<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 23, 1994
REGISTRATION NO.
POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 33-65674,
POST-EFFECTIVE AMENDMENT NO. 3 TO REGISTRATION STATEMENT NO. 33-49062,
POST-EFFECTIVE AMENDMENT NO. 4 TO REGISTRATION STATEMENT NO. 33-46146,
POST-EFFECTIVE AMENDMENT NO. 5 TO REGISTRATION STATEMENT NO. 33-40990,
POST-EFFECTIVE AMENDMENT NO. 7 TO REGISTRATION STATEMENT NO. 33-3663
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
AND POST-EFFECTIVE AMENDMENTS
UNDER
THE SECURITIES ACT OF 1933
------------------------
LEHMAN BROTHERS HOLDINGS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-3216325
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) 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 P. RUSSO
CHIEF LEGAL OFFICER
LEHMAN BROTHERS HOLDINGS 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)
COPY TO:
<TABLE>
<S> <C>
RAYMOND W. WAGNER, ESQ. JENNIFER MARRE, ESQ.
SIMPSON THACHER & BARTLETT LEHMAN BROTHERS INC.
425 LEXINGTON AVENUE 3 WORLD FINANCIAL CENTER
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
BY MARKET CONDITIONS.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1)(2) PER UNIT OFFERING PRICE(3) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
Debt Securities............................... U.S. $3,500,000,000 100% U.S. $3,500,000,000 U.S. $1,206,905
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 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.
(2) 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 as
shall result in aggregate gross proceeds equivalent to U.S. $3,500,000,000
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. $3,500,000,000 to the Registrant.
(3) Estimated solely for the purpose of calculating the registration fee.
------------------------
STATEMENT PURSUANT TO RULE 429
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE FIRST PROSPECTUS
HEREIN IS A COMBINED PROSPECTUS AND ALSO RELATES TO REGISTRATION STATEMENT NO.
33-65674 PREVIOUSLY FILED BY THE REGISTRANT AND DECLARED EFFECTIVE ON OCTOBER 4,
1993. PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE SECOND
PROSPECTUS CONTAINED HEREIN IS A COMBINED PROSPECTUS AND ALSO RELATES TO
REGISTRATION STATEMENT NO. 33-65674 PREVIOUSLY FILED BY THE REGISTRANT AND
DECLARED EFFECTIVE ON OCTOBER 4, 1993, REGISTRATION STATEMENT NO. 33-49062
PREVIOUSLY FILED BY THE REGISTRANT AND DECLARED EFFECTIVE ON JULY 10, 1992,
REGISTRATION STATEMENT NO. 33-46146 PREVIOUSLY FILED BY THE REGISTRANT AND
DECLARED EFFECTIVE ON MARCH 25, 1992, REGISTRATION STATEMENT NO. 33-40990
PREVIOUSLY FILED BY THE REGISTRANT AND DECLARED EFFECTIVE ON SEPTEMBER 13, 1991
AND REGISTRATION STATEMENT NO. 33-3663 PREVIOUSLY FILED BY THE E.F. HUTTON GROUP
INC. ON FORM S-3 AND DECLARED EFFECTIVE ON APRIL 30, 1986. THIS REGISTRATION
STATEMENT ALSO CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION
STATEMENT NO. 33-65674, POST-EFFECTIVE AMENDMENT NO. 3 TO REGISTRATION STATEMENT
NO. 33-49062, POST-EFFECTIVE AMENDMENT NO. 4 TO REGISTRATION STATEMENT NO.
33-46146, POST-EFFECTIVE AMENDMENT NO. 5 TO REGISTRATION STATEMENT NO. 33-40990
AND POST-EFFECTIVE AMENDMENT NO. 7 TO REGISTRATION STATEMENT NO. 33-3663.
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
Subject to Completion, dated November 23, 1994
LEHMAN BROTHERS HOLDINGS INC.
DEBT SECURITIES
------------------------
Lehman Brothers Holdings Inc. ("Holdings"), may offer from time to time
unsecured debt securities (the "Debt Securities") consisting of debentures,
notes and/or other evidences of indebtedness in one or more series for proceeds
of up to U.S.$4,173,400,000, or the equivalent thereof if any of the Debt
Securities are denominated in a foreign currency or foreign currency unit. 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 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
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 Debt Securities may be issued in registered form or bearer form with
coupons attached. In addition, all or a portion of the Debt Securities of a
series may be issued in global form. 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."
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 will be sold either through underwriters, dealers or
agents, or directly by Holdings. The applicable Prospectus Supplement sets forth
the names of any underwriters or agents (which may include Lehman Brothers Inc.,
a subsidiary of Holdings ('Lehman Brothers")) involved in the sale of the Debt
Securities in respect of which this Prospectus is being delivered, the proposed
amounts, if any, to be purchased by underwriters and the compensation, if any,
of such underwriters or agents.
This Prospectus together with the applicable Prospectus Supplement may also
be used by Lehman Brothers or Lehman Government Securities Inc. ("LGSI") in
connection with offers and sales of Debt Securities related to market making
transactions, by and through Lehman Brothers or LGSI, at negotiated prices
related to prevailing market prices at the time of sale or otherwise. Lehman
Brothers and/or LGSI may act as principal or agent in such transactions.
------------------------
, 1994
<PAGE> 3
AVAILABLE INFORMATION
Holdings is subject to the informational requirements of the Securities
Exchange Act of 1934 (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, Northwestern Atrium 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. Holdings' Common Stock is listed on the New York Stock
Exchange, Inc. (the "Exchange") and the Pacific Stock Exchange Inc. (the "PSE").
Holdings' 8 3/4% Notes Due 2002 are listed on the Exchange. Holdings' $55
Million Serial Zero Coupon Senior Notes Due May 16, 1998, FT-SE Eurotrack 200
Index Call Warrants expiring June 4, 1996, Japanese Yen Bear Warrants Expiring
September 15, 1995, 7 1/4% Oracle Yield Enhanced Equity Linked Debt SecuritiesSM
due 1996, 6 1/2% Amgen Yield Enhanced Equity Linked Debt Securities Due 1997,
Japanese Yen Bear Warrants Expiring March 5, 1996, Stock Upside Note
SecuritiesSM Due 2000, 9 1/4% Micron Yield Enhanced Equity Linked Debt
Securities Due 1997 and AMEX Hong Kong 30 Index Call Warrants are listed on the
American Stock Exchange, Inc. (the "ASE"), and reports and other information
concerning Holdings may also be inspected at the offices of the Exchange at 20
Broad Street, New York, New York 10005, at the offices of the ASE, 86 Trinity
Place, New York, New York 10006 and at the offices of the PSE, 301 Pine Street,
San Francisco, California 94104.
Holdings has filed with the SEC a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further information,
reference is hereby made to the Registration Statement.
------------------------
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by Holdings with the SEC pursuant
to the Exchange Act are hereby incorporated by reference in this Prospectus:
(1) Holdings' Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
(2) Holdings' Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1994, June 30, 1994 and August 31, 1994.
(3) Holdings' Current Reports on Form 8-K dated February 24, 1994,
April 14, 1994, April 26, 1994, June 7, 1994, June 15, 1994, July
29, 1994, September 2, 1994, September 22, 1994 and November 15,
1994.
Each document filed by Holdings 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
Statement 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 Statement or this Prospectus.
Holdings 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 J. Capko,
the Controller's Office, Lehman Brothers Holdings Inc., 3 World Financial
Center, 27th Floor, New York, New York 10285 (telephone (212) 526-0660).
2
<PAGE> 4
THE COMPANY
Lehman Brothers Holdings Inc. (together with its consolidated subsidiaries,
hereinafter referred to as the "Company" unless the context otherwise requires)
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 and regional headquarters in London and Tokyo
are complemented by offices in additional locations in the United States,
Europe, the Middle East, Latin America and the Asia Pacific region.
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; institutional
asset management; research; and the trading of foreign exchange, derivative
products and certain commodities. The Company acts as a market marker in all
major equity and fixed income 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"), and holds memberships or associate
memberships on several principal international securities and commodities
exchanges, including the London, Tokyo, Hong Kong, Frankfurt and Milan stock
exchanges.
Holdings was incorporated in Delaware on December 29, 1983. Holdings'
principal executive offices are located at 3 World Financial Center, New York,
New York 10285 (telephone (212) 526-7000).
USE OF PROCEEDS
Except as otherwise may be set forth in an applicable Prospectus Supplement
accompanying this Prospectus, Holdings intends to apply the net proceeds from
the sale of the Debt Securities 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 five years in the period ended December 31, 1993,
and the eight months ended August 31, 1994:
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
YEAR ENDED DECEMBER 31, AUGUST 31,
----------------------------------------- ------------------
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1.01 * 1.03 * 1.00 1.03
</TABLE>
- ---------------
* Earnings were inadequate to cover fixed charges and would have had to increase
approximately $766 million and $247 million in order to cover the deficiencies
for the periods ended December 31, 1990 and December 31, 1992, respectively.
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> 5
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either Senior Debt (as defined below)
or Subordinated Debt (as defined below) of Holdings. The Debt Securities
constituting Senior Debt will be issued under an indenture, dated as of
September 1, 1987, between Holdings and Citibank, N.A., Trustee, as supplemented
and amended by Supplemental Indentures dated as of November 25, 1987, as of
November 27, 1990, as of September 13, 1991 and as of October 4, 1993 (the
"Senior Indenture"), and the Debt Securities constituting Subordinated Debt will
be issued under an indenture between Holdings and Chemical Bank, Trustee (the
"Subordinated Indenture"). The Senior Indenture and the Subordinated Indenture
are hereinafter collectively referred to as the "Indentures" and, individually,
as an "Indenture". Each Indenture will incorporate by reference certain Standard
Multiple-Series Indenture Provisions, filed with the SEC on July 30, 1987 and as
amended and refiled with the SEC on November 16, 1987. This Prospectus contains
descriptions of all material provisions of the Indentures. The summary of such
provisions of the Indentures does not purport to be complete; copies of such
Indentures are filed as exhibits to the Registration Statement of which this
Prospectus is a part. All articles and sections of the applicable Indenture, and
all capitalized terms set forth below, have the meanings specified in the
applicable Indenture.
GENERAL
Neither Indenture limits the amount of debentures, notes or other evidences
of indebtedness which may be issued thereunder. Each Indenture provides that
Debt Securities may be issued from time to time in one or more series. Since
Holdings, as a holding company, does not have any significant assets other than
the equity securities of its subsidiaries, its cash flow and consequent ability
to service its debt, including the Debt Securities, are dependent upon the
earnings of its subsidiaries and the distribution of those earnings to Holdings,
or upon loans or other payments of funds by those subsidiaries to Holdings.
Holdings' subsidiaries, including Lehman Brothers, are separate and distinct
legal entities and will have no obligation, contingent or otherwise, to pay any
interest or principal on the Debt Securities or to make any funds available
therefor, whether by dividends, loans or other payments. Dividends, loans and
other payments by Lehman Brothers are restricted by net capital and other rules
of various regulatory bodies. See "Capital Requirements." The payment of
dividends by Holdings' subsidiaries is contingent upon the earnings of those
subsidiaries and is subject to various business considerations in addition to
net capital requirements and contractual restrictions.
Since the Debt Securities will be obligations of a holding company, the
ability of holders of the Debt Securities to benefit from any distribution of
assets of any subsidiary upon the liquidation or reorganization of such
subsidiary is subordinate to the prior claims of present and future creditors of
such subsidiary.
Reference is made to the applicable Prospectus Supplement for the following
terms and other information with respect to the Debt Securities being offered
thereby: (1) the title of such Debt Securities and whether such Debt Securities
will be Senior Debt or Subordinated Debt; (2) any limit on the aggregate
principal amount of such Debt Securities; (3) whether the 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 Debt Securities are to be issued in whole or in part in the form of
one or more temporary or permanent global 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 Debt Securities will mature; (6) the rate or
rates (or manner of determining the same) at which such 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
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 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 Indenture as described below under "Payment and Paying
Agents", the principal of and premium, if any, and interest, if any, on the Debt
Securities will be payable and each office or agency where, subject to the terms
of the applicable Indenture as described below under
4
<PAGE> 6
"Denominations, Registration and Transfer," the 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 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 Debt Security or must pay such additional
amounts in respect of any Debt Security; (12) the terms and conditions, if any,
upon which the 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 Debt Securities
are payable; (13) the denominations in which any 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 Debt Securities which are Bearer Securities will be issuable if other than
the denomination of $5,000; (14) the currency, currencies or currency units for
which such Debt Securities may be purchased and the currency, currencies or
currency units in which the principal of and interest, if any, on such 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 Debt
Securities; and (16) other terms of the Debt Securities. (Section 301).
If any of the Debt Securities are sold for foreign currencies or foreign
currency units or if the principal of or interest, if any, on any series of 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 Debt Securities and such currencies or currency
units will be set forth in an applicable Prospectus Supplement relating thereto.
One or more series of 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.
SENIOR DEBT
The Debt Securities constituting part of the senior debt of Holdings (the
"Senior Debt") will rank equally with all other unsecured debt of Holdings
except Subordinated Debt.
SUBORDINATED DEBT
The Debt Securities constituting part of the subordinated debt of Holdings
(the "Subordinated Debt") will be subordinate and junior in the right of
payment, to the extent and in the manner set forth in the Subordinated
Indenture, to all present or future Senior Debt. "Senior Debt" is defined to
mean (a) any indebtedness for money borrowed or evidenced by bonds, notes,
debentures or similar instruments, (b) indebtedness under capitalized leases,
(c) any indebtedness representing the deferred and unpaid purchase price of any
property or business, and (d) all deferrals, renewals, extensions and refundings
of any such indebtedness or obligation; except that the following does not
constitute Senior Debt: (i) indebtedness evidenced by the Subordinated Debt,
(ii) indebtedness which is expressly made equal in right of payment with the
Subordinated Debt or subordinate and subject in right of payment to the
Subordinated Debt, (iii) indebtedness for goods or materials purchased in the
ordinary course of business or for services obtained in the ordinary course of
business or indebtedness consisting of trade payables or (iv) indebtedness which
is subordinated to any obligation of Holdings of the type specified in clauses
(a) through (d) above. The effect of clause (iv) is that Holdings may not issue,
assume or guaranty any indebtedness for money borrowed which is junior to the
Senior Debt and senior to the Subordinated Debt. (Subordinated Indenture Section
1401).
Upon the failure to pay the principal or premium, if any, on Senior Debt
when due or upon the maturity of any Senior Debt by lapse of time, acceleration
or otherwise, all principal thereof, interest thereon, if any, and other amounts
due in connection therewith shall first be paid in full, before any payment is
made on account of the principal, premium, if any, or interest, if any, on the
Subordinated Debt or to acquire any of the Subordinated Debt or on account of
the redemption, sinking fund or analogous provisions in the Subordinated
5
<PAGE> 7
Indenture. (Subordinated Indenture Section 1402). Upon any distribution of
assets of Holdings pursuant to any dissolution, winding up, liquidation or
reorganization of Holdings, payment of the principal, premium, if any, and
interest, if any, on the Subordinated Debt will be subordinated, to the extent
and in the manner set forth in the Subordinated Indenture, to the prior payment
in full of all Senior Debt. (Subordinated Indenture Section 1403). By reason of
such subordination, in the event of insolvency, creditors of Holdings who are
holders of Senior Debt may recover more ratably than the holders of Subordinated
Debt.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise provided with respect to a series of Debt Securities, the
Debt Securities will be issuable as Registered Securities without coupons and in
denominations of $1,000 or any integral multiple thereof. 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 Debt Securities of the series to be
represented by such Global Security or Securities. If so provided with respect
to a series of Debt Securities, 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 applicable 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."
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 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 applicable Indenture,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such series will be exchangeable into 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 Bearer Security surrendered in exchange
for a 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 Registered Security issued in exchange for such Bearer
Security, but will be payable only to the Holder of such coupon when due in
accordance with the terms of the applicable Indenture. (Section 305). Except as
provided in an applicable Prospectus Supplement, Bearer Securities will not be
issued in exchange for Registered Securities.
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 Holdings for such purpose with respect to any
series of Debt Securities and referred to in an applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental
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charges as described in each 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. Holdings has appointed each Trustee as Security Registrar under the
applicable Indenture. (Section 305). If a Prospectus Supplement refers to any
transfer agents (in addition to the Security Registrar) initially designated by
Holdings with respect to any series of Debt Securities, Holdings 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 Debt
Securities of a series are issuable only as Registered Securities, Holdings will
be required to maintain a transfer agent in each Place of Payment for such
series and, if Debt Securities of a series are issuable as Bearer Securities,
Holdings 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. Holdings may at any time designate additional transfer agents with
respect to any series of Debt Securities. (Section 1002).
In the event of any redemption in part, Holdings shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and ending at the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities, the
day of the first publication of the relevant notice of redemption or, if 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 Holdings may designate from time
to time, at the option of the Holder, by check or by transfer to an account
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 Holdings
or the delivery by Holdings of the Bearer Security in definitive 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 Holdings. No payment with respect to
any Bearer Security will be made at any office or agency of Holdings 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 Holdings' 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).
Unless otherwise indicated in an applicable Prospectus Supplement, 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 Holdings may designate from time to time,
except that at the option of Holdings 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
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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).
Unless otherwise indicated in an applicable Prospectus Supplement, the
principal office of each Trustee under the applicable Indenture in The City of
New York will be designated as Holdings' sole Paying Agent for payments with
respect to Debt Securities which are issuable solely as Registered Securities
and as Holdings' Paying Agent in the Borough of Manhattan, The City of New York,
for payments with respect to 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 Holdings for the Debt
Securities will be named in an applicable Prospectus Supplement. Holdings 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 Debt Securities of a series are issuable only as
Registered Securities, Holdings will be required to maintain a Paying Agent in
each Place of Payment for such series, and if Debt Securities of a series may be
issuable as Bearer Securities, Holdings 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 Debt Securities of such series and any coupons
appertaining thereto may be presented and surrendered for payment; provided that
if the 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, Holdings will maintain a
Paying Agent in Luxembourg or any other required city located outside the United
States, as the case may be, for the Debt Securities of such series. (Section
1002).
All moneys paid by Holdings to a Paying Agent for the payment of principal
of (and premium, if any) or interest on any 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 Holdings and the Holder of such Debt
Security or any coupon will thereafter look only to Holdings for payment
thereof. (Section 1003).
GLOBAL SECURITIES
The 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 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.
Unless otherwise specified in an applicable Prospectus Supplement, 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 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 Debt Securities or by Holdings, if such
Debt Securities are offered and sold directly by Holdings. 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
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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 Debt Securities represented by such Global Security for all purposes under
the Indenture governing such Debt Securities. Except as set forth below, owners
of beneficial interests in such Global Securities will not be entitled to have
Debt Securities of the series represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of
Debt Securities of such series in definitive form and will not be considered the
owners or holders thereof under the Indenture.
Payment of principal of, premium, if any, and any interest on 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 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.
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 Debt Securities in definitive
registered form in exchange for all of the Global Securities representing such
Debt Securities. In addition, the Company may at any time and in its sole
discretion determine not to have any Debt Securities in registered form
represented by one or more Global Securities and, in such event, will issue Debt
Securities in definitive form in exchange for all of the Global Securities
representing such Debt Securities. (Section 305). Further, if the Company so
specifies with respect to the Debt Securities of a series, an owner of a
beneficial interest in a Global Security representing Debt Securities of such
series may, on terms acceptable to the Company and the Depository for such
Global Security, receive 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 Debt Securities of the
series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name (if
the Debt Securities of such series are issuable as Registered Securities). 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 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 Debt
Securities of such series are issuable as Bearer Securities or (c) as either
Registered or Bearer Securities if the 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.
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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 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 Euro-clear System
("Euro-clear") and Centrale de Livraison de Valeurs Mobilieres, S.A. ("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
definitive Debt Securities (including interests in a permanent Global Security
in bearer form), representing 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 Debt Security represented by a temporary Global Security
in bearer form or 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 Euro-clear or CEDEL, exchange its interest for definitive Bearer
Securities or, if specified in an applicable Prospectus Supplement, definitive
Registered Securities of any authorized denomination. No Bearer Security
delivered in exchange for a portion of a temporary Global Security or 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 Euro-clear and
CEDEL with respect to the portion of the temporary Global Security in bearer
form held for its account. Each of Euro-clear 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 Debt Securities remain outstanding, unless an applicable
Prospectus Supplement relating thereto provides otherwise, Holdings 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 Debt Securities and, if Holdings so
elects, any other indebtedness of Holdings ranking at least pari passu with the
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 Holdings, the consolidated net worth of which constitutes at least
5% of the consolidated net worth of Holdings. As of October 31, 1994, Holdings'
Designated Subsidiaries were Lehman Brothers, Lehman Commercial Paper Inc.,
LGSI, Lehman Brothers Holdings PLC, Lehman Brothers UK Holdings Limited, Lehman
Brothers International (Europe), Lehman Brothers Japan Inc., 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 Indenture with respect to Debt Securities of such series: (a) failure
to pay principal of or premium, if any, on any Debt Security of that series when
due; (b) failure to pay interest, if any, on any 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 Debt Security of that series; (d) failure to perform any
other covenant of Holdings in the Indenture (other than a covenant included in
the applicable Indenture solely for the benefit
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of a series of Debt Securities other than that series), continued for 90 days
after written notice as provided in the Indenture; and (e) certain events in
bankruptcy, insolvency or reorganization in respect of Holdings. (Section 501).
An Event of Default with respect to a particular series of Debt Securities does
not necessarily constitute an Event of Default with respect to any other series
of Debt Securities issued under the same or another Indenture. The Trustee may
withhold notice to the Holders of any series of 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).
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, unless the principal of all of the
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 Debt Securities of that series may declare the principal amount (or,
if the 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 Debt Securities of that series to be due and payable immediately. At any
time after a declaration of acceleration with respect to 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 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."
Each 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 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 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 Debt Securities of that series. (Section 512).
Holdings will be required to furnish to each Trustee annually a statement
as to the performance by Holdings of certain of its obligations under the
applicable Indenture and as to any default in such performance. (Section 1006).
SATISFACTION AND DISCHARGE
Except as may otherwise be set forth in an applicable Prospectus Supplement
relating to a series of Debt Securities, each Indenture provides that Holdings
shall be discharged from its obligations under the Debt Securities of such
series (with certain exceptions) at any time prior to the Stated Maturity or
redemption thereof when (a) Holdings has irrevocably deposited with the
applicable Trustee, in trust, (i) sufficient funds in the currency or currency
unit in which the 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 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 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 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 Debt Securities
of such series and (b) Holdings has paid all other sums payable with respect to
the Debt Securities of such series and (c) certain other conditions are met.
Upon such discharge, the Holders of the Debt Securities of such series shall no
longer be entitled to the benefits of the Indenture, except for certain rights,
including registration of transfer
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and exchange of the Debt Securities of such series and replacement of lost,
stolen or mutilated Debt Securities, and shall look only to such deposited funds
or obligations for payment. (Sections 401 and 403).
DEFEASANCE OF CERTAIN OBLIGATIONS
If the terms of the Debt Securities of any series so provide, Holdings 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 Debt Securities of such series, if (a) Holdings has
irrevocably deposited with the applicable Trustee, in trust, (i) sufficient
funds in the currency or currency unit in which the 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 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 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 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 Debt Securities of such series and (b) certain
other conditions are met. The obligations of Holdings under the Indenture with
respect to the 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 either Indenture may be made by Holdings
and the applicable 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 such 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 Debt Security, (b) reduce the principal amount
of, or the premium, if any, or interest, if any, on, any Debt Security, (c)
change any obligation of Holdings 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 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 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 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 applicable Indenture or for waiver of
compliance with certain provisions of the applicable Indenture or for waiver of
certain defaults, (k) reduce the requirements contained in either Indenture for
quorum or voting, or (l) change any obligation of Holdings to maintain an office
or agency in the places and for the purposes required in the applicable
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
Debt Securities of that series waive, insofar as that series is concerned,
compliance by Holdings with certain restrictive provisions of the applicable
Indenture. (Section 1007). 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 Debt Securities of that series and any coupons appertaining
thereto waive any past default under the applicable Indenture with respect to
that series, except a default in the
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payment of the principal of or premium, if any, or interest, if any, on any 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 applicable
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Debt Security of that series affected. (Section 513).
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series if Debt Securities of that series are issuable as
Bearer Securities. A meeting may be called at any time by the applicable
Trustee, and also, upon request, by Holdings 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
Debt Securities of any series duly held in accordance with the applicable
Indenture will be binding on all Holders of 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
Holdings 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, Holdings, provided that (i) the Person (if other than
Holdings) formed by such consolidation or into which Holdings is merged or which
acquires or leases the assets of Holdings substantially as an entirety is
organized under the laws of any United States jurisdiction and assumes Holdings'
obligations on the Debt Securities and under the 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 Debt Securities, notices to Holders of Bearer Securities
will be given by publication in a daily 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).
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TITLE
Title to any temporary global Debt Security, any permanent global Debt
Security, any Bearer Securities and any coupons appertaining thereto will pass
by delivery. Holdings, each Trustee and any agent of Holdings or the applicable
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 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 Debt Security or a Debt Security with a mutilated coupon
appertaining thereto will be replaced by Holdings at the expense of the Holder
upon surrender of such Debt Security to the applicable Trustee. Debt Securities
or coupons that become destroyed, stolen or lost will be replaced by Holdings at
the expense of the Holder upon delivery to the applicable Trustee of the Debt
Security and coupons or evidence of the destruction, loss or theft thereof
satisfactory to Holdings and the applicable Trustee; in the case of any coupon
which becomes destroyed, stolen or lost, such coupon will be replaced by
issuance of a new Debt Security in exchange for the Debt Security to which such
coupon appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon an indemnity satisfactory to the applicable Trustee and Holdings may be
required at the expense of the Holder of such Debt Security or coupon before a
replacement Debt Security will be issued. (Section 306).
CONCERNING THE TRUSTEES
Business and other relationships (including other trusteeships) between, on
the one hand, Holdings and its affiliates and, on the other hand, the Trustee
under the Indenture pursuant to which any of the Debt Securities to which an
applicable Prospectus Supplement accompanying this Prospectus relates are
described in such Prospectus Supplement.
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 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.
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."
14
<PAGE> 16
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.
UNITED STATES TAXATION
In the opinion of Simpson Thacher & Bartlett, special United States tax
counsel to Holdings, 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 Holdings or any Paying Agent of
principal or interest (which for purposes of this discussion includes
original issue discount) on a Debt Security owned by a Non-United States
Holder, provided, in the case of interest, (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 Holdings entitled to vote within
the 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 Holdings through stock ownership and (iii)
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;
(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 Holdings
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 qualify for the exemption from withholding tax in (a)(iii) above, the
beneficial owner of a Registered 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 Holdings with a statement to the effect
that the beneficial owner is not a United States person. 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 United States person (which certification may be
made on an Internal Revenue Service ("IRS") Form W-8, or any 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.
Payments to Non-United States Holders not meeting the requirements of
paragraph (a) above and thus subject to withholding of United States federal
income tax may nevertheless be exempt from such withholding if the beneficial
owner of the Debt Security provides a paying agent of Holdings with a properly
executed (1) IRS Form 1001 (or any successor form) claiming an exemption from
withholding under the benefit of a tax treaty or (2) IRS Form 4224 (or any
successor form) stating that interest paid on the Debt Security is not subject
to withholding tax because it is effectively connected with the owner's conduct
of a trade or business in the United States.
15
<PAGE> 17
BACKUP WITHHOLDING
Under certain circumstances, Holdings or its paying agent will have to
report to the United States IRS payments of principal, interest, original issue
discount, if any, and any premium. In addition, Holdings or its paying agent may
have to withhold 31% of such payments made after December 31, 1992, and deposit
such amounts with the IRS ("backup withholding").
Generally, no information reporting or backup withholding will be required
with respect to payments made 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)(iii) above has
been received.
If the conditions in the preceding paragraph have been met, backup
withholding and information reporting will not apply if the principal of, or
interest on, a Debt Security is 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 United States 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 United States trade or
business, 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 United States person and certain other conditions are met or (2) the
beneficial owner otherwise establishes an exemption. Principal of, and interest
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 certifies to its non-United States status under penalties of
perjury or otherwise establishes an exemption.
The temporary regulations expressly provide that the Treasury is still
considering the issue of whether backup withholding will apply with respect to
certain payments of principal, interest or the proceeds of a sale that are not
subject to backup withholding under the current regulations. Although the
temporary regulations indicate that any new provisions that impose backup
withholding on such payments will apply only to payments after the date such
regulations are issued, such provisions may apply to such future payments made
on or with respect to obligations existing at the time such regulations were
issued. Accordingly, such future regulations could result in the imposition of
backup withholding in respect of future payments of principal of and premium, if
any, interest on, or the proceeds of sale of, the Debt Securities
notwithstanding that the requirements outlined above are otherwise satisfied.
TAX CONSEQUENCES OF SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Debt Securities as more
fully described under "Description of 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 not
be taxable to Non-United States Holders under the circumstances outlined above.
Furthermore, following discharge, the Debt Securities might be subject to
withholding, backup withholding and/or information reporting.
CERTAIN TAX CONSEQUENCES FOR UNITED STATES HOLDERS
A Debt Security may be issued for an amount which is less than its stated
redemption price at maturity. The difference will be "original issue discount"
and will accrue as interest over the life of the Debt Security under a formula
based on the compounding of interest. The amount of original issue discount so
accrued in respect of a Debt Security will be added to the Holder's tax cost
therefor. Notice will be given in the appropriate Prospectus Supplement when a
particular Debt Security will have original issue discount.
16
<PAGE> 18
If a Holder's tax cost for a Debt Security exceeds the redemption price at
maturity thereof, the Holder will be considered to have purchased the Debt
Security at a "premium." The Holder (except in the case of a dealer in
securities or one who holds debt obligations primarily for sale to customers in
the ordinary course of his trade or business) may elect to amortize the premium
generally over the remaining term of the Debt Security. The amount amortized in
any year will be treated as a reduction of the Holder's interest income from the
Debt Security. A Holder's tax cost for the Debt Security will be reduced by the
amount amortized each year.
If a subsequent Holder purchases a Debt Security at a premium, i.e., at a
price in excess of the issue price plus the original issue discount accrued
prior to acquisition, the amount includible in income in each taxable year as
original issue discount will be reduced by that portion of the premium properly
allocable to the year.
A Holder will recognize taxable gain (or loss) when all or part of a Debt
Security is disposed of for an amount greater (or less) than his original tax
cost therefor plus any accrued original issue discount or minus any amortized
premium. In general, any such taxable gain or loss will be capital gain or loss,
except in the case of a dealer or financial institution. Such gain (or loss)
might arise in the event of a Satisfaction and Discharge. See "Tax Consequences
of Satisfaction and Discharge" above.
Under sections 165(j) and 1287(a) of the Code, a beneficial owner subject
to United States taxation on income derived from the Debt Securities or coupons
will not, with certain exceptions, be entitled to deduct any loss on Bearer
Securities or coupons and must treat as ordinary income any gain realized on the
sale or other disposition (including the receipt of principal) of Bearer
Securities or coupons.
THE OPINIONS AND DISCUSSION SET FORTH ABOVE ARE INTENDED ONLY AS A SUMMARY
AND DO NOT PURPORT TO BE A COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX
EFFECTS RELEVANT TO A DECISION TO PURCHASE DEBT SECURITIES. SUCH OPINIONS AND
DISCUSSION DO NOT ADDRESS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, LOCALITY OR NON-U.S. JURISDICTION. FURTHERMORE, THE OPINIONS OF COUNSEL
AND DISCUSSION SET FORTH ABOVE ARE BASED ON THE CODE, REGULATIONS, RULINGS AND
JUDICIAL DECISIONS AS OF THE DATE HEREOF, AND SUCH AUTHORITIES MAY BE REPEALED,
REVOKED OR MODIFIED SO AS TO MAKE THE FOREGOING ANALYSIS INAPPLICABLE. IT IS
RECOMMENDED THAT ALL PROSPECTIVE INVESTORS CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE TAX CONSIDERATIONS OF THIS OFFERING.
CAPITAL REQUIREMENTS
As registered broker-dealers, Lehman Brothers and certain of Holdings'
other 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
Lehman Brothers. The Exchange or the NASD, as the case may be, monitors the
application of the Net Capital Rule by the Regulated Subsidiaries. Lehman
Brothers and such 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.
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
17
<PAGE> 19
$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 Lehman
Brothers and the Regulated Subsidiaries that require the intensive use of
capital, such as underwriting and trading activities and the financing of
customer account balances, and also could restrict Holdings' ability to withdraw
capital from Lehman Brothers and the Regulated Subsidiaries which in turn could
limit Holdings' ability to pay dividends, repay debt and redeem or purchase
shares of its outstanding capital stock.
The Company is subject to other domestic and international regulatory
requirements with which it is required to comply.
PLAN OF DISTRIBUTION
Holdings may sell Debt Securities in any one or more of the following ways:
(i) through, or through underwriting syndicates managed by, Lehman Brothers
alone or with one or more other underwriters; (ii) through one or more dealers
or agents (which may include Lehman Brothers or LGSI); or (iii) directly to one
or more purchasers. The specific managing underwriter or underwriters or agent
or agents 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 or agents so named in a Prospectus Supplement
are underwriters or agents, respectively, in connection with such Debt
Securities. The applicable Prospectus Supplement also describes the discounts
and commissions to be allowed or paid to the underwriters or agents, all other
items constituting underwriting or agency compensation, the discounts and
commissions to be allowed or paid to dealers, if any, and the exchanges, if any,
on which such Debt Securities will be listed.
Debt Securities acquired by any underwriter will be acquired for its 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
such Debt Securities 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
resold by it or are not resold at the public offering price set forth in an
applicable Prospectus Supplement, the funds derived from such offering by the
Company on a consolidated basis may be reduced.
If so indicated in an applicable Prospectus Supplement, Holdings will
authorize the underwriters named therein to solicit offers by certain
institutional investors to purchase Debt Securities providing for payment and
delivery on a future date specified in an applicable 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 charitable institutions and such other institutions as may be
approved by Holdings. 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)
Holdings shall have sold to such underwriters the total principal amount of such
Debt Securities less the principal amount thereof covered by such arrangements.
Underwriters named therein will not have any responsibility in respect of the
validity of such arrangements or the performance of Holdings or such
institutional investors thereunder.
18
<PAGE> 20
Each distributor of Bearer Securities will agree that it will not offer or
sell during the restricted period, directly or indirectly, Bearer Securities in
the United States or to United States persons (other than as discussed under
"Limitations on Issuance of Bearer Securities") and in connection with the sale
of Bearer Securities during the restricted period, will not deliver definitive
Bearer Securities within the United States. See "Limitations on Issuance of
Bearer Securities."
Each underwriter or agent will represent and agree that (i) it has not
offered or sold and will not offer or sell in the United Kingdom, by means of
any document, any Debt Securities other than to persons whose ordinary business
it is to buy or sell shares or debentures, whether as principal or agent (except
in circumstances which do not constitute an offer to the public within the
meaning of the Companies Act 1985); (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 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 9(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1988.
The underwriters and agents named in an applicable Prospectus Supplement
may be entitled under agreements entered into with Holdings to indemnification
by Holdings against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which the
underwriters and agents may be required to make in respect thereof. The
underwriters and agents may engage in transactions with, or perform services
for, Holdings in the ordinary course of business.
Holdings has been advised by Lehman Brothers and LGSI that Lehman Brothers
and LGSI may from time to time purchase and sell Debt Securities in the
secondary market, but that neither of them is obligated to do so. No assurance
can be given that there will be a secondary market for the Debt Securities.
The underwriting and agency arrangements for this offering will comply with
the requirements of Schedule E of the By-laws of the NASD regarding an NASD
member firm's participation in distributing its affiliate's securities.
ERISA MATTERS
Each of Holdings, Lehman Brothers and LGSI 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 Offered Debt Securities, the validity of the Debt Securities offered hereby
will be passed upon for Holdings by Karen M. Muller, Esq., Deputy General
Counsel of Holdings and for the underwriters or agents 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 Holdings, Lehman Brothers and certain of their subsidiaries.
19
<PAGE> 21
INDEPENDENT ACCOUNTANTS
The consolidated financial statements and schedules of the Company for the
years ended December 31, 1993, December 31, 1992 and December 31, 1991,
appearing in the Company's Current Report on Form 8-K dated April 14, 1994,
which supersedes in its entirety the consolidated financial statements and
schedules included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, 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 schedules 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.
20
<PAGE> 22
===============================================================================
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 HOLDINGS OR ANY AGENT OR UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A 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 HOLDINGS SINCE
THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information................. 2
Documents Incorporated by Reference... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Debt Securities........ 4
Limitations on Issuance of Bearer
Securities.......................... 14
United States Taxation................ 15
Capital Requirements.................. 17
Plan of Distribution.................. 18
ERISA Matters......................... 19
Legal Opinions........................ 19
Independent Accountants............... 20
</TABLE>
===============================================================================
===============================================================================
LEHMAN BROTHERS
HOLDINGS INC.
Debt Securities
----------------
PROSPECTUS
, 1994
----------------
===============================================================================
<PAGE> 23
PROSPECTUS
LEHMAN BROTHERS HOLDINGS INC.
DEBT SECURITIES
------------------------
Lehman Brothers Holdings Inc. ("Holdings") may offer from time to time
debt securities (the "Debt Securities") consisting of debentures, notes and/or
other evidences of indebtedness in one or more series pursuant to an indenture
between Holdings and Citibank, N.A., and an indenture between Holdings and
Chemical Bank.
The Debt Securities may be issued in registered form or bearer form with
coupons attached. In addition, all or a portion of the Debt Securities of a
series may be issued in global form. 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 following Debt Securities are currently issued and outstanding:
$ 280,000,000 aggregate principal amount of Serial Zero Coupon Senior
Notes Due 1995-1998.
$ 70,000,000 aggregate principal amount of Serial Zero Coupon Senior
Notes Due 1995-1998.
$ 150,000,000 aggregate principal amount of 9 3/4% Notes Due 1996.
$ 120,000,000 aggregate principal amount of 8 7/8% Notes Due 1998.
$ 200,000,000 aggregate principal amount of 8 3/8% Notes Due 1999.
$ 200,000,000 aggregate principal amount of 8 7/8% Notes Due 2002.
$ 200,000,000 aggregate principal amount of 8 3/8% Notes Due 1997.
$ 100,000,000 aggregate principal amount of 9 1/4% Notes Due 2004.
$ 200,000,000 aggregate principal amount of 8 3/4% Notes Due 2002.
$ 200,000,000 aggregate principal amount of 7 5/8% Notes Due 1997.
$ 200,000,000 aggregate principal amount of 7 5/8% Notes Due 1999.
$ 150,000,000 aggregate principal amount of 6 3/8% Notes Due 1998.
$ 175,000,000 aggregate principal amount of 5 1/2% Notes Due 1996.
$ 200,000,000 aggregate principal amount of 5 3/4% Notes Due 1998.
$ 19,860,000 aggregate principal amount of Medium-Term Notes, Series B,
Due From Nine Months to 30 Years From Date of Issue.
$ 171,700,000 aggregate principal amount of Medium-Term Notes, Series C,
Due From Nine Months to 30 Years From Date of Issue.
$1,099,142,000 aggregate principal amount of Medium-Term Notes, Series
D, Due from Nine Months to 30 Years From Date of Issue.
For a discussion of certain United States federal income tax consequences
to holders of Debt Securities, see "United States Taxation" and the description
of the Debt Securities set forth herein.
