<PAGE> 1
Filed pursuant to Rule 424(b)(2)
Registration No. 33-58548
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 14, 1994)
1,000,000 SUNS(SM)
LEHMAN BROTHERS HOLDINGS INC.
REGIONAL BANK STOCK
UPSIDE NOTE SECURITIES(SM) DUE 1996
------------------------
The Regional Bank Stock Upside Note Securities Due 1996 (the "Securities" or
"SUNS") of Lehman Brothers Holdings Inc. ("Holdings") are being offered at an
issue price (the "Issue Price") of $25 per SUNS. The Stated Maturity of the
Securities is December 5, 1996. The amount payable at Stated Maturity will be
calculated based on the change in the value of a basket of equity securities of
United States bank holding companies (the "Basket"). 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 Stated Maturity and are not subject to any sinking fund.
The amount payable at Maturity (the "Maturity Payment Amount") will equal
the product of (a) the Issue Price and (b) the sum of (i) one and (ii) a
specified percentage (the "Participation Percentage") of the difference between
the Basket Maturity Value (as defined herein) and the Original Basket Value of
100, divided by the Original Basket Value of 100; provided that, the Maturity
Payment Amount will not be less than $23.75. In the event the Basket Maturity
Value is greater than 100, the Participation Percentage will be 95%. If the
Basket Maturity Value is equal to or less than 100, the Participation Percentage
will be 100%. There will be no payments with respect to the Securities prior to
Maturity. For information as to the calculation of the Maturity Payment Amount,
the composition of the Basket and certain tax consequences to holders of the
securities, see "Description of Securities," "Certain United States Federal
Income Tax Consequences" and "The Basket" in this Prospectus Supplement.
PURCHASERS OF SECURITIES SHOULD BE PREPARED TO SUSTAIN A LOSS OF UP TO 5% OF
THE PRINCIPAL AMOUNT OF THEIR SECURITIES IF THE BASKET MATURITY VALUE IS LESS
THAN 100. FOR OTHER INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS, SEE "SPECIAL CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT.
The Securities will originally be issued as certificates in registered form.
Forty-five calendar days after the closing of the offering, each registered
holder 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.
The SUNS have been approved for listing on the American Stock Exchange (the
"AMEX"), subject to notice of issuance, under the symbol "BKG".
Lehman Brothers Inc., a wholly owned subsidiary of Holdings, may, but is not
obligated to, purchase and sell the Securities for its own account for the
purpose of making a market in the Securities.
------------------------
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>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
UNDERWRITING DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS(1) HOLDINGS(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Security.................... $25.00 $0.43 $24.57
- -----------------------------------------------------------------------------------------------------
Total(3)........................ $25,000,000 $430,000 $24,570,000
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Holdings has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting other expenses payable by Holdings estimated at $100,000.
(3) Holdings has granted the Underwriters a 30-day option to purchase up to an
additional 150,000 SUNS solely to cover over-allotments. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Holdings, before deducting expenses, will be
$28,750,000, $494,500 and $28,255,500, respectively. See "Underwriting."
------------------------
The Securities offered by this Prospectus Supplement are offered by the
Underwriters subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the Underwriters and
to certain further conditions. The Underwriters reserve 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
December 5, 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 relating to prevailing market prices at the time of
sale or otherwise. Lehman Brothers Inc. may act as principal or agent in such
transactions.
------------------------
LEHMAN BROTHERS
KEMPER SECURITIES, INC.
OPPENHEIMER & CO., INC.
November 28, 1994
<PAGE> 2
"SUNS" and "Stock Upside Note Securities" are service marks of Lehman
Brothers Inc.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
S-2
<PAGE> 3
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.
Issuer..................... Lehman Brothers Holdings Inc. ("Holdings").
Securities Offered......... 1,000,000 Regional Bank Stock Upside Note
Securities Due 1996 (the "Securities" or "SUNS").
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.
Issue Price................ $25 per SUNS.
Denominations.............. $25 and integral multiples thereof.
Stated Maturity............ December 5, 1996 (the "Stated Maturity").
Interest................... There will be no payments with respect to the
Securities prior to Maturity.
Maturity Payment Amount.... At Stated Maturity each Holder will be entitled to
receive an amount (the "Maturity Payment Amount")
with respect to each $25 principal amount of
Securities equal to the following:
<TABLE>
<S> <C>
Basket Maturity Value - 100
$25 X [ 1 + ( --------------------------- X Participation )]
100 Percentage
</TABLE>
provided that, the Maturity Payment Amount will not
be less than $23.75. The Participation Percentage
will be 95% if the Basket Maturity Value is greater
than 100 and 100% if the Basket Maturity Value is
equal to or less than 100. The basket maturity
value (the "Basket Maturity Value"), will be
determined by Lehman Brothers Inc., an affiliate of
Holdings (the "Calculation Agent"), and, subject to
certain exceptions described herein, will equal the
sum of the products of the Average Market Prices
and the applicable Multipliers for the securities
in the Basket (each a "Basket Security" and
collectively the "Basket Securities"). The average
market price (the "Average Market Price") of a
Basket Security will equal the average (mean) of
the Market Prices (determined as described herein)
of such Basket Security determined on the first ten
Calculation Days occurring during the period
beginning on the twentieth Trading Day prior to
Stated Maturity, and on each succeeding Trading Day
up to and including the eleventh Trading Day prior
to Stated Maturity (the "Calculation Period"). If
there are fewer than ten Calculation Days with
respect to a Basket Security, then the Average
Market Price will equal the average (mean) of the
Market Prices on such Calculation Days, and if
there is only one Calculation Day, the Average
Market Price will equal the Market Price on such
Calculation Day. The multiplier (the "Multiplier")
relating to each Basket Security is specified under
the caption "Description of Securities -- Basket
Securities" below and indicates the number of
shares (or the fraction of one share) of such
Basket Security included in the calculation of the
Basket Maturity Value. The Multipliers will remain
constant for the term of the Securities unless
adjusted for certain corporate events such as stock
splits, reverse stock splits or stock dividends. In
the event of a merger or consolidation of an issuer
of a Basket Security in which such issuer is not
the surviving entity, the value of such Basket
Security will be based on the value of the
consideration received in exchange for such Basket
Security, as adjusted for the accrual of interest.
See "Description of Securities -- Adjustments to
the Multiplier and Basket" and "Description of
Securities -- Maturity Payment Amount." See also
"Description of Securities -- Events of Default and
Acceleration" for a description of payments upon
any acceleration of the maturity of the Securities.
Regional Bank Basket....... The Regional Bank Basket (the "Basket") is made up
of the stocks of 20 corporations operating as bank
holding companies in the United States, 19 of which
operate regional banks and one of which operates a
national
S-3
<PAGE> 4
bank. Ownership of the Securities will not entitle
Holders to receive Basket Securities. The Basket
Securities have significantly different levels of
market value (i.e., the number of shares
outstanding of a security multiplied by the current
price of such security). The original Multipliers
will be determined so that each Basket Security
represents an equal percentage of the Original
Basket Value (as defined below) on the date the
Securities are priced for initial sale to the
public. See "Description of Securities -- Basket
Securities" in this Prospectus Supplement. The
inclusion of a Basket Security in the Basket is not
a recommendation to buy or sell such Basket
Security, and neither Holdings nor any of its
affiliates make any representation as to the
performance of the Basket or any Basket Securities.
Basket Value............... The basket value (the "Basket Value") for any day
will equal the sum of the products of the most
recently available Market Prices and the applicable
Multipliers for the Basket Securities. The Basket
Maturity Value, however, is calculated based on
Average Market Prices for certain days. As long as
SUNS are listed on the AMEX, the AMEX intends to
calculate and disseminate the value of the Basket
based on the most recently reported prices at
approximately 15 second intervals during AMEX
business hours and the Basket Value at the end of
such day to vendors via the facilities of the AMEX
Tape under the symbol "BXK." See "Description of
Securities -- Maturity Payment Amount" in this
Prospectus Supplement.
Original Basket Value...... Based on the individual prices of the Basket
Securities on the date that the Securities are
priced for initial offering to the public, the
Multiplier for each Basket Security will be
initially set so that the Basket Value on such date
(the "Original Basket Value") will equal 100.
Special Considerations..... The Securities are subject to certain special
considerations. Investors should be aware that if
the Basket Maturity Value is less than 100, at
Maturity Holders will receive a Maturity Payment
Amount that is up to 5% less than the Issue Price,
even if the value of the Basket as of some interim
period or periods prior to the Calculation Period
may have exceeded 100, because the Maturity Payment
Amount is calculated on the basis of the Basket
Maturity Value only. The Basket Maturity Value does
not reflect the payment of dividends on the Basket
Securities and therefore the yield based on the
appreciation of the Basket, if any, for the period
from the date of determination of the Original
Basket Value through the end of the Calculation
Period will not produce the same yield as if the
Basket Securities were purchased and held for a
similar 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 principal amount thereof, if,
among other things, the Basket Value at such time
is below, equal to or not sufficiently above the
Original Basket Value. It is expected that the
secondary market for the Securities will be
affected by a number of factors, including changes
in interest rates, the volatility of the Basket
Value, the time remaining to Stated Maturity and
changes in dividend rates. See "Special
Considerations" herein.
Holders of the Securities will receive the Maturity
Payment Amount at Maturity and will not have any
right at any time to receive any of the Basket
Securities or any ownership right or interest in
such Basket Securities, even though the return on
the investment in the Securities is based on the
value of the Basket.
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 risks specific to
the banking industry. See "The Basket -- The
Banking Industry" in this Prospectus Supplement.
Investors should also consider the tax consequences
of investing in the Securities. See "Certain United
States Federal Income Tax Consequences" in this
Prospectus Supplement.
S-4
<PAGE> 5
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 Maturity Payment Amount (described below under
"Description of Securities -- Maturity Payment Amount").
SPECIAL CONSIDERATIONS
PAYMENT AT MATURITY
If the Basket Maturity Value is less than 100, the Maturity Payment Amount
with respect to the Securities will be up to 5% less than the Issue Price. This
will be true even though the value of the Basket as of some interim period or
periods prior to the Calculation Period may have exceeded 100, because the
Maturity Payment Amount is calculated on the basis of the Basket Maturity Value
only. PURCHASERS OF SECURITIES SHOULD BE PREPARED TO SUSTAIN A LOSS OF UP TO 5%
OF THE PRINCIPAL AMOUNT OF THEIR SECURITIES.
Even if the principal of the Securities is fully returned, such return of
principal will not reflect any opportunity cost implied by inflation and other
factors relating to the time value of money.
The Basket Maturity Value does not reflect the payment of dividends on the
Basket Securities and therefore the yield based on the appreciation of the
Basket, if any, for the period from the date of determination of the Original
Basket Value through the end of the Calculation Period will not produce the same
yield as if the Basket Securities were purchased and held for a similar period.
TRADING
The Securities have been approved for listing on the AMEX, subject to
notice of issuance. 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 the Original Basket
Value of 100. However, 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 100. A discount could also result from increased interest
rates, increased dividends or decreased volatility of the Basket Securities.
Before selling Securities, a Holder of Securities should carefully consider,
among other things, (i) the trading price of the Securities, (ii) the Basket
Value at the time, (iii) the time remaining to Stated Maturity, (iv) prevailing
interest rates and (v) any related transaction costs.
The trading value of the Securities may be affected by a number of
interrelated factors, including those listed below. The relationship among these
factors 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, if U.S. interest rates increase, the
value of the Securities is expected to decrease. If U.S. interest rates
decrease, the value of the Securities is expected to increase.
Volatility of the Basket Value. If the volatility of the Basket Value
increases, the trading value of the Securities is expected to increase. If
the volatility of the Basket Value decreases, the trading value of the
Securities is expected to decrease.
Time Remaining to Stated Maturity. The Securities may trade at a
value other than that which may be inferred from the level of interest
rates and the Basket Value. This difference may be due to expectations
concerning interest rates, volatility and the value of the Basket Value
during the period prior to Stated Maturity. As the time remaining to Stated
Maturity decreases, this difference in value is expected to decrease.
S-5
<PAGE> 6
Dividend Rates. If dividend rates on the stocks comprising the Basket
Securities increase, the value of the Securities is expected to decrease.
Conversely, if dividend rates on the Basket Securities decrease, the value
of the Securities is expected to increase.
OTHER CONSIDERATIONS
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 risks specific to the banking industry.
See "The Basket -- The Banking Industry" in this Prospectus Supplement.
Investors should also consider the tax consequences of investing in the
Securities. See "Certain United States Federal Income Tax Consequences" in this
Prospectus Supplement.
S-6
<PAGE> 7
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.
Certain capitalized terms used herein have the meanings ascribed thereto in
the accompanying Prospectus. Reference is also made to the Glossary for certain
defined terms used herein and the locations of other defined terms used herein.
The aggregate number of SUNS to be issued will be 1,000,000, subject to the
over-allotment option granted by Holdings to the Underwriters (see
"Underwriting" in this Prospectus Supplement). The Securities will be issued at
100% of their principal amount in denominations of $25 and integral multiples
thereof. The Securities will mature on December 5, 1996.
The Securities are not redeemable by Holdings or repayable at the option of
any Holder prior to Stated Maturity 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. There will be
no payments with respect to the Securities prior to Maturity.
MATURITY PAYMENT AMOUNT
At Stated Maturity each Holder will be entitled to receive an amount with
respect to each $25 principal amount of Securities equal to the following:
<TABLE>
<S> <C>
Basket Maturity Value - 100
$25 X [ 1 + ( --------------------------- X Participation )]
100 Percentage
</TABLE>
provided that, the Maturity Payment Amount will not be less than $23.75. The
Participation Percentage will be 95% if the Basket Maturity Value is greater
than 100 and 100% if the Basket Maturity Value is equal to or less than 100. The
Basket Maturity Value will be determined by Lehman Brothers Inc. as Calculation
Agent. The Basket Maturity Value, subject to certain exceptions described
herein, will equal the sum of the products of the Average Market Prices and the
applicable Multipliers for each Basket Security. The Average Market Price of a
Basket Security will equal the average (mean) of the Market Prices (determined
as described herein) of such Basket Security determined on the first ten
Calculation Days occurring during the period beginning on the twentieth Trading
Day prior to Stated Maturity and on each succeeding Trading Day up to and
including the eleventh Trading Day prior to Stated Maturity. If there are fewer
than ten Calculation Days with respect to a Basket Security, then the Average
Market Price will equal the average (mean) of the Market Prices on such
Calculation Days, and if there is only one Calculation Day, the Average Market
Price will equal the Market Price on such Calculation Day. The Multiplier
relating to each Basket Security is specified under the caption "Description of
Securities -- Basket Securities" below and indicates the number of shares
(or the fraction of one share) of such Basket Security included in the
calculation of the Basket Maturity Value. The Multipliers will remain constant
for the term of the Securities unless adjusted for certain corporate events such
as stock splits, reverse stock splits or stock dividends. See "Description of
Securities -- Basket Securities -- Adjustments to the Multiplier and Basket" in
this Prospectus Supplement. "Calculation Day" with respect to a Basket Security
means any Trading Day during the Calculation Period on which a Market Disruption
Event has not occurred. If a Market Disruption Event occurs on all Trading Days
during
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<PAGE> 8
the Calculation Period then the eleventh scheduled Trading Day prior to Stated
Maturity will be deemed a Calculation Day, notwithstanding the Market Disruption
Event.
"Market Price," which will be determined by the Calculation Agent based on
information reasonably available to it, means for a Calculation Day the
following:
(i) If the Basket Security is listed on a national securities exchange
or is a NASDAQ National Market System ("NASDAQ NMS") security, Market Price
means the last reported sale price at 4:00 p.m., New York City time,
regular way, on such day on the principal securities exchange registered
under the Securities Exchange Act of 1934 on which such Basket Security is
listed or admitted to trading or NASDAQ NMS, as the case may be.
(ii) If the Basket Security is not listed on a national securities
exchange or is not a NASDAQ NMS security, Market Price means the last
reported sale price on the over-the-counter market.
As used herein, "Trading Day" shall mean a day on which trading is
generally conducted on the New York Stock Exchange ("NYSE"), AMEX and NASDAQ NMS
and in the over-the-counter market for equity securities as determined by the
Calculation Agent.
"Market Disruption Event" with respect to a Basket Security means any of
the following events as determined by the Calculation Agent:
(i) the suspension or material limitation in the trading of such
Basket Security for more than two hours of trading or during the period
one-half hour prior to the time that such Basket Security is to be priced
(for purposes of this definition, limitations pursuant to NYSE Rule 80A (or
any applicable rule or regulation enacted or promulgated by the NYSE, any
other self regulatory organization or the Securities and Exchange
Commission of similar scope as determined by the Calculation Agent) on
trading during significant market fluctuations shall be considered
"material"),
(ii) the suspension or material limitation (whether by reason of
movements in price otherwise exceeding levels permitted by the relevant
exchange or otherwise) in the trading of option contracts related to a
Basket Security traded on any exchange for more than two hours of trading
or during the period one-half hour prior to the time that such Basket
Security is to be priced, or
(iii) a banking moratorium has been declared by federal or any state
authorities.
