
the contrary that may be in effect from time to time. Payment of distributions
to DTC is the responsibility of Trust [XII], disbursement of such payments to
direct participants is the responsibility of DTC, and disbursement of such
payments to the beneficial owners is the responsibility of direct and indirect
participants.
Except as provided in the next paragraph, a beneficial owner in a global
TARGETS will not be entitled to receive physical delivery of TARGETS.
Accordingly, each beneficial owner must rely on the procedures of DTC to
exercise any rights under the TARGETS.
DTC may discontinue providing its services as securities depositary with
respect to the TARGETS at any time by giving reasonable notice to Trust [XII].
Under such circumstances, in the event that a successor securities depositary is
not obtained, TARGETS certificates are required to be printed and delivered.
Additionally, the individual trustees, with the consent of Salomon Smith Barney
Holdings, may decide to discontinue use of the system of book-entry transfers
through DTC or any successor depositary with respect to the TARGETS. In that
event, certificates for the TARGETS will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Salomon Smith Barney Holdings and Trust
[XII] believe to be reliable, but neither Salomon Smith Barney Holdings nor
Trust [XII] takes responsibility for the accuracy thereof.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The institutional trustee, prior to the occurrence of a default with
respect to the trust securities, and after the curing of all defaults that may
have occurred, undertakes to perform only the duties that are specifically set
forth in the amended and restated declaration of trust. If such a default occurs
and the institutional trustee has actual knowledge of it, the institutional
trustee will exercise the rights and powers vested in it by the amended and
restated declaration of trust and will use the same degree of care and skill in
the exercise of such rights and powers as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to those provisions, the
institutional trustee is under no obligation to exercise any of the rights or
powers vested in it by the amended and restated declaration of trust at the
request of any holder of TARGETS, unless offered reasonable security and
indemnity by the holder against the costs, expenses and liabilities which the
institutional trustee might incur thereby. Notwithstanding the foregoing, the
holders of TARGETS will not be required to offer the indemnity in the event the
holders, by exercising their voting rights, direct the institutional trustee to
take any action following an acceleration event.
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PAYING AGENT
In the event that the TARGETS do not remain in book-entry only form, the
institutional trustee will act as paying agent for the TARGETS and may designate
an additional or substitute paying agent at any time. In addition, registration
of transfers of TARGETS will be effected without charge by or on behalf of Trust
[XII], but upon payment, with the giving of such indemnity as Trust [XII] or
Salomon Smith Barney Holdings may require, in respect of any tax or other
government charges which may be imposed in relation to it.
GOVERNING LAW
The amended and restated declaration of trust and the TARGETS will be
governed by, and construed in accordance with, the internal laws of the State of
Delaware.
MISCELLANEOUS
The individual trustees are authorized and directed to operate Trust [XII]
in such a way so that Trust [XII] will not be required to register as an
investment company under the Investment Company Act or be characterized as other
than a grantor trust for United States federal income tax purposes. Salomon
Smith Barney Holdings and the individual trustees are authorized to take any
action, not inconsistent with applicable law, the amended and restated
declaration of trust or the restated certificate of incorporation of Salomon
Smith Barney Holdings, that each of Salomon Smith Barney Holdings and the
individual trustees in their discretion deem to be necessary or desirable to
achieve such end as long as the action does not adversely affect the interests
of the holders of the TARGETS or vary the terms thereof.
Holders of the TARGETS have no preemptive rights.
DESCRIPTION OF THE FORWARD CONTRACT
Salomon Smith Barney Holdings is also by this prospectus offering its
related forward contract with respect to the common stock. The terms of the
forward contract will be set forth in an indenture between Salomon Smith Barney
Holdings and The Chase Manhattan Bank. The indenture will be qualified under the
Trust Indenture Act. The indenture trustee will act as trustee for the forward
contract under the indenture for purposes of compliance with the provisions of
the Trust Indenture Act. The terms of the forward contract will include those
stated in the indenture and those made part of the indenture by the Trust
Indenture Act. The forward contract will rank equally with all other unsecured
contractual obligations of Salomon Smith Barney Holdings and the unsecured and
unsubordinated debt of Salomon Smith Barney Holdings. Since Salomon Smith Barney
Holdings is a holding company, the forward contract will be effectively
subordinated to the claims of creditors of Salomon Smith Barney Holdings'
subsidiaries.
Subject to certain anti-dilution adjustments, the forward contract relates
to an aggregate of shares of common stock. Under the forward
contract, Salomon Smith Barney Holdings will pay an amount equal to the
aggregate maturity payments or the aggregate accelerated maturity payments, as
the case may be, to Trust [XII] at maturity of the forward contract as described
above. The forward contract provides, among other things, for a payment by
Salomon Smith Barney Holdings to Trust [XII] of an amount determined by
reference to the ten day closing price as of the maturity date or accelerated
maturity date, as the case may be. See "Description of the TARGETS".
Pursuant to the terms of the forward contract, Salomon Smith Barney
Holdings will, in appropriate cases, pay yield enhancement payments, which are
on the amount paid by Trust [XII] to Salomon Smith Barney Holdings for the
forward contract. The yield enhancement payments will take the form of quarterly
cash payments in the amount of approximately $ (except that the
payment on will be approximately $ ), accruing from the
date of issuance of the TARGETS, computed on the basis of a 360-day year of
twelve 30-day months and for any period less than a full calendar month, the
number of days elapsed in such month. Depending on market conditions at the time
of pricing of the TARGETS for initial sale to the public, the amount of the
yield enhancement payments may be zero or a nominal amount. The yield
enhancement payments, together with distributions received by Trust [XII] with
respect to the treasury securities, will be used by the Trust [XII] to pay the
quarterly distributions to the holders of the TARGETS. See "Description of the
TARGETS -- Quarterly Distributions".
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The forward contract is a contract in the form of an indenture between the
Salomon Smith Barney Holdings and a trustee for the benefit of the holder of the
interests in the forward contract. The forward contract is a prepaid
"cash-settled" forward contract, whereby the obligor settles its obligation in
cash rather than in securities. The indenture will provide that Salomon Smith
Barney Holdings will pay all fees and expenses related to
- the offering of the trust securities and the forward contract,
- the organization, maintenance and dissolution of Trust [XII],
- the retention of the trustees, and
- the enforcement by the institutional trustee of the rights of the holders
of the TARGETS.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the guarantee that
will be executed and delivered by Salomon Smith Barney Holdings for the benefit
of the holders of TARGETS. The guarantee will be qualified as an indenture under
the Trust Indenture Act. The Chase Manhattan Bank will act as indenture trustee
under the guarantee. The terms of the guarantee will be those set forth in the
guarantee and those made part of the guarantee by the Trust Indenture Act. The
summary does not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the form of
guarantee, which is filed as an exhibit to the registration statement of which
this prospectus forms a part, and the Trust Indenture Act. The guarantee will be
held by the guarantee trustee for the benefit of the holders of the TARGETS.