In addition, Holdings has guaranteed the payment of principal and interest
on the following outstanding notes issued by The E.F. Hutton Group Inc. (the
"Guaranteed Notes"):
$102,145,000 aggregate principal amount of 8 7/8% Notes Due May 1, 1996.
------------------------
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.
------------------------
This Prospectus has been prepared in connection with the Debt Securities
and is used by Lehman Brothers Inc. ("Lehman Brothers") and Lehman Government
Securities Inc. ("LGSI") in connection with offers and sales related to market
making transactions in the Debt Securities. Lehman Brothers and/or LGSI may act
as principal or agent in such transactions. The Debt Securities will be offered
in the over-the-counter market at negotiated prices related to prevailing market
prices at the time of sale or otherwise.
------------------------
, 1994
<PAGE> 24
AVAILABLE INFORMATION
Holdings is subject to the informational requirements of the Securities
Exchange Act of 1934 (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, Northwestern Atrium 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. Holdings' Common Stock is listed on the New York Stock
Exchange, Inc. (the "Exchange") and the Pacific Stock Exchange Inc. (the "PSE").
Holdings' 8 3/4% Notes Due 2002 are listed on the Exchange. Holdings' $55
Million Serial Zero Coupon Senior Notes Due May 16, 1998, FT-SE Eurotrack 200
Index Call Warrants expiring June 4, 1996, Japanese Yen Bear Warrants Expiring
September 15, 1995, 7 1/4% Oracle Yield Enhanced Equity Linked Debt SecuritiesSM
due 1996, 6 1/2% Amgen Yield Enhanced Equity Linked Debt Securities Due 1997,
Japanese Yen Bear Warrants Expiring March 5, 1996, Stock Upside Note
SecuritiesSM Due 2000, 9 1/4% Micron Yield Enhanced Equity Linked Debt
Securities Due 1997 and AMEX Hong Kong 30 Index Call Warrants are listed on the
American Stock Exchange, Inc. (the "ASE"), and reports and other information
concerning Holdings may also be inspected at the offices of the Exchange at 20
Broad Street, New York, New York 10005, at the offices of the ASE, 86 Trinity
Place, New York, New York 10006 and at the offices of the PSE, 301 Pine Street,
San Francisco, California 94104.
Holdings has filed with the SEC a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further information,
reference is hereby made to the Registration Statement.
------------------------
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by Holdings with the SEC pursuant
to the Exchange Act are hereby incorporated by reference in this Prospectus:
(1) Holdings' Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
(2) Holdings' Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1994, June 30, 1994 and August 31, 1994.
(3) Holdings' Current Reports on Form 8-K dated February 24, 1994,
April 14, 1994, April 26, 1994, June 7, 1994, June 15, 1994, July
29, 1994, September 2, 1994, September 22, 1994 and November 15,
1994.
Each document filed by Holdings 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
Statement 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 Statement or this Prospectus.
Holdings 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 J. Capko,
the Controller's Office, Lehman Brothers Holdings Inc., 3 World Financial
Center, 27th Floor, New York, New York 10285 (telephone (212) 526-0660).
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<PAGE> 25
THE COMPANY
Lehman Brothers Holdings Inc. (together with its consolidated subsidiaries,
hereinafter referred to as the "Company" unless the context otherwise requires)
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 and regional headquarters in London and Tokyo
are complemented by offices in additional locations in the United States,
Europe, the Middle East, Latin America and the Asia Pacific region.
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; institutional
asset management; research; and the trading of foreign exchange, derivative
products and certain commodities. The Company acts as a market marker in all
major equity and fixed income 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"), and holds memberships or associate
memberships on several principal international securities and commodities
exchanges, including the London, Tokyo, Hong Kong, Frankfurt and Milan stock
exchanges.
Holdings was incorporated in Delaware on December 29, 1983. Holdings'
principal executive offices are located at 3 World Financial Center, New York,
New York 10285 (telephone (212) 526-7000).
USE OF PROCEEDS
Except as otherwise may be set forth in an applicable Prospectus Supplement
accompanying this Prospectus, Holdings intends to apply the net proceeds from
the sale of the Debt Securities 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 five years in the period ended December 31, 1993,
and the eight months ended August 31, 1994:
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
YEAR ENDED DECEMBER 31, AUGUST 31,
----------------------------------------- ------------------
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1.01 * 1.03 * 1.00 1.03
</TABLE>
- ---------------
* Earnings were inadequate to cover fixed charges and would have had to increase
approximately $766 million and $247 million in order to cover the deficiencies
for the periods ended December 31, 1990 and December 31, 1992, respectively.
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.
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<PAGE> 26
DESCRIPTION OF DEBT SECURITIES
The Debt Securities constitute either Senior Debt (as defined below) or
Subordinated Debt (as defined below) of Holdings. The Debt Securities
constituting Senior Debt are issued under an indenture, dated as of September 1,
1987, between Holdings and Citibank, N.A., Trustee, as supplemented and amended
by Supplemental Indentures dated as of November 25, 1987, as of November 27,
1990, as of September 13, 1991, and as of October 4, 1993 (the "Senior
Indenture"), and the Debt Securities constituting Subordinated Debt are to be
issued under an indenture between Holdings and Chemical Bank, Trustee (the
"Subordinated Indenture"). The Senior Indenture and the Subordinated Indenture
are hereinafter collectively referred to as the "Indentures" and, individually,
as an "Indenture". Each Indenture will incorporate by reference certain Standard
Multiple-Series Indenture Provisions, filed with the SEC on July 30, 1987 and as
amended and refiled with the SEC on November 16, 1987. This Prospectus contains
descriptions of all material provisions of the Indentures. The summary of such
provisions of the Indentures does not purport to be complete; copies of such
Indentures are filed as exhibits to the Registration Statement of which this
Prospectus is a part. All articles and sections of the applicable Indenture, and
all capitalized terms set forth below, have the meanings specified in the
applicable Indenture.
GENERAL
Neither Indenture limits the amount of debentures, notes or other evidences
of indebtedness which may be issued thereunder. Each Indenture provides that
Debt Securities may be issued from time to time in one or more series. Since
Holdings, as a holding company, does not have any significant assets other than
the equity securities of its subsidiaries, its cash flow and consequent ability
to service its debt, including the Debt Securities, are dependent upon the
earnings of its subsidiaries and the distribution of those earnings to Holdings,
or upon loans or other payments of funds by those subsidiaries to Holdings.
Holdings' subsidiaries, including Lehman Brothers, are separate and distinct
legal entities and will have no obligation, contingent or otherwise, to pay any
interest or principal on the Debt Securities or to make any funds available
therefor, whether by dividends, loans or other payments. Dividends, loans and
other payments by Lehman Brothers are restricted by net capital and other rules
of various regulatory bodies. See "Capital Requirements." The payment of
dividends by Holdings' subsidiaries is contingent upon the earnings of those
subsidiaries and is subject to various business considerations in addition to
net capital requirements and contractual restrictions.
Since the Debt Securities are obligations of a holding company, the ability
of holders of the Debt Securities to benefit from any distribution of assets of
any subsidiary upon the liquidation or reorganization of such subsidiary is
subordinate to the prior claims of present and future creditors of such
subsidiary.
Reference is made to the applicable description below for the following
terms and other information with respect to an issue of Debt Securities: (1) the
title of such Debt Securities and whether such Debt Securities are Senior Debt
or Subordinated Debt; (2) any limit on the aggregate principal amount of such
Debt Securities; (3) whether the Debt Securities are issuable as Registered
Securities or Bearer Securities or both, and if Bearer Securities were issued,
whether Bearer Securities may be exchanged for Registered Securities and the
circumstances and places for such exchange, if permitted; (4) whether the Debt
Securities are to be issued in whole or in part in the form of one or more
temporary or permanent global 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 Debt Securities will mature; (6) the rate or
rates (or manner of determining the same) at which such Debt Securities bear
interest, if any, and the date or dates from which such interest accrues; (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 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 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 Indenture as described below under "Payment and Paying
Agents," the principal of and premium, if any, and interest, if any, on the Debt
Securities is payable and each office or agency where, subject to the terms of
the applicable Indenture as described below under "Denominations, Registration
and
4
<PAGE> 27
Transfer," the 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 Debt Securities are payable pursuant to
any optional or mandatory redemption provisions; (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 Debt
Security or must pay such additional amounts in respect of any Debt Security;
(12) the terms and conditions, if any, upon which the 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 Debt Securities are payable; (13) the denominations
in which any Debt Securities which are Registered Securities are issuable if
other than denominations of $1,000 and any integral multiple thereof, and the
denomination or denominations in which any Debt Securities which are Bearer
Securities are issuable if other than the denomination of $5,000; (14) the
currency, currencies or currency units for which such Debt Securities may be
purchased and the currency, currencies or currency units in which the principal
of and interest, if any, on such 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 Debt Securities; and (16) other terms of the Debt
Securities. (Section 301).
If any of the Debt Securities are sold for foreign currencies or foreign
currency units or if the principal of or interest, if any, on any series of 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 Debt Securities and such currencies or currency
units will be set forth in the terms and provisions of an issue of Debt
Securities described below.
One or more series of 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 below in
the applicable description of the terms and provisions of an issue of Debt
Securities.
SENIOR DEBT
The Debt Securities constituting part of the senior debt of Holdings (the
"Senior Debt") rank equally with all other unsecured debt of Holdings except
Subordinated Debt.
SUBORDINATED DEBT
The Debt Securities constituting part of the subordinated debt of Holdings
(the "Subordinated Debt") are subordinate and junior in the right of payment, to
the extent and in the manner set forth in the Subordinated Indenture, to all
present or future Senior Debt. "Senior Debt" is defined to mean (a) any
indebtedness for money borrowed or evidenced by bonds, notes, debentures or
similar instruments, (b) indebtedness under capitalized leases, (c) any
indebtedness representing the deferred and unpaid purchase price of any property
or business, and (d) all deferrals, renewals, extensions and refundings of any
such indebtedness or obligation; except that the following does not constitute
Senior Debt: (i) indebtedness evidenced by the Subordinated Debt, (ii)
indebtedness which is expressly made equal in right of payment with the
Subordinated Debt or subordinate and subject in right of payment to the
Subordinated Debt, (iii) indebtedness for goods or materials purchased in the
ordinary course of business or for services obtained in the ordinary course of
business or indebtedness consisting of trade payables, or (iv) indebtedness
which is subordinated to any obligation of Holdings of the type specified in
clauses (a) through (d) above. The effect of clause (iv) is that Holdings may
not issue, assume or guaranty any indebtedness for money borrowed which is
junior to the Senior Debt and senior to the Subordinated Debt. (Subordinated
Indenture Section 1401).
Upon the failure to pay the principal or premium, if any, on Senior Debt
when due or upon the maturity of any Senior Debt by lapse of time, acceleration
or otherwise, all principal thereof, interest thereon, if any, and other amounts
due in connection therewith shall first be paid in full, before any payment is
made on account of the principal, premium, if any, or interest, if any, on the
Subordinated Debt or to acquire any of the Subordinated Debt or on account of
the redemption, sinking fund or analogous provisions in the Subordinated
5
<PAGE> 28
Indenture. (Subordinated Indenture Section 1402). Upon any distribution of
assets of Holdings pursuant to any dissolution, winding up, liquidation or
reorganization of Holdings, payment of the principal, premium, if any, and
interest, if any, on the Subordinated Debt will be subordinated, to the extent
and in the manner set forth in the Subordinated Indenture, to the prior payment
in full of all Senior Debt. (Subordinated Indenture Section 1403). By reason of
such subordination, in the event of insolvency, creditors of Holdings who are
holders of Senior Debt may recover more ratably than the holders of Subordinated
Debt.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise provided with respect to a series of Debt Securities, the
Debt Securities will be issuable as Registered Securities without coupons and in
denominations of $1,000 or any integral multiple thereof. 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 Debt Securities of the series to be
represented by such Global Security or Securities. If so provided with respect
to a series of Debt Securities, 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 applicable 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 for 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."
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 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 applicable Indenture,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such series will be exchangeable into Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. Unless the terms and provisions of an
issue of Debt Securities described below provide otherwise, any Bearer Security
surrendered in exchange for a 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 Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the terms of the applicable Indenture.
(Section 305). Unless the terms and provisions of an issue of Debt Securities
described below provide otherwise, Bearer Securities will not be issued in
exchange for Registered Securities.
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 Holdings for such purpose with respect to any
series of Debt Securities and referred to below in the applicable
6
<PAGE> 29
description of the terms and provisions of an issue of Debt Securities, without
service charge and upon payment of any taxes and other governmental charges as
described in each 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.
Holdings has appointed each Trustee as Security Registrar under the applicable
Indenture. (Section 305). If the terms and provisions of an issue of Debt
Securities described below refer to any transfer agents (in addition to the
Security Registrar) initially designated by Holdings with respect to any series
of Debt Securities, Holdings 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 Debt Securities of a series are issuable
only as Registered Securities, Holdings will be required to maintain a transfer
agent in each Place of Payment for such series and, if Debt Securities of a
series are issuable as Bearer Securities, Holdings 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. Holdings may at any time
designate additional transfer agents with respect to any series of Debt
Securities. (Section 1002).
In the event of any redemption in part, Holdings shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and ending at the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities, the
day of the first publication of the relevant notice of redemption or, if 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 the terms and provisions of an issue of Debt Securities described
below provide otherwise, 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 Holdings may designate from time to time, at the option of the Holder, by
check or by transfer to an account maintained by the payee with a bank located
outside the United States. (Sections 307 and 1002). Unless the terms and
provisions of an issue of Debt Securities described below provide otherwise,
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 Holdings or the
delivery by Holdings of the Bearer Security in definitive 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 Holdings. No payment with respect to
any Bearer Security will be made at any office or agency of Holdings 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 Holdings' 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).
Unless the terms and provisions of an issue of Debt Securities described
below provide otherwise, 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 Holdings may
designate from time to time, except that at the option of Holdings 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
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<PAGE> 30
Register. (Sections 305, 307, 1002). Unless the terms and provisions of an issue
of Debt Securities described below provide otherwise, 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).
Unless the terms and provisions of an issue of Debt Securities described
below provide otherwise, the principal office of each Trustee under the
applicable Indenture in The City of New York will be designated as Holdings'
sole Paying Agent for payments with respect to Debt Securities which are
issuable solely as Registered Securities and as Holdings' Paying Agent in the
Borough of Manhattan, The City of New York, for payments with respect to 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 Holdings for the Debt Securities will be named below in
the applicable description of the terms and provisions of an issue of Debt
Securities. Holdings 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 Debt Securities of a series
are issuable only as Registered Securities, Holdings will be required to
maintain a Paying Agent in each Place of Payment for such series, and if Debt
Securities of a series may be issuable as Bearer Securities, Holdings 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 Debt Securities of such
series and any coupons appertaining thereto may be presented and surrendered for
payment; provided that if the 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,
Holdings will maintain a Paying Agent in Luxembourg or any other required city
located outside the United States, as the case may be, for the Debt Securities
of such series. (Section 1002).
All moneys paid by Holdings to a Paying Agent for the payment of principal
of (and premium, if any) or interest on any 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 Holdings and the Holder of such Debt
Security or any coupon will thereafter look only to Holdings for payment
thereof. (Section 1003).
GLOBAL SECURITIES
The 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 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.
Unless otherwise specified in an applicable Prospectus Supplement, 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 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 Debt Securities or by Holdings, if such
Debt Securities are offered and sold directly by Holdings. 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
8
<PAGE> 31
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 interest 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 Debt Securities represented by such Global Security for all purposes under
the Indenture governing such Debt Securities. Except as set forth below, owners
of beneficial interests in such Global Securities will not be entitled to have
Debt Securities of the series represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of
Debt Securities of such series in definitive form and will not be considered the
owners or holders thereof under the Indenture.
Payment of principal of, premium, if any, and any interest on 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 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.
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 a depository and a successor depository is not appointed by the
Company within 90 days, the Company will issue Debt Securities in definitive
registered form in exchange for all of the Global Securities representing such
Debt Securities. In addition, the Company may at any time and in its sole
discretion determine not to have any Debt Securities in registered form
represented by one or more Global Securities and, in such event, will issue Debt
Securities in definitive form in exchange for all of the Global Securities
representing such Debt Securities. (Section 305). Further, if the Company so
specifies with respect to the Debt Securities of a series, an owner of a
beneficial interest in a Global Security representing Debt Securities of such
series may, on terms acceptable to the Company and the Depository for such
Global Security, receive 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 Debt Securities of the
series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name (if
the Debt Securities of such series are issuable as Registered Securities). 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 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 Debt
Securities of such series are issuable as Bearer Securities or (c) as either
Registered or Bearer Securities if the 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.
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Bearer Debt Securities
If so specified in the terms and provisions of an issue of Debt Securities
described below, pending the availability of a permanent Global Security, all or
any portion of the 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 Euro-clear System ("Euro-clear") and Centrale de Livraison de
Valeurs Mobilieres, S.A. ("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 definitive Debt Securities (including
interests in a permanent Global Security in bearer form), representing Debt
Securities having the same interest rate and Stated Maturity, but in each such
case 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
Debt Security represented by a temporary Global Security in bearer form or 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
Euro-clear or CEDEL, exchange its interest for definitive Bearer Securities or,
if specified in the terms and provisions of the issue of Debt Securities,
definitive Registered Securities of any authorized denomination. No Bearer
Security delivered in exchange for a portion of a temporary Global Security or 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 the terms and provisions of an issue of Debt Securities described
below provide otherwise, 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 Euro-clear and CEDEL with respect to the portion of the
temporary Global Security in bearer form held for its account. Each of
Euro-clear 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 Debt Securities remain outstanding, unless the terms and
provisions of an issue of Debt Securities described below provide otherwise,
Holdings 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 Debt Securities and,
if Holdings so elects, any other indebtedness of Holdings ranking at least pari
passu with the 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 Holdings, the consolidated net worth of which constitutes at least
5% of the consolidated net worth of Holdings. As of October 31, 1994, Holdings'
Designated Subsidiaries were Lehman Brothers, Lehman Commercial Paper Inc.,
LGSI, Lehman Brothers Holdings PLC, Lehman Brothers UK Holdings Limited, Lehman
Brothers International (Europe), Lehman Brothers Japan Inc., LB I Group Inc. and
Lehman Brothers Financial Products Inc.
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EVENTS OF DEFAULT
Except as may otherwise be set forth in the terms and provisions of a
series of Debt Securities described below, the following are Events of Default
under the Indenture with respect to Debt Securities of such series: (a) failure
to pay principal of or premium, if any, on any Debt Security of that series when
due; (b) failure to pay interest, if any, on any 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 Debt Security of that series; (d) failure to perform any
other covenant of Holdings in the Indenture (other than a covenant included in
the applicable Indenture solely for the benefit of a series of Debt Securities
other than that series), continued for 90 days after written notice as provided
in the Indenture; and (e) certain events in bankruptcy, insolvency or
reorganization in respect of Holdings. (Section 501). An Event of Default with
respect to a particular series of Debt Securities does not necessarily
constitute an Event of Default with respect to any other series of Debt
Securities issued under the same or another Indenture. The Trustee may withhold
notice to the Holders of any series of 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).
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, unless the principal of all of the
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 Debt Securities of that series may declare the principal amount (or,
if the 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 Debt Securities of that series to be due and payable immediately. At any
time after a declaration of acceleration with respect to 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 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."
Each 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 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 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 Debt Securities of that series. (Section 512).
Holdings is required to furnish to each Trustee annually a statement as to
the performance by Holdings of certain of its obligations under the applicable
Indenture and as to any default in such performance. (Section 1006).
SATISFACTION AND DISCHARGE
Except as may otherwise be set forth in the terms and provisions of a
series of Debt Securities described below, each Indenture provides that Holdings
shall be discharged from its obligations under the Debt Securities of such
series (with certain exceptions) at any time prior to the Stated Maturity or
redemption thereof when (a) Holdings has irrevocably deposited with the
applicable Trustee, in trust, (i) sufficient funds in the currency or currency
unit in which the 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 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 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
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redemption) on, the 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 Debt Securities of such series and (b) Holdings has paid all other sums
payable with respect to the Debt Securities of such series and (c) certain other
conditions are met. Upon such discharge, the Holders of the 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 Debt
Securities of such series and replacement of lost, stolen or mutilated Debt
Securities, and shall look only to such deposited funds or obligations for
payment. (Sections 401 and 403).
DEFEASANCE OF CERTAIN OBLIGATIONS
If the terms of the Debt Securities of any series so provide, Holdings 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 Debt Securities of such series, if (a) Holdings has
irrevocably deposited with the applicable Trustee, in trust, (i) sufficient
funds in the currency or currency unit in which the 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 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 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 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 Debt Securities of such series and (b) certain
other conditions are met. The obligations of Holdings under the Indenture with
respect to the 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 either Indenture may be made by Holdings
and the applicable 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 such 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 Debt Security, (b) reduce the principal amount
of, or the premium, if any, or interest, if any, on, any Debt Security, (c)
change any obligation of Holdings 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 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 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 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 applicable Indenture or for waiver of
compliance with certain provisions of the applicable Indenture or for waiver of
certain defaults, (k) reduce the requirements contained in either Indenture for
quorum or voting, or (l) change any obligation of Holdings to maintain an office
or agency in the places and for the purposes required in the applicable
Indenture. (Section 902).
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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
Debt Securities of that series waive, insofar as that series is concerned,
compliance by Holdings with certain restrictive provisions of the applicable
Indenture. (Section 1007). 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 Debt Securities of that series and any coupons appertaining
thereto waive any past default under the applicable 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 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 applicable Indenture cannot be modified or amended
without the consent of the Holder of each Outstanding Debt Security of that
series affected. (Section 513).
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series if Debt Securities of that series are issuable as
Bearer Securities. A meeting may be called at any time by the applicable
Trustee, and also, upon request, by Holdings or the Holders of 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
Debt Securities of any series duly held in accordance with the applicable
Indenture will be binding on all Holders of 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
Holdings 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, Holdings, provided that (i) the Person (if other than
Holdings) formed by such consolidation or into which Holdings is merged or which
acquires or leases the assets of Holdings substantially as an entirety is
organized under the laws of any United States jurisdiction and assumes Holdings'
obligations on the Debt Securities and under the 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
Unless the terms and provisions of an issue of Debt Securities described
below provide otherwise, notices to Holders of Bearer Securities will be given
by publication in a daily 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
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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 Debt Security, any permanent global Debt
Security, any Bearer Securities and any coupons appertaining thereto will pass
by delivery. Holdings, each Trustee and any agent of Holdings or the applicable
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 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 Debt Security or a Debt Security with a mutilated coupon
appertaining thereto will be replaced by Holdings at the expense of the Holder
upon surrender of such Debt Security to the applicable Trustee. Debt Securities
or coupons that become destroyed, stolen or lost will be replaced by Holdings at
the expense of the Holder upon delivery to the applicable Trustee of the Debt
Security and coupons or evidence of the destruction, loss or theft thereof
satisfactory to Holdings and the applicable Trustee; in the case of any coupon
which becomes destroyed, stolen or lost, such coupon will be replaced by
issuance of a new Debt Security in exchange for the Debt Security to which such
coupon appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon an indemnity satisfactory to the applicable Trustee and Holdings may be
required at the expense of the Holder of such Debt Security or coupon before a
replacement Debt Security will be issued. (Section 306).
CONCERNING THE TRUSTEES
Holdings and its affiliates maintain bank accounts, borrow money and have
other customary banking relationships (including other trusteeships) with each
Trustee.
Unless otherwise specified, terms defined under a caption for a specific
issue of Debt Securities shall have such meanings only as to the Debt Securities
described therein.
TERMS AND PROVISIONS OF SERIAL ZERO COUPON SENIOR NOTES DUE 1994-1998
The first series of Serial Zero Coupon Senior Notes Due 1994-1998 (the
"First Series") has four separate remaining maturities with $20,000,000 in
aggregate principal amount due May 16 in each of the years 1995-1997 and
$220,000,000 due May 16, 1998. The second series of Serial Zero Coupon Senior
Notes Due 1995-1998 (the "Second Series") has four separate remaining maturities
with $5,000,000 in aggregate principal amount due May 16 in each of the years
1995-1997 and $55,000,000 due May 16, 1998. The First Series and the Second
Series are herein collectively referred to as the "Serial Notes." The Serial
Notes constitute Senior Debt and are issued in fully registered form. There are
not any periodic payments of interest on the Serial Notes; instead the Serial
Notes were issued at substantial discounts from the principal amounts at stated
maturity. The Serial Notes are not subject to any sinking fund. The Serial Notes
may be redeemed at the option of Holdings, in whole or in part, at any time at a
price of 100% of their principal amount at stated maturity.
If upon the occurrence of an Event of Default the Serial Notes are declared
to be due and payable the amount due and payable on the Serial Notes will be
equal to the sum of (i) the issue price of the Serial Notes plus (ii) the
accrued amortization of original issue discount attributable on a ratable basis
from the date of issuance to the date of declaration.
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If a bankruptcy proceeding is commenced in respect of Holdings, under
Section 502(b)(2) of Title 11 of the United States Code, the claim of the Holder
of a Serial Note with respect to the principal amount thereof would be limited
to the issue price of the Serial Note plus the portion of the initial discount
(the difference between such principal amount and the issue price of the Serial
Note) attributable on a ratable basis to the period from the date of original
issue of the Serial Note to the commencement of the proceeding.
For a discussion of certain federal tax consequences with respect to the
Serial Notes see "United States Taxation -- Certain Tax Consequences for United
States Holders -- Original Issue Discount Notes" and "Market Discount and
Premium."
TERMS AND PROVISIONS OF 9 3/4% NOTES DUE 1996
The 9 3/4% Notes Due 1996 (the "9 3/4% Notes") bear interest at the annual
rate of 9 3/4%, payable semiannually on April 1 and October 1 of each year to
the person in whose name the 9 3/4% Note is registered at the close of business
on the fifteenth day of the month preceding such Interest Payment Date. The
9 3/4% Notes mature on April 1, 1996. The 9 3/4% Notes are not subject to
redemption prior to maturity and are not subject to any sinking fund. The 9 3/4%
Notes constitute Senior Debt and are issued in fully registered form without
coupons in denominations of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 8 7/8% NOTES DUE 1998
The 8 7/8% Notes Due 1998 (the "8 7/8% Notes") bear interest at the annual
rate of 8 7/8%, payable semiannually on May 1 and November 1 of each year to the
person in whose name the 8 7/8% Note is registered at the close of business on
the fifteenth day of the month preceding such Interest Payment Date. The 8 7/8%
Notes mature on November 1, 1998. The 8 7/8% Notes are not subject to redemption
prior to maturity and are not subject to any sinking fund. The 8 7/8% Notes
constitute Senior Debt and are issued in fully registered form without coupons
in denominations of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 8 3/8% NOTES DUE 1999
The 8 3/8% Notes Due 1999 (the "8 3/8% 1999 Notes") bear interest at the
annual rate of 8 3/8%, payable semiannually on February 15 and August 15 of each
year to the person in whose name the 8 3/8% 1999 Note is registered at the close
of business on the last day of the month preceding such Interest Payment Date.
The 8 3/8% 1999 Notes mature on February 15, 1999. The 8 3/8% 1999 Notes are not
subject to redemption prior to maturity and are not subject to any sinking fund.
The 8 3/8% 1999 Notes constitute Senior Debt and are issued in fully registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000.
TERMS AND PROVISIONS OF 8 7/8% NOTES DUE 2002
The 8 7/8% Notes Due 2002 (the "8 7/8% 2002 Notes") bear interest at the
annual rate of 8 7/8%, payable semiannually on March 1 and September 1 of each
year to the person in whose name the 8 7/8% 2002 Note is registered at the close
of business on the fifteenth day of the month preceding such Interest Payment
Date. The 8 7/8% 2002 Notes mature March 1, 2002. The 8 7/8% 2002 Notes are not
subject to redemption prior to maturity and are not subject to any sinking fund.
The 8 7/8% 2002 Notes constitute Senior Debt and are issued in fully registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000.
TERMS AND PROVISIONS OF 8 3/8% NOTES DUE 1997
The 8 3/8% Notes Due 1997 (the "8 3/8% 1997 Notes") bear interest at the
annual rate of 8 3/8%, payable semiannually on April 1 and October 1 of each
year to the person in whose name the 8 3/8% 1997 Note is registered at the close
of business on the fifteenth day of the month preceding such Interest Payment
Date. The 8 3/8% 1997 Notes mature on April 1, 1997. The 8 3/8% 1997 Notes are
not subject to redemption prior to maturity and are not subject to any sinking
fund. The 8 3/8% 1997 Notes constitute Senior Debt and are issued in fully
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000.
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TERMS AND PROVISIONS OF 9 1/4% NOTES DUE 2004
The 9 1/4% Notes Due 2004 (the "9 1/4% Notes") bear interest at the annual
rate of 9 1/4%, payable semiannually on April 1 and October 1 of each year to
the person in whose name the 9 1/4% Note is registered at the close of business
on the fifteenth day of the month preceding such Interest Payment Date. The
9 1/4% Notes mature on April 1, 2004. The 9 1/4% Notes are not subject to
redemption prior to maturity but are subject to a sinking fund. The 9 1/4% Notes
constitute Senior Debt and are issued in fully registered form without coupons
in denominations of $1,000 and integral multiples of $1,000.
Sinking Fund
The 9 1/4% Notes are subject to redemption through the operation of a
sinking fund commencing October 1, 2000, and on each October 1 thereafter to and
including October 1, 2003, at their principal amount, together with accrued
interest to the date fixed for redemption. The sinking fund will provide for the
annual redemption of $20,000,000 principal amount of 9 1/4% Notes which will be
sufficient to retire 80% of the 9 1/4% Notes prior to maturity. The Company may,
at its option, receive credit against mandatory sinking fund payments for 9 1/4%
Notes acquired through open market purchases.
Notice of redemption pursuant to the sinking fund shall be given, not less
than 30 nor more than 60 days prior to the sinking fund payment date, to each
holder of a 9 1/4% Note to be redeemed at such holder's address as it appears in
the Securities Register.
TERMS AND PROVISIONS OF 8 3/4% NOTES DUE 2002
The 8 3/4% Notes Due 2002 (the "8 3/4% Notes") bear interest at the annual
rate of 8 3/4%, payable semiannually on May 15 and November 15 of each year to
the person in whose name the 8 3/4% Note is registered at the close of business
on the last day of the month preceding such Interest Payment Date. The 8 3/4%
Notes mature May 15, 2002. The 8 3/4% Notes are not subject to redemption prior
to maturity and are not subject to any sinking fund. The 8 3/4% Notes constitute
Senior Debt and are issued in fully registered form without coupons in
denominations of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 7 5/8% NOTES DUE 1997
The 7 5/8% Notes Due 1997 (the "7 5/8% Notes") bear interest at the annual
rate of 7 5/8%, payable semiannually on June 15 and December 15 of each year to
the person in whose name the 7 5/8% Note is registered at the close of business
on the last day of the month preceding such Interest Payment Date. The 7 5/8%
Notes mature on June 15 1997. The 7 5/8% Notes are not subject to redemption
prior to maturity and are not subject to any sinking fund. The 7 5/8% Notes
constitute Senior Debt and are issued in fully registered form without coupons
in denominations of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 7 5/8% NOTES DUE 1999
The 7 5/8% Notes Due 1999 (the "7 5/8% 1999 Notes") bear interest at the
annual rate of 7 5/8%, payable semiannually on January 15 and July 15 of each
year to the person in whose name the 7 5/8% 1999 Note is registered at the close
of business on the last day of the month preceding such Interest Payment Date.
The 7 5/8% 1999 Notes mature on July 15, 1999. The 7 5/8% 1999 Notes are not
subject to redemption prior to maturity and are not subject to any sinking fund.
The 7 5/8% 1999 Notes constitute Senior Debt and are issued in fully registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000.
TERMS AND PROVISIONS OF 6 3/8% NOTES DUE 1998
The 6 3/8% Notes Due 1998 (the "6 3/8% Notes") bear interest at the annual
rate of 6 3/8%, payable semiannually on June 1 and December 1 of each year to
the person in whose name the 6 3/8% Note is registered at the close of business
on the fifteenth day of the month preceding such Interest Payment Date. The
6 3/8% Notes mature on June 1, 1998. The 6 3/8% Notes are not subject to
redemption prior to maturity and are not subject to any sinking fund. The 6 3/8%
Notes constitute Senior Debt and are issued in fully registered form without
coupons in denominations of $1,000 and integral multiples of $1,000.
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<PAGE> 39
TERMS AND PROVISIONS OF 5 1/2% NOTES DUE 1996
The 5 1/2% Notes Due 1996 (the "5 1/2% Notes") bear interest at the annual
rate of 5 1/2%, payable semiannually on June 15 and December 15 of each year to
the person in whose name the 5 1/2% Note is registered at the close of business
on the last day of the month preceding such Interest Payment Date. The 5 1/2%
Notes mature on June 15, 1996. The 5 1/2% Notes are not subject to redemption
prior to maturity and are not subject to any sinking fund. The 5 1/2% Notes
constitute Senior Debt and are issued in fully registered form without coupons
in denominations of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 5 3/4% NOTES DUE 1998
The 5 3/4% Notes Due 1996 (the "5 3/4% Notes") bear interest at the annual
rate of 5 3/4%, payable semiannually on February 15 and August 15 of each year
to the person in whose name the 5 3/4% Note is registered at the close of
business on the last day of the month preceding such Interest Payment Date. The
5 3/4% Notes mature February 15, 1998. The 5 3/4% Notes are not subject to
redemption prior to maturity and are not subject to any sinking fund. The 5 3/4%
Notes constitute Senior Debt and are issued in fully registered form without
coupons in denominations of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF MEDIUM-TERM NOTES, SERIES B
Set forth below is a table indicating the issuance date and the maturities
of the $19,860,000 aggregate principal amount of Medium-Term Notes, Series B
issued and outstanding as of November 23, 1994. The Medium-Term Notes, Series B
constitute Senior Debt and have either (a) fixed interest rates or (b) floating
interest rates which are either reset daily, monthly, quarterly, semiannually or
annually based on the Commercial Paper Rate, the Prime Rate, the Federal Funds
Effective Rate, the Treasury Rate or LIBOR, adjusted by a Spread or Spread
Multiplier, as applicable. The Medium-Term Notes, Series B are not subject to
any sinking fund and are not redeemable prior to Stated Maturity.
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
------------- ---------------- ------------- ----
<S> <C> <C> <C>
September 27, 1991.......... $ 2,000,000 September 27, 2001 9.50%
May 24, 1991................ $ 2,000,000 May 24, 1995 8.85%
*April 4, 1991............... $ 15,860,000 April 1, 2011 6.00%
</TABLE>
- ---------------
* The Note was issued at a substantial discount from the principal amount. A
holder of this Note should consult its tax advisor with respect to the tax
consequences of owning such a Note.
TERMS AND PROVISIONS OF MEDIUM-TERM NOTES, SERIES C
Set forth below is a table indicating the issuance and maturities of the
$171,700,000 aggregate principal amount of Medium-Term Notes, Series C issued
and outstanding as of November 23, 1994. The Medium-Term Notes, Series C
constitute Senior Debt and have either (a) fixed interest rates, (b) floating
interest rates which are either reset daily, monthly, quarterly, semiannually or
annually based on the Commercial Paper Rate, the Prime Rate, the Federal Funds
Effective Rate, the Treasury Rate or LIBOR, adjusted by a Spread or Spread
Multiplier, as applicable, or (c) the amounts payable as interest determined by
reference to one or more commodity prices, equity indices or other factors. The
Medium-Term Notes, Series C are not subject to any sinking fund and are not
redeemable prior to Stated Maturity.
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
------------- ---------------- ------------- ----
<S> <C> <C> <C>
April 22, 1992............... $ 2,700,000 April 24, 1995 7.03%
(1)April 15, 1992............... $ 5,000,000 April 15, 1996 9.00% Resettable Semiannually
April 8, 1992................ $ 2,000,000 April 10, 1995 7.39%
March 27, 1992............... $ 50,000,000 March 27, 1995 7.69%
March 16, 1992............... $ 5,000,000 March 16, 1995 7.36%
March 10, 1992............... $ 5,500,000 March 10, 1995 7.41%
March 3, 1992................ $ 9,000,000 March 4, 2002 9.12%
February 28, 1992............ $ 1,000,000 February 28, 2002 9.14%
February 28, 1992............ $ 67,000,000 February 28, 2002 9.17%
February 27, 1992............ $ 3,000,000 February 27, 1995 7.28%
February 21, 1992............ $ 1,000,000 February 21, 1995 7.20%
</TABLE>
17
<PAGE> 40
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
------------- ---------------- ------------- ----
<S> <C> <C> <C>
December 23, 1991............ $ 5,000,000 December 26, 1996 7.08%
December 17, 1991............ $ 1,000,000 December 17, 1996 7.70%
(2)December 16, 1991............ $ 5,000,000 December 16, 1994 9.00% Resettable Semiannually
December 2, 1991............. $ 1,000,000 December 4, 1995 7.60%
November 20, 1991............ $ 1,000,000 November 20, 1996 8.20%
October 17, 1991............. $ 2,500,000 October 17, 1996 8.35%
September 25, 1991........... $ 5,000,000 September 25, 1996 8.75%
</TABLE>
- ---------------
1. Interest for succeeding Interest Payment Periods is based, at the election of
the holder of a Note, upon one of seven formulas involving the difference
between 2 multiplied by the fixed rate an affiliate of the issuer would pay
in an ECU denominated interest rate swap and 2 multiplied by the fixed rate
such affiliate would pay in a U.S.$ denominated interest rate swap, each for
a specified period of time; or, if the holder of a Note fails to make an
election on the applicable day prior to an Interest Payment Date, the
difference between 2 multiplied by 6-month ECU London Interbank Offered Rate
minus 2 multiplied by 6-month U.S.$ London Interbank Offered Rate, in each
instance as such terms are defined by the International Swap Dealers
Association; provided, that in no event will interest be less than zero.
2. Interest for succeeding Interest Payment Periods is based, at the election of
the holder of a Note, upon one of three formulas involving the difference
between 2.60 multiplied by the fixed rate an affiliate of the issuer would
pay in a Swiss Franc denominated interest rate swap and 2.60 multiplied by
the fixed rate such affiliate would pay in a U.S.$ denominated interest rate
swap each for a specified period of time; or, if the holder of a Note fails
to make an election on the applicable day prior to an Interest Payment Date,
the difference between 2.60 multiplied by 6-month Swiss Franc London
Interbank Offered Rate minus 2.60 multiplied by 6-month U.S.$ London
Interbank Offered Rate, in each instance as such terms are defined by the
International Swap Dealers Association; provided, that in no event will
interest be less than zero.
TERMS AND PROVISIONS OF MEDIUM-TERM NOTES, SERIES D
Set forth below is a table indicating the issuance and maturities of the
$1,099,142,000 aggregate principal amount of Medium-Term Notes, Series D issued
and outstanding as of November 23, 1994. The Medium-Term Notes, Series D
constitute Senior Debt and have either (a) fixed interest rates, (b) floating
interest rates which are either reset daily, monthly, quarterly, semiannually or
annually based on the Commercial Paper Rate, the Prime Rate, the Federal Funds
Effective Rate, the Treasury Rate or LIBOR, adjusted by a Spread or Spread
Multiplier, as applicable, or (c) the amounts payable as interest determined by
reference to one or more commodity prices, equity indices or other factors. The
Medium-Term Notes, Series D are not subject to any sinking fund and are not
redeemable prior to Stated Maturity.
