PROSPECTUS SUPPLEMENT
(To Prospectus dated May 6, 1996)
126,646 YEELDS SM
LEHMAN BROTHERS HOLDINGS INC.
6% Black & Decker Yield Enhanced Equity Linked Debt Securities Due 1998
(ISSUE PRICE AND PRINCIPAL AMOUNT BASED ON THE PRICE OF THE BLACK &
DECKER CORPORATION COMMON STOCK)
---------------------------
The 6% Black & Decker Yield Enhanced Equity Linked Debt Securities Due
1998 (a "YEELD" or a "Security", and in the aggregate, the "YEELDS" or the
"Securities") of Lehman Brothers Holdings Inc. ("Holdings") are being offered at
an issue price (the "Issue Price") of $39.48 per YEELD. The closing price of the
Common Stock (the "Black & Decker Common Stock") of The Black & Decker
Corporation ("Black & Decker") on the day prior to the date of this Prospectus
Supplement was $39.75. The YEELDS will mature on August 31, 1998, subject to
extension upon the occurrence of certain Non-Trading Days. The YEELDS 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 YEELDS may not be redeemed prior
to maturity and are not subject to any sinking fund.
The principal amount of each YEELD payable at maturity will equal the
lesser of (A) 136% of the Issue Price or (B) the Closing Price (as defined
herein) of the Black & Decker Common Stock on the maturity date, subject to
adjustment as a result of certain dilution events (see "Description of
YEELDS--Dilution Adjustments" in this Prospectus Supplement). Interest on each
YEELD is payable semi-annually on each March 1 and September 1 at the rate of 6%
of the Issue Price per annum (or $2.3688 per annum), beginning March 1, 1997.
For a discussion of certain United States federal income tax consequences for
holders of YEELDS, see "Certain United States Federal Income Tax Considerations"
in this Prospectus Supplement.
The YEELDS involve a high degree of risk, including the risk that the
principal amount payable at maturity will be less than the Issue Price if the
average Closing Price of Black & Decker Common Stock on the maturity date is
less than the Issue Price. Purchasers should be prepared to sustain a
substantial loss of the principal amount of their YEELDS and are advised to
consider carefully the information under "Risk Factors" on page S-5 in this
Prospectus Supplement.
Black & Decker is neither affiliated with Holdings or its subsidiaries nor
involved in this offering of YEELDS. The YEELDS are Senior Debt obligations of
Holdings and holders thereof will have no recourse to Black & Decker for such
obligations. See "Risk Factors--Lack of Affiliation Between Holdings and Black &
Decker" in this Prospectus Supplement.
Lehman Brothers Inc., a wholly owned subsidiary of Holdings, may, but is
not obligated to, purchase and sell YEELDS for its own account for the purposes
of making a market in the YEELDS.
---------------------------
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.
================================================================================
Price to Underwriting Discounts Proceeds to
Public(1) and Commissions Holdings(1)(2)
- --------------------------------------------------------------------------------
Per Security. $39.48 $0.0987 $39.38
- --------------------------------------------------------------------------------
Total........ $4,999,984.08 $12,499.96 $4,987,484.12
================================================================================
(1) Plus accrued interest, if any, from September 10, 1996.
(2) Before deducting expenses payable by Holdings estimated to be $50,000.
The YEELDS offered by this Prospectus Supplement are offered by the
Underwriter subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the Underwriter and
to certain further conditions. The Underwriter reserves the right to reject
orders in whole or in part. It is expected that delivery of the Securities will
be made at the offices of Lehman Brothers Inc., New York, New York, on or about
September 10, 1996.
This Prospectus Supplement together with the accompanying Prospectus may
also be used by Lehman Brothers Inc. in connection with offers and sales of
YEELDS 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.
---------------------------
<PAGE>
LEHMAN BROTHERS
September 5, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
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.....6% Black & Decker Yield Enhanced Equity Linked Debt
Securities (a "YEELD" or a "Security", and in the
aggregate, the "YEELDS" or the "Securities")Due 1998.
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............$39.48 per YEELD
Denominations..........$999,988.92 and integral multiples of $39.48 in excess
thereof.
Stated Maturity .......The YEELDS will mature on August 31, 1998, subject to
extension upon the occurrence of certain Non-Trading
Days.
Payments...............Each YEELD will bear interest from September 10, 1996 at
the rate of 6% of the Issue Price per annum (or $2.3688
per annum) until the principal amount thereof is pai
or made available for payment. Interest on the YEELDS
will be payable semi-annually in arrears on each
March 1 and September 1(each an "Interest Payment Date"),
beginning March 1, 1997, and at maturity. Interest on
the YEELDS will be computed on the basis of a 360-day
year of twelve 30-day months. Each payment of interest
in respect of an Interest Payment Date will include
interest accrued through the day before such Interest
Payment Date. If an Interest Payment Date falls on a day
that is not a Business Day, the interest payment to be
made on such Interest Payment Date will be made on
the next succeeding Business Day with the same force
and effect as if made on such Interest Payment Date,
and no additional interest will accrue as a result of
such delayed payment. See "Description of Securities--
Interest Payments" in this Prospectus Supplement.
The principal amount of each YEELD payable at maturity
will equal the lesser of (A) 136% of the Issue Price or
(B) the Closing Price of Black & Decker Common Stock,
subject to adjustment as a result of certain
dilution events (see "Description of YEELDS--Dilution
Adjustments" in this Prospectus Supplement), on the
maturity date. See "Description of Securities--General"
in this Prospectus Supplement.
Risk Factors...........The YEELDS are subject to certain special considerations.
The trading price of the YEELDS may vary considerably
prior to maturity due, among other things, to
fluctuations in the price of Black & Decker Common
Stock and other events that are difficult to predict
and beyond Holdings' control. As indicated in "Price
Range of Black & Decker Common Stock" in this Prospectus
Supplement, the price of Black & Decker Common Stock
has during certain recent periods been highly
<PAGE>
volatile. Investors should also be aware that there can
be no assurance that the principal amount payable at
maturity will be greater than the Issue Price and,if the
Closing Price of Black & Decker Common Stock on the
maturity date is less than the Issue Price,such principal
amount will be less, in which case an investment in
YEELDS may result in a loss. The principal amount of
the YEELDS payable at maturity is also subject to
adjustment for certain events arising from certain
actions of Black & Decker that modify its capital
structure. See "Description of YEELDS--Dilution
Adjustments" in this Prospectus Supplement.The principal
amount of the YEELDS is not adjusted for other events,
such as offerings of Black & Decker Common Stock for
cash, that may adversely affect the price of Black &
Decker Common Stock and, because of the relationship
of such principal amount to the price of Black &
Decker Common Stock, may adversely affect the price
of YEELDS. Black & Decker is not involved in the
offering of the YEELDS and has no obligations with
respect to the YEELDS. Moreover, there can be no
assurance as to how the YEELDS will trade in the
secondary market or whether such market will be liquid or
illiquid.
It is suggested that prospective investors who consider
purchasing YEELDS should reach an investment decision
only after carefully considering with their advisers
the suitability of YEELDS in the light of their
particular circumstances.
Investors should also consider the tax consequences of
investing in YEELDS. See "Certain United States Federal
Income Tax Considerations" in this Prospectus Supplement.
<PAGE>
RISK FACTORS
YEELDS are a relatively new type of securities.
As described in more detail below, the trading price of the YEELDS may
vary considerably prior to maturity due, among other things, to fluctuations in
the price of Black & Decker Common Stock and other events that are difficult to
predict and beyond Holdings' control.
Comparison To Other Debt Securities. The terms of the YEELDS differ from
those of ordinary debt securities, in that the principal amount received at
maturity is not fixed, but is based on the price of Black & Decker Common Stock.
There can be no assurance that the principal amount payable at maturity will be
greater than the Issue Price and, if the Closing Price of Black & Decker Common
Stock on the maturity date is less than the Issue Price, such principal amount
will be less, in which case an investment in YEELDS may result in a loss.
Relationship of YEELDS and Black & Decker Common Stock. The market price
of YEELDS at any time is expected to be affected primarily by changes in the
price of Black & Decker Common Stock. As indicated in "Price Range of Black &
Decker Common Stock" in this Prospectus Supplement, the price of Black & Decker
Common Stock has during certain recent periods been highly volatile.
It is impossible to predict whether the price of Black & Decker Common
Stock will rise or fall. Trading prices of Black & Decker Common Stock will be
influenced by Black & Decker's operational results and by complex and
interrelated political, economic, financial and other factors that can affect
the capital markets generally, the markets on which Black & Decker Common Stock
is traded and the market segment of which Black & Decker is a part. See "The
Black & Decker Corporation" in this Prospectus Supplement.
Dilution of Black & Decker Common Stock. The principal amount of the
YEELDS payable at maturity is subject to adjustment for certain events arising
from stock splits and combinations, stock dividends, extraordinary cash
dividends and certain other actions of Black & Decker that modify its capital
structure. See "Description of YEELDS--Dilution Adjustments" in this Prospectus
Supplement. The principal amount of the YEELDS is not adjusted for other events,
such as offerings of Black & Decker Common Stock for cash, that may adversely
affect the price of Black & Decker Common Stock and, because of the relationship
of such principal amount to the price of Black & Decker Common Stock, may
adversely affect the price of YEELDS. There can be no assurance that Black &
Decker will not make offerings of Black & Decker Common Stock in the future or
as to the amount of such offerings, if any.
