PRICING SUPPLEMENT NO. 17 Rule 424(b)(3)
DATED: December 2, 2005 File No. 333-121744
(To Prospectus dated February 2, 2005,
and Prospectus Supplement dated February 2, 2005)
$12,410,781,162
THE BEAR STEARNS COMPANIES INC.
Medium-Term Notes, Series B
Principal Amount: $5,000,000 Floating Rate Notes [x] Book Entry Notes [x]
Original Issue Date: 12/23/2005 Fixed Rate Notes [ ] Certificated Notes [ ]
Maturity Date: 12/23/2015 CUSIP#: 073928N25
Option to Extend Maturity: No [x]
Yes [ ] Final Maturity Date:
Minimum Denominations: $100,000, increased in multiples of $10,000
Optional Optional
Redemption Repayment Repayment
Redeemable On Price(s) Date(s) Price(s)
------------- -------------- ------------- -----------
* * N/A N/A
Applicable Only to Fixed Rate Notes:
-----------------------------------
Interest Rate:
Interest Payment Dates:
Applicable Only to Floating Rate Notes:
--------------------------------------
Interest Rate Basis: Maximum Interest Rate: N/A
[ ] Commercial Paper Rate Minimum Interest Rate: N/A
[ ] Federal Funds Effective Rate
[ ] Federal Funds Open Rate Interest Reset Date(s): **
[ ] Treasury Rate Interest Reset Period: Quarterly
[ ] LIBOR Reuters Interest Payment Date(s): ***
[ ] LIBOR Telerate
[ ] Prime Rate
[x] CMT Rate +
Interest Rate: Cliquet Inverse Interest Payment Period: Quarterly
Floating Rate+
See Annex A
Index Maturity: Ten Years Interest Determination Date(s): 2nd
Business Day prior to but not
including the first day of the next
Interest Payment Period
Spread (plus or minus): N/A Day Count Basis: 360-day year of
twelve 30-day months
Calculation Agent: Bear, Stearns & Co. Inc.
* Commencing March 23, 2006 and on each Interest Payment Date thereafter
until Maturity, the Notes may be called in whole at par at the option of
the Company on five Business Days' notice. For purposes of this provision,
"Business Day" means any day that is not a Saturday or Sunday, and that is
neither a legal holiday nor a day on which banking institutions or trust
companies in New York City are authorized or obligated by law to close.
** Commencing March 23, 2006 and on the 23rd of each June, September,
December, March thereafter prior to Maturity.
*** Commencing March 23, 2006 and on the 23rd of each June, September,
December, March thereafter, including the maturity date.
CERTAIN US FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain US federal income tax
consequences of the purchase, beneficial ownership and disposition of the
Cliquet Inverse Floating Rate Notes (the "Notes"). This discussion supplements
the section captioned "Certain US Federal Income Tax Considerations" in the
Prospectus Supplement dated February 2, 2005. This summary deals only with a
beneficial owner of a Note that is:
o an individual who is a citizen or resident of the United States for US
federal income tax purposes;
o a corporation (or other entity that is treated as a corporation for US
federal tax purposes) that is created or organized in or under the laws of
the United States or any State thereof (including the District of
Columbia);
o an estate whose income is subject to US federal income taxation regardless
of its source; or
o a trust if a court within the United States is able to exercise primary
supervision over its administration, and one or more United States persons
have the authority to control all of its substantial decisions (each, a
"US Holder").