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
------------- ---------------- ------------- ----
<S> <C> <C> <C>
(1)July 30, 1993........... $ 25,000,000 August 7, 1995 Selected Bond Index
July 30, 1993........... $ 29,000,000 July 28, 1995 Libor Reset Quarterly + .50%
July 26, 1993........... $ 50,000,000 July 26, 1995 Libor Reset Quarterly + .55%
(2)July 22, 1993........... $ 60,000,000 July 22, 1996 5.213%
July 21, 1993........... $ 1,000,000 July 21, 1995 4.82%
July 20, 1993........... $ 1,500,000 July 20, 1998 6.00%
July 20, 1993........... $ 1,000,000 July 22, 1996 5.10%
July 20, 1993........... $ 1,000,000 July 20, 1995 4.87%
July 19, 1993........... $ 5,500,000 July 19, 1995 4.81%
July 19, 1993........... $ 10,000,000 July 20, 1998 Libor Reset Quarterly + .60%
July 15, 1993........... $ 1,000,000 July 17, 1995 4.82%
July 15, 1993........... $ 2,100,000 July 15, 1996 5.15%
July 15, 1993........... $ 1,000,000 July 15, 1998 6.00%
July 15, 1993........... $ 1,000,000 July 17, 1995 4.85%
July 15, 1993........... $ 15,000,000 October 16, 1995 5.00%
July 14, 1993........... $ 1,000,000 July 14, 1998 6.09%
July 14, 1993........... $ 10,000,000 July 14, 1995 4.85%
July 14, 1993........... $ 1,000,000 July 15, 1996 5.26%
July 13, 1993........... $ 1,000,000 July 13, 1995 4.79%
July 12, 1993........... $ 1,500,000 June 30, 1998 6.125%
July 9, 1993............ $ 3,000,000 July 9, 1998 6.09%
July 9, 1993............ $ 2,000,000 July 10, 1995 4.83%
</TABLE>
18
<PAGE> 41
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
------------- ---------------- ------------- ----
<S> <C> <C> <C>
July 9, 1993............ $ 5,000,000 July 9, 1998 6.08%
July 8, 1993............ $ 25,825,000 July 8, 1998 6.08%
July 8, 1993............ $ 10,000,000 January 9, 1995 4.27%
July 8, 1993............ $ 1,000,000 July 8, 1998 6.08%
July 8, 1993............ $ 5,000,000 January 9, 1995 4.27%
July 7, 1993............ $ 2,000,000 July 7, 1995 4.86%
July 7, 1993............ $ 5,000,000 July 7, 1995 4.86%
July 7, 1993............ $ 2,000,000 July 5, 1996 5.15%
July 6, 1993............ $ 1,000,000 July 6, 1998 6.05%
July 6, 1993............ $ 1,000,000 July 6, 1998 6.02%
July 1, 1993............ $ 7,000,000 June 30, 1995 5.00%
July 1, 1993............ $ 1,000,000 July 1, 1997 5.75%
June 30, 1993........... $ 1,000,000 June 30, 1995 4.95%
June 30, 1993........... $ 29,000,000 June 30, 1998 6.125%
June 30, 1993........... $ 1,000,000 June 30, 1998 6.27%
June 29, 1993........... $ 35,000,000 June 29, 1998 6.25%
June 29, 1993........... $ 500,000 June 29, 1998 6.20%
(3)June 28, 1993........... $ 20,000,000 June 28, 1995 Libor Reset Quarterly + .85%
June 25, 1993........... $ 2,500,000 June 26, 1995 5.00%
(4)June 25, 1993........... $ 10,000,000 June 26, 1995 Prime Reset Daily - 1.90%
June 24, 1993........... $ 20,000,000 June 26, 1995 Libor Reset Quarterly + .55%
June 23, 1993........... $ 1,075,000 June 23, 1995 4.94%
June 23, 1993........... $ 2,000,000 June 23, 1995 4.91%
June 23, 1993........... $ 2,000,000 June 23, 1995 4.94%
June 23, 1993........... $ 3,000,000 June 30, 1995 4.91%
June 18, 1993........... $ 6,000,000 June 19, 1995 4.98%
June 18, 1993........... $ 5,500,000 June 19, 1995 5.00%
June 18, 1993........... $ 3,000,000 June 19, 1995 5.01%
June 17, 1993........... $ 10,000,000 June 16, 1995 5.10%
June 15, 1993........... $ 600,000 June 17, 1996 5.57%
June 15, 1993........... $ 500,000 June 17, 1996 5.57%
June 14, 1993........... $ 1,200,000 December 14, 1995 5.34%
June 14, 1993........... $ 2,000,000 June 14, 1995 5.10%
June 10, 1993........... $ 1,100,000 June 12, 1995 4.95%
June 9, 1993............ $ 1,200,000 June 9, 1995 4.99%
June 9, 1993............ $ 1,000,000 June 10, 1996 5.40%
June 8, 1993............ $ 15,000,000 June 8, 1995 5.13%
(5)June 7, 1993............ $ 20,000,000 June 7, 1995 Lehman Brothers Baa Corp. Bond Index
June 4, 1993............ $ 5,000,000 December 5, 1994 4.40%
June 3, 1993............ $ 2,000,000 December 5, 1994 4.49%
June 3, 1993............ $ 3,000,000 June 5, 1995 5.01%
June 1, 1993............ $ 1,000,000 June 15, 1995 5.02%
May 28, 1993............ $ 37,000,000 January 2, 1996 5.25%
May 28, 1993............ $ 1,400,000 May 28, 1998 6.32%
May 27, 1993............ $ 1,000,000 May 28, 1996 5.20%
May 27, 1993............ $ 1,000,000 May 28, 1996 5.15%
May 27, 1993............ $ 1,000,000 May 30, 1995 4.86%
May 26, 1993............ $ 10,000,000 May 26, 1995 Libor Reset Quarterly + .50%
May 26, 1993............ $ 10,000,000 May 26, 1995 4.86%
May 25, 1993............ $ 1,000,000 May 25, 1995 4.84%
May 25, 1993............ $ 3,000,000 May 25, 1995 4.82%
May 25, 1993............ $ 5,000,000 May 28, 1996 5.34%
</TABLE>
19
<PAGE> 42
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
------------- ---------------- ------------- ----
<S> <C> <C> <C>
May 24, 1993............ $ 11,000,000 November 24, 1995 5.03%
May 21, 1993............ $ 2,000,000 May 22, 1995 4.74%
May 20, 1993............ $ 5,500,000 May 22, 1995 4.63%
(6)March 17, 1993.......... $106,000,000 March 18, 1996 Libor Reset Quarterly + .50%
March 15, 1993.......... $ 2,500,000 March 16, 1998 6.50%
March 11, 1993.......... $ 5,000,000 March 11, 1996 5.48%
March 11, 1993.......... $ 10,000,000 March 13, 1995 4.95%
March 11, 1993.......... $ 1,000,000 March 13, 1995 4.90%
March 10, 1993.......... $ 7,000,000 March 9, 1995 Libor Reset Quarterly + .90%
March 10, 1993.......... $ 5,000,000 March 11, 1996 Libor Reset Quarterly + 1.00%
March 9, 1993........... $ 3,000,000 March 11, 1996 5.60%
March 8, 1993........... $ 1,000,000 March 8, 1996 5.59%
March 5, 1993........... $ 4,000,000 March 6, 1995 Libor Reset Quarterly + .90%
March 4, 1993........... $ 2,000,000 March 3, 1995 Libor Reset Quarterly + .90%
March 4, 1993........... $ 2,000,000 March 3, 1995 Libor Reset Quarterly + .90%
March 3, 1993........... $ 2,000,000 March 3, 1995 Libor Reset Quarterly + .85%
March 3, 1993........... $ 5,000,000 March 3, 1995 5.14%
February 25, 1993....... $ 1,000,000 February 27, 1995 5.20%
(7)February 22, 1993....... $ 31,000,000 February 22, 1995 Libor Reset Quarterly + .90%
February 19, 1993....... $ 14,600,000 February 21, 1995 Libor Reset Quarterly + .92%
February 19, 1993....... $ 10,000,000 February 21, 1995 Libor Reset Quarterly + .90%
January 13, 1993........ $ 1,000,000 January 13, 1998 7.27%
January 12, 1993........ $ 1,000,000 January 12, 1995 5.74%
January 7, 1993......... $ 3,000,000 January 9, 1995 5.79%
December 29, 1992....... $ 3,000,000 December 29, 1994 Libor Reset Quarterly + .80%
December 23, 1992....... $ 5,000,000 December 23, 1994 Libor Reset Quarterly + .80%
(5)December 23, 1992....... $ 60,000,000 December 31, 1996 Lehman Brothers Baa
Corporate Bond Index
December 22, 1992....... $ 2,000,000 December 22, 1994 5.99%
December 21, 1992....... $ 2,000,000 July 1, 1999 7.75%
October 20, 1992........ $ 1,000,000 October 20, 1995 5.58%
September 16, 1992...... $ 1,000,000 September 16, 1997 6.26%
September 11, 1992...... $ 5,000,000 September 11, 1995 5.56%
September 2, 1992....... $ 5,000,000 September 5, 1995 5.82%
September 1, 1992....... $ 2,000,000 September 2, 1997 6.72%
August 26, 1992......... $ 1,000,000 August 28, 1995 5.57%
August 26, 1992......... $ 3,000,000 August 26, 2002 7.64%
August 25, 1992......... $ 2,000,000 August 25, 1997 6.25%
August 25, 1992......... $ 5,000,000 February 28, 1995 5.15%
August 17, 1992......... $ 3,000,000 August 18, 1997 6.55%
August 14, 1992......... $ 5,000,000 August 15, 1995 5.71%
August 14, 1992......... $ 5,000,000 August 15, 1995 5.70%
August 11, 1992......... $ 10,000,000 August 12, 2002 7.85%
August 6, 1992.......... $ 2,000,000 August 7, 1995 5.76%
August 5, 1992.......... $ 1,000,000 August 5, 2002 7.72%
July 22, 1992........... $ 1,000,000 July 22, 1996 6.30%
July 21, 1992........... $ 6,000,000 July 21, 1995 5.86%
July 20, 1992........... $ 3,000,000 June 20, 2000 7.78%
July 20, 1992........... $ 10,000,000 June 30, 1995 Libor Reset Quarterly + .70%
July 17, 1992........... $ 1,000,000 July 17, 1996 6.42%
July 17, 1992........... $ 1,000,000 July 17, 1997 6.93%
</TABLE>
20
<PAGE> 43
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
------------- ---------------- ------------- ----
<S> <C> <C> <C>
July 15, 1992........... $ 2,000,000 July 15, 1996 6.46%
July 14, 1992........... $ 15,000,000 July 14, 1995 6.00%
July 8, 1992............ $ 5,000,000 July 10, 1995 6.37%
(8)June 26, 1992........... $ 9,042,000 June 26, 1996 9.50% Resettable Semiannually
June 12, 1992........... $ 5,000,000 June 12, 1995 6.80%
June 12, 1992........... $ 26,000,000 June 12, 1997 7.75%
June 11, 1992........... $ 1,000,000 June 12, 1995 6.83%
June 5, 1992............ $ 10,000,000 June 5, 1997 7.87%
June 5, 1992............ $ 5,000,000 June 5, 1997 7.875%
June 3, 1992............ $ 5,000,000 June 5, 1995 7.00%
June 3, 1992............ $ 1,000,000 June 3, 1999 8.40%
May 29, 1992............ $ 1,000,000 May 29, 1997 7.93%
May 28, 1992............ $ 4,000,000 May 28, 1999 8.18%
May 27, 1992............ $ 1,000,000 May 27, 1999 8.15%
May 27, 1992............ $ 10,000,000 September 28, 2001 9.00%
May 20, 1992............ $ 3,000,000 May 22, 1995 6.92%
May 20, 1992............ $ 2,000,000 May 22, 1995 7.02%
May 15, 1992............ $ 5,000,000 May 15, 1995 7.28%
May 14, 1992............ $ 10,000,000 May 14, 2002 8.97%
May 7, 1992............. $ 3,500,000 March 1, 2002 9.125%
(9)May 1, 1992............. $ 30,000,000 May 1, 1995 11.00% Reset Semiannually
</TABLE>
- ---------------
1. Interest on this Note is payable on the fifth New York Business Day
following the last day of the calendar month (each such month an "Interest
Payment Period") during which such interest accrued based upon the
appreciation in the level of an index (the "Index") that includes any one
and up to four bonds selected by the holder, from among those issued by the
governments of Australia, Canada, France, Germany, Japan, the United Kingdom
and the United States during such Interest Payment Period from the index
level previously reached for which an interest payment was made. Interest is
not paid during an interest Payment Period if pursuant to the formula
employed in determining interest, the resulting number is zero or a negative
number. Upon Maturity, this Note will be redeemed at par unless the level of
the index has declined from the level reached at the most recent time at
which a change in the level of the index resulted in the payment of
Interest. In such event, the amount paid at Maturity will be reduced in
direct proportion to the decline in the Index.
2. Interest on the Notes is payable semi-annually on each January 22 and July
22 when the Note is outstanding and on the Maturity Date. For the period
from and including July 22, 1994 to but excluding the Maturity Date interest
on the Note will be calculated at the rate of (a) 6.073% plus (b) the
difference between (i) the London Interbank Offered Rate for 3 month
deposits of U.S. Dollars as it appears on the Telerate Page 3750 at 9:30
a.m. New York City time on July 20, 1994 and (ii)(x) the yield of two year
U.S. Treasury Notes as it appears under the 9 a.m. New York City time on
Telerate Page 7690 on July 20, 1994 plus (y) the arithmetic mean of the bid
and asked spreads over a U.S. Treasury component at which two year interest
rate swaps are trading as it appears on Telerate Page 314 as of 9:30 a.m.
New York City time on July 20, 1994. Interest will be calculated on the
basis of a year consisting of twelve months of 30 days each. The Telerate
pages are deemed to include any successor pages of that service for purposes
of posting the applicable statistic. Interest may be zero for the Interest
Periods commencing on July 22, 1994 through the Maturity Date.
3. Interest on the Note is payable quarterly on the 28th day of March, June,
September, and December at a rate determined by reference to settings of the
three-month United States Dollar London Interbank Offered Rate ("LIBOR").
For the period from June 28, 1994 to the Maturity Date, interest on the Note
will accrue at a rate dependent on the arithmetic average of LIBOR during a
one-week period from June 22, 1994 through June 28, 1994. If the average
LIBOR during such period is less than or equals 4.10%, then interest on the
Note will continue to accrue for the period from June 28, 1994 through the
Maturity Date at a rate of LIBOR plus a spread of 0.85%. If the average
LIBOR during such period exceeds 4.10%, then interest on the Note will
accrue at the lower of (a) LIBOR plus a spread of 0.85% or (b) 15.10% minus
the product of (i) 2 multiplied by (ii) LIBOR. At maturity, the Note will be
redeemed at par.
4. The "Prime Rate" means, with respect to any Interest Determination Date, the
interest rate (expressed as a percentage per annum) for such date, as
published in the applicable weekly statistical release designated as
H.15(519)
21
<PAGE> 44
(or any successor publication, published by the Board of Governors of the
Federal Reserve System) ("H.15(519)") opposite the caption "Bank prime
loan." If such an interest rate is not so published in H.15(519) by 9:00
a.m., New York City time, on the Calculation Date (the Business Day prior to
an Interest Payment Date) the Prime Rate will be determined by the
Calculation Agent and will be the arithmetic mean (rounded to the nearest
one-hundred thousandth of one percentage point, with five one-millionths of
one percentage point rounded upwards) of the rates of interest publicly
announced by each bank that appears on the display designated as page "NYMF"
on the Reuters Monitor Money Rates Service (or such other page as may
replace the NYMF page on that service) (the "Reuters Screen NYMF Page") as
such bank's U.S. dollar prime rate or base lending rate as in effect for
such Interest Determination Date, as quoted on the Reuters Screen NYMF Page
as of 9:00 a.m., New York City time, on that Interest Determination Date,
provided, that, at least four rates appear on the Reuters Screen NYMF Page
as of 9:00 a.m., New York City time, for such date. If fewer than four such
rates appear on the Reuters Screen NYMF Page as of 9:00 a.m., New York City
time, for such Interest Determination Date, the Prime Rate for such Interest
Determination Date will be determined by the Calculation Agent and will be
the arithmetic mean (rounded to the nearest one-hundred thousandth of one
percentage point, with five one-millionths of one percentage point rounded
upwards) of the rates quoted by three major banks in The City of New York
selected by the Calculation Agent as such banks' U.S. dollar prime rate or
base lending rate on the basis of the actual number of days in the year
divided by 360 as of the close of business on such Interest Determination
Date. If fewer than three such quotations are provided, the applicable
interest rate used for such Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean (rounded to the
nearest one-hundred thousandth of one percentage point, with five
one-millionths of one percentage point rounded upwards) of the U.S. dollar
prime or base lending rates quoted in The City of New York on the basis of
the actual number of days in the year divided by 360 as of the close of
business on such Interest Determination Date by three substitute banks or
trust companies organized and doing business under the laws of the United
States or any state thereof, each having total equity capital of at least
U.S. $500,000,000 and being subject to supervision or examination by federal
or state authority, selected by the Calculation Agent; provided, however,
that if the banks or trust companies selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Prime
Rate used for such Interest Determination Date will be the Prime Rate used
for the New York Banking Day preceding such Interest Determination Date.
5. Interest on this Note is payable on the fifth New York Business Day
following the last day of the calendar month (each such month an "Interest
Payment Period") during which such Interest accrued based upon the
appreciation in the level of the Lehman Brothers Baa Corporate Bond Index
(the "Index") during such Interest Payment Period from the Index level
previously reached. Interest is not paid during an Interest Payment Period
if pursuant to the formula employed in determining interest, the resulting
number is zero or a negative number. Upon Maturity, this Note will be
redeemed at par unless the level of the Index has declined from the level
reached at the most recent time at which a change in the level of the Index
resulted in the payment of Interest. In such event, the amount paid at
Maturity will be reduced in direct proportion to the decline in the Index.
6. The holder of the Note has the option to cause the Company to repurchase all
or any portion of the Note on the third Wednesday of each March, June,
September or December prior to Stated Maturity (each such Wednesday a
"Repurchase Date"); provided, that the Company receives notice from the
holder with respect to such repurchase not more than sixty (60) nor less
than five (5) Business Days prior to the Repurchase Date.
7. The Interest Rate is based on 1-month Libor plus .90% and will be reset
quarterly on the Interest Reset Date in March, June, September and December,
as applicable.
8. Principal and interest on the Note, which will be paid in U.S. Dollars
("U.S.$"), will be determined with reference to Canadian dollars ("CAD") as
more fully set forth below. Interest for succeeding Interest Payment Periods
is based, at the election of the holder of the Note, upon one of seven
formulas (each a "Formula"), six of which involve the difference between 2
multiplied by the fixed rate an affiliate of the issuer would pay in an
European Currency Unit ("ECU") denominated interest rate swap and 2
multiplied by the fixed rate such affiliate would pay in a Japanese Yen
denominated interest rate swap, each for a specified period of time. The
seventh Formula which the holder of a Note may elect is 2 multiplied by
6-month ECU London Interbank Offered Rate minus 2 multiplied by 6-month
Japanese Yen London Interbank Offered Rate, in each instance as such term is
defined by the International Swap Dealers Association (such Formula
hereinafter the "LIBOR Formula"). If the holder of the Note fails to make an
election on the applicable day prior to an Interest Payment Date the LIBOR
Formula will be applied. The amount of interest payable on any Interest
Payment Date will be equal to the product of CAD 10,786,313 times the
applicable Formula for the relevant Interest Payment Period times the spot
rate at which U.S.$ may be purchased for CAD (the "Spot Exchange Rate") for
settlement on such Interest Payment Date, as determined by an affiliate of
the issuer two New York and Toronto Banking Days prior to such Interest
Payment Date. In no event will interest be less than zero. The
22
<PAGE> 45
principal amount payable on the Maturity Date will equal CAD 10,786,313
times the Spot Exchange Rate, as determined by an affiliate of the issuer
two New York and Toronto Banking Days prior to such Maturity Date.
9. Interest for succeeding Interest Payment Periods is based upon a formula
involving 2 multiplied by 6-month Deutsche Mark London Interbank Offered
rate minus 2 multiplied by 6-month U.S.$ London Interbank Offered Rate minus
0.30%, in each instance as such terms are defined by the International Swap
Dealers Association; provided, that in no event will interest be less than
zero.
TERMS AND PROVISIONS OF GUARANTEED NOTES
The Guaranteed Notes have been issued under an indenture dated as of May 1,
1986 ("Guaranteed Indenture"), between The E. F. Hutton Group Inc. ("Group") and
the trustee, United States Trust Company of New York (the "Guaranteed Note
Trustee"). A copy of the Guaranteed Indenture is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summaries of certain terms and provisions of the Guaranteed Indenture do not
purport to be complete and are subject to, and qualified in their entirety by
reference to all the provisions of, the Guaranteed Indenture, including the
definitions therein of certain terms. Wherever reference is made to particular
defined terms (which are capitalized herein) of the Guaranteed Indenture, such
defined terms are incorporated herein by reference.
The Guaranteed Notes are unsecured obligations of Group and rank pari passu
with all other unsecured and unsubordinated indebtedness of Group. Holdings has
unconditionally guaranteed the due and punctual payment of principal and
interest on the Guaranteed Notes, when and as the same shall become due and
payable, whether at maturity or upon redemption or upon declaration or
otherwise, according to the terms of the Guaranteed Notes and the Guaranteed
Indenture. The Guarantee is an unsecured obligation and ranks pari passu with
all other unsecured obligations of Holdings.
Principal of and interest on the Guaranteed Notes is payable, and the
Guaranteed Notes are exchangeable and transfers thereof will be registrable, at
the office of the Trustee, currently located at 45 Wall Street, New York, New
York. The Guaranteed Notes are issuable in fully registered form only without
coupons in denominations of $1,000 and any integral multiple thereof, and may be
transferred or exchanged without payment of any service charge; Group may,
however, require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Except as otherwise provided in the Indenture, interest on the Guaranteed
Notes is payable semi-annually on May 1 and November 1, to the persons in whose
names Guaranteed Notes are registered at the close of business on the next
preceding April 15 and October 15 and, unless other arrangements are made, is
paid by checks mailed to such persons at their registered addresses. The
Guaranteed Notes are not redeemable prior to maturity.
Group may not consolidate with or merge into, or transfer all or
substantially all of its assets to, another corporation unless (a) the successor
corporation, which shall be a corporation organized and existing under the laws
of the United States of America or one of the States of the United States of
America, assumes by supplemental indenture all the obligations of Group under
the Guaranteed Notes and the Guaranteed Indenture and (b) at the time of the
merger, consolidation or sale, and after giving effect thereto, no default or
Event of Default would exist.
A sale of all or substantially all of the assets of Group to a Controlled
Subsidiary of Holdings is permitted without requiring the transferee to assume
Group's obligations under the Guaranteed Notes and the Guaranteed Indenture.
Holdings may not consolidate with or merge into, or transfer all or
substantially all of its assets to, another corporation unless the successor
corporation, which shall be a corporation organized and existing under the laws
of the United States or a State thereof, assumes by supplemental indenture all
the obligations of Holdings under the Guarantee.
EVENTS OF DEFAULT, NOTICE AND WAIVER
If an Event of Default with respect to the Guaranteed Notes then
outstanding shall have happened and be continuing, the Guaranteed Note Trustee
or the Holders of 25% in principal amount of the Guaranteed Notes then
outstanding may declare the principal and accrued interest of all the Guaranteed
Notes to be due
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and payable immediately; provided, that if all Events of Default with respect to
the Guaranteed Notes shall have been remedied, the Holders of a majority in
aggregate principal amount of the Guaranteed Notes then outstanding may rescind
and annul such declaration and its consequences.
An Event of Default with respect to the Guaranteed Notes then outstanding
is defined in the Guaranteed Indenture as being: default in payment of any
principal on any Guaranteed Notes; default for 30 days in payment of any
interest on any Guaranteed Notes; default for 60 days after notice by the
Holders of 25% of the outstanding Guaranteed Notes or the Guaranteed Note
Trustee in the performance of any other covenant in the Guaranteed Indenture
with respect to the Guaranteed Notes; or certain events of bankruptcy,
insolvency or reorganization.
If a default with respect to the Guaranteed Notes occurs and is continuing
and if it is known to the Guaranteed Note Trustee, the Guaranteed Note Trustee
is required to give to the Holders of the Guaranteed Notes notice of such
default within 90 days after it occurs; provided that, except in the case of
default in the payment of principal of or interest on the Guaranteed Notes with
respect to which such default has occurred, the Guaranteed Note Trustee shall be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the Holders of the Guaranteed
Notes.
In the event a default with respect to the Guaranteed Notes occurs and is
continuing, the Guaranteed Note Trustee, subject to its duty during default to
act with the required standard of care, may require indemnification by the
Holders of the Guaranteed Notes before proceeding to exercise any right or power
under the Guaranteed Indenture at the request of the Holders of the Guaranteed
Notes. The Holders of a majority in principal amount of the outstanding
Guaranteed Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Guaranteed Note Trustee, or
exercising any trust or power conferred on the Guaranteed Note Trustee. The
Guaranteed Note Trustee, however, may refuse to follow any direction that
conflicts with law or the Guaranteed Indenture or which would be unjustly
prejudicial to other Holders of Guaranteed Notes.
In certain cases, the Holders of a majority in principal amount of the
outstanding Guaranteed Notes may, on behalf of the Holders of all the Guaranteed
Notes, waive any past default with respect to such series except a default in
the payment of the principal or interest on the Guaranteed Notes with respect to
which such default has occurred.
Group is required to file annually with the Guaranteed Note Trustee a
certificate as to the absence of defaults under the Guaranteed Indenture.
MODIFICATION OF THE GUARANTEED INDENTURE AND WAIVER
Group and the Guaranteed Note Trustee may, with the consent of the Holders
of a majority in principal amount of the outstanding Guaranteed Notes (which
consent may be solicited without giving notice to all Holders of the Guaranteed
Notes) amend or supplement the Guaranteed Indenture in any respect with respect
to the Guaranteed Notes or waive compliance by Group with the provisions of the
Guaranteed Indenture with respect to the Guaranteed Notes, except that no such
amendment, supplement or waiver may, without in each case the consent of each
affected Holder of a Guaranteed Note, (a) extend the fixed maturity of any
Guaranteed Note, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, or waive a default in the
payment of principal or interest thereon or make any Guaranteed Note payable in
money other than United States Dollars or (b) reduce the aforesaid percentage of
Guaranteed Notes, if consent of the Holders is required for any such amendment,
supplement or waiver.
In addition, Group and the Guaranteed Note Trustee may, without notice to
or consent of any Holders of the Guaranteed Notes, amend or supplement the
Guaranteed Indenture or the Guaranteed Notes: (a) to cure any ambiguity, defect
or inconsistency; (b) to comply with the terms and conditions of the Guaranteed
Indenture under which Group may merge into, or transfer its assets to, another
corporation; (c) to provide for uncertificated Guaranteed Notes in addition to
or in place of certificated Guaranteed Notes; and (d) to make any change that
does not materially adversely affect the rights of any Holder of a Guaranteed
Note.
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SATISFACTION AND DISCHARGE
Group's obligations under the Guaranteed Indenture with respect to the
Guaranteed Notes will be discharged upon payment of all Guaranteed Notes or, at
the option of Group, upon the deposit in trust with the Guaranteed Note Trustee
or with another trustee acceptable to both the Guaranteed Note Trustee and Group
of money or U. S. Government Obligations sufficient to pay the principal of or
interest on the Guaranteed Notes on the dates such payments are due in
accordance with their terms. To exercise any such option, Group is required to
deliver to the Guaranteed Note Trustee an opinion of counsel to the effect that
(1) the deposit and related defeasance would not cause the Holders of the
Guaranteed Notes to recognize income, gain or loss for Federal income tax
purposes, accompanied by an applicable ruling received from or published by the
Internal Revenue Service, and (2) if the Guaranteed Notes are then listed on the
NYSE, such Guaranteed Notes would not be delisted from the NYSE as a result of
the exercise of such option.
MISCELLANEOUS
No Holder of a note of either series may institute any action against Group
under the Guaranteed Indenture (except actions for payment of overdue principal
of or interest on the Guaranteed Notes) unless the Holders of at least 25% of
the principal amount of Guaranteed Notes then outstanding shall have requested
the Guaranteed Note Trustee to institute such action and assured reasonable
indemnity to the Guaranteed Note Trustee against any loss, liability or expense
and the Guaranteed Note Trustee shall not have instituted such action within 60
days of such request.
REGARDING THE TRUSTEE
The Guaranteed Note Trustee serves as trustee under certain indentures
relating to over 400 of Shearson Lehman's tax exempt and corporate income unit
trusts.
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 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 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.
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 Sections 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."
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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 Northern Mariana
Islands. The term "United States Holder" means any holder that is a United
States person. The term "Non-United States Holder" means any Holder which is not
an United States person.
UNITED STATES TAXATION
Certain Tax Consequences for United States Holders. The following summary
describes certain United States federal income tax consequences of the ownership
of 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, financial
institutions, life insurance companies 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. For a discussion of certain United States federal income tax consequences
of the ownership of Debt Securities to Non-United States Holders see "Certain
Tax Consequences for Non-United States Holders" below. 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.
UNITED STATES HOLDERS. 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 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 a United States
Holder.
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
from domestic sources at the time it is paid or accrued in accordance with the
United States Holder's method of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT. The following is a summary of the principal
United States federal income tax consequences of the ownership of Debt
Securities issued with original issue discount ("Original Issue Discount Notes")
by United States Holders. This summary is based upon regulations issued by the
Treasury Department which became effective on April 4, 1994 (the "OID
Regulations"). The OID Regulations provide, however, that taxpayers generally
may rely on such regulations in determining the federal income tax consequences
of owning debt instruments issued after December 21, 1992. The following
discussion addresses only Debt Securities providing for fixed payments and
Securities that bear qualified stated interest, as defined below.
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 Security
other than "qualified stated interest," as defined below) will be issued with
original issue discount ("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. Notice will be given in the applicable Prospectus Supplement
when the Company determines that a particular Debt Security will be an Original
Issue Discount Note.
Under the OID Regulations, 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. "Qualified stated interest" with respect to a
Debt Security is stated interest that is unconditionally payable in cash or in
property (other than
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debt instruments of the issuer) at least annually at a single fixed rate ("Fixed
Rate Security"). Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval between payments.
Debt Securities other than Fixed Rate Securities will also be treated as bearing
qualified stated interest if they qualify as "variable rate debt instruments".
A Debt Security will be treated as a "variable rate debt instrument" for
purposes of the OID regulations if the Debt Security is issued for an amount
that does not exceed the total of principal payments unconditionally payable by
more than an amount equal to the lesser of (i) 0.015 multiplied by the product
of the total principal unconditionally payable and the number of complete years
to maturity from the issue date; or (ii) 15 percent of the total principal
payments unconditionally payable. In addition, to be a variable rate debt
instrument, the Debt Security must bear stated interest at (i) one or more
qualified floating rates, (ii) a single fixed rate and one or more qualified
floating rates, (iii) a single objective rate or (iv) a single fixed rate and a
single objective rate that is a "qualified inverse floating rate." In general, a
qualified floating rate is a rate the variations in the value of which can
reasonably be expected to measure contemporaneous variations in the cost of
newly borrowed funds in the currency in which the Debt Security is denominated.
An objective rate is a rate (other than a qualified floating rate) that is
determined using a single fixed formula and that is based on one or more of: (i)
qualified floating rates, (ii) rates that would be qualified floating rates for
a debt obligation denominated in a different currency or (iii) the yield or
change in the price of one or more items of actively traded personal property,
other than the stock or debt of the issuer or a related party. A "qualified
inverse floating rate" is a rate that is equal to a fixed rate minus a qualified
floating rate and the variations in which can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly borrowed
funds, disregarding certain restrictions on such rate such as caps, floors or
governors. Unless a Prospectus Supplement so indicates, Debt Securities will be
issued with 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
stated principal payments on the Debt Security are made, including the de
minimis OID in proportion to the amount of principal paid. Any amount of de
minimis OID that has not been included in income prior to sale, exchange or
retirement of a Debt Security shall be treated as capital gain.
The OID Regulations provide that Debt Securities that may be redeemed prior
to their Stated Maturity shall be treated from the time of issuance as having a
maturity date for federal income tax purposes on such redemption date if such
redemption would result in a lower yield to maturity in the case of a redemption
at the issuer's option or a higher yield to maturity in the case of a redemption
at the holder's option. The Company will determine whether a particular Debt
Security is deemed to have a maturity date for federal income tax purposes prior
to its Stated Maturity.
United States Holders of Original Issue Discount Notes 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 Note 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 Note 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. In general, the computation of OID is simplest if accrual periods
correspond to the intervals between payment dates provided by the terms of the
Debt Security. 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 the
qualified stated interest allocable to the accrual period. In determining OID
allocable to an accrual period, if an interval between payments of qualified
stated interest contains more than one accrual period, the amount of qualified
stated interest payable at the end of the interval (including
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any qualified stated interest that is payable on the first day of the accrual
period immediately following the interval) is allocated on a pro rata basis to
each accrual period in the interval and the adjusted issue price must be
increased by the amount of any qualified stated interest that has accrued prior
to the first day of the accrual period but is not payable until the end of the
interval. 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. If
all accrual periods are of equal length, except for either an initial shorter
accrual period or an initial and a final shorter accrual period, the amount of
OID allocable to the initial accrual period may be computed under any reasonable
method. 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 prior
payments, or any payments made on the first day of the accrual period, with
respect to such Debt Security that were not qualified stated interest. 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 certain variable rate debt instruments that are issued with
OID and that bear interest at a single qualified floating rate or a qualified
inverse floating rate, the accrual of OID is to be determined by assuming that
the rate is fixed upon issuance at the initial value of the interest rate. In
the case of certain variable rate debt instruments that are issued with OID and
that bear an objective interest rate (other than a qualified inverse floating
rate), the accrual of OID is calculated by assuming that the Debt Security bears
interest at a fixed rate that reflects the yield that is reasonably expected for
the Debt Security. The method for determining OID on Debt Securities that do not
bear interest at a qualified floating rate, at a qualified inverse floating rate
or at an objective rate will be provided in the applicable Prospectus Supplement
for such Debt Security. 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. If a United
States Holder makes this election for a Debt Security with market discount or
amortizable bond premium, the election is treated as an election under the
market discount or amortizable bond premium provisions, described below, and the
electing United States Holder will be required to amortize bond premium or
include market discount in income currently for all of the holder's other debt
instruments with market discount or amortizable bond 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
Services ("IRS"). UNITED STATES HOLDERS SHOULD CONSULT WITH THEIR OWN TAX
ADVISERS ABOUT THIS ELECTION.
In the case of Original Issue Discount Notes having a term of one year or
less ("Short-Term Original Issue Discount Notes"), 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 Original Issue Discount Note, unless the United States Holder
elects to compute this discount using tax basis instead of issue price. In
general, an individual and certain other cash method United States Holders of a
Short-Term Original Issue Discount Note are not required to include accrued
discount in their income currently unless they elect to do so. United States
Holders who 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 Original Issue Discount Notes (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
who 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 Original Issue Discount Note will be ordinary income to the extent of
the discount accrued through the date of sale, exchange or retirement. In
addition, such United States Holder who does not elect to include currently
accrued discount may be required to defer deductions for a portion of the
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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 Note) for an amount that is less than its
stated redemption price at maturity or, in the case of an Original Issue
Discount Note, 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, a 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
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.
ACQUISITION PREMIUM; AMORTIZABLE BOND PREMIUM. A United States Holder who
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 who 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
the 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 or market discount, or any discount with respect
to a Short-Term Original Issue Discount Note, previously included in income by
the United States Holder and reduced by an amortized premium and any cash
payments on the Security other than qualified stated interest. Upon the sale,
exchange or retirement of a Debt Security (which might arise in the event of a
satisfaction and discharge), 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 Original Issue Discount Notes, 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,
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under certain circumstances, taxed at lower rates than items of ordinary income.
The deductibility of capital losses is subject to limitations.
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 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.
Certain Tax Consequences for 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 or interest (which for purposes of this discussion includes OID)
on a Debt Security owned by a Non-United States Holder, provided, in the
case of interest, (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 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 and (iii) 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;
(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 income 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 qualify for the exemption from withholding tax in (a)(iii) above, the
beneficial owner of a Debt Security, or a financial institution holding the
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 United States person. 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 United States person (which certification may be
made on an IRS Form W-8, or any 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.
Payments to Non-United States Holders not meeting the requirements of
paragraph (a) above and thus subject to withholding of United States federal
income tax may nevertheless be exempt from such withholding if the beneficial
owner of the Debt Security provides a Paying Agent of the Company with a
properly executed (1) IRS Form 1001 (or any successor form) claiming an
exemption from withholding under the benefit of a tax treaty or (2) IRS Form
4224 (or any successor form) stating that interest paid on the Debt Security is
not subject to withholding tax because it is effectively connected with the
owner's conduct of a trade or business in the United States.
No information reporting or backup withholding will be required with
respect to payments made by the Company or any Paying Agent to Non-United States
Holders if a statement described in (a)(iii) above has been received and the
payor does not have actual knowledge that the beneficial owner is a United
States person.
30
<PAGE> 53
In addition, backup withholding and information reporting will not apply if
payments of principal, interest, original issue discount 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 United States 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 United
States 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. Under proposed
Treasury Regulations not currently in effect, backup withholding will not apply
to such payments absent actual knowledge that the payee is a United States
person.
Payments of principal, interest, OID or 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 a statement described in (a)(iii) 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 United States federal income tax
liability provided the required information is furnished to the IRS.
THE OPINIONS AND DISCUSSION SET FORTH ABOVE ARE INTENDED ONLY AS A SUMMARY
AND DO NOT PURPORT TO BE A COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX
EFFECTS RELEVANT TO A DECISION TO PURCHASE DEBT SECURITIES. SUCH OPINIONS AND
DISCUSSION DO NOT ADDRESS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, LOCALITY OR NON-U.S. JURISDICTION. FURTHERMORE, THE OPINIONS OF COUNSEL
AND DISCUSSION SET FORTH ABOVE ARE BASED ON THE CODE, REGULATIONS, RULINGS AND
JUDICIAL DECISIONS AS OF THE DATE HEREOF, AND SUCH AUTHORITIES MAY BE REPEALED,
REVOKED OR MODIFIED SO AS TO MAKE THE FOREGOING ANALYSIS INAPPLICABLE. IT IS
RECOMMENDED THAT ALL PROSPECTIVE INVESTORS CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE TAX CONSIDERATIONS OF THIS OFFERING.
CAPITAL REQUIREMENTS
As registered broker-dealers, Lehman Brothers and certain of Holdings'
other 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 NYSE monitors the application of the Net Capital Rule by the
Company. The NYSE and the NASD, as the case may be, monitor 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.
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
31
<PAGE> 54
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, and also could restrict Holdings' ability to withdraw
capital from Lehman Brothers which in turn could limit Holdings' ability to pay
dividends, repay debt and redeem or purchase shares of its outstanding capital
stock.
The Company is subject to other domestic and international regulatory
requirements with which it is required to comply.
ERISA MATTERS
Each of Holdings, Lehman Brothers and LGSI 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.
OTHER MATTERS
The distribution of the Debt Securities by the Company will comply with the
requirements of Schedule E of the By-laws of the NASD regarding an NASD member
firm distributing securities of an affiliate.
