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Filed Pursuant to Rule 424(b)(3)
Registration Nos. 33-16141, 33-3663,
33-21143, 33-25797, 33-37226, 33-40990,
33-46146, 33-49062, 33-58548, and
33-65674.
PROSPECTUS
LEHMAN BROTHERS HOLDINGS INC.
DEBT SECURITIES
------------------------
Lehman Brothers Holdings Inc. ("Holdings") may offer from time to time debt
securities (the "Debt Securities") consisting of debentures, notes and/or other
evidences of indebtedness in one or more series pursuant to an indenture between
Holdings and Citibank, N.A., and an indenture between Holdings and Chemical
Bank.
The Debt Securities may be issued in registered form or bearer form with
coupons attached. In addition, all or a portion of the Debt Securities of a
series may be issued in global form. Debt Securities in bearer form will be
offered only outside the United States to non-United States persons and to
offices located outside the United States of certain United States financial
institutions. See "Limitations on Issuance of Bearer Securities."
The following Debt Securities are currently issued and outstanding:
$ 280,000,000 aggregate principal amount of Serial Zero Coupon Senior
Notes Due 1995-1998.
$ 70,000,000 aggregate principal amount of Serial Zero Coupon Senior
Notes Due 1995-1998.
$ 150,000,000 aggregate principal amount of 9 3/4% Notes Due 1996.
$ 120,000,000 aggregate principal amount of 8 7/8% Notes Due 1998.
$ 200,000,000 aggregate principal amount of 8 3/8% Notes Due 1999.
$ 200,000,000 aggregate principal amount of 8 7/8% Notes Due 2002.
$ 200,000,000 aggregate principal amount of 8 3/8% Notes Due 1997.
$ 100,000,000 aggregate principal amount of 9 1/4% Notes Due 2004.
$ 200,000,000 aggregate principal amount of 8 3/4% Notes Due 2002.
$ 200,000,000 aggregate principal amount of 7 5/8% Notes Due 1997.
$ 200,000,000 aggregate principal amount of 7 5/8% Notes Due 1999.
$ 150,000,000 aggregate principal amount of 6 3/8% Notes Due 1998.
$ 175,000,000 aggregate principal amount of 5 1/2% Notes Due 1996.
$ 200,000,000 aggregate principal amount of 5 3/4% Notes Due 1998.
$ 29,360,000 aggregate principal amount of Medium-Term Notes, Series B,
Due From Nine Months to 30 Years From Date of Issue.
$ 182,700,000 aggregate principal amount of Medium-Term Notes, Series C,
Due From Nine Months to 30 Years From Date of Issue.
$1,562,642,000 aggregate principal amount of Medium-Term Notes, Series
D, Due from Nine Months to 30 Years From Date of Issue.
For a discussion of certain United States federal income tax consequences
to holders of Debt Securities, see "United States Taxation" and the description
of the Debt Securities set forth herein.
In addition, Holdings has guaranteed the payment of principal and interest
on the following outstanding notes issued by The E.F. Hutton Group Inc. (the
"Guaranteed Notes"):
$102,145,000 aggregate principal amount of 8 7/8% Notes Due May 1, 1996.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Prospectus has been prepared in connection with the Debt Securities
and is used by Lehman Brothers Inc. ("Lehman Brothers") in connection with
offers and sales related to market-making transactions in the Debt Securities.
Lehman Brothers may act as principal or agent in such transactions. The Debt
Securities will be offered in the over-the-counter market at negotiated prices
related to prevailing market prices at the time of sale or otherwise.
------------------------
June 10, 1994
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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 Notes Due May 16, 1998 are listed on the American Stock
Exchange, Inc., and reports and other information concerning the Company can be
inspected at the offices of the Exchange, 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 10006-1881.
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 the Company 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 Report on Form 10-Q for the fiscal quarter ended
March 31, 1994.
(3) Holdings' Current Reports on Form 8-K dated February 24, 1994, April
14, 1994, April 26, 1994 and June 7, 1994.
Each document filed by Holdings pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debt Securities 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 and any amendment
or supplement thereto to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement or this Prospectus or any
such amendment or supplement.
Holdings will provide without charge to each person, including any
beneficial owner of any Debt Security, to whom a copy of this Prospectus is
delivered, upon the written or oral request of any such person, a copy of any or
all of the documents which are incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to Mary J. Capko,
the Controller's Office, Lehman Brothers Holdings Inc., 3 World Financial
Center, 27th Floor, New York, New York 10285 (telephone (212) 526-0660).
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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 19 additional locations in the United States, 11
in Europe and the Middle East, four in Latin America and seven in 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
exchange.
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) 596-7000).
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, 1992,
and for the three months ended March 31, 1994:
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
- ---------------------------------------- ----------
1989 1990 1991 1992 1993 1994
- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C>
1.01 * 1.03 * 1.00 1.06
</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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DESCRIPTION OF DEBT SECURITIES
The Debt Securities constitute either Senior Debt (as defined below) or
Subordinated Debt (as defined below) of Holdings. The Debt Securities
constituting Senior Debt are issued under an indenture, dated as of September 1,
1987, between Holdings and Citibank, N.A., Trustee, as supplemented and amended
by Supplemental Indentures dated as of November 25, 1987, as of November 27,
1990 and as of September 13, 1991, (the "Senior Indenture"), and the Debt
Securities constituting Subordinated Debt are to be issued under an indenture
between Holdings and Chemical Bank, Trustee (the "Subordinated Indenture"). The
Senior Indenture and the Subordinated Indenture are hereinafter collectively
referred to as the "Indentures" and, individually, as an "Indenture". Each
Indenture will incorporate by reference certain Standard Multiple-Series
Indenture Provisions, filed with the SEC on July 30, 1987 and as amended and
refiled with the SEC on November 16, 1987. This Prospectus contains descriptions
of all material provisions of the Indentures. The summary of such provisions of
the Indentures does not purport to be complete; copies of such Indentures are
filed as exhibits to the Registration Statement of which this Prospectus is a
part. All articles and sections of the applicable Indenture, and all capitalized
terms set forth below, have the meanings specified in the applicable Indenture.
GENERAL
Neither Indenture limits the amount of debentures, notes or other evidences
of indebtedness which may be issued thereunder. Each Indenture provides that
Debt Securities may be issued from time to time in one or more series. Since
Holdings, as a holding company, does not have any significant assets other than
the equity securities of its subsidiaries, its cash flow and consequent ability
to service its debt, including the Debt Securities, are dependent upon the
earnings of its subsidiaries and the distribution of those earnings to Holdings,
or upon loans or other payments of funds by those subsidiaries to Holdings.
Holdings' subsidiaries, including Lehman Brothers, are separate and distinct
legal entities and will have no obligation, contingent or otherwise, to pay any
interest or principal on the Debt Securities or to make any funds available
therefor, whether by dividends, loans or other payments. Dividends, loans and
other payments by Lehman Brothers are restricted by net capital and other rules
of various regulatory bodies. See "Capital Requirements." The payment of
dividends by Holdings' subsidiaries is contingent upon the earnings of those
subsidiaries and is subject to various business considerations in addition to
net capital requirements and contractual restrictions.
Since the Debt Securities are obligations of a holding company, the ability
of holders of the Debt Securities to benefit from any distribution of assets of
any subsidiary upon the liquidation or reorganization of such subsidiary is
subordinate to the prior claims of present and future creditors of such
subsidiary.
Reference is made to the applicable description below for the following
terms and other information with respect to an issue of Debt Securities: (1) the
title of such Debt Securities and whether such Debt Securities are Senior Debt
or Subordinated Debt; (2) any limit on the aggregate principal amount of such
Debt Securities; (3) whether the Debt Securities are issuable as Registered
Securities or Bearer Securities or both, and if Bearer Securities were issued,
whether Bearer Securities may be exchanged for Registered Securities and the
circumstances and places for such exchange, if permitted; (4) whether the Debt
Securities are to be issued in whole or in part in the form of one or more
temporary or permanent global Debt Securities ("Global Securities") in
registered or bearer form and, if so, the identity of the depositary, if any,
for such Global Security or Securities; (5) the date or dates (or manner of
determining the same) on which such Debt Securities will mature; (6) the rate or
rates (or manner of determining the same) at which such Debt Securities bear
interest, if any, and the date or dates from which such interest accrues; (7)
the dates (or manner of determining the same) on which such interest will be
payable and the Regular Record Dates for such Interest Payment Dates for Debt
Securities which are Registered Securities, and the extent to which, or the
manner in which, any interest payable on a temporary or permanent global Debt
Security on an Interest Payment Date will be paid if other than in the manner
described under "Global Securities" below; (8) any mandatory or optional sinking
fund or analogous provisions; (9) each office or agency where, subject to the
terms of the applicable Indenture as described below under "Payment and Paying
Agents," the principal of and premium, if any, and interest, if any, on the Debt
Securities is payable and each office or agency where, subject to the terms of
the applicable Indenture as described below under "Denominations, Registration
and
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Transfer," the Debt Securities may be presented for registration of transfer or
exchange; (10) the date, if any, after which, and the price or prices in the
currency or currency unit in which, such Debt Securities are payable pursuant to
any optional or mandatory redemption provisions; (11) any provisions for payment
of additional amounts for taxes and any provision for redemption, in the event
the Company must comply with reporting requirements in respect of a Debt
Security or must pay such additional amounts in respect of any Debt Security;
(12) the terms and conditions, if any, upon which the Debt Securities of such
series may be repayable prior to maturity at the option of the holder thereof
(which option may be conditional) and the price or prices in the currency or
currency unit in which such Debt Securities are payable; (13) the denominations
in which any Debt Securities which are Registered Securities are issuable if
other than denominations of $1,000 and any integral multiple thereof, and the
denomination or denominations in which any Debt Securities which are Bearer
Securities are issuable if other than the denomination of $5,000; (14) the
currency, currencies or currency units for which such Debt Securities may be
purchased and the currency, currencies or currency units in which the principal
of and interest, if any, on such Debt Securities may be payable; (15) any index
used to determine the amount of payments of principal of and premium, if any,
and interest, if any, on such Debt Securities; and (16) other terms of the Debt
Securities. (Section 301).
If any of the Debt Securities are sold for foreign currencies or foreign
currency units or if the principal of or interest, if any, on any series of Debt
Securities is payable in foreign currencies or foreign currency units, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such issue of Debt Securities and such currencies or currency
units will be set forth in the terms and provisions of an issue of Debt
Securities described below.
One or more series of Debt Securities may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. Federal income tax
consequences and special considerations applicable to any such series are
described under "United States Taxation" and may be further described below in
the applicable description of the terms and provisions of an issue of Debt
Securities.
SENIOR DEBT
The Debt Securities constituting part of the senior debt of Holdings (the
"Senior Debt") rank equally with all other unsecured debt of Holdings except
Subordinated Debt.
SUBORDINATED DEBT
The Debt Securities constituting part of the subordinated debt of Holdings
(the "Subordinated Debt") are subordinate and junior in the right of payment, to
the extent and in the manner set forth in the Subordinated Indenture, to all
present or future Senior Debt. "Senior Debt" is defined to mean (a) any
indebtedness for money borrowed or evidenced by bonds, notes, debentures or
similar instruments, (b) indebtedness under capitalized leases, (c) any
indebtedness representing the deferred and unpaid purchase price of any property
or business, and (d) all deferrals, renewals, extensions and refundings of any
such indebtedness or obligation; except that the following does not constitute
Senior Debt: (i) indebtedness evidenced by the Subordinated Debt, (ii)
indebtedness which is expressly made equal in right of payment with the
Subordinated Debt or subordinate and subject in right of payment to the
Subordinated Debt, (iii) indebtedness for goods or materials purchased in the
ordinary course of business or for services obtained in the ordinary course of
business or indebtedness consisting of trade payables, or (iv) indebtedness
which is subordinated to any obligation of Holdings of the type specified in
clauses (a) through (d) above. The effect of clause (iv) is that Holdings may
not issue, assume or guaranty any indebtedness for money borrowed which is
junior to the Senior Debt and senior to the Subordinated Debt. (Subordinated
Indenture Section 1401).
Upon the failure to pay the principal or premium, if any, on Senior Debt
when due or upon the maturity of any Senior Debt by lapse of time, acceleration
or otherwise, all principal thereof, interest thereon, if any, and other amounts
due in connection therewith shall first be paid in full, before any payment is
made on account of the principal, premium, if any, or interest, if any, on the
Subordinated Debt or to acquire any of the Subordinated Debt or on account of
the redemption, sinking fund or analogous provisions in the Subordinated
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Indenture. (Subordinated Indenture Section 1402). Upon any distribution of
assets of Holdings pursuant to any dissolution, winding up, liquidation or
reorganization of Holdings, payment of the principal, premium, if any, and
interest, if any, on the Subordinated Debt will be subordinated, to the extent
and in the manner set forth in the Subordinated Indenture, to the prior payment
in full of all Senior Debt. (Subordinated Indenture Section 1403). By reason of
such subordination, in the event of insolvency, creditors of Holdings who are
holders of Senior Debt may recover more ratably than the Holders of Subordinated
Debt.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise provided with respect to a series of Debt Securities, the
Debt Securities will be issuable as Registered Securities without coupons and in
denominations of $1,000 or any integral multiple thereof. Debt Securities of a
series may be issuable in whole or in part in the form of one or more Global
Securities, as described below under "Global Securities". One or more Global
Securities will be issued in a denomination or aggregate denominations equal to
the aggregate principal amount of Debt Securities of the series to be
represented by such Global Security or Securities. If so provided with respect
to a series of Debt Securities, Debt Securities of such series will be issuable
solely as Bearer Securities with coupons attached or as both Registered
Securities and Bearer Securities. (Section 201).
In connection with the sale during the "restricted period" as defined in
section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury regulations
(generally the first 40 days after the closing date and, with respect to unsold
allotments, until sold) no Bearer Security shall be mailed or otherwise
delivered to any location in the United States (as defined under "Limitations on
Issuance of Bearer Securities"). A Bearer Security in definitive form (including
interests in a permanent Global Security) may be delivered only if the Person
entitled to receive such Bearer Security furnishes written certification, in the
form required by the applicable Indenture, to the effect that such Bearer
Security is not owned by or on behalf of a United States person (as defined
under "Limitations on Issuance of Bearer Securities"), or, if a beneficial
interest in such Bearer Security is owned by or on behalf of a United States
person, that such United States person (i) acquired and holds the Bearer
Security through a foreign branch of a United States financial institution, (ii)
is a foreign branch of a United States financial institution purchasing for its
own account or for resale (and in either case, (i) or (ii), such financial
institution agrees to comply with the requirements of Section 165(j)(3)(A), (B)
or (C) of the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations thereunder) or (iii) is a financial institution purchasing for
resale during the restricted period only to non-United States persons outside
the United States. (Sections 303, 304). See "Global Securities--Bearer
Securities" and "Limitations on Issuance of Bearer Securities."