Lack of Affiliation Between Holdings and Black & Decker. Holdings is not
affiliated with Black & Decker and, although Holdings has no knowledge that any
of the events described in the preceding subsection are currently being
contemplated by Black & Decker or of any event that would have a material
adverse effect on Black & Decker or on the price of Black & Decker Common Stock,
such events are beyond Holdings' ability to control and are difficult to
predict.
Black & Decker is not involved in the offering of YEELDS and has no
obligations with respect to the YEELDS, including any obligation to take the
needs of Holdings or of Holders into consideration for any reason. Black &
Decker will not receive any of the proceeds of the offering of the YEELDS made
hereby and is not responsible for, and has not participated in, the
determination of the timing of, prices for, or quantities of, the YEELDS to be
issued or in the determination or calculation of the principal amount to be paid
at maturity. Black & Decker is not involved with the administration, marketing
or trading of the YEELDS and has no obligations with respect to the principal
amount to be paid to Holders at maturity.
Possible Illiquidity of the Secondary Market. It is not possible to
predict how the YEELDS will trade in the secondary market or whether such market
will be liquid or illiquid. Because the YEELDS are not listed or traded on any
securities exchange pricing information for the YEELDS may be difficult to
obtain, and the liquidity of the YEELDS may be adversely affected.
Other Considerations. It is suggested that prospective investors who
consider purchasing YEELDS should reach an investment decision only after
carefully considering with their advisers the suitability of an investment in
YEELDS in light of their particular circumstances. Investors should also
consider the tax consequences of investing in YEELDS. See "Certain United States
Federal Income Tax Consequences" in this Prospectus Supplement.
<PAGE>
USE OF PROCEEDS
An amount equal to approximately half of the proceeds to be received by
Holdings from the sale of the YEELDS is being used by Holdings or one or more of
its subsidiaries before and immediately following the initial offering of the
YEELDS to acquire Black & Decker Common Stock or listed or over-the-counter
options contracts in, or other derivative or synthetic instruments related to,
Black & Decker Common Stock in connection with hedging Holding's obligations
under the YEELDS. The balance of such proceeds will be used for general
corporate purposes. See "Use of Proceeds" in the accompanying Prospectus. From
time to time after the initial offering and prior to the maturity of the YEELDS,
depending on market conditions (including the market price of Black & Decker
Common Stock), in connection with hedging with respect to the YEELDS, Holdings
expects that it or one or more of its subsidiaries will increase or decrease
their initial hedging positions using dynamic hedging techniques and may take
long or short positions in Black & Decker Common Stock, in listed or
over-the-counter options contracts in, or other derivative or synthetic
instruments related to, Black & Decker Common Stock. In addition, Holdings or
one or more of its subsidiaries may purchase or otherwise acquire a long or
short position in YEELDS from time to time and may, in their sole discretion,
hold or resell such YEELDS. Holdings or one or more of its subsidiaries may also
take positions in other types of appropriate financial instruments that may
become available in the future. To the extent that Holdings or one or more of
its subsidiaries have a long hedge position in Black & Decker Common Stock or
options contracts in, or other derivative or synthetic instruments related to,
Black & Decker Common Stock, Holdings or one or more of its subsidiaries may
liquidate a portion of their holdings at or about the time of the maturity of
the YEELDS. Depending, among other things, on future market conditions, the
aggregate amount and the composition of such positions are likely to vary over
time. Profits or losses from any such position cannot be ascertained until such
position is closed out and any offsetting position or positions are taken into
account.
<PAGE>
THE BLACK & DECKER CORPORATION
According to publicly available documents, Black & Decker, a Maryland
corporation, manufactures products used in and around the home and for
commercial applications. Black & Decker is subject to the informational
requirements of the Securities Exchange Act of 1934. Accordingly, Black & Decker
files reports, proxy statements and other information with the Securities and
Exchange Commission. Copies of such reports, proxy statements and other
information may be inspected and copied at certain offices of the Commission and
at the offices of the New York Stock Exchange, Inc. at the addresses listed
under "Available Information" in the accompanying Prospectus. To the best of
Holdings' knowledge, based upon currently available public documents, as of the
date of this Prospectus Supplement Black & Decker is eligible to use Form S-3
under the Securities Act of 1933, as amended, for securities offerings.
THIS PROSPECTUS SUPPLEMENT RELATES ONLY TO THE YEELDS OFFERED HEREBY AND
DOES NOT RELATE TO THE BLACK & DECKER COMMON STOCK. ALL DISCLOSURES CONTAINED IN
THIS PROSPECTUS SUPPLEMENT REGARDING BLACK & DECKER ARE DERIVED FROM THE
PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING PARAGRAPH. NEITHER
HOLDINGS NOR THE UNDERWRITER HAS VERIFIED EITHER THE ACCURACY OR THE
COMPLETENESS OF THE INFORMATION CONCERNING BLACK & DECKER INCLUDED THEREIN.
THUS, THERE CAN BE NO ASSURANCE THAT ALL EVENTS OCCURRING PRIOR OR SUBSEQUENT 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 BLACK & DECKER COMMON STOCK HAVE BEEN PUBLICLY
DISCLOSED. BECAUSE THE PRINCIPAL AMOUNT OF THE YEELDS PAYABLE AT MATURITY IS
RELATED TO THE TRADING PRICE OF BLACK & DECKER COMMON STOCK, SUCH EVENTS, IF
ANY, WOULD ALSO AFFECT THE TRADING PRICE OF THE YEELDS. HOLDINGS DOES NOT INTEND
TO FURNISH TO HOLDERS OF YEELDS SUBSEQUENT INFORMATION WITH RESPECT TO BLACK &
DECKER.
PRICE RANGE OF BLACK & DECKER COMMON STOCK
Black & Decker Common Stock is listed and traded on the New York Stock
Exchange ("NYSE") under the symbol "BDK". The following table sets forth, for
the periods indicated, the high and low Closing Prices for Black & Decker Common
Stock as reported on the NYSE Composite Tape.
- --------------------------------------------------------------------------------
HIGH LOW
- ------------------------------------------------------------------------------
1993
- -----------------------------------------------------------------------------
First Quarter $19 5/8 $16 3/4
- -----------------------------------------------------------------------------
Second Quarter........................... 21 5/8 17 1/2
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Third Quarter............................ 22 1/4 20
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Fourth Quarter........................... 22 7/8 18 3/4
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1994
- -----------------------------------------------------------------------------
First Quarter............................ 22 1/8 19 1/4
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Second Quarter........................... 20 3/4 17 1/4
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Third Quarter............................ 23 1/8 17 1/8
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Fourth Quarter........................... 25 3/4 21 1/4
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1995
- -------------------------------------------------------------------------------
First Quarter............................ 29 3/4 23 1/8
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Second Quarter........................... 33 28 1/4
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Third Quarter............................ 34 1/2 30 1/2
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Fourth Quarter........................... 37 7/8 32 7/8
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1996
- ------------------------------------------------------------------------------
First Quarter............................ 38 30 3/4
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Second Quarter........................... 41 1/4 35 1/8
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Third Quarter (through September 4, 1996) 41 1/8 34 1/2
- ------------------------------------------ ------------------------------------
Black & Decker paid a dividend of $0.10 per share in each quarter of
fiscal year 1995. Black & Decker paid a dividend of $0.12 per share in each of
the first two quarters of 1996 and declared a dividend of $0.12 per share on
July 18, 1996 payable September 27, 1996. Holdings makes no representation as to
the amount of dividends, if any, that Black & Decker will pay in the future. In
any event, beneficial holders of YEELDS ("Holders") will not be entitled to
receive any dividends that may be payable on Black & Decker Common Stock.
<PAGE>
DESCRIPTION OF SECURITIES
General
The YEELDS 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 YEELDS 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 YEELDS 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 the
locations of other defined terms used herein.
The aggregate number of YEELDS to be issued will be 126,646. The
Securities will be issued in denominations of $999,988.92 and multiples of
$39.48 in excess thereof. The YEELDS will mature on August 31, 1998 subject to
extension in the case of certain Non-Trading Days. At maturity, the Holder of a
YEELD will be entitled to receive the principal amount, which will equal the
lesser of (a) 136% of the Issue Price or (b) the Closing Price per share of the
Black & Decker Common Stock, subject to adjustment as a result of certain
dilution events (see "Dilution Adjustments" below), on the maturity date. Lehman
Brothers Inc., acting as the calculation agent, shall determine the principal
amount due at maturity.
