AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1996
REGISTRATION NO. 333-08319
POST-EFFECTIVE AMENDMENT NO. 3 TO REGISTRATION STATEMENT NO. 33-63613
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT 1
TO
FORM S-3
REGISTRATION STATEMENT
AND POST EFFECTIVE AMENDMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
LEHMAN BROTHERS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-2518466
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
THOMAS A. RUSSO, ESQ.
CHIEF LEGAL OFFICER
LEHMAN BROTHERS INC.
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
JENNIFER MARRE, ESQ. RAYMOND W. WAGNER, ESQ.
LEHMAN BROTHERS INC. SIMPSON THACHER & BARTLETT
3 WORLD FINANCIAL CENTER 425 LEXINGTON AVENUE
24TH FLOOR NEW YORK, NEW YORK 10017
NEW YORK, NEW YORK 10285
</TABLE>
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement, as determined in
light of market conditions.
-------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT AGGREGATE AGGREGATE AMOUNT OF
OF SECURITIES TO BE TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED (A) (B) (C) UNIT PRICE (C) (D) FEE (C) (E)
<S> <C> <C> <C> <C>
Debt Securities.................. U.S. $1,500,000,000 100% U.S. $1,500,000,000 U.S. $517,242
</TABLE>
<TABLE>
<C> <S>
(a) Includes the amount, if any, that may be acquired and sold by an affiliate of the Registrant
in connection with certain market making activities of such affiliate.
(b) Or, if any Debt Securities are issued (i) with an initial offering price denominated in a
foreign currency or a foreign currency unit, such amount shall result in aggregate gross
proceeds equivalent to U.S. $1,500,000,000 to the Registrant at the time of initial offering
or (ii) at an original issue discount, such greater amount as shall result in aggregate gross
proceeds of U.S. $1,500,000,000 to the Registrant.
(c) Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus herein also relates to
$250,000,000 of debt securities of the Registrant registered under Registration Statement No.
33-63615. A filing fee of $86,207 in respect of such securities was paid on October 23, 1995
upon the filing of such Registration Statement.
(d) Estimated solely for the purpose of calculating the registration fee.
(e) $344,828 previously paid with respect to an aggregate $1,000,000,000 of Debt Securities
calculated in accordance with Rule 457(o) under the Securities Act of 1933.
</TABLE>
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS HEREIN
IS A COMBINED PROSPECTUS AND ALSO RELATES TO REGISTRATION STATEMENT NO. 33-63613
PREVIOUSLY FILED WITH THE COMMISSION ON FORM S-3 AND DECLARED EFFECTIVE NOVEMBER
8, 1995. THIS REGISTRATION STATEMENT ALSO CONSTITUTES POST-EFFECTIVE AMENDMENT
NO. 3 TO REGISTRATION STATEMENT NO. 33-63613.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION DATED JULY 23, 1996
PROSPECTUS
LEHMAN BROTHERS INC.
DEBT SECURITIES
------------------------
Lehman Brothers Inc. (the "Company") may offer from time to time unsecured
senior debt securities ("Senior Debt Securities") and unsecured senior
subordinated debt securities ("Senior Subordinated Debt Securities") and
(together, "Debt Securities") consisting of debentures, notes and/or other
evidences of indebtedness in one or more series for proceeds of up to
U.S.$1,750,000,000, or the equivalent thereof if any of the Senior Debt
Securities are denominated in a foreign currency or foreign currency unit.
The Senior Subordinated Debt Securities will (as hereinafter defined) rank
equally with all other senior subordinated indebtedness of the Company and are
subordinated to all Senior Indebtedness as defined in the Subordinated
Indenture. There is no limitation on the amount of Senior Indebtedness which may
be incurred by the Company.
The Debt Securities may be offered as separate series in amounts, at prices
and on terms to be determined at the time of sale. The Senior Debt Securities
may be sold for United States dollars, foreign currencies or foreign currency
units, and the principal of and interest, if any, on the Debt Securities may be
payable in United States dollars, foreign currencies or foreign currency units.
The Senior Subordinated Debt Securities may be sold only for, and may be payable
only in, United States dollars. The specific designation, priority, aggregate
principal amount, the currency or currency unit for which the Debt Securities
may be purchased, the currency or currency unit in which the principal and
interest, if any, is payable, the rate (or method of calculation) and time of
payment of interest, if any, authorized denominations, maturity, offering price,
any redemption terms, any listing on a securities exchange and the initial
public offering price and any other terms in connection with the offering and
sale of Debt Securities in respect of which this Prospectus is being delivered
are set forth in an applicable Prospectus Supplement.
The Senior Debt Securities may be issued in registered form or bearer form
with coupons attached. Senior Debt Securities in bearer form will be offered
only outside the United States to non-United States persons and to offices
located outside the United States of certain United States financial
institutions. See "Limitations on Issuance of Bearer Securities." The Senior
Subordinated Debt Securities may be issued only in registered form. In addition,
all or a portion of the Debt Securities of a series may be issued in global
form.
For a discussion of certain United States federal income tax consequences to
holders of Debt Securities, see "United States Taxation."
------------------------
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 Debt Securities may be sold through, or through underwriting syndicates
managed by, Lehman Brothers Inc. alone or with one or more other underwriters.
The applicable Prospectus Supplement sets forth the names of the specific
managing underwriter or underwriters and the members of the underwriting
syndicate, if any, involved in the sale of the Debt Securities in respect of
which this Prospectus is being delivered.
------------------------
This Prospectus, together with the applicable Prospectus Supplement, may
also be used by Lehman Brothers International (Europe) in connection with offers
and sales of Debt Securities related to market making transactions at negotiated
prices related to prevailing market prices at the time of sale or otherwise.
Lehman Brothers International (Europe) may act as principal or agent in such
transactions.
------------------------
, 1996
<PAGE>
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. INFORMATION
CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. 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
STATE.
<PAGE>
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 and other information with the Securities and Exchange
Commission (the "SEC"). Such reports and information may be inspected and copied
at the public reference facilities maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the SEC:
New York Regional Office, 7 World Trade Center, New York, New York 10048; and
Chicago Regional Office, Suite 1400, Citicorp Center, 500 W. Madison Street,
Chicago, Illinois 60661-2511; and copies of such material can be obtained from
the Public Reference Section of the SEC, Washington, D.C. 20549, at prescribed
rates. The SEC also maintains a Web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. In addition, reports and
other information concerning the Company may be inspected at the offices of the
New York Stock Exchange, Inc. (the "NYSE") at 20 Broad Street, New York, New
York 10005.
The Company has filed with the SEC registration statements on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statements") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statements, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further information,
reference is hereby made to the Registration Statements.
------------------------
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the SEC
pursuant to the Exchange Act are hereby incorporated by reference in this
Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
November 30, 1995.
(2) The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended February 29 and May 31, 1996.
Each document filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debt Securities offered by an applicable
Prospectus Supplement shall be deemed to be incorporated by reference into this
Prospectus from the date of filing of such document. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of the Registration
Statements and this Prospectus to the extent that a statement contained herein,
in an applicable Prospectus Supplement 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 the
Registration Statements or this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of any Debt Security, to whom a copy of this Prospectus is
delivered, upon the written or oral request of any such person, a copy of any or
all of the documents which are incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to Mary Jo Capko,
the Controller's Office, Lehman Brothers Inc., 3 World Financial Center, 27th
Floor, New York, New York 10285 (telephone (212) 526-0660).
2
<PAGE>
THE COMPANY
The Company is one of the leading global investment banks serving
institutional, corporate, government and high net worth individual clients and
customers. The Company's worldwide headquarters in New York are complemented by
offices in additional locations in the United States, Europe, the Middle East,
Latin America and the Asia Pacific region. The Company also operates a
commodities trading and sales operation in London. Affiliates of the Company
provide investment banking and capital markets services in Europe and Asia.
The Company's business includes capital raising for clients through
securities underwriting and direct placements; corporate finance and strategic
advisory services; merchant banking; securities sales and trading; asset
management; research; and the trading of foreign exchange, derivative products
and certain commodities. The Company acts as a market marker in all major fixed
income and equity products in both the domestic and international markets. The
Company is a member of all principal securities and commodities exchanges in the
United States, as well as the National Association of Securities Dealers, Inc.
("NASD"). Affiliates of the Company hold memberships or associate memberships on
several principal international securities and commodities exchanges, including
the London, Tokyo, Hong Kong, Frankfurt and Milan stock exchanges.
The Company was incorporated in Delaware in 1965. The Company is a
wholly-owned subsidiary of Lehman Brothers Holdings Inc. ("Holdings"). The
Company's executive offices are located at 3 World Financial Center, New York,
New York 10285 (telephone (212) 526-7000). Unless the context otherwise
indicates, the term "Company" as used in this Prospectus includes Lehman
Brothers Inc. and its subsidiaries.
USE OF PROCEEDS
Except as otherwise may be set forth in an applicable Prospectus Supplement
accompanying this Prospectus, the Company intends to apply the net proceeds from
the sale of the Debt Securities to its general funds to be used for general
corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of the
Company for each of the three years in the period ended December 31, 1993, the
eleven months ended November 30, 1994, the year ended November 30, 1995 and the
six months ended May 31, 1996:
<TABLE>
<CAPTION>
ELEVEN MONTHS SIX MONTHS
YEAR ENDED DECEMBER ENDED YEAR ENDED ENDED
31, NOVEMBER 30, NOVEMBER 30, MAY 31,
---------------------- ------------- ------------ -----------
1991 1992 1993 1994 1995 1996
---- ---- ---- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1.05 1.05 * * 1.01 1.03
</TABLE>
----------------
* Earnings were inadequate to cover fixed charges and would have had to
increase approximately $214 million in 1993 and $51 million in the eleven
months ended November 30, 1994 in order to cover the deficiencies for the
respective periods.
In computing the ratio of earnings to fixed charges, "earnings" consist of
earnings from continuing operations before income taxes and fixed charges.
"Fixed charges" consist principally of interest expense and one-third of office
rentals and one-fifth of equipment rentals, which are deemed to be
representative of the interest factor.
3
<PAGE>
DESCRIPTION OF SENIOR DEBT SECURITIES
The following description sets forth general terms and provisions of the
Senior Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Senior Debt Securities offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may or may
not apply to the Senior Debt Securities so offered will be described in the
Prospectus Supplement relating to such Senior Debt Securities.
The Senior Debt Securities are to be issued under an indenture, dated as of
October 23, 1995, between the Company and The Bank of New York, Trustee (the
"Senior Indenture"). A copy of the Senior Indenture is filed as an exhibit to
the Registration Statements of which this Prospectus is a part. This Prospectus
contains descriptions of all material provisions of the Senior Indenture. The
summaries of such provisions of the Senior 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 Senior Indenture, including the definitions
therein of certain terms. Wherever particular provisions or defined terms of the
Senior Indenture are referred to, such provisions or defined terms are
incorporated herein by reference. All articles and sections of the Senior
Indenture, and all capitalized terms set forth below, have the meanings
specified in the Senior Indenture.
GENERAL
The Indenture does not limit the amount of Senior Debt Securities which may
be issued thereunder and provides that Senior Debt Securities may be issued from
time to time in one or more series.
Reference is made to an applicable Prospectus Supplement for the following
terms and other information with respect to the Senior Debt Securities being
offered thereby: (1) the title of such Senior Debt Securities; (2) any limit on
the aggregate principal amount of such Senior Debt Securities; (3) whether the
Senior Debt Securities are to be issuable as Registered Securities or Bearer
Securities or both, and if Bearer Securities are issued, whether Bearer
Securities may be exchanged for Registered Securities and the circumstances and
places for such exchange, if permitted; (4) whether the Senior Debt Securities
are to be issued in whole or in part in the form of one or more temporary or
permanent global Senior Debt Securities ("Global Securities") in registered or
bearer form and, if so, the identity of the depositary, if any, for such Global
Security or Securities; (5) the date or dates (or manner of determining the
same) on which such Senior Debt Securities will mature; (6) the rate or rates
(or manner of determining the same) at which such Senior Debt Securities will
bear interest, if any, and the date or dates from which such interest will
accrue; (7) the dates (or manner of determining the same) on which such interest
will be payable and the Regular Record Dates for such Interest Payment Dates for
Senior Debt Securities which are Registered Securities, and the extent to which,
or the manner in which, any interest payable on a temporary or permanent global
Senior Debt Security on an Interest Payment Date will be paid if other than in
the manner described under "Global Securities" below; (8) any mandatory or
optional sinking fund or analogous provisions; (9) each office or agency where,
subject to the terms of the applicable Senior Indenture as described below under
"Payment and Paying Agents", the principal of and premium, if any, and interest,
if any, on the Senior Debt Securities will be payable and each office or agency
where, subject to the terms of the Senior Indenture as described below under
"Denominations, Registration and Transfer," the Senior Debt Securities may be
presented for registration of transfer or exchange; (10) the date, if any, after
which, and the price or prices in the currency or currency unit in which, such
Senior Debt Securities are payable pursuant to any optional or mandatory
redemption provision; (11) any provisions for payment of additional amounts for
taxes and any provision for redemption, in the event the Company must comply
with reporting requirements in respect of a Senior Debt Security or must pay
such additional amounts in respect of any Senior Debt Security; (12) the terms
and conditions, if any, upon which the Senior Debt Securities of such series may
be repayable prior to maturity at the option of the holder thereof (which option
may be conditional) and the price or prices in the currency or currency unit in
which such Senior Debt Securities are payable; (13) the denominations in which
any Senior Debt Securities which are Registered Securities will be issuable if
other than denominations of $1,000 and any integral multiple thereof, and the
denomination or denominations in which any Senior Debt Securities which are
Bearer
4
<PAGE>
Securities will be issuable if other than the denomination of $5,000; (14) the
currency, currencies or currency units for which such Senior Debt Securities may
be purchased and the currency, currencies or currency units in which the
principal of and interest, if any, on such Senior Debt Securities may be
payable; (15) any index used to determine the amount of payments of principal of
and premium, if any, and interest, if any, on such Senior Debt Securities; (16)
the terms and conditions, if any, pursuant to which such Senior Debt Securities
may be converted or exchanged for other securities of the Company or any other
person; (17) the terms and conditions, if any, pursuant to which the principal
of and premium, if any, and interest, if any, on such Senior Debt Securities are
payable, at the election of the Company or the holder thereof, in securities or
other property; and (18) other terms of the Senior Debt Securities.
