<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO 1 To
FORM 10-K
(MARK ONE)
[_] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM JANUARY 1, 1994 TO NOVEMBER 30, 1994
COMMISSION FILE NUMBER 1-9466
LEHMAN BROTHERS HOLDINGS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3216325
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) (IDENTIFICATION NO.)
3 WORLD FINANCIAL CENTER 10285
NEW YORK, NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 526-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, $.10 par value New York Stock Exchange
Pacific Stock Exchange
$55 Million Serial Zero Coupon Senior Notes American Stock Exchange
Due May 16, 1998
FT-SE Eurotrack 200 Index Call Warrants American Stock Exchange
Expiring June 4, 1996
Japanese Yen Bear Warrants American Stock Exchange
Expiring September 15, 1995
7 1/4% Oracle Yield Enhanced Equity Linked Debt American Stock Exchange
Securities SM Due 1996
6 1/2% Amgen Yield Enhanced Equity Linked Debt American Stock Exchange
Securities Due 1997
Japanese Yen Bear Warrants American Stock Exchange
Expiring March 5, 1996
8 3/4% Notes Due 2002 New York Stock Exchange
Global Telecommunications Stock Upside Note American Stock Exchange
Securities SM Due 2000
9 1/8% Micron Yield Enhanced Equity Linked Debt American Stock Exchange
Securities Due 1997
AMEX Hong Kong 30 Index Call Warrants American Stock Exchange
Expiring February 26, 1996
Regional Bank Stock Upside Note American Stock Exchange
Securities Due 1996
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K [X].
Aggregate market value of the voting stock held by non-affiliates of the
Registrant at January 31, 1995 was approximately $1,768,402,526. For purposes
of this information, the outstanding shares of common stock owned by certain
executive officers of the Registrant were deemed to be shares of common stock
held by affiliates.
As of January 31, 1995, 104,524,025 shares of the registrant's Common Stock,
$.10 par value per share were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Lehman Brothers Holdings Inc. 1994 Annual Report to Stockholders--
Incorporated in part in Form 10-K, Parts I, II and IV.
(2) Lehman Brothers Holdings Inc. Proxy Statement for its 1995 Annual Meeting
of Stockholders--Incorporated in part in Form 10-K, Parts I and III.
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<PAGE>
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
3. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
10.15 Transaction Support Services Agreement dated as of September 30,
1994 by and between Bear, Stearns Securities Corp. and Lehman
Brothers Inc.*,**
* Filed herewith.
** Confidential Treatment has been requested for portions of this
exhibit.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to its
Transition Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Lehman Brothers Holdings Inc.
(Registrant)
April 5, 1995
By: /s/ Karen M. Muller
____________________________________
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
AMENDMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
NAME TITLE DATE
* Chief Executive Officer and April 5, 1995
________________________________ Chairman of the Board of
RICHARD S. FULD, JR. Directors (principal executive
officer)
*
________________________________ Chief Operating Officer, April 5, 1995
T. CHRISTOPHER PETTIT President and Director
* Chief Financial Officer April 5, 1995
________________________________ (principal financial officer)
ROBERT MATZA
*
________________________________ Controller (principal accounting
STEPHEN J. BIER officer) April 5, 1995
* Director April 5, 1995
________________________________
ROGER S. BERLIND
* Director April 5, 1995
________________________________
JOHN J. BYRNE
* Director April 5, 1995
________________________________
KATSUMI FUNAKI
* Director April 5, 1995
________________________________
JOHN D. MACOMBER
* Director April 5, 1995
________________________________
MASATAKA SHIMASAKI
* Director April 5, 1995
________________________________
DINA MERRILL
* Director April 5, 1995
________________________________
MALCOLM WILSON
By: /s/ Karen M. Muller
_____________________________
KAREN M. MULLER
(ATTORNEY-IN-FACT)
April 5, 1995
<PAGE>
EXHIBIT 10.15
BEAR STEARNS BEAR, STEARNS SECURITIES CORP.
ONE METROTECH CENTER NORTH
BROOKLYN, NEW YORK 11201-3859
(212) 272-1000
September 30, 1994
Lehman Brothers Inc.
200 Vesey Street
New York, New York 10285
Attention: Jeremiah Callaghan
Managing Director
Re: Agreement for Transaction Support Services
Gentlemen:
This Agreement sets forth the terms and conditions under which Bear, Stearns
Securities Corp. ("BSSC") will provide transaction support services and such
other back office support services (collectively, the "Services"), as more
specifically set forth herein, to Lehman Brothers Inc. ("you") to enable you to
carry certain of your customer and proprietary accounts, and clear certain of
your customer and proprietary securities transactions, as mutually agreed upon.