The Debt Securities may not be offered or sold directly or indirectly (i)
in the United Kingdom by means of any document other than to persons whose
ordinary business it is to buy or sell shares or debentures whether as principal
or agent (except in circumstances which do not constitute an offer to the public
within the meaning of the Companies Act 1985), and (ii) except in compliance
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done in relation to the Debt Securities in, from or otherwise
involving the United Kingdom. In addition, no person participating in the sale
of the Debt Securities will issue or pass to any person in the United Kingdom
any document received by it in connection with the issuance of the Debt
Securities unless that person is of a kind described in Article 9(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements and schedules of the Company for the
years ended December 31, 1993, December 31, 1992 and December 31, 1991,
appearing in the Company's Current Report on Form 8-K dated April 14, 1994,
which supersedes in its entirety the consolidated financial statements and
schedules included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, 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 schedules 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.
32
<PAGE> 55
================================================================================
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 HOLDINGS OR ANY AGENT OR UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A 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 HOLDINGS SINCE
THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Documents Incorporated by Reference... 2
The Company........................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Debt Securities........ 4
Limitations on Issuance of Bearer
Securities.......................... 25
United States Taxation................ 26
Capital Requirements.................. 31
ERISA Matters......................... 32
Other Matters......................... 32
Independent Accountants............... 32
</TABLE>
================================================================================
================================================================================
LEHMAN BROTHERS
HOLDINGS INC.
Debt Securities
---------------
PROSPECTUS
November , 1994
------------------
================================================================================
<PAGE> 56
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 the Registrant
in connection with the offering described in this Registration Statement (other
than underwriting discounts and commissions).
<TABLE>
<S> <C>
SEC registration fee......................................... $1,206,905
NASD fee..................................................... 30,500
Legal fees and expenses...................................... 25,000*
Accounting fees and expenses................................. 100,000*
Fees and expenses of Trustees................................ 30,000*
Blue Sky qualification fees and expenses..................... 25,000*
Printing and engraving fees.................................. 30,000*
Miscellaneous................................................ 2,595*
----------
Total.............................................. $1,450,000
=========
</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 and
officers 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 (the "Act");
(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;
(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;
II-1
<PAGE> 57
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 Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the Act, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange 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 Act 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 Act 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 Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 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
November, 1994.
LEHMAN BROTHERS HOLDINGS INC.
By /s/ MICHAEL R. MILVERSTED
---------------------------------
Michael R. Milversted
Treasurer
II-3
<PAGE> 59
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas A. Russo, Robert Matza and Michael R.
Milversted and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) and supplements to this Registration
Statement and any registration statement previously filed by the Registrant or a
predecessor in interest, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------- ------------------------------ ------------------
<S> <C> <C>
/s/ RICHARD S. FULD, JR. Chief Executive Officer and November 23, 1994
Chairman of the Board of
- ------------------------------------------- Directors
Richard S. Fuld, Jr. (principal executive officer)
/s/ T. CHRISTOPHER PETTIT Chief Operating Officer, November 23, 1994
President and Director
- -------------------------------------------
T. Christopher Pettit
/s/ ROBERT MATZA Chief Financial Officer November 23, 1994
(principal financial officer)
- -------------------------------------------
Robert Matza
/s/ STEPHEN J. BIER Controller November 23, 1994
(principal accounting officer)
- -------------------------------------------
Stephen J. Bier
/s/ ROGER S. BERLIND Director November 23, 1994
- -------------------------------------------
Roger S. Berlind
Director
- -------------------------------------------
John J. Byrne
/s/ KATSUMI FUNAKI Director November 23, 1994
- -------------------------------------------
Katsumi Funaki
/s/ JOHN D. MACOMBER Director November 23, 1994
- -------------------------------------------
John D. Macomber
/s/ MASATAKA SHIMASAKI Director November 23, 1994
- -------------------------------------------
Masataka Shimasaki
Director
- -------------------------------------------
Dina Merrill
Director
- -------------------------------------------
Malcolm Wilson
</TABLE>
II-4
<PAGE> 60
EXHIBIT INDEX
<TABLE>
<CAPTION>
FILED HEREWITH (--),
PREVIOUSLY FILED (*) PAGE NUMBER
EXHIBIT OR INCORPORATED BY IN SEQUENTIAL
NUMBER DESCRIPTION REFERENCE TO NUMBERING SYSTEM
- ------ --------------------------------- ------------------------------ ----------------
<S> <C> <C> <C> <C>
1(a) -- Form of Agency Agreement Exhibit 1(a) to Registration
Statement No. 33-65674 filed
July 7, 1993
1(b) -- Form of Underwriting Agreement --
(including Delayed Delivery
Contract)
1(c) -- Form of Placement Agency Exhibit 1(c) to Post-Effective
Agreement Amendment No. 1 to Registra-
tion Statement No. 33-16141
filed November 16, 1987
4(a) -- Holdings Standard Multiple Series Exhibit 4(a) to Post-Effective
Indenture Provisions dated July Amendment No. 1 to Registra-
30, 1987 and as amended November tion Statement No. 33-16141
16, 1987 filed November 16, 1987
4(b) -- Indenture dated as of September Exhibit 4(b) to Post-Effective
1, 1987 between Holdings and Amendment No. 1 to Registra-
Citibank, N.A., as Trustee, with tion Statement No. 33-16141
respect to the Senior Debt filed on November 16, 1987
Securities
4(c) -- Revised Form of Indenture between Exhibit 4(c) to Post-Effective
Holdings and Chemical Bank, as Amendment No. 1 to Registra-
Trustee, with respect to the tion Statement No. 33-16141
Subordinated Debt Securities filed on November 16, 1987
4(d) -- Supplemental Indenture, dated as Exhibit 4(m) to Registration
of November 25, 1987, between Statement No. 33-25797 filed
Holdings and Citibank, N.A., as November 25, 1988
Trustee, with respect to the
Senior Debt Securities
4(e) -- Second Supplemental Indenture, Exhibit 4(e) to Registration
dated as of November 27, 1990 Statement No. 33-49062 filed
between Holdings and Citibank, June 30, 1992
N.A., as Trustee, with respect to
the Senior Debt Securities
4(f) -- Third Supplemental Indenture Exhibit 4(f) to Registration
dated as of September 13, 1991, Statement No. 33-46146 filed
between Holdings and Citibank, on March 10, 1992
N.A., as Trustee, with respect to
the Senior Debt Securities
4(g) -- Fourth Supplement Indenture dated Exhibit 2(f) to Form 8-A filed
as of October 4, 1993, between October 7, 1993
Holdings and Citibank, N.A., as
Trustee, with respect to Senior
Debt Securities
4(h) -- Form of Fixed Rate Note Exhibit 4(d) to Registration
Statement No. 33-40990 filed
May 31, 1991
</TABLE>
E-1
<PAGE> 61
<TABLE>
<CAPTION>
FILED HEREWITH (--),
PREVIOUSLY FILED (*) PAGE NUMBER
EXHIBIT OR INCORPORATED BY IN SEQUENTIAL
NUMBER DESCRIPTION REFERENCE TO NUMBERING SYSTEM
- ------ ----------- -------------------- ----------------
<S> <C> <C> <C>
4(i) -- Form of Variable Rate Note Exhibit 4(e) to Registration
Statement No. 33-40990 filed
May 31, 1991
4(j) -- Form of Medium-Term Note (Fixed- Exhibit 4(f) to Registration
Rate) Statement No. 33-16141 filed
July 30, 1987
4(k) -- Form of Medium-Term Note Exhibit 4(g) to Registration
(Floating Rate) Statement No. 33-16141 filed
July 30, 1987
4(l) -- Form of Bearer Security for Exhibit 4(h) to Post-Effective
Fixed-Rate Note and Form of Amendment No. 1 to Registra-
Related Coupon tion Statement 33-16141
filed November 16, 1987
4(m) -- Form of Bearer Security for Exhibit 4(i) to Post-Effective
Variable Rate Note and Form of Amendment No. 1 to Registra-
Related Coupon tion Statement No. 33-16141
filed November 16, 1987
4(n) -- Form of Bearer Security for Exhibit 4(j) to Post-Effective
Medium-Term Note (Fixed Rate) and Amendment No. 1 to Registra-
Form of Related Coupon tion Statement No. 33-16141
filed November 16, 1987
4(o) -- Form of Bearer Security for Exhibit 4(k) to Post-Effective
Medium-Term Note (Floating Rate) Amendment No. 1 to Registra-
and Form of Related Coupon tion Statement 33-16141
filed November 16, 1987
4(p) -- Form of Serial Zero Coupon Senior Exhibit 4.1 to Holdings'
Note Current Report on Form 8-K
dated April 27, 1988
4(q) -- Form of Medium-Term Note, Series Exhibit 4(o) to Registration
B (Fixed Rate) Statement No. 33-37226 filed
on October 16, 1990
4(r) -- Form of Medium-Term Note, Series Exhibit 4(p) to Registration
B (Floating Rate) Statement No. 33-37226 filed
on October 16, 1990
4(s) -- Indenture, dated as of May 1, Exhibit 4.1 to The E.F. Hutton
1986, between The E.F. Hutton Group Inc.'s Registration
Group Inc. ("Group") and United Statement on Form S-3 (Reg.
States Trust Company of New York No. 33-3663)
("U.S. Trust"), as trustee with
respect to the Guaranteed Notes
4(t) -- Supplemental Indenture, dated as Exhibit 4(r) to Registration
of June 15, 1988 between Group Statement No. 33-37226 filed
and U.S. Trust, with respect to on October 16, 1990
the Guaranteed Notes
</TABLE>
E-2
<PAGE> 62
<TABLE>
<CAPTION>
FILED HEREWITH (--),
PREVIOUSLY FILED (*) PAGE NUMBER
EXHIBIT OR INCORPORATED BY IN SEQUENTIAL
NUMBER DESCRIPTION REFERENCE TO NUMBERING SYSTEM
- ------ --------------------------------- ------------------------------ ----------------
<S> <C> <C> <C> <C>
4(u) -- Form of Medium-Term Note, Series Exhibit 4(t) to Registration
C (Fixed Rate) Statement No. 33-40990 filed
May 31, 1991
4(v) -- Form of Medium-Term Note, Series Exhibit 4(u) to Registration
C (Floating Rate) Statement No. 33-40990 filed
May 31, 1991
4(w) -- Form of Medium-Term Note, Series Exhibit 4(v) to Registration
D (Fixed Rate) Statement No. 33-49062 filed
June 30, 1992
4(x) -- Form of Medium-Term Note, Series Exhibit 4(w) to Registration
D (Floating Rate) Statement No. 33-49062 filed
June 30, 1992
4(y) -- Form of Medium-Term Note, Series --
E (Fixed Rate)
4(z) -- Form of Medium-Term Note, Series --
E (Floating Rate)
4(aa) -- Form of Medium-Term Note, Series --
E (Currency Indexed)
5 -- Opinion and consent of Karen M. --
Muller, Esq.
8 -- Opinion and consent of Simpson --
Thacher & Bartlett regarding
certain tax matters
12 -- Computation of ratio of earnings Exhibit 12 to Holdings' Annual
to fixed charges Report on Form 10-K for the
year ended December 31, 1993
and to Holdings' Quarterly
Report on Form 10-Q for the
eight months ended August
31, 1994
23(a) -- Consent of Karen M. Muller, Esq. --
(included in Exhibit 5)
23(b) -- Consent of Ernst & Young LLP, --
Independent Auditors
23(c) -- Consent of Simpson Thacher & --
Bartlett (included in Exhibit 8)
24 -- Power of Attorney Included on Page II-4 of this
Registration Statement
26(a) -- Form T-1 Statement of Eligibility Exhibit to Registration
and Qualification under Trust Statement No. 33-53651 filed
Indenture Act of 1939 of May 16, 1994
Citibank, N.A. (separately bound)
26(b) -- Form T-1 Statement of Eligibility Exhibit 26(b) to Registration
and Qualification under the Trust Statement No. 33-40990 filed
Indenture Act of 1939 of Chemical May 31, 1991
Bank (separately bound)
</TABLE>
E-3
<PAGE> 1
[FORM]
Debt Securities
LEHMAN BROTHERS HOLDINGS INC.
UNDERWRITING AGREEMENT
New York, New York
Dated the date set forth
In Schedule I hereto
To the Representative(s)
named in Schedule I
hereto, of the Underwriters
named in Schedule II hereto
Gentlemen:
Lehman Brothers Holdings Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to you and the other underwriters named
in Schedule II hereto (the "Underwriters"), for whom you are acting as
representatives (the "Representatives"), the principal amount of its debt
securities identified in Schedule I hereto (the "Securities") to be issued
under the indenture (the "Indenture") identified in such Schedule I, between
the Company and the trustee (the "Trustee") identified therein. If the firm or
firms listed in Schedule II hereto include only the firm or firms listed in
Schedule I hereto, then the terms "Underwriters" and "Representatives" shall
each be deemed to refer to such firm or firms.
1. Representations and Warranties. The Company
represents and warrants to each Underwriter that:
(a) The Company meets the requirements for the use of
Form S-3 under the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations promulgated thereunder (the
"Rules"), and has carefully prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on
Form S-3 (the file number of which is set forth in Schedule I hereto),
which has become effective, for the registration of the Securities
under the Securities Act. The registration statement, as amended at
the date of this Agreement, meets the requirements set forth in Rule
415(a)(1)(x) under the Securities Act and complies in all other
material respects with such rule. The Company proposes to file with
the Commission pursuant to Rule 424 under the Securities Act ("Rule
424") a supplement to the form of prospectus included in the
registration statement relating to the initial offering of the
Securities and the plan of distribution
<PAGE> 2
2
thereof and has previously advised you of all further information
(financial and other) with respect to the Company to be set forth
therein. The term "Registration Statement" means the registration
statement, as amended at the date of this Agreement, including the
exhibits thereto, financial statements, and all documents incorporated
therein by reference pursuant to Item 12 of Form S-3 (the
"Incorporated Documents"), and such prospectus as then amended,
including the Incorporated Documents, is hereinafter referred to as
the "Basic Prospectus"; and such supplemented form of prospectus, in
the form in which it shall be filed with the Commission pursuant to
Rule 424 (including the Basic Prospectus as so supplemented), is
hereinafter called the "Final Prospectus". Any preliminary form of
the Basic Prospectus which has heretofore been filed pursuant to Rule
424 is hereinafter called the "Interim Prospectus". Any reference
herein to the Registration Statement, the Basic Prospectus, any
Interim Prospectus or the Final Prospectus shall be deemed to refer to
and include the Incorporated Documents which were filed under the
Securities Exchange Act of 1934 (the "Exchange Act"), on or before the
date of this Agreement or the issue date of the Basic Prospectus, any
Interim Prospectus or the Final Prospectus, as the case may be; and
any reference herein to the terms "amend", "amendment" or "supplement"
with respect to the Registration Statement, the Basic Prospectus, any
Interim Prospectus or the Final Prospectus shall be deemed to refer to
and include the filing of any Incorporated Documents under the
Exchange Act after the date of this Agreement or the issue date of the
Basic Prospectus, any Interim Prospectus or the Final Prospectus, as
the case may be, and deemed to be incorporated therein by reference.
(b) As of the date hereof, when the Final Prospectus is
first filed with the Commission pursuant to Rule 424, when, before the
Closing Date (hereinafter defined), any amendment to the Registration
Statement becomes effective, when, before the Closing Date, any
Incorporated Document is filed with the Commission, when any
supplement to the Final Prospectus is filed with the Commission and at
the Closing Date, the Registration Statement, the Final Prospectus and
any such amendment or supplement will comply in all material respects
with the applicable requirements of the Securities Act and the Rules,
and the Incorporated Documents will comply in all material respects
with the requirements of the Exchange Act or the Securities Act, as
applicable, and the rules and regulations adopted by the Commission
thereunder; on the date hereof and on the Closing Date, the Indenture
shall have been qualified under and will comply in all material
respects with the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"); on the date it became effective, the Registration
Statement did not, and, on the date that any post-effective amendment
to the Registration Statement becomes effective, the Registration
Statement as
<PAGE> 3
3
amended by such post-effective amendment did not or will not, as the
case may be, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading; on the date the Final
Prospectus is filed with the Commission pursuant to Rule 424 and on
the Closing Date, the Final Prospectus, as it may be amended or
supplemented, will not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
are made, not misleading; and on said dates, the Incorporated
Documents will comply in all material respects with the applicable
provisions of the Exchange Act and rules and regulations of the
Commission thereunder, and, when read together with the Final
Prospectus, or the Final Prospectus as it may be then amended or
supplemented, will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided that
the foregoing representations and warranties in this paragraph (b)
shall not apply to statements or omissions made in reliance upon and
in conformity with written information furnished to the Company by or
through the Representatives on behalf of any Underwriter specifically
for use in connection with the preparation of the Registration
Statement or the Final Prospectus, as they may be amended or
supplemented, or to any statements in or omissions from the statement
of eligibility and qualification on Form T-1 of the Trustee under the
Trust Indenture Act ("Form T-1").
(c) The Basic Prospectus and any Interim Prospectus, as
of their respective dates, complied in all material respects with the
requirements of the Securities Act and of the Rules and did not
include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. The Commission has not issued an order preventing or
suspending the use of the Basic Prospectus or any Interim Prospectus.
(d) The nationally recognized firm of independent public
accountants whose report appears in the Company's most recent Annual
Report on Form 10-K, which is incorporated by reference in the Final
Prospectus, are independent public accountants as required by the
Securities Act and the Rules.
(e) In the event that a report of a nationally recognized
firm of independent public accountants regarding historical financial
information with respect to any entity
<PAGE> 4
4
acquired by the Company is required to be incorporated by reference in
the Final Prospectus, such independent public accountants were
independent public accountants, as required by the Securities Act and
the Rules, during the period of their engagement to examine the
financial statements being reported on and at the date of their
report.
(f) The audited consolidated financial statements of the
Company in the Final Prospectus and the Registration Statement present
fairly on a consolidated basis the financial position, the results of
operations, changes in common stock and other stockholder's equity and
cash flows of the Company and its subsidiaries, as of the respective
dates and for the respective periods indicated, all in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved. The unaudited consolidated financial
statements of the Company, if any, included in the Final Prospectus
and the Registration Statement and the related notes are true,
complete and correct, subject to normally recurring changes resulting
from year-end audit adjustments, and have been prepared in accordance
with the instructions to Form 10-Q.
(g) Except as described in or contemplated by the
Registration Statement and the Final Prospectus, there has not been
any material adverse change in or any adverse development which
materially affects the business, properties, financial condition or
results of the Company or the Company and its subsidiaries taken as
whole, from the dates as of which information is given in the
Registration Statement and Final Prospectus.
(h) The Securities conform to the description thereof
contained in the Final Prospectus, are duly and validly authorized,
and, when validly authenticated, issued and delivered in accordance
with the Indenture and sold to the Underwriters as provided in this
Agreement, will be validly issued and outstanding obligations of the
Company entitled to the benefits of the Indenture.
(i) The Company does not have any subsidiaries having
business or properties that are material to the business and
properties of the Company and its subsidiaries taken as a whole with
the exception of Lehman Brothers Inc. ("Lehman") and the possible
exception of Lehman Commercial Paper Inc. and Lehman Government
Securities Inc. (the "Named Subsidiaries"). Neither the Company nor
any of the Named Subsidiaries is in violation of its corporate charter
or by-laws or in default under any agreement, indenture or instrument,
the effect of which violation or default would be material to the
Company and its subsidiaries taken as a whole. The execution,
delivery and performance of this Agreement will not conflict with,
result in the creation or imposition of any material lien, charge or
encumbrance upon
<PAGE> 5
5
any of the assets of the Company or any of its subsidiaries pursuant
to the terms of, or constitute a default under, any material
agreement, indenture or instrument, or result in a violation of the
corporate charter or by-laws of the Company or any of its subsidiaries
or any order, rule or regulation of any court or governmental agency
having jurisdiction over the Company, any of the Named Subsidiaries or
their property. Except as set forth in the Final Prospectus or as
required by the Securities Act, the Exchange Act, the Trust Indenture
Act and applicable state securities laws, no consent, authorization or
order of, or filing or registration with, any court or governmental
agency is required for the execution, delivery and performance of this
Agreement.
(j) The Company and each of the Named Subsidiaries have
been duly organized, are validly existing and in good standing under
the laws of their respective jurisdictions of incorporation, are duly
qualified to do business and in good standing as foreign corporations
and are fully registered as a broker-dealer, broker, dealer or
investment advisor, as the case may be, in each jurisdiction in which
their respective ownership of property or the conduct of their
respective businesses requires such qualification or registration and
in which the failure to qualify or register would be reasonably
likely, individually or in the aggregate, to have a material adverse
effect on the business, condition or properties of the Company and its
subsidiaries taken as a whole. Each of the Company and its Named
Subsidiaries holds all material licenses, permits, and certificates
from governmental authorities necessary for the conduct of its
business and owns, or possesses adequate rights to use, all material
rights necessary for the conduct of such business and has not received
any notice of conflict with the asserted rights of others in respect
thereof; and each of the Company and its Named Subsidiaries has the
corporate power and authority necessary to own or hold its properties
and to conduct the businesses in which it is engaged. Except as may
be disclosed in the Registration Statement and the Final Prospectus,
all outstanding shares of capital stock of the Named Subsidiaries are
owned by the Company, directly or indirectly through subsidiaries,
free and clear of any lien, pledge and encumbrance or any claim of any
third party and are duly authorized, validly issued and outstanding,
fully paid and non-assessable.
(k) Except as described in the Registration Statement and
the Final Prospectus, there is no material litigation or governmental
proceeding pending or, to the knowledge of the Company, threatened
against the Company or any of its subsidiaries which might reasonably
be expected to result in any material adverse change in the business,
properties, financial condition or results of operations of the
Company and its subsidiaries taken as a whole or which is required
<PAGE> 6
6
to be disclosed in the Registration Statement and the Final Prospectus.
(l) The certificates delivered pursuant to paragraph (f)
of Section 6 hereof and all other documents delivered by the Company
or its representatives in connection with the issuance and sale of the
Securities were on the dates on which they were delivered, or will be
on the dates on which they are to be delivered, in all material
respects true and complete.
2. Sale and Purchase of the Securities. The Company
agrees to sell to each Underwriter, and each Underwriter, on the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein stated, agrees to purchase from the Company, at the
purchase price set forth in Schedule I hereto, the principal amount of
Securities set forth opposite the name of such Underwriter in Schedule II
hereto, except that, if Schedule I hereto provides for the sale of Securities
pursuant to delayed delivery arrangements, the respective principal amounts of
Securities to be purchased by the Underwriters shall be as set forth in
Schedule II hereto, less the respective amounts of Contract Securities
determined as provided below. Securities to be purchased by the Underwriters
are herein sometimes called the "Underwriters' Securities" and Securities to be
purchased pursuant to Delayed Delivery Contracts (as hereinafter defined) are
herein called "Contract Securities". The obligations of the Underwriters under
this Agreement are several and not joint.
If so provided in Schedule I hereto, the Underwriters are
authorized to solicit offers to purchase Securities, or a portion thereof, from
the Company pursuant to delayed delivery contracts ("Delayed Delivery
Contracts"), substantially in the form of Schedule III hereto but with such
changes therein as the Company may authorize or approve, and the Underwriters
will endeavor to make such arrangements. Delayed Delivery Contracts are to be
with institutional investors, including commercial and savings banks, insurance
companies, pension funds and educational and charitable institutions. The
Company will make Delayed Delivery Contracts in all cases where sales of
Contract Securities arranged by the Underwriters have been approved by the
Company but, except as the Company may otherwise agree, each such Delayed
Delivery Contract must be for not less than the minimum principal amount set
forth in Schedule I hereto and the total principal amount of Contract
Securities may not exceed the maximum principal amount set forth in Schedule I
hereto. The Underwriters will not have any responsibility in respect of the
validity or performance of Delayed Delivery Contracts. The principal amount of
Securities to be purchased by each Underwriter as set forth in Schedule II
hereto shall be reduced by an amount which bears the same proportion to the
total principal amount of Contract Securities as the principal amount of
Securities set forth opposite the name of such Underwriter
<PAGE> 7
7
bears to the total principal amount of Securities set forth in Schedule II
hereto, except to the extent that the Representatives determine that such
reduction shall be otherwise than in such proportion and so advise the Company
in writing; provided, however, that the total principal amount of Securities to
be purchased by all Underwriters shall be the total principal amount set forth
in Schedule II hereto less the total principal amount of Contract Securities.
3. Delivery and Payment. Delivery by the Company of the
Underwriters' Securities to the Representatives for the respective accounts of
the several Underwriters and payment by the Underwriters therefor by certified
or official bank check or checks payable in, or by wire transfer of,
immediately available (federal) funds to or upon the order of the Company shall
take place at the office, on the date and at the time specified in Schedule I
hereto, which date and time may be postponed by agreement between the
Representatives and the Company or as provided in Section 9 hereof (such date
and time of delivery and payment for the Underwriters' Securities being herein
called the "Closing Date").
Concurrently with the delivery of any payment for
Underwriters' Securities as provided in this Section 3, the Company will
deliver to the Representatives for the respective accounts of the several
Underwriters a check in an amount equal to the fee set forth in Schedule I
hereto with respect to the principal amount of Securities for which Delayed
Delivery Contracts are made.
The Underwriters' Securities will be registered in such names
and in such authorized denominations as the Representatives may request no less
than two full business days in advance of the Closing Date. The Company agrees
to have the Underwriters' Securities available for inspection, checking and
packaging by the Representatives at such place as is designated by the
Representatives, not later than 1:00 p.m., New York City time, on the business
day prior to the Closing Date.
4. Offering by Underwriters. The Company hereby
confirms that the Underwriters and dealers have been authorized to distribute
or cause to be distributed any Interim Prospectus and are authorized to
distribute the Final Prospectus (as from time to time amended or supplemented
if the Company furnishes amendments or supplements thereto to the
Underwriters). The Representatives agree that, as soon as the Representatives
believe the offering of the Securities has been terminated, the Representatives
will so advise the Company.
5. Agreements. The Company agrees with the several
Underwriters that:
(a) The Company will cause the Final Prospectus to be
filed with the Commission pursuant to Rule 424 as required
<PAGE> 8
8
thereby and will promptly advise the Representatives (A) when the
Final Prospectus shall have been filed with the Commission pursuant to
Rule 424, (B) when any amendment to the Registration Statement
relating to the Securities shall have become effective, (C) of any
request by the Commission for any amendment of the Registration
Statement, the Final Prospectus, the Basic Prospectus or any Interim
Prospectus, or for any additional information, (D) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or the qualification of the Indenture or the
institution or threatening of any proceedings for that purpose and (E)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose. After the date of this Agreement and prior to the
termination of the offering of these Securities the Company will not
file any amendment of the Registration Statement or amendment or
supplement to the Final Prospectus (except an amendment or supplement
to the Final Prospectus that is deemed to be incorporated by reference
in the Final Prospectus pursuant to Item 12 of Form S-3) without the
consent of the Representatives and will use its best efforts to
prevent the issuance of any such stop order and, if issued, to obtain
as soon as possible the withdrawal thereof. Prior to receipt of the
advice to be given by the Representatives pursuant to Section 4, the
Company will not file any document that would be deemed to be
incorporated by reference in the Final Prospectus pursuant to Item 12
of Form S-3 without delivering to the Representatives a copy of the
document proposed to be so filed, such delivery to be made at least
twenty-four hours prior to such filing, and the Company will consult
with the Representatives as to any comments which the Representatives
make in a timely manner with respect to the document so delivered.
(b) Subject to the last sentence of the immediately
preceding paragraph, if, at any time when a prospectus relating to the
Securities is required to be delivered under the Securities Act, any
event occurs as a result of which the Final Prospectus as then amended
or supplemented would include any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if it shall be necessary at any time to
amend or supplement the Final Prospectus to comply with the Securities
Act or the Rules, the Company promptly will prepare and file with the
Commission an amendment or supplement which will correct such
statement or omission or an amendment which will effect such
compliance and will use its best efforts to cause any amendment of the
Registration Statement containing an
<PAGE> 9
9
amended Final Prospectus to be made effective as soon as possible.
(c) The Company will deliver to the Representatives,
without charge, (i) signed copies of the Registration Statement
relating to the Securities and of any amendments thereto (including
all exhibits filed with, or incorporated by reference in, any such
document) and (ii) as many conformed copies of the Registration
Statement and of any amendments thereto which shall become effective
on or before the Closing Date (excluding exhibits) as the
Representatives may reasonably request.
(d) During such period as a prospectus is required by law
to be delivered by an Underwriter or dealer, the Company will deliver,
without charge to the Representatives and to Underwriters and dealers,
at such office or offices as the Representatives may designate, as
many copies of the Basic Prospectus, any Interim Prospectus and the
Final Prospectus as the Representatives may reasonably request.
(e) The Company will make generally available to its
security holders and to the Representatives as soon as practicable an
earnings statement (which need not be audited) of the Company and its
subsidiaries, covering a period of at least 12 months beginning after
the date the Final Prospectus is filed with the Commission pursuant to
Rule 424, which will satisfy the provisions of Section 11(a) of the
Securities Act.
(f) The Company will furnish such information, execute
such instruments and take such actions as may be required to qualify
the Securities for offering and sale under the laws of such
jurisdictions as the Representatives may designate and will maintain
such qualifications in effect so long as required for the distribution
of the Securities; provided, however, that the Company shall not be
required to qualify to do business in any jurisdiction where it is not
now so qualified or to take any action which would subject it to
general or unlimited service of process in any jurisdiction where it
is not now so subject.
(g) So long as any Securities are outstanding, the
Company will furnish or cause to be furnished to the Representatives
copies of all annual reports and current reports filed with the
Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as
may be designated by the Commission.
(h) If the Company has applied for the listing of the
Securities on the New York Stock Exchange Inc. (the "NYSE"), it will
use its best efforts to cause such listing to be approved as soon as
possible.
<PAGE> 10
10
(i) For a period beginning at the time of execution of
this Agreement and ending on the later of the business day following
the Closing Date or following the date on which any price restrictions
on the sale of the Securities are terminated, without the prior
consent of the Representatives, the Company will not offer, sell,
contract to sell or otherwise dispose of any debt securities of the
Company covered by the Registration Statement or any other
registration statement filed under the Securities Act.
(j) The Company will use its best efforts to do and
perform all things to be done and performed hereunder prior to the
Closing Date and to satisfy all conditions precedent to the delivery
of the Securities to be purchased hereunder.
6. Conditions to the Obligations of the Underwriters.
The obligations of the Underwriters to purchase the Securities shall be subject
to the accuracy in all material respects of the representations and warranties
on the part of the Company contained herein as of the date hereof and the
Closing Date, to the accuracy of any material statements made in any
certificates, opinions, affidavits, written statements or letters furnished to
the Representatives or to Simpson Thacher & Bartlett ("Underwriters' Counsel")
pursuant to this Section 6, to the performance by the Company of its respective
obligations hereunder and to the following additional conditions:
(a) The Final Prospectus shall have been filed with the
Commission pursuant to Rule 424 not later than 5:00 p.m., New York
City time, on the second business day following the date of this
Agreement or such later date and time as shall be consented to in
writing by the Representatives.
(b) No order suspending the effectiveness of the
Registration Statement, as amended from time to time, or suspending
the qualification of the Indenture, shall be in effect and no
proceedings for such purpose shall be pending before or threatened by
the Commission and any requests for additional information on the part
of the Commission (to be included in the Registration Statement or the
Final Prospectus or otherwise) shall have been complied with to the
reasonable satisfaction of the Representatives.
(c) Since the respective dates as of which information is
given in the Registration Statement and the Final Prospectus, there
shall not have been any change or decrease specified in the letter or
letters referred to in paragraphs (g) or (h) of this Section 6 which,
in the judgment of the Representatives, makes it impracticable or
inadvisable to proceed with the offering and delivery of the
Securities as contemplated by the Registration Statement and the Final
Prospectus.
<PAGE> 11
11
(d) The Company shall have furnished to the
Representatives the opinion of the Deputy General Counsel for the
Company, dated the day of the Closing Date, to the effect that:
(i) The Company has been duly organized and is
validly existing and in good standing under the laws of the
jurisdiction of its incorporation with all requisite corporate
power and authority to own and operate its properties and to
conduct its business as described in the Final Prospectus.
(ii) The Securities and the Indenture conform in
all material respects to the descriptions thereof contained in
the Final Prospectus.
(iii) The Indenture has been duly authorized,
executed and delivered by the Company, has been duly qualified
under the Trust Indenture Act and constitutes a legal, valid
and binding instrument enforceable against the Company in
accordance with its terms, subject to the effects of
bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance and other laws relating to or affecting creditors'
rights generally from time to time in effect and to general
principles of equity (whether considered in a proceeding in
equity or at law) and by an implied covenant of good faith and
fair dealing; and the Securities have been duly authorized,
executed, authenticated, issued and delivered and constitute
legal, valid and binding obligations of the Company entitled
to the benefits of the Indenture, subject to the effects of
bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance and other laws relating to or affecting creditors'
rights generally from time to time in effect and to general
principles of equity (whether considered in a proceeding in
equity or at law) and by an implied covenant of good faith.
(iv) No consent, approval, authorization or order
of any court or governmental agency or body is required for
the consummation of the transactions contemplated in this
Agreement, except for (1) such consents, approvals,
authorizations or orders as have been obtained under the
Securities Act and such as may be required under the Exchange
Act and the blue sky laws of any jurisdiction in connection
with the purchase and distribution of the Securities by the
Underwriters, and (2) the qualification of the Indenture under
the Trust Indenture Act, which has been obtained.
(v) Such counsel does not know of any contracts
or other documents which are required to be filed as exhibits
to the Registration Statement by the
<PAGE> 12
12
Securities Act or by the Rules which have not been filed as
exhibits to the Registration Statement or incorporated therein
by reference as permitted by the Rules.
(vi) To the best of such counsel's knowledge,
neither the Company nor any of its Named Subsidiaries is in
violation of its corporate charter or by-laws, or in default
under any material agreement, indenture or instrument known to
such counsel, the effect of which violation or default would
be material to the Company and its subsidiaries taken as a
whole.
(vii) This Agreement and, to the extent applicable,
the Delayed Delivery Contracts have been duly authorized,
executed and delivered by the Company; the execution, delivery
and performance of this Agreement and any Delayed Delivery
Contracts by the Company will not conflict with, or result in
the creation or imposition of any material lien, charge or
encumbrance upon any of the assets of the Company or any of
its Named Subsidiaries pursuant to the terms of, or constitute
a default under, any material agreement, indenture or
instrument known to such counsel and to which the Company or
any of its Named Subsidiaries is a party or is bound, or
result in a violation of the corporate charter or by-laws of
the Company or any of its Named Subsidiaries or any order,
rule or regulation known to such counsel of any court or
governmental agency having jurisdiction over the Company, any
of its Named Subsidiaries or any of their respective
properties, the effect of which would be material to the
Company and its subsidiaries taken as a whole.
(viii) The Registration Statement has become
effective under the Securities Act, and, to the best of the
knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceeding for that purpose is pending or threatened by
the Commission.
(ix) The Registration Statement, the Final
Prospectus and each amendment thereof or supplement thereto
(except that no opinion need be expressed as to the financial
statements or other financial or statistical data or the Form
T-1 of the Trustee under the Trust Indenture Act included or
incorporated by reference therein) comply as to form in all
material respects with the requirements of the Securities Act
and the Rules.
(x) If the Securities are to be listed on the
NYSE, authorization therefor has been given, subject to
official notice of issuance and evidence of
<PAGE> 13
13
satisfactory distribution, or the Company has filed a
preliminary listing application and all required supporting
documents with respect to the Securities with the NYSE, and
such counsel has no reason to believe that the Securities will
not be authorized for listing, subject to official notice of
issuance and evidence of satisfactory distribution.
(xi) Each of the Named Subsidiaries is a duly
organized and validly existing corporation in good standing
under the laws of the jurisdiction of its incorporation with
all requisite corporate power and authority to own and operate
its properties and to conduct its business as described in the
Final Prospectus. Each of the Company and its Named
Subsidiaries is duly qualified to do business as a foreign
corporation, is in good standing and is duly registered as a
broker-dealer, broker, dealer or investment advisor, as the
case may be, in each jurisdiction in which the nature of the
business conducted by it or in which the ownership or holding
by lease of the properties owned or held by it require such
qualification or registration and where the failure to so
qualify or register would have a material adverse effect on
the Company and its subsidiaries taken as a whole.
(xii) All the outstanding shares of capital stock of
each of the Company's Named Subsidiaries have been duly and
validly authorized and issued and are fully paid and
non-assessable and, except for directors' qualifying shares,
are owned by the Company or a subsidiary of the Company free
and clear of any claims, liens, encumbrances and security
interests.
(xiii) Such counsel does not know of any litigation
or any governmental proceeding pending or threatened against
the Company or any of its subsidiaries which would affect the
subject matter of this Agreement or is required to be
disclosed in the Final Prospectus which is not disclosed and
correctly summarized therein.
Such opinion shall also contain a statement that although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Final Prospectus (except as to those matters
stated in paragraph (ii) of such opinion), such counsel has no reason to
believe that (i) the Registration Statement, as of its effective date,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or (ii) the Final Prospectus contains any
untrue statement of a material fact or
<PAGE> 14
14
omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except that no opinion need be expressed as to the financial
statements or other financial or statistical data or the Form T-1 included or
incorporated by reference therein).
In rendering such opinion, such counsel may rely upon
opinions of local counsel satisfactory to the Representatives for matters not
governed by New York law and may rely as to matters of fact, to the extent he
deems proper, upon certificates or affidavits of officers of the Company, the
Trustee and public officials. Such counsel may rely on a certificate of the
Trustee with respect to the execution of the Securities by the Company and the
authentication thereof by the Trustee.
(e) The Representatives shall have received from
Underwriters' Counsel such opinion or opinions, dated the day of the Closing
Date, with respect to the issuance and sale of the Securities, the Registration
Statement, the Final Prospectus and other related matters as the
Representatives may reasonably require, and the Company shall have furnished to
such counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
(f) The Company shall have furnished to the
Representatives a certificate of its Chief Executive Officer, its President or
any Managing Director or Executive Vice President or Vice President and its
Chief Financial Officer or its Treasurer, dated the day of the Closing Date, to
the effect that:
(i) The representations and warranties of the
Company in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date, and the Company has complied with
all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing
Date.
(ii) To the best of their knowledge after due
inquiry, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or threatened.
(iii) In their opinion, (x) the Registration
Statement does not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, (y) the Final Prospectus does not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the
<PAGE> 15
15
statements therein, in the light of the circumstances under
which they were made, not misleading, and (z) since the
effective date of the Registration Statement there has not
occurred any event required to be set forth in an amended or
supplemented prospectus which has not been so set forth.
(g) At the time this Agreement is executed, a nationally
recognized firm of independent public accountants shall have furnished to the
Representatives a letter, dated the date of this Agreement, in form and
substance satisfactory to the Representatives, confirming that they are
independent auditors with respect to the Company within the meaning of the
Securities Act and the Rules and stating in effect that:
(i) In their opinion, the consolidated financial
statements of the Company and its subsidiaries, and the
supporting schedules, included in the Registration Statement
and the Final Prospectus and audited by them comply as to form
in all material respects with the applicable accounting
requirements of the Securities Act and the Exchange Act and
the related published rules and regulations thereunder.
(ii) On the basis of a reading of the unaudited
consolidated financial statements of the Company and its
subsidiaries, if any, included in the Registration Statement
and the Final Prospectus, carrying out certain specified
procedures (but not an audit in accordance with generally
accepted auditing standards), a reading of the minutes of the
meetings of the directors of the Company and Lehman and
inquiries of certain officials of the Company and its
subsidiaries who have responsibility for financial and
accounting matters of the Company and its subsidiaries, as to
transactions and events subsequent to the date of the most
recent audited consolidated financial statements included in
the Registration Statement and the Final Prospectus, nothing
came to their attention that caused them to believe that any
material modifications should be made to the unaudited
consolidated financial statements of the Company and its
subsidiaries, if any, included in the Registration Statement
and the Final Prospectus for them to be in conformity with
generally accepted accounting principles; and such financial
statements do not comply as to form in all material respects
with the applicable accounting requirements of the Securities
Act and the related published rules and regulations.