If any of the Senior Debt Securities are sold for foreign currencies or
foreign currency units or if the principal of or interest, if any, on any series
of Senior Debt Securities is payable in foreign currencies or foreign currency
units, the restrictions, elections, tax consequences, specific terms and other
information with respect to such issue of Senior Debt Securities and such
currencies or currency units will be set forth in an applicable Prospectus
Supplement relating thereto.
One or more series of Senior Debt Securities may be sold at a substantial
discount below their stated principal amount, bearing no interest or interest at
a rate which at the time of issuance is below market rates. Federal income tax
consequences and special considerations applicable to any such series are
described under "United States Taxation" and may be further described in an
applicable Prospectus Supplement.
The Senior Debt Securities will be unsecured obligations of the Company
constituting part of the senior debt of the Company (the "Senior Debt") and will
rank equally with all other unsecured debt of the Company except subordinated
debt.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise provided with respect to a series of Senior Debt
Securities, the Senior Debt Securities will be issuable as Registered Securities
without coupons and in denominations of $1,000 or any integral multiple thereof.
Senior Debt Securities of a series may be issuable in whole or in part in the
form of one or more Global Securities, as described below under "Global
Securities." One or more Global Securities will be issued in a denomination or
aggregate denominations equal to the aggregate principal amount of Senior Debt
Securities of the series to be represented by such Global Security or
Securities. If so provided with respect to a series of Senior Debt Securities,
Senior Debt Securities of such series will be issuable solely as Bearer
Securities with coupons attached or as both Registered Securities and Bearer
Securities. (Section 201).
In connection with the sale during the "restricted period" as defined in
Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury Regulations
(generally, the first 40 days after the closing date and, with respect to unsold
allotments, until sold), no Bearer Security shall be mailed or otherwise
delivered to any location in the United States (as defined under "Limitations on
Issuance of Bearer Securities"). A Bearer Security in definitive form (including
interests in a permanent Global Security) may be delivered only if the Person
entitled to receive such Bearer Security furnishes written certification, in the
form required by the Indenture, to the effect that such Bearer Security is not
owned by or on behalf of a United States person (as defined under "Limitations
on Issuance of Bearer Securities"), or, if a beneficial interest in such Bearer
Security is owned by or on behalf of a United States person, that such United
States person (i) acquired and holds the Bearer Security through a foreign
branch of a United States financial institution, (ii) is a foreign branch of a
United States financial institution purchasing for its own account or resale
(and in either case, (i) or (ii), such financial institution agrees to comply
with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder)
or (iii) is a financial institution purchasing for resale during the restricted
period only to non-United States persons outside the United States. (Sections
303, 304). See "Global Securities--Bearer Debt Securities" and "Limitations on
Issuance of Bearer Securities."
5
<PAGE>
Registered Securities of any series (other than a Global Security) will be
exchangeable for other Registered Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations. In
addition, if Senior Debt Securities of any series are issuable as both
Registered Securities and as Bearer Securities, at the option of the Holder upon
request confirmed in writing, and subject to the terms of the Senior Indenture,
definitive Bearer Securities (with all unmatured coupons, except as provided
below, and all matured coupons in default) of such series will be exchangeable
into definitive Registered Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor. Unless
otherwise indicated in an applicable Prospectus Supplement, any definitive
Bearer Security surrendered in exchange for a definitive Registered Security
between a Regular Record Date or a Special Record Date and the relevant date for
payment of interest shall be surrendered without the coupon relating to such
date for payment of interest and interest will not be payable in respect of the
definitive Registered Security issued in exchange for such definitive Bearer
Security, but will be payable only to the Holder of such coupon when due in
accordance with the terms of the Senior Indenture. (Section 305). Except as
provided in an applicable Prospectus Supplement, Bearer Securities will not be
issued in exchange for Registered Securities.
Senior Debt Securities may be presented for exchange as provided above, and
Registered Securities (other than a Global Security) may be presented for
registration of transfer (with the form of transfer endorsed thereon duly
executed), at the office of the Security Registrar or at the office of any
transfer agent designated by the Company for such purpose with respect to any
series of Senior Debt Securities and referred to in an applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental charges as described in the Senior Indenture. Such transfer or
exchange will be effected upon the Security Registrar or such transfer agent, as
the case may be, being satisfied with the documents of title and identity of the
person making the request. The Company has appointed the Trustee as Security
Registrar under the Senior Indenture. (Section 305). If a Prospectus Supplement
refers to any transfer agents (in addition to the Security Registrar) initially
designated by the Company with respect to any series of Senior Debt Securities,
the Company may at any time rescind the designation of any such transfer agent
or approve a change in the location through which any such transfer agent acts,
except that, if Senior Debt Securities of a series are issuable only as
Registered Securities, the Company will be required to maintain a transfer agent
in each Place of Payment for such series and, if Senior Debt Securities of a
series are issuable as Bearer Securities, the Company will be required to
maintain (in addition to the Security Registrar) a transfer agent in a Place of
Payment for such series located outside the United States. The Company may at
any time designate additional transfer agents with respect to any series of
Senior Debt Securities. (Section 1002).
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange Senior Debt Securities of any
series during a period beginning at the opening of business 15 days before any
selection of Senior Debt Securities of that series to be redeemed and ending at
the close of business on (A) if Senior Debt Securities of the series are
issuable only as Registered Securities, the day of mailing of the relevant
notice of redemption and (B) if Senior Debt Securities of the series are
issuable as Bearer Securities, the day of the first publication of the relevant
notice of redemption or, if Senior Debt Securities of the series are also
issuable as Registered Securities and there is no publication, the mailing of
the relevant notice of redemption; (ii) register the transfer of or exchange any
Registered Security, or portion thereof, called for redemption, except the
unredeemed portion of any Registered Security being redeemed in part; or (iii)
exchange any Bearer Security called for redemption, except to exchange such
Bearer Security for a Registered Security of that series and like tenor which is
immediately surrendered for redemption. (Section 305).
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Bearer Securities will
be payable, subject to any applicable laws and regulations, at the offices of
such Paying Agents outside the United States as the Company may designate from
time to time, at the option of the Holder, by check or by transfer to an account
6
<PAGE>
maintained by the payee with a bank located outside the United States. (Sections
307 and 1002). Unless otherwise indicated in an applicable Prospectus
Supplement, payment of interest on Bearer Securities on any Interest Payment
Date will be made only against surrender of the coupon relating to such Interest
Payment Date. (Section 1001). No payment of interest on a Bearer Security will
be made unless on the earlier of the date of the first such payment by the
Company or the delivery by the Company of the Bearer Security in permanent form
(including interests in a permanent Global Security) (the "Certification Date"),
a written certificate in the form and to the effect described under
"Denominations, Registration and Transfer" is provided to the Company. No
payment with respect to any Bearer Security will be made at any office or agency
of the Company in the United States or by check mailed to any address in the
United States or by transfer to an account maintained with a bank located in the
United States. Notwithstanding the foregoing, payment of principal of (and
premium, if any) and interest on Bearer Securities denominated and payable in
U.S. dollars will be made at the office of the Company's Paying Agent in the
Borough of Manhattan, The City of New York if, and only if, payment of the full
amount thereof in U.S. dollars at all offices or agencies outside the United
States is illegal or effectively precluded by exchange controls or other similar
restrictions. (Section 1002).
Payment of principal of (and premium, if any) and any interest on Registered
Securities (other than a Global Security) will be made in U.S. dollars at the
office of such Paying Agent or Paying Agents as the Company may designate from
time to time, except that at the option of the Company payment of any interest
may be made (i) by check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register or (ii) by wire transfer to
an account maintained by the Person entitled thereto as specified in the
Security Register. (Sections 305, 307, 1002). Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any instalment of interest on
Registered Securities will be made to the Person in whose name such Registered
Security is registered at the close of business on the Regular Record Date for
such interest payment. (Section 307).
The principal corporate trust office of the Trustee under the applicable
Senior Indenture in The City of New York will be designated as the Company's
sole Paying Agent for payments with respect to Senior Debt Securities which are
issuable solely as Registered Securities and as the Company's Paying Agent in
the Borough of Manhattan, The City of New York, for payments with respect to
Senior Debt Securities (subject to the limitations described above in the case
of Bearer Securities) which may be issuable as Bearer Securities. Any Paying
Agents outside the United States and any other Paying Agents in the United
States initially designated by the Company for the Senior Debt Securities will
be named in an applicable Prospectus Supplement. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agents or approve a change in the office through which any Paying Agent acts,
except that, if Senior Debt Securities of a series are issuable only as
Registered Securities, the Company will be required to maintain a Paying Agent
in each Place of Payment for such series, and if Senior Debt Securities of a
series may be issuable as Bearer Securities, the Company will be required to
maintain (i) a Paying Agent in the Borough of Manhattan, The City of New York
for payments with respect to any Registered Securities of the series (and for
payments with respect to Bearer Securities of the series in the circumstances
described above, but not otherwise), and (ii) a Paying Agent in a Place of
Payment located outside the United States where Senior Debt Securities of such
series and any coupons appertaining thereto may be presented and surrendered for
payment; provided that if the Senior Debt Securities of such series are listed
on The Luxembourg Stock Exchange (the "Stock Exchange") or any other stock
exchange located outside the United States and such stock exchange shall so
require, the Company will maintain a Paying Agent in Luxembourg or any other
required city located outside the United States, as the case may be, for the
Senior Debt Securities of such series. (Section 1002).
All moneys paid by the Company to a Paying Agent for the payment of
principal of (and premium, if any) or interest on any Senior Debt Security which
remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company and the
Holder of such Senior Debt Security or any coupon will thereafter look only to
the Company for payment thereof. (Section 1003).
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GLOBAL SECURITIES
The Senior Debt Securities of a series may be issued in whole or in part in
the form of one or more Global Securities that will be deposited with or on
behalf of a depository (a "Depository") identified in the Prospectus Supplement
relating to such series. Global Securities may be issued in either registered or
bearer form and in either temporary or permanent form.
The specific terms of the depository arrangement with respect to any Senior
Debt Securities of a series will be described in the Prospectus Supplement
relating to such series. The Company anticipates that the following provisions
will apply to all depository arrangements.
Senior Debt Securities which are to be represented by a Global Security in
registered form to be deposited with or on behalf of a Depository will be
registered in the name of such Depository or its nominee. Upon the issuance of a
Global Security in registered form, the Depository for such Global Security will
credit the respective principal amounts of the Senior Debt Securities
represented by such Global Security to the accounts of institutions that have
accounts with such depository or its nominee ("participants"). The accounts to
be credited shall be designated by the underwriters or agents of such Senior
Debt Securities or by the Company, if such Senior Debt Securities are offered
and sold directly by the Company. Ownership of beneficial interests in such
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
that ownership interest will be effected only through, records maintained by the
Depository or its nominee for such Global Security. Ownership of beneficial
interests in 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 Depository for a Global Security in registered form, or its
nominee, is the registered owner of such Global Security, such depository or
such nominee, as the case may be, will be considered the sole owner or holder of
the Senior Debt Securities represented by such Global Security for all purposes
under the Senior Indenture. Except as set forth below, owners of beneficial
interests in such Global Securities will not be entitled to have Senior 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 Senior
Debt Securities of such series in definitive form and will not be considered the
owners or holders thereof under the Senior Indenture.
Payment of principal of, premium, if any, and any interest on Senior Debt
Securities registered in the name of or held by a Depository or its nominee will
be made to the Depository or its nominee, as the case may be, as the registered
owner or the holder of the Global Security. None of the Company, the Trustee,
any Paying Agent or the Security Registrar for such Senior Debt Securities will
have any 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. (Section 308).