This Agreement also sets forth the terms and conditions under which BSSC will
open and carry, in your name, certain omnibus accounts, as more particularly
described in paragraph 5(a), in order to facilitate the clearance by BSSC of
government securities, securities settled outside the forty-eight contiguous
states ("Non-U.S. Settled Securities") and such other products as you and BSSC
shall agree. BSSC will also provide certain Services to Lehman Brothers Holdings
Inc. and its subsidiaries. For purposes of the Securities Investor Protection
Act and the financial responsibility rules of the Securities and Exchange
Commission ("SEC"), customers shall be deemed to be your customers.
1. Engagement
----------
You hereby engage BSSC to provide the Services and to make available to
you such personnel and facilities as are necessary therefor. The
Services shall be performed in compliance with and subject to all
applicable U.S. federal, state and foreign securities laws and
regulations, and, as applicable, the constitution, rules, by-laws and
regulations of the New York Stock Exchange Inc. and all other exchanges,
boards of trade, contract markets and clearing organizations of which
BSSC or you is a member (collectively, the "Applicable Rules").
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2. Commissions
-----------
You shall have sole discretion to determine the amount of commissions and
fees charged to your customer accounts, to the extent permitted by the
Applicable Rules.
3. Fees - Term of Agreement
------------------------
[Confidential treatment has been requested for the omitted portions of this
section]
(f) The term of this Agreement shall be for a period of five years, unless
extended by mutual consent. For purposes of computing the term of this
Agreement, the first year of this Agreement shall be deemed to commence as
of the first business day of the first full month following the Conversion
Date.
<PAGE>
(j) In the event of an industry wide event that materially impacts the costs
associated with providing the Services contemplated by this Agreement, the
parties hereto agree to negotiate in good faith to amend the fees provided
herein in a manner consistent with such event.
(k) The term business day, as used in this Agreement, is defined as any day
which is not a Saturday or Sunday on which the New York Stock Exchange is
open for business.
4. Financial Information
---------------------
You and BSSC each agree to supply the other with copies of monthly and
quarterly Financial and Operational Combined Uniform Single Reports
("Focus Reports"), excluding the income statement and any profit and
loss calculations, simultaneously with the filing thereof.
5. Omnibus Accounts
----------------
(a) In order to facilitate the clearance of government securities, Non-U.S.
Settled Securities and such other products as you and BSSC shall agree, BSSC
will open and carry in your name, a special omnibus account for the benefit
of your customers (the "Customer Omnibus Account") and a separate omnibus
account for your proprietary transactions (the "Proprietary Omnibus
Account") (collectively, the "Omnibus Accounts"). You will become an omnibus
correspondent of BSSC with respect to such Omnibus Accounts, which will be
carried as either cash or margin accounts.
(b) With respect to the Customer Omnibus Account, you and BSSC agree as follows:
(i) the Customer Omnibus Account shall be established and maintained in
compliance with the requirements of SEC Rule 15(c) 3-3 and Regulation T;
(ii) all property held therein shall be held by BSSC for the exclusive
benefit of your customer's (subject, however, to a lawfully issued subpoena
or court order); (iii) BSSC shall maintain physical possession or control of
the securities therein, free of any charge, lien or claim of any kind in
favor of BSSC or any persons claiming through BSSC; (iv) BSSC shall not
subject the Customer Omnibus Account to any right, charge, security
interest, lien or other claim in favor of BSSC or any other party (except in
response to a lawfully issued subpoena or court order); (v) there shall be
no commingling of funds or property of the Customer Omnibus Account with
funds or property of yours or of BSSC's, and (vi) day short sales effected
will be short sales made on behalf of your customers, other than your
partners, if any.
(c) With respect to the Omnibus Accounts, you will be responsible to BSSC for:
(i) compliance with Regulation T; (ii) maintaining margin in accordance with
the Applicable Rules; (iii) unsecured debits; (iv) all check payments until
credited to BSSC; and (v) the delivery of securities sold or loaned, in good
delivery form under the Applicable Rules.
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(d) BSSC shall have sole discretion to execute buy-ins or sell outs in the
Omnibus Accounts whenever it determines such action appropriate.
(e) During a tender period, BSSC will tender only on a trade date basis the
number of shares net long in the Omnibus Accounts as of either the proration
or withdrawal date.
(f) BSSC shall issue and deliver comparisons and confirmations covering the
Omnibus Accounts directly to you on BSSC's forms, with the following
disclosure: "Transactions cleared through BSSC, a wholly owned and
guaranteed subsidiary of Bear, Stearns & Co. Inc. You will be responsible
for advising BSSC regarding the allocation of all transactions to each
customer covered by the Customer Omnibus Account. BSSC shall issue and
deliver confirmations and notices to your customers in accordance with
paragraph 6.