Registered Securities of any series (other than a Global Security) will be
exchangeable for other Registered Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations. In
addition, if Debt Securities of any series are issuable as both Registered
Securities and as Bearer Securities, at the option of the Holder upon request
confirmed in writing, and subject to the terms of the applicable Indenture,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such series will be exchangeable into Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. Unless the terms and provisions of an
issue of Debt Securities described below provide otherwise, any Bearer Security
surrendered in exchange for a Registered Security between a Regular Record Date
or a Special Record Date and the relevant date for payment of interest shall be
surrendered without the coupon relating to such date for payment of interest and
interest will not be payable in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the terms of the applicable Indenture.
(Section 305). Unless the terms and provisions of an issue of Debt Securities
described below provide otherwise, Bearer Securities will not be issued in
exchange for Registered Securities.
Debt Securities may be presented for exchange as provided above, and
Registered Securities (other than a Global Security) may be presented for
registration of transfer (with the form of transfer endorsed thereon duly
executed), at the office of the Security Registrar or at the office of any
transfer agent designated by Holdings for such purpose with respect to any
series of Debt Securities and referred to below in the applicable
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description of the terms and provisions of an issue of Debt Securities, without
service charge and upon payment of any taxes and other governmental charges as
described in each Indenture. Such transfer or exchange will be effected upon the
Security Registrar or such transfer agent, as the case may be, being satisfied
with the documents of title and identity of the person making the request.
Holdings has appointed each Trustee as Security Registrar under the applicable
Indenture. (Section 305). If the terms and provisions of an issue of Debt
Securities described below refer to any transfer agents (in addition to the
Security Registrar) initially designated by Holdings with respect to any series
of Debt Securities, Holdings may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that, if Debt Securities of a series are issuable
only as Registered Securities, Holdings will be required to maintain a transfer
agent in each Place of Payment for such series and, if Debt Securities of a
series are issuable as Bearer Securities, Holdings will be required to maintain
(in addition to the Security Registrar) a transfer agent in a Place of Payment
for such series located outside the United States. Holdings may at any time
designate additional transfer agents with respect to any series of Debt
Securities. (Section 1002).
In the event of any redemption in part, Holdings shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and ending at the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities, the
day of the first publication of the relevant notice of redemption or, if Debt
Securities of the series are also issuable as Registered Securities and there is
no publication, the mailing of the relevant notice of redemption; (ii) register
the transfer of or exchange any Registered Security, or portion thereof, called
for redemption, except the unredeemed portion of any Registered Security being
redeemed in part; or (iii) exchange any Bearer Security called for redemption,
except to exchange such Bearer Security for a Registered Security of that series
and like tenor which is immediately surrendered for redemption. (Section 305).
PAYMENT AND PAYING AGENTS
Unless the terms and provisions of an issue of Debt Securities described
below provide otherwise, payment of principal of (and premium, if any) and any
interest on Bearer Securities will be payable, subject to any applicable laws
and regulations, at the offices of such Paying Agents outside the United States
as Holdings may designate from time to time, at the option of the Holder, by
check or by transfer to an account maintained by the payee with a bank located
outside the United States. (Sections 307 and 1002). Unless the terms and
provisions of an issue of Debt Securities described below provide otherwise,
payment of interest on Bearer Securities on any Interest Payment Date will be
made only against surrender of the coupon relating to such Interest Payment
Date. (Section 1001). No payment of interest on a Bearer Security will be made
unless on the earlier of the date of the first such payment by Holdings or the
delivery by Holdings of the Bearer Security in definitive form (including
interests in a permanent Global Security) (the "Certification Date"), a written
certificate in the form and to the effect described under "Denominations,
Registration and Transfer" is provided to Holdings. No payment with respect to
any Bearer Security will be made at any office or agency of Holdings in the
United States or by check mailed to any address in the United States or by
transfer to an account maintained with a bank located in the United States.
Notwithstanding the foregoing, payment of principal of (and premium, if any) and
interest on Bearer Securities denominated and payable in U.S. dollars will be
made at the office of Holdings' Paying Agent in the Borough of Manhattan, The
City of New York if, and only if, payment of the full amount thereof in U.S.
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
(Section 1002).
Unless the terms and provisions of an issue of Debt Securities described
below provide otherwise, payment of principal of (and premium, if any) and any
interest on Registered Securities (other than a Global Security) will be made 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.
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(Sections 305, 307, 1002). Unless the terms and provisions of an issue of Debt
Securities described below provide otherwise, payment of any instalment of
interest on Registered Securities will be made to the Person in whose name such
Registered Security is registered at the close of business on the Regular Record
Date for such interest payment. (Section 307).
Unless the terms and provisions of an issue of Debt Securities described
below provide otherwise, the principal office of each Trustee under the
applicable Indenture in The City of New York will be designated as Holdings'
sole Paying Agent for payments with respect to Debt Securities which are
issuable solely as Registered Securities and as Holdings' Paying Agent in the
Borough of Manhattan, The City of New York, for payments with respect to Debt
Securities (subject to the limitations described above in the case of Bearer
Securities) which may be issuable as Bearer Securities. Any Paying Agents
outside the United States and any other Paying Agents in the United States
initially designated by Holdings for the Debt Securities will be named below in
the applicable description of the terms and provisions of an issue of Debt
Securities. Holdings may at any time designate additional Paying Agents or
rescind the designation of any Paying Agents or approve a change in the office
through which any Paying Agent acts, except that, if Debt Securities of a series
are issuable only as Registered Securities, Holdings will be required to
maintain a Paying Agent in each Place of Payment for such series, and if Debt
Securities of a series may be issuable as Bearer Securities, Holdings will be
required to maintain (i) a Paying Agent in the Borough of Manhattan, The City of
New York for payments with respect to any Registered Securities of the series
(and for payments with respect to Bearer Securities of the series in the
circumstances described above, but not otherwise), and (ii) a Paying Agent in a
Place of Payment located outside the United States where Debt Securities of such
series and any coupons appertaining thereto may be presented and surrendered for
payment; provided that if the Debt Securities of such series are listed on The
Luxembourg Stock Exchange (the "Stock Exchange") or any other stock exchange
located outside the United States and such stock exchange shall so require,
Holdings will maintain a Paying Agent in Luxembourg or any other required city
located outside the United States, as the case may be, for the Debt Securities
of such series. (Section 1002).
All moneys paid by Holdings to a Paying Agent for the payment of principal
of (and premium, if any) or interest on any Debt Security which remain unclaimed
at the end of two years after such principal, premium or interest shall have
become due and payable will be repaid to Holdings and the Holder of such Debt
Security or any coupon will thereafter look only to Holdings for payment
thereof. (Section 1003).
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with or on behalf
of a depository (a "Depository") identified in the Prospectus Supplement
relating to such series. Global Securities may be issued in either registered or
bearer form and in either temporary or permanent form.
The specific terms of the depository arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will apply
to all depository arrangements.
Unless otherwise specified in an applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security in registered form
to be deposited with or on behalf of a Depository will be registered in the name
of such depository or its nominee. Upon the issuance of a Global Security in
registered form, the U.S. Depository for such Global Security will credit the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of institutions that have accounts with such depository
or its nominee ("participants"). The accounts to be credited shall be designated
by the underwriters or agents of such Debt Securities or by the Holdings, if
such Debt Securities are offered and sold directly by Holdings. Ownership of
beneficial interests in such Global Securities will be limited to participants
or persons that may hold interests through participants. Ownership of beneficial
interests by participants in such Global Securities will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depository or its nominee for such Global Security. Ownership
or beneficial interest in Global Securities by persons that hold through
participants will be shown on, and the
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transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interest in a Global Security.
So long as the Depository for a Global Security in registered form, or its
nominee, is the registered owner of such Global Security, such depository or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Global Security for all purposes under
the Indenture governing such Debt Securities. Except as set forth below, owners
of beneficial interests in such Global Securities will not be entitled to have
Debt Securities of the series represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of
Debt Securities of such series in definitive form and will not be considered the
owners or holders thereof under the Indenture.
Payment of principal of, premium, if any, and any interest on Debt
Securities registered in the name of or held by a Depository or its nominee will
be made to the Depository or its nominee, as the case may be, as the registered
owner or the holder of the Global Security. None of the Company, the Trustee,
any Paying Agent or the Security Registrar for such Debt Securities will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests. (Section 308).
The Company expects that the Depository for a permanent Global Security in
registered form, upon receipt of any payment of principal, premium or interest
in respect of a permanent Global Security, will credit immediately participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Security as shown on the
records of such Depository. The Company also expects that payments by
participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such participants.
A Global Security in registered form may not be transferred except as a
whole by the Depository for such Global Security to a nominee of such depository
or by a nominee of such depository to such depository or another nominee of such
depository or by such depository or any such nominee to a successor of such
depository or a nominee of such successor. If a Depository for a permanent
Global Security in registered form is at any time unwilling or unable to
continue as a depository and a successor depository is not appointed by the
Company within 90 days, the Company will issue Debt Securities in definitive
registered form in exchange for all of the Global Securities representing such
Debt Securities. In addition, the Company may at any time and in its sole
discretion determine not to have any Debt Securities in registered form
represented by one or more Global Securities and, in such event, will issue Debt
Securities in definitive form in exchange for the Global Security or Securities
representing such Debt Securities. (Section 305). Further, if the Company so
specifies with respect to the Debt Securities of a series, an owner of a
beneficial interest in a Global Security representing Debt Securities of such
series may, on terms acceptable to the Company and the Depository for such
Global Security, receive Debt Securities of such series in definitive form. In
any such instance, an owner of a beneficial interest in a Global Security will
be entitled to physical delivery in definitive form of Debt Securities of the
series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name (if
the Debt Securities of such series are issuable as Registered Securities). Debt
Securities of such series so issued in definitive form will be issued (a) as
Registered Securities in denominations, unless otherwise specified by the
Company, of $1,000 and integral multiples thereof if the Debt Securities of such
series are issuable as Registered Securities, (b) as Bearer Securities in the
denomination, unless otherwise specified by the Company, of $5,000 if the Debt
Securities of such series are issuable as Bearer Securities or (c) as either
Registered or Bearer Securities if the Debt Securities of such series are
issuable in either form. (Section 305). See, however, "Limitations on Issuance
of Bearer Securities" below for a description of certain restrictions on the
issuance of a Bearer Security in definitive form in exchange for an interest in
a Global Security.
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Bearer Debt Securities
If so specified in the terms and provisions of an issue of Debt Securities
described below, pending the availability of a permanent Global Security, all or
any portion of the Debt Securities of a series which may be issuable as Bearer
Securities will initially be represented by one or more temporary Global
Securities, without interest coupons, to be deposited with a common depositary
in London for Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euro-clear System ("Euro-clear") and Centrale de Livraison de
Valeurs Mobilieres, S.A. ("CEDEL") for credit to the designated accounts. The
interests of the beneficial owner or owners in a temporary Global Security in
bearer form will be exchangeable for definitive Debt Securities (including
interests in a permanent Global Security in bearer form, representing Debt
Securities having the same interest rate and Stated Maturity), but in each such
case only upon written certification in the form and to the effect described
under "Denominations, Registration and Transfer", unless such certification has
been provided on an earlier interest payment date. The beneficial owner of a
Debt Security represented by a temporary Global Security in bearer form or a
permanent Global Security in bearer form may, on or after the applicable
exchange date and upon 30 days' notice to the applicable Trustee given through
Euro-clear or CEDEL, exchange its interest for definitive Bearer Securities or,
if specified in the terms and provisions of the issue of Debt Securities,
definitive Registered Securities of any authorized denomination. No Bearer
Security delivered in exchange for a portion of a temporary Global Security or a
permanent Global Security shall be mailed or otherwise delivered to any location
in the United States in connection with such exchange. (Sections 303 and 304).
Unless the terms and provisions of an issue of Debt Securities described
below provide otherwise, interest in respect of any portion of a temporary
Global Security in bearer form payable in respect of an Interest Payment Date
occurring prior to the issuance of a permanent Global Security in bearer form
will be paid to each of Euro-clear and CEDEL with respect to the portion of the
temporary Global Security in bearer form held for its account. Each of
Euro-clear and CEDEL will undertake in such circumstances to credit such
interest received by it in respect of a temporary Global Security in bearer form
to the respective accounts for which it holds such temporary Global Security in
bearer form as of the relevant Interest Payment Date, but only upon receipt in
each case of written certification in the form and to the effect described under
"Denomination, Registration and Transfer."
LIMITATION ON LIENS
So long as any Debt Securities remain outstanding, unless the terms and
provisions of an issue of Debt Securities described below provide otherwise,
Holdings will not, and will not permit any Designated Subsidiary (as defined
below), directly or indirectly, to create, issue, assume, incur or guarantee any
indebtedness for money borrowed which is secured by a mortgage, pledge, lien,
security interest or other encumbrance of any nature on any of the present or
future common stock of a Designated Subsidiary unless the Debt Securities and,
if Holdings so elects, any other indebtedness of Holdings ranking at least pari
passu with the Debt Securities, shall be secured equally and ratably with (or
prior to) such other secured indebtedness for money borrowed so long as it is
outstanding. (Section 1005).
The term "Designated Subsidiary" means any present or future consolidated
subsidiary of Holdings, the consolidated net worth of which constitutes at least
5% of the consolidated net worth of Holdings. As of April 30, 1994, Holdings'
Designated Subsidiaries were Lehman Brothers, Lehman Commercial Paper Inc.,
Lehman Government Securities Inc., Lehman Brothers Group Inc., Lehman Brothers
Holdings PLC, Lehman Brothers UK Holdings Limited, Lehman Brothers International
(Europe), Lehman Brothers Japan Inc., Lehman Special Securities Inc., Lehman
Brothers Financial Products Inc., Lehman Brothers Verwaltungs and
Beteiligungsgesellschaft MbH, LB I Group Inc. and Lehman Pass-Through Securities
Inc.