The Company expects that the Depository for a permanent Global Security in
registered form, upon receipt of any payment of principal, premium 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 such Depository. The Company 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.
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A Global Security in registered form may not be transferred except as a
whole by the Depository for such Global Security to a nominee of such depository
or by a nominee of such depository to such depository or another nominee of such
depository or by such depository or any such nominee to a successor of such
depository or a nominee of such successor. If a Depository for a permanent
Global Security in registered form is at any time unwilling or unable to
continue as depository and a successor depository is not appointed by the
Company within 90 days, the Company will issue Senior Debt Securities in
definitive form in exchange for all of the Global Securities representing such
Senior Debt Securities. In addition, the Company may at any time and in its sole
discretion determine not to have any Senior Debt Securities in registered form
represented by one or more Global Securities and, in such event, will issue
Senior Debt Securities in definitive form in exchange for all of the Global
Securities representing such Senior Debt Securities. (Section 305). Further, if
the Company so specifies with respect to the Senior Debt Securities of a series,
an owner of a beneficial interest in a Global Security representing Senior Debt
Securities of such series may, on terms acceptable to the Company and the
Depository for such Global Security, receive Senior Debt Securities of such
series 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 Senior Debt Securities of the series represented by such
Global Security equal in principal amount to such beneficial interest and to
have such Senior Debt Securities registered in its name (if the Senior Debt
Securities of such series are issuable as Registered Securities). Senior Debt
Securities of such series so issued in definitive form will be issued (a) as
Registered Securities in denominations, unless otherwise specified by the
Company, of $1,000 and integral multiples thereof if the Senior Debt Securities
of such series are issuable as Registered Securities, (b) as Bearer Securities
in the denomination, unless otherwise specified by the Company, of $5,000 if the
Senior Debt Securities of such series are issuable as Bearer Securities or (c)
as either Registered or Bearer Securities if the Senior Debt Securities of such
series are issuable in either form. (Section 305). See, however, "Limitations on
Issuance of Bearer Securities" below for a description of certain restrictions
on the issuance of a Bearer Security in definitive form in exchange for an
interest in a Global Security.
BEARER DEBT SECURITIES
If so specified in an applicable Prospectus Supplement, pending the
availability of a permanent Global Security, all or any portion of the Senior
Debt Securities of a series which may be issuable as Bearer Securities will
initially be represented by one or more temporary Global Securities, without
interest coupons, to be deposited with a common depositary in London for Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear") and Cedel Bank, societe anonyme ("Cedel") for
credit to the designated accounts. The interests of the beneficial owner or
owners in a temporary Global Security in bearer form will be exchangeable for:
(i) in whole, definitive Bearer Securities, (ii) in whole, Senior Debt
Securities to be represented thereafter by one or more permanent Global
Securities, in bearer form without interest coupons, and/or (iii) in whole or in
part, definitive Registered Securities, on or after the Exchange Date; provided,
however, that if definitive Bearer Securities have previously been issued in
exchange for an interest in a permanent Global Security in bearer form
representing Senior Debt Securities of the same series, then interests in such
Senior Debt Securities (with certain exceptions) shall only be exchangeable, in
whole, for definitive Bearer Securities, definitive Registered Securities, or
any combination thereof, representing Senior Debt Securities having the same
interest rate and Stated Maturity, but only upon written certification in the
form and to the effect described under "Denominations, Registration and
Transfer" unless such certification has been provided on an earlier interest
payment date. The beneficial owner of a Senior Debt Security represented by a
permanent Global Security in bearer form may, on or after the applicable
Exchange Date and upon 30 days' notice to the applicable Trustee given through
Euroclear or Cedel, exchange its interest in whole for definitive Bearer
Securities or, if specified in an applicable Prospectus Supplement, in whole or
in part, definitive Registered Securities of any authorized denomination,
provided, however, that if definitive Bearer Securities are issued in partial
exchange for Senior Debt Securities represented by such permanent Global
Security such issuance (with certain exceptions)
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shall give rise to the exchange of such permanent Global Security in whole for,
at the option of the Holders, definitive Bearer Securities, definitive
Registered Securities, or any combination thereof. No Bearer Security delivered
in exchange for a portion of a permanent Global Security shall be mailed or
otherwise delivered to any location in the United States in connection with such
exchange. (Sections 303 and 304).
Unless otherwise specified in an applicable Prospectus Supplement, interest
in respect of any portion of a temporary Global Security in bearer form payable
in respect of an Interest Payment Date occurring prior to the issuance of a
permanent Global Security in bearer form will be paid to each of Euroclear and
Cedel with respect to the portion of the temporary Global Security in bearer
form held for its account. Each of Euroclear and Cedel will undertake in such
circumstances to credit such interest received by it in respect of a temporary
Global Security in bearer form to the respective accounts for which it holds
such temporary Global Security in bearer form as of the relevant Interest
Payment Date, but only upon receipt in each case of written certification, in
the form and to the effect described under "Denomination, Registration and
Transfer."
LIMITATION ON LIENS
So long as any Senior Debt Securities remain outstanding, unless an
applicable Prospectus Supplement relating thereto provides otherwise, the
Company will not, and will not permit any Designated Subsidiary (as defined
below), directly or indirectly, to create, issue, assume, incur or guarantee any
indebtedness for money borrowed which is secured by a mortgage, pledge, lien,
security interest or other encumbrance of any nature on any of the present or
future common stock of a Designated Subsidiary unless the Senior Debt Securities
and, if the Company so elects, any other indebtedness of the Company ranking at
least pari passu with the Senior Debt Securities, shall be secured equally and
ratably with (or prior to) such other secured indebtedness for money borrowed so
long as it is outstanding. (Section 1005).
The term "Designated Subsidiary" means any present or future consolidated
subsidiary of the Company, the consolidated net worth of which constitutes at
least 5% of the consolidated net worth of the Company. As of May 31, 1996, the
Company's Designated Subsidiaries were Lehman Commercial Paper Inc., Structured
Assets Securities Corporation, LB I Group Inc. and Lehman Brothers Financial
Products Inc.
EVENTS OF DEFAULT
Except as may otherwise be set forth in an applicable Prospectus Supplement
relating to a series of Debt Securities, the following are Events of Default
under the Senior Indenture with respect to Senior Debt Securities of such
series: (a) failure to pay principal of or premium, if any, on any Senior Debt
Security of that series when due; (b) failure to pay interest, if any, on any
Senior Debt Security of that series and any related coupons when due, continued
for 30 days; (c) failure to deposit any sinking fund payment or analogous
obligation, when due, continued for 30 days, in respect of any Senior Debt
Security of that series; (d) failure to perform any other covenant of the
Company in the Senior Indenture (other than a covenant included in the Senior
Indenture solely for the benefit of a series of Senior Debt Securities other
than that series), continued for 90 days after written notice as provided in the
Senior Indenture; and (e) certain events in bankruptcy, insolvency or
reorganization in respect of the Company. (Section 501). An Event of Default
with respect to a particular series of Senior Debt Securities does not
necessarily constitute an Event of Default with respect to any other series of
Senior Debt Securities issued under the same or another Senior Indenture. The
Trustee may withhold notice to the Holders of any series of Senior Debt
Securities of any default with respect to such series (except in the payment of
principal, premium or interest, if any) if it considers such withholding to be
in the interests of such Holders. (Section 602).
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If an Event of Default with respect to Senior Debt Securities of any series
at the time outstanding occurs and is continuing, unless the principal of all of
the Senior Debt Securities of such series shall have already become due and
payable, either the Trustee or the Holders of at least 25% in principal amount
of the outstanding Senior Debt Securities of that series may declare the
principal amount (or, if the Senior Debt Securities of that series are (i)
Original Issue Discount Securities, such portion of the principal amount as may
be specified in the terms of the series, or (ii) Indexed Securities or Dual
Currency Securities, the amount determined in accordance with the specified
terms of the series) of all the Senior Debt Securities of that series to be due
and payable immediately. At any time after a declaration of acceleration with
respect to Senior Debt Securities of any series has been made, but before a
judgment or decree based on acceleration has been obtained and entered, the
Holders of a majority in principal amount of the outstanding Senior Debt
Securities of that series may, under certain circumstances, rescind and annul
such acceleration. (Section 502). For information as to waiver of defaults, see
"Meetings, Modification and Waiver."
The Senior Indenture provides that the Trustee will be under no obligation,
subject to the duty of the Trustee during default to act with the required
standard of care, to exercise any of its rights or powers under such Senior
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable indemnity. (Section 603). Subject
to such provisions for indemnification of the Trustee, the Holders of a majority
in principal amount of the outstanding Senior Debt Securities of any series will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee, with respect to the Senior Debt Securities of that
series. (Section 512).
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Senior Indenture and as to any default in such performance. (Section 1006).
SATISFACTION AND DISCHARGE
The Senior Indenture provides that the Company shall be discharged from its
obligations under the Senior Debt Securities of such series (with certain
exceptions) at any time prior to the Stated Maturity or redemption thereof when
(a) the Company has irrevocably deposited with the Trustee, in trust, (i)
sufficient funds in the currency or currency unit in which the Senior Debt
Securities of such series are payable to pay the principal of (and premium, if
any), and interest, if any, to Stated Maturity (or redemption) on, the Senior
Debt Securities of such series, or (ii) such amount of direct obligations of, or
obligations the principal of and interest, if any, on which are fully guaranteed
by, the government which issued the currency in which the Senior Debt Securities
of such series are payable, and which are not subject to prepayment, redemption
or call, as will, together with the predetermined and certain income to accrue
thereon without consideration of any reinvestment thereof, be sufficient to pay
when due the principal of (and premium, if any), and interest, if any, to Stated
Maturity (or redemption) on, the Senior Debt Securities of such series, or (iii)
such combination of such funds and securities as described in (i) and (ii),
respectively, as will, together with the predetermined and certain income to
accrue on any such securities as described in (ii), be sufficient to pay when
due the principal of (and premium, if any), and interest, if any, to Stated
Maturity (or redemption) on, the Senior Debt Securities of such series and (b)
the Company has paid all other sums payable with respect to the Senior Debt
Securities of such series and (c) certain other conditions are met. Upon such
discharge, the Holders of the Senior Debt Securities of such series shall no
longer be entitled to the benefits of the Indenture, except for certain rights,
including registration of transfer and exchange of the Senior Debt Securities of
such series and replacement of lost, stolen or mutilated Senior Debt Securities,
and shall look only to such deposited funds or obligations for payment.
(Sections 401 and 403).
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DEFEASANCE OF CERTAIN OBLIGATIONS
If the terms of the Senior Debt Securities of any series so provide, the
Company may omit to comply with the restrictive covenants in Section 801
("Company May Consolidate, Etc., Only on Certain Terms"), Section 1005
("Limitations on Liens on Common Stock of Designated Subsidiaries") and any
other specified covenant and any such omission with respect to such Sections
shall not be an Event of Default with respect to the Senior Debt Securities of
such series, if (a) the Company has irrevocably deposited with the applicable
Trustee, in trust, (i) sufficient funds in the currency or currency unit in
which the Senior Debt Securities of such series are payable to pay the principal
of (and premium, if any), and interest, if any, to Stated Maturity (or
redemption) on, the Senior Debt Securities of such series, or (ii) such amount
of direct obligations of, or obligations the principal of and interest, if any,
on which are fully guaranteed by, the government which issued the currency in
which the Senior Debt Securities of such series are payable and which are not
subject to prepayment, redemption or call, as will, together with the
predetermined and certain income to accrue thereon without consideration of any
reinvestment thereof, be sufficient to pay when due the principal of (and
premium, if any), and interest, if any, to Stated Maturity (or redemption) on,
the Senior Debt Securities of such series or, (iii) such combination of such
funds and securities as described in (i) and (ii), respectively, as will,
together with the predetermined and certain income to accrue on any such
securities as described in (ii), be sufficient to pay when due the principal of
(and premium, if any), and interest, if any, to Stated Maturity (or redemption)
on, the Senior Debt Securities of such series and (b) certain other conditions
are met. The obligations of the Company under the Senior Indenture with respect
to the Senior Debt Securities of such series, other than with respect to the
covenants referred to above shall remain in full force and effect. (Section
1009).
