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Filed Pursuant to Rule 424(b)(2)
Registration No. 033-58548
PROSPECTUS SUPPLEMENT
(To Prospectus Supplement dated November 10, 1994)
LEHMAN BROTHERS HOLDINGS INC.
INDUSTRIAL COMMODITY
BASKET NOTES
[Stylized depiction of various aspects of the recovery and
refinement of certain of the commodities included in the basket.]
LEHMAN BROTHERS
This brochure must be attached to the Prospectus and Prospectus Supplement that
provides a description of Industrial Commodity Basket Notes, including details
on the risks associated with an investment in Industrial Commodity Basket
Notes.
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PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 14, 1994)
$25,000,000
LEHMAN BROTHERS HOLDINGS INC.
INDUSTRIAL COMMODITY BASKET NOTES DUE 1996
The Industrial Commodity Basket Notes Due 1996 (the "Securities") of Lehman
Brothers Holdings Inc. ("Holdings") will mature on November 18, 1996 (the
"Stated Maturity Date"). Each Holder in whose name Securities are registered at
the close of business on the day preceding the Stated Maturity Date will be
entitled to receive a payment in respect of such Securities (the "Settlement
Amount") which shall, subject to certain exceptions, be calculated based on the
average of the Market Prices (as defined herein) of a basket of certain
non-financial commodities (the "Basket") for the first three Determination Days
(as defined herein) occurring between November 11, 1996 and the Stated Maturity
Date, inclusively. If the average of the Market Prices of the Basket over such
Determination Days (the "Basket Maturity Value") exceeds $1,000, each Holder
will be entitled to a Settlement Amount that will be greater than the principal
amount of such Holder's Securities; if the Basket Maturity Value is $1,000 or
less, each Holder will be entitled to a Settlement Amount that will be equal to
the principal amount of such Holder's Securities. The Calculation Agent (as
defined herein) has estimated that, based on forward prices, the value of the
Basket on November 9, 1994, was $1,000. Although each Holder will be entitled to
receive, on or after the Stated Maturity Date, the Settlement Amount with
respect to such Holder's Securities, there will be no payment of interest,
periodic or otherwise, with respect to the Securities. For information as to the
calculation of the Settlement Amount, which will be payable on the Stated
Maturity Date (unless accelerated upon an Event of Default or delayed due to a
Market Disruption Event), the calculation of the value of the Basket, the
composition of the Basket and certain tax consequences to holders of the
Securities, see "Description of Securities," "The Basket" and "Certain United
States Federal Income Tax Consequences" in this Prospectus Supplement. FOR OTHER
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "SPECIAL
CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT.
The Securities are to be issued as a series of Debt Securities under the
Senior Indenture described in the accompanying Prospectus and will constitute
"Senior Debt" of Holdings as described in the accompanying Prospectus. The
Securities may not be redeemed prior to the Stated Maturity Date and are not
subject to any sinking fund.
Application has been made to list the Securities on the Luxembourg Stock
Exchange.
Lehman Brothers Inc., a wholly owned subsidiary of Holdings, may, but is
not obligated to, purchase and sell Securities for its own account for the
purpose of making a market in the Securities.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==========================================================================================================
Price to Underwriting Proceeds to
Public Discount(1) Holdings(2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Security............................ 100% 2% 98%
- ----------------------------------------------------------------------------------------------------------
Total................................... $25,000,000 $500,000 $24,500,000
==========================================================================================================
</TABLE>
(1) Holdings has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting other expenses payable by Holdings estimated at $150,000.
---------------------------
The Securities offered by this Prospectus Supplement are offered by the
Underwriter subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the Underwriter and
to certain further conditions. The Underwriter reserves the right to reject
orders in whole or in part. It is expected that delivery of the Securities will
be made at the offices of Lehman Brothers Inc., New York, New York, on or about
November 17, 1994.
This Prospectus Supplement together with the accompanying Prospectus may
also be used by Lehman Brothers Inc. in connection with offers and sales of
Securities related to market making transactions, by and through Lehman Brothers
Inc., at negotiated prices related to prevailing market prices at the time of
sale or otherwise. Lehman Brothers Inc. may act as principal or agent in such
transactions.
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LEHMAN BROTHERS
November 10, 1994
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The Securities offered by Holdings for sale in the United States will
initially be evidenced by certificates in fully registered form (each, a
"Certificate"). The Securities offered by Holdings for sale in Europe will be
issued in book-entry form and will be evidenced by one or more registered global
certificates as described under "Form of Securities -- Book-Entry Form" in this
Prospectus Supplement. One hundred and eighty calendar days after the closing of
the offering, each registered holder of Certificates will have the option to
convert the form of such holder's Securities from certificated to book-entry
form within a forty-five calendar day period as described herein. Ownership of
converted Securities will be maintained in book-entry form by or through the
Depository. Beneficial owners of Securities in book-entry form will not have the
right to receive physical certificates evidencing their ownership except under
the limited circumstances described herein.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information set forth elsewhere or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus. Certain capitalized terms used herein have the meanings ascribed
thereto in the accompanying Prospectus. Reference is also made to the "Glossary"
appearing at the end of this Prospectus Supplement for certain defined terms
used herein and the locations of other defined terms used herein.
Issuer..................... Lehman Brothers Holdings Inc. ("Holdings").
Securities Offered......... $25,000,000 of Industrial Commodity Basket Notes
Due 1996 (the "Securities"). The Securities are
to be issued as a series of Debt Securities under
the Senior Indenture described in the
accompanying Prospectus and will constitute
Senior Debt of Holdings.
Denominations.............. $25,000 principal amount, and $5,000 principal
amount increments in excess thereof.
Interest Payments.......... The Securities will not bear interest.
Stated Maturity Date....... November 18, 1996 (the "Stated Maturity Date").
Settlement Amount..........
Each Holder in whose name Securities are registered
at the close of business on the day preceding the
Stated Maturity Date will be entitled to receive
a payment (the "Settlement Amount") with respect
to the principal amount of Securities registered
to such Holder equal to such principal amount
multiplied by the following:
1 + (1.25 X (Basket Maturity
Value -- $1,000) )
$1,000
provided, however, if the Basket Maturity Value
is less than $1,000, then such Settlement Amount
will be equal to such principal amount. The
Basket Maturity Value will be equal to the sum of
the Settlement Prices of the Commodities included
in the Basket.
Subject to the occurrence of Market Disruption
Events, the Settlement Price of each Commodity
will be equal to the average of the Market Prices
(determined as described herein) of such
Commodity for the first three Determination Days
occurring between November 11, 1996 (the
"Calculation Initiation Date") and the Stated
Maturity Date, inclusively (such period, the
"Determination Period"). See "Description of
Securities -- Settlement Amount" in this
Prospectus Supplement. See also "Description of
Securities -- Events of Default and Acceleration"
for a description of the calculation of payments
upon any acceleration of the Maturity of the
Securities.
The Settlement Prices of certain of the Commodities
will be determined by reference to settlement
prices of certain contracts traded on the New
York Mercantile Exchange, Inc. (the "NYMEX") and
the London Metal Exchange (the "LME"). The
Settlement Prices of the balance of the
Commodities will be determined by reference to
the Fixing Prices of such Commodities reported by
the London Bullion Market Association (the
"LBM"). See "Description of Securities --
Settlement Amount" in this Prospectus Supplement.
The Basket................. The "Basket" is made up of different quantities of
the following Commodities: Aluminum, Copper,
Crude Oil, Gold, Lead, Nickel,
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Silver and Zinc. Ownership of Securities will not
entitle any Holder to invest in or to receive any
of the Commodities. The Basket is not equally
weighted; that is, on the date the Securities are
issued, the various Commodities will represent
differing percentages of the Basket Value on that
date, ranging from 3.5% for Lead to 30% for Gold.
See "Description of Securities -- Commodities"
and "The Basket" in this Prospectus Supplement.
The inclusion of a Commodity in the Basket is not
a recommendation to buy or sell such Commodity,
and neither Holdings nor any of its affiliates
makes any representation or warranty as to the
performance of the Basket or any Commodity.
Basket Value............... The value of the Basket at any given time will
equal the sum of the current forward prices for
each Commodity multiplied in each case by the
quantity of such Commodity in the Basket (the
"Basket Value"). To determine the appropriate
forward prices for the Commodities in the Basket,
Holders should refer: (i) in the case of
Aluminum, Copper, Lead, Nickel and Zinc, to the
current price for the appropriate Contract on the
LME for delivery in November 1996 (or, with
respect to Lead and Nickel prior to July 1995, to
the estimated forward price for delivery of such
Commodity on or about the Calculation Initiation
Date), (ii) in the case of Crude Oil, to the
current price for the Crude Oil Contract on the
NYMEX for delivery in December 1996, and (iii) in
the case of Gold and Silver, to the estimated
forward price for delivery of Gold and Silver,
respectively, on or about the Calculation
Initiation Date. Lehman Brothers Inc., a
wholly-owned subsidiary of Holdings (the
"Calculation Agent"), has estimated that the
Basket Value at the close of business on November
9, 1994 was $1,000. Subject to the occurrence of
Market Disruption Events, the Basket Maturity
Value will be calculated based on the average of
the Market Prices of the respective Commodities
during the first three Trading Days during the
Determination Period. See "Description of
Securities -- Settlement Amount" in this
Prospectus Supplement. See also "Description of
Securities -- Events of Default and Acceleration"
for a description of the calculation of payments
upon any acceleration of the Maturity of the
Securities.
Special Considerations..... The Securities are subject to certain special
considerations. Investors should be aware that if
the Basket Maturity Value is equal to or less
than $1,000, the Settlement Amount payable with
respect to each Security shall be limited to the
principal amount of such Security, even if the
Basket Value as of some date or dates prior to
the Calculation Initiation Date may have exceeded
$1,000, because the Settlement Amount will be
calculated only on the basis of Market Prices (or
other prices, in the case of a Market Disruption
Event) during the Determination Period. Moreover,
there can be no assurance as to how the
Securities will trade in the secondary market or
whether such market will be liquid. The price at
which a Holder will be able to sell Securities
prior to Maturity may be at a discount from the
face amount thereof, if, among other things, the
Basket Value at such time is below, equal to or
not sufficiently above $1,000. It is expected
that the secondary market for the Securities will
be affected by a number of factors, including the
Basket Value, fluctuations in interest rates, the
volatility of the Basket Value and the time
remaining to the Stated
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Maturity Date. See "Special Considerations" in
this Prospectus Supplement.
Payment of the Settlement Amount could be deferred
beyond the Stated Maturity Date for up to three
Business Days in the event that a Market
Disruption Event with respect to any Commodity
occurs during the Determination Period. In that
event, interest in respect of the Securities will
not accrue or be payable on or after the Stated
Maturity Date. See "Description of
Securities -- Settlement Amount" in this
Prospectus Supplement.
Holders of Securities will not, by virtue of their
ownership of Securities, have any right at any
time to invest in or receive any of the
Commodities, even though the return on an
investment in the Securities will be based on the
Settlement Prices of such Commodities.
The Market Prices of certain of the Commodities
will be determined by reference to settlement
prices of contracts traded on the NYMEX, a U.S.
commodity exchange, and the LME, a foreign
commodity exchange, or by reference to prices
reported by the LBM, an industry association of
bullion market participants. Trading on commodity
exchanges involves certain risks, and trading on
the LME may involve additional risks. See
"Special Considerations -- LME Trading," "-- LBM
Trading," "-- Effect of Adverse Changes in Market
Prices," and "-- Suspension or Material
Disruption of Futures Trading; Temporary
Distortions" in this Prospectus Supplement.
It is suggested that prospective investors who
consider purchasing the Securities should reach
an investment decision only after carefully
considering with their advisers the suitability
of an investment in the Securities in the light
of their particular circumstances.
Investors should also consider the tax consequences
of investing in the Securities. See "Certain
United States Federal Income Tax Consequences" in
this Prospectus Supplement.