For the purposes of this definition, 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 an announced change in the regular business hours of
the relevant exchange.
All percentages resulting from any calculation on 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.
S-8
<PAGE> 9
BASKET SECURITIES
The stocks listed below will be used to calculate the value of the Basket.
Holders of the Securities will not have any right to receive the Basket
Securities. The following table sets forth the Basket Securities, the primary
exchange on which the Basket Securities are traded, the market capitalization of
the respective issuers of the Basket Securities and the initial Multipliers.
Each Basket Security will initially represent 5.0% of the Original Basket Value.
<TABLE>
<CAPTION>
APPROXIMATE
MARKET VALUE
PRIMARY OF ISSUER OF
ISSUER OF THE EXCHANGE OF BASKET INITIAL
BASKET SECURITY BASKET SECURITY SECURITY(1) MULTIPLIER
--------------------------------------------------------------- ----------------- ------------ -----------
($MM)
<C> <S> <C> <C> <C>
1. Bancorp Hawaii, Inc. .......................................... NYSE 1,071.64 0.1970443
2. Barnett Banks, Inc. ........................................... NYSE 3,806.38 0.1273885
3. Baybanks, Inc. ................................................ NASDAQ NMS 1,004.61 0.0945626
4. Citizens Bancorp............................................... NASDAQ NMS 395.48 0.1886792
5. City National Corporation...................................... NYSE 434.72 0.5194805
6. CoreStates Financial Corp. .................................... NYSE 3,535.92 0.1990050
7. First American Corporation..................................... NASDAQ NMS 715.71 0.1826484
8. First Chicago Corporation...................................... NYSE 4,286.67 0.1078167
9. Hibernia Corporation........................................... NYSE 761.47 0.6349206
10. Mercantile Bancorporation Inc.................................. NYSE 1,352.44 0.1600000
11. Michigan National Corporation.................................. NASDAQ NMS 1,152.45 0.0664452
12. Midlantic Corporation.......................................... NASDAQ NMS 1,364.99 0.1923077
13. North Fork Bancorporation, Inc. ............................... NYSE 203.77 0.3539823
14. Provident Bankshares Corporation............................... NASDAQ NMS 151.09 0.2409639
15. Summit Bancorporation.......................................... NASDAQ NMS 574.26 0.2631579
16. U.S. Bancorp................................................... NASDAQ NMS 2,252.05 0.2185792
17. UJB Financial Corp. ........................................... NYSE 1,339.70 0.2051282
18. Union Planters Corporation..................................... NYSE 531.00 0.2395210
19. UST Corp. ..................................................... NASDAQ NMS 179.51 0.4878049
20. Vermont Financial Services Corp. .............................. NASDAQ NMS 92.55 0.2469136
</TABLE>
- ---------------
(1) The approximate total market value of the issuer of a Basket Security was
calculated by multiplying the most recent publicly available number of
outstanding shares of the Basket Security of such issuer by the Market Price
for such shares on November 28, 1994.
The initial Multiplier relating to each Basket Security will indicate the
number of shares (or the fraction of one share) of such Basket Security, given
the market price of such Basket Security, required to be included in the
calculation of the Original Basket Value so that each Basket Security represents
an equal percentage (i.e., 5.0%) of the Original Basket Value. The price of each
Basket Security used to calculate the initial Multiplier relating to each such
Basket Security will be the closing price of such Basket Security on the date
that the Securities are priced by Holdings for initial sale to the public. The
respective Multipliers will remain constant for the term of the Securities
unless adjusted for certain corporate events, as described below.
The Basket Value, for any day, will equal the sum of the products of the
most recently available Market Prices for the most recent Trading Day with
respect to each Basket Security and the applicable Multipliers for the Basket
Securities. The Basket Maturity Value, however, is calculated based on the
average Market Prices for certain days.
The AMEX has informed Holdings that, as long as SUNS are listed on the
AMEX, it intends to calculate and disseminate the value of the Basket based on
the most recently reported prices at approximately 15 second intervals during
AMEX business hours and the Basket Value at the end of such day to vendors via
the facilities of the AMEX Tape under the symbol "BXK." In the event a Basket
Security is converted into a Cash Component (as defined below), the interest
that has accrued on any given day will only be reflected in the Basket Value
quoted by the AMEX at the end of such day and not in the values disseminated at
interim periods during the day.
S-9
<PAGE> 10
ADJUSTMENTS TO THE MULTIPLIER AND BASKET
The Multiplier with respect to any Basket Security and the Basket will be
adjusted by the Calculation Agent as follows:
1. If a Basket Security is subject to a stock split or reverse stock
split then once such split has become effective, the Multiplier relating to
such Basket Security will be adjusted to equal the product of the number of
shares outstanding after such split has become effective with respect to
each share of such Basket Security outstanding immediately prior to the
effectiveness of such split and the prior Multiplier.
2. If a Basket Security is subject to an extraordinary stock dividend
or extraordinary stock distribution (i.e., issuance of additional shares of
the Basket Security other than in lieu of an ordinary cash dividend) that
is given equally to all holders of shares of the issuer of such Basket
Security, then once such Basket Security is trading ex-dividend, the
Multiplier will be adjusted so that the new Multiplier shall equal the
former Multiplier plus the product of the number of shares of such Basket
Security issued with respect to one such share of Basket Security and the
prior Multiplier.
3. If the issuer of a Basket Security is being liquidated or
dissolved or is subject to a proceeding under any applicable bankruptcy,
insolvency or other similar law such Basket Security will continue to be
included in the Basket so long as a Market Price for such Basket Security
is available. Subject to paragraph 7 below, if a Market Price is no longer
available for a Basket Security for whatever reason, including the
liquidation or dissolution of the issuer of such Basket Security or the
subjection of the issuer of such Basket Security to a proceeding under any
applicable bankruptcy, insolvency or other similar law, then the value of
such Basket Security will equal zero in connection with calculating the
Basket Value and the Basket Maturity Value for so long as no Market Price
is available, and no attempt will be made to find a replacement stock or
increase the value of the Basket to compensate for the deletion of such
Basket Security.
4. If the issuer of a Basket Security has been subject to a merger or
consolidation and is not the surviving entity and holders of such Basket
Security are entitled to receive cash or securities in exchange for such
Basket Security, then a value for such Basket Security will be determined
(i) in the case of cash, at the time of receipt by such holders and will
equal the amount of such cash consideration, and (ii) in the case of
securities, on the first Trading Day on which such securities are traded
regular way, and will equal the Market Price of such securities (in each
case (i) and (ii), the "Cash Component"); provided, that if such securities
do not have a Market Price, the Cash Component shall be the fair market
value of such securities, as determined by the Calculation Agent. The Cash
Component, as adjusted for the accrual of interest described below, will be
constant for the remaining term of the Securities. No adjustment will be
made to the Multiplier of such Basket Security.
The Cash Component will accrue interest at a rate equal to the London
Inter-Bank Offered Rate ("LIBOR") with a term equal to the period of time
from the Interest Commencement Date (as defined below) to December 5, 1996
(the "Specified Maturity"), determined and fixed (i) in the case of cash,
on the first Business Day that is immediately following the date of
determination of such Cash Component and (ii) in the case of securities, on
the fourth Business Day following the date of determination of such Cash
Component (in each case (i) and (ii), the "LIBOR Determination Date").
LIBOR will accrue on such Cash Component commencing on the second London
Business Day following such LIBOR Determination Date (the "Interest
Commencement Date") up to and including the Specified Maturity.
LIBOR, will be determined by the Calculation Agent in accordance with
the following provisions:
(i) On the relevant LIBOR Determination Date, LIBOR will be
determined through the application of linear interpolation by reference
to the offered rates for deposits of not less than U.S.$1,000,000 having
a maturity immediately before and immediately after the Specified
Maturity, commencing on the Interest Commencement Date, which appear
either (a) if the Specified Maturity is one year or less from the
relevant LIBOR Determination Date, on the display designated as Page
3750 on the Dow Jones Telerate Service (or such other page as may
replace Page 3750 on that service for the purpose of displaying London
Interbank offered rates of major banks) ("Telerate
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<PAGE> 11
Page 3750"), or (b) if the Specified Maturity is more than one year from
the relevant LIBOR Determination Date, on each of Telerate Page 3750 and
on the display designated as page "SWAP" on the Reuter Monitor Money
Rates Service (or such other page as may replace the SWAP page on that
service for the purpose of displaying London Interbank offered rates of
major banks) ("Reuters-SWAP"), in each case as of 11:00 A.M., London
time; provided that if there is an offered rate for the Specified
Maturity, then LIBOR will be such offered rate. If such offered rates do
not appear, LIBOR with respect to such LIBOR Determination Date will be
determined as described in (ii) below.
(ii) With respect to a LIBOR Determination Date on which no such
offered rates appear on Telerate Page 3750 or Reuters SWAP as described
in (i) above, LIBOR will be determined on the basis of the rates at
approximately 11:00 A.M., London time, on such LIBOR Determination Date,
at which deposits in U.S. dollars having the Specified Maturity are
offered to prime banks in the London Interbank market by four major
banks in the London Interbank market selected by the Calculation Agent
commencing on the Interest Commencement Date and in a principal amount
equal to an amount not less than U.S.$1,000,000 that in the Calculation
Agent's judgment is representative for a single transaction in such
market at such time (a "Representative Amount"). The Calculation Agent
will request the principal London office of each of such banks to
provide a quotation of its rate. If at least two such quotations are
provided, LIBOR with respect to such LIBOR Determination Date will be
calculated by reference to the arithmetic mean of such quotations. If
fewer than two quotations are provided, LIBOR with respect to such LIBOR
Determination Date will be calculated by reference to the arithmetic
mean of the rates quoted at approximately 11:00 A.M., New York City
time, on such LIBOR Determination Date by three major banks in The City
of New York, selected by the Calculation Agent, for loans in U.S.
dollars to leading European banks having the Specified Maturity
commencing on the Interest Commencement Date and in a Representative
Amount; provided, however, that if fewer than three banks selected as
aforesaid by the Calculation Agent are quoting as mentioned in this
sentence, LIBOR with respect to such Cash Component will be the LIBOR as
last in effect.
"London Business Day" means any day on which dealings in deposits in
U.S. dollars are transacted in the London interbank market.
The value of any Basket Security converted into a Cash Component as of
any given day will equal the sum of the Cash Component and all interest
accrued thereon as of such day. The interest that has accrued on any given
day will only be reflected in the Basket Value quoted by the AMEX at the
end of such day and not in the values disseminated at interim periods
during the day. For purposes of calculating the Basket Maturity Value, the
value of any such Basket Security will equal the sum of the Cash Component
and all interest accrued up to and including the Specified Maturity.
Interest will not be compounded.
5. If all the Basket Securities of any class or series of an issuer
are converted into or exchanged for the same or a different number of
shares of any class or classes of equity security other than such Basket
Security, whether by capital reorganization, recapitalization,
reclassification or otherwise, (other than pursuant to paragraph 4 above)
then, once such conversion has become effective, the former Basket Security
will be removed from the Basket and such new equity securities will be
added to the Basket as new Basket Securities. The Multiplier for each such
new Basket Security will equal the product of the last value of the
Multiplier with respect to the former Basket Security and the number of
shares of such new Basket Security issued with respect to one share of the
former Basket Security.
6. If the issuer of a Basket Security issues to all of its
shareholders equity securities of an issuer other than the issuer of the
Basket Security, then such new equity securities will be added to the
Basket as a new Basket Security. The Multiplier for such new Basket
Security will equal the product of the last value of the Multiplier with
respect to the Basket Security for which the new Basket Security is being
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<PAGE> 12
issued (the "Original Basket Security") and the number of shares of the new
Basket Security issued with respect to one share of the Original Basket
Security.
7. If a Basket Security is subject to an extraordinary dividend or an
extraordinary distribution (including upon liquidation or dissolution) of
cash or other property of any kind (other than any such dividend or
distribution otherwise addressed in the preceding paragraphs) which is
received equally by all holders of such Basket Securities, then the
Calculation Agent shall determine the fair market value, if any, of such
cash or other property received in respect of each share of such Basket
Security and the Basket shall thereafter be deemed to include an amount
equal to the product of the Multiplier on such date and such fair market
value.
No adjustments of any Multiplier of a Basket Security will be required
unless such adjustment would require a change of at least 1% in the Multiplier
then in effect. The Multiplier resulting from any of the adjustments specified
above will be rounded to the nearest one thousandth with five ten-thousandths
being rounded upward.
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<PAGE> 13
THE BASKET
GENERAL
While the Basket consists of stocks of issuers that operate as bank holding
companies in the United States, the Basket is not intended to provide an
indication of the pattern of price movements of common stocks of bank holding
companies generally. Nineteen of the 20 bank holding companies whose stocks
comprise the Basket are engaged in the regional banking business and one is
engaged in the national banking business. Each of the issuers of a Basket
Security files certain information reports with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934. Such
reports generally contain a description of the business of the issuer, financial
statements and certain other information which may be material to potential
investors in the Securities. THE INCLUSION OF A BASKET SECURITY IN THE BASKET IS
NOT A RECOMMENDATION TO BUY OR SELL SUCH BASKET SECURITY, AND NEITHER HOLDINGS
NOR ANY OF ITS AFFILIATES MAKE ANY REPRESENTATION TO ANY PURCHASER OF SECURITIES
AS TO THE PERFORMANCE OF THE BASKET OR ANY BASKET SECURITY.
THIS PROSPECTUS SUPPLEMENT RELATES ONLY TO THE SUNS OFFERED HEREBY AND DOES
NOT RELATE TO THE BASKET SECURITIES. ALL DISCLOSURES CONTAINED IN THIS
PROSPECTUS SUPPLEMENT REGARDING THE ISSUERS OF THE BASKET SECURITIES ARE DERIVED
FROM THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING PARAGRAPH.
NEITHER HOLDINGS NOR THE UNDERWRITERS HAVE VERIFIED EITHER THE ACCURACY OR THE
COMPLETENESS OF THE INFORMATION CONCERNING THE ISSUERS OF THE BASKET SECURITIES
INCLUDED THEREIN. THUS, THERE CAN BE NO ASSURANCE THAT ALL EVENTS OCCURRING
PRIOR TO THE DATE HEREOF (INCLUDING EVENTS THAT WOULD AFFECT THE ACCURACY OR
COMPLETENESS OF THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING
PARAGRAPH) THAT WOULD AFFECT THE TRADING PRICE OF THE BASKET SECURITIES HAVE
BEEN PUBLICLY DISCLOSED. BECAUSE THE AMOUNT PAYABLE AT MATURITY IS RELATED TO
THE TRADING PRICE OF THE BASKET SECURITIES, SUCH EVENTS, IF ANY, WOULD ALSO
AFFECT THE TRADING PRICE OF THE SUNS. HOLDINGS DOES NOT INTEND TO FURNISH TO
HOLDERS OF SUNS SUBSEQUENT INFORMATION WITH RESPECT TO THE ISSUERS OF THE BASKET
SECURITIES.
Holdings or its affiliates may presently or from time to time engage in
business with one or more of the issuers of the Basket Securities or with
persons seeking to acquire such issuers, including providing advisory services
to such issuers or other persons, including merger and acquisition advisory
services. In the course of such business, Holdings or its affiliates may acquire
non-public information with respect to such issuers and, in addition, one or
more affiliates of Holdings may publish research reports with respect to such
issuers. The actions described in the preceding sentences, including merger and
acquisition advisory services, may directly adversely effect the Market Prices
of the Basket Securities. Holdings does not make any representation to any
purchaser of a Security with respect to any matters whatsoever relating to such
issuers. Any prospective purchaser of a Security should undertake an independent
investigation of the issuers of the Basket Securities as in its judgment is
appropriate to make an informed decision with respect to an investment in the
Securities.
THE BANKING INDUSTRY
The commercial banking industry in the United States is (i) subject to
intense competition, (ii) extensively regulated, (iii) facing significant
economic, regulatory and political risks and (iv) undergoing extensive
consolidation -- each of which affects the prices of the equity securities of
commercial banks and their holding companies, including the stocks in the
Basket.
Most commercial banking organizations and their affiliates face intense
competition across many product lines from other commercial banks, savings
banks, savings and loan associations, investment advisory firms, finance
companies, mutual funds, insurance firms, brokerage firms and credit unions,
many of which are not subject to the same or even similar regulatory burdens and
restrictions and some of which for a variety of reasons are larger and have
significantly more resources.
The activities of commercial banks and their holding companies and
affiliates are subject to extensive regulation under both federal and state law.
The activities of such organizations are typically limited to those
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<PAGE> 14
expressly provided for by law or otherwise considered necessary or incidental to
carrying on the business of banking or closely related thereto, precluding such
organizations in many cases from unrestricted participation in the financial
services industry, particularly in the insurance and securities areas. Not only
does such regulation restrict the types of activities in which such entities are
engaged and the services offered, such regulation also imposes substantial
restrictions on the manner in which such services and products are provided.