MEETINGS, MODIFICATION AND WAIVER
Modifications and amendments of the Senior Indenture may be made by the
Company and the Trustee with the consent of the Holders of not less than 66 2/3%
in principal amount of the Outstanding Debt Securities of each series issued
under the Senior Indenture affected by such modification or amendment; provided,
however, that no such modification or amendment may, without the consent of the
Holder of each Outstanding Debt Security affected thereby, (a) change the Stated
Maturity of the principal of, or any instalment of principal of or interest, if
any, on, any Senior Debt Security, (b) reduce the principal amount of, or the
premium, if any, or interest, if any, on, any Senior Debt Security, (c) change
any obligation of the Company to pay additional amounts, (d) reduce the amount
of principal of an Original Issue Discount Security payable upon acceleration of
the Maturity thereof, (e) adversely affect the right of repayment or repurchase,
if any, at the option of the Holder, (f) reduce the amount, or postpone the date
fixed for, any payment under any sinking fund or analogous provision, (g) change
the place or currency or currency unit of payment of principal of or premium, if
any, or interest, if any, on any Senior Debt Security, (h) change or eliminate
the right, if any, to elect payment in a coin or currency or currency unit other
than that in which Senior Debt Securities which are Registered Securities are
denominated or stated to be payable, (i) impair the right to institute suit for
the enforcement of any payment on or with respect to any Senior Debt Security,
(j) reduce the percentage in principal amount of Outstanding Debt Securities of
any series, the consent of the Holders of which is required for modification or
amendment of the Senior Indenture or for waiver of compliance with certain
provisions of the Senior Indenture or for waiver of certain defaults, (k) reduce
the requirements contained in the Senior Indenture for quorum or voting, or (l)
change any obligation of the Company to maintain an office or agency in the
places and for the purposes required in the Senior Indenture. (Section 902).
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
Senior Debt Securities of that series waive, insofar as that series is
concerned, compliance by the Company with certain restrictive provisions of the
Senior Indenture. (Section 1007). The Holders of not less than a majority in
principal amount of the
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Outstanding Debt Securities of any series may on behalf of the Holders of all
Senior Debt Securities of that series and any coupons appertaining thereto waive
any past default under the Senior Indenture with respect to that series, except
a default in the payment of the principal of or premium, if any, or interest, if
any, on any Senior Debt Security of that series or in the payment of any sinking
fund instalment or analogous obligation or in respect of a provision which under
the Senior Indenture cannot be modified or amended without the consent of the
Holder of each Outstanding Debt Security of that series affected. (Section 513).
The Senior Indenture contains provisions for convening meetings of the
Holders of Senior Debt Securities of a series if Senior Debt Securities of that
series are issuable as Bearer Securities. (Section 1301). A meeting may be
called at any time by the applicable Trustee, and also, upon request, by the
Company or Holders of at least 10% in principal amount of the Outstanding Debt
Securities of such series, in any such case upon notice given in accordance with
"Notices" below. (Section 1302). Except as limited by the proviso in the second
preceding paragraph, any resolution presented at a meeting or adjourned meeting
at which a quorum is present may be adopted by the affirmative vote of the
Holders of a majority in principal amount of the Outstanding Debt Securities of
that series; provided, however, that, except as limited by the proviso in the
second preceding paragraph, any resolution with respect to any consent or waiver
which may be given by the Holders of not less than 66 2/3% in principal amount
of the Outstanding Debt Securities of a series may be adopted at a meeting or an
adjourned meeting at which a quorum is present only by the affirmative vote of
66 2/3% in principal amount of the Outstanding Debt Securities of that series;
and provided, further, that, except as limited by the proviso in the second
preceding paragraph, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority, in principal amount of Outstanding Debt Securities of a series
may be adopted at a meeting or adjourned meeting duly reconvened at which a
quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Senior Debt Securities of any series duly held in accordance with the applicable
Senior Indenture will be binding on all Holders of Senior Debt Securities of
that series and the related coupons. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the Holders of
not less than 66 2/3% in principal amount of the Outstanding Debt Securities of
a series, the persons holding or representing 66 2/3% in principal amount of the
Outstanding Debt Securities of such series will constitute a quorum. (Section
1304).
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may, without the consent of any Holders of Outstanding Debt
Securities, consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to, any Person, and any other Person may
consolidate or merge with or into, or transfer or lease its assets substantially
as an entirety to, the Company, provided that (i) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
which acquires or leases the assets of the Company substantially as an entirety
is organized under the laws of any United States jurisdiction and assumes the
Company obligations on the Senior Debt Securities and under the Senior
Indenture, (ii) after giving effect to the transaction, no 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, and (iii) certain other
conditions are met. (Section 801).
NOTICES
Except as may otherwise be set forth in an applicable Prospectus Supplement
relating to a series of Senior Debt Securities, notices to Holders of Bearer
Securities will be given by publication in a daily
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newspaper in the English language of general circulation in The City of New York
and in London, and so long as such Bearer Securities are listed on the Stock
Exchange and the Stock Exchange shall so require, in a daily newspaper of
general circulation in Luxembourg or, if not practical, elsewhere in Western
Europe. Such publication is expected to be made in The Wall Street Journal, the
Financial Times and the Luxemburger Wort. Notices to Holders of Registered
Securities will be given by mail to the addresses of such Holders as they appear
in the Security Register. (Sections 101 and 106).
TITLE
Title to any temporary global Senior Debt Security, any permanent global
Senior Debt Security, any Bearer Securities and any coupons appertaining thereto
will pass by delivery. The Company, the Trustee and any agent of the Company or
the Trustee may treat the bearer of any Bearer Security and the bearer of any
coupon and the registered owner of any Registered Security as the absolute owner
thereof (whether or not such Senior Debt Security or coupon shall be overdue and
notwithstanding any notice to the contrary) for the purpose of making payment
and for all other purposes. (Section 308).
REPLACEMENT OF DEBT SECURITIES AND COUPONS
Any mutilated Senior Debt Security or a Senior Debt Security with a
mutilated coupon appertaining thereto will be replaced by the Company at the
expense of the Holder upon surrender of such Senior Debt Security to the
Trustee. Senior Debt Securities or coupons that become destroyed, stolen or lost
will be replaced by the Company at the expense of the Holder upon delivery to
the Trustee of the Senior Debt Security and coupons or evidence of the
destruction, loss or theft thereof satisfactory to the Company and the Trustee;
in the case of any coupon which becomes destroyed, stolen or lost, such coupon
will be replaced by issuance of a new Senior Debt Security in exchange for the
Senior Debt Security to which such coupon appertains. In the case of a
destroyed, lost or stolen Senior Debt Security or coupon an indemnity
satisfactory to the Trustee and the Company may be required at the expense of
the Holder of such Senior Debt Security or coupon before a replacement Senior
Debt Security will be issued. (Section 306).
CONCERNING THE TRUSTEES
The Company and its affiliates maintain bank accounts, borrow money and have
other customary banking relationships with the Trustee.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Securities may not be offered or sold during the restricted period (as defined
under "Description of Senior Debt Securities-- Denominations, Registration and
Transfer"), or delivered in definitive form in connection with a sale during the
restricted period, in the United States or to United States persons other than
to (a) the United States office of (i) an international organization (as defined
in Section 7701(a)(18) of the Code), (ii) a foreign central bank (as defined in
Section 895 of the Code), or (iii) any underwriter, agent, or dealer offering or
selling Bearer Securities during the restricted period (a "Distributor")
pursuant to a written contract with the issuer or with another Distributor, that
purchases Bearer Securities for resale or for its own account and agrees to
comply with the requirements of Section 165(j)(3)(A), (B), or (C) of the Code,
or (b) the foreign branch of a United States financial institution purchasing
for its own account or for resale, which institution agrees to comply with the
requirements of Section 165(j)(3)(A), (B), or (C) of the Code. In addition, a
sale of a Bearer Security may be made during the restricted period to a United
States person who acquired and holds the Bearer Security on the Certification
Date through a foreign branch of a United States financial institution that
agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the Code. Any Distributor (including an affiliate of a Distributor) offering or
selling Bearer Securities during the restricted period must agree not to offer
or sell Bearer Securities in the United States or to United States persons
(except as discussed above) and must employ procedures reasonably designed to
ensure that its employees or agents directly engaged in selling Bearer
Securities are aware of these restrictions.
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Bearer Securities and their interest coupons will bear a legend
substantially to the following effect: "Any United States person who holds this
obligation will be subject to limitations under the United States income tax
laws, including the limitations provided in Section 165(j) and 1287(a) of the
Internal Revenue Code."
Purchasers of Bearer Securities may be affected by certain limitations under
United States tax laws. See "United States Taxation--Backup Withholding."
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States and an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source, and "United States" means the United States of America (including the
States and the District of Columbia) and its possessions including Puerto Rico,
the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern
Mariana Islands. The term "Non-United States Holder" means any Holder which is
not an United States person.
DESCRIPTION OF SENIOR SUBORDINATED DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Senior Subordinated Debt Securities to which any Prospectus Supplement may
relate. The particular terms of the Senior Subordinated Debt Securities offered
by any Prospectus Supplement and the extent, if any, to which such general
provisions may or may not apply to the Senior Subordinated Debt Securities so
offered will be described in the Prospectus Supplement relating to such Senior
Subordinated Debt Securities.
The Securities are to be issued under an indenture, dated as of March 1,
1996 (the "Subordinated Indenture") between the Company and The First National
Bank of Chicago, as trustee (the "Trustee"). The form of the Subordinated
Indenture is filed as an exhibit to the Registration Statements of which this
Prospectus is a part. This Prospectus contains descriptions of all material
provisions of the Subordinated Indenture. The summaries of such provisions of
the Subordinated 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
Subordinated Indenture, including the definitions therein of certain terms.
Wherever particular provisions or defined terms of the Subordinated Indenture
are referred to, such provisions or defined terms are incorporated herein by
reference. All articles and sections of the Subordinated Indenture, and all
capitalized terms set forth below, have the meanings specified in the
Subordinated Indenture.
GENERAL
The Subordinated Indenture does not limit the aggregate principal amount of
Senior Subordinated Debt Securities which may be issued thereunder and provides
that Senior Subordinated Debt Securities may be issued thereunder from time to
time in one or more series. The Subordinated Indenture requires the prior
approval of the issuance of any Senior Subordinated Debt Securities by the New
York Stock Exchange, and, to the extent required, certain other domestic stock
exchanges or boards of trade. The Senior Subordinated Debt Securities will be
unsecured obligations of the Company and will rank equally with all indebtedness
of the Company designated as Senior Subordinated Indebtedness. At May 31, 1996,
approximately $3.4 billion of Senior Subordinated Indebtedness (on an
unconsolidated basis) was outstanding.
Reference is made to the Prospectus Supplement relating to the particular
series of Senior Subordinated Debt Securities offered thereby for the following
terms of such Senior Subordinated Debt Securities: (1) the title of such Senior
Subordinated Debt Securities; (2) any limit on the aggregate principal amount of
such Senior Subordinated Debt Securities; (3) the date or dates (or manner of
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determining the same) on which such Senior Subordinated Debt Securities will
mature; (4) the rate or rates (which may be fixed or variable) (or manner of
determining the same) per annum at which such Senior Subordinated Debt
Securities will bear interest, if any, and the date from which such interest
will accrue and the dates on which such interest will be payable (the "Interest
Payment Dates") and the Regular Record Dates for such Interest Payment Dates;
(5) any mandatory or optional sinking fund or obligation to purchase or
analogous provisions; (6) the price or prices at which and the terms and
conditions upon which such Senior Subordinated Debt Securities may be redeemed,
as a whole or in part, at the option of the Company; (7) any additional
restrictive covenants included for the benefit of the Holders of such Senior
Subordinated Debt Securities; (8) any additional Events of Acceleration or
Events of Default provided with respect to such Senior Subordinated Debt
Securities; (9) if such Senior Subordianted Debt Securities are issuable as
Senior Subordinated Debt Securities the payment of principal of (and premium, if
any) and/or interest due thereon is determined with reference to rates of
exchange, prices, indices or other similar methods, the manner in which the
amount of payments of principal of (and premium, if any) and/or interest due
thereon shall be determined; (10) if such Senior Subordinated Debt Securities
may be converted into or exchanged for other securities of the Company or any
other person, the terms and conditions pursuant to which such Senior
Subordinated Debt Securities may be converted or exchanged; (11) if the
principal of (or premium, if any) or interest, if any, on such Senior
Subordinated Debt Securities are to be payable, at the election of the Company
or a Holder thereof, in securities or other property, the type and amount of
such securities or other property, or the method by which such amount shall be
determined, and the periods within which, and the terms and conditions upon
which, any such election may be made; (12) whether such Senior Subordinated Debt
Securities shall be issued in whole or in part in the form of a global Security
or Securities and, in such case, the Depositary for such global Security or
Securities, whether such global form shall be permanent or temporary and the
particular provisions applicable thereto; and (13) any other terms of such
Senior Subordinated Debt Securities.
The Subordinated Indenture provides the Company with the ability, in
addition to the ability to issue Senior Subordinated Debt Securities with terms
different from those of Senior Subordinated Debt Securities previously issued,
to "reopen" a previous issue of Senior Subordinated Debt Securities and issue
additional Senior Subordinated Debt Securities of such series. (Section 3.1).
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of and premium, if any, and interest, if any, on the Senior
Subordinated Debt Securities (other than a Global Security) offered thereby will
be payable, and such Senior Subordinated Debt Securities will be exchangeable
and transfers thereof will be registrable, at the office of the Trustee at the
address designated in the Prospectus Supplement, provided that, at the option of
the Company, payment of interest may be made by check mailed to the address of
the Person entitled thereto as it appears in the Security Register. (Sections
3.5, 3.7 and 3.9).
