-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G5MP/kEBSZp9mcNcjooXtH10ahjEbobBmm5X6IGFwrd84xzCqcOo7l2cO3kun3TO PMgo85ClbBVwoyvCsfjjUg== 0000950123-96-006905.txt : 19961125 0000950123-96-006905.hdr.sgml : 19961125 ACCESSION NUMBER: 0000950123-96-006905 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19961122 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE HATHAWAY INC /DE/ CENTRAL INDEX KEY: 0000109694 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 042254452 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 033-30570 FILM NUMBER: 96670585 BUSINESS ADDRESS: STREET 1: 1440 KIEWIT PLZ CITY: OMAHA STATE: NE ZIP: 68131 BUSINESS PHONE: 4023461400 MAIL ADDRESS: STREET 1: 1440 KIEWIT PLAZA CITY: OMAHA STATE: NE ZIP: 68131 POS AM 1 POST-EFFECTIVE AMENDMENT NO. 2 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 1996 REGISTRATION NO. 33-30570 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ POST-EFFECTIVE AMENDMENT NO. 2 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ BERKSHIRE HATHAWAY INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ DELAWARE 04-2254452 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1440 KIEWIT PLAZA OMAHA, NEBRASKA 68131 (402) 346-1400 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ MARC D. HAMBURG BERKSHIRE HATHAWAY INC. 1440 KIEWIT PLAZA OMAHA, NEBRASKA 68131 (402) 346-1400 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: R. GREGORY MORGAN ALAN L. BELLER JOHN W. WHITE MUNGER, TOLLES & OLSON CLEARY, GOTTLIEB, STEEN & HAMILTON CRAVATH, SWAINE & MOORE 355 SOUTH GRAND AVENUE ONE LIBERTY PLAZA 825 EIGHTH AVENUE LOS ANGELES, CALIFORNIA 90071 NEW YORK, NEW YORK 10006 NEW YORK, NEW YORK 10019 (213) 683-9100 (212) 225-2000 (212) 474-1000
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO PUBLIC: From time to time after the effective date of this Post-Effective Amendment No. 2 as determined by 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. [ ] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXPLANATORY NOTE This Post-Effective Amendment No. 2 amends the Registration Statement on Form S-3 (Registration Number 33-30570) of Berkshire Hathaway Inc. ("Berkshire") originally filed with the Securities and Exchange Commission on August 17, 1989 (the "Registration Statement"). The Registration Statement was declared effective by the Commission on August 30, 1989. Post-Effective Amendment No. 1 was filed with the Commission on November 8, 1996. This Amendment updates the text of the base prospectus included in the Registration Statement to reflect more current information regarding Berkshire and clarifies the text of the base prospectus to state expressly that the securities registered by the Registration Statement may include Debt Securities issued by Berkshire which would be exchangeable in certain circumstances into securities issued by another company. This Amendment also includes a prospectus supplement to the base prospectus. The prospectus supplement describes an offering of Debt Securities exchangeable in certain circumstances into common stock issued by Salomon Inc. i 3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE POST-EFFECTIVE AMENDMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION NOVEMBER 22, 1996 PROSPECTUS SUPPLEMENT (To Prospectus Dated November , 1996) $350,000,000 BERKSHIRE HATHAWAY INC. % SENIOR EXCHANGEABLE NOTES DUE , 2001 (SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE, OF SALOMON INC) The Notes are being offered by Berkshire Hathaway Inc. ("Berkshire") at a price of $ per $1,000 principal amount due at maturity (the "Issue Price"). Interest on the Notes at the rate of % per annum on the principal amount due at maturity is payable semiannually on and of each year, commencing , 1997. Such rate of interest and accrual of OID (as defined below) represents a yield to maturity of % per annum (computed on a semi- annual bond equivalent basis). "OID" means original issue discount calculated on a constant yield basis using the $1,000 principal amount due at maturity. The calculation of original issue discount for United States Federal income tax purposes will differ. The Notes will be issued with Tax OID (as defined herein) for U.S. Federal income tax purposes, which will be calculated under recently issued U.S. Treasury regulations governing contingent payment debt instruments. For a discussion of certain United States Federal income tax consequences for holders of Notes, see "Certain United States Federal Income Tax Considerations." At maturity (including as a result of acceleration or otherwise), if both (1) the 10-Day Average Closing Price (as defined herein) of the common stock, par value $1.00 per share (the "Salomon Common Stock"), of Salomon Inc, a Delaware corporation ("Salomon"), and (2) the Closing Price (as defined herein) of Salomon Common Stock on the last trading day (as defined herein) prior to maturity are equal to or greater than the Exchange Price (as defined herein) then in effect, each Note will be exchanged by Berkshire into Salomon Common Stock at an exchange rate (the "Exchange Rate") of shares of Salomon Common Stock per Note or, at Berkshire's option, cash equal to the product of the Exchange Rate and the Current Market Value (as defined herein) of Salomon Common Stock. In all other circumstances, Berkshire will pay at maturity $1,000 per Note (or, in the event the Notes mature prior to , 2001, the Accreted Value (as defined herein) thereof). Accrued and unpaid interest to maturity will be payable by Berkshire in cash on all Notes outstanding at maturity. The Exchange Rate will be subject to adjustment upon the occurrence of certain events affecting the Salomon Common Stock. On the last trading day of January, April, July and October, from and including January 1997 through and including July 2001 (each, an "Exchange Date"), any Notes (other than Notes with respect to which a notice of exchange for Salomon Common Stock has been delivered by Berkshire) will be exchangeable, at the option of the holder, for shares of Salomon Common Stock at the Exchange Rate then in effect, provided that the Closing Price of Salomon Common Stock on the Exchange Date exceeds the Exchange Price then in effect, and subject to certain additional conditions. In addition, if a prospectus is required to be delivered under the Securities Act and is not available to Berkshire for use during any Exchange Period (as defined herein), the foregoing exchange rights will be subject to cancellation or postponement as described under "Description of the Notes -- Exchange at Option of Holder." The Notes will not be redeemable or exchangeable at the option of Berkshire prior to , 1999. Thereafter, (1) at any time when both (A) the 10-Day Average Closing Price of Salomon Common Stock on the date on which the applicable notice of redemption is given and (B) the Closing Price of Salomon Common Stock on the last trading day prior to such date are equal to or greater than the Exchange Price then in effect, Berkshire may, at its option, either (i) exchange the Notes, in whole or in part, for shares of Salomon Common Stock at the Exchange Rate then in effect or (ii) redeem the Notes, in whole or in part, in cash at a price per Note equal to the product of the Exchange Rate then in effect and the Current Market Value of Salomon Common Stock on the date on which the applicable notice of redemption is given, and (2) at any other time, Berkshire may, at its option, redeem the Notes, in whole or in part, in cash at a price per Note equal to the Accreted Value of the Notes on the date of redemption. Berkshire may not redeem the Notes for cash during certain periods as described under "Description of the Notes -- Redemption or Exchange at Option of Berkshire." The Notes are not subject to any sinking fund prior to maturity. Attached hereto as Appendix A is a prospectus supplement and prospectus of Salomon (the "Salomon Prospectus") covering the shares of Salomon Common Stock which may be received by a holder of Notes at maturity or upon exchange prior to maturity. The Salomon Common Stock is listed on the New York Stock Exchange (the "NYSE") under the symbol "SB." An application has been filed to list the Notes on the NYSE. PROSPECTIVE INVESTORS ARE URGED TO CONSIDER CAREFULLY THE INFORMATION CONTAINED UNDER "RISK FACTORS RELATING TO THE NOTES" BEGINNING ON PAGE S-6. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT PRICE TO UNDERWRITING PROCEEDS TO DUE AT MATURITY PUBLIC(1) DISCOUNT BERKSHIRE(1)(2) Per Note................ 100% % % % Total(3)................ $350,000,000 $ $ $ - ------------------------------------------------------------------------------------------------------------
(1) Plus accrued interest and OID, if any, from November , 1996. (2) Before deducting estimated expenses of $295,500 payable by Berkshire. (3) Berkshire has granted to the Underwriters an option, exercisable within 30 days after the date of this Prospectus Supplement, to purchase up to an additional $50,000,000 aggregate principal amount due at maturity of Notes at the Price to Public, less the Underwriting Discount, solely to cover over-allotments, if any. If the Underwriters exercise such option in full, the total Principal Amount Due at Maturity, Price to Public, Underwriting Discount, and Proceeds to Berkshire will be $400,000,000, $ , $ , and $ , respectively. See "Plan of Distribution." The Notes are offered subject to receipt and acceptance by the Underwriters, to prior sale and to the Underwriters' right to reject any order in whole or in part and to withdraw, cancel or modify the offer without notice. It is expected that delivery of the Notes will be made at the office of Salomon Brothers Inc, or through the facilities of The Depository Trust Company, on or about November , 1996. SALOMON BROTHERS INC GOLDMAN, SACHS & CO. SMITH BARNEY INC. The date of this Prospectus Supplement is November , 1996. 4 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AND/OR SALOMON COMMON STOCK AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NYSE, IN THE OVER- THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 5 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this Prospectus. Investors should carefully consider the information set forth under the heading "Risk Factors Relating to the Notes." For definitions of certain terms used in this Prospectus, see "Description of the Notes -- Certain Definitions." THE OFFERING SECURITIES OFFERED......... $350,000,000 in aggregate principal amount due at maturity of Senior Exchangeable Notes Due 2001 ($400,000,000 in aggregate principal amount due at maturity if the Underwriters' over-allotment option is exercised in full). ISSUE PRICE................ $ per $1,000 principal amount due at maturity. MATURITY DATE.............. , 2001. INTEREST................... % per annum on the principal amount due at maturity (or % per annum on the Issue Price), payable semi-annually in cash on and of each year, commencing , 1997. YIELD TO MATURITY OF NOTES...................... % per annum, computed on a semi-annual bond equivalent basis giving effect both to the accrual of OID (calculated based on the excess of the principal amount due at maturity over the Issue Price) and the accrual of interest, calculated from , 1996. See "Certain United States Federal Income Tax Considerations." PAYMENT OR EXCHANGE AT MATURITY................. At maturity (including as a result of acceleration or otherwise) if both (1) the 10-Day Average Closing Price of Salomon Common Stock at maturity and (2) the Closing Price of Salomon Common Stock on the last trading day prior to maturity are equal to or greater than the Exchange Price then in effect, each Note will be exchanged by Berkshire into shares of Salomon Common Stock per Note (the "Exchange Rate"), or Berkshire may, at its option, deliver cash, in lieu of delivering shares of Salomon Common Stock, in an amount equal to the product obtained by multiplying the Exchange Rate by the Current Market Value (as defined below) of Salomon Common Stock at maturity. In all other circumstances, Berkshire will pay at maturity, in cash, a price per Note equal to the principal amount due at maturity (or, in the event the Notes mature prior to the Maturity Date, the Accreted Value thereof). In all events, accrued and unpaid interest to maturity will be payable by Berkshire in cash on all Notes outstanding at maturity. The Exchange Rate will be subject to adjustment upon the occurrence of certain events affecting the Salomon Common Stock as described under "Description of the Notes -- Adjustment of Exchange Rate." "Current Market Value" of Salomon Common Stock on any date of determination means the greater of (1) the 10-Day Average Closing Price as of such date and (2) the Closing Price of Salomon Common Stock on the trading day immediately preceding such date (or, if determined after the close of business on any trading day, the Closing Price of Salomon Common Stock on such trading day). "10-Day Average Closing Price" of Salomon Common Stock as of any date of determination means the average Closing Price of Salomon Common Stock on the 10 trading S-3 6 days immediately prior to such date (or, if determined after the close of business on any trading day, the average Closing Price of Salomon Common Stock on such trading day and the nine trading days immediately prior to such date). EXCHANGE AT OPTION OF THE HOLDER................... On the last trading day of each January, April, July and October, from and including January 1997 through and including July 2001 (each an "Exchange Date"), any Notes (other than Notes with respect to which a notice of exchange for Salomon Common Stock has been delivered by Berkshire prior to such Exchange Date) will be exchangeable, at the option of the holder, for shares of Salomon Common Stock at the Exchange Rate then in effect, provided that (1) such holder has delivered such Notes to the Trustee during the Exchange Period (as defined below) in accordance with the procedures set forth in the Indenture and (2) the Closing Price of Salomon Common Stock on the Exchange Date exceeds the Exchange Price then in effect, and subject to certain additional conditions. In addition, if a prospectus is required to be delivered under the Securities Act and is not available to Berkshire for use during any Exchange Period, the foregoing exchange rights will be subject to cancellation or postponement as described under "Description of the Notes -- Exchange at Option of Holder." The "Exchange Period" with respect to any Exchange Date means the period from the opening of business on the business day immediately prior to such Exchange Date until the close of business on such Exchange Date. REDEMPTION OR EXCHANGE AT OPTION OF BERKSHIRE...... The Notes will not be redeemable or exchangeable at the option of Berkshire prior to , 1999. Thereafter, (1) at any time when both (A) the 10-Day Average Closing Price of Salomon Common Stock on the date on which the applicable notice of redemption is given and (B) the Closing Price of Salomon Common Stock on the last trading day prior to such date are equal to or greater than the Exchange Price then in effect, Berkshire may, at its option, either (i) exchange the Notes, in whole or in part, for shares of Salomon Common Stock at the Exchange Rate then in effect or (ii) redeem the Notes, in whole or in part, in cash at a price per Note equal to the product of the Exchange Rate then in effect and the Current Market Value of Salomon Common Stock on the date on which the applicable notice of redemption is given, and (2) at any other time, Berkshire may, at its option, redeem the Notes, in whole or in part, in cash at a price per Note equal to the Accreted Value of the Notes on the date of redemption. However, Berkshire may not give any notice of redemption for cash prior to or during any Exchange Period if the redemption date would occur during or after such Exchange Period. SINKING FUND............... None. RANKING.................... The Notes will be unsecured obligations of Berkshire ranking on a parity with all other unsecured and unsubordinated indebtedness of Berkshire. "Unsubordinated" indebtedness refers to debt obligations of Berkshire that are not specifically by their terms subordinated or junior in rank to other, more senior, debt obligations of Berkshire. Berkshire is a holding company that conducts virtually all of its S-4 7 operations through subsidiaries and, therefore, the Notes will effectively be subordinated to indebtedness and other liabilities of Berkshire's subsidiaries. As of September 30, 1996, Berkshire's subsidiaries had approximately $16.8 billion of total indebtedness and other liabilities, while Berkshire had no secured indebtedness. The Indenture does not limit the ability of Berkshire or its subsidiaries to incur additional indebtedness (including secured indebtedness). CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS........... Because the Notes will be treated as contingent payment debt obligations of Berkshire, and because by accepting Notes holders thereof agree to this treatment of the Notes, U.S. Holders (as defined herein) of the Notes will be required to include original issue discount for United States federal income tax purposes ("Tax OID") in gross income on a constant yield basis over the term of the Notes. The amount of Tax OID will equal the excess of (i) the sum of the cash interest payable over the life of the Notes and an assumed amount payable at maturity of the Notes over (ii) the Issue Price of the Notes. Such Tax OID will be includible in a U.S. Holder's gross income for United States federal income tax purposes (as ordinary income) over the life of the Notes, regardless of when (or whether) cash (or Salomon Common Stock) attributable to such Tax OID is actually received by such holder. The amount of Tax OID includible in a U.S. Holder's gross income during any period will exceed the cash interest payable with respect to a Note for such period. Furthermore, because the amount of Tax OID is calculated based (in part) on an assumed amount payable at maturity, if the value of the Salomon Common Stock or cash actually paid at maturity is, in fact, less than the assumed amount payable at maturity, a U.S. Holder will have recognized taxable income in periods prior to maturity that exceed such holder's economic income from the holding of the Note during such periods (with an offsetting ordinary loss at maturity of the Note). If a U.S. Holder receives shares of Salomon Common Stock (or the cash equivalent thereof) upon a retirement, redemption or optional exchange of a Note, such holder will recognize ordinary taxable income to the extent the value of such Salomon Common Stock (or cash equivalent) exceeds the assumed amount payable at maturity that was taken into account in determining the amount of Tax OID with respect to the Note. A U.S. Holder will also be required to treat any gain recognized upon a sale of a Note as ordinary income (rather than capital gain). See "Certain United States Federal Income Tax Considerations." USE OF PROCEEDS............ The net proceeds received from the sale of Notes will be used for general corporate purposes. LISTING.................... An application has been filed to list the Notes on the NYSE. The Salomon Common Stock is currently listed on the NYSE under the symbol "SB." S-5 8 RISK FACTORS RELATING TO THE NOTES As described in more detail below, the trading price of the Notes may vary considerably prior to maturity due to, among other things, fluctuations in the price of Salomon Common Stock and other events that are difficult to predict and beyond Berkshire's control. COMPARISON TO OTHER DEBT SECURITIES The terms of the Notes differ from those of ordinary debt securities in that the amount that a holder of the Notes will receive at maturity or upon redemption or exchange of the Notes prior to maturity is not fixed, but may be based on the price of the Salomon Common Stock as described under "Description of the Notes." Berkshire will not have the right to exchange the Notes for Salomon Common Stock at or prior to maturity unless both (1) the 10-Day Average Closing Price of Salomon Common Stock at maturity or on the date on which the applicable notice of redemption is given and (2) the Closing Price of Salomon Common Stock on the last trading day prior to such date are equal to or greater than the Exchange Price then in effect. Therefore, the value (based on such average and last-day Closing Prices) of the shares of Salomon Common Stock (or the equivalent cash amount) received by a holder of Notes at maturity will not be less than the principal amount due at maturity of the Notes. However, the value of the shares of Salomon Common Stock received by a holder upon exchange of the Notes at Berkshire's option prior to maturity may fluctuate during the 15 to 30 day period between the date on which the applicable notice of exchange is given and the effective date of such exchange and, therefore, the value of such shares on such effective date may be less than the Accreted Value of the Notes on such date. In addition, the amount of cash received upon any redemption of the Notes at Berkshire's option prior to maturity will be determined as of the date on which the applicable notice of redemption is given and, therefore, such cash amount may be less than the value (determined as of the redemption date) of the shares of Salomon Common Stock into which such Notes are exchangeable. In addition, the opportunity for equity appreciation afforded by an investment in the Notes is less than the opportunity for equity appreciation afforded by an investment in the Salomon Common Stock because the amount receivable by a holder of Notes upon redemption or exchange of the Notes at or prior to maturity will exceed the Accreted Value of such Notes only if both (1) the 10-Day Average Closing Price of Salomon Common Stock at maturity or on the date on which the applicable notice of redemption is given and (2) the Closing Price of Salomon Common Stock on the last trading day prior such date are equal to or greater than the Exchange Price then in effect. The Exchange Price initially represents an appreciation of approximately % over the Closing Price of the Salomon Common Stock on the NYSE on November , 1996. RELATIONSHIP OF THE NOTES AND SALOMON COMMON STOCK The market price of the Notes at any time may be affected by changes in the price of Salomon Common Stock. Berkshire is making no prediction to prospective holders of Notes as to whether the price of Salomon Common Stock will rise or fall. Trading prices of Salomon Common Stock will be determined by Salomon's operational results and by complex and interrelated economic, financial, political and other factors that can affect the capital markets generally, the NYSE (on which the Salomon Common Stock is traded) and the market segment of which Salomon is a part. Holders of the Notes will not be entitled to any rights with respect to Salomon Common Stock (including, without limitation, voting rights and rights to receive any dividends or other distributions in respect thereof) until such time, if any, as such Notes have been exchanged at or prior to maturity for shares of Salomon Common Stock and the applicable record date, if any, for the exercise of such rights occurs after such date. IMPACT OF THE NOTES ON THE MARKET FOR THE SALOMON COMMON STOCK It is not possible to predict accurately how or whether the Notes will trade in the secondary market or whether such market will be liquid. Any market that develops for the Notes is likely to influence and be S-6 9 influenced by the market for the Salomon Common Stock. For example, the price of the Salomon Common Stock could become more volatile and could be depressed by investors' anticipation of the potential distribution into the market of substantial additional amounts of Salomon Common Stock at the maturity of the Notes, by possible sales of Salomon Common Stock by investors who view the Notes as a more attractive means of equity participation in Salomon and by hedging or arbitrage trading activity that may develop involving the Notes and the Salomon Common Stock. DILUTION OF SALOMON COMMON STOCK The Exchange Rate (which determines the number of shares of Salomon Common Stock that holders of the Notes are entitled to receive upon the exchange at or prior to maturity) or the exchange consideration is subject to adjustment for certain events arising from, among others, a merger or consolidation in which Salomon is not the surviving or resulting corporation, a sale or other transfer of all or substantially all of the assets of Salomon and the liquidation, dissolution, winding up or bankruptcy of Salomon, as well as stock splits and combinations, stock dividends and certain other actions of Salomon that modify its capital structure. See "Description of the Notes -- Adjustment of Exchange Rate." The Exchange Rate or the exchange consideration may not be adjusted for other events, such as offerings of Salomon Common Stock for cash or in connection with acquisitions, that may adversely affect the price of Salomon Common Stock and, because of the relationship between the Notes and the price of Salomon Common Stock, such other events may adversely affect the trading price of the Notes. There can be no assurance that Salomon or Berkshire will not make offerings of Salomon Common Stock or take such other action in the future or as to the amount of such offerings, if any. See "Relationship Between Berkshire and Salomon." NO OBLIGATION ON PART OF SALOMON WITH RESPECT TO THE NOTES Other than its obligation to make available a Salomon Prospectus for use by Berkshire in connection with any exchange of Notes at the option of the holder as described under "Description of the Notes -- Exchange at Option of Holder," Salomon has no obligations with respect to the Notes, including any obligation to take the needs of Berkshire as issuer of the Notes or of holders of the Notes into consideration for any reason. Salomon will not receive any of the proceeds of the offering of the Notes, other than the portion of the Underwriting Discount earned by Salomon Brothers Inc, a wholly owned subsidiary of Salomon, in connection with the underwriting of the Notes. Salomon will not be involved with the administration of the Notes and will have no obligations with respect to the election of consideration received by holders of the Notes at maturity or upon redemption or exchange prior to maturity. POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET The Notes are novel securities and there is currently no secondary market for the Notes. The Underwriters (other than Salomon Brothers Inc) currently intend, but are not obligated, to make a market in the Notes. See "Plan of Distribution." There can be no assurance that a secondary market will develop or, if a secondary market does develop, that it will provide the holders of the Notes with liquidity of investment or that it will continue for the life of the Notes. An application will be filed to list the Notes on the NYSE. However, there can be no assurance that, if so listed, the Notes will not later be delisted or that trading in the Notes on the NYSE will not be suspended. In the event of a failure to list, delisting or suspension of trading on such market, Berkshire will apply for quotation on another trading market or for listing of the Notes on another national securities exchange. If the Notes are not listed or traded on any securities exchange or trading market, or if trading of the Notes is suspended, pricing information for the Notes may be difficult to obtain, and the liquidity of the Notes may be adversely affected. TAX CONSEQUENCES Because the Notes will be treated as contingent payment debt obligations of Berkshire, and because by accepting Notes holders thereof agree to this treatment of the Notes, U.S. Holders of the Notes will be S-7 10 required to include original issue discount for U.S. Federal income tax purposes ("Tax OID") in gross income on a constant yield basis over the term of the Notes. The amount of Tax OID will equal the excess of (i) the sum of the cash interest payable over the life of the Notes and an assumed amount payable at maturity of the Notes over (ii) the Issue Price of the Notes. Such Tax OID will be includible in a U.S. Holder's gross income for U.S. Federal income tax purposes (as ordinary income) over the life of the Notes, regardless of when (or whether) cash (or Salomon Common Stock) attributable to such Tax OID is actually received by such holder. The amount of Tax OID includible in a U.S. Holder's gross income during any period will exceed the cash interest payable with respect to a Note for such period. Furthermore, because the amount of Tax OID is calculated based (in part) on an assumed amount payable at maturity, if the value of the Salomon Common Stock or cash actually paid at maturity is, in fact, less than the assumed amount payable at maturity, a U.S. Holder will have recognized taxable income in periods prior to maturity that exceed such holder's economic income from the holding of a Note during such periods (with an offsetting ordinary loss at maturity of the Note). If a U.S. Holder receives shares of Salomon Common Stock (or the cash equivalent thereof) upon a retirement, redemption or optional exchange by the holder of a Note, such holder will recognize ordinary taxable income to the extent the value of such Salomon Common Stock (or cash equivalent) exceeds the assumed amount payable at maturity that was taken into account in determining the amount of Tax OID with respect to the Note. A U.S. Holder will also be required to treat any gain recognized upon a sale of a Note as ordinary income (rather than capital gain). See "Certain United States Federal Income Tax Considerations." SALOMON INC Salomon Inc conducts global investment banking, global securities and commodities trading, and U.S. oil refining and gathering activities. Investment banking activities are conducted by Salomon Brothers Holding Company Inc and its subsidiaries, including Salomon Brothers Inc ("Salomon Brothers"). Salomon Brothers provides capital raising, advisory, trading and risk management services to its customers, and executes proprietary trading strategies on its own behalf. Salomon Inc's commodities trading activities are conducted by its wholly owned subsidiary, Phibro Inc., and its subsidiaries. Oil refining and gathering activities are conducted by Basis Petroleum, Inc. At November 8, 1996, Salomon employed 8,639 people. Attached hereto as Appendix A is the Salomon Prospectus covering the shares of Salomon Common Stock offered in connection with the Notes. Information about reports, proxy statements and other information concerning Salomon filed with the Securities and Exchange Commission and the NYSE is contained on page 2 of the Salomon Prospectus. RELATIONSHIP BETWEEN BERKSHIRE AND SALOMON As of the date of this Prospectus Supplement, Berkshire beneficially owns 21,370,437 shares of Salomon Common Stock, representing approximately 18% of the outstanding voting power of Salomon. Such beneficial ownership consists of (1) 10,317,806 shares of Salomon Common Stock held by subsidiaries of Berkshire and (2) 420,000 shares of the 9.00% Series A Cumulative Convertible Preferred Stock of Salomon ("Salomon Convertible Preferred Stock") held by subsidiaries of Berkshire, which shares are convertible, at the option of the holder, into an aggregate of 11,052,631 shares of Salomon Common Stock at the current conversion rate. In October 1987, pursuant to a Purchase Agreement dated September 27, 1987, between Salomon and Berkshire (the "Purchase Agreement"), Salomon issued to certain affiliates of Berkshire an aggregate of 700,000 shares of Salomon Convertible Preferred Stock. In the Purchase Agreement, Berkshire (which for purposes of the Purchase Agreement includes the affiliates of Berkshire) agreed that (1) Berkshire will not sell any Salomon securities owned by it to a third party without first giving Salomon or its designee a reasonable opportunity to purchase such securities at the same price and on the same terms and conditions proposed with respect to an anticipated sale by Berkshire to a third party, and (2) if Salomon does not exercise its right of first refusal and buy Salomon securities which Berkshire S-8 11 proposes to sell, Berkshire will not knowingly sell to any one entity or group acting in concert Salomon securities giving such entity or group securities which amount in the aggregate to over 5% of the Salomon voting stock outstanding at the time of the sale. In the Purchase Agreement, Salomon agreed to use its best efforts to nominate and elect Warren E. Buffett and Charles T. Munger, or two other Berkshire representatives reasonably acceptable to Salomon, to Salomon's Board of Directors, so long as Berkshire owns at least 5% of Salomon's outstanding voting securities. On October 31, 1995, pursuant to the terms of the Certificate of Designation of the Salomon Convertible Preferred Stock, Salomon redeemed 140,000 shares of Salomon Convertible Preferred Stock for a redemption price of $140,000,000. On October 29, 1996, Berkshire converted the 140,000 shares of Salomon Convertible Preferred Stock that would otherwise have been redeemed by Salomon on October 31, 1996, into 3,684,206 shares of Salomon Common Stock. If the shares called for redemption are not previously converted, one-third of the remaining 420,000 shares of Salomon Convertible Preferred Stock are to be redeemed annually on each October 31 of 1997 through 1999 at $1,000 per share plus any accrued but unpaid dividends. No cash dividends may be paid on the Salomon Common Stock, nor may Salomon repurchase any Salomon Common Stock, if dividends or required redemptions of the Salomon Convertible Preferred Stock are in arrears. Berkshire has asked Salomon, pursuant to Salomon's obligations under the Purchase Agreement, to file a registration statement under the Securities Act registering the shares of Salomon Common Stock that may be delivered upon exchange of the Notes. Pursuant to the Purchase Agreement, Salomon will pay certain expenses arising in connection with such registration. In addition, Salomon will waive its right of first refusal under the Purchase Agreement with respect to the delivery of shares of Salomon Common Stock in exchange for the Notes. Berkshire has also advised Salomon that, depending upon its evaluation of market conditions and investment alternatives, Berkshire may effect other types of transactions that could result in a disposition of a portion of its shares of Salomon Common Stock, or may determine not to effect any such transaction. Berkshire expects to remain a large shareholder of Salomon even if, over time, it disposes of a portion of its shares of Salomon Common Stock. In that connection, Berkshire has advised Salomon that Mr. Buffett, Berkshire's Chairman and Chief Executive Officer, and Mr. Munger, its Vice Chairman, expect to remain on Salomon's Board of Directors, with Mr. Buffett continuing to serve as Chairman of the Executive Committee. In addition, Louis A. Simpson, President and Chief Executive Officer--Capital Operations of GEICO Corporation, a wholly owned subsidiary of Berkshire, would expect to remain a director of Salomon and to continue serving as Chairman of the Audit Committee. S-9 12 PRICE RANGE OF SALOMON COMMON STOCK AND DIVIDEND POLICY Salomon Common Stock is listed on the NYSE under the symbol "SB." The following table sets forth the high and low sales prices of the Salomon Common Stock as reported on the NYSE and the dividends paid per share thereon for the calendar periods listed below:
DIVIDENDS HIGH LOW PER SHARE ---- ---- --------- 1994 First Quarter......................................... $52 3/4 $44 3/4 .16 Second Quarter........................................ 52 5/8 47 1/4 .16 Third Quarter......................................... 48 1/4 38 1/2 .16 Fourth Quarter........................................ 42 35 .16 1995 First Quarter......................................... 40 1/8 32 1/4 .16 Second Quarter........................................ 43 1/4 33 1/4 .16 Third Quarter......................................... 41 1/8 34 3/4 .16 Fourth Quarter........................................ 40 5/8 33 7/8 .16 1996 First Quarter......................................... 39 1/4 34 7/8 .16 Second Quarter........................................ 44 1/4 36 1/8 .16 Third Quarter......................................... 46 7/8 38 .16 Fourth Quarter (through November 21, 1996)............ 49 44 1/8 .16
As of November 20, 1996, there were approximately 11,569 holders of record of Salomon Common Stock, including The Depository Trust Company which holds shares of Salomon Common Stock on behalf of an indeterminate number of beneficial owners. On November 21, 1996, the closing sale price of Salomon Common Stock on the NYSE was $45 7/8 per share. Berkshire makes no representation as to the amount of dividends, if any, that Salomon will pay in the future. In any event, holders of the Notes will not be entitled to receive any dividends that may be payable on Salomon Common Stock until such time, if any, as the Notes shall have been exchanged for shares of Salomon Common Stock and a record date, if any, for such dividend occurs after such date. See "Description of the Notes." USE OF PROCEEDS The net proceeds to be received by Berkshire from the sale of the Notes will be used for general corporate purposes. S-10 13 SELECTED CONSOLIDATED FINANCIAL DATA OF BERKSHIRE The selected consolidated financial data which follows should be read in conjunction with the restated audited consolidated financial statements and accompanying notes and the unaudited condensed consolidated financial statements and accompanying notes of Berkshire in the documents which are incorporated by reference into the Prospectus of Berkshire attached hereto. Berkshire's consolidated financial statements for the years ended December 31, 1991 through December 31, 1995 and the nine months ended September 30, 1995 have been restated to account for Berkshire's acquisition of GEICO Corporation on January 2, 1996. The condensed consolidated financial statements of Berkshire as of September 30, 1996 and September 30, 1995 and for the nine months ended September 30, 1996 and September 30, 1995 are unaudited; however, in Berkshire's opinion, they reflect all adjustments, consisting only of normal recurring items, necessary for a fair presentation of the financial position and results of operations for such periods. See "Available Information" and "Incorporation of Certain Documents by Reference" in the Prospectus.