GENERAL
Under the guarantee, Salomon Smith Barney Holdings will irrevocably and
unconditionally agree to pay in full to the holders of the TARGETS, except to
the extent paid by Trust [XII], as and when due, regardless of any defense,
right of set off or counterclaim which Trust [XII] may have or assert, the
following payments:
- any maturity payment that is required to be made in respect of the
TARGETS, to the extent Trust [XII] has funds available,
- any accelerated maturity payment that is required to be made in respect
of the TARGETS, to the extent Trust [XII] has funds available,
- any treasury proceeds that are required to be distributed in respect of
the TARGETS, to the extent that Trust [XII] has funds available,
- any quarterly distributions that are required to be made in respect of
the TARGETS, to the extent Trust [XII] has funds available,
- any accrued and unpaid yield enhancement payments as of the maturity date
or accelerated maturity, as the case may be, to the extent Trust [XII]
has funds available, and
- any other remaining assets of Trust [XII] upon liquidation of Trust
[XII].
Salomon Smith Barney Holdings' obligation to make a guarantee payment may
be satisfied by direct payment of the required amounts by Salomon Smith Barney
Holdings to the holders of TARGETS or by causing Trust [XII] to pay such amounts
to such holders.
The guarantee will be a guarantee with respect to the TARGETS from the time
of issuance of the TARGETS but will not apply to any payment of quarterly
distributions, maturity payments, accelerated maturity payments, treasury
proceeds, accrued and unpaid yield enhancement payments or to payments upon the
dissolution, winding-up or termination of Trust [XII], except to the extent
Trust [XII] has funds available. If Salomon Smith Barney Holdings does not pay
the aggregate maturity payments or the aggregate accelerated maturity payments
to Trust [XII] upon maturity of the forward contract, including maturity as a
result of acceleration, Trust [XII] will not pay any maturity payment or
accelerated maturity payment to holders of the TARGETS and will not have funds
available to make the payments. If the U.S. federal government, as the issuer of
the treasury securities, does not make periodic payments to Trust [XII] with
respect to the treasury securities, or Salomon Smith Barney Holdings does not
pay the yield enhancement payments to Trust [XII] under the forward contract,
then, in either event, Trust [XII] will not pay the full
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amount of the quarterly distributions to holders of the TARGETS and will not
have funds available to make the payments. The guarantee, when taken together
with Salomon Smith Barney Holdings' obligations under the forward contract, the
indenture and the declaration, including its obligations to pay costs, expenses,
debts and liabilities of Trust [XII], other than with respect to trust
securities, will provide a full and unconditional guarantee by Salomon Smith
Barney Holdings of Trust [XII]'s obligations under the TARGETS.
MODIFICATIONS OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of TARGETS, in which case no vote will be required, the guarantee may
be amended only with the prior approval of the holders of a majority of the
outstanding TARGETS. All guarantees and agreements contained in the guarantee
will bind the successors, assignees, receivers, trustees and representatives of
Salomon Smith Barney Holdings and shall inure to the benefit of the holders of
the TARGETS then outstanding.
GUARANTEE ENFORCEMENT EVENTS
An enforcement event under the guarantee will occur upon the failure of
Salomon Smith Barney Holdings to perform any of its payment or other obligations
thereunder. The holders of a majority of the TARGETS have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the guarantee trustee in respect of the guarantee or to direct the exercise
of any trust or power conferred upon the guarantee trustee under the guarantee.
If the guarantee trustee fails to enforce the guarantee trustee's rights under
the guarantee, any holder of TARGETS may directly institute a legal proceeding
against Salomon Smith Barney Holdings to enforce the guarantee trustee's rights
under the guarantee, without first instituting a legal proceeding against Trust
[XII], the guarantee trustee or any other person or entity. A holder of TARGETS
may also directly institute a legal proceeding against Salomon Smith Barney
Holdings to enforce such holder's right to receive payment under the guarantee
without first directing the guarantee trustee to enforce the terms of the
guarantee or instituting a legal proceeding against Trust [XII] or any other
person or entity.
Salomon Smith Barney Holdings will be required to provide annually to the
guarantee trustee a statement as to the performance by Salomon Smith Barney
Holdings of certain of its obligations under the guarantee and as to any default
in such performance.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, prior to the occurrence of a default with respect to
the guarantee and after the curing of all defaults that may have occurred,
undertakes to perform only the duties that are specifically set forth in the
guarantee. If any default occurs with respect to the guarantee that has not been
cured or waived and the guarantee trustee has actual knowledge of it, the
guarantee trustee will exercise its rights and powers under the guarantee, and
use the same degree of care and skill in the exercise of such rights and powers
as a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, the guarantee trustee is under no obligation to
exercise any of the powers vested in it by the guarantee at the request of any
holder of the TARGETS unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The guarantee will terminate as to the TARGETS upon full payment to the
holders of the TARGETS of
- the maturity payments and all quarterly distributions,
- the accelerated maturity payments, the treasury proceeds and any accrued
but unpaid yield enhancement payments or
- the amounts payable in accordance with the declaration upon liquidation
of Trust [XII].
The guarantee will continue to be effective or will be reinstated, as the case
may be, if at any time any holder of TARGETS must restore payment of any sum
paid under the TARGETS or the guarantee.
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STATUS OF THE GUARANTEE
The guarantee will constitute a guarantee of payment and not of collection.
The guaranteed party may institute a legal proceeding directly against the
guarantor to enforce its rights under the guarantee without first instituting a
legal proceeding against any other person or entity.
GOVERNING LAW
The guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
DESCRIPTION OF THE TREASURY SECURITIES
The treasury securities will consist of a portfolio of stripped
self-amortizing securities issued by the U.S. Treasury and maturing on a
quarterly basis through the maturity date. The treasury securities will bear
quarterly payments corresponding to the payment dates of the quarterly
distributions payable on the TARGETS. Upon acceleration of maturity to an
accelerated maturity date, any treasury securities then held by the
institutional trustee on behalf of Trust [XII] will be sold and the treasury
proceeds will be distributed to holders of the trust securities. See
"Description of the TARGETS -- Acceleration of Maturity Date; Enforcement of
Rights".
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax consequences
of the purchase, ownership and disposition of the TARGETS. Unless otherwise
specifically indicated herein, this summary only addresses U.S. Holders. A "U.S.
Holder" is a holder of the TARGETS that is an individual who is a citizen or
resident of the United States, a U.S. domestic corporation, or any other person
that is subject to U.S. federal income taxation on a net income basis in respect
of its investment in the TARGETS. The discussion below is based on the advice of
Cleary, Gottlieb, Steen & Hamilton.