Such restrictions include, for example, limitations on places of business and
extensive customer disclosure requirements. Although the geographical
restrictions that were historically imposed on the locations of offices of
commercial banks have undergone substantial relaxation over the past ten years
and, as a result of recently enacted federal interstate banking legislation,
will be further relaxed over the next several years, as a result of these
restrictions many commercial banking organizations, including many of those in
the Basket, operate in a relatively small geographic area in contrast to many of
their non-bank competitors. In addition, commercial banking organizations are
subject to various affirmative regulatory obligations not otherwise imposed upon
many of their competitors. These include capital requirements, obligations to
pay deposit insurance premiums and maintain certain non-interest bearing
reserves with the Federal Reserve and requirements under various community
reinvestment type laws.
Most commercial banks face various economic, regulatory and political
risks. Most of the significant assets of a commercial banking organization are
financial assets the underlying value of which may fluctuate with changes in
interest rates or the underlying credit-worthiness of the obligor or borrower.
Many commercial banking organizations operate in a relatively small geographic
area, resulting in concentration risks and subjecting the performance and
financial condition of the organization in many cases directly to the status of
the local economies in which it operates. Commercial banks also face the ongoing
regulatory and political risk of even more expansive and costly regulation as
well as the risk of potentially significant regulatory sanctions should they be
found to have serious operational deficiencies or impaired results of operations
or financial condition. The imposition of such sanctions can have a
significantly adverse effect on a bank's results of operations and financial
condition.
As a result of significant overcapacity in the industry, the relaxation of
geographic restrictions, economies of scale and a variety of other factors, the
commercial banking industry in the United States has undergone extensive
consolidation during the last ten years and this process is expected to continue
in the near future.
HISTORICAL INFORMATION
The following table sets forth the high and low price for each of the
Basket Securities as reported on the exchange in which it trades, during 1991,
1992, 1993 and during 1994 (through November 28, 1994), and the closing price on
December 31, 1991, 1992, and 1993 and on November 28, 1994. The historical
prices of the Basket Securities should not be taken as an indication of future
performance, and no assurance can be given that the prices of the Basket
Securities will increase sufficiently to cause the beneficial owners of the
Securities to receive an amount greater than the Minimum Maturity Payment Amount
at Stated Maturity. The historical stock prices set forth herein have been
adjusted to reflect certain corporate events that affected the prices of the
Basket Securities, including, but not limited to, scrips issues, rights issues,
stock splits, reverse splits, stock dividends, spin-offs and extraordinary
dividends. Certain adjustments to the Multiplier and the Basket will be made by
the Calculation Agent as set forth under "Description of
Securities -- Adjustments to the Multiplier and Basket;" such adjustments may
not correspond to the adjustments made in determining the historical stock
prices set forth herein.
<TABLE>
<CAPTION>
BASKET SECURITIES HIGH LOW LAST
- ----------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Bancorp Hawaii, Inc.
1991........................................................... $31.83 $18.89 $30.00
1992........................................................... 34.67 26.83 29.33
1993........................................................... 35.92 26.67 27.33
1994 (through November 28)..................................... 34.75 24.13 25.38
Barnett Banks, Inc.
1991........................................................... 36.38 15.50 33.50
1992........................................................... 43.63 31.00 41.25
1993........................................................... 50.38 37.38 41.50
1994 (through November 28)..................................... 48.13 37.25 39.25
</TABLE>
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<TABLE>
<CAPTION>
BASKET SECURITIES HIGH LOW LAST
- ----------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Baybanks, Inc.
1991........................................................... $20.00 $ 9.25 $19.13
1992........................................................... 41.00 18.50 40.75
1993........................................................... 52.25 37.75 50.75
1994 (through November 28)..................................... 65.25 49.25 52.88
Citizens Bancorp
1991........................................................... 21.00 14.75 16.25
1992........................................................... 22.75 15.75 22.75
1993........................................................... 31.75 21.75 27.00
1994 (through November 28)..................................... 31.50 25.00 26.50
City National Corporation
1991........................................................... 15.75 8.63 11.88
1992........................................................... 16.00 4.63 6.63
1993........................................................... 11.63 6.38 7.50
1994 (through November 28)..................................... 12.13 7.13 9.63
CoreStates Financial Corp.
1991........................................................... 24.31 12.00 23.94
1992........................................................... 28.94 21.00 28.56
1993........................................................... 30.19 25.13 26.13
1994 (through November 28)..................................... 29.13 22.88 25.13
First American Corporation
1991........................................................... 18.25 6.00 18.00
1992........................................................... 28.13 18.00 27.50
1993........................................................... 34.50 25.25 32.00
1994 (through November 28)..................................... 35.00 26.38 27.38
First Chicago Corporation
1991........................................................... 28.75 15.63 24.63
1992........................................................... 37.75 22.88 36.75
1993........................................................... 50.63 35.50 43.25
1994 (through November 28)..................................... 55.50 41.13 46.38
Hibernia Corporation
1991........................................................... 8.25 2.00 2.75
1992........................................................... 7.00 2.50 5.88
1993........................................................... 9.13 5.50 7.75
1994 (through November 28)..................................... 9.13 7.25 7.88
Mercantile Bancorporation Inc.
1991........................................................... 25.17 12.67 25.08
1992........................................................... 32.17 23.17 32.17
1993........................................................... 37.67 29.08 30.08
1994 (through November 28)..................................... 39.25 29.75 31.25
Michigan National Corporation
1991........................................................... 42.00 14.25 41.50
1992........................................................... 52.50 40.25 51.25
1993........................................................... 65.00 49.75 57.50
1994 (through November 28)..................................... 82.50 54.63 75.25
</TABLE>
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<TABLE>
<CAPTION>
BASKET SECURITIES HIGH LOW LAST
- ----------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Midlantic Corporation
1991........................................................... $ 9.38 $ 2.88 $ 4.50
1992........................................................... 21.88 4.38 19.88
1993........................................................... 28.63 17.50 25.50
1994 (through November 28)..................................... 31.88 24.25 26.00
North Fork Bancorporation, Inc.
1991........................................................... 10.75 3.75 4.75
1992........................................................... 9.50 4.25 8.13
1993........................................................... 13.38 7.63 12.88
1994 (through November 28)..................................... 16.88 12.50 14.13
Provident Bankshares Corporation
1991........................................................... 8.13 2.75 6.75
1992........................................................... 14.50 6.25 14.25
1993........................................................... 22.00 12.00 19.25
1994 (through November 28)..................................... 27.75 18.25 20.75
Summit Bancorporation
1991........................................................... 12.96 7.05 11.14
1992........................................................... 19.32 11.14 19.09
1993........................................................... 22.50 16.82 19.32
1994 (through November 28)..................................... 21.71 17.27 19.00
U.S. Bancorp
1991........................................................... 23.75 11.75 22.38
1992........................................................... 26.63 19.88 26.38
1993........................................................... 28.88 22.00 25.00
1994 (through November 28)..................................... 28.63 22.25 22.88
UJB Financial Corp.
1991........................................................... 17.50 6.88 14.63
1992........................................................... 24.50 14.00 24.25
1993........................................................... 33.50 21.50 24.00
1994 (through November 28)..................................... 29.25 23.50 24.38
Union Planters Corporation
1991........................................................... 16.88 6.50 14.38
1992........................................................... 24.88 13.50 24.25
1993........................................................... 30.00 22.38 25.13
1994 (through November 28)..................................... 28.88 20.38 20.88
UST Corp.
1991........................................................... 9.05 5.24 6.88
1992........................................................... 10.50 6.50 9.50
1993........................................................... 12.50 7.38 10.63
1994 (through November 28)..................................... 14.38 9.25 10.25
Vermont Financial Services Corp.
1991........................................................... 12.00 4.25 9.50
1992........................................................... 19.50 9.00 15.50
1993........................................................... 23.00 14.50 17.25
1994 (through November 28)..................................... 24.25 16.25 20.25
</TABLE>
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Securities shall have
occurred and be continuing, the amount payable to a Holder of a Security upon
any acceleration permitted under the Senior Indenture will be equal to the
Maturity Payment Amount calculated as though the date of acceleration was the
Stated Maturity.
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<PAGE> 17
See "Description of Securities -- Maturity Payment Amount" herein. 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, calculated as
though the commencement of the proceeding was the Stated Maturity.
CALCULATION AGENT
All determinations made by 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.
FORM OF SECURITIES
CONVERSION OPTION
The Securities will initially be evidenced by certificates in fully
registered form (each, a "Certificate"). Forty-five calendar days after the
closing of the offering, each Holder 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 the Global Security described below), a Certificate must be
delivered to the Depository in the manner referred to below. The Conversion
Option Period is expected to run from January 19, 1995, through March 4, 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 after the
Conversion Option Period 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).
Certificates which have been exchanged into book-entry form may not be
re-exchanged for Certificates, except under the limited circumstances described
in the accompanying Prospectus under "Global Securities."
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<PAGE> 18
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 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 principal 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 substitute 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.
The Maturity Payment Amount 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.
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. Participants
include securities brokers and dealers (including the Underwriters), 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"). Persons
who are not participants may beneficially own securities held by DTC only
through participants or indirect participants.
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
S-18
<PAGE> 19
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 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.
Neither Holdings nor the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made to beneficial owners
of book-entry securities or for maintaining, supervising or reviewing any
records relating to such beneficial owners.
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 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 principal of 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 payment of principal or any interest 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 and integral
multiples 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
The SUNS have been approved for listing on the AMEX, subject to notice of
issuance, under the symbol "BKG".
S-19
<PAGE> 20
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 the material United States
federal income tax consequences of the ownership and disposition of the
Securities.
The following summary describes certain United States federal income tax
consequences of the ownership of Securities as of the date hereof. Except where
noted, it deals only with 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.
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 Maturity Payment 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 Issue Price, if any, as
contingent interest includable in income by United States Holders as ordinary
income at such time. If the amounts payable at Maturity are less than the Issue
Price, the Holder should treat such difference as a capital loss.
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, but not its aggregate amount.
For example, under proposed regulations issued in 1991 (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
S-20
<PAGE> 21
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"). The
Bifurcation Regulations, however, would not apply to the Securities if the Issue
Price exceeds the minimum Maturity Payment Amount by more than an "insubstantial
amount." The Bifurcation Regulations do not define the term "insubstantial
amount." 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. 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 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
Maturity Payment 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 Maturity Payment 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
S-21
<PAGE> 22
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
Maturity Payment 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 Maturity Payment Amount by Holdings or any paying
agent to Non-United States Holders if a statement described 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 Maturity Payment 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 Maturity
Payment 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 Maturity Payment 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.
S-22
<PAGE> 23
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated as of November 28, 1994 (the "Underwriting Agreement"), Holdings has
agreed to sell to each of the underwriters named below (the "Underwriters"), and
each of the Underwriters has severally agreed to purchase, the number of SUNS
set forth opposite its name below.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SUNS
------------ --------------
<S> <C>
Lehman Brothers Inc. ....................................... 334,000
Kemper Securities, Inc. .................................... 333,000
Oppenheimer & Co., Inc. .................................... 333,000
--------------
Total............................................. 1,000,000
=============
</TABLE>
Holdings has been advised that the Underwriters propose initially to offer
the Securities to the public at the public offering price set forth on the cover
page of this Prospectus Supplement, and to certain dealers at such price less a
concession not in excess of $0.35 per Security. The Underwriters may allow and
such dealers may reallow a concession not in excess of $0.10 per Security to
certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed.
Holdings has granted an option to the Underwriters, exercisable within 30
days of the date of this Prospectus Supplement, to purchase up to an additional
150,000 SUNS to cover over-allotments, if any, at the price to public less the
underwriting discounts and commissions specified on the cover page of this
Prospectus Supplement.
Lehman Brothers Inc. is a wholly owned subsidiary of Holdings. The
participation of Lehman Brothers Inc. in the offer and sale of the SUNS complies
with the requirements of Schedule E of the By Laws of the National Association
of Securities Dealers regarding underwriting securities of an affiliate.
The Underwriters have advised Holdings that they intend to make a market in
the Securities but the Underwriters are not obligated to do so and may
discontinue market making without notice at any time for any reason, including,
without limitation, as a result of their respective investment banking
businesses. No assurance can be given as to the liquidity of the trading market
for the Securities.
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.
Holdings has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
VALIDITY OF THE SECURITIES
The validity of the Securities will be passed upon for Holdings by Karen
Muller, Esq., Deputy General Counsel of Holdings and for the Underwriters by
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004. The
Underwriters are being advised as to certain matters by Simpson Thacher &
Bartlett (a partnership which includes professional corporations), 425 Lexington
Avenue, New York, New York 10017. Simpson Thacher & Bartlett acts as counsel in
various matters for Holdings, Lehman Brothers and certain of their subsidiaries.
S-23
<PAGE> 24
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.
"Maturity" of any Security means the date on which the principal 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.
"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.
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>
AMEX................................................................................. Cover
Average Market Price................................................................. S-3
Basket............................................................................... Cover
Basket Maturity Value................................................................ S-3
Basket Securities.................................................................... S-3
Basket Security...................................................................... S-3
Basket Value......................................................................... S-4
Calculation Agent.................................................................... S-3
Calculation Day...................................................................... S-7
Calculation Period................................................................... S-3
Cash Component....................................................................... S-10
CEDE................................................................................. S-18
Certificate.......................................................................... S-17
Code................................................................................. S-20
Conversion Option Period............................................................. S-17
Depository........................................................................... S-18
DTC.................................................................................. S-18
Global Security...................................................................... S-18
Holdings............................................................................. Cover
indirect participants................................................................ S-18
IRS.................................................................................. S-20
Issue Price.......................................................................... Cover
LIBOR................................................................................ S-10
LIBOR Determination Date............................................................. S-10
London Business Day.................................................................. S-11
Market Disruption Event.............................................................. S-8
Market Price......................................................................... S-8
Maturity Payment Amount.............................................................. S-3
Multiplier........................................................................... S-3
NASDAQ NMS........................................................................... S-8
NYSE................................................................................. S-8
Non-United States Holder............................................................. S-20
Original Basket Value................................................................ S-4
</TABLE>
S-24
<PAGE> 25
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------
<S> <C>
Original Basket Security............................................................. S-12
participants......................................................................... S-18
Participation Percentage............................................................. Cover
registered holder.................................................................... S-18
SEC.................................................................................. S-13
Securities........................................................................... Cover
Security Register.................................................................... S-18
Specified Maturity................................................................... S-10
Stated Maturity...................................................................... S-3
SUNS................................................................................. Cover
Trading Day.......................................................................... S-8
Underwriters......................................................................... S-23
Underwriting Agreement............................................................... S-23
United States Holder................................................................. S-20
Withdrawn Regulations................................................................ S-21
</TABLE>
S-25
<PAGE> 26
LEHMAN BROTHERS HOLDINGS INC.
DEBT SECURITIES, DEBT WARRANTS, CURRENCY WARRANTS,
INDEX WARRANTS AND INTEREST RATE WARRANTS
------------------------
Lehman Brothers Holdings Inc. ("Holdings"), may offer from time to time (i)
unsecured debt securities (the "Debt Securities") consisting of debentures,
notes and/or other evidences of indebtedness, (ii) warrants to purchase Debt
Securities ("Debt Warrants"), (iii) warrants entitling the holders thereof to
receive from Holdings, upon exercise, the cash value of the right to purchase
("Currency Call Warrants") and to sell ("Currency Put Warrants" and, together
with the Currency Call Warrants, the "Currency Warrants") a certain amount of
one currency or currency unit for a certain amount of a different currency or
currency unit, all as shall be designated by Holdings at the time of offering,
(iv) warrants entitling the holders thereof to receive from Holdings, upon
exercise, an amount in cash determined by reference to decreases ("Index Put
Warrants") or increases ("Index Call Warrants") in the level of a specified
index (an "Index") which may be based on one or more U.S. or foreign stocks,
bonds or other securities, one or more U.S. or foreign interest rates, one or
more currencies or currency units, or any combination of the foregoing, or
determined by reference to the differential between any two Indices ("Index
Spread Warrants" and, together with the Index Put Warrants and the Index Call
Warrants, the "Index Warrants") and (v) warrants entitling the holders thereof
to receive from Holdings, upon exercise, an amount in cash determined by
reference to decreases ("Interest Rate Put Warrants") or increases ("Interest
Rate Call Warrants" and, together with the Interest Rate Put Warrants, the
"Interest Rate Warrants") in the yield or closing price of one or more specified
debt instruments issued either by the United States government or by a foreign
government (the "Debt Instrument"), in the interest rate or interest rate swap
rate established from time to time by one or more specified financial
institutions (the "Rate") or in any specified combination of Debt Instruments
and/or Rates, for aggregate proceeds of up to U.S.$618,062,720, or the
equivalent thereof in one or more foreign currencies or foreign currency units
(such amount being the aggregate proceeds to Holdings from all Debt Securities,
Debt Warrants, Currency Warrants, Index Warrants and Interest Rate Warrants
(collectively, the "Securities") issued and the exercise price of any Debt
Securities issuable upon the exercise of any Debt Warrants). The Securities may
be offered either together or separately and in one or more series in amounts,
at prices and on terms to be determined at the time of the offering. Unless
otherwise specified in an applicable Prospectus Supplement, the Securities will
be sold for, and the Debt Warrants, Currency Warrants, Index Warrants or
Interest Rate Warrants (collectively, the "Warrants") will be exercisable in,
United States dollars, and the principal of and interest, if any, on the Debt
Securities and the cash payments, if any, in respect of the Currency Warrants,
the Index Warrants and the Interest Rate Warrants will be payable in United
States dollars. If this Prospectus is being delivered in connection with the
offering and sale of Debt Securities, the specific designation, priority,
aggregate principal amount, the currency or currency unit for which the Debt
Securities may be purchased, the currency or currency unit in which the
principal and interest, if any, is payable, the rate (or method of calculation)
and time of payment of interest, if any, authorized denominations, maturity, any
redemption terms, any listing on a securities exchange and the initial public
offering price, a discussion of certain United States federal income tax,
accounting or other special considerations applicable thereto and any other
terms in connection with such offering and sale are set forth in an applicable
Prospectus Supplement. If this Prospectus is being delivered in connection with
the offering and sale of Warrants, the specific designation, aggregate number of
warrants, the currency or currency unit for which the warrants may be purchased,
the currency or currency unit in which the cash settlement value or the exercise
price, if applicable, is payable, the method of calculation of the cash
settlement value, if applicable, the date on which such warrants become
exercisable and the expiration date, provisions, if any, for the automatic
exercise and/or cancellation prior to the expiration date, the initial public
offering price, a discussion of certain United States federal income tax,
accounting or other special considerations applicable thereto and any other
terms in connection with such offering and sale will be set forth in an
applicable Prospectus Supplement.