This discussion is based on interpretations of the Internal Revenue Code
of 1986, as amended (the "Code"), regulations issued there under, and rulings
and decisions currently in effect (or in some cases proposed), all of which are
subject to change. Any such change may be applied retroactively and may
adversely affect the federal income tax consequences described herein. This
summary addresses only US Holders that purchase Notes at initial issuance and
beneficially own such Notes as capital assets and not as part of a "straddle,"
"hedge," "synthetic security" or a "conversion transaction" for federal income
tax purposes, or as part of some other integrated investment. This summary does
not discuss all of the tax consequences that may be relevant to particular
investors or to investors subject to special treatment under the federal income
tax laws (such as banks, thrifts, or other financial institutions; insurance
companies; securities dealers or brokers, or traders in securities electing
mark-to-market treatment; mutual funds or real estate investment trusts; small
business investment companies; S corporations; persons that hold their Notes
through a partnership or other entity treated as a partnership for US federal
tax purposes; investors whose functional currency is not the US dollar; certain
former citizens or residents of the United States; persons subject to the
alternative minimum tax; retirement plans or other tax-exempt entities, or
persons holding the Notes in tax-deferred or tax-advantaged accounts; or
investors that report any item of income, gain, expense, loss or deduction in
respect of Notes for tax purposes in an amount that differs from the amount
reported for book purposes by more than $10 million), and this summary does not
discuss the tax consequences under the laws of any foreign, state or local
taxing jurisdictions. This summary also does not address the tax consequences to
shareholders, or other equity holders in, or beneficiaries of, a holder, or any
state, local or foreign tax consequences of the purchase, ownership or
disposition of the Notes. Accordingly, prospective investors are urged to
consult their tax advisors with respect to the federal, state and local tax
consequences of
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investing in the Notes, as well as any consequences arising under the laws of
any other taxing jurisdiction to which they may be subject.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE FEDERAL,
STATE, LOCAL AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES.
Federal Income Tax Treatment of US Holders.
General
There are no regulations, rulings or other authorities addressing the
federal income tax treatment of debt instruments with terms that are
substantially similar to the Notes, and therefore the federal income tax
treatment of the Notes is subject to some uncertainty.
Under certain Treasury regulations addressing the timing and character of
income, gain, loss and deduction in respect of debt instruments (the "the OID
regulations"), for purposes of determining the yield and maturity of a debt
instrument, an issuer is generally deemed to exercise a call option in a manner
that minimizes the yield on the debt instrument. The OID regulations do not
indicate how this rule is applied to debt instruments, such as the Notes, that
provide for an inverse floating rate of interest and are callable at par. We
intend to take the position that for purposes of applying this rule, the yield
on the Notes should be calculated assuming each Quarterly Coupon is computed
based on the 10 year CMT rate in effect on the date the Notes are issued. Based
on this assumption, our yield would be minimized by exercising our call on March
23, 2006 and therefore, for purposes of the OID regulations, the Notes would be
treated as bearing interest at the initial Interest Rate and having a maturity
of three months. This assumption has been made solely for federal income tax
purposes in order to comply with the OID regulations. This assumption does not
necessarily reflect our expectations regarding the actual yield on the Notes,
nor is it an indication of our intention regarding whether or not to call the
Notes at any time.
Under this position, the Quarterly Coupon on a Note for the initial
Interest Payment Period will be taxable to a US Holder as ordinary interest
income at the time it accrues or is received in accordance with the US Holder's
normal method of accounting for tax purposes. If we do not call the Notes on
March 23, 2006, solely for purposes of the OID regulations, the Notes would be
deemed to be retired and reissued at the end of the initial Interest Payment
Period. In this event, a US Holder would not recognize gain or loss in respect
of such deemed retirement and reissuance and the Quarterly Coupon for the
subsequent Interest Payment Period would be taxable to the US Holder as ordinary
interest income at the time it accrues or is received in accordance with the US
Holder's normal method of accounting for tax purposes. We intend to take
analogous positions for each subsequent Interest Reset Period. Accordingly, if
based on the 10 year CMT rate in effect on such date, our yield would be
minimized by exercising our call option, we intend to take the position that we
are deemed to exercise our call option on such Interest Payment Date, and
subject to the treatment described above. If, based on the 10 year CMT rate in
effect on such date, our yield would not be minimized by exercising our call
option, we intend to take the position that we are not deemed to exercise our
call option. In this event, we intend to treat the Notes as "contingent payment
debt instruments" for federal income tax purposes at such time. The treatment of
contingent payment debt instruments is summarized below under "--Alternative
Treatment" and in the Prospectus Supplement dated February 2, 2005, under the
caption "Certain US Federal Income Tax Considerations - Contingent Payment Debt
Instruments." U.S. Holders may contact John F. Stacconi at (212) 272-2123 for
information as to whether we will treat the Notes as contingent payment debt
instruments on any Interest Payment Date, and for the comparable yield and
projected payment schedule if we are treating the Notes as contingent payment
debt instruments.