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USE OF PROCEEDS
The net proceeds from the sale of the Securities will be used as described
under "Use of Proceeds" in the accompanying Prospectus and to hedge market risks
affecting the value of the Settlement Amount payable with respect to the
Securities (the transactions used to hedge such market risks are herein called
the "Hedging Transactions"). For a description of the calculation of the
Settlement Amount, see "Description of Securities -- Settlement Amount" in this
Prospectus Supplement. In connection with such Hedging Transactions, Holdings or
one or more of its subsidiaries may purchase or maintain positions in a variety
of financial instruments relating to the Basket and the Commodities. Depending
on future market conditions and the actual amount of Securities outstanding from
time to time, among other things, the aggregate amount and the composition of
such positions are likely to vary over time. Holdings expects that it or its
subsidiaries may take positions in (i) futures contracts related to the
Commodities, (ii) listed or over-the-counter option contracts on the Commodities
and (iii) other derivative or synthetic instruments relating to the Commodities.
There can be no assurance that Holdings or one or more of its subsidiaries did
not or will not affect the prices of the Commodities or the Basket as a result
of its hedging activities.
SPECIAL CONSIDERATIONS
PAYMENT AT MATURITY
If the Basket Maturity Value is equal to or less than $1,000, the
Settlement Amount payable with respect to each Security will be limited to the
principal amount of such Security. This will be true even though the Basket
Value as of some date or dates prior to the Calculation Initiation Date may have
exceeded $1,000, because the Settlement Amount will be calculated only on the
basis of Market Prices (or other prices, in the case of a Market Disruption
Event) during the Determination Period. Purchasers of Securities should
therefore be prepared to realize no "time value" return on the principal amount
of their Securities.
TRADING
Application has been made to list the Securities on the Luxembourg Stock
Exchange. There can be no assurance as to how the Securities will trade in the
secondary market or whether such market will be liquid. It is expected that the
secondary market for the Securities will be affected by a number of factors.
The trading value of the Securities is expected to depend primarily on the
extent of the appreciation, if any, of the Basket Value over $1,000. The price
at which a Holder will be able to sell Securities prior to Maturity may be at a
discount from the principal amount thereof if, at such time, the Basket Value is
below, equal to or not sufficiently above $1,000. In addition to discounts which
could result from a decrease in the Basket Value, as discussed below, discounts
could also result from fluctuations in interest rates, decreased volatility of
the Basket Value or decreased time remaining to the Stated Maturity Date.
The trading value of the Securities may be affected by a number of
interrelated factors, including those listed below. The relationship among these
factors, and how they affect the Settlement Amount, is complex. Accordingly,
investors should be aware that factors other than the Basket Value are likely to
affect the trading value of the Securities. The expected effect on the trading
value of the Securities of each of the factors listed below, assuming in each
case that all other factors are held constant, is as follows:
Interest Rates. In general, due to "time value" considerations, if
interest rates increase, the value of the Securities is expected to
decrease and if interest rates decrease, the value of the Securities is
expected to increase. However, due to the complex interaction between
interest rates, commodity prices and the performance of the economy in
general, it is difficult to predict the impact of interest rate movements
on the Basket Value.
Volatility of the Basket Value. An increase in the volatility of the
Basket Value would normally have a positive impact on the trading value of
the Securities although such impact will be diminished to the extent that
the Basket Value is significantly less than or significantly greater than
$1,000. Conversely,
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a decrease in the volatility of the Basket Value would normally have a
negative impact on the trading value of the Securities although such impact
will also be diminished to the extent that the Basket Value is
significantly less than or significantly greater than $1,000.
Time Remaining to the Stated Maturity Date. The Securities may trade
at a value other than that which may be inferred from the level of interest
rates, volatility and the Basket Value. This difference may be due to
expectations concerning interest rates, volatility and the Basket Value
during the period prior to the Stated Maturity Date. As the time remaining
to the Stated Maturity Date decreases, this difference in value is expected
to decrease.
Relationship Between Spot Prices and Forward Prices. Prior to
Maturity, the Basket Value is determined in relation to the forward prices
for the Commodities in the Basket. Since the relationship between forward
and spot prices depends on prevailing interest rates, supply and demand and
other factors, the Basket Value may not always reflect movements in the
spot prices of the Commodities.
There can be no assurance that the foregoing factors will affect the Basket
Value and the trading value of the Securities as described, and neither Holdings
nor any of its affiliates makes any representation or warranty as to the
performance of the Basket or as to the trading value of the Securities.
LME TRADING
The Market Prices of certain of the Commodities will be determined by
reference to the settlement prices of contracts traded on the LME. As discussed
below, the LME is a principals' market which operates in a manner more closely
analogous to the over-the-counter physical commodity markets than the futures
markets, and certain features of U.S. futures markets are not present in the
context of LME trading. For example, there are no daily price limits on the LME,
which would otherwise restrict the extent of daily fluctuations in the prices of
LME contracts. In a declining market, therefore, it is possible that prices
would continue to decline without limitation within a Trading Day or over a
period of Trading Days. In addition, a contract may be entered into on the LME
calling for delivery on any day from one day to three months following the date
of such contract and for monthly delivery in any of the next 16 to 24 months
(depending on the Commodity) following such third month, in contrast to trading
on futures exchanges, which call for delivery in stated delivery months. As a
result, there may be a greater risk of a concentration of positions in LME
contracts on particular delivery dates, which in turn could cause temporary
aberrations in the prices of LME contracts for certain delivery dates. If such
aberrations occur during the Determination Period, the prices of the contracts
used to determine the Settlement Prices, and consequently the Settlement Amount,
could be adversely affected.
LBM TRADING
The Settlement Prices of Gold and Silver will be determined by reference to
the Fixing Prices of such Commodities reported by the LBM. The LBM is a
self-regulatory association of bullion market participants. Although all market
making members of the LBM are supervised by the Bank of England and are required
to satisfy a capital adequacy test, the LBM itself is not a regulated entity. If
the LBM should stop operations, or if bullion trading by LBM members should
become subject to a value added tax, any other tax or any other form of
regulation currently not in place, the role of LBM price fixings for Gold and
Silver as global benchmarks for those Commodities may be affected.
EFFECT OF TRADING IN THE COMMODITIES AND RELATED INSTRUMENTS
Holdings and its affiliates are and will be actively involved in the
trading of the Commodities, futures and forward contracts with respect to the
Commodities and other instruments and derivative products based on the
Commodities and/or the Basket (collectively, "Commodity Investments"). Holdings
and its affiliates may also issue or underwrite, or authorize unaffiliated
entities to issue or underwrite, other Commodity Investments. In addition,
affiliates of Holdings are market making members of the LBM, ring-dealing
members of the LME and clearing members of the NYMEX.
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Such activities with respect to Commodity Investments could adversely
affect the Basket Value, which could in turn adversely affect the value of, and
the return on, the Securities.
POTENTIAL CONFLICTS OF INTEREST
As noted above, Holdings and its affiliates expect to engage in activities
related to Commodity Investments, for their proprietary accounts or for other
accounts under their management. Such activities could present certain conflicts
of interest. For example, the issuance of other securities indexed to the
Basket, i.e., the introduction of competing products into the marketplace, could
adversely affect the value of the Securities. To the extent that Holdings or its
affiliates serves as issuer, agent or underwriter of such securities or other
instruments, its interests with respect to such products may be adverse to those
of the Holders of Securities.
Additionally, if a Market Disruption Event occurs during the Determination
Period or if the Maturity of the Securities is accelerated, the Basket Maturity
Value may be determined by reference to firm bid prices quoted by the
Calculation Agent and/or to forward prices published by members of the LBM
selected by the Calculation Agent. Finally, under certain circumstances, the
Calculation Agent may adjust the Basket or the method of determining the Market
Price of one or more of the Commodities. Such quotes, selections and adjustments
by the Calculation Agent will directly impact the Settlement Amount payable with
respect to the Securities. See "Description of Securities -- Settlement Amount,"
"-- Events of Default and Acceleration" and "-- Adjustments to the Basket and
Market Price" in this Prospectus Supplement. Conflicts of interest may arise
between the Calculation Agent's responsibilities with respect to the Securities
and its status as a wholly-owned subsidiary of Holdings.
EFFECT OF ADVERSE CHANGES IN MARKET PRICES OF COMMODITIES
The Basket is comprised of eight distinct Commodities, and the Market
Prices are determined by reference to futures contracts, forward contracts and
spot prices relating to such Commodities. The Basket Value, and therefore the
value of the Securities, could be adversely affected by adverse changes in the
Market Prices of one or more of the Commodities.
Market Prices of the Commodities can be affected by a variety of factors,
including inflation, weather, governmental programs and policies, national and
international political and economic events, changes in interest and exchange
rates, the outbreak or cessation of war, acts of terrorism, significant
accidents, natural catastrophes, technological advances, the discovery of
significant additional sources of such Commodities and trading activity in
Commodity Investments.
SUSPENSION OR MATERIAL DISRUPTION OF TRADING; TEMPORARY DISTORTIONS
The Market Prices of certain of the Commodities are determined by reference
to the settlement prices of contracts traded on the LME and the NYMEX and the
Market Prices of the balance of the Commodities are determined by reference to
spot prices reported by the LBM. These markets are subject to temporary
distortions or other disruptions due to conditions of illiquidity in the
markets, the participation of speculators, government regulation and
intervention and other factors. Such circumstances, particularly if they occur
during the Determination Period, could adversely affect the value of the
Securities.
If a Market Disruption Event with respect to any Commodity exists or occurs
during the first three Trading Days of the Determination Period, the Settlement
Price of such Commodity will be calculated using the Market Prices of such
Commodity on the first three Determination Days during the Determination Period.
With respect to each Commodity, a "Determination Day" means a Trading Day on
which no Market Disruption Event with respect to such Commodity has occurred.
If, due to a Market Disruption Event for any Commodity, there are less than
three Determination Days for such Commodity during the Determination Period, the
Settlement Price for such Commodity will be calculated based on the average of
(i) the Market Price for such Commodity on each Determination Day, if any, and
(ii) the firm bid price for the relevant quantity of such Commodity quoted by
the Calculation Agent on as many of the last three Trading Days during the
Determination Period as are required to assure that the Settlement Price is
based on the average of
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<PAGE> 10
three prices (including Market Prices and prices quoted by the Calculation
Agent) during the Determination Period. See "Description of
Securities -- Settlement Amount" in this Prospectus Supplement.
DEFERRAL OF SETTLEMENT DATE
As discussed above under "Suspension or Material Disruption of Trading;
Temporary Distortions," if a Market Disruption Event exists or occurs with
respect to a Commodity during the first three Trading Days of the Determination
Period, the calculation of the Settlement Price of such Commodity would be
deferred until such Commodity ceased to be so affected or, if such Market
Disruption Event continued through the Determination Period, until the Stated
Maturity Date at which time the Calculation Agent would determine such
Settlement Price in the manner described herein. Because the Settlement Amount
will not be calculated until a Settlement Price for each Commodity has been
determined, it is possible that settlement of the Securities will take place up
to three Business Days after the Stated Maturity Date. See "Description of
Securities -- Settlement Amount" in this Prospectus Supplement.
If a Market Disruption Event results in the deferral of the payment of the
Settlement Amount beyond the Stated Maturity Date, interest in respect of such
deferred payment will not accrue or be payable. See "Description of
Securities -- Settlement Amount" in this Prospectus Supplement.
POTENTIAL MODIFICATIONS OF THE BASKET AND MARKET PRICE
The composition of the Basket and the method of calculating Market Prices
may be adjusted by the Calculation Agent, a wholly-owned subsidiary of Holdings,
from time to time upon the occurrence of certain extraordinary events. By way of
example, if the terms of the Contracts used for determining the Market Price of
a Commodity are changed in a material respect by the commodity exchange upon
which the Contract trades, or if a Market Price is not available for a Commodity
for any reason, then the Calculation Agent may take such action, including
adjustments to the Basket or to the method of calculating the Market Price of
such Commodity, as it deems appropriate. See "Description of
Securities -- Adjustments to the Basket and Market Price" in this Prospectus
Supplement. Such changes could adversely affect the Basket Value and,
consequently, the value of the Securities.
OTHER CONSIDERATIONS
An investment in the Securities may not be appropriate for all investors.
It is suggested that prospective investors who consider purchasing the
Securities should reach an investment decision only after carefully considering
with their advisers the suitability of the Securities in the light of their
particular circumstances.
Investors should also consider the tax consequences of investing in the
Securities. See "Certain United States Federal Income Tax Consequences" in this
Prospectus Supplement.