The summary is based on U.S. federal income tax laws, regulations, rulings
and decisions now in effect, all of which are subject to change, possibly on a
retroactive basis. Except to the extent discussed below in "-- Tax Consequences
to Non-U.S. Holders" and "-- Backup Withholding and Information Reporting," the
summary deals only with U.S. Holders that will hold the TARGETS as capital
assets and that purchased the TARGETS in the initial offering. The summary does
not address tax considerations that may be relevant to a particular holder in
light of such holder's individual circumstances or that are applicable to
holders subject to special tax rules, such as banks, tax-exempt entities,
insurance companies, dealers in securities or currencies, traders in securities
electing to mark to market, persons that will hold the TARGETS as a position in
a "straddle" for tax purposes or as part of a "synthetic security" or a
"conversion transaction" or other integrated investment comprised of the TARGETS
and one or more other investments, or persons that have a functional currency
other than the U.S. dollar. It does not include any description of the tax laws
of any state, local or foreign government that may be applicable to the TARGETS
or to the holders thereof. Prospective purchasers of the TARGETS should consult
their tax advisors in determining the tax consequences to them of purchasing,
owning or disposing of the TARGETS, including the application to their
particular situation of the U.S. federal income tax considerations discussed
below, as well as the application of state, local, foreign income or other tax
laws.
There are no regulations, published rulings or judicial decisions
addressing the characterization for U.S. federal income tax purposes of the
TARGETS or instruments with terms substantially similar to the TARGETS. Pursuant
to the amended and restated declaration of trust, every holder of the TARGETS
and Trust [XII] agrees to treat the TARGETS for U.S. federal income tax purposes
as a beneficial interest in a trust that holds the treasury securities and the
forward contract. In addition, pursuant to the forward contract and the amended
and restated declaration of trust, every holder of the TARGETS, Trust [XII] and
Salomon Smith Barney Holdings agree to characterize for U.S. federal income tax
purposes, in the absence of an administrative determination or judicial ruling
to the contrary, (1) the forward contract as a cash-settled
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forward purchase contract and (2) an amount equal to the purchase price of the
TARGETS less the purchase price of the treasury securities as a cash deposit to
be applied on the maturity date or accelerated maturity date in full
satisfaction of the holder's payment obligation under the forward contract.
Trust [XII] intends to report holders' income to the Internal Revenue Service in
accordance with this agreed treatment.
Under this agreed approach, the tax consequences of holding a TARGETS
should be as described below. Prospective investors in the TARGETS should be
aware, however, that no ruling is being requested from the Internal Revenue
Service with respect to the TARGETS and the Internal Revenue Service might take
a different view as to the proper characterization of the TARGETS or of the
forward contract and of the U.S. federal income tax consequences to a holder
thereof.
TAX STATUS OF TRUST [XII]
The Trust will be treated as a grantor trust owned solely by the present
and future holders of trust securities for U.S. federal income tax purposes, and
accordingly, income received by Trust [XII] will be treated as income of the
holders of the TARGETS in the manner set forth below.
TAX CONSEQUENCES TO U.S. HOLDERS
Tax Basis in the Treasury Securities and the Forward Contract. Each U.S.
Holder should be considered the owner of its pro rata portion of the treasury
securities and the forward contract in Trust [XII]. The cost to the U.S. Holder
of its TARGETS should be allocated among the holder's pro rata portion of the
treasury securities and the forward contract, in proportion to the fair market
values thereof on the date on which the holder acquires its TARGETS, in order to
determine the holder's tax basis in such assets. It is currently anticipated
that approximately 10% to 15% and 85% to 90% of the net proceeds of the offering
will be used by Trust [XII] to purchase the treasury securities and the forward
contract, respectively.
Recognition of Original Issue Discount on the Treasury Securities. The
treasury securities in Trust [XII] will consist of stripped, self-amortizing
U.S. Treasury securities. A U.S. Holder should be required to treat its pro rata
portion of each treasury security in Trust [XII] as a bond that was originally
issued on the date the holder purchased its TARGETS and at an original issue
discount equal to the excess of the holder's pro rata portion of the amounts
payable on such treasury security over the holder's tax basis therein, as
discussed above. The amount of such excess, however, should constitute only a
portion of the total amounts payable with respect to the treasury securities
held by Trust [XII] and, accordingly, a substantial portion of the quarterly
cash distributions from Trust [XII] to holders should be treated as a tax-free
return of the holder's investment in the treasury securities and should reduce
the holder's tax basis in its pro rata portion of the treasury securities. A
U.S. Holder, whether using the cash or accrual method of tax accounting, should
be required to include original issue discount, other than original issue
discount on short-term treasury securities as described below, in gross income
for U.S. federal income tax purposes as it accrues, in accordance with a
constant yield method, prior to the receipt of cash attributable to such income.
A U.S. Holder's tax basis in a treasury security held by Trust [XII] should be
increased by the amount of any original issue discount included in gross income
by the holder with respect to such treasury security and reduced to the extent
that any payment received on maturity, sale or other disposition of the TARGETS
represents a repayment of accrued original issue discount.
With respect to any short-term treasury security (a treasury security with
a maturity of one year or less from the date it is purchased) held by Trust
[XII], U.S. Holders using the cash method of tax accounting should generally be
required to include interest payments on such treasury securities in gross
income as such payments are received. In addition, such cash method U.S. Holders
may be denied a deduction for any related interest expense until such payments
are received. U.S. Holders using the accrual method of tax accounting should be
required to include original issue discount on any short-term treasury security
held by Trust [XII] in gross income as such original issue discount accrues.
Unless a U.S. Holder elects to accrue the original issue discount on a
short-term treasury security according to a constant yield method based on daily
compounding, such original issue discount should be accrued on a straight-line
basis.
Treatment of the Forward Contract. Each U.S. Holder should be treated as
having entered into a pro rata portion of the forward contract and, at the
maturity date or accelerated maturity date, as having received
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a pro rata portion of the maturity payment or accelerated maturity payment, as
the case may be, received by Trust [XII]. Under current law, a U.S. Holder
should not recognize income, gain or loss upon entry into the forward contract
and should not be required to include in gross income additional amounts over
the term of the forward contract, except with respect to the yield enhancement
payments, as described below. The Internal Revenue Service and the U.S. Treasury
Department have indicated that they plan to publish guidance with respect to
accrual of income on certain derivative financial instruments with contingent
payments, including prepaid forward contracts. If such guidance were issued with
retroactive application, it could increase the amount of income required to be
included over the term of the forward contract. See also, "-- Possible
Alternative Characterizations" below.
Treatment of the Yield Enhancement Payments. Consistent with the agreed
characterization, any yield enhancement payments, including amounts payable with
respect to any deferred yield enhancement payments, should be characterized as
interest payable on the amount of the cash deposit and should generally be
includible in the income of a U.S. holder on an accrual basis.
Sale or Other Disposition of the TARGETS. Upon a sale or other disposition
of all or some of a U.S. Holder's TARGETS, such holder should be treated as
having sold its pro rata portions of the treasury securities and the forward
contract underlying the TARGETS. The selling U.S. Holder should recognize
capital gain or loss equal to the difference between the amount realized from
such sale or other disposition and the holder's aggregate tax bases in its pro
rata portions of the treasury securities and the forward contract, except to the
extent of any (1) accrued interest with respect to the holder's pro rata portion
of the treasury securities includible in gross income as ordinary income and (2)
possibly any accrued but unpaid yield enhancement payments, as described above.
Any such gain or loss will be long-term capital gain or loss if the U.S.