The Debt Securities and the Debt Warrants may be issued in registered form
or bearer form with, in the case of Debt Securities, coupons attached. The
Currency Warrants, Index Warrants and Interest Rate Warrants will be issued in
registered form only. In addition, all or a portion of the Securities of a
series may be issued in global form. Debt Securities in bearer form will be
offered only outside the United States to non-United States persons and to
offices located outside the United States of certain United States financial
institutions. See "Description of Debt Securities -- Limitations on Issuance of
Bearer Securities."
Discussions of certain United States federal income taxation consequences to
holders of Securities and certain of the risks associated with an investment in
Securities will be set forth in the applicable Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COM-
MISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The Securities will be sold either through underwriters, dealers or agents,
or directly by Holdings. The applicable Prospectus Supplement sets forth the
names of any underwriters or agents (which may include Lehman Brothers Inc., a
subsidiary of Holdings ("Lehman Brothers")) involved in the sale of the
Securities in respect of which this Prospectus is being delivered, the proposed
amounts, if any, to be purchased by underwriters and the compensation, if any,
of such underwriters or agents.
This Prospectus together with the applicable Prospectus Supplement may also
be used by Lehman Brothers, in connection with offers and sales of Securities
related to market making transactions, by and through Lehman Brothers, at
negotiated prices related to prevailing market prices at the time of sale or
otherwise. Lehman Brothers may act as principal or agent in such transactions.
------------------------
October 14, 1994
<PAGE> 27
AVAILABLE INFORMATION
Holdings is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"SEC"). Such reports and information may be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the SEC: New
York Regional Office, 7 World Trade Center, New York, New York 10048; and
Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500 W. Madison
Street, Chicago, Illinois 60661-2511; and copies of such material can be
obtained from the Public Reference Section of the SEC, Washington, D.C. 20549,
at prescribed rates. Holdings' Common Stock and 8 3/4% Notes Due 2002 are listed
on the New York Stock Exchange, Inc. (the "Exchange") and Holdings' $55 Million
Serial Zero Coupon Senior Notes Due May 16, 1998, FT-SE Eurotrack 200 Index Call
Warrants Expiring June 4, 1996, Japanese Yen Bear Warrants Expiring September
15, 1995, 7 1/4% Oracle Yield Enhanced Equity Linked Debt SecuritiesSM Due 1996,
6 1/2% Amgen Yield Enhanced Equity Linked Debt Securities Due 1997, Japanese Yen
Bear Warrants Expiring March 5, 1996, Global Telecommunications Stock Upside
Note SecuritiesSM Due 2000 and 9 1/8% Micron Yield Enhanced Equity Linked Debt
Securities Due 1997 are listed on the American Stock Exchange, Inc. and reports
and other information concerning Holdings may also be inspected at the offices
of the Exchange at 20 Broad Street, New York, New York 10005 and at the offices
of the American Stock Exchange, Inc., 86 Trinity Place, New York, New York
10006.
Holdings has filed with the SEC a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further information,
reference is hereby made to the Registration Statement.
------------------------
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by Holdings with the SEC pursuant
to the Exchange Act are hereby incorporated by reference in this Prospectus:
(1) Holdings' Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
(2) Holdings' Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994 and June 30, 1994.
(3) Holdings' Current Reports on Form 8-K dated February 24, 1994,
April 14, 1994, April 26, 1994, June 7, 1994, June 15, 1994, July
29, 1994, September 2, 1994 and September 22, 1994.
Each document filed by Holdings pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities offered by an applicable
Prospectus Supplement shall be deemed to be incorporated by reference into this
Prospectus from the date of filing of such document. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of the Registration
Statement and this Prospectus to the extent that a statement contained herein,
in an applicable Prospectus Supplement or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Prospectus.
Holdings will provide without charge to each person, including any
beneficial owner of any Security, to whom a copy of this Prospectus is
delivered, upon the written or oral request of any such person, a copy of any or
all of the documents which are incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to Mary J. Capko,
the Controller's Office, Lehman Brothers Holdings Inc., 3 World Financial
Center, 27th Floor, New York, New York 10285 (telephone (212) 526-0660).
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<PAGE> 28
THE COMPANY
Lehman Brothers Holdings Inc. (together with its consolidated subsidiaries
hereinafter referred to as the "Company" unless the context otherwise requires)
is one of the leading global investment banks serving institutional, corporate,
government and high net worth individual clients and customers. The Company's
worldwide headquarters in New York and regional headquarters in London and Tokyo
are complemented by offices in additional locations in the United States,
Europe, the Middle East, Latin America and the Asia Pacific region.
The Company's business includes capital raising for clients through
securities underwriting and direct placements; corporate finance and strategic
advisory services; merchant banking; securities sales and trading; institutional
asset management; research; and the trading of foreign exchange, derivative
products and certain commodities. The Company acts as a market maker in all
major equity and fixed income products in both the domestic and international
markets. Lehman Brothers is a member of all principal securities and commodities
exchanges in the United States, as well as the National Association of
Securities Dealers, Inc. ("NASD"), and holds memberships or associate
memberships on several principal international securities and commodities
exchanges, including the London, Tokyo, Hong Kong, Frankfurt and Milan stock
exchanges.
Holdings was incorporated in Delaware on December 29, 1983. Holdings'
principal executive offices are located at 3 World Financial Center, New York,
New York 10285 (telephone (212) 526-7000).
USE OF PROCEEDS
Except as otherwise may be set forth in an applicable Prospectus Supplement
accompanying this Prospectus, Holdings intends to apply the net proceeds from
the sale of the Securities for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for each of the five years in the period ended December 31, 1993 and
for six months ended June 30, 1994:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
- ----------------------------------------- ------------------
1989 1990 1991 1992 1993 1994
- ----- ----- ----- ----- ----- ------------------
<S> <C> <C> <C> <C> <C>
1.01 * 1.03 * 1.00 1.04
</TABLE>
- ---------------
* Earnings were inadequate to cover fixed charges and would have had to increase
approximately $766 million and $247 million in order to cover the deficiencies
for the periods ended December 31, 1990 and December 31, 1992, respectively.
In computing the ratio of earnings to fixed charges, "earnings" consist of
earnings from continuing operations before income taxes and fixed charges.
"Fixed charges" consist principally of interest expense and one-third of office
rentals and one-fifth of equipment rentals, which are deemed to be
representative of the interest factor.
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<PAGE> 29
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either Senior Debt (as defined below)
or Subordinated Debt (as defined below) of Holdings. The Debt Securities
constituting Senior Debt will be issued under an indenture, dated as of
September 1, 1987, between Holdings and Citibank, N.A., Trustee, as supplemented
and amended by Supplemental Indentures dated as of November 25, 1987, as of
November 27, 1990, as of September 13, 1991 and as of October 4, 1993 (the
"Senior Indenture"), and the Debt Securities constituting Subordinated Debt will
be issued under an indenture between Holdings and Chemical Bank, Trustee (the
"Subordinated Indenture"). The Senior Indenture and the Subordinated Indenture
are hereinafter collectively referred to as the "Indentures" and, individually,
as an "Indenture". Each Indenture will incorporate by reference certain Standard
Multiple-Series Indenture Provisions, filed with the SEC on July 30, 1987 and as
amended and refiled with the SEC on November 16, 1987. This Prospectus contains
descriptions of all material provisions of the Indentures. The summary of such
provisions of the Indentures does not purport to be complete; copies of such
Indentures are filed as exhibits to the Registration Statement of which this
Prospectus is a part. All articles and sections of the applicable Indenture, and
all capitalized terms set forth below, have the meanings specified in the
applicable Indenture.
GENERAL
Neither Indenture limits the amount of debentures, notes or other evidences
of indebtedness which may be issued thereunder. Each Indenture provides that
Debt Securities may be issued from time to time in one or more series. Since
Holdings, as a holding company, does not have any significant assets other than
the equity securities of its subsidiaries, its cash flow and consequent ability
to service its debt, including the Debt Securities, are dependent upon the
earnings of its subsidiaries and the distribution of those earnings to Holdings,
or upon loans or other payments of funds by those subsidiaries to Holdings.
Holdings' subsidiaries, including Lehman Brothers, are separate and distinct
legal entities and will have no obligation, contingent or otherwise, to pay any
interest or principal on the Debt Securities or to make any funds available
therefor, whether by dividends, loans or other payments. Dividends, loans and
other payments by Lehman Brothers are restricted by net capital and other rules
of various regulatory bodies. See "Capital Requirements." The payment of
dividends by Holdings' subsidiaries is contingent upon the earnings of those
subsidiaries and is subject to various business considerations in addition to
net capital requirements and contractual restrictions.
Since the Debt Securities will be obligations of a holding company, the
ability of holders of the Debt Securities to benefit from any distribution of
assets of any subsidiary upon the liquidation or reorganization of such
subsidiary is subordinate to the prior claims of present and future creditors of
such subsidiary.
Reference is made to the applicable Prospectus Supplement for the following
terms and other information with respect to the Debt Securities being offered
thereby: (1) the title of such Debt Securities and whether such Debt Securities
will be Senior Debt or Subordinated Debt; (2) any limit on the aggregate
principal amount of such Debt Securities; (3) whether the Debt Securities are to
be issuable as Registered Securities or Bearer Securities or both, and if Bearer
Securities are issued, whether Bearer Securities may be exchanged for Registered
Securities and the circumstances and places for such exchange, if permitted; (4)
whether the Debt Securities are to be issued in whole or in part in the form of
one or more temporary or permanent global Debt Securities ("Global Securities")
in registered or bearer form and, if so, the identity of the depositary, if any,
for such Global Security or Securities; (5) the date or dates (or manner of
determining the same) on which such Debt Securities will mature; (6) the rate or
rates (or manner of determining the same) at which such Debt Securities will
bear interest, if any, and the date or dates from which such interest will
accrue; (7) the dates (or manner of determining the same) on which such interest
will be payable and the Regular Record Dates for such Interest Payment Dates for
Debt Securities which are Registered Securities, and the extent to which, or the
manner in which, any interest payable on a temporary or permanent global Debt
Security on an Interest Payment Date will be paid if other than in the manner
described under "Global Securities" below; (8) any mandatory or optional sinking
fund or analogous provisions; (9) each office or agency where, subject to the
terms of the applicable Indenture as described below under "Payment and Paying
Agents", the principal of and premium, if any, and interest, if any, on the Debt
Securities will be payable and each office or agency where, subject to the terms
of the applicable Indenture as described below under
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<PAGE> 30
"Denominations, Registration and Transfer," the Debt Securities may be presented
for registration of transfer or exchange; (10) the date, if any, after which,
and the price or prices in the currency or currency unit in which, such Debt
Securities are payable pursuant to any optional or mandatory redemption
provision; (11) any provisions for payment of additional amounts for taxes and
any provision for redemption, in the event the Company must comply with
reporting requirements in respect of a Debt Security or must pay such additional
amounts in respect of any Debt Security; (12) the terms and conditions, if any,
upon which the Debt Securities of such series may be repayable prior to maturity
at the option of the holder thereof (which option may be conditional) and the
price or prices in the currency or currency unit in which such Debt Securities
are payable; (13) the denominations in which any Debt Securities which are
Registered Securities will be issuable if other than denominations of $1,000 and
any integral multiple thereof, and the denomination or denominations in which
any Debt Securities which are Bearer Securities will be issuable if other than
the denomination of $5,000; (14) the currency, currencies or currency units for
which such Debt Securities may be purchased and the currency, currencies or
currency units in which the principal of and interest, if any, on such Debt
Securities may be payable; (15) any index used to determine the amount of
payments of principal of and premium, if any, and interest, if any, on such Debt
Securities; and (16) other terms of the Debt Securities. (Section 301).
If any of the Debt Securities are sold for foreign currencies or foreign
currency units or if the principal of or interest, if any, on any series of Debt
Securities is payable in foreign currencies or foreign currency units, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such issue of Debt Securities and such currencies or currency
units will be set forth in an applicable Prospectus Supplement relating thereto.
One or more series of Debt Securities may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. Federal income tax
consequences and special considerations applicable to any such series will be in
an applicable Prospectus Supplement.
SENIOR DEBT
The Debt Securities constituting part of the senior debt of Holdings (the
"Senior Debt") will rank equally with all other unsecured debt of Holdings
except Subordinated Debt.
SUBORDINATED DEBT
The Debt Securities constituting part of the subordinated debt of Holdings
(the "Subordinated Debt") will be subordinate and junior in the right of
payment, to the extent and in the manner set forth in the Subordinated
Indenture, to all present or future Senior Debt. "Senior Debt" is defined to
mean (a) any indebtedness for money borrowed or evidenced by bonds, notes,
debentures or similar instruments, (b) indebtedness under capitalized leases,
(c) any indebtedness representing the deferred and unpaid purchase price of any
property or business, and (d) all deferrals, renewals, extensions and refundings
of any such indebtedness or obligation; except that the following does not
constitute Senior Debt: (i) indebtedness evidenced by the Subordinated Debt,
(ii) indebtedness which is expressly made equal in right of payment with the
Subordinated Debt or subordinate and subject in right of payment to the
Subordinated Debt, (iii) indebtedness for goods or materials purchased in the
ordinary course of business or for services obtained in the ordinary course of
business or indebtedness consisting of trade payables or (iv) indebtedness which
is subordinated to any obligation of Holdings of the type specified in clauses
(a) through (d) above. The effect of clause (iv) is that Holdings may not issue,
assume or guaranty any indebtedness for money borrowed which is junior to the
Senior Debt and senior to the Subordinated Debt. (Subordinated Indenture Section
1401).
Upon the failure to pay the principal or premium, if any, on Senior Debt
when due or upon the maturity of any Senior Debt by lapse of time, acceleration
or otherwise, all principal thereof, interest thereon, if any, and other amounts
due in connection therewith shall first be paid in full, before any payment is
made on account of the principal, premium, if any, or interest, if any, on the
Subordinated Debt or to acquire any of the Subordinated Debt or on account of
the redemption, sinking fund or analogous provisions in the Subordinated
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<PAGE> 31
Indenture. (Subordinated Indenture Section 1402). Upon any distribution of
assets of Holdings pursuant to any dissolution, winding up, liquidation or
reorganization of Holdings, payment of the principal, premium, if any, and
interest, if any, on the Subordinated Debt will be subordinated, to the extent
and in the manner set forth in the Subordinated Indenture, to the prior payment
in full of all Senior Debt. (Subordinated Indenture Section 1403). By reason of
such subordination, in the event of insolvency, creditors of Holdings who are
holders of Senior Debt may recover more ratably than the holders of Subordinated
Debt.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise provided with respect to a series of Debt Securities, the
Debt Securities will be issuable as Registered Securities without coupons and in
denominations of $1,000 or any integral multiple thereof. Debt Securities of a
series may be issuable in whole or in part in the form of one or more Global
Securities, as described below under "Global Securities." One or more Global
Securities will be issued in a denomination or aggregate denominations equal to
the aggregate principal amount of Debt Securities of the series to be
represented by such Global Security or Securities. If so provided with respect
to a series of Debt Securities, Debt Securities of such series will be issuable
solely as Bearer Securities with coupons attached or as both Registered
Securities and Bearer Securities. (Section 201).
