<PAGE> 1
PROSPECTUS SUPPLEMENT
(To Prospectus Supplement dated October 24, 1994)
Lehman Brothers Holdings Inc.
Regional Bank
Stock Upside Note Securities(SM)
SUNS(SM)
["SUN" GRAPHIC]
This brochure must be attached to the Prospectus and Prospectus Supplement that
provides a description of SUNS, including details on the risks associated with
an investment in SUNS.
<PAGE> 2
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 14, 1994)
REGIONAL BANK SUNS FEATURES
THE STOCK UPSIDE NOTE SECURITIES(SM) (SUNS(SM)) OFFERED HEREBY ALLOW INVESTORS
TO PARTICIPATE IN THE UPSIDE POTENTIAL OF THE UNDERLYING REGIONAL BANK BASKET.
THE REGIONAL BANK BASKET IS A FIXED BASKET CONSISTING OF 20 EQUITY SECURITIES
THAT TRADE ON THE NYSE OR NASDAQ NATIONAL MARKET SYSTEM REPRESENTING A VARIETY
OF COMPANIES IN THE BANKING INDUSTRY.
These SUNS offer investors:
- -- DEGREE OF PRINCIPAL PROTECTION: No less than $23.75, representing 95% of the
original issue price, is returned at maturity regardless of the performance of
the underlying equity basket during the term of the Securities.
- -- PARTICIPATION IN PRICE APPRECIATION OF UNDERLYING EQUITY BASKET: Investors
will receive a specified percentage of the appreciation, if any, of the
underlying equity basket from the date of issue to maturity.
- -- SHORT MATURITY: The Regional Bank SUNS mature in approximately two years.
- -- SENIOR DEBT SECURITIES: These SUNS are non-callable senior debt securities
of Lehman Brothers Holdings Inc. ("Holdings").
- -- STOCK EXCHANGE LISTING: Application has been made to list the Securities on
the American Stock Exchange.
- -- PROVIDES FOR PAYMENT ONLY AT MATURITY: These SUNS provide for a payment only
at maturity. There are no periodic payments prior to maturity.
- -- SPECIAL CONSIDERATIONS: Consult the attached Prospectus Supplement for a
detailed description of the risks associated with an investment in SUNS,
including the possibility that an investor may receive only 95% of the original
issue price at maturity. The price an investor receives for SUNS upon sale prior
to maturity may be more or less than the original cost, depending on interest
rates, dividend rates, time remaining to maturity, the value and volatility of
the underlying equity basket and other factors described in the Prospectus
Supplement. The payment at maturity is exclusive of dividends on the underlying
equity basket.
<PAGE> 3
Filed pursuant to Rule 424(b)(2)
Registration No. 33-58548 and 33-53651
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION AND HAS BECOME EFFECTIVE.
THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, dated October 24, 1994
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 14, 1994)
1,500,000 SUNSSM
LEHMAN BROTHERS HOLDINGS INC.
REGIONAL BANK STOCK
UPSIDE NOTE SECURITIESSM DUE 1996
------------------------
The Regional Bank Stock Upside Note Securities Due 1996 (the "Securities" or
"SUNS") of Lehman Brothers Holdings Inc. ("Holdings") are being offered at an
issue price (the "Issue Price") of $25 per SUNS. The Stated Maturity of the
Securities is , 1996. The amount payable at Stated Maturity will be
calculated based on the change in the value of a basket of equity securities of
United States bank holding companies (the "Basket"). The Securities are to be
issued as a series of Debt Securities under the Senior Indenture described in
the accompanying Prospectus and will constitute "Senior Debt" of Holdings as
described in the accompanying Prospectus. The Securities may not be redeemed
prior to Stated Maturity and are not subject to any sinking fund.
The amount payable at Maturity (the "Maturity Payment Amount") will equal
the product of (a) the Issue Price and (b) the sum of (i) one and (ii) a
specified percentage (the "Participation Percentage") of the difference between
the Basket Maturity Value (as defined herein) and the Original Basket Value of
100, divided by the Original Basket Value of 100; provided that, the Maturity
Payment Amount will not be less than $23.75. In the event the Basket Maturity
Value is greater than 100, the Participation Percentage will be %. If the
Basket Maturity Value is equal to or less than 100, the Participation Percentage
will be 100%. There will be no payments with respect to the Securities prior to
Maturity. For information as to the calculation of the Maturity Payment Amount,
the composition of the Basket and certain tax consequences to holders of the
securities, see "Description of Securities," "Certain United States Federal
Income Tax Consequences" and "The Basket" in this Prospectus Supplement.
PURCHASERS OF SECURITIES SHOULD BE PREPARED TO SUSTAIN A LOSS OF UP TO 5% OF
THE PRINCIPAL AMOUNT OF THEIR SECURITIES IF THE BASKET MATURITY VALUE IS LESS
THAN 100. FOR OTHER INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS, SEE "SPECIAL CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT.
The Securities will originally be issued as certificates in registered form.
Forty-five calendar days after the closing of the offering, each registered
holder will have the option to convert the form of such holder's Securities from
certificated to book-entry form within a forty-five calendar day period as
described herein. Ownership of converted Securities will be maintained in
book-entry form by or through the Depository. Beneficial owners of Securities in
book-entry form will not have the right to receive physical certificates
evidencing their ownership except under the limited circumstances described
herein.
Application has been made to list the SUNS on the American Stock Exchange
(the "AMEX") under the symbol "BKG".
Lehman Brothers Inc., a wholly owned subsidiary of Holdings, may, but is not
obligated to, purchase and sell the Securities for its own account for the
purpose of making a market in the Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
UNDERWRITING DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS(1) HOLDINGS(2)
- -----------------------------------------------------------------------------------------------------
Per Security.................... $25.00 $ $
- -----------------------------------------------------------------------------------------------------
Total(3)........................ $37,500,000 $ $
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Holdings has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting other expenses payable by Holdings estimated at $ .
(3) Holdings has granted the Underwriters a 30-day option to purchase up to an
additional 225,000 SUNS solely to cover over-allotments. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Holdings, before deducting expenses, will be
$ , $ and $ , respectively. See "Underwriting."
------------------------
The Securities offered by this Prospectus Supplement are offered by the
Underwriters subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the Underwriters and
to certain further conditions. The Underwriters reserve the right to reject
orders in whole or in part. It is expected that delivery of the Securities will
be made at the offices of Lehman Brothers Inc., New York, New York, on or about
November , 1994.
This Prospectus Supplement together with the accompanying Prospectus may
also be used by Lehman Brothers Inc. in connection with offers and sales of
Securities related to market making transactions, by and through Lehman Brothers
Inc., at negotiated prices relating to prevailing market prices at the time of
sale or otherwise. Lehman Brothers Inc. may act as principal or agent in such
transactions.
------------------------
LEHMAN BROTHERS
KEMPER SECURITIES, INC.
OPPENHEIMER & CO., INC.
November , 1994
<PAGE> 4
"SUNS" and "Stock Upside Note Securities" are service marks of Lehman
Brothers Inc.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
S-2
<PAGE> 5
SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information set forth elsewhere or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus.
Issuer..................... Lehman Brothers Holdings Inc. ("Holdings").
Securities Offered......... 1,500,000 Regional Bank Stock Upside Note
Securities Due 1996 (the "Securities" or "SUNS").
The Securities are to be issued as a series of Debt
Securities under the Senior Indenture described in
the accompanying Prospectus and will constitute
Senior Debt of Holdings.
Issue Price................ $25 per SUNS.
Denominations.............. $25 and integral multiples thereof.
Stated Maturity............ , 1996 (the "Stated Maturity").
Interest................... There will be no payments with respect to the
Securities prior to Maturity.
Maturity Payment Amount.... At Stated Maturity each Holder will be entitled to
receive an amount (the "Maturity Payment Amount")
with respect to each $25 principal amount of
Securities equal to the following:
Basket
Maturity
Value - 100
$25 x [ 1 + ( --------------- x Participation ) ]
100 Percentage
provided that, the Maturity Payment Amount will not
be less than $23.75. The Participation Percentage
will be % if the Basket Maturity Value is greater
than 100 and 100% if the Basket Maturity Value is
equal to or less than 100. The basket maturity
value (the "Basket Maturity Value"), will be
determined by Lehman Brothers Inc., an affiliate of
Holdings (the "Calculation Agent"), and, subject to
certain exceptions described herein, will equal the
sum of the products of the Average Market Prices
and the applicable Multipliers for the securities
in the Basket (each a "Basket Security" and
collectively the "Basket Securities"). The average
market price (the "Average Market Price") of a
Basket Security will equal the average (mean) of
the Market Prices (determined as described herein)
of such Basket Security determined on the first ten
Calculation Days occurring during the period
beginning on the twentieth Trading Day prior to
Stated Maturity, and on each succeeding Trading Day
up to and including the eleventh Trading Day prior
to Stated Maturity (the "Calculation Period"). If
there are fewer than ten Calculation Days with
respect to a Basket Security, then the Average
Market Price will equal the average (mean) of the
Market Prices on such Calculation Days, and if
there is only one Calculation Day, the Average
Market Price will equal the Market Price on such
Calculation Day. The multiplier (the "Multiplier")
relating to each Basket Security is specified under
the caption "Description of Securities -- Basket
Securities" below and indicates the number of
shares (or the fraction of one share) of such
Basket Security included in the calculation of the
Basket Maturity Value. The Multipliers will remain
constant for the term of the Securities unless
adjusted for certain corporate events such as stock
splits, reverse stock splits or stock dividends. In
the event of a merger or consolidation of an issuer
of a Basket Security in which such issuer is not
the surviving entity, the value of such Basket
Security will be based on the value of the
consideration received in exchange for such Basket
Security, as adjusted for the accrual of interest.