Holder's holding period for the TARGETS is more than one year. The distinction
between capital gain or loss and ordinary income or loss is important for
purposes of the limitations on a holder's ability to offset capital losses
against ordinary income. In addition, long-term capital gains recognized by an
individual U.S. Holder generally are subject to a maximum rate of 20 percent.
Distributions of Cash at the Maturity Date or Accelerated Maturity
Date. On the receipt of cash by Trust [XII] with respect to the forward
contract on the maturity date or accelerated maturity date, a U.S. Holder should
realize capital gain or loss equal to the difference between the holder's pro
rata portion of the amount of cash received by Trust [XII] and the holder's tax
basis in its pro rata portion of the forward contract at that time, except to
the extent such cash is attributable to yield enhancement payments, as described
above. Under certain circumstances, on or following the accelerated maturity
date, Trust [XII] may sell all or a portion of the treasury securities and
distribute the treasury proceeds to holders. Upon such a sale by Trust [XII], a
U.S. Holder should realize capital gain or loss equal to the difference between
the amount of cash received by the holder, except to the extent of any accrued
interest with respect to the holder's pro rata portion of the treasury
securities and the holder's tax basis in its pro rata portion of the treasury
securities sold by Trust [XII]. Any such capital gain or loss described in this
paragraph will be long-term capital gain or loss if the U.S. Holder's holding
period for the TARGETS is more than one year and will be subject to the same
maximum U.S. federal income tax rates for individuals discussed above under
"-- Sale or Other Disposition of the TARGETS".
Possible Alternative Characterizations. The Internal Revenue Service may
contend that the TARGETS should be characterized for U.S. federal income tax
purposes in a manner different than the approach described above. For example,
the Internal Revenue Service might assert that the forward contract should be
treated as a contingent debt obligation of Salomon Smith Barney Holdings that is
subject to Treasury regulations governing contingent payment debt instruments.
If the Internal Revenue Service were to prevail in making such an assertion,
original issue discount would accrue with respect to the forward contract at a
"comparable yield" for Salomon Smith Barney Holdings under the forward contract,
determined at the time the forward contract is entered into. A U.S. Holder's pro
rata portion of original issue discount with respect to the forward contract and
the treasury securities might exceed the aggregate amount of the quarterly
distributions received by the holder. In addition, under this treatment, a U.S.
Holder would be required to treat any gain realized on the sale or other
disposition of the TARGETS as ordinary income to the extent that such gain is
allocable to the holder's pro rata portion of the forward contract. Any loss
realized on such sale or
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other disposition that is allocable to the U.S. Holder's pro rata portion of the
forward contract would be treated as an ordinary loss to the extent of the
holder's original issue discount inclusions with respect to the forward contract
and as capital loss to the extent of loss in excess of such inclusions. It is
also possible that the Internal Revenue Service could take the view that a U.S.
Holder should include in gross income the amount of cash actually received each
year in respect of the TARGETS or that the TARGETS as a whole constitute a
contingent payment debt instrument subject to the rules described above.
Potential Application of Constructive Ownership Rules. Some or all of the
net long-term capital gain arising from certain "constructive ownership"
transactions may be characterized as ordinary income, in which case an interest
charge would be imposed on any such ordinary income. These rules have no
immediate application to forward contracts in respect of the stock of a domestic
operating company, including the TARGETS. The rules, however, grant
discretionary authority to the U.S. Treasury Department to expand the scope of
"constructive ownership" transactions to include forward contracts in respect of
the stock of all corporations. The rules separately also direct the Treasury to
promulgate regulations excluding a forward contract that does not convey
"substantially all" of the economic return on an underlying asset from the scope
of "constructive ownership" transactions. This category may include the TARGETS.
It is not possible to predict whether such regulations will be promulgated by
the Treasury, or the form or effective date that any regulations that may be
promulgated might take.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
A "Non-U.S. Holder" is a holder of the TARGETS that is a non-resident alien
individual or foreign corporation. In the case of a Non-U.S. Holder:
(1) quarterly distributions made with respect to the TARGETS should not be
subject to U.S. withholding tax, provided that the beneficial owner of
the TARGETS complies with applicable certification requirements,
including in general the furnishing of an Internal Revenue Service Form
W-8BEN or a substitute form; and
(2) any capital gain realized upon the sale or other disposition of the
TARGETS should not be subject to U.S. federal income tax unless (A) the
gain is effectively connected with a U.S. trade or business of such
holder or (B) in the case of an individual, the individual is present
in the United States for 183 days or more in the taxable year of the
sale or other disposition and either (i) the gain is attributable to a
fixed place of business maintained by such individual in the United
States or (ii) such holder has a tax home in the United States.
For purpose of applying the rules set forth above to an entity that is
treated as fiscally transparent (e.g., a partnership) for U.S. federal income
tax purpose, the beneficial owner means each of the ultimate beneficial owners
of the entity.
A Non-U.S. Holder that is subject to U.S. federal income taxation on a net
income basis with respect to its investment in the TARGETS should see the
discussion in "-- Tax Consequences to U.S. Holders".
BACKUP WITHHOLDING AND INFORMATION REPORTING
A holder of the TARGETS, including a Non-U.S. Holder, may be subject to
information reporting and to backup withholding tax on certain amounts paid to
the holder unless such holder:
(1) is a corporation or comes within certain other exempt categories and,
when required, provides proof of such exemption, or
(2) provides a correct taxpayer identification number, certifies as to no
loss of exemption from backup withholding tax and otherwise complies
with applicable requirements of the backup withholding rules.
Backup withholding is not an additional tax and any amounts withheld may be
credited against the holder's U.S. federal income tax liability, provided that
the required information is furnished to the Internal Revenue Service.
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ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended, imposes
certain requirements on "employee benefit plans", as defined in Section 3(3) of
ERISA, subject to ERISA, including entities such as collective investment funds
and separate accounts whose underlying assets include the assets of such plans
(collectively, "ERISA Plans") and on those persons who are fiduciaries with
respect to ERISA Plans. Section 406 of ERISA and Section 4975 of the Internal
Revenue Code of 1986 prohibit certain transactions involving the assets of an
ERISA Plan or a plan, such as a Keogh plan or an individual retirement account,
that is not subject to ERISA but which is subject to Section 4975 of the
Internal Revenue Code (together with ERISA Plans, "Plans") and certain persons,
referred to as "parties in interest" under ERISA or "disqualified persons" under
the Internal Revenue Code, having certain relationships to such Plans, unless a
statutory or administrative exception or exemption is applicable to the
transaction. As used below, the term "Pension Type Accounts" shall include
Plans, entities the assets of which may be deemed to be "plan assets" under
ERISA regulations, and governmental plans subject to any substantially similar
federal, state or local laws.
The U.S. Department of Labor has promulgated a regulation, 29 C.F.R.