In connection with the sale during the "restricted period" as defined in
Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury Regulations
(generally, the first 40 days after the closing date and, with respect to unsold
allotments, until sold) no Bearer Security shall be mailed or otherwise
delivered to any location in the United States (as defined under "Limitations on
Issuance of Bearer Securities"). A Bearer Security in definitive form (including
interests in a permanent Global Security) may be delivered only if the Person
entitled to receive such Bearer Security furnishes written certification, in the
form required by the applicable Indenture, to the effect that such Bearer
Security is not owned by or on behalf of a United States person (as defined
under "Limitations on Issuance of Bearer Securities"), or, if a beneficial
interest in such Bearer Security is owned by or on behalf of a United States
person, that such United States person (i) acquired and holds the Bearer
Security through a foreign branch of a United States financial institution, (ii)
is a foreign branch of a United States financial institution purchasing for its
own account or resale (and in either case, (i) or (ii), such financial
institution agrees to comply with the requirements of Section 165(j)(3)(A), (B)
or (C) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder) or (iii) is a financial institution purchasing for
resale during the restricted period only to non-United States persons outside
the United States (Sections 303, 304). See "Global Securities -- Bearer Debt
Securities" and "Limitations on Issuance of Bearer Securities."
Registered Securities of any series (other than a Global Security) will be
exchangeable for other Registered Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations. In
addition, if Debt Securities of any series are issuable as both Registered
Securities and as Bearer Securities, at the option of the Holder upon request
confirmed in writing, and subject to the terms of the applicable Indenture,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such series will be exchangeable into Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. Unless otherwise indicated in an
applicable Prospectus Supplement, any Bearer Security surrendered in exchange
for a Registered Security between a Regular Record Date or a Special Record Date
and the relevant date for payment of interest shall be surrendered without the
coupon relating to such date for payment of interest and interest will not be
payable in respect of the Registered Security issued in exchange for such Bearer
Security, but will be payable only to the Holder of such coupon when due in
accordance with the terms of the applicable Indenture. (Section 305). Except as
provided in an applicable Prospectus Supplement, Bearer Securities will not be
issued in exchange for Registered Securities.
Debt Securities may be presented for exchange as provided above, and
Registered Securities (other than a Global Security) may be presented for
registration of transfer (with the form of transfer endorsed thereon duly
executed), at the office of the Security Registrar or at the office of any
transfer agent designated by Holdings for such purpose with respect to any
series of Debt Securities and referred to in an applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental
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<PAGE> 32
charges as described in each Indenture. Such transfer or exchange will be
effected upon the Security Registrar or such transfer agent, as the case may be,
being satisfied with the documents of title and identity of the person making
the request. Holdings has appointed each Trustee as Security Registrar under the
applicable Indenture. (Section 305). If a Prospectus Supplement refers to any
transfer agents (in addition to the Security Registrar) initially designated by
Holdings with respect to any series of Debt Securities, Holdings may at any time
rescind the designation of any such transfer agent or approve a change in the
location through which any such transfer agent acts, except that, if Debt
Securities of a series are issuable only as Registered Securities, Holdings will
be required to maintain a transfer agent in each Place of Payment for such
series and, if Debt Securities of a series are issuable as Bearer Securities,
Holdings will be required to maintain (in addition to the Security Registrar) a
transfer agent in a Place of Payment for such series located outside the United
States. Holdings may at any time designate additional transfer agents with
respect to any series of Debt Securities. (Section 1002).
In the event of any redemption in part, Holdings shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and ending at the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities, the
day of the first publication of the relevant notice of redemption or, if Debt
Securities of the series are also issuable as Registered Securities and there is
no publication, the mailing of the relevant notice of redemption; (ii) register
the transfer of or exchange any Registered Security, or portion thereof, called
for redemption, except the unredeemed portion of any Registered Security being
redeemed in part; or (iii) exchange any Bearer Security called for redemption,
except to exchange such Bearer Security for a Registered Security of that series
and like tenor which is immediately surrendered for redemption. (Section 305).
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Bearer Securities will
be payable, subject to any applicable laws and regulations, at the offices of
such Paying Agents outside the United States as Holdings may designate from time
to time, at the option of the Holder, by check or by transfer to an account
maintained by the payee with a bank located outside the United States. (Sections
307 and 1002). Unless otherwise indicated in an applicable Prospectus
Supplement, payment of interest on Bearer Securities on any Interest Payment
Date will be made only against surrender of the coupon relating to such Interest
Payment Date. (Section 1001). No payment of interest on a Bearer Security will
be made unless on the earlier of the date of the first such payment by Holdings
or the delivery by Holdings of the Bearer Security in definitive form (including
interests in a permanent Global Security) (the "Certification Date"), a written
certificate in the form and to the effect described under "Denominations,
Registration and Transfer" is provided to Holdings. No payment with respect to
any Bearer Security will be made at any office or agency of Holdings in the
United States or by check mailed to any address in the United States or by
transfer to an account maintained with a bank located in the United States.
Notwithstanding the foregoing, payment of principal of (and premium, if any) and
interest on Bearer Securities denominated and payable in U.S. dollars will be
made at the office of Holdings' Paying Agent in the Borough of Manhattan, The
City of New York if, and only if, payment of the full amount thereof in U.S.
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
(Section 1002).
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Registered Securities
(other than a Global Security) will be made at the office of such Paying Agent
or Paying Agents as Holdings may designate from time to time, except that at the
option of Holdings payment of any interest may be made (i) by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) by wire transfer to an account maintained by the
Person entitled thereto as specified in the Security Register. (Sections 305,
307, 1002). Unless otherwise indicated in an applicable Prospectus Supplement,
payment of any instalment of interest on
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<PAGE> 33
Registered Securities will be made to the Person in whose name such Registered
Security is registered at the close of business on the Regular Record Date for
such interest payment. (Section 307).
Unless otherwise indicated in an applicable Prospectus Supplement, the
principal office of each Trustee under the applicable Indenture in The City of
New York will be designated as Holdings' sole Paying Agent for payments with
respect to Debt Securities which are issuable solely as Registered Securities
and as Holdings' Paying Agent in the Borough of Manhattan, The City of New York,
for payments with respect to Debt Securities (subject to the limitations
described above in the case of Bearer Securities) which may be issuable as
Bearer Securities. Any Paying Agents outside the United States and any other
Paying Agents in the United States initially designated by Holdings for the Debt
Securities will be named in an applicable Prospectus Supplement. Holdings may at
any time designate additional Paying Agents or rescind the designation of any
Paying Agents or approve a change in the office through which any Paying Agent
acts, except that, if Debt Securities of a series are issuable only as
Registered Securities, Holdings will be required to maintain a Paying Agent in
each Place of Payment for such series, and if Debt Securities of a series may be
issuable as Bearer Securities, Holdings will be required to maintain (i) a
Paying Agent in the Borough of Manhattan, The City of New York for payments with
respect to any Registered Securities of the series (and for payments with
respect to Bearer Securities of the series in the circumstances described above,
but not otherwise), and (ii) a Paying Agent in a Place of Payment located
outside the United States where Debt Securities of such series and any coupons
appertaining thereto may be presented and surrendered for payment; provided that
if the Debt Securities of such series are listed on The Luxembourg Stock
Exchange (the "Stock Exchange") or any other stock exchange located outside the
United States and such stock exchange shall so require, Holdings will maintain a
Paying Agent in Luxembourg or any other required city located outside the United
States, as the case may be, for the Debt Securities of such series. (Section
1002).
All moneys paid by Holdings to a Paying Agent for the payment of principal
of (and premium, if any) or interest on any Debt Security which remain unclaimed
at the end of two years after such principal, premium or interest shall have
become due and payable will be repaid to Holdings and the Holder of such Debt
Security or any coupon will thereafter look only to Holdings for payment
thereof. (Section 1003).
LIMITATION ON LIENS
So long as any Debt Securities remain outstanding, unless an applicable
Prospectus Supplement relating thereto provides otherwise, Holdings will not,
and will not permit any Designated Subsidiary (as defined below), directly or
indirectly, to create, issue, assume, incur or guarantee any indebtedness for
money borrowed which is secured by a mortgage, pledge, lien, security interest
or other encumbrance of any nature on any of the present or future common stock
of a Designated Subsidiary unless the Debt Securities and, if Holdings so
elects, any other indebtedness of Holdings ranking at least pari passu with the
Debt Securities, shall be secured equally and ratably with (or prior to) such
other secured indebtedness for money borrowed so long as it is outstanding.
(Section 1005).
The term "Designated Subsidiary" means any present or future consolidated
subsidiary of Holdings, the consolidated net worth of which constitutes at least
5% of the consolidated net worth of Holdings. As of July 31, 1994, Holdings'
Designated Subsidiaries were Lehman Brothers, Lehman Commercial Paper Inc.,
Lehman Government Securities Inc., Lehman Brothers Holdings PLC, Lehman Brothers
UK Holdings Limited, Lehman Brothers International (Europe), Lehman Brothers
Japan Inc., Lehman Funding Corp., Lehman Brothers Financial Products Inc., and
LB I Group Inc.
EVENTS OF DEFAULT
Except as may otherwise be set forth in an applicable Prospectus Supplement
relating to a series of Debt Securities, the following are Events of Default
under the Indenture with respect to Debt Securities of such series: (a) failure
to pay principal of or premium, if any, on any Debt Security of that series when
due; (b) failure to pay interest, if any, on any Debt Security of that series
and any related coupons when due, continued for 30 days; (c) failure to deposit
any sinking fund payment or analogous obligation, when due, continued for 30
days, in respect of any Debt Security of that series; (d) failure to perform any
other covenant
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<PAGE> 34
of Holdings in the Indenture (other than a covenant included in the applicable
Indenture solely for the benefit of a series of Debt Securities other than that
series), continued for 90 days after written notice as provided in the
Indenture; (e) certain events in bankruptcy, insolvency or reorganization in
respect of Holdings; and (f) any other Event of Default provided with respect to
Debt Securities of that series. (Section 501). An Event of Default with respect
to a particular series of Debt Securities does not necessarily constitute an
Event of Default with respect to any other series of Debt Securities issued
under the same or another Indenture. The Trustee may withhold notice to the
Holders of any series of Debt Securities of any default with respect to such
series (except in the payment of principal, premium or interest, if any) if it
considers such withholding to be in the interests of such Holders. (Section
602).
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, unless the principal of all of the
Debt Securities of such series shall have already become due and payable, either
the Trustee or the Holders of at least 25% in principal amount of the
outstanding Debt Securities of that series may declare the principal amount (or,
if the Debt Securities of that series are Original Issue Discount Securities,
such portion of the principal amount as may be specified in the terms of the
series) of all the Debt Securities of that series to be due and payable
immediately. At any time after a declaration of acceleration with respect to
Debt Securities of any series has been made, but before a judgment or decree
based on acceleration has been obtained and entered, the Holders of a majority
in principal amount of the outstanding Debt Securities of that series may, under
certain circumstances, rescind and annul such acceleration. (Section 502). For
information as to waiver of defaults, see "Meetings, Modification and Waiver."
Each Indenture provides that the Trustee will be under no obligation,
subject to the duty of the Trustee during default to act with the required
standard of care, to exercise any of its rights or powers under such Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable indemnity. (Section 603). Subject to such
provisions for indemnification of the Trustee, the Holders of a majority in
principal amount of the outstanding Debt Securities of any series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, with respect to the Debt Securities of that series. (Section 512).
Holdings will be required to furnish to each Trustee annually a statement
as to the performance by Holdings of certain of its obligations under the
applicable Indenture and as to any default in such performance. (Section 1006).
SATISFACTION AND DISCHARGE
Except as may otherwise be set forth in an applicable Prospectus Supplement
relating to a series of Debt Securities, each Indenture provides that Holdings
shall be discharged from its obligations under the Debt Securities of such
series (with certain exceptions) at any time prior to the Stated Maturity or
redemption thereof when (a) Holdings has irrevocably deposited with the
applicable Trustee, in trust, (i) sufficient funds in the currency or currency
unit in which the Debt Securities of such series are payable to pay the
principal of (and premium, if any), and interest, if any, to Stated Maturity (or
redemption) on, the Debt Securities of such series, or (ii) such amount of
direct obligations of, or obligations the principal of and interest, if any, on
which are fully guaranteed by, the government which issued the currency in which
the Debt Securities of such series are payable, and which are not subject to
prepayment, redemption or call, as will, together with the predetermined and
certain income to accrue thereon without consideration of any reinvestment
thereof, be sufficient to pay when due the principal of (and premium, if any),
and interest, if any, to Stated Maturity (or redemption) on, the Debt Securities
of such series, or (iii) such combination of such funds and securities as
described in (i) and (ii), respectively, as will, together with the
predetermined and certain income to accrue on any such securities as described
in (ii), be sufficient to pay when due the principal of (and premium, if any),
and interest, if any, to Stated Maturity (or redemption) on, the Debt Securities
of such series and (b) Holdings has paid all other sums payable with respect to
the Debt Securities of such series and (c) certain other conditions are met.
Upon such discharge, the Holders of the Debt Securities of such series shall no
longer be entitled to the benefits of the Indenture, except for certain rights,
including registration of transfer
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<PAGE> 35
and exchange of the Debt Securities of such series and replacement of lost,
stolen or mutilated Debt Securities, and shall look only to such deposited funds
or obligations for payment. (Sections 401 and 403).
DEFEASANCE OF CERTAIN OBLIGATIONS
If the terms of the Debt Securities of any series so provide, Holdings may
omit to comply with the restrictive covenants in Section 801 ("Company May
Consolidate, Etc., Only on Certain Terms"), Section 1005 ("Limitations on Liens
on Common Stock of Designated Subsidiaries") and any other specified covenant
and any such omission with respect to such Sections shall not be an Event of
Default with respect to the Debt Securities of such series, if (a) Holdings has
irrevocably deposited with the applicable Trustee, in trust, (i) sufficient
funds in the currency or currency unit in which the Debt Securities of such
series are payable to pay the principal of (and premium, if any), and interest,
if any, to Stated Maturity (or redemption) on, the Debt Securities of such
series, or (ii) such amount of direct obligations of, or obligations the
principal of and interest, if any, on which are fully guaranteed by, the
government which issued the currency in which the Debt Securities of such series
are payable and which are not subject to prepayment, redemption or call, as
will, together with the predetermined and certain income to accrue thereon
without consideration of any reinvestment thereof, be sufficient to pay when due
the principal of (and premium, if any), and interest, if any, to Stated Maturity
(or redemption) on, the Debt Securities of such series or, (iii) such
combination of such funds and securities as described in (i) and (ii),
respectively, as will, together with the predetermined and certain income to
accrue on any such securities as described in (ii), be sufficient to pay when
due the principal of (and premium, if any), and interest, if any, to Stated
Maturity (or redemption) on, the Debt Securities of such series and (b) certain
other conditions are met. The obligations of Holdings under the Indenture with
respect to the Debt Securities of such series, other than with respect to the
covenants referred to above shall remain in full force and effect. (Section
1009).
MEETINGS, MODIFICATION AND WAIVER
Modifications and amendments of either Indenture may be made by Holdings
and the applicable Trustee with the consent of the Holders of not less than
66 2/3% in principal amount of the Outstanding Debt Securities of each series
issued under such Indenture affected by such modification or amendment;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Debt Security affected thereby, (a)
change the Stated Maturity of the principal of, or any instalment of principal
of or interest, if any, on, any Debt Security, (b) reduce the principal amount
of, or the premium, if any, or interest, if any, on, any Debt Security, (c)
change any obligation of Holdings to pay additional amounts, (d) reduce the
amount of principal of an Original Issue Discount Security payable upon
acceleration of the Maturity thereof, (e) adversely affect the right of
repayment or repurchase, if any, at the option of the Holder, (f) reduce the
amount, or postpone the date fixed for, any payment under any sinking fund or
analogous provision, (g) change the currency or currency unit of payment of
principal of or premium, if any, or interest, if any, on any Debt Security, (h)
change or eliminate the right, if any, to elect payment in a coin or currency or
currency unit other than that in which Debt Securities which are Registered
Securities are denominated or stated to be payable, (i) impair the right to
institute suit for the enforcement of any payment on or with respect to any Debt
Security, (j) reduce the percentage in principal amount of Outstanding Debt
Securities of any series, the consent of the Holders of which is required for
modification or amendment of the applicable Indenture or for waiver of
compliance with certain provisions of the applicable Indenture or for waiver of
certain defaults, (k) reduce the requirements contained in either Indenture for
quorum or voting, or (l) change any obligation of Holdings to maintain an office
or agency in the places and for the purposes required in the applicable
Indenture. (Section 902).
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
Debt Securities of that series waive, insofar as that series is concerned,
compliance by Holdings with certain restrictive provisions of the applicable
Indenture. (Section 1007). The Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of any series may on behalf of the
Holders of all Debt Securities of that series and any coupons appertaining
thereto waive any past default under the applicable Indenture with respect to
that series, except a default in the
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payment of the principal of or premium, if any, or interest, if any, on any Debt
Security of that series or in the payment of any sinking fund instalment or
analogous obligation or in respect of a provision which under the applicable
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Debt Security of that series affected. (Section 513).