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EVENTS OF DEFAULT
Except as may otherwise be set forth in the terms and provisions of a
series of Debt Securities described below, the following are Events of Default
under the Indenture with respect to Debt Securities of such series: (a) failure
to pay principal of or premium, if any, on any Debt Security of that series when
due; (b) failure to pay interest, if any, on any Debt Security of that series
and any related coupons when due, continued for 30 days; (c) failure to deposit
any sinking fund payment or analogous obligation, when due, continued for 30
days, in respect of any Debt Security of that series; (d) failure to perform any
other covenant of Holdings in the Indenture (other than a covenant included in
the applicable Indenture solely for the benefit of a series of Debt Securities
other than that series), continued for 90 days after written notice as provided
in the Indenture; and (e) certain events in bankruptcy, insolvency or
reorganization in respect of Holdings. (Section 501). An Event of Default with
respect to a particular series of Debt Securities does not necessarily
constitute an Event of Default with respect to any other series of Debt
Securities issued under the same or another Indenture. The Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to such series (except in the payment of principal, premium or interest,
if any) if it considers such withholding to be in the interests of such Holders.
(Section 602).
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, unless the principal of all of the
Debt Securities of such series shall have already become due and payable, either
the Trustee or the Holders of at least 25% in principal amount of the
outstanding Debt Securities of that series may declare the principal amount (or,
if the Debt Securities of that series are 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 is required to furnish to each Trustee annually a statement as to
the performance by Holdings of certain of its obligations under the applicable
Indenture and as to any default in such performance. (Section 1006).
SATISFACTION AND DISCHARGE
Except as may otherwise be set forth in the terms and provisions of a
series of Debt Securities described below, each Indenture provides that Holdings
shall be discharged from its obligations under the Debt Securities of such
series (with certain exceptions) at any time prior to the Stated Maturity or
redemption thereof when (a) Holdings has irrevocably deposited with the
applicable Trustee, in trust, (i) sufficient funds in the currency or currency
unit in which the Debt Securities of such series are payable to pay the
principal of (and premium, if any), and interest, if any, to Stated Maturity (or
redemption) on, the Debt Securities of such series, or (ii) such amount of
direct obligations of, or obligations the principal of and interest, if any, on
which are fully guaranteed by, the government which issued the currency in which
the Debt Securities of such series are payable, and which are not subject to
prepayment, redemption or call, as will, together with the predetermined and
certain income to accrue thereon without consideration of any reinvestment
thereof, be sufficient to pay when due the principal of (and premium, if any),
and interest, if any, to Stated Maturity (or
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redemption) on, the Debt Securities of such series, or (iii) such combination of
such funds and securities as described in (i) and (ii), respectively, as will,
together with the predetermined and certain income to accrue on any such
securities as described in (ii), be sufficient to pay when due the principal of
(and premium, if any), and interest, if any, to Stated Maturity (or redemption)
on, the Debt Securities of such series and (b) Holdings has paid all other sums
payable with respect to the Debt Securities of such series and (c) certain other
conditions are met. Upon such discharge, the Holders of the Debt Securities of
such series shall no longer be entitled to the benefits of the Indenture, except
for certain rights, including registration of transfer and exchange of the Debt
Securities of such series and replacement of lost, stolen or mutilated Debt
Securities, and shall look only to such deposited funds or obligations for
payment. (Sections 401 and 403).
DEFEASANCE OF CERTAIN OBLIGATIONS
If the terms of the Debt Securities of any series so provide, Holdings may
omit to comply with the restrictive covenants in Section 801 ("Company May
Consolidate, Etc., Only on Certain Terms") and Section 1005 ("Limitations on
Liens on Common Stock of Designated Subsidiaries") and any such omission with
respect to such Sections shall not be an Event of Default with respect to the
Debt Securities of such series, if (a) Holdings has irrevocably deposited with
the applicable Trustee, in trust, (i) sufficient funds in the currency or
currency unit in which the Debt Securities of such series are payable to pay the
principal of (and premium, if any), and interest, if any, to Stated Maturity (or
redemption) on, the Debt Securities of such series, or (ii) such amount of
direct obligations of, or obligations the principal of and interest, if any, on
which are fully guaranteed by, the government which issued the currency in which
the Debt Securities of such series are payable and which are not subject to
prepayment, redemption or call, as will, together with the predetermined and
certain income to accrue thereon without consideration of any reinvestment
thereof, be sufficient to pay when due the principal of (and premium, if any),
and interest, if any, to Stated Maturity (or redemption) on, the Debt Securities
of such series or, (iii) such combination of such funds and securities as
described in (i) and (ii), respectively, as will, together with the
predetermined and certain income to accrue on any such securities as described
in (ii), be sufficient to pay when due the principal of (and premium, if any),
and interest, if any to Stated Maturity (or redemption) on, the Debt Securities
of such series and (b) certain other conditions are met. The obligations of
Holdings under the Indenture with respect to the Debt Securities of such series,
other than with respect to the covenants referred to above shall remain in full
force and effect. (Section 1009).
MEETINGS, MODIFICATION AND WAIVER
Modifications and amendments of either Indenture may be made by Holdings
and the applicable Trustee with the consent of the Holders of not less than
66 2/3% in principal amount of the Outstanding Debt Securities of each series
issued under such Indenture affected by such modification or amendment;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Debt Security affected thereby, (a)
change the Stated Maturity of the principal of, or any instalment of principal
of or interest, if any, on, any Debt Security, (b) reduce the principal amount
of, or the premium, if any, or interest, if any, on, any Debt Security, (c)
change any obligation of Holdings to pay additional amounts, (d) reduce the
amount of principal of an Original Issue Discount Security payable upon
acceleration of the Maturity thereof, (e) adversely affect the right of
repayment or repurchase, if any, at the option of the Holder, (f) reduce the
amount, or postpone the date fixed for, any payment under any sinking fund or
analogous provision, (g) change the place or currency or currency unit of
payment of principal of or premium, if any, or interest, if any, on any Debt
Security, (h) change or eliminate the right, if any, to elect payment in a coin
or currency or currency unit other than that in which Debt Securities which are
Registered Securities are denominated or stated to be payable, (i) impair the
right to institute suit for the enforcement of any payment on or with respect to
any Debt Security, (j) reduce the percentage in principal amount of Outstanding
Debt Securities of any series, the consent of the Holders of which is required
for modification or amendment of the applicable Indenture or for waiver of
compliance with certain provisions of the applicable Indenture or for waiver of
certain defaults, (k) reduce the requirements contained in either Indenture for
quorum or voting, or (l) change any obligation of Holdings to maintain an office
or agency in the places and for the purposes required in the applicable
Indenture. (Section 902).
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The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
Debt Securities of that series waive, insofar as that series is concerned,
compliance by Holdings with certain restrictive provisions of the applicable
Indenture. (Section 1007). The Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of any series may on behalf of the
Holders of all Debt Securities of that series and any coupons appertaining
thereto waive any past default under the applicable Indenture with respect to
that series, except a default in the payment of the principal of or premium, if
any, or interest, if any, on any Debt Security of that series or in the payment
of any sinking fund instalment or analogous obligation or in respect of a
provision which under the applicable Indenture cannot be modified or amended
without the consent of the Holder of each Outstanding Debt Security of that
series affected. (Section 513).
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series if Debt Securities of that series are issuable as
Bearer Securities. A meeting may be called at any time by the applicable
Trustee, and also, upon request, by Holdings or the Holders of least 10% in
principal amount of the Outstanding Debt Securities of such series, in any such
case upon notice given in accordance with "Notices" below. (Section 1302).
Except as limited by the proviso in the second preceding paragraph, any
resolution presented at a meeting or adjourned meeting at which a quorum is
present may be adopted by the affirmative vote of the Holders of a majority in
principal amount of the Outstanding Debt Securities of that series; provided,
however, that, except as limited by the proviso in the second preceding
paragraph, any resolution with respect to any consent or waiver which may be
given by the Holders of not less than 66 2/3% in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or an
adjourned meeting at which a quorum is present only by the affirmative vote of
66 2/3% in principal amount of the Outstanding Debt Securities of that series;
and provided, further, that, except as limited by the proviso in the second
preceding paragraph, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority, in principal amount of Outstanding Debt Securities of a series
may be adopted at a meeting or adjourned meeting duly reconvened at which a
quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Debt Securities of any series duly held in accordance with the applicable
Indenture will be binding on all Holders of Debt Securities of that series and
the related coupons. The quorum at any meeting called to adopt a resolution, and
at any reconvened meeting, will be persons holding or representing a majority in
principal amount of the Outstanding Debt Securities of a series; provided,
however, that if any action is to be taken at such meeting with respect to a
consent or waiver which may be given by the Holders of not less than 66 2/3% in
principal amount of the Outstanding Debt Securities of a series, the persons
holding or representing 66 2/3% in principal amount of the Outstanding Debt
Securities of such series will constitute a quorum. (Section 1304).
CONSOLIDATION, MERGER AND SALE OF ASSETS
Holdings may, without the consent of any Holders of Outstanding Debt
Securities, consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to, any Person, and any other Person may
consolidate or merge with or into, or transfer or lease its assets substantially
as an entirety to, Holdings, provided that (i) the Person (if other than
Holdings) formed by such consolidation or into which Holdings is merged or which
acquires or leases the assets of Holdings substantially as an entirety is
organized under the laws of any United States jurisdiction and assumes Holdings'
obligations on the Debt Securities and under the Indenture, (ii) after giving
effect to the transaction, no Event of Default, and no event which, after notice
or lapse of time or both, would become an Event of Default, shall have happened
and be continuing, and (iii) certain other conditions are met. (Section 801).
NOTICES
Unless the terms and provisions of an issue of Debt Securities described
below provide otherwise, notices to Holders of Bearer Securities will be given
by publication in a daily newspaper in the English language of general
circulation in The City of New York and in London, and so long as such Bearer
Securities are listed on
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the Stock Exchange and the Stock Exchange shall so require, in a daily newspaper
of general circulation in Luxembourg or, if not practical, elsewhere in Western
Europe. Such publication is expected to be made in The Wall Street Journal, the
Financial Times and the Luxemburger Wort. Notices to Holders of Registered
Securities will be given by mail to the addresses of such Holders as they appear
in the Security Register. (Sections 101 and 106).
TITLE
Title to any temporary global Debt Security, any permanent global Debt
Security, any Bearer Securities and any coupons appertaining thereto will pass
by delivery. Holdings, each Trustee and any agent of Holdings or the applicable
Trustee may treat the bearer of any Bearer Security and the bearer of any coupon
and the registered owner of any Registered Security as the absolute owner
thereof (whether or not such Debt Security or coupon shall be overdue and
notwithstanding any notice to the contrary) for the purpose of making payment
and for all other purposes. (Section 308).
REPLACEMENT OF DEBT SECURITIES AND COUPONS
Any mutilated Debt Security or a Debt Security with a mutilated coupon
appertaining thereto will be replaced by Holdings at the expense of the Holder
upon surrender of such Debt Security to the applicable Trustee. Debt Securities
or coupons that become destroyed, stolen or lost will be replaced by Holdings at
the expense of the Holder upon delivery to the applicable Trustee of the Debt
Security and coupons or evidence of the destruction, loss or theft thereof
satisfactory to Holdings and the applicable Trustee; in the case of any coupon
which becomes destroyed, stolen or lost, such coupon will be replaced by
issuance of a new Debt Security in exchange for the Debt Security to which such
coupon appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon an indemnity satisfactory to the applicable Trustee and Holdings may be
required at the expense of the Holder of such Debt Security or coupon before a
replacement Debt Security will be issued. (Section 306).
CONCERNING THE TRUSTEES
Holdings and its affiliates maintain bank accounts, borrow money and have
other customary banking relationships (including other trusteeships) with each
Trustee.
Unless otherwise specified, terms defined under a caption for a specific
issue of Debt Securities shall have such meanings only as to the Debt Securities
described therein.
TERMS AND PROVISIONS OF SERIAL ZERO COUPON SENIOR NOTES DUE 1994-1998
The first series of Serial Zero Coupon Senior Notes Due 1994-1998 (the
"First Series") has four separate remaining maturities with $20,000,000 in
aggregate principal amount due May 16 in each of the years 1995-1997 and
$220,000,000 due May 16, 1998. The second series of Serial Zero Coupon Senior
Notes Due 1995-1998 (the "Second Series") has four separate remaining maturities
with $5,000,000 in aggregate principal amount due May 16 in each of the years
1995-1997 and $55,000,000 due May 16, 1998. The First Series and the Second
Series are herein collectively referred to as the "Serial Notes." The Serial
Notes constitute Senior Debt and are issued in fully registered form. There are
not any periodic payments of interest on the Serial Notes; instead the Serial
Notes were issued at substantial discounts from the principal amounts at stated
maturity. The Serial Notes are not subject to any sinking fund. The Serial Notes
may be redeemed at the option of Holdings, in whole or in part, at any time at a
price of 100% of their principal amount at stated maturity.
If upon the occurrence of an Event of Default the Serial Notes are declared
to be due and payable the amount due and payable on the Serial Notes will be
equal to the sum of (i) the issue price of the Serial Notes plus (ii) the
accrued amortization of original issue discount attributable on a ratable basis
from the date of issuance to the date of declaration.
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If a bankruptcy proceeding is commenced in respect of Holdings, under
Section 502(b)(2) of Title 11 of the United States Code, the claim of the Holder
of a Serial Note with respect to the principal amount thereof would be limited
to the issue price of the Serial Note plus the portion of the initial discount
(the difference between such principal amount and the issue price of the Serial
Note) attributable on a ratable basis to the period from the date of original
issue of the Serial Note to the commencement of the proceeding.
For a discussion of certain federal tax consequences with respect to the
Serial Notes see "United States Taxation -- Certain Tax Consequences for United
States Holders -- Original Issue Discount Notes" and "Market Discount and
Premium."