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ----------------------- -------------------------------------------------------------------- 1996 1995 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- -------- -------- (DOLLARS IN MILLIONS) Revenues: Sales and service revenues................. $2,137.0 $1,871.4 $2,755.9 $2,351.9 $1,962.9 $1,774.4 $1,651.1 Insurance premiums earned................... 2,904.8 579.4 957.5 923.2 650.7 664.3 776.4 Interest, dividend and other investment income................... 582.5 456.1 629.2 519.0 520.7 485.5 482.8 Income from finance businesses............... 16.9 21.5 26.6 24.9 22.2 20.7 19.5 Realized investment gain(1).................. 2,428.6(2) 141.2 194.1 91.3 546.4 89.9 192.5 -------- -------- -------- -------- -------- -------- -------- Total revenues....... $8,069.8 $3,069.6 $4,563.3 $3,910.3 $3,702.9 $3,034.8 $3,122.3 ======== ======== ======== ======== ======== ======== ======== Earnings: Before realized investment gain and cumulative effect of accounting change................... $ 555.3 $ 435.5 $ 669.9 $ 491.9(3) $ 520.2(4) $ 400.8 $ 382.8 Realized investment gain(1).................. 1,588.6(2) 90.2 125.0 61.1 356.7 59.6 124.2 Cumulative effect of change in accounting for income taxes.................... -- -- -- -- (33.3) -- -- -------- -------- -------- -------- -------- -------- -------- Net earnings......... $2,123,9 $ 525.7 $ 794.9 $ 553.0 $ 843.6 $ 460.4 $ 507.0 ======== ======== ======== ======== ======== ======== ======== Sources of net earnings: Property and casualty insurance................ $ 454.5 $ 331.3 $ 496.4 $ 487.3 $ 436.2 $ 287.8 $ 275.0 Non-insurance businesses... 123.2 111.5 191.4 202.2 166.5 154.1 131.8 Realized investment gain(1).................. 1,568.6(2) 90.2 125.0 61.1 356.7 59.6 124.2 Interest expense........... (45.1) (25.2) (34.9) (37.3) (35.6) (62.9) (57.2) Other...................... 22.7 17.9 17.0 12.3 6.7 21.8 33.2 -------- -------- -------- -------- -------- -------- -------- Earnings before non-recurring charges and effect of accounting change................... 2,123.9 525.7 $ 794.9 $ 725.6 $ 930.5 $ 460.4 $ 507.0 Non-recurring charges and effect of accounting change................... -- -- -- (172.6)(3) (86.9)(5) -- -- -------- -------- -------- -------- -------- -------- -------- Net earnings............... $2,123.9 $ 525.7 $ 794.9 $ 553.0 $ 843.6 $ 460.4 $ 507.0 ======== ======== ======== ======== ======== ======== ======== Ratio of earnings to fixed charges(6)............... 34.01x 13.15x 14.14x 10.90x 19.11x 7.43x 7.38x ======== ======== ======== ======== ======== ======== ========
AS OF SEPTEMBER 30, AS OF DECEMBER 31, ----------------------- ----------------------------------------------------------------- 1996 1995 1995 1994 1993 1992 1991 --------- --------- --------- --------- --------- --------- --------- (DOLLARS IN MILLIONS) Balance sheet data: Total assets...................... $39,206.7 $27,165.3 $28,711.4 $20,609.6 $18,697.5 $15,721.5 $13,869.9 Borrowings under investment 1,435.2 806.6 1,061.7 810.7 972.4 1,154.7 1,100.5 agreements and other debt(7).... Shareholders' equity.............. 21,188.7 15,685.0 16,738.7 11,651.5 10,140.2 8,132.9 7,145.0
- --------------- (1) The amount of realized investment gain/loss for any given period has no predictive value, and variations in amount from period to period have no practical analytical value, particularly in view of the unrealized appreciation now existing in Berkshire's consolidated investment portfolio. S-11 14 (2) In March 1996, The Walt Disney Company completed its acquisition of Capital Cities/ABC, Inc. A pre-tax realized gain related to this transaction of $2.2 billion ($1.4 billion after-tax) is included in 1996's year-to-date results. (3) Includes a charge of $172.6 million representing an other-than-temporary decline in value of investment in USAir Group, Inc. preferred stock. (4) Includes a charge of $53.6 million representing the effect of the change in U.S. Federal income tax rates on deferred taxes applicable to unrealized appreciation. (5) Includes a charge of $33.3 million related to change in accounting for income taxes and $53.6 million as described in (4) above. (6) Earnings represent income before provision for income taxes and fixed charges. Fixed charges, which exclude fixed charges of Berkshire's finance businesses, consist of interest on all indebtedness, amortization of debt issuance costs and discount or premium relating to any indebtedness, and such portion of rental charges considered to be representative of the interest component in the particular case. Including fixed charges of finance businesses, which consist of interest on indebtedness and, in years prior to 1994, interest on savings deposits, the ratios of earnings to fixed charges were as follows:
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ------------------ --------------------------------------------------- 1996 1995 1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- ------- ------- 27.31x 9.70x 10.48x 7.82x 14.21x 5.93x 5.71x
(7) Excludes borrowings of finance businesses. S-12 15 CAPITALIZATION OF BERKSHIRE The following table sets forth the capitalization of Berkshire and its consolidated subsidiaries at September 30, 1996 and as adjusted to give effect to the issuance of the Notes being offered hereby.
SEPTEMBER 30, 1996 ----------------------------- OUTSTANDING AS ADJUSTED(1) ----------- -------------- (DOLLARS IN MILLIONS) Notes offered hereby.............................. $ -- $ 350.0 Borrowings under investment agreements............ 1,145.1 1,145.1 Other long term debt.............................. 679.2 679.2 Minority shareholders' interests.................. 311.8 311.8 Shareholders' equity(2)........................... $21,188.7 $ 21,188.7 --------- --------- Total Capitalization $23,324.8 $ 23,674.8 ========= =========
- --------------- (1) Assuming the Underwriters' over-allotment option is exercised in full, the Notes offered hereby and total capitalization at September 30, 1996, as adjusted, would have been $400.0 and $23,724.8, respectively. (2) At September 30, 1996, Berkshire had 1,500,000 authorized shares of Class A Common Stock, $5.00 par value per share, of which 1,189,074 shares were issued and outstanding, and 50,000,000 authorized shares of Class B Common Stock, $.1667 par value per share, of which 650,640 shares were issued and outstanding. S-13 16 DESCRIPTION OF THE NOTES The following description of the particular terms of the Notes supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the Debt Securities set forth in the accompanying Prospectus under the "Description of Debt Securities" to which reference is hereby made. GENERAL The Notes are to be issued under an indenture dated as of December 1, 1987 (as supplemented from time to time, the "Indenture"), between Berkshire and State Street Bank and Trust Company, as trustee (the "Trustee"). A copy of the Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus Supplement is a part. The following summaries of certain provisions of the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Indenture, including the definitions of certain capitalized terms used in this Prospectus. Capitalized terms used herein and not otherwise defined have the meanings set forth in the section, "-- Certain Definitions." The Notes will mature on , 2001 (the "Maturity Date"). The Notes will be limited to $350,000,000 aggregate principal amount due at maturity ($400,000,000 in aggregate principal amount due at maturity if the Underwriters' over-allotment option is exercised in full), and will be issued in registered form without coupons in denominations of $1,000 and any integral multiple thereof. Unless payment on the Notes is accelerated or the Notes are redeemed or exchanged or otherwise mature prior to the Maturity Date, the principal amount due at maturity of each Note is $1,000. The Notes are being offered at a discount from their principal amount due at maturity. In addition, the Notes will be issued with Tax OID for U.S. Federal income tax purposes, which will be calculated under recently issued U.S. Treasury regulations governing contingent payment debt instruments. See "Certain United States Federal Income Tax Considerations." The Notes will bear interest at the rate of % per annum on the principal amount due at maturity (or % on the Issue Price), from , 1996, or from the most recent date to which interest has been paid or provided for, payable semiannually on and of each year (each an "Interest Payment Date"), commencing on , 1997, to holders of record at the close of business on the or immediately preceding each Interest Payment Date. The maturity (including as a result of acceleration or otherwise), redemption or exchange of the Notes will cause OID and interest to cease to accrue thereon, under the terms and subject to the conditions of the Indenture. Berkshire will maintain an office or agency in New York, New York at which principal of and interest on the Notes will be paid, Salomon Common Stock (or, at the option of Berkshire at maturity or in the event of a redemption, its cash equivalent) will be delivered in any exchange for the Notes at or prior to maturity upon surrender of such Notes, and the Notes may be presented for exchange or registration of transfer, except that interest may be paid, at the option of Berkshire, by check mailed to the registered holders of the Notes. Such office or agency initially will be at the offices of an affiliate of the Trustee (and at such other offices or agencies that may be established by Berkshire for such purposes). The Notes may be transferred, combined or divided without payment of any charge other than taxes or other governmental charges involved in issuing Notes in the name of a person other than the holder of the Note. No sinking fund is provided for the Notes. PAYMENT OR EXCHANGE AT MATURITY At maturity (including as a result of acceleration or otherwise), if both (1) the 10-Day Average Closing Price of Salomon Common Stock and (2) the Closing Price of Salomon Common Stock on the last trading day prior to maturity are equal to or greater than the Exchange Price then in effect, each Note will be exchanged by Berkshire into shares of Salomon Common Stock at the Exchange Rate, or Berkshire may, at its option, deliver cash, in lieu of delivering shares of Salomon Common Stock, in an S-14 17 amount equal to the product obtained by multiplying the Exchange Rate by the Current Market Value of Salomon Common Stock at maturity. In all other circumstances, Berkshire will pay at maturity, in cash, a price per Note equal to the principal amount due at maturity (or, in the event the Notes mature prior to the Maturity Date, the Accreted Value thereof). In all events, accrued and unpaid interest to maturity shall be payable by Berkshire in cash on all Notes outstanding at maturity. The Exchange Rate or exchange consideration will be subject to adjustment upon the occurrence of certain events affecting Salomon Common Stock as described under "-- Adjustment of Exchange Rate." In any exchange of Notes for shares of Salomon Common Stock at maturity of the Notes, no fractional shares of Salomon Common Stock will be issued, as described under "-- Fractional Shares." Not later than 15 days prior to maturity, Berkshire will notify The Depository Trust Company and the Trustee and will publish a notice in a daily newspaper of national circulation stating whether Berkshire (1) will exchange the Notes for shares of Salomon Common Stock or (2) will deliver cash equal to the product obtained by multiplying the Exchange Rate by the Current Market Value of Salomon Common Stock at maturity, if at maturity both (A) the 10-Day Average Closing Price of Salomon Common Stock and (B) the Closing Price of Salomon Common Stock on the last trading day prior to maturity are equal to or greater than the Exchange Price then in effect. The Salomon Common Stock, if any, to which a holder is entitled upon any exchange at maturity will be delivered or made available by Berkshire as soon as practicable and, in any event, not later than the close of business on the fifth Business Day after maturity. If Berkshire delivers shares of Salomon Common Stock at maturity of the Notes, holders of the Notes will be responsible for the payment of any brokerage costs incurred upon any subsequent sale of such stock. EXCHANGE AT OPTION OF HOLDER On the last trading day of each January, April, July and October, from and including January 1997 through and including July 2001 (each an "Exchange Date"), any Notes (other than Notes with respect to which a notice of exchange for Salomon Common Stock has been delivered by Berkshire prior to such Exchange Date) will be exchangeable, at the option of the holder, for shares of Salomon Common Stock at the Exchange Rate then in effect, provided that the Closing Price of Salomon Common Stock on the Exchange Date exceeds the Exchange Price then in effect, and subject to certain additional conditions described below. To exchange a Note for Salomon Common Stock, a holder must, at any time during the period from the opening of business on the Business Day immediately prior to such Exchange Date until the close of business on such Exchange Date (the "Exchange Period"), (1) deliver to the Trustee (or such other office or agency that may be established by Berkshire for such purpose) a completed and manually signed exchange notice (the "Exchange Notice") on the back of such Note (or a facsimile thereof), (2) surrender or arrange for book entry transfer of such Note to the Trustee, (3) if required, furnish appropriate endorsements and transfer documents and (4) if required, pay all transfer or similar taxes. Any Exchange Notice may be withdrawn by the holder by a written notice of withdrawal delivered to the Trustee prior to the close of business on the Exchange Date. The notice of withdrawal shall state the principal amount due at maturity and any certificate number(s) of the Notes as to which the withdrawal notice relates and the principal amount due at maturity, if any, which remains subject to the Exchange Notice, each of which must be $1,000 or an integral multiple thereof. Salomon has agreed with Berkshire to use its reasonable efforts to cause a shelf registration statement covering the Salomon Common Stock deliverable upon exchange of the Notes (the "Salomon Registration Statement") to be effective under the Securities Act during each Exchange Period in order to permit the Salomon Prospectus forming a part thereof to be usable by Berkshire in connection with any exchange of Notes at the option of the holder; provided however, that (1) Salomon may postpone delivery of a prospectus at any time for valid business reasons, and (2) Salomon's obligation shall cease at such time as Salomon is no longer an affiliate of Berkshire and a Salomon Prospectus is no longer required to be delivered under the Securities Act. If a Salomon Prospectus is required to be delivered and is not made available by Salomon to Berkshire for use during any Exchange Period, Berkshire shall, on or S-15 18 prior to the applicable Exchange Date, upon written notice to each holder that has complied with the procedures for exchange of Notes described above (an "Electing Holder"), postpone such Exchange Date from time to time until such later Business Day (the "New Exchange Date") as Berkshire is able to deliver a Salomon Prospectus or is no longer required to do so. In the event that Berkshire postpones any Exchange Date, (A) no additional Notes may be delivered to the Trustee by any holder for exchange into Salomon Common Stock at any time during the period from the original Exchange Date through and including the New Exchange Date, (B) each Electing Holder shall have the right, at any time until the New Exchange Date, to irrevocably withdraw any Notes delivered to the Trustee on or prior to the original Exchange Date, and (C) any Notes that have not been withdrawn by an Electing Holder prior to the New Exchange Date shall be exchanged for shares of Salomon Common Stock on the New Exchange Date, provided that the Closing Price of Salomon Common Stock on the New Exchange Date exceeds the Exchange Price then in effect. In addition, if a Reorganization Event shall have occurred as described under "-- Adjustment of Exchange Rate -- Adjustment of Exchange Consideration for Consolidation, Merger or Other Reorganization Event," the Notes shall not be exchangeable at the option of the holder for any Exchange Securities during any Exchange Period if a prospectus covering such Exchange Securities is required to be delivered by Berkshire under the Securities Act and is not available to Berkshire for use during such Exchange Period. Upon any exchange of Notes at the option of the holder, no payment will be made in respect of accrued but unpaid interest, unless such exchange is made concurrently with or after acceleration of the Notes following an event of default under the Indenture. The Salomon Common Stock to which a holder is entitled upon any exchange will be delivered or made available by Berkshire as soon as practicable and, in any event, not later than the close of business on the fifth Business Day after the applicable Exchange Date. REDEMPTION OR EXCHANGE AT OPTION OF BERKSHIRE The Notes will not be redeemable or exchangeable at the option of Berkshire prior to , 1999. Thereafter, (1) at any time when both (A) the 10-Day Average Closing Price of the Salomon Common Stock on the date on which the applicable notice of redemption is given and (B) the Closing Price of Salomon Common Stock on the last trading day prior to such date are equal to or greater than the Exchange Price then in effect, Berkshire may, at its option, either (i) exchange the Notes, in whole or in part, for shares of Salomon Common Stock at the Exchange Rate then in effect or (ii) redeem the Notes, in whole or in part, in cash at a price per Note equal to the product of the Exchange Rate then in effect and the Current Market Value of Salomon Common Stock on the date on which the applicable notice of redemption is given, and (2) at any other time, Berkshire may, at its option, redeem the Notes, in whole or in part, in cash at a price per Note equal to the Accreted Value of the Notes on the date of redemption. However, Berkshire may not give any notice of redemption for cash (x) during the period from the beginning of any Exchange Period until the close of business on the applicable Exchange Date or New Exchange Date or (y) prior to the beginning of any Exchange Period if the redemption date would occur during or after such Exchange Period. Upon any exchange or redemption described in clause (1) above, the holders of Notes will not receive any payment representing accrued OID; such accrued OID will be deemed paid upon the receipt of Salomon Common Stock or the cash equivalent received on such exchange or redemption. In connection with any redemption or exchange prior to maturity of the Notes, Berkshire will notify The Depository Trust Company and the Trustee and will publish a notice in a daily newspaper of national circulation stating (1) the Exchange Rate then in effect, (2) whether the Notes will be exchanged for shares of Salomon Common Stock or redeemed for cash, (3) the redemption or exchange date (which shall be at least 15 days but not more than 30 days after the date of such notice) and (4) in the case of a redemption, the redemption price. On the exchange date with respect to any exchange of Notes for Salomon Common Stock, such Notes shall cease to be outstanding and shall be deemed to represent solely the right to receive shares of Salomon Common Stock in accordance with the terms of the S-16 19 Indenture. Berkshire will pay in cash the accrued and unpaid interest on all Notes redeemed or exchanged to but excluding the date of redemption or exchange. The following table shows the Issue Price, accrued OID, Accreted Value and Exchange Price of the Notes as of November , 1999, and at each anniversary thereof through the Maturity Date. If the Notes are redeemed between any two such dates, the Accreted Value would include an additional amount reflecting the additional OID accrued from the previous date in the table, and the Exchange Price would be adjusted in accordance with the definition of such term.
DATE ISSUE PRICE ACCRUED OID ACCRETED VALUE EXCHANGE PRICE -------------------------- ----------- ----------- -------------- -------------- , 1999............ $ $ $ $ , 2000............ , 2001............
In any exchange of Notes for shares of Salomon Common Stock at or prior to maturity of the Notes, no fractional shares of Salomon Common Stock will be issued, as described under " -- Fractional Shares." If Berkshire exchanges Notes for shares of Salomon Common Stock, holders of the Notes will be responsible for the payment of any brokerage costs incurred upon the subsequent sale of such shares. If less than all the Notes then outstanding are to be redeemed or exchanged prior to maturity of the Notes, the Trustee will select those to be redeemed or exchanged as a whole or in part pro rata or by lot or by such method as the Trustee shall deem fair and appropriate. Notice of redemption or exchange will be given to holders of the Notes to be redeemed or exchanged by first-class mail, postage prepaid at their last address appearing on the Note registry books. NO RESTRICTION ON SALE OF SALOMON STOCK The Indenture does not contain any restriction on the ability of Berkshire to sell, pledge or otherwise convey all or any portion of the Salomon Common Stock or Salomon Convertible Preferred Stock held by it, and no such shares of Salomon Common Stock or Salomon Convertible Preferred Stock will be pledged or otherwise held in escrow for exchange at maturity of the Notes. Consequently, in the event of a bankruptcy, insolvency or liquidation of Berkshire, the Salomon Common Stock or Salomon Convertible Preferred Stock, if any, then owned by Berkshire will be subject to the claims of the creditors of Berkshire. In addition, as described herein, Berkshire will have the option under certain circumstances, exercisable in its sole discretion, to satisfy its obligations at maturity or upon redemption of the Notes by delivering to holders of the Notes either a number of shares of Salomon Common Stock or cash in an amount equal to the product obtained by multiplying such number of shares by the Current Market Value of Salomon Common Stock on the date of the related notice of redemption or the Maturity Date, as applicable. In the event of a sale, pledge or conveyance by Berkshire of the Salomon Common Stock or Salomon Convertible Preferred Stock held by it, a holder of the Notes may be more likely to receive cash in lieu of Salomon Common Stock in those circumstances in which Berkshire can elect to deliver either Salomon Common Stock or the cash equivalent. As a result, there can be no assurance that, if Berkshire can elect at maturity or upon redemption to deliver Salomon Common Stock, it will do so, or, if it does so elect, that it will use all or any portion of its current holdings of Salomon Common Stock (or will convert all or any portion of its current holdings of Salomon Convertible Preferred Stock into Salomon Common Stock) in order to make such delivery. It is Berkshire's current intention to deliver Salomon Common Stock at maturity or exchange of the Notes (if Berkshire has the right to deliver either cash or Salomon Common Stock at such time); however, Berkshire may change its intention at any time. Holders of the Notes will not be entitled, as such holders, to any rights with respect to Salomon Common Stock (including without limitation voting rights and rights to receive any dividends or other distributions in respect thereof) until such time, if any, as Berkshire shall have delivered shares of Salomon Common Stock to holders of the Notes at or prior to maturity in accordance with the terms of the Indenture. See "Relationship Between Berkshire and Salomon". S-17 20 RANKING The Notes will be unsecured obligations of Berkshire ranking on a parity with all other unsecured and unsubordinated indebtedness of Berkshire. Berkshire is a holding company that conducts virtually all of its operations through subsidiaries and, therefore, the Notes will effectively be subordinated to all indebtedness and liabilities of Berkshire's subsidiaries. As of September 30, 1996, Berkshire's subsidiaries had approximately $16.8 billion of total indebtedness and other liabilities, while Berkshire had no secured indebtedness. The Indenture does not limit the ability of Berkshire or its subsidiaries to incur additional indebtedness (including secured indebtedness). ADJUSTMENT OF EXCHANGE RATE Adjustment for Distributions, Reclassification, etc. The Exchange Rate shall be subject to adjustment from time to time as follows: (1) If Salomon shall: (A) pay a dividend or make a distribution with respect to the Salomon Common Stock in shares of such stock; (B) subdivide or split the outstanding shares of Salomon Common Stock into a greater number of shares; (C) combine the outstanding shares of Salomon Common Stock into a smaller number of shares; or (D) issue by reclassification of shares of Salomon Common Stock any shares of common stock of Salomon; then, in any such event, the Exchange Rate in effect immediately prior to such event shall be adjusted so that the holder of any Note shall thereafter be entitled to receive, upon exchange of such holder's Note by Berkshire at maturity or upon redemption, the number of shares of Salomon Common Stock that such holder would have owned or been entitled to receive immediately following such event had such Note been exchanged immediately prior to such event or any record date with respect thereto. Each such adjustment shall become effective at the opening of business on the Business Day next following the record date for determination of holders of Salomon Common Stock entitled to receive such dividend or distribution in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, split, combination or reclassification. Each such adjustment shall be made successively. (2) If Salomon shall issue rights or warrants to all holders of Salomon Common Stock entitling them to subscribe for or purchase shares of Salomon Common Stock (other than rights to purchase Salomon Common Stock pursuant to (A) a plan for the reinvestment of dividends or interest or (B) pursuant to a shareholders rights plan or agreement, unless a triggering event shall have occurred thereunder) at a price per share less than the current market price of Salomon Common Stock (determined for purposes of this clause (2) as the Closing Price per share of Salomon Common Stock on the record date fixed for the determination of stockholders entitled to receive such rights or warrants), then in each case the Exchange Rate shall be adjusted by multiplying the Exchange Rate in effect immediately prior to such record date, by a fraction, of which (x) the numerator shall be the number of shares of Salomon Common Stock outstanding at the close of business on such record date, plus the number of additional shares of Salomon Common Stock offered for subscription or purchase pursuant to such rights or warrants, and (y) the denominator shall be the number of shares of Salomon Common Stock outstanding at the close of business on such record date, plus the number of additional shares of Salomon Common Stock that the aggregate offering price of the total number of shares of Salomon Common Stock so offered for subscription or purchase pursuant to such rights or warrants would purchase at such current market price (calculated at the Closing Price per share of Salomon Common Stock on such record date), which shall be determined by multiplying such total numbers of shares offered by the exercise price of such S-18 21 rights or warrants and dividing the product so obtained by such current market price. Such adjustment shall become effective at the opening of business on the Business Day next following the record date for the determination of stockholders entitled to receive such rights or warrants. To the extent that shares of Salomon Common Stock are not delivered after the expiration of such rights or warrants, the Exchange Rate shall be readjusted to the Exchange Rate which would then be in effect had such adjustments for the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Salomon Common Stock actually delivered. Each such adjustment shall be made successively. (3) If Salomon shall pay a dividend or make a distribution to all holders of Salomon Common Stock of any class of its capital stock, evidences of its indebtedness or other assets (in each case excluding any dividends or distributions referred to in paragraph (1) above or any ordinary periodic cash dividends that do not constitute Extraordinary Cash Dividends (as defined below)) or shall issue to all holders of Salomon Common Stock rights or warrants to subscribe for or purchase any of its securities (other than those referred to in paragraph (2) above), then in each such case, the Exchange Rate shall be adjusted by multiplying the Exchange Rate in effect on the record date mentioned below by a fraction of which (A) the numerator shall be the current market price per share of the Salomon Common Stock on the record date for the determination of stockholders entitled to receive such dividend or distribution (such current market price being determined for purposes of this paragraph as the Closing Price per share of Salomon Common Stock on such record date) and (B) the denominator shall be such current market price per share of Salomon Common Stock less the fair market value (as determined by the Board of Directors of Berkshire, whose determination shall be conclusive, and described in a resolution adopted with respect thereto) as of such record date of the portion of the capital stock, evidences of indebtedness or other assets so distributed or of such subscription rights or warrants applicable to one share of Salomon Common Stock; provided, however, that in the event of a distribution of shares of capital stock of a subsidiary of Salomon (a "Spin-Off") made to holders of shares of Salomon Common Stock, the numerator of such fraction shall be the sum of (i) the Closing Price of Salomon Common Stock as of the 35th trading day after the effective date of such Spin-Off and (ii) the Closing Price of the number of shares (or the fraction of a share) of capital stock of such subsidiary of Salomon on such 35th trading day which is distributed in such Spin-Off in respect of one share of Salomon Common Stock as of such 35th trading day and the denominator of which shall be the Closing Price of Salomon Common Stock as of such 35th trading day. Each such adjustment shall become effective on the opening of business on the Business Day next following the record date for the determination of stockholders entitled to receive such dividend or distribution (or, in the case of an adjustment pursuant to the proviso of the immediately preceding sentence, on the Business Day next following the 35th trading day after the effective date of the Spin-Off). Each such adjustment shall be made successively. Any shares of Salomon Common Stock issuable in payment of a dividend shall be deemed to have been issued immediately prior to the close of business on the record date for such dividend for purposes of calculating the number of outstanding shares of Salomon Common Stock under paragraph (2) above. All adjustments to the Exchange Rate shall be calculated to the nearest 1/10,000th of a share of Salomon Common Stock (or if there is not a nearest 1/10,000th of a share to the next lower 1/10,000th of a share). No adjustment in the Exchange Rate shall 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 paragraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment. For purposes of the foregoing, the term "Extraordinary Cash Dividend" shall mean, with respect to any consecutive 365-day period, any cash dividend with respect to Salomon Common Stock the amount of which, together with the aggregate amount of all other such cash dividends on the Salomon Common Stock occurring in such 365-day period, exceeds on a per share basis 10% of the average Closing Price per share of the Salomon Common Stock over such 365-day period, and for purposes of applying the formula set forth in paragraph (3) above, the fair market value of such dividends being calculated pursuant to such paragraph (3) shall be equal to (A) the aggregate amount of such cash dividend together with the amounts of such other cash dividends occurring in such period minus (B) the S-19 22 aggregate amount of such other cash dividends occurring in such period for which a prior adjustment in the Exchange Rate was previously made as described in this subsection. In making the determinations required by the foregoing sentence, the amount of cash dividends paid on a per share basis shall be appropriately adjusted to reflect the occurrence during such period of any event described in this subsection. Adjustment of Exchange Consideration for Consolidation, Merger or Other Reorganization Event. In the event of (1) any consolidation or merger of Salomon, or any surviving entity or subsequent surviving entity of Salomon (a "Salomon Successor"), with or into another entity (other than a merger or consolidation in which Salomon is the continuing corporation and in which the Salomon Common Stock outstanding immediately prior to the merger or consolidation is not exchanged for cash, securities ("Exchange Securities") or other property of Salomon or another corporation), (2) any statutory exchange of securities of Salomon or any Salomon Successor with another corporation (other than in connection with a merger or acquisition) or (3) any liquidation, dissolution or winding up of Salomon or any Salomon Successor (any such event, a "Reorganization Event"), if Berkshire shall have the right to deliver either cash or Salomon Common Stock at maturity or upon redemption or exchange of the Notes, then, at the option of Berkshire, each holder of Notes will receive at maturity or upon redemption or exchange, in lieu of Salomon Common Stock, cash in an amount equal to the Exchange Rate multiplied by the Transaction Value (as defined herein). Notwithstanding the foregoing, with respect to any securities received in a Reorganization Event that (A) are (i) listed on a United States national securities exchange, (ii) reported on a United States national securities system subject to last sale reporting, (iii) traded in the over-the-counter market and reported on the National Quotation Bureau or similar organization or (iv) for which bid and ask prices are available from at least three nationally recognized investment banking firms and (B) are either (x) perpetual equity securities or (y) non-perpetual equity or debt securities with a stated maturity after the Maturity Date ("Reported Exchange Securities"), Berkshire may, at its option, in lieu of delivering the amount of cash deliverable in respect of Reported Exchange Securities received in a Reorganization Event, as determined in accordance with the previous sentence, deliver a number of such Reported Exchange Securities with a value equal to such cash amount, as determined in accordance with clause (2) of the definition of Transaction Value, as applicable; provided, however, that (a) if such option is exercised, Berkshire shall deliver Reported Exchange Securities in respect of all, but not less than all, cash amounts that would otherwise be deliverable in respect of Reported Exchange Securities received in a Reorganization Event, (b) Berkshire may not exercise such option if Berkshire has elected to deliver cash in lieu of Salomon Common Stock deliverable at maturity or upon redemption and (c) Berkshire must exercise such option if Berkshire does not elect to deliver cash in lieu of Salomon Common Stock deliverable at maturity or upon redemption. If Berkshire elects to deliver Reported Exchange Securities, each holder of Notes will be responsible for the payment of any and all brokerage and other transaction costs upon the sale of such Reported Exchange Securities. If, following any Reorganization Event, any Reported Exchange Security ceases to qualify as a Reported Exchange Security, then (x) Berkshire may no longer elect to deliver such Reported Exchange Security in lieu of an equivalent amount of cash and (y) notwithstanding clause (2) of the definition of Transaction Value, the Transaction Value of such Reported Exchange Security shall mean the fair market value of such Reported Exchange Security on the date such security ceases to qualify as a Reported Exchange Security, as determined by a nationally recognized investment banking firm selected for this purpose by Berkshire. If a Reorganization Event shall occur, subject to certain conditions described under "-- Exchange at Option of Holder," upon exchange of any Notes at the option of the holder, each holder of a Note will have the right to receive the kind and amount of cash, Exchange Securities or other property receivable upon such Reorganization Event by a holder of the number of shares of Salomon Common Stock for which such Note might have been exchanged immediately prior to such Reorganization Event (assuming that such holder failed to exercise his rights of election, if any, as to the kind or amount of cash, Exchange Securities, and other property receivable in such Reorganization Event). S-20 23 The kind and amount of securities into which the Notes shall be exchangeable by Berkshire after consummation of any Reorganization Event shall be subject to adjustment as described above in "Adjustment of Exchange Rate -- Adjustment for Distributions, Reclassification, etc." following the date of consummation of such transaction. Notice of Adjustments and Certain Other Events. (1) Whenever the Exchange Rate or the consideration receivable upon exchange is adjusted as previously described, Berkshire shall: (A) forthwith compute the adjusted Exchange Rate as described above in "Adjustment of Exchange Rate -- Adjustment for Distributions, Reclassification, etc." or the adjusted exchange consideration described above in "Adjustment of Exchange Rate -- Adjustment of Exchange Consideration for Consolidation, Merger or Other Reorganization Event" and prepare a certificate signed by an officer of Berkshire setting forth the adjusted Exchange Rate or exchange consideration, the method of calculation thereof in reasonable detail, and the facts requiring such adjustment and upon which such adjustment is based, which certificate shall be conclusive, final and binding evidence of the correctness of the adjustment, and file such certificate forthwith with the Trustee; and (B) within 10 Business Days following the occurrence of an event that permits or requires an adjustment to the Exchange Rate or exchange consideration as described in "Adjustment of Exchange Rate -- Adjustment for Distributions, Reclassification, etc." and "Adjustment of Exchange Rate -- Adjustment of Exchange Consideration for Consolidation, Merger or Other Reorganization Event" (or if Berkshire is not aware of such occurrence, as soon as practicable after becoming so aware), provide written notice to the Trustee and to the holders of the outstanding Notes of the occurrence of such event and a statement in reasonable detail setting forth the method by which the adjustment to the Exchange Rate or exchange consideration was determined and setting forth the revised Exchange Rate or exchange consideration per Note. (2) In case at any time while any of the Notes are outstanding Berkshire receives notice that: (A) Salomon has declared a dividend (or any other distribution) on or in respect of the Salomon Common Stock to which clause (1) or (2) of "Adjustment of Exchange Rate -- Adjustment for Distributions, Reclassification, etc." shall apply (other than any cash dividends and distributions, if any, paid from time to time by Salomon that do not constitute Extraordinary Cash Dividends); (B) Salomon has authorized the issuance to all holders of Salomon Common Stock of rights or warrants to subscribe for or purchase shares of Salomon Common Stock or of any other subscription rights or warrants; (C) there shall be proposed any conversion or reclassification of Salomon Common Stock (other than a subdivision or combination of outstanding shares of such Salomon Common Stock) or any consolidation, merger or reorganization to which Salomon is a party and for which approval of any stockholders of Salomon is required; or (D) there shall be proposed the voluntary or involuntary dissolution, liquidation or winding up of Salomon; then Berkshire shall promptly cause to be delivered to the Trustee and filed at the office or agency maintained for the purpose of exchange of Notes in the Borough of Manhattan, in The City of New York by the Trustee, and shall promptly cause to be mailed to the holders of the Notes at their last addresses as they shall appear upon the registration books of the Securities Registrar, at least 10 days before the date hereinafter specified (or the earlier of the dates hereinafter specified, in the event that more than one is specified), a notice stating (i) the date on which a record is to be taken for the purpose of such dividend, distribution or grant of rights or warrants, or, if a record is not to be taken, the date as of which the holders of Salomon Common Stock to be entitled to such dividend, distribution or grant of rights or S-21 24 warrants are to be determined, or (ii) the date, if known by Berkshire, on which such reclassification, consolidation, merger, dissolution, liquidation or winding up is expected to become effective. FRACTIONAL SHARES No fractional shares of Salomon Common Stock will be issued if any Notes are exchanged for shares of Salomon Common Stock at or prior to maturity. If more than one Note from the same holder is exchanged for Salomon Common Stock at one time, the number of full shares of Salomon Common Stock to be delivered upon exchange shall be computed on the basis of the aggregate number of Notes from such holder so exchanged at that time. In lieu of any fractional share otherwise issuable in respect of all Notes of any holder that are exchanged at or prior to maturity, such holder shall be entitled to receive an amount in cash equal to the product of such fraction of a share and the Current Market Value of Salomon Common Stock on the applicable Exchange Date (in the case of an exchange at the option of the holder), the date on which the related notice of exchange is given (in the case of an exchange at the option of Berkshire) or the Maturity Date, as applicable. BOOK-ENTRY SYSTEM The Notes will be issued in the form of one or more global securities (the "Global Securities") deposited with The Depository Trust Company (the "Depositary") and registered in the name of a nominee of the Depositary. The Depositary has advised Berkshire and the Underwriters as follows: The Depositary is a limited purpose trust company organized under the laws of the State of New York, 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 Section 17A of the Exchange Act. The Depositary was created to hold securities of persons who have accounts with the Depositary ("participants") and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of certificates. Such participants include securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to the Depositary's book-entry system also is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Upon the issuance of a Global Security, the Depositary or its nominee will credit the respective Notes represented by such Global Security to the accounts of participants. The accounts to be credited shall be designated by the Underwriters. Ownership of beneficial interests in the Global Securities will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests by participants in such Global Securities will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by the Depositary or its nominee for such Global Securities. Ownership of beneficial interests in such Global Securities by persons that hold through participants will be shown on, and the transfer of that ownership interest within such participant will be effected only through, records maintained by such participant. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global Security. So long as the Depositary, or its nominee, is the registered owner of a Global Security, such depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Notes for all purposes under the Indenture. Except as set forth below, owners of beneficial interests in such Global Securities will not be entitled to have the Notes registered in their names, will not receive or be entitled to receive physical delivery of the Notes in definitive form and will not be considered the owners or holders thereof under the Indenture. Payment of principal of and any interest on the Notes registered in the name of or held by the Depositary or its nominee will be made to the Depositary or its nominee, as the case may be, as the registered owner or the holder of the Global Security. None of Berkshire, the Trustee, any paying agent or S-22 25 any securities registrar for the Notes will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Berkshire expects that the Depositary, upon receipt of any payment of principal or interest in respect of a permanent Global Security, will credit immediately participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Security as shown on the records of the Depositary. Berkshire also expects that payments by participants to owners of beneficial interests in such Global Security held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. A Global Security may not be transferred except as a whole by the Depositary to a nominee or a successor of the Depositary. If the Depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by Berkshire within ninety days, Berkshire will issue Notes in definitive registered form in exchange for the Global Security representing such Notes. In addition, Berkshire may at any time and in its sole discretion determine not to have any Notes represented by one or more Global Securities and, in such event, will issue Notes in definitive form in exchange for all of the Global Securities representing the Notes. Further, if Berkshire so specifies with respect to the Notes, an owner of a beneficial interest in a Global Security representing Notes may, on terms acceptable to Berkshire and the Depositary for such Global Security, receive Notes in definitive form. Moreover, if there shall have occurred and be continuing an Event of Default, or an event that, with the giving of notice or lapse of time, or both, would constitute an Event of Default with respect to any Notes represented by one or more Global Securities, such Global Securities shall be exchangeable for Notes in definitive form. In any such instance, an owner of a beneficial interest in a Global Security will be entitled to physical delivery in definitive form of Notes represented by such Global Security equal in number to that represented by such beneficial interest and to have such Notes registered in its name. DEFEASANCE The provisions in the accompanying Prospectus regarding defeasance of Debt Securities will not be applicable to the Notes. LISTING An application has been filed to list the Notes on the NYSE. The Salomon Common Stock is currently listed and traded on the NYSE under the symbol "SB". GOVERNING LAW The Indenture provides that it and the Notes will be governed by and construed in accordance with the laws of the State of New York. CERTAIN DEFINITIONS "Accreted Value" of a Note means the Issue Price of such Note plus accrued OID thereon. "Business Day" means any day that is not a Saturday, a Sunday or a day on which the NYSE, banking institutions or trust companies in The City of New York are authorized or obligated by law or executive order to close. "Closing Price" of any security on any date of determination means the closing sale price (or, if no closing price is reported, the last reported sale price) of such security (regular way) on the NYSE on such date or, if such security is not listed for trading on the NYSE on any such date, as reported in the composite transactions for the principal United States securities exchange on which such security is so listed, or if such security is not so listed on a United States national or regional securities exchange, as S-23 26 reported by the Nasdaq Stock Market, or, if such security is not so reported, the last quoted bid price for such security in the over-the-counter market as reported by the National Quotation Bureau or similar organization, or, if such bid price is not available, the average of the mid-point of the last bid and ask prices for such security from each of at least three nationally recognized investment banking firms selected for such purpose by Berkshire, or if such quotes are not available, the market value of such security on such date as determined by a nationally recognized independent investment banking firm selected for this purpose by Berkshire. "Current Market Value" of Salomon Common Stock on any date of determination means the greater of (1) the 10-Day Average Closing Price of Salomon Common Stock as of such date and (2) the Closing Price of Salomon Common Stock on the trading day immediately preceding such date (or, if determined after the close of business on any trading day, the Closing Price of Salomon Common Stock on such trading day). "Exchange Price" of a Note on any date means (1) the Accreted Value of such Note on such date divided by (2) the Exchange Rate in effect on such date. "OID" means original issue discount calculated on a constant yield basis using $1,000 principal amount due at maturity based on the excess of the principal amount due at maturity over the Issue Price. "Tax OID" means original issue discount for U.S. Federal income tax purposes calculated on a constant yield basis determined as described in "Certain United States Federal Income Tax Considerations." "10-Day Average Closing Price" of Salomon Common Stock as of any date of determination means the average Closing Price of Salomon Common Stock on the 10 trading days immediately prior to such date (or, if determined after the close of business on any trading day, the average Closing Price of Salomon Common Stock on such trading day and the nine trading days immediately prior to such date). A "trading day" means any day on which the security the Closing Price of which is being determined (1) is not suspended from trading on any national or regional securities exchange 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. "Transaction Value" means (1) for any cash received in any Reorganization Event, the amount of cash received per share of Salomon Common Stock, (2) for any Reported Exchange Securities received in any Reorganization Event, an amount equal to the average Closing Price per security of such Reported Exchange Securities on the 10 trading days immediately prior to maturity or the date on which the notice of redemption or exchange is given, as applicable, multiplied by the number of such Reported Exchange Securities received for each share of Salomon Common Stock and (3) for any property received in any Reorganization Event other than cash or such Reported Exchange Securities, an amount equal to the fair market value of the property received per share of Salomon Common Stock on the date such property is received, as determined by a nationally recognized investment banking firm selected for this purpose by Berkshire; provided, however, that in the case of clause (2), (A) with respect to securities that are Reported Exchange Securities by virtue of only clause (A)(iv) of the definition of Reported Exchange Securities, Transaction Value with respect to any such Reported Exchange Securities means the average of the mid-point of the last bid and ask prices for such Reported Exchange Security as of maturity or such notice date from each of at least three nationally recognized investment banking firms selected for such purpose by Berkshire multiplied by the number of such Reported Exchange Securities received for each share of Salomon Common Stock and (B) with respect to all other Reported Exchange Securities, if there are not 10 trading days for any particular Reported Exchange Security occurring after the 60th calendar day immediately prior to, but not including, the date of maturity or such notice date, Transaction Value with respect to such Reported Exchange Security means the market value per security of such Reported Exchange Security as of maturity or such notice date as determined by a nationally recognized investment banking firm selected for such purpose by Berkshire multiplied by the number of such Reported Exchange Securities received for each share of Salomon Common Stock. S-24 27 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following discussion is a general summary of the material United States ("U.S.") Federal income tax considerations that may be relevant to a holder of Notes that is a U.S. Holder (as defined below). This summary is based on provisions of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as currently in effect and all of which are subject to change (possibly with retroactive effect) and to differing interpretations. Furthermore, there can be no assurance that the Internal Revenue Service would not take a position contrary to those expressed herein. This summary deals only with U.S. Holders that hold the Notes as capital assets and does not address all aspects of U.S. Federal income taxation that may be applicable to investors in light of their particular circumstances, or to investors subject to special treatment under U.S. Federal income tax law (including, but not limited to, life insurance companies, dealers in securities, financial institutions, tax-exempt organizations, persons having a functional currency other than the U.S. dollar, and persons holding the Notes as a position in a "straddle" or conversion transaction, or as part of a "synthetic security" or other integrated financial transaction). This summary also does not address the state, local or foreign tax consequences of an investment in the Notes. As used herein, the term "U.S. Holder" means a holder of a Note that is, for U.S. Federal income tax purposes, (1) an individual citizen or resident of the United States, (2) a corporation, or other entity taxable as a corporation for U.S. Federal income tax purposes, created or organized in or under the laws of the United States or of any political subdivision thereof, (3) an estate or trust the income of which is subject to U.S. Federal income taxation regardless of its source, or (4) a person otherwise subject to U.S. Federal income taxation on a net basis in respect of such holder's ownership of a Note. TAXATION OF THE NOTES Berkshire has received an opinion of Munger, Tolles & Olson, counsel to Berkshire, that the Notes will be treated as single debt instruments subject to recently issued U.S. Treasury regulations governing contingent payment debt instruments (the "Contingent Payment Regulations"). Berkshire intends to treat each Note as a contingent payment debt instrument subject to the Contingent Payment Regulations, and by accepting Notes, holders thereof agree to this treatment and to report all income (or loss) with respect to the Notes in accordance with those regulations. The Contingent Payment Regulations require the application of a "noncontingent bond" method to determine accruals of income, gain, loss and deduction with respect to a contingent debt obligation. As described in more detail in the second succeeding paragraph, under the noncontingent bond method, a U.S. Holder of a Note will be required for tax purposes to include in income each year an accrual of interest at the rate of % (the "comparable yield"). Accordingly, for purposes of the Contingent Payment Regulations, a U.S. Holder of a Note will be assumed to be entitled to receive, in respect of the Note, semi-annual payments of interest at a rate of %, as well as a fixed payment (in stock) of $ on , 2001 (the "Payment Schedule"). The fixed payment due on , 2001 is calculated as the amount required to produce the comparable yield when combined with the semi-annual payments of interest made in respect of the Note and taking into account the Note's Issue Price. The comparable yield and the Payment Schedule are used to determine accruals of interest for tax purposes only and are not assurances by Berkshire with respect to the actual yield of, or payments to be made in respect of, the Note. The comparable yield and the Payment Schedule do not necessarily represent Berkshire's expectations regarding such yield or the amounts of such payments. Each Note is being issued at a price of $ per $1,000 principal amount due at maturity, which represents OID of % from the principal amount due at maturity of the Note. The amount of OID on a Note for U.S. Federal income tax purposes ("Tax OID"), however, will be greater than the amount of OID on the Note described in the preceding sentence, because the relevant tax rules require that Tax OID S-25 28 be accrued at the comparable yield, rather than on the stated coupon plus the OID on the Note. Under the Tax OID rules of the Code, and the Treasury regulations promulgated thereunder, a U.S. Holder, whether such holder uses the cash or the accrual method of tax accounting, will be required to include as ordinary interest income the sum of the "daily portions" of Tax OID on the Note for all days during the taxable year that the U.S. Holder owns the Note. As a result, a U.S. Holder of a Note that employs the cash method of accounting will be required to include amounts in respect of Tax OID accruing on the Note in taxable income each year, whether or not the current receipt of cash from the Note is sufficient to pay any resulting tax. The daily portions of Tax OID on a Note are determined by allocating to each day in any accrual period a ratable portion of the Tax OID allocable to that accrual period. In the case of an initial holder, the amount of Tax OID on a Note allocable to each accrual period is determined by multiplying the "adjusted issue price" (as defined below) of the Note at the beginning of the accrual period by the comparable yield of the Note (appropriately adjusted to reflect the length of the accrual period). The "adjusted issue price" of a Note at the beginning of any accrual period generally will be the sum of its Issue Price and the amount of Tax OID allocable to all prior accrual periods, less the amount of any payments made in all prior accrual periods. When a U.S. Holder sells, exchanges or otherwise disposes of a Note (including the repayment of the Note on the Maturity Date or the exercise by Berkshire or the U.S. Holder of its respective option to exchange the Notes for Salomon Common Stock) (a "disposition"), the U.S. Holder's gain (or loss) on such disposition will equal the difference between the amount received by the U.S. Holder for the Note and the U.S. Holder's tax basis in the Note. Upon the repayment of a Note on the Maturity Date or on an earlier exercise by Berkshire or the U.S. Holder of its respective exchange option, the U.S. Holder will be treated as receiving an amount equal to the fair market value of any Salomon Common Stock received by such holder, plus any cash received in lieu of fractional shares. A U.S. Holder's tax basis (i.e., adjusted cost) in a Note will be equal to the U.S. Holder's original purchase price for the Note, plus any Tax OID accrued by the U.S. Holder and less the amount of any payments received by such holder while holding such Note. Any gain realized by a U.S. Holder on a disposition will be treated as ordinary interest income. Any loss realized by a U.S. Holder on a disposition will be treated as ordinary loss, to the extent of the U.S. Holder's Tax OID inclusions with respect to the obligation up to the date of disposition. Any loss realized in excess of such amount generally will be treated as a capital loss. An individual U.S. Holder generally will be allowed a deduction for any such loss without regard to the two-percent miscellaneous itemized deduction rule of section 67 of the Code. Any capital loss recognized by a U.S. Holder will be a long-term capital loss if such U.S. Holder has held such Note for more than one year, and a short-term capital loss in other cases. If a U.S. Holder receives Salomon Common Stock in a disposition, such holder will have a basis in that stock equal to the stock's fair market value on the date of the disposition. Additionally, the U.S. Holder's holding period in the Salomon Common Stock will begin the day after the disposition. A U.S. Holder that purchases a Note in the secondary market for an amount that differs from the Note's adjusted issue price at the time of purchase will be required to accrue Tax OID on the contingent debt obligation in accordance with the comparable yield and Payment Schedule, even if market conditions have changed since the date of issuance. If the difference between a U.S. Holder's purchase price for the Note and the adjusted issue price of the Note is attributable to a change in interest rates, the U.S. Holder will be required to allocate that difference among all remaining Tax OID accruals on the Note. If the difference between a U.S. Holder's purchase price for the Note and the adjusted issue price of the Note is attributable to a change in expectations as to the payment to be made by Berkshire on the Maturity Date, the U.S. Holder will be required to allocate that difference to the payment on the Maturity Date. Adjustments allocated to either a Tax OID accrual or the payment on the Maturity Date are taken into account at the time the corresponding Tax OID is accrued or payment is made. If the purchaser's basis is greater than the adjusted issue price of the Note, the excess is treated as a "negative adjustment" that reduces such Tax OID accruals or payment; if the purchaser's basis is less than the adjusted issue price, the difference is treated as a "positive adjustment" that similarly increases such Tax OID accruals or payment. Any negative and positive adjustments of the kind described above made S-26 29 by a U.S. Holder of a Note in respect of any difference between its purchase price and the adjusted issue price of the Note on the date of purchase decrease or increase, respectively, the U.S. Holder's basis in the Note, in a manner consistent with the operation of the general premium and market discount rules that such adjustments supersede. Certain U.S. Holders may receive Forms 1099-OID reporting Tax OID accruals on a Note. Those forms may not, however, reflect the effects of any positive or negative adjustments resulting from the U.S. Holder's purchase of a Note in the secondary market at a price that differs from its adjusted issue price on the date of purchase. U.S. Holders are urged to consult their tax advisors as to whether, and how, such adjustments should be made to the amounts reported on any Form 1099-OID. BACKUP WITHHOLDING AND INFORMATION REPORTING A U.S. Holder may be subject to information reporting and to backup withholding at a rate of 31 percent with respect to payments made on a Note, or the proceeds of the sale of a Note before maturity, unless such U.S. Holder provides proof of an applicable exemption or a correct taxpayer identification number, and otherwise complies with applicable requirements of the information reporting and backup withholding rules. TAXATION OF SALOMON COMMON STOCK Distributions on Salomon Common Stock. The gross amount of any distribution made by Salomon to a U.S. Holder with respect to the Salomon Common Stock generally will be includible in the income of a U.S. Holder as dividend income to the extent that such distribution is paid out of Salomon's current or accumulated earnings and profits as determined under U.S. Federal income tax principles. Subject to certain limitations, United States corporations holding Salomon Common Stock that receive dividends thereon generally will be eligible for a dividends-received deduction equal to 70% of the dividends received. If the amount of any distribution exceeds Salomon's current and accumulated earnings and profits as so computed, such excess first will be treated as a tax-free return of capital to the extent of the U.S. Holder's tax basis in its Salomon Stock, and thereafter as gain from the sale or exchange of property. Dispositions of Salomon Common Stock. A U.S. Holder generally will recognize capital gain or loss for U.S. Federal income tax purposes on the sale or disposition of Salomon Common Stock in an amount equal to the difference between the amount realized on the sale or other disposition and the U.S. Holder's tax basis in the Salomon Common Stock. Any such gain or loss will be long-term gain or loss if the U.S. Holder held the Salomon Common Stock for more than one year. As discussed above, a U.S. Holder that received Salomon Common Stock from Berkshire in a disposition of a Note will have a basis in that Salomon Common Stock equal to that stock's fair market value on the date of such disposition of the Note. Additionally, the U.S. Holder's holding period in the Salomon Common Stock will begin the day after such disposition of the Note. S-27 30 PLAN OF DISTRIBUTION Subject to the terms and conditions set forth in the Underwriting Agreement, Berkshire has agreed to sell to the Underwriters named below, and each of the Underwriters has severally agreed to purchase from Berkshire, the principal amount of the Notes set forth opposite its name below:
PRINCIPAL UNDERWRITERS AMOUNT OF NOTES ------------------------------------------------------------- --------------- Salomon Brothers Inc......................................... $ Goldman, Sachs & Co.......................................... Smith Barney Inc. ........................................... ------------ Total.............................................. $ 350,000,000 ============
In the Underwriting Agreement, the several Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all of the Notes if any are purchased. Berkshire has been advised that the Underwriters propose to offer the Notes to the public initially at the offering price set forth on the cover of this Prospectus Supplement and to certain dealers at such price less a selling concession of not more than % of such principal amount of the Notes; that the Underwriters may allow, and each such dealer may reallow, to other dealers a concession not exceeding % of such principal amount of the Notes; and that such Issue Price and such concession and reallowance may be changed by the Underwriters after completion of the offering of the Notes. Berkshire has granted to the Underwriters an option, exercisable for 30 days from the date of this Prospectus Supplement (or, if such 30th day is not a Business Day, on the next Business Day thereafter), to purchase up to an additional $50,000,000 aggregate principal amount of the Notes at the Issue Price set forth on the cover page hereof, less the underwriting discount. The Underwriters may exercise such option solely for the purpose of covering over-allotments, if any, incurred in connection with the sale of the Notes offered hereby. Each of Berkshire and Salomon has agreed that it will not, for a period of 90 days after the date of this Prospectus Supplement, without the written consent of Salomon Brothers, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any shares of Salomon Common Stock, or any securities convertible into or exchangeable for, shares of Salomon Common Stock; provided, however, that such restriction shall not affect the ability of Berkshire, Salomon or their subsidiaries to take any such actions in connection with the offer and sale of the Notes or any exchange at or prior to maturity pursuant to the terms of Notes; and provided, further, that Salomon may sell or register shares of Salomon Common Stock or grant options to purchase the same, in either case, pursuant to any employee or director stock option plan, stock ownership plan or dividend reinvestment plan of Salomon in effect as of the date of this Prospectus. Berkshire and Salomon have agreed in the Underwriting Agreement to indemnify the Underwriters and their controlling persons against certain liabilities under the Securities Act or to contribute to payments the Underwriters or their controlling persons may be required to make in respect thereof. Berkshire and Salomon have also agreed to indemnify each other and their controlling persons with respect to certain liabilities, including liabilities under the Securities Act, or contribute to payments in respect thereof. Berkshire has been advised by the Underwriters (other than Salomon Brothers) that they may make a market in the Notes but they are not obligated to do so and may discontinue such market making at any time without notice. No assurance can be given that an active public market for the Notes will develop. Salomon Brothers is a wholly owned subsidiary of Salomon. Berkshire beneficially owns Salomon Common Stock and Salomon Preferred Stock representing approximately 18% of the voting power of Salomon. Mr. Buffett, Mr. Munger, and Louis A. Simpson, President and Chief Executive Officer-Capital Operations of GEICO Corporation, are directors of Salomon. Because of such ownership and other S-28 31 relationships between Berkshire and Salomon Brothers, Berkshire may be deemed to be an affiliate of Salomon Brothers. Accordingly, the offering is being made pursuant to the provisions of Rule 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc. See "Relationship between Berkshire and Salomon" in this Prospectus Supplement and "Ownership of Company Securities by Berkshire" in the Salomon Prospectus. In the ordinary course of their respective businesses, certain of the Underwriters and their respective affiliates have engaged in and may in the future engage in commercial and investment banking transactions with Berkshire, Salomon and their affiliates. VALIDITY OF THE NOTES The validity of the Notes offered hereby will be passed upon for Berkshire by Munger, Tolles & Olson, Los Angeles, California. Certain legal matters relating to the Notes will be passed on for Salomon by Cravath, Swaine & Moore, New York, New York, and for the Underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New York. Cravath, Swaine & Moore has previously represented, and may continue to represent, GEICO Corporation in connection with its significant legal matters. S-29 32 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE POST- EFFECTIVE AMENDMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION NOVEMBER 22, 1996 PROSPECTUS BERKSHIRE HATHAWAY INC. DEBT SECURITIES Berkshire Hathaway Inc. ("Berkshire") intends from time to time to issue in one or more series its debt securities (the "Debt Securities") with an aggregate initial public offering price or purchase price of up to $400,000,000 or the equivalent thereof in one or more foreign currencies or composite currencies, including the European Currency Unit. The Debt Securities of each series will be offered on terms to be determined at the time of sale. When a particular series of Debt Securities is offered, a supplement to this Prospectus (the "Prospectus Supplement") will be delivered with this Prospectus setting forth with respect to such series; the designation and principal amount offered; the rate and time of payment of interest, if any; the maturity or maturities; the currency in which the Debt Securities are denominated (which may be U.S. Dollars or foreign currencies, including the European Currency Unit); the terms for a sinking, purchase or analogous fund, if any; the terms for redemption or early repayment, if any; the terms for conversion or exchange of such series for securities of Berkshire or another issuer, if any; any other terms of such series; the purchase price and other terms of the offering; and any listing on a securities exchange. The Debt Securities may be sold (1) through underwriting syndicates represented by one or more managing underwriters or through one or more underwriters; (2) through agents designated from time to time; or (3) directly to institutional purchasers. Any such managing underwriters or underwriters will include Salomon Brothers Inc. The names of any underwriters or agents of Berkshire involved in the sale of the Debt Securities in respect of which this Prospectus is being delivered and any applicable commissions or discounts will be set forth in the Prospectus Supplement. The net proceeds to Berkshire from such sale will also be set forth in the Prospectus Supplement. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is November , 1996 33 AVAILABLE INFORMATION Berkshire is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). All such reports, proxy statements and other information filed with the Commission concerning Berkshire can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices at Seven World Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained upon written request addressed to the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission maintains a World Wide Web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding Berkshire. Berkshire's Class A Common Stock and Class B Common Stock are each listed on the New York Stock Exchange. Reports, proxy statements, information statements and other information concerning Berkshire can be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Berkshire has filed with the Commission a registration statement on Form S-3 (herein together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act of 1933 (the "Securities Act"). This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement, which may be obtained from the Commission at its principal office in Washington, D.C. upon payment of charges prescribed by the Commission. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by Berkshire with the Commission pursuant to Section 13 of the Exchange Act (File No. 1-10125) are incorporated herein by reference: (1) Berkshire's Annual Report on Form 10-K for the year ended December 31, 1995; (2) Berkshire's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996; and (3) Berkshire's Current Reports on Form 8-K filed on January 16, 1996, February 15, 1996, March 27, 1996, July 26, 1996, and October 16, 1996. All documents filed by Berkshire pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus, and prior to the termination of this offering, shall be deemed to be incorporated by reference in this Prospectus and to be part of this Prospectus from the date of filing of such documents. Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained in this Prospectus or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Each person, including any beneficial owner, to whom a copy of this Prospectus is delivered may obtain, without charge, upon written or oral request, a copy of any or all of the documents incorporated herein by reference, except the exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Written requests for such copies should be directed to the Corporate Secretary, Berkshire Hathaway Inc., 1440 Kiewit Plaza, Omaha, Nebraska 68131. Telephone requests for such copies should be directed to the Corporate Secretary at (402) 346-1400. 2 34 BERKSHIRE HATHAWAY INC. Berkshire is a holding company owning subsidiaries engaged in a number of diverse business activities. The most important of these is the property and casualty insurance business, which Berkshire conducts through subsidiaries referred to collectively as the Berkshire Hathaway Insurance Group. See "-- Berkshire Hathaway Insurance Group." The investment portfolios of the insurance subsidiaries include meaningful equity ownership percentages of other publicly traded companies. See "-- Common Stock Investments." In addition, Berkshire publishes the Buffalo News, a daily and Sunday newspaper in upstate New York, and its non-insurance subsidiaries engage in a variety of manufacturing, publication, retail and finance businesses. See "-- Non-Insurance Businesses of Berkshire." Operating decisions for the various insurance and non-insurance businesses of Berkshire are made by the managers of the business units. Investment decisions and all other capital allocation decisions are made for Berkshire and its subsidiaries by Warren E. Buffett, Berkshire's Chairman, in consultation with Charles T. Munger, its Vice-Chairman. Berkshire's executive offices are located at 1440 Kiewit Plaza, Omaha, Nebraska 68131, and its telephone number at that location is (402) 346-1400. Berkshire Hathaway Insurance Group The Berkshire Hathaway Insurance Group (the "Group") operates a primary or direct insurance business nationwide and a reinsurance business worldwide. The largest subsidiary in the Group is National Indemnity Company ("National Indemnity"), headquartered in Omaha, Nebraska with offices also in Stamford, Connecticut. Also included in this Group is GEICO Corporation ("GEICO"), the seventh largest auto insurer in the United States. The Group maintains capital strength at high levels, significantly higher than normal in the industry. This capital strength differentiates Group members from their competitors. For example, in each of the five years from 1991 through 1995 the Group's ratio of net premiums written to year-end statutory surplus was 10% or less; the addition of GEICO will cause the Group's ratio to increase in 1996 to a presently estimated 15%-20%. The industry average net premiums-to-surplus ratio from 1991 through 1995 ranged from 113% to 141% (based on statistics published by A.M Best & Company). Because it maintains large capital in relation to annual premiums written, Berkshire can pay losses under the most adverse circumstances. This obvious margin of safety is very attractive to the Group's insureds, and creates opportunities for the Group to negotiate and enter into contracts of insurance specially designed to meet unique needs of sophisticated insurance and reinsurance buyers. Berkshire's capital base also allows the Group to issue policies with limits larger than other insurance companies are typically prepared to write. Finally, large capital combined with low overhead allows the Group to respond to insurance opportunities with exceptional speed and be selective about the business it writes. The Group can forbear from writing policies when it perceives rates to be inadequate. Conversely, it can more fully utilize its capital strength when better-than-industry-average results may be expected. Reinsurance. The Reinsurance Division of National Indemnity, located in Stamford, Connecticut, provides excess of loss and quota share treaty reinsurance to other property/casualty insurers and reinsurers. Minimal organizational resources, but huge financial resources, are currently devoted to this business. During 1990, management of the Group perceived declines in industry capacity and competition for megacatastrophe excess-of-loss reinsurance ("super-cat") coverages. Consequently, National Indemnity has written coverages for a number of such risks. Management believes that in recent years the Group has been the largest provider in the world of this type of coverage. These coverages may provide sizeable amounts of indemnification per contract, and a single event may result in payments under a number of contracts. Berkshire's present underwriting standards (which are subject to change) seek to limit Berkshire's exposure to a loss from a single event to $1 billion in excess of the premium earned. This business can produce extreme volatility in reported periodic results. Accounting consequences, 3 35 however, do not influence decisions of Berkshire's management with respect to this or any other business, and this fact plus the Group's extraordinary financial strength are believed to be the primary reasons why the Group has become a major provider of these coverages. Since 1992, there has been a substantial increase in catastrophe reinsurance capacity for the industry. Most of the additional capacity has arisen from equity capital raised by newly-formed entities. Berkshire management has observed that, in some instances, catastrophe reinsurance prices have fallen below the amounts that it considered adequate. The result was a decrease in the level of business accepted in 1995. Management anticipates that the level of business accepted in 1996, and possibly in subsequent years as well, may also be reduced. In recent years, the Group has entered into several non-traditional reinsurance arrangements known as finite risk contracts. These contracts have become increasingly significant in the Group's business and the property/casualty insurance marketplace. These reinsurance agreements provide essentially traditional coverages but also contractually establish minimum and maximum payouts by the reinsurer. Minimum payout requirements may call for repayments to the reinsured, on specified dates, of sums not otherwise paid out by the reinsurer as losses. The amount of risk transferred, while significant, is limited. Because the period over which claims are expected to be paid can be lengthy, the time value of money is an important element in pricing and setting terms for these contracts. Transaction amounts and limits of indemnification are likely to be large. In addition, a single contract may relate to loss occurrences in a number of lines of business that span a number of years. Providers of such non-traditional products need significant financial strength. Increased competition for such business and new accounting standards for ceding companies have limited the number of opportunities to write such business, particularly with respect to retroactive reinsurance coverages of past loss events. However, the occasional acceptance of such business continues to produce considerable premium volume. Primary or Direct Basis Insurance. The Group also writes insurance on a primary or direct basis (policies issued in the name of and to the insured party). The Group's primary or direct business was significantly expanded when GEICO became a wholly owned subsidiary of Berkshire on January 2, 1996. GEICO, through its own subsidiaries, is a multiple line property casualty insurer, the principal business of which is writing private passenger automobile insurance. GEICO markets its policies to individuals in 48 states and the District of Columbia by direct response methods, which is a major aspect of GEICO's strategy to be a low-cost provider of such coverages. Other Group members engaged in primary or direct basis insurance underwrite multiple lines of principally casualty coverages nationwide for primarily commercial accounts. These members write business through insurance agents and brokers. The traditional business of National Indemnity has been largely in providing liability coverages for commercial truck and bus operators and related commercial transportation activities that require specialized underwriting knowledge and techniques. The Commercial Casualty Division and Professional Liability and Special Risk Division of National Indemnity solicit and underwrite especially large or unusual risks. Other member companies, referred to as "homestate operations," market various commercial coverages for standard risks to insured in an increasing number of selected states. The Group also insures the credit card debt of policyholders through Berkshire's 82%-owned Central States Indemnity Co. of Omaha, which markets to individuals through credit card issuers nationwide, and provides workers' compensation insurance primarily to employers in California through Cypress Insurance Company. Underwriting Results and "Float." The increases in reinsurance business in recent years have produced an exceptional increase in the amount of "float" generated by the Group. Float is an estimate of the net investable funds provided by policyholders to the Group and held by it prior to payment of claims and claims adjustment expenses. Float arises because of the time lapse between the dates premiums are paid by policyholders and the dates policy costs, primarily losses and loss adjustment expenses, are paid. Float equals the sum of unpaid losses, unpaid loss adjustment expenses, unearned 4 36 premiums, and other liabilities to policyholders, less the aggregate of premium balances receivable, amounts recoverable as reinsurance on paid and unpaid losses, deferred policy acquisition costs, deferred charges applicable to assumed reinsurance and prepaid income taxes. The Group generates float in exceptional amounts relative to premium volume. Since 1967, when Berkshire entered the insurance business, its float has grown at an annual compounded rate of 20.7%. The "cost" of float in any year is the underwriting loss that occurs when premiums earned by an insurer are less than losses and expenses incurred by the insurer for the year. In years when an underwriting profit is achieved, as the Group has in each of the past three years, the "cost" of float is negative; that is, the Group has had access to money at no cost. The following table shows the Group's pre-tax underwriting profit or loss (stated on the basis of generally accepted accounting principles and not including GEICO), average float, and approximate cost of float (compared to the year-end yield on long-term U.S. Treasury bonds) for the past five years:
(1) YEAR-END UNDERWRITING (2) APPROXIMATE YIELD ON LONG-TERM GAIN (LOSS) AVERAGE FLOAT COST OF FUNDS GOVERNMENT BONDS --------------- --------------- ----------------- ------------------ (IN $ MILLIONS) (IN $ MILLIONS) (RATIO OF 1 TO 2) 1991............. (119.6) 1,895.0 6.31% 7.40% 1992............. (109.0) 2,290.4 4.76% 7.39% 1993............. 30.0 2,624.7 less than zero 6.35% 1994............. 129.0 3,056.6 less than zero 7.88% 1995............. 19.6 3,607.2 less than zero 5.95%
Underwriting results from the last three years have benefitted from the profitability of the super-cat business. This business has produced underwriting gains of approximately $152 million, $240 million, and $110 million in 1995, 1994 and 1993, respectively, but is virtually certain to produce huge losses in some years in the future. Common Stock Investments Berkshire's investment portfolio, held principally through insurance subsidiaries, includes marketable equity securities valued at approximately $25.6 billion as of September 30, 1996. Such investments include:
APPROXIMATE PERCENTAGE OF CAPITAL STOCK ---------------------- American Express Company....................... 10% The Coca-Cola Company.......................... 8% The Walt Disney Company........................ 3 1/2% Federal Home Loan Mortgage Company............. 9% The Gillette Company........................... 11% Salomon Inc.................................... 18%* The Washington Post Company.................... 16% Wells Fargo & Company.......................... 8%
- --------------- * Includes Salomon preferred stock with a carrying value of $588 million as of September 30, 1996 not included in the $25.6 billion stated above. Much information about these publicly-owned companies is available, including that released from time to time by the companies themselves. Non-Insurance Businesses of Berkshire Berkshire's non-insurance businesses engage in a variety of manufacturing, publication, retail, and finance activities. Berkshire's non-insurance businesses accounted for approximately 62% of Berkshire's consolidated revenues and 26% of consolidated net earnings in 1995. 5 37 USE OF PROCEEDS Except as otherwise set forth in the Prospectus Supplement, the proceeds to be received by Berkshire from the sale of the Debt Securities will be used for general corporate purposes. DESCRIPTION OF DEBT SECURITIES The following description of the terms of the Debt Securities sets forth certain general terms and provisions of the Debt Securities to which any Prospectus Supplement may relate. The particular terms of the Debt Securities offered by any Prospectus Supplement and the extent, if any, to which such general provisions may apply to the Debt Securities so offered will be described in the Prospectus Supplement relating to such Debt Securities. The Debt Securities are to be issued under an indenture, dated as of December 1, 1987 (the "Indenture"), between Berkshire and State Street Bank and Trust Company (as successor trustee to The First National Bank of Boston), as trustee (the "Trustee"). The Indenture is an exhibit to the Registration Statement. The following summaries of certain provisions of the Indenture do not purport to be complete and are qualified in their entirety by reference to the provisions of the Indenture. Numerical references in parentheses below are to sections in the Indenture. Wherever particular sections or defined terms of the Indenture are referred to, it is intended that such sections or defined terms shall be incorporated herein by reference. GENERAL The Debt Securities offered by this Prospectus will be limited to an aggregate initial public offering price of up to $400,000,000 or the equivalent thereof in one or more foreign currencies or composite currencies, including the European Currency Unit. The Indenture provides that Debt Securities in an unlimited amount may be issued thereunder from time to time in one or more series. (Section 301) The Debt Securities will be unsecured obligations of Berkshire and will rank pari passu with all other unsecured and unsubordinated obligations of Berkshire. Reference is hereby made to the Prospectus Supplement relating to the particular series of Debt Securities offered thereby for the terms of such Debt Securities, including, where applicable: (1) the designation, aggregate principal amount, currency or currencies and denominations of such Debt Securities; (2) the price (expressed as a percentage of the aggregate principal amount thereof) at which such Debt Securities will be issued; (3) the date or dates on which such Debt Securities will mature; (4) the currency or currencies in which such Debt Securities are being sold and in which the principal of and any premium and interest on such Debt Securities will be payable and, if the holders of any such Debt Securities may elect the currency in which payments thereon are to be made, the manner of such election; (5) the rate or rates (which may be fixed or variable) per annum at which such Debt Securities will bear interest; (6) the date from which such interest on such Debt Securities will accrue, the dates on which such interest will be payable and the date on which payment of such interest will commence; (7) the dates on which and the price or prices at which such Debt Securities will, pursuant to any mandatory sinking fund provision, or may, pursuant to any optional redemption or required repayment provisions, be redeemed or repaid and the other terms and provisions of any such optional redemption or required repayment; (8) whether such Debt Securities are to be issued in the form of one or more Global Securities and, if so, the identity of the Depositary for such Global Security or Securities; (9) any additional restrictive covenants included for the benefit of holders of such Debt Securities; (10) additional Events of Default provided with respect to such Debt Securities; (11) whether such Debt Securities will be convertible or exchangeable for securities of Berkshire or another issuer; and (12) any other specific terms of or matters relating to such Debt Securities. Principal, premium, if any, and interest will be payable at the Place of Payment designated for such Debt Securities, provided that payment of interest may, at the option of Berkshire, be made by check mailed to the address of the person entitled thereto as it appears in the Security Register. (Section 307) 6 38 The Debt Securities will be issued only in fully registered form, without coupons. Debt Securities of a series may be issued in the form of one or more Global Securities, as described below under "Global Securities." Unless the Prospectus Supplement specifies otherwise, the Debt Securities will be issued only in denominations of $1,000 or any integral multiple thereof. The Prospectus Supplement relating to a series of Debt Securities denominated in a foreign or composite currency will specify the denomination thereof. (Section 302 and 305) Debt Securities of any series (other than a Global Security) will be exchangeable into an equal aggregate principal amount of Debt Securities of the same series (with the same interest rate and maturity date) of different authorized denominations. (Section 305) Debt Securities (other than Global Securities) may be presented for exchange or for registration of transfer (with the form of transfer endorsed thereon duly executed), at the office of any transfer agent or at the office of the Security Registrar, without service charge and upon payment of any taxes and other governmental charges as described in the Indenture. Such transfer or exchange will be effected upon the transfer agent or the Security Registrar, as the case may be, being satisfied with the documents of title and identity of the person making the request. No service charge will be made for any transfer or exchange of the Debt Securities, but Berkshire may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (Section 305) Debt Securities may be issued under the Indenture as Original Issue Discount Securities to be offered and sold at a substantial discount below their stated principal amount which may bear no interest or interest at a rate which is below the market rate. Federal income tax consequences and other special considerations applicable to any such Original Issue Discount Securities will be described in the Prospectus Supplement relating thereto. "Original Issue Discount Securities" means any Debt Securities that provide for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof upon the occurrence of an Event of Default and the continuation thereof. (Section 101) GLOBAL SECURITIES The Debt Securities of a series may be issued in the form of one or more fully registered Global Securities that will be deposited with, or on behalf of, a depositary (the "Depositary") identified in the Prospectus Supplement relating to such series. Unless and until it is exchanged in whole or in part for Debt Securities in definitive registered form, a Global Security may not be transferred except as a whole by the Depositary or any other nominee of such Depositary or by such Depositary or any such nominee to a successor of such Depositary or a nominee of such successor. (Section 305) The specific terms of the depositary arrangement with respect to a series of Debt Securities will be described in the Prospectus Supplement relating to such series. Berkshire anticipates that the following provisions will apply to all depositary arrangements. Upon the issuance of a Global Security, the Depositary for such Global Security will credit, on its book-entry registration and transfer system, the respective principal amounts of the Debt Securities represented by such Global Security to accounts of institutions that have accounts with such Depositary ("participants"). The accounts to be credited shall be designated by the underwriters or agents of such Debt Securities or by Berkshire if such Debt Securities are offered and sold directly by Berkshire. Ownership of beneficial interests in such Global Security will be shown on, and the transfer of that ownership will be effected only through, records maintained by the Depositary for such Global Security or by participants or persons that hold through participants. The laws of some states require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global Security. So long as the Depositary for a Global Security, or its nominee, is the registered owner of such Global Security, such Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such Global Security for all purposes under the Indenture. 7 39 Except as set forth below or in the Prospectus Supplement, owners of beneficial interests in a Global Security will not be entitled to have Debt Securities of the series represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Debt Securities of such series in definitive form and will not be considered the owners or holders thereof under the Indenture. Principal, premium, if any, and interest payments on Debt Securities registered in the name of a Depositary or its nominee will be made to the Depositary or its nominee, as the case may be, as the registered owner of the Global Security or securities representing such Debt Securities. None of Berkshire, the Trustee, and Paying Agent or the Security Registrar will have a responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Berkshire expects that the Depositary for a series of Debt Securities, upon receipt of any payment of principal, premium or interest, will credit immediately participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Security or Securities for such Debt Securities as shown on the records of such Depositary. Berkshire also expects that payments by participants to owners of beneficial interests in such Global Security or Securities held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. If a Depositary for a series of Debt Securities is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by Berkshire within ninety days, Berkshire will issue Debt Securities for such series in definitive form in exchange for the Global Security or Securities representing such Series of Debt Securities. In addition, Berkshire may at any time and in its sole discretion determine not to have the Debt Securities of a series represented by a Global Security or Securities and, in such event, will issue Debt Securities of such series in definitive form in exchange for the Global Security or Securities representing such series of Debt Securities. In either instance, an owner of a beneficial interest in a Global Security will be entitled to have Debt Securities of the series represented by such Global Security equal in principal amount to such beneficial interest registered in its name and will be entitled to physical delivery of such Debt Securities in definitive form. Debt Securities of such series so issued in definitive form will be issued in denominations of $1,000 and integral multiples thereof and will be issued in registered form only, without coupons. DEFEASANCE At Berkshire's option, either (1) Berkshire will be Discharged (as hereinafter defined) from any and all obligations in respect of any series of Debt Securities or (2) Berkshire shall cease to be under any obligations to comply with the restriction on its ability to merge, consolidate or sell assets as set forth in the Indenture, in either case if it deposits irrevocably with the Trustee, in trust, specifically for the benefit of the holders of such series, money or Government Obligations (as hereinafter defined) which through the payment of interest thereon and principal thereof in accordance with their terms will provide money in an amount sufficient (in the written opinion of a nationally recognized firm of independent accountants in the case of Government Obligations or a combination of money and Government Obligations) to pay all the principal of, and interest on, the Debt Securities of such series on the dates such payments are due in accordance with the terms of such Debt Securities. To exercise such option, Berkshire is required to deliver to the Trustee an opinion of a nationally recognized tax counsel to the effect that Holders of the Debt Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and discharge and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and discharge had not occurred. 8 40 The term "Discharged" is defined to mean that Berkshire is deemed to have paid and discharged the entire indebtedness represented by, and obligations under, the Debt Securities of such series, except (1) the rights of holders of the Debt Securities of such series to receive, from the trust fund described above, payment of the principal of and the interest on the Debt Securities of such series when such payments are due, (2) Berkshire's obligations with respect to the Debt Securities of such series with respect to registration, transfer, exchange maintenance of a paying office and holding money in trust and (3) the rights, powers, trusts, duties and immunities of the Trustee under the Indenture. The term "Government Obligations" is defined to mean securities that are (1) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality or the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under either clause are not callable or redeemable at the option of the issuer thereof, and also includes a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligations or a specific payment of interest on or principal of any such Government Obligations held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligations evidenced by such depository receipt. (Article Thirteen) EVENTS OF DEFAULT, WAIVER AND NOTICE Events of default with respect to any series of Debt Securities are defined in the Indenture as being: (1) default for thirty days in payment of any interest on any Debt Security of such series; (2) default in payment of principal of or premium, if any, on any Debt Security of such series when due; (3) default in the deposit of any sinking fund payment on any Debt Security of such series when due: (4) default for ninety days after notice to Berkshire by the Trustee or by the holders of 25% in principal amount of Debt Securities of such series then outstanding in performance of any other covenant in the Indenture; (5) acceleration of the maturity of any indebtedness for money borrowed by Berkshire or any Consolidated Subsidiary (as defined) of $5,000,000 or more at the time outstanding, if such acceleration is by reason of default by Berkshire or such Consolidated Subsidiary and is not rescinded or annulled within ten days after notice by the Trustee or the holders of 25% in principal amount of Debt Securities of such series then outstanding; and (6) certain events of bankruptcy, insolvency and reorganization. (Section 501) The Indenture provides that if an event of default specified therein with respect to any series of Debt Securities shall occur and be continuing, either the Trustee or the holders of 25% in principal amount of Debt Securities of such series then outstanding may declare the principal of and accrued but unpaid interest on all Debt Securities of such series to be due and payable. (Section 502) In certain cases, the holders of a majority in principal amount of any series of Debt Securities then outstanding may on behalf of the holders of all Debt Securities of such series waive any past default or event of default with respect to Debt Securities of such series except a default not theretofore cured in payment of the principal of or premium, if any, or interest on any Debt Securities of such series. (Sections 502 and 513) The Indenture contains a provision entitling the Trustee, subject to the duty of the Trustee during default with respect to any series of Debt Securities to act with the required standard of care, to be indemnified by the holders of Debt Securities of such series before proceeding to exercise any right or power under the Indenture at the request of the holders. (Section 603) The Indenture provides that no holder of Debt Securities may institute any proceeding, judicial or otherwise, to enforce the Indenture except in the case of failure of the Trustee, for sixty days, to act after the Trustee has been given (1) notice of default with respect to Debt Securities of such series, (2) a request to enforce the Indenture by the holders of not less than 25% in aggregate principal amount of Debt Securities of such series then outstanding and (3) an offer of reasonable indemnity. (Section 507) This provision will not 9 41 prevent any holder of Debt Securities from enforcing payment of the principal thereof and premium, if any, and interest thereon at the respective due dates thereof. (Section 508) The holders of a majority in aggregate principal amount of any series of Debt Securities then outstanding may direct the time, method and place of conducting any proceedings for any remedy available to the Trustee or exercising any trust or power conferred on it with resect to Debt Securities of such series. However, the Trustee may refuse to follow any direction that conflicts with law or the Indenture or that would be unjustly prejudicial to holders of Debt Securities of such series not joining therein. (Section 512) The Indenture provides that the Trustee will, within ninety days after the occurrence of a default with respect to any series of Debt Securities known to it, give to the holders of Debt Securities of such series notice of such default known to it not cured or waived, but, except in the case of a default in the payment of principal of or premium, if any, or interest on Debt Securities of such series, the Trustee shall be protected in withholding of such notice if it determines in good faith that the withholding of such notice is in the interest of the holders of Debt Securities of such series. (Section 602) CONSOLIDATION, MERGER OR SALE OF ASSETS OF BERKSHIRE Berkshire shall not consolidate with or merge into any other corporation or sell all or substantially all of its assets, unless (1) the corporation formed by such consolidation or into which Berkshire is merged or the corporation which acquires its assets is organized in the United States and expressly assumes all of the obligations of Berkshire under the Indenture and (2) immediately after giving effect to such transaction, no Event of Default, and no event which after notice or lapse of time or both would become an Event of Default, and no event which after notice or lapse of time or both would become an Event of Default, shall have happened and be continuing. Upon any such consolidation, merger or sale, the successor corporation formed by such consolidation, or into which Berkshire is merged or to which such sale is made, shall succeed to, and be substituted for, Berkshire under the Indenture. (Sections 801 and 802) MODIFICATION AND WAIVER The Indenture permits Berkshire and the Trustee, with the consent of the holders of 66 2/3% in principal amount of the Debt Securities at the time outstanding thereunder and affected thereby to execute supplemental indentures adding any provisions to or changing or eliminating any of the provisions of the Indenture or modifying the rights of the holders of Debt Securities of such series, except that no supplemental indenture may, without the consent of all holders of such affected series of Debt Securities, (1) change the maturity of Debt Securities or any installment of interest thereon or reduce the principal amount thereof or the interest thereon, or change any place of payment or the coin or currency in which a Debt Security is payable or affect the right of any holder to institute suit for the enforcement of payment in accordance with the foregoing, or (2) reduce the aforesaid percentage of Debt Securities of such series, the consent of the holders of which is required for any such supplemental indenture. Compliance by Berkshire with certain restrictive covenants may be waived in particular cases with the consent of the holders of 66 2/3% in principal amount of the outstanding Debt Securities of each series affected thereby. (Section 902) PLAN OF DISTRIBUTION Berkshire may sell the Debt Securities in any of three ways: (1) through underwriters or dealers; (2) through agents; or (3) directly to a limited number of institutional purchasers or to a single purchaser. The Prospectus Supplement with respect to the Debt Securities being offered thereby will set forth the terms of the offering of such Debt Securities, including the name or names of any underwriters, the purchase price of such Debt Securities and the proceeds to Berkshire from such sale, any underwriting discounts and other items constituting underwriters' compensation, any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers, and any securities exchanges on which such Debt Securities may be listed. 10 42 If underwriters are used in the sale, the Debt Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The Debt Securities may be offered to the public through underwriting syndicates represented by one or more managing underwriters. Any managing underwriters or underwriters will include Salomon Brothers Inc. Unless otherwise set forth in the Prospectus Supplement, the obligations of the underwriters to purchase Debt Securities will be subject to certain conditions precedent and the underwriters will be obligated to purchase all the Debt Securities offered by the Prospectus Supplement if any of such Debt Securities are purchased. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. Debt Securities may be sold directly by Berkshire or through agents designated by Berkshire from time to time. Any agent involved in the offer or sale of the Debt Securities in respect of which this Prospectus is delivered will be named, and any commissions payable by Berkshire to such agent will be set forth, in the Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement, any such agent will be acting on a best efforts basis for the period of its appointment. If so indicated in the Prospectus Supplement, Berkshire will authorize agents, underwriters or dealers to solicit offers by certain specified institutions to purchase Debt Securities from Berkshire at the public offering price set forth in the Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject only to those conditions set forth in the Prospectus Supplement and the Prospectus Supplement will set forth the commissions payable for solicitation of such contracts. Agents and underwriters may be entitled under agreements entered into with Berkshire to indemnification by Berkshire against certain civil liabilities, including liabilities under the Securities Act of 1933, or to contribution with respect to payments which the agents or underwriters may be required to make in respect thereof. Agents and underwriters may be customers of, engage in transactions with, or perform services for, the company or its affiliates in the ordinary course of business. ERISA MATTERS Berkshire and Salomon Brothers Inc may each be considered a "party in interest" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), with respect to many employee benefit plans. Prohibited transactions within the meaning of ERISA may arise if the Debt Securities are acquired by a pension or other employee benefit plan with respect to which Salomon Brothers Inc is a service provider, unless such Debt Securities are acquired pursuant to an exemption for transactions effected on behalf of such plan by a "qualified professional asset manager" or pursuant to any other available exemption. Any such pension or employee benefit plan proposing to invest in the Debt Securities should consult with its legal counsel. EXPERTS The financial statement schedules incorporated in this Prospectus by reference from Berkshire's Annual Report on Form 10-K for the year ended December 31, 1995 and the restated financial statements incorporated by reference from Berkshire's Current Report on Form 8-K dated July 16, 1996 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports which are incorporated herein by reference, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The consolidated financial statements of GEICO incorporated by reference in Berkshire's Current Report on Form 8-K dated March 27, 1996, which is incorporated in this Prospectus by reference, have been audited by Coopers & Lybrand L.L.P., independent auditors, as stated in their report which is incorporated herein by reference, and has been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 11 43 LEGAL OPINIONS Certain legal matters relating to the Debt Securities will be passed upon for Berkshire by Munger, Tolles & Olson, Los Angeles, California, and for the underwriters, if any, by counsel named in the applicable Prospectus Supplement. 12 44 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION NOVEMBER 22, 1996 PROSPECTUS SUPPLEMENT APPENDIX A (To Prospectus Dated November , 1996) SHARES SALOMON INC COMMON STOCK (PAR VALUE $1.00 PER SHARE) This Prospectus Supplement relates to shares (subject to adjustment as described below) of Common Stock, par value $1.00 per share (the "Common Stock"), of Salomon Inc (the "Company"), that may be delivered by Berkshire Hathaway Inc. ("Berkshire") upon exchange for its Senior Exchangeable Notes Due 2001 (the "Notes") at or prior to maturity in accordance with the terms of such Notes. The number of shares of Common Stock that may be delivered by Berkshire upon exchange for the Notes is subject to adjustment upon the occurrence of certain events as described in the anti-dilution provisions of the Notes. This Prospectus Supplement, together with the attached Prospectus, constitutes Appendix A to a prospectus of Berkshire (the "Berkshire Prospectus") covering the sale of $350,000,000 aggregate principal amount of Notes. The Company will not receive any of the net proceeds from the sale of the Notes or delivery thereunder of the shares of Common Stock covered hereby. Berkshire has granted the Underwriters of the Notes a 30-day option to purchase up to an additional $50,000,000 aggregate principal amount of Notes, which, upon their redemption by Berkshire or at maturity, may be exchangeable, at Berkshire's option, for an additional shares (subject to adjustment as described above) of Common Stock. Such option to purchase additional Notes has been granted solely to cover over-allotments, if any. The Common Stock is traded on the New York Stock Exchange (the "NYSE") under the symbol "SB." On November 21, 1996, the closing sale price of Common Stock was $45 7/8 per share. See "Price Range of Common Stock." THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus Supplement is November , 1996. 45 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NYSE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. PRICE RANGE OF COMMON STOCK The Common Stock of the Company is listed on the NYSE under the symbol "SB." The following table sets forth the high and low sales prices of the Common Stock as reported on the NYSE and the dividends paid per share thereon for the calendar periods listed below:
DIVIDENDS HIGH LOW PER SHARE ---- ---- --------- 1994 First Quarter................................................. $52 3/4 $44 3/4 $ .16 Second Quarter................................................ 52 5/8 47 1/4 .16 Third Quarter................................................. 48 1/4 38 1/2 .16 Fourth Quarter................................................ 42 35 .16 1995 First Quarter................................................. 40 1/8 32 1/4 .16 Second Quarter................................................ 43 1/4 33 1/4 .16 Third Quarter................................................. 41 1/8 34 3/4 .16 Fourth Quarter................................................ 40 5/8 33 7/8 .16 1996 First Quarter................................................. 39 1/4 34 7/8 .16 Second Quarter................................................ 44 1/4 36 1/8 .16 Third Quarter................................................. 46 7/8 38 .16 Fourth Quarter (through November 21, 1996).................... 49 44 1/8 .16
For a recent closing price of the Common Stock, see the cover page of this Prospectus Supplement. As of November 20, 1996, there were 11,569 record holders of the Common Stock, including The Depository Trust Company which holds shares of Common Stock on behalf of an indeterminate number of beneficial owners. OWNERSHIP OF COMPANY SECURITIES BY BERKSHIRE Assuming that Berkshire were to deliver the maximum number of shares of Common Stock deliverable upon exchange of the Notes at the initial exchange rate applicable thereto, Berkshire would beneficially own shares ( shares if the Underwriters' over-allotment option is exercised in full) of Common Stock, representing approximately % ( % if the Underwriters' over-allotment option is exercised in full) of the outstanding voting power of the Company, in each case based on the number of shares of Common Stock and the Company's 9.00% Series A Cumulative Convertible Preferred Stock (the "Convertible Preferred Stock") beneficially owned by Berkshire as of November , 1996, and assuming full conversion of such Convertible Preferred Stock and no disposition of Common Stock by Berkshire other than upon exchange of the Notes. S-2 46 PLAN OF DISTRIBUTION Subject to the terms and conditions set forth in the Underwriting Agreement, Berkshire has agreed to sell to the Underwriters named below, and each of the Underwriters has severally agreed to purchase from Berkshire, the principal amount of the Notes set forth opposite its name below:
PRINCIPAL UNDERWRITERS AMOUNT OF NOTES ------------------------------------------------------------------- ------------- Salomon Brothers Inc............................................... $ Goldman, Sachs & Co................................................ Smith Barney Inc................................................... ---------- Total.................................................... $350,000,000 ==========