See "Description of Securities -- Adjustments to
the Multiplier and Basket" and "Description of
Securities -- Maturity Payment Amount." See also
"Description of Securities -- Events of Default and
Acceleration" for a description of payments upon
any acceleration of the maturity of the Securities.
Regional Bank Basket....... The Regional Bank Basket (the "Basket") is made up
of the stocks of 20 corporations operating as bank
holding companies in the United States, 19 of which
operate regional banks and one of which operates a
national
S-3
<PAGE> 6
bank. Ownership of the Securities will not entitle
Holders to receive Basket Securities. The Basket
Securities have significantly different levels of
market value (i.e., the number of shares
outstanding of a security multiplied by the current
price of such security). The original Multipliers
will be determined so that each Basket Security
represents an equal percentage of the Original
Basket Value (as defined below) on the date the
Securities are priced for initial sale to the
public. See "Description of Securities -- Basket
Securities" in this Prospectus Supplement. The
inclusion of a Basket Security in the Basket is not
a recommendation to buy or sell such Basket
Security, and neither Holdings nor any of its
affiliates make any representation as to the
performance of the Basket or any Basket Securities.
Basket Value............... The basket value (the "Basket Value") for any day
will equal the sum of the products of the most
recently available Market Prices and the applicable
Multipliers for the Basket Securities. The Basket
Maturity Value, however, is calculated based on
Average Market Prices for certain days. As long as
SUNS are listed on the AMEX, the AMEX intends to
calculate and disseminate the value of the Basket
based on the most recently reported prices at
approximately 15 second intervals during AMEX
business hours and the Basket Value at the end of
such day to vendors via the facilities of the AMEX
Tape under the symbol "BXK." See "Description of
Securities -- Maturity Payment Amount" in this
Prospectus Supplement.
Original Basket Value...... Based on the individual prices of the Basket
Securities on the date that the Securities are
priced for initial offering to the public, the
Multiplier for each Basket Security will be
initially set so that the Basket Value on such date
(the "Original Basket Value") will equal 100.
Special Considerations..... The Securities are subject to certain special
considerations. Investors should be aware that if
the Basket Maturity Value is less than 100, at
Maturity Holders will receive a Maturity Payment
Amount that is up to 5% less than the Issue Price,
even if the value of the Basket as of some interim
period or periods prior to the Calculation Period
may have exceeded 100, because the Maturity Payment
Amount is calculated on the basis of the Basket
Maturity Value only. The Basket Maturity Value does
not reflect the payment of dividends on the Basket
Securities and therefore the yield based on the
appreciation of the Basket, if any, for the period
from the date of determination of the Original
Basket Value through the end of the Calculation
Period will not produce the same yield as if the
Basket Securities were purchased and held for a
similar period. Moreover, there can be no assurance
as to how the Securities will trade in the
secondary market or whether such market will be
liquid. The price at which a Holder will be able to
sell Securities prior to Maturity may be at a
discount from the principal amount thereof, if,
among other things, the Basket Value at such time
is below, equal to or not sufficiently above the
Original Basket Value. It is expected that the
secondary market for the Securities will be
affected by a number of factors, including changes
in interest rates, the volatility of the Basket
Value, the time remaining to Stated Maturity and
changes in dividend rates. See "Special
Considerations" herein.
Holders of the Securities will receive the Maturity
Payment Amount at Maturity and will not have any
right at any time to receive any of the Basket
Securities or any ownership right or interest in
such Basket Securities, even though the return on
the investment in the Securities is based on the
value of the Basket.
It is suggested that prospective investors who
consider purchasing the Securities should reach an
investment decision only after carefully
considering with their advisers the suitability of
an investment in the Securities in the light of
their particular circumstances.
Investors should also consider risks specific to
the banking industry. See "The Basket -- The
Banking Industry" in this Prospectus Supplement.
Investors should also consider the tax consequences
of investing in the Securities. See "Certain United
States Federal Income Tax Consequences" in this
Prospectus Supplement.
S-4
<PAGE> 7
USE OF PROCEEDS
The net proceeds from the sale of the Securities will be used as described
under "Use of Proceeds" in the accompanying Prospectus and to hedge market risks
affecting the value of the Maturity Payment Amount (described below under
"Description of Securities -- Maturity Payment Amount").
SPECIAL CONSIDERATIONS
PAYMENT AT MATURITY
If the Basket Maturity Value is less than 100, the Maturity Payment Amount
with respect to the Securities will be up to 5% less than the Issue Price. This
will be true even though the value of the Basket as of some interim period or
periods prior to the Calculation Period may have exceeded 100, because the
Maturity Payment Amount is calculated on the basis of the Basket Maturity Value
only. PURCHASERS OF SECURITIES SHOULD BE PREPARED TO SUSTAIN A LOSS OF UP TO 5%
OF THE PRINCIPAL AMOUNT OF THEIR SECURITIES.
Even if the principal of the Securities is fully returned, such return of
principal will not reflect any opportunity cost implied by inflation and other
factors relating to the time value of money.
The Basket Maturity Value does not reflect the payment of dividends on the
Basket Securities and therefore the yield based on the appreciation of the
Basket, if any, for the period from the date of determination of the Original
Basket Value through the end of the Calculation Period will not produce the same
yield as if the Basket Securities were purchased and held for a similar period.
TRADING
Application has been made to list the Securities on the AMEX. There can be
no assurance as to how the Securities will trade in the secondary market or
whether such market will be liquid. It is expected that the secondary market for
the Securities will be affected by a number of factors.
The trading value of the Securities is expected to depend primarily on the
extent of the appreciation, if any, of the Basket Value over the Original Basket
Value of 100. However, the price at which a Holder will be able to sell
Securities prior to Maturity may be at a discount from the principal amount
thereof if, at such time, the Basket Value is below, equal to or not
sufficiently above 100. A discount could also result from increased interest
rates, increased dividends or decreased volatility of the Basket Securities.
Before selling Securities, a Holder of Securities should carefully consider,
among other things, (i) the trading price of the Securities, (ii) the Basket
Value at the time, (iii) the time remaining to Stated Maturity, (iv) prevailing
interest rates and (v) any related transaction costs.
The trading value of the Securities may be affected by a number of
interrelated factors, including those listed below. The relationship among these
factors is complex. Accordingly, investors should be aware that factors other
than the Basket Value are likely to affect the trading value of the Securities.
The expected effect on the trading value of the Securities of each of the
factors listed below, assuming in each case that all other factors are held
constant, is as follows:
Interest Rates. In general, if U.S. interest rates increase, the
value of the Securities is expected to decrease. If U.S. interest rates
decrease, the value of the Securities is expected to increase.
Volatility of the Basket Value. If the volatility of the Basket Value
increases, the trading value of the Securities is expected to increase. If
the volatility of the Basket Value decreases, the trading value of the
Securities is expected to decrease.
Time Remaining to Stated Maturity. The Securities may trade at a
value other than that which may be inferred from the level of interest
rates and the Basket Value. This difference may be due to expectations
concerning interest rates, volatility and the value of the Basket Value
during the period prior to Stated Maturity. As the time remaining to Stated
Maturity decreases, this difference in value is expected to decrease.
S-5
<PAGE> 8
Dividend Rates. If dividend rates on the stocks comprising the Basket
Securities increase, the value of the Securities is expected to decrease.
Conversely, if dividend rates on the Basket Securities decrease, the value
of the Securities is expected to increase.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Securities should reach an investment decision only after carefully considering
with their advisers the suitability of the Securities in the light of their
particular circumstances.
Investors should also consider the risks specific to the banking industry.
See "The Basket -- The Banking Industry" in this Prospectus Supplement.
Investors should also consider the tax consequences of investing in the
Securities. See "Certain United States Federal Income Tax Consequences" in this
Prospectus Supplement.
S-6
<PAGE> 9
DESCRIPTION OF SECURITIES
GENERAL
The Securities are to be issued as a series of Debt Securities under the
Senior Indenture, which is more fully described in the accompanying Prospectus.
The following description of the particular terms of the Securities offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set forth
under the heading "Description of Debt Securities" in the accompanying
Prospectus. For a description of the rights attaching to different series of
Debt Securities under the Senior Indenture, see "Description of Debt Securities"
in the accompanying Prospectus. The Securities constitute "Senior Debt" as
defined in the accompanying Prospectus.
Certain capitalized terms used herein have the meanings ascribed thereto in
the accompanying Prospectus. Reference is also made to the Glossary for certain
defined terms used herein and the locations of other defined terms used herein.
The aggregate number of SUNS to be issued will be 1,500,000, subject to the
over-allotment option granted by Holdings to the Underwriters (see
"Underwriting" in this Prospectus Supplement). The Securities will be issued at
100% of their principal amount in denominations of $25 and integral multiples
thereof. The Securities will mature on , 1996.
The Securities are not redeemable by Holdings or repayable at the option of
any Holder prior to Stated Maturity and are not subject to any sinking fund.
Upon the occurrence of an Event of Default with respect to the Securities,
Holders of the Securities may accelerate the Maturity of the Securities, as
described under "Description of Securities -- Events of Default and
Acceleration" in this Prospectus Supplement and "Description of Debt
Securities -- Events of Default" in the accompanying Prospectus. There will be
no payments with respect to the Securities prior to Maturity.