The "Closing Price" of any security on any date of determination means the
closing sale price or last reported sale price of such security on the NYSE
Composite Tape on such date or, if such security is not listed for trading on
the NYSE on any such date, on such other national securities exchange or
association that is the primary market for the trading of such security. A
"Trading Day" is defined as a Business Day on which the security the Closing
Price of which is being determined (a) is not suspended from trading on any
national securities exchange or association at the close of business and (b) has
traded at least once on the national securities exchange or association that is
the primary market for the trading of such security. "Business Day" with respect
to the YEELDS means any day that is not a Saturday, a Sunday or a day on which
the NYSE, the American Stock Exchange or any other national securities exchange
is authorized or obligated by law or executive order to close.
The maximum aggregate principal amount payable at maturity of the YEELDS
is therefore $6,799,978.35. Holdings in the future may, however, "reopen" the
issue of YEELDS and issue additional YEELDS at a later time or issue additional
Debt Securities or other securities with terms similar to those of the YEELDS,
and such issuances may affect the trading value of the YEELDS.
The YEELDS are not redeemable by Holdings or repayable at the option of
any Holder prior to maturity and are not subject to any sinking fund. Upon the
occurrence of an Event of Default with respect to the YEELDS, Holders may
accelerate the maturity of the YEELDS, 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.
Non-Trading Days
In the event that August 31, 1998 is not a Trading Day (a "Non-Trading
Day"), the YEELDS will not mature on August 31, 1998, but the maturity of the
YEELDS will be extended until the next Trading Day and the principal amount
payable at maturity will be based on Closing Price of Black & Decker Common
Stock on such Trading Day. The YEELDS will continue to accrue interest until the
principal amount of the YEELDS is paid at maturity, which, in the event that the
maturity of the YEELDS is extended as a result of a Non-Trading Day, will be
payable to the Holders of YEELDS on the date of such extended maturity.
Interest Payments
Each YEELD will bear interest from September 10, 1996 at the rate of 6% of
the Issue Price per annum (or $2.3688 per annum) until the principal amount
thereof is paid or made available for payment. Interest on the YEELDS will be
payable semi-annually in arrears on each March 1 and September 1 (each an
"Interest Payment Date"), beginning March 1, 1997, and at maturity. Interest on
the YEELDS will be computed on the basis of a 360-day year of twelve 30-day
months. Each payment of interest in respect of an Interest Payment Date will
include interest accrued through the day before such Interest Payment Date. If
an Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
<PAGE>
Dilution Adjustments
The closing price of Black & Decker Common Stock used to calculate the
principal amount of the YEELDS payable at maturity shall be subject to
adjustment as described below to the extent that any of the events requiring
such adjustment occur during the period commencing on the date hereof and ending
at the maturity of the YEELDS:
(i) Black & Decker Common Stock Dividends, Extraordinary Cash Dividends
and Other Distributions. If a dividend or other distribution is declared
(a) on any class of Black & Decker's capital stock (or on the capital
stock of any Black & Decker Survivor, as defined in (iv) below) payable in
shares of Black & Decker Common Stock (or the common stock of any Black &
Decker Survivor) or (b) on Black & Decker Common Stock payable in cash in
an amount greater than 10% of the Closing Price of Black & Decker Common
Stock on the date fixed for the determination of the shareholders of Black
& Decker entitled to receive such cash dividend (an "Extraordinary Cash
Dividend"), then the Closing Price of Black & Decker Common Stock (or the
common stock of any Black & Decker Survivor) at the close of business on
each Trading Day following the date (the "Black & Decker Record Date")
fixed for the determination of the shareholders of Black & Decker (or any
Black & Decker Survivor) entitled to receive such distribution shall (for
purposes of calculating the principal amount of the YEELDS payable at
maturity) be increased by multiplying such Closing Price by a fraction of
which the numerator shall be the sum of (x) the number of shares of Black
& Decker Common Stock (or the common stock of any Black & Decker Survivor)
outstanding on the Black & Decker Record Date plus (y) the number of
shares constituting such distribution or, in the case of an Extraordinary
Cash Dividend, the number of shares of Black & Decker Common Stock that
could be purchased with the amount of such Extraordinary Cash Dividend at
the Closing Price of Black & Decker Common Stock on the Trading Day
immediately subsequent to such Black & Decker Record Date, and the
denominator shall be the number of shares of Black & Decker Common Stock
(or the common stock of any Black & Decker Survivor) outstanding on the
Black & Decker Record Date.
(ii) Subdivisions and Combinations of Black & Decker Common Stock. In
the event that the outstanding shares of Black & Decker Common Stock (or
the common stock of any Black & Decker Survivor) are subdivided into a
greater number of shares, the Closing Price of Black & Decker Common Stock
(or the common stock of any Black & Decker Survivor) used to calculate the
principal amount of the YEELDS payable at maturity on each Trading Day
following the date on which such subdivision becomes effective will be
proportionately increased, and, conversely, in the event that the
outstanding shares of Black & Decker Common Stock (or the common stock of
any Black & Decker Survivor) are combined into a smaller number of shares,
such Closing Price will be proportionately reduced.
(iii) Reclassifications of Black & Decker Common Stock. In the event
that Black & Decker Common Stock (or the common stock of any Black &
Decker Survivor) is changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (except to the extent otherwise provided in
(i) or (ii) above or pursuant to a consolidation, merger, sale, transfer,
lease or conveyance, liquidation, dissolution or winding-up, as described
in (iv) below), the principal amount of the YEELDS payable at maturity
shall be calculated by using the Closing Prices of the shares of stock
into which a share of Black & Decker Common Stock (or the common stock of
any Black & Decker Survivor) was changed on each Trading Day following the
effectiveness of such change.
(iv) Dissolution of Black & Decker; Mergers, Consolidations or Sales of
Assets in which Black & Decker is not the Surviving Entity; Spin-Offs. In
the event of any (A) consolidation or merger of Black & Decker, or any
surviving entity or subsequent surviving entity of Black & Decker (a
"Black & Decker Survivor") with or into another entity (other than a
consolidation or merger in which Black & Decker is the surviving entity),
(B) sale, transfer, lease or conveyance of all or substantially all of the
assets of Black & Decker or any Black & Decker Survivor, (C) liquidation,
dissolution or winding-up of Black & Decker or any Black & Decker Survivor
or (D) any declaration of a distribution on Black & Decker Common Stock of
the common stock of any subsidiary of Black & Decker (a "Black & Decker
Spin-Off") (any of the events described in (A), (B), (C) or (D), a
"Reorganization Event"), the principal amount of a YEELD payable at
maturity will be the value of the cash and other property (including
securities) received by a holder of a share of Black & Decker Common Stock
in any such Reorganization Event plus, in the case of an Black & Decker
Spin-Off, the value of a share of Black & Decker Common Stock, or, to the
extent that such holder obtains securities in any Reorganization Event,
the value of the cash and other property received by the holder of such
securities in any subsequent Reorganization Event. For purposes of
determining the principal amount payable at the maturity of the YEELDS,
the value of (A) any cash and other property (other than listed
securities) received in any such Reorganization Event will be an amount
equal to the value of such cash and other property at the effective time
of such Reorganization Event and (B) any property consisting of listed
securities received in any such Reorganization Event will be an amount
equal to the Closing Price of such securities on the maturity date.
Notwithstanding the foregoing, the principal amount of each YEELD payable
at maturity will not, under any circumstances, exceed 136% of the issue price.
<PAGE>
Events of Default and Acceleration
In case an Event of Default with respect to the YEELDS shall have occurred
and be continuing, the amount payable to a Holder upon any acceleration
permitted under the Senior Indenture will be equal to: (i) the principal amount
thereof (determined as though the YEELDS matured on the date of acceleration)
plus (ii) an additional amount, if any, of interest calculated to the date of
payment of such principal amount. See "Description of Securities--Interest
Payments" in this Prospectus Supplement. If a bankruptcy proceeding is commenced
in respect of Holdings, the claim of the Holder of a YEELD may be limited, under
Section 502 (b) (2) of Title 11 of the United States Code, to the principal
amount of the YEELDS plus an additional amount, if any, of contingent interest
calculated as though the date of the commencement of the proceeding was an
Interest Payment Date.
Certificates for Securities
The YEELDS will be evidenced by certificates in fully registered form
(each, a "Certificate"). The Trustee will maintain a register (the "Security
Register") for registering the ownership of and transfers of YEELDS 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 YEELDS evidenced by such Certificate for any purpose
whatsoever, and as the person entitled to exercise the rights represented by the
YEELDS 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 YEELD evidenced by a Certificate is not the registered
holder thereof (for example, if it holds the Certificate through a broker
holding such YEELD 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 number of YEELDS, 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 number of YEELDS.
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 number of YEELDS, 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 principal of, and interest on YEELDS 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; provided,
however, that payment of interest may be made at the option of Holdings by check
mailed to the address of the person entitled thereto as it appears on the books
of the Trustee.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States federal income tax
consequences of the ownership of the YEELDS as of the date hereof. Except where
noted, it deals only with the YEELDS held as capital assets by initial holders
and does not deal with those with special situations, such as dealers in options
or persons who hold a YEELD in the ordinary course of business, financial
institutions, life insurance companies or purchasers holding the YEELDS as part
of a hedging transaction or a "straddle." 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.