DESCRIPTION OF SECURITIES
GENERAL
The Securities are to be issued as a series of Debt Securities under the
Senior Indenture, which is more fully described in the accompanying Prospectus.
The following description of the particular terms of the Securities offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set forth
under the heading "Description of Debt Securities" in the accompanying
Prospectus. For a description of the rights attaching to different series of
Debt Securities under the Senior Indenture, see "Description of Debt Securities"
in the accompanying Prospectus. The Securities constitute "Senior Debt" as
defined in the accompanying Prospectus.
The aggregate principal amount of Securities to be issued will be
$25,000,000. See "Underwriting" in this Prospectus Supplement. The Securities
will be issued in denominations of $25,000 principal amount, and $5,000
principal amount increments in excess thereof. The Securities will not bear
interest and will mature on November 18, 1996. Each Holder in whose name
Securities are registered at the close of business on the day
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preceding the Stated Maturity Date will be entitled to receive the Settlement
Amount in respect of such Securities, which shall be calculated based on the
Basket Maturity Value. If the Basket Maturity Value exceeds $1,000, each Holder
will be entitled to a Settlement Amount that shall be greater than the principal
amount of such Holder's Securities; if the Basket Maturity Value is $1,000 or
less, each Holder will be entitled to a Settlement Amount that shall be equal to
the principal amount of such Holder's Securities. See "Settlement Amount" below.
The Securities are not redeemable by Holdings or repayable at the option of
any Holder prior to the Stated Maturity Date and are not subject to any sinking
fund. Upon the occurrence of an Event of Default with respect to the Securities,
Holders of the Securities may accelerate the Maturity of the Securities, as
described under "Description of Securities -- Events of Default and
Acceleration" in this Prospectus Supplement and "Description of Debt
Securities -- Events of Default" in the accompanying Prospectus.
SETTLEMENT AMOUNT
Each Holder in whose name Securities are registered at the close of
business on the day preceding the Stated Maturity Date will be entitled to
receive a Settlement Amount with respect to the principal amount of Securities
registered to such Holder, which Settlement Amount shall be equal to such
principal amount multiplied by the following:
1 + (1.25 X (Basket Maturity Value -- $1,000) )
---------------------------------
$1,000
provided, however, that if the Basket Maturity Value is less than $1,000, then
such Settlement Amount shall be equal to such principal amount.
The value of the Basket on the Stated Maturity Date (the "Basket Maturity
Value") will be determined by the Calculation Agent and will equal the sum of
the Settlement Prices of all of the Commodities included in the Basket. The
"Settlement Price" of each Commodity will equal the average of the Market Prices
of such Commodity for the first three Determination Days occurring during the
Determination Period. If, due to a Market Disruption Event for any Commodity,
there are less than three Determination Days for such Commodity during the
Determination Period, the Settlement Price for such Commodity will be calculated
based on the average of (i) the Market Price for such Commodity on each
Determination Day, if any, and (ii) the firm bid price for the relevant quantity
of such Commodity quoted by the Calculation Agent on as many of the last three
Trading Days during the Determination Period as are required to assure that the
Settlement Price is based on the average of three prices (including Market
Prices and prices quoted by the Calculation Agent) during the Determination
Period.
The quantity of each Commodity included in the Basket is specified under
the caption "Description of Securities -- Commodities" below. The quantity of
each Commodity included in the Basket will remain constant for the term of the
Securities unless adjusted by the Calculation Agent upon the occurrence of
certain extraordinary events as set forth under "Adjustments to the Basket and
Market Price" below.
"Market Price" for any day, which will be determined with respect to each
Commodity based on reasonably available information, means the following:
(i) in the case of Aluminum on any day (including any Determination
Day), the Market Price (expressed in dollars) shall be the product of (a)
the final closing price (expressed in dollars per tonne) on such day of the
November 1996 Aluminum Contract, as established by the LME and displayed on
Reuters LMES, and (b) .07058 tonnes;
(ii) in the case of Copper on any day (including any Determination
Day), the Market Price (expressed in dollars) shall be the product of (a)
the final closing price (expressed in dollars per tonne) on such day of the
November 1996 Copper Contract, as established by the LME and displayed on
Reuters LMEN, and (b) .06272 tonnes;
(iii) in the case of Crude Oil, the Market Price (expressed in
dollars) shall be the product of (a) the closing settlement price
(expressed in dollars per barrel) on such day of the December 1996
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<PAGE> 12
Crude Oil Contract, as established by the NYMEX and displayed on Telerate
page 8810 or 8811, and (b) 7.00054 barrels;
(iv) in the case of Gold on any Determination Day, the Market Price
(expressed in dollars) shall be the product of (a) the London p.m. Gold
Fixing Price (expressed in dollars per ounce) on such day reported by the
LBM, as displayed on Reuters MTUA, and (b) .68999 ounces; and in the case
of Gold on any other day, the Market Price shall be an amount (expressed in
dollars) equal to the estimated forward price on such day for .68999 ounces
of Gold for delivery on or about the Calculation Initiation Date, as
estimated by the person making such determination;
(v) in the case of Lead on any Determination Day and on any other day
on and after the day that the LME first establishes prices with respect to
the November 1996 Lead Contract (expected by Holdings to be in July 1995),
the Market Price (expressed in dollars) shall be the product of (a) the
final closing settlement price (expressed in dollars per tonne) on such day
of the November 1996 Lead Contract, as established by the LME and displayed
on Reuters LMEO, and (b) .05109 tonnes; and in the case of Lead on any
other day, the Market Price shall be an amount (expressed in dollars) equal
to the estimated forward price on such day for .05109 tonnes of Lead for
delivery on or about the Calculation Initiation Date, as estimated by the
person making such determination;
(vi) in the case of Nickel on any Determination Day and on any other
day on and after the day that the LME first establishes prices with respect
to the November 1996 Nickel Contract (expected by Holdings to be in July
1995), the Market Price (expressed in dollars) shall be the product of (a)
the final closing price (expressed in dollars per tonne) on such day of the
November 1996 Nickel Contract, as established by the LME and displayed on
Reuters LMEP, and (b) .006309 tonnes; and in the case of Nickel on any
other day, the Market Price shall be an amount (expressed in dollars) equal
to the estimated forward price on such day for .006309 tonnes of Nickel for
delivery on or about the Calculation Initiation Date, as estimated by the
person making such determination;
(vii) in the case of Silver on any Determination Day, the Market Price
(expressed in dollars) shall be the product of (a) the London Spot Silver
Fixing Price (expressed in dollars per ounce) on such day reported by the
LBM and as published in the Wall Street Journal and (b) 23.38205 ounces;
and in the case of Silver on any other day, the Market Price shall be an
amount (expressed in dollars) equal to the estimated forward price on such
day for 23.38205 ounces of Silver for delivery on or about the Calculation
Initiation Date, as estimated by the person making such determination; and
(viii) in the case of Zinc on any day (including any Determination
Day), the Market Price (expressed in dollars) shall be the product of (a)
the final closing price (expressed in dollars per tonne) on such day of the
November 1996 Zinc Contract, as established by the LME and displayed on
Reuters LMEQ, and (b) .06502 tonnes.
Except as otherwise provided in this paragraph, the Settlement Amount will
be payable to the Holders of Securities on the Stated Maturity Date. As
discussed above, if a Market Disruption Event exists or occurs with respect to a
Commodity during the first three Trading Days of the Determination Period, the
calculation of the Settlement Price of such Commodity would be deferred until
such Commodity ceased to be so affected or, if such Market Disruption Event
continued through the Determination Period, until the Stated Maturity Date at
which time the Calculation Agent would determine such Settlement Price in the
manner described above. Because the Settlement Amount will not be calculated
until a Settlement Price for each Commodity has been determined, it is possible
that settlement of the Securities will take place up to three Business Days
after the Stated Maturity Date. In any event, Holders of Securities will be
entitled to receive the Settlement Amount with respect to their Securities no
later than the third Business Day after the Stated Maturity Date. IN THE EVENT
THAT PAYMENT OF THE SETTLEMENT AMOUNT IS DEFERRED BEYOND THE STATED MATURITY
DATE, INTEREST IN RESPECT OF SUCH DEFERRED PAYMENT WILL NOT ACCRUE OR BE
PAYABLE.
"Market Disruption Event" with respect to any of Aluminum, Copper, Lead,
Nickel or Zinc (each, an "LME Metal") means either of the following events: (i)
the LME fails to announce official closing prices in U.S. dollars for such LME
Metal or (ii) a suspension, material limitation or termination of trading in
contracts for such LME Metal or a disruption in the trading of such LME Metal
such that the Calculation
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<PAGE> 13
Agent determines that any Hedging Transactions in such LME Metal at the official
LME settlement prices have not been or could not be executed. "Market Disruption
Event" with respect to either Gold or Silver (each, a "Precious Metal") means
that such Precious Metal is not traded by the LBM or is not quoted in U.S.
dollars by the LBM. "Market Disruption Event" with respect to Crude Oil means
either of the following events: (i) the NYMEX fails to announce official closing
prices for Crude Oil or (ii) the termination or suspension of, or a material
limitation or disruption in, the trading of Crude Oil on the NYMEX such that the
Calculation Agent determines that any Hedging Transactions in Crude Oil at the
official NYMEX settlement price have not been or could not be executed. For the
purposes of the foregoing, a limitation on the hours in a Trading Day and/or
number of days of trading will not constitute a Market Disruption Event if it
results from a previously announced change in the regular business hours of the
relevant exchange. The Calculation Agent in its sole discretion will be
responsible for determining if a Market Disruption Event has occurred.
All percentages resulting from any calculation with respect to the
Securities will be rounded to the nearest one hundred-thousandth of a percentage
point, with five one millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all
dollar amounts used in or resulting from such calculation will be rounded to the
nearest cent with one-half cent being rounded upwards.
HYPOTHETICAL SETTLEMENT AMOUNTS
Set forth below is a table demonstrating the Settlement Amount with respect
to $50,000 principal amount of Securities based upon various hypothetical Basket
Maturity Values. The illustrative Settlement Amounts in the table do not reflect
any "time value" which may be reflected in the trading value, and are not
necessarily indicative of potential profit or loss, which are affected in
addition by purchase price and transaction costs. Neither Holdings nor any of
its affiliates makes any representation or warranty as to the probability or
magnitude of any increase or decrease in the Market Prices of the Commodities,
and no assurance can be given that the Market Prices of the Commodities will
increase sufficiently to cause Holders to receive a Settlement Amount in excess
of the principal amount of their Securities. See "Settlement Amount" above for a
description of the method of calculation of the Settlement Amount.
<TABLE>
<CAPTION>
HYPOTHETICAL
BASKET SETTLEMENT
MATURITY VALUE AMOUNT
-------------- ----------
<S> <C>
$1,000 or less $50,000.00
1,025................................... 51,562.50
1,050................................... 53,125.00
1,075................................... 54,687.50
1,100................................... 56,250.00
1,125................................... 57,812.50
1,150................................... 59,375.00
1,175................................... 60,937.50
1,200................................... 62,500.00
1,225................................... 64,062.50
1,250................................... 65,625.00
1,275................................... 67,187.50
1,300................................... 68,750.00
1,325................................... 70,312.50
1,350................................... 71,875.00
1,375................................... 73,437.50
1,400................................... 75,000.00
</TABLE>
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<PAGE> 14
COMMODITIES
The commodities listed below (each, a "Commodity" and collectively, the
"Commodities") comprise the Basket and, therefore, the value of such Commodities
will affect the trading value of the Securities and the magnitude of the
Settlement Amount. Holders of Securities will not, by virtue of their ownership
of Securities, have any right at any time to invest in or to receive any of the
Commodities, even though the return on the investment in the Securities is based
on the Market Prices of such Commodities. The following table sets forth each
Commodity, the quantity of each Commodity included in the Basket, the Market
Price on November 9, 1994 of each Commodity and the percentage of the Basket
Value contributed on November 9, 1994 by each Commodity.