Section 2510.3-101, describing what constitutes the assets of a Plan with
respect to the Plan's investment in an entity for purposes of certain provisions
of ERISA, including the fiduciary responsibility provisions of Title I of ERISA
and Section 4975 of the Internal Revenue Code. Under this regulation, if a Plan
invests in a beneficial interest in a trust or a profits interest in a
partnership, the Plan's assets include both the equity interest and an undivided
interest in each of the entity's underlying assets, unless the interest is a
"publicly-offered security" or certain other conditions are satisfied. It is
anticipated that the TARGETS should constitute "publicly-offered securities"
within the meaning of the regulation, and that, consequently, transactions
engaged in by the Trust, including the forward contract, should not be subject
to the provisions of ERISA or Section 4975 of the Internal Revenue Code.
Any Pension Type Account which proposes to purchase the TARGETS should
consult with its counsel regarding the applicability of the fiduciary
responsibility and prohibited transaction provisions of ERISA, Section 4975 of
the Internal Revenue Code and any substantially similar applicable law to such
an investment, and to confirm that such investment will not constitute or result
in a prohibited transaction or any other violation of an applicable legal
requirement for which an exemption is not available.
By its purchase of any TARGETS, each initial purchaser and subsequent
transferee will be deemed to have represented and warranted on each day from the
date on which the purchaser or transferee acquires the TARGETS through and
including the date on which the purchaser or transferee disposes of its interest
in the TARGETS, either that (A) it is not a Pension Type Account or subject to
any federal, state, or local law that is substantially similar to the provisions
of Section 406 of ERISA or Section 4975 of the Internal Revenue Code or (B) its
purchase, holding and disposition of such TARGETS will not result in a
prohibited transaction under Section 406 of ERISA or Section 4975 of the
Internal Revenue Code or any other violation of an applicable legal requirement
for which an exemption is not available, all of the conditions of which have
been satisfied.
46
48
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, Salomon Smith Barney Inc., as underwriter, has agreed to
purchase from Trust [XII], and Trust [XII] has agreed to sell to Salomon Smith
Barney Inc., TARGETS.
The underwriting agreement provides that the obligation of Salomon Smith
Barney Inc. to purchase the TARGETS included in this offering is subject to
approval of certain legal matters by counsel and to certain other conditions.
Salomon Smith Barney Inc. is obligated to purchase all of the TARGETS, other
than those covered by the over-allotment option described below, if it purchases
any TARGETS.
Salomon Smith Barney Inc. proposes to offer some of the TARGETS directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the TARGETS to certain dealers at the public offering
price less a concession not in excess of $ per TARGETS. Salomon Smith
Barney Inc. may allow, and such dealers may reallow, a concession not in excess
of $ per TARGETS on sales to certain other dealers. If all of the TARGETS
are not sold at the initial offering price, Salomon Smith Barney Inc. may change
the public offering price and the other selling terms.
Trust [XII] has granted to Salomon Smith Barney Inc. an option, exercisable
for 30 days from the date of this prospectus, to purchase up to
additional TARGETS at the public offering price. Salomon Smith Barney Holdings
will pay the underwriting discount in the amount per TARGETS set forth on the
cover page hereof with respect to such additional TARGETS. Salomon Smith Barney
Inc. may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with this offering.
Trust [XII] and Salomon Smith Barney Holdings have agreed that, for the
period beginning on the date of the underwriting agreement and continuing to and
including the closing date for the purchase of the TARGETS, they will not,
without the prior written consent of Salomon Smith Barney Inc., dispose of or
hedge any securities, including any backup undertakings of such securities, of
Salomon Smith Barney Holdings or of Trust [XII], in each case that are
substantially similar to the TARGETS, or any securities convertible into or
exchangeable for the TARGETS or such substantially similar securities. Salomon
Smith Barney Inc. may release any of the securities subject to this lock-up at
any time without notice.
The underwriting agreement provides that Trust [XII] and Salomon Smith
Barney Holdings will indemnify Salomon Smith Barney Inc. against certain
liabilities, including liabilities under the Securities Act of 1933, and will
make certain contributions in respect thereof, or will contribute to payments
that Salomon Smith Barney Inc. may be required to make in respect of any of
those liabilities and will reimburse Salomon Smith Barney Inc. for certain legal
and other expenses.
Prior to this offering, there has been no public market for the TARGETS.
Consequently, the initial public offering price for the TARGETS was determined
by negotiations among Trust [XII] and Salomon Smith Barney Inc. There can be no
assurance, however, that the prices at which the TARGETS will sell in the public
market after this offering will not be lower than the price at which they are
sold by Salomon Smith Barney Inc. or that an active trading market in the
TARGETS will develop and continue after this offering.
Salomon Smith Barney Holdings and Trust [XII] will apply to list the
TARGETS on under the symbol " ".
In view of the fact that the proceeds of the sale of the TARGETS will
ultimately be used by Trust [XII] to purchase the forward contract, the
underwriting agreement provides that Salomon Smith Barney Holdings will pay to
Salomon Smith Barney Inc. an underwriting discount of $ per TARGETS for
the account of Salomon Smith Barney Inc.
In connection with the offering, Salomon Smith Barney Inc., as the
underwriter, may purchase and sell the TARGETS and common stock in the open
market. These transactions may include over-allotment, covering transactions and
stabilizing transactions. Over-allotment involves sales of the TARGETS by
Salomon Smith Barney Inc. in excess of the number of the TARGETS issued in the
offering, which creates a short position. Covering transactions involve
purchases of the TARGETS in the open market after the distribution has been
completed to cover short positions. Stabilizing transactions consist of certain
bids or
47
49
purchases of the TARGETS or common stock made for the purpose of preventing or
slowing a decline in the market price of the TARGETS or common stock while the
offering is in progress. These activities may cause the price of the TARGETS to
be higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected in the
over-the-counter market or otherwise and, if commenced, may be discontinued at
any time.
The offer and sale of the TARGETS will comply with the requirements of Rule
2810 of the Conduct Rules of the National Association of Securities Dealers,
Inc. regarding direct participation programs.
This prospectus may be used by Salomon Smith Barney Holdings, Salomon Smith
Barney Inc. or other affiliates of Salomon Smith Barney Holdings in connection
with offers and sales of the TARGETS (subject to obtaining any necessary
approval of for any such offers and sales) in
market-making transactions at negotiated prices related to prevailing market
prices at the time of sale. Any such entity may act as principal or agent in
such transactions. No such entity is obligated to make a market in the TARGETS
and any such entity may discontinue any market-making at any time without
notice, at its sole discretion. There can be no assurance of the liquidity or
existence of a secondary market for any TARGETS.
LEGAL MATTERS
The validity of the TARGETS, the forward contract, the guarantee and
certain matters relating thereto will be passed upon for Salomon Smith Barney
Holdings and Trust [XII] by Marcy Engel, Esq. Ms. Engel, a Deputy General
Counsel of Salomon Smith Barney Holdings, beneficially owns or has rights to
acquire under Citigroup employee benefit plans, an aggregate of less than one
percent of the common stock of Citigroup. Certain legal matters will be passed
upon for the underwriter by Cleary, Gottlieb, Steen & Hamilton, New York, New
York. Cleary, Gottlieb, Steen & Hamilton has also acted as special tax counsel
to Salomon Smith Barney Holdings in connection with tax matters related to the
TARGETS. Cleary, Gottlieb, Steen & Hamilton has from time to time acted as
counsel for Salomon Smith Barney Holdings and its affiliates and may do so in
the future.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 2000, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
48
50
=======================================
You should rely only on the information
contained or incorporated by reference
in this prospectus. We have not
authorized anyone to provide you with
different information. We are not making
an offer of these securities in any
state where the offer is not permitted.