(iii) If pro forma financial statements are included
in the Registration Statement or the Final Prospectus, (x)
they have read such pro forma financial statements, (y) they
have made inquiries of certain
<PAGE> 16
16
officials of the Company who have responsibility for financial
and accounting matters of the Company as to the basis for
their determination of the pro forma adjustments and whether
such pro forma financial statements comply as to form in all
material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X and (z) they have proved the
arithmetic accuracy of the application of the pro forma
adjustments to historical amounts; and as a result thereof,
nothing came to their attention that caused them to believe
that such pro forma financial statements do not so comply with
Rule 11- 02 of Regulation S-X and that such pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements.
(iv) They have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is expressed in dollars, or percentages derived from
dollar amounts, and has been obtained from the general
accounting records of the Company) set forth in the
Registration Statement, as amended, and the Final Prospectus,
as amended or supplemented, and in Exhibit 12 to the
Registration Statement, including specified information, if
any, included or incorporated from the Company's Annual Report
on Form 10-K incorporated therein or specified information, if
any, included or incorporated from any of the Company's
Quarterly Reports on Form 10-Q or its Current Reports on Form
8-K incorporated therein, agrees with the accounting records
of the Company and its subsidiaries or computations made
therefrom, excluding any questions of legal interpretation.
The letter required by this paragraph (g) may refer to a prior
letter of such nationally recognized firm of independent public accountants,
addressed to the Company, covering the above items (a "Prior Letter"). For the
purposes of the letter required by this paragraph (g), such nationally
recognized firm of independent public accountants need not perform any
procedures subsequent to the date of the Prior Letter.
(h) At the Closing Date, the nationally recognized firm
of independent public accountants referred to in paragraph (g) of this Section
6 shall have furnished to the Representatives a letter, dated the day of the
Closing Date, in form and substance satisfactory to the Representatives, which
reconfirms the matters set forth in their letter delivered pursuant to
paragraph (g) of this Section 6 and states in effect that:
(i) In their opinion, any consolidated financial
statements of the Company and its subsidiaries, and the
supporting schedules, included in the Registration
<PAGE> 17
17
Statement and the Final Prospectus and audited by them and not
covered by their letter delivered pursuant to paragraph (g) of
this Section 6 comply as to form in all material respects with
the applicable accounting requirements of the Securities Act
and the Exchange Act and the related published rules and
regulations thereunder.
(ii) On the basis of a reading of the unaudited
consolidated financial statements of the Company and its
subsidiaries, if any, included in the Registration Statement
and the Final Prospectus and of the latest unaudited
consolidated financial statements made available by the
Company and Lehman, carrying out certain specified procedures
(but not an audit in accordance with generally accepted
auditing standards), a reading of the minutes of the meetings
of the directors of the Company, and inquiries of certain
officials of the Company and its subsidiaries, who have
responsibility for financial and accounting matters of the
Company and its subsidiaries, as to transactions and events
subsequent to the date of the most recent audited consolidated
financial statements included in the Registration Statement
and the Final Prospectus, nothing came to their attention that
caused them to believe that:
(A) any material modifications should be
made to the unaudited consolidated financial
statements of the Company and its subsidiaries, if
any, included in the Registration Statement and the
Final Prospectus and not covered by their letter
delivered pursuant to paragraph (g) of this Section
6, for them to be in conformity with generally
accepted accounting principles; and such financial
statements do not comply as to form in all material
respects with the applicable accounting requirements
of the Securities Act and the published instructions,
rules and regulations thereunder.
(B) the unaudited capsule information of the
Company and its subsidiaries, if any, included in the
Registration Statement and the Final Prospectus does
not agree with the amounts set forth in the unaudited
consolidated financial statements of the Company from
which it was derived or was not determined on a basis
substantially consistent with that of the
corresponding financial information in the latest
audited financial statements of the Company included
in the Registration Statement and the Final
Prospectus.
<PAGE> 18
18
(C)(I) as of the latest date as of which the
Company and its subsidiaries have monthly financial
statements, there was any change in the capital stock
or additional paid-in capital, or increase in long-
term indebtedness of the Company and its
subsidiaries, or any decrease in retained earnings,
as compared with the amounts shown in the most recent
consolidated statement of financial condition of the
Company and its subsidiaries included in the
Registration Statement and the Final Prospectus, (II)
with respect to the period subsequent to the date of
the most recent financial statements included in the
Registration Statement and the Final Prospectus and
extending through the latest date as of which the
Company and its subsidiaries have monthly financial
statements, there was a consolidated net loss or
(III) with respect to the amounts of net capital or
excess net capital of Lehman determined pursuant to
Commission Rule 15c3-1 and shown in the most recent
financial statement of Lehman filed pursuant to
Commission Rule 17a-5, there has been any decrease in
such amounts as compared with the amounts shown in
the most recent consolidated financial statements
included in the Registration Statement and the Final
Prospectus;
(D) as of a specified date not more than
five business days prior to the date of the letter,
(I) there was any change in the capital stock or
additional paid-in capital, or increase in long-term
indebtedness of the Company and its subsidiaries as
compared with the amounts shown in the most recent
consolidated statement of financial condition of the
Company and its subsidiaries included in the
Registration Statement and the Final Prospectus or
(II) there was any decrease in the estimated amounts
of net capital or excess net capital of Lehman
determined pursuant to Commission Rule 15c3-1, as
compared with the amounts shown on the most recent
financial statement of Lehman filed pursuant to
Commission Rule 17a-5, such that Lehman did not
satisfy the requirements of Section 5 of Schedule E
to Article III of the By-Laws of the National
Association of Securities Dealers, Inc., which permit
releases of proceeds from escrow;
except in all instances for increases or decreases set forth
in such letter, in which case the letter shall be accompanied
by an explanation by the Company as to the significance
thereof, unless said explanation is not deemed necessary by
the Representatives.
<PAGE> 19
19
(iii) If pro forma financial statements are included
in the Registration Statement or the Final Prospectus and are
not covered by their letter delivered pursuant to paragraph
(g) of this Section 6, (x) they have read such pro forma
financial statements, (y) they have made inquiries of certain
officials of the Company who have responsibility for financial
and accounting matters of the Company as to the basis for
their determination of the pro forma adjustments and whether
such pro forma financial statements comply as to form in all
material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X and (z) they have proved the
arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts; and as a result
thereof, nothing came to their attention that caused them to
believe that such pro forma financial statements do not so
comply with Rule 11-02 of Regulation S-X and that such pro
forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements.
(iv) To the extent not covered by their letter
delivered pursuant to paragraph (g) of this Section 6, they
have performed certain other specified procedures as a result
of which they determined that certain information of an
accounting, financial or statistical nature (which is
expressed in dollars, or percentages derived from dollar
amounts, and has been obtained from the general accounting
records of the Company) set forth in the Registration
Statement, as amended, and the Final Prospectus, as amended or
supplemented, and in Exhibit 12 to the Registration Statement,
including specified information, if any, included or
incorporated from the Company's Annual Report on Form 10-K
incorporated therein or specified information, if any,
included or incorporated from any of the Company's Quarterly
Reports on Form 10-Q or its Current Reports on Form 8-K
incorporated therein, agrees with the accounting records of
the Company and its subsidiaries or computations made
therefrom, excluding any questions of legal interpretation.
(i) So long as historical financial information with respect to
any entity acquired by the Company is required to be included in the
Registration Statement or the Final Prospectus, at the Closing Date, a
nationally recognized firm of independent public accountants shall have
furnished to the Representatives a letter, dated the day of the Closing Date,
in form and substance satisfactory to the Representatives, confirming that they
are, or were as of a stated time, independent public accountants within the
meaning of the Securities Act and the Rules and stating in effect that:
<PAGE> 20
20
(i) in their opinion the audited consolidated
financial statements of such entity acquired by the Company,
and the supporting schedules, included in the Registration
Statement and Final Prospectus and examined by them, comply as
to form in all material respects with the applicable
accounting requirements of the Securities Act and the related
published rules and regulations of the Commission thereunder;
and
(ii) they have performed certain other specified
procedures as a result of which they determined that certain
historical financial information relating to such entity
acquired by the Company as required to be reported pursuant to
rules and regulations promulgated under the Exchange Act agree
with the accounting records of such entity acquired by the
Company or computations made therefrom, excluding any
questions of legal interpretation.
(j) Subsequent to the execution of this Agreement, there
shall not have been any decrease in the ratings of any of the Company's debt
securities by Moody's Investors Service, Inc. or Standard & Poor's Corporation.
(k) The Company shall have accepted Delayed Delivery
Contracts in any case where sales of Contract Securities arranged by the
Underwriters have been approved by the Company.
(l) Prior to the Closing Date, the Company shall have
furnished to the Representatives such further information, certificates and
documents as the Representatives or Underwriters' Counsel may reasonably
request.
If any of the conditions specified in this Section 6 shall not
have been fulfilled when and as required by this Agreement, or if any of the
certificates or opinions furnished to the Representatives or Underwriters'
Counsel pursuant to this Section 6 shall not be in all material respects
reasonably satisfactory in form and substance to the Representatives and to
Underwriters' Counsel, this Agreement and all obligations of the Underwriters
hereunder may be cancelled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Company in
writing, or by telegraph confirmed in writing.
7. Expenses. (a) Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
the Company will pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including, without limiting the
generality of the foregoing, all costs, taxes and expenses incident to the
issuance, sale and delivery of the Securities to the Underwriters, all fees and
expenses of the Company's counsel and accountants, all costs and expenses
incident to the preparing,
<PAGE> 21
21
printing and filing of the Registration Statement (including all exhibits
thereto), any Interim Prospectus, the Basic Prospectus, the Final Prospectus
and any amendments thereof or supplements thereto and the Indenture, and the
rating of the Securities by one or more rating agencies, all costs and expenses
(including fees of Underwriters' Counsel and their disbursements) incurred in
connection with blue sky qualifications, advising on the legality of the
Securities for investment, the filing requirements, if any, of the National
Association of Securities Dealers, Inc. in connection with its review of
corporate financings, the fee for listing the Securities on the NYSE, the fees
and expenses of the Trustee and all costs and expenses of the printing and
distribution of all documents in connection with such offering. Except as
provided in this Section 7, the Company will have no responsibility to the
Underwriters for the Underwriters' own costs and expenses, including the fees
of Underwriters' Counsel and any advertising expenses in connection with any
offer the Underwriters may make.
(b) If the sale of the Securities provided for herein is
not consummated because any condition to the obligations of the Underwriters
set forth in Section 6 hereof is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof, the Company will, subject to demand by the
Representatives, reimburse the Underwriters for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of the
Securities.
8. Indemnification. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person who controls such
Underwriter within the meaning of the Securities Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, as
originally filed or in any amendment thereof, or in any Interim Prospectus, the
Basic Prospectus or the Final Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that (i) the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
<PAGE> 22
22
therein in reliance upon and in conformity with written information furnished
to the Company as herein stated by the Representatives on behalf of any
Underwriter specifically for use in connection with the preparation thereof,
and (ii) such indemnity with respect to the Basic Prospectus or any Interim
Prospectus shall not inure to the benefit of any Underwriter (or any person
controlling such Underwriter) from whom the person asserting any such loss,
claim, damage or liability purchased the Securities which are the subject
thereof if such person did not receive a copy of the Final Prospectus at or
prior to the confirmation of the sale of such Securities to such person in any
case where such delivery is required by the Securities Act and the untrue
statement or omission of a material fact contained in the Basic Prospectus or
any Interim Prospectus was corrected in the Final Prospectus, unless such
failure to deliver the Final Prospectus was a result of noncompliance by the
Company with Section 5(d) hereof. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.
(b) Each Underwriter severally agrees to indemnify and
hold harmless the Company, each of its directors, each of its officers who
signs the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Securities Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, the Basic
Prospectus, any Interim Prospectus or the Final Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that the same was made therein in
reliance upon and in conformity with written information furnished to the
Company as herein stated by the Representatives on behalf of such Underwriter
specifically for use in the preparation thereof, and agrees to reimburse each
such indemnified party for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action. This indemnity agreement will be in addition to
any liability which any Underwriter may otherwise have. The statements set
forth in the last paragraph of the cover page and under the heading
"Underwriting" in the Final Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in the Registration Statement and the Final Prospectus, as the case may be, and
you, as the Representatives, confirm that such statements are correct.
<PAGE> 23
23
(c) Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 8. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein, and to the extent that it may elect by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and either (i) the indemnifying party or parties and the
indemnified party or parties mutually agree or (ii) representation of both the
indemnifying party or parties and the indemnified party or parties by the same
counsel is inappropriate under applicable standards of professional conduct due
to actual or potential differing interests between them, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf
of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed counsel in connection with the assumption
of legal defenses in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel, approved by the
Representatives in the case of subparagraph (a) representing the indemnified
parties under subparagraph (a), as the case may be, who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party.
(d) In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
subparagraph (a) of this Section 8 is due in accordance with its terms but is
for any reason held by a court to be unavailable from the Company on grounds of
policy or other similar grounds, the Company and the Underwriters shall
contribute to the aggregate losses, claims, damages and
<PAGE> 24
24
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) to which the Company and one
or more of the Underwriters may be subject in such proportion so that the
Underwriters are responsible for that portion represented by the percentage
that the underwriting discounts appearing on the cover page of the Final
Prospectus bear to the public offering prices appearing thereon and the Company
is responsible for the balance; provided, however, that (i) in no case shall
any Underwriter (except as may be provided in any agreement among underwriters)
be responsible for any amount in excess of the underwriting discounts
applicable to the Securities purchased by such Underwriter hereunder and (ii)
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 8, each person who controls an Underwriter within the meaning of the
Securities Act shall have the same rights to contribution as such Underwriter,
and each person who controls the Company within the meaning of either the
Securities Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to clauses
(i) and (ii) of this subparagraph (d). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission to
so notify such party or parties shall not relieve the party or parties from
whom contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this subparagraph (d).
9. Default by an Underwriter. If any one or more
Underwriters shall fail to purchase and pay for all of the Securities agreed to
be purchased by such Underwriter or Underwriters hereunder and such failure to
purchase shall constitute a default in the performance of its or their
obligations under this Agreement, the remaining Underwriters shall be obligated
severally to take up and pay for (in the respective proportions which the
principal amount of Securities set forth opposite their names in Schedule II
hereto bear to the aggregate principal amount of Securities set opposite the
names of the remaining Underwriters) the Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase; provided, however,
that in the event that the aggregate principal amount of Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase shall
exceed 10% of the aggregate principal amount of the Securities, the remaining
Underwriters shall have the right to purchase all, but shall not be under any
obligation to purchase any, of the Securities, and if such non-defaulting
Underwriters do not purchase all the Securities, this Agreement will terminate
without liability to
<PAGE> 25
25
any non-defaulting Underwriters or the Company. In the event of a default by
any Underwriter as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding seven days, as the Representatives
shall determine in order that the required changes in the Registration
Statement and the Final Prospectus or in any other documents or arrangements
may be effected. Nothing herein contained shall relieve any defaulting
Underwriter of its liability, if any, to the Company and any non-defaulting
Underwriter for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company at or prior to delivery of and payment for all the Securities,
if, prior to such time (i) trading in securities generally on the NYSE or the
over-the-counter market shall have been suspended or limited or minimum prices
shall have been established on the NYSE or the over-the-counter market, (ii) a
banking moratorium shall have been declared either by federal or New York State
authorities, (iii) any new restriction materially affecting the distribution of
the Securities shall have become effective; trading in any securities of the
Company shall have been suspended or halted by any national securities
exchange, the National Association of Securities Dealers, Inc. or the
Commission, (iv) the United States becomes engaged in hostilities or there is
an escalation in hostilities involving the United States or there is a
declaration of a national emergency or war by the United States, or (v) there
shall have been such a material adverse change in national or international
political, financial or economic conditions, national or international equity
markets or currency exchange rates or controls as to make it, in the judgment
of the Representatives, inadvisable or impracticable to proceed with the
payment for and delivery of the Securities.
11. Representations and Indemnities to Survive Delivery.
The respective agreements, representations, warranties, indemnities and other
statements of the Company or its officers (as such officers) and of the
Underwriters set forth in or made pursuant to this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter or the Company or any of its officers or directors or any
controlling person within the meaning of the Securities Act, and will survive
delivery of the payment for the Securities.
12. Notices. All communications hereunder will be in
writing, and, if sent to the Representatives will be mailed, delivered,
telegraphed or telexed and confirmed to them, at the address specified in
Schedule I hereto; or, if sent to the Company will be mailed, delivered,
telegraphed or telexed and confirmed to it at 3 World Financial Center, New
York, New York 10285, Attention: Chief Financial Officer.
<PAGE> 26
26
13. Successors. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their successors and, to the
extent and only to the extent stated in Section 8 hereof, the officers and
directors and controlling persons referred to in Section 8 hereof, and except
as provided in Section 8 hereof, no person other than the parties hereto and
their respective successors will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by
and construed in accordance with the laws of the State of New York.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the several Underwriters.
Very truly yours,
LEHMAN BROTHERS HOLDINGS INC.
By___________________________________
Title:
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
LEHMAN BROTHERS INC.
By___________________________
Title:
Acting on behalf of the Representatives named
in Schedule I annexed hereto and the several
Underwriters named in Schedule II annexed hereto.
<PAGE> 27
SCHEDULE I
Date of Underwriting Agreement:
Registration Statement No. 33-
Representatives and Address:
Indenture, Title, Purchase Price and Description of Securities:
Indenture:
Title:
Principal amount:
Price to public:
Purchase price:
Interest rate:
Time of payment of interest:
Maturity:
Sinking fund provisions:
Redemption provisions:
Closing Date, Time and Location:
Date:
Time:
Location:
Delayed Delivery Arrangements:
<PAGE> 28
SCHEDULE II
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
UNDERWRITERS PURCHASED
------------ -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $
<PAGE> 29
1
SCHEDULE III
DELAYED DELIVERY CONTRACT
, 19
[Insert name and address of lead Representative]
Dear Sirs:
The undersigned hereby agrees to purchase from Lehman Brothers
Holdings Inc. (the "Company"), and the Company agrees to sell to the
undersigned, on , 19 (the "Delivery Date"), $ principal amount
of the Company's % due (the "Securities") offered by the Company's
Prospectus dated , 19 , and related Prospectus Supplement dated
, 19 , receipt of a copy of which is hereby acknowledged, at a purchase price
of % of the principal amount thereof, plus accrued interest or
amortization of original issue discount, if any, thereon from , 19 ,
to the date of payment and delivery, and on the further terms and conditions
set forth in this contract.
Payment for the Securities to be purchased by the undersigned shall be
made on or before 11:00 a.m., New York City time, on the Delivery Date to or
upon the order of the Company in New York Clearing House (next day) funds, at
your office or at such other place as shall be agreed between the Company and
the undersigned upon delivery to the undersigned of the Securities in
definitive fully registered form and in such authorized denominations and
registered in such names as the undersigned may request by written or
telegraphic communication addressed to the Company not less than five full
business days prior to the Delivery Date. If no request is received, the
Securities will be registered in the name of the undersigned and issued in a
denomination equal to the aggregate principal amount of Securities to be
purchased by the undersigned on the Delivery Date.
The obligation of the undersigned to take delivery of and make payment
for Securities on the Delivery Date, and the obligation of the Company to sell
and deliver Securities on the Delivery Date, shall be subject to the conditions
(and neither party shall incur any liability by reason of the failure thereof)
that (1) the purchase of Securities to be made by the undersigned, which
purchase the undersigned represents is not prohibited on the date hereof, shall
not on the Delivery Date be prohibited under the laws of the jurisdiction to
which the undersigned is subject, and (2) the Company, on or before the
Delivery Date, shall have sold to certain underwriters (the "Underwriters")
such principal amount of the Securities as is to be sold to them pursuant to
the Underwriting Agreement referred to in the Prospectus and Prospectus
Supplement mentioned above. Promptly after completion of such sale to the
Underwriters, the Company will mail or deliver to the undersigned at its
address set forth below notice to such effect, accompanied by a copy of the
opinion of counsel for the Company delivered to the Underwriters in connection
therewith. The
<PAGE> 30
2
obligation of the undersigned to take delivery of and make payment for the
Securities, and the obligation of the Company to cause the Securities to be
sold and delivered, shall not be affected by the failure of any purchaser to
take delivery of and make payment for the Securities pursuant to other
contracts similar to this contract.
This contract will inure to the benefit of and be binding upon
the parties hereto and their respective successors, but will not be assignable
by either party hereto without the written consent of the other.
It is understood that acceptance of this contract and other similar
contracts is in the Company's sole discretion and, without limiting the
foregoing, need not be on a first come, first served basis. If this contract
is acceptable to the Company, it is required that the Company sign the form of
acceptance below and mail or deliver one of the counterparts hereof to the
undersigned at its address set forth below. This will become a binding
contract between the Company and the undersigned, as of the date first above
written, when such counterpart is so mailed or delivered.
This agreement shall be governed by and construed in accordance with
the laws of the State of New York.
Very truly yours,
___________________________________
(Name of Purchaser)
By_________________________________
(Signature and Title of Officer)
_________________________________
(Address)
Accepted:
Lehman Brothers Holdings Inc.
By___________________________________
(Authorized Signature)
<PAGE> 1
CUSIP NO. ___________
REGISTERED FACE AMOUNT:
No. __
If this Note is an OID Note (as defined below) the following
legend is applicable:
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED
STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE ISSUE
PRICE OF THIS NOTE IS _____% OF ITS PRINCIPAL AMOUNT, AND THE
AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE YIELD TO MATURITY
COMPOUNDED _____________, THE ISSUE DATE AND THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT ALLOCABLE TO THE SHORT PERIOD
DETERMINED USING THE EXACT METHOD WITHIN THE MEANING OF
PROPOSED TREASURY REGULATION SECTION 1.1272- 1(c)(2)(ii) ARE
AS SET FORTH BELOW.
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTE, SERIES E
(FIXED RATE)
If the registered owner of this Note (as indicated below) is
The Depository Trust Company (the "Depository") or a nominee of the Depository,
this Note is a Note in global form (a "Global Security") and the following
legends are applicable except as specified on the reverse hereof:
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY OR A NOMINEE OF THE
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE
& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED
FORM, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY.
<PAGE> 2
2
<TABLE>
<S> <C> <C>
ISSUE PRICE: $ OPTION TO RECEIVE PAYMENTS OPTIONAL REPAYMENT PRICES:
IN THE SPECIFIED CURRENCY:
ISSUE DATE: [ ] YES [ ] NO OPTIONAL INTEREST RATE RESET:
[ ] YES [ ] NO
MATURITY DATE: SPECIFIED CURRENCY:
OPTIONAL RESET DATES:
INTEREST RATE: AMORTIZING NOTE:
[ ] YES [ ] NO OPTIONAL REDEMPTION:
INTEREST PAYMENT DATES: [ ] YES [ ] NO
SINKING FUND:
REGULAR RECORD DATES: INITIAL REDEMPTION DATE:
TOTAL AMOUNT OF OID:
EXCHANGE RATE AGENT: INITIAL REDEMPTION
YIELD TO MATURITY: PERCENTAGE: %
DEPOSITORY:
INITIAL ACCRUAL PERIOD OID: APPLICABILITY OF ANNUAL REDEMPTION
DUAL CURRENCY NOTE: PERCENTAGE REDUCTION:
[ ] YES [ ] NO AUTHORIZED DENOMINATIONS: [ ] YES [ ] NO
If yes, state Annual Percentage
OPTION ELECTION DATES: EXTENDIBLE NOTE: Reduction: %
[ ] YES [ ] NO
OPTIONAL PAYMENT RENEWABLE NOTE:
CURRENCY: EXTENSION PERIOD: [ ] YES [ ] NO
DESIGNATED EXCHANGE NUMBER OF EXTENSION PERIODS: INITIAL MATURITY DATE:
RATE:
OPTION TO ELECT REPAYMENT: SPECIAL ELECTION INTERVAL:
OPTION VALUE CALCULATION [ ] YES [ ] NO
AGENT: RENEWABLE IN PART:
OPTIONAL REPAYMENT DATES: [ ] YES [ ] NO
OTHER PROVISIONS:
AUTHORIZED RENEWABLE AMOUNTS:
SPECIAL ELECTION PERIOD:
</TABLE>
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized
and existing under the laws of the State of Delaware (herein called the
"Company", which term includes any successor corporation under the Indenture
referred to on the reverse hereof), for value received, hereby promises to pay
to ___________, or registered assigns, on the Maturity Date the Principal
Amount hereof (as defined below) and, if so specified above, to pay interest
thereon from the Issue Date specified above or from the most recent Interest
Payment Date specified above to which interest has been paid or duly provided
for at the Interest Rate specified above until the principal hereof is paid or
made available for payment and (to the extent that the payment of such interest
shall be legally enforceable) at such rate per annum on any overdue principal
and premium and on any overdue instalment of interest. Unless otherwise
specified above, and except as provided in Section 8 on the reverse hereof if
this Note is a Dual Currency Note (as hereinafter defined), payments of
principal, premium, if any, and interest hereon will be made in U.S. dollars;
if the Specified Currency set forth above is a currency other than U.S. dollars
(a "Foreign Currency"), such payments will be made in U.S. dollars based on the
equivalent of that Foreign Currency converted into U.S. dollars in the manner
set forth in Section 2 on the reverse hereof. If the Specified
<PAGE> 3
3
Currency is a Foreign Currency and it is so provided above, the Holder may
elect to receive such payments in that Foreign Currency by delivery of a
written request to the Trustee (or to any duly appointed Paying Agent) at the
Corporate Trust Office (as defined below) not later than 10 calendar days prior
to the applicable payment date, and such election will remain in effect for the
Holder until revoked by written notice to the Trustee (or to any such Paying
Agent) at the Corporate Trust Office received not later than 10 calendar days
prior to the applicable payment date; provided, however, no such election or
revocation may be made if, with respect to this Note, (i) an Event of Default
has occurred, (ii) the Company has exercised any discharge or defeasance
options or (iii) the Company has given a notice of redemption. In the event
the Holder makes any such election pursuant to the preceding sentence, such
election will not be effective on any transferee of such Holder and such
transferee shall be paid in U.S. dollars unless such transferee makes an
election pursuant to the preceding sentence; provided, however, that such
election, if in effect while funds are on deposit with the Trustee to satisfy
and discharge this Note, will be effective on any such transferee unless
otherwise specified above. The "Principal Amount" of this Note at any time
means (i) if this Note is an OID Note, the Amortized Face Amount at such time
as described in Section 7 on the reverse hereof, (ii) if this Note is an
Amortizing Note, the Outstanding Face Amount at such time as described in
Section 4 on the reverse hereof, (iii) in all other cases, the Face Amount
hereof.
If this Note is subject to an Annual Percentage Reduction as
specified above, the Redemption Price shall initially be the Initial Redemption
Percentage of the Principal Amount of this Note on the Initial Redemption Date
and shall decline at each anniversary of the Initial Redemption Date (each such
date, a "Redemption Date") by the Annual Percentage Reduction of such Principal
Amount until the Redemption Price is 100% of such Principal Amount.
In the event of any optional redemption by the Company, any
repayment at the option of the Holder, acceleration of the maturity of this
Note or other prepayment of this Note prior to the Maturity Date specified
above, the term "Maturity" when used herein shall refer, where applicable, to
the date of redemption, repayment, acceleration or other prepayment of this
Note.
An "OID Note" is any Note (a) that has been issued at an Issue
Price lower, by more than a de minimis amount (as determined under United
States federal income tax rules applicable to original issue discount
instruments), than the Face Amount thereof and (b) any other Note that for
United States federal income tax purposes would be considered an original issue
discount instrument.
Except as provided in the following paragraph, the Company
will pay interest semiannually on February 15 and August
<PAGE> 4
4
15 of each year (unless other Interest Payment Dates are specified above) (each
an "Interest Payment Date"), commencing with the first Interest Payment Date
next succeeding the Issue Date, and at Maturity; provided that any payment of
principal, premium, if any, or interest to be made on any Interest Payment Date
or on a date of Maturity that is not a Business Day shall be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date or such date of Maturity, as the case may be, and no
additional interest shall accrue as a result of such delayed payment. The term
"Business Day" means any day, other than a Saturday or Sunday, that meets each
of the following applicable requirements: such day is (a) not a day on which
banking institutions in the Borough of Manhattan, The City of New York are
authorized or required by law or regulation to close; (b) if the Specified
Currency is a Foreign Currency other than European Currency Units ("ECU"), (x)
not a day on which banking institutions are authorized or required by law or
regulation to close in the principal financial center of the country issuing
the Foreign Currency and (y) a day on which banking institutions in such
principal financial center are carrying out transactions in such Foreign
Currency; and (c) if the Specified Currency is ECU, (x) not a day on which
banking institutions are authorized or required by law or regulation to close
in Luxembourg and (y) an ECU clearing day, as determined by the ECU Banking
Association in Paris. Each payment of interest hereon shall include interest
accrued through the day before the Interest Payment Date or date of Maturity,
as the case may be. Unless otherwise specified above, interest on this Note
will be computed on the basis of a 360-day year of twelve 30-day months. In no
event shall the interest rate of this Note be higher than the maximum rate
permitted by applicable law, as the same may be modified by United States law
of general application.
Unless otherwise specified above, the interest payable on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Note (or one or more predecessor Notes) is registered at the
close of business on the Regular Record Date indicated above (whether or not a
Business Day) next preceding such Interest Payment Date; provided that,
notwithstanding any provision of the Indenture to the contrary, interest
payable on any date of Maturity shall be payable to the Person to whom
principal shall be payable; and provided, further, that, unless otherwise
specified above, in the case of a Note initially issued between a Regular
Record Date and the Interest Payment Date relating to such Regular Record Date,
interest for the period beginning on the Issue Date and ending on such Interest
Payment Date shall be paid on the Interest Payment Date following the next
succeeding Regular Record Date to the registered Holder on such next succeeding
Regular Record Date.
Unless otherwise indicated above, and except as provided below
if this Note is a Global Security, all payments of interest on this Note and
all principal payments hereon if this Note is an Amortizing Note (other than
interest and, in the case
<PAGE> 5
5
of Amortizing Notes, principal payable at Maturity) will be made by check
(unless otherwise provided above, from an account at a bank located outside the
United States if such amount is payable in a Foreign Currency); provided that,
if the Holder hereof is the Holder of U.S. $10,000,000 or more in aggregate
Principal Amount of Notes of this series of like tenor and term (or a Holder of
the equivalent thereof in a Foreign Currency determined as provided in Section
2 on the reverse hereof), such Holder shall be entitled to receive interest
payments (and principal payments, if this Note is an Amortizing Note) in
immediately available funds, but only if complete and appropriate instructions
have been received in writing by the Trustee (or any such Paying Agent) on or
prior to the applicable Regular Record Date. Simultaneously with any election
by the Holder hereof to receive payments in respect hereof in a Foreign
Currency, such Holder may, if so entitled (as provided above), elect to receive
such payments in immediately available funds by providing complete and
appropriate instructions to the Trustee (or any such Paying Agent), and all
such payments will be made in immediately available funds to an account
maintained by the payee with a bank located outside the United States or as
otherwise provided above.
Unless otherwise indicated above, and except as provided below
if this Note is a Global Security, payments of principal, premium, if any, and
interest payable at Maturity will be made in immediately available funds
(unless otherwise indicated above, payable to an account at a bank located
outside the United States if payable in a Foreign Currency) upon surrender of
this Note at the corporate trust office or agency of the Trustee (or any duly
appointed Paying Agent) maintained for that purpose in the Borough of
Manhattan, The City of New York (the "Corporate Trust Office"), provided that
this Note is presented to the Trustee (or any such Paying Agent) in time for
the Trustee (or any such Paying Agent) to make such payments in such funds in
accordance with its normal procedures.
Unless otherwise specified above, if this Note is a Global
Security, payments of interest hereon and principal hereon if this Note is an
Amortizing Note (in each case, other than at Maturity), will be made in
same-day funds in accordance with existing arrangements between the Trustee (or
any duly appointed Paying Agent) and the Depository. Unless otherwise
specified above, if this Note is a Global Security, any principal, premium
and/or interest payable hereon at Maturity will be paid by wire transfer in
immediately available funds to an account specified by the Depository (which
account, unless otherwise provided above, will be at a bank located outside the
United States if payable in a Foreign Currency).
The Company will pay any administrative costs imposed by banks
in making payments in immediately available funds, but any tax, assessment or
governmental charge imposed upon payments hereunder, including, without
limitation, any withholding tax, will be borne by the Holder hereof.
<PAGE> 6
6
References herein to "U.S. dollars" or "U.S.$" or "$" are to
the coin or currency of the United States as at the time of payment is legal
tender for the payment of public and private debts.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS
NOTE SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL
PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been signed
by the Trustee under the Indenture.
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused
this instrument to be signed by its Chairman of the Board, its President, its
Vice Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer, by manual or facsimile signature under its corporate seal, attested
by its Secretary or one of its Assistant Secretaries by manual or facsimile
signature.
Dated:
[SEAL] LEHMAN BROTHERS HOLDINGS INC.
By:_____________________
Chairman of the Board
Attest:_________________
Assistant Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned Indenture.
CITIBANK, N.A.
as Trustee
By:___________________________
Authorized Officer
<PAGE> 7
7
[REVERSE OF NOTE]
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTES, SERIES E
(Fixed Rate)
Section 1. General. This Note is one of a duly authorized
series of Notes of the Company designated as the Medium-Term Notes, Series E
(Fixed Rate) of the Company (herein called the "Notes"), limited in aggregate
principal amount to $2,500,000,000 (or (i) the equivalent thereof in Foreign
Currencies or (ii) such greater amount, if OID Notes are issued, as shall
result in aggregate gross proceeds to the Company of $2,500,000,000), subject
to reduction as a result of the sale under certain circumstances of other debt
securities of the Company. The foregoing limit, however, may be increased by
the Company if in the future it determines that it may wish to sell additional
Notes. The Notes are one of an indefinite number of series of debt securities
of the Company (collectively, the "Securities") issued or issuable under and
pursuant to an indenture dated as of September 1, 1987, as amended (the
"Indenture"), duly executed and delivered by the Company and Citibank, N.A., as
Trustee (herein called the "Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Securities. The separate series of
Securities may be issued in various aggregate principal amounts, may mature at
different times, may bear interest (if any) at different rates, may be subject
to different redemption provisions or repayment or repurchase rights (if any),
may be subject to different sinking, purchase or analogous funds (if any), may
be subject to different covenants and Events of Default and may otherwise vary
as in the Indenture provided.
Section 2. Currency Exchanges and Payments. If the Specified
Currency hereof is a Foreign Currency and the Holder is either not entitled to
elect to receive payments in respect hereof in such Foreign Currency or any
such election is not in effect, the amount of any U.S. dollar payment to be
made in respect hereof will be determined by the Exchange Rate Agent specified
on the face hereof or a successor thereto (the "Exchange Rate Agent"), based on
the indicative quotation in The City of New York selected by the Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the applicable payment date that yields the least number of U.S.
dollars upon conversion of such Foreign Currency. Unless otherwise provided on
the face hereof, such selection shall be made from among the quotations
appearing on the bank composite or multi- contributor pages of the Reuters
Monitor Foreign Exchange Service or, if not available, the Telerate Monitor
Foreign Exchange Service. If such quotations
<PAGE> 8
8
are unavailable from either such foreign exchange service, unless otherwise
provided on the face hereof, such selection shall be made from the quotations
received by the Exchange Rate Agent from no more than three nor less than two
recognized foreign exchange dealers in The City of New York selected by the
Exchange Rate Agent and approved by the Company (one of which may be the
Exchange Rate Agent) for the purchase by the quoting dealer, for settlement on
such payment date, of the aggregate amount of such Foreign Currency payable on
such payment date in respect of all Notes denominated in such Foreign Currency
and for which the applicable dealer commits to execute a contract. If no such
bid quotations are available, payments will be made in the Foreign Currency.
Unless otherwise specified on the face hereof, if payment
hereon is required to be made in a Foreign Currency and such currency is
unavailable to the Company for making payments thereof due to the imposition of
exchange controls or other circumstances beyond the Company's control, or is no
longer used by the government of the country which issued such currency or for
the settlement of transactions by public institutions of or within the
international banking community, then the Company will be entitled to make
payments with respect hereto in U.S. dollars until such Foreign Currency is
again available or so used. The amount so payable on any date in such Foreign
Currency shall be converted into U.S. dollars at a rate determined by the
Exchange Rate Agent on the basis of the noon buying rate in The City of New
York for cable transfers in the Foreign Currency as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate")
for such Foreign Currency on the second Business Day prior to such payment
date, or on such other basis as may be specified on the face hereof. In the
event such Market Exchange Rate is not then available, the Company will be
entitled to make payments in U.S. dollars (i) if such Foreign Currency is not a
composite currency, on the basis of the most recently available Market Exchange
Rate for such Foreign Currency or (ii) if such Foreign Currency is a composite
currency, including, without limitation, the ECU, in an amount determined by
the Exchange Rate Agent to be the sum of the results obtained by multiplying
the number of units of each component currency of such composite currency, as
of the most recent date on which such composite currency was used, by the
Market Exchange Rate for such component currency on the second Business Day
prior to such payment date (or if such Market Exchange Rate is not then
available, by the most recently available Market Exchange Rate for such
component currency, or as otherwise specified on the face hereof). Any payment
in respect hereof made under such circumstances in U.S. dollars will not
constitute an Event of Default under the Indenture.
If the official unit of any component currency of a composite
currency is altered by way of combination or subdivision, the number of units
of that currency as a component shall be divided or multiplied in the same
proportion. If two or
<PAGE> 9
9
more component currencies are consolidated into a single currency, the amounts
of those currencies as components shall be replaced by an amount in such single
currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that original component
currency as a component shall be replaced by amounts of such two or more
currencies having an aggregate value on the date of division equal to the
amount of the former component currency immediately before such division.
In the event of an official redenomination of the Specified
Currency or the Optional Payment Currency (including, without limitation, an
official redenomination of any such currency that is a composite currency), the
obligations of the Company to make payments in or with reference to such
currency shall, in all cases, be deemed immediately following such
redenomination to be obligations to make payments in or with reference to that
amount of redenominated currency representing the amount of such currency
immediately before such redenomination. In no event shall any adjustment be
made to any amount payable hereunder as a result of any redenomination of any
component currency of any composite currency (unless such composite currency is
itself officially redenominated).
All determinations referred to above made by the Exchange Rate
Agent shall be at its sole discretion (except to the extent expressly provided
herein that any determination is subject to approval by the Company) and, in
the absence of manifest error, shall be conclusive for all purposes and binding
on the Holder hereof, and the Exchange Rate Agent shall have no liability
therefor.
All currency exchange costs will be borne by the Holder hereof
by deduction from the payments made hereon.
Section 3. Redemption. If so specified on the face hereof,
the Company may at its option redeem this Note in whole or from time to time in
part on or after the date designated as the Initial Redemption Date on the face
hereof at either a price based on a constant percentage of the Principal Amount
of this Note as specified on the face hereof or at prices declining from the
premium specified on the face hereof, if any, to 100% of the Principal Amount
hereof, together, in each case, with accrued interest to the Redemption Date.