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Senior Subordinated Debt Securities offered thereby will be issued only in
fully registered form without coupons in denominations of $1,000 or any integral
multiple thereof. (Section 3.2). Senior Subordinated Debt Securities of a series
may be issuable in whole or in part in the form of one or more Global Securities
as described below under "Global Securities." One or more Global Securities will
be issued in denomination, or in aggregate denomination, equal to the aggregate
principal amount of Senior Subordinated Debt Securities of the series to be
represented by such Global Security or Securities. No service charge will be
made for any transfer or exchange of such Senior Subordinated Debt Securities,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith. (Section 3.5).
Securities may be issued under the Subordinated Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount from the
principal amount thereof. "Original Issue Discount Security" means any security
which provides for an amount less than the principal amount
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thereof to be due and payable following an Event of Acceleration or an Event of
Default. (Section 1.1). If the Senior Subordinated Debt Securities are Original
Issue Discount Securities or are treated as issued with original issue discount
for federal income tax purposes, special federal income tax, accounting and
other considerations applicable thereto will be described in the Prospectus
Supplement relating thereto.
RESTRICTIONS ON PAYMENT
The Company's obligation to pay the Senior Subordinated Debt Securities at
maturity shall be suspended if, after giving effect to such payment, the
Company's net capital would be reduced below its Applicable Minimum Capital or
its adjusted net capital. The Company's Applicable Minimum Capital and adjusted
net capital are the minimum amounts of capital to be maintained by the Company
as required by the rules and regulations of various domestic exchanges, boards
of trade and governmental agencies to which it is subject in order to permit
payment of subordinated debt capital. If such obligation is suspended for more
than six months, the Company will be required to liquidate its business. If any
principal payment is made on the Senior Subordinated Debt Securities at a time
when the Company's net capital is below its Applicable Minimum Capital, the
Holders of the Senior Subordinated Debt Securities are required to repay to the
Company, its successors or assigns, the sum so paid; provided however, that any
suit for such recovery must be commenced within two years of the date of such
payment. (Sections 7.2(b) and 12.3).
The Company may not make any optional redemptions of the Senior Subordinated
Debt Securities without the consent of various domestic exchanges and boards of
trade or if the Company's net capital will be reduced below certain minimum
requirements. If any principal payment is made on the Senior Subordinated Debt
Securities notwithstanding the foregoing, the Holders of the Senior Subordinated
Debt Securities are required to repay to the Company, its successors or assigns,
the sum so paid, provided, however, that any suit for such recovery must be
commenced within two years of the date of such payment. (Section 12.3).
REDEMPTION
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Company at any time on or after the first anniversary of the issuance
thereof may redeem for cash Senior Subordinated Debt Securities in whole or in
part at their principal amount (or, if the Senior Subordinated Debt Securities
of that series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) plus accrued
interest, if any, provided, however, that permission of the New York Stock
Exchange, and, to the extent required, certain other domestic stock exchanges or
boards of trade, has been obtained. (Section 12.2).
SUBORDINATION
The payment of the principal of, premium, if any, and interest, if any, on
the Senior Subordinated Debt Securities is expressly subordinated, to the extent
and in the manner set forth in the Subordinated Indenture, in right of payment
to the prior payment of all Senior Indebtedness. "Senior Indebtedness" includes
all Indebtedness (as defined below) of the Company, to the extent unsecured,
arising out of any matter or event occurring prior to the date on which any
payment on or in respect of any Debt Securities matures and becomes due and
payable, which has not in whole or in part been subordinated in right of payment
to any other Indebtedness of the Company. "Indebtedness" means all obligations
which would be treated as liabilities in accordance with generally accepted
accounting principles. By reason of such subordination, upon the maturity of any
Senior Indebtedness, full payment in accordance with the terms thereof must be
made or provided for before any payment of principal or interest, if any, or
premium, if any, is made upon the Senior Subordinated Debt Securities and, in
the event of bankruptcy, assignment for benefit of creditors, liquidation,
reorganization or other marshalling of assets and
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liabilities of the Company, payment of the principal and interest, if any,
and/or premium, if any, on the Senior Subordinated Debt Securities will be
subordinated to the prior payment in full of all Senior Indebtedness, and
nothing shall be paid to the Holders of the Senior Subordinated Debt Securities
unless all amounts due to the Holders of Senior Indebtedness has been paid or
provided for. (Sections 4.1 and 4.2).
There is no limitation in the Subordinated Indenture on the amount of Senior
Indebtedness or other Indebtedness that may exist. At May 31, 1996, Senior
Indebtedness (on an unconsolidated basis) was approximately $74 billion and
total assets of the Company (on an unconsolidated basis) were approximately $80
billion. The Prospectus Supplement related to a particular series of Senior
Subordinated Debt Securities will set forth the amount of Senior Indebtedness
then outstanding.
JUNIOR INDEBTEDNESS
The Senior Subordinated Debt Securities will be senior in right of payment
to certain Indebtedness of the Company designated as subordinated debt in the
respective instrument or plan document pursuant to which such Indebtedness was
issued or incurred. (Section 4.11). At May 31, 1996, approximately $215 million
of such subordinated debt (on an unconsolidated basis) was outstanding.
FINANCIAL COVENANTS
The Company may pay dividends on its common stock (with the exception of
dividends paid in common stock) only to the extent that the aggregate of such
dividends paid subsequent to June 30, 1978 does not exceed the sum of (i)
$5,000,000, (ii) the aggregate Consolidated Net Income earned since that date,
(iii) the net proceeds of the sale since that date of common stock of the
Company and (iv) the net proceeds of indebtedness sold since that date which was
thereafter converted into common stock of the Company. (Section 5.5).
EVENTS OF DEFAULT AND ACCELERATION AND NOTICE THEREOF
The Holders of a majority in aggregate principal amount of the outstanding
Senior Subordinated Debt Securities of a series will have the right to direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the Trustee with respect to the Securities of such series.
The Trustee or the Holders of not less than 25% in aggregate principal amount of
the outstanding Senior Subordinated Debt Securities of a series may, if an Event
of Acceleration as defined in the Subordinated Indenture occurs with respect to
Senior Subordinated Debt Securities of that series, declare, by notice in
writing, the principal amount (or, if the Senior Subordinated Debt Securities of
that series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all
Outstanding Securities of that series and the interest accrued thereon to be due
and payable on the last business day of the sixth calendar month following such
notice (but not earlier than the first anniversary of the date of issuance of
such Senior Subordinated Debt Securities in any event) and, if such Event of
Acceleration is not cured by the Company prior to such last business day, the
Outstanding Senior Subordinated Debt Securities of that series will be due and
payable on that date. In case an Event of Default with respect to Senior
Subordinated Debt Securities of any series shall occur, the principal amount
(or, if the Senior Subordinated Debt Securities of that series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of that series) of all Outstanding Securities of that
series will become immediately due and payable. If, with respect to any series
of Senior Subordinated Debt Securities, the Company shall (i) fail for 30 days
to pay interest upon any Senior Subordinated Debt Security of that series, (ii)
fail to pay principal or premium, if any, on any Senior Subordinated Debt
Security of that series when due or (iii) fail to make or satisfy any sinking
fund payment or analogous obligation on any Senior Subordinated Debt Security
when due, the Company will, upon demand of the Trustee with respect to the
Senior Subordinated Debt Securities of such series, pay to such Trustee for the
benefit of the holders of
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such Senior Subordinated Debt Securities the amount then due and payable on such
Senior Subordinated Debt Securities, including, to the extent legally
enforceable, interest on any overdue principal and premium, if any, and on any
overdue interest at the rate or rates prescribed therefor in such Senior
Subordinated Debt Securities, together with an amount to cover the costs and
expenses of collection. If the Company fails to pay such amounts and such
failure continues unremedied (or is not waived) on the last business day of the
sixth full calendar month following the date of the demand of the Trustee
referred to above, such Trustee may institute and prosecute a judicial
proceeding for the collection of such amounts. (Section 7.5). Subject to
provisions requiring the exercise of the degree of care a prudent man would show
in the conduct of his own affairs, the Trustee will be under no obligation to
exercise any of its rights or powers under the Subordinated Indenture at the
request of any of the Holders of Senior Subordinated Debt Securities unless they
shall have offered to the Trustee reasonable security or indemnity. Except as
specifically provided in the Subordinated Indenture, nothing therein relieves
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own wilful misconduct. (Sections 7.2(a), 7.3, 7.14, 8.1
and 8.3(e)).
The following events constitute Events of Acceleration as defined in the
Subordinated Indenture with respect to any series of Senior Subordinated Debt
Securities: failure for 30 days to pay interest upon any Senior Subordindated
Debt Security of that series when due; failure to pay principal or premium, if
any, on any Senior Subordinated Debt Security of that series when due; failure
for 60 days after notice to perform a certain covenant in the Subordinated
Indenture; and, subject to certain conditions, acceleration of the maturity of
Indebtedness of the Company constituting net capital aggregating more that
$10,000,000 upon default thereon. Events of Default include: bankruptcy,
liquidation and similar proceedings and the failure for 15 consecutive days to
maintain the minimum amount of net capital under the Net Capital Rule necessary
to permit the Company to carry on its business as a broker-dealer. (Section
7.1).
The Subordinated Indenture provides that the Trustee shall, within 90 days
after the occurrence of an event described in the preceding paragraph (without
regard to any period of grace as therein specified or any requirement for the
giving of notice) or the failure of the Company to duly observe or perform any
provision of the Subordinated Indenture with respect to Senior Subordinated Debt
Securities of any series, give to the Holders of the outstanding Senior
Subordinated Debt Securities of that series notice of all uncured defaults known
to it with respect to Senior Subordinated Debt Securities of that series
(including both Events of Default and Events of Acceleration); provided that,
except in the case of default in the payment of principal or interest, if any,
on any of the Subordinated Debt Securities of that series or the payment of any
sinking fund installment, the Trustee shall be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interests of the Holders of the outstanding Senior Subordinated Debt
Securities of that series. (Section 8.2).
The Company must deliver to the Trustee annually an officers' certificate
stating whether or not the signers thereof have obtained knowledge of any
existing default by the Company in the performance or fulfillment of the
covenants, agreements and obligations contained in the Subordinated Indenture
with respect to any series of Senior Subordinated Debt Securities and, if so,
specifying each such default and the nature thereof. (Section 5.6).
MODIFICATION OF THE SUBORDINATED INDENTURE
Modifications and amendments of the Subordinated Indenture may be made by
the Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the outstanding Senior Subordinated
Debt Securities of each series affected thereby; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
outstanding Senior Subordinated Debt Security affected thereby: (a) change the
stated maturity date of the principal of, or any installment of principal of or
interest, if any, on, any Senior Subordinated Debt
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Security; (b) reduce the principal amount of, or the premium (if any) or
interest, if any, on, any Senior Subordinated Debt Security; (c) adversely
affect any right of repayment at the option of the Holder of any Senior
Subordinated Debt Security, or reduce the amount of, or postpone the date fixed
for, the payment of any sinking fund or analogous obligation; (d) reduce the
amount of principal of an Original Issue Discount Security payable upon
acceleration of the Maturity thereof; (e) change the place or currency of
payment of principal of, or premium (if any) or interest, if any, on, any Senior
Subordinated Debt Security; (f) impair the right to institute suit for the
enforcement of any payment on or with respect to any Senior Subordinated Debt
Security; or (g) reduce the percentage in principal amount of outstanding Senior
Subordinated Debt Securities of any series, the consent of the Holders of which
is required for modification or amendment of the Subordinated Indenture or for
waiver of compliance with certain provisions of the Subordinated Indenture or
for waiver of certain defaults. (Section 10.2).
The Holders of not less than a majority in aggregate principal amount of the
outstanding Senior Subordinated Debt Securities of any series may on behalf of
the Holders of all Senior Subordinated Debt Securities of that series waive,
insofar as that series is concerned, compliance by the Company with certain
restrictive covenants of the Subordinated Indenture. (Section 5.7). The Holders
of a majority in aggregate principal amount of the outstanding Senior
Subordinated Debt Securities of any series may on behalf of the Holders of all
Senior Subordinated Debt Securities of that series waive any past default under
the Subordinated Indenture with respect to that series, except a default in the
payment of the principal of, or the premium (if any) or interest, if any, on,
any Senior Subordinated Debt Security of that series or in respect of a
provision which under the Subordinated Indenture cannot be modified or amended
without the consent of the Holder of each outstanding Senior Subordinated Debt
Security of that series affected. (Section 7.15).
SATISFACTION AND DISCHARGE
The Subordinated Indenture may be fully satisfied and discharged not earlier
than two years after payment of all outstanding Senior Subordinated Debt
Securities shall have been made or duly provided for. (Section 6.1).
GLOBAL SECURITIES
The Senior Subordinated Debt Securities of a series may be issued in whole
or in part in the form of one or more Global Securities that will be deposited
with or on behalf of a depository (a "Depository") identified in the Prospectus
Supplement relating to such series. Global Securities will be issued in
registered form in either temporary or permanent form.