(g) Unless otherwise agreed, BSSC shall not be required to comply with any
request other than from you to make transfers of cash or securities directly
to your customers or other third parties.
(h) You agree not to exceed, either acting alone for the Proprietary Omnibus
Account or with others in concert, the applicable position and exercise
limits for each of the Omnibus Accounts, respectively, as established by the
options exchange or marketplace where options transactions are executed.
(i) You agree that BSSC shall have a lien upon and security interest in all
property held in the Proprietary Omnibus Account as security for the
repayment of your obligations and liabilities to BSSC arising out of or
incurred in connection with the Omnibus Accounts. You further agree that
BSSC, having made a best efforts attempt, market conditions permitting, to
provide you with prior notice, may debit any cash balance and/or liquidate
any securities or commodities held in the Proprietary Omnibus Account and
credit the proceeds to its account in an amount necessary to satisfy such
obligations. This provision shall survive the termination of this Agreement,
thereby extending the right to any lien and security interest for the
duration of any account transfer period and for an additional reasonable
period of time until, in the reasonable discretion of BSSC, security for the
repayment of such obligations is no longer required.
6. Transaction Support Services
----------------------------
In order to provide the Services contemplated by this Agreement, BSSC will
make available to you such personnel, data processing services and such
other facilities as will be required to enable either you or BSSC, as the
case may be, to carry your customer and proprietary accounts and clear your
customer and proprietary transactions.
(a) BSSC will provide such Services as are necessary and customary in order to
enable you or BSSC, as the case may be, to clear securities transactions
executed by you for certain
4
<PAGE>
of your customer and proprietary accounts. BSSC will make available to you,
at no extra charge, such operational and systems enhancements and provide
such Services as are necessary to ensure your compliance with new settlement
and other procedures mandated by the Applicable Rules. BSSC will also
provide Services to enable either you or BSSC, as the case may be, to clear
such new products as shall be mutually agreed upon.
(b) BSSC will, in your name and on your behalf, issue and deliver, or receive
and review, as the case may be, the documentation necessary to complete
comparisons and trade confirmations, with respect to transactions listed on
the BSSC end-of-day records (except transactions in Non-U.S. Settled
Securities), on forms for such purpose which shall display your name in
front (and not that of BSSC); except that (i) you shall be responsible for
all trade date telephonic and other comparisons with brokers or dealers and
(ii) you will instruct your counterparties to contact you directly if they
find any discrepancies in confirmations. BSSC will send you duplicates of
such documentation as you may reasonably request from time to time. At the
end of each day, BSSC will report to you and you will report to BSSC any
discrepancies that are disclosed during such day as a result of the
comparison or confirmation process. BSSC will also provide you with a list
of transactions with brokers or dealers for which BSSC has not received the
necessary comparison information. You are solely responsible for reconciling
all such discrepancies and BSSC is not obligated to perform any further
Services under this Agreement in connection with any unreconciled
transaction until all such discrepancies with respect to such transaction
are resolved. BSSC is not responsible for any failure to settle or allocate
securities, or for other irregularities that may arise, because either you
or your counterparty did not call discrepancies to its attention during the
comparison and confirmation process.
(c) BSSC will, utilizing information provided by you, compute and produce, on a
daily basis, calculations of the following requirements: (i) all possession
and control; (ii) all margin requirements; (iii) reserve formula (on a
weekly and calendar month-end basis and as reasonably needed by you, and
only to the extent the information is provided to BSSC); (iv) daily
settlement obligations (projected and final) of all clearing corporations
and depository corporations; and (v) such other calculations as are feasible
to compute and produce, given the information provided by you, to enable you
to balance, monitor and reconcile all positions in securities and other
instruments held by BSSC on your behalf for your customer and proprietary
accounts. BSSC will provide you with a daily statement reporting such
calculations and positions, and will make 2 best efforts attempt to
accommodate your cut-off dates in providing such statement to you.
(d) BSSC will, in your name and on your behalf and under your supervision and
control, monitor your customer accounts for the following purposes: (i)
requiring your customers to remit payment for purchases, interest and margin
obligations and other charges, (ii) requiring your customers to deliver
securities sold, (iii) requiring your customers to maintain money,
securities and options as required by the Applicable Rules, (iv) advising
your customers of the necessity to buy-in or sell-out positions based upon
your
5
<PAGE>
determination of such necessity, but subject to BSSC's interpretation of the
Applicable Rules, (v) transferring securities to and from the accounts of
your customers against payment and supervising funds deposits and transfers,
(vi) arranging for the exercise and assignment of options, and (vii)
providing custody, segregation and such safekeeping as is mutually agreed
upon of money and securities of your customers. Other than as specifically
set forth herein, BSSC shall not contact your customers during the term of
this Agreement, unless specifically requested by you.