MATURITY PAYMENT AMOUNT
At Stated Maturity each Holder will be entitled to receive an amount with
respect to each $25 principal amount of Securities equal to the following:
Basket Maturity Value -100
$25 x [ 1 + ( ---------------------------- x Participation Percentage ) ]
100
provided that, the Maturity Payment Amount will not be less than $23.75. The
Participation Percentage will be % if the Basket Maturity Value is greater
than 100 and 100% if the Basket Maturity Value is equal to or less than 100. The
Basket Maturity Value will be determined by Lehman Brothers Inc. as Calculation
Agent. The Basket Maturity Value, subject to certain exceptions described
herein, will equal the sum of the products of the Average Market Prices and the
applicable Multipliers for each Basket Security. The Average Market Price of a
Basket Security will equal the average (mean) of the Market Prices (determined
as described herein) of such Basket Security determined on the first ten
Calculation Days occurring during the period beginning on the twentieth Trading
Day prior to Stated Maturity and on each succeeding Trading Day up to and
including the eleventh Trading Day prior to Stated Maturity. If there are fewer
than ten Calculation Days with respect to a Basket Security, then the Average
Market Price will equal the average (mean) of the Market Prices on such
Calculation Days, and if there is only one Calculation Day, the Average Market
Price will equal the Market Price on such Calculation Day. The Multiplier
relating to each Basket Security is specified under the caption "Description of
Securities -- Basket Securities" below and indicates the number
of shares (or the fraction of one share) of such Basket Security included in the
calculation of the Basket Maturity Value. The Multipliers will remain constant
for the term of the Securities unless adjusted for certain corporate events such
as stock splits, reverse stock splits or stock dividends. See "Description of
Securities -- Basket Securities -- Adjustments to the Multiplier and Basket" in
this Prospectus Supplement. "Calculation Day" with respect to a Basket Security
means any Trading Day during the Calculation Period on which a Market Disruption
Event has not occurred. If a Market Disruption Event occurs on all Trading Days
during
S-7
<PAGE> 10
the Calculation Period then the eleventh scheduled Trading Day prior to Stated
Maturity will be deemed a Calculation Day, notwithstanding the Market Disruption
Event.
"Market Price," which will be determined by the Calculation Agent based on
information reasonably available to it, means for a Calculation Day the
following:
(i) If the Basket Security is listed on a national securities exchange
or is a NASDAQ National Market System ("NASDAQ NMS") security, Market Price
means the last reported sale price at 4:00 p.m., New York City time,
regular way, on such day on the principal securities exchange registered
under the Securities Exchange Act of 1934 on which such Basket Security is
listed or admitted to trading or NASDAQ NMS, as the case may be.
(ii) If the Basket Security is not listed on a national securities
exchange or is not a NASDAQ NMS security, Market Price means the last
reported sale price on the over-the-counter market.
As used herein, "Trading Day" shall mean a day on which trading is
generally conducted on the New York Stock Exchange ("NYSE"), AMEX and NASDAQ NMS
and in the over-the-counter market for equity securities as determined by the
Calculation Agent.
"Market Disruption Event" with respect to a Basket Security means any of
the following events as determined by the Calculation Agent:
(i) the suspension or material limitation in the trading of such
Basket Security for more than two hours of trading or during the period
one-half hour prior to the time that such Basket Security is to be priced
(for purposes of this definition, limitations pursuant to NYSE Rule 80A (or
any applicable rule or regulation enacted or promulgated by the NYSE, any
other self regulatory organization or the Securities and Exchange
Commission of similar scope as determined by the Calculation Agent) on
trading during significant market fluctuations shall be considered
"material"),
(ii) the suspension or material limitation (whether by reason of
movements in price otherwise exceeding levels permitted by the relevant
exchange or otherwise) in the trading of option contracts related to a
Basket Security traded on any exchange for more than two hours of trading
or during the period one-half hour prior to the time that such Basket
Security is to be priced, or
(iii) a banking moratorium has been declared by federal or any state
authorities.
For the purposes of this definition, a limitation on the hours in a trading
day and/or number of days of trading will not constitute a Market Disruption
Event if it results from an announced change in the regular business hours of
the relevant exchange.
All percentages resulting from any calculation on the Securities will be
rounded to the nearest one hundred-thousandth of a percentage point, with five
one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts
used in or resulting from such calculation will be rounded to the nearest cent
with one-half cent being rounded upwards.
S-8
<PAGE> 11
BASKET SECURITIES
The stocks listed below will be used to calculate the value of the Basket.
Holders of the Securities will not have any right to receive the Basket
Securities. The following table sets forth the Basket Securities, the primary
exchange on which the Basket Securities are traded, the market capitalization of
the respective issuers of the Basket Securities and the initial Multipliers.
Each Basket Security will initially represent 5.0% of the Original Basket Value.
<TABLE>
<CAPTION>
APPROXIMATE
MARKET VALUE
PRIMARY OF ISSUER OF
ISSUER OF THE EXCHANGE OF BASKET INITIAL
BASKET SECURITY BASKET SECURITY SECURITY(1) MULTIPLIER
--------------- ----------------- ------------ -----------
($MM)
<S> <C> <C> <C> <C>
1. Bancorp Hawaii, Inc. .......................................... NYSE 1,192.60
2. Barnett Banks, Inc. ........................................... NYSE 4,108.37
3. Baybanks, Inc. ................................................ NASDAQ NMS 1,118.40
4. Citizens Bancorp............................................... NASDAQ NMS 428.17
5. City National Corporation...................................... NYSE 462.27
6. CoreStates Financial Corp. .................................... NYSE 3,674.03
7. First American Corporation..................................... NASDAQ NMS 822.25
8. First Chicago Corporation...................................... NYSE 4,424.21
9. Hibernia Corporation........................................... NYSE 731.51
10. Mercantile Bancorporation Inc.................................. NYSE 1,493.16
11. Michigan National Corporation.................................. NASDAQ NMS 1,193.44
12. Midlantic Corporation.......................................... NASDAQ NMS 1,475.48
13. North Fork Bancorporation, Inc. ............................... NYSE 221.29
14. Provident Bankshares Corporation............................... NASDAQ NMS 156.63
15. Summit Bancorporation.......................................... NASDAQ NMS 529.78
16. U.S. Bancorp................................................... NASDAQ NMS 2,486.02
17. UJB Financial Corp. ........................................... NYSE 1,450.62
18. Union Planters Corporation..................................... NYSE 547.32
19. UST Corp. ..................................................... NASDAQ NMS 186.86
20. Vermont Financial Services Corp. .............................. NASDAQ NMS 102.74
</TABLE>
- ---------------
(1) The approximate total market value of the issuer of a Basket Security was
calculated by multiplying the most recent publicly available number of
outstanding shares of the Basket Security of such issuer by the Market Price
for such shares on October 21, 1994.
The initial Multiplier relating to each Basket Security will indicate the
number of shares (or the fraction of one share) of such Basket Security, given
the market price of such Basket Security, required to be included in the
calculation of the Original Basket Value so that each Basket Security represents
an equal percentage (i.e., 5.0%) of the Original Basket Value. The price of each
Basket Security used to calculate the initial Multiplier relating to each such
Basket Security will be the closing price of such Basket Security on the date
that the Securities are priced by Holdings for initial sale to the public. The
respective Multipliers will remain constant for the term of the Securities
unless adjusted for certain corporate events, as described below.
The Basket Value, for any day, will equal the sum of the products of the
most recently available Market Prices for the most recent Trading Day with
respect to each Basket Security and the applicable Multipliers for the Basket
Securities. The Basket Maturity Value, however, is calculated based on the
average Market Prices for certain days.
The AMEX has informed Holdings that, as long as SUNS are listed on the
AMEX, it intends to calculate and disseminate the value of the Basket based on
the most recently reported prices at approximately 15 second intervals during
AMEX business hours and the Basket Value at the end of such day to vendors via
the facilities of the AMEX Tape under the symbol "BXK." In the event a Basket
Security is converted into a Cash Component (as defined below), the interest
that has accrued on any given day will only be reflected in the Basket Value
quoted by the AMEX at the end of such day and not in the values disseminated at
interim periods during the day.
S-9
<PAGE> 12
ADJUSTMENTS TO THE MULTIPLIER AND BASKET
The Multiplier with respect to any Basket Security and the Basket will be
adjusted by the Calculation Agent as follows:
1. If a Basket Security is subject to a stock split or reverse stock
split then once such split has become effective, the Multiplier relating to
such Basket Security will be adjusted to equal the product of the number of
shares outstanding after such split has become effective with respect to
each share of such Basket Security outstanding immediately prior to the
effectiveness of such split and the prior Multiplier.
2. If a Basket Security is subject to an extraordinary stock dividend
or extraordinary stock distribution (i.e., issuance of additional shares of
the Basket Security other than in lieu of an ordinary cash dividend) that
is given equally to all holders of shares of the issuer of such Basket
Security, then once such Basket Security is trading ex-dividend, the
Multiplier will be adjusted so that the new Multiplier shall equal the
former Multiplier plus the product of the number of shares of such Basket
Security issued with respect to one such share of Basket Security and the
prior Multiplier.
3. If the issuer of a Basket Security is being liquidated or
dissolved or is subject to a proceeding under any applicable bankruptcy,
insolvency or other similar law such Basket Security will continue to be
included in the Basket so long as a Market Price for such Basket Security
is available. Subject to paragraph 7 below, if a Market Price is no longer
available for a Basket Security for whatever reason, including the
liquidation or dissolution of the issuer of such Basket Security or the
subjection of the issuer of such Basket Security to a proceeding under any
applicable bankruptcy, insolvency or other similar law, then the value of
such Basket Security will equal zero in connection with calculating the
Basket Value and the Basket Maturity Value for so long as no Market Price
is available, and no attempt will be made to find a replacement stock or
increase the value of the Basket to compensate for the deletion of such
Basket Security.