The specific terms of the depository arrangement with respect to any Senior
Subordinated Debt Securities of a series will be described in the Prospectus
Supplement relating to such series. The Company anticipates that the following
provisions will apply to all depository arrangements.
Senior Subordinated Debt Securities which are to be represented by a Global
Security to be deposited with or on behalf of a Depository will be registered in
the name of such Depository or its nominee. Upon the issuance of a Global
Security, the Depository for such Global Security will credit the respective
principal amounts of the Senior Subordinated Debt Securities represented by such
Global Security to the accounts of institutions that have accounts with such
depository or its nominee ("participants"). The accounts to be credited shall be
designated by the underwriters or agents of such Senior Subordinated Debt
Securities or by the Company, if such Senior Subordinated Debt Securities are
offered and sold directly by the Company. Ownership of beneficial interests in
such 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
that ownership interest will be effected only through, records maintained by the
Depository or its nominee for such Global Security. Ownership of beneficial
interests in Global Securities by persons that hold through participants will be
shown on, and the transfer of that ownership interest
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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 Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, such depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Senior
Subordinated Debt Securities represented by such Global Security for all
purposes under the Subordinated Indenture. Except as set forth below, owners of
beneficial interests in such Global Securities will not be entitled to have
Senior Subordinated 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 Senior Subordinated Debt Securities of such series in
definitive form and will not be considered the owners or holders thereof under
the Subordinated Indenture.
Payment of principal of, and premium, if any, and any interest on Senior
Subordinated Debt Securities registered in the name of or held by a Depository
or its nominee will be made to the Depository or its nominee, as the case may
be, as the registered owner or the holder of the Global Security. None of the
Company, the Trustee, any Paying Agent or the Security Registrar for such Senior
Subordinated Debt Securities will have any 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. (Section
3.11).
The Company expects that the Depository for a permanent Global Security,
upon receipt of any payment of principal, premium 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 such
Depository. The Company 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 Depository
for such Global Security to a nominee of such depository or by a nominee of such
depository to such depository or another nominee of such depository or by such
depository or any such nominee to a successor of such depository or a nominee of
such successor. If a Depository for a permanent Global Security is at any time
unwilling or unable to continue as depository and a successor depository is not
appointed by the Company within 90 days, the Company will issue Senior
Subordianted Debt Securities in definitive form in exchange for all of the
Global Securities representing such Senior Subordinated Debt Securities. In
addition, the Company may at any time and in its sole discretion determine not
to have any Senior Subordinated Debt Securities represented by one or more
Global Securities and, in such event, will issue Senior Subordinated Debt
Securities in definitive form in exchange for all of the Global Securities
representing such Senior Subordinated Debt Securities. (Section 3.5). Further,
if the Company so specifies with respect to the Senior Subordinated Debt
Securities of a series, an owner of a beneficial interest in a Global Security
representing Senior Subordinated Debt Securities of such series may, on terms
acceptable to the Company and the Depository for such Global Security, receive
Senior Subordinated Debt Securities of such series 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 Senior Subordinated Debt
Securities of the series represented by such Global Security equal in principal
amount to such beneficial interest and to have such Senior Subordinated Debt
Securities registered in its name. Senior Subordinated Debt Securities of such
series so issued in definitive form will be issued as registered securities in
denominations, unless otherwise specified by the Company, of $1,000 and integral
multiples thereof. (Section 3.5).
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CERTAIN INFORMATION RELATING TO THE TRUSTEE
The Company and its affiliates maintain bank accounts, borrow money and have
other customary banking relationships with the Trustee.
UNITED STATES TAXATION
In the opinion of Simpson Thacher & Bartlett, special United States tax
counsel to the Company, the following discussion is an accurate summary of the
material United States federal income tax consequences of the purchase,
ownership and disposition of Debt Securities as of the date hereof. Except where
noted, it deals only with Debt Securities held as capital assets by United
States Holders and does not deal with special situations, such as those of
dealers in securities or currencies, financial institutions, life insurance
companies, persons holding Debt Securities as a part of a hedging or conversion
transaction or a straddle or United States Holders whose "functional currency"
is not the U.S. dollar. Furthermore, the discussion below is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and
regulations, rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to result in
federal income tax consequences different from those discussed below. Any
special United States federal income tax considerations relevant to a particular
issue of Debt Securities will be provided in the applicable Prospectus
Supplement. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF DEBT
SECURITIES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME
TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
PAYMENTS OF INTEREST
Except as set forth below, interest on a Debt Security will generally be
taxable to a United States Holder as ordinary income at the time it is paid or
accrued in accordance with the United States Holder's method of accounting for
tax purposes. As used herein, a "United States Holder" of a Debt Security means
a holder that is a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust the
income of which is subject to United States federal income taxation regardless
of its source. A "Non-United States Holder" is a holder that is not a United
States Holder.
ORIGINAL ISSUE DISCOUNT
United States Holders of Debt Securities issued with original issue discount
("OID") will be subject to special tax accounting rules, as described in greater
detail below. United States Holders of such Debt Securities should be aware that
they generally must include OID in gross income in advance of the receipt of
cash attributable to that income. However, United States Holders of such Debt
Securities generally will not be required to include separately in income cash
payments received on the Debt Securities, even if denominated as interest, to
the extent such payments do not constitute qualified stated interest (as defined
below). Debt Securities issued with OID will be referred to as "Original Issue
Discount Debt Securities." Notice will be given in the applicable Prospectus
Supplement when the Company determines that a particular Debt Security will be
an Original Issue Discount Debt Security.
This summary is based upon final Treasury regulations applicable to debt
instruments issued with OID (the "OID Regulations"). The following discussion
does not address Debt Securities providing for contingent payments other than
Debt Securities that bear qualified stated interest.
A Debt Security with an "issue price" that is less than its stated
redemption price at maturity (the sum of all payments to be made on the Debt
Security other than "qualified stated interest") will be issued with OID if such
difference is at least 0.25 percent of the stated redemption price at maturity
multiplied by the number of complete years to maturity. The "issue price" of
each Debt Security in a particular offering will be the first price at which a
substantial amount of that particular offering is sold
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(other than to an underwriter, placement agent or wholesaler). The term
"qualified stated interest" means stated interest that is unconditionally
payable in cash or in property (other than debt instruments of the issuer) at
least annually at a single fixed rate or, subject to certain conditions, based
on one or more indices. Interest is payable at a single fixed rate only if the
rate appropriately takes into account the length of the interval between
payments. Notice will be given in the applicable Prospectus Supplement when the
Company determines that a particular Debt Security will bear interest that is
not qualified stated interest.
In the case of a Debt Security issued with de minimis OID (i.e., discount
that is not OID because it is less than 0.25 percent of the stated redemption
price at maturity multiplied by the number of complete years to maturity), the
United States Holder generally must include such de minimis OID in income as
principal payments on the Debt Securities are made in proportion to the stated
principal amount of the Debt Security. Any amount of de minimis OID that has
been included in income shall be treated as capital gain.
Original Issue Discount Debt Securities that may be redeemed prior to their
stated maturity at the option of the Company and/or at the option of the Holder
may be subject to rules that differ from the general rules discussed herein.
Persons considering the purchase of Original Issue Discount Debt Securities with
such features should carefully examine the applicable Prospectus Supplement and
should consult their own tax advisors with respect to such features since the
tax consequences with respect to OID will depend, in part, on the particular
terms and features of the Debt Securities.
United States Holders of Original Issue Discount Debt Securities with a
maturity upon issuance of more than one year must, in general, include OID in
income in advance of the receipt of some or all of the related cash payments.
The amount of OID includible in income by the initial United States Holder of an
Original Issue Discount Debt Security is the sum of the "daily portions" of OID
with respect to the Debt Security for each day during the taxable year or
portion of the taxable year in which such United States Holder held such Debt
Security ("accrued OID"). The daily portion is determined by allocating to each
day in any "accrual period" a pro rata portion of the OID allocable to that
accrual period. The "accrual period" for an Original Issue Discount Debt
Security may be of any length and may vary in length over the term of the Debt
Security, provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs on the first day or the final
day of an accrual period. The amount of OID allocable to any accrual period is
an amount equal to the excess, if any, of (a) the product of the Debt Security's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period) over (b) the
sum of any qualified stated interest allocable to the accrual period. OID
allocable to a final accrual period is the difference between the amount payable
at maturity (other than a payment of qualified stated interest) and the adjusted
issue price at the beginning of the final accrual period. Special rules will
apply for calculating OID for an initial short accrual period. The "adjusted
issue price" of a Debt Security at the beginning of any accrual period is equal
to its issue price increased by the accrued OID for each prior accrual period
(determined without regard to the amortization of any acquisition or bond
premium, as described below) and reduced by any payments made on such Debt
Security (other than qualified stated interest) on or before the first day of
the accrual period. Under these rules, a United States Holder will have to
include in income increasingly greater amounts of OID in successive accrual
periods. The Company is required to provide information returns stating the
amount of OID accrued on Debt Securities held of record by persons other than
corporations and other exempt Holders.
In the case of an Original Issue Discount Debt Security that is a floating
rate Debt Security, both the "yield to maturity" and "qualified stated interest"
will be determined solely for purposes of calculating the accrual of OID as
though the Debt Security will bear interest in all periods at a fixed rate
generally equal to the rate that would be applicable to interest payments on the
Debt Security on its date of issue or, in the case of certain floating rate Debt
Securities, the rate that reflects the yield to maturity that is reasonably
expected for the Debt Security. Additional rules may apply if interest on a
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<PAGE>
floating rate Debt Security is based on more than one interest index. Persons
considering the purchase of floating rate Debt Securities should carefully
examine the applicable Prospectus Supplement and should consult their own tax
advisors regarding the U.S. federal income tax consequences of the holding and
disposition of such Debt Securities.
United States Holders may elect to treat all interest on any Debt Security
as OID and calculate the amount includible in gross income under the constant
yield method described above. For the purposes of this election, interest
includes stated interest, acquisition discount, OID, de minimis OID, market
discount, de minimis market discount and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium. The election is to be made for
the taxable year in which the United States Holder acquired the Debt Security,
and may not be revoked without the consent of the Internal Revenue Service (the
"IRS"). UNITED STATES HOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS ABOUT
THIS ELECTION.
SHORT-TERM DEBT SECURITIES
In the case of Original Issue Discount Debt Securities having a term of one
year or less ("Short-Term Debt Securities"), under the OID Regulations all
payments (including all stated interest) will be included in the stated
redemption price at maturity and, thus, United States Holders will generally be
taxable on the discount in lieu of stated interest. The discount will be equal
to the excess of the stated redemption price at maturity over the issue price of
a Short-Term Debt Security, unless the United States Holder elects to compute
this discount using tax basis instead of issue price. In general, individuals
and certain other cash method United States Holders of a Short-Term Debt
Security are not required to include accrued discount in their income currently
unless they elect to do so. United States Holders that report income for federal
income tax purposes on the accrual method and certain other United States
Holders are required to accrue discount on such Short-Term Debt Securities (as
ordinary income) on a straight-line basis, unless an election is made to accrue
the discount according to a constant yield method based on daily compounding. In
the case of a United States Holder that is not required, and does not elect, to
include discount in income currently, any gain realized on the sale, exchange or
retirement of the Short-Term Debt Security will be ordinary income to the extent
of the discount accrued through the date of sale, exchange or retirement. In
addition, a United States Holder that does not elect to currently include
accrued discount in income may be required to defer deductions for a portion of
the United States Holder's interest expense with respect to any indebtedness
incurred or continued to purchase or carry such Debt Securities.
MARKET DISCOUNT
If a United States Holder purchases a Debt Security (other than an Original
Issue Discount Debt Security) for an amount that is less than its stated
redemption price at maturity or, in the case of an Original Issue Discount Debt
Security, its adjusted issue price, the amount of the difference will be treated
as "market discount" for federal income tax purposes, unless such difference is
less than a specified de minimis amount. Under the market discount rules, a
United States Holder will be required to treat any principal payment on, or any
gain on the sale, exchange, retirement or other disposition of, a Debt Security
as ordinary income to the extent of the market discount which has not previously
been included in income and is treated as having accrued on such Debt Security
at the time of such payment or disposition. In addition, the United States
Holder may be required to defer, until the maturity of the Debt Security or its
earlier disposition in a taxable transaction, the deduction of all or a portion
of the interest expense on any indebtedness incurred or continued to purchase or
carry such Debt Security.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Debt Security, unless
the United States Holder elects to accrue on a constant interest method. A
United States Holder of a Debt Security may elect to include market discount in
income currently as it accrues (on either a ratable or constant interest
method), in which case the rule described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
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<PAGE>
ACQUISITION PREMIUM; AMORTIZABLE BOND PREMIUM
A United States Holder that purchases a Debt Security for an amount that is
greater than its adjusted issue price but equal to or less than the sum of all
amounts payable on the Debt Security after the purchase date other than payments
of qualified stated interest will be considered to have purchased such Debt
Security at an "acquisition premium." Under the acquisition premium rules, the
amount of OID which such holder must include in its gross income with respect to
such Debt Security for any taxable year will be reduced by the portion of such
acquisition premium properly allocable to such year.