(e) BSSC shall: (i) maintain certain of your books and records, as mutually
agreed, pertaining to transactions with respect to which the Services are
performed by BSSC on your behalf; (ii) provide the data necessary to enable
you or your agent to prepare monthly statements for your customer accounts,
as required by the Applicable Rules governing brokers having custody of
money and securities; and (iii) provide such other services as are
necessary, appropriate and consistent with this Agreement.
(f) During the Termination Period, as such term is defined in paragraph 3(c),
BSSC, in addition to continuing to provide the Services, shall provide such
services as you and BSSC reasonably deem necessary and appropriate,
including but not limited to data processing and employee transition support
services, to enable you to deconvert your customer and proprietary accounts.
(g) BSSC will provide the Services with the same standard of care it utilizes to
clear and carry the transactions and accounts introduced to it by Bear,
Stearns & Co. Inc.; provided, however, that BSSC shall be entitled to rely
upon, as correct, all information provided by you for the purposes of this
Agreement.
(h) BSSC will not provide Services to enable either you or BSSC, as the case may
be, to clear securities transactions in non-U.S. markets where BSSC does not
have the required facilities or relationship to provide clearance services
and BSSC has made a good faith determination not to provide such services in
such non-U.S. market.
(i) The Services shall be performed in accordance with BSSC's interpretation of
the Applicable Rules. In the event of a dispute relating to such
interpretation, you and BSSC hereby agree to present such dispute to a
mutually acceptable expert unrelated to either party, and to make a good
faith attempt to resolve such dispute in a commercially reasonable manner
and as expeditiously as practicable, without resorting to industry
arbitration. In the event such dispute is not resolved in a timely manner,
BSSC will continue to perform the Services that are the subject of the
dispute. In the event such dispute is resolved in accordance with BSSC's
interpretation of the Applicable Rules and against your interpretation
thereof, you shall indemnify BSSC for all loss, liability, damage, claim,
cost or expense (including but not limited to reasonable fees and expenses
of legal counsel) arising out of or incurred in connection with BSSC having
performed such Services.
6
<PAGE>
(j) BSSC shall serve as a passive, non-discretionary, non-bank custodian to your
customer Individual Retirement Accounts ("IRAs") and Qualified Retirement
Plans ("QRPs"), subject to BSSC receiving the approval of the Internal
Revenue Service, and BSSC will maintain such custodial accounts in the same
manner as BSSC maintains those established in connection with its IRA's and
QRPs.
7. Financing Obligations
---------------------
(a) BSSC shall neither finance nor in any way act as your creditor in connection
with the Services to be provided to you hereunder, except to the extent the
Omnibus Accounts are carried in margin accounts. It is agreed that: (i) all
settlement obligations, including but not limited to those set forth in
Section 6 of this Agreement, shall be your sole and exclusive responsibility
and (ii) BSSC shall neither provide nor arrange for the borrowing and
lending of securities in connection with the performance of the Services
hereunder;
(b) If BSSC incurs any liability, obligation, interest or other charge, charge-
back, assessment or collateralization requirement with respect to the
Omnibus Accounts, pursuant to the rules, regulations, procedures or other
binding terms of a clearing corporation or system or arrangement for the
settlement or comparison of your transactions which liability, obligation,
interest or other charge, charge-back, assessment or collateralization
requirement would not customarily be included in BSSC's standard processing
charge, you shall promptly, upon demand by BSSC, transfer to BSSC such
amount in immediately available funds or collateral sufficient to satisfy
your pro-rata share of such liability, obligation, interest or other charge,
charge-back, or assessment or collateralization requirement, such pro-rata
share to be determined between you and BSSC on a basis comparable to that
employed by such Clearing Corporation, system or arrangement in determining
the amount of any such liability, obligation, interest or other charge,
charge-back, assessment payable by, or collateralization requirement imposed
upon BSSC. BSSC shall promptly send to you any written materials it receives
from any such Clearing Corporation, system or arrangement describing any
such liability, obligation, interest or other charge, charge-back or
assessment or collateralization requirement.
(c) BSSC will credit or debit you, as the case may be, at the BSSC Internal
Benchmark Rate which is currently the Federal Funds Rate plus 3/8%, which
rate may change at BSSC's discretion, for any open fail transactions BSSC
has with you or with any other counterparty on account of your transactions,
including but not limited to any cash account credit or debit balance in the
Omnibus Accounts, BSSC fail transactions to or from you and unsettled
syndicate transactions.