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series if Debt Securities of that series are issuable as
Bearer Securities. A meeting may be called at any time by the applicable
Trustee, and also, upon request, by Holdings or Holders of at least 10% in
principal amount of the Outstanding Debt Securities of such series, in any such
case upon notice given in accordance with "Notices" below. (Section 1302).
Except as limited by the proviso in the second preceding paragraph, any
resolution presented at a meeting or adjourned meeting at which a quorum is
present may be adopted by the affirmative vote of the Holders of a majority in
principal amount of the Outstanding Debt Securities of that series; provided,
however, that, except as limited by the proviso in the second preceding
paragraph, any resolution with respect to any consent or waiver which may be
given by the Holders of not less than 66 2/3% in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or an
adjourned meeting at which a quorum is present only by the affirmative vote of
66 2/3% in principal amount of the Outstanding Debt Securities of that series;
and provided, further, that, except as limited by the proviso in the second
preceding paragraph, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority, in principal amount of Outstanding Debt Securities of a series
may be adopted at a meeting or adjourned meeting duly reconvened at which a
quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Debt Securities of any series duly held in accordance with the applicable
Indenture will be binding on all Holders of Debt Securities of that series and
the related coupons. The quorum at any meeting called to adopt a resolution, and
at any reconvened meeting, will be persons holding or representing a majority in
principal amount of the Outstanding Debt Securities of a series; provided,
however, that if any action is to be taken at such meeting with respect to a
consent or waiver which may be given by the Holders of not less than 66 2/3% in
principal amount of the Outstanding Debt Securities of a series, the persons
holding or representing 66 2/3% in principal amount of the Outstanding Debt
Securities of such series will constitute a quorum (Section 1304).
CONSOLIDATION, MERGER AND SALE OF ASSETS
Holdings may, without the consent of any Holders of Outstanding Debt
Securities, consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to, any Person, and any other Person may
consolidate or merge with or into, or transfer or lease its assets substantially
as an entirety to, Holdings, provided that (i) the Person (if other than
Holdings) formed by such consolidation or into which Holdings is merged or which
acquires or leases the assets of Holdings substantially as an entirety is
organized under the laws of any United States jurisdiction and assumes Holdings'
obligations on the Debt Securities and under the Indenture, (ii) after giving
effect to the transaction, no Event of Default, and no event which, after notice
or lapse of time or both, would become an Event of Default, shall have happened
and be continuing, and (iii) certain other conditions are met. (Section 801).
NOTICES
Except as may otherwise be set forth in an applicable Prospectus Supplement
relating to a series of Debt Securities, notices to Holders of Bearer Securities
will be given by publication in a daily newspaper in the English language of
general circulation in The City of New York and in London, and so long as such
Bearer Securities are listed on the Stock Exchange and the Stock Exchange shall
so require, in a daily newspaper of general circulation in Luxembourg or, if not
practical, elsewhere in Western Europe. Such publication is expected to be made
in The Wall Street Journal, the Financial Times and the Luxemburger Wort.
Notices to Holders of Registered Securities will be given by mail to the
addresses of such Holders as they appear in the Security Register. (Sections 101
and 106).
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TITLE
Title to any temporary global Debt Security or permanent global Debt
Security in bearer form or any Bearer Securities and any coupons appertaining
thereto will pass by delivery. Holdings, each Trustee and any agent of Holdings
or the applicable Trustee may treat the bearer of any Bearer Security and the
bearer of any coupon and the registered owner of any Registered Security as the
absolute owner thereof (whether or not such Debt Security or coupon shall be
overdue and notwithstanding any notice to the contrary) for the purpose of
making payment and for all other purposes. (Section 308).
REPLACEMENT OF DEBT SECURITIES AND COUPONS
Any mutilated Debt Security or a Debt Security with a mutilated coupon
appertaining thereto will be replaced by Holdings at the expense of the Holder
upon surrender of such Debt Security to the applicable Trustee. Debt Securities
or coupons that become destroyed, stolen or lost will be replaced by Holdings at
the expense of the Holder upon delivery to the applicable Trustee of the Debt
Security and coupons or evidence of the destruction, loss or theft thereof
satisfactory to Holdings and the applicable Trustee; in the case of any coupon
which becomes destroyed, stolen or lost, such coupon will be replaced by
issuance of a new Debt Security in exchange for the Debt Security to which such
coupon appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon an indemnity satisfactory to the applicable Trustee and Holdings may be
required at the expense of the Holder of such Debt Security or coupon before a
replacement Debt Security will be issued. (Section 306).
CONCERNING THE TRUSTEES
Business and other relationships (including other trusteeships) between, on
the one hand, Holdings and its affiliates and, on the other hand, the Trustee
under the Indenture pursuant to which any of the Debt Securities to which an
applicable Prospectus Supplement accompanying this Prospectus relates are
described in such Prospectus Supplement.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Securities may not be offered or sold during the restricted period (as defined
under "Denominations, Registration and Transfer"), or delivered in definitive
form in connection with a sale during the restricted period, in the United
States or to United States persons other than to (a) the United States office of
(i) an international organization (as defined in Section 7701 (a)(18) of the
Code), (ii) a foreign central bank (as defined in Section 895 of the Code), or
(iii) any underwriter, agent, or dealer offering or selling Bearer Securities
during the restricted period (a "Distributor") pursuant to a written contract
with the issuer or with another Distributor, that purchases Bearer Securities
for resale or for its own account and agrees to comply with the requirements of
Section 165 (j)(3)(A), (B), or (C) of the Code, or (b) the foreign branch of a
United States financial institution purchasing for its own account or for
resale, which institution agrees to comply with the requirements of Section 165
(j)(3)(A), (B), or (C) of the Code. In addition, a sale of a Bearer Security may
be made during the restricted period to a United States person who acquired and
holds the Bearer Security on the Certification Date through a foreign branch of
a United States financial institution that agrees to comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Code. Any Distributor
(including an affiliate of a Distributor) offering or selling Bearer Securities
during the restricted period must agree not to offer or sell Bearer Securities
in the United States or to United States persons (except as discussed above) and
must employ procedures reasonably designed to ensure that its employees or
agents directly engaged in selling Bearer Securities are aware of these
restrictions.
Bearer Securities and their interest coupons will bear a legend
substantially to the following effect: "Any United States person who holds this
obligation will be subject to limitations under the United States income tax
laws, including the limitations provided in Section 165(j) and 1287(a) of the
Internal Revenue Code."
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Purchasers of Bearer Securities may be affected by certain limitations
under United States tax laws. See the applicable Prospectus Supplement for a
summary of material U.S. federal income tax consequences to United States
persons investing in Bearer Securities.
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States and an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source, and "United States" means the United States of America (including the
States and the District of Columbia) and its possessions including Puerto Rico,
the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern
Mariana Islands. The term "Non-United States Holder" means any Holder which is
not an United States person.
DESCRIPTION OF WARRANTS
The Debt Warrants, Currency Warrants, Index Warrants and Interest Rate
Warrants are to be issued under separate warrant agreements (each a "Warrant
Agreement" and respectively a "Debt Warrant Agreement", a "Currency Warrant
Agreement", an "Index Warrant Agreement" and an "Interest Rate Warrant
Agreement") to be entered into between Holdings and one or more banks or trust
companies, as warrant agent (each a "Warrant Agent" and respectively a "Debt
Warrant Agent", a "Currency Warrant Agent", an "Index Warrant Agent" and an
"Interest Rate Warrant Agent"), all as shall be set forth in the Prospectus
Supplement relating to the Warrants being offered thereby. A form of each type
of Warrant Agreement, including a form of warrant certificate representing each
type of Warrant (each a "Warrant Certificate" and respectively a "Debt Warrant
Certificate", a "Currency Warrant Certificate", an "Index Warrant Certificate"
and an "Interest Rate Warrant Certificate"), reflecting the alternative
provisions that may be included in the Warrant Agreements to be entered into
with respect to particular offerings of Warrants, are incorporated by reference
as exhibits to the Registration Statement of which this Prospectus is a part.
The descriptions contained herein of the Warrant Agreements and the Warrant
Certificates and summaries of certain provisions of the Warrant Agreements and
the Warrant Certificates do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all the provisions of the
applicable Warrant Agreements and the Warrant Certificates, including the
definitions therein of certain terms not otherwise defined in this Prospectus.
Wherever particular sections of, or terms defined in, the Warrant Agreements are
referred to, such sections or defined terms are incorporated herein by
reference.
The particular terms of each issue of Warrants, as well as any
modifications or additions to the general terms of the applicable Warrant
Agreement or Warrant Certificate, will be described in the Prospectus Supplement
relating to such Warrants. Accordingly, for a description of the terms of a
particular issue of Warrants, reference must be made to the Prospectus
Supplement relating thereto and to the descriptions set forth below.
DEBT WARRANTS
Holdings may issue, together with Debt Securities, Currency Warrants, Index
Warrants or Interest Rate Warrants, or separately, Debt Warrants for the
purchase of Debt Securities. If any of the Debt Warrants are sold for foreign
currencies or foreign currency units or if any series of Debt Warrants is
exercisable in foreign currencies or foreign currency units, the restrictions,
elections, tax consequences, specific terms and other information with respect
to such issue of Debt Warrants and such currencies or currency units will be set
forth in an applicable Prospectus Supplement relating thereto.
If so specified in the applicable Prospectus Supplement, the Debt Warrants
may, in certain circumstances, be cancelled by Holdings prior to their
expiration date and the holders thereof will be entitled to receive only the
applicable Cancellation Amount. The Cancellation Amount may be either a fixed
amount or an amount that varies during the term of the Debt Warrants in
accordance with a schedule or formula.
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General
The Prospectus Supplement will describe the terms of any Debt Warrants
offered thereby, the Debt Warrant Agreement relating to such Debt Warrants and
the Debt Warrant Certificates representing such Debt Warrants, including the
following: (1) the title of such Debt Warrants; (2) the aggregate amount of such
Debt Warrants; (3) the initial offering price of such Debt Warrants; (4) the
exercise price; (5) the currency or currency unit in which the initial offering
price and/or the exercise price of such Debt Warrants is payable; (6) whether
the Debt Warrants are to be issuable in registered or bearer form or both, and
if in bearer form, whether such Debt Warrants may be exchanged for Debt Warrants
in registered form and the circumstances and places for such exchange, if
permitted; (7) if applicable, the title and terms of related Debt Securities
with which such Debt Warrants are issued, the number of such Debt Warrants
issued with each such Debt Security and the date, if any, on and after which
such Debt Warrants and such Debt Securities will be separately transferable; (8)
the title, aggregate principal amount and terms of the Debt Securities
purchasable upon exercise of all of such Debt Warrants; (9) the principal amount
of Debt Securities purchasable upon exercise of each Debt Warrant and the price
at which such principal amount of Debt Securities may be purchased upon such
exercise; (10) the date on which the right to exercise such Debt Warrants shall
commence and the date (the "Debt Warrant Expiration Date") on which such right
shall expire; (11) any minimum number of Debt Warrants which must be exercised
at any one time, other than upon automatic exercise; (12) the maximum number, if
any, of such Debt Warrants that may, subject to election by Holdings, be
exercised by all owners (or by any person or entity) on any day; (13) any
provisions for the automatic exercise of such Debt Warrants; (14) whether and
under what circumstances such Debt Warrants may be cancelled by Holdings prior
to expiration; (15) any other procedures and conditions relating to the exercise
of such Debt Warrants; (16) the identity of the Debt Warrant Agent; (17) any
national securities exchange on which such Debt Warrants will be listed; (18)
provisions, if any, for issuing such Debt Warrants in certificated form; (19) if
applicable, a discussion of certain United States federal income tax, accounting
or other special considerations applicable thereto; and (20) any other terms of
the Debt Warrants.
Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations and, if in registered form, may be
presented for registration of transfer and Debt Warrants may be exercised at the
corporate trust office of the Debt Warrant Agent or any other office indicated
in the Prospectus Supplement relating thereto (Section 3.1). Prior to the
exercise of Debt Warrants, holders of Debt Warrants will not be entitled to
payments of principal of (or premium, if any) or interest, if any, on the Debt
Securities purchasable upon such exercise, or to enforce any of the covenants in
the applicable Indenture (Section 4.1).
Exercise of Debt Warrants
Unless otherwise provided in the Prospectus Supplement, each Debt Warrant
will entitle the holder thereof to purchase for cash such principal amount of
Debt Securities at such exercise price as shall in each case be set forth in, or
be determinable as set forth in, the Prospectus Supplement relating to the Debt
Warrants offered thereby (Sections 2.1). Debt Warrants may be exercised at any
time up to the close of business on the Debt Warrant Expiration Date specified
in the Prospectus Supplement relating to the Debt Warrants offered thereby.
After the close of business on the Debt Warrant Expiration Date (or such later
date to which such Debt Warrant Expiration Date may be extended by Holdings),
unexercised Debt Warrants will become void (Section 2.2).
Debt Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Debt Warrants offered thereby. Upon receipt of payment and the
Debt Warrant Certificate properly completed and duly executed at the corporate
trust office of the Debt Warrant Agent or any other office indicated in the
Prospectus Supplement, Holdings will, as soon as practicable, forward to the
person entitled thereto the Debt Securities purchasable upon such exercise. If
fewer than all of the Debt Warrants represented by such Debt Warrant Certificate
are exercised, a new Debt Warrant Certificate will be issued for the remaining
amount of Debt Warrants (Section 2.3).
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Other Information
Other important information concerning Debt Warrants is set forth below
under "Certain Items Applicable to All Warrants -- Modifications", "-- Merger,
Consolidation, Sale or Other Dispositions", "-- Enforceability of Rights by
Beneficial Owner; Governing Law" and "-- Unsecured Obligations of a Holding
Company".
CURRENCY WARRANTS
Holdings may issue, together with Debt Securities, Debt Warrants, Index
Warrants or Interest Rate Warrants, or separately, Currency Warrants (a) in the
form of Currency Put Warrants, entitling the owners thereof to receive from
Holdings the Currency Warrant Cash Settlement Value (as shall be defined in the
Prospectus Supplement) of the right to sell a specified amount of one currency
(whether U.S. dollars or a foreign currency or foreign currency unit) (a "Base
Currency") for a specified amount of a different currency (whether U.S. dollars
or a foreign currency or foreign currency unit) (a "Reference Currency"), (b) in
the form of Currency Call Warrants, entitling the owners thereof to receive from
Holdings the Currency Warrant Cash Settlement Value of the right to purchase a
specified amount of a Base Currency for a specified amount of a Reference
Currency, or (c) in such other form as shall be specified in the related
Prospectus Supplement. The Prospectus Supplement for an issue of Currency
Warrants will set forth the formula pursuant to which the Currency Warrant Cash
Settlement Value will be determined, including any multipliers, if
applicable.
The Prospectus Supplement will describe the terms of any Currency Warrants
offered thereby, the Currency Warrant Agreement relating to such Currency
Warrants and the Currency Warrant Certificates representing such Currency
Warrants, including the following: (1) the title of such Currency Warrants; (2)
the aggregate amount of such Currency Warrants; (3) the initial offering price
of such Currency Warrants; (4) the exercise price, if any; (5) the currency or
currency unit in which the initial offering price, the exercise price, if any,
and the Currency Warrant Cash Settlement Value of such Currency Warrants is
payable; (6) the Base Currency and the Reference Currency for such Currency
Warrants; (7) whether such Currency Warrants shall be Currency Put Warrants,
Currency Call Warrants or otherwise; (8) the formula for determining the
Currency Warrant Cash Settlement Value, if applicable, of each Currency Warrant;
(9) whether and under what circumstances a minimum and/or maximum expiration
value is applicable upon the expiration or exercise of such Currency Warrants;
(10) the effect or effects, if any, of the occurrence of a Market Disruption
Event or Force Majeure Event; (11) the date on which the right to exercise such
Currency Warrants shall commence and the date (the "Currency Warrant Expiration
Date") on which such right shall expire; (12) any minimum number of Currency
Warrants which must be exercised at any one time, other than upon automatic
exercise; (13) the maximum number, if any, of such Currency Warrants that may,
subject to election by Holdings, be exercised by all owners (or by any person or
entity) on any day; (14) any provisions for the automatic exercise of such
Currency Warrants other than at expiration; (15) whether and under what
circumstances such Currency Warrants may be cancelled by Holdings prior to their
expiration date; (16) any other procedures and conditions relating to the
exercise of such Currency Warrants; (17) the identity of the Currency Warrant
Agent; (18) any national securities exchange on which such Currency Warrants
will be listed; (19) provisions, if any, for issuing such Currency Warrants in
certificated form; (20) if such Currency Warrants are not issued in book-entry
form, the place or places at which payments in respect of such Currency Warrants
are to be made by Holdings; (21) if applicable, a discussion of certain United
States federal income tax, accounting or other special considerations applicable
thereto; and (22) any other terms of the Currency Warrants.