4. If the issuer of a Basket Security has been subject to a merger or
consolidation and is not the surviving entity and holders of such Basket
Security are entitled to receive cash or securities in exchange for such
Basket Security, then a value for such Basket Security will be determined
(i) in the case of cash, at the time of receipt by such holders and will
equal the amount of such cash consideration, and (ii) in the case of
securities, on the first Trading Day on which such securities are traded
regular way, and will equal the Market Price of such securities (in each
case (i) and (ii), the "Cash Component"); provided, that if such securities
do not have a Market Price, the Cash Component shall be the fair market
value of such securities, as determined by the Calculation Agent. The Cash
Component, as adjusted for the accrual of interest described below, will be
constant for the remaining term of the Securities. No adjustment will be
made to the Multiplier of such Basket Security.
The Cash Component will accrue interest at a rate equal to the London
Inter-Bank Offered Rate ("LIBOR") with a term equal to the period of time
from the Interest Commencement Date (as defined below) to , 1996
(the "Specified Maturity"), determined and fixed on the first Business Day
(the "LIBOR Determination Date") that is immediately following the date of
determination of such Cash Component. LIBOR will accrue on such Cash
Component commencing (i) in the case of cash, on the second London Business
Day following such LIBOR Determination Date and (ii) in the case of
securities, on the fifth Business Day following such LIBOR Determination
Date (in each case (i) and (ii), the "Interest Commencement Date") up to
and including the Specified Maturity.
LIBOR, will be determined by the Calculation Agent in accordance with
the following provisions:
(i) On the relevant LIBOR Determination Date, LIBOR will be
determined through the application of linear interpolation by reference
to the offered rates for deposits of not less than U.S.$1,000,000 having
a maturity immediately before and immediately after the Specified
Maturity, commencing on the Interest Commencement Date, which appear
either (a) if the Specified Maturity is one year or less from the
relevant LIBOR Determination Date, on the display designated as Page
3750 on the Dow Jones Telerate Service (or such other page as may
replace Page 3750 on that service for the purpose of displaying London
Interbank offered rates of major banks) ("Telerate
S-10
<PAGE> 13
Page 3750"), or (b) if the Specified Maturity is more than one year from
the relevant LIBOR Determination Date, on each of Telerate Page 3750 and
on the display designated as page "SWAP" on the Reuter Monitor Money
Rates Service (or such other page as may replace the SWAP page on that
service for the purpose of displaying London Interbank offered rates of
major banks) ("Reuters-SWAP"), in each case as of 11:00 A.M., London
time; provided that if there is an offered rate for the Specified
Maturity, then LIBOR will be such offered rate. If such offered rates do
not appear, LIBOR with respect to such LIBOR Determination Date will be
determined as described in (ii) below.
(ii) With respect to a LIBOR Determination Date on which no such
offered rates appear on Telerate Page 3750 or Reuters SWAP as described
in (i) above, LIBOR will be determined on the basis of the rates at
approximately 11:00 A.M., London time, on such LIBOR Determination Date,
at which deposits in U.S. dollars having the Specified Maturity are
offered to prime banks in the London Interbank market by four major
banks in the London Interbank market selected by the Calculation Agent
commencing on the Interest Commencement Date and in a principal amount
equal to an amount not less than U.S.$1,000,000 that in the Calculation
Agent's judgment is representative for a single transaction in such
market at such time (a "Representative Amount"). The Calculation Agent
will request the principal London office of each of such banks to
provide a quotation of its rate. If at least two such quotations are
provided, LIBOR with respect to such LIBOR Determination Date will be
calculated by reference to the arithmetic mean of such quotations. If
fewer than two quotations are provided, LIBOR with respect to such LIBOR
Determination Date will be calculated by reference to the arithmetic
mean of the rates quoted at approximately 11:00 A.M., New York City
time, on such LIBOR Determination Date by three major banks in The City
of New York, selected by the Calculation Agent, for loans in U.S.
dollars to leading European banks having the Specified Maturity
commencing on the Interest Commencement Date and in a Representative
Amount; provided, however, that if fewer than three banks selected as
aforesaid by the Calculation Agent are quoting as mentioned in this
sentence, LIBOR with respect to such Cash sub-component will be the
LIBOR as last in effect.
"London Business Day" means any day on which dealings in deposits in
U.S. dollars are transacted in the London interbank market.
The value of any Basket Security converted into a Cash Component as of
any given day will equal the sum of the Cash Component and all interest
accrued thereon as of such day. The interest that has accrued on any given
day will only be reflected in the Basket Value quoted by the AMEX at the
end of such day and not in the values disseminated at interim periods
during the day. For purposes of calculating the Basket Maturity Value, the
value of any such Basket Security will equal the sum of the Cash Component
and all interest accrued up to and including the Specified Maturity.
Interest will not be compounded.
5. If all the Basket Securities of any class or series of an issuer
are converted into or exchanged for the same or a different number of
shares of any class or classes of equity security other than such Basket
Security, whether by capital reorganization, recapitalization,
reclassification or otherwise, (other than pursuant to paragraph 4 above)
then, once such conversion has become effective, the former Basket Security
will be removed from the Basket and such new equity securities will be
added to the Basket as new Basket Securities. The Multiplier for each such
new Basket Security will equal the product of the last value of the
Multiplier with respect to the former Basket Security and the number of
shares of such new Basket Security issued with respect to one share of the
former Basket Security.
6. If the issuer of a Basket Security issues to all of its
shareholders equity securities of an issuer other than the issuer of the
Basket Security, then such new equity securities will be added to the
Basket as a new Basket Security. The Multiplier for such new Basket
Security will equal the product of the last value of the Multiplier with
respect to the Basket Security for which the new Basket Security is being
S-11
<PAGE> 14
issued (the "Original Basket Security") and the number of shares of the new
Basket Security issued with respect to one share of the Original Basket
Security.
7. If a Basket Security is subject to an extraordinary dividend or an
extraordinary distribution (including upon liquidation or dissolution) of
cash or other property of any kind (other than any such dividend or
distribution otherwise addressed in the preceding paragraphs) which is
received equally by all holders of such Basket Securities, then the
Calculation Agent shall determine the fair market value, if any, of such
cash or other property received in respect of each share of such Basket
Security and the Basket shall thereafter be deemed to include an amount
equal to the product of the Multiplier on such date and such fair market
value.
No adjustments of any Multiplier of a Basket Security will be required
unless such adjustment would require a change of at least 1% in the Multiplier
then in effect. The Multiplier resulting from any of the adjustments specified
above will be rounded to the nearest one thousandth with five ten-thousandths
being rounded upward.
S-12
<PAGE> 15
THE BASKET
GENERAL
While the Basket consists of stocks of issuers that operate as bank holding
companies in the United States, the Basket is not intended to provide an
indication of the pattern of price movements of common stocks of bank holding
companies generally. Nineteen of the 20 bank holding companies whose stocks
comprise the Basket are engaged in the regional banking business and one is
engaged in the national banking business. Each of the issuers of a Basket
Security files certain information reports with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934. Such
reports generally contain a description of the business of the issuer, financial
statements and certain other information which may be material to potential
investors in the Securities. THE INCLUSION OF A BASKET SECURITY IN THE BASKET IS
NOT A RECOMMENDATION TO BUY OR SELL SUCH BASKET SECURITY, AND NEITHER HOLDINGS
NOR ANY OF ITS AFFILIATES MAKE ANY REPRESENTATION TO ANY PURCHASER OF SECURITIES
AS TO THE PERFORMANCE OF THE BASKET OR ANY BASKET SECURITY.
THIS PROSPECTUS SUPPLEMENT RELATES ONLY TO THE SUNS OFFERED HEREBY AND DOES
NOT RELATE TO THE BASKET SECURITIES. ALL DISCLOSURES CONTAINED IN THIS
PROSPECTUS SUPPLEMENT REGARDING THE ISSUERS OF THE BASKET SECURITIES ARE DERIVED
FROM THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING PARAGRAPH.
NEITHER HOLDINGS NOR THE UNDERWRITERS HAVE VERIFIED EITHER THE ACCURACY OR THE
COMPLETENESS OF THE INFORMATION CONCERNING THE ISSUERS OF THE BASKET SECURITIES
INCLUDED THEREIN. THUS, THERE CAN BE NO ASSURANCE THAT ALL EVENTS OCCURRING
PRIOR TO THE DATE HEREOF (INCLUDING EVENTS THAT WOULD AFFECT THE ACCURACY OR
COMPLETENESS OF THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING
PARAGRAPH) THAT WOULD AFFECT THE TRADING PRICE OF THE BASKET SECURITIES HAVE
BEEN PUBLICLY DISCLOSED. BECAUSE THE AMOUNT PAYABLE AT MATURITY IS RELATED TO
THE TRADING PRICE OF THE BASKET SECURITIES, SUCH EVENTS, IF ANY, WOULD ALSO
AFFECT THE TRADING PRICE OF THE SUNS. HOLDINGS DOES NOT INTEND TO FURNISH TO
HOLDERS OF SUNS SUBSEQUENT INFORMATION WITH RESPECT TO THE ISSUERS OF THE BASKET
SECURITIES.