(d) In the event you request BSSC to arrange for financing not specifically
provided for herein (including margin balances in the Omnibus Accounts),
such financing shall be provided on such terms and conditions as shall be
mutually agreed upon.
7
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8. Indemnification
---------------
(a) You shall indemnify and hold harmless BSSC, its control persons and
affiliates and its and their respective officers, directors, employees,
successors and assigns ("Indemnified Parties") from and against any loss,
liability, damage, claim, cost or expense (to the extent such cost or
expense is not otherwise covered in paragraph 3), including but not limited
to reasonable fees and expenses of legal counsel, incurred by BSSC or
Indemnified Parties arising directly or indirectly out of or in connection
with BSSC's performance of the Services hereunder; provided, however, that
BSSC and Indemnified Parties shall not be indemnified or held harmless to
the extent that such loss, liability, damage, claim, cost or expense arises
from BSSC's negligence, bad faith or willful misconduct. You further agree
to indemnify and hold harmless BSSC and Indemnified Parties for any act or
omission of BSSC in its capacity as custodian of your customer IRAs and
Qualified Retirement Plans, except insofar as such loss, liability, damage,
claim, cost or expense arises from BSSC's negligence, bad faith or willful
misconduct.
(b) BSSC agrees to indemnify and hold harmless you and Indemnified Parties and
you agree to indemnify and hold harmless BSSC and Indemnified Parties from
and against any loss, liability, damage, claim, cost or expense (including
but not limited to reasonable fees and expenses of legal counsel but
excluding special or punitive damages) arising out of or resulting from any
failure by the indemnifying party or its employees to carry out fully the
duties and responsibilities assigned to such herein or any breach of any
representation, warranty or covenant herein by such party under this
Agreement. The indemnifying party shall have the right to retain legal
counsel of its choosing, provided that the indemnified party consents to
such legal counsel (which consent shall not be unreasonably withheld), and
the indemnifying party shall have the right to settle any action for which
indemnification is sought.
(c) BSSC hereby agrees that it will not, without your prior written consent,
initiate any legal action against any of your customers relating to or
arising from this Agreement and BSSC's performance of the Services
hereunder.
9. Representations, Warranties and Covenants
-----------------------------------------
(a) You represent, warrant and covenant to BSSC as follows: (i) you are now
conducting, and during the course of this Agreement you will conduct your
business in all material respects in accordance with all federal and state
statutes and the regulations and rules of all self-regulatory organizations
that have jurisdiction over those matters; (ii) you are now, and during the
term of this Agreement will remain, a member in good standing of the New
York Stock Exchange Inc. and the National Association of Securities Dealers,
Inc., and you agree to promptly notify BSSC of any additional affiliations
or exchange memberships; (iii) you are now and during the term of this
Agreement will remain, duly authorized and in good standing under the laws
of the jurisdiction of your incorporation, and have the corporate power to
own your property and to carry on your business as now
8
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being conducted and are duly qualified to do business in each jurisdiction
where such qualification is necessary; (iv) you have all the requisite
authority in conformity with all Applicable Rules to enter into this
Agreement and to retain the services of BSSC in accordance with the terms
hereof and you have taken all necessary action to authorize the execution
and delivery of this Agreement and the performance of your obligations
hereunder; (v) you are in compliance, and during the term of this Agreement
will remain in compliance, with; ( 1) the capital and financial reporting
requirements of every national securities exchange or other securities
exchange and/or securities association of which you are a member, (2) the
net capital requirements of the Securities and Exchange Commission, and (3)
the capital requirements of every state in which you are licensed as a
broker-dealer; (vi) you hereby agree and warrant that you have and will
maintain appropriate brokers blanket bond insurance policies covering all
such acts of your employees, agents and officers, in the amount of
$100,000,000. This insurance shall remain in effect until the effective date
of termination of this Agreement. You further agree to notify BSSC
immediately in the event such insurance is either cancelled, reduced or
otherwise changed in any material respect.
(b) BSSC represents, warrants and covenants to you as follows: (i) BSSC during
the term of this Agreement (a) is and will remain duly organized and validly
existing as a Delaware corporation, (b) is and will remain duly registered
or licensed and in good standing as a broker dealer with the SEC and a
member firm of the New York Stock Exchange Inc. and the National Association
of Securities Dealers, Inc. (c) has corporate power to own its properties,
to carry on its businesses now being conducted and to enter into and perform
this Agreement and (d) has taken necessary action to authorize the execution
of this Agreement and the performance of its obligations hereunder; (ii)
BSSC has all the requisite authority in conformity with all Applicable Rules
to enter into and perform this Agreement; (iii) BSSC hereby agrees and
warrants that it has and will maintain appropriate brokers blanket bond
insurance policies covering all such acts of its employees, agents and
officers, in the amount of $200,000,000. BSSC further agrees to obtain a
rider to such brokers blanket bond insurance policies acknowledging you as a
loss payee for losses to your property and securities sustained as a result
of the Services performed pursuant to this Agreement. This insurance shall
remain in effect until the effective date of termination of this Agreement.