You should not assume that the
information contained or incorporated by
reference in this prospectus is accurate
as of any date other than the date on
the cover of this prospectus.
TABLE OF CONTENTS
<Table>
<Caption>
Page
- ---------------------------------------
Summary 2
- ---------------------------------------
Risk Factors 13
- ---------------------------------------
Available Information 17
- ---------------------------------------
Salomon Smith Barney Holdings 19
- ---------------------------------------
Use of Proceeds and Hedging
Activities 20
- ---------------------------------------
Issuer of the Common Stock 21
- ---------------------------------------
Historical Data on the Common Stock 22
- ---------------------------------------
TARGETS Trust [XII] 23
- ---------------------------------------
Description of the TARGETS 24
- ---------------------------------------
Description of the Forward Contract 39
- ---------------------------------------
Description of the Guarantee 40
- ---------------------------------------
Description of the Treasury
Securities 42
- ---------------------------------------
United States Federal Income Tax
Considerations 42
- ---------------------------------------
ERISA Considerations 46
- ---------------------------------------
Underwriting 47
- ---------------------------------------
Legal Matters 48
- ---------------------------------------
Experts 48
- ---------------------------------------
=======================================
</Table>
TARGETS TRUST [XII]
TARGETED GROWTH
ENHANCED TERMS SECURITIES
(TARGETS(R))
With respect to
the common stock of
________________________
Due on
____________
$[10.00] per TARGETS
Payments Due From TARGETS Trust [XII]
Guaranteed by
Salomon Smith Barney
Holdings Inc.
PROSPECTUS
_____,2001
Salomon Smith Barney
51
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<Table>
Commission Registration Fee................................. $ 250,000
Accounting Fees............................................. 100,000
Trustees' Fees and Expenses................................. 55,000
Blue Sky Fees and Expenses.................................. 5,000
Printing and Engraving Fees................................. 200,000
NASD Fee.................................................... 30,500
Legal Fees and Expenses..................................... 500,000
Miscellaneous............................................... 9,500
----------
Total............................................. $1,150,000
</Table>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
SALOMON SMITH BARNEY HOLDINGS INC.
Section 721 of the New York Business Corporation Law ("B.C.L.") provides
that, in addition to the indemnification provided in Article 7 of the B.C.L., a
corporation may indemnify a director or officer by a provision contained in its
certificate of incorporation or by-laws or by a duly authorized resolution of
its shareholders or directors or by agreement provided that no indemnification
may be made to or on behalf of any director or officer if a judgment or other
final adjudication adverse to the director or officer establishes that his acts
were committed in bad faith or were the result of active and deliberate
dishonesty and material to the cause of action, or that such director or officer
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
Section 722(a) of the B.C.L. provides that a corporation may indemnify a
director or officer made, or threatened to be made, a party to any action other
than a derivative action, whether civil or criminal, against judgments, fines,
amounts paid in settlement and reasonable expenses actually and necessarily
incurred as a result of such action, if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or not opposed to,
the best interests of the corporation and, in criminal actions or proceedings,
in addition, has no reasonable cause to believe that his conduct was unlawful.
Section 722(c) of the B.C.L. provides that a corporation may indemnify a
director or officer, made or threatened to be made a party in a derivative
action, against amounts paid in settlement and reasonable expenses actually and
necessarily incurred by him in connection with the defense or settlement of such
action or in connection with an appeal therein if such director or officer
acted, in good faith, for a purpose which he reasonably believed to be in, or
not opposed to, the best interests of the corporation, except that no
indemnification will be available under Section 722(c) of the B.C.L. in respect
of a threatened or pending action which is settled or otherwise disposed of or
any claims as to which such director or officer shall have been adjudged liable
to the corporation, unless and only to the extent that the court in which the
action was brought, or, if no action was brought, any court of competent
jurisdiction, determines, upon application, that, in view of all the
circumstances of the case, the director or officer is fairly and reasonably
entitled to indemnity for such portion of the settlement amount and expenses as
the court deems proper.
Section 723 of the B.C.L. specifies the manner in which payment of
indemnification under Section 722 of the B.C.L. or indemnification permitted
under Section 721 of the B.C.L. may be authorized by the corporation. It
provides that indemnification by a corporation is mandatory in any case in which
the director or officer has been successful, whether on the merits or otherwise,
in defending an action. In the event that the director or officer has not been
successful or the action is settled, indemnification must be authorized by the
II-1
52
appropriate corporate action as set forth in Section 723. Section 724 of the
B.C.L. provides that, upon application by a director or officer, indemnification
may be awarded by a court to the extent authorized under Sections 722 and 723.
Section 725 of the B.C.L. contains certain other miscellaneous provisions
affecting the indemnification of directors and officers.
Section 726 of the B.C.L. authorizes the purchase and maintenance of
insurance to indemnify (1) a corporation for any obligation which it incurs as a
result of the indemnification of directors and officers under the above
sections, (2) directors and officers in instances in which they may be
indemnified by a corporation under such sections, and (3) directors and officers
in instances in which they may not otherwise be indemnified by a corporation
under such sections, provided the contract of insurance covering such directors
and officers provides, in a manner acceptable to the New York State
Superintendent of Insurance, for a retention amount and for co-insurance.
Article Seventh(e) of the Restated Certificate of Incorporation of Salomon
Smith Barney Holdings Inc. (the "Company") provides in part as follows:
The Corporation shall indemnify to the full extent authorized by law any
person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of
the fact that he, his testator or intestate is or was a director,
officer or employee of the Corporation or any predecessor of the
Corporation or serves or served any other enterprise as a director,
officer or employee at the request of the Corporation or any predecessor
of the Corporation, provided that this provision shall not provide for
indemnification to be made to or on behalf of any director or officer if
a judgment or other final adjudication adverse to the director or
officer establishes that his acts were committed in bad faith or were
the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained in fact a
financial profit or other advantage to which he was not legally
entitled.
Article Ninth of the Restated Certificate of Incorporation of the Company
provides as follows:
To the fullest extent permitted under section 402 of the B.C.L., no
director of the corporation shall be personally liable to the
corporation or its shareholders for damages for any breach of duty in
such capacity, provided that this provision shall not limit
(a) the liability of any director if a judgment or other final
adjudication adverse to him or her establishes that his or her acts
or omissions were in bad faith or involved intentional misconduct or
a knowing violation of law or that he or she personally gained in
fact a financial profit or other advantage to which he or she was
not legally entitled or that his or her acts violated section 719 of
the B.C.L. or
(b) the liability of any director for any act or omission prior to
adoption of a provision authorized by this paragraph.