TERMS AND PROVISIONS OF 9 3/4% NOTES DUE 1996
The 9 3/4% Notes Due 1996 (the "9 3/4% Notes") bear interest at the annual
rate of 9 3/4%, payable semiannually on April 1 and October 1 of each year to
the person in whose name the 9 3/4% Note is registered at the close of business
on the fifteenth day of the month preceding such Interest Payment Date. The
9 3/4% Notes mature on April 1, 1996. The 9 3/4% Notes are not subject to
redemption prior to maturity and are not subject to any sinking fund. The 9 3/4%
Notes constitute Senior Debt and are issued in fully registered form without
coupons in denominations of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 8 7/8% NOTES DUE 1998
The 8 7/8% Notes Due 1998 (the "8 7/8% Notes") bear interest at the annual
rate of 8 7/8%, payable semiannually on May 1 and November 1 of each year to the
person in whose name the 8 7/8% Note is registered at the close of business on
the fifteenth day of the month preceding such Interest Payment Date. The 8 7/8%
Notes mature on November 1, 1998. The 8 7/8% Notes are not subject to redemption
prior to maturity and are not subject to any sinking fund. The 8 7/8% Notes
constitute Senior Debt and are issued in fully registered form without coupons
in denominations of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 8 3/8% NOTES DUE 1999
The 8 3/8% Notes Due 1999 (the "8 3/8% 1999 Notes") bear interest at the
annual rate of 8 3/8%, payable semiannually on February 15 and August 15 of each
year to the person in whose name the 8 3/8% 1999 Note is registered at the close
of business on the last day of the month preceding such Interest Payment Date.
The 8 3/8% 1999 Notes mature on February 15, 1999. The 8 3/8% 1999 Notes are not
subject to redemption prior to maturity and are not subject to any sinking fund.
The 8 3/8% 1999 Notes constitute Senior Debt and are issued in fully registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000.
TERMS AND PROVISIONS OF 8 7/8% NOTES DUE 2002
The 8 7/8% Notes Due 2002 (the "8 7/8% 2002 Notes") bear interest at the
annual rate of 8 7/8%, payable semiannually on March 1 and September 1 of each
year to the person in whose name the 8 7/8% 2002 Note is registered at the close
of business on the fifteenth day of the month preceding such Interest Payment
Date. The 8 7/8% 2002 Notes mature March 1, 2002. The 8 7/8% 2002 Notes are not
subject to redemption prior to maturity and are not subject to any sinking fund.
The 8 7/8% 2002 Notes constitute Senior Debt and are issued in fully registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000.
TERMS AND PROVISIONS OF 8 3/8% NOTES DUE 1997
The 8 3/8% Notes Due 1997 (the "8 3/8% 1997 Notes") bear interest at the
annual rate of 8 3/8%, payable semiannually on April 1 and October 1 of each
year to the person in whose name the 8 3/8% 1997 Note is registered at the close
of business on the fifteenth day of the month preceding such Interest Payment
Date. The 8 3/8% 1997 Notes mature on April 1, 1997. The 8 3/8% 1997 Notes are
not subject to redemption prior to maturity and are not subject to any sinking
fund. The 8 3/8% 1997 Notes constitute Senior Debt and are issued in fully
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000.
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TERMS AND PROVISIONS OF 9 1/4% NOTES DUE 2004
The 9 1/4% Notes Due 2004 (the "9 1/4% Notes") bear interest at the annual
rate of 9 1/4%, payable semiannually on April 1 and October 1 of each year to
the person in whose name the 9 1/4% Note is registered at the close of business
on the fifteenth day of the month preceding such Interest Payment Date. The
9 1/4% Notes mature on April 1, 2004. The 9 1/4% Notes are not subject to
redemption prior to maturity but are subject to a sinking fund. The 9 1/4% Notes
constitute Senior Debt and are issued in fully registered form without coupons
in denominations of $1,000 and integral multiples of $1,000.
Sinking Fund
The 9 1/4% Notes are subject to redemption through the operation of a
sinking fund commencing October 1, 2000, and on each October 1 thereafter to and
including October 1, 2003, at their principal amount, together with accrued
interest to the date fixed for redemption. The sinking fund will provide for the
annual redemption of $20,000,000 principal amount of 9 1/4% Notes which will be
sufficient to retire 80% of the 9 1/4% Notes prior to maturity. The Company may,
at its option, receive credit against mandatory sinking fund payments for 9 1/4%
Notes acquired through open market purchases.
Notice of redemption pursuant to the sinking fund shall be given, not less
than 30 nor more than 60 days prior to the sinking fund payment date, to each
holder of a 9 1/4% Note to be redeemed at such holder's address as it appears in
the Securities Register.
TERMS AND PROVISIONS OF 8 3/4% NOTES DUE 2002
The 8 3/4% Notes Due 2002 (the "8 3/4% Notes") bear interest at the annual
rate of 8 3/4%, payable semiannually on May 15 and November 15 of each year to
the person in whose name the 8 3/4% Note is registered at the close of business
on the last day of the month preceding such Interest Payment Date. The 8 3/4%
Notes mature May 15, 2002. The 8 3/4% Notes are not subject to redemption prior
to maturity and are not subject to any sinking fund. The 8 3/4% Notes constitute
Senior Debt and are issued in fully registered form without coupons in
denominations of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 7 5/8% NOTES DUE 1997
The 7 5/8% Notes Due 1997 (the "7 5/8% Notes") bear interest at the annual
rate of 7 5/8%, payable semiannually on June 15 and December 15 of each year to
the person in whose name the 7 5/8% Note is registered at the close of business
on the last day of the month preceding such Interest Payment Date. The 7 5/8%
Notes mature on June 15 1997. The 7 5/8% Notes are not subject to redemption
prior to maturity and are not subject to any sinking fund. The 7 5/8% Notes
constitute Senior Debt and are issued in fully registered form without coupons
in denominations of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 7 5/8% NOTES DUE 1999
The 7 5/8% Notes Due 1999 (the "7 5/8% 1999 Notes") bear interest at the
annual rate of 7 5/8%, payable semiannually on January 15 and July 15 of each
year to the person in whose name the 7 5/8% 1999 Note is registered at the close
of business on the last day of the month preceding such Interest Payment Date.
The 7 5/8% 1999 Notes mature on July 15, 1999. The 7 5/8% 1999 Notes are not
subject to redemption prior to maturity and are not subject to any sinking fund.
The 7 5/8% 1999 Notes constitute Senior Debt and are issued in fully registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000.
TERMS AND PROVISIONS OF 6 3/8% NOTES DUE 1998
The 6 3/8% Notes Due 1998 (the "6 3/8% Notes") bear interest at the annual
rate of 6 3/8%, payable semiannually on June 1 and December 1 of each year to
the person in whose name the 6 3/8% Note is registered at the close of business
on the fifteenth day of the month preceding such Interest Payment Date. The
6 3/8% Notes mature on June 1, 1998. The 6 3/8% Notes are not subject to
redemption prior to maturity and are not subject to any sinking fund. The 6 3/8%
Notes constitute Senior Debt and are issued in fully registered form without
coupons in denominations of $1,000 and integral multiples of $1,000.
16
<PAGE> 17
TERMS AND PROVISIONS OF 5 1/2% NOTES DUE 1996
The 5 1/2% Notes Due 1996 (the "5 1/2% Notes") bear interest at the annual
rate of 5 1/2%, payable semiannually on June 15 and December 15 of each year to
the person in whose name the 5 1/2% Note is registered at the close of business
on the last day of the month preceding such Interest Payment Date. The 5 1/2%
Notes mature on June 15, 1996. The 5 1/2% Notes are not subject to redemption
prior to maturity and are not subject to any sinking fund. The 5 1/2% Notes
constitute Senior Debt and are issued in fully registered form without coupons
in denominations of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 5 3/4% NOTES DUE 1998
The 5 3/4% Notes Due 1996 (the "5 3/4% Notes") bear interest at the annual
rate of 5 3/4%, payable semiannually on February 15 and August 15 of each year
(commencing February 15, 1994) to the person in whose name the 5 3/4% Note is
registered at the close of business on the last day of the month preceding such
Interest Payment Date. The 5 3/4% Notes mature February 15, 1998. The 5 3/4%
Notes are not subject to redemption prior to maturity and are not subject to any
sinking fund. The 5 3/4% Notes constitute Senior Debt and are issued in fully
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000.
TERMS AND PROVISIONS OF MEDIUM-TERM NOTES, SERIES B
Set forth below is a table indicating the issuance date and the maturities
of the $29,360,000 aggregate principal amount of Medium-Term Notes, Series B
issued and outstanding as of June 9, 1994. The Medium-Term Notes, Series B
constitute Senior Debt and have either (a) fixed interest rates or (b) floating
interest rates which are either reset daily, monthly, quarterly, semiannually or
annually based on the Commercial Paper Rate, the Prime Rate, the Federal Funds
Effective Rate, the Treasury Rate or LIBOR, adjusted by a Spread or Spread
Multiplier, as applicable. The Medium-Term Notes, Series B are not subject to
any sinking fund and are not redeemable prior to Stated Maturity.
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
<S> <C> <C> <C>
September 27, 1991.......... $ 2,000,000 September 27, 2001 9.50%
August 26, 1991............. $ 1,000,000 August 26, 1994 7.97%
August 8, 1991.............. $ 3,500,000 August 8, 1994 8.47%
August 2, 1991.............. $ 5,000,000 August 2, 1994 8.55%
May 24, 1991................ $ 2,000,000 May 24, 1995 8.85%
*April 4, 1991............... $ 15,860,000 April 1, 2011 6.00%
</TABLE>
- ---------------
* The Note was issued at a substantial discount from the principal amount. A
holder of this Note should consult its tax advisor with respect to the tax
consequences of owning such a Note.
TERMS AND PROVISIONS OF MEDIUM-TERM NOTES, SERIES C
Set forth below is a table indicating the issuance and maturities of the
$182,700,000 aggregate principal amount of Medium-Term Notes, Series C issued
and outstanding as of June 9, 1994. The Medium-Term Notes, Series C constitute
Senior Debt and have either (a) fixed interest rates, (b) floating interest
rates which are either reset daily, monthly, quarterly, semiannually or annually
based on the Commercial Paper Rate, the Prime Rate, the Federal Funds Effective
Rate, the Treasury Rate or LIBOR, adjusted by a Spread or Spread Multiplier, as
applicable, or (c) the amounts payable as interest determined by reference to
one or more commodity prices, equity indices or other factors. The Medium-Term
Notes, Series C are not subject to any sinking fund and are not redeemable prior
to Stated Maturity.
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
- ------------------------------
<S> <C> <C> <C>
April 22, 1992............... $ 2,700,000 April 24, 1995 7.03%
(1)April 15, 1992............... $ 5,000,000 April 15, 1996 9.00% Resettable Semiannually
April 8, 1992................ $ 2,000,000 April 10, 1995 7.39%
March 27, 1992............... $ 50,000,000 March 27, 1995 7.69%
March 16, 1992............... $ 5,000,000 March 16, 1995 7.36%
March 10, 1992............... $ 5,500,000 March 10, 1995 7.41%
March 3, 1992................ $ 9,000,000 March 4, 2002 9.12%
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
<S> <C> <C> <C>
February 28, 1992............ $ 1,000,000 February 28, 2002 9.14%
February 28, 1992............ $ 67,000,000 February 28, 2002 9.17%
February 27, 1992............ $ 3,000,000 February 27, 1995 7.28%
February 21, 1992............ $ 1,000,000 February 21, 1995 7.20%
December 23, 1991............ $ 5,000,000 December 26, 1996 7.08%
December 17, 1991............ $ 1,000,000 December 17, 1996 7.70%
(2)December 16, 1991............ $ 5,000,000 December 16, 1994 9.00% Resettable Semiannually
December 2, 1991............. $ 1,000,000 December 4, 1995 7.60%
November 20, 1991............ $ 1,000,000 November 20, 1996 8.20%
(3)November 20, 1991............ $ 5,000,000 November 16, 1994 11.25% Resettable Semiannually
October 28, 1991............. $ 1,000,000 October 28, 1994 7.75%
October 17, 1991............. $ 2,500,000 October 17, 1996 8.35%
October 11, 1991............. $ 5,000,000 October 11, 1994 8.00%
September 25, 1991........... $ 5,000,000 September 25, 1996 8.75%
</TABLE>
- ---------------
(1)Interest for succeeding Interest Payment Periods is based, at the election of
the holder of a Note, upon one of seven formulas involving the difference
between 2 multiplied by the fixed rate an affiliate of the issuer would pay
in an ECU denominated interest rate swap and 2 multiplied by the fixed rate
such affiliate would pay in a U.S.$ denominated interest rate swap, each for
a specified period of time; or, if the holder of a Note fails to make an
election on the applicable day prior to an Interest Payment Date, the
difference between 2 multiplied by 6-month ECU London Interbank Offered Rate
minus 2 multiplied by 6-month U.S.$ London Interbank Offered Rate, in each
instance as such terms are defined by the International Swap Dealers
Association; provided, that in no event will interest be less than zero.
(2)Interest for succeeding Interest Payment Periods is based, at the election of
the holder of a Note, upon one of three formulas involving the difference
between 2.60 multiplied by the fixed rate an affiliate of the issuer would
pay in a Swiss Franc denominated interest rate swap and 2.60 multiplied by
the fixed rate such affiliate would pay in a U.S.$ denominated interest rate
swap each for a specified period of time; or, if the holder of a Note fails
to make an election on the applicable day prior to an Interest Payment Date,
the difference between 2.60 multiplied by 6-month Swiss Franc London
Interbank Offered Rate minus 2.60 multiplied by 6-month U.S.$ London
Interbank Offered Rate, in each instance as such terms are defined by the
International Swap Dealers Association; provided, that in no event will
interest be less than zero.
(3)Interest for succeeding Interest Payment Periods is based, at the election of
the holder of a Note, upon one of three formulas involving the difference
between 4 multiplied by the fixed rate an affiliate of the issuer would pay
in a Deutsche Mark denominated interest rate swap and 5 multiplied by the
fixed rated such affiliate would pay in a U.S.$ denominated interest rate
swap each for a specified period of time minus 0.90%; or, if the holder of a
Note fails to make an election on the applicable day prior to an Interest
Payment Date, the difference between 4 multiplied by 6-month Deutsche Mark
London Interbank Offered Rate minus 5 multiplied by 6-month U.S.$ London
Interbank Offered Rate minus 0.90%, in each instance as such terms are
defined by the International Swap Dealers Association; provided, that in no
event will interest be less than zero.