A United States Holder that purchases a Debt Security for an amount in
excess of the sum of all amounts payable on the Debt Security after the purchase
date other than qualified stated interest will be considered to have purchased
such Debt Security at a "premium" and will not be required to include any OID in
income. A United States Holder generally may elect to amortize the premium over
the remaining term of the Debt Security on a constant yield method. The amount
amortized in any year will be treated as a reduction of the United States
Holder's interest income from the Debt Security. Bond premium on a Debt Security
held by a United States Holder that does not make such an election will decrease
the gain or increase the loss otherwise recognized on disposition of the Debt
Security. The election to amortize premium on a constant yield method once made
applies to all debt obligations held or subsequently acquired by the electing
United States Holder on or after the first day of the first taxable year to
which the election applies and may not be revoked without the consent of the
IRS.
SALE, EXCHANGE AND RETIREMENT OF DEBT SECURITIES
A United States Holder's tax basis in a Debt Security will, in general, be
the United States Holder's cost therefor, increased by OID, market discount or
any discount with respect to a Short-Term Debt Security previously included in
income by the United States Holder and reduced by any amortized premium and any
cash payments on the Debt Security other than qualified stated interest. Upon
the sale, exchange or retirement of a Debt Security, a United States Holder will
recognize gain or loss equal to the difference between the amount realized upon
the sale, exchange or retirement (less any accrued qualified stated interest,
which will be taxable as such) and the adjusted tax basis of the Debt Security.
Except as described above with respect to certain Short-Term Debt Securities or
with respect to market discount, such gain or loss will be capital gain or loss
and will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Debt Security has been held for more than one year. Under current
law, net capital gains of individuals are, under certain circumstances, taxed at
lower rates than items of ordinary income. The deductibility of capital losses
is subject to limitations.
TAX CONSEQUENCES OF SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Debt Securities as more
fully described under "Description of Senior Debt Securities -- Satisfaction and
Discharge" and "Description of Senior Subordinated Debt Securities --
Satisfaction and Discharge" above. In that event, the IRS may take the view that
such a discharge constitutes the retirement of the Debt Securities and the
issuance of new obligations with the result that Holders of the Debt Securities
would recognize any gain or loss realized on such a retirement, although any
such gain would generally not be taxable to Non-United States Holders under the
circumstances outlined below. Furthermore, following discharge, the Debt
Securities might be subject to withholding, backup withholding and/or
information reporting.
NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be required
with respect to the payment by the Company or any Paying Agent of principal,
premium, if any, or interest (which for purposes of this discussion includes
OID) on a Debt Security owned by a Non-United States Holder, provided (i)
that the beneficial owner does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Company entitled to vote within the
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meaning of section 871(h)(3) of the Code and the regulations thereunder,
(ii) the beneficial owner is not a controlled foreign corporation that is
related to the Company through stock ownership, (iii) the beneficial owner
is not a bank whose receipt of interest on a Debt Security is described in
section 881(c)(3)(A) of the Code, (iv) in the case of a Registered Security,
the beneficial owner satisfies the statement requirement (described
generally below) set forth in section 871(h) and section 881(c) of the Code
and the regulations thereunder; and (v) such interest is not considered
contingent interest under Section 871(h)(4)(A) of the Code and the
regulations thereunder.
(b) no withholding of United States federal income tax will be required
with respect to any gain or income realized by a Non-United States Holder
upon the sale, exchange or retirement of a Debt Security; and
(c) a Debt Security beneficially owned by an individual who at the time
of death is a Non-United States Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that
such individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the company entitled
to vote within the meaning of section 871(h)(3) of the Code and provided
that the interest payments with respect to such Debt Security would not have
been, if received at the time of such individual's death, effectively
connected with the conduct of a United States trade or business by such
individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Debt Security, or a financial institution holding the Debt
Security on behalf of such owner, must provide, in accordance with specified
procedures, a paying agent of the Company with a statement to the effect that
the beneficial owner is not a U.S. person, citizen or resident. Pursuant to
current temporary Treasury regulations, these requirements will be met if (1)
the beneficial owner provides his name and address, and certifies, under
penalties of perjury, that he is not a U.S. person, citizen or resident (which
certification may be made on an Internal Revenue Service Form W-8 (or successor
form)) or (2) a financial institution holding the Debt Security on behalf of the
beneficial owner certifies, under penalties of perjury, that such statement has
been received by it and furnishes a paying agent with a copy thereof.
If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of premium, if
any, and interest (including OID) made to such Non-United States Holder will be
subject to a 30% withholding tax unless the beneficial owner of the Debt
Security provides the Company or its paying agent, as the case may be, with a
properly executed (1) Internal Revenue Service Form 1001 (or successor form)
claiming an exemption from withholding under the benefit of a tax treaty or (2)
Internal Revenue Service Form 4224 (or successor form) stating that interest
paid on the Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States.
If a Non-United States Holder is engaged in a trade or business in the
United States and premium, if any, or interest (including OID) on the Debt
Security is effectively connected with the conduct of such trade or business,
the Non-United States Holder, although exempt from the withholding tax discussed
above, will be subject to United States federal income tax on such interest and
OID on a net income basis in the same manner as if it were a United States
Holder. In addition, if such holder is a foreign corporation, it may be subject
to a branch profits tax equal to 30% of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For this purpose, such
premium, if any, and interest (including OID) on a Debt Security will be
included in such foreign corporation's earnings and profits.
Any gain or income realized upon the sale, exchange or retirement of a Debt
Security will not be subject to United States federal income tax if (i) such
gain or income is not effectively connected with a trade or business in the
United States of the Non-United States Holder, and (ii) in the case of a Non-
United States Holder who is an individual, either such individual is not present
in the United States for 183 days or more in the taxable year of such sale,
exchange or retirement, and certain other conditions are not met.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to certain
payments of principal, interest, OID and premium paid on Debt Securities and to
the proceeds of sale of a Debt Security made to United States Holders other than
certain exempt recipients (such as corporations). A 31% backup withholding tax
will apply to such payments if the United States Holder fails to provide a
taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income.
No information reporting on IRS Form 1099 or backup withholding will be
required with respect to payments made by the Company or any paying agent to
Non-United States Holders (1) if those payments are made outside of the United
States on Bearer Securities or (2) on Registered Securities with respect to
which a statement described in (a)(iv) under "Non-United States Holders" has
been received and the payor does not have actual knowledge that the beneficial
owner is a United States person. However, interest (including OID) paid to a
Non-United States Holder on a Registered Security will be required to be
reported annually on IRS Form 1042-S.
In addition, backup withholding and information reporting will not apply if
payments of the principal, interest, OID or premium on a Debt Security are paid
or collected by a foreign office of a custodian, nominee or other foreign agent
on behalf of the beneficial owner of such Debt Security, or if a foreign office
of a broker (as defined in applicable Treasury regulations) pays the proceeds of
the sale of a Debt Security to the owner thereof. If, however, such nominee,
custodian, agent or broker is, for United States federal income tax purposes, a
U.S. person, a controlled foreign corporation or a foreign person that derives
50% or more of its gross income for certain periods from the conduct of a trade
or business in the United States, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (1) such
custodian, nominee, agent or broker has documentary evidence in its records that
the beneficial owner is not a U.S. person and certain other conditions are met
or (2) the beneficial owner otherwise establishes an exemption. Temporary
Treasury regulations provide that the Treasury is considering whether backup
withholding will apply with respect to such payments of principal, interest or
the proceeds of a sale that are not subject to backup withholding under the
current regulations.
Payments of principal, interest, OID and premium on a Debt Security paid to
the beneficial owner of a Debt Security by a United States office of a
custodian, nominee or agent, or the payment by the United States office of a
broker of the proceeds of sale of a Debt Security, will be subject to both
backup withholding and information reporting unless the beneficial owner
provides the statement referred to in (a)(iv) above and the payor does not have
actual knowledge that the beneficial owner is a United States person or
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
CAPITAL REQUIREMENTS
As registered broker-dealers, the Company and certain of its subsidiaries
(the "Regulated Subsidiaries") are subject to the SEC's net capital rule (Rule
15c3-1, the "Net Capital Rule"), promulgated under the Exchange Act. The
Exchange monitors the application of the Net Capital Rule by the Company, and
the NASD monitors the application of the Net Capital Rule by the Regulated
Subsidiaries. The Company and the Regulated Subsidiaries compute net capital
under the alternative method of the Net Capital Rule which requires the
maintenance of minimum net capital, as defined. A broker-dealer may be required
to reduce its business if its net capital is less than 4% of aggregate debit
balances and may also be prohibited from expanding its business or paying cash
dividends if resulting net capital would be less than 5% of aggregate debit
balances. In addition, the Net Capital Rule does not allow withdrawal of
subordinated capital if net capital would be less than 5% of such debit
balances.
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The Net Capital Rule also limits the ability of broker-dealers to transfer
large amounts of capital to parent companies and other affiliates. Under the Net
Capital Rule equity capital can not be withdrawn from a broker-dealer without
the prior approval of the SEC when net capital after the withdrawal would be
less than 25% of its securities positions haircuts (which are deductions from
capital of certain specified percentages of the market value of securities to
reflect the possibility of a market decline prior to disposition). In addition,
the Net Capital Rule requires broker-dealers to notify the SEC and the
appropriate self-regulatory organization two business days before a withdrawal
of excess net capital if the withdrawal would exceed the greater of $500,000 or
30% of the broker-dealer's excess net capital, and two business days after a
withdrawal that exceeds the greater of $500,000 or 20% of excess net capital.
Finally, the Net Capital Rule authorizes the SEC to order a freeze on the
transfer of capital if a broker-dealer plans a withdrawal of more than 30% of
its excess net capital and the SEC believes that such a withdrawal would be
detrimental to the financial integrity of the firm or would jeopardize the
broker-dealer's ability to pay its customers.
Compliance with the Net Capital Rule could limit those operations of the
Company and its Regulated Subsidiaries that require the intensive use of
capital, such as underwriting and trading activities and the financing of
customer account balances.
The Company is subject to other domestic and international regulatory
requirements with which it is required to comply.
OUTSTANDING SUBORDINATED DEBT INSTRUMENTS
The Company has issued various subordinated debt instruments in a form, and
to persons, approved by the NYSE in accordance with the provisions of NYSE Rule
325. When issued, the Debt Securities shall constitute such subordinated debt.
The Company is permitted to treat such subordinated debt as capital for the
purposes of the Net Capital Rule and NYSE Rule 325. The instruments evidencing
such subordinated debt provide that they shall be subordinated and junior in
right of payment to the prior payment in full, or provision for such payment, of
all obligations to all other present and future creditors of the Company (except
for other subordinated debt similarly subordinated).
PLAN OF DISTRIBUTION
The Company may sell Debt Securities through, or through underwriting
syndicates managed by, Lehman Brothers Inc. ("Lehman Brothers") alone or with
one or more other underwriters. The specific managing underwriter or
underwriters with respect to the offer and sale of Debt Securities are set forth
on the cover of a Prospectus Supplement relating to such Debt Securities and the
members of the underwriting syndicate, if any, are named in such Prospectus
Supplement. Only the underwriters so named in a Prospectus Supplement are
underwriters, in connection with the Debt Securities offered thereby. The
Prospectus Supplement also describes the discounts and commissions to be allowed
or paid to the underwriters, all other items constituting underwriting
compensation, the discounts and commissions to be allowed or paid to dealers, if
any, and the exchanges, if any, on which the Debt Securities will be listed.
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 obligations of the
underwriters to purchase such Debt Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all the
Debt Securities of the series 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. To the extent, if any, that Debt Securities to be purchased
by Lehman Brothers, as underwriter, are not sold by it at the public offering
price set forth in the Prospectus Supplement, the Company, as issuer of such
Debt
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Securities, will not receive the full amount of net proceeds of such Debt
Securities set forth on the cover of the Prospectus Supplement.
If so indicated in the Prospectus Supplement, the Company will authorize the
underwriters to solicit offers by certain institutional investors to purchase
Debt Securities providing for payment and delivery on a future date specified in
the Prospectus Supplement. There may be limitations on the minimum amount which
may be purchased by any such institutional investor or on the portion of the
aggregate principal amount of the particular Debt Securities which may be sold
pursuant to such arrangements. Institutional investors to which such offers may
be made, when authorized, include commercial and savings banks, insurance
companies, pension funds, educational and charitable institutions and such other
institutions as may be approved by the Company. The obligations of any such
purchasers pursuant to such delayed delivery and payment arrangements will not
be subject to any conditions except (i) the purchase by an institution of the
particular Debt Securities shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which such institution is
subject, and (ii) the Company shall have sold to such underwriters the total
principal amount of such Debt Securities less the principal amount thereof
covered by such arrangements. Underwriters will not have any responsibility in
respect of the validity of such arrangements or the performance of the Company
or such institutional investors thereunder.