BSSC further agrees to notify you immediately in the event such insurance is
either cancelled, reduced or otherwise changed in any material respect.
(c) You acknowledge that you will be responsible for obtaining such SIPC
insurance as you deem necessary to cover losses arising out of or incurred
in connection with a SIPC proceeding affecting your customers.
(d) Each party shall be responsible for obtaining and maintaining registered and
first class mail insurance covering losses arising out of or incurred in
connection with any loss of mail under the control of each respective party.
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10. Confidentiality
---------------
You and BSSC each hereby undertake to keep confidential any information
either party may acquire as a result of this Agreement regarding the
business affairs and customers of the other party which each party supplies
to the other party in confidence solely by reason of the Services provided
hereunder. You and BSSC shall each endeavor in good faith to cause their
respective employees to comply with this undertaking.
11. Supervision of Accounts
-----------------------
(a) You shall be solely responsible for: (i) knowing each of your customers,
assessing the suitability and transactions for your customer accounts and
the Customer Omnibus Account; (ii) reviewing your customer accounts and the
Customer Omnibus Account for, among other things, manipulative practices,
insider trading, control and restricted securities and compliance with all
federal and state statutes and the regulations and rules of all self-
regulatory organizations that have jurisdiction over those matters; (iii)
obtaining and maintaining all proper documentation including all new account
documents and such other documents as are necessary for the performance of
your responsibilities under this Agreement and retaining such documents in
accordance with all federal and state statutes and the regulations and rules
of all self-regulatory organizations that have jurisdiction over those
matters except to the extent BSSC has either agreed to be responsible
therefor or BSSC deems it necessary or desirable to be responsible therefor
for the performance of its responsibilities hereunder, including but not
limited to its responsibilities as custodian of your customer IRAs and
Qualified Retirement Plans.
(b) You shall be solely responsible for the supervision of your employees who
open, approve or authorize transactions and their compliance with all
federal and state statutes and the regulations and rules of all self-
regulatory organizations that have jurisdiction over those matters, as well
as for overall supervision of functions and activities performed by BSSC.
12. Systems Access
--------------
In consideration of BSSC providing you access to certain of BSSC's computer
systems, documentation and the programs and data accessible thereby
(collectively the "Systems"), you acknowledge and agree to the following
terms and conditions:
(a) You acknowledge that any User I.D.s or password given to you relating to the
Systems will be designated exclusively for your use and programmed
specifically according to the functionality (i.e., entitlements) you have
requested and been granted. Each such User I.D. is intended to enable you to
view your data exclusively. You will take all necessary steps to preserve
the confidentiality of and prevent any unauthorized person from obtaining
access to or using any such User I.D. or password. You shall be required to
change your password every 90 days. For the purposes of this Agreement,
"your data" shall include but not necessarily be limited to your customers'
names, addresses,
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securities positions and activity, and the securities positions and activity
in your proprietary account(s), including such positions and activities of
your affiliates.
(b) Although access to your data may be obtained from any location, device or
other machine using the software provided to you, it is intended that access
to your data will be controlled by the User I.D.s and passwords.
Notwithstanding the foregoing, (i) you shall be solely responsible for
controlling the access to and activity in your customer and proprietary
accounts, (ii) otherwise protecting and preserving the confidentiality of
all data, and (iii) you shall not copy or distribute any system programs or
in any way use or allow use of the Systems beyond the specific use or uses
for which you have been authorized. You shall not be responsible for
controlling BSSC's access to and activity in your customer and proprietary
accounts or for ensuring that BSSC, its employees and its agents adhere to
BSSC's confidentiality obligation hereunder.
(c) You shall be solely responsible for requesting the initiation, termination
or limitation of the functionality of your User I.D.s. In particular, you
acknowledge that time is of the essence in notifying BSSC of the termination
or change in status of any employee or agent who has access to the Systems.
All such requests and notices shall be in writing to your BSSC relationship
manager.
(d) You will communicate all requests for access to the Systems in writing to
your BSSC relationship manager.
(e) You acknowledge that BSSC may, in the course of maintaining the Systems,
monitor your activities, and you hereby consent to such monitoring, subject
to BSSC's express agreement to adhere to its obligation of confidentiality
hereunder.