In the Underwriting Agreement, the several Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all the Notes if any are purchased. Berkshire has been advised that the Underwriters propose to offer the Notes to the public initially at the offering price set forth on the cover of the Berkshire Prospectus and to certain dealers at such price less a selling concession of not more than % of such principal amount of the Notes; that the Underwriters may allow, and each such dealer may reallow, to other dealers a concession not exceeding % of such principal amount of the Notes; and that such public offering price and concession and reallowance may be changed by the Underwriters after completion of the offering of the Notes. Berkshire has granted to the Underwriters an option, exercisable for 30 days from the date of the Berkshire Prospectus (or, if such 30th day shall not be a business day, on the next business day thereafter), to purchase up to an additional $50,000,000 aggregate principal amount of the Notes at the public offering price set forth on the cover page of the Berkshire Prospectus, less the underwriting discount. The Underwriters may exercise such option solely for the purpose of covering over-allotments, if any, incurred in connection with the sale of the Notes. Each of Berkshire and the Company has agreed that it will not, for a period of 90 days after the date of the Berkshire Prospectus, without the written consent of Salomon Brothers Inc, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any shares of Common Stock, or any securities convertible into or exchangeable for, shares of Common Stock; provided, however, that such restriction shall not affect the ability of Berkshire, the Company or their subsidiaries to take any such actions in connection with the offer and sale of the Notes or any exchange at or prior to maturity pursuant to the terms of Notes; and provided, further, that the Company may sell or register shares of Common Stock or grant options to purchase the same, in either case, pursuant to any employee or director stock option plan, stock ownership plan or dividend reinvestment plan of the Company in effect as of the date of the Berkshire Prospectus. Berkshire and the Company have agreed in the Underwriting Agreement to indemnify the Underwriters and their controlling persons against certain liabilities under the Securities Act of 1933, as amended (the "Securities Act"), or contribute to payments the Underwriters or their controlling persons may be required to make in respect thereof. The Company and Berkshire have also agreed to indemnify each other and their controlling persons with respect to certain liabilities, including liabilities under the Securities Act, or contribute to payments in respect thereof. S-3 47 Berkshire has been advised by the Underwriters (other than Salomon Brothers Inc) that they may make a market in the Notes but they are not obligated to do so and may discontinue such market making at any time without notice. No assurance can be given that an active public market for the Notes will develop. In the ordinary course of their respective businesses, certain of the Underwriters and their respective affiliates have engaged in and may in the future engage in commercial and investment banking transactions with Berkshire, the Company and their affiliates. S-4 48 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION NOVEMBER 22, 1996 PROSPECTUS SALOMON INC COMMON STOCK (PAR VALUE $1.00 PER SHARE) This Prospectus relates to an indeterminate number of shares (the "Shares") of Common Stock, par value $1.00 per share (the "Common Stock"), of Salomon Inc (the "Company"), that may be deliverable by Berkshire Hathaway Inc. ("Berkshire") upon exchange of exchangeable debt securities having an aggregate public offering price of up to $400,000,000 (the "Berkshire Exchangeable Debt Securities") that may be offered by Berkshire. The Common Stock deliverable by Berkshire upon exchange of the Berkshire Exchangeable Debt Securities may include shares of Common Stock currently owned by Berkshire or its affiliates and/or shares of Common Stock hereafter acquired by Berkshire or its affiliates upon conversion of shares of the Company's 9.00% Series A Cumulative Convertible Preferred Stock (the "Convertible Preferred Stock"), through open market purchases, or in privately negotiated transactions. See "Ownership of Company Securities by Berkshire." The Company will not receive any of the net proceeds from the sale of the Berkshire Exchangeable Debt Securities or delivery thereunder of the Shares covered hereby. The specific terms of the Berkshire Exchangeable Debt Securities will be set forth in one or more prospectuses of Berkshire (the "Berkshire Prospectus"), to which this Prospectus, together with a Prospectus Supplement, will constitute Appendix A. This Prospectus may not be used unless accompanied by a Prospectus Supplement. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Berkshire Exchangeable Debt Securities may be sold (i) through underwriting syndicates represented by one or more managing underwriters or through one or more underwriters; (ii) through agents designated from time to time; or (iii) directly to institutional purchasers. Any such managing underwriters or underwriters will include Salomon Brothers Inc. The names of any underwriters or agents involved in the sale of the Berkshire Exchangeable Debt Securities and any applicable commissions or discounts will be set forth in the Berkshire Prospectus. The Common Stock is traded on the New York Stock Exchange under the symbol "SB." The date of this Prospectus is November , 1996. 49 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information concerning the Company can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained upon written request addressed to the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, or through the World Wide Web (http://www.sec.gov). In addition, reports, proxy statements and other information concerning the Company may be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 and at the offices of the American Stock Exchange, 86 Trinity Place, New York, New York 10006. The Company has filed with the Commission a registration statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Company Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), relating to the Shares offered hereby. This Prospectus does not contain all the information set forth in the Company Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Company Registration Statement and to the exhibits thereto. Statements contained herein concerning the provisions of certain documents are not necessarily complete, and in each instance, reference is made to the copy of such document filed as an exhibit to the Company Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, filed by the Company with the Commission pursuant to Section 13 of the Exchange Act (File No. 1-4346), are incorporated herein by reference: (i) the Annual Report on Form 10-K for the year ended December 31, 1995 (the "1995 10-K"); (ii) the Quarterly Reports on Form 10-Q for the periods ended March 31, 1996, June 30, 1996 and September 30, 1996; and (iii) the Current Reports on Form 8-K dated January 23, 1996, February 1, 1996, February 12, 1996, April 23, 1996, April 29, 1996, May 30, 1996, June 5, 1996, June 26, 1996, June 28, 1996, July 23, 1996, September 12, 1996 and October 22, 1996. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Shares shall be deemed to be incorporated by reference in this Prospectus. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. 2 50 THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE, EXCEPT THE EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO THE CORPORATE SECRETARY, SALOMON INC, SEVEN WORLD TRADE CENTER, NEW YORK, NEW YORK 10048. TELEPHONE REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO THE CORPORATE SECRETARY AT (212) 783-7000. ------------------ SALOMON INC Salomon Inc conducts global investment banking, global securities and commodities trading, and U.S. oil refining and gathering activities. Investment banking activities are conducted by Salomon Brothers Holding Company Inc and its subsidiaries, including Salomon Brothers Inc ("Salomon Brothers"). Salomon Brothers provides capital raising, advisory, trading and risk management services to its customers, and executes proprietary trading strategies on its own behalf. Salomon Inc's commodities trading activities are conducted by the Company's wholly owned subsidiary, Phibro Inc., and its subsidiaries. Oil refining and gathering activities are conducted by Basis Petroleum, Inc. At November 8, 1996, the Company employed 8,639 people. The Company's principal executive offices are located at Seven World Trade Center, New York, New York 10048 (telephone (212) 783-7000). Its registered office in Delaware is c/o Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. OWNERSHIP OF COMPANY SECURITIES BY BERKSHIRE As of the date of this Prospectus, Berkshire beneficially owns 21,370,437 shares of Common Stock, representing approximately 18% of the outstanding voting power of the Company. Such beneficial ownership consists of (i) 10,317,806 shares of Common Stock held by subsidiaries of Berkshire and (ii) 420,000 shares of Convertible Preferred Stock held by subsidiaries of Berkshire, which shares are convertible, at the option of the holder, into 11,052,631 shares of Common Stock at the current conversion rate. In October 1987, pursuant to a Purchase Agreement dated September 27, 1987, between the Company and Berkshire (the "Purchase Agreement"), the Company issued to certain affiliates of Berkshire an aggregate of 700,000 shares of Convertible Preferred Stock. In the Purchase Agreement, Berkshire (which for purposes of the Purchase Agreement includes the affiliates of Berkshire) agreed that (i) Berkshire will not sell any Company securities owned by it to a third party without first giving the Company or its designee a reasonable opportunity to purchase such securities at the same price and on the same terms and conditions proposed with respect to an anticipated sale by Berkshire to a third party, and (ii) if the Company does not exercise its right of first refusal and buy Company securities which Berkshire proposes to sell, Berkshire will not knowingly sell to any one entity or group acting in concert Company securities giving such entity or group securities which amount in the aggregate to over 5% of the Company voting stock outstanding at the time of the sale. In the Purchase Agreement, the Company agreed to use its best efforts to nominate and elect Warren E. Buffett and Charles T. Munger, or two other Berkshire representatives reasonably acceptable to the Company, to the Company's Board of Directors, so long as Berkshire owns at least 5% of the Company's outstanding voting securities. On October 31, 1995, pursuant to the terms of the Certificate of Designation of the Convertible Preferred Stock, the Company redeemed 140,000 shares of Convertible Preferred Stock for a redemption price of $140,000,000. On October 29, 1996, Berkshire converted the 140,000 shares of Convertible Preferred Stock that would otherwise have been redeemed by the Company on October 31, 1996, into 3,684,206 shares of Common Stock. If the shares called for redemption are 3 51 not previously converted, one-third of the remaining 420,000 shares of Convertible Preferred Stock are to be redeemed annually on each October 31 of 1997 through 1999 at $1,000 per share plus any accrued but unpaid dividends. No cash dividends may be paid on the Common Stock, nor may the Company repurchase any of its Common Stock, if dividends or required redemptions of the Convertible Preferred Stock are in arrears. Berkshire has advised the Company that it is considering engaging in a transaction at some future date that may over time result in a reduction in Berkshire's shareholding in the Company. In this connection, Berkshire has advised the Company that it is considering whether to sell Berkshire Exchangeable Debt Securities, and has asked the Company, pursuant to the Company's obligations under the Purchase Agreement, to file the Company Registration Statement registering the Shares covered hereby. Pursuant to the Purchase Agreement, the Company will pay certain expenses arising in connection with such registration. In addition, the Company will waive its right of first refusal under the Purchase Agreement with respect to the delivery of Shares in exchange for any Berkshire Exchangeable Debt Securities. Berkshire has also advised the Company that, depending upon its evaluation of market conditions and investment alternatives, Berkshire may effect other types of transactions that could result in a disposition of a portion of its shares of Common Stock, or may determine not to effect any such transaction. Berkshire expects to remain a large shareholder of the Company even if, over time, it disposes of a portion of its shares of Common Stock. In that connection, Berkshire has advised the Company that Mr. Buffett, Berkshire's Chairman and Chief Executive Officer, and Mr. Munger, its Vice Chairman, expect to remain on the Company's Board of Directors, with Mr. Buffett continuing to serve as Chairman of the Executive Committee. In addition, Louis A. Simpson, President and Chief Executive Officer--Capital Operations of GEICO Corporation, a wholly owned subsidiary of Berkshire, would expect to remain a director of the Company and to continue serving as Chairman of the Audit Committee. Each Prospectus Supplement will set forth the number of shares of Common Stock that would be beneficially owned by Berkshire assuming that Berkshire were to deliver the maximum number of Shares deliverable upon exchange of the Berkshire Exchangeable Debt Securities offered thereby at the exchange rate applicable thereto, as well as any change in the ownership of Company securities by Berkshire since the date of this Prospectus. DESCRIPTION OF CAPITAL STOCK The following description of the capital stock of the Company is subject to the detailed provisions of the Company's Certificate of Incorporation and bylaws as currently in effect (the "Bylaws"). This description does not purport to be complete or to give full effect to the terms of the provisions of statutory or common law and is subject to, and qualified in its entirety by reference to, the Certificate of Incorporation and the Bylaws, each of which has been incorporated by reference as an exhibit to the Company Registration Statement of which this Prospectus is a part. COMMON STOCK As of the date of this Prospectus, the Company's Certificate of Incorporation authorizes the issuance of 250,000,000 shares of Common Stock. As of November 20, 1996, 109,039,278 shares of Common Stock were outstanding. Subject to the rights of the holders of any outstanding shares of preferred stock, holders of Common Stock are entitled to receive such dividends, in cash, securities, or property, as may from time to time be declared by the Board of Directors. Subject to the provisions of the Bylaws with respect to the closing of the transfer books and the fixing of a record date, holders of shares of Common Stock are entitled to one vote per share of Common Stock held on all matters requiring a vote of the holders of Common Stock. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, after payment shall have been made to the holders of preferred stock of the full amount to which they shall be entitled, the holders of Common Stock shall 4 52 be entitled to share ratably, according to the number of shares held by them, in all remaining assets of the Company available for distribution. Shares of Common Stock are not redeemable and have no subscription, conversion or preemptive rights. The outstanding shares of Common Stock are listed on the New York Stock Exchange and trade under the symbol "SB." The transfer agent and registrar for the Common Stock is First Chicago Trust Company of New York. PREFERRED STOCK The Company is authorized by its Certificate of Incorporation to issue 5,000,000 shares of preferred stock, without par value, which may be issued from time to time in one or more series and, subject to the provisions of the Certificate of Incorporation applicable to all series of preferred stock, shall have such designations, voting powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated in the resolution or resolutions providing for the issue thereof adopted by the Company's Board of Directors or a duly authorized committee thereof. As of the date of this Prospectus, the Company has outstanding (i) 400,000 shares of 8.08% Cumulative Preferred Stock, Series D, (ii) 500,000 shares of 8.40% Cumulative Preferred Stock, Series E, and (iii) 420,000 shares of Convertible Preferred Stock. See "Ownership of Company Securities by Berkshire." Each outstanding series of preferred stock ranks on parity as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up. There are also currently authorized and reserved for issuance 690,000 shares of 9.50% Cumulative Preferred Stock, Series F (the "Series F Preferred Stock"), which shares are issuable pursuant to purchase contracts of the Company, each of which requires the purchase on June 30, 2021 (or earlier if accelerated by the Company) of a depositary share representing one-twentieth of a share of Series F Preferred Stock. These purchase contracts were issued in connection with the offering by SI Financing Trust I of 13,800,000 9 1/2% Trust Preferred Stock(SM) (TRUPS(SM)) Units, each consisting of a 9 1/4% Preferred Security fully and unconditionally guaranteed by the Company and one purchase contract. There are currently reserved for issuance up to 2,500,000 shares of Series B Junior Participating Preferred Stock of the Company, which shares are issuable upon the exercise of certain preferred share purchase rights (collectively, the "Rights"). The Rights will become exercisable only if a person or group (other than Berkshire and its affiliates) acquires or (unless exercisability is delayed by the Company's Board of Directors) announces an offer to acquire 20% or more (which percentage may be reduced to not less than 10% by the Company's Board of Directors prior to the time the Rights become exercisable) of the outstanding shares of Common Stock. Shares of Series B Junior Participating Preferred Stock issued upon the exercise of the Rights will rank junior to all shares of any other class of the Company's preferred stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up. PLAN OF DISTRIBUTION The Shares covered hereby will be deliverable only upon exchange of the Berkshire Exchangeable Debt Securities, and may include shares of Common Stock currently owned by Berkshire or its affiliates and/or shares of Common Stock hereafter acquired by Berkshire or its affiliates upon conversion of shares of Convertible Preferred Stock, through open market purchases, or in privately negotiated transactions. See "Ownership of Company Securities by Berkshire." Berkshire may sell the Berkshire Exchangeable Debt Securities in any of three ways: (i) through underwriting syndicates represented by one or more managing underwriters or through one or more underwriters; (ii) through agents designated from time to time; or (iii) directly to institutional purchasers. Any such managing underwriters or underwriters will include Salomon 5 53 Brothers. The Berkshire Prospectus will set forth the terms of the offering of the Berkshire Exchangeable Debt Securities, including the name or names of any underwriters or agents, the purchase price of such Berkshire Exchangeable Debt Securities and the proceeds to Berkshire from such sale, any underwriting discounts and other items constituting underwriters' compensation, any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers, and any securities exchanges on which such Berkshire Exchangeable Debt Securities may be listed. If accompanied by a Prospectus Supplement indicating that it may be used for such purpose, this Prospectus also may be used by Berkshire in connection with any exchange of Berkshire Exchangeable Debt Securities for Common Stock at the option of the holder. Salomon Brothers is a wholly owned subsidiary of the Company. Berkshire beneficially owns Common Stock and Convertible Preferred Stock representing approximately 18% of the outstanding voting power of the Company. Mr. Buffett, Mr. Munger, and Mr. Simpson are directors of the Company. Because of such ownership and other relationships between Salomon Brothers and Berkshire, Berkshire may be deemed to be an affiliate of Salomon Brothers. Accordingly, any offering of the Shares covered hereby will be made pursuant to the provisions of Rule 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc. EXPERTS The financial statements and related schedules included in the 1995 10-K have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are incorporated by reference in this Prospectus in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. LEGAL OPINIONS Certain legal matters will be passed upon for the Company by Cravath, Swaine & Moore, New York, New York, and for any agents or underwriters of the Berkshire Exchangeable Debt Securities by Cleary, Gottlieb, Steen & Hamilton, New York, New York. Cravath, Swaine & Moore has previously represented, and may continue to represent, GEICO Corporation, a wholly owned subsidiary of Berkshire, in connection with its significant legal matters. 6 54 NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION, OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ARE NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ------------------------ TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUPPLEMENT Price Range of Common Stock........... S-2 Ownership of Company Securities by Berkshire........................... S-2 Plan of Distribution.................. S-3 PROSPECTUS Available Information................. 2 Incorporation of Certain Documents by Reference........................... 2 Salomon Inc........................... 3 Ownership of Company Securities by Berkshire........................... 3 Description of Capital Stock.......... 4 Plan of Distribution.................. 5 Experts............................... 6 Legal Opinions........................ 6
SHARES SALOMON INC COMMON STOCK (PAR VALUE $1.00 PER SHARE) PROSPECTUS SUPPLEMENT DATED NOVEMBER , 1996 55 NO DEALER, SALESPERSON OR ANY INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION, OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BERKSHIRE OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF BERKSHIRE SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ARE NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ------------------------ TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUPPLEMENT Prospectus Summary.................... S-3 Risk Factors Relating to the Notes.... S-6 Salomon Inc........................... S-8 Relationship Between Berkshire and Salomon............................. S-8 Price Range of Salomon Common Stock and Dividend Policy................. S-10 Use of Proceeds....................... S-10 Selected Consolidated Financial Data of Berkshire........................ S-11 Capitalization of Berkshire........... S-13 Description of the Notes.............. S-14 Certain United States Federal Income Tax Considerations.................. S-25 Plan of Distribution.................. S-28 Validity of the Notes................. S-29 PROSPECTUS Available Information................. 2 Incorporation of Certain Documents by Reference........................... 2 Berkshire Hathaway Inc................ 3 Use of Proceeds....................... 6 Description of Debt Securities........ 6 Plan of Distribution.................. 10 ERISA Matters......................... 11 Experts............................... 11 Legal Opinions........................ 12 APPENDIX A Prospectus Relating to Salomon Common Stock
$350,000,000 BERKSHIRE HATHAWAY INC. % SENIOR EXCHANGEABLE NOTES DUE , 2001 SALOMON BROTHERS INC GOLDMAN, SACHS & CO. SMITH BARNEY INC. PROSPECTUS SUPPLEMENT DATED NOVEMBER , 1996 56 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses of this offering are estimated as follows:* SEC registration fee........................................... $ 80,000 NASD fee....................................................... 15,500 Blue sky fees and expenses..................................... 1,000 Printing and engraving expenses................................ 16,000 Legal fees and expenses........................................ 150,000 Accounting fees and expenses................................... 20,000 Trustee fees and expenses...................................... 8,000 Miscellaneous.................................................. 5,000 -------- Total................................................ $295,500 ========
- --------------- * All amounts other than the SEC registration fee and the NASD fee are estimated. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the General Corporation Law of Delaware empowers Berkshire to indemnify, subject to the standards therein prescribed, any person in connection with any action, suit or proceeding brought or threatened by reason of the fact that such person is or was a director, officer, employee or agent of Berkshire or is or was serving as such with respect to another corporation or other entity at the request of Berkshire. Section 10 of Berkshire's By-Laws provides that Berkshire shall, to the fullest extent permitted by Section 145 of the General Corporation Law of Delaware, indemnify directors and officers of Berkshire from and against any and all of the expenses, liabilities or other matters referred to in or covered by said Section. Additionally, as permitted by said Section and Berkshire's By-Laws, Berkshire has entered into Indemnification Agreements with each of its Directors and Officers. The description of these Indemnification Agreements under the caption "Summary of the Indemnification Agreements" on page 9 of Berkshire's definitive proxy statement for its May 19, 1987 Annual Meeting of Stockholders, Commission File No. 0-7413, is incorporated herein by reference. As permitted by Section 102 of the General Corporation Law of Delaware, Berkshire's Restated Certificate of Incorporation includes as Article Tenth thereof a provision eliminating, to the extent permitted by Delaware law, the personal liability of each director of Berkshire to Berkshire or any of its shareholders for monetary damages resulting from breaches of such director's fiduciary duty of care. ITEM 16. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------ ---------------------------------------------------------------------------- 1 Form of Underwriting Agreement 4.1 Indenture dated as of December 1, 1987 between Berkshire Hathaway Inc. and State Street Bank and Trust Company (as successor trustee to The First National Bank of Boston), Trustee* 4.2 Form of First Supplemental Indenture to be entered into by Berkshire Hathaway Inc. and State Street Bank and Trust Company, Trustee 5 Opinion of Counsel* 8 Opinion re Tax Matters 12 Statement re Computation of Ratios 23.1 Consent of Deloitte & Touche LLP 23.2 Consent of Coopers & Lybrand L.L.P.
II-1 57
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------ ---------------------------------------------------------------------------- 23.3 Consent of Munger, Tolles & Olson (included in Exhibits 5 and 8) 24 Power of attorney* 26 Statement of Eligibility of Trustee for the Debt Securities*
- --------------- * Previously filed. ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by Berkshire pursuant to Rule 424(b)(1) or (4) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus and each filing of Berkshire's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference into 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; (3) 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 previously disclosed in the registration statement or any material change to such information in the registration statement; and (4) 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. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Berkshire pursuant to the provisions described under Item 15 above, or otherwise, Berkshire has been advised that in the opinion of the Commission 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 Berkshire of expenses incurred or paid by a director, officer or controlling person of Berkshire 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, Berkshire will, unless in the opinion of its 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. II-2 58 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Berkshire certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-3 and has duly caused this Post-Effective Amendment No. 2 to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Omaha, State of Nebraska, on November 21, 1996. BERKSHIRE HATHAWAY INC. By /s/ MARC D. HAMBURG -------------------------------- Marc D. Hamburg Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 2 to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------- -------------------------- ------------------ /s/ WARREN E. BUFFETT Chairman of the Board and November 21, 1996 - --------------------------------------------- Director (principal Warren E. Buffett executive officer) /s/ MARC D. HAMBURG Vice President and Chief November 21, 1996 - --------------------------------------------- Financial Officer Marc D. Hamburg (principal financial officer) /s/ DANIEL J. JAKSICH Controller (principal November 21, 1996 - --------------------------------------------- accounting officer) Daniel J. Jaksich Vice-Chairman of the Board November 21, 1996 - --------------------------------------------- and Director Charles T. Munger * Director November 21, 1996 - --------------------------------------------- Susan T. Buffett * Director November 21, 1996 - --------------------------------------------- Malcolm G. Chace, III
II-3 59
SIGNATURE TITLE DATE - --------------------------------------------- -------------------------- ------------------ * Director November 21, 1996 - --------------------------------------------- Walter Scott, Jr. * Director November 21, 1996 - --------------------------------------------- Howard G. Buffett *By /s/ WARREN E. BUFFETT - --------------------------------------------- Warren E. Buffett Attorney-in-Fact
II-4 60 DESCRIPTION OF DOCUMENT
EXHIBIT NUMBER - --------------------- 1 -- Form of Underwriting Agreement 4.1 -- Indenture dated as of December 1, 1987 between Berkshire Hathaway Inc. and State Street Bank and Trust Company (as successor trustee to The First National Bank of Boston), Trustee* 4.2 -- Form of First Supplemental Indenture to be entered into by Berkshire Hathaway Inc. and State Street Bank and Trust Company, Trustee 5 -- Opinion of Counsel* 8 -- Opinion re Tax Matters 12 -- Statement re Computation of Ratios 23.1 -- Consent of Deloitte & Touche LLP 23.2 -- Consent of Coopers & Lybrand L.L.P. 23.3 -- Consent of Munger, Tolles & Olson (included in Exhibits 5 and 8) 24 -- Power of attorney* 26 -- Statement of Eligibility of Trustee for the Debt Securities*
- --------------- * Previously filed. EX-1 2 UNDERWRITING AGREEMENT 1 Exhibit 1 Draft 11/13/96 BERKSHIRE HATHAWAY INC. $[350,000,000] _____ % Senior Exchangeable Notes Due _______, 2001* (Subject to Exchange into Shares of Common Stock, par value $1.00 per share, of Salomon Inc) Underwriting Agreement New York, New York November 21, 1996 Salomon Brothers Inc Goldman, Sachs & Co. Smith Barney Inc. as Representatives of the several Underwriters c/o Salomon Brothers Inc Seven World Trade Center New York, New York 10048 Ladies and Gentlemen: Berkshire Hathaway Inc., a Delaware corporation ("Berkshire"), proposes to sell to the underwriters named in Schedule I hereto (the "Underwriters"), for whom you (the "Representatives") are acting as representatives, $[350,000,000] principal face amount of its ______% Senior Exchangeable Notes Due ________, 2001 (the "Underwritten Securities"), to be issued under an indenture (the "Indenture") dated as of December 1, 1987 between Berkshire and State Street Bank and Trust Company, as successor trustee to the First National Bank of Boston (the "Trustee"), as amended to the date hereof by the First Supplemental Indenture - --------------- * Plus an option to purchase from Berkshire Hathaway Inc. up to $[50,000,000] principal face amount of additional _____% Senior Exchangeable Notes Due ________, 2001 to cover over-allotments. 2 thereto dated as of November __, 1996. In addition, the Underwriters will have an option to purchase up to $[50,000,000] principal face amount of such securities (the "Option Securities" and, together with the Underwritten Securities, the "Securities"). The Securities may be exchanged by Berkshire under certain circumstances at maturity (including as a result of acceleration or otherwise) or prior to maturity into shares of Common Stock, par value $1.00 per share (the "Salomon Common Stock"), of Salomon Inc, a Delaware corporation ("Salomon") (or, at Berkshire's option under the circumstances described in the Final Berkshire Prospectus, cash with an equal value), at the rate specified in the Final Berkshire Prospectus. The Securities may also, at the option of the holders and subject to certain conditions, be exchanged into Salomon Common Stock at such rate during certain periods. In connection with the foregoing and pursuant to the Purchase Agreement dated September 27, 1987 between Berkshire and Salomon, as amended (the "Purchase Agreement") Salomon has filed with the Commission a registration statement with respect to ___________ shares (the "Underwritten Shares") of Salomon Common Stock, in respect of the Underwritten Securities, plus an additional ________ shares (the "Option Shares" and, together with the Underwritten Shares, the "Shares") of Salomon Common Stock in respect of the Option Securities, for sale by Berkshire as a selling stockholder (to the extent Berkshire shall so elect to deliver to holders of the Securities, or holders of the Securities shall so elect to receive during specified periods, Salomon Common Stock pursuant to the terms of the Securities), which registration statement is referred to in Section 2 of this Agreement, and Salomon , by action of its Board of Directors, has waived its right of first refusal under Section 10(b)(iii) of the Purchase Agreement with respect to such a sale of the Shares by Berkshire. Certain terms used in this Agreement are defined in paragraph (c) of Section 1 and paragraph (c) of Section 2. 1. Representations and Warranties of Berkshire. Berkshire represents and warrants to, and agrees with, each Underwriter as set forth below in this Section 1. (a) Berkshire meets the requirements for use of Form S-3 under the Securities Act of 1933, as amended (the "Act"), and has filed with the Securities and Exchange Commission (the "Commission") a registration statement (file number 33-30570) on Form S-3, including a basic prospectus, for the registration under the Act of the offering and sale of the Securities. Berkshire may have filed one or more amendments thereto, and may have used a Preliminary Final Berkshire Prospectus, each of which has previously been furnished to you. Such registration statement, as so amended, has become effective. Although the Basic Berkshire Prospectus may not include all the information with respect to the Securities and the offering thereof required by the Act and the rules thereunder to be included in the Final Berkshire Prospectus, the Basic Berkshire Prospectus includes all such information required by the Act and the rules thereunder. Berkshire will next file with the Commission pursuant to Rules 415 and 424(b)(2) or (5) a final supplement to the form of prospectus included in such registration statement relating to the Securities and the offering thereof. As filed, such final prospectus supplement shall include all required information with respect to the Securities and the offering thereof and, except to the extent the Representatives shall agree in writing to a modification, 2 3 shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the Basic Berkshire Prospectus and any Preliminary Final Berkshire Prospectus) as Berkshire has advised you, prior to the Execution Time, will be included or made therein. (b) On the Berkshire Effective Date, the Berkshire Registration Statement did or will, and when the Final Berkshire Prospectus is first filed in accordance with Rule 424(b) and on the Closing Date, the Final Berkshire Prospectus (and any supplements thereto) will, comply in all material respects with the applicable requirements of the Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the respective rules thereunder; on the Berkshire Effective Date, the Berkshire Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; on the Berkshire Effective Date and on the Closing Date the Indenture did or will comply in all material respects with the applicable requirements of the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and the rules thereunder; and, on the date of any filing pursuant to Rule 424(b) and on the Closing Date, the Final Prospectuses (together with any supplements thereto) will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that Berkshire makes no representations or warranties as to (i) that part of the Berkshire Registration Statement which shall constitute the Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of the Trustee, (ii) the information contained in or omitted from the Berkshire Registration Statement or any Final Prospectuses (or any supplements thereto) in reliance upon and in conformity with information furnished in writing to Berkshire or Salomon by or on behalf of any Underwriter through the Representatives specifically for use in connection with the Berkshire Registration Statement or any Final Prospectuses (or any supplements thereto) or (iii) (A) the information contained in or omitted from the Final Berkshire Prospectus under the headings "Salomon Inc" and "Price Range of Salomon Common Stock and Dividend Policy" (other than the last paragraph thereof) or (B) the information contained in or omitted from the Salomon Prospectus, except that under the heading "Ownership of Company Securities by Berkshire". (c) The terms which follow, when used in this Agreement, shall have the meanings indicated. The term "Berkshire Effective Date" shall mean each date that the Berkshire Registration Statement and any post-effective amendment or amendments thereto became or become effective. "Execution Time" shall mean the date and time that this Agreement is executed and delivered by the parties hereto. "Basic Berkshire Prospectus" shall mean the prospectus referred to in paragraph (a) of this Section 1 contained in the Berkshire Registration Statement at the Berkshire Effective Date. "Preliminary Final Berkshire Prospectus" shall mean any preliminary prospectus supplement to the Basic Berkshire Prospectus which describes the Securities and the offering thereof and is used prior to filing the Final Berkshire Prospectus. "Final Berkshire Prospectus" shall mean the prospectus supplement relating to the Securities that is first filed pursuant to Rule 424(b) after the Execution Time together with the Basic Berkshire Prospectus. The Final Berkshire Prospectus and the Salomon 3 4 Prospectus (as defined in Section 2(c)) are referred to herein collectively as the "Final Prospectuses". "Berkshire Registration Statement" shall mean the registration statement referred to in paragraph (a) of this Section 1, including incorporated documents, exhibits and financial statements, as amended at the Execution Time and, in the event any post-effective amendment thereto becomes effective prior to the Closing Date shall also mean such registration statement as so amended. "Rule 415," "Rule 424" and "Regulation S-K" refer to such rules or regulation under the Act. Any reference herein to the Berkshire Registration Statement, the Basic Berkshire Prospectus, any Preliminary Final Berkshire Prospectus or the Final Berkshire Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Exchange Act on or before the Berkshire Effective Date or the issue date of the Basic Berkshire Prospectus, any Preliminary Final Berkshire Prospectus or the Final Berkshire Prospectus, as the case may be; and any reference herein to the terms "amend," "amendment" or "supplement" with respect to the Berkshire Registration Statement, the Basic Berkshire Prospectus, any Preliminary Final Berkshire Prospectus or the Final Berkshire Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Berkshire Effective Date, or the issue date of the Basic Berkshire Prospectus, any Preliminary Final Berkshire Prospectus or the Final Berkshire Prospectus, as the case may be, deemed to be incorporated therein by reference. (d) Immediately prior to any delivery of Shares pursuant to the Securities, Berkshire or one of its subsidiaries will be the lawful owner of such Shares and will convey good and marketable title to such Shares upon such delivery, free and clear of all liens, encumbrances, equities and claims whatsoever. (e) Berkshire has no reason to believe that the representations and warranties of Salomon contained in Section 2 hereof are not true and correct, is familiar with the Salomon Registration Statement and has no knowledge of any material fact, condition or information not disclosed in the Salomon Prospectus or any supplement thereto which has adversely affected or may adversely affect the business of Salomon or any of its subsidiaries. (f) Berkshire has not taken and will not take, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of Salomon to facilitate the sale or resale of the Securities or the Shares, and has not effected any sales of Salomon Common Stock which, if effected by the issuer, would be required to be disclosed in response to Item 701 of Regulation S-K. 2. Representations and Warranties of Salomon. Salomon represents and warrants to, and agrees with, each Underwriter and, with respect to Section 2(f) only, Berkshire as set forth below in this Section 2. (a) Salomon meets the requirements for use of Form S-3 under the Act and has filed with the Commission a registration statement (file number 333-11881) on such Form, including a related preliminary prospectus, for the registration under the Act of the offering and sale of the Shares in connection with the offering and sale of the Securities. Salomon may have 4 5 filed one or more amendments thereto, including the related preliminary prospectus, and may have used a preliminary prospectus supplement, each of which has previously been furnished to you. Salomon will next file with the Commission one of the following: (i) prior to effectiveness of such registration statement, a further amendment to such registration statement, including the form of final prospectus, (ii) a final prospectus in accordance with Rules 430A and 424(b)(1) or (4), or (iii) a final prospectus in accordance with Rules 415 and 424(b)(2) or (5). In the case of clause (ii), Salomon has included in such registration statement, as amended at the Salomon Effective Date, all information (other than Rule 430A Information) required by the Act and the rules thereunder to be included in the Salomon Prospectus with respect to the Shares and the offering thereof. As filed, such amendment and form of final prospectus, or such final prospectus, shall contain all Rule 430A Information, together with all other such required information, with respect to the Shares and the offering thereof and, except to the extent the Representatives shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the latest Preliminary Salomon Prospectus) as Salomon has advised you, prior to the Execution Time, will be included or made therein. (b) On the Salomon Effective Date, the Salomon Registration Statement did or will, and when the Salomon Prospectus is first filed (if required) in accordance with Rule 424(b) and on the Closing Date, the Salomon Prospectus (and any supplement thereto) will, comply in all material respects with the applicable requirements of the Act, the Exchange Act and the respective rules thereunder; on the Salomon Effective Date, the Salomon Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; on the Salomon Effective Date the Salomon Prospectus, if not filed pursuant to Rule 424(b), did not or will not, and on the date of any filing pursuant to Rule 424(b) and on the Closing Date, the Final Prospectuses (together with any supplements thereto) will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that Salomon makes no representation or warranty as to (i) the information contained in or omitted from the Salomon Registration Statement or any Final Prospectuses (or any supplements thereto) in reliance upon and in conformity with information furnished in writing to Salomon or Berkshire by or on behalf of any Underwriter through the Representatives or (ii) (A) the information contained in or omitted from the Salomon Prospectus under the heading "Ownership of Company Securities by Berkshire" in the prospectus supplement and in the first, fourth and fifth paragraphs under the heading "Ownership of Company Securities by Berkshire" in the base prospectus or (B) the information contained in or omitted from the Berkshire Prospectus, except that under the headings "Salomon Inc" and "Price Range of Salomon Common Stock and Dividend Policy" (other than the last paragraph thereto). (c) The terms which follow, when used in this Agreement, shall have the meanings indicated. The term "Salomon Effective Date" shall mean each date that the Salomon Registration Statement and any post-effective amendment or amendments thereto became or become effective. "Preliminary Salomon Prospectus" shall mean any preliminary prospectus and 5 6 any preliminary prospectus supplement referred to in paragraph (a) of this Section 2 and any preliminary prospectus and any preliminary prospectus supplement included in the Salomon Registration Statement at the Salomon Effective Date that omits Rule 430A Information. "Salomon Prospectus" shall mean the prospectus relating to the Shares that is used in connection with the offering and sale of the Securities, that is attached as Appendix A to the Final Berkshire Prospectus and that is first filed pursuant to Rule 424(b) after the Execution Time or, if no filing pursuant to Rule 424(b) is required, shall mean the form of final prospectus relating to the Shares included in the Salomon Registration Statement at the Salomon Effective Date. "Salomon Registration Statement" shall mean the registration statement referred to in paragraph (a) of this Section 2 including incorporated documents, exhibits and financial statements, as amended at the Execution Time (or, if not effective at the Execution Time, in the form in which it shall become effective) and, in the event any post-effective amendment thereto becomes effective prior to the Closing Date, shall also mean such registration statement as so amended. Such term shall include any Rule 430A Information deemed to be included therein at the Salomon Effective Date as provided by Rule 430A. "Rule 430A" refers to such rule under the Act. "Rule 430A Information" means information with respect to the Securities (or the Shares) and the offering thereof permitted to be omitted from the Berkshire Registration Statement (or the Salomon Registration Statement) when it becomes effective pursuant to Rule 430A. Any reference herein to the Salomon Registration Statement, Preliminary Salomon Prospectus or the Salomon Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Exchange Act on or before the Salomon Effective Date or the issue date of a Preliminary Salomon Prospectus or the Salomon Prospectus, as the case may be; and any reference herein to the terms "amend," "amendment" or "supplement" with respect to the Salomon Registration Statement, any Preliminary Salomon Prospectus or the Salomon Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Salomon Effective Date, or the issue date of any Preliminary Salomon Prospectus or the Salomon Prospectus, as the case may be, deemed to be incorporated therein by reference. (d) Except as disclosed in the Salomon Prospectus, there is no pending or, to the best knowledge of Salomon, threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator to which Salomon or any of its subsidiaries is a party or of which any property of Salomon or any of its subsidiaries is the subject that would reasonably be expected, individually or in the aggregate, to have a material adverse effect on the business or financial position of Salomon and its subsidiaries taken as a whole. (e) Salomon and its subsidiaries are (i) in compliance with any and all applicable federal, state and local and foreign laws and regulations applicable to any of them, (ii) have accomplished all registrations and received all permits, licenses or other approvals required of them under applicable laws and regulations to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such registration, permit, license or approval, except as described in the Salomon Prospectus or where such noncompliance, failure to accomplish required registrations or receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such registrations, permits, licenses or 6 7 approvals would not, singly or in the aggregate, have a material adverse effect on the business or financial position of Salomon and its subsidiaries taken as a whole. (f) Pursuant to the Purchase Agreement, at any time when Berkshire is an affiliate of Salomon within the meaning of the Act and registration of the Shares deliverable upon exchange of the Securities at the option of the holders of Securities is required under the Act, Salomon shall use its reasonable efforts to cause a registration statement to be effective under the Act during each Exchange Period (as defined in the Final Berkshire Prospectus) in order to permit a prospectus to be usable by Berkshire in connection with any exchange of Securities, pursuant to the terms thereof, at the option of the holders thereof. It is understood and agreed that Salomon may delay the effectiveness of any registration statement or the delivery of any Salomon prospectus if Salomon determines in good faith and for valid business reasons that delivery of a Salomon prospectus would not be in the best interest of Salomon or is prohibited by applicable law. Salomon shall notify Berkshire of any delay pursuant to the immediately preceding sentence and Berkshire shall not use any Salomon prospectus previously furnished to it during the period of such delay. 