Other important information concerning Currency Warrants is set forth below
under "Certain Items Applicable to All Warrants -- Modifications", "-- Merger,
Consolidation, Sale or Other Dispositions", "-- Enforceability of Rights by
Beneficial Owner; Governing Law" and "-- Unsecured Obligations of a Holding
Company" and "Certain Items Applicable to Currency Warrants, Index Warrants and
Interest Rate Warrants -- Exercise of Warrants", "-- Market Disruption and Force
Majeure Events" and "-- Settlement Currency", "-- Listing".
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INDEX WARRANTS
Holdings may issue, together with Debt Securities, Debt Warrants, Currency
Warrants or Interest Rate Warrants, or separately, Index Warrants (a) in the
form of Index Put Warrants, entitling the owners thereof to receive from
Holdings the Index Cash Settlement Value (as shall be defined in the Prospectus
Supplement) in cash, which amount will be determined by reference to the amount,
if any, by which the Fixed Amount (as shall be defined in the Prospectus
Supplement) at the time of exercise exceeds the Index Value (as shall be defined
in the Prospectus Supplement), (b) in the form of Index Call Warrants, entitling
the owners thereof to receive from Holdings the Index Cash Settlement Value in
cash, which amount will be determined by reference to the amount, if any, by
which the Index Value at the time of exercise exceeds the Fixed Amount, (c) in
the form of Index Spread Warrants, entitling the owners thereof to receive from
Holdings the Index Cash Settlement Value in cash, which amount will be
determined by reference to the amount, if any, by which the Reference Index
Value (as shall be defined in the Prospectus Supplement) at the time of exercise
exceeds the Base Index Value (as shall be defined in the Prospectus Supplement)
or (d) in such other form as shall be specified in the related Prospectus
Supplement. The Prospectus Supplement for an issue of Index Warrants will set
forth the formula pursuant to which the Index Cash Settlement Value will be
determined, including any multipliers, if applicable.
The Prospectus Supplement will describe the terms of Index Warrants offered
thereby, the Index Warrant Agreement relating to such Index Warrants and the
Index Warrant Certificate representing such Index Warrants, including the
following: (1) the title of such Index Warrants; (2) the aggregate amount of
such Index Warrants; (3) the initial offering price of such Index Warrants; (4)
the exercise price, if any; (5) the currency or currency unit in which the
initial offering price, the exercise price, if any, and the Index Cash
Settlement Value of such Index Warrants is payable; (6) the Index or Indices for
such Index Warrants, which may be based on one or more U.S. or foreign stocks,
bonds, or other securities, one or more U.S. or foreign interest rates, one or
more currencies or currency units, or any combination of the foregoing, and may
be a preexisting U.S. or foreign index compiled and published by a third party
or an index based on one or more securities, interest rates or currencies
selected by Holdings solely in connection with the issuance of such Index
Warrants, and certain information regarding such Index or Indices and the
underlying securities, interest rates or currencies (including, to the extent
possible, the policies of the publisher of the Index with respect to additions,
deletions and substitutions of such securities, interest rates or currencies);
(7) whether such Index Warrants shall be Index Put Warrants, Index Call
Warrants, Index Spread Warrants or otherwise; (8) the method of providing for a
substitute Index or Indices or otherwise determining the amount payable in
connection with the exercise of such Index Warrants if any Index changes or
ceases to be made available by its publisher; (9) the formula for determining
the Index Cash Settlement Value, if applicable, of each Index Warrant; (10)
whether and under what circumstances a minimum and/or maximum expiration value
is applicable upon the expiration or exercise of such Index Warrants; (11) the
effect or effects, if any, of the occurrence of a Market Disruption Event or
Force Majeure Event; (12) the date on which the right to exercise such Index
Warrants shall commence and the date (the "Index Warrant Expiration Date") on
which such right shall expire; (13) any minimum number of Index Warrants which
must be exercised at any one time, other than upon automatic exercise; (14) the
maximum number, if any, of such Index Warrants that may, subject to election by
Holdings, be exercised by all owners (or by any person or entity) on any day;
(15) any provisions for the automatic exercise of such Index Warrants other than
at expiration; (16) whether and under what circumstances such Index Warrants may
be cancelled by Holdings prior to their expiration date; (17) any provisions
permitting a Holder to condition any notice of exercise on the absence of
certain specified changes in the Index Value, the Base Index Value or the
Reference Index Value after the date of exercise; (18) any other procedures and
conditions relating to the exercise of such Index Warrants; (19) the identity of
the Index Warrant Agent; (20) any national securities exchange on which such
Index Warrants will be listed; (21) provisions, if any, for issuing such Index
Warrants in certificated form; (22) if such Index Warrants are not issued in
book-entry form, the place or places at which payments in respect of such Index
Warrants are to be made by Holdings; (23) if applicable, a discussion of certain
United States federal income tax, accounting or other special considerations
applicable thereto; and (24) any other terms of such Index Warrants.
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Other important information concerning Index Warrants is set forth below
under "Certain Items Applicable to All Warrants -- Modifications", "-- Merger,
Consolidation, Sale or Other Dispositions", "-- Enforceability of Rights by
Beneficial Owner; Governing Law" and "-- Unsecured Obligations of a Holding
Company" and "Certain Items Applicable to Currency Warrants, Index Warrants and
Interest Rate Warrants -- Exercise of Warrants", "-- Market Disruption and Force
Majeure Events", "-- Settlement Currency", "-- Listing".
INTEREST RATE WARRANTS
Holdings may issue, together with Debt Securities, Debt Warrants, Currency
Warrants or Index Warrants or, separately, Interest Rate Warrants (a) in the
form of Interest Rate Put Warrants, entitling the owners thereof to receive from
Holdings the Interest Rate Cash Settlement Value (as shall be defined in the
Prospectus Supplement) in cash, which amount will be determined by reference to
the amount, if any, by which the Spot Amount (as shall be defined in the
Prospectus Supplement) is less than the Strike Amount (as shall be defined in
the Prospectus Supplement) on the applicable valuation date following exercise,
(b) in the form of Interest Rate Call Warrants, entitling the owners thereof to
receive from Holdings the Interest Rate Cash Settlement Value in cash, which
amount will be determined by reference to the amount, if any, by which the Spot
Amount on the applicable valuation date following exercise exceeds the Strike
Amount or (c) in such other form as shall be specified in the related Prospectus
Supplement. The Prospectus Supplement for an issue of Interest Rate Warrants
will set forth the formula pursuant to which the Interest Rate Cash Settlement
Value will be determined, including any multipliers, if applicable. The Strike
Amount may either be a fixed yield, price or rate of a Debt Instrument, a Rate
or any combination of Debt Instruments and/or Rates or a yield, price or rate
that varies during the term of the Interest Rate Warrants in accordance with a
schedule or formula. The Debt Instrument will be one or more instruments
specified in the applicable Prospectus Supplement issued either by the United
States government or by a foreign government. The Rate will be one or more
interest rates or interest rate swap rates established from time to time by one
or more financial institutions specified in the applicable Prospectus
Supplement.
The Prospectus Supplement will describe the terms of Interest Rate Warrants
offered thereby, the Interest Rate Warrant Agreement relating to such Interest
Rate Warrants and the Interest Rate Warrant Certificate representing such
Interest Rate Warrants, including the following: (1) the title of such Interest
Rate Warrants, (2) the aggregate amount of such Interest Rate Warrants; (3) the
initial offering price of such Interest Rate Warrants; (4) the exercise price,
if any; (5) the currency or currency unit in which the initial offering price,
the exercise price, if any, and the Interest Rate Cash Settlement Value of such
Interest Rate Warrants is payable; (6) the Debt Instrument (which may be one or
more debt instruments issued either by the United States government or by a
foreign government), the Rate (which may be one or more interest rates or
interest rate swap rates established from time to time by one or more specified
financial institutions) or the other yield, price or rate utilized for such
Interest Rate Warrants, and certain information regarding such Debt Instrument
or Rate; (7) whether such Interest Rate Warrants shall be Interest Rate Put
Warrants, Interest Rate Call Warrants or otherwise; (8) the Strike Amount, the
method of determining the Spot Amount and the method of expressing movements in
the yield or closing price of the Debt Instrument or in the level of the Rate as
a cash amount in the currency in which the Interest Rate Cash Settlement Value
of such Warrants is payable; (9) the formula for determining the Interest Rate
Cash Settlement Value, if applicable, of each Interest Rate Warrant; (10)
whether and under what circumstances a minimum and/or maximum expiration value
is applicable upon the expiration or exercise of such Interest Rate Warrants;
(11) the effect or effects, if any, of the occurrence of a Market Disruption
Event or Force Majeure Event; (12) the date on which the right to exercise such
Interest Rate Warrants shall commence and the date (the "Interest Rate Warrant
Expiration Date") on which such right shall expire; (13) any minimum number of
Interest Rate Warrants which must be exercised at any one time, other than upon
automatic exercise; (14) the maximum number, if any, of such Interest Rate
Warrants that may, subject to election by Holdings, be exercised by all owners
(or by any person or entity) on any day; (15) any provisions for the automatic
exercise of such Interest Rate Warrants other than at expiration; (16) whether
and under what circumstances such Interest Rate Warrants may be cancelled by
Holdings prior to their expiration date; (17) any provisions permitting a Holder
to condition any notice of exercise on the absence of certain specified changes
in the Spot Amount after the date
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of exercise; (18) any other procedures and conditions relating to the exercise
of such Interest Rate Warrants; (19) the identity of the Interest Rate Warrant
Agent; (20) any national securities exchange on which such Interest Rate
Warrants will be listed; (21) provisions, if any, for issuing such Interest Rate
Warrants in certificated form; (22) if such Interest Rate Warrants are not
issued in book-entry form, the place or places at which payments in respect of
such Interest Rate Warrants are to be made by Holdings; (23) if applicable, a
discussion of certain United States federal income tax, accounting or other
special considerations applicable thereto; and (24) any other terms of such
Interest Rate Warrants.
Other important information concerning Interest Rate Warrants is set forth
below under "Certain Items Applicable to All Warrants -- Modifications",
"-- Merger, Consolidation, Sale or Other Dispositions", "-- Enforceability of
Rights by Beneficial Owner; Governing Law" and "-- Unsecured Obligations of a
Holding Company" and "Certain Items Applicable to Currency Warrants, Index
Warrants and Interest Rate Warrants -- Exercise of Warrants", "-- Market
Disruption and Force Majeure Events", "-- Settlement Currency", "-- Listing".
CERTAIN ITEMS APPLICABLE TO ALL WARRANTS
Modifications
Each Warrant Agreement and the terms of each issue of Warrants may be
amended by Holdings and the applicable Warrant Agent, without the consent of the
beneficial owners or the registered holders, for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision contained therein, or in any other manner which Holdings
may deem necessary or desirable and which will not adversely affect the
interests of the beneficial owners of the then outstanding unexercised Warrants
in any material respect (Section 6.1).
Holdings and each Warrant Agent also may modify or amend the applicable
Warrant Agreement and the terms of the related Warrants, with the consent of the
beneficial owners of not less than a majority in number of the then outstanding
unexercised Warrants affected, provided that no such modification or amendment
that reduces the amount receivable upon exercise, cancellation or expiration,
shortens the period of time during which the Warrants may be exercised or
otherwise materially and adversely affects the exercise rights of the beneficial
owners of the Warrants or reduces the percentage number of outstanding Warrants
the consent of whose beneficial owners is required for modification or amendment
of the applicable Warrant Agreement or the terms of the Warrants may be made
without the consent of the beneficial owners affected thereby (Section 6.1).
Merger, Consolidation, Sale or Other Dispositions
If at any time there is a merger or consolidation involving Holdings or a
sale, transfer, conveyance or other disposition of all or substantially all of
the assets of Holdings, then in any such event the successor or assuming
corporation shall succeed to and be substituted for Holdings, with the same
effect as if it had been named in the applicable Warrant Agreement and in the
applicable Warrants as Holdings. Holdings shall thereupon be relieved of any
further obligation under such Warrant Agreement or under such Warrants, and, in
the event of any such merger, consolidation, sale, transfer, conveyance or other
disposition, Holdings as the predecessor corporation may thereupon or at any
time thereafter be dissolved, wound up or liquidated (Section 6.2 of the Debt
Warrant Agreement and Section 3.2 of each other Warrant Agreement).
Enforceability of Rights by Beneficial Owner; Governing Law
Each Warrant Agent will act solely as an agent of Holdings in connection
with the issuance and exercise of the applicable Warrants and will not assume
any obligation or relationship of agency or trust for or with any owner of a
beneficial interest in any Warrant or with the registered holder thereof
(Section 5.2). A Warrant Agent shall have no duty or responsibility in case of
any default by Holdings in the performance of its obligations under the
applicable Warrant Agreement or Warrant Certificate including, without
limitation, any duty or responsibility to initiate any proceedings at law or
otherwise or to make any demand upon Holdings (Section 5.2). Beneficial owners
may, without the consent of the applicable Warrant Agent, enforce by
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appropriate legal action, on their own behalf, their right to exercise their
Warrants, to receive Debt Securities, in the case of Debt Warrants, and to
receive payment, if any, for their Warrants, in the case of Currency Warrants,
Index Warrants or Interest Rate Warrants (Section 4.2 of the Debt Warrant
Agreement and Section 3.1 of each other Warrant Agreement). Except as may
otherwise be provided in the Prospectus Supplement relating thereto, each issue
of Warrants and the applicable Warrant Agreement will be governed by and
construed in accordance with the law of the State of New York (Section 6.5).
Unsecured Obligations of a Holding Company
The Warrants are unsecured obligations of Holdings and, therefore, changes
in the perceived creditworthiness of Holdings may be expected to affect trading
prices in Warrants. Since Holdings, as a holding company, does not have any
significant assets other than the equity securities of its subsidiaries, its
cash flow and consequent ability to satisfy its financial obligations, including
Warrants, are dependent upon the earnings of its subsidiaries and the
distribution of those earnings to Holdings, or upon loans or other payments of
funds by those subsidiaries to Holdings. Holdings' subsidiaries, including
Lehman Brothers, are separate and distinct legal entities and will have no
obligation, contingent or otherwise, to pay any amount in respect of Warrants or
to make any funds available therefor, whether by dividends, loans or other
payments. Dividends, loans and other payments by Lehman Brothers are restricted
by net capital and other rules of various regulatory bodies. See "Capital
Requirements." The payment of dividends by Holdings' subsidiaries is contingent
upon the earnings of those subsidiaries and is subject to various business
considerations in addition to net capital requirements and contractual
restrictions. Additionally, since Warrants will be obligations of a holding
company, the ability of holders of Warrants to benefit from any distribution of
assets of any subsidiary upon the liquidation or reorganization of such
subsidiary is subordinate to the prior claims of present and future creditors of
such subsidiary.
CERTAIN ITEMS APPLICABLE TO CURRENCY WARRANTS, INDEX WARRANTS AND INTEREST RATE
WARRANTS
Exercise of Warrants
Except as may otherwise be provided in the applicable Prospectus Supplement
relating thereto, (a) each Currency Warrant, Index Warrant and Interest Rate
will entitle the owner, upon payment of the exercise price, if any, to the
applicable Cash Settlement Value of such Warrant, on the applicable Exercise
Date, in each case as such terms will further be defined in the applicable
Prospectus Supplement relating thereto (Section 2.2) and (b) if not exercised
prior to 1:30 p.m., New York City time, on the Business Day preceding the
applicable Warrant Expiration Date, the Warrants will be deemed automatically
exercised on such Warrant Expiration Date (Section 2.3). As described below,
Currency Warrants, Index Warrants and Interest Rate Warrants may also be deemed
to be automatically exercised if they are delisted. Procedures for exercise of
the Currency Warrants, Index Warrants and Interest Rate Warrants will be set out
in the applicable Prospectus Supplement.
Market Disruption and Force Majeure Events
If so specified in the applicable Prospectus Supplement, following the
occurrence of a Market Disruption Event or Force Majeure Event (as each term
shall be defined therein), the Cash Settlement Value of a Currency Warrant, an
Index Warrant or an Interest Rate Warrant may be determined on a different basis
than under normal exercise of a Warrant or the determination of the applicable
Cash Settlement Value. In addition, if so specified in the applicable Prospectus
Supplement, Currency Warrants, Index Warrants and Interest Rate Warrants may, in
certain circumstances, be cancelled by Holdings prior to their expiration date
and the holders thereof will be entitled to receive only the applicable
Cancellation Amount. The Cancellation Amount may be either a fixed amount or an
amount that varies during the term of the Warrants in accordance with a schedule
or formula.
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Settlement Currency
Currency Warrants, Index Warrants and Interest Rate Warrants will be
settled only in U.S. dollars (unless settlement in a foreign currency is
specified in the applicable Prospectus Supplement and is permissible under
applicable) law and accordingly will not require or entitle an owner to sell,
deliver, purchase or take delivery of the currency, security or other instrument
underlying such Warrants. If any of the Currency Warrants, Index Warrants or
Interest Rate Warrants are sold for, or if the exercise price, if any, is
payable in, foreign currencies or foreign currency units or if the amount
payable by Holdings in respect of any series of Currency Warrants, Index
Warrants or Interest Rate Warrants is payable in foreign currencies or foreign
currency units, the restrictions, elections, tax consequences, specific terms
and other information with respect to such issue of Warrants and such currencies
or currency units will be set forth in an applicable Prospectus Supplement
relating thereto.