Sale, Exchange, Redemption, Repayment or Other Disposition of the Notes
Under the approach described above, upon the disposition of a Note by
sale, exchange, redemption (if we exercise our call right or otherwise),
repayment or other disposition, a US Holder will generally recognize taxable
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gain or loss equal to the difference, if any, between (i) the amount realized on
the disposition (other than amounts attributable to accrued but unpaid interest,
which would be treated as such) and (ii) the US Holder's adjusted tax basis in
the Note. A US Holder's adjusted tax basis in a Note generally will equal the
cost of the Note (net of accrued interest) to the US Holder. Capital gains of
individual taxpayers from the sale, exchange, redemption, repayment or other
disposition of a Note held for more than one year may be eligible for reduced
rates of taxation. The deductibility of a capital loss realized on the sale,
exchange, redemption, repayment or other disposition of a Note is subject to
limitations.
Alternative Treatment
As mentioned above, there are no regulations, rulings or other authorities
addressing the federal income tax treatment of debt instruments with terms that
are substantially similar to the Notes, and therefore the federal income tax
treatment of the Notes is subject to some uncertainty. Accordingly, other
treatments of the Notes are possible. For example, in the event that we are not
deemed to exercise our right to call the Notes for purposes of the OID
regulations on March 23, 2006 or on a subsequent Interest Payment Date, it is
possible that the Notes could be treated as contingent payment debt instruments
for federal income tax purposes. If the Notes were treated as contingent payment
debt instruments for federal income tax purposes, the timing and character of
income with respect to the Notes would be significantly affected. For example, a
US Holder would be required to include in income in each year an amount equal to
the "comparable yield" of the Notes, which is generally equal to the yield at
which we would issue a noncontingent debt instrument with terms and conditions
similar to the Notes. In addition, a "projected payment schedule" would be
computed, as of the Original Issue Date or as of the most recent Interest
Payment Date on which we were not deemed to exercise our call option, that would
produce the comparable yield. Furthermore, any gain realized on the maturity
date or upon an earlier call, sale, exchange or other disposition of the Notes
would generally be treated as ordinary income, and any loss realized on the
maturity date or upon an earlier call, sale, exchange or other disposition of
the Notes would be treated as ordinary loss to the extent of interest included
as income in the current or previous taxable years by the US Holder in respect
of the Notes, and capital loss thereafter. Finally, special rules may apply if
the Notes are outstanding and treated as contingent payment debt instruments on
the date on which the Quarterly Coupon becomes the Fixed Coupon. The federal
income tax treatment of contingent payment debt instruments is summarized in the
Prospectus Supplement dated February 2, 2005, under the caption "Certain US
Federal Income Tax Considerations - Contingent Payment Debt Instruments."
Prospective investors should consult their tax advisors with respect to their
treatment if the Notes are treated as contingent payment debt instruments.
Information Reporting and Backup Withholding.
Information reporting will apply to certain payments on a Note (including
interest and OID) and proceeds of the sale of a Note held by a US Holder that is
not an exempt recipient (such as a corporation). Backup withholding may apply to
payments made to a US Holder if (a) the US Holder has failed to provide its
correct taxpayer identification number on IRS Form W-9, or (b) we have been
notified by the IRS of an underreporting by the US Holder (underreporting
generally refers to a determination by the IRS that a payee has failed to
include in income on its tax return any reportable dividend and interest
payments required to be shown on a tax return for a taxable year).
Backup withholding is not an additional tax and may be refunded (or
credited against your US federal income tax liability, if any), provided, that
certain required information is furnished. The information reporting
requirements may apply regardless of whether withholding is required.
THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX
IMPLICATIONS OF AN INVESTMENT IN NOTES. PROSPECTIVE INVESTORS ARE URGED TO
CONSULT WITH THEIR OWN TAX ADVISORS PRIOR TO INVESTING TO DETERMINE THE TAX
IMPLICATIONS OF SUCH INVESTMENT IN LIGHT OF EACH SUCH INVESTOR'S PARTICULAR
CIRCUMSTANCES.