<TABLE>
<CAPTION>
NOVEMBER 9, 1994
NOVEMBER 9, 1994 % OF
COMMODITY QUANTITY MARKET PRICE BASKET VALUE
- --------- -------- ---------------- ----------------
<S> <C> <C> <C>
Aluminum..................................... .07058 tonnes $ 125 12.5%
Copper....................................... .06272 tonnes 145 14.5
Crude Oil.................................... 7.00054 barrels 130 13.0
Gold(1)...................................... .68999 ounces 300 30.0
Lead(1)...................................... .05109 tonnes 35 3.5
Nickel(1).................................... .006309 tonnes 50 5.0
Silver(1).................................... 23.38205 ounces 140 14.0
Zinc......................................... .06502 tonnes 75 7.5
------- -----
$ 1,000 100.0%
</TABLE>
- ---------------
(1) The Market Prices for Gold, Lead, Nickel and Silver were determined by the
Calculation Agent by reference to the Lehman Brothers Inc. bid on
November 9, 1994 for .68999 ounces of Gold, for .05109 tonnes of Lead, for
.006309 tonnes of Nickel and for 23.38205 ounces of Silver, respectively,
for delivery on November 18, 1996.
As set forth in the above table, different quantities of the various
Commodities are included in the Basket, and each Commodity represents a
different percentage of the forward value of the Basket on November 9, 1994. The
respective quantities of each Commodity included in the Basket will remain
constant for the term of the Securities unless adjusted by the Calculation Agent
upon the occurrence of certain extraordinary events as set forth under
"Adjustments to the Basket and Market Price" below.
The Basket Value, for any day, will equal the current forward prices for
each Commodity multiplied in each case by the quantity of such Commodity in the
Basket. To determine the appropriate forward prices for the Commodities in the
Basket, Holders should refer: (i) in the case of an LME Metal, to the current
price for the appropriate Contract on the LME for delivery in November 1996 (or,
with respect to Lead and Nickel prior to July 1995, to the estimated forward
price for delivery of such Commodity on or about the Calculation Initiation
Date), (ii) in the case of Crude Oil, to the current price for the Crude Oil
Contract on the NYMEX for delivery in December 1996 and (iii) in the case of a
Precious Metal, to an estimated forward price for delivery of such Precious
Metal on or about the Calculation Initiation Date. The Basket Maturity Value,
and therefore the Settlement Amount, is calculated based on the Market Prices of
the Commodities on and after the Calculation Initiation Date. See "Settlement
Amount" above.
Aluminum
The Market Price of Aluminum is determined by reference to the LME's "High
Grade Primary Aluminum Contract" (the "Aluminum Contract"). The price of the
Aluminum Contract is primarily affected by the global demand for and supply of
Aluminum.
Demand for Aluminum is significantly influenced by the level of global
industrial economic activity. Industrial sectors which are particularly
important include the automobile, packaging and construction sectors. An
additional, but highly volatile, component of demand is adjustments to inventory
in response to changes in economic activity and/or pricing levels.
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<PAGE> 15
The supply of Aluminum is widely spread around the world, and the principal
factor dictating the smelting of such Aluminum is the ready availability of
inexpensive power. The supply of Aluminum is also affected by current and
previous price levels, which will influence investment decisions in new
smelters. Other factors influencing supply include droughts, transportation
problems and shortages of power and raw materials.
Copper
The Market Price of Copper is determined by reference to the LME's
"Copper -- Grade A Contract" (the "Copper Contract"). The price of the Copper
Contract is primarily affected by the global demand for and supply of Copper.
Demand for Copper is significantly influenced by the level of global
industrial economic activity. Industrial sectors which are particularly
important include the electrical and construction sectors. In recent years
demand has been supported by strong consumption from newly industrializing
countries, which continue to be in a copper-intensive period of economic growth
as they develop their infrastructure. An additional, but highly volatile,
component of demand is adjustments to inventory in response to changes in
economic activity and/or pricing levels.
Apart from the United States, Canada and Australia, the majority of copper
concentrate supply (the raw material) comes from outside the Organization for
Economic Cooperation and Development countries. Chile is the largest producer of
copper concentrate. In recent years, copper supply has been affected by strikes,
financial problems and terrorist activity. Output has fallen particularly
sharply in the "African Copperbelt" and in Bougainville, Papua New Guinea.
Crude Oil
The Market Price of Crude Oil is determined by reference to the NYMEX's
"Light 'Sweet' Crude Oil Futures Contract" (the "Crude Oil Contract"). The Crude
Oil Contract is based on West Texas Intermediate ("WTI") crude oil delivered to
Cushing, Oklahoma. Although WTI is refined principally in the United States'
mid-continent region, it forms the basis for pricing other domestic crudes as
well as some foreign grades. The WTI spot price, in turn, is usually determined
by global (rather than regional) supply and demand conditions due to the
availability of product and crude oil pipelines that link the mid-continent to
the Gulf Coast, a major crude oil trading and refining center.
Demand for petroleum products by consumers, as well as agricultural,
manufacturing and transportation industries, determines demand for Crude Oil by
refiners. Since the precursors of product demand are linked to economic
activity, Crude Oil demand will tend to reflect economic conditions. However,
other factors such as weather will also influence product and crude oil demand.
Crude Oil supply is determined by both economic and political factors. Oil
prices (along with drilling costs, availability of attractive prospects for
drilling, taxes and technology) determine exploration and development spending
which influence output capacity with a lag. In the short run, production
decisions by the Organization of Petroleum Exporting Countries also affects
supply and prices. Oil export embargoes such as the United Nations-imposed trade
sanctions on Iraq represent another route through which political developments
move the market.
Gold
The Market Price of Gold is determined by reference to the London p.m. Gold
Fixing (expressed in dollars per ounce) by the LBM.
Spot market Gold prices can fluctuate widely and are affected by numerous
factors, including industrial and jewelry demand, expectations with respect to
the rate of inflation, the strength of the U.S. dollar (the currency in which
the price of Gold is generally quoted) and of other currencies, interest rates,
central bank sales, forward sales by producers, global or regional political or
economic events, and production costs and disruptions in major Gold producing
regions such as South Africa and the Commonwealth of Independent States ("CIS").
The demand for and supply of Gold affect Gold prices, but not necessarily in the
same manner as supply and demand affect the prices of other Commodities. The
supply of Gold consists of a combination of new mine production and existing
stocks of bullion and formulated Gold held by governments, public and private
financial institutions, industrial organizations and private individuals. As the
amounts
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<PAGE> 16
produced in any single year constitute a very small portion of the total
potential supply of Gold, normal variations in production do not necessarily
have a significant impact on the supply of Gold or on its price. In addition,
the price of Gold has on occasion been subject to very rapid short-term changes
due to speculative activities.
Lead
The Market Price of Lead is determined by reference to the LME's "Standard
Lead Contract" (the "Lead Contract"). The price of the Lead Contract is
primarily affected by the global demand for and supply of Lead.
Demand for Lead is significantly influenced by the level of global
industrial economic activity. The automobile industrial sector is particularly
important given that the use of Lead in batteries accounts for approximately 60%
of world-wide Lead demand. In recent years, demand has stabilized following
substitution of other commodities for Lead in a number of markets -- notably
gasoline and chemicals -- in the 1970s and 1980s. An additional, but highly
volatile, component of demand is adjustments to inventory in response to changes
in economic activity and/or pricing levels.
The secondary (recycling) sector is the source of approximately 50% of the
total supply of Lead and refined lead output is dominated by the developed
economies. The supply of Lead is also affected by current and previous price
levels, which will influence investment decisions in new mines and smelters. The
low prices for Lead in the early 1990s have tended to discourage such
investments.
Nickel
The Market Price of Nickel is determined by reference to the LME's "Primary
Nickel Contract" (the "Nickel Contract"). The price of the Nickel Contract is
primarily affected by the global demand for and supply of Nickel.
Demand for Nickel is significantly influenced by the level of global
industrial economic activity. The stainless steel industrial sector is
particularly important given that the use of Nickel in the manufacture of
stainless steel accounts for approximately 60% of world-wide Nickel demand. The
stainless steel sector has growth potential as there is a trend for alloyed
steel such as stainless steel to replace non-alloyed steel as the benefits of
life-cycle costing become more clear. A number of stainless steel mills have
invested in new capacity which indicates the likelihood of continued growth in
stainless steel production and therefore Nickel demand. An additional, but
highly volatile, component of demand is adjustments to inventory in response to
changes in economic activity and/or pricing levels.
Nickel supply is dominated by Canada and the CIS. Although exports from the
CIS have increased sharply in recent years, there are indications that such
exports have now peaked. The supply of Nickel is also affected by current and
previous price levels, which will influence investment decisions in new mines
and smelters. The low prices for Nickel in the early 1990s have tended to
discourage such investments.
Silver
The Market Price of Silver is determined by reference to the London Spot
Silver Fixing (expressed in dollars per ounce) by the LBM.
Spot market Silver prices can fluctuate widely and are affected by numerous
factors, including industrial and jewelry demand, expectations with respect to
the rate of inflation, the relative strength of the U.S. dollar (the currency in
which the price of Silver is generally quoted) and of other currencies, interest
rates, central bank sales, forward sales by producers, global or regional
political or economic events, and production costs and disruptions in major
Silver producing countries such as Mexico and Peru. The demand for and supply of
Silver affect Silver prices, but not necessarily in the same manner as supply
and demand affect the prices of other Commodities. The supply of Silver consists
of a combination of new mine production and existing stocks of bullion and
fabricated Silver held by governments, public and private financial
institutions, industrial organizations and private individuals.
S-15
<PAGE> 17
Zinc
The Market Price of Zinc is determined by reference to the LME's "Special
High Grade Zinc Contract" (the "Zinc Contract"). The price of the Zinc Contract
is primarily affected by the global demand for and supply of Zinc.
Demand for Zinc is significantly influenced by the level of global
industrial economic activity. The galvanized steel industrial sector is
particularly important given that the use of Zinc in the manufacture of
galvanized steel accounts for approximately 50% of world-wide Zinc demand. The
galvanized steel sector is in turn heavily dependent on the automobile and
construction sectors. The galvanized steel sector has growth potential as there
is a trend for coated steel such as galvanized steel to replace non-coated steel
as the benefits of life-cycle costing become more clear. A number of galvanized
steel mills have invested in new capacity which indicates the likelihood of
continued growth in galvanized steel production and therefore Zinc demand. An
additional, but highly volatile, component of demand is adjustments to inventory
in response to changes in economic activity and/or pricing levels.
The supply of zinc concentrate (the raw material) is dominated by
Australia, North America and Latin America. The supply of Zinc is also affected
by current and previous price levels, which will influence investment decisions
in new mines and smelters. The low prices for Zinc in the early 1990s have
tended to discourage such investments.
------------------------
Finally, in addition to supply and demand factors that influence settlement
prices for the Commodities as described above, psychological and speculative
forces play a major role in driving the markets for each of the Commodities.
ADJUSTMENTS TO THE BASKET AND MARKET PRICE
The Basket and/or the method of calculating the Market Price may be
adjusted from time to time by the Calculation Agent, a wholly-owned subsidiary
of Holdings, as follows:
(i) In the event that a Market Price is not available for a Commodity
for whatever reason, including any discontinuance of trading in the
relevant Contract by the LME or the NYMEX, then the Calculation Agent may
take such action, including adjustments to the Basket or to the method of
calculating such Market Price as it deems appropriate. By way of example,
and without limitation, if a Contract which serves as the basis for
determining the Market Price of a particular Commodity is discontinued by
the exchange on which it traded, the Calculation Agent may calculate such
Market Price for such Commodity by reference to another contract for such
Commodity traded on another exchange or to the Lehman Brothers Inc. bid for
such Commodity for delivery during the Determination Period.
(ii) In the event that the terms of any Contract used for determining
the Market Price of any Commodity are changed in a material respect by the
commodity exchange upon which the contract trades, the Calculation Agent
may take such action, including adjustments to the Basket or to the method
of calculating the Market Price of such Commodity, as it deems appropriate.
The Calculation Agent has informed Holdings that, to its knowledge, the
terms of certain of the LME Metal Contracts have been adjusted several
times since 1980 with respect to the required quality of the Commodity to
be delivered thereunder and the location for such delivery. Although
Holdings is not aware of any planned modification of the terms of any
Contract, no assurance can be given that such modifications will not occur
prior to the Stated Maturity Date.