No statutory, judicial or administrative authority directly addresses the
characterization of the YEELDS or instruments similar to the YEELDS for United
States federal income tax purposes. As a result, significant aspects of the
United States federal income tax consequences of an investment in the YEELDS are
not certain. No ruling is being requested from the Internal Revenue Service (the
"IRS") with respect to the YEELDS and no assurance can be given that the IRS
will agree with the conclusions expressed herein. Persons considering the
purchase, ownership or disposition of the YEELDS should
<PAGE>
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 YEELD 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 who is not a United States Holder.
By purchasing a YEELD, the holder agrees with the Company to treat for
federal income tax purposes a YEELD as consisting of (i) a debt obligation
("Note") with an issue price equal to the issue price of a YEELD and a fixed
principal amount unconditionally payable at Maturity equal to the principal
amount of a YEELD, bearing interest at the stated interest rate on a YEELD, and
(ii) the application of the proceeds from the principal repayment of the Note at
Maturity to a capped cash-settled forward purchase contract on BDK Common Stock
("Forward Contract").
Taxation of United States Holders
In accordance with the agreement described above as to the federal income
tax treatment of a YEELD, a United States Holder will include currently in
income, as ordinary interest income, payments denominated as interest (including
an interest payment at maturity) that are made with respect to the YEELDS, in
accordance with such holder's regular method of tax accounting. Upon the sale,
exchange, or other disposition of a YEELD, a United States Holder generally will
recognize gain or loss equal to the difference between the amount realized on
the sale or other disposition and the United States Holder's aggregate tax basis
in the YEELDS. Such gain or loss generally will be long-term capital gain or
loss if the United States Holder has held the YEELDS for more than one year at
the time of disposition. At maturity of a YEELD, the Company intends to treat
the gain or loss from the settlement of the Forward Contract as capital gain or
loss although the IRS may take the position that such gain or loss is ordinary.
The distinction between capital gain or loss and ordinary income or loss
is important for purposes of the limitations on a United States Holder's ability
to offset capital losses against ordinary income. In addition, certain
individuals are subject to taxation at a reduced rate on long-term capital
gains.
The IRS may contend that the YEELDS should be characterized for federal
income tax purposes under a different approach than that described above. For
example, the IRS may contend that the YEELDS should be treated as debt
instruments subject to final Treasury regulations dealing with "contingent
payment" debt instruments (the "1996 OID Regulations"). Under the "noncontingent
bond method" described in the 1996 OID Regulations, a United States Holder would
accrue interest income each year based on the comparable yield and projected
payment schedule of the YEELDS. Under this method, the timing of a United States
Holder's income would be accelerated. Moreover, in the event that the amount
payable at maturity on the YEELDS is greater (or less) than the amount provided
in the projected payment schedule, such difference would be treated as a
positive (or negative) adjustment. A positive adjustment is treated as
additional interest income. A negative adjustment is treated first as a
reduction of interest accrued for such year and then as an ordinary loss to the
extent it does not exceed such Holder's prior interest inclusions on the YEELD.
Any additional negative adjustment would be treated as a capital loss.
Similarly, any gain realized by a United States Holder on the sale or exchange
of a YEELD would be treated as interest income, and any loss would be treated as
an ordinary loss to the extent it does not exceed prior interest inclusions and
capital loss thereafter.
Taxation of Non-United States Holders
Based on the treatment of the YEELDS described above and subject to the
discussion below concerning backup withholding, in the case of a Non-United
States Holder of a YEELD, payments made with respect to such YEELD (other than
payments of interest to certain parties related to the Company), including
payments on any sale or disposition of such YEELD, should not be subject to
United States withholding tax, provided that such holder complies with
applicable certification requirements.
As discussed above, alternative characterizations of the YEELDS for
federal income tax purposes are possible, some of which may require withholding
tax to be imposed with respect to payments on the YEELDS. Should payments with
respect to the YEELDS become subject to withholding tax, the Company will
withhold tax at the statutory rate. However, until the IRS provides further
guidance, no tax will be withheld. Non-United States Holders should consult
their own tax advisers.
<PAGE>
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to payments on a
YEELD and to the proceeds of sale of a YEELD 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 payments made by the Company or any paying agent to Non-United States
Holders if such holder certifies as to its non-U.S. status and the payor does
not have actual knowledge that the beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply
if payments on a YEELD are paid or collected by a foreign office of a custodian,
nominee or other foreign agent on behalf of the beneficial owner of such YEELDS,
or if a foreign office of a broker (as defined in applicable Treasury
regulations) pays the proceeds of the sale of a YEELD to the owner thereof. If,
however, such nominee, custodian, agent or broker is, for United States federal
income tax purposes, a U.S. 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 U.S. person and
certain other conditions are met or (2) the beneficial owner otherwise
establishes an exemption. Temporary Treasury regulations provide that the
Treasury is considering whether backup withholding will apply with respect to
such payments of principal, interest or the proceeds of a sale that are not
subject to backup withholding under the current regulations.
Payments on a YEELD paid to the beneficial owner of a YEELD 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 YEELD, will be subject to
both backup withholding and information reporting unless the beneficial owner
certifies as to its non-U.S. status and the payor does not have actual knowledge
that the beneficial owner is a United states person or otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement dated as of September 5, 1996 (the "Underwriting Agreement") Holdings
has agreed to sell to Lehman Brothers Inc. (the "Underwriter"), and the
Underwriter has agreed to purchase, all of the YEELDS.
Holdings has been advised that the Underwriter proposes initially to offer
the YEELDS to the public at the public offering price set forth on the cover
page of this Prospectus Supplement. After the initial public offering, the
public offering price and may be changed.
Lehman Brothers Inc. may, but is not obligated to, purchase and sell YEELDS
for its own account for the purpose of making a market in YEELDS.
This Prospectus Supplement together with the accompanying Prospectus may
also be used by Lehman Brothers Inc. in connection with offers and sales of
YEELDS 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.
Lehman Brothers Inc. is a wholly owned subsidiary of Holdings.
The participation of Lehman Brothers Inc. in the offer and sale of the YEELDS
complies with the requirements of Schedule E of the By-Laws of the NASD
regarding underwriting securities of an affiliate.
Holdings has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act.
<PAGE>
GLOSSARY
Definitions for the following terms are set forth in this prospectus
Supplement at the pages indicated:
Page on Which
Term Term is Defined
Black & Decker................................................. Cover
Black & Decker Common Stock.................................... Cover
Black & Decker Record Date..................................... S-9
Black & Decker Spin-Off........................................ S-9
Black & Decker Survivor........................................ S-9
Business Day................................................... S-8
Certificate.................................................... S-10
Closing Price.................................................. S-8
Code........................................................... S-10
Extraordinary Cash Dividend.................................... S-9
Forward Contract............................................... S-11
Holders........................................................ S-7
Holdings....................................................... S-3
Interest Payment Date.......................................... S-3
IRS............................................................ S-10
Issue Price.................................................... S-3
1996 OID Regulations........................................... S-11
NYSE........................................................... S-7
Non-Trading Day................................................ S-8
Note........................................................... S-11
registered holder.............................................. S-10
Reorganization Event........................................... S-9
Securities..................................................... S-3
Security....................................................... Cover
Security Register.............................................. S-10
Trading Day.................................................... S-8
Underwriter.................................................... S-12
Underwriting Agreement......................................... S-12
United States Holder........................................... S-11
YEELD.......................................................... Cover
YEELDS......................................................... Cover
<PAGE>
PROSPECTUS
LEHMAN BROTHERS HOLDINGS INC.