3. Purchase and Sale. (a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, Berkshire agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from Berkshire, at purchase price of ___% of the principal face amount thereof, plus amortization of original issue discount, if any, on the Securities from November __, 1996 to the Closing Date, the principal face amount of the Securities set forth opposite such Underwriter's name in Schedule I hereto. (b) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, Berkshire hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to $_______ principal face amount of the Option Securities at the same purchase price as the Underwriters shall pay for the Underwritten Securities. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Securities by the Underwriters. Said option may be exercised in whole or in part at any time (but not more than once) on or before the 30th day after the date of the Final Berkshire Prospectus upon written or telegraphic notice by the Representatives to Berkshire setting forth the number of the Option Securities as to which the several Underwriters are exercising the option and the settlement date. Delivery of certificates for the Option Securities, and payment therefor, shall be made as provided in Section 4 hereof. The principal amount of Option Securities to be purchased by each Underwriter shall be the same percentage of the total principal face amount of Option Securities to be purchased by the several Underwriters as such Underwriter is purchasing of the Underwritten Securities, subject to such adjustments as you in your absolute discretion shall make to round the denominations of the Securities to integral multiples of $1,000. 4. Delivery and Payment. Delivery of and payment for the Underwritten Securities and the Option Securities (if the option provided for in Section 3(b) hereof shall have been exercised on or before the first business day prior to the Closing Date) shall be made at 7 8 10:00 AM, New York City time, on November __, 1996, (or such later date not later than five business days after such specified date as the Representatives shall designate) which date and time may be postponed by agreement between the Representatives and Berkshire or as provided in Section 11 hereof (such date and time of delivery and payment for the Securities being herein called the "Closing Date"). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of Berkshire either by certified or official bank check or checks drawn on or by a New York Clearing House bank or by wire transfer to an account designated in writing by Berkshire at least two business days in advance of the Closing Date, and in either case payable in same-day funds. Delivery of the Securities shall be made through the facilities of The Depository Trust Company. Berkshire agrees to have the Securities available for inspection and checking by the Representatives in New York, New York, not later than 1:00 PM on the business day prior to the Closing Date. If the option provided for in Section 3(b) hereof is exercised after the first business day prior to the Closing Date, Berkshire will deliver (at the expense of Berkshire) to the Representatives at Seven World Trade Center, New York, New York, on the date specified by the Representatives (which shall be within three business days after exercise of said option), certificates for the Option Securities in such names and denominations as the Representatives shall have requested against payment of the purchase price thereof to or upon the order of Berkshire either by certified or official bank check or checks drawn on or by a New York Clearing House bank or by wire transfer to an account designated in writing by Berkshire at least two business days in advance of the Closing Date, and in either case payable in same-day funds. If settlement for the Option Securities occurs after the Closing Date, Berkshire and Salomon will deliver to the Representatives on the settlement date for the Option Securities, and the obligation of the Underwriters to purchase the Option Securities shall be conditioned upon receipt of, supplemental opinions and certificates confirming as of such date certain of the opinions and certificates, as requested by the Underwriters, delivered on the Closing Date pursuant to Section 7 hereof. 5. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Securities for sale to the public as set forth in the Final Berkshire Prospectus. 6. Agreements of Berkshire. Berkshire agrees with the several Underwriters that: (a) Berkshire will use its best efforts to cause the Berkshire Registration Statement, if not effective at the Execution Time, and any amendment thereto to become effective. Prior to the termination of the offering of the Securities, Berkshire will not file any amendment of the Berkshire Registration Statement or supplement (including the Final Berkshire Prospectus or any Preliminary Final Berkshire Prospectus) to the Basic Berkshire Prospectus unless Berkshire has furnished you a copy for your review prior to filing and will not file any such proposed amendment or supplement to which you reasonably object. Subject to the foregoing sentence, Berkshire will cause the Final Berkshire Prospectus, properly completed, and 8 9 any supplement thereto to be filed with the Commission, if required, pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representatives of such timely filing. Berkshire will promptly advise the Representatives (i) when the Berkshire Registration Statement, if not effective at the Execution Time, and any amendment thereto, shall have become effective, (ii) when the Final Berkshire Prospectus, and any supplement thereto, shall have been filed with the Commission pursuant to Rule 424(b), (iii) when, prior to termination of the offering of the Securities, any amendment to the Berkshire Registration Statement shall have been filed or become effective, (iv) of any request by the Commission for any amendment of the Berkshire Registration Statement or supplement to the Final Berkshire Prospectus or for any additional information, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Berkshire Registration Statement or the institution or threatening of any proceeding for that purpose and (vi) of the receipt by Berkshire of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. Berkshire will use its best efforts to prevent the issuance of any such stop order and, if issued, to obtain as soon as possible the withdrawal thereof. (b) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act, any event occurs as a result of which the Final Berkshire Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary to amend the Berkshire Registration Statement or supplement the Final Berkshire Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, Berkshire promptly will prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 6, an amendment or supplement which will correct such statement or omission or effect such compliance. (c) As soon as practicable, Berkshire will make generally available to its security holders and to the Representatives an earnings statement or statements of Berkshire and its subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. (d) Berkshire will furnish to the Representatives and counsel for the Underwriters, without charge, copies of the Berkshire Registration Statement (including exhibits thereto), and to each other Underwriter a copy of the Berkshire Registration Statement (without exhibits thereto) and so long as delivery of a prospectus by an Underwriter or any dealer may be required by the Act, as many copies of each Preliminary Final Berkshire Prospectus and the Final Berkshire Prospectus and any supplement thereto as the Representatives may reasonably request. (e) Berkshire will arrange for the qualification of the Securities and the Shares for sale under the laws of such jurisdictions as the Representatives may designate and will maintain such qualifications in effect so long as required for the distribution of the Securities and the Shares; provided, however, that in connection therewith, Berkshire shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any 9 10 jurisdiction. Berkshire will pay the fee of the National Association of Securities Dealers, Inc. in connection with any review of the offering by it. (f) Until the 90th business day following the Execution Time, Berkshire will not, without the prior written consent of Salomon Brothers Inc, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any shares of Salomon Common Stock, or any securities convertible into or exchangeable for, shares of Salomon Common Stock; provided, however, that the foregoing shall not restrict the ability of Berkshire or its subsidiaries to take any such actions in connection with the offer and sale of shares of Salomon Common Stock in connection with the offering of the Securities or any exchange or redemption of the Securities in accordance with their terms. 7. Agreements of Salomon. Salomon agrees with the several Underwriters that: (a) Salomon will use its best efforts to cause the Salomon Registration Statement, if not effective at the Execution Time, and any amendment thereof, to become effective. Prior to the termination of the offering of the Securities, Salomon will not file any amendment of the Salomon Registration Statement or supplement to the Salomon Prospectus unless Salomon has furnished you a copy for your review prior to filing and will not file any such proposed amendment or supplement to which you reasonably object. Subject to the foregoing sentence, if the Salomon Registration Statement has become or becomes effective pursuant to Rule 430A, or filing of the Salomon Prospectus is otherwise required under Rule 424(b), Salomon will cause the Salomon Prospectus, properly completed, and any supplement thereto to be filed with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representatives of such timely filing. Salomon will promptly advise the Representatives (i) when the Salomon Registration Statement, if not effective at the Execution Time, and any amendment thereto, shall have become effective, (ii) when the Salomon Prospectus, and any supplement thereto, shall have been filed (if required) with the Commission pursuant to Rule 424(b), (iii) when, prior to termination of the offering of the Shares, any amendment to the Salomon Registration Statement shall have been filed or become effective, (iv) of any request by the Commission for any amendment of the Salomon Registration Statement or supplement to the Salomon Prospectus or for any additional information, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Salomon Registration Statement or the institution or threatening of any proceeding for that purpose and (vi) of the receipt by Salomon of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. Salomon will use its best efforts to prevent the issuance of any such stop order and, if issued, to obtain as soon as possible the withdrawal thereof. (b) If, at any time when a prospectus relating to the Shares is required to be delivered under the Act in connection with the distribution of the Securities, any event occurs as a result of which the Salomon Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall 10 11 be necessary to amend the Salomon Registration Statement or supplement the Salomon Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, Salomon promptly will notify the Representatives and prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 7, an amendment or supplement which will correct such statement or omission or effect such compliance. (c) As soon as practicable, Salomon will make generally available to its security holders and to the Representatives an earnings statement or statements of Salomon and its subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. (d) Salomon will furnish to the Representatives and counsel for the Underwriters, without charge, signed copies of the Salomon Registration Statement (including exhibits thereto), and to each other Underwriter a copy of the Salomon Registration Statement (without exhibits thereto) and so long as delivery of a prospectus by an Underwriter or any dealer may be required by the Act, as many copies of each Preliminary Salomon Prospectus and the Salomon Prospectus and any supplement thereto as the Representatives may reasonably request. (e) Salomon will arrange for the qualification of the Shares for sale under the laws of such jurisdictions as the Representatives may designate and will maintain such qualifications in effect so long as required for the distribution of the Securities and the Shares; provided, however, that in connection therewith, Salomon shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction. (f) Until the 90th business day following the Execution Time, Salomon will not without the prior written consent of Salomon Brothers Inc, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any shares of Salomon Common Stock or any securities convertible into, or exchangeable for, shares of Salomon Common Stock (other than the Shares in connection with the offering by Berkshire of the Securities); provided, however, that the foregoing shall not restrict the ability of Salomon or its subsidiaries to take such actions in connection with the offering by Berkshire of the Securities or any exchange or redemption of the Securities in accordance with their terms; and provided, further, that Salomon may sell or register shares of Salomon Common Stock or grant options to purchase the same, in either case, pursuant to any employee or director stock option plan, stock ownership plan or dividend reinvestment plan of Salomon in effect at the Execution Time. 8. Conditions to the Obligations of the Underwriters. The obligations of the Underwriters to purchase the Underwritten Securities and the Option Securities, as the case may be, shall be subject to the accuracy of the representations and warranties on the part of Berkshire and Salomon contained herein as of the Execution Time, the Closing Date and any settlement date pursuant to Section 4 hereof, to the accuracy of the statements of Berkshire and Salomon made in any certificates pursuant to the provisions hereof, to the performance by Berkshire and Salomon of their respective obligations hereunder and to the following additional conditions: (a) If the Berkshire Registration Statement or the Salomon Registration Statement has not become effective prior to the Execution Time, unless the Representatives agrees in 11 12 writing to a later time, such Berkshire or Salomon Registration Statement will become effective not later than (i) 6:00 PM, New York City time, on the date of determination of the public offering price, if such determination occurred at or prior to 3:00 PM, New York City time, on such date or (ii) 12:00 Noon, New York City time, on the business day following the day on which the public offering price was determined, if such determination occurred after 3:00 PM, New York City time, on such date; if filing of the Final Berkshire Prospectus or the Salomon Prospectus, or any supplements thereto, is required pursuant to Rule 424(b), such Final Berkshire Prospectus or Salomon Prospectus, and any such supplements, will be filed in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Berkshire Registration Statement or the Salomon Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened. (b) Berkshire shall have furnished to the Representatives the opinion of Munger, Tolles & Olson, counsel for Berkshire, dated the Closing Date, to the effect that: (i) each of Berkshire and National Indemnity Company, Columbia Insurance Company and Government Employees Insurance Company (individually a "Subsidiary" and collectively the "Subsidiaries") has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own its properties and conduct its business as described in the Final Berkshire Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification where it owns or leases material properties or conducts material business, except for any such jurisdiction where the failure to be so qualified would not have a material adverse effect on such Subsidiary; and Berkshire is not required to register as an investment company under the Investment Company Act of 1940; (ii) all the outstanding shares of capital stock of each Subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Final Berkshire Prospectus, all outstanding shares of capital stock of the Subsidiaries are owned by Berkshire either directly or through wholly owned subsidiaries free and clear of any perfected security interest and such counsel is not aware of any other security interests, claims, liens or encumbrances; (iii) Berkshire's authorized equity capitalization is as set forth in the Final Berkshire Prospectus; the Securities conform to the description thereof contained in the Final Berkshire Prospectus; and authorization has been given to list the Securities on the NYSE, subject to official notice of issuance and evidence of satisfactory distribution, or Berkshire has filed a preliminary listing application and all required supporting documents with respect to the Securities with the NYSE and such counsel has no reason to believe that the Securities will not be authorized for listing, subject to official notice of issuance and evidence of satisfactory distribution; 12 13 (iv) the Indenture has been duly authorized, executed and delivered, has been duly qualified under the Trust Indenture Act and constitutes a legal, valid and binding obligation enforceable against Berkshire in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and equitable principles relating to the granting of specific performance and other equitable remedies as a matter of judicial discretion); and the Securities have been duly authorized, executed and delivered by Berkshire and, when authenticated by the Trustee in accordance with the provisions of the Indenture and delivered to and paid for by the Underwriters pursuant to this Agreement, will constitute legal, valid and binding obligations of Berkshire entitled to the benefits of the Indenture; (v) to the best knowledge of such counsel, there is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving Berkshire or any of its subsidiaries, of a character required to be disclosed in the Berkshire Registration Statement which is not adequately disclosed in the Final Berkshire Prospectus, and there is no franchise, contract or other document of a character required to be described in the Berkshire Registration Statement or Final Berkshire Prospectus, or to be filed as an exhibit, which is not described or filed as required; (vi) the Berkshire Registration Statement has become effective under the Act; any required filing of the Basic Berkshire Prospectus, any Preliminary Final Berkshire Prospectus and the Final Berkshire Prospectus, and any supplements thereto, pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); to the best knowledge of such counsel, no stop order suspending the effectiveness of the Berkshire Registration Statement has been issued, no proceedings for that purpose have been instituted or threatened, and the Berkshire Registration Statement and the Final Berkshire Prospectus (other than the financial statements and other financial and statistical information contained or incorporated therein and the Salomon Prospectus, as to which such counsel need express no opinion) comply as to form in all material respects with the applicable requirements of the Act, the Exchange Act and the Trust Indenture Act and the respective rules thereunder; and such counsel has no reason to believe that at the Berkshire Effective Date the Berkshire Registration Statement (other than the financial statements and other financial and statistical information contained or incorporated therein and the Salomon Prospectus, as to which such counsel need express no opinion) contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Final Berkshire Prospectus (other than the financial statements and other financial and statistical information contained or incorporated therein and the Salomon Prospectus, as to which such counsel need express no opinion) includes any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; 13 14 (vii) this Agreement has been duly authorized, executed and delivered by Berkshire; (viii) no consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body is required for the consummation of the transactions contemplated herein, except such as have been obtained under the Act, the Exchange Act and the Trust Indenture Act and such as may be required under the state securities or blue sky laws in connection with the purchase and distribution of the Securities and the Shares by the Underwriters and such other approvals (specified in such opinion) as have been obtained; (ix) neither the issue and sale of the Securities, nor the consummation of any other of the transactions herein contemplated nor the fulfillment of the terms hereof will conflict with, result in a breach of, or constitute a default under the charter or by-laws of Berkshire or the terms of any indenture or other agreement or instrument known to such counsel and to which Berkshire or any of its subsidiaries is a party or bound, or any order or regulation known to such counsel to be applicable to Berkshire or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over Berkshire or any of its subsidiaries; and (x) no holder of securities of Berkshire has rights to the registration of such securities under the Berkshire Registration Statement. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the States of California and Delaware (and as to Delaware, involving the application of any law other than the Delaware General Corporation Law) or the United States, to the extent deemed proper and specified in such opinion, upon the opinion of other counsel of good standing believed to be reliable and who are satisfactory to counsel for the Underwriters, (B) to the extent such opinion relates to the law of the State of New York (which law the Indenture, this Agreement and the Securities state to be the governing law thereof), assume that the laws of the State of California are the same as those of the State of New York and (C) as to matters of fact, to the extent deemed proper, on certificates of responsible officers of Berkshire and public officials. References to the Final Berkshire Prospectus in this paragraph (b) include any supplements thereto at the Closing Date. (c) Salomon shall have furnished to the Representatives the opinion of Cravath, Swaine & Moore, counsel for Salomon, or Arnold S. Olshin, Secretary for Salomon, dated the Closing Date, to the effect, in the aggregate, that: (i) each of Salomon and Salomon Brothers Inc. ("SBI") has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own its properties and conduct its business as described in the Salomon Prospectus; 14 15 (ii) Salomon's authorized equity capitalization is as set forth in the Salomon Prospectus; the capital stock of Salomon conforms to the description thereof contained in the Salomon Prospectus; the outstanding shares of Salomon Common Stock have been duly and validly authorized and issued and are fully paid and nonassessable; the shares of Salomon Common Stock (the "Conversion Shares") issuable on conversion of Salomon's 9% Series A Cumulative Convertible Preferred Stock (the "Convertible Preferred Stock") shall upon conversion of the Convertible Preferred Stock in accordance with its terms be duly issued, fully paid and nonassessable; and no holders of securities of Salomon are entitled to preemptive or other rights to subscribe for the Conversion Shares; (iii) to the best knowledge of such counsel, there is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving Salomon or any of its subsidiaries, of a character required to be disclosed in the Salomon Registration Statement which is not adequately disclosed in the Salomon Prospectus; and the statements included or incorporated in the Salomon Prospectus describing any legal proceedings relating to Salomon fairly summarize such matters; (iv) the Salomon Registration Statement has become effective under the Act; any required filing of any Salomon Prospectus, and any supplements thereto, pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); to the best knowledge of such counsel, no stop order suspending the effectiveness of the Salomon Registration Statement has been issued, and no proceedings for that purpose have been instituted or threatened; the Salomon Registration Statement and the Salomon Prospectus (other than the financial statements and other financial and statistical information contained therein as to which such counsel need not express any opinion) appeared on their face to be appropriately responsive in all material respects with the requirements of the Act and the respective rules and regulations thereunder; and such counsel has no reason to believe that at the Salomon Effective Date, the Salomon Registration Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or that at the Closing Date, the Salomon Prospectus (other than the financial statements and other financial and statistical information contained therein) includes any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (v) this Agreement has been duly authorized, executed and delivered by Salomon; (vi) no consent, approval, authorization or order of any court or governmental body or agency is required for the consummation by Salomon of the transactions contemplated herein, except such as have been obtained under the Act (other than in connection with any exchange of the Securities at the option of the holder thereof) and such as may be required under the blue sky laws of any jurisdiction in connection with 15 16 the sale of the Securities by the Underwriters and the distribution of the Shares pursuant to the terms of the Securities and such other approvals (specified in such opinion) as have been obtained; (vii) neither the issue and sale of the Securities nor the delivery of the Shares upon exchange of the Securities, nor the consummation of any other of the transactions herein contemplated nor the fulfillment of the terms hereof will conflict with, result in a breach of, or constitute a default under the charter or by-laws of Salomon or the terms of any indenture or other agreement or instrument known to such counsel and to which Salomon or any of its subsidiaries is a party or bound, or any order or regulation known to such counsel to be applicable to Salomon or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over Salomon or any of its subsidiaries; and (viii) no holder of securities of Salomon, other than Berkshire, has rights to the registration of such securities under the Salomon Registration Statement. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the States of New York and Delaware or the United States, to the extent such counsel deems proper and specified in such opinion, upon the opinion of other counsel of good standing whom such counsel believes to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of Salomon and public officials. References to the Salomon Prospectus in this paragraph (c) include any supplements thereto at the Closing Date. (d) The Representatives shall have received from Cleary, Gottlieb, Steen & Hamilton, counsel for the Underwriters, such opinion or opinions, or letter or letters, dated the Closing Date, with respect to the issuance and sale of the Securities, the Indenture, the Shares, the Salomon Registration Statement, the Salomon Prospectus (together with any supplement thereto), certain information contained in the Berkshire Registration Statement and the Final Berkshire Prospectus (together with any supplement thereto) and other related matters as the Representatives may reasonably require, and the Representatives and Berkshire shall have received from Cravath, Swaine & Moore such letter or letters, dated the Closing Date, with respect to certain information contained in the Berkshire Registration Statement and the Final Berkshire Prospectus (together with any supplement thereto) as the Representatives may reasonably require. (e) Berkshire shall have furnished to the Representatives a certificate of Berkshire, signed by the Chairman or the Vice Chairman of the Board and the principal financial or accounting officer of Berkshire, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Berkshire Registration Statement, the Final Berkshire Prospectus, any supplement to the Final Berkshire Prospectus and this Agreement and that: (i) the representations and warranties of Berkshire in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if 16 17 made on the Closing Date and Berkshire has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date; (ii) no stop order suspending the effectiveness of the Berkshire Registration Statement has been issued and no proceedings for that purpose have been instituted or, to Berkshire's knowledge, threatened; and (iii) since the date of the most recent financial statements included in, or incorporated by reference in, the Final Berkshire Prospectus (exclusive of any supplement thereto), there has been no material adverse change in the condition (financial or other), earnings, business or properties of Berkshire and its subsidiaries, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Berkshire Prospectus (exclusive of any supplement thereto). (f) Salomon shall have furnished to the Representatives and Berkshire a certificate of Salomon, signed by the Senior Vice President and Controller of Salomon, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Salomon Registration Statement, the Salomon Prospectus, any supplements to the Salomon Prospectus and this Agreement and that: (i) the representations and warranties of Salomon in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date and Salomon has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date; (ii) no stop order suspending the effectiveness of the Salomon Registration Statement and no proceedings for that purpose have been instituted or, to Salomon's knowledge, threatened; and (iii) since the date of the most recent financial statements included in, or incorporated by reference in, the Salomon Prospectus (exclusive of any supplement thereto), there has been no material adverse change in the condition (financial or other), earnings, business or properties of Salomon and its subsidiaries, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Salomon Prospectus (exclusive of any supplement thereto). (g) At the Execution Time and at the Closing Date, Deloitte & Touche LLP shall have furnished to the Representatives a letter or letters (which may refer to letters previously delivered to one or more of the Representatives), dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Representatives, confirming that they are independent accountants within the meaning of the Act and the Exchange Act and the respective applicable published rules and regulations thereunder and stating in effect that: 17 18 (i) in their opinion the audited consolidated financial statements and financial statement schedules included or incorporated in the Berkshire Registration Statement and the Final Berkshire Prospectus and reported on by them comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations; (ii) on the basis of a reading of the latest unaudited consolidated financial statements made available by Berkshire and its subsidiaries; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors and audit committees of Berkshire and the minutes of the meetings of the stockholders and directors of the Subsidiaries; and inquiries of certain officials of Berkshire who have responsibility for financial and accounting matters of Berkshire and its subsidiaries as to transactions and events subsequent to the date of the most recent audited financial statements in or incorporated in the Final Berkshire Prospectus, nothing came to their attention which caused them to believe that: (1) any unaudited financial statements included or incorporated in the Berkshire Registration Statement and the Final Berkshire Prospectus do not comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect to financial statements included or incorporated in quarterly reports on Form 10-Q under the Exchange Act; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included or incorporated in the Berkshire Registration Statement and the Final Berkshire Prospectus; or (2) with respect to the period subsequent to the date of the most recent financial statements (other than any capsule information), audited or unaudited, in or incorporated in the Berkshire Registration Statement and the Final Berkshire Prospectus, there were any increases, at a specified date not more than three business days prior to the date of the letter, in the borrowings under investment agreements and other debt of Berkshire and its subsidiaries or decreases in stockholders' equity of Berkshire, each as compared with the amounts shown on the most recent consolidated balance sheet included or incorporated in the Berkshire Registration Statement and the Final Berkshire Prospectus, except in all instances for changes set forth in such letter, in which case the letter shall be accompanied by an explanation by Berkshire as to the significance thereof unless said explanation is not deemed necessary by the Representatives; and (iii) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the 18 19 general accounting records of Berkshire and is subsidiaries) set forth in the Berkshire Registration Statement and the Final Berkshire Prospectus and in Exhibit 12 to the Berkshire Registration Statement, including the information set forth under the caption "Selected Consolidated Financial Data of Berkshire" in the Final Berkshire Prospectus, the information included or incorporated in Items 1, 6 and 7 of Berkshire's Annual Report on Form 10-K, incorporated in the Berkshire Registration Statement and the Final Berkshire Prospectus, and the information included in the "Management's Discussion and Analysis of Berkshire Financial Condition and Results of Operations" included or incorporated in Berkshire's Quarterly Reports on Form 10-Q, incorporated in the Berkshire Registration Statement Registration Statement and the Final Berkshire Prospectus, agrees with the accounting records of Berkshire and its subsidiaries, excluding any questions of legal interpretation. References to the Final Berkshire Prospectus in this paragraph (g) include any supplement thereto at the date of the letter. (h) At the Execution Time, Arthur Andersen LLP shall have furnished to the Representatives and Berkshire a letter or letters (which may refer to letters previously delivered to the Representatives), dated as of the Execution Time, in form and substance satisfactory to the Representatives, confirming that they are independent accountants within the meaning of the Act and the Exchange Act and the respective applicable published rules and regulations thereunder and stating in effect that: (i) in their opinion the audited financial statements and schedules included or incorporated by reference in the Salomon Registration Statement and the Salomon Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations thereunder; (ii) on the basis of a reading of the latest unaudited financial statements made available by Salomon and its subsidiaries; their limited review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited interim financial information as indicated in their reports incorporated in the Salomon Registration Statement and the Salomon Prospectus; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors and executive and audit committees of Salomon and SBI; and inquiries of certain officials of Salomon who have responsibility for financial and accounting matters of Salomon and its subsidiaries as to transactions and events subsequent to the date of the most recent audited financial statements in or incorporated in the Salomon Prospectus, nothing came to their attention which caused them to believe that: 19 20 (1) any unaudited financial statements included or incorporated in the Salomon Registration Statement and the Salomon Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Exchange Act and with the related published rules and regulations with respect to financial statements included or incorporated in quarterly reports on Form 10-Q under the Exchange Act; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included or incorporated in the Salomon Registration Statement and the Salomon Prospectus; or (2) with respect to the period subsequent to the date of the most recent financial statements (other than any capsule information), audited or unaudited, in or incorporated in the Salomon Registration Statement and the Salomon Prospectus, there were any changes, at a specified date not more than three business days prior to the date of the letter, in the consolidated long-term debt of Salomon and its subsidiaries or decreases in the stockholders' equity of Salomon and its subsidiaries as compared with the amounts shown on the most recent consolidated balance sheet included or incorporated in the Salomon Registration Statement and the Salomon Prospectus, or for the period from the date of the most recent financial statements included or incorporated in the Salomon Registration Statement and the Salomon Prospectus to such specified date there were any decreases, as compared with the corresponding period in the preceding year, in net revenues or income before taxes or in total or per share amounts of net income of Salomon and its subsidiaries, except in all instances for changes or decreases set forth in such letter, in which case the letter shall be accompanied by an explanation by Salomon as to the significance thereof unless said explanation is not deemed necessary by the Representatives; and (iii) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of Salomon and is subsidiaries) set forth in the Salomon Registration Statement and the Salomon Prospectus, including the information included or incorporated in Items 1, 2, 6, 7 and 11 of Salomon's Annual Report on Form 10-K, incorporated in the Salomon Registration Statement and the Salomon Prospectus, and the information included in the "Management's Discussion and Analysis of Salomon Financial Condition and Results of Operations" included or incorporated in Salomon's Quarterly Reports on Form 10-Q, incorporated in the Salomon Registration Statement and the Salomon Prospectus, agrees with the accounting records of Salomon and its subsidiaries, excluding any questions of legal interpretation. References to the Salomon Prospectus in this paragraph (h) include any supplement thereto at the date of the letter. 