The Company may exercise such option by causing the Trustee to mail by
first-class mail to the Holder hereof a notice of such redemption at least 30
but not more than 60 days prior to the Redemption Date. In the event of
redemption of this Note in part only, a new Note or Notes of this series for
the unredeemed portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof in accordance with the terms of the Indenture.
Unless otherwise specified on the face hereof, if less than all of the Notes
with like tenor and terms to this Note are to be redeemed, the Notes
<PAGE> 10
10
to be redeemed shall be selected by the Trustee by such method as the Trustee
shall deem fair and appropriate.
Section 4. Sinking Funds and Amortizing Notes. Unless
otherwise specified on the face hereof or unless this Note is an Amortizing
Note, this Note will not be subject to any sinking fund. If it is specified on
the face hereof that this Note is an Amortizing Note, the Company will make
payments combining principal and interest on the dates and in the amounts set
forth in the table appearing in Schedule I, attached to this Note. If this
Note is an Amortizing Note, payments made hereon will be applied first to
interest due and payable on each such payment date and then to the reduction of
the Outstanding Face Amount. The term "Outstanding Face Amount" means, at any
time, the amount of unpaid principal hereof at such time.
Section 5. Optional Repayment. If so specified on the face
hereof, this Note will be repayable prior to the Maturity Date at the option of
the Holder on the Optional Repayment Dates specified on the face hereof at the
Optional Repayment Prices specified on the face hereof, together with accrued
interest to the applicable Optional Repayment Date. Unless otherwise specified
on the face hereof, in order for this Note to be so repaid, the Company must
receive, at least 30 but not more than 45 days prior to an Optional Repayment
Date, either (i) this Note with the form below entitled "Option to Elect
Repayment" duly completed or (ii) a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States setting forth the name of the Holder hereof, the Face
Amount hereof, the Face Amount to be repaid, the certificate number hereof or a
description of the tenor and terms of this Note, a statement that the option to
elect repayment is being exercised thereby and a guarantee that this Note with
the form below entitled "Option to Elect Repayment" duly completed will be
received by the Paying Agent not later than five Business Days after the date
of such telegram, telex, facsimile transmission or letter and this Note and
form duly completed are received by the Paying Agent by such fifth Business
Day. Exercise of this repayment option shall be irrevocable, except as
otherwise provided under Section 6 or Section 9. The repayment option may be
exercised by the Holder of this Note with respect to less than the Face Amount
then outstanding provided that the Face Amount of the Note remaining
outstanding after repayment is an authorized denomination. Upon such partial
repayment this Note shall be cancelled and a new Note or Notes for the
remaining Face Amount hereof shall be issued in the name of the Holder of this
Note.
Section 6. Optional Interest Reset. If so specified on the
face hereof, the Interest Rate on this Note may be reset at the option of the
Company, in the manner set forth below (unless otherwise specified on the face
hereof), on the Optional Reset Date or Optional Reset Dates specified on the
face hereof.
<PAGE> 11
11
The Company may exercise such option by notifying the Trustee of such exercise
at least 45 but not more than 60 days prior to an Optional Reset Date. Not
later than five Business Days after receipt thereof, the Trustee will mail by
first-class mail to the Holder of this Note a notice (the "Reset Notice")
setting forth (i) the election of the Company to reset the interest rate, (ii)
such new interest rate and (iii) the provisions, if any, for redemption during
the period from such Optional Reset Date to the next Optional Reset Date or, if
there is no such next Optional Reset Date, to the Maturity Date of this Note
(each such period a "Subsequent Interest Period"), including the date or dates
on which or the period or periods during which and the price or prices at which
such redemption may occur during such Subsequent Interest Period. The Reset
Notice shall be substantially in the form of Exhibit A to this Note. Upon the
transmittal by the Trustee of a Reset Notice to the Holder of this Note, such
new interest rate shall take effect automatically, and, except as modified by
the Reset Notice and as described in the next paragraph, this Note will have
the same terms as prior to the transmittal of such Reset Notice.
Notwithstanding the foregoing, not later than 20 days prior to
an Optional Reset Date, the Company may, at its option, revoke the interest
rate provided for in the Reset Notice and establish an interest rate that is
higher than the interest rate provided for in the Reset Notice for the
Subsequent Interest Period commencing on such Optional Reset Date by causing
the Trustee to mail by first-class mail notice of such higher interest rate to
the Holder of this Note. Such notice shall be irrevocable and shall be mailed
by the Trustee within five Business Days after receipt thereof. All Notes with
respect to which the interest rate is reset on an Optional Reset Date will bear
such higher interest rate for the Subsequent Interest Period.
If the Company elects to reset the interest rate of this Note,
the Holder of this Note will have the option to elect repayment by the Company
of this Note, or any portion hereof, on any Optional Reset Date at a price
calculated with reference to the Face Amount hereof to be repaid, plus any
interest accrued to, such Optional Reset Date. In order to obtain repayment on
an Optional Reset Date, the Holder must follow the procedures set forth above
in Section 5 for optional repayment except that the period for delivery or
notification to the Trustee shall be at least 25 but not more than 35 days
prior to such Optional Reset Date and except that, if the Holder has tendered
this Note for repayment pursuant to the Reset Notice, the Holder may, by
written notice to the Trustee, revoke such tender for repayment until the close
of business on the tenth day prior to such Optional Reset Date; provided,
however, that if such day is not a Business Day, then such notice may be given
on the next succeeding Business Day.
<PAGE> 12
12
Section 7. OID Notes. If this Note is an OID Note, unless
otherwise specified on the face hereof, the amount payable in the event of
redemption by the Company, repayment at the option of the Holder or
acceleration of Maturity shall be the Amortized Face Amount of this Note as of
the date of such redemption, repayment or acceleration rather than the Face
Amount hereof. The "Amortized Face Amount" of this Note shall be the amount
equal to (a) the Issue Price (as set forth on the face hereof) plus (b) that
portion of the difference between the Issue Price and the Face Amount hereof
that has accrued at the Yield to Maturity set forth on the face hereof
(computed in accordance with generally accepted United States bond yield
computation principles) at the date as of which the Amortized Face Amount is
calculated, but in no event shall the Amortized Face Amount of this Note exceed
the Face Amount.
Section 8. Dual Currency Notes. If it is specified on the
face hereof that this Note is a Dual Currency Note, the Company has a one time
option, exercisable on any one of the Option Election Dates specified on the
face hereof in whole, but not in part, with respect to all Dual Currency Notes
issued on the same day and having the same terms as this Note (this "Tranche"),
of thereafter making all payments of principal, premium, if any, and interest
(which payments would otherwise be made in the Specified Currency of such
Notes) in the Optional Payment Currency specified on the face hereof. If the
Company makes such an election, the amount of Optional Payment Currency payable
in respect hereof shall be determined by the Exchange Rate Agent by converting
the amount of Specified Currency that would otherwise be payable into the
Optional Payment Currency at the Designated Exchange Rate specified on the face
hereof.
The Company may exercise such option by notifying the Trustee
of such exercise on or prior to the Option Election Date. The Trustee will
mail by first-class mail to each holder of a Note of this Tranche a notice of
such election within five Business Days of the Option Election Date which shall
state (i) the first date, whether an Interest Payment Date and/or the Maturity
Date, on which scheduled payments in the Optional Payment Currency will be made
and (ii) the Designated Exchange Rate. Any such notice by the Company, once
given, may not be withdrawn.
If this Note is a Dual Currency Note, unless otherwise
specified on the face hereof and notwithstanding any prior election made by the
Company, the amount payable hereon in the event of any optional redemption by
the Company, any repayment at the option of the Holder, any acceleration of the
Maturity of this Note or other prepayment of this Note prior to the Maturity
Date shall be an amount equal to the Principal Amount hereof otherwise due and
payable plus accrued interest to but excluding the date of redemption,
repayment, acceleration or other prepayment minus the Total Option Value
multiplied by a fraction, the numerator of which is the Principal Amount hereof
and the
<PAGE> 13
13
denominator of which is the aggregate Principal Amount of all Dual Currency
Notes of this Tranche. In no event will such payment be less than zero.
Notwithstanding any prior election made by the Company, such payment shall be
made in the Specified Currency unless otherwise provided on the face hereof.
The term "Total Option Value" means, with respect to any Dual
Currency Note on any date, an amount (calculated as of such date by the Option
Value Calculation Agent) equal to the sum of the Option Values (calculated as
of such date by the Option Value Calculation Agent) for all Interest Payment
Dates occurring after the date of calculation up to and including the Maturity
Date. The term "Option Value" means, with respect to an Interest Payment Date
or the Maturity Date, the amount calculated by the Option Value Calculation
Agent to be the arithmetic average of the prices quoted on the date of
calculation by three reference banks (which banks shall be selected by the
Option Value Calculation Agent and shall be reasonably acceptable to the
Company) for the right on the Option Election Date immediately preceding such
Interest Payment Date or Maturity Date to purchase for value on such Interest
Payment Date or Maturity Date from such reference banks (A) the aggregate
amount of the Specified Currency due on such Interest Payment Date or Maturity
Date with respect to all of the Dual Currency Notes of this Tranche in exchange
for (B) the amount of the Optional Payment Currency that would be received if
the amount in clause (A) were converted into the Optional Payment Currency at
the Designated Exchange Rate.
All determinations referred to above made by the Exchange Rate
Agent or the Option Value Calculation Agent shall be at their sole discretion
(except to the extent expressly provided herein that any determination is
subject to approval by the Company) and, in the absence of manifest error,
shall be conclusive for all purposes and binding on the Holder hereof, and
neither the Exchange Rate Agent nor the Option Value Calculation Agent shall
have any liability therefor.
Section 9. Extendible Notes. If it is specified on the face
hereof that this Note is an Extendible Note, the Company has the option to
extend the Maturity Date hereof for the number of Extension Periods set forth
on the face hereof, each of which Extension Periods shall be a period of from
one to five whole years. Unless otherwise specified on the face hereof, the
following procedures shall apply if this Note is an Extendible Note.
The Company may exercise its option by notifying the Trustee
of such exercise at least 45 but not more than 60 days prior to the Maturity
Date hereof in effect prior to the exercise of such option (the "Original
Stated Maturity"). Not later than five Business Days after receipt thereof,
the Trustee will mail to the Holder a notice (the "Extension Notice"), first
class, postage prepaid, setting forth (i) the election of the Company to extend
the Maturity Date, (ii) the new Maturity Date, (iii) the
<PAGE> 14
14
Interest Rate applicable to the Extension Period and (iv) the provisions, if
any, for redemption during the Extension Period, including the date on which or
the period or periods during which and the price at which such redemption may
occur during the Extension Period. Upon the mailing by the Trustee of an
Extension Notice to the Holder, the Maturity Date hereof shall be extended
automatically, and, except as modified by the Extension Notice and as described
in the next paragraph, this Note will have the same terms as prior to the
mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to
the Original Stated Maturity hereof, the Company may, at its option, revoke the
interest rate provided for in the Extension Notice and establish a higher
interest rate for the Extension Period by causing the Trustee to mail notice of
such higher interest rate, first class, postage prepaid, to the Holder. Such
notice shall be irrevocable and shall be mailed by the Trustee within three
Business Days after receipt thereof. This Note will bear such higher interest
rate for the Extension Period, whether or not tendered for repayment.
If the Company extends the Maturity Date of this Note, the
Holder will have the option to elect repayment by the Company of this Note, or
any portion hereof, on the Original Stated Maturity at a price calculated with
reference to the Face Amount hereof to be repaid plus any accrued interest to
such date. In order for this Note to be so repaid on the Original Stated
Maturity, the Holder must follow the procedures set forth in Section 5 hereof
for optional repayment, except that the period for delivery of this Note or
notification to the Trustee shall be at least 25 but not more than 35 days
prior to the Original Stated Maturity and except that the Holder may, by
written notice to the Trustee, revoke any such tender for repayment until the
close of business on the tenth day prior to the Original Stated Maturity;
provided, however, that if such day is not a Business Day, then such notice may
be given on the next succeeding Business Day.
Section 10. Renewable Notes. If it is specified on the face
hereof that this Note is a Renewable Note, this Note will mature on the Initial
Maturity Date specified on the face hereof unless the Maturity of all or any
portion of this Note is extended in accordance with the procedures described
below.
On the Interest Payment Date occurring in the sixth month
(unless a different Special Election Interval is specified on the face hereof)
prior to the Initial Maturity Date hereof (the "Initial Maturity Extension
Date") and on the Interest Payment Date occurring in each sixth month (or the
last month of each Special Election Interval) after such Initial Maturity
Extension Date (each, together with the Initial Maturity Extension Date, a
"Maturity Extension Date"), the Maturity of this Note will be extended to the
Interest Payment Date occurring
<PAGE> 15
15
in the twelfth month (or, if a Special Election Interval is specified on the
face hereof, the last month in a period equal to twice the Special Election
Interval) after such Maturity Extension Date, unless the Holder elects to
terminate the automatic extension of the Maturity hereof or any portion hereof
as described below.
If the Holder elects to terminate the automatic extension of
the Maturity of any portion of the principal amount of this Note during the
specified period prior to any Maturity Extension Date, such portion will become
due and payable on the Interest Payment Date occurring in the sixth month (or
the last month in the Special Election Interval) after such Maturity Extension
Date (the "Extended Maturity Date").
The Holder may elect to terminate the automatic extension of
the Maturity of this Note, or if so specified above, any portion hereof, by
delivering a notice to such effect to the Trustee (or any duly appointed Paying
Agent) at the Corporate Trust Office not less than 15 nor more than 30 days
prior to such Maturity Extension Date (unless another period is specified on
the face hereof as the "Special Election Period"). Such election will be
irrevocable and will be binding upon each subsequent Holder of this Note. An
election to terminate the automatic extension of the Maturity of this Note may
be exercised with respect to less than the entire Face Amount hereof only if so
specified on the face hereof and only in such Face Amount, or any integral
multiple in excess thereof, as is specified on the face hereof.
Notwithstanding the foregoing, the Maturity of this Note will not be extended
beyond the Maturity Date specified on the face hereof.
Unless otherwise specified above, any such election to
terminate will be effective only if this Note, with the "Option to Elect
Termination of Automatic Extension" included herein duly executed, is presented
to the Trustee (or any duly appointed Paying Agent) simultaneously with notice
of such election (or, in the event notice of such election, together with a
guarantee of delivery within five Business Days, is transmitted on behalf of
the Holder from a member of a national securities exchange, the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States, within five Business Days of the date of such notice).
As soon as practicable following receipt of this Note the Trustee (or any duly
appointed Paying Agent) shall issue in exchange herefor in the name of the
Holder (i) a Note, in a face amount equal to the face amount of this Note for
which the election to terminate the automatic extension of Maturity was
exercised, with terms identical to those specified herein (except for the Issue
Date and the Initial Interest Rate and except that such Note shall have a
fixed, non- extendable Maturity on the Extended Maturity Date) and (ii) if such
election is made with respect to less than the full Face Amount hereof, a
replacement Renewable Note, in a face amount
<PAGE> 16
16
equal to the Face Amount of this Note for which no election was made, with
terms identical to this Note.
Section 11. Principal Amount For Indenture Purposes. For the
purpose of determining whether Holders of the requisite amount of Notes
outstanding under the Indenture have made a demand, given a notice or waiver or
taken any other action, the outstanding principal amount of this Note will be
deemed to be the Principal Amount, provided, however, if this Note is an OID
Note, the outstanding, principal amount of this Note will be deemed to be the
Face Amount set forth above.
Section 12. Modification and Waivers. The Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
holders of not less than 66-2/3% in aggregate principal amount of each series
of the Securities at the time Outstanding to be affected, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) extend the fixed maturity
of any Security, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon or reduce any premium payable on
redemption, or make the principal thereof, or premium, if any, or interest
thereon payable in any coin or currency other than that hereinabove provided,
without the consent of the holder of each Security so affected, or (ii) change
the place of payment on any Security, or impair the right to institute suit for
payment on any Security, or reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each Security so affected. It is also
provided in the Indenture that, prior to any declaration accelerating the
Maturity of any series of Securities, the holders of a majority in aggregate
principal amount of the Securities of such series Outstanding may on behalf of
the holders of all the Securities of such series waive any past default or
Event of Default under the Indenture with respect to such series and its
consequences, except a default in the payment of interest, if any, on or the
principal of, or premium if any, on any of the Securities of such series, or in
the payment of any sinking fund installment or analogous obligation with
respect to Securities of such series. Any such consent or waiver by the Holder
of this Note shall be conclusive and binding upon such Holder and upon all
future holders and owners of this Note and any Notes which may be issued in
exchange or substitution herefor, irrespective of whether or not any notation
thereof is made upon this Note or such other Notes.
Section 13. Obligations Unconditional. No reference herein
to the Indenture and no provisions of this Note or of the Indenture shall alter
or impair the obligation of the Company,
<PAGE> 17
17
which is absolute and unconditional, to pay the principal of, premium, if any,
and interest, if any, on this Note at the place, at the respective times, at
the rate, and in the coin or currency herein prescribed.
Section 14. Defeasance. The Indenture contains provisions
for the discharge of the Indenture and defeasance at any time of the
indebtedness on this Note upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Note.
Section 15. Authorized Form and Denominations. The Notes of
this series are issuable in registered form, without coupons. Unless otherwise
set forth on the face hereof, Notes denominated in U.S. dollars will be issued
in Face Amount denominations of U.S. $100,000 and any integral multiple of U.S.
$1,000 in excess thereof. Notes denominated in a Foreign Currency will be
issued in the denomination or denominations set forth on the face hereof. Each
Note will be issued initially as either a Global Security or a Certificated
Note, at the option of the holders thereof, either at the office or agency to
be designated and maintained by the Company for such purpose in the Borough of
Manhattan, The City of New York, pursuant to the provisions of the Indenture or
at any of such other offices or agencies as may be designated and maintained by
the Company for such purpose pursuant to the provisions of the Indenture, and
in the manner and subject to the limitations provided in the Indenture, but
without the payment of any service charge, except for any tax or other
governmental charges imposed in connection therewith. Notes of this series are
exchangeable for a like aggregate Face Amount of Notes of this series of a
different authorized denomination, except that Global Securities will not be
exchangeable for Certificated Notes.
Section 16. Registration of Transfer. As provided in the
Indenture and subject to certain limitations as therein set forth, the transfer
of this Note is registrable in the Security Register, upon surrender of this
Note for registration of transfer, at the Corporate Trust Office or agency in a
Place of Payment for this Note, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar requiring such written instrument of transfer duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of this series, of authorized denominations and for the same
aggregate Face Amount, will be issued to the designated transferee or
transferees.
If this Note is a Global Security and if at any time the
Depository notifies the Company that it is unwilling or unable to continue as
Depository or if at any time the Depository shall no longer be eligible under
the Indenture, the Company shall appoint a successor Depository. If a
successor Depository for the Securities of such series is not appointed by the
Company
<PAGE> 18
18
within 90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company will issue, and the Trustee will authenticate and
deliver, Notes in definitive form in an aggregate Face Amount equal to the Face
Amount hereof.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name this Note is registered as the owner hereof
for all purposes, and neither the Company nor the Trustee nor any agent of the
Company or of the Trustee shall be affected by any notice to the contrary.
Section 17. Events of Default. If an Event of Default with
respect to Notes of this series shall occur and be continuing, the principal of
the Notes of this series may be declared due and payable in the manner and with
the effect provided in the Indenture. In the event that this Note is an OID
Note or a Dual Currency Note, the amount of principal of this Note that becomes
due and payable upon such acceleration shall be equal to the amount calculated
as set forth in Section 7 or Section 8, respectively, hereof. Upon payment (i)
of the aggregate applicable amounts of principal of the Notes of this series so
declared due and payable and (ii) of interest on any overdue principal and
overdue interest (in each case to the extent that the payment of such interest
shall be legally enforceable), all of the Company's obligations in respect of
the payment of the principal of and interest, if any, on the Notes of this
series shall terminate.
Section 18. No Recourse Against Certain Persons. No recourse
for the payment of the principal of, premium, if any, or interest on this Note,
or for any claim based hereon or otherwise in respect hereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in the
Indenture or any Indenture supplemental thereto or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.
Section 19. Defined Terms. All terms used but not defined in
this Note are used herein as defined in the Indenture.
<PAGE> 19
19
Section 20. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 20
20
OPTION TO ELECT REPAYMENT
The undersigned owner of this Note hereby irrevocably elects
to have the Company repay the Face Amount of this Note or portion hereof below
designated at (i) the Optional Repayment Percentage multiplied by the Principal
Amount of this Note to be repaid in respect of such Face Amount plus accrued
interest to the Optional Repayment Date, if this Note is to be repaid pursuant
to the Optional Repayment provision described in Section 5 hereof, or (ii) 100%
of the Principal Amount of this Note to be repaid in respect of such Face
Amount plus accrued interest to the Optional Reset Date, if this Note is to be
repaid pursuant to the Optional Interest Reset provision described in Section 6
hereof or the Extendible Notes provision described in Section 9 hereof. Any
such election is irrevocable except as provided in Section 6 or Section 9
hereof.
Dated:_________________ _______________________________
Signature
Sign exactly as name appears on the front of
this Note [SIGNATURE GUARANTEED - required
only if Notes are to be issued and delivered
to other than the registered Holder]
Face Amount to be Fill in for registration of
repaid, if amount to be Notes if to be issued otherwise
repaid is less than the than to the registered Holder:
Face Amount of this
Note (Face Amount Name: ___________________________
remaining must be an Address: ________________________
authorized denomination) ______________________
(Please print name
$_______________________ and address including
zip code)
SOCIAL SECURITY OR OTHER TAXPAYER ID
NUMBER
_________________________________
<PAGE> 21
21
OPTION TO ELECT TERMINATION OF AUTOMATIC EXTENSION
The undersigned owner of this Note hereby irrevocably elects
to terminate the automatic extension of this Note or of the portion of the Face
Amount of this Note below designated. Any such election is irrevocable and
will be binding on any subsequent Holder hereof.
Dated:_________________ _______________________________
Signature
Sign exactly as name appears on the front of
this Note [SIGNATURE GUARANTEED - required
only if Notes are to be issued and delivered
to other than the registered Holder]
Face Amount to be Fill in for registration of
terminated, if amount to be Notes if to be issued otherwise
terminated is less than the than to the registered Holder:
Face Amount of this
Note (such Face Amount Name: ___________________________
must be an authorized Address: ________________________
denomination) ______________________
(Please print name
$_______________________ and address including
zip code)
SOCIAL SECURITY OR OTHER TAXPAYER
ID NUMBER
_________________________________
<PAGE> 22
22
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenant by the entireties
JT TEN - as joint tenants with right of
survivorship and not as
tenants in common
UNIF GIFT
MIN ACT - __________Custodian__________
(Cust) (Minor)
Under Uniform Gifts to
Minors Act
_____________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned
hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________________________________
Please print or type name and address, including zip code of assignee
__________________________________________________________________
the within Note of LEHMAN BROTHERS HOLDINGS INC. and all rights thereunder and
does hereby irrevocably constitute and appoint
<PAGE> 23
23
______________________________________________________Attorney to transfer the
said Note on the books of the within-named Company, with full power of
substitution in the premises.
Dated:______________________________
SIGNATURE GUARANTEED:__________________________________________
NOTICE: The signature to this
assignment must correspond with the
name as it appears upon the face of
the within Note in every particular,
without alteration or enlargement or
any change whatsoever.
<PAGE> 24
SCHEDULE I
Amortization Table
<TABLE>
<S> <C>
Date Payment
---- -------
</TABLE>
<PAGE> 25
EXHIBIT A
RESET NOTICE
LEHMAN BROTHERS HOLDINGS INC.
Medium-Term Notes, Series E
(Fixed Rate)
CUSIP No. ___________
Registered Nos. ___-___
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized
and existing under the laws of the State of Delaware (the "Company"), is the
issuer of the above-referenced Notes (the "Notes"). Capitalized terms used
herein and not defined are used as defined in the Notes.
The Company hereby elects to reset the Interest Rate set forth
on the face of the Notes. On and after _________________1/, the Interest Rate
shall be _______________.
Each Holder of a Note has the option to elect repayment by the
Company of such Note, or any portion thereof, on any Optional Reset Date
pursuant to the terms of such Note. The Notes may be repaid on the dates and
at the prices set forth below:
<TABLE>
<S> <C>
Date Redemption Price
---- ----------------
</TABLE>
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused
this Reset Notice to be signed by its Chairman of the Board, its President, its
Vice Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer and to be attested by its Secretary or one of its Assistant
Secretaries.
Dated: LEHMAN BROTHERS HOLDINGS INC.
By:________________________
Title:
Attest:____________________
Title:
____________________
1/ Insert applicable Optional Reset Date.
<PAGE> 1
CUSIP NO. ___________
REGISTERED FACE AMOUNT:
No. __
If this Note is an OID Note (as defined below) the following
legend is applicable:
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED
STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE ISSUE
PRICE OF THIS NOTE IS _____% OF ITS PRINCIPAL AMOUNT, AND THE
AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE YIELD TO MATURITY
COMPOUNDED _____________, THE ISSUE DATE AND THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT ALLOCABLE TO THE SHORT PERIOD
DETERMINED USING THE EXACT METHOD WITHIN THE MEANING OF
PROPOSED TREASURY REGULATION SECTION 1.1272- 1(c)(2)(ii) ARE
AS SET FORTH BELOW.
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTE, SERIES E
(FLOATING RATE)
If the registered owner of this Note (as indicated below) is
The Depository Trust Company (the "Depository") or a nominee of the Depository,
this Note is a Note in global form (a "Global Security") and the following
legends are applicable except as specified on the reverse hereof:
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY OR A NOMINEE OF THE
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE
& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED
FORM, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY.
<PAGE> 2
<TABLE>
<S> <C> <C>
ISSUE PRICE: $ OPTION ELECTION DATES: OPTIONAL REPAYMENT DATES:
ISSUE DATE: OPTIONAL PAYMENT OPTIONAL REPAYMENT PRICES:
CURRENCY:
MATURITY DATE: OPTIONAL SPREAD OR SPREAD MULTIPLIER RESET:
DESIGNATED EXCHANGE [ ] YES [ ] NO
INTEREST RATE BASIS: RATE:
OPTIONAL RESET DATES:
MAXIMUM INTEREST RATE: OPTION VALUE CALCULATION
AGENT: OPTIONAL REDEMPTION:
MINIMUM INTEREST RATE: [ ] YES [ ] NO
OPTION TO RECEIVE PAYMENTS
INTEREST RESET DATES: IN THE SPECIFIED CURRENCY: INITIAL REDEMPTION DATE:
[ ] YES [ ] NO
INTEREST PAYMENT DATES: INITIAL REDEMPTION
SPECIFIED CURRENCY: PERCENTAGE: %
REGULAR RECORD DATES:
SINKING FUND: APPLICABILITY OF ANNUAL REDEMPTION PERCENTAGE
INITIAL INTEREST RATE: REDUCTION
TOTAL AMOUNT OF OID: [ ] YES [ ] NO
INDEX MATURITY: If yes, state Annual Percentage
YIELD TO MATURITY: Reduction: %
SPREAD:
INITIAL ACCRUAL PERIOD OID: RENEWABLE NOTE:
SPREAD MULTIPLIER: [ ] YES [ ] NO
AUTHORIZED DENOMINATIONS:
INTEREST DETERMINATION DATE: INITIAL MATURITY DATE:
EXTENDIBLE NOTE:
CALCULATION AGENT: [ ] YES [ ] NO SPECIAL ELECTION INTERVAL:
EXCHANGE RATE AGENT: EXTENSION PERIOD: RENEWABLE IN PART:
[ ] YES [ ] NO
DEPOSITORY: NUMBER OF EXTENSION PERIODS:
AUTHORIZED RENEWABLE AMOUNTS:
DUAL CURRENCY NOTE: OPTION TO ELECT REPAYMENT:
[ ] YES [ ] NO [ ] YES [ ] NO SPECIAL ELECTION PERIOD:
OTHER PROVISIONS:
</TABLE>
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized
and existing under the laws of the State of Delaware (herein called the
"Company", which term includes any successor corporation under the Indenture
referred to on the reverse hereof), for value received, hereby promises to pay
to ___________, or registered assigns, on the Maturity Date the Principal
Amount hereof (as defined below) and, if so specified above, to pay interest
thereon from the Issue Date specified above or from the most recent Interest
Payment Date specified above to which interest has been paid or duly provided
for at the rate per annum determined in accordance with the provisions on the
reverse hereof, depending on the Interest Rate Basis specified above, until the
principal hereof is paid or made available for payment and (to the extent that
the payment of such interest shall be legally enforceable) at such rate per
annum on any overdue principal and premium and on any overdue instalment of
interest. Unless otherwise specified above, and except as provided in Section
9 on the reverse hereof if this Note is a Dual Currency Note (as hereinafter
defined), payments of principal, premium, if any, and interest hereon will be
made in
<PAGE> 3
3
U.S. dollars; if the Specified Currency set forth above is a currency other
than U.S. dollars (a "Foreign Currency"), such payments will be made in U.S.
dollars based on the equivalent of that Foreign Currency converted into U.S.
dollars in the manner set forth in Section 2 on the reverse hereof. If the
Specified Currency is a Foreign Currency and it is so provided above, the
Holder may elect to receive such payments in that Foreign Currency by delivery
of a written request to the Trustee (or to any duly appointed Paying Agent) at
the Corporate Trust Office (as defined below) not later than 10 calendar days
prior to the applicable payment date, and such election will remain in effect
for the Holder until revoked by written notice to the Trustee (or to any such
Paying Agent) at the Corporate Trust Office received not later than 10 calendar
days prior to the applicable payment date; provided, however, no such election
or revocation may be made if, with respect to this Note, (i) an Event of
Default has occurred, (ii) the Company has exercised any discharge or
defeasance options or (iii) the Company has given a notice of redemption. In
the event the Holder makes any such election pursuant to the preceding
sentence, such election will not be effective on any transferee of such Holder
and such transferee shall be paid in U.S. dollars unless such transferee makes
an election pursuant to the preceding sentence; provided, however, that such
election, if in effect while funds are on deposit with the Trustee to satisfy
and discharge this Note, will be effective on any such transferee unless
otherwise specified above. The "Principal Amount" of this Note at any time
means (i) if this Note is an OID Note, the Amortized Face Amount at such time
as described in Section 8 on the reverse hereof and (ii) in all other cases,
the Face Amount hereof.
If this Note is subject to an Annual Redemption Percentage
Reduction as specified above, the Redemption Price shall initially be the
Initial Redemption Percentage of the Principal Amount of this Note on the
Initial Redemption Date and shall decline at each anniversary of the Initial
Redemption Date (each such date, a "Redemption Date") by the Annual Percentage
Reduction of such Principal Amount until the Redemption Price is 100% of such
Principal Amount.
In the event of any optional redemption by the Company, any
repayment at the option of the Holder, acceleration of the maturity of this
Note or other prepayment of this Note prior to the Maturity Date specified
above, the term "Maturity" when used herein shall refer, where applicable, to
the date of redemption, repayment, acceleration or other prepayment of this
Note.
An "OID Note" is any Note (a) that has been issued at an Issue
Price lower, by more than a de minimis amount (as determined under United
States federal income tax rules applicable to original issue discount
instruments), than the Face Amount thereof and (b) any other Note that for
United States federal income tax purposes would be considered an original issue
discount instrument.
<PAGE> 4
4
Except as provided in the following paragraph, the Company
will pay interest on each Interest Payment Date specified above, commencing
with the first Interest Payment Date next succeeding the Issue Date, and at
Maturity; provided that any payment of principal, premium, if any, or interest
to be made on any Interest Payment Date or on a date of Maturity that is not a
Business Day shall be made on the next succeeding Business Day with the same
force and effect as if made on such Interest Payment Date or such date of
Maturity, as the case may be, and no additional interest shall accrue as a
result of such delayed payment, except that if this Note is a LIBOR Note (as
defined in Section 3 on the reverse hereof) and such next succeeding Business
Day falls in the next calendar month, such payment shall be made on the
preceding day that is a London Banking Day. The term "Business Day" means any
day, other than a Saturday or Sunday, that meets each of the following
applicable requirements: such day is (a) not a day on which banking
institutions in the Borough of Manhattan, The City of New York are authorized
or required by law or regulation to close; (b) if the Specified Currency is a
Foreign Currency other than European Currency Units ("ECU"), (x) not a day on
which banking institutions are authorized or required by law or regulation to
close in the principal financial center of the country issuing the Foreign
Currency and (y) a day on which banking institutions in such principal
financial center are carrying out transactions in such Foreign Currency; (c) if
the Specified Currency is ECU, (x) not a day on which banking institutions are
authorized or required by law or regulation to close in Luxembourg and (y) an
ECU clearing day, as determined by the ECU Banking Association in Paris; and
(d) if this Note is a LIBOR Note, a London Banking Day. The term "London
Banking Day" means any day on which dealings in deposits in the Specified
Currency are transacted in the London interbank market. Unless otherwise
specified above, the interest payable on each Interest Payment Date or at
Maturity will be the amount of interest accrued from and including the Issue
Date or from and including the last Interest Payment Date to which interest has
been paid, as the case may be, to, but excluding, such Interest Payment Date or
the date of Maturity, as the case may be; provided, however, that if interest
on this Note is reset daily or weekly, interest payable on each Interest
Payment Date will be the amount of interest accrued from and including the
Issue Date or from and excluding the last date to which interest has been paid,
as the case may be, to, and including, the Regular Record Date immediately
preceding such Interest Payment Date, except that at Maturity the interest
payable will include interest accrued to, but excluding, the date of Maturity.
Unless otherwise specified above, the interest payable on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Note (or one or more predecessor Notes) is registered at the
close of business on the Regular Record Date indicated above (whether or not a
Business Day) next preceding such Interest Payment Date; provided that,
notwithstanding any provision of the Indenture to the contrary,
<PAGE> 5
5
interest payable on any date of Maturity shall be payable to the Person to whom
principal shall be payable; and provided, further, that, unless otherwise
specified above, in the case of a Note initially issued between a Regular
Record Date and the Interest Payment Date relating to such Regular Record Date,
interest for the period beginning on the Issue Date and ending on such Interest
Payment Date shall be paid on the Interest Payment Date following the next
succeeding Regular Record Date to the registered Holder on such next succeeding
Regular Record Date.
Unless otherwise indicated above, and except as provided below
if this Note is a Global Security, all payments of interest on this Note (other
than interest payable at Maturity) will be made by check (unless otherwise
provided above, from an account at a bank located outside the United States if
such amount is payable in a Foreign Currency); provided that, if the Holder
hereof is the Holder of U.S. $10,000,000 or more in aggregate Principal Amount
of Notes of this series of like tenor and term (or a Holder of the equivalent
thereof in a Foreign Currency determined as provided in Section 2 on the
reverse hereof), such Holder shall be entitled to receive interest payments in
immediately available funds, but only if complete and appropriate instructions
have been received in writing by the Trustee (or any such Paying Agent) on or
prior to the applicable Regular Record Date. Simultaneously with any election
by the Holder hereof to receive payments in respect hereof in a Foreign
Currency, such Holder may, if so entitled (as provided above), elect to receive
such payments in immediately available funds by providing complete and
appropriate instructions to the Trustee (or any such Paying Agent), and all
such payments will be made in immediately available funds to an account
maintained by the payee with a bank located outside the United States or as
otherwise provided above.
Unless otherwise indicated above, and except as provided below
if this Note is a Global Security, payments of principal, premium, if any, and
interest payable at Maturity will be made in immediately available funds
(unless otherwise indicated above, payable to an account at a bank located
outside the United States if payable in a Foreign Currency) upon surrender of
this Note at the corporate trust office or agency of the Trustee (or any duly
appointed Paying Agent) maintained for that purpose in the Borough of
Manhattan, The City of New York (the "Corporate Trust Office"), provided that
this Note is presented to the Trustee (or any such Paying Agent) in time for
the Trustee (or any such Paying Agent) to make such payments in such funds in
accordance with its normal procedures.
Unless otherwise specified above, if this Note is a Global
Security, payments of interest hereon (other than at Maturity) will be made in
same-day funds in accordance with existing arrangements between the Trustee (or
any duly appointed Paying Agent) and the Depository. Unless otherwise
specified above, if this Note is a Global Security, any principal, premium
<PAGE> 6
6
and/or interest payable hereon at Maturity will be paid by wire transfer in
immediately available funds to an account specified by the Depository (which
account, unless otherwise provided above, will be at a bank located outside the
United States if payable in a Foreign Currency).
The Company will pay any administrative costs imposed by banks
in making payments in immediately available funds, but any tax, assessment or
governmental charge imposed upon payments hereunder, including, without
limitation, any withholding tax, will be borne by the Holder hereof.
References herein to "U.S. dollars" or "U.S.$" or "$" are to
the coin or currency of the United States as at the time of payment is legal
tender for the payment of public and private debts.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS
NOTE SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL
PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been signed
by the Trustee under the Indenture.
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused
this instrument to be signed by its Chairman of the Board, its President, its
Vice Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer, by manual or facsimile signature under its corporate seal, attested
by its Secretary or one of its Assistant Secretaries by manual or facsimile
signature.
Dated: LEHMAN BROTHERS HOLDINGS INC.
[SEAL]
By:
------------------------
Chairman of the Board
Attest:
--------------------
Assistant Secretary
<PAGE> 7
7
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned Indenture.
CITIBANK, N.A.
as Trustee
By:___________________________
Authorized Officer
<PAGE> 8
8
[REVERSE OF NOTE]
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTES, SERIES E
(Floating Rate)
Section 1. General. This Note is one of a duly authorized
series of Notes of the Company designated as the Medium-Term Notes, Series E
(Floating Rate) of the Company (herein called the "Notes"), limited in
aggregate principal amount to $2,500,000,000 (or (i) the equivalent thereof in
Foreign Currencies or (ii) such greater amount, if OID Notes are issued, as
shall result in aggregate gross proceeds to the Company of $2,500,000,000),
subject to reduction as a result of the sale under certain circumstances of
other debt securities of the Company. The foregoing limit, however, may be
increased by the Company if in the future it determines that it may wish to
sell additional Notes. The Notes are one of an indefinite number of series of
debt securities of the Company (collectively, the "Securities") issued or
issuable under and pursuant to an indenture dated as of September 1, 1987, as
amended (the "Indenture"), duly executed and delivered by the Company and
Citibank, N.A., as Trustee (herein called the "Trustee"), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the
Securities. The separate series of Securities may be issued in various
aggregate principal amounts, may mature at different times, may bear interest
(if any) at different rates, may be subject to different redemption provisions
or repayment or repurchase rights (if any), may be subject to different
sinking, purchase or analogous funds (if any), may be subject to different
covenants and Events of Default and may otherwise vary as in the Indenture
provided.
Section 2. Currency Exchanges and Payments. If the Specified
Currency hereof is a Foreign Currency and the Holder is either not entitled to
elect to receive payments in respect hereof in such Foreign Currency or any
such election is not in effect, the amount of any U.S. dollar payment to be
made in respect hereof will be determined by the Exchange Rate Agent specified
on the face hereof or a successor thereto (the "Exchange Rate Agent"), based on
the indicative quotation in The City of New York selected by the Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the applicable payment date that yields the least number of U.S.
dollars upon conversion of such Foreign Currency. Unless otherwise provided on
the face hereof, such selection shall be made from among the quotations
appearing on the bank composite or multi- contributor pages of the Reuters
Monitor Foreign Exchange Service or, if not available, the Telerate Monitor
Foreign Exchange Service. If such quotations
<PAGE> 9
9
are unavailable from either such foreign exchange service, unless otherwise
provided on the face hereof, such selection shall be made from the quotations
received by the Exchange Rate Agent from no more than three nor less than two
recognized foreign exchange dealers in The City of New York selected by the
Exchange Rate Agent and approved by the Company (one of which may be the
Exchange Rate Agent) for the purchase by the quoting dealer, for settlement on
such payment date, of the aggregate amount of such Foreign Currency payable on
such payment date in respect of all Notes denominated in such Foreign Currency
and for which the applicable dealer commits to execute a contract. If no such
bid quotations are available, payments will be made in the Foreign Currency.