(f) You hereby agree to release and discharge BSSC and the Indemnified Parties
from all responsibility and liability arising out of or incurred in
connection with your use of the Systems, your failure to perform any
obligation pursuant to this paragraph 12 or BSSC providing you access to the
Systems and from all damages that flow as a consequence of such action or
failure to perform. You further agree to indemnify and hold harmless BSSC
and the Indemnified Parties from any loss, liability, damage, claim, cost or
expense (including but not limited to reasonable fees and expenses of legal
counsel) arising out of or incurred in connection with your use of the
Systems, your failure to perform any obligation pursuant to this paragraph
12 or BSSC providing you access to the Systems, except insofar as such loss,
liability, damage, claim, cost or expense arises out of BSSC's negligence,
bad faith or willful misconduct.
(g) You undertake to take all reasonable steps to ensure that all of your
employees and agents having access to the Systems comply with the terms of
this paragraph 12.
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13. Default
-------
Notwithstanding any provision in this Agreement, the following events or
occurrences shall constitute an Event of Default under this Agreement:
(a) Either party hereto shall fail to perform or observe any term, covenant or
condition to be performed hereunder and such failure shall continue to be
unremedied for a period of 30 days after written notice from the non-
defaulting party to the defaulting party specifying the failure and
demanding that the same be remedied; provided, however, that non-payment of
the fees due under paragraph 3 as a result of a bona-fide fee dispute shall
not be deemed an Event of Default; or
(b) Any representation or warranty made by either party shall prove to be
incorrect at any time in any material respect; or
(c) A receiver, liquidator or trustee of either party hereto or of any property
held by either party, is appointed by court order and such order remains in
effect for more than 30 days; or either party is adjudicated bankrupt or
insolvent; or any property of either party is sequestered by court order and
such order remains in effect for more than 30 days; or a petition is filed
against either party under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect (collectively, "Insolvency
Laws"), and is not dismissed within 30 days after such filing; or
(d) Either party hereto files a petition in voluntary bankruptcy or seeks relief
under any provision of any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, or consents to the filing
of any petition against it under any such law ; or
(e) Either party hereto makes an assignment for the benefit of its creditors, or
admits in writing its inability to pay its debts generally as they become
due, or consents to the appointment of a receiver, trustee or liquidator of
either party, or of any property held by either party; or
(f) Either party hereto ceases for whatever reason to be a member of the New
York Stock Exchange or the National Association of Securities Dealers; or
(g) Either party hereto fails to comply with the Applicable Rules in a manner
which materially adversely affects the business of that party.
Upon the occurrence of any such Event of Default, the nondefaulting party
may, at its option and subject to the Applicable Rules, by notice to the
defaulting party declare that this Agreement shall be thereby terminated and
such termination shall be effective as of the date such notice has been
communicated to the defaulting party. Termination
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hereunder shall not release either party from obligations incurred in
connection with this Agreement prior to the effective date of termination.
14. Software
--------
In the event of an Event of Default with respect to BSSC under paragraph
13(c), (d) or (e), BSSC shall, to the extent permissible under the
Insolvency Laws, negotiate with you regarding your request to purchase such
of BSSC's proprietary systems software as shall have been used in connection
with BSSC's provision of the Services hereunder.
15. Relationship of Parties
-----------------------
(a) BSSC shall limit its services pursuant to the terms of this Agreement to the
Services expressly defined and set forth herein. Neither this Agreement nor
any operation hereunder shall create a general or limited partnership,
association or joint venture or agency relationship between you and BSSC.
(b) Neither party or its respective affiliates shall, without the prior written
approval of the other party, place any advertisement in any newspaper,
publication, periodical, sales literature or any other media if such
advertisement in any manner makes reference to this Agreement or the
Services embodied herein. BSSC and its affiliates shall not solicit your
customers using this Agreement or the relationship created thereby as a
marketing tool.
(c) Should you in any way hold yourself out as, advertise or represent that you
are an agent of BSSC, BSSC shall have the power, at its option, to terminate
this Agreement and you shall be liable for any loss, liability, damage,
claim, cost or expense (including but not limited to fees and expenses of
legal counsel) sustained or incurred by BSSC as a result of such a
representation of agency or apparent authority to act as an agent of BSSC or
agency by estoppel. Notwithstanding the provision of this Agreement that any
dispute or controversy between the parties relating to or arising out of
this Agreement shall be referred to and settled by arbitration, in
connection with any breach by you of this paragraph 15, BSSC may, at any
time prior to the initial arbitration hearing pertaining to such dispute or
controversy, seek by application to the United States District Court for the
Southern District of New York or the Supreme Court of the State of New York
for the County of New York any such temporary or provisional relief or
remedy ("provisional remedy") provided for by the laws of the United States
of America or the laws of the State of New York as would be available in an
action based upon such dispute or controversy in the absence of an agreement
to arbitrate. The parties acknowledge and agree that it is their intention
to have any such application for a provisional remedy decided by the Court
to which it is made and that such application shall not be referred to or
settled by arbitration. No such application to either said Court for a
provisional remedy, nor any act or conduct by either party in furtherance of
or in opposition to such application, shall constitute a relinquishment or
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waiver of any right to have the underlying dispute or controversy with
respect to which such application is made settled by arbitration in
accordance with this Agreement.