Holdings or its affiliates may presently or from time to time engage in
business with one or more of the issuers of the Basket Securities or with
persons seeking to acquire such issuers, including providing advisory services
to such issuers or other persons, including merger and acquisition advisory
services. In the course of such business, Holdings or its affiliates may acquire
non-public information with respect to such issuers and, in addition, one or
more affiliates of Holdings may publish research reports with respect to such
issuers. The actions described in the preceding sentences, including merger and
acquisition advisory services, may directly adversely effect the Market Prices
of the Basket Securities. Holdings does not make any representation to any
purchaser of a Security with respect to any matters whatsoever relating to such
issuers. Any prospective purchaser of a Security should undertake an independent
investigation of the issuers of the Basket Securities as in its judgment is
appropriate to make an informed decision with respect to an investment in the
Securities.
THE BANKING INDUSTRY
The commercial banking industry in the United States is (i) subject to
intense competition, (ii) extensively regulated, (iii) facing significant
economic, regulatory and political risks and (iv) undergoing extensive
consolidation -- each of which affects the prices of the equity securities of
commercial banks and their holding companies, including the stocks in the
Basket.
Most commercial banking organizations and their affiliates face intense
competition across many product lines from other commercial banks, savings
banks, savings and loan associations, investment advisory firms, finance
companies, mutual funds, insurance firms, brokerage firms and credit unions,
many of which are not subject to the same or even similar regulatory burdens and
restrictions and some of which for a variety of reasons are larger and have
significantly more resources.
The activities of commercial banks and their holding companies and
affiliates are subject to extensive regulation under both federal and state law.
The activities of such organizations are typically limited to those
S-13
<PAGE> 16
expressly provided for by law or otherwise considered necessary or incidental to
carrying on the business of banking or closely related thereto, precluding such
organizations in many cases from unrestricted participation in the financial
services industry, particularly in the insurance and securities areas. Not only
does such regulation restrict the types of activities in which such entities are
engaged and the services offered, such regulation also imposes substantial
restrictions on the manner in which such services and products are provided.
Such restrictions include, for example, limitations on interest rates and places
of business and extensive customer disclosure requirements. Although the
geographical restrictions that were historically imposed on the locations of
offices of commercial banks have undergone substantial relaxation over the past
ten years, as a result of these restrictions many commercial banking
organizations, including many of those in the Basket, operate in a relatively
small geographic area in contrast to many of their non-bank competitors. In
addition, commercial banking organizations are subject to various affirmative
regulatory obligations not otherwise imposed upon many of their competitors.
These include capital requirements, obligations to pay deposit insurance
premiums and maintain certain non-interest bearing reserves with the Federal
Reserve and requirements under various community reinvestment type laws.
Most commercial banks face various economic, regulatory and political
risks. Most of the significant assets of a commercial banking organization are
financial assets the underlying value of which may fluctuate with changes in
interest rates or the underlying credit-worthiness of the obligor or borrower.
Many commercial banking organizations operate in a relatively small geographic
area, resulting in concentration risks and subjecting the performance and
financial condition of the organization in many cases directly to the status of
the local economies in which it operates. Commercial banks also face the ongoing
regulatory and political risk of even more expansive and costly regulation as
well as the risk of potentially significant regulatory sanctions should they be
found to have serious operational deficiencies or impaired results of operations
or financial condition. The imposition of such sanctions can have a
significantly adverse effect on a bank's results of operations and financial
condition.
As a result of significant overcapacity in the industry, the relaxation of
geographic restrictions, economies of scale and a variety of other factors, the
commercial banking industry in the United States has undergone extensive
consolidation during the last ten years and this process is expected to continue
in the near future.
HISTORICAL INFORMATION
The following table sets forth the high and low price for each of the
Basket Securities as reported on the exchange in which it trades, during 1991,
1992, 1993 and during 1994 (through October 21, 1994), and the closing price on
December 31, 1991, 1992, and 1993 and on October 21, 1994. The historical prices
of the Basket Securities should not be taken as an indication of future
performance, and no assurance can be given that the prices of the Basket
Securities will increase sufficiently to cause the beneficial owners of the
Securities to receive an amount greater than the Minimum Maturity Payment Amount
at Stated Maturity. The historical stock prices set forth herein have been
adjusted to reflect certain corporate events that affected the prices of the
Basket Securities, including, but not limited to, scrips issues, rights issues,
stock splits, reverse splits, stock dividends, spin-offs and extraordinary
dividends. Certain adjustments to the Multiplier and the Basket will be made by
the Calculation Agent as set forth under "Description of
Securities -- Adjustments to the Multiplier and Basket;" such adjustments may
not correspond to the adjustments made in determining the historical stock
prices set forth herein.
<TABLE>
<CAPTION>
BASKET SECURITIES HIGH LOW LAST
- ----------------- ---- --- ----
<S> <C> <C> <C>
Bancorp Hawaii, Inc.
1991........................................................... $31.83 $18.89 $30.00
1992........................................................... 34.67 26.83 29.33
1993........................................................... 35.92 26.67 27.33
1994 (through October 21)...................................... 34.75 27.00 28.13
Barnett Banks, Inc.
1991........................................................... 36.38 15.50 33.50
1992........................................................... 43.63 31.00 41.25
1993........................................................... 50.38 37.38 41.50
1994 (through October 21)...................................... 48.13 39.75 42.13
</TABLE>
S-14
<PAGE> 17
<TABLE>
<CAPTION>
BASKET SECURITIES HIGH LOW LAST
- ----------------- ---- --- ----
<S> <C> <C> <C>
Baybanks, Inc.
1991........................................................... 20.00 9.25 19.13
1992........................................................... 41.00 18.50 40.75
1993........................................................... 52.25 37.75 50.75
1994 (through October 21)...................................... 65.25 49.25 59.25
Citizens Bancorp
1991........................................................... 21.00 14.75 16.25
1992........................................................... 22.75 15.75 22.75
1993........................................................... 31.75 21.75 27.00
1994 (through October 21)...................................... 31.50 26.00 28.75
City National Corporation
1991........................................................... $15.75 $ 8.63 $11.88
1992........................................................... 16.00 4.63 6.63
1993........................................................... 11.63 6.38 7.50
1994 (through October 10)...................................... 12.13 7.13 10.25
CoreStates Financial Corp.
1991........................................................... 24.31 12.00 23.94
1992........................................................... 28.94 21.00 28.56
1993........................................................... 30.19 25.13 26.13
1994 (through October 10)...................................... 29.13 24.13 26.00
First American Bancorp
1991........................................................... 18.25 6.00 18.00
1992........................................................... 28.13 18.00 27.50
1993........................................................... 34.50 25.25 32.00
1994 (through October 10)...................................... 35.00 28.75 31.50
First Chicago Corporation
1991........................................................... 28.75 15.63 24.63
1992........................................................... 37.75 22.88 36.75
1993........................................................... 50.63 35.50 43.25
1994 (through October 10)...................................... 55.50 41.13 47.88
Hibernia Corporation
1991........................................................... 8.25 2.00 2.75
1992........................................................... 7.00 2.50 5.88
1993........................................................... 9.13 5.50 7.75
1994 (through October 10)...................................... 9.13 7.25 8.25
Mercantile Bancorporation Inc.
1991........................................................... 25.17 12.67 25.08
1992........................................................... 32.17 23.17 32.17
1993........................................................... 37.67 29.08 30.08
1994 (through October 10)...................................... 39.25 29.92 35.38
Michigan National Corporation
1991........................................................... 42.00 14.25 41.50
1992........................................................... 52.50 40.25 51.25
1993........................................................... 65.00 49.75 57.50
1994 (through October 10)...................................... 80.75 54.63 78.00
</TABLE>
S-15
<PAGE> 18
<TABLE>
<CAPTION>
BASKET SECURITIES HIGH LOW LAST
- ----------------- ---- --- ----
<S> <C> <C> <C>
Midlantic Corporation
1991........................................................... 9.38 2.88 4.50
1992........................................................... 21.88 4.38 19.88
1993........................................................... 28.63 17.50 25.50
1994 (through October 10)...................................... 31.88 24.25 28.13
North Fork Bancorporation, Inc.
1991........................................................... 10.75 3.75 4.75
1992........................................................... 9.50 4.25 8.13
1993........................................................... 13.38 7.63 12.88
1994 (through October 10)...................................... 16.88 12.50 15.50
Provident Bankshares Corporation
1991........................................................... $ 8.13 $ 2.75 $ 6.75
1992........................................................... 14.50 6.25 14.25
1993........................................................... 22.00 12.00 19.25
1994 (through October 10)...................................... 27.75 18.25 24.50
Summit Bancorporation
1991........................................................... 14.25 7.75 12.25
1992........................................................... 21.25 12.25 21.00
1993........................................................... 24.75 18.50 21.25
1994 (through October 10)...................................... 23.88 19.00 20.88
U.S. Bancorp
1991........................................................... 23.75 11.75 22.38
1992........................................................... 26.63 19.88 26.38
1993........................................................... 28.88 22.00 25.00
1994 (through October 10)...................................... 28.63 23.50 24.94
UJB Financial Corp.
1991........................................................... 17.50 6.88 14.63
1992........................................................... 24.50 14.00 24.25
1993........................................................... 33.50 21.50 24.00
1994 (through October 10)...................................... 29.25 23.50 26.50
Union Planters Corporation
1991........................................................... 16.88 6.50 14.38
1992........................................................... 24.88 13.50 24.25
1993........................................................... 30.00 22.38 25.13
1994 (through October 10)...................................... 28.88 22.75 23.75
UST Corp.