TERMS AND PROVISIONS OF MEDIUM-TERM NOTES, SERIES D
Set forth below is a table indicating the issuance and maturities of the
$1,562,642,000 aggregate principal amount of Medium-Term Notes, Series D issued
and outstanding as of June 9, 1994. The Medium-Term Notes, Series D constitute
Senior Debt and have either (a) fixed interest rates, (b) floating interest
rates which are either reset daily, monthly, quarterly, semiannually or annually
based on the Commercial Paper Rate, the Prime Rate, the Federal Funds Effective
Rate, the Treasury Rate or LIBOR, adjusted by a Spread or Spread Multiplier, as
applicable, or (c) the amounts payable as interest determined by reference to
one or more commodity prices, equity indices or other factors. The Medium-Term
Notes, Series D are not subject to any sinking fund and are not redeemable prior
to Stated Maturity.
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
<S> <C> <C> <C>
(1)July 30, 1993.......... $ 25,000,000 August 7, 1995 Selected Bond Index
(2)July 30, 1993.......... $ 10,000,000 July 29, 1994 Prime Reset Daily - 2.35%
July 30, 1993.......... $ 10,000,000 July 29, 1994 Libor Reset Quarterly + .20%
July 30, 1993.......... $ 29,000,000 July 28, 1995 Libor Reset Quarterly + .50%
July 30, 1993.......... $ 82,000,000 July 29, 1994 Libor Reset Monthly + .20%
July 26, 1993.......... $ 50,000,000 July 26, 1995 Libor Reset Quarterly + .55%
(3)July 22, 1993.......... $ 60,000,000 July 22, 1996 5.213%
July 21, 1993.......... $ 1,000,000 July 21, 1995 4.82%
July 20, 1993.......... $ 1,500,000 July 20, 1998 6.00%
July 20, 1993.......... $ 1,000,000 July 22, 1996 5.10%
July 20, 1993.......... $ 1,000,000 July 20, 1995 4.87%
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
<S> <C> <C> <C>
July 19, 1993........... $ 5,500,000 July 19, 1995 4.81%
July 19, 1993........... $ 10,000,000 July 20, 1998 Libor Reset Quarterly + .60%
July 15, 1993........... $ 1,000,000 July 17, 1995 4.82%
July 15, 1993........... $ 2,100,000 July 15, 1996 5.15%
July 15, 1993........... $ 1,000,000 July 15, 1998 6.00%
July 15, 1993........... $ 1,000,000 July 17, 1995 4.85%
July 15, 1993........... $ 15,000,000 October 16, 1995 5.00%
July 14, 1993........... $ 1,000,000 July 14, 1998 6.09%
July 14, 1993........... $ 10,000,000 July 14, 1995 4.85%
July 14, 1993........... $ 1,000,000 July 15, 1996 5.26%
July 13, 1993........... $ 1,000,000 July 13, 1995 4.79%
July 12, 1993........... $ 1,500,000 June 30, 1998 6.125%
July 9, 1993............ $ 3,000,000 July 9, 1998 6.09%
July 9, 1993............ $ 2,000,000 July 10, 1995 4.83%
July 9, 1993............ $ 5,000,000 July 9, 1998 6.08%
July 8, 1993............ $ 25,825,000 July 8, 1998 6.08%
July 8, 1993............ $ 10,000,000 January 9, 1995 4.27%
July 8, 1993............ $ 1,000,000 July 8, 1998 6.08%
July 8, 1993............ $ 5,000,000 January 9, 1995 4.27%
July 7, 1993............ $ 2,000,000 July 7, 1995 4.86%
July 7, 1993............ $ 5,000,000 July 7, 1995 4.86%
July 7, 1993............ $ 2,000,000 July 5, 1996 5.15%
July 6, 1993............ $ 1,000,000 July 6, 1998 6.05%
July 6, 1993............ $ 1,000,000 July 6, 1998 6.02%
July 1, 1993............ $ 7,000,000 June 30, 1995 5.00%
July 1, 1993............ $ 1,000,000 July 1, 1997 5.75%
July 1, 1993............ $ 75,000,000 July 29, 1994 4.02%
June 30, 1993........... $ 1,000,000 June 30, 1995 4.95%
June 30, 1993........... $ 29,000,000 June 30, 1998 6.125%
June 30, 1993........... $ 1,000,000 June 30, 1998 6.27%
June 29, 1993........... $ 35,000,000 June 29, 1998 6.25%
June 29, 1993........... $ 500,000 June 29, 1998 6.20%
(4)June 28, 1993........... $ 20,000,000 June 28, 1995 Libor Reset Quarterly + .85%
June 25, 1993........... $ 2,500,000 June 26, 1995 5.00%
(2)June 25, 1993........... $ 10,000,000 June 26, 1995 Prime Reset Daily - 1.90%
June 24, 1993........... $ 20,000,000 June 26, 1995 Libor Reset Quarterly + .55%
June 23, 1993........... $ 1,075,000 June 23, 1995 4.94%
June 23, 1993........... $ 2,000,000 June 23, 1995 4.91%
June 23, 1993........... $ 2,000,000 June 23, 1995 4.94%
June 23, 1993........... $ 3,000,000 June 30, 1995 4.91%
June 18, 1993........... $ 6,000,000 June 19, 1995 4.98%
June 18, 1993........... $ 5,500,000 June 19, 1995 5.00%
June 18, 1993........... $ 3,000,000 June 19, 1995 5.01%
June 17, 1993........... $ 10,000,000 June 16, 1995 5.10%
June 15, 1993........... $ 600,000 June 17, 1996 5.57%
June 15, 1993........... $ 500,000 June 17, 1996 5.57%
June 14, 1993........... $ 1,200,000 December 14, 1995 5.34%
June 14, 1993........... $ 2,000,000 June 14, 1995 5.10%
June 10, 1993........... $ 1,100,000 June 12, 1995 4.95%
June 9, 1993............ $ 1,200,000 June 9, 1995 4.99%
June 9, 1993............ $ 1,000,000 June 10, 1996 5.40%
June 8, 1993............ $ 15,000,000 June 8, 1995 5.13%
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
<S> <C> <C> <C>
(5)June 7, 1993............ $ 20,000,000 June 7, 1995 Lehman Brothers Baa Corp. Bond Index
June 4, 1993............ $ 5,000,000 December 5, 1994 4.40%
June 3, 1993............ $ 2,000,000 December 5, 1994 4.49%
June 3, 1993............ $ 3,000,000 June 5, 1995 5.01%
June 1, 1993............ $ 1,000,000 June 15, 1995 5.02%
May 28, 1993............ $ 37,000,000 January 2, 1996 5.25%
May 28, 1993............ $ 1,400,000 May 28, 1998 6.32%
May 27, 1993............ $ 1,000,000 May 28, 1996 5.20%
May 27, 1993............ $ 1,000,000 May 28, 1996 5.15%
May 27, 1993............ $ 1,000,000 May 30, 1995 4.86%
May 26, 1993............ $ 10,000,000 May 26, 1995 Libor Reset Quarterly + .50%
May 26, 1993............ $ 10,000,000 May 26, 1995 4.86%
May 25, 1993............ $ 1,000,000 May 25, 1995 4.84%
May 25, 1993............ $ 3,000,000 May 25, 1995 4.82%
May 25, 1993............ $ 5,000,000 May 28, 1996 5.34%
May 24, 1993............ $ 11,000,000 November 24, 1995 5.03%
May 21, 1993............ $ 10,000,000 June 22, 1994 3.80%
May 21, 1993............ $ 2,000,000 May 22, 1995 4.74%
May 20, 1993............ $ 5,500,000 May 22, 1995 4.63%
May 20, 1993............ $ 6,000,000 November 21, 1994 4.18%
May 19, 1993............ $ 20,000,000 November 21, 1994 Libor Reset Quarterly + .375%
(6)March 17, 1993.......... $106,000,000 March 18, 1996 Libor Reset Quarterly + .50%
March 15, 1993.......... $ 2,500,000 March 16, 1998 6.50%
March 11, 1993.......... $ 5,000,000 March 11, 1996 5.48%
March 11, 1993.......... $ 10,000,000 March 13, 1995 4.95%
March 11, 1993.......... $ 1,000,000 March 13, 1995 4.90%
March 10, 1993.......... $ 7,000,000 March 9, 1995 Libor Reset Quarterly + .90%
March 10, 1993.......... $ 5,000,000 March 11, 1996 Libor Reset Quarterly + 1.00%
March 9, 1993........... $ 3,000,000 March 11, 1996 5.60%
March 8, 1993........... $ 1,000,000 March 8, 1996 5.59%
(7)March 5, 1993........... $ 25,000,000 September 5, 1994 Lehman Brothers Baa
Corporate Bond Index
March 5, 1993........... $ 4,000,000 March 6, 1995 Libor Reset Quarterly + .90%
March 4, 1993........... $ 5,000,000 September 5, 1994 4.74%
March 4, 1993........... $ 2,000,000 March 3, 1995 Libor Reset Quarterly + .90%
March 4, 1993........... $ 2,000,000 March 3, 1995 Libor Reset Quarterly + .90%
March 3, 1993........... $ 2,000,000 March 3, 1995 Libor Reset Quarterly + .85%
March 3, 1993........... $ 5,000,000 March 3, 1995 5.14%
February 25, 1993....... $ 1,000,000 February 27, 1995 5.20%
(8)February 22, 1993....... $ 31,000,000 February 22, 1995 Libor Reset Quarterly + .90%
February 19, 1993....... $ 14,600,000 February 21, 1995 Libor Reset Quarterly + .92%
February 19, 1993....... $ 10,000,000 February 21, 1995 Libor Reset Quarterly + .90%
January 13, 1993........ $ 1,000,000 January 13, 1998 7.27%
January 12, 1993........ $ 1,000,000 January 12, 1995 5.74%
January 7, 1993......... $ 3,000,000 January 9, 1995 5.79%
December 29, 1992....... $ 3,000,000 December 29, 1994 Libor Reset Quarterly + .80%
December 23, 1992....... $ 5,000,000 December 23, 1994 Libor Reset Quarterly + .80%
(5)December 23, 1992....... $ 60,000,000 December 31, 1996 Lehman Brothers Baa
Corporate Bond Index
December 22, 1992....... $ 2,000,000 December 22, 1994 5.99%
December 22, 1992....... $150,000,000 June 22, 1994 Libor Reset Quarterly + .625%
December 21, 1992....... $ 2,000,000 July 1, 1999 7.75%
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
<S> <C> <C> <C>
October 27, 1992........ $ 500,000 October 27, 1994 5.05%
October 27, 1992........ $ 1,000,000 October 27, 1994 5.05%
October 20, 1992........ $ 12,500,000 June 15, 1994 Libor Reset Quarterly + .60%
October 20, 1992........ $ 1,000,000 October 20, 1995 5.58%
September 16, 1992...... $ 2,000,000 September 16, 1994 4.56%
September 16, 1992...... $ 1,000,000 September 16, 1997 6.26%
September 15, 1992...... $ 5,000,000 September 15, 1994 4.57%
September 11, 1992...... $ 5,000,000 September 11, 1995 5.56%
September 11, 1992...... $ 5,000,000 September 12, 1994 4.85%
September 10, 1992...... $ 2,500,000 September 12, 1994 4.84%
September 8, 1992....... $ 30,000,000 September 7, 1994 Libor Reset Monthly + .57%
September 3, 1992....... $ 5,000,000 August 30, 1994 4.96%
September 2, 1992....... $ 5,000,000 September 5, 1995 5.82%
September 1, 1992....... $ 2,000,000 September 2, 1997 6.72%
August 26, 1992......... $ 1,000,000 August 28, 1995 5.57%
August 26, 1992......... $ 1,000,000 August 26, 1994 4.77%
August 26, 1992......... $ 3,000,000 August 26, 2002 7.64%
August 25, 1992......... $ 2,000,000 August 25, 1997 6.25%
August 25, 1992......... $ 5,000,000 February 28, 1995 5.15%
August 18, 1992......... $ 1,000,000 August 18, 1994 4.85%
August 17, 1992......... $ 3,000,000 August 18, 1997 6.55%
August 14, 1992......... $ 5,000,000 August 15, 1995 5.71%
August 14, 1992......... $ 5,000,000 August 15, 1995 5.70%
August 11, 1992......... $ 10,000,000 August 12, 2002 7.85%
August 6, 1992.......... $ 2,000,000 August 7, 1995 5.76%
August 5, 1992.......... $ 1,000,000 August 5, 2002 7.72%
July 27, 1992........... $ 5,000,000 July 27, 1994 5.02%
July 22, 1992........... $ 1,000,000 July 22, 1996 6.30%
July 21, 1992........... $ 6,000,000 July 21, 1995 5.86%
July 20, 1992........... $ 3,000,000 June 20, 2000 7.78%
July 20, 1992........... $ 10,000,000 June 30, 1995 Libor Reset Quarterly + .70%
July 17, 1992........... $ 1,000,000 July 17, 1996 6.42%
July 17, 1992........... $ 1,000,000 July 17, 1997 6.93%
July 15, 1992........... $ 2,000,000 July 15, 1996 6.46%
July 14, 1992........... $ 15,000,000 July 14, 1995 6.00%
July 8, 1992............ $ 5,000,000 July 10, 1995 6.37%
(9)June 26, 1992........... $ 9,042,000 June 26, 1996 9.50% Resettable Semiannually
June 12, 1992........... $ 5,000,000 June 12, 1995 6.80%
June 12, 1992........... $ 26,000,000 June 12, 1997 7.75%
June 11, 1992........... $ 1,000,000 June 12, 1995 6.83%
June 5, 1992............ $ 10,000,000 June 5, 1997 7.87%
June 5, 1992............ $ 5,000,000 June 5, 1997 7.875%
June 3, 1992............ $ 5,000,000 June 5, 1995 7.00%
June 3, 1992............ $ 1,000,000 June 3, 1999 8.40%
May 29, 1992............ $ 1,000,000 May 29, 1997 7.93%
May 28, 1992............ $ 4,000,000 May 28, 1999 8.18%
May 27, 1992............ $ 1,000,000 May 27, 1999 8.15%
May 27, 1992............ $ 10,000,000 September 28, 2001 9.00%
May 20, 1992............ $ 3,000,000 May 22, 1995 6.92%
May 20, 1992............ $ 2,000,000 May 22, 1995 7.02%
May 15, 1992............ $ 5,000,000 May 15, 1995 7.28%
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
ISSUANCE DATE PRINCIPAL AMOUNT MATURITY DATE RATE
<S> <C> <C> <C>
20028.97% May 7, 1992.... $ 3,500,000 March 1, 2002 9.125%
10May 1, 1992........... $ 30,000,000 May 1, 1995 11.00% Reset Semiannually
</TABLE>
- ---------------
1. Interest on this Note is payable on the fifth New York Business Day
following the last day of the calendar month (each such month an "Interest
Payment Period") during which such interest accrued based upon the
appreciation in the level of an index (the "Index") that includes any one
and up to four bonds selected by the holder, from among those issued by the
governments of Australia, Canada, France, Germany, Japan, the United Kingdom
and the United States during such Interest Payment Period from the index
level previously reached for which an interest payment was made. Interest is
not paid during an interest Payment Period if pursuant to the formula
employed in determining interest, the resulting number is zero or a negative
number. Upon Maturity, this Note will be redeemed at par unless the level of
the index has declined from the level reached at the most recent time at
which a change in the level of the index resulted in the payment of
Interest. In such event, the amount paid at Maturity will be reduced in
direct proportion to the decline in the Index.