Debt Securities, Debt Warrants, Currency Warrants,
Index Warrants and Interest Rate Warrants
---------------------------
Lehman Brothers Holdings Inc. ("Holdings") may offer from time to time (i)
unsecured debt securities (the "Debt Securities") consisting of debentures,
notes and/or other evidences of indebtedness, (ii) warrants to purchase Debt
Securities ("Debt Warrants"), (iii) warrants entitling the holders thereof to
receive from Holdings, upon exercise, the cash value of the right to purchase
("Currency Call Warrants") and to sell ("Currency Put Warrants" and, together
with the Currency Call Warrants, the "Currency Warrants") a certain amount of
one currency or currency unit for a certain amount of a different currency or
currency unit, all as shall be designated by Holdings at the time of offering,
(iv) warrants entitling the holders thereof to receive from Holdings, upon
exercise, an amount in cash determined by reference to decreases ("Index Put
Warrants") or increases ("Index Call Warrants") in the level of a specified
index (an "Index") which may be based on one or more U.S. or foreign stocks,
bonds or other securities, one or more U.S. or foreign interest rates, one or
more currencies or currency units, or any combination of the foregoing, or
determined by reference to the differential between any two Indices ("Index
Spread Warrants" and, together with the Index Put Warrants and the Index Call
Warrants, the "Index Warrants") and (v) warrants entitling the holders thereof
to receive from Holdings, upon exercise, an amount in cash determined by
reference to decreases ("Interest Rate Put Warrants") or increases ("Interest
Rate Call Warrants" and, together with the Interest Rate Put Warrants, the
"Interest Rate Warrants") in the yield or closing price of one or more specified
debt instruments issued either by the United States government or by a foreign
government (the "Debt Instrument"), in the interest rate or interest rate swap
rate established from time to time by one or more specified financial
institutions (the "Rate") or in any specified combination of Debt Instruments
and/or Rates, for aggregate proceeds of up to U.S.$533,706,470, or the
equivalent thereof in one or more foreign currencies or foreign currency units
(such amount being the aggregate proceeds to Holdings from all Debt Securities,
Debt Warrants, Currency Warrants, Index Warrants and Interest Rate Warrants
(collectively, the "Securities") issued and the exercise price of any Debt
Securities issuable upon the exercise of any Debt Warrants). The Securities may
be offered either together or separately and in one or more series in amounts,
at prices and on terms to be determined at the time of the offering. Unless
otherwise specified in an applicable Prospectus Supplement, the Securities will
be sold for, and the Debt Warrants, Currency Warrants, Index Warrants or
Interest Rate Warrants (collectively, the "Warrants") will be exercisable in,
United States dollars, and the principal of and interest, if any, on the Debt
Securities and the cash payments, if any, in respect of the Currency Warrants,
the Index Warrants and the Interest Rate Warrants will be payable in United
States dollars. If this Prospectus is being delivered in connection with the
offering and sale of Debt Securities, the specific designation, priority,
aggregate principal amount, the currency or currency unit for which the Debt
Securities may be purchased, the currency or currency unit in which the
principal and interest, if any, is payable, the rate (or method of calculation)
and time of payment of interest, if any, authorized denominations, maturity, any
redemption terms, any listing on a securities exchange and the initial public
offering price, a discussion of certain United States federal income tax,
accounting or other special considerations applicable thereto and any other
terms in connection with such offering and sale are set forth in an applicable
Prospectus Supplement. If this Prospectus is being delivered in connection with
the offering and sale of Warrants, the specific designation, aggregate number of
warrants, the currency or currency unit for which the warrants may be purchased,
the currency or currency unit in which the cash settlement value or the exercise
price, if applicable, is payable, the method of calculation of the cash
settlement value, if applicable, the date on which such warrants become
exercisable and the expiration date, provisions, if any, for the automatic
exercise and/or cancellation prior to the expiration date, the initial public
offering price, a discussion of certain United States federal income tax,
accounting or other special considerations applicable thereto and any other
terms in connection with such offering and sale will be set forth in an
applicable Prospectus Supplement.
The Debt Securities and the Debt Warrants may be issued in registered form
or bearer form with, in the case of Debt Securities, coupons attached. The
Currency Warrants, Index Warrants and Interest Rate Warrants will be issued in
registered form only. In addition, all or a portion of the Securities of a
series may be issued in global form. Debt Securities in bearer form will be
offered only outside the United States to non-United States persons and to
offices located outside the United States of certain United States financial
institutions.
See "Description of Debt Securities--Limitations on Issuance of Bearer
Securities."
Discussions of certain United States federal income taxation consequences
to holders of Securities and certain of the risks associated with an investment
in Securities will be set forth in the applicable Prospectus Supplement.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
The Securities will be sold either through underwriters, dealers or
agents, or directly by Holdings. The applicable Prospectus Supplement sets forth
the names of any underwriters or agents (which may include Lehman Brothers Inc.,
a subsidiary of Holdings ("Lehman Brothers")) involved in the sale of the
Securities in respect of which this Prospectus is being delivered, the proposed
amounts, if any, to be purchased by underwriters and the compensation, if any,
of such underwriters or agents.
---------------------------
This Prospectus together with the applicable Prospectus Supplement may
also be used by Lehman Brothers, in connection with offers and sales of
Securities related to market making transactions, by and through Lehman
Brothers, at negotiated prices related to prevailing market prices at the time
of sale or otherwise. Lehman Brothers may act as principal or agent in such
transactions.
May 6, 1996
<PAGE>
AVAILABLE INFORMATION
Holdings is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "SEC"). Such reports and information may be inspected and copied
at the public reference facilities maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the SEC:
New York Regional Office, 7 World Trade Center, New York, New York 10048; and
Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500 W. Madison
Street, Chicago, Illinois 60661-2511; and copies of such material can be
obtained from the Public Reference Section of the SEC, Washington, D.C. 20549,
at prescribed rates. Holdings' 8 3/4% Notes Due 2002 are listed on the New York
Stock Exchange, Inc. (the "Exchange") and Holdings' $55 Million Serial Zero
Coupon Senior Notes Due May 16, 1998, FT-SE Eurotrack 200 Index Call Warrants
Expiring June 4, 1996, 7 1/4% Oracle Yield Enhanced Equity Linked Debt
Securities(sm) Due 1996, 6 1/2% Amgen Yield Enhanced Equity Linked Debt
Securities Due 1997, Stock Upside Note Securities(sm) Due 2000 and the AMEX Hong
Kong 30 Index Call Warrants Expiring January 23, 1998 are listed on the American
Stock Exchange, Inc. and reports and other information concerning Holdings may
also be inspected at the offices of the Exchange at 20 Broad Street, New York,
New York 10005 and at the offices of the American Stock Exchange, Inc., 86
Trinity Place, New York, New York 10006.
Holdings has filed with the SEC a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further information,
reference is hereby made to the Registration Statement.
---------------------------
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by Holdings with the SEC pursuant
to the Exchange Act are hereby incorporated by reference in this Prospectus:
(1) Holdings' Annual Report on Form 10-K for the year ended November
30, 1995.
(2) Holdings' Quarterly Report on Form 10-Q for the quarter ended
February 29, 1996.
(3) Holdings' Current Reports on Form 8-K dated January 4, 1996 and March 20,
1996.
Each document filed by Holdings pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities offered by an applicable
Prospectus Supplement shall be deemed to be incorporated by reference into this
Prospectus from the date of filing of such document. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of the Registration
Statement and this Prospectus to the extent that a statement contained herein,
in an applicable Prospectus Supplement or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Prospectus.
Holdings will provide without charge to each person, including any
beneficial owner of any Security, to whom a copy of this Prospectus is
delivered, upon the written or oral request of any such person, a copy of any or
all of the documents which are incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to Mary J. Capko,
the Controller's Office, Lehman Brothers Holdings Inc., 3 World Financial
Center, 27th Floor, New York, New York 10285 (telephone (212) 526-0660).
THE COMPANY
Lehman Brothers Holdings Inc. (together with its consolidated subsidiaries
hereinafter referred to as the "Company" unless the context otherwise requires)
is one of the leading global investment banks serving institutional, corporate,
government and high net worth individual clients and customers. The Company's
worldwide headquarters in New York and regional headquarters in London and Tokyo
are complemented by offices in additional locations in the United States,
Europe, the Middle East, Latin and South America and the Asia Pacific region.
The Company's business includes capital raising for clients through
securities underwriting and direct placements; corporate finance and strategic
advisory services; merchant banking; securities sales and trading; institutional
asset management; research; and the trading of foreign exchange, derivative
products and certain commodities. The Company acts as a market maker in all
major equity and fixed income products in both the domestic and international
markets.
<PAGE>
Lehman Brothers is a member of all principal securities and commodities
exchanges in the United States, as well as the National Association of
Securities Dealers, Inc. ("NASD"), and holds memberships or associate
memberships on several principal international securities and commodities
exchanges, including the London, Tokyo, Hong Kong, Frankfurt and Milan stock
exchanges.
Holdings was incorporated in Delaware on December 29, 1983. Holdings'
principal executive offices are located at 3 World Financial Center, New York,
New York 10285 (telephone (212) 526-7000).
USE OF PROCEEDS
Except as otherwise may be set forth in an applicable Prospectus
Supplement accompanying this Prospectus, Holdings intends to apply the net
proceeds from the sale of the Securities for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for each of the three years in the period ended December 31, 1993,
the eleven months ended November 30, 1994, the twelve months ended November 30,
1995 and for the three months ended February 29, 1996:
- --------------------------------------------------------------------------------
Year Ended December 31,
Eleven Months Twelve Months Three Months
Ended Ended Ended
November 30, November 30, February 29,
- --------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------
1.03 * 1.00 1.03 1.03 1.05
- --------------------------------------------------------------------------------
* Earnings were inadequate to cover fixed charges and would have had to
increase approximately $247 million in order to cover the deficiencies
for the period ended December 31, 1992.
In computing the ratio of earnings to fixed charges, "earnings" consist of
earnings from continuing operations before income taxes and fixed charges.