1991........................................................... 9.05 5.24 6.88
1992........................................................... 10.50 6.50 9.50
1993........................................................... 12.50 7.38 10.63
1994 (through October 10)...................................... 14.38 10.50 10.75
Vermont Financial Services Corp.
1991........................................................... 12.00 4.25 9.50
1992........................................................... 19.50 9.00 15.50
1993........................................................... 23.00 14.50 17.25
1994 (through October 10)...................................... 24.25 16.25 22.00
</TABLE>
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Securities shall have
occurred and be continuing, the amount payable to a Holder of a Security upon
any acceleration permitted under the Senior Indenture will be equal to the
Maturity Payment Amount calculated as though the date of acceleration was the
Stated Maturity.
S-16
<PAGE> 19
See "Description of Securities -- Maturity Payment Amount" herein. If a
bankruptcy proceeding is commenced in respect of Holdings, the claim of the
Holder of a Security may be limited, under Section 502(b)(2) of Title 11 of the
United States Code, to the principal amount of the Security, calculated as
though the commencement of the proceeding was the Stated Maturity.
CALCULATION AGENT
All determinations made by the Calculation Agent shall be at the sole
discretion of the Calculation Agent and, in the absence of manifest error, shall
be conclusive for all purposes and binding on Holdings and the Holders of the
Securities and the Calculation Agent shall have no liability therefor.
FORM OF SECURITIES
CONVERSION OPTION
The Securities will initially be evidenced by certificates in fully
registered form (each, a "Certificate"). Forty-five calendar days after the
closing of the offering, each Holder will have the option to convert the form of
such Holder's Securities from certificated to book-entry form within a
forty-five calendar day period (the "Conversion Option Period"). In order to be
exchanged for Securities in book-entry form (represented by a beneficial
interest in the Global Security described below), a Certificate must be
delivered to the Depository in the manner referred to below. The Conversion
Option Period is expected to run from , 1994, through , 1994.
Certificates received by the Depository for exchange during the Conversion
Option Period will be exchanged for Securities in book-entry form by the close
of business on the Business Day so received by the Depository (if received by
the Depository at its then applicable cut-off time for same day credit) or on
the following Business Day (if received by the Depository at its then applicable
cut-off time for next day credit). After the last day of the Conversion Option
Period, the Depository will not be required to accept delivery of Certificates
for exchange for book-entry Securities, but may permit Certificates to be so
exchanged on a case-by-case basis. It is anticipated that after the Conversion
Option Period, Certificates delivered to the Depository in proper form for
deposit will be accepted by the Depository for exchange for book-entry
Securities, generally within three to four Business Days after delivery to the
Depository. However, there can be no assurance that such Certificates will be
accepted for exchange. Further, there can be no assurance, with respect to
Certificates accepted for exchange, that exchange will occur within that time
period. Securities surrendered at any time for exchange for book-entry
Securities may not be delivered for transfer until such exchange has been
effected. Since Certificates are not required to be exchanged for Securities in
book-entry form, it is likely that not all Certificates will be so exchanged.
Accordingly, Holders purchasing Securities in secondary market trading after the
Conversion Option Period may wish to make specific arrangements with brokers or
other participants or indirect participants if they wish to purchase only
Securities in book-entry form and not Certificates.
In order to be exchanged for a Security in book-entry form, a Certificate
must be delivered to the Depository, in proper form for deposit, by a
participant of the Depository. Accordingly, a Holder which is not a participant
must deliver its Certificate, in proper form for deposit, to such a participant
either directly or through an indirect participant or brokerage firm which
maintains an account with the participant, in order to have its Certificate
exchanged for a Security in book-entry form. Such Holders who desire to exchange
their Certificates for Securities in book-entry form should contact their
brokers or other participants or indirect participants to obtain information on
procedures for submitting their Certificates to the Depository, including the
proper form for submission and (during the Conversion Option Period) the cut-off
times for same day and next day exchange. Certificates which are held by the
Holder in nominee or "street" name may be automatically exchanged into
book-entry form by the broker or other entity in whose name such Certificates
are registered, without action of or consent by the beneficial owner of the
related Security (i.e., such beneficial owner need not deliver a Certificate).
Certificates which have been exchanged into book-entry form may not be
re-exchanged for Certificates, except under the limited circumstances described
in the accompanying Prospectus under "Global Securities."
S-17
<PAGE> 20
CERTIFICATES FOR SECURITIES
The Trustee will maintain a register (the "Security Register") for
registering the ownership of and transfers of Securities represented by
Certificates. Prior to due presentment for registration of transfer, Holdings,
the Trustee, and any agent of either of them may deem and treat the person in
whose name a Certificate is registered (the "registered holder") as the absolute
owner of the Securities evidenced by such Certificate for any purpose
whatsoever, and as the person entitled to exercise the rights represented by the
Securities evidenced thereby, and neither Holdings, the Trustee, nor any agent
of either of them shall be affected by any notice to the contrary. Accordingly,
if a beneficial owner of a Security evidenced by a Certificate is not the
registered holder thereof (for example, if it holds the Certificate through a
broker holding such Certificate in nominee or "street" name), it may exercise
its rights as a Holder only through the registered holder.
The Trustee shall from time to time register the transfer of any
outstanding Certificates upon surrender thereof at the Trustee's office, duly
endorsed, or accompanied by a written instrument or instruments of transfer in
form satisfactory to the Trustee duly executed by the registered holder thereof,
by the duly appointed legal representative thereof or by its duly authorized
attorney, such signature to be guaranteed by a bank or trust company located, or
with a correspondent office, in The City of New York or by a broker or dealer
which is a member of a national securities exchange. A new Certificate shall be
issued to the transferee upon any such registration of transfer.
At the option of a Holder, Certificates may be exchanged for other
Certificates, representing a like principal amount of Securities upon surrender
to the Trustee at the Trustee's office of the Certificates to be exchanged.
Holdings shall thereupon execute, and the Trustee shall countersign and deliver,
one or more new Certificates representing a like principal amount of Securities.
If any Certificate is mutilated, lost, stolen or destroyed, Holdings may in
its discretion execute, and the Trustee may countersign and deliver, in exchange
and substitute for and upon cancellation of the mutilated Certificate, or in
lieu of the lost, stolen or destroyed Certificate, a new Certificate of like
tenor and representing an equivalent principal amount of Securities, but only
(in the case of loss, theft or destruction) upon receipt of evidence
satisfactory to Holdings and the Trustee of such loss, theft or destruction of
such Certificate and security or indemnity, if requested, also satisfactory to
them. Applicants for substitute Certificates must also comply with such other
reasonable regulations and pay such other reasonable charges as Holdings or the
Trustee may prescribe.
The Maturity Payment Amount on Securities in certificated form will be
payable when due at the office of the Trustee, Citibank, N.A., Corporate Trust
Services, at 111 Wall Street, 5th Floor, New York, New York 10043.
BOOK-ENTRY FORM
Securities held in book-entry form will be held in the form of one or more
global certificates (the "Global Security") registered in the name of the
nominee of the depository, The Depository Trust Company ("DTC", and together
with any successor depository, the "Depository"). Holdings anticipates that the
Depository's initial nominee will be CEDE & Co. ("CEDE"). Accordingly, CEDE is
expected to be the registered holder of the Securities in book-entry form.
DTC is a limited-purpose trust company which was created to hold securities
for its participating organizations ("participants") and to facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants. Participants
include securities brokers and dealers (including the Underwriters), banks and
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants"). Persons
who are not participants may beneficially own securities held by DTC only
through participants or indirect participants.
DTC's nominee for all purposes will be considered the sole owner or holder
of the Securities which are held in book-entry form. Holders which own
Securities in book-entry form will not be entitled to have Securities registered
in their names, will not be considered the holders thereof under the Senior
Indenture, and
S-18
<PAGE> 21
will not be entitled to exchange their book-entry Securities for definitive form
Certificates, except under the limited circumstances described below.
A Holder that is not a participant will have its ownership of a Security in
book-entry form recorded on or through the records of the brokerage firm or
other entity that maintains such Holder's account. In turn, the total number of
Securities in book-entry form held by an individual brokerage firm for its
clients will be maintained on the records of the Depository in the name of such
brokerage firm (or in the name of a participant that acts as agent for the
Holder's brokerage firm if such firm is not a participant). Therefore, a Holder
must rely upon the foregoing procedures to evidence such Holder's ownership of a
Security in book-entry form. Transfer of ownership of a Security in book-entry
form may be effected only through the Depository, and, if applicable, the
brokerage firm or other entity that maintains the selling Holder's book-entry
account. The laws of some states of the United States may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits on transfer and such laws may impair the ability to own,
transfer or pledge securities in book-entry form.
Neither Holdings nor the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made to beneficial owners
of book-entry securities or for maintaining, supervising or reviewing any
records relating to such beneficial owners.
Holdings understands that under existing industry practices, in the event
that Holdings requests any action of Holders or that Holders which own
Securities in book-entry form desire to give or take any action which Holders
are entitled to give or take under the Senior Indenture, the Depository would
authorize the participants to give or take such action, and such participants
would authorize Holders owning through such participants to give or take such
action or would otherwise act upon the instructions of Holders owning through
them. Accordingly, each Holder which owns a Security in book-entry form must
rely on the procedures of the Depository and, if such Holder is not a
participant, on the procedures of the participant through which such Holder owns
its Security, to exercise any rights of a Holder under the Senior Indenture.