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The distribution of Notes will conform to the requirements set forth in Rule
2720 of the NASD Conduct Rules.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution
Agreement dated as of June 19, 2003, as amended, we have agreed to sell to Bear,
Stearns & Co. Inc. ("Bear Stearns"), as principal, and Bear Stearns has agreed
to purchase from us, $5,000,000 aggregate principal amount of Notes. An
aggregate of $5,000,000 of the Notes will be initially offered to the public at
100% of their principal amount. We will offer the Notes to Bear Stearns at 100%
of the price at which the Notes are offered to the public. Bear Stearns intends
to allow a discount to other agents not in excess of 3.00% of the public
offering price.
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Annex A
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Cliquet Inverse Floating Rate
+ The Interest Rate for each Interest Payment Period shall be determined by the
Calculation Agent in accordance with the following:
--------------------------------------------------------------------------------
Interest Payment Period Quarterly Coupon
--------------------------------------------------------------------------------
For the Interest Payment Period from
and including December 23, 2005 to but 8.50% (Initial Interest Rate)
excluding March 23, 2006
--------------------------------------------------------------------------------
For the Interest Payment Period from Previous Quarterly Coupon(+) + 4.65%
and including March 23, 2006 to but - 10 Year CMT Rate
excluding June 23, 2006
--------------------------------------------------------------------------------
For the Interest Payment Period from Previous Quarterly Coupon + 4.75%
and including June 23, 2006 to but - 10 Year CMT Rate
excluding September 23, 2006
--------------------------------------------------------------------------------
For the Interest Payment Period from Previous Quarterly Coupon + 4.75%
and including September 23, 2006 to but - 10 Year CMT Rate
excluding December 23, 2006
--------------------------------------------------------------------------------
For the Interest Payment Period from Previous Quarterly Coupon + 4.825%
and including December 23, 2006 to but - 10 Year CMT Rate
excluding March 23, 2007
--------------------------------------------------------------------------------
For the Interest Payment Period from Previous Quarterly Coupon + 4.825%
and including March 23, 2007 to but - 10 Year CMT Rate
excluding June 23, 2007
--------------------------------------------------------------------------------
For the Interest Payment Period from Previous Quarterly Coupon + 4.85%
and including June 23, 2007 to but - 10 Year CMT Rate
excluding September 23, 2007
--------------------------------------------------------------------------------
For the Interest Payment Period from Previous Quarterly Coupon + 4.85%
and including September 23, 2007 to but - 10 Year CMT Rate
excluding December 23, 2007
--------------------------------------------------------------------------------
For the Interest Payment Period from Previous Quarterly Coupon + 4.95%
and including December 23, 2007 to but - 10 Year CMT Rate
excluding March 23, 2008
--------------------------------------------------------------------------------
For the Interest Payment Period from Previous Quarterly Coupon + 4.95%
and including March 23, 2008 to but - 10 Year CMT Rate
excluding June 23, 2008
--------------------------------------------------------------------------------
For the Interest Payment Period from Previous Quarterly Coupon + 5.00%
and including June 23, 2008 to but - 10 Year CMT Rate
excluding September 23, 2008
--------------------------------------------------------------------------------
For the Interest Payment Period from Previous Quarterly Coupon + 5.00%
and including September 23, 2008 to but - 10 Year CMT Rate ("Fixed Coupon")
excluding December 23, 2008
--------------------------------------------------------------------------------
For each Interest Payment Period from
and including December 23, 2008 to but Fixed Coupon
excluding December 23, 2015
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(+) Previous Quarterly Coupon with respect to an Interest Payment Period
means the Interest Rate for the preceding Interest Payment Period.
With respect to any Interest Payment Period, 10 year CMT Rate shall be the
CMT rate with a Designated CMT Index Maturity of 10 years as quoted on CMT
Telerate page 7051 at 11:00 a.m. on the second Business Day prior to but not
including the first day of such Interest Payment Period. If any Interest Reset
Date would otherwise be a day that is not a Business Day, such Interest Reset
Date shall be postponed to the next succeeding day that is a Business Day. For
purposes of determining an Interest Reset Date, "Business Day" means any day
that is not a Saturday or Sunday, and that is neither a legal holiday nor a day
on which banking institutions or trust companies in New York City are authorized
or obligated by law to close.
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