Unless otherwise specified on the face hereof, if payment
hereon is required to be made in a Foreign Currency and such currency is
unavailable to the Company for making payments thereof due to the imposition of
exchange controls or other circumstances beyond the Company's control, or is no
longer used by the government of the country which issued such currency or for
the settlement of transactions by public institutions of or within the
international banking community, then the Company will be entitled to make
payments with respect hereto in U.S. dollars until such Foreign Currency is
again available or so used. The amount so payable on any date in such Foreign
Currency shall be converted into U.S. dollars at a rate determined by the
Exchange Rate Agent on the basis of the noon buying rate in The City of New
York for cable transfers in the Foreign Currency as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate")
for such Foreign Currency on the second Business Day prior to such payment
date, or on such other basis as may be specified on the face hereof. In the
event such Market Exchange Rate is not then available, the Company will be
entitled to make payments in U.S. dollars (i) if such Foreign Currency is not a
composite currency, on the basis of the most recently available Market Exchange
Rate for such Foreign Currency or (ii) if such Foreign Currency is a composite
currency, including, without limitation, the ECU, in an amount determined by
the Exchange Rate Agent to be the sum of the results obtained by multiplying
the number of units of each component currency of such composite currency, as
of the most recent date on which such composite currency was used, by the
Market Exchange Rate for such component currency on the second Business Day
prior to such payment date (or if such Market Exchange Rate is not then
available, by the most recently available Market Exchange Rate for such
component currency, or as otherwise specified on the face hereof). Any payment
in respect hereof made under such circumstances in U.S. dollars will not
constitute an Event of Default under the Indenture.
If the official unit of any component currency of a composite
currency is altered by way of combination or subdivision, the number of units
of that currency as a component shall be divided or multiplied in the same
proportion. If two or
<PAGE> 10
10
more component currencies are consolidated into a single currency, the amounts
of those currencies as components shall be replaced by an amount in such single
currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that original component
currency as a component shall be replaced by amounts of such two or more
currencies having an aggregate value on the date of division equal to the
amount of the former component currency immediately before such division.
In the event of an official redenomination of the Specified
Currency or the Optional Payment Currency (including, without limitation, an
official redenomination of any such currency that is a composite currency), the
obligations of the Company to make payments in or with reference to such
currency shall, in all cases, be deemed immediately following such
redenomination to be obligations to make payments in or with reference to that
amount of redenominated currency representing the amount of such currency
immediately before such redenomination. In no event shall any adjustment be
made to any amount payable hereunder as a result of any redenomination of any
component currency of any composite currency (unless such composite currency is
itself officially redenominated).
All determinations referred to above made by the Exchange Rate
Agent shall be at its sole discretion (except to the extent expressly provided
herein that any determination is subject to approval by the Company) and, in
the absence of manifest error, shall be conclusive for all purposes and binding
on the Holder hereof, and the Exchange Rate Agent shall have no liability
therefor.
All currency exchange costs will be borne by the Holder hereof
by deduction from the payments made hereon.
Section 3. Determination of Interest Rate. For the period
from the Issue Date to the first Interest Reset Date set forth on the face
hereof, the interest rate hereon shall be the Initial Interest Rate specified
on the face hereof. Thereafter, the interest rate hereon will be reset on each
Interest Reset Date; provided, however, that the interest rate in effect for
the ten days immediately prior to Maturity will be that in effect on the tenth
day preceding such Maturity. If any Interest Reset Date would otherwise be a
day that is not a Business Day (or, if this Note is a LIBOR Note, a day that is
not a London Banking Day), such Interest Reset Date shall be postponed to the
next day that is a Business Day (or, if this Note is a LIBOR Note, to the next
day that is a London Banking Day), except that if this Note is a LIBOR Note and
such London Banking Day is in the next succeeding calendar month, such Interest
Reset Date shall be the immediately preceding London Banking Day. If this Note
is a Treasury Rate Note (as defined below) and an auction date for Treasury
bills shall fall on any Interest Reset Date, then such
<PAGE> 11
11
Interest Reset Date shall instead be the first Business Day immediately
following such auction date. Subject to applicable provisions of law and
except as specified herein, on each Interest Reset Date, the rate of interest
on this Note on and after the first Interest Reset Date shall be the rate
determined in accordance with the provisions of the heading below which has
been designated as the Interest Rate Basis on the face hereof plus or minus the
Spread, if any, specified on the face hereof or multiplied by the Spread
Multiplier, if any, specified on the face hereof.
Commercial Paper Rate Notes
If the Interest Rate Basis is the Commercial Paper Rate, this
Note is a "Commercial Paper Rate Note." A Commercial Paper Rate Note will bear
interest at the interest rate calculated with reference to the Commercial Paper
Rate and the Spread or Spread Multiplier, if any. Unless otherwise specified
on the face hereof, "Commercial Paper Rate" means, with respect to any Interest
Determination Date, the Money Market Yield (calculated as described below) of
the rate on that date for commercial paper having the applicable Index Maturity
as such rate is published in the publication entitled "Statistical Release
H.15(519), Selected Interest Rates," or any successor publication, published by
the Board of Governors of the Federal Reserve System ("H.15(519)") under the
heading "Commercial Paper". If such rate is not published by 9:00 A.M., New
York City time, on the Calculation Date (as defined below) pertaining to such
Interest Determination Date, then the Commercial Paper Rate shall be the Money
Market Yield of the rate on such Interest Determination Date for commercial
paper having the applicable Index Maturity as published in the daily
statistical release entitled "Composite 3:30 P.M. Quotations for U.S.
Government Securities" (or any successor publication) published by the Federal
Reserve Bank of New York ("Composite Quotations") under the heading "Commercial
Paper". If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on such Calculation Date, then the
Commercial Paper Rate for such Interest Determination Date shall be calculated
by the Calculation Agent and shall be the Money Market Yield of the arithmetic
mean of the offered rates as of 11:00 A.M., New York City time, on such
Interest Determination Date of three leading dealers of commercial paper in The
City of New York selected by the Calculation Agent after consultation with the
Company for commercial paper having the applicable Index Maturity, placed for
industrial issuers whose bond rating is "AA", or the equivalent, from a
nationally recognized securities rating agency; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Commercial Paper Rate for the applicable period
will be the Commercial Paper Rate in effect on such Interest Determination
Date.
<PAGE> 12
12
"Money Market Yield" shall be a yield calculated in accordance
with the following formula:
D X 360
Money Market Yield = ------------- x 100
360 - (D X M)
where "D" refers to the per annum rate for the commercial paper, quoted on a
bank discount basis and expressed as a decimal; and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Federal Funds Effective Rate Notes
If the Interest Rate Basis is the Federal Funds Effective
Rate, this Note is a "Federal Funds Effective Rate Note." A Federal Funds
Effective Rate Note will bear interest at the interest rate calculated with
reference to the Federal Funds Effective Rate and the Spread or Spread
Multiplier, if any. Unless otherwise specified on the face hereof, "Federal
Funds Effective Rate" means, with respect to any Interest Determination Date,
the rate on that day for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)" or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Effective Rate will be the rate on such
Interest Determination Date as published in Composite Quotations under the
heading "Federal Funds/Effective Rate". If such rate is not yet published in
either H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, then the
Federal Funds Effective Rate for such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
rates as of 11:00 A.M., New York City time, on such Interest Determination Date
for the last transaction in overnight Federal Funds arranged by three leading
brokers of Federal Funds transactions in The City of New York selected by the
Calculation Agent after consultation with the Company; provided, however, that
if the brokers selected as aforesaid by the Calculation Agent are not quoting
as mentioned in this sentence, the Federal Funds Effective Rate for the
applicable period will be the Federal Funds Effective Rate in effect on such
Interest Determination Date.
CD Rate Notes
If the Interest Rate Basis is the CD Rate, this Note is a "CD
Rate Note." A CD Rate Note will bear interest at the interest rate calculated
with reference to the CD Rate and the Spread or Spread Multiplier, if any.
Unless otherwise specified on the face hereof, "CD Rate" means, with respect to
any Interest Determination Date, the rate on such date for negotiable
certificates of deposit having the applicable Index Maturity as published in
H.15(519) under the heading "CDs (Secondary Market)" or, if not so published by
9:00 A.M., New York City time, on the
<PAGE> 13
13
Calculation Date pertaining to such Interest Determination Date, the CD Rate
will be the rate on such Interest Determination Date for negotiable
certificates of deposit of the applicable Index Maturity as published in
Composite Quotations under the heading "Certificates of Deposit". If such rate
is not yet published in either H.15(519) or Composite Quotations by 3:00 P.M.,
New York City time, on such Calculation Date, then the CD Rate for such
Interest Determination Date will be calculated by the Calculation Agent and
will be the arithmetic mean of the secondary market offered rates as of the
opening of business, New York City time, on such Interest Determination Date,
of three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent after
consultation with the Company for negotiable certificates of deposit of major
United States money center banks of the highest credit standing (in the market
for negotiable certificates of deposit) with a remaining maturity closest to
the applicable Index Maturity in a denomination of $5,000,000; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence, the CD Rate for the applicable
period will be the CD Rate in effect on such Interest Determination Date.
LIBOR Notes
If the Interest Rate Basis is LIBOR, this Note is a "LIBOR
Note." A LIBOR Note will bear interest at the interest rate calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any. Unless
otherwise indicated on the face hereof, "LIBOR" means the rate determined by
the Calculation Agent as follows:
(a) With respect to an Interest Determination Date, LIBOR
will be, as specified on the face hereof, either (i) the arithmetic mean of the
offered rates for deposits in U.S. dollars for the period (commencing on the
Interest Reset Date) of the applicable Index Maturity which appear on the
display designated as page "LIBO" on the Reuters Monitor Money Rates Service,
or such other page as may replace the LIBO page on that service for the purpose
of displaying London interbank offered rates of major banks (the "Reuters
Screen LIBO Page"), at approximately 11:00 A.M., London time, on such Interest
Determination Date, if at least two such offered rates appear on the Reuters
Screen LIBO Page ("LIBOR Reuters"), or (ii) the offered rate for deposits in
U.S. dollars or the applicable Foreign Currency specified on the face hereof
for the period (commencing on the Interest Reset Date) of the applicable Index
Maturity which appears on the Telerate Page 3740 (as defined below) or the
Telerate Page 3750 (as defined below), as applicable, at approximately 11:00
A.M., London time, on such Interest Determination Date ("LIBOR Telerate"). If
neither LIBOR Reuters nor LIBOR Telerate is specified on the face hereof, LIBOR
will be determined as if LIBOR Telerate had been specified.
<PAGE> 14
14
(b) With respect to an Interest Determination Date on which
fewer than two offered rates appear on the Reuters Screen LIBO Page as
specified in (a)(i) above, or on which no rate appears on the Telerate Page
3740 or the Telerate Page 3750, as applicable, as specified in (a)(ii) above,
as applicable, the Calculation Agent will request the principal London office
of each of four major banks in the London interbank market, as selected by the
Calculation Agent after consultation with the Company, to provide the
Calculation Agent with its offered quotation for deposits in the applicable
currency for the period (commencing on the Interest Reset Date) of the
applicable Index Maturity to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on such Interest Determination Date and
in a principal amount equal to an amount of not less than $1,000,000 (or the
equivalent thereof in the applicable currency if such currency is a Foreign
Currency) that is representative of a single transaction in such market at such
time. If at least two such quotations are provided, LIBOR in respect of such
Interest Determination Date will be the arithmetic mean of such quotations. If
fewer than two such quotations are provided, LIBOR in respect of such Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., New York City time, on such Interest Determination
Date by three major banks in The City of New York selected by the Calculation
Agent after consultation with the Company for loans in the applicable currency
to leading European banks, for the period (commencing on the Interest Reset
Date) of the applicable Index Maturity and in a principal amount equal to an
amount of not less than $1,000,000 (or the equivalent thereof in the applicable
currency if such currency is a Foreign Currency) that is representative of a
single transaction in such market at such time, provided, however, that if the
banks in The City of New York selected as aforesaid by the Calculation Agent
are not quoting as mentioned in this sentence, LIBOR for the applicable period
will be LIBOR as in effect on such Interest Determination Date.
The term "Telerate Page 3740" means the display designated as
page "3740" on the Telerate Service, or such other page as may replace the 3740
page on that service or such other service or services as may be nominated by
the British Bankers' Association for the purpose of displaying London interbank
offered rates for deposits in Australian Dollars, French Francs, Canadian
Dollars, Italian Lira, Spanish Pesetas and Dutch Guilders. The term "Telerate
Page 3750" means the display designated as page "3750" on the Telerate Service,
or such other page as may replace the 3750 page on that service or such other
service or services as may be nominated by the British Bankers' Association for
the purpose of displaying London interbank offered rates for deposits in U.S.
Dollars, British Pounds Sterling, German Deutsche Marks, Swiss Francs, Japanese
Yen and ECU.
<PAGE> 15
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Prime Rate Notes
If the Interest Rate Basis is the Prime Rate, this Note is a
"Prime Rate Note." A Prime Rate Note will bear interest at the interest rate
calculated with reference to the Prime Rate and the Spread or Spread
Multiplier, if any. Unless otherwise specified on the face hereof, "Prime
Rate" means, with respect to any Interest Determination Date, the rate on that
day as published in H.15(519) under the heading "Bank Prime Loan" or, if not so
published by 9:00 A.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the Prime Rate will be determined by the
Calculation Agent and will be the arithmetic mean of the rates of interest
publicly announced by each bank named on the display designated as page "NYMF"
on the Reuters Monitor Money Rates Service, or such other page as may replace
the NYMF page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks (the "Reuters Screen NYMF Page"), as
such bank's prime rate or base lending rate as in effect for such Interest
Determination Date. If fewer than four such rates but more than one such rate
appear on the Reuters Screen NYMF Page for such Interest Determination Date,
the Prime Rate will be determined by the Calculation Agent and will be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on such Interest
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent after consultation with the Company. If
fewer than two such rates appear on the Reuters Screen NYMF Page, the Prime
Rate will be calculated by the Calculation Agent and will be the arithmetic
mean of the prime rates in effect for such Interest Determination Date as
furnished in The City of New York by at least three substitute banks or trust
companies organized and doing business under the laws of the United States, or
any state thereof, in each case having total equity capital of at least
$500,000,000 and being subject to supervision or examination by federal or
state authority, selected by the Calculation Agent after consultation with the
Company to provide such rate or rates; provided, however, that if the banks or
trust companies selected as aforesaid are not quoting as mentioned in this
sentence, the Prime Rate for the applicable period will be the Prime Rate in
effect on such Interest Determination Date.
Treasury Rate Notes
If the Interest Rate Basis is the Treasury Rate, this Note is
a "Treasury Rate Note." A Treasury Rate Note will bear interest at the
interest rate calculated with reference to the Treasury Rate and the Spread or
Spread Multiplier, if any. Unless otherwise specified on the face hereof
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such Interest Determination Date of direct
obligations of the United States ("Treasury bills") having the applicable Index
Maturity as published in H.15(519) under the
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heading "U.S. Government Securities--Treasury bills-- auction average
(investment)" or, if not so published by 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the auction
average rate (expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) as otherwise announced
by the United States Department of the Treasury. In the event that the results
of the auction of Treasury bills having the applicable Index Maturity are not
published or reported as provided above by 3:00 P.M., New York City time, on
such Calculation Date or if no such auction is held on such Interest
Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 P.M., New York City time, on such Interest
Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent after consultation with
the Company for the issue of Treasury bills with a remaining maturity closest
to the applicable Index Maturity; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Treasury Rate for the applicable period will be the Treasury
Rate in effect on such Interest Determination Date.
The term "Calculation Date" means the date on which the
Calculation Agent is to calculate an interest rate for this Note, which shall
be the tenth calendar day after the related Interest Determination Date or if
such day is not a Business Day, the next succeeding Business Day, unless
otherwise specified on the face hereof.
Notwithstanding the foregoing, the interest rate hereon shall
not be greater than the Maximum Interest Rate, if any, or less than the Minimum
Interest Rate, if any, shown on the face hereof. The interest rate on this
Note will in no event be higher than the maximum rate permitted by New York law
as the same may be modified by United States law of general applicability.
The Calculation Agent will, upon the request of the Holder of
this Note, provide the interest rate then in effect and, if determined, the
interest rate which will become effective as a result of a determination made
on the most recent Interest Determination Date with respect to this Note.
Unless otherwise specified on the face hereof, the Interest
Determination Date pertaining to an Interest Reset Date will be (a) such
Interest Reset Date for a Prime Rate Note and (b) the Business Day preceding
such Interest Reset Date for a Commercial Paper Rate Note, a Federal Funds
Effective Rate Note or a CD Rate Note. Unless otherwise specified on the face
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hereof, the Interest Determination Date pertaining to an Interest Reset Date
for a LIBOR Note will be the second London Banking Day preceding such Interest
Reset Date. Unless otherwise specified on the face hereof, the Interest
Determination Date pertaining to an Interest Reset Date for a Treasury Rate
Note will be the day of the week in which such Interest Reset Date falls on
which Treasury bills of the applicable Index Maturity would normally be
auctioned. Treasury bills are usually sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is usually held
on the following Tuesday, except that such auction may be held on the preceding
Friday. If, as the result of a legal holiday, an auction is so held on the
preceding Friday, such Friday will be the Interest Determination Date
pertaining to the Interest Reset Date occurring in the next succeeding week.
Accrued interest from the Issue Date or from the last date to
which interest has been paid shall be calculated by multiplying the face amount
of this Note by an accrued interest factor. This accrued interest factor shall
be computed by adding the interest factors calculated for each day from the
Issue Date or from the last date to which interest has been paid, to the date
for which accrued interest is being calculated. The interest factor for each
such day is computed by dividing the interest rate applicable to such date by
360, in the case of Commercial Paper Rate Notes, Federal Funds Effective Rate
Notes, CD Rate Notes, LIBOR Notes and Prime Rate Notes, or by the actual number
of days in the year, in the case of Treasury Rate Notes. The interest rate
applicable to any day that is an Interest Reset Date is the interest rate as
determined, in accordance with the procedures set forth above, with respect to
the Interest Determination Date pertaining to such Interest Reset Date. The
interest rate applicable to any other day is the interest rate for the
immediately preceding Interest Reset Date (or, if none, the Initial Interest
Rate).
Unless otherwise specified on the face hereof, all percentages
resulting from any calculation of the rate of interest on this Note will be
rounded, if necessary, to the nearest one hundred-thousandth of a percent
(.0000001), with five one- millionths of a percentage point rounded upward, and
all currency amounts used in or resulting from such calculation will be rounded
to the nearest one-hundredth of a unit (with five one-thousandths of a unit
being rounded upwards).
Section 4. Redemption. If so specified on the face hereof,
the Company may at its option redeem this Note in whole or from time to time in
part on or after the date designated as the Initial Redemption Date on the face
hereof at either a price based on a constant percentage of the Principal Amount
of this Note as specified on the face hereof or at prices declining from the
premium specified on the face hereof, if any, to 100% of the Principal Amount
hereof, together, in each case, with accrued interest to the Redemption Date.
The Company may exercise such
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option by causing the Trustee to mail by first-class mail to the Holder hereof
a notice of such redemption at least 30 but not more than 60 days prior to the
Redemption Date. In the event of redemption of this Note in part only, a new
Note or Notes of this series for the unredeemed portion hereof shall be issued
in the name of the Holder hereof upon the cancellation hereof in accordance
with the terms of the Indenture. Unless otherwise specified on the face
hereof, if less than all of the Notes with like tenor and terms to this Note
are to be redeemed, the Notes to be redeemed shall be selected by the Trustee
by such method as the Trustee shall deem fair and appropriate.
Section 5. Sinking Funds. Unless otherwise specified on the
face hereof, this Note will not be subject to any sinking fund.
Section 6. Optional Repayment. If so specified on the face
hereof, this Note will be repayable prior to the Maturity Date at the option of
the Holder on the Optional Repayment Dates specified on the face hereof at the
Optional Repayment Prices specified on the face hereof, together with accrued
interest to the applicable Optional Repayment Date. Unless otherwise specified
on the face hereof, in order for this Note to be so repaid, the Company must
receive, at least 30 but not more than 45 days prior to an Optional Repayment
Date, either (i) this Note with the form below entitled "Option to Elect
Repayment" duly completed or (ii) a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States setting forth the name of the Holder hereof, the Face
Amount hereof, the Face Amount to be repaid, the certificate number hereof or a
description of the tenor and terms of this Note, a statement that the option to
elect repayment is being exercised thereby and a guarantee that this Note with
the form below entitled "Option to Elect Repayment" duly completed will be
received by the Paying Agent not later than five Business Days after the date
of such telegram, telex, facsimile transmission or letter and this Note and
form duly completed are received by the Paying Agent by such fifth Business
Day. Exercise of this repayment option shall be irrevocable, except as
otherwise provided under Section 7 or Section 10. The repayment option may be
exercised by the Holder of this Note with respect to less than the Face Amount
then outstanding provided that the Face Amount of the Note remaining
outstanding after repayment is an authorized denomination. Upon such partial
repayment this Note shall be cancelled and a new Note or Notes for the
remaining Face Amount hereof shall be issued in the name of the Holder of this
Note.
Section 7. Optional Spread or Spread Multiplier Reset. If so
specified on the face hereof, the Spread or Spread Multiplier, if any, set
forth on the face hereof may be reset at the option of the Company, in the
manner set forth below (unless otherwise specified on the face hereof), on the
Optional Reset
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Date or Optional Reset Dates specified on the face hereof. The Company may
exercise such option by notifying the Trustee in writing of such exercise at
least 45 but not more than 60 days prior to an Optional Reset Date. Not later
than five Business Days after receipt thereof, the Trustee will mail by
first-class mail to the Holder of this Note a notice (the "Reset Notice")
setting forth (i) the election of the Company to reset the Spread or Spread
Multiplier, (ii) such new Spread or Spread Multiplier and (iii) the provisions,
if any, for redemption during the period from such Optional Reset Date to the
next Optional Reset Date or, if there is no such next Optional Reset Date, to
the Maturity Date of this Note (each such period a "Subsequent Interest
Period"), including the date or dates on which or the period or periods during
which and the price or prices at which such redemption may occur during such
Subsequent Interest Period. The Reset Notice shall be substantially in the
form of Exhibit A to this Note. Upon the transmittal by the Trustee of a Reset
Notice to the Holder of this Note, such new Spread or Spread Multiplier shall
take effect automatically, and, except as modified by the Reset Notice and as
described in the next paragraph, this Note will have the same terms as prior to
the transmittal of such Reset Notice.
Notwithstanding the foregoing, not later than 20 days prior to
an Optional Reset Date, the Company may, at its option, revoke the Spread or
Spread Multiplier provided for in the Reset Notice and establish a Spread or
Spread Multiplier that is higher than the interest rate provided for in the
Reset Notice for the Subsequent Interest Period commencing on such Optional
Reset Date by causing the Trustee to mail by first-class mail notice of such
higher Spread or Spread Multiplier to the Holder of this Note. Such notice
shall be irrevocable and shall be mailed by the Trustee within five Business
Days after receipt thereof. All Notes with respect to which the Spread or
Spread Multiplier is reset on an Optional Reset Date will bear such higher
Spread or Spread Multiplier for the Subsequent Interest Period.
If the Company elects to reset the Spread or Spread Multiplier
of this Note, the Holder of this Note will have the option to elect repayment
by the Company of this Note, or any portion hereof, on any Optional Reset Date
at a price calculated with reference to the Face Amount hereof to be repaid,
plus any interest accrued to such Optional Reset Date. In order to obtain
repayment on an Optional Reset Date, the Holder must follow the procedures set
forth above in Section 6 for optional repayment except that the period for
delivery or notification to the Trustee shall be at least 25 but not more than
35 days prior to such Optional Reset Date and except that, if the Holder has
tendered this Note for repayment pursuant to the Reset Notice, the Holder may,
by written notice to the Trustee, revoke such tender for repayment until the
close of business on the tenth day prior to such Optional Reset Date; provided,
however, that if such day is not a Business Day, then such notice may be given
on the next succeeding Business Day.
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Section 8. OID Notes. If this Note is an OID Note, unless
otherwise specified on the face hereof, the amount payable in the event of
redemption by the Company, repayment at the option of the Holder or
acceleration of Maturity shall be the Amortized Face Amount of this Note as of
the date of such redemption, repayment or acceleration rather than the Face
Amount hereof. The "Amortized Face Amount" of this Note shall be the amount
equal to (a) the Issue Price (as set forth on the face hereof) plus (b) that
portion of the difference between the Issue Price and the Face Amount hereof
that has accrued at the Yield to Maturity set forth on the face hereof
(computed in accordance with generally accepted United States bond yield
computation principles) at the date as of which the Amortized Face Amount is
calculated, but in no event shall the Amortized Face Amount of this Note exceed
the Face Amount.
Section 9. Dual Currency Notes. If it is specified on the
face hereof that this Note is a Dual Currency Note, the Company has a one time
option, exercisable on any one of the Option Election Dates specified on the
face hereof in whole, but not in part, with respect to all Dual Currency Notes
issued on the same day and having the same terms as this Note (this "Tranche"),
of thereafter making all payments of principal, premium, if any, and interest
(which payments would otherwise be made in the Specified Currency of such
Notes) in the Optional Payment Currency specified on the face hereof. If the
Company makes such an election, the amount of Optional Payment Currency payable
in respect hereof shall be determined by the Exchange Rate Agent by converting
the amount of Specified Currency that would otherwise be payable into the
Optional Payment Currency at the Designated Exchange Rate specified on the face
hereof.
The Company may exercise such option by notifying the Trustee
of such exercise on or prior to the Option Election Date. The Trustee will
mail by first-class mail to each holder of a Note of this Tranche a notice of
such election within five Business Days of the Option Election Date which shall
state (i) the first date, whether an Interest Payment Date and/or the Maturity
Date, on which scheduled payments in the Optional Payment Currency will be made
and (ii) the Designated Exchange Rate. Any such notice by the Company, once
given, may not be withdrawn.
If this Note is a Dual Currency Note, unless otherwise
specified on the face hereof and notwithstanding any prior election made by the
Company, the amount payable hereon in the event of any optional redemption by
the Company, any repayment at the option of the Holder, any acceleration of the
Maturity of this Note or other prepayment of this Note prior to the Maturity
Date shall be an amount equal to the Principal Amount hereof otherwise due and
payable plus accrued interest to but excluding the date of redemption,
repayment, acceleration or other prepayment minus the Total Option Value
multiplied by a fraction, the numerator of which is the Principal Amount hereof
and the
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denominator of which is the aggregate Principal Amount of all Dual Currency
Notes of this Tranche. In no event will such payment be less than zero.
Notwithstanding any prior election made by the Company, such payment shall be
made in the Specified Currency unless otherwise provided on the face hereof.
The term "Total Option Value" means, with respect to any Dual
Currency Note on any date, an amount (calculated as of such date by the Option
Value Calculation Agent) equal to the sum of the Option Values (calculated as
of such date by the Option Value Calculation Agent) for all Interest Payment
Dates occurring after the date of calculation up to and including the Maturity
Date. The term "Option Value" means, with respect to an Interest Payment Date
or the Maturity Date, the amount calculated by the Option Value Calculation
Agent to be the arithmetic average of the prices quoted on the date of
calculation by three reference banks (which banks shall be selected by the
Option Value Calculation Agent and shall be reasonably acceptable to the
Company) for the right on the Option Election Date immediately preceding such
Interest Payment Date or Maturity Date to purchase for value on such Interest
Payment Date or Maturity Date from such reference banks (A) the aggregate
amount of the Specified Currency due on such Interest Payment Date or Maturity
Date with respect to all of the Dual Currency Notes of this Tranche in exchange
for (B) the amount of the Optional Payment Currency that would be received if
the amount in clause (A) were converted into the Optional Payment Currency at
the Designated Exchange Rate.
All determinations referred to above made by the Exchange Rate
Agent or the Option Value Calculation Agent shall be at their sole discretion
(except to the extent expressly provided herein that any determination is
subject to approval by the Company) and, in the absence of manifest error,
shall be conclusive for all purposes and binding on the Holder hereof, and
neither the Exchange Rate Agent nor the Option Value Calculation Agent shall
have any liability therefor.
Section 10. Extendible Notes. If it is specified on the face
hereof that this Note is an Extendible Note, the Company has the option to
extend the Maturity Date hereof for the number of Extension Periods set forth
on the face hereof, each of which Extension Periods shall be a period of from
one to five whole years. Unless otherwise specified on the face hereof, the
following procedures shall apply if this Note is an Extendible Note.
The Company may exercise its option by notifying the Trustee
of such exercise at least 45 but not more than 60 days prior to the Maturity
Date hereof in effect prior to the exercise of such option (the "Original
Stated Maturity"). Not later than five Business Days after receipt thereof,
the Trustee will mail to the Holder a notice (the "Extension Notice"), first
class, postage prepaid, setting forth (i) the election of the Company to extend
the Maturity Date, (ii) the new Maturity Date, (iii) the
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Spread or Spread Multiplier applicable to the Extension Period and (iv) the
provisions, if any, for redemption during the Extension Period, including the
date on which or the period or periods during which and the price at which such
redemption may occur during the Extension Period. Upon the mailing by the
Trustee of an Extension Notice to the Holder, the Maturity Date hereof shall be
extended automatically, and, except as modified by the Extension Notice and as
described in the next paragraph, this Note will have the same terms as prior to
the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to
the Original Stated Maturity hereof, the Company may, at its option, revoke the
Spread or Spread Multiplier provided for in the Extension Notice and establish
a higher Spread or Spread Multiplier for the Extension Period by causing the
Trustee to mail notice of such higher Spread or Spread Multiplier, first class,
postage prepaid, to the Holder. Such notice shall be irrevocable and shall be
mailed by the Trustee within three Business Days after receipt thereof. This
Note will bear such higher Spread or Spread Multiplier for the Extension
Period, whether or not tendered for repayment.
If the Company extends the Maturity Date of this Note, the
Holder will have the option to elect repayment by the Company of this Note, or
any portion hereof, on the Original Stated Maturity at a price calculated with
reference to the Face Amount hereof to be repaid plus any accrued interest to
such date. In order for this Note to be so repaid on the Original Stated
Maturity, the Holder must follow the procedures set forth in Section 6 hereof
for optional repayment, except that the period for delivery of this Note or
notification to the Trustee shall be at least 25 but not more than 35 days
prior to the Original Stated Maturity and except that the Holder may, by
written notice to the Trustee, revoke any such tender for repayment until the
close of business on the tenth day prior to the Original Stated Maturity;
provided, however, that if such day is not a Business Day, then such notice may
be given on the next succeeding Business Day.
Section 11. Renewable Notes. If it is specified on the face
hereof that this Note is a Renewable Note, this Note will mature on the Initial
Maturity Date specified on the face hereof unless the Maturity of all or any
portion of this Note is extended in accordance with the procedures described
below.
On the Interest Payment Date occurring in the sixth month
(unless a different Special Election Interval is specified on the face hereof)
prior to the Initial Maturity Date hereof (the "Initial Maturity Extension
Date") and on the Interest Payment Date occurring in each sixth month (or the
last month of each Special Election Interval) after such Initial Maturity
Extension Date (each, together with the Initial Maturity Extension Date, a
"Maturity Extension Date"), the Maturity of
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this Note will be extended to the Interest Payment Date occurring in the
twelfth month (or, if a Special Election Interval is specified on the face
hereof, the last month in a period equal to twice the Special Election
Interval) after such Maturity Extension Date, unless the Holder elects to
terminate the automatic extension of the Maturity hereof or any portion hereof
as described below.
If the Holder elects to terminate the automatic extension of
the Maturity of any portion of the principal amount of this Note during the
specified period prior to any Maturity Extension Date, such portion will become
due and payable on the Interest Payment Date occurring in the sixth month (or
the last month in the Special Election Interval) after such Maturity Extension
Date (the "Extended Maturity Date").
The Holder may elect to terminate the automatic extension of
the Maturity of this Note, or if so specified above, any portion hereof, by
delivering a notice to such effect to the Trustee (or any duly appointed Paying
Agent) at the Corporate Trust Office not less than 15 nor more than 30 days
prior to such Maturity Extension Date (unless another period is specified on
the face hereof as the "Special Election Period"). Such election will be
irrevocable and will be binding upon each subsequent Holder of this Note. An
election to terminate the automatic extension of the Maturity of this Note may
be exercised with respect to less than the entire Face Amount hereof only if so
specified on the face hereof and only in such Face Amount, or any integral
multiple in excess thereof, as is specified on the face hereof.
Notwithstanding the foregoing, the Maturity of this Note will not be extended
beyond the Maturity Date specified on the face hereof.
Unless otherwise specified above, any such election to
terminate will be effective only if this Note, with the "Option to Elect
Termination of Automatic Extension" included herein duly executed, is presented
to the Trustee (or any duly appointed Paying Agent) simultaneously with notice
of such election (or, in the event notice of such election, together with a
guarantee of delivery within five Business Days, is transmitted on behalf of
the Holder from a member of a national securities exchange, the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States, within five Business Days of the date of such notice).
As soon as practicable following receipt of this Note the Trustee (or any duly
appointed Paying Agent) shall issue in exchange herefor in the name of the
Holder (i) a Note, in a face amount equal to the face amount of this Note for
which the election to terminate the automatic extension of Maturity was
exercised, with terms identical to those specified herein (except for the Issue
Date and the Initial Interest Rate and except that such Note shall have a
fixed, non- extendable Maturity on the Extended Maturity Date) and (ii) if such
election is made with respect to less than the full Face Amount hereof, a
replacement Renewable Note, in a face amount
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equal to the Face Amount of this Note for which no election was made, with
terms identical to this Note.
Section 12. Principal Amount For Indenture Purposes. For the
purpose of determining whether Holders of the requisite amount of Notes
outstanding under the Indenture have made a demand, given a notice or waiver or
taken any other action, the outstanding principal amount of this Note will be
deemed to be the Principal Amount, provided, however, if this Note is an OID
Note, the outstanding, principal amount of this Note will be deemed to be the
Face Amount set forth above.
Section 13. Modification and Waivers. The Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
holders of not less than 66-2/3% in aggregate principal amount of each series
of the Securities at the time Outstanding to be affected, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) extend the fixed maturity
of any Security, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon or reduce any premium payable on
redemption, or make the principal thereof, or premium, if any, or interest
thereon payable in any coin or currency other than that hereinabove provided,
without the consent of the holder of each Security so affected, or (ii) change
the place of payment on any Security, or impair the right to institute suit for
payment on any Security, or reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each Security so affected. It is also
provided in the Indenture that, prior to any declaration accelerating the
Maturity of any series of Securities, the holders of a majority in aggregate
principal amount of the Securities of such series Outstanding may on behalf of
the holders of all the Securities of such series waive any past default or
Event of Default under the Indenture with respect to such series and its
consequences, except a default in the payment of interest, if any, on or the
principal of, or premium if any, on any of the Securities of such series, or in
the payment of any sinking fund installment or analogous obligation with
respect to Securities of such series. Any such consent or waiver by the Holder
of this Note shall be conclusive and binding upon such Holder and upon all
future holders and owners of this Note and any Notes which may be issued in
exchange or substitution herefor, irrespective of whether or not any notation
thereof is made upon this Note or such other Notes.
Section 14. Obligations Unconditional. No reference herein
to the Indenture and no provisions of this Note or of the Indenture shall alter
or impair the obligation of the Company,
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which is absolute and unconditional, to pay the principal of, premium, if any,
and interest, if any, on this Note at the place, at the respective times, at
the rate, and in the coin or currency herein prescribed.
Section 15. Defeasance. The Indenture contains provisions
for the discharge of the Indenture and defeasance at any time of the
indebtedness on this Note upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Note.
Section 16. Authorized Form and Denominations. The Notes of
this series are issuable in registered form, without coupons. Unless otherwise
set forth on the face hereof, Notes denominated in U.S. dollars will be issued
in Face Amount denominations of U.S. $100,000 and any integral multiple of U.S.
$1,000 in excess thereof. Notes denominated in a Foreign Currency will be
issued in the denomination or denominations set forth on the face hereof. Each
Note will be issued initially as either a Global Security or a Certificated
Note, at the option of the holders thereof, either at the office or agency to
be designated and maintained by the Company for such purpose in the Borough of
Manhattan, The City of New York, pursuant to the provisions of the Indenture or
at any of such other offices or agencies as may be designated and maintained by
the Company for such purpose pursuant to the provisions of the Indenture, and
in the manner and subject to the limitations provided in the Indenture, but
without the payment of any service charge, except for any tax or other
governmental charges imposed in connection therewith. Notes of this series are
exchangeable for a like aggregate Face Amount of Notes of this series of a
different authorized denomination, except that Global Securities will not be
exchangeable for Certificated Notes.
Section 17. Registration of Transfer. As provided in the
Indenture and subject to certain limitations as therein set forth, the transfer
of this Note is registrable in the Security Register, upon surrender of this
Note for registration of transfer, at the Corporate Trust Office or agency in a
Place of Payment for this Note, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar requiring such written instrument of transfer duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of this series, of authorized denominations and for the same
aggregate Face Amount, will be issued to the designated transferee or
transferees.
If this Note is a Global Security and if at any time the
Depository notifies the Company that it is unwilling or unable to continue as
Depository or if at any time the Depository shall no longer be eligible under
the Indenture, the Company shall appoint a successor Depository. If a
successor Depository for the Securities of such series is not appointed by the
Company
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within 90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company will issue, and the Trustee will authenticate and
deliver, Notes in definitive form in an aggregate Face Amount equal to the Face
Amount hereof.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name this Note is registered as the owner hereof
for all purposes, and neither the Company nor the Trustee nor any agent of the
Company or of the Trustee shall be affected by any notice to the contrary.
Section 18. Events of Default. If an Event of Default with
respect to Notes of this series shall occur and be continuing, the principal of
the Notes of this series may be declared due and payable in the manner and with
the effect provided in the Indenture. In the event that this Note is an OID
Note or a Dual Currency Note, the amount of principal of this Note that becomes
due and payable upon such acceleration shall be equal to the amount calculated
as set forth in Section 8 or Section 9, respectively, hereof. Upon payment (i)
of the aggregate applicable amounts of principal of the Notes of this series so
declared due and payable and (ii) of interest on any overdue principal and
overdue interest (in each case to the extent that the payment of such interest
shall be legally enforceable), all of the Company's obligations in respect of
the payment of the principal of and interest, if any, on the Notes of this
series shall terminate.
Section 19. No Recourse Against Certain Persons. No recourse
for the payment of the principal of, premium, if any, or interest on this Note,
or for any claim based hereon or otherwise in respect hereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in the
Indenture or any Indenture supplemental thereto or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.
Section 20. Defined Terms. All terms used but not defined in
this Note are used herein as defined in the Indenture.