2. The "Prime Rate" means, with respect to any Interest Determination Date, the
interest rate (expressed as a percentage per annum) for such date, as
published in the applicable weekly statistical release designated as
H.15(519) (or any successor publication, published by the Board of Governors
of the Federal Reserve System) ("H.15(519)") opposite the caption "Bank
prime loan." If such an interest rate is not so published in H.15(519) by
9:00 a.m., New York City time, on the Calculation Date (the Business Day
prior to an Interest Payment Date) the Prime Rate will be determined by the
Calculation Agent and will be the arithmetic mean (rounded to the nearest
one-hundred thousandth of one percentage point, with five one-millionths of
one percentage point rounded upwards) of the rates of interest publicly
announced by each bank that appears on the display designated as page "NYMF"
on the Reuters Monitor Money Rates Service (or such other page as may
replace the NYMF page on that service) (the "Reuters Screen NYMF Page") as
such bank's U.S. dollar prime rate or base lending rate as in effect for
such Interest Determination Date, as quoted on the Reuters Screen NYMF Page
as of 9:00 a.m., New York City time, on that Interest Determination Date,
provided, that, at least four rates appear on the Reuters Screen NYMF Page
as of 9:00 a.m., New York City time, for such date. If fewer than four such
rates appear on the Reuters Screen NYMF Page as of 9:00 a.m., New York City
time, for such Interest Determination Date, the Prime Rate for such Interest
Determination Date will be determined by the Calculation Agent and will be
the arithmetic mean (rounded to the nearest one-hundred thousandth of one
percentage point, with five one-millionths of one percentage point rounded
upwards) of the rates quoted by three major banks in The City of New York
selected by the Calculation Agent as such banks' U.S. dollar prime rate or
base lending rate on the basis of the actual number of days in the year
divided by 360 as of the close of business on such Interest Determination
Date. If fewer than three such quotations are provided, the applicable
interest rate used for such Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean (rounded to the
nearest one-hundred thousandth of one percentage point, with five
one-millionths of one percentage point rounded upwards) of the U.S. dollar
prime or base lending rates quoted in The City of New York on the basis of
the actual number of days in the year divided by 360 as of the close of
business on such Interest Determination Date by three substitute banks or
trust companies organized and doing business under the laws of the United
States or any state thereof, each having total equity capital of at least
U.S. $500,000,000 and being subject to supervision or examination by federal
or state authority, selected by the Calculation Agent; provided, however,
that if the banks or trust companies selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Prime
Rate used for such Interest Determination Date will be the Prime Rate used
for the New York Banking Day preceding such Interest Determination Date.
3. Interest on the Notes is payable semi-annually on each January 22 and July
22 when the Note is outstanding and on the Maturity Date. For the period
from and including July 22, 1994 to but excluding the Maturity Date interest
on the Note will be calculated at the rate of (a) 6.073% plus (b) the
difference between (i) the London Interbank Offered Rate for 3 month
deposits of U.S. Dollars as it appears on the Telerate Page 3750 at 9:30
a.m. New York City time on July 20, 1994 and (ii)(x) the yield of two year
U.S. Treasury Notes as it appears under the 9 a.m. New York City time on
Telerate Page 7690 on July 20, 1994 plus (y) the arithmetic mean of the bid
and asked spreads over a U.S. Treasury component at which two year interest
rate swaps are trading as it appears on Telerate Page 314 as of 9:30 a.m.
New York City time on July 20, 1994. Interest will be calculated on the
basis of a year consisting of twelve months of 30 days each. The Telerate
pages are deemed to include any successor pages of that service for purposes
of posting the applicable statistic. Interest may be zero for the Interest
Periods coming on July 22, 1994 through the Maturity Date.
4. Interest on the Note is payable quarterly on the 28th day of March, June,
September, and December, commencing September 28, 1993, at a rate determined
by reference to settings of the three-month United States Dollar London
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Interbank Offered Rate ("LIBOR"). For the period from the Issue Date to June
28, 1994, interest will accrue on the Note at a rate equal to LIBOR plus a
spread of 0.85%. For the period from June 28, 1994 to the Maturity Date,
interest on the Note will accrue at a rate dependent on the arithmetic
average of LIBOR during a one-week period from June 22, 1994 through June
28, 1994. If the average LIBOR during such period is less than or equals
4.10%, then interest on the Note will continue to accrue for the period from
June 28, 1994 through the Maturity Date at a rate of LIBOR plus a spread of
0.85%. If the average LIBOR during such period exceeds 4.10%, then interest
on the Note will accrue at the lower of (a) LIBOR plus a spread of 0.85% or
(b) 15.10% minus the product of (i) 2 multiplied by (ii) LIBOR. At maturity,
the Note will be redeemed at par.
(5) Interest on this Note is payable on the fifth New York Business Day
following the last day of the calendar month (each such month an "Interest
Payment Period") during which such Interest accrued based upon the
appreciation in the level of the Lehman Brothers Baa Corporate Bond Index
(the "Index") during such Interest Payment Period from the Index level
previously reached. Interest is not paid during an Interest Payment Period
if pursuant to the formula employed in determining interest, the resulting
number is zero or a negative number. Upon Maturity, this Note will be
redeemed at par unless the level of the Index has declined from the level
reached at the most recent time at which a change in the level of the Index
resulted in the payment of Interest. In such event, the amount paid at
Maturity will be reduced in direct proportion to the decline in the Index.
(6) The holder of the Note has the option to cause the Company to repurchase all
or any portion of the Note on the third Wednesday of each March, June,
September or December prior to Stated Maturity (each such Wednesday a
"Repurchase Date"); provided, that the Company receives notice from the
holder with respect to such repurchase not more than sixty (60) nor less
than five (5) Business Days prior to the Repurchase Date.
(7) Interest on this Note is payable on the fifth New York Business Day
following the last day of the Interest Payment Period during which such
interest accrued based upon the appreciation in the level of the Lehman
Brothers Baa Corporate Bond Index (the "Index") during such Interest Payment
Period from the Index level previously reached plus a specified Spread (the
"Spread"). Interest other than in respect of the Spread is not paid if the
Index declines during an Interest Payment Period. Upon Maturity, this Note
will be redeemed at par unless the level of the Index has declined from the
level reached at the most recent time at which a change in level of the
Index resulted in the payment of Interest other than in respect of the
Spread. In such event, the redemption amount paid at Maturity will be
reduced in direct proportion to the decline in the Index.
(8) The Initial Interest Rate is based on 1-month Libor plus .90% and will be
reset on March 17, 1993. Thereafter, Interest will be reset quarterly on the
Interest Reset Date in March, June, September and December, as applicable.
(9) Principal and interest on the Note, which will be paid in U.S. Dollars
("U.S.$"), will be determined with reference to Canadian dollars ("CAD") as
more fully set forth below. Interest for succeeding Interest Payment Periods
is based, at the election of the holder of the Note, upon one of seven
formulas (each a "Formula"), six of which involve the difference between 2
multiplied by the fixed rate an affiliate of the issuer would pay in an
European Currency Unit ("ECU") denominated interest rate swap and 2
multiplied by the fixed rate such affiliate would pay in a Japanese Yen
denominated interest rate swap, each for a specified period of time. The
seventh Formula which the holder of a Note may elect is 2 multiplied by
6-month ECU London Interbank Offered Rate minus 2 multiplied by 6-month
Japanese Yen London Interbank Offered Rate, in each instance as such term is
defined by the International Swap Dealers Association (such Formula
hereinafter the "LIBOR Formula"). If the holder of the Note fails to make an
election on the applicable day prior to an Interest Payment Date the LIBOR
Formula will be applied. The amount of interest payable on any Interest
Payment Date will be equal to the product of CAD 10,786,313 times the
applicable Formula for the relevant Interest Payment Period times the spot
rate at which U.S.$ may be purchased for CAD (the "Spot Exchange Rate") for
settlement on such Interest Payment Date, as determined by an affiliate of
the issuer two New York and Toronto Banking Days prior to such Interest
Payment Date. In no event will interest be less than zero. The principal
amount payable on the Maturity Date will equal CAD 10,786,313 times the Spot
Exchange Rate, as determined by an affiliate of the issuer two New York and
Toronto Banking Days prior to such Maturity Date.
(10)Interest for succeeding Interest Payment Periods is based upon a formula
involving 2 multiplied by 6-month Deutsche Mark London Interbank Offered
rate minus 2 multiplied by 6-month U.S.$ London Interbank Offered Rate minus
0.30%, in each instance as such terms are defined by the International Swap
Dealers Association; provided, that in no event will interest be less than
zero.
TERMS AND PROVISIONS OF GUARANTEED NOTES
The Guaranteed Notes have been issued under an indenture dated as of May 1,
1986 ("Guaranteed Indenture"), between The E. F. Hutton Group Inc. ("Group") and
the trustee, United States Trust Company
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of New York (the "Guaranteed Note Trustee"). A copy of the Guaranteed Indenture
is filed as an exhibit to the Registration Statement of which this Prospectus is
a part. The following summaries of certain terms and provisions of the
Guaranteed Indenture do not purport to be complete and are subject to, and
qualified in their entirety by reference to all the provisions of, the
Guaranteed Indenture, including the definitions therein of certain terms.
Wherever reference is made to particular defined terms (which are capitalized
herein) of the Guaranteed Indenture, such defined terms are incorporated herein
by reference.
The Guaranteed Notes are unsecured obligations of Group and rank pari passu
with all other unsecured and unsubordinated indebtedness of Group. Holdings has
unconditionally guaranteed the due and punctual payment of principal and
interest on the Guaranteed Notes, when and as the same shall become due and
payable, whether at maturity or upon redemption or upon declaration or
otherwise, according to the terms of the Guaranteed Notes and the Guaranteed
Indenture. The Guarantee is an unsecured obligation and ranks pari passu with
all other unsecured obligations of Holdings.
Principal of and interest on the Guaranteed Notes is payable, and the
Guaranteed Notes are exchangeable and transfers thereof will be registrable, at
the office of the Trustee, currently located at 45 Wall Street, New York, New
York. The Guaranteed Notes are issuable in fully registered form only without
coupons in denominations of $1,000 and any integral multiple thereof, and may be
transferred or exchanged without payment of any service charge; Group may,
however, require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Except as otherwise provided in the Indenture, interest on the Guaranteed
Notes is payable semi-annually on May 1 and November 1, to the persons in whose
names Guaranteed Notes are registered at the close of business on the next
preceding April 15 and October 15 and, unless other arrangements are made, is
paid by checks mailed to such persons at their registered addresses. The
Guaranteed Notes are not redeemable prior to maturity.
Group may not consolidate with or merge into, or transfer all or
substantially all of its assets to, another corporation unless (a) the successor
corporation, which shall be a corporation organized and existing under the laws
of the United States of America or one of the States of the United States of
America, assumes by supplemental indenture all the obligations of Group under
the Guaranteed Notes and the Guaranteed Indenture and (b) at the time of the
merger, consolidation or sale, and after giving effect thereto, no default or
Event of Default would exist.
A sale of all or substantially all of the assets of Group to a Controlled
Subsidiary of Holdings is permitted without requiring the transferee to assume
Group's obligations under the Guaranteed Notes and the Guaranteed Indenture.
Holdings may not consolidate with or merge into, or transfer all or
substantially all of its assets to, another corporation unless the successor
corporation, which shall be a corporation organized and existing under the laws
of the United States or a State thereof, assumes by supplemental indenture all
the obligations of Holdings under the Guarantee.
EVENTS OF DEFAULT, NOTICE AND WAIVER
If an Event of Default with respect to the Guaranteed Notes then
outstanding shall have happened and be continuing, the Guaranteed Note Trustee
or the Holders of 25% in principal amount of the Guaranteed Notes then
outstanding may declare the principal and accrued interest of all the Guaranteed
Notes to be due and payable immediately; provided, that if all Events of Default
with respect to the Guaranteed Notes shall have been remedied, the Holders of a
majority in aggregate principal amount of the Guaranteed Notes then outstanding
may rescind and annul such declaration and its consequences.
An Event of Default with respect to the Guaranteed Notes then outstanding
is defined in the Guaranteed Indenture as being: default in payment of any
principal on any Guaranteed Notes; default for 30 days in payment of any
interest on any Guaranteed Notes; default for 60 days after notice by the
Holders of 25% of the outstanding Guaranteed Notes or the Guaranteed Note
Trustee in the performance of any other covenant in the Guaranteed Indenture
with respect to the Guaranteed Notes; or certain events of bankruptcy,
insolvency or reorganization.
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If a default with respect to the Guaranteed Notes occurs and is continuing
and if it is known to the Guaranteed Note Trustee, the Guaranteed Note Trustee
is required to give to the Holders of the Guaranteed Notes notice of such
default within 90 days after it occurs; provided that, except in the case of
default in the payment of principal of or interest on the Guaranteed Notes with
respect to which such default has occurred, the Guaranteed Note Trustee shall be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the Holders of the Guaranteed
Notes.