Article Twelve of the By-laws of the Company provides as follows:
The Corporation shall indemnify to the full extent authorized by law any
person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of
the fact that he, his testator or intestate is or was a director,
officer or employee of the Corporation or any predecessor of the
Corporation or serves or served any other enterprise as a director,
officer or employee at the request of the Corporation or any predecessor
of the Corporation, provided that this provision shall not provide for
indemnification to be made to or on behalf of any director or officer if
a judgment or other final adjudication adverse to the director or
officer establishes that his acts were committed in bad faith or were
the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained in fact a
financial profit or other advantage to which he was not legally
entitled.
The Company has purchased certain liability insurance for its officers and
directors as permitted by Section 726 of the B.C.L. and has entered into
indemnity agreements with its directors and certain officers providing
indemnification in addition to that provided under the B.C.L., as permitted by
Section 721 of the B.C.L.
II-2
53
THE TARGETS TRUSTS
The form of amended and restated declaration of trust for each of TARGETS
Trust XII, TARGETS Trust XIII, TARGETS Trust XIV, TARGETS Trust XV, TARGETS
Trust XVI, TARGETS Trust XVII, TARGETS Trust XVIII, TARGETS Trust XIX, TARGETS
Trust XX, TARGETS Trust XXI, TARGETS Trust XXII, TARGETS Trust XXIII, TARGETS
Trust XXIV, TARGETS Trust XXV, TARGETS Trust XXVI and TARGETS Trust XXVII (each
a "TARGETS Trust") provides that no Institutional Trustee (as defined in each
amended and restated declaration of trust) or any of its affiliates, Delaware
Trustee (as defined in each amended and restated declaration of trust) or any of
its affiliates, or officer, director, shareholder, member, partner, employee,
representative, custodian, nominee or agent of the Institutional Trustee or the
Delaware Trustee (each a "Fiduciary Indemnified Person"), and no Regular Trustee
(as defined in each amended and restated declaration of trust), affiliate of any
Regular Trustee, or any officer, director, shareholder, member, partner,
employee, representative or agent of any Regular Trustee, or any employee or
agent of such TARGETS Trust or its affiliates (each a "Company Indemnified
Person") shall be liable, responsible or accountable in damages or otherwise to
such TARGETS Trust, any Affiliate (as defined in the amended and restated
declaration of trust) of such TARGETS Trust or any holder of securities issued
by such TARGETS Trust, or to any officer, director, shareholder, partner,
member, representative, employee or agent of such TARGETS Trust or its
Affiliates for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Fiduciary Indemnified Person or Company
Indemnified Person in good faith on behalf of such TARGETS Trust and in a manner
such Fiduciary Indemnified Person or Company Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Fiduciary
Indemnified Person or Company Indemnified Person by such amended and restated
declaration of trust or by law, except that a Fiduciary Indemnified Person or
Company Indemnified Person shall be liable for any loss, damage, or claim
incurred by reason of such Fiduciary Indemnified Person's or Company Indemnified
Person's gross negligence (or in the case of a Fiduciary Indemnified Person,
negligence) or willful misconduct with respect to such acts or omissions. The
amended and restated declaration of trust of each TARGETS Trust also provides
that, to the full extent permitted by law, the Company shall indemnify any
Company Indemnified Person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in right of such TARGETS Trust) by reason of the fact that he is or was a
Company Indemnified Person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of such TARGETS Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
amended and restated declaration of trust of each TARGETS Trust also provides
that to the full extent permitted by law, the Company shall indemnify any
Company Indemnified Person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in right of
such TARGETS Trust to procure a judgment in its favor by reason of the fact that
he is or was a Company Indemnified Person against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of such
TARGETS Trust and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such Company Indemnified Person shall have
been adjudged to be liable to such TARGETS Trust unless and only to the extent
that the Court of Chancery of Delaware or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such Court
of Chancery or such other court shall deem proper. The amended and restated
declaration of trust of each TARGETS Trust further provides that expenses
(including attorneys' fees) incurred by a Company Indemnified Person in
defending a civil, criminal, administrative or investigative action, suit or
proceeding referred to in the immediately preceding two sentences shall be paid
by the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Company
Indemnified Person to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Company as authorized in the
amended and restated declaration of trust. The directors and
II-3
54
officers of the Company and the individual trustees are covered by insurance
policies indemnifying them against certain liabilities, including certain
liabilities arising under the Securities Act, which might be incurred by them in
such capacities and against which they cannot be indemnified by the Company or
the TARGETS Trusts. Any agents, dealers or underwriters who execute any of the
agreements filed as Exhibit 1 to this Registration Statement will agree to
indemnify the Company's directors and their officers and the TARGETS Trustees
who signed the Registration Statement against certain liabilities that may arise
under the Securities Act with respect to information furnished to the Company or
any of the TARGETS Trusts by or on behalf of such indemnifying party.
For the undertaking with respect to indemnification, see Item 17 herein.
See the Form of proposed Underwriting Agreement filed or to be filed as
Exhibit 1 for certain indemnification provisions.
ITEM 16. EXHIBITS.
<Table>
<Caption>
EXHIBIT NO.
- -----------
1 -- Form of Underwriting Agreement for the offering of the
TARGETS being registered under this Registration Statement,
incorporated by reference to Exhibit 1 to Salomon Smith
Barney Holding Inc.'s Registration Statement on Form S-3
(No. 333-32792).
3.01 -- Restated Certificate of Incorporation of Salomon Smith
Barney Holdings Inc. ("Salomon Smith Barney"), effective as
of July 1, 1999, incorporated by reference to Exhibit 3.02
to Post-Effective Amendment No. 1 to Salomon Smith Barney's
Registration Statement on Form S-3 (No. 333-71667).
3.02 -- By-Laws of Salomon Smith Barney, incorporated by reference
to Exhibit 3.03 to Post-Effective Amendment No. 1 to Salomon
Smith Barney's Registration Statement on Form S-3 (No.
333-71667).
4(a) -- Certificate of Trust of TARGETS Trust XII, incorporated by
reference to Exhibit 4(g) to Salomon Smith Barney's
Registration Statement on Form S-3 (No. 333-32792).
4(b) -- Certificate of Trust of TARGETS Trust XIII, incorporated by
reference to Exhibit 4(h) to Salomon Smith Barney's
Registration Statement on Form S-3 (No. 333-32792).
4(c) -- Certificate of Trust of TARGETS Trust XIV, incorporated by
reference to Exhibit 4(i) to Salomon Smith Barney's
Registration Statement on Form S-3 (No. 333-32792).
4(d) -- Certificate of Trust of TARGETS Trust XV, incorporated by
reference to Exhibit 4(j) to Salomon Smith Barney's
Registration Statement on Form S-3 (No. 333-32792).
4(e) -- Certificate of Trust of TARGETS Trust XVI, incorporated by
reference to Exhibit 4(k) to Salomon Smith Barney's
Registration Statement on Form S-3 (No. 333-32792).
4(f) -- Certificate of Trust of TARGETS Trust XVII, incorporated by
reference to Exhibit 4(l) to Salomon Smith Barney's
Registration Statement on Form S-3 (No. 333-32792).