No adjustment will be made unless the Calculation Agent determines, in its
sole discretion, that such adjustment is appropriate to maintain the validity of
the Market Price as an economic benchmark for the affected Commodity within the
Basket. Such adjustments, if any, may be made by the Calculation Agent at any
time, or from time to time, on or prior to the Stated Maturity Date. No
adjustment will be made other than in accordance with the foregoing. See
"Special Considerations -- Potential Conflicts of Interest" in this Prospectus
Supplement for a description of certain conflicts of interest which may arise
between the
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<PAGE> 18
Calculation Agent's status as a wholly-owned subsidiary of Holdings and its
responsibilities to adjust the Basket and/or the method of calculating the
Market Price.
EVENTS OF DEFAULT AND ACCELERATION
If an Event of Default with respect to the Securities shall have occurred
and be continuing, the amount payable to a Holder with respect to any Security
upon any acceleration permitted under the Senior Indenture will be equal to an
amount calculated as though the Basket Maturity Value is equal to the sum of the
Market Prices on the date of acceleration for each Commodity other than Gold and
Silver plus the Acceleration Value on the date of acceleration for each of Gold
and Silver; provided, that if the date of acceleration is not a Determination
Day for any Commodity, the Basket Maturity Value will be calculated by reference
to the bid price for the relevant quantity of such Commodity quoted on such day
by the Calculation Agent, a wholly-owned subsidiary of Holdings. If a bankruptcy
proceeding is commenced in respect of Holdings, the claim of the Holder of a
Security may be limited, under Section 502(b)(2) of Title 11 of the United
States Code, to the principal amount of the Security plus an additional amount,
if any, of contingent interest calculated as though the Basket Maturity Value is
equal to the sum of the Market Prices on the date of the commencement of the
proceeding for each Commodity other than Gold and Silver plus the Acceleration
Value on the date of acceleration for each of Gold and Silver; provided, that if
the date of acceleration is not a Determination Day for any Commodity, the
Basket Maturity Value will be calculated by reference to the bid price for the
relevant quantity of such Commodity quoted on such day by the Calculation Agent,
a wholly-owned subsidiary of Holdings. The "Acceleration Value" for each of Gold
and Silver shall be the forward price for .68999 ounces of Gold and for 23.38205
ounces of Silver, respectively, for delivery during the Determination Period, as
determined by the Calculation Agent by reference to the arithmetic mean of such
forward prices published by three members of the LBM selected by the Calculation
Agent. See "Description of Securities -- Settlement Amount" in this Prospectus
Supplement for a description of the calculation of the Settlement Amount and see
"Special Considerations -- Potential Conflicts of Interest" in this Prospectus
Supplement for a description of certain conflicts of interest which may arise
between the Calculation Agent's status as a wholly-owned subsidiary of Holdings
and its foregoing responsibilities with respect to the Securities.
CALCULATION AGENT
All selections, adjustments and determinations made by Lehman Brothers
Inc., a wholly-owned subsidiary of Holdings, as the Calculation Agent shall be
at the sole discretion of the Calculation Agent and, in the absence of manifest
error, shall be conclusive for all purposes and binding on Holdings and the
Holders of the Securities, and the Calculation Agent shall have no liability
therefor.
THE BASKET
GENERAL
The Basket is comprised of eight distinct non-financial (i.e., physical)
Commodities, each of which falls within one of the following three general
sectors (the "Sectors"): precious metals, base metals and energy. Holdings has
included the Sectors in the Basket because it believes that, as a general
matter, the prices of commodities in these Sectors are broadly reflective of
economic recovery; that is, prices of such Commodities generally increase during
periods of economic recovery. NEITHER HOLDINGS NOR ANY OF ITS AFFILIATES MAKES
ANY REPRESENTATION OR WARRANTY AS TO THE PERFORMANCE OF THE COMMODITIES OR THE
BASKET, AND NEITHER HOLDINGS NOR THE CALCULATION AGENT WILL ADJUST THE BASKET
FOR THE PURPOSE OF CAUSING OR ENCOURAGING THE PERFORMANCE INDICATED IN THE
PRECEDING SENTENCE.
The specific Commodities which comprise the Basket (namely Aluminum,
Copper, Crude Oil, Gold, Lead, Nickel, Silver and Zinc) were selected by
Holdings on the basis of, among other things, their liquidity, their general
lack of seasonality and the ready availability of price information.
Holdings has included in the Basket the specified quantity of each
Commodity such that, as of November 9, 1994, each Sector represented not less
than 10% and not more than 50% of the Basket Value and such that no individual
Commodity represented more than 30% of the Basket Value.
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<PAGE> 19
THE INCLUSION OF A COMMODITY IN THE BASKET IS NOT A RECOMMENDATION TO
INVEST IN OR DIVEST ANY INTEREST IN SUCH COMMODITY, AND NEITHER HOLDINGS NOR ANY
OF ITS AFFILIATES MAKE ANY REPRESENTATION OR WARRANTY TO ANY PURCHASER OF
SECURITIES AS TO THE PERFORMANCE OF THE BASKET, ANY COMMODITY OR ANY SECTOR.
Holdings or its affiliates may presently or from time to time invest in, or
divest an interest in, one or more Commodity Investments, may render investment
advice to a third party with respect to one or more Commodity Investments, or
may facilitate on behalf of a third party an investment in, or a divestiture of
an interest in, one or more Commodity Investments. In the course of such
business, Holdings or its affiliates may acquire nonpublic information with
respect to such Commodity Investments and, in addition, one or more affiliates
of Holdings may produce and/or publish research reports with respect to such
Commodity Investments. Holdings does not make any representation or warranty to
any purchaser of a Security with respect to any matters whatsoever relating to
such activities.
ANY PROSPECTIVE PURCHASER OF A SECURITY SHOULD UNDERSTAND THE COMMODITY
FUTURES, FORWARD AND SPOT MARKETS AND SHOULD UNDERTAKE AN INDEPENDENT
INVESTIGATION OF THE COMMODITIES SUCH AS IN ITS JUDGMENT IS APPROPRIATE TO MAKE
AN INFORMED DECISION WITH RESPECT TO AN INVESTMENT IN THE SECURITIES.
THE COMMODITIES MARKETS
The Market Prices of certain of the Commodities (i.e., Crude Oil and the
LME Metals) are determined by reference to the settlement prices of futures and
forward contracts traded on the NYMEX and the LME, respectively, and the Market
Prices of the Precious Metals are determined by reference to spot prices on the
LBM.
An exchange-traded futures contract is a bilateral agreement providing for
the purchase and sale of a specified type and quantity of a commodity or
financial instrument during a stated delivery month for a fixed price or, in the
case of a futures contract on an index, providing for the payment and receipt of
a cash settlement. By its terms, a futures contract provides for a specified
settlement month in which the commodity or financial instrument is to be
delivered by the seller (whose position is therefore described as "short") and
acquired by the purchaser (whose position is therefore described as "long") or
in which the cash settlement amount is required to be paid. Prior to the date on
which delivery is to be made under a futures contract, the exchange clearing
house will require the holders of short positions to state their intentions with
respect to delivery and, to the extent that such holders elect to make delivery
(as opposed to cash settlement), the clearing house will match them with holders
of long positions, who will then be required to accept delivery. In the vast
majority of cases, actual delivery under contracts never takes place, as
contracts are often liquidated with offsetting futures transactions prior to the
maturity of the original contract.
No purchase price is paid or received on the purchase or sale of a futures
contract. Instead, an amount of cash or cash equivalents, which varies based on
the requirements imposed by the exchange clearing houses, but which may be as
low as 5% or less of the value of the contract, must be deposited with the
broker as "initial margin." This margin deposit collateralizes the obligations
of the parties to the futures contract to perform their obligations under such
contract. By depositing margin in the most advantageous form (which may vary
depending on the exchange, clearing house or broker involved), a market
participant may be able to earn interest on its margin funds, thereby increasing
the potential total return which may be realized from an investment in futures
contracts. Subsequent payments to and from the broker, referred to as "variation
margin," are then normally made on a daily basis as the price of the futures
contract fluctuates, thereby making existing positions in the futures contract
more or less valuable, a process known as "marking to the market."
Futures contracts are traded on organized exchanges, known as "contract
markets," through the facilities of a centralized clearing house and a brokerage
firm which is a member of the clearing house. The clearing house guarantees the
performance of each clearing member which is a party to a futures contract by,
in effect, taking the opposite side of the transaction. At any time prior to the
expiration of a futures contract, subject to the availability of a liquid
secondary market, a trader may elect to close out its position by taking an
opposite position on the exchange on which the position was entered into, which
operates to terminate the position and fix the trader's profit or loss. U.S.
contract markets (including the NYMEX), as well as brokers and market
S-18
<PAGE> 20
participants, are subject to regulation by the Commodity Futures Trading
Commission. Futures markets outside the U.S. are generally subject to regulation
by comparable regulatory authorities (such as the Securities and Investment
Board in the United Kingdom (the "SIB")).
The NYMEX
The NYMEX, located in New York City, is the principal exchange for the
trading of oil futures contracts. NYMEX began commodities trading in 1872,
organized as the Butter and Cheese Exchange of New York, and has since traded a
variety of commodity products. The establishment of energy futures on the NYMEX
occurred in 1978, with the introduction of heating oil futures contracts. NYMEX
opened trading in leaded gasoline futures in 1981, followed by the Crude Oil
Contract in March 1983 and unleaded gasoline futures in 1984.
The LME
The LME was established in 1877 and is the principal base-metal exchange in
the world on which contracts for delivery of copper, lead, zinc, tin, aluminum,
aluminum alloy and nickel are traded. In contrast to U.S. futures exchanges, the
LME operates as a principals' market for the trading of forward contracts, and
is therefore more closely analogous to over-the-counter physical commodity
markets than futures markets. As a result, members of the LME trade with each
other as principals and not as agents for customers, although such members may
enter into offsetting "back-to-back" contracts with their customers. In
addition, while futures exchanges permit trading to be conducted in contracts
for monthly delivery in stated delivery months, LME contracts may be established
for delivery on any day (referred to as a "prompt date") from one day to three
months following the date of contract, and for monthly delivery in any of the
next 16 to 24 months (depending on the Commodity) following such third month.
Further, because it is a principals' forward market, there are no price limits
applicable to LME contracts, and prices could decline without limitation over a
period of time. Trading is conducted on the basis of warrants that cover
physical material held in listed warehouses.
The LME is not a cash cleared market; its interoffice and floor trading
procedure is combined with a clearing system operating between principals based
on bank guarantees and other forms of collateral. Both interoffice and floor
trading are covered by a matching system run by the London Clearing House, whose
role is to act as a central counterparty to trades executed between clearing
members and thereby reduce risk and settlement costs. The LME is subject to
regulation by the SIB.
The bulk of trading on the LME is transacted through interoffice dealing
which allows the LME to operate as a 24-hour market. Trading on the floor takes
place in two sessions daily, from 11:50 am to 1:35 pm and from 3:20 to 5:00 pm,
London time. The two sessions are each broken down into two rings made up of
five minutes' trading in each contract. After the second ring of the first
session the official prices for the day are announced. Contracts may be settled
by offset or delivery and can be cleared in U.S. dollars, Pounds Sterling,
Japanese Yen and German Marks.
Copper and Tin have traded on the LME since its establishment. The Copper
Contract was upgraded to High Grade Copper in November 1981 and again to today's
Grade-A Contract which began trading in June 1986. Lead and Zinc were officially
introduced in 1920, but were traded unofficially before that. The Lead Contract
has remained virtually unchanged since its reintroduction in 1952 following the
closure of the Exchange brought about by the second World War. Zinc, on the
other hand, has undergone a number of upgradings, most recently with the
introduction of the present Special High Grade Zinc Contract in June 1986.
Primary Aluminum was introduced as a 99.5% contract in December 1978 and today's
99.7% High Grade Aluminum Contract began trading in August 1987. Nickel joined
the Exchange the year after Aluminum, in April 1979. The LME share (by weight)
of world terminal market trading is over 90% of all Copper and virtually all
Aluminum, Lead, Nickel, Tin and Zinc. The LME, therefore, is well established to
reflect changes in supply and demand for these metals worldwide.