Payment of the principal of Securities registered in the name of the
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the holder of the Global Securities representing such
Securities. None of Holdings, the Trustee or any other agent of Holdings or any
agent of the Trustee will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests or for supervising or reviewing any records relating to such
beneficial ownership interests. Holdings expects that the Depository, upon
receipt of any payment of principal or any interest payment in respect of a
Global Security, will credit the accounts of the participants with payment in
amounts proportionate to their respective holdings in principal amount of
beneficial interest in such Global Security as shown on the records of the
Depository. Holdings also expects that payments by participants to Holders will
be governed by standing customer instructions and customary practices, as is now
the case with Securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
participants.
If at any time (i) the Depository notifies Holdings that it is unwilling or
unable to continue as Depository or (ii) Holdings becomes aware that the
Depository shall no longer be eligible under the Senior Indenture, Holdings
shall appoint a successor Depository. If a successor Depository for the
Securities is not appointed by Holdings within 90 days after any such event,
Holdings will issue, and the Trustee will authenticate and deliver, Securities
in definitive form in an aggregate principal amount equal to the aggregate
principal amount of the Global Securities, in denominations of $25 and integral
multiples thereof. Such definitive Securities shall be registered in such name
or names as the Depository shall instruct the Trustee. It is expected that such
instructions will be based upon directions received by the Depository from
participants with respect to ownership of beneficial interests in such Global
Securities.
LISTING
Application has been made to list the SUNS on the AMEX under the symbol
"BKG".
S-19
<PAGE> 22
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, special counsel to Holdings,
the following discussion is an accurate summary of the material United States
federal income tax consequences of the ownership and disposition of the
Securities.
The following summary describes certain United States federal income tax
consequences of the ownership of Securities as of the date hereof. Except where
noted, it deals only with Securities held by initial purchasers as capital
assets and does not deal with special situations, such as those of dealers in
securities or currencies, financial institutions, life insurance companies,
persons holding Securities as part of a hedging or conversion transaction or
United States Holders whose "functional currency" is not the U.S. dollar.
Furthermore, the discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in federal income tax consequences
different from those discussed below. PERSONS CONSIDERING THE PURCHASE,
OWNERSHIP OR DISPOSITION OF SECURITIES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR
SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER
TAXING JURISDICTION.
As used herein, a "United States Holder" of a Security means a Holder that
is a citizen or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. A
"Non-United States Holder" is a Holder that is not a United States Holder.
GENERAL
There are no regulations, cases or rulings directly addressing the
treatment of securities similar to the Security other than the proposed
regulations discussed below. Although not free from doubt, Holdings believes
that the Securities should be treated as debt of Holdings for federal income tax
purposes. Accordingly, Holdings intends to treat the Securities as debt for U.S.
federal income tax purposes and file information returns with the Internal
Revenue Service (the "IRS") consistent with such treatment. The discussion that
follows is based on such approach.
UNITED STATES HOLDERS
Taxation of the Maturity Payment Amount
Under general principles of U.S. federal income tax law, interest is
included in income as ordinary income when paid or accrued, in accordance with a
holder's regular method of accounting. Moreover, in accordance with such
principles, "contingent interest" on debt is generally not includable in income
before the amount of such interest becomes fixed. Accordingly, Holdings intends
to treat amounts payable at Maturity in excess of the Issue Price, if any, as
contingent interest includable in income by United States Holders as ordinary
income at such time. If the amounts payable at Maturity are less than the Issue
Price, the Holder should treat such difference as a capital loss.
There are no regulations, cases or rulings directly applicable to the
treatment of the Securities. The IRS may contend, however, that the Securities
should be treated differently for U.S. federal income tax purposes from the
treatment described above. Moreover, there can be no assurance that regulations
that would apply different rules to the Securities from those described above
will not come into effect and apply retroactively to the Securities. In such
cases, the timing and character of a United States Holder's income could be
affected, but not its aggregate amount.
For example, under proposed regulations issued in 1991 (the "Bifurcation
Regulations"), a Security could be treated for federal income tax purposes as
two separate instruments: (1) a debt instrument of Holdings with a stated
redemption price at maturity equal to its principal amount (the "noncontingent
debt
S-20
<PAGE> 23
instrument") and (2) a cash settlement option based upon the value of the Basket
that must be exercised by delivering the Security (the "property right"). The
Bifurcation Regulations, however, would not apply to the Securities if the Issue
Price exceeds the minimum Maturity Payment Amount by more than an "insubstantial
amount." The Bifurcation Regulations do not define the term "insubstantial
amount." If the Bifurcation Regulations were to apply to the Securities, the
timing of income could be significantly accelerated. Moreover, the IRS may
contend that rules similar to proposed regulations which were released to
replace the Bifurcation Regulations, but which were withdrawn (the "Withdrawn
Regulations"), should apply to the Securities. Under the Withdrawn Regulations,
United States Holders would be required to accrue some minimum amount of
interest income currently over the life of the Security (based on the estimated
value of the Basket) with the result that all or a portion of amounts realized
by a United States Holder at Maturity or on sale of a Security would be treated
as ordinary income and not capital gain.
As described above, however, Holdings intends to treat the Securities as
requiring no accrual of contingent interest by United States Holders until such
amounts are fixed and Holdings will file information returns with the IRS
consistent with such treatment.
Sale or Exchange of Securities
A United States Holder's tax basis in a Security will, in general, be the
United States Holder's cost therefor. Upon the sale or exchange of a Security, a
United States Holder will recognize gain or loss equal to the difference between
the amount realized and the adjusted tax basis of the Security. Although the
matter is not free from doubt, under current law such gain or loss should be
treated as capital gain or loss. It is possible, however, that the IRS could
promulgate regulations that treat all or part of such gain or loss as ordinary
and that such regulations could apply retroactively to the Securities.
NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by Holdings or any paying agent of the
Maturity Payment Amount on a Security owned by a Non-United States Holder,
provided (i) that the beneficial owner does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of the Holdings entitled to vote within the meaning of section 871(h)(3) of
the Code and the regulations thereunder, (ii) the beneficial owner is not a
controlled foreign corporation that is related to Holdings through stock
ownership, (iii) the beneficial owner is not a bank whose receipt of
interest on a Security is described in section 881(c)(3)(A) of the Code and
(iv) the beneficial owner satisfies the statement requirement (described
generally below) set forth in section 871(h) and section 881(c) of the Code
and the regulations thereunder;
(b) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-United States
Holder upon the sale, exchange or retirement of a Security; and
(c) a Security beneficially owned by an individual who at the time of
death is a Non-United States Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that
such individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of Holdings entitled to
vote within the meaning of section 871(h)(3) of the Code and provided that
the Maturity Payment Amount with respect to such Security would not have
been, if received at the time of such individual's death, effectively
connected with the conduct of a United States trade or business by such
individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Security, or a financial institution holding the Security on
behalf of such owner, must provide, in accordance with specified procedures, a
paying agent of Holdings with a statement to the effect that the beneficial
owner is not a United States person, citizen or resident. Pursuant to current
temporary Treasury regulations, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that
S-21
<PAGE> 24
he is not a United States person, citizen or resident (which certification may
be made on an IRS Form W-8 (or successor form)) or (2) a financial institution
holding the Security on behalf of the beneficial owner certifies, under
penalties of perjury, that such statement has been received by it and furnishes
a paying agent with a copy thereof.
Payments to Non-United States Holders not meeting the requirements of
paragraph (a) above and thus subject to withholding of United States federal
income tax may nevertheless be exempt from such withholding if the beneficial
owner of the Security provides Holdings with a properly executed (1) IRS Form
1001 (or successor form) claiming an exemption from withholding under the
benefit of a tax treaty or (2) IRS Form 4224 (or successor form) stating that
interest paid on the Security is not subject to withholding tax because it is
effectively connected with the owner's conduct of a trade or business in the
United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payment of the
Maturity Payment Amount on a Security and to the proceeds of sale of a Security
made to United States Holders other than certain exempt recipients (such as
corporations). A 31 percent backup withholding tax will apply to such payments
if the United States Holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
No information reporting or backup withholding will be required with
respect to payment of the Maturity Payment Amount by Holdings or any paying
agent to Non-United States Holders if a statement described above in (a)(iv)
under "Non-United States Holders" has been received and the payor does not have
actual knowledge that the beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply if
payment of the Maturity Payment Amount on a Security is paid or collected by a
foreign office of a custodian, nominee or other foreign agent on behalf of the
beneficial owner of such Security, or if a foreign office of a broker (as
defined in applicable Treasury regulations) pays the proceeds of the sale of a
Security to the owner thereof. If, however, such nominee, custodian, agent or
broker is, for United States federal income tax purposes, a United States
person, a controlled foreign corporation or a foreign person that derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (1) such
custodian, nominee, agent or broker has documentary evidence in its records that
the beneficial owner is not a United States person and certain other conditions
are met or (2) the beneficial owner otherwise establishes an exemption.
Temporary Treasury regulations provide that the Treasury is considering whether
backup withholding will apply with respect to such payment of the Maturity
Payment Amount or the proceeds of a sale that are not subject to backup
withholding under the current regulations. Under proposed Treasury regulations
not currently in effect backup withholding will not apply to such payments
absent actual knowledge that the payee is a United States person.