"Fixed charges" consist principally of interest expense and one-third of office
rentals and one-fifth of equipment rentals, which are deemed to be
representative of the interest factor.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either Senior Debt (as defined below)
or Subordinated Debt (as defined below) of Holdings. The Debt Securities
constituting Senior Debt will be issued under an indenture, dated as of
September 1, 1987, between Holdings and Citibank, N.A., Trustee, as supplemented
and amended by Supplemental Indentures dated as of November 25, 1987, as of
November 27, 1990, as of September 13, 1991, as of October 4, 1993 and as of
October 1, 1995 (the "Senior Indenture"), and the Debt Securities constituting
Subordinated Debt will be issued under an indenture between Holdings and
Chemical Bank, Trustee (the "Subordinated Indenture"). The Senior Indenture and
the Subordinated Indenture are hereinafter collectively referred to as the
"Indentures" and, individually, as an "Indenture". Each Indenture will
incorporate by reference certain Standard Multiple-Series Indenture Provisions,
filed with the SEC on July 30, 1987 and as amended and refiled with the SEC on
November 16, 1987. This Prospectus contains descriptions of all material
provisions of the Indentures. The summary of such provisions of the Indentures
does not purport to be complete; copies of such Indentures are filed as exhibits
to the Registration Statement of which this Prospectus is a part. All articles
and sections of the applicable Indenture, and all capitalized terms set forth
below, have the meanings specified in the applicable Indenture.
General
Neither Indenture limits the amount of debentures, notes or other
evidences of indebtedness which may be issued thereunder. Each Indenture
provides that Debt Securities may be issued from time to time in one or more
series. Since Holdings, as a holding company, does not have any significant
assets other than the equity securities of its subsidiaries, its cash flow and
consequent ability to service its debt, including the Debt Securities, are
dependent upon the earnings of its subsidiaries and the distribution of those
earnings to Holdings, or upon loans or other payments of funds by those
subsidiaries to Holdings. Holdings' subsidiaries, including Lehman Brothers, are
separate and distinct legal entities and will have no obligation, contingent or
otherwise, to pay any interest or principal on the Debt Securities or to make
any funds available therefor, whether by dividends, loans or other payments.
Dividends, loans and other payments by Lehman Brothers are restricted by net
capital and other rules of various regulatory bodies. See "Capital
Requirements." The payment of dividends by Holdings' subsidiaries is contingent
upon the earnings of those subsidiaries and is subject to various business
considerations in addition to net capital requirements and contractual
restrictions.
<PAGE>
Since the Debt Securities will be obligations of a holding company, the
ability of holders of the Debt Securities to benefit from any distribution of
assets of any subsidiary upon the liquidation or reorganization of such
subsidiary is subordinate to the prior claims of present and future creditors of
such subsidiary.
Reference is made to the applicable Prospectus Supplement for the
following terms and other information with respect to the Debt Securities being
offered thereby: (1) the title of such Debt Securities and whether such Debt
Securities will be Senior Debt or Subordinated Debt; (2) any limit on the
aggregate principal amount of such Debt Securities; (3) whether the Debt
Securities are to be issuable as Registered Securities or Bearer Securities or
both, and if Bearer Securities are issued, whether Bearer Securities may be
exchanged for Registered Securities and the circumstances and places for such
exchange, if permitted; (4) whether the Debt Securities are to be issued in
whole or in part in the form of one or more temporary or permanent global Debt
Securities ("Global Securities") in registered or bearer form and, if so, the
identity of the depositary, if any, for such Global Security or Securities; (5)
the date or dates (or manner of determining the same) on which such Debt
Securities will mature; (6) the rate or rates (or manner of determining the
same) at which such Debt Securities will bear interest, if any, and the date or
dates from which such interest will accrue; (7) the dates (or manner of
determining the same) on which such interest will be payable and the Regular
Record Dates for such Interest Payment Dates for Debt Securities which are
Registered Securities, and the extent to which, or the manner in which, any
interest payable on a temporary or permanent global Debt Security on an Interest
Payment Date will be paid if other than in the manner described under "Global
Securities" below; (8) any mandatory or optional sinking fund or analogous
provisions; (9) each office or agency where, subject to the terms of the
applicable Indenture as described below under "Payment and Paying Agents", the
principal of and premium, if any, and interest, if any, on the Debt Securities
will be payable and each office or agency where, subject to the terms of the
applicable Indenture as described below under "Denominations, Registration and
Transfer," the Debt Securities may be presented for registration of transfer or
exchange; (10) the date, if any, after which, and the price or prices in the
currency or currency unit in which, such Debt Securities are payable pursuant to
any optional or mandatory redemption provision; (11) any provisions for payment
of additional amounts for taxes and any provision for redemption, in the event
the Company must comply with reporting requirements in respect of a Debt
Security or must pay such additional amounts in respect of any Debt Security;
(12) the terms and conditions, if any, upon which the Debt Securities of such
series may be repayable prior to maturity at the option of the holder thereof
(which option may be conditional) and the price or prices in the currency or
currency unit in which such Debt Securities are payable; (13) the denominations
in which any Debt Securities which are Registered Securities will be issuable if
other than denominations of $1,000 and any integral multiple thereof, and the
denomination or denominations in which any Debt Securities which are Bearer
Securities will be issuable if other than the denomination of $5,000; (14) the
currency, currencies or currency units for which such Debt Securities may be
purchased and the currency, currencies or currency units in which the principal
of and interest, if any, on such Debt Securities may be payable; (15) any index
used to determine the amount of payments of principal of and premium, if any,
and interest, if any, on such Debt Securities; and (16) other terms of the Debt
Securities. (Section 301.)
If any of the Debt Securities are sold for foreign currencies or foreign
currency units or if the principal of or interest, if any, on any series of Debt
Securities is payable in foreign currencies or foreign currency units, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such issue of Debt Securities and such currencies or currency
units will be set forth in an applicable Prospectus Supplement relating thereto.
One or more series of Debt Securities may be sold at a substantial
discount below their stated principal amount, bearing no interest or interest at
a rate which at the time of issuance is below market rates. Federal income tax
consequences and special considerations applicable to any such series will be in
an applicable Prospectus Supplement.
Senior Debt
The Debt Securities constituting part of the senior debt of Holdings (the
"Senior Debt") will rank equally with all other unsecured debt of Holdings
except Subordinated Debt.
Subordinated Debt
The Debt Securities constituting part of the subordinated debt of Holdings
(the "Subordinated Debt") will be subordinate and junior in the right of
payment, to the extent and in the manner set forth in the Subordinated
Indenture, to all present or future Senior Debt. "Senior Debt" is defined to
mean (a) any indebtedness for money borrowed or evidenced by bonds, notes,
debentures or similar instruments, (b) indebtedness under capitalized leases,
(c) any indebtedness representing the deferred and unpaid purchase price of any
property or business, and (d) all deferrals, renewals, extensions and refundings
of any such indebtedness or obligation; except that the following does not
constitute Senior Debt: (i) indebtedness evidenced by the Subordinated Debt,
(ii) indebtedness which is expressly made equal in right of payment with the
Subordinated Debt or subordinate and subject in right of payment to the
Subordinated Debt, (iii) indebtedness for goods or materials purchased in the
ordinary course of business or for services obtained in the ordinary course of
business or indebtedness consisting of trade payables or (iv) indebtedness which
is subordinated to any obligation of Holdings of the type specified in clauses
(a) through (d) above. The effect of clause
<PAGE>
(iv) is that Holdings may not issue, assume or guaranty any indebtedness for
money borrowed which is junior to the Senior Debt and senior to the Subordinated
Debt. (Subordinated Indenture Section 1401.)
Upon the failure to pay the principal or premium, if any, on Senior Debt
when due or upon the maturity of any Senior Debt by lapse of time, acceleration
or otherwise, all principal thereof, interest thereon, if any, and other amounts
due in connection therewith shall first be paid in full, before any payment is
made on account of the principal, premium, if any, or interest, if any, on the
Subordinated Debt or to acquire any of the Subordinated Debt or on account of
the redemption, sinking fund or analogous provisions in the Subordinated
Indenture. (Subordinated Indenture Section 1402.) Upon any distribution of
assets of Holdings pursuant to any dissolution, winding up, liquidation or
reorganization of Holdings, payment of the principal, premium, if any, and
interest, if any, on the Subordinated Debt will be subordinated, to the extent
and in the manner set forth in the Subordinated Indenture, to the prior payment
in full of all Senior Debt. (Subordinated Indenture Section 1403.) By reason of
such subordination, in the event of insolvency, creditors of Holdings who are
holders of Senior Debt may recover more ratably than the holders of Subordinated
Debt.
Denominations, Registration and Transfer
Unless otherwise provided with respect to a series of Debt Securities, the
Debt Securities will be issuable as Registered Securities without coupons and in
denominations of $1,000 or any integral multiple thereof. Debt Securities of a
series may be issuable in whole or in part in the form of one or more Global
Securities, as described below under "Global Securities." One or more Global
Securities will be issued in a denomination or aggregate denominations equal to
the aggregate principal amount of Debt Securities of the series to be
represented by such Global Security or Securities. If so provided with respect
to a series of Debt Securities, Debt Securities of such series will be issuable
solely as Bearer Securities with coupons attached or as both Registered
Securities and Bearer Securities. (Section 201.)