S-19
<PAGE> 21
The LBM
The Market Prices of Gold and Silver will be determined by reference to the
"Fixing Prices" of such Commodities on the LBM. The Fixing Prices represent the
matching of orders from customers and bullion markets throughout the world.
The LBM, located in London, England, was formally incorporated in 1987. The
LBM is a self-regulatory association of bullion market participants. All market
making members of the LBM are supervised by the Bank of England and are required
to satisfy a capital adequacy test. Market making members of the LBM quote spot
and forward delivery prices (in U.S. dollars per ounce) for Gold and Silver
throughout each business day. In addition, the LBM publishes the Fixing Price
for Gold in the morning and in the evening of each business day and the Fixing
Price for Silver in the afternoon of each business day.
HISTORICAL INFORMATION
The following table sets forth for the days indicated during 1990, 1991,
1992, 1993 and 1994 (through November 1, 1994) (a) in the case of Gold and
Silver, the spot prices for the days indicated (b) in the case of each of the
other Commodities, the settlement prices for the nearby Contract for such
Commodity and (c) the spot value of the Basket (i.e., the value of the Basket
calculated by reference to the spot prices and to the quantity of each Commodity
in the Basket). The spot value of the Basket has been calculated and included in
this table for the benefit of prospective investors; prospective investors
should note that the Basket Value (as such term is defined and used in this
Prospectus Supplement) is calculated by reference to forward prices for the
Commodities rather than by reference to spot prices for the Commodities. By way
of example, although the spot value of the Basket on November 9, 1994 was
$962.44, the Calculation Agent has estimated that the Basket Value on November
9, 1994 was $1,000. The historical prices of the Commodities should not be taken
as an indication of future performance, and no assurance can be given that the
prices of the Commodities will increase sufficiently to cause the Holders of
Securities to receive a Settlement Amount in excess of the principal amount of
such Securities.
S-20
<PAGE> 22
The historical spot prices set forth below have been obtained from
commercial data services unaffiliated with Holdings, which services are believed
by Holdings to be reliable.
<TABLE>
<CAPTION>
CRUDE
DATE GOLD(1) SILVER(1) ALUMINUM(2) COPPER(2) NICKEL(2) LEAD(2) ZINC(2) OIL(3)
- -------- -------- --------- ----------- --------- ---------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1/2/90 $399.000 $5.210 $1637.000 $2418.111 $ 7900.000 $721.728 $1395.000 $22.890
2/1/90 415.800 5.265 1405.000 2252.523 6400.000 703.703 1300.500 22.700
3/1/90 406.300 5.140 1532.000 2494.170 8315.000 882.450 1512.000 21.170
4/2/90 368.400 4.940 1595.000 2758.468 8975.000 824.932 1608.000 20.480
5/2/90 369.600 4.995 1494.000 2735.595 9300.000 798.005 1750.000 18.680
6/1/90 363.400 5.035 1591.000 2639.728 8275.000 824.915 1745.000 17.500
7/2/90 357.400 4.920 1530.000 2629.173 8605.000 906.915 1723.000 16.720
8/1/90 370.600 4.830 1715.000 2867.830 10330.000 876.488 1569.000 21.540
9/4/90 381.400 4.740 1875.000 2934.846 11135.000 867.881 1606.000 29.120
10/1/90 396.300 4.665 1930.000 2776.095 9850.000 768.620 1382.000 37.090
11/1/90 380.400 4.200 1922.000 2598.445 8750.000 723.309 1300.000 35.170
12/3/90 380.600 4.120 1494.000 2497.627 8365.000 656.059 1249.500 29.150
1/2/91 390.800 4.125 1542.000 2638.808 8325.000 621.866 1257.000 26.490
2/1/91 364.500 3.835 1481.000 2401.600 8593.000 586.575 1180.000 21.340
3/1/91 366.900 3.735 1540.000 2495.870 8561.000 597.870 1226.000 19.380
4/2/91 357.500 4.015 1435.000 2453.946 9095.000 617.462 1227.000 19.700
5/1/91 356.500 3.955 1346.000 2438.877 9040.000 588.992 1152.000 21.250
6/3/91 363.000 4.170 1226.000 2161.978 8140.000 532.858 1052.700 21.130
7/1/91 368.900 4.450 1316.000 2256.853 8585.000 559.771 1077.000 20.760
8/1/91 363.400 4.055 1266.000 2260.599 8220.000 546.620 1058.000 21.270
9/3/91 347.300 3.895 1250.500 2297.064 7786.000 531.069 1023.500 22.240
10/1/91 353.900 4.140 1143.500 2315.438 7532.000 535.609 997.500 22.220
11/1/91 357.700 4.105 1156.500 2375.157 7436.000 513.713 989.700 23.820
12/2/91 368.300 4.065 1102.200 2383.392 7127.000 519.480 1218.000 21.080
1/2/92 350.900 3.935 1117.000 2150.500 7188.000 540.430 1173.700 19.490
2/3/92 356.400 4.150 1216.700 2159.079 7718.000 505.370 1162.500 18.960
3/2/92 350.400 4.100 1270.000 2285.610 7592.000 518.214 1176.000 18.340
4/1/92 344.000 4.140 1288.200 2242.890 7461.000 533.463 1278.700 19.840
5/1/92 337.500 3.995 1288.000 2196.040 7372.000 519.955 1371.500 20.850
6/1/92 336.800 4.030 1304.400 2216.766 7332.000 535.521 1436.000 22.030
7/1/92 343.500 4.030 1309.700 2429.256 7485.000 611.331 1323.000 21.860
8/3/92 354.000 3.900 1318.600 2496.076 7325.000 681.465 1358.500 21.580
9/1/92 341.700 3.750 1294.400 2501.496 7203.000 660.339 1411.100 21.640
10/1/92 348.500 3.730 1239.300 2310.800 6693.000 587.205 1325.200 21.830
11/2/92 339.500 3.760 1144.200 2253.174 5964.000 484.497 1082.000 20.770
12/1/92 334.600 3.725 1199.300 2166.601 5512.000 460.135 1075.000 19.510
1/4/93 328.200 3.640 1238.300 2346.813 6150.000 454.052 1066.700 19.040
2/1/93 329.700 3.665 1196.100 2217.488 5776.000 416.125 1106.500 20.310
3/1/93 328.500 3.565 1174.200 2125.728 5907.000 409.104 992.000 20.600
4/1/93 336.300 3.870 1128.000 2148.091 6086.000 412.766 980.500 20.520
5/4/93 356.100 4.270 1125.500 1838.270 5953.000 415.711 1006.700 20.390
6/1/93 377.300 4.585 1122.700 1794.435 5609.000 398.470 922.700 20.240
7/1/93 379.000 4.710 1227.400 1922.500 5320.000 388.000 919.400 18.450
8/2/93 405.600 5.350 1213.400 1963.500 4915.000 391.800 920.700 17.970
9/1/93 369.100 4.800 1140.300 1967.200 4573.000 384.000 872.200 17.970
10/1/93 354.000 4.060 1098.200 1680.200 4056.000 364.300 877.700 18.630
11/1/93 363.200 4.200 1025.800 1604.500 4520.000 396.100 937.700 17.430
12/1/93 373.100 4.555 1054.400 1645.200 4679.000 427.700 937.000 15.480
1/4/94 394.100 5.200 1114.500 1733.500 5196.000 463.000 993.700 14.670
2/1/94 381.600 5.190 1245.700 1865.200 5835.000 509.300 994.500 15.920
3/1/94 381.300 5.340 1286.000 1848.000 5822.000 459.800 948.000 14.670
4/5/94 384.700 5.580 1289.000 1888.000 5539.000 442.100 935.500 15.740
5/3/94 375.100 5.240 1302.500 1951.000 5541.000 458.500 929.200 16.890
6/1/94 386.300 5.400 1313.500 2200.000 6101.000 499.000 952.200 18.210
7/1/94 384.600 5.350 1463.200 2365.500 6121.000 545.100 952.200 19.530
8/1/94 383.800 5.295 1444.600 2421.000 6112.000 587.100 946.300 20.550
9/1/94 386.000 5.425 1535.500 2497.500 6338.000 601.800 985.700 17.470
10/3/94 393.100 5.640 1603.000 2476.700 6283.000 623.000 1005.500 18.190
11/1/94 384.500 5.275 1836.200 2726.000 7426.000 662.400 1142.700 18.680
</TABLE>
<TABLE>
<CAPTION>
SPOT
VALUE OF
DATE BASKET
- -------- ----------
<S> <C>
1/2/90 $1001.9862
2/1/90 970.2448
3/1/90 1009.1421
4/2/90 1001.9742
5/2/90 992.8314
6/1/90 976.6451
7/2/90 964.2298
8/1/90 1032.3167
9/4/90 1113.2692
10/1/90 1143.7729
11/1/90 1082.1954
12/3/90 992.6391
1/2/91 991.9030
2/1/91 906.6216
3/1/91 905.6610
4/2/91 902.3570
5/1/91 897.2100
6/3/91 865.0433
7/1/91 891.1362
8/1/91 874.1713
9/3/91 861.5289
10/1/91 862.2105
11/1/91 877.6463
12/2/91 874.7164
1/2/92 833.5535
2/3/92 847.0645
3/2/92 849.8518
4/1/92 862.1074
5/1/92 863.1324
6/1/92 878.9225
7/1/92 893.5476
8/3/92 905.4938
9/1/92 894.1224
10/1/92 871.2884
11/2/92 822.3730
12/1/92 803.2609
1/4/93 810.7969
2/1/93 808.5080
3/1/93 793.0945
4/1/93 803.7582
5/4/93 807.2704
6/1/93 816.7536
7/1/93 821.1672
8/2/93 850.4319
9/1/93 801.7500
10/1/93 753.7670
11/1/93 753.5834
12/1/93 762.2073
1/4/94 804.6399
2/1/94 828.5012
3/1/94 819.1819
4/5/94 833.8479
5/3/94 832.6697
6/1/94 876.8701
7/1/94 907.1960
8/1/94 916.3720
9/1/94 915.3204
10/3/94 935.7702
11/1/94 974.9721
</TABLE>
- ---------------
(1) Expressed in dollars per ounce.
(2) Expressed in dollars per tonne.
(3) Expressed in dollars per barrel.
S-21
<PAGE> 23
FORM OF SECURITIES
The Securities offered by Holdings for sale in the United States will
initially be evidenced by Certificates in fully registered form. The Securities
offered by Holdings for sale in Europe will be issued in book-entry form and
will be evidenced by one or more registered global certificates as described
under "Book-Entry Form" below.
CONVERSION OPTION
One hundred and eighty calendar days after the closing of the offering,
each Holder of a Certificate will have the option to convert the form of such
Holder's Securities from certificated to book-entry form within a forty-five
calendar day period (the "Conversion Option Period"). In order to be exchanged
for Securities in book-entry form (represented by a beneficial interest in a
Global Security described below), a Certificate must be delivered to the
Depository in the manner referred to below. The Conversion Option Period will
run from May 16, 1995, through June 30, 1995. Certificates received by the
Depository for exchange during the Conversion Option Period will be exchanged
for Securities in book-entry form by the close of business on the Business Day
so received by the Depository (if received by the Depository at its then
applicable cut-off time for same day credit) or on the following Business Day
(if received by the Depository at its then applicable cut-off time for next day
credit). After the last day of the Conversion Option Period, the Depository will
not be required to accept delivery of Certificates for exchange for book-entry
Securities, but may permit Certificates to be so exchanged on a case-by-case
basis. It is anticipated that after the Conversion Option Period, Certificates
delivered to the Depository in proper form for deposit will be accepted by the
Depository for exchange for book-entry Securities, generally within three to
four Business Days after delivery to the Depository. However, there can be no
assurance that such Certificates will be accepted for exchange. Further, there
can be no assurance, with respect to Certificates accepted for exchange, that
exchange will occur within that time period. Securities surrendered at any time
for exchange for book-entry Securities may not be delivered for transfer until
such exchange has been effected. Since Certificates are not required to be
exchanged for Securities in book-entry form, it is likely that not all
Certificates will be so exchanged. Accordingly, Holders purchasing Securities in
secondary market trading may wish to make specific arrangements with brokers or
other participants or indirect participants if they wish to purchase only
Securities in book-entry form and not Certificates.