Payment of the Maturity Payment Amount on a Security paid to the beneficial
owner of a Security by a United States office of a custodian, nominee or agent,
or the payment by the United States office of a broker of the proceeds of sale
of a Security, will be subject to both backup withholding and information
reporting unless the beneficial owner provides the statement referred to in
(a)(iv) above and the payor does not have actual knowledge that the beneficial
owner is a United States person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such Holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
S-22
<PAGE> 25
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated as of , 1994 (the "Underwriting Agreement"), Holdings has
agreed to sell to each of the underwriters named below (the "Underwriters") for
whom Lehman Brothers Inc., Kemper Securities, Inc. and Oppenheimer & Co., Inc.
are acting as representatives (the "Representatives"), and each of the
Underwriters has severally agreed to purchase, the number of SUNS set forth
opposite its name below.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SUNS
------------ --------------
<S> <C>
Lehman Brothers Inc. .......................................
Kemper Securities, Inc. ....................................
Oppenheimer & Co., Inc. ....................................
--------------
Total............................................. 1,500,000
=============
</TABLE>
Holdings has been advised by the Representatives that the Underwriters
propose initially to offer the Securities to the public at the public offering
price set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of $ per Security. The
Underwriter may allow and such dealers may reallow a concession not in excess of
$ per Security to certain other dealers. After the initial public offering,
the public offering price and such concessions may be changed.
Holdings has granted an option to the Underwriters, exercisable within 30
days of the date of this Prospectus Supplement, to purchase up to an additional
300,000 SUNS to cover over-allotments, if any, at the price to public less the
underwriting discounts and commissions specified on the cover page of this
Prospectus Supplement.
Lehman Brothers Inc. is a wholly owned subsidiary of Holdings. The
participation of Lehman Brothers Inc. in the offer and sale of the SUNS complies
with the requirements of Schedule E of the By Laws of the National Association
of Securities Dealers regarding underwriting securities of an affiliate.
The Representatives have advised Holdings that they intend to make a market
in the Securities but the Representatives are not obligated to do so and may
discontinue market making without notice at any time for any reason, including,
without limitation, as a result of their respective investment banking
businesses. No assurance can be given as to the liquidity of the trading market
for the Securities.
This Prospectus Supplement together with the accompanying Prospectus may
also be used by Lehman Brothers Inc. in connection with offers and sales of
Securities related to market making transactions, by and through Lehman Brothers
Inc., at negotiated prices related to prevailing market prices at the time of
sale or otherwise. Lehman Brothers Inc. may act as principal or agent in such
transactions.
Holdings has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
VALIDITY OF THE SECURITIES
The validity of the Securities will be passed upon for Holdings by Karen
Muller, Esq., Deputy General Counsel of Holdings and for the Underwriters by
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004. The
Underwriters are being advised as to certain matters by Simpson Thacher &
Bartlett (a partnership which includes professional corporations), 425 Lexington
Avenue, New York, New York 10017. Simpson Thacher & Bartlett acts as counsel in
various matters for Holdings, Lehman Brothers and certain of their subsidiaries.
S-23
<PAGE> 26
GLOSSARY
Set forth below are definitions of some of the terms used in this
Prospectus Supplement and not defined in the accompanying Prospectus.
"Business Day" means a day of the week which is not a day on which banking
institutions in New York, New York, are authorized or required by law to close.
"Maturity" of any Security means the date on which the principal of such
Security becomes due and payable as provided therein or in the Senior Indenture,
whether at Stated Maturity or by declaration of acceleration or otherwise.
"Holder" means, with respect to any certificated Security, the Person in
whose name the certificate is registered in the Security Register and, with
respect to any Global Security, any Beneficial Holder thereof to the extent of
such Beneficial Holder's interest therein.
In addition, definitions for the following terms are set forth in this
Prospectus Supplement at the pages indicated:
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------
<S> <C>
AMEX................................................................................. Cover
Average Market Price................................................................. S-3
Basket............................................................................... Cover
Basket Maturity Value................................................................ S-3
Basket Securities.................................................................... S-3
Basket Security...................................................................... S-3
Basket Value......................................................................... S-4
Calculation Agent.................................................................... S-3
Calculation Day...................................................................... S-7
Calculation Period................................................................... S-3
Cash Component....................................................................... S-10
CEDE................................................................................. S-18
Certificate.......................................................................... S-17
Code................................................................................. S-20
Conversion Option Period............................................................. S-17
Depository........................................................................... S-18
DTC.................................................................................. S-18
Global Security...................................................................... S-18
Holdings............................................................................. Cover
indirect participants................................................................ S-18
IRS.................................................................................. S-20
Issue Price.......................................................................... Cover
LIBOR................................................................................ S-10
LIBOR Determination Date............................................................. S-10
London Business Day.................................................................. S-11
Market Disruption Event.............................................................. S-8
Market Price......................................................................... S-8
Maturity Payment Amount.............................................................. S-3
Multiplier........................................................................... S-3
NASDAQ NMS........................................................................... S-8
NYSE................................................................................. S-8
Non-United States Holder............................................................. S-20
Original Basket Value................................................................ S-4
</TABLE>
S-24
<PAGE> 27
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
Original Basket Security............................................................. S-12
participants......................................................................... S-18
Participation Percentage............................................................. Cover
registered holder.................................................................... S-18
Representatives...................................................................... S-23
SEC.................................................................................. S-13
Securities........................................................................... Cover
Security Register.................................................................... S-18
Specified Maturity................................................................... S-10
Stated Maturity...................................................................... S-3
SUNS................................................................................. Cover
Trading Day.......................................................................... S-8
Underwriters......................................................................... S-23
Underwriting Agreement............................................................... S-23
United States Holder................................................................. S-20
Withdrawn Regulations................................................................ S-21
</TABLE>
S-25
<PAGE> 28
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF HOLDINGS SINCE THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary............................... S-3
Use of Proceeds....................... S-5
Special Considerations................ S-5
Description of Securities............. S-7
The Basket............................ S-13
Form of Securities.................... S-17
Certain United States Federal Income
Tax Consequences.................... S-20
Underwriting.......................... S-23
Validity of the Securities............ S-23
Glossary.............................. S-24
PROSPECTUS
Available Information................. 2
Documents Incorporated by Reference... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Debt Securities........ 4
Description of Warrants............... 13
Global Securities..................... 20
United States Taxation................ 22
Capital Requirements.................. 22
Plan of Distribution.................. 23
ERISA Matters......................... 24
Legal Opinions........................ 24
Independent Accountants............... 25
- ------------------------------------------------------
- ------------------------------------------------------
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
1,500,000 SUNS
LEHMAN BROTHERS
HOLDINGS INC.
REGIONAL BANK
STOCK UPSIDE NOTE
SECURITIES DUE 1996
---------------------
PROSPECTUS SUPPLEMENT
, 1994
---------------------
LEHMAN BROTHERS
KEMPER SECURITIES, INC.
OPPENHEIMER & CO., INC.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 29
HOW SUNS WORK
---------------------------------------
PURCHASE PRICE
---------------------------------------
SUNS ARE PURCHASED FOR $25 EACH.
---------------------------------------
PAYMENT AT MATURITY
---------------------------------------
(THE $100 AMOUNT SPECIFIED IN THE FORMULA BELOW REPRESENTS
THE ORIGINAL BASKET VALUE ON THE DATE THAT THE SECURITIES ARE PRICED BY
HOLDINGS FOR INITIAL OFFERING TO THE PUBLIC.)
Basket Maturity Value -100
$25 x [ + ( ---------------------------- x Participation Percentage ) ]
100
THE PARTICIPATION PERCENTAGE WILL BE 100% IF THE BASKET MATURITY VALUE
IS EQUAL TO OR LESS THAN 100, AND %
IF THE BASKET MATURITY VALUE IS GREATER THAN 100.
IF THE BASKET MATURITY VALUE IS LESS THAN 100,
THE AMOUNT PAYABLE AT MATURITY WITH RESPECT TO A SECURITY WILL BE
LESS THAN THE PRINCIPAL AMOUNT OF SUCH SECURITY. IN NO EVENT WILL THE
INVESTOR RECEIVE AT MATURITY LESS THAN 95% OF PRINCIPAL.
--------------------------------------------
COMPONENT STOCKS OF THE REGIONAL BANK BASKET
--------------------------------------------
COMPANY NAME
BANCORP HAWAII, INC.
BARNETT BANKS, INC.
BAYBANKS, INC.
CITIZENS BANCORP
CITY NATIONAL CORPORATION
CORESTATES FINANCIAL CORP.
FIRST AMERICAN CORPORATION
FIRST CHICAGO CORPORATION
HIBERNIA CORPORATION
MERCANTILE BANCORPORATION, INC.
MICHIGAN NATIONAL CORPORATION
MIDLANTIC CORPORATION
NORTH FORK BANCORPORATION, INC.
PROVIDENT BANKSHARES CORPORATION
SUMMIT BANCORPORATION
U.S. BANCORP
UJB FINANCIAL CORP.
UNION PLANTERS CORPORATION
UST CORP.
VERMONT FINANCIAL SERVICES CORP.
THE INCLUSION OF A COMPONENT STOCK IN THE BASKET SHOULD NOT BE CONSIDERED A
RECOMMENDATION TO BUY OR SELL SUCH COMPONENT STOCK, AND NEITHER HOLDINGS NOR ANY
OF ITS AFFILIATES MAKE ANY REPRESENTATION TO ANY PURCHASER OF SECURITIES AS TO
THE PERFORMANCE OF THE BASKET OR ANY COMPONENT STOCK. HOLDERS OF THE SECURITIES
WILL NOT HAVE ANY RIGHT TO RECEIVE BASKET SECURITIES.
<PAGE> 30
LEHMAN BROTHERS
KEMPER SECURITIES, INC.
OPPENHEIMER & CO., INC.
(SM)"SUNS" and "Stock Upside Note Securities" are service marks of Lehman
Brothers.