4(g) -- Certificate of Trust of TARGETS Trust XVIII.
4(h) -- Certificate of Trust of TARGETS Trust XIX.
4(i) -- Certificate of Trust of TARGETS Trust XX.
4(j) -- Certificate of Trust of TARGETS Trust XXI.
4(k) -- Certificate of Trust of TARGETS Trust XXII.
4(l) -- Certificate of Trust of TARGETS Trust XXIII.
4(m) -- Certificate of Trust of TARGETS Trust XXIV.
4(n) -- Certificate of Trust of TARGETS Trust XXV.
4(o) -- Certificate of Trust of TARGETS Trust XXVI.
4(p) -- Certificate of Trust of TARGETS Trust XXVII.
</Table>
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<Table>
<Caption>
EXHIBIT NO.
- -----------
4(q) -- Form of Amended and Restated Declaration of Trust,
incorporated by reference to Exhibit 4(m) to Salomon Smith
Barney's Registration Statement on Form S-3 (No. 333-32792).
4(r) -- Form of TARGETS Guarantee Agreement, incorporated by
reference to Exhibit 4(n) to Salomon Smith Barney's
Registration Statement on Form S-3 (No. 333-32792).
4(s) -- Form of Indenture, incorporated by reference to Exhibit 4(o)
to Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
4(t) -- Form of TARGETS (included in Exhibit 4(q)).
4(u) -- Form of Common Securities (included in Exhibit 4(q)).
4(v) -- Form of Forward Contract (included in Exhibit 4(s)).
5 -- Opinion of counsel as to certain corporate law matters.
8 -- Opinion of counsel as to certain federal income tax matters.
12 -- Computation of Ratio of Earnings to Fixed Charges of Salomon
Smith Barney (incorporated by reference to Exhibit 12.01 to
Salomon Smith Barney's Annual Report on Form 10-K for the
year ended December 31, 2000 and Exhibit 12.01 to Salomon
Smith Barney's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001).
23(a) -- Consent of PricewaterhouseCoopers LLP, independent certified
public accountants.
23(b) -- Consent of counsel (contained in Exhibits No. 5 and 8).
25(a) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XII, incorporated by reference to Exhibit 25(g) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
25(b) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XIII, incorporated by reference to Exhibit 25(h) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
25(c) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XIV, incorporated by reference to Exhibit 25(i) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
25(d) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XV, incorporated by reference to Exhibit 25(j) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
25(e) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XVI, incorporated by reference to Exhibit 25(k) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
25(f) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XVII, incorporated by reference to Exhibit 25(l) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
25(g) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XVIII.
</Table>
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<Table>
<Caption>
EXHIBIT NO.
- -----------
25(h) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XIX.
25(i) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XX.
25(j) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XXI.
25(k) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XXII.
25(l) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XXIII.
25(m) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XXIV.
25(n) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XXV.
25(o) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XXVI.
25(p) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the amended and restated declaration of trust of TARGETS
Trust XXVII.
25(q) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XII, incorporated by reference to Exhibit 25(s) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
25(r) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XIII, incorporated by reference to Exhibit 25(t) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
25(s) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XIV, incorporated by reference to Exhibit 25(u) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
25(t) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XV, incorporated by reference to Exhibit 25(v) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
25(u) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XVI, incorporated by reference to Exhibit 25(w) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
</Table>
II-6
57
<Table>
<Caption>
EXHIBIT NO.
- -----------
25(v) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XVII, incorporated by reference to Exhibit 25(x) to
Salomon Smith Barney's Registration Statement on Form S-3
(No. 333-32792).
25(w) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XVIII.
25(x) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XIX.
25(y) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XX.
25(z) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XXI.
25(aa) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XXII.
25(bb) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XXIII.
25(cc) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XXIV.
25(dd) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XXV.
25(ee) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XXVI.
25(ff) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the TARGETS Guarantee Agreement with respect to TARGETS
Trust XXVII.
25(gg) -- Form T-1, Statement of Eligibility Under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank, under
the Indenture with respect to the Forward Contracts,
incorporated by reference to Exhibit 25(y) to Salomon Smith
Barney's Registration Statement on Form S-3 (No. 333-32792).
</Table>
- ---------------
* A Form T-1 Statement of Eligibility and Qualification of Trustees other than
those as to which Form T-1s are filed herewith may be filed as an Exhibit to
a Current Report on Form 8-K and incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
II-7
58
previously disclosed in the registration statement or any material change
to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act, each filing of Salomon Smith
Barney Holdings Inc.'s annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrants pursuant to the provisions described in Item 15 or otherwise, the
Registrants have been advised that in the opinion of the SEC, such
Indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer, or controlling person of the
Registrants in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer, or controlling person in connection with the
securities being registered, the Registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(d) The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-8
59
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XII certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XII
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
II-9
60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XIII certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement and, or Amendment thereto, to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XIII
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
II-10
61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XIV certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XIV
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
II-11
62
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XV certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XV
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
II-12
63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XVI certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XVI
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XVII certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XVII
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
II-14
65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XVIII certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XVIII
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
II-15
66
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XIX certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XIX
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
II-16
67
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XX certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XX
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
II-17
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XXI certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XXI
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
II-18
69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XXII certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XXII
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
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70
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XXIII certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XXIII
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
II-20
71
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XXIV certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XXIV
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
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72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XXV certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XXV
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
II-22
73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XXVI certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XXVI
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
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74
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TARGETS Trust
XXVII certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement, or Amendment thereto, to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 10th day of September, 2001.
TARGETS TRUST XXVII
By: /s/ MICHAEL J. DAY
------------------------------------
Name: Michael J. Day
Title: Regular Trustee
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Regular Trustee
By: /s/ MARK I. KLEINMAN
------------------------------------
Name: Mark I. Kleinman
Title: Regular Trustee
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75
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Salomon Smith
Barney Holdings Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement, or Amendment thereto, to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 10th day of September, 2001.
SALOMON SMITH BARNEY HOLDINGS INC.
By: /s/ BARBARA A. YASTINE
------------------------------------
Name: Barbara A. Yastine
Title: Senior Executive Vice
President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment thereto has been signed below by the
following persons in the capacities indicated with Salomon Smith Barney Holdings
Inc. on the 10th day of September, 2001.
<Table>
<Caption>
SIGNATURES TITLE
---------- -----
/s/ MICHAEL A. CARPENTER Chairman of the Board, Chief Executive
- -------------------------------------------- Officer (Principal Executive Officer) and
(Michael A. Carpenter) Director
/s/ DERYCK C. MAUGHAN Director
- --------------------------------------------
(Deryck C. Maughan)
/s/ BARBARA A. YASTINE Senior Executive Vice President and Chief
- -------------------------------------------- Financial Officer (Principal Financial
(Barbara A. Yastine) Officer)
/s/ MICHAEL J. DAY Executive Vice President and Controller
- -------------------------------------------- (Principal Accounting Officer)
(Michael J. Day)
</Table>
II-25