In order to be exchanged for a Security in book-entry form, a Certificate
must be delivered to the Depository, in proper form for deposit, by a
participant of the Depository. Accordingly, a Holder which is not a participant
must deliver its Certificate, in proper form for deposit, to such a participant
either directly or through an indirect participant or brokerage firm which
maintains an account with the participant, in order to have its Certificate
exchanged for a Security in book-entry form. Such Holders who desire to exchange
their Certificates for Securities in book-entry form should contact their
brokers or other participants or indirect participants to obtain information on
procedures for submitting their Certificates to the Depository, including the
proper form for submission and (during the Conversion Option Period) the cut-off
times for same day and next day exchange. Certificates which are held by the
Holder in nominee or "street" name may be automatically exchanged into
book-entry form by the broker or other entity in whose name such Certificates
are registered, without action of or consent by the beneficial owner of the
related Security (i.e., such beneficial owner need not deliver a Certificate).
Securities in book-entry form, including Certificates which have been
exchanged into book-entry form, may not be exchanged for Certificates except
under the limited circumstances described in the accompanying Prospectus under
"Global Securities."
CERTIFICATES FOR SECURITIES
The Trustee will maintain a register (the "Security Register") for
registering the ownership of and transfers of Securities represented by
Certificates. Prior to due presentment for registration of transfer, Holdings,
the Trustee, and any agent of either of them may deem and treat the person in
whose name a Certificate is registered (the "registered holder") as the absolute
owner of the Securities evidenced by such
S-22
<PAGE> 24
Certificate for any purpose whatsoever, and as the person entitled to exercise
the rights represented by the Securities evidenced thereby, and neither
Holdings, the Trustee, nor any agent of either of them shall be affected by any
notice to the contrary. Accordingly, if a beneficial owner of a Security
evidenced by a Certificate is not the registered holder thereof (for example, if
it holds the Certificate through a broker holding such Certificate in nominee or
"street" name), it may exercise its rights as a Holder only through the
registered holder.
The Trustee shall from time to time register the transfer of any
outstanding Certificates upon surrender thereof at the Trustee's office, duly
endorsed, or accompanied by a written instrument or instruments of transfer in
form satisfactory to the Trustee duly executed by the registered holder thereof,
by the duly appointed legal representative thereof or by its duly authorized
attorney, such signature to be guaranteed by a bank or trust company located, or
with a correspondent office, in The City of New York or by a broker or dealer
which is a member of a national securities exchange. A new Certificate shall be
issued to the transferee upon any such registration of transfer.
At the option of a Holder, Certificates may be exchanged for other
Certificates, representing a like face amount of Securities upon surrender to
the Trustee at the Trustee's office of the Certificates to be exchanged.
Holdings shall thereupon execute, and the Trustee shall countersign and deliver,
one or more new Certificates representing a like principal amount of Securities.
If any Certificate is mutilated, lost, stolen or destroyed, Holdings may in
its discretion execute, and the Trustee may countersign and deliver, in exchange
and substitution for and upon cancellation of the mutilated Certificate, or in
lieu of the lost, stolen or destroyed Certificate, a new Certificate of like
tenor and representing an equivalent principal amount of Securities, but only
(in the case of loss, theft or destruction) upon receipt of evidence
satisfactory to Holdings and the Trustee of such loss, theft or destruction of
such Certificate and security or indemnity, if requested, also satisfactory to
them. Applicants for substitute Certificates must also comply with such other
reasonable regulations and pay such other reasonable charges as Holdings or the
Trustee may prescribe.
Payments on Securities in certificated form will be payable when due at the
office of the Trustee, Citibank, N.A., Corporate Trust Services, at 111 Wall
Street, 5th Floor, New York, New York 10043.
BOOK-ENTRY FORM
Securities held in book-entry form will be held in the form of one or more
global certificates (the "Global Security") registered in the name of the
nominee of the depository, The Depository Trust Company ("DTC", and together
with any successor depository, the "Depository"). Holdings anticipates that the
Depository's initial nominee will be CEDE & Co. ("CEDE"). Accordingly, CEDE is
expected to be the registered holder of the Securities in book-entry form.
Holders of Securities in book-entry form may elect to hold interests in the
Global Securities through DTC in the United States or through Cedel, S.A.
("CEDEL") or Morgan Guaranty Trust Company of New York, Brussels Office as
operator of the Euroclear System ("Euroclear") in Europe, if they are
participants in such systems, or indirectly through organizations which are
participants in such systems. Euroclear and CEDEL will hold interests on behalf
of their participants through their respective depositaries, Morgan Guaranty
Trust Company of New York ("Morgan") and Citibank N.A. ("Citibank"), which in
turn will hold such interests in accounts as participants in DTC. DTC, Euroclear
and CEDEL have advised Holdings as follows:
DTC is a limited-purpose trust company which was created to hold securities
for its participating organizations ("participants") and to facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers (including the Underwriter), banks and trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
S-23
<PAGE> 25
Persons who are not participants may beneficially own securities held by DTC
only through participants or indirect participants.
Euroclear and CEDEL hold securities for participating organizations and
facilitate the clearance and settlement of securities transactions between their
respective participants through electronic book-entry changes in accounts of
such participants. Euroclear and CEDEL provide to their participants, among
other things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing.
Euroclear and CEDEL interface with domestic securities markets. Euroclear and
CEDEL participants are financial institutions such as underwriters, securities
brokers and dealers, banks, trust companies and certain other organizations.
Indirect access to Euroclear or CEDEL is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Euroclear or CEDEL participant either directly or
indirectly.
DTC's nominee for all purposes will be considered the sole owner or holder
of the Securities which are held in book-entry form. Holders which own
Securities in book-entry form will not be entitled to have Securities registered
in their names, will not be considered the holders thereof under the Senior
Indenture, and will not be entitled to exchange their book-entry Securities for
definitive form Certificates, except under the limited circumstances described
below.
A Holder that is not a participant will have its ownership of a Security in
book-entry form recorded on or through the records of the brokerage firm or
other entity that maintains such Holder's account. In turn, the total number of
Securities in book-entry form held by an individual brokerage firm for its
clients will be maintained on the records of the Depository in the name of such
brokerage firm (or in the name of a participant that acts as agent for the
Holder's brokerage firm if such firm is not a participant). Therefore, a Holder
must rely upon the foregoing procedures to evidence such Holder's ownership of a
Security in book-entry form. Transfer of ownership of a Security in book-entry
form may be effected only through the Depository, and, if applicable, the
brokerage firm or other entity that maintains the selling Holder's book-entry
account. The laws of some states of the United States and of other jurisdictions
may require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits on transfer and such laws may impair
the ability to own, transfer or pledge securities in book-entry form.
Persons interested in trading in Securities in book-entry form should
determine the locations of both the purchaser's and the seller's accounts in
order to ensure that settlement can be made on the desired date.
Secondary market trading between DTC participants (other than Morgan and
Citibank as depositaries for Euroclear and CEDEL, respectively) will be settled
using the procedures applicable to United States corporate debt obligations in
same-day funds.
Secondary market trading between Euroclear participants and/or CEDEL
participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
When Securities are to be transferred from the account of a DTC participant
(other than Morgan and Citibank as depositaries for Euroclear and CEDEL,
respectively) to the account of a Euroclear participant or a CEDEL participant,
the purchaser must send instructions to Euroclear or CEDEL through a participant
at least one business day prior to settlement. Euroclear or CEDEL, as the case
may be, will instruct Morgan or Citibank, respectively, to receive the
Securities against payment. Payment will then be made by Morgan or Citibank, as
the case may be, to the DTC participant's account against delivery of the
Securities. After settlement has been completed, the Securities will be credited
to the respective clearing system and by the clearing system, in accordance with
its usual procedures, to the Euroclear participant's or CEDEL participant's
account. Credit for the Securities will appear on the next day (European time)
and the cash debit will be back-valued to the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Euroclear or
CEDEL cash debit will be valued instead as of the actual settlement date.
Euroclear participants and CEDEL participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any
S-24
<PAGE> 26
settlement occurring within Euroclear or CEDEL. Under this approach, they may
take on credit exposure to Euroclear or CEDEL until the Securities are credited
to their accounts one day later.
As an alternative, if Euroclear or CEDEL has extended a line of credit to
them, participants can elect not to preposition funds and allow that credit line
to be drawn upon to finance settlement. Under this procedure, Euroclear
participants or CEDEL participants purchasing Securities would incur overdraft
charges for one day, assuming they cleared the overdraft when the Securities
were credited to their accounts.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending Securities to Morgan
or Citibank for the benefit of Euroclear participants or CEDEL participants. The
sale proceeds will be available to the DTC seller on the settlement date. Thus,
to the DTC participant, a cross-market transaction will settle no differently
from a trade between two DTC participants.
Due to time zone differences in their favor, Euroclear and CEDEL
participants may employ their customary procedures for transactions in which
Securities are to be transferred by the respective clearing system, through
Morgan or Citibank, to another DTC participant. The seller must send
instructions to Euroclear or CEDEL through a participant at least one business
day prior to settlement. In these cases, Euroclear or CEDEL will instruct Morgan
or Citibank, as appropriate, to credit the Securities to the DTC participant's
account against payment. The payment will then be reflected in the account of
the Euroclear participant or CEDEL participant the following day, and receipt of
the cash proceeds in the Euroclear or CEDEL participant's account would be
back-valued to the value date (which would be the preceding day, when settlement
occurs in New York). If settlement is not completed on the intended value date
(i.e., the trade fails), receipt of the cash proceeds in the Euroclear or CEDEL
participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use Euroclear or CEDEL and that purchase
Securities from DTC participants for credit to Euroclear participants or CEDEL
participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(i) borrowing through Euroclear or CEDEL for one day (until the
purchase side of the day trade is reflected in their Euroclear or CEDEL
accounts) in accordance with the clearing system's customary procedures;
(ii) borrowing the Securities in the United States from a DTC
participant no later than one day prior to settlement, which would give the
Securities sufficient time to be reflected in their Euroclear account or
CEDEL account in order to settle the sale side of the trade; or
(iii) staggering the value dates for the buy and sell sides of the
trade so that the value date for the purchase from the DTC participant is
at least one day prior to the value date for the sale to the Euroclear
participant or CEDEL participant.
Although DTC, Euroclear and CEDEL have agreed to the procedures described
above in order to facilitate transfers of Securities among participants of DTC,
Euroclear and CEDEL, they are under no obligation to perform or continue to
perform such procedures and such procedures may be modified or discontinued at
any time. Neither Holdings nor the Trustee will have any responsibility for the
performance by DTC, Euroclear or CEDEL or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Holdings understands that under existing industry practices, in the event
that Holdings requests any action of Holders or that Holders which own
Securities in book-entry form desire to give or take any action which Holders
are entitled to give or take under the Senior Indenture, the Depository would
authorize the participants to give or take such action, and such participants
would authorize Holders owning through such participants to give or take such
action or would otherwise act upon the instructions of Holders owning through
them. Accordingly, each Holder which owns a Security in book-entry form must
rely on the
S-25
<PAGE> 27
procedures of the Depository and, if such Holder is not a participant, on the
procedures of the participant through which such Holder owns its Security, to
exercise any rights of a Holder under the Senior Indenture.
Payment of the Settlement Amount with respect to Securities registered in
the name of the Depository or its nominee will be made to the Depository or its
nominee, as the case may be, as the holder of the Global Securities representing
such Securities. None of Holdings, the Trustee or any other agent of Holdings or
any agent of the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests or for supervising or reviewing any records relating to such
beneficial ownership interests. Holdings expects that the Depository, upon
receipt of any Settlement Amount payment in respect of a Global Security, will
credit the accounts of the participants with payment in amounts proportionate to
their respective holdings in principal amount of beneficial interest in such
Global Security as shown on the records of the Depository. Holdings also expects
that payments by participants to Holders will be governed by standing customer
instructions and customary practices, as is now the case with Securities held
for the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such participants.