In the event a default with respect to the Guaranteed Notes occurs and is
continuing, the Guaranteed Note Trustee, subject to its duty during default to
act with the required standard of care, may require indemnification by the
Holders of the Guaranteed Notes before proceeding to exercise any right or power
under the Guaranteed Indenture at the request of the Holders of the Guaranteed
Notes. The Holders of a majority in principal amount of the outstanding
Guaranteed Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Guaranteed Note Trustee, or
exercising any trust or power conferred on the Guaranteed Note Trustee. The
Guaranteed Note Trustee, however, may refuse to follow any direction that
conflicts with law or the Guaranteed Indenture or which would be unjustly
prejudicial to other Holders of Guaranteed Notes.
In certain cases, the Holders of a majority in principal amount of the
outstanding Guaranteed Notes may, on behalf of the Holders of all the Guaranteed
Notes, waive any past default with respect to such series except a default in
the payment of the principal or interest on the Guaranteed Notes with respect to
which such default has occurred.
Group is required to file annually with the Guaranteed Note Trustee a
certificate as to the absence of defaults under the Guaranteed Indenture.
MODIFICATION OF THE GUARANTEED INDENTURE AND WAIVER
Group and the Guaranteed Note Trustee may, with the consent of the Holders
of a majority in principal amount of the outstanding Guaranteed Notes (which
consent may be solicited without giving notice to all Holders of the Guaranteed
Notes) amend or supplement the Guaranteed Indenture in any respect with respect
to the Guaranteed Notes or waive compliance by Group with the provisions of the
Guaranteed Indenture with respect to the Guaranteed Notes, except that no such
amendment, supplement or waiver may, without in each case the consent of each
affected Holder of a Guaranteed Note, (a) extend the fixed maturity of any
Guaranteed Note, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, or waive a default in the
payment of principal or interest thereon or make any Guaranteed Note payable in
money other than United States Dollars or (b) reduce the aforesaid percentage of
Guaranteed Notes, if consent of the Holders is required for any such amendment,
supplement or waiver.
In addition, Group and the Guaranteed Note Trustee may, without notice to
or consent of any Holders of the Guaranteed Notes, amend or supplement the
Guaranteed Indenture or the Guaranteed Notes: (a) to cure any ambiguity, defect
or inconsistency; (b) to comply with the terms and conditions of the Guaranteed
Indenture under which Group may merge into, or transfer its assets to, another
corporation; (c) to provide for uncertificated Guaranteed Notes in addition to
or in place of certificated Guaranteed Notes; and (d) to make any change that
does not materially adversely affect the rights of any Holder of a Guaranteed
Note.
SATISFACTION AND DISCHARGE
Group's obligations under the Guaranteed Indenture with respect to the
Guaranteed Notes will be discharged upon payment of all Guaranteed Notes or, at
the option of Group, upon the deposit in trust with the Guaranteed Note Trustee
or with another trustee acceptable to both the Guaranteed Note Trustee and Group
of money or U. S. Government Obligations sufficient to pay the principal of or
interest on the Guaranteed Notes on the dates such payments are due in
accordance with their terms. To exercise any such option, Group is required to
deliver to the Guaranteed Note Trustee an opinion of counsel to the effect that
(1) the deposit and related defeasance would not cause the Holders of the
Guaranteed Notes to recognize income, gain or loss for Federal income tax
purposes, accompanied by an applicable ruling received from or
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published by the Internal Revenue Service, and (2) if the Guaranteed Notes are
then listed on the NYSE, such Guaranteed Notes would not be delisted from the
NYSE as a result of the exercise of such option.
MISCELLANEOUS
No Holder of a note of either series may institute any action against Group
under the Guaranteed Indenture (except actions for payment of overdue principal
of or interest on the Guaranteed Notes) unless the Holders of at least 25% of
the principal amount of Guaranteed Notes then outstanding shall have requested
the Guaranteed Note Trustee to institute such action and assured reasonable
indemnity to the Guaranteed Note Trustee against any loss, liability or expense
and the Guaranteed Note Trustee shall not have instituted such action within 60
days of such request.
REGARDING THE TRUSTEE
The Guaranteed Note Trustee serves as trustee under certain indentures
relating to over 400 of Shearson Lehman's tax exempt and corporate income unit
trusts.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Securities may not be offered or sold during the restricted period (as defined
under "Description of Debt Securities -- Denominations, Registration and
Transfer"), or delivered in definitive form in connection with a sale during the
restricted period, in the United States or to United States persons other than
to (a) the United States office of (i) an international organization (as defined
in Section 7701(a)(18) of the Code), (ii) a foreign central bank (as defined in
Section 895 of the Code), or (iii) any underwriter, agent, or dealer offering or
selling Bearer Securities during the restricted period (a "Distributor")
pursuant to a written contract with the issuer or with another Distributor, that
purchases Bearer Securities for resale or for its own account and agrees to
comply with the requirements of Section 165(j)(3)(A), (B), or (C) of the Code,
or (b) the foreign branch of a United States financial institution purchasing
for its own account or for resale, which institution agrees to comply with the
requirements of Section 165(j)(3)(A), (B), or (C) of the Code. In addition, a
sale of a Bearer Security may be made during the restricted period to a United
States person who acquired and holds the Bearer Security through a foreign
branch of a United States financial institution that agrees to comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Code. Any Distributor
(including an affiliate of a Distributor) offering or selling Bearer Securities
during the restricted period must agree not to offer or sell Bearer Securities
in the United States or to United States persons (except as discussed above) and
must employ procedures reasonably designed to ensure that its employees or
agents directly engaged in selling Bearer Securities are aware of these
restrictions.
Bearer Securities and their interest coupons will bear a legend
substantially to the following effect: "Any United States person who holds this
obligation will be subject to limitations under the United States income tax
laws, including the limitations provided in Sections 165(j) and 1287(a) of the
Internal Revenue Code."
Purchasers of Bearer Securities may be affected by certain limitations
under United States tax laws. See "United States Taxation -- Backup
Withholding."
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States and an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source, and "United States" means the United States of America (including the
States and the District of Columbia), and its possessions including Puerto Rico,
the U.S. Virgin Islands, Guam, American Samoa, Wake Island and Northern Mariana
Islands. The term "United States Holder" means any holder that is a United
States person. The term "Non-United States Holder" means any Holder which is not
an United States person.
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UNITED STATES TAXATION
Certain Tax Consequences for United States Holders. The following summary
describes certain United States federal income tax consequences of the ownership
of Securities as of the date hereof. Except where noted, it deals only with Debt
Securities held as capital assets by United States Holders and does not deal
with special situations, such as those of dealers in securities, financial
institutions, life insurance companies or United States Holders whose
"functional currency" is not the U.S. dollar. Furthermore, the discussion below
is based upon the provisions of the Internal Revenue Code of 1986, as amended
(the "Code") and regulations, rulings and judicial decisions thereunder as of
the date hereof, and such authorities may be repealed, revoked or modified so as
to result in federal income tax consequences different from those discussed
below. For a discussion of certain United States federal income tax consequences
of the ownership of Debt Securities to Non-United States Holders see "Certain
Tax Consequences for Non-United States Holders" below. PERSONS CONSIDERING THE
PURCHASE, OWNERSHIP OR DISPOSITION OF DEBT SECURITIES SHOULD CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
OTHER TAXING JURISDICTION.
UNITED STATES HOLDERS. As used herein, a "United States Holder" of a Debt
Security means a holder that is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States, or an estate or trust the income of which is subject
to United States federal income taxation regardless of its source, and "United
States" means the United States of America (including the States and the
District of Columbia) and its possessions including Puerto Rico, the U.S. Virgin
Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. The
term "Non-United States Holder" means any Holder which is not a United States
Holder.
PAYMENTS OF INTEREST. Except as set forth below, interest on a Debt
Security will generally be taxable to a United States Holder as ordinary income
from domestic sources at the time it is paid or accrued in accordance with the
United States Holder's method of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT. The following is a summary of the principal
United States federal income tax consequences of the ownership of Debt
Securities issued with original issue discount ("Original Issue Discount Notes")
by United States Holders. This summary is based upon regulations issued by the
Treasury Department which became effective on April 4, 1994 (the "OID
Regulations"). The OID Regulations provide, however, that taxpayers generally
may rely on such regulations in determining the federal income tax consequences
of owning debt instruments issued after December 21, 1992. The following
discussion addresses only Debt Securities providing for fixed payments and
Securities that bear qualified stated interest, as defined below.
A Debt Security with an "issue price" that is less than its stated
redemption price at maturity (the sum of all payments to be made on the Security
other than "qualified stated interest," as defined below) will be issued with
original issue discount ("OID") if such difference is at least 0.25 percent of
the stated redemption price at maturity multiplied by the number of complete
years to maturity. Notice will be given in the applicable Prospectus Supplement
when the Company determines that a particular Debt Security will be an Original
Issue Discount Note.
Under the OID Regulations, the "issue price" of each Debt Security in a
particular offering will be the first price at which a substantial amount of
that particular offering is sold. "Qualified stated interest" with respect to a
Debt Security is stated interest that is unconditionally payable in cash or in
property (other than debt instruments of the issuer) at least annually at a
single fixed rate ("Fixed Rate Security"). Interest is payable at a single fixed
rate only if the rate appropriately takes into account the length of the
interval between payments. Debt Securities other than Fixed Rate Securities will
also be treated as bearing qualified stated interest if they qualify as
"variable rate debt instruments".
A Debt Security will be treated as a "variable rate debt instrument" for
purposes of the OID regulations if the Debt Security is issued for an amount
that does not exceed the total of principal payments unconditionally payable by
more than an amount equal to the lesser of (i) 0.015 multiplied by the product
of the total principal unconditionally payable and the number of complete years
to maturity from the issue date;
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or (ii) 15 percent of the total principal payments unconditionally payable. In
addition, to be a variable rate debt instrument, the Debt Security must bear
stated interest at (i) one or more qualified floating rates, (ii) a single fixed
rate and one or more qualified floating rates, (iii) a single objective rate or
(iv) a single fixed rate and a single objective rate that is a "qualified
inverse floating rate." In general, a qualified floating rate is a rate the
variations in the value of which can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the currency
in which the Debt Security is denominated. An objective rate is a rate (other
than a qualified floating rate) that is determined using a single fixed formula
and that is based on one or more of: (i) qualified floating rates, (ii) rates
that would be qualified floating rates for a debt obligation denominated in a
different currency or (iii) the yield or change in the price of one or more
items of actively traded personal property, other than the stock or debt of the
issuer or a related party. A "qualified inverse floating rate" is a rate that is
equal to a fixed rate minus a qualified floating rate and the variations in
which can reasonably be expected to inversely reflect contemporaneous variations
in the cost of newly borrowed funds, disregarding certain restrictions on such
rate such as caps, floors or governors. Unless a Prospectus Supplement so
indicates, Debt Securities will be issued with qualified stated interest.
In the case of a Debt Security issued with de minimis OID (i.e., discount
that is not OID because it is less than 0.25 percent of the stated redemption
price at maturity multiplied by the number of complete years to maturity), the
United States Holder generally must include such de minimis OID in income as
stated principal payments on the Debt Security are made, including the de
minimis OID in proportion to the amount of principal paid. Any amount of de
minimis OID that has not been included in income prior to sale, exchange or
retirement of a Debt Security shall be treated as capital gain.
The OID Regulations provide that Debt Securities that may be redeemed prior
to their Stated Maturity shall be treated from the time of issuance as having a
maturity date for federal income tax purposes on such redemption date if such
redemption would result in a lower yield to maturity in the case of a redemption
at the issuer's option or a higher yield to maturity in the case of a redemption
at the holder's option. The Company will determine whether a particular Debt
Security is deemed to have a maturity date for federal income tax purposes prior
to its Stated Maturity.
United States Holders of Original Issue Discount Notes with a maturity upon
issuance of more than one year must, in general, include OID in income in
advance of the receipt of some or all of the related cash payments. The amount
of OID includible in income by the initial United States Holder of an Original
Issue Discount Note is the sum of the "daily portions" of OID with respect to
the Debt Security for each day during the taxable year or portion of the taxable
year in which such United States Holder held such Debt Security ("accrued OID").
The daily portion is determined by allocating to each day in any "accrual
period" a pro rata portion of the OID allocable to that accrual period. The
"accrual period" for an Original Issue Discount Note may be of any length and
may vary in length over the term of the Debt Security, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs on the first day or the final day of an accrual
period. In general, the computation of OID is simplest if accrual periods
correspond to the intervals between payment dates provided by the terms of the
Debt Security. The amount of OID allocable to any accrual period is an amount
equal to the excess, if any, of (a) the product of the Debt Security's adjusted
issue price at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual period and
properly adjusted for the length of the accrual period) over (b) the sum of the
qualified stated interest allocable to the accrual period. In determining OID
allocable to an accrual period, if an interval between payments of qualified
stated interest contains more than one accrual period, the amount of qualified
stated interest payable at the end of the interval (including any qualified
stated interest that is payable on the first day of the accrual period
immediately following the interval) is allocated on a pro rata basis to each
accrual period in the interval and the adjusted issue price must be increased by
the amount of any qualified stated interest that has accrued prior to the first
day of the accrual period but is not payable until the end of the interval. OID
allocable to a final accrual period is the difference between the amount payable
at maturity (other than a payment of qualified stated interest) and the adjusted
issue price at the beginning of the final accrual period. If all accrual periods
are of equal length, except for either an initial shorter accrual period or an
initial and a final shorter accrual period, the amount of OID allocable to the
initial accrual period may be computed under any reasonable method. The
"adjusted issue
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price" of a Debt Security at the beginning of any accrual period is equal to its
issue price increased by the accrued OID for each prior accrual period
(determined without regard to the amortization of any acquisition or bond
premium, as described below) and reduced by any prior payments, or any payments
made on the first day of the accrual period, with respect to such Debt Security
that were not qualified stated interest. Under these rules, a United States
Holder will have to include in income increasingly greater amounts of OID in
successive accrual periods. The Company is required to provide information
returns stating the amount of OID accrued on Debt Securities held of record by
persons other than corporations and other exempt holders.