The underwriters may be entitled under agreements entered into with the
Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the underwriters may be required to make in respect thereof.
The underwriters may engage in transactions with, or perform services for, the
Company in the ordinary course of business.
Each underwriter will represent and agree that (i) it has not offered or
sold and will not offer or sell any Debt Securities to persons in the United
Kingdom except to persons whose ordinary activities involve then in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (ii) it complied and will comply with all applicable provisions
of the Financial Services Act 1986 and the Regulations with respect to anything
done by it in relation to the Debt Securities in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on to any person in the United Kingdom any document received by it
in connection with the issue of the Debt Securities if that person is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom such document may
otherwise lawfully be issued or passed on.
This Prospectus, together with an applicable Prospectus Supplement, may also
be used by Lehman Brothers International (Europe) ("LBIE") in connection with
offers and sales of Securities related to market making transactions, by and
through LBIE, at negotiated prices related to prevailing market prices at the
time of sale or otherwise. LBIE may act as principal or agent in such
transactions.
The underwriting arrangements for any offering of the Debt Securities will
comply with the requirements of Schedule E of the By-Laws of the NASD regarding
an NASD member firm underwriting its own securities. Pursuant to Section 5 of
Schedule E to the By-Laws of the NASD, the net proceeds to be received by the
Company from the sale of the Debt Securities shall be placed in a duly
established escrow account and shall not be released therefrom or used by the
Company in any manner until the Company has filed with the NASD a computation of
net capital in the manner required by and meeting the requirements of Section 5
of Schedule E.
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ERISA MATTERS
The Company may be considered a "party in interest" within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and a
"disqualified person" under corresponding provisions of the Code, with respect
to certain employee benefit plans. Certain transactions between an employee
benefit plan and a party in interest or disqualified person may result in
"prohibited transactions" within the meaning of ERISA and the Code. ANY EMPLOYEE
BENEFIT PLAN PROPOSING TO INVEST IN THE DEBT SECURITIES SHOULD CONSULT WITH ITS
LEGAL COUNSEL.
LEGAL OPINIONS
Unless otherwise indicated in an applicable Prospectus Supplement relating
to Debt Securities, the validity of the Debt Securities offered hereby will be
passed upon for the Company by Karen M. Muller, Esq., Deputy General Counsel of
the Company, and for any underwriter by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), 425 Lexington Avenue, New
York, New York 10017. Simpson Thacher & Bartlett acts as counsel in various
matters for Lehman Brothers Holdings Inc., the Company and certain of their
subsidiaries.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements and schedule of the Company for the
year ended November 30, 1995, for the eleven months ended November 30, 1994, and
for the year ended December 31, 1993 appearing in the Company's Report on Form
10-K for the year ended November 30, 1995, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such consolidated financial statements and
schedule are, and audited financial statements included in subsequently filed
documents will be, incorporated herein by reference in reliance upon the reports
of Ernst & Young LLP pertaining to such financial statements (to the extent
covered by consents filed with the Securities and Exchange Commission) given
upon the authority of such firm as experts in accounting and auditing.
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- ---------------------------------------- -------------------------------------
- ---------------------------------------- -------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY AGENT OR
UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A LEHMAN BROTHERS INC.
SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE
OF THIS PROSPECTUS.
--------------------- DEBT SECURITIES
TABLE OF CONTENTS
PAGE
----
Available Information................. 2
Documents Incorporated by Reference... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Senior Debt
Securities............................ 4
Limitations on Issuance of Bearer ---------------------
Securities..........................14
Description of Senior Subordinated PROSPECTUS
Debt Securities.....................15
United States Taxation................22 , 1996
Capital Requirements..................27
Outstanding Subordinated Debt ---------------------
Instruments.........................28
Plan of Distribution..................28
ERISA Matters.........................30
Legal Opinions........................30
Independent Accountants...............30
- ---------------------------------------- -------------------------------------
- ---------------------------------------- -------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses to be incurred by Lehman Brothers
Inc. (the "Registrant"), in connection with the offering described in this
Registration Statement (other than underwriting discounts and commissions).
<TABLE>
<S> <C>
SEC registration fee............................................ $517,242
NASD fee........................................................ $ 30,500
Legal fees and expenses......................................... 25,000*
Accounting fees and expenses.................................... 20,000*
Fees and expenses of Trustee.................................... 30,000*
Blue Sky qualification fees and expenses........................ 25,000*
Printing and engraving fees..................................... 30,000*
Miscellaneous................................................... 4,658*
--------
Total..................................................... $682,400
--------
--------
</TABLE>
- ------------
* Estimated and subject to future contingencies
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Restated Certificate of Incorporation of the Registrant requires the
Registrant to indemnify its directors and officers to the fullest extent
permitted by Delaware General Corporation Law. In addition, the directors of the
Registrant are insured under officers' and directors' liability insurance
policies purchased by the Company. The directors, officers and employees of the
Registrant are also insured against fiduciary liabilities under the Employee
Retirement Income Security Act of 1974.
Any underwriting agreement or agency agreement with respect to an offering
of securities registered hereunder will provide for the indemnification of the
Registrant and its officers and directors by the underwriters or agents, as the
case may be, against certain liabilities including liabilities under the
Securities Act of 1933.
ITEM 16. EXHIBITS
The Exhibit Index on page E-1 is hereby incorporated by reference.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to
II-1
<PAGE>
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) 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;
provided, however, that the undertakings set forth in paragraphs (i) and
(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Act of 1934 that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Restated Certificate of Incorporation and other
provisions summarized in Item 15 above, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted against the Registrant by such director, officer or
controlling person in connection with the securities being registered, the
Registrant 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 of 1933 and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
23rd day of July, 1996.
LEHMAN BROTHERS INC.
By /s/ MICHAEL R. MILVERSTED
...................................
Michael R. Milversted
Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------------- --------------
<S> <C> <C>
* Chairman of the Board, Chief July 23, 1996
........................................ Executive Officer, and Director
Richard S. Fuld, Jr. (principal executive officer)
* President and Director July 23, 1996
........................................
T. Christopher Pettit
* Chief Financial Officer and July 23, 1996
........................................ Director (principal financial
Charles B. Hintz and accounting officer)
* Controller July 23, 1996
........................................
David Goldfarb
* Director July 23, 1996
........................................
Roger S. Berlind
* Director July 23, 1996
........................................
Philip Caldwell
* Director July 23, 1996
........................................
Howard L. Clark, Jr.
* Director July 23, 1996
........................................
Frederick Frank
* Director July 23, 1996
........................................
Sherman R. Lewis, Jr.
*By /s/ MICHAEL R. MILVERSTED July 23, 1996
........................................
Michael R. Milversted, Attorney-in-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
FILED HEREWITH(-)
PREVIOUSLY FILED(*)
EXHIBIT OR INCORPORATED BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------------------------------------------------- ---------------------------
<C> <S> <C>
1(a) --Form of Underwriting Agreement for Debt Securities
(including Delayed Delivery Contract)................ Exhibit 1(a) to
Registration Statement No.
33-63613 filed on October
23, 1995.
4(a) --Form of Subordinated Indenture between the
Registrant and The First National Bank of Chicago,
as Trustee, with respect to the Registrant's Senior
Subordinated Debt Securities......................... Exhibit 4(a) to Post-
Effective Amendment No. 2
to Registration Statement
No. 33-63613 filed on April
12, 1996
4(b) --First Supplemental Indenture, dated as of April 19,
1996, between the Registrant and The First National
Bank of Chicago, as Trustee.......................... *
4(c) --Form of Senior Subordinated Debt Securities........ Included in Exhibit 4(a) to
Post-Effective Amendment
No. 2 to Registration
Statement No. 33-63613
filed on April 12, 1996
4(g) --Senior Indenture dated as of October 23, 1995
between the Registrant and The Bank of New York, as
Trustee, with respect to the Registrant's Senior
Debt Securities.................................... Exhibit 4(o) to
Registration Statement No.
33-63613 filed on October
23, 1995
4(h) --Form of Senior Debt Securities..................... Included in Exhibit 4(o) to
Registration Statement No.
33-63613 filed on October
23, 1995
5 --Opinion and consent of Karen Muller, Esq. ......... --
8 --Opinion and consent of Simpson Thacher & Bartlett
re tax matters....................................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FILED HEREWITH(-)
PREVIOUSLY FILED(*)
EXHIBIT OR INCORPORATED BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------------------------------------------------- ---------------------------
<C> <S> <C>
12 --Computation of ratio of earnings to fixed
charges.............................................. Exhibit 12 to the
Registrant's Annual Report
on Form 10-K for the fiscal
year ended November 30,
1995 and to the
Registrant's Quarterly
Report on Form 10-Q for the
six months ended May 31,
1996
23(a) --Consent of Karen Muller, Esq. (included in
Exhibit 5)........................................... --
23(b) --Consent of Ernst & Young, Independent Auditors....... --
23(c) --Consent of Simpson Thacher & Bartlett (included in
Exhibit 8)........................................... *
24 --Power of Attorney.................................... *
25(a) --Form T-1 Statement of Eligibility under Trust
Indenture Act of 1939 of The First National Bank of
Chicago.............................................. Exhibit 25(a) to Post-
Effective Amendment No. 1
to Registration Statement
No. 33-63613 filed on March
6, 1996
25(b) --Form T-1 Statement of Eligibility under Trust
Indenture Act of 1939 of The Bank of New York........ Exhibit 25(b) to
Registration Statement No.
33-63613 filed on October
23, 1995
</TABLE>
EXHIBIT 5
LEHMAN BROTHERS INC.
THREE WORLD FINANCIAL CENTER
NEW YORK, NY 10285
July 23, 1996
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Ladies and Gentlemen:
I am Deputy General Counsel of Lehman Brothers Inc., a Delaware
corporation (the "Company"). A Registration Statement on Form S-3 (the
"Registration Statement"), under the Securities Act of 1933, as amended (the
"Act"), was filed by the Company with the Securities and Exchange Commission on
July 17, 1996 and Amendment No. 1 ("Amendment No. 1") was filed on the date
hereof. The Registration Statement, as amended, relates to the registration of
up to $1,500,000,000 principal amount of debt securities (the "Debt Securities")
consisting of senior debt (the "Senior Debt") and subordinated debt (the
"Subordinated Debt") which the Company may offer from time to time in one or
more series.
In that connection, I or members of my staff have examined and relied
upon originals or copies, certified or otherwise identified to our satisfaction,
of such documents, corporate records, certificates and instruments relating to
the Company as I have deemed relevant and necessary to the formation of the
opinion hereinafter set forth. In such examination, I have assumed the
genuineness and authenticity of all documents examined by us or members of my
staff and all signatures thereon, the legal capacity of all persons executing
such documents, the conformity to originals of all copies of documents submitted
to us and the truth and correctness of any representations and warranties
contained therein.
Based upon the foregoing, I am of the opinion that:
(i) the Senior Debt is duly authorized, and when the Indenture pursuant
to which the Senior Debt will be issued (the "Senior Indenture") between the
Company and The Bank of New York., as Trustee (the "Senior Debt Trustee"), has
been duly executed and delivered, and, the Senior Debt, when duly executed by
the Company, authenticated by the Senior Debt Trustee in accordance with the
terms of the Senior Indenture and issued and delivered against payment therefor,
will be legally issued and will constitute a valid and binding obligation of the
Company entitled to the benefits of the Senior Indenture; and
(ii) the Subordinated Debt is duly authorized, and when the Indenture
pursuant to which the Subordinated Debt will be issued (the "Subordinated
Indenture") between the Company and The First National Bank of Chicago, as
Trustee (the "Subordinated Debt Trustee") has been duly executed and delivered,
the Subordinated Debt, when duly executed by the Company, authenticated by the
Subordinated Debt Trustee in accordance with the terms of the Subordinated
Indenture and issued and delivered against payment therefor, will be legally
issued and will constitute a valid and binding obligation of the Company
entitled to the benefits of the Subordinated Indenture.
In rendering this opinion, I express no opinion as to the laws of any
jurisdiction other than the State of New York, the General Corporation Law of
the State of Delaware and the United States of America.
I hereby consent to the filing of this opinion as an exhibit to
Amendment No. 1 and to the reference to me under the caption "Legal Opinions" in
the Registration Statement, without admitting that I am an "expert" under the
Act, or the rules and regulations of the Securities and Exchange Commission
issued thereunder, with respect to any part of the Registration Statement,
including this exhibit.
Very truly yours,
Karen M. Muller
Deputy General Counsel
Exhibit 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm as experts under the caption
"Independent Accountants" in the Registration Statement on Form S-3 and
related prospectus of Lehman Brothers Inc. (the "Company") for the
registration of $1,500,000,000 of debt securities and in a post effective
amendment to the Registration Statement on Form S-3 (File No. 33-63613) of
the Company and to the incorporation by reference therein of our report
dated January 10, 1996, appearing in the Company's Transition Report on
Form 10-K for the year ended November 30, 1995.
New York, New York
July 23, 1996
/s/ Ernst & Young LLP