20 21 In addition, at the Closing Date, Arthur Andersen LLP shall have furnished to the Representatives and Berkshire a letter or letters, dated as of the Closing Date, in form and substance satisfactory to the Representatives, to the effect set forth above. (i) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in each of the Berkshire Registration Statement and the Salomon Registration Statement (exclusive of any amendment thereof) and each of the Final Berkshire Prospectus and the Salomon Prospectus (exclusive of any supplements thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraphs (g) and (h) of this Section 8 or (ii) any change, or any development involving a prospective change, in or affecting the business or properties of either Berkshire or Salomon and their respective subsidiaries, taken as a whole, the effect of which, in any case referred to in clause (i) or (ii) above, is, in the judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Berkshire Registration Statement and the Salomon Registration Statement (in either case, exclusive of any amendment thereof) and the Final Berkshire Prospectus and the Salomon Prospectus (in either case, exclusive of any supplement thereto). (j) Subsequent to the Execution Time, there shall not have been any decrease in the rating of any of Berkshire's or Salomon's debt securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act). (k) Prior to the Closing Date, each of Berkshire and Salomon shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request. If any of the conditions specified in this Section 8 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters, this Agreement and all obligations of the Underwriter hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to Berkshire and Salomon in writing or by telephone or telegraph confirmed in writing. 9. Reimbursement of Underwriters' Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 8 hereof is not satisfied, because of any termination pursuant to Section 12 hereof or because of any refusal, inability or failure on the part of Berkshire or Salomon to perform any agreement herein or comply with any provision hereof other than by reason of a default by any Underwriter, Berkshire will reimburse the Underwriters severally upon demand for all reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities. 21 22 10. Indemnification and Contribution. (a) Berkshire agrees to indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter, each person who controls any Underwriter within the meaning of either the Act or the Exchange Act, Salomon, each of Salomon's directors, each of Salomon's officers who signs the Salomon Registration Statement and each person who controls Salomon within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Berkshire Registration Statement as originally filed or in any amendment thereof, or in the Basic Berkshire Prospectus, any Preliminary Final Berkshire Prospectus or the Final Berkshire Prospectus, or in any amendment thereof or supplement thereto, or (ii) the Salomon Registration Statement as originally filed or in any amendment thereof, or in any Preliminary Salomon Prospectus or the Salomon Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in the documents referred to in clause (i) or (ii) above a material fact required to be stated in the documents referred to in clause (i) or (ii) above or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that Berkshire will not be liable under the indemnity agreement in this paragraph (a) to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in (A) the documents referred to in clause (i) or (ii) above in reliance upon and in conformity with written information furnished to Berkshire or Salomon by or on behalf of any Underwriter through the Representatives specifically for inclusion therein, or (B) (1) the Berkshire Registration Statement, any Preliminary Final Berkshire Prospectus or the Final Berkshire Prospectus (or any amendment or supplement thereto) under the headings "Salomon Inc" and "Price Range of Salomon Common Stock and Dividend Policy" (other than the last paragraph thereof) or (2) the Salomon Registration Statement, any Preliminary Salomon Prospectus or the Salomon Prospectus (or any amendment or supplement thereto), except under the heading "Ownership of Company Securities by Berkshire". This indemnity agreement will be in addition to any liability which Berkshire may otherwise have. (b) Salomon agrees to indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter, each person who controls any Underwriter within the meaning of either the Act or the Exchange Act, Berkshire, each of Berkshire's directors, each of Berkshire's officers who signs the Berkshire Registration Statement, and each person who controls Berkshire within the meaning of either the Act or the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Salomon Registration Statement as originally filed or in any amendment thereof, or in any Preliminary Salomon 22 23 Prospectus or the Salomon Prospectus, or in any amendment thereof or supplement thereto, or (ii) the Berkshire Registration Statement as originally filed or in any amendment thereof, or in any Preliminary Final Berkshire Prospectus or the Final Berkshire Prospectus, or in any amendment thereto or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in the documents referred to in clause (i) or (ii) above a material fact required to be stated in the documents referred to in clause (i) or (ii) above or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that Salomon will not be liable under the indemnity agreement in this paragraph (b) to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in (A) the documents referred to in clause (i) or (ii) above in reliance upon and in conformity with written information furnished to Salomon or Berkshire by or on behalf of any Underwriter through the Representatives specifically for inclusion therein or (B) (1) the information contained in or omitted from the Salomon Registration Statement, any Preliminary Salomon Prospectus or the Salomon Prospectus under the heading "Ownership of Company Securities by Berkshire" in the prospectus supplement and in the first, fourth and fifth paragraphs under the heading "Ownership of Company Securities by Berkshire" in the base prospectus or (2) the Berkshire Registration Statement, any Preliminary Final Berkshire Prospectus or the Final Berkshire Prospectus (or any amendment or supplement thereto), except under the headings "Salomon Inc" and "Price Range of Salomon Common Stock and Dividend Policy" (other than the last paragraph thereof). This indemnity agreement will be in addition to any liability which Salomon may otherwise have. (c) Each Underwriter severally agrees to indemnify and hold harmless Berkshire and Salomon, each of their respective directors, each of their respective officers who signs the Berkshire Registration Statement or the Salomon Registration Statement, respectively, and each person who controls Berkshire or Salomon within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnities in paragraph (a) from Berkshire to each Underwriter or in paragraph (b) from Salomon to each Underwriter, respectively, but only with reference to written information relating to such Underwriter furnished to Berkshire by or on behalf of such Underwriter through the Representatives specifically for inclusion in the Berkshire Registration Statement as originally filed or in any amendment thereof, or in any Preliminary Final Berkshire Prospectus or the Final Berkshire Prospectus, or in any amendment thereof or supplement thereto, and to Salomon by or on behalf of any Underwriter through the Representatives specifically for inclusion in the Salomon Registration Statement as originally filed or in any amendment thereof, or in any Preliminary Salomon Prospectus or the Salomon Prospectus, or in any amendment thereof or supplement thereto. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have. Berkshire and Salomon acknowledge that the statements set forth in the last paragraph of the cover page and under the heading "Plan of Distribution" in any Preliminary Final Berkshire Prospectus or the Final Berkshire Prospectus and the statements set forth under the heading "Plan of Distribution" in any Preliminary Salomon Prospectus or the Salomon Prospectus constitute the only information furnished in writing by or on behalf of any Underwriter for inclusion in the 23 24 documents referred to in the foregoing indemnity, and you, as the Representatives, confirm that such statements are correct. (d) Promptly after receipt by an indemnified party under this Section 10 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 10, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from any liability under paragraphs (a), (b) or (c) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraphs (a), (b) or (c) above. The indemnifying party shall be entitled to appoint counsel of indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party in accordance with this paragraph (d) within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (e) In the event that the indemnity provided in paragraph (a), (b) or (c) of this Section 10 is unavailable to or insufficient to hold harmless an indemnified party for any reason, Berkshire, Salomon and the Underwriters agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which Berkshire, Salomon and one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by Berkshire and Salomon, on the one hand, and the Underwriters, on the other hand, from the offering of the Securities; provided, however, that in no case shall any 24 25 Underwriter (except as may be provided in any agreement among underwriters relating to the offering of the Securities) be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such Underwriter hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, Berkshire and Salomon, on the one hand, and the Underwriters, on the other hand, shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of Berkshire and Salomon, on the one hand, and the Underwriters, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. The relative benefits received by Berkshire or Salomon on the one hand and the Underwriters on the other with respect to such offering shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by Berkshire, and the total underwriting discounts and commissions, respectively, in each case as set forth on the cover page of the Final Berkshire Prospectus. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by Berkshire and Salomon, on the one hand, or the Underwriters, on the other hand. Berkshire, Salomon and the Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (e), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 10, each person who controls an Underwriter within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Underwriter shall have the same rights to contribution as such Underwriter, and each person who controls Berkshire or Salomon within the meaning of either the Act or the Exchange Act, each officer of Berkshire or Salomon who shall have signed the Berkshire Registration Statement or the Salomon Registration Statement and each director of Berkshire or Salomon shall have the same rights to contribution as Berkshire or Salomon, subject in each case to the applicable terms and conditions of this paragraph (e). 11. Default by an Underwriter. If any one or more Underwriters shall fail to purchase and pay for any of the Securities agreed to be purchased by such Underwriter or Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective proportions which the principal amount of Securities set forth opposite their names in Schedule I hereto bears to the aggregate principal amount of Securities set forth opposite the names of all the remaining Underwriters) the Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase; provided, however, that in the event that the aggregate principal amount of Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate amount of Securities set forth in Schedule I hereto, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Underwriters do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Underwriter, Berkshire or Salomon. In the event of a default by any Underwriter as set forth in this Section 11, the Closing Date shall be postponed for such period, not exceeding seven days, as the Representatives shall 25 26 determine in order that the required changes in the Berkshire Registration Statement or Salomon Registration Statement and the Final Berkshire Prospectus or Salomon Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter of its liability, if any, to Berkshire, Salomon and any nondefaulting Underwriter for damages occasioned by its default hereunder. 12. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to Berkshire and Salomon prior to delivery of and payment for the Securities, if prior to such time (i) trading in Berkshire's or Salomon's Common Stock shall have been suspended by the Commission, (ii) trading in the securities generally on the NYSE shall have been suspended or limited or minimum prices shall have been established on such Exchange, (iii) a banking moratorium shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war or other calamity or crisis, the effect of which on financial markets of the United States is such as to make it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Final Berkshire Prospectus (exclusive of any supplement thereto). 13. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of Berkshire and Salomon or their respective officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Underwriters, Berkshire or Salomon or any of the officers, directors or controlling persons referred to in Section 10 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 9 and 10 hereof shall survive the termination or cancellation of this Agreement. 14. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or telegraphed and confirmed to them at Seven World Trade Center, New York, New York 10048, attention of the Legal Department; if sent to Berkshire, will be mailed, delivered or telegraphed and confirmed to it at 1440 Kiewit Plaza, Omaha, Nebraska 68131, attention of the Chief Executive Officer; or if sent to Salomon, will be mailed, delivered, telegraphed and confirmed to it at Seven World Trade Center, New York, New York 10048, attention of the Secretary. 15. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 10 hereof, and no other person will have any right or obligation hereunder. 26 27 16. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among Berkshire, Salomon and the several Underwriters. Very truly yours, Berkshire Hathaway Inc. By: ____________________________ Name: Title: Salomon Inc By:_____________________________ Name: Title: The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Salomon Brothers Inc Goldman, Sachs & Co. Smith Barney Inc. By: Salomon Brothers Inc By:___________________________ Name: Title: For themselves and the other several Underwriters named in Schedule I to the foregoing Agreement. 27 28 SCHEDULE I
Underwriter Principal Face Amount of Underwritten Securities - ----------- ------------------------------------------------ to be Purchased --------------- Salomon Brothers Inc......................... Goldman, Sachs & Co.......................... Smith Barney Inc............................. ------------- Total................... $[350,000,000] ==============
28 EX-4.2 3 FIRST SUPPLEMENTAL INDENTURE 1 ================================================================================ EXHIBIT 4.2 FIRST SUPPLEMENTAL INDENTURE Dated as of November [__], 1996 Supplementing and Amending the Indenture Dated as of December 1, 1987 -------------- BERKSHIRE HATHAWAY INC. TO STATE STREET BANK AND TRUST COMPANY, Trustee -------------- [___]% Senior Exchangeable Notes Due [_______], 2001 -------------- ================================================================================ 2 FIRST SUPPLEMENTAL INDENTURE dated as of November [__], 1996 (this "Supplemental Indenture"), made and entered into by and between BERKSHIRE HATHAWAY INC., a corporation organized and existing under the laws of the State of Delaware having its principal office at 1440 Kiewit Plaza, Omaha, Nebraska 68131 (the "Company"), and STATE STREET BANK AND TRUST COMPANY, as successor trustee (together with its successors, the "Trustee"). WHEREAS the Company entered into an Indenture dated as of December 1, 1987 (the "Basic Indenture") with The First National Bank of Boston, as the initial Trustee, for the purposes of issuing its unsecured debentures, notes or other evidences of indebtedness to be issued in one or more series (the "Debt Securities"), in such principal amount or amounts as may from time to time be authorized by or pursuant to the authority granted in one or more resolutions of the Board of Directors of the Company; WHEREAS the Company has requested the Trustee to join with it in the execution and delivery of this First Supplemental Indenture in order to comply with amendments to the Trust Indenture Act and to provide for a series of Debt Securities denominated its "[__]% Senior Exchangeable Notes Due [_________], 2001" (such Debt Securities being referred to herein as the "Notes"); WHEREAS Section 901(6) and (8) of the Basic Indenture provides that without the consent of the Holders of Debt Securities, the Company, when authorized by a Board Resolution, and the Trustee may enter into one or more indentures supplemental to the Basic Indenture, in form satisfactory to the Trustee, (a) to establish the form or terms of Debt Securities of any series and (b) to cure any ambiguity, to correct or supplement any provision therein which may be defective or inconsistent with any other provision therein, or to make any other provisions with respect to matters or questions arising under the Basic Indenture which shall not be inconsistent with the provisions of the Basic Indenture, provided such other provisions shall not adversely affect the interest of the Holders of Debt Securities of any series in any material respect; WHEREAS the entry into this Supplemental Indenture by the parties hereto is in all respects authorized by the provisions of the Basic Indenture; and WHEREAS all things necessary to make this Supplemental Indenture a valid agreement of the Company in accordance with its terms have been done. NOW, THEREFORE, and in consideration of the premises and purchase of the Debt Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders, without preference, priority or distinction of any of the Debt Securities over any of the others by reason of difference in series or priority in time of issuance, negotiation or maturity thereof, or otherwise except as otherwise provided in the Basic Indenture or this Supplemental Indenture, as follows: 3 2 SECTION 1. The Basic Indenture is hereby amended to reflect certain amendments to the Trust Indenture Act as follows: (a) The definition of "Trust Indenture Act" in Section 101 is amended to add to such definition the phrase ", as amended by the Trust Indenture Reform Act of 1990," after the date "1939" in the first line of such definition. (b) Section 102 of the Indenture is amended to add in the first line of the second paragraph, after the word "Indenture", the following: "(other than certificates provided pursuant to Section 1004)". (c) Section 107 of the Indenture is amended to read in its entirety as follows: "If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act which is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be." (d) Section 608 of the Indenture is amended to read in its entirety as follows: "If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. To the extent permitted by such Act, the Trustee shall not be deemed to have a conflicting interest by virtue of being a trustee under this Indenture with respect to Securities of more than one series." (e) Section 609 of the Indenture is amended to read in its entirety as follows: "There shall at all times be one (and only one) Trustee hereunder with respect to the Securities of each series, which may be Trustee hereunder for Securities of one or more other series. Each Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee with respect to the Securities of any series shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article." 4 3 (e) Section 613 of the Indenture is amended to read in its entirety as follows: "If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor)." (f) Section 703 of the Indenture is amended to read in its entirety as follows: "The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Debt Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Debt Securities are listed on any stock exchange." (g) Section 1004 of the Indenture is amended by denoting the current paragraph in Section 1004 as paragraph (a) and by adding as a new paragraph (b) the following: "(b) The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, a certificate of the principal executive officer, principal financial officer or principal accounting officer of the Company stating whether or not to the best knowledge of the signer thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which such signer may have knowledge." SECTION 2. The Basic Indenture is hereby amended by amending Section 301 of the Basic Indenture by (i) adding as a new subparagraph (15) the following: "(15) the obligation, if any, of the Company to permit the conversion or exchange of the Debt Securities of such series into other securities (whether or not issued by, or the obligation of, the Company), and the terms and conditions upon which such conversion or exchange shall be effected (including, without limitation, the initial conversion or exchange price or rate, the conversion or exchange period and any other provision in addition to or in lieu of those set forth in this Indenture relative to such obligation); and"; and by (ii) renumbering current subparagraphs (15) and (16) of Section 301 to new subparagraphs (16) and (17), respectively. SECTION 3. The Basic Indenture is hereby further amended, solely with respect to a series of securities that consists of Notes, as follows: 5 4 (a) By amending Section 101 to add new definitions thereto, in the appropriate alphabetical sequence, as follows: "Accreted Value" of a Note means the issue price of the Note plus accrued OID thereon. "Business Day" for purposes of the Notes means any day that is not a Saturday, a Sunday or a day on which the NYSE, banking institutions or trust companies in The City of New York are authorized or obligated by law or executive order to close. "Closing Price" of any security on any date of determination means the closing sale price (or, if no closing price is reported, the last reported sale price) of such security (regular way) on the NYSE on such date or, if such security is not listed for trading on the NYSE on any such date, as reported in the composite transactions for the principal United States securities exchange on which such security is so listed, or if such security is not so listed on a United States national or regional securities exchange, as reported by the Nasdaq Stock Market, or, if such security is not so reported, the last quoted bid price for such security in the over-the-counter market as reported by the National Quotation Bureau or similar organization, or, if such bid price is not available, the average of the mid-point of the last bid and ask prices for such security from each of at least three nationally recognized investment banking firms selected for such purpose by the Company, or if such quotes are not available, the market value of such security on such date as determined by a nationally recognized independent investment banking firm selected for this purpose by the Company. "Current Market Value" of Salomon Common Stock on any date of determination means the greater of (1) the 10-Day Average Closing Price of Salomon Common Stock as of such date and (2) the Closing Price of Salomon Common Stock on the Trading Day immediately preceding such date (or, if determined after the close of business on any Trading Day, the Closing Price of Salomon Common Stock on such Trading Day). "Electing Holder" has the meaning specified in Section 1402. "Exchange Date" means the last Trading Day of each January, April, July and October, from and including January 1997 through and including July 2001. "Exchange Notice" has the meaning specified in Section 1402. "Exchange Period" means the period from the opening of business on the Business Day immediately prior to an Exchange Date until the close of business on such Exchange Date. "Exchange Price" of a Note on any date means (1) the Accreted Value of such Note on such date divided by (2) the Exchange Rate in effect on such date. 6 5 "Exchange Rate" means initially [____] shares of Salomon Common Stock per Note, as the same may be adjusted in certain instances as provided in Section 1405 hereof. "Exchange Securities" has the meaning specified in Section 1405. "Extraordinary Cash Dividend" has the meaning specified in Section 1405. "Maturity Date" means [_________], 2001. "New Exchange Date" has the meaning specified in Section 1402. "NYSE" means the New York Stock Exchange. "OID" with respect to the Notes means original issue discount calculated on a constant yield basis using $1,000 principal amount due at Maturity based on the excess of the principal amount due at Maturity over the issue price of the Notes. "Reorganization Event" has the meaning specified in Section 1405. "Salomon" means Salomon Inc. "Salomon Common Stock" means the common stock, par value $1.00 per share of Salomon. "Salomon Prospectus" means the prospectus supplement and prospectus of Salomon covering the shares of Salomon Common Stock which may be received by a Holder of Notes upon an exchange of Notes pursuant to Section 1402. "Salomon Successor" has the meaning specified in Section 1405. "Spin-Off" has the meaning specified in Section 1405. "10-Day Average Closing Price" of Salomon Common Stock as of any date of determination means the average Closing Price of Salomon Common Stock on the 10 Trading Days immediately prior to such date (or, if determined after the close of business on any Trading Day, the average Closing Price of Salomon Common Stock on such Trading Day and the nine Trading Days immediately prior to such date). "Trading Day" means any day on which the security the Closing Price of which is being determined (1) is not suspended from trading on any national or regional securities exchange 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. 7 6 "Transaction Value" means (1) for any cash received in any Reorganization Event, the amount of cash received per share of Salomon Common Stock, (2) for any Reported Exchange Securities received in any Reorganization Event, an amount equal to the average Closing Price per security of such Reported Exchange Securities on the 10 Trading Days immediately prior to Maturity or the date on which notice of redemption or exchange is given pursuant to Section 1403, as applicable, multiplied by the number of such Reported Exchange Securities received for each share of Salomon Common Stock, and (3) for any property received in any Reorganization Event other than cash or such Reported Exchange Securities, an amount equal to the fair market value of the property received per share of Salomon Common Stock on the date such property is received, as determined by a nationally recognized investment banking firm selected for this purpose by the Company; provided however, that in the case of clause (2), (A) with respect to securities that are Reported Exchange Securities by virtue of only clause (i)(d) of the definition of Reported Exchange Securities, Transaction Value with respect to any such Reported Exchange Security means the average of the mid-point of the last bid and ask prices for such Reported Exchange Security as of Maturity or such notice date, as applicable, from each of at least three nationally recognized investment banking firms selected for such purpose by the Company multiplied by the number of such Reported Exchange Securities received for each share of Salomon Common Stock and (B) with respect to all other Reported Exchange Securities, if there are not 10 Trading Days for any particular Reported Exchange Security occurring after the 60th calendar day immediately prior to, but not including, the date of Maturity or such notice date, as applicable, Transaction Value with respect to such Reported Exchange Security means the market value per security of such Reported Exchange Security as of Maturity or such notice date, as applicable, as determined by a nationally recognized investment banking firm selected for such purpose by the Company multiplied by the number of such Reported Exchange Securities received for each share of Salomon Common Stock. (b) By amending Section 902 of the Basic Indenture by adding to the end of paragraph (1) thereof the following: "change the terms under which the Notes are exchangeable as set forth in Article Fourteen, or". (c) By amending Section 1301 of the Basic Indenture to read in its entirety as follows: "The provisions of this Article shall not be applicable to the Notes." (d) By adding the following Article Fourteen: "ARTICLE FOURTEEN EXCHANGE OF NOTES 8 7 SECTION 1401. Payment or Exchange at Maturity. (a) At Maturity, if both (1) the 10-Day Average Closing Price of Salomon Common Stock and (2) the Closing Price of Salomon Common Stock on the last Trading Day prior to Maturity are equal to or greater than the Exchange Price then in effect, each Note will be exchanged by the Company into shares of Salomon Common Stock at the Exchange Rate, or the Company may, at its option, deliver cash, in lieu of delivering shares of Salomon Common Stock, in an amount equal to the product obtained by multiplying the Exchange Rate by the Current Market Value of Salomon Common Stock at Maturity. In all other circumstances, the Company will pay at Maturity, in cash, a price per Note equal to the principal amount due at Maturity (or, in the event the Notes mature prior to the Maturity Date, the Accreted Value thereof). In all events, accrued and unpaid interest to Maturity shall be payable by the Company in cash on all Notes outstanding at Maturity. The Exchange Rate or exchange consideration will be subject to adjustment as provided in Section 1405. (b) Not later than 15 days prior to Maturity, the Company will notify the Depositary and the Trustee and will publish a notice in a daily newspaper of national circulation stating whether the Company (1) will exchange the Notes for shares of Salomon Common Stock or (2) will deliver cash equal to the product obtained by multiplying the Exchange Rate by the Current Market Value of Salomon Common Stock at Maturity, if at Maturity both (A) the 10-Day Average Closing Price of Salomon Common Stock and (B) the Closing Price of Salomon Common Stock on the last Trading Day prior to Maturity are equal to or greater than the Exchange Price then in effect. The Salomon Common Stock, if any, to which a Holder is entitled upon any exchange at Maturity will be delivered or made available by the Company as soon as practicable and, in any event, not later than the close of business on the fifth Business Day after Maturity. If the Company delivers shares of Salomon Common Stock at Maturity, Holders of the Notes will be responsible for the payment of any brokerage costs incurred upon any subsequent sale of such stock. SECTION 1402. Exchange at Option of Holder. (a) On each Exchange Date, any Notes (other than Notes with respect to which a notice of exchange for Salomon Common Stock has been delivered by the Company prior to such Exchange Date) will be exchangeable, at the option of the Holder, for shares of Salomon Common Stock at the Exchange Rate then in effect, provided that the Closing Price of Salomon Common Stock on the Exchange Date exceeds the Exchange Price then in effect, and subject to certain additional conditions described below. (b) To exchange a Note for Salomon Common Stock, a Holder must, at any time during the relevant Exchange Period, (1) deliver to the Trustee (or such office or agency that may be established by the Company for such purpose) a completed and manually signed exchange notice (the "Exchange Notice") on the back of such Note (or a facsimile thereof), 9 8 (2) surrender or arrange for book entry transfer of such Note to the Trustee, (3) if required, furnish appropriate endorsements and transfer documents and (4) if required, pay all transfer or similar taxes. Any Exchange Notice may be withdrawn by the Holder by a written notice of withdrawal delivered to the Trustee prior to the close of business on the Exchange Date. The notice of withdrawal shall state the principal amount due at Maturity and any certificate number(s) of the Notes as to which the withdrawal notice relates and the principal amount due at Maturity, if any, which remains subject to the Exchange Notice, each of which must be $1,000 or an integral multiple thereof. (c) In the event that a Salomon Prospectus is required to be delivered under the Securities Act of 1933 upon an exchange of Notes and is not made available by Salomon to the Company for use during any Exchange Period, the Company shall, on or prior to the applicable Exchange Date, upon written notice to each Holder that has complied with the procedures for exchange of Notes described herein (an "Electing Holder"), postpone such Exchange Date from time to time until such later Business Day (the "New Exchange Date") as the Company is able to deliver a Salomon Prospectus or is no longer required to do so. In the event that the Company postpones any Exchange Date, (1) no additional Notes may be delivered to the Trustee by any Holder for exchange into Salomon Common Stock at any time during the period from the original Exchange Date through and including the New Exchange Date, (2) each Electing Holder shall have the right, at any time until the New Exchange Date, to irrevocably withdraw any Notes delivered to the Trustee on or prior to the original Exchange Date, and (3) any Notes that have not been withdrawn by an Electing Holder prior to the New Exchange Date shall be exchanged for shares of Salomon Common Stock on the New Exchange Date, provided that the Closing Price of Salomon Common Stock on the New Exchange Date exceeds the Exchange Price then in effect. (d) If a Reorganization Event shall have occurred, the Notes shall not be exchangeable at the option of the Holder for any Exchange Securities during any Exchange Period if a prospectus covering such Exchange Securities is required to be delivered by the Company under the Securities Act and is not available to the Company for use during such Exchange Period. (e) Upon any exchange of Notes at the option of the Holder, no payment will be made in respect of accrued but unpaid interest, unless such exchange is made concurrently with or after acceleration of the Notes following an event of default hereunder. The Salomon Common Stock to which a Holder is entitled upon any exchange will be delivered or made available by the Company as soon as practicable and, in any event, not later than the close of business on the fifth Business Day after the applicable Exchange Date. SECTION 1403. Redemption or Exchange at Option of the Company. 10 9 (a) The Notes will not be redeemable or exchangeable at the option of the Company prior to [_________], 1999. Thereafter, (1) at any time when both (A) the 10-Day Average Closing Price of Salomon Common Stock on the date on which the applicable notice of redemption is given and (B) the Closing Price of Salomon Common Stock on the last Trading Day prior to such date are equal to or greater than the Exchange Price then in effect, the Company may, at its option, either (i) exchange the Notes, in whole or in part, for shares of Salomon Common Stock at the Exchange Rate then in effect or (ii) redeem the Notes, in whole or in part, in cash at a price per Note equal to the product of the Exchange Rate then in effect and the Current Market Value of Salomon Common Stock on the date on which the applicable notice of redemption is given, and (2) at any other time, the Company may, at its option redeem the Notes, in whole or in part, in cash at a price per Note equal to the Accreted Value of the Notes on the date of redemption. However, the Company may not give any notice of redemption for cash (x) during the period from the beginning of any Exchange Period until the close of business on the applicable Exchange Date or New Exchange Date or (y) prior to the beginning of any Exchange Period if the Redemption Date would occur during or after such Exchange Period. Upon any exchange or redemption described in clause (1) above, the Holders of Notes will not receive any payment representing accrued OID; such accrued OID will be deemed paid upon the receipt of Salomon Common Stock or the cash equivalent received on such exchange or redemption. (b) In connection with any redemption or exchange prior to Maturity of the Notes, the Company will notify the Depositary and the Trustee and will publish a notice in a daily newspaper of national circulation stating (1) the Exchange Rate then in effect, (2) whether the Notes will be exchanged for shares of Salomon Common Stock or redeemed for cash, (3) the redemption or Exchange Date (which shall be at least 15 days but not more than 30 days after the date of such notice) and (4) in the case of a redemption, the redemption price. On the Exchange Date with respect to any exchange of Notes for Salomon Common Stock, such Notes shall cease to be outstanding and shall be deemed to represent solely the right to receive shares of Salomon Common Stock in accordance with the terms of the Indenture. The Company will pay in cash the accrued and unpaid interest on all Notes redeemed or exchanged to but excluding the date of redemption or exchange. If the Company exchanges Notes for shares of Salomon Common Stock, Holders of the Notes will be responsible for the payment of any brokerage costs incurred upon the subsequent sale of such shares. (c) If less than all the Notes then outstanding are to be redeemed or exchanged prior to maturity of the Notes, the Trustee will select those to be redeemed or exchanged as a whole or in part pro rata or by lot or by such method as the Trustee shall deem fair and appropriate. Notice of redemption or exchange will be given to Holders of the Notes to be redeemed or exchanged by first-class mail, postage prepaid at their last address appearing on the Note registry books. SECTION 1404. No Fractional Shares. 