In connection with the sale during the "restricted period" as defined in
Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury Regulations
(generally, the first 40 days after the closing date and, with respect to unsold
allotments, until sold) no Bearer Security shall be mailed or otherwise
delivered to any location in the United States (as defined under "Limitations on
Issuance of Bearer Securities"). A Bearer Security in definitive form (including
interests in a permanent Global Security) may be delivered only if the Person
entitled to receive such Bearer Security furnishes written certification, in the
form required by the applicable Indenture, to the effect that such Bearer
Security is not owned by or on behalf of a United States person (as defined
under "Limitations on Issuance of Bearer Securities"), or, if a beneficial
interest in such Bearer Security is owned by or on behalf of a United States
person, that such United States person (i) acquired and holds the Bearer
Security through a foreign branch of a United States financial institution, (ii)
is a foreign branch of a United States financial institution purchasing for its
own account or resale (and in either case, (i) or (ii), such financial
institution agrees to comply with the requirements of Section 1650)(j)(3)(A),
(B) or (C) of the Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations thereunder) or (iii) is a financial institution purchasing for
resale during the restricted period only to non-United States persons outside
the United States (Sections 303, 304). See "Global Securities--Bearer Debt
Securities" and "Limitations on Issuance of Bearer Securities."
Registered Securities of any series (other than a Global Security) will be
exchangeable for other Registered Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations. In
addition, if Debt Securities of any series are issuable as both Registered
Securities and as Bearer Securities, at the option of the Holder upon request
confirmed in writing, and subject to the terms of the applicable Indenture,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such series will be exchangeable into Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. Unless otherwise indicated in an
applicable Prospectus Supplement, any Bearer Security surrendered in exchange
for a Registered Security between a Regular Record Date or a Special Record Date
and the relevant date for payment of interest shall be surrendered without the
coupon relating to such date for payment of interest and interest will not be
payable in respect of the Registered Security issued in exchange for such Bearer
Security, but will be payable only to the Holder of such coupon when due in
accordance with the terms of the applicable Indenture. (Section 305.) Except as
provided in an applicable Prospectus Supplement, Bearer Securities will not be
issued in exchange for Registered Securities.
Debt Securities may be presented for exchange as provided above, and
Registered Securities (other than a Global Security) may be presented for
registration of transfer (with the form of transfer endorsed thereon duly
executed), at the office of the Security Registrar or at the office of any
transfer agent designated by Holdings for such purpose with respect to any
series of Debt Securities and referred to in an applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental charges as described in each Indenture. Such transfer or exchange
will be effected upon the Security Registrar or such transfer agent, as the case
may be, being satisfied with the documents of title and identity of the person
making the request. Holdings has appointed each Trustee as Security Registrar
under the applicable Indenture. (Section 305). If a Prospectus Supplement refers
to any transfer agents (in addition to the Security Registrar) initially
designated by Holdings with respect to any series of Debt Securities, Holdings
may at any time rescind the designation of any such transfer agent or approve a
change in the location through which any such transfer agent acts, except that,
if Debt Securities of a series are issuable only as Registered Securities,
<PAGE>
Holdings will be required to maintain a transfer agent in each Place of Payment
for such series and, if Debt Securities of a series are issuable as Bearer
Securities, Holdings will be required to maintain (in addition to the Security
Registrar) a transfer agent in a Place of Payment for such series located
outside the United States. Holdings may at any time designate additional
transfer agents with respect to any series of Debt Securities. (Section 1002.)
In the event of any redemption in part, Holdings shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and ending at the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities, the
day of the first publication of the relevant notice of redemption or, if Debt
Securities of the series are also issuable as Registered Securities and there is
no publication, the mailing of the relevant notice of redemption; (ii) register
the transfer of or exchange any Registered Security, or portion thereof, called
for redemption, except the unredeemed portion of any Registered Security being
redeemed in part; or (iii) exchange any Bearer Security called for redemption,
except to exchange such Bearer Security for a Registered Security of that series
and like tenor which is immediately surrendered for redemption. (Section 305.)
Payment and Paying Agents
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Bearer Securities will
be payable, subject to any applicable laws and regulations, at the offices of
such Paying Agents outside the United States as Holdings may designate from time
to time, at the option of the Holder, by check or by transfer to an account
maintained by the payee with a bank located outside the United States. (Sections
307 and 1002.) Unless otherwise indicated in an applicable Prospectus
Supplement, payment of interest on Bearer Securities on any Interest Payment
Date will be made only against surrender of the coupon relating to such Interest
Payment Date. (Section 1001.) No payment of interest on a Bearer Security will
be made unless on the earlier of the date of the first such payment by Holdings
or the delivery by Holdings of the Bearer Security in definitive form (including
interests in a permanent Global Security) (the "Certification Date"), a written
certificate in the form and to the effect described under "Denominations,
Registration and Transfer" is provided to Holdings. No payment with respect to
any Bearer Security will be made at any office or agency of Holdings in the
United States or by check mailed to any address in the United States or by
transfer to an account maintained with a bank located in the United States.
Notwithstanding the foregoing, payment of principal of (and premium, if any) and
interest on Bearer Securities denominated and payable in U.S. dollars will be
made at the office of Holdings' Paying Agent in the Borough of Manhattan, The
City of New York if, and only if, payment of the full amount thereof in U.S.
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
(Section 1002.)
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Registered Securities
(other than a Global Security) will be made at the office of such Paying Agent
or Paying Agents as Holdings may designate from time to time, except that at the
option of Holdings payment of any interest may be made (i) by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) by wire transfer to an account maintained by the
Person entitled thereto as specified in the Security Register. (Sections 305,
307, 1002.) Unless otherwise indicated in an applicable Prospectus Supplement,
payment of any instalment of interest on Registered Securities will be made to
the Person in whose name such Registered Security is registered at the close of
business on the Regular Record Date for such interest payment. (Section 307.)
Unless otherwise indicated in an applicable Prospectus Supplement, the
principal office of each Trustee under the applicable Indenture in The City of
New York will be designated as Holdings' sole Paying Agent for payments with
respect to Debt Securities which are issuable solely as Registered Securities
and as Holdings' Paying Agent in the Borough of Manhattan, The City of New York,
for payments with respect to Debt Securities (subject to the limitations
described above in the case of Bearer Securities) which may be issuable as
Bearer Securities. Any Paying Agents outside the United States and any other
Paying Agents in the United States initially designated by Holdings for the Debt
Securities will be named in an applicable Prospectus Supplement. Holdings may at
any time designate additional Paying Agents or rescind the designation of any
Paying Agents or approve a change in the office through which any Paying Agent
acts, except that, if Debt Securities of a series are issuable only as
Registered Securities, Holdings will be required to maintain a Paying Agent in
each Place of Payment for such series, and if Debt Securities of a series may be
issuable as Bearer Securities, Holdings will be required to maintain (i) a
Paying Agent in the Borough of Manhattan, The City of New York for payments with
respect to any Registered Securities of the series (and for payments with
respect to Bearer Securities of the series in the circumstances described above,
but not otherwise), and (ii) a Paying Agent in a Place of Payment located
outside the United States where Debt Securities of such series and any coupons
appertaining thereto may be presented and surrendered for payment; provided that
if the Debt Securities of such series are listed on The Luxembourg Stock
Exchange (the "Stock Exchange") or any other stock exchange located outside the
United States and such stock exchange shall so require, Holdings will maintain a
Paying Agent in Luxembourg or
<PAGE>
any other required city located outside the United States, as the case may be,
for the Debt Securities of such series. (Section 1002.)
All moneys paid by Holdings to a Paying Agent for the payment of principal
of (and premium, if any) or interest on any Debt Security which remain unclaimed
at the end of two years after such principal, premium or interest shall have
become due and payable will be repaid to Holdings and the Holder of such Debt
Security or any coupon will thereafter look only to Holdings for payment
thereof. (Section 1003.)
Limitation on Liens
So long as any Debt Securities remain outstanding, unless an applicable
Prospectus Supplement relating thereto provides otherwise, Holdings will not,
and will not permit any Designated Subsidiary (as defined below), directly or
indirectly, to create, issue, assume, incur or guarantee any indebtedness for
money borrowed which is secured by a mortgage, pledge, lien, security interest
or other encumbrance of any nature on any of the present or future common stock
of a Designated Subsidiary unless the Debt Securities and, if Holdings so
elects, any other indebtedness of Holdings ranking at least pari passu with the
Debt Securities, shall be secured equally and ratably with (or prior to) such
other secured indebtedness for money borrowed so long as it is outstanding.
(Section 1005.)
The term "Designated Subsidiary" means any present or future consolidated
subsidiary of Holdings, the consolidated net worth of which constitutes at least
5% of the consolidated net worth of Holdings. As of February 29, 1996, Holdings'
Designated Subsidiaries were Lehman Brothers, Lehman Brothers Holdings PLC,
Lehman Brothers UK Holdings Limited, Lehman Brothers U.K. Holdings (Delaware)
Inc., Lehman Brothers International (Europe), Lehman Brothers Japan Inc. and
Lehman Brothers Financial Products Inc.