Listing
Unless otherwise provided in the Prospectus Supplement, each issue of
Currency Warrants, Index Warrants and Interest Rate Warrants will be listed on a
national securities exchange, as specified in the applicable Prospectus
Supplement, subject only to official notice of issuance, as a pre-condition to
the sale of any such Warrants. It may be necessary in certain circumstances for
such national securities exchange to obtain the approval of the SEC in
connection with any such listing. In the event that the such Warrants are
delisted from, or permanently suspended from trading on, such exchange, and, at
or prior to such delisting or suspension, such Warrants shall not have been
listed on another national securities exchange, any such Warrants not previously
exercised will be deemed automatically exercised on the date such delisting or
permanent trading suspension becomes effective (Section 2.3). The applicable
Cash Settlement Value to be paid in such event will be as set forth in the
applicable Prospectus Supplement. Holdings will notify holders of such Warrants
as soon as practicable of such delisting or permanent trading suspension. The
applicable Warrant Agreement will contain a covenant of Holdings not to seek
delisting of such Warrants from, or permanent suspension of their trading on,
such exchange (Section 2.4 of the Currency Warrant Agreement and the Interest
Rate Warrant Agreement and Section 2.5 of the Index Warrant Agreement).
GLOBAL SECURITIES
The Securities of a series may be issued in whole or in part in the form of
one or more Global Securities that will be deposited with or on behalf of a
depository (a "Depository") identified in the Prospectus Supplement relating to
such series. Global Securities representing Debt Securities or Debt Warrants may
be issued in either registered or bearer form. Global Securities representing
Currency Warrants, Index Warrants or Interest Rate Warrants will be issued in
registered form only. Global Securities may be issued in either temporary or
permanent form.
The specific terms of the depository arrangement with respect to any
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will apply
to all depository arrangements.
Unless otherwise specified in an applicable Prospectus Supplement,
Securities which are to be represented by a Global Security in registered form
to be deposited with or on behalf of a Depository will be registered in the name
of such Depository or its nominee. Upon the issuance of a Global Security in
registered form, the Depository for such Global Security will credit the
respective principal amounts, in the case of Debt Securities, and the respective
number of warrants, in the case of Warrants represented by such Global Security
to the accounts of institutions that have accounts with such Depository or its
nominee ("participants"). The accounts to be credited shall be designated by the
underwriters or agents of such Securities or by Holdings, if such Securities are
offered and sold directly by Holdings. Ownership of beneficial interests in such
Global Securities will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests by
participants in such Global Securities will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depository or its nominee for such Global Security. Ownership of beneficial
interests in Global Securities by persons that hold through participants will be
shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that
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certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depository for a Global Security in registered form, or its
nominee, is the registered owner of such Global Security, such Depository or
such nominee, as the case may be, will be considered the sole owner or holder of
the Securities represented by such Global Security for all purposes under the
applicable Indenture, in the case of Debt Securities, or under the applicable
warrant agreement, in the case of Warrants, governing such Securities. Except as
set forth below, owners of beneficial interests in such Global Security will not
be entitled to have Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Securities of such series in definitive form and will not be
considered the owners or holders thereof under the applicable Indenture, in the
case of Debt Securities, or under the applicable warrant agreement, in the case
of Warrants.
Payments in respect of Securities registered in the name of or held by a
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the registered owner or the holder of the Global Security. None
of Holdings, the applicable Trustee or Warrant agent, any Paying Agent or any
Security Registrar for such Securities will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in a Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Holdings expects that the Depository for a permanent Global Security in
registered form, upon receipt of any payment in respect of a permanent Global
Security, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in such Global
Security as shown on the records of such Depository. Holdings also expects that
payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
A Global Security in registered form may not be transferred except as a
whole by the Depository for such Global Security to a nominee of such Depository
or by a nominee of such Depository to such Depository or another nominee of such
Depository or by such Depository or any such nominee to a successor of such
Depository or a nominee of such successor. If a Depository for a permanent
Global Security in registered form is at any time unwilling or unable to
continue as Depository and a successor Depository is not appointed by Holdings
within 90 days, Holdings will issue Securities in definitive registered form in
exchange for the Global Security representing such Securities. In addition,
Holdings may at any time and in its sole discretion determine not to have any
Securities in registered form represented by one or more Global Securities and,
in such event, will issue Securities in definitive form in exchange for all of
the Global Securities representing such Securities. Further, if Holdings so
specifies with respect to the Securities of a series, an owner of a beneficial
interest in a Global Security representing Securities of such series may, on
terms acceptable to Holdings and the Depository for such Global Security,
receive Securities of such series in definitive form. In any such instance, an
owner of a beneficial interest in a Global Security will be entitled to physical
delivery in definitive form of Securities of the series represented by such
Global Security equal in principal amount, in the case of Debt Securities, or
number, in the case of Warrants, to such beneficial interest and to have such
Securities registered in its name (if the Securities of such series are issuable
as registered securities). Unless otherwise specified by Holdings, Securities of
such series so issued in definitive form will be issued either as registered or
bearer securities (if the Securities of such series are issuable in such form)
and in authorized denominations, in the case of Debt Securities, or in
authorized numbers, in the case of Warrants, as specified in the applicable
Prospectus Supplement. See, however, "Description of Debt
Securities -- Limitations on Issuance of Bearer Securities" above for a
description of certain restrictions on the issuance of a Bearer Security in
definitive form in exchange for an interest in a Global Security.
BEARER DEBT SECURITIES
If so specified in an applicable Prospectus Supplement, pending the
availability of a permanent Global Security, all or any portion of the Debt
Securities of a series which may be issuable as bearer securities will
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initially be represented by one or more temporary Global Securities, without
interest coupons, to be deposited with a common depositary in London for Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euro-clear System ("Euro-clear") and Centrale de Livraison de Valeurs
Mobilieres, S.A. ("CEDEL") for credit to the designated accounts. The interests
of the beneficial owner or owners in such a temporary Global Security in bearer
form will be exchangeable for definitive Debt Securities (including interests in
a permanent Global Security in bearer form), representing Debt Securities having
the same interest rate and Stated Maturity, but only upon written certification
in the form and to the effect described under "Description of Debt
Securities-Denominations, Registration and Transfer" unless such certification
has been provided on an earlier interest payment date. The beneficial owner of a
Debt Security represented by a temporary Global Security in bearer form or a
permanent Global Security in bearer form may, on or after the applicable
exchange date and upon 30 days' notice to the applicable Trustee given through
Euro-clear or CEDEL, exchange its interest for definitive bearer Debt Securities
or, if specified in an applicable Prospectus Supplement, definitive registered
Debt Securities of any authorized denomination. No bearer Debt Security
delivered in exchange for a portion of a temporary Global Security or a
permanent Global Security shall be mailed or otherwise delivered to any location
in the United States in connection with such exchange.
Unless otherwise specified in an applicable Prospectus Supplement, interest
in respect of any portion of such a temporary Global Security in bearer form
payable in respect of an Interest Payment Date occurring prior to the issuance
of a permanent Global Security in bearer form will be paid to each of Euro-clear
and CEDEL with respect to the portion of the temporary Global Security in bearer
form held for its account. Each of Euro-clear and CEDEL will undertake in such
circumstances to credit such interest received by it in respect of a temporary
Global Security in bearer form to the respective accounts for which it holds
such temporary Global Security in bearer form as of the relevant Interest
Payment Date, but only upon receipt in each case of written certification, in
the form and to the effect described under "Description of Debt
Securities-Denomination, Registration and Transfer."
UNITED STATES TAXATION
A summary of the material U.S. federal income tax consequences to U.S.
persons investing in Securities will be set forth in the applicable Prospectus
Supplement. The summary of U.S. federal income tax consequences contained in the
Prospectus Supplement will be presented for informational purposes only,
however, and will not be intended as legal or tax advice to prospective
purchasers. Prospective purchasers of Securities are urged to consult their own
tax advisors prior to any acquisition of Securities.
CAPITAL REQUIREMENTS
As registered broker-dealers, Lehman Brothers and certain of Holdings'
other subsidiaries (the "Regulated Subsidiaries") are subject to the SEC's net
capital rule (Rule 15c3-1, the "Net Capital Rule"), promulgated under the
Exchange Act. The Exchange monitors the application of the Net Capital Rule by
Lehman Brothers. The Exchange or the NASD, as the case may be, monitors the
application of the Net Capital Rule by the Regulated Subsidiaries. Lehman
Brothers and such Regulated Subsidiaries compute net capital under the
alternative method of the Net Capital Rule which requires the maintenance of
minimum net capital, as defined. A broker-dealer may be required to reduce its
business if its net capital is less than 4% of aggregate debit balances and may
also be prohibited from expanding its business or paying cash dividends if
resulting net capital would be less than 5% of aggregate debit balances. In
addition, the Net Capital Rule does not allow withdrawal of subordinated capital
if net capital would be less than 5% of such debit balances.
The Net Capital Rule also limits the ability of broker-dealers to transfer
large amounts of capital to parent companies and other affiliates. Under the Net
Capital Rule equity capital can not be withdrawn from a broker-dealer without
the prior approval of the SEC when net capital after the withdrawal would be
less than 25% of its securities positions haircuts (which are deductions from
capital of certain specified percentages of the market value of securities to
reflect the possibility of a market decline prior to disposition). In addition,
the Net Capital Rule requires broker-dealers to notify the SEC and the
appropriate self-regulatory organization two business days before a withdrawal
of excess net capital if the withdrawal would exceed the greater of
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$500,000 or 30% of the broker-dealer's excess net capital, and two business days
after a withdrawal that exceeds the greater of $500,000 or 20% of excess net
capital. Finally, the Net Capital Rule authorizes the SEC to order a freeze on
the transfer of capital if a broker-dealer plans a withdrawal of more than 30%
of its excess net capital and the SEC believes that such a withdrawal would be
detrimental to the financial integrity of the firm or would jeopardize the
broker-dealer's ability to pay its customers.
Compliance with the Net Capital Rule could limit those operations of Lehman
Brothers and the Regulated Subsidiaries that require the intensive use of
capital, such as underwriting and trading activities and the financing of
customer account balances, and also could restrict Holdings' ability to withdraw
capital from Lehman Brothers and the Regulated Subsidiaries which in turn could
limit Holdings' ability to pay dividends, repay debt and redeem or purchase
shares of its outstanding capital stock.
The Company is subject to other domestic and international regulatory
requirements with which it is required to comply.
PLAN OF DISTRIBUTION
Holdings may sell Securities in any one or more of the following ways: (i)
through, or through underwriting syndicates managed by, Lehman Brothers alone or
with one or more other underwriters; (ii) through one or more dealers or agents
(which may include Lehman Brothers); or (iii) directly to one or more
purchasers. The specific managing underwriter or underwriters or agent or agents
with respect to the offer and sale of Securities are set forth on the cover of a
Prospectus Supplement relating to such Securities and the members of the
underwriting syndicate, if any, are named in such Prospectus Supplement. Only
the underwriters or agents so named in a Prospectus Supplement are underwriters
or agents, respectively, in connection with such Securities. The applicable
Prospectus Supplement also describes the discounts and commissions to be allowed
or paid to the underwriters or agents, all other items constituting underwriting
or agency compensation, the discounts and commissions to be allowed or paid to
dealers, if any, and the exchanges, if any, on which such Securities will be
listed.
Securities acquired by any underwriter will be acquired for its own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The obligations of the underwriters to purchase
such Securities will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such Securities if any of such
Securities are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time. To the extent, if any, that Securities to be purchased by Lehman Brothers,
as underwriter, are not resold by it or are not resold at the public offering
price set forth in an applicable Prospectus Supplement, the funds derived from
such offering by the Company on a consolidated basis may be reduced.
If so indicated in an applicable Prospectus Supplement, Holdings will
authorize the underwriters named therein to solicit offers by certain
institutional investors to purchase Securities providing for payment and
delivery on a future date specified in an applicable Prospectus Supplement.
There may be limitations on the minimum amount which may be purchased by any
such institutional investor or on the portion of the aggregate proceeds to
Holdings of the particular Securities which may be sold pursuant to such
arrangements. Institutional investors to which such offers may be made, when
authorized, include commercial and savings banks, insurance companies, pension
funds, educational charitable institutions and such other institutions as may be
approved by Holdings. The obligations of any such purchasers pursuant to such
delayed delivery and payment arrangements will not be subject to any conditions
except (i) the purchase by an institution of the particular Securities shall not
at the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject, and (ii) Holdings shall have
sold to such underwriters all of such Securities less the amount of such
securities covered by such arrangements. Underwriters named therein will not
have any responsibility in respect of the validity of such arrangements or the
performance of Holdings or such institutional investors thereunder.
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Each distributor of Bearer Securities will agree that it will not offer or
sell during the restricted period, directly or indirectly, Bearer Securities in
the United States or to United States persons (other than as discussed under
"Description of Debt Securities -- Limitations on Issuance of Bearer
Securities") and in connection with the sale of Bearer Securities during the
restricted period, will not deliver definitive Bearer Securities within the
United States. See "Description of Debt Securities -- Limitations on Issuance of
Bearer Securities."
Each underwriter or agent will represent and agree that (i) it has not
offered or sold and will not offer or sell in the United Kingdom, by means of
any document, any Securities other than to persons whose ordinary business it is
to buy or sell shares or debentures, whether as principal or agent (except in
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985); (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Securities in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on to any person in the United Kingdom any document received
by it in connection with the issue of the Securities if that person is of a kind
described in Article 9(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1988.
The underwriters and agents named in an applicable Prospectus Supplement
may be entitled under agreements entered into with Holdings to indemnification
by Holdings against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which the
underwriters and agents may be required to make in respect thereof. The
underwriters and agents may engage in transactions with, or perform services
for, Holdings in the ordinary course of business.
Holdings has been advised by Lehman Brothers that Lehman Brothers may from
time to time purchase and sell Securities in the secondary market. Each offering
of Securities and any market-making activities by Lehman Brothers with respect
to Securities will be conducted in compliance with the requirements of Schedule
E of the By-Laws of the NASD regarding an NASD member firm's participation in
distributing its affiliate's securities. Lehman Brothers may act as principal or
agent in such transactions. This Prospectus may be used by Lehman Brothers in
connection with such transactions. Such sales, if any, will be made at varying
prices related to prevailing market prices at the time of sale. Lehman Brothers
is not obligated to make a market in any Securities and may discontinue any
market-making activities at any time without notice. No assurance can be given
that there will be a secondary market for the Securities.
ERISA MATTERS
Each of Holdings and Lehman Brothers may be considered a "party in
interest" within the meaning of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and a "disqualified person" under corresponding
provisions of the Code, with respect to certain employee benefit plans. Certain
transactions between an employee benefit plan and a party in interest or
disqualified person may result in "prohibited transactions" within the meaning
of ERISA and the Code. ANY EMPLOYEE BENEFIT PLAN PROPOSING TO INVEST IN THE
SECURITIES SHOULD CONSULT WITH ITS LEGAL COUNSEL.
LEGAL OPINIONS
Unless otherwise indicated in an applicable Prospectus Supplement relating
to offered Securities, the validity of the Securities offered hereby will be
passed upon for Holdings by David Marcus, Esq., General Counsel of Holdings and
for the underwriters or agents by Simpson Thacher & Bartlett (a partnership
which includes professional corporations), 425 Lexington Avenue, New York, New
York 10017. Simpson Thacher & Bartlett acts as counsel in various matters for
Holdings, Lehman Brothers and certain of their subsidiaries.
24
<PAGE> 50
INDEPENDENT ACCOUNTANTS
The consolidated financial statements and schedules of the Company for the
years ended December 31, 1993, December 31, 1992 and December 31, 1991,
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 have been audited by Ernst & Young, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements and schedules are, and audited
financial statements included in subsequently filed documents will be,
incorporated herein by reference in reliance upon the reports of Ernst & Young
pertaining to such financial statements (to the extent covered by consents filed
with the Securities and Exchange Commission) given upon the authority of such
firm as experts in accounting and auditing.
25
<PAGE> 51
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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-5
Special Considerations................ S-5
Description of Securities............. S-7
The Basket............................ S-13
Form of Securities.................... S-17
Certain United States Federal Income
Tax Consequences.................... S-20
Underwriting.......................... S-23
Validity of the Securities............ S-23
Glossary.............................. S-24
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
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- --------------------------------------------
</TABLE>
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- ------------------------------------------------------
1,000,000 SUNS
LEHMAN BROTHERS
HOLDINGS INC.
REGIONAL BANK
STOCK UPSIDE NOTE
SECURITIES DUE 1996
---------------------
PROSPECTUS SUPPLEMENT
NOVEMBER 28, 1994
---------------------
LEHMAN BROTHERS
KEMPER SECURITIES, INC.
OPPENHEIMER & CO., INC.
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