16. No Waiver of Rights
-------------------
The enumeration herein of specific remedies shall not be exclusive of any
other remedies. Any delay or failure by any party to this Agreement to
exercise any right herein contained, now or hereafter existing under the
Applicable Rules shall not be construed to be a waiver of such right, or to
limit the exercise of such right. No single, partial or other exercise of
any such right shall preclude the further exercise thereof or the exercise
of any other right.
17. NYSE Filing Requirement
-----------------------
This Agreement shall be submitted to and approved by the New York Stock
Exchange, Inc., or other regulatory and self-regulatory bodies vested with
the authority to review and approve this Agreement or any amendment or
modifications hereto. In the event of disapproval, the parties hereto agree
to bargain in good faith to achieve the requisite approval.
18. Arbitration/Governing Law
-------------------------
(a) This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to the conflicts of law
principles thereof.
(b) In the event of a dispute or controversy relating to or in any way arising
out of this Agreement, you and BSSC hereby agree to present such dispute or
controversy to a panel to consist of three senior representatives of each
party, including Jeremiah Callaghan of your firm and Bruce Geismar of BSSC,
or their respective designees.
(c) In the event a dispute or controversy is not resolved in accordance with
subparagraph (b) above, such dispute or controversy shall be settled by
arbitration before and under the rules and auspices of the New York Stock
Exchange, Inc., unless the transaction which gives rise to such dispute or
controversy is effected in another United States market which provides
arbitration facilities, in which case it shall be settled by arbitration
under such facilities.
19. Extraordinary Events/Acts of God
--------------------------------
(a) BSSC shall not be liable for losses caused directly or indirectly by any
inability of BSSC to provide the Services occasioned by government actions
or restrictions, exchange or market rulings, suspension of trading, war,
strikes, natural calamities (including weather conditions), delays,
communications or utilities failures, terrorism,
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criminal acts of others not under the control of BSSC or any other
conditions or occurrences beyond its control.
(b) You hereby acknowledge that BSSC has represented to you that it has a
disaster recovery plan covering its back office operations located at One
Metrotech Center North, Brooklyn, New York but that no such disaster
recovery plan exists at the time of execution of this Agreement covering
BSSC's data processing facility located at 115 South Jefferson Road,
Whippany, New Jersey. The development of such a disaster recovery plan is in
progress and will be implemented, with input from you, in a reasonable and
timely manner.
20. Notices
-------
BSSC agrees that it will send to you copies of all written notices sent to
customers. Notices to you shall be sent to: Lehman Brothers Inc., 200 Vesey
Street, New York, New York 10285, Attention, Jeremiah Callaghan, Managing
Director, with a copy to David Marcus, Esq., Managing Director and General
Counsel, at the same address.
Notices to BSSC shall be sent to Richard Harriton, the President of Bear,
Stearns Securities Corp., 245 Park Avenue, New York, N.Y. 10167, with a copy
to Mark E. Lehman, Senior Managing Director and Chief Legal Officer of BSSC.
Termination shall not affect any of the rights and liabilities of the
parties hereto incurred before the date of receipt of such notice of
termination.
21. Statute of Fraud; Amendments
----------------------------
(a) This Agreement supersedes all other agreements between the parties with
respect to the Services contemplated herein. This Agreement may not be
amended except by a writing signed by both parties hereto.
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(b) This Agreement shall be binding upon and inure to the benefit of the
respective successors of the parties. Neither party may assign any of its
rights or obligations hereunder without the prior written consent of the
other party, unless such assignment is made as part of a general assignment
of a party s assets to another firm.
Please evidence your agreement to the foregoing by executing and delivering to
BSSC the enclosed copy hereof. whereupon you and BSSC shall have entered into
this Agreement.
Very truly yours,
BEAR, STEARNS SECURITIES CORP.
By: /s/ Richard Harriton
-------------------------------
Title: President
----------------------------
Date: 10/12/94
----------------------------
ACCEPTED AND AGREED TO:
- ----------------------------------
Lehman Brothers Inc.
By: Jeremiah Callaghan
-------------------------------
Title: Managing Director
----------------------------
Date: 10/12/94
----------------------------
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Schedule A
[Confidential treatment has been requested for this Schedule A which is
intentionally omitted]