Events of Default
Except as may otherwise be set forth in an applicable Prospectus
Supplement relating to a series of Debt Securities, the following are Events of
Default under the Indenture with respect to Debt Securities of such series: (a)
failure to pay principal of or premium, if any, on any Debt Security of that
series when due; (b) failure to pay interest, if any, on any Debt Security of
that series and any related coupons when due, continued for 30 days; (c) failure
to deposit any sinking fund payment or analogous obligation, when due, continued
for 30 days, in respect of any Debt Security of that series; (d) failure to
perform any other covenant of Holdings in the Indenture (other than a covenant
included iii the applicable Indenture solely for the benefit of a series of Debt
Securities other than that series), continued for 90 days after written notice
as provided in the Indenture; (e) certain events in bankruptcy, insolvency or
reorganization in respect of Holdings; and (f) any other Event of Default
provided with respect to Debt Securities of that series. (Section 501.) An Event
of Default with respect to a particular series of Debt Securities does not
necessarily constitute an Event of Default with respect to any other series of
Debt Securities issued under the same or another Indenture. The Trustee may
withhold notice to the Holders of any series of Debt Securities of any default
with respect to such series (except in the payment of principal, premium or
interest, if any) if it considers such withholding to be in the interests of
such Holders. (Section 602.)
If an Event of Default with respect to Debt Securities of any series at
the time outstanding occurs and is continuing, unless the principal of all of
the Debt Securities of such series shall have already become due and payable,
either the Trustee or the Holders of at least 25% in principal amount of the
outstanding Debt Securities of that series may declare the principal amount (or,
if the Debt Securities of that series are Original Issue Discount Securities,
such portion of the principal amount as may be specified in the terms of the
series) of all the Debt Securities of that series to be due and payable
immediately. At any time after a declaration of acceleration with respect to
Debt Securities of any series has been made, but before a judgment or decree
based on acceleration has been obtained and entered, the Holders of a majority
in principal amount of the outstanding Debt Securities of that series may, under
certain circumstances, rescind and annul such acceleration. (Section 502.) For
information as to waiver of defaults, see "Meetings, Modification and Waiver."
Each Indenture provides that the Trustee will be under no obligation,
subject to the duty of the Trustee during default to act with the required
standard of care, to exercise any of its rights or powers under such Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable indemnity. (Section 603.) Subject to such
provisions for indemnification of the Trustee, the Holders of a majority in
principal amount of the outstanding Debt Securities of any series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, with respect to the Debt Securities of that series. (Section 512.)
Holdings will be required to furnish to each Trustee annually a statement
as to the performance by Holdings of certain of its obligations under the
applicable Indenture and as to any default in such performance. (Section 1006.)
Satisfaction and Discharge
<PAGE>
Except as may otherwise be set forth in an applicable Prospectus
Supplement relating to a series of Debt Securities, each Indenture provides that
Holdings shall be discharged from its obligations under the Debt Securities of
such series (with certain exceptions) at any time prior to the Stated Maturity
or redemption thereof when (a) Holdings has irrevocably deposited with the
applicable Trustee, in trust, (i) sufficient funds in the currency or currency
unit in which the Debt Securities of such series are payable to pay the
principal of (and premium, if any), and interest, if any, to Stated Maturity (or
redemption) on, the Debt Securities of such series, or (ii) such amount of
direct obligations of, or obligations the principal of and interest, if any, on
which are fully guaranteed by, the government which issued the currency in which
the Debt Securities of such series are payable, and which are not subject to
prepayment, redemption or call, as will, together with the predetermined and
certain income to accrue thereon without consideration of any reinvestment
thereof, be sufficient to pay when due the principal of (and premium, if any),
and interest, if any, to Stated Maturity (or redemption) on, the Debt Securities
of such series, or (iii) such combination of such funds and securities as
described in (i) and (ii), respectively, as will, together with the
predetermined and certain income to accrue on any such securities as described
in (ii), be sufficient to pay when due the principal of (and premium, if any),
and interest, if any, to Stated Maturity (or redemption) on, the Debt Securities
of such series and (b) Holdings has paid all other sums payable with respect to
the Debt Securities of such series and (c) certain other conditions are met.
Upon such discharge, the Holders of the Debt Securities of such series shall no
longer be entitled to the benefits of the Indenture, except for certain rights,
including registration of transfer and exchange of the Debt Securities of such
series and replacement of lost, stolen or mutilated Debt Securities, and shall
look only to such deposited funds or obligations for payment. (Sections 401 and,
403.)
Defeasance of Certain Obligations
If the terms of the Debt Securities of any series so provide, Holdings may
omit to comply with the restrictive covenants in Section 801 ("Company May
Consolidate, Etc., Only on Certain Terms"), Section 1005 ("Limitations on Liens
on Common Stock of Designated Subsidiaries") and any other specified covenant
and any such omission with respect to such Sections shall not be an Event of
Default with respect to the Debt Securities of such series, if (a) Holdings has
irrevocably deposited with the applicable Trustee, in trust, (i) sufficient
funds in the currency or currency unit in which the Debt Securities of such
series are payable to pay the principal of (and premium, if any), and interest,
if any, to Stated Maturity (or redemption) on, the Debt Securities of such
series, or (ii) such amount of direct obligations of, or obligations the
principal of and interest, if any, on which are fully guaranteed by, the
government which issued the currency in which the Debt Securities of such series
are payable and which are not subject to prepayment, redemption or call, as
will, together with the predetermined and certain income to accrue thereon
without consideration of any reinvestment thereof, be sufficient to pay when due
the principal of (and premium, if any), and interest, if any, to Stated Maturity
(or redemption) on, the Debt Securities of such series or, (iii) such
combination of such funds and securities as described in (i) and (ii),
respectively, as will, together with the predetermined and certain income to
accrue on any such securities as described in (ii), be sufficient to pay when
due the principal of (and premium, if any), and interest, if any, to Stated
Maturity (or redemption) on, the Debt Securities of such series and (b) certain
other conditions are met. The obligations of Holdings under the Indenture with
respect to the Debt Securities of such series, other than with respect to the
covenants referred to above shall remain in full force and effect. (Section
1009.)
Meetings, Modification and Waiver
Modifications and amendments of either Indenture may be made by Holdings
and the applicable Trustee with the consent of the Holders of not less than 66
2/3% in principal amount of the Outstanding Debt Securities of each series
issued under such Indenture affected by such modification or amendment;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Debt Security affected thereby, (a)
change the Stated Maturity of the principal of, or any instalment of principal
of or interest, if any, on, any Debt Security, (b) reduce the principal amount
of, or the premium, if any, or interest, if any, on, any Debt Security, (c)
change any obligation of Holdings to pay additional amounts, (d) reduce the
amount of principal of an Original Issue Discount Security payable upon
acceleration of the Maturity thereof, (e) adversely affect the right of
repayment or repurchase, if any, at the option of the Holder, (f) reduce the
amount, or postpone the date fixed for, any payment under any sinking fund or
analogous provision, (g) change the currency or currency unit of payment of
principal of or premium, if any, or interest, if any, on any Debt Security, (h)
change or eliminate the right, if any, to elect payment in a coin or currency or
currency unit other than that in which Debt Securities which are Registered
Securities are denominated or stated to be payable, (i) impair the right to
institute suit for the enforcement of any payment on or with respect to any Debt
Security, (j) reduce the percentage in principal amount of Outstanding Debt
Securities of any series, the consent of the Holders of which is required for
modification or amendment of the applicable Indenture or for waiver of
compliance with certain provisions of the applicable Indenture or for waiver of
certain defaults, (k) reduce the requirements contained in either Indenture for
quorum or voting, or (1) change any obligation of Holdings to maintain an office
or agency in the places and for the purposes required in the applicable
Indenture. (Section 902.)
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
Debt Securities of that series waive, insofar as that series is concerned,
compliance by Holdings with certain restrictive provisions of the applicable
Indenture. (Section 1007.) The Holders of not less than
<PAGE>
a majority in principal amount of the Outstanding Debt Securities of any series
may on behalf of the Holders of all Debt Securities of that series and any
coupons appertaining thereto waive any past default under the applicable
Indenture with respect to that series, except a default in the payment of the
principal of or premium, if any, or interest, if any, on any Debt Security of
that series or in the payment of any sinking fund instalment or analogous
obligation or in respect of a provision which under the applicable Indenture
cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security of that series affected. (Section 513.)
Each Indenture contains provisions for convening meetings of the Holders
of Debt Securities of a series if Debt Securities of that series are issuable as
Bearer Securities. A meeting may be called at any time by the applicable
Trustee, and also, upon request, by Holdings or Holders of at least 10% in
principal amount of the Outstanding Debt Securities of such series, in any such
case upon notice given in accordance with "Notices" below. (Section 1302.)
Except as limited by the proviso in the second preceding paragraph, any
resolution presented at a meeting or adjourned meeting at which a quorum is
present may be adopted by the affirmative vote of the Holders of a majority in
principal amount of the Outstanding Debt Securities of that series; provided,
however, that, except as limited by the proviso in the second preceding
paragraph, any resolution with respect to any consent or waiver which may be
given by the Holders of not less than 66 2/3% in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or an
adjourned meeting at which a quorum is present only by the affirmative vote of
66 2/3% in principal amount of the Outstanding Debt Securities of that series;
and provided, further, that, except as limited by the proviso in the second
preceding paragraph, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority, in principal amount of Outstanding Debt Securities of a series
may be adopted at a meeting or adjourned meeting duly reconvened