In the case of certain variable rate debt instruments that are issued with
OID and that bear interest at a single qualified floating rate or a qualified
inverse floating rate, the accrual of OID is to be determined by assuming that
the rate is fixed upon issuance at the initial value of the interest rate. In
the case of certain variable rate debt instruments that are issued with OID and
that bear an objective interest rate (other than a qualified inverse floating
rate), the accrual of OID is calculated by assuming that the Debt Security bears
interest at a fixed rate that reflects the yield that is reasonably expected for
the Debt Security. The method for determining OID on Debt Securities that do not
bear interest at a qualified floating rate, at a qualified inverse floating rate
or at an objective rate will be provided in the applicable Prospectus Supplement
for such Debt Security. United States Holders may elect to treat all interest on
any Debt Security as OID and calculate the amount includible in gross income
under the constant yield method described above. For the purposes of this
election, interest includes stated interest, acquisition discount, OID, de
minimis OID, market discount, de minimis market discount and unstated interest,
as adjusted by any amortizable bond premium or acquisition premium. If a United
States Holder makes this election for a Debt Security with market discount or
amortizable bond premium, the election is treated as an election under the
market discount or amortizable bond premium provisions, described below, and the
electing United States Holder will be required to amortize bond premium or
include market discount in income currently for all of the holder's other debt
instruments with market discount or amortizable bond premium. The election is to
be made for the taxable year in which the United States Holder acquired the Debt
Security, and may not be revoked without the consent of the Internal Revenue
Services ("IRS"). UNITED STATES HOLDERS SHOULD CONSULT WITH THEIR OWN TAX
ADVISERS ABOUT THIS ELECTION.
In the case of Original Issue Discount Notes having a term of one year or
less ("Short-Term Original Issue Discount Notes"), under the OID Regulations all
payments (including all stated interest) will be included in the stated
redemption price at maturity and, thus, United States Holders will generally be
taxable on the discount in lieu of stated interest. The discount will be equal
to the excess of the stated redemption price at maturity over the issue price of
a Short-Term Original Issue Discount Note, unless the United States Holder
elects to compute this discount using tax basis instead of issue price. In
general, an individual and certain other cash method United States Holders of a
Short-Term Original Issue Discount Note are not required to include accrued
discount in their income currently unless they elect to do so. United States
Holders who report income for federal income tax purposes on the accrual method
and certain other United States Holders are required to accrue discount on such
Short-Term Original Issue Discount Notes (as ordinary income) on a straight-line
basis, unless an election is made to accrue the discount according to a constant
yield method based on daily compounding. In the case of a United States Holder
who is not required, and does not elect, to include discount in income
currently, any gain realized on the sale, exchange or retirement of the
Short-Term Original Issue Discount Note will be ordinary income to the extent of
the discount accrued through the date of sale, exchange or retirement. In
addition, such United States Holder who does not elect to include currently
accrued discount may be required to defer deductions for a portion of the United
States Holder's interest expense with respect to any indebtedness incurred or
continued to purchase or carry such Debt Securities.
MARKET DISCOUNT. If a United States Holder purchases a Debt Security
(other than an Original Issue Discount Note) for an amount that is less than its
stated redemption price at maturity or, in the case of an Original Issue
Discount Note, its adjusted issue price, the amount of the difference will be
treated as "market discount" for federal income tax purposes, unless such
difference is less than a specified de minimis amount. Under the market discount
rules, a United States Holder will be required to treat any principal payment
on, or any gain on the sale, exchange, retirement or other disposition of, a
Debt Security as ordinary income to the
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extent of the market discount which has not previously been included in income
and is treated as having accrued on such Debt Security at the time of such
payment or disposition. In addition, a United States Holder may be required to
defer, until the maturity of the Debt Security or its earlier disposition in a
taxable transaction, the deduction of all or a portion of the interest expense
on any indebtedness incurred or continued to purchase or carry such Debt
Security.
Any market discount will be considered to accrue ratably during the period
of acquisition to the maturity date of the Debt Security, unless the United
States Holder elects to accrue on a constant interest method. A United States
Holder of a Debt Security may elect to include market discount in income
currently as it accrues (on either a ratable or constant interest method), in
which case the rule described above regarding deferral of interest deductions
will not apply. This election to include market discount in income currently,
once made, applies to all market discount obligations acquired on or after the
first taxable year to which the election applies, and may not be revoked without
the consent of the IRS.
ACQUISITION PREMIUM; AMORTIZABLE BOND PREMIUM. A United States Holder who
purchases a Debt Security for an amount that is greater than its adjusted issue
price but equal to or less than the sum of all amounts payable on the Debt
Security after the purchase date other than payments of qualified stated
interest will be considered to have purchased such Debt Security at an
"acquisition premium". Under the acquisition premium rules, the amount of OID
which such holder must include in its gross income with respect to such Debt
Security for any taxable year will be reduced by the portion of such acquisition
premium properly allocable to such year.
A United States Holder who purchases a Debt Security for an amount in
excess of the sum of all amounts payable on the Debt Security after the purchase
date other than qualified stated interest will be considered to have purchased
the Debt Security at a "premium" and will not be required to include any OID in
income. A United States Holder generally may elect to amortize the premium over
the remaining term of the Debt Security on a constant yield method. The amount
amortized in any year will be treated as a reduction of the United States
Holder's interest income from the Debt Security. Bond premium on a Debt Security
held by a United States Holder that does not make such an election will decrease
the gain or increase the loss otherwise recognized on disposition of the Debt
Security. The election to amortize premium on a constant yield method once made
applies to all debt obligations held or subsequently acquired by the electing
United States Holder on or after the first day of the first taxable year to
which the election applies and may not be revoked without the consent of the
IRS.
SALE, EXCHANGE AND RETIREMENT OF DEBT SECURITIES. A United States Holder's
tax basis in a Debt Security will, in general, be the United States Holder's
cost therefor, increased by OID or market discount, or any discount with respect
to a Short-Term Original Issue Discount Note, previously included in income by
the United States Holder and reduced by an amortized premium and any cash
payments on the Security other than qualified stated interest. Upon the sale,
exchange or retirement of a Debt Security (which might arise in the event of a
satisfaction and discharge), a United States Holder will recognize gain or loss
equal to the difference between the amount realized upon the sale, exchange or
retirement (less any accrued qualified stated interest, which will be taxable as
such) and the adjusted tax basis of the Debt Security. Except as described above
with respect to certain Short-Term Original Issue Discount Notes, such gain or
loss will be capital gain or loss and will be long-term capital gain or loss if
at the time of sale, exchange or retirement the Debt Security has been held for
more than one year. Under current law, net capital gains of individuals are,
under certain circumstances, taxed at lower rates than items of ordinary income.
The deductibility of capital losses is subject to limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING. In general, information
reporting requirements will apply to certain payments of principal, interest,
OID and premium paid on Debt Securities and to proceeds of sale of a Debt
Security made to United States Holders other than certain exempt recipients
(such as corporations). A 31% backup withholding tax will apply to such payments
if the United States Holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
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Certain Tax Consequences for Non-United States Holders. Under present
United States federal income and estate tax law, and subject to the discussion
below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Company or any Paying Agent of
principal or interest (which for purposes of this discussion includes OID)
on a Debt Security owned by a Non-United States Holder, provided, in the
case of interest, (i) that the beneficial owner does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote within the meaning of
Section 871(h)(3) of the Code and the regulations thereunder, (ii) the
beneficial owner is not a controlled foreign corporation that is related to
the Company through stock ownership and (iii) the beneficial owner
satisfies the statement requirement (described generally below) set forth
in Section 871(h) and Section 881(c) of the Code and the regulations
thereunder;
(b) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-United States
Holder upon the sale, exchange or retirement of a Debt Security; and
(c) a Debt Security beneficially owned by an individual who at the
time of death is a Non-United States Holder will not be subject to United
States federal income tax as a result of such individual's death, provided
that such individual does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the Company
entitled to vote within the meaning of Section 871(h)(3) of the Code and
provided that the interest payments with respect to such Debt Security
would not have been, if received at the time of such individual's death,
effectively connected with the conduct of a United States trade or business
by such individual.
To qualify for the exemption from withholding tax in (a)(iii) above, the
beneficial owner of a Debt Security, or a financial institution holding the
Security on behalf of such owner, must provide, in accordance with specified
procedures, a Paying Agent of the Company with a statement to the effect that
the beneficial owner is not a United States person. Pursuant to current
temporary Treasury Regulations, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that he is not a United States person (which certification may be
made on an IRS Form W-8, or any successor form) or (2) a financial institution
holding the Debt Security on behalf of the beneficial owner certifies, under
penalties of perjury, that such statement has been received by it and furnishes
a Paying Agent with a copy thereof.
Payments to Non-United States Holders not meeting the requirements of
paragraph (a) above and thus subject to withholding of United States federal
income tax may nevertheless be exempt from such withholding if the beneficial
owner of the Debt Security provides a Paying Agent of the Company with a
properly executed (1) IRS Form 1001 (or any successor form) claiming an
exemption from withholding under the benefit of a tax treaty or (2) IRS Form
4224 (or any successor form) stating that interest paid on the Debt Security is
not subject to withholding tax because it is effectively connected with the
owner's conduct of a trade or business in the United States.
No information reporting or backup withholding will be required with
respect to payments made by the Company or any Paying Agent to Non-United States
Holders if a statement described in (a)(iii) above has been received and the
payor does not have actual knowledge that the beneficial owner is a United
States person.
In addition, backup withholding and information reporting will not apply if
payments of principal, interest, original issue discount or premium on a Debt
Security are paid or collected by a foreign office of a custodian, nominee or
other foreign agent on behalf of the beneficial owner of such Debt Security, or
if a foreign office of a broker (as defined in applicable Treasury Regulations)
pays the proceeds of the sale of a Debt Security to the owner thereof. If,
however, such nominee, custodian, agent or broker is, for United States federal
income tax purposes, a United States person, a controlled foreign corporation or
a foreign person that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States, such
payments will not be subject to backup withholding but will be subject to
information
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reporting, unless (1) such custodian, nominee, agent or broker has documentary
evidence in its records that the beneficial owner is not a United States person
and certain other conditions are met or (2) the beneficial owner otherwise
establishes an exemption. Temporary Treasury Regulations provide that the
Treasury is considering whether backup withholding will apply with respect to
such payments of principal, interest or the proceeds of a sale that are not
subject to backup withholding under the current regulations. Under proposed
Treasury Regulations not currently in effect, backup withholding will not apply
to such payments absent actual knowledge that the payee is a United States
person.
Payments of principal, interest, OID or premium on a Debt Security paid to
the beneficial owner of a Debt Security by a United States office of a
custodian, nominee or agent, or the payment by the United States office of a
broker of the proceeds of sale of a Debt Security, will be subject to both
backup withholding and information reporting unless the beneficial owner
provides a statement described in (a)(iii) above and the payor does not have
actual knowledge that the beneficial owner is a United States person or
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
CAPITAL REQUIREMENTS
As registered broker-dealers the Company and certain of its subsidiaries
(the "Regulated Subsidiaries") are subject to the SEC's net capital rule (Rule
15c3-1, the "Net Capital Rule"), promulgated under the Exchange Act. The NYSE
monitors the application of the Net Capital Rule by the Company. The NYSE and
the NASD, as the case may be, monitor the application of the Net Capital Rule by
the Regulated Subsidiaries. The Company and the Regulated Subsidiaries compute
net capital under the alternative method of the Net Capital Rule which requires
the maintenance of minimum net capital, as defined. A broker-dealer may be
required to reduce its business if its net capital is less than 4% of aggregate
debit balances and may also be prohibited from expanding its business or paying
cash dividends, if resulting net capital would be less than 5% of aggregate
debit balances. In addition, the Net Capital Rule does not allow withdrawal of
subordinated capital if net capital would be less than 5% of such debit
balances.
The Net Capital Rule also limits the ability of broker-dealers to transfer
large amounts of capital to parent companies and other affiliates. Under the Net
Capital Rule equity capital can not be withdrawn from a broker-dealer without
the prior approval of the SEC when net capital after the withdrawal would be
less than 25% of its securities positions haircuts (which are deductions from
capital of certain specified percentages of the market value of securities to
reflect the possibility of a market decline prior to disposition). In addition,
the Net Capital Rule requires broker-dealers to notify the SEC and the
appropriate self-regulatory organization two business days before a withdrawal
of excess net capital if the withdrawal would exceed the greater of $500,000 or
30% of the broker-dealer's excess net capital, and two business days after a
withdrawal that exceeds the greater of $500,000 or 20% of excess net capital.
Finally, the Net Capital Rule authorizes the SEC to order a freeze on the
transfer of capital if a broker-dealer plans a withdrawal of more than 30% of
its excess net capital and the SEC believes that such a withdrawal would be
detrimental to the financial integrity of the firm or would jeopardize the
broker-dealer's ability to pay its customers.
Compliance with the Net Capital Rule could limit those operations of the
Company and its Regulated Subsidiaries that require the intensive use of
capital, such as underwriting and trading activities and the financing of
customer account balances, and also could restrict Holdings' ability to withdraw
capital from Lehman Brothers which in turn could limit Holdings' ability to pay
dividends, repay debt and redeem or purchase shares of its outstanding capital
stock.
The Company is subject to other domestic and international regulatory
requirements with which it is required to comply.
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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 DEBT
SECURITIES SHOULD CONSULT WITH ITS LEGAL COUNSEL.
OTHER MATTERS
The distribution of the Debt Securities by Lehman Brothers will comply with
the requirements of Schedule E of the By-laws of the NASD regarding an NASD
member firm distributing securities of an affiliate.
The Debt Securities may not be offered or sold directly or indirectly (i)
in the United Kingdom by means of any document other than to persons whose
ordinary business it is to buy or sell shares or debentures whether as principal
or agent (except in circumstances which do not constitute an offer to the public
within the meaning of the Companies Act 1985), and (ii) except in compliance
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done in relation to the Debt Securities in, from or otherwise
involving the United Kingdom. In addition, no person participating in the sale
of the Debt Securities will issue or pass to any person in the United Kingdom
any document received by it in connection with the issuance of the Debt
Securities unless that person is of a kind described in Article 9(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements and schedules of the Company for the
years ended December 31, 1993, December 31, 1992 and December 31, 1991,
appearing in the Company's 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.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY HOLDINGS OR ANY AGENT OR UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HOLDINGS SINCE
THE DATE OF THIS PROSPECTUS.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information................. 2
Documents Incorporated by Reference... 2
The Company........................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Debt Securities........ 4
Limitations on Issuance of Bearer
Securities.......................... 26
United States Taxation................ 27
Capital Requirements.................. 31
ERISA Matters......................... 32
Other Matters......................... 32
Independent Accountants............... 33
</TABLE>
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LEHMAN BROTHERS
HOLDINGS INC.
Debt Securities
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PROSPECTUS
June 10, 1994
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