If at any time (i) the Depository notifies Holdings that it is unwilling or
unable to continue as Depository or (ii) Holdings becomes aware that the
Depository shall no longer be eligible under the Senior Indenture, Holdings
shall appoint a successor Depository. If a successor Depository for the
Securities is not appointed by Holdings within 90 days after any such event,
Holdings will issue, and the Trustee will authenticate and deliver, Securities
in definitive form in an aggregate principal amount equal to the aggregate
principal amount of the Global Securities, in denominations of $25,000 principal
amount, and $5,000 principal amount increments in excess thereof. Such
definitive Securities shall be registered in such name or names as the
Depository shall instruct the Trustee. It is expected that such instructions
will be based upon directions received by the Depository from participants with
respect to ownership of beneficial interests in such Global Securities.
LISTING
Application has been made to list the Securities on the Luxembourg Stock
Exchange. Copies of the constitutional documents of Holdings will be available
for inspection by Holders of Securities, for so long as any Securities are
listed on the Luxembourg Stock Exchange, at the office of Citibank (Luxembourg)
S.A. (the "Luxembourg Paying Agent") at 16, avenue Marie-Therese, L-2132 in
Luxembourg. Copies of the most recent Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q of Holdings will be available to any holders of Securities
free of charge from the office of the Luxembourg Paying Agent in Luxembourg so
long as the Securities are listed on the Luxembourg Stock Exchange. Copies of
the Global Securities and the Senior Indenture will be available for inspection
by holders of Securities, for so long as any Securities are outstanding, during
usual business hours at the specified office of the Luxembourg Paying Agent.
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, special counsel to Holdings,
the following discussion is an accurate summary of certain United States federal
income tax consequences of the ownership of Securities as of the date hereof.
Except where noted, it deals only with Securities held by initial purchasers as
capital assets and does not deal with special situations, such as those of
dealers in securities or currencies, financial institutions, life insurance
companies, persons holding Securities as part of a hedging or conversion
transaction 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. PERSONS CONSIDERING THE
PURCHASE, OWNERSHIP OR DISPOSITION OF 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.
S-26
<PAGE> 28
As used herein, a "United States Holder" of a Security means a Holder that
is a citizen or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. A
"Non-United States Holder" is a Holder that is not a United States Holder.
GENERAL
There are no regulations, cases or rulings directly addressing the
treatment of securities similar to the Security other than the proposed
regulations discussed below. Although not free from doubt, Holdings believes
that the Securities should be treated as debt of Holdings for federal income tax
purposes. Accordingly, Holdings intends to treat the Securities as debt for U.S.
federal income tax purposes and file information returns with the Internal
Revenue Service (the "IRS") consistent with such treatment. The discussion that
follows is based on such approach.
UNITED STATES HOLDERS
Taxation of the Settlement Amount
Under general principles of U.S. federal income tax law, interest is
included in income as ordinary income when paid or accrued, in accordance with a
holder's regular method of accounting. Moreover, in accordance with such
principles, "contingent interest" on debt is generally not includable in income
before the amount of such interest becomes fixed. Accordingly, Holdings intends
to treat amounts payable at Maturity in excess of the principal amount of the
Securities, if any, as contingent interest includable in income by United States
Holders as ordinary income at such time.
There are no regulations, cases or rulings directly applicable to the
treatment of the Securities. The IRS may contend, however, that the Securities
should be treated differently for U.S. federal income tax purposes from the
treatment described above. Moreover, there can be no assurance that regulations
that would apply different rules to the Securities from those described above
will not come into effect and apply retroactively to the Securities. In such
cases, the timing and character of a United States Holder's income could be
affected.
For example, under certain proposed regulations (the "Bifurcation
Regulations"), a Security could be treated for federal income tax purposes as
two separate instruments: (1) a debt instrument of Holdings with a stated
redemption price at maturity equal to its principal amount (the "noncontingent
debt instrument") and (2) a cash settlement option based upon the value of the
Basket that must be exercised by delivering the Security (the "property right").
If the Bifurcation Regulations were to apply to the Securities, the timing of
income could be significantly accelerated. Moreover, the IRS may contend that
rules similar to proposed regulations which were released to replace the
Bifurcation Regulations, but which were withdrawn (the "Withdrawn Regulations"),
should apply to the Securities. Under the Withdrawn Regulations, United States
Holders would be required to accrue some minimum amount of interest income
currently over the life of the Security (based on the estimated value of the
Basket) with the result that all or a portion of amounts realized by a United
States Holder at Maturity or on sale of a Security would be treated as ordinary
income and not capital gain.
As described above, however, Holdings intends to treat the Securities as
requiring no accrual of contingent interest by United States Holders until such
amounts are fixed and Holdings will file information returns with the IRS
consistent with such treatment.
Sale or Exchange of Securities
A United States Holder's tax basis in a Security will, in general, be the
United States Holder's cost therefor, increased by any amounts previously
included in income by the United States Holder. Upon the sale or exchange of a
Security, a United States Holder will recognize gain or loss equal to the
difference between the amount realized and the adjusted tax basis of the
Security. Although the matter is not free from doubt, under current law such
gain or loss should be treated as capital gain or loss. It is possible, however,
that the
S-27
<PAGE> 29
IRS could promulgate regulations that treat all or part of such gain or loss as
ordinary and that such regulations could apply retroactively to the Securities.
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 Holdings or any paying agent of the
Settlement Amount on a Security owned by a Non-United States Holder,
provided (i) that the beneficial owner does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of the 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, (iii) the beneficial owner is not a bank whose receipt of
interest on a Security is described in section 881(c)(3)(A) of the Code and
(iv) 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 Security; and
(c) a 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 Settlement Amount with respect to such Security would not have been, if
received at the time of such individual's death, effectively connected with
the conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Security, or a financial institution holding the 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, citizen or resident. Pursuant to current
temporary Treasury regulations, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that he is not a United States person, citizen or resident (which
certification may be made on an IRS Form W-8 (or successor form)) or (2) a
financial institution holding the 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 Security provides Holdings with a properly executed (1) IRS Form
1001 (or successor form) claiming an exemption from withholding under the
benefit of a tax treaty or (2) IRS Form 4224 (or successor form) stating that
interest paid on the 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.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payment of the
Settlement Amount on a Security and to the proceeds of sale of a Security made
to United States Holders other than certain exempt recipients (such as
corporations). A 31 percent backup withholding tax will apply to such payments
if the United States Holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
No information reporting or backup withholding will be required with
respect to payment of the Settlement Amount by Holdings or any paying agent to
Non-United States Holders if a statement described
S-28
<PAGE> 30
above in (a)(iv) under "Non-United States Holders" has been received and the
payor does not have actual knowledge that the beneficial owner is a United
States person.
In addition, backup withholding and information reporting will not apply if
payment of the Settlement Amount on a 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 Security, or if a foreign office of a broker (as
defined in applicable Treasury regulations) pays the proceeds of the sale of a
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 payment of the Settlement
Amount 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.
Payment of the Settlement Amount on a Security paid to the beneficial owner
of a 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
Security, will be subject to both backup withholding and information reporting
unless the beneficial owner provides the statement referred to in (a)(iv) above
and the payor does not have actual knowledge that the beneficial owner is a
United States person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such Holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated as of November 10, 1994 (the "Underwriting Agreement"), Holdings has
agreed to sell to Lehman Brothers Inc. (the "Underwriter"), and the Underwriter
has agreed to purchase, $25,000,000 principal amount of the Securities.
Holdings has been advised that the Underwriter proposes initially to offer
the Securities to the public at the public offering price set forth on the cover
page of this Prospectus Supplement. After the initial public offering, the
public offering price may be changed.
Lehman Brothers Inc. is a wholly owned subsidiary of Holdings. The
participation of Lehman Brothers Inc. in the offer and sale of the Securities
complies with the requirements of Schedule E of the By Laws of the National
Association of Securities Dealers, Inc. regarding underwriting securities of an
affiliate.
The Underwriter has advised Holdings that it intends to make a market in
the Securities but the Underwriter is not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Securities.
Holdings has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933.
GLOSSARY
Set forth below are definitions of some of the terms used in this
Prospectus Supplement and not defined in the accompanying Prospectus.
"Business Day" means a day of the week which is not a day on which banking
institutions in New York, New York, are authorized or required by law to close.
"Contract" means any of the Aluminum Contract, the Copper Contract, the
Crude Oil Contract, the Lead Contract, the Nickel Contract and the Zinc
Contract.
S-29
<PAGE> 31
"Holder" means, with respect to any certificated Security, the Person in
whose name the certificate is registered in the Security Register and, with
respect to any Global Security, any Beneficial Holder thereof to the extent of
such Beneficial Holder's interest therein.
"Maturity" of any Security means the date on which the Settlement Amount of
such Security becomes due and payable as provided therein or in the Senior
Indenture, whether at Stated Maturity or by declaration of acceleration or
otherwise.
"Trading Day" shall mean a calendar day on which the NYMEX, the LME, the
LBM and any other exchange, the trading prices of which will be used to
determine the Market Price of any Commodity, is scheduled to be open for
business and all of the Commodities are scheduled to be available for trading.
In addition, definitions for the following terms are set forth in this
Prospectus Supplement at the pages indicated:
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
Acceleration Value......................................................... S-17
Aluminum Contract.......................................................... S-13
Basket..................................................................... S-3
Basket Maturity Value...................................................... S-10
Basket Value............................................................... S-4
Bifurcation Regulations.................................................... S-27
Calculation Agent.......................................................... S-4
Calculation Initiation Date................................................ S-3
CEDE....................................................................... S-23
CEDEL...................................................................... S-23
Certificate................................................................ S-2
CIS........................................................................ S-14
Citibank................................................................... S-23
Code....................................................................... S-26
Commodity.................................................................. S-13
Commodity Investments...................................................... S-7
Conversion Option Period................................................... S-22
Copper Contract............................................................ S-14
Crude Oil Contract......................................................... S-14
Depository................................................................. S-23
Determination Day.......................................................... S-8
Determination Period....................................................... S-3
DTC........................................................................ S-23
Euroclear.................................................................. S-23
Fixing Prices.............................................................. S-20
Global Security............................................................ S-23
Hedging Transactions....................................................... S-6
Holdings................................................................... S-3
indirect participants...................................................... S-23
IRS........................................................................ S-27
Lead Contract.............................................................. S-15
LBM........................................................................ S-3
LME........................................................................ S-3
LME Metal.................................................................. S-11
Luxembourg Paying Agent.................................................... S-26
</TABLE>
S-30
<PAGE> 32
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
Market Disruption Event.................................................... S-12
Market Price............................................................... S-10
Morgan..................................................................... S-23
Nickel Contract............................................................ S-15
noncontingent debt instrument.............................................. S-27
Non-United States Holder................................................... S-27
NYMEX...................................................................... S-3
participants............................................................... S-23
Precious Metal............................................................. S-12
property right............................................................. S-27
registered holder.......................................................... S-22
Sectors.................................................................... S-17
Securities................................................................. S-3
Security Register.......................................................... S-22
Settlement Amount.......................................................... S-3
Settlement Price........................................................... S-10
SIB........................................................................ S-19
Stated Maturity Date....................................................... S-3
Underwriter................................................................ S-29
Underwriting Agreement..................................................... S-29
United States Holder....................................................... S-27
Withdrawn Regulations...................................................... S-27
WTI........................................................................ S-14
Zinc Contract.............................................................. S-16
</TABLE>
S-31
<PAGE> 33
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF HOLDINGS SINCE THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary............................... S-3
Use of Proceeds....................... S-6
Special Considerations................ S-6
Description of Securities............. S-9
The Basket............................ S-17
Form of Securities.................... S-22
Certain United States Federal Income
Tax Consequences.................... S-26
Underwriting.......................... S-29
Glossary.............................. S-29
PROSPECTUS
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
Description of Warrants............... 13
Global Securities..................... 20
United States Taxation................ 22
Capital Requirements.................. 22
Plan of Distribution.................. 23
ERISA Matters......................... 24
Legal Opinions........................ 24
Independent Accountants............... 25
</TABLE>
================================================================================
================================================================================
$25,000,000
LEHMAN BROTHERS
HOLDINGS INC.
INDUSTRIAL COMMODITY BASKET
NOTES DUE 1996
---------------------------
PROSPECTUS SUPPLEMENT
NOVEMBER 10, 1994
---------------------------
LEHMAN BROTHERS
================================================================================
<PAGE> 34
LBP11ICB Cover Image (c)1994 Lehman Brothers Holdings Inc.
All Rights Reserved.