11 10 No fractional shares of Salomon Common Stock will be issued if any Notes are exchanged for shares of Salomon Common Stock at or prior to Maturity. If more than one Note from the same Holder is exchanged for Salomon Common Stock at one time, the number of full shares of Salomon Common Stock to be delivered upon exchange shall be computed on the basis of the aggregate number of Notes from such Holder so exchanged at that time. In lieu of any fractional share otherwise issuable in respect of all Notes of any Holder that are exchanged at or prior to Maturity, the Company, through the Paying Agent, shall make a cash payment in respect of such fractional interest to such Holder in an amount equal to the product of such fraction of a share and the Current Market Value of Salomon Common Stock on the applicable Exchange Date (in the case of an exchange at the option of the Holder), the date on which the related notice of exchange is given (in the case of an exchange at the option of the Company) or at Maturity, as applicable. The Company shall, upon exchange of any Notes, provide cash to the Paying Agent in an amount equal to the cash payable with respect to any fractional shares of Salomon Common Stock deliverable upon exchange of such Notes, and the Company shall retain such fractional shares of Salomon Common Stock. SECTION 1405. Adjustment of Exchange Rate. (a) Adjustment for Distributions, Reclassification, etc. The Exchange Rate shall be subject to adjustment from time to time as follows: (1) If Salomon shall: (A) pay a dividend or make a distribution with respect to the Salomon Common Stock in shares of such stock; (B) subdivide or split the outstanding shares of Salomon Common Stock into a greater number of shares; (C) combine the outstanding shares of Salomon Common Stock into a smaller number of shares; or (D) issue by reclassification of shares of Salomon Common Stock any shares of common stock of Salomon; then, in any such event, the Exchange Rate in effect immediately prior to such event shall be adjusted so that the Holder of any Note shall thereafter be entitled to receive, upon exchange of such Holder's Note by the Company at Maturity or upon redemption, the number of shares of Salomon Common Stock that such Holder would have owned or been entitled to receive immediately following such event had such Note been exchanged immediately prior to such event or any record date with respect thereto. Each such adjustment shall become effective at the opening of business on 12 11 the Business Day next following the record date for determination of holders of Salomon Common Stock entitled to receive such dividend or distribution in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, split, combination or reclassification. Each such adjustment shall be made successively. (2) If Salomon shall issue rights or warrants to all holders of Salomon Common Stock entitling them to subscribe for or purchase shares of Salomon Common Stock (other than rights to purchase Salomon Common Stock pursuant to (A) a plan for the reinvestment of dividends or interest or (B) pursuant to a shareholders rights plan or agreement, unless a triggering event shall have occurred thereunder) at a price per share less than the current market price of Salomon Common Stock (determined for purposes of this clause (2) as the Closing Price per share of Salomon Common Stock on the record date fixed for the determination of stockholders entitled to receive such rights or warrants), then in each case the Exchange Rate shall be adjusted by multiplying the Exchange Rate in effect immediately prior to such record date, by a fraction, of which (x) the numerator shall be the number of shares of Salomon Common Stock outstanding at the close of business on such record date, plus the number of additional shares of Salomon Common Stock offered for subscription or purchase pursuant to such rights or warrants, and (y) the denominator shall be the number of shares of Salomon Common Stock outstanding at the close of business on such record date, plus the number of additional shares of Salomon Common Stock that the aggregate offering price of the total number of shares of Salomon Common Stock so offered for subscription or purchase pursuant to such rights or warrants would purchase at such current market price (calculated at the Closing Price per share of Salomon Common Stock on such record date), which shall be determined by multiplying such total numbers of shares offered by the exercise price of such rights or warrants and dividing the product so obtained by such current market price. Such adjustment shall become effective at the opening of business on the Business Day next following the record date for the determination of stockholders entitled to receive such rights or warrants. To the extent that shares of Salomon Common Stock are not delivered after the expiration of such rights or warrants, the Exchange Rate shall be readjusted to the Exchange Rate which would then be in effect had such adjustments for the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Salomon Common Stock actually delivered. Each such adjustment shall be made successively. (3) If Salomon shall pay a dividend or make a distribution to all holders of Salomon Common Stock of any class of its capital stock, evidences of its indebtedness or other assets (in each case excluding any dividends or distributions referred to in paragraph (1) above or any ordinary periodic cash dividends that do not constitute Extraordinary Cash Dividends (as defined below)) or shall issue to all 13 12 holders of Salomon Common Stock rights or warrants to subscribe for or purchase any of its securities (other than those referred to in paragraph (2) above), then in each such case, the Exchange Rate shall be adjusted by multiplying the Exchange Rate in effect on the record date mentioned below by a fraction of which (A) the numerator shall be the current market price per share of the Salomon Common Stock on the record date for the determination of stockholders entitled to receive such dividend or distribution (such current market price being determined for purposes of this paragraph as the Closing Price per share of Salomon Common Stock on such record date) and (B) the denominator shall be such current market price per share of Salomon Common Stock less the fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive, and described in a resolution adopted with respect thereto) as of such record date of the portion of the capital stock, evidences of indebtedness or other assets so distributed or of such subscription rights or warrants applicable to one share of Salomon Common Stock; provided, however, that in the event of a distribution of shares of capital stock of a subsidiary of Salomon (a "Spin-Off") made to holders of shares of Salomon Common Stock, the numerator of such fraction shall be the sum of (i) the Closing Price of Salomon Common Stock as of the 35th Trading Day after the effective date of such Spin-Off and (ii) the Closing Price of the number of shares (or the fraction of a share) of capital stock of such subsidiary of Salomon on such 35th Trading Day which is distributed in such Spin-Off in respect of one share of Salomon Common Stock as of such 35th Trading Day and the denominator of which shall be the Closing Price of Salomon Common Stock as of such 35th Trading Day. Each such adjustment shall become effective on the opening of business on the Business Day next following the record date for the determination of stockholders entitled to receive such dividend or distribution (or, in the case of an adjustment pursuant to the proviso of the immediately preceding sentence, on the Business Day next following the 35th Trading Day after the effective date of the Spin-Off). Each such adjustment shall be made successively. (4) Any shares of Salomon Common Stock issuable in payment of a dividend shall be deemed to have been issued immediately prior to the close of business on the record date for such dividend for purposes of calculating the number of outstanding shares of Salomon Common Stock under paragraph (2) above. (5) All adjustments to the Exchange Rate shall be calculated to the nearest 1/10,000th of a share of Salomon Common Stock (or if there is not a nearest 1/10,000th of a share to the next lower 1/10,000th of a share). No adjustment in the Exchange Rate shall 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 paragraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment. 14 13 (6) For purposes of the foregoing, the term "Extraordinary Cash Dividend" shall mean, with respect to any consecutive 365-day period, any cash dividend with respect to Salomon Common Stock the amount of which, together with the aggregate amount of all other such cash dividends on the Salomon Common Stock occurring in such 365-day period, exceeds on a per share basis 10% of the average Closing Price per share of the Salomon Common Stock over such 365-day period, and for purposes of applying the formula set forth in paragraph (3) above, the fair market value of such dividends being calculated pursuant to such paragraph (3) shall be equal to (A) the aggregate amount of such cash dividend together with the amounts of such other cash dividends occurring in such period minus (B) the aggregate amount of such other cash dividends occurring in such period for which a prior adjustment in the Exchange Rate was previously made as described in this subsection. In making the determinations required by the foregoing sentence, the amount of cash dividends paid on a per share basis shall be appropriately adjusted to reflect the occurrence during such period of any event described in this subsection. (b) Adjustment of Exchange Consideration for Consolidation, Merger or Other Reorganization Event. (1) In the event of (A) any consolidation or merger of Salomon, or any surviving entity or subsequent surviving entity of Salomon (a "Salomon Successor"), with or into another entity (other than a merger or consolidation in which Salomon is the continuing corporation and in which the Salomon Common Stock outstanding immediately prior to the merger or consolidation is not exchanged for cash, securities ("Exchange Securities") or other property of Salomon or another corporation), (B) any statutory exchange of securities of Salomon or any Salomon Successor with another corporation (other than in connection with a merger or acquisition) or (C) any liquidation, dissolution or winding up of Salomon or any Salomon Successor (any such event, a "Reorganization Event"), if the Company shall have the right to deliver either cash or Salomon Common Stock at Maturity or upon redemption or exchange of the Notes, then, at the option of the Company, each Holder of Notes will receive at Maturity or upon such redemption or exchange, in lieu of Salomon Common Stock, cash in an amount equal to the Exchange Rate multiplied by the Transaction Value. Notwithstanding the foregoing, with respect to any securities received in a Reorganization Event that (i) are (a) listed on a United States national securities exchange, (b) reported on a United States national securities system subject to last sale reporting, (c) traded in the over-the-counter market and reported on the National Quotation Bureau or similar organization or (d) for which bid and ask prices are available from at least three nationally recognized investment banking firms and (ii) are either (x) perpetual equity securities or (y) non-perpetual equity or debt securities with a stated maturity after the Maturity Date ("Reported Exchange Securities"), the Company may, at its option, in lieu of delivering the amount of cash deliverable in respect of Reported Exchange Securities received in a Reorganization Event, as determined in accordance with the previous sentence, deliver a number of such Reported Exchange Securities with a value equal to such cash 15 14 amount, as determined in accordance with clause (2) of the definition of Transaction Value, as applicable; provided, however, that (i) if such option is exercised, the Company shall deliver Reported Exchange Securities in respect of all, but not less than all, cash amounts that would otherwise be deliverable in respect of Reported Exchange Securities received in a Reorganization Event, (ii) the Company may not exercise such option if the Company has elected to deliver cash in lieu of Salomon Common Stock deliverable at Maturity or upon redemption and (iii) the Company must exercise such option if the Company does not elect to deliver cash in lieu of Salomon Common Stock deliverable at Maturity or upon redemption. If the Company elects to deliver Reported Exchange Securities, each Holder of Notes will be responsible for the payment of any and all brokerage and other transaction costs upon the sale of such Reported Exchange Securities. If, following any Reorganization Event, any Reported Exchange Security ceases to qualify as a Reported Exchange Security, then (x) the Company may no longer elect to deliver such Reported Exchange Security in lieu of an equivalent amount of cash and (y) notwithstanding clause (2) of the definition of Transaction Value, the Transaction Value of such Reported Exchange Security shall mean the fair market value of such Reported Exchange Security on the date such security ceases to qualify as a Reported Exchange Security, as determined by a nationally recognized investment banking firm selected for this purpose by the Company. (2) If a Reorganization Event shall occur, subject to the conditions described in Section 1402(d), upon exchange of any Notes at the option of the Holder, each Holder of a Note will have the right to receive the kind and amount of cash, Exchange Securities or other property receivable upon such Reorganization Event by a holder of the number of shares of Salomon Common Stock for which such Note might have been exchanged immediately prior to such Reorganization Event (assuming that such Holder failed to exercise his rights of election, if any, as to the kind or amount of cash, Exchange Securities, and other property receivable in such Reorganization Event). If a Holder elects to exchange any Notes for Exchange Securities following a Reorganization Event, such Holder will be responsible for the payment of any and all brokerage and other transaction costs upon the sale of such Exchange Securities. (3) The kind and amount of securities into which the Notes shall be exchangeable by the Company after consummation of any Reorganization Event shall be subject to adjustment as described in paragraph (a) above following the date of consummation of such transaction. SECTION 1406. Notice of Adjustments and Certain Other Events. (a) Whenever the Exchange Rate or the consideration receivable upon exchange is adjusted as herein provided, the Company shall: (1) forthwith compute the adjusted Exchange Rate in accordance with Section 1405 and prepare an Officers' Certificate setting forth the adjusted Exchange Rate or 16 15 exchange consideration, the method of calculation thereof in reasonable detail, and the facts requiring such adjustment and upon which such adjustment is based, which certificate shall be conclusive, final and binding evidence of the correctness of the adjustment, and file such certificate forthwith with the Trustee; and (2) within 10 Business Days following the occurrence of an event that permits or requires an adjustment to the Exchange Rate or exchange consideration pursuant to Section 1405 (or if the Company is not aware of such occurrence, as soon as practicable after becoming so aware), provide an Officers' Certificate to the Trustee and written notice to the Holders of the Outstanding Notes of the occurrence of such event and a statement in reasonable detail setting forth the method by which the adjustment to the Exchange Rate or exchange consideration was determined and setting forth the revised Exchange Rate or exchange consideration per Note. The Trustee shall not be deemed to know of any adjustment in the Exchange Rate or the consideration receivable upon exchange, or of any facts requiring such an adjustment, unless and until it shall have received, at its Corporate Trust Office, an Officers' Certificate to such effect. (b) In case at any time while any of the Notes are outstanding the Company receives notice that: (1) Salomon has declared a dividend (or any other distribution) on or in respect of the Salomon Common Stock to which Section 1405(a)(1) or (2) shall apply (other than any cash dividends and distributions, if any, paid from time to time by Salomon that do not constitute Extraordinary Cash Dividends); (2) Salomon has authorized the issuance to all holders of Salomon Common Stock of rights or warrants to subscribe for or purchase shares of Salomon Common Stock or of any other subscription rights or warrants; (3) there shall be proposed any conversion or reclassification of Salomon Common Stock (other than a subdivision or combination of outstanding shares of such Salomon Common Stock) or any consolidation, merger or reorganization to which Salomon is a party and for which approval of any stockholders of Salomon is required; or (4) there shall be proposed the voluntary or involuntary dissolution, liquidation or winding up of Salomon; then the Company shall promptly cause to be delivered to the Trustee and filed at the office or agency maintained for the purpose of exchange of Notes in the Borough of Manhattan, in The City of New York by the Trustee, and shall promptly cause to be mailed to the Holders 17 16 of the Notes at their last addresses as they shall appear upon the registration books of the Securities Registrar, at least 10 days before the date hereinafter specified (or the earlier of the dates hereinafter specified, in the event that more than one is specified), a notice stating (i) the date on which a record is to be taken for the purpose of such dividend, distribution or grant of rights or warrants, or, if a record is not to be taken, the date as of which the holders of Salomon Common Stock to be entitled to such dividend, distribution or grant of rights or warrants are to be determined, or (ii) the date, if known by the Company, on which such reclassification, consolidation, merger, dissolution, liquidation or winding up is expected to become effective. The Trustee shall not be deemed to know of any declaration, issuance or proposal unless and until it shall have received, at its Corporate Trust Office, an Officers' Certificate to such effect. SECTION 1407. Taxes. (a) The Company will pay any and all documentary, stamp, transfer or similar taxes that may be payable in respect of the transfer and delivery of Salomon Common Stock pursuant hereto; provided, however, that the Company shall not be required to pay any such tax which may be payable in respect of any transfer involved in the delivery of Salomon Common Stock in a name other than that in which the Notes so exchanged were registered, and no such transfer or delivery shall be made unless and until the Person requesting such transfer has paid to the Company the amount of any such tax, or has established, to the satisfaction of the Company, that such tax has been paid. (b) The Company and, by its purchase of a Note hereby, each Holder of a Note agree to treat, for U.S. federal income tax purposes, each Note as a contingent payment debt instrument subject to the U.S. Treasury regulations under the Internal Revenue Code of 1986, as amended, governing such instruments (Treas. Reg. Section 1.1275-4) and to report all income (or loss) with respect to the Notes in accordance with those regulations. SECTION 1408. Shares Free and Clear. The Company hereby warrants that upon exchange of any Note for Salomon Common Stock pursuant to this Indenture, the Holder of such Note shall receive all rights held by the Company in the Salomon Common Stock for which such Note is at such time exchangeable pursuant to this Indenture, free and clear of any and all liens, claims, charges and encumbrances other than any liens, claims, charges and encumbrances which may have been placed on any Salomon Common Stock by the prior owner thereof, prior to the time such Salomon Common Stock was acquired by the Company. Except as provided in Section 1407, the Company will pay all taxes and charges with respect to the delivery of Salomon Common Stock delivered in exchange for Notes hereunder. In addition, the Company further warrants that any Salomon Common Stock so delivered in exchange for Notes 18 17 hereunder shall be free of any transfer restrictions (other than such as are solely attributable to any Holder's status as an affiliate of Salomon). SECTION 1409. Cancellation of Debt Security. Upon receipt by the Trustee of Notes delivered to it for exchange under this Article Fourteen, the Trustee shall cancel and dispose of the same as provided in Section 309." (e) By amending the table of contents of the Basic Indenture to reflect the additions described in subsections (a) and (d) of this Section 3. SECTION 4. The form of Notes attached hereto as Exhibit A is hereby adopted, pursuant to Section 202 of the Indenture, as a form of Debt Securities of a series that consists of Notes. SECTION 5. The Basic Indenture, as supplemented and amended by this Supplemental Indenture and all other indentures thereto, is in all respects ratified and confirmed, and the Basic Indenture, this Supplemental Indenture and all indentures supplemental thereto shall be read, taken and construed as one and the same instrument. SECTION 6. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Supplemental Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. SECTION 7. All covenants and agreements in this Supplemental Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 8. In case any provision in this Supplemental Indenture or in the Debt Securities of any series shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions (or of the other series of Debt Securities) shall not in any way be affected or impaired thereby. If the Company elects to deliver cash in lieu of Salomon Common Stock at Maturity, the Company will be obligated to deliver cash with respect to all, but not less than all, of the shares of Salomon Common Stock that would otherwise be deliverable; provided, however, that the Company will deliver Salomon Common Stock to any Holder if in the Company's determination the delivery of cash to such Holder may violate applicable law. SECTION 9. Nothing in this Supplemental Indenture, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Holders of each series of Debt Securities any benefit or any legal or equitable right, remedy or claim under this Supplemental Indenture. 19 18 SECTION 10. This Supplemental Indenture and each Debt Security of any series shall be deemed to be a contract made under the laws of the State of New York and this Supplemental Indenture and each such Debt Security shall be governed by and construed in accordance with the laws of the State of New York. SECTION 11. All capitalized terms used in this Supplemental Indenture and not otherwise defined herein that are defined in the Basic Indenture shall have the meanings set forth therein. SECTION 12. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 13. The recitals contained herein and in the Debt Securities, except the certificate of authentication of the Trustee thereon, shall be taken as statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of the Basic Indenture, this Supplemental Indenture or of the Debt Securities and shall not be accountable for the use or application by the Company of the Debt Securities or the proceeds thereof. 20 19 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. BERKSHIRE HATHAWAY INC. By............................... Attest: ................................... STATE STREET BANK AND TRUST COMPANY, Trustee By............................... Attest: ................................... 21 20 STATE OF NEBRASKA ) ) ss.: COUNTY OF DOUGLAS ) On the .... day of November, 1996, before me personally came ..........................., to me known, who, being by me duly sworn, did depose and say that he/she is .................... of Berkshire Hathaway Inc., one of the corporations described in and which executed the foregoing instrument; that he/she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority. .................................. STATE OF ________ ) ) ss.: COUNTY OF ________ ) On the .... day of November, 1996, before me personally came ..........................., to me known, who, being by me duly sworn, did depose and say that he/she is .................... of State Street Bank and Trust Company, a Massachusetts trust company described in and which executed the foregoing instrument; that he/she knows the seal of said trust company; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority. ................................. 22 Exhibit A GLOBAL NOTE THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF CEDE & CO., THE NOMINEE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"). UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST THEREIN. BERKSHIRE HATHAWAY INC. [___]% Senior Exchangeable Notes Due [________], 2001 No. ......... $ ........ Berkshire Hathaway Inc., a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of [________________] Dollars ($[___________]) on [__________], 2001, and to pay interest thereon from [__________], 1996 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on [__________] and [__________] in each year, commencing [__________], 1997 at the rate of [___]% per annum, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the [__________] and [__________] (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. 23 At Maturity, if both (1) the 10-Day Average Closing Price of Salomon Common Stock and (2) the Closing Price of Salomon Common Stock on the last Trading Day prior to Maturity are equal to or greater than the Exchange Price then in effect, each Note will be exchanged by the Company into shares of Salomon Common Stock at the Exchange Rate, or the Company may, at its option, deliver cash, in lieu of delivering shares of Salomon Common Stock, in an amount equal to the product obtained by multiplying the Exchange Rate by the Current Market Price of Salomon Common Stock at Maturity. In all other circumstances, the Company will pay at Maturity, in cash, a price per Note equal to the principal amount due at Maturity (or, in the event the Notes mature prior to the Maturity Date, the Accreted Value thereof). In all events, accrued and unpaid interest to Maturity shall be payable by the Company in cash on all Notes outstanding at Maturity. The Exchange Rate or exchange consideration will be subject to adjustment as provided in the Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made on each Interest Payment Date or at Maturity by the Trustee as Paying Agent by wire transfer of immediately available funds to a separate account of the Depositary or its nominee at the Federal Reserve Bank of New York, provided that, in the case of payments made at Maturity of this Security, this Security is presented to the Trustee in time for the Trustee to make such payments in accordance with its normal procedures. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. A-2 24 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: November [__], 1996 BERKSHIRE HATHAWAY INC. By............................ Attest: ............................... TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities of the Series designated herein referred to in the within-mentioned Indenture. STATE STREET BANK AND TRUST COMPANY, Trustee By............................ A-3 25 REVERSE OF SECURITY This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of December 1, 1987, between the Company and State Street Bank and Trust Company, as successor Trustee thereunder (herein called the "Trustee", which term includes any successor trustee under the Indenture), as supplemented by a First Supplemental Indenture, dated as of November [___], 1996, between the Company and the Trustee (herein collectively called the "Indenture"), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to [______________] dollars ($[__________]). Subject to and upon compliance with the provisions of the Indenture, on the last Trading Day of each January, April, July and October, from and including January 1997 through and including July 2001, any Notes (other than Notes with respect to which a notice of exchange for Salomon Common Stock has been delivered by the Company prior to such Exchange Date) will be exchangeable, at the option of the Holder, for shares of Salomon Common Stock at the Exchange Rate of [____] shares of Salomon Common Stock per Note (or at the current adjusted Exchange Rate if an adjustment has been made as provided in the Indenture), provided that the Closing Price of Salomon Common Stock on the Exchange Date exceeds the Exchange Price then in effect, and subject to certain additional conditions described below. In the event that a prospectus supplement and prospectus of Salomon covering the shares of Salomon Common Stock which may be received by a Holder of Notes upon an exchange is required to be delivered under the Securities Act of 1933 and is not made available by Salomon to the Company for use during any Exchange Period, the Company shall, on or prior to the applicable Exchange Date, upon written notice to each Holder that has complied with the procedures for exchange of Notes described herein (an "Electing Holder"), postpone such Exchange Date from time to time until such later Business Day (the "New Exchange Date") as the Company is able to deliver a Salomon Prospectus or is no longer required to do so. In the event that the Company postpones any Exchange Date, (1) no additional Notes may be delivered to the Trustee by any Holder for exchange into Salomon Common Stock at any time during the period from the original Exchange Date through and including the New Exchange Date, (2) each Electing Holder shall have the right, until the New Exchange Date, to irrevocably withdraw any Notes delivered to the Trustee on or prior to the original Exchange Date, and (3) any Notes that have not been withdrawn by an Electing Holder prior to the New Exchange Date shall be exchanged for shares of Salomon Common Stock on the New Exchange Date, provided that the Closing Price of Salomon Common Stock on the New Exchange Date exceeds the Exchange Price then in effect. In addition, if a Reorganization Event shall have occurred, the Notes shall not be exchangeable at the option of the Holder for any Exchange Securities during any Exchange Period if a prospectus covering such Exchange Securities is required to be delivered by the Company under the Securities Act and is not available to the Company for use during such Exchange Period. A-4 26 The Notes will not be redeemable or exchangeable at the option of the Company prior to [_________], 1999. Thereafter, (1) at any time when both (A) the 10-Day Average Closing Price of the Salomon Common Stock on the date on which the applicable notice of redemption is given and (B) the Closing Price of Salomon Common Stock on the last Trading Day prior to such date are equal to or greater than the Exchange Price then in effect, the Company may, at its option, either (i) exchange the Notes, in whole or in part, for shares of Salomon Common Stock at the Exchange Rate then in effect or (ii) redeem the Notes, in whole or in part, in cash at a price per Note equal to the product of the Exchange Rate then in effect and the Current Market Value of Salomon Common Stock on the date on which the applicable notice of redemption is given, and (2) at any other time, the Company may, at its option redeem the Notes, in whole or in part, in cash at a price per Note equal to the Accreted Value of the Notes on the date of redemption. However, the Company may not give any notice of redemption for cash (x) during the period from the beginning of any Exchange Period until the close of business on the applicable Exchange Date or New Exchange Date or (y) prior to the beginning of any Exchange Period if the Redemption Date would occur during or after such Exchange Period. Upon any exchange or redemption described in clause (1) above, the Holders of Notes will not receive any payment representing accrued OID; such accrued OID will be deemed paid upon the receipt of Salomon Common Stock or the cash equivalent received on such exchange or redemption. In connection with any redemption or exchange prior to Maturity of the Notes, the Company will notify the Depositary and the Trustee and will publish a notice in a daily newspaper of national circulation stating (1) the Exchange Rate then in effect, (2) whether the Notes will be exchanged for shares of Salomon Common Stock or redeemed for cash and (3) the redemption or Exchange Date (which shall be at least 15 days but not more than 30 days after the date of such notice). On the Exchange Date with respect to any exchange of Notes for Salomon Common Stock, such Notes shall cease to be outstanding and shall be deemed to represent solely the right to receive shares of Salomon Common Stock in accordance with the terms of the Indenture. The Company will pay in cash the accrued and unpaid interest on all Notes redeemed or exchanged to but excluding the date of redemption or exchange. In any exchange of Notes for shares of Salomon Common Stock at or prior to Maturity of the Notes, no fractional shares of Salomon Common Stock will be issued, as provided in the Indenture. If the Company exchanges Notes for shares of Salomon Common Stock, Holders of the Notes will be responsible for the payment of any brokerage costs incurred upon the subsequent sale of such shares. If less than all the Notes then outstanding are to be redeemed or exchanged prior to maturity of the Notes, the Trustee will select those to be redeemed or exchanged as a whole or in part pro rata or by lot or by such method as the Trustee shall deem fair and appropriate. Notice of redemption or exchange will be given to holders of the Notes to be redeemed or exchanged by first-class mail, postage prepaid at their last address appearing on the Note registry books. A-5 27 If an Event of Default with respect to Securities of this series shall occur and be continuing, the Accreted Value of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of 66 2/3% in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. A-6 28 The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. A-7 EX-8 4 OPINION RE TAX MATTERS 1 Exhibit 8 [MUNGER, TOLLES & OLSON LETTERHEAD] November 22, 1996 Berkshire Hathaway Inc. 1440 Kiewit Plaza Omaha, Nebraska 68131 Gentlemen: You have requested our opinion regarding the United States federal income tax characterization of the Notes being offered in connection with the Registration Statement on Form S-3, Registration No. 33-30570, as filed with the Securities and Exchange Commission on August 30, 1989 by Berkshire Hathaway Inc., as amended by Post-Effective Amendment No. 1 to the Form S-3, filed on November 8, 1996, and Post-Effective Amendment No. 2 to the Form S-3, filed on November 22, 1996 (as amended, the "Registration Statement"). Terms used herein and not otherwise defined herein shall have the same meaning as in the Registration Statement. In rendering our opinion, we have reviewed the Registration Statement and such other materials as we have deemed necessary or appropriate as a basis for our opinion. In addition, we have considered the applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations promulgated thereunder by the Treasury Department (the "Regulations"), pertinent judicial authorities, rulings of the Internal Revenue Service (the "IRS") and such other authorities as we have considered relevant, in each case, in effect on the date hereof. It should be noted that such Code, Regulations, judicial decisions, 2 Exhibit 8 [MUNGER, TOLLES & OLSON LETTERHEAD] Berkshire Hathaway Inc. November 21, 1996 Page 2 administrative interpretations and such other authorities are subject to change at any time and, in some circumstances, with retroactive effect. A material change in any of the materials or authorities upon which our opinion is based could affect our conclusions stated herein. There can be no assurance that a contrary position will not asserted by the IRS. Based upon the foregoing, it is our opinion that the Notes will be treated as single debt instruments subject to recently issued U.S. Treasury regulations governing contingent payment debt instruments. This opinion is being furnished in connection with the Registration Statement. Any variation or difference in the facts from those set forth in the Registration Statement may affect the conclusions stated herein. We hereby consent to the use of our name under the caption "Certain United States Federal Income Tax Considerations" in the Registration Statement and to the filing of this opinion as an Exhibit to the Registration Statement. In giving this consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder. Very truly yours, Munger, Tolles & Olson EX-12 5 STATEMENT RE COMPUTATION OF RATIOS 1 EXHIBIT 12 BERKSHIRE HATHAWAY INC. CALCULATION OF RATIO OF CONSOLIDATED EARNINGS TO CONSOLIDATED FIXED CHARGES (DOLLARS IN MILLIONS)
NINE MONTHS ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31, ------------------- ------------------------------------------------------ 1996 1995 1995 1994 1993 1992 1991 -------- ------ -------- ------ -------- ------ ------ Net earnings..................... $2,123.9 $525.7 $ 794.9 $553.0 $ 843.6 $460.4 $507.0 Income tax expense............. 1,045.4 160.0 276.2 163.2 439.7 142.5 147.4 Minority interest in earnings..................... 16.6 10.4 13.3 8.7 10.0 5.2 11.0 Equity in the earnings of less than 50% owned investees..... -- (71.6) (92.5) (29.9) (103.6) (57.5) (72.5) Fixed charges*................. 96.5 51.4 75.5 70.2 65.7 85.6 92.9 -------- ------ -------- ------ -------- ------ ------ Earnings available for fixed charges........................ $3,282.4 $675.9 $1,067.4 $765.3 $1,255.4 $636.2 $685.8 ======== ====== ======== ====== ======== ====== ====== Realized investment gain, pretax, included in earnings available for fixed charges.............. $2,428.6 $141.2 $ 194.1 $ 91.3 $ 546.4 $ 89.9 $192.5 ======== ====== ======== ====== ======== ====== ====== Fixed charges* Interest on indebtedness....... $ 79.7 $ 40.6 $ 59.3 $ 60.1 $ 56.6 $ 76.1 $ 83.6 Rentals representing interest..................... 16.8 10.8 16.2 10.1 9.1 9.5 9.3 -------- ------ -------- ------ -------- ------ ------ $ 96.5 $ 51.4 $ 75.5 $ 70.2 $ 65.7 $ 85.6 $ 92.9 ======== ====== ======== ====== ======== ====== ====== Ratio of earnings to fixed charges*....................... 34.01 13.15 14.14 10.90 19.11 7.43 7.38 ======== ====== ======== ====== ======== ====== ====== Ratio of earnings, excluding realized investment gain, to fixed charges*................. 8.85 10.40 11.57 9.60 10.79 6.38 5.31 ======== ====== ======== ====== ======== ====== ======
- --------------- * Excludes fixed charges of finance businesses which consist of interest on indebtedness and, in years prior to 1994, interest on savings deposits. Fixed charges of finance businesses were as follows:
NINE MONTHS ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31, ------------------- ------------------------------------------------------ 1996 1995 1995 1994 1993 1992 1991 -------- ------ -------- ------ -------- ------ ------ Finance business fixed charges... 24.6 30.4 29.1 31.8 24.4 26.1 32.9
Including fixed charges of finance businesses the ratios of earnings to fixed charges were as follows:
NINE MONTHS ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31, ------------------- ------------------------------------------------------ 1996 1995 1995 1994 1993 1992 1991 -------- ------ -------- ------ -------- ------ ------ Including realized investment gain........................... 27.31 9.70 10.48 7.82 14.21 5.93 5.71 Excluding realized investment gain... 7.25 7.73 8.63 6.92 8.14 5.12 4.18
EX-23.1 6 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Post-Effective Amendment No. 2 to the Registration Statement (No. 33-30570) of Berkshire Hathaway Inc. on Form S-3, of our report on schedules dated March 8, 1996 appearing in the Annual Report on Form 10-K of Berkshire Hathaway Inc. for the year ended December 31, 1995, and our report dated March 8, 1996 (July 16, 1996 as to the restatement described in Note 1(a) to the financial statements) appearing in the Current Report on Form 8-K of Berkshire Hathaway Inc. filed July 26, 1996, and to the reference to us under the heading "Experts" in the Prospectus which is part of this Registration Statement. Deloitte & Touche LLP Omaha, Nebraska November 21, 1996 EX-23.2 7 CONSENT OF COOPERS & LYBRAND LLP 1 EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Post-Effective Amendment No. 2 to the Registration Statement (No. 33-30570) of Berkshire Hathaway Inc. on Form S-3, of our report dated February 16, 1996, on our audits of the consolidated financial statements of GEICO Corporation and subsidiaries as of December 31, 1995 and 1994, and for the years ended December 31, 1995, 1994 and 1993, which report is incorporated by reference into the Current Report on Form 8-K of Berkshire Hathaway Inc. filed March 27, 1996, and to the reference to us under the heading "Experts" in the Prospectus which is part of this Registration Statement. Coopers & Lybrand L.L.P. Washington, D.C. November 22, 1996 -----END PRIVACY-ENHANCED MESSAGE-----