<PAGE> 27
27
Section 21. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 28
28
OPTION TO ELECT REPAYMENT
The undersigned owner of this Note hereby irrevocably elects
to have the Company repay the Face Amount of this Note or portion hereof below
designated at (i) the Optional Repayment Percentage multiplied by the Principal
Amount of this Note to be repaid in respect of such Face Amount plus accrued
interest to the Optional Repayment Date, if this Note is to be repaid pursuant
to the Optional Repayment provision described in Section 6 hereof, or (ii) 100%
of the Principal Amount of this Note to be repaid in respect of such Face
Amount plus accrued interest to the Optional Reset Date, if this Note is to be
repaid pursuant to the Optional Spread or Spread Multiplier Reset provision
described in Section 7 hereof or the Extendible Notes provision described in
Section 10 hereof. Any such election is irrevocable except as provided in
Section 7 or Section 10 hereof.
Dated:
----------------- ------------------
Signature
Sign exactly as name appears on the front of this
Note [SIGNATURE GUARANTEED - required only if
Notes are to be issued and delivered to other
than the registered Holder]
Face Amount to be Fill in for registration of
repaid, if amount to be Notes if to be issued otherwise
repaid is less than the than to the registered Holder:
Face Amount of this
Note (Face Amount Name:
remaining must be an ----------------------------
authorized denomination) Address:
------------------------
------------------------
(Please print name
$ and address including
----------------------- zip code)
SOCIAL SECURITY OR OTHER TAXPAYER
ID NUMBER
----------------------------------
<PAGE> 29
29
OPTION TO ELECT TERMINATION OF AUTOMATIC EXTENSION
The undersigned owner of this Note hereby irrevocably elects
to terminate the automatic extension of this Note or of the portion of the Face
Amount of this Note below designated. Any such election is irrevocable and
will be binding on any subsequent Holder hereof.
Dated:
----------------- -------------------------------
Signature
Sign exactly as name appears on the
front of this Note [SIGNATURE
GUARANTEED - required only if Notes
are to be issued and delivered to
other than the registered Holder]
Face Amount to be Fill in for registration of
terminated, if amount to be Notes if to be issued otherwise
terminated is less than the than to the registered Holder:
Face Amount of this
Note (such Face Amount Name:
must be an authorized ----------------------------
denomination) Address:
------------------------
------------------------
(Please print name
$ and address including
----------------------- zip code)
SOCIAL SECURITY OR OTHER TAXPAYER
ID NUMBER
-----------------------------------
<PAGE> 30
30
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenant by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT
MIN ACT - Custodian
---------- ----------
(Cust) (Minor)
Under Uniform Gifts to
Minors Act
-----------------------------
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned
hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________________________________
Please print or type name and address, including zip code of assignee
__________________________________________________________________
the within Note of LEHMAN BROTHERS HOLDINGS INC. and all rights thereunder and
does hereby irrevocably constitute and appoint
<PAGE> 31
31
______________________________________________________Attorney to transfer the
said Note on the books of the within-named Company, with full power of
substitution in the premises.
Dated:______________________________
SIGNATURE GUARANTEED:__________________________________________
NOTICE: The signature to this assignment
must correspond with the name as it appears
upon the face of the within Note in every
particular, without alteration or enlargement
or any change whatsoever.
<PAGE> 32
EXHIBIT A
RESET NOTICE
LEHMAN BROTHERS HOLDINGS INC.
Medium-Term Notes, Series E
(Floating Rate)
CUSIP No. ___________
Registered Nos. ___-___
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized
and existing under the laws of the State of Delaware (the "Company"), is the
issuer of the above-referenced Notes (the "Notes"). Capitalized terms used
herein and not defined are used as defined in the Notes.
The Company hereby elects to reset the [Spread] [Spread
Multiplier] set forth on the face of the Notes. On and after
_________________1, the [Spread] Spread Multiplier] shall be _______________.
Each Holder of a Note has the option to elect repayment by the
Company of such Note, or any portion thereof, on any Optional Reset Date
pursuant to the terms of such Note. The Notes may be repaid on the dates and
at the prices set forth below:
Date Redemption Price
---- ----------------
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused
this Reset Notice to be signed by its Chairman of the Board, its President, its
Vice Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer and to be attested by its Secretary or one of its Assistant
Secretaries.
Dated:
LEHMAN BROTHERS HOLDINGS INC.
By:
------------------------
Title:
Attest:
--------------------
Title:
____________________
1 Insert applicable Optional Reset Date.
<PAGE> 1
CUSIP NO. ___________
REGISTERED FACE AMOUNT:
No. __
If this Note is an OID Note (as defined below) the following
legend is applicable:
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED
STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE ISSUE
PRICE OF THIS NOTE IS _____% OF ITS FACE AMOUNT, AND THE
AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE YIELD TO MATURITY
COMPOUNDED _____________, THE ISSUE DATE AND THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT ALLOCABLE TO THE SHORT PERIOD
DETERMINED USING THE EXACT METHOD WITHIN THE MEANING OF
PROPOSED TREASURY REGULATION SECTION 1.1272- 1(c)(2)(ii) ARE
AS SET FORTH BELOW.
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTE, SERIES E
(CURRENCY INDEXED)
If the registered owner of this Note (as indicated below) is
The Depository Trust Company (the "Depository") or a nominee of the Depository,
this Note is a Note in global form (a "Global Security") and the following
legends are applicable except as specified on the reverse hereof:
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY OR A NOMINEE OF THE
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE
& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED
FORM, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY.
<PAGE> 2
2
<TABLE>
<S> <C> <C>
ISSUE PRICE: $ OPTION TO RECEIVE PAYMENTS OPTION TO ELECT REPAYMENT:
IN U.S. DOLLARS: [ ] YES [ ] NO
ISSUE DATE: [ ] YES [ ] NO
OPTIONAL REPAYMENT DATES:
MATURITY DATE: DENOMINATED CURRENCY:
OPTIONAL REPAYMENT PRICES:
INTEREST RATE: INDEXED CURRENCY:
OPTIONAL INTEREST RATE RESET:
INTEREST PAYMENT BASE EXCHANGE RATE: [ ] YES [ ] NO
DATES:
DETERMINATION AGENT: OPTIONAL RESET DATES:
REGULAR RECORD
DATES: SINKING FUND: OPTIONAL REDEMPTION:
[ ] YES [ ] NO
EXCHANGE RATE AGENT: TOTAL AMOUNT OF OID:
INITIAL REDEMPTION DATE:
DEPOSITORY: YIELD TO MATURITY:
INITIAL REDEMPTION
OTHER PROVISIONS: INITIAL ACCURAL PERCENTAGE %
PERIOD OID:
REFERENCE DEALERS: APPLICABILITY OF ANNUAL
REDEMPTION PERCENTAGE REDUCTION:
AUTHORIZED DENOMINATIONS: [ ] YES [ ] NO
If yes, state Annual Percentage Reduction: %
</TABLE>
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized
and existing under the laws of the State of Delaware (herein called the
"Company", which term includes any successor corporation under the Indenture
referred to on the reverse hereof), for value received, hereby promises to pay
to ___________, or registered assigns, on the Maturity Date the principal sum
equal to the Face Amount hereof, plus or minus an amount determined by the
Determination Agent (as defined below) in accordance with the formula set forth
below (the "Principal Amount") and to pay interest on the Face Amount as
described below and on the reverse hereof until the Principal Amount is paid or
made available for payment and (to the extent that the payment of such interest
shall be legally enforceable) to pay interest on any overdue principal and
premium and on any overdue instalment of interest. Unless otherwise specified
above, all payments in respect of this Note will be made in the Denominated
Currency.
The Principal Amount of this Note payable at Maturity shall
equal:
(a) if the Spot Rate equals or exceeds the Base Exchange Rate,
<TABLE>
<S> <C> <C>
Spot Rate - Base Exchange Rate
------------------------------
Face Amount + (Face Amount x Spot Rate ); or
</TABLE>
<PAGE> 3
3
(b) if the Base Exchange Rate exceeds the Spot Rate,
<TABLE>
<S> <C> <C> <C>
Base Exchange Rate - Spot Rate
------------------------------
Face Amount - (Face Amount x Spot Rate );
</TABLE>
; provided, however, that in no event shall such Principal Amount be greater
than twice the Face Amount or less than zero. If this Note is an OID Note,
unless otherwise specified above, the term "Face Amount" when used in the above
formula shall refer to the Amortized Face Amount, as described on the reverse
hereof. An "OID Note" is any Note (a) that has been issued at an Issue Price
lower, by more than a de minimis amount (as determined under United States
federal income tax rules applicable to original issue discount instruments),
than the Face Amount thereof and (b) any other Note that for United States
federal income tax purposes would be considered an original issue discount
instrument.
The amount of interest, if any, payable on any Interest
Payment Date (as defined below) shall equal:
<TABLE>
<S> <C> <C> <C> <C>
Interest Rate Base Exchange Rate
------------- ------------------------------
Face Amount x 2 x Spot Rate
</TABLE>
If the Interest Rate on this Note may be reset at the option of the Company as
set forth on the reverse hereof, the term "Interest Rate" when used in the
above formula shall refer to the interest rate in effect during the relevant
period.
The terms used in the preceding formulas shall have the
following meanings:
"Business Day" means any day, other than a Saturday or Sunday,
that meets each of the following applicable requirements:
such day is (a) not a day on which banking institutions in the
Borough of Manhattan, The City of New York are authorized or
required by law or regulation to close; (b) if the Denominated
Currency specified above is a Foreign Currency (as defined in
Section 2 on the reverse hereof) other than European Currency
Units ("ECU"), (x) not a day on which banking institutions are
authorized or required by law or regulation to close in the
principal financial center of the country issuing the Foreign
Currency and (y) a day on which banking institutions in such
principal financial center are carrying out transactions in
such Foreign Currency; and (c) if the Denominated Currency
specified above is ECU, (x) not a day on which banking
institutions are authorized or required by law or regulation
to close in Luxembourg and (y) an ECU clearing day, as
determined by the ECU Banking Association in Paris.
"Determination Date" means the second Exchange Rate Day prior
to the date of Maturity.
<PAGE> 4
4
"Exchange Rate Day" means any day which is a Business Day in
The City of New York and in the principal financial center of
the country which recognizes the Denominated Currency as a
unit of domestic exchange and the principal financial center
of the country which recognizes the Indexed Currency as a unit
of domestic exchange.
"Reference Dealers" means the three banks or firms specified
above or, if any of them shall be unwilling or unable to
provide the requested quotations, such other major money
center bank or banks in The City of New York selected by the
Company, in consultation with the Determination Agent, to act
as Reference Dealer or Dealers in replacement therefor.
"Spot Rate" means the arithmetic mean of the open market spot
offer quotations for the Indexed Currency (spot bid quotations
for the Denominated Currency) obtained by the Determination
Agent from the Reference Dealers in The City of New York at
approximately 11:00 A.M., New York City time, on the
Determination Date, for an amount of Indexed Currency equal to
the Face Amount multiplied by the Base Exchange Rate, with
settlement on the date of Maturity to be in the Denominated
Currency; provided that if such quotations from the Reference
Dealers are not available on the Determination Date due to
circumstances beyond the control of the Company or the
Determination Agent, the Spot Rate will be determined on the
basis of the most recently available quotations from the
Reference Dealers. The Spot Rate shall be expressed in units
of the Indexed Currency per one unit of Denominated Currency.
In the absence of manifest error, the determination by the
Determination Agent of the Spot Rate and of the amount of principal and
interest payable in respect of this Note shall be final and binding on the
Company and the Holder hereof.
If this Note is subject to an Annual Percentage Reduction as
specified above, the Redemption Price shall initially be the Initial Redemption
Percentage of the Principal Amount of this Note on the Initial Redemption Date
and shall decline at each anniversary of the Initial Redemption Date (each such
date, a "Redemption Date") by the Annual Percentage Reduction of such Principal
Amount until the Redemption Price is 100% of such Principal Amount.
In the event of any optional redemption by the Company, any
repayment at the option of the Holder, acceleration of the maturity of this
Note or other prepayment of this Note prior to the Maturity Date, the term
"Maturity" when used herein shall
<PAGE> 5
5
refer, where applicable, to the date of redemption, repayment, acceleration or
other prepayment of this Note.
Interest shall be payable from the Issue Date specified above
or from the most recent Interest Payment Date to which interest has been paid
or duly provided for until the principal hereof is paid or made available for
payment. Except as provided in the following paragraph, the Company will pay
interest semiannually on February 15 and August 15 of each year (unless other
Interest Payment Dates are specified above) (each an "Interest Payment Date"),
commencing with the first Interest Payment Date next succeeding the Issue Date,
and at Maturity; provided that any payment of principal, premium, if any, or
interest to be made on any Interest Payment Date or on a date of Maturity that
is not a Business Day shall be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date or date of
Maturity, as the case may be, and no additional interest shall accrue as a
result of such delayed payment. Each payment of interest hereon shall include
interest accrued through the day before the Interest Payment Date or date of
Maturity, as the case may be. Unless otherwise specified above, interest on
this Note will be computed on the basis of a 360-day year of twelve 30-day
months. In no event shall the interest rate of this Note be higher than the
maximum rate permitted by applicable law, as the same may be modified by United
States law of general application.
Unless otherwise specified above, the interest payable on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Note (or one or more predecessor Notes) is registered at the
close of business on the Regular Record Date indicated above (whether or not a
Business Day) next preceding such Interest Payment Date; provided that,
notwithstanding any provision of the Indenture to the contrary, interest
payable on any date of Maturity shall be payable to the Person to whom
principal shall be payable; and provided, further, that, unless otherwise
specified above, in the case of a Note issued between a Regular Record Date and
the Interest Payment Date relating to such Regular Record Date, interest for
the period beginning on the Issue Date and ending on such Interest Payment Date
shall be paid on the Interest Payment Date following the next succeeding
Regular Record Date to the registered Holder on such next succeeding Regular
Record Date.
Unless otherwise indicated above, and except as provided below
if this Note is a Global Security, payment of interest on this Note (other than
interest payable at Maturity) will be made by check (unless otherwise provided
above, from an account at a bank located outside the United States if such
amount is payable in a Foreign Currency); provided that, if the Holder hereof
is the Holder of U.S. $10,000,000 or more in aggregate Face Amount of Notes of
this series of like tenor and term (or a Holder of the equivalent thereof in a
Foreign Currency determined as provided in Section 2 on the reverse hereof),
such
<PAGE> 6
6
Holder shall be entitled to receive interest payments in immediately available
funds, but only if complete and appropriate instructions have been received in
writing by the Trustee (or any such Paying Agent) on or prior to the applicable
Regular Record Date. Simultaneously with any election by the Holder hereof to
receive payments in respect hereof in U.S. dollars, such Holder may, if so
entitled (as provided above), elect to receive such payments in immediately
available funds by providing complete and appropriate instructions to the
Trustee (or any such Paying Agent), and all such payments will be made in
immediately available funds to an account maintained by the payee with a bank
located outside the United States or as otherwise provided above.
Unless otherwise indicated above, and except as provided below
if this Note is a Global Security, payments of principal, premium, if any, and
interest payable at Maturity will be made in immediately available funds
(unless otherwise indicated above, payable to an account at a bank located
outside the United States if payable in a Foreign Currency) upon surrender of
this Note at the corporate trust office or agency of the Trustee (or any duly
appointed Paying Agent) maintained for that purpose in the Borough of
Manhattan, The City of New York (the "Corporate Trust Office"), provided that
this Note is presented to the Trustee (or any such Paying Agent) in time for
the Trustee (or any such Paying Agent) to make such payments in such funds in
accordance with its normal procedures.
Unless otherwise specified above, if this Note is a Global
Security, payments of interest (other than at Maturity) will be made in
same-day funds in accordance with existing arrangements between the Trustee (or
any duly appointed Paying Agent) and the Depository. Unless otherwise
specified above, if this Note is a Global Security, any principal, premium
and/or interest payable hereon at Maturity will be paid by wire transfer in
immediately available funds to an account specified by the Depository (which
account, unless otherwise provided above, will be at a bank located outside the
United States if payable in a Foreign Currency).
The Company will pay any administrative costs imposed by banks
in making payments in immediately available funds, but any tax, assessment or
governmental charge imposed upon payments hereunder, including, without
limitation, any withholding tax, will be borne by the Holder hereof.
References herein to "U.S. dollars" or "U.S.$" or "$" are to
the coin or currency of the United States as at the time of payment is legal
tender for the payment of public and private debts.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS
NOTE SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL
PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
<PAGE> 7
7
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been signed
by the Trustee under the Indenture.
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused
this instrument to be signed by its Chairman of the Board, its President, its
Vice Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer, by manual or facsimile signature under its corporate seal, attested
by its Secretary or one of its Assistant Secretaries by manual or facsimile
signature.
Dated:
[SEAL] LEHMAN BROTHERS HOLDINGS INC.
By:_______________________
Chairman of the Board
Attest:__________________
Assistant Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned Indenture.
CITIBANK, N.A.
as Trustee
By:___________________________
Authorized Officer
<PAGE> 8
8
[REVERSE OF NOTE]
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTES, SERIES E
(Currency Indexed)
Section 1. General. This Note is one of a duly authorized
series of Notes of the Company designated as the Medium-Term Notes, Series E
(Currency Indexed) of the Company (herein called the "Notes"), limited in
aggregate principal amount to $2,500,000,000 (or (i) the equivalent thereof in
Foreign Currencies or (ii) such greater amount, if OID Notes are issued, as
shall result in aggregate gross proceeds to the Company of $2,500,000,000),
subject to reduction as a result of the sale under certain circumstances of
other debt securities of the Company. The foregoing limit, however, may be
increased by the Company if in the future it determines that it may wish to
sell additional Notes. The Notes are one of an indefinite number of series of
debt securities of the Company (collectively, the "Securities") issued or
issuable under and pursuant to an indenture dated as of September 1, 1987, as
amended (the "Indenture"), duly executed and delivered by the Company and
Citibank, N.A., as Trustee (herein called the "Trustee"), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the
Securities. The separate series of Securities may be issued in various
aggregate principal amounts, may mature at different times, may bear interest
(if any) at different rates, may be subject to different redemption provisions
or repayment or repurchase rights (if any), may be subject to different
sinking, purchase or analogous funds (if any), may be subject to different
covenants and Events of Default and may otherwise vary as in the Indenture
provided.
Section 2. Currency Exchanges and Payments. If the
Denominated Currency is other than U.S. dollars (a "Foreign Currency") and it
is specified on the face hereof that the Holder has the option to receive
payments in respect of this Note in U.S. dollars, the amount of any U.S.
dollar payment to be made in respect hereof will be determined by the Exchange
Rate Agent specified on the face hereof or a successor thereto (the "Exchange
Rate Agent"), based on the indicative quotation in The City of New York
selected by the Exchange Rate Agent at approximately 11:00 a.m., New York City
time, on the second Business Day preceding the applicable payment date that
yields the least number of U.S. dollars upon conversion of such Foreign
Currency. Unless otherwise provided on the face hereof, such selection shall
be made from among the quotations appearing on the bank composite or multi-
contributor pages of the Reuters Monitor Foreign Exchange Service or, if not
available, the Telerate Monitor Foreign Exchange Service. If such quotations
<PAGE> 9
9
are unavailable from either such foreign exchange service, unless otherwise
provided on the face hereof, such selection shall be made from the quotations
received by the Exchange Rate Agent from no more than three nor less than two
recognized foreign exchange dealers in The City of New York selected by the
Exchange Rate Agent and approved by the Company (one of which may be the
Exchange Rate Agent) for the purchase by the quoting dealer, for settlement on
such payment date, of the aggregate amount of such Foreign Currency payable on
such payment date in respect of all Notes denominated in such Foreign Currency
and for which the applicable dealer commits to execute a contract. If no such
bid quotations are available, payments will be made in the Foreign Currency.
Unless otherwise specified on the face hereof, if payment
hereon is required to be made in a Foreign Currency and such currency is
unavailable to the Company for making payments thereof due to the imposition of
exchange controls or other circumstances beyond the Company's control, or is no
longer used by the government of the country which issued such currency or for
the settlement of transactions by public institutions of or within the
international banking community, then the Company will be entitled to make
payments with respect hereto in U.S. dollars until such Foreign Currency is
again available or so used. The amount so payable on any date in such Foreign
Currency shall be converted into U.S. dollars at a rate determined by the
Exchange Rate Agent on the basis of the noon buying rate in The City of New
York for cable transfers in the Foreign Currency as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate")
for such Foreign Currency on the second Business Day prior to such payment
date, or on such other basis as may be specified on the face hereof. In the
event such Market Exchange Rate is not then available, the Company will be
entitled to make payments in U.S. dollars (i) if such Foreign Currency is not a
composite currency, on the basis of the most recently available Market Exchange
Rate for such Foreign Currency or (ii) if such Foreign Currency is a composite
currency, including, without limitation, the ECU, in an amount determined by
the Exchange Rate Agent to be the sum of the results obtained by multiplying
the number of units of each component currency of such composite currency, as
of the most recent date on which such composite currency was used, by the
Market Exchange Rate for such component currency on the second Business Day
prior to such payment date (or if such Market Exchange Rate is not then
available, by the most recently available Market Exchange Rate for such
component currency, or as otherwise specified on the face hereof). Any payment
in respect hereof made under such circumstances in U.S. dollars will not
constitute an Event of Default under the Indenture.
If the official unit of any component currency of a composite
currency is altered by way of combination or subdivision, the number of units
of that currency as a component shall be divided or multiplied in the same
proportion. If two or
<PAGE> 10
10
more component currencies are consolidated into a single currency, the amounts
of those currencies as components shall be replaced by an amount in such single
currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that original component
currency as a component shall be replaced by amounts of such two or more
currencies having an aggregate value on the date of division equal to the
amount of the former component currency immediately before such division.
In the event of an official redenomination of the Denominated
Currency or the Indexed Currency (including, without limitation, an official
redenomination of any such currency that is a composite currency), the
obligations of the Company to make payments in or with reference to such
currency shall, in all cases, be deemed immediately following such
redenomination to be obligations to make payments in or with reference to that
amount of redenominated currency representing the amount of such currency
immediately before such redenomination. In no event shall any adjustment be
made to any amount payable hereunder as a result of any redenomination of any
component currency of any composite currency (unless such composite currency is
itself officially redenominated).
All determinations referred to above made by the Exchange Rate
Agent shall be at its sole discretion (except to the extent expressly provided
herein that any determination is subject to approval by the Company) and, in
the absence of manifest error, shall be conclusive for all purposes and binding
on the Holder hereof, and the Exchange Rate Agent shall have no liability
therefor.
All currency exchange costs will be borne by the Holder hereof
by deduction from the payments made hereon.
Section 3. Redemption. If so specified on the face hereof,
the Company may at its option redeem this Note in whole or from time to time in
part on or after the date designated as the Initial Redemption Date on the face
hereof at either a price based on a constant percentage of the Principal Amount
of this Note as specified on the face hereof or at prices declining from the
premium specified on the face hereof, if any, to 100% of the Principal Amount
hereof, together, in each case, with accrued interest to the Redemption Date.
The Company may exercise such option by causing the Trustee to mail by
first-class mail to the Holder hereof a notice of such redemption at least 30
but not more than 60 days prior to the Redemption Date. In the event of
redemption of this Note in part only, a new Note or Notes of this series for
the unredeemed portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof in accordance with the terms of the Indenture.
Unless otherwise specified on the face hereof, if less than all of the Notes
with like tenor and terms to this Note are to be redeemed, the Notes
<PAGE> 11
11
to be redeemed shall be selected by the Trustee by such method as the Trustee
shall deem fair and appropriate.
Section 4. Sinking Fund. Unless otherwise specified on the
face hereof, this Note will not be subject to any sinking fund.
Section 5. Optional Repayment. If so specified on the face
hereof, this Note will be repayable prior to the Maturity Date at the option of
the Holder on the Optional Repayment Dates specified on the face hereof at the
Optional Repayment Prices specified on the face hereof, together with accrued
interest to the applicable Optional Repayment Date. Unless otherwise specified
on the face hereof, in order for this Note to be so repaid, the Company must
receive, at least 30 but not more than 45 days prior to an Optional Repayment
Date, either (i) this Note with the form below entitled "Option to Elect
Repayment" duly completed or (ii) a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States setting forth the name of the Holder hereof, the Face
Amount hereof, the Face Amount to be repaid, the certificate number hereof or a
description of the tenor and terms of this Note, a statement that the option to
elect repayment is being exercised thereby and a guarantee that this Note with
the form below entitled "Option to Elect Repayment" duly completed will be
received by the Paying Agent not later than five Business Days after the date
of such telegram, telex, facsimile transmission or letter and this Note and
form duly completed are received by the Paying Agent by such fifth Business
Day. Exercise of this repayment option shall be irrevocable, except as
otherwise provided under Section 6. The repayment option may be exercised by
the Holder of this Note with respect to less than the Face Amount then
outstanding provided that the Face Amount of the Note remaining outstanding
after repayment is an authorized denomination. Upon such partial repayment
this Note shall be cancelled and a new Note or Notes for the remaining Face
Amount hereof shall be issued in the name of the Holder of this Note.
Section 6. Optional Interest Reset. If so specified on the
face hereof, the Interest Rate on this Note may be reset at the option of the
Company, in the manner set forth below (unless otherwise specified on the face
hereof), on the Optional Reset Date or Optional Reset Dates specified on the
face hereof. The Company may exercise such option by notifying the Trustee in
writing of such exercise at least 45 but not more than 60 days prior to an
Optional Reset Date. Not later than five Business Days after receipt thereof,
the Trustee will mail by first-class mail to the Holder of this Note a notice
(the "Reset Notice") setting forth (i) the election of the Company to reset the
interest rate, (ii) such new interest rate and (iii) the provisions, if any,
for redemption during the period from such Optional Reset Date to the next
Optional Reset Date or, if there
<PAGE> 12
12
is no such next Optional Reset Date, to the Maturity Date of this Note (each
such period a "Subsequent Interest Period"), including the date or dates on
which or the period or periods during which and the price or prices at which
such redemption may occur during such Subsequent Interest Period. The Reset
Notice shall be substantially in the form of Exhibit A to this Note. Upon the
transmittal by the Trustee of a Reset Notice to the Holder of this Note, such
new interest rate shall take effect automatically, and, except as modified by
the Reset Notice and as described in the next paragraph, this Note will have
the same terms as prior to the transmittal of such Reset Notice.
Notwithstanding the foregoing, not later than 20 days prior to
an Optional Reset Date, the Company may, at its option, revoke the interest
rate provided for in the Reset Notice and establish an interest rate that is
higher than the interest rate provided for in the Reset Notice for the
Subsequent Interest Period commencing on such Optional Reset Date by causing
the Trustee to mail by first-class mail notice of such higher interest rate to
the Holder of this Note. Such notice shall be irrevocable and shall be mailed
by the Trustee within five Business Days after receipt thereof. All Notes with
respect to which the interest rate is reset on an Optional Reset Date will bear
such higher interest rate for the Subsequent Interest Period.
If the Company elects to reset the interest rate of this Note,
the Holder of this Note will have the option to elect repayment by the Company
of this Note, or any portion hereof, on any Optional Reset Date at a price
calculated with reference to the aggregate Face Amount hereof to be repaid,
plus any interest accrued to, such Optional Reset Date. In order to obtain
repayment on an Optional Reset Date, the Holder must follow the procedures set
forth above in Section 5 for optional repayment except that the period for
delivery or notification to the Trustee shall be at least 25 but not more than
35 days prior to such Optional Reset Date and except that, if the Holder has
tendered this Note for repayment pursuant to the Reset Notice, the Holder may,
by written notice to the Trustee, revoke such tender for repayment until the
close of business on the tenth day prior to such Optional Reset Date; provided,
however, that if such day is not a Business Day, then such notice may be given
on the next succeeding Business Day.
Section 7. OID Notes. If this Note is an OID Note, unless
otherwise specified on the face hereof, the amount payable in the event of
redemption by the Company, repayment at the option of the Holder or
acceleration of Maturity shall be calculated with reference to the Amortized
Face Amount of this Note as of the date of such redemption, repayment or
acceleration rather than with reference to the Face Amount hereof. The
"Amortized Face Amount" of this Note shall be the amount equal to (a) the Issue
Price (as set forth on the face hereof) plus (b) that portion of the difference
between the Issue Price and the
<PAGE> 13
13
Face Amount hereof that has accrued at the Yield to Maturity set forth on the
face hereof (computed in accordance with generally accepted United States bond
yield computation principles) at the date as of which the Amortized Face Amount
is calculated, but in no event shall the Amortized Face Amount of this Note
exceed the Face Amount.
Section 8. Principal Amount For Indenture Purposes. For the
purpose of determining whether Holders of the requisite amount of Notes
outstanding under the Indenture have made a demand, given a notice or waiver or
taken any other action, the outstanding principal amount of this Note will be
deemed to be the Face Amount.
Section 9. Modification and Waivers. The Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
holders of not less than 66-2/3% in aggregate principal amount of each series
of the Securities at the time Outstanding to be affected, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) extend the fixed maturity
of any Security, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon or reduce any premium payable on
redemption, or make the principal thereof, or premium, if any, or interest
thereon payable in any coin or currency other than that hereinabove provided,
without the consent of the holder of each Security so affected, or (ii) change
the place of payment on any Security, or impair the right to institute suit for
payment on any Security, or reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each Security so affected. It is also
provided in the Indenture that, prior to any declaration accelerating the
Maturity of any series of Securities, the holders of a majority in aggregate
principal amount of the Securities of such series Outstanding may on behalf of
the holders of all the Securities of such series waive any past default or
Event of Default under the Indenture with respect to such series and its
consequences, except a default in the payment of interest, if any, on or the
principal of, or premium if any, on any of the Securities of such series, or in
the payment of any sinking fund installment or analogous obligation with
respect to Securities of such series. Any such consent or waiver by the Holder
of this Note shall be conclusive and binding upon such Holder and upon all
future holders and owners of this Note and any Notes which may be issued in
exchange or substitution herefor, irrespective of whether or not any notation
thereof is made upon this Note or such other Notes.
<PAGE> 14
14
Section 10. Obligations Unconditional. No reference herein
to the Indenture and no provisions of this Note or of the Indenture shall alter
or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of, premium, if any, and interest, if any, on this Note at
the place, at the respective times, at the rate, and in the coin or currency
herein prescribed.
Section 11. Defeasance. The Indenture contains provisions
for the discharge of the Indenture and defeasance at any time of the
indebtedness on this Note upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Note.
Section 12. Authorized Form and Denominations. The Notes of
this series are issuable in registered form, without coupons. Unless otherwise
set forth on the face hereof, Notes denominated in U.S. dollars will be issued
in Face Amount denominations of U.S. $100,000 and any integral multiple of U.S.
$1,000 in excess thereof. Notes denominated in a Foreign Currency will be
issued in the denomination or denominations set forth on the face hereof. Each
Note will be issued initially as either a Book-Entry Note or a Certificated
Note, at the option of the holders thereof, either at the office or agency to
be designated and maintained by the Company for such purpose in the Borough of
Manhattan, The City of New York, pursuant to the provisions of the Indenture or
at any of such other offices or agencies as may be designated and maintained by
the Company for such purpose pursuant to the provisions of the Indenture, and
in the manner and subject to the limitations provided in the Indenture, but
without the payment of any service charge, except for any tax or other
governmental charges imposed in connection therewith. Notes of this series are
exchangeable for a like aggregate Face Amount of Notes of this series of a
different authorized denomination, except that Book-Entry Notes will not be
exchangeable for Certificated Notes.
Section 13. Registration of Transfer. As provided in the
Indenture and subject to certain limitations as therein set forth, the transfer
of this Note is registrable in the Security Register, upon surrender of this
Note for registration of transfer, at the Corporate Trust Office or agency in a
Place of Payment for this Note, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar requiring such written instrument of transfer duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of this series, of authorized denominations and for the same
aggregate Face Amount, will be issued to the designated transferee or
transferees.
If this Note is a Global Security and if at any time the
Depository notifies the Company that it is unwilling or unable to continue as
Depository or if at any time the Depository
<PAGE> 15
15
shall no longer be eligible under the Indenture, the Company shall appoint a
successor Depository. If a successor Depository for the Securities of such
series is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility, the Company will
issue, and the Trustee will authenticate and deliver, Notes in definitive form
in an aggregate Face Amount equal to the Face Amount hereof.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name this Note is registered as the owner hereof
for all purposes, and neither the Company nor the Trustee nor any agent of the
Company or of the Trustee shall be affected by any notice to the contrary.
Section 14. Events of Default. If an Event of Default with
respect to Notes of this series shall occur and be continuing, the principal of
the Notes of this series may be declared due and payable in the manner and with
the effect provided in the Indenture. In the event that this Note is an OID
Note, the amount of principal of this Note that becomes due and payable upon
such acceleration shall be equal to the amount calculated as set forth in
Section 7 hereof. Upon payment (i) of the aggregate applicable amounts of
principal of the Notes of this series so declared due and payable and (ii) of
interest on any overdue principal and overdue interest (in each case to the
extent that the payment of such interest shall be legally enforceable), all of
the Company's obligations in respect of the payment of the principal of and
interest, if any, on the Notes of this series shall terminate.
Section 15. No Recourse Against Certain Persons. No recourse
for the payment of the principal of, premium, if any, or interest on this Note,
or for any claim based hereon or otherwise in respect hereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in the
Indenture or any Indenture supplemental thereto or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.
<PAGE> 16
16
Section 16. Defined Terms. All terms used but not defined in
this Note are used herein as defined in the Indenture.
Section 17. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 17
17
OPTION TO ELECT REPAYMENT
The undersigned owner of this Note hereby irrevocably elects
to have the Company repay the Face Amount of this Note or portion hereof below
designated at (i) the Optional Repayment Percentage multiplied by the Principal
Amount of this Note to be repaid in respect of such Face Amount plus accrued
interest to the Optional Repayment Date, if this Note is to be repaid pursuant
to the Optional Repayment provision described in Section 5 hereof, or (ii) 100%
of the Principal Amount of this Note to be repaid in respect of such Face
Amount plus accrued interest to the Optional Reset Date, if this Note is to be
repaid pursuant to the Optional Interest Reset provision described in Section 6
hereof. Any such election is irrevocable except as provided in Section 6
hereof.
Dated:_________________ _______________________________
Signature
Sign exactly as name appears on the front of
this Note [SIGNATURE GUARANTEED - required
only if Notes are to be issued and delivered
to other than the registered Holder]
Face Amount to be Fill in for registration of
repaid, if amount to be Notes if to be issued
repaid is less than the otherwise than to the registered
Face Amount of this Holder:
Note (Face Amount Name: ___________________________
remaining must be an Address: ________________________
authorized denomination) ______________________
(Please print name
$_______________________ and address including
zip code)
SOCIAL SECURITY OR OTHER TAXPAYER
ID NUMBER
_________________________________
<PAGE> 18
18
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenant by the entireties
JT TEN - as joint tenants with right of
survivorship and not as
tenants in common
UNIF GIFT
MIN ACT - __________Custodian__________
(Cust) (Minor)
Under Uniform
Gifts to Minors Act
_____________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned
hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________________________________
Please print or type name and address, including zip code of assignee
__________________________________________________________________
the within Note of LEHMAN BROTHERS HOLDINGS INC. and all rights
thereunder and does hereby irrevocably constitute and appoint
<PAGE> 19
19
______________________________________________________Attorney to transfer the
said Note on the books of the within-named Company, with full power of
substitution in the premises.
Dated:______________________________
SIGNATURE GUARANTEED:__________________________________________
NOTICE: The signature to this assignment
must correspond with the name as it appears
upon the face of the within Note in every
particular, without alteration or
enlargement or any change whatsoever.
<PAGE> 20
EXHIBIT A
RESET NOTICE
LEHMAN BROTHERS HOLDINGS INC.
Medium-Term Notes, Series E
(Currency Indexed)
CUSIP No. ___________
Registered Nos. ___-___
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized
and existing under the laws of the State of Delaware (the "Company"), is the
issuer of the above-referenced Notes (the "Notes"). Capitalized terms used
herein and not defined are used as defined in the Notes.
The Company hereby elects to reset the Interest Rate set forth
on the face of the Notes. On and after _________________1/, the Interest Rate
shall be _______________.
Each Holder of a Note has the option to elect repayment by the
Company of such Note, or any portion thereof, on any Optional Reset Date
pursuant to the terms of such Note. The Notes may be repaid on the dates and
at the prices set forth below:
<TABLE>
<S> <C>
Date Redemption Price
---- ----------------
</TABLE>
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused
this Reset Notice to be signed by its Chairman of the Board, its President, its
Vice Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer and to be attested by its Secretary or one of its Assistant
Secretaries.
Dated:
LEHMAN BROTHERS HOLDINGS INC.
By:________________________
Title:
Attest:___________________
Title:
____________________
1/ Insert applicable Optional Reset Date.
<PAGE> 1
LEHMAN BROTHERS HOLDINGS INC.
THREE WORLD FINANCIAL CENTER
NEW YORK, NY 10285
November 23, 1994
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Gentlemen:
I am Deputy General Counsel of Lehman Brothers Holdings Inc., a
Delaware corporation ("Holdings"). 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
the date hereof. The Registration Statement relates to the registration of up
to $3,500,000,000 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
Holdings 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, the indenture pursuant to
which the Senior Debt will be issued (the "Senior Indenture") between Holdings
and Citibank, N.A., as Trustee (the "Senior Debt Trustee"), has been duly
executed and delivered, and, the Senior Debt, when duly executed by Holdings,
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 Holdings
entitled to the benefits of the Senior Indenture; and
(ii) the Subordinated Debt is duly authorized and, when the Indenture
pursuant to
<PAGE> 2
LETTER TO SECURITIES AND EXCHANGE COMMISSION
NOVEMBER 23, 1994
PAGE 2
which the Subordinated Debt will be issued (the "Subordinated Indenture")
between Holdings and Chemical Bank, as Trustee (the "Subordinated Debt
Trustee") has been duly executed and delivered, the Subordinated Debt, when
duly executed by Holdings, 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 Holdings 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 the
Registration Statement 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
<PAGE> 1
(212) 455-2000
November 23, 1994
Lehman Brothers Holdings Inc.
3 World Financial Center
New York, New York 10285
Dear Sirs:
We have acted as special United States tax counsel to Lehman
Brothers Holdings Inc. ("Holdings") in connection with the preparation and
filing of the Registration Statement on Form S-3 filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, in
respect of Debt Securities to be offered from time to time by Holdings. In
that connection, we have given the opinions contained in the section entitled
"United States Taxation" in the Registration Statement and related
prospectuses.
We hereby confirm that our opinions referenced in this letter are
accurate and hereby consent to the filing of this letter as an Exhibit to the
Registration Statement and to the use of our name in the section entitled
"United States Taxation" in the Registration Statement and related
prospectuses.
<PAGE> 2
Lehman Brothers Holdings Inc. - 2 - November 23, 1994
We are members of the Bar of the State of New York and we do not
express any opinion herein concerning any law other than the law of the State
of New York and the federal law of the United States.
Very truly yours,
/s/SIMPSON THACHER & BARTLETT
SIMPSON THACHER & BARTLETT
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent
Accountants" in the Registration Statement on Form S-3 and related Prospectuses
of Lehman Brothers Holdings Inc. (formerly Shearson Lehman Brothers Holdings
Inc., the "Company") for the registration of $3,500,000,000 of Debt Securities
and in post effective amendments to the Registration Statements on Form S-3
(File Nos. 33-65674, 33-49062, 33-46146, 33-40990 and 33-3663) and to the
incorporation by reference therein of our report dated February 3, 1994, except
for Note 2, as to which the date is April 4, 1994 with respect to the
consolidated financial statements and schedules of Lehman Brothers Holdings
Inc. and Subsidiaries included in its Current Report (Form 8-K) dated April 14,
1994, which supersedes in its entirety the consolidated financial statements
and schedules included in the Company's Annual Report (Form 10-K) for the year
ended December 31, 1993, both filed with Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
New York, New York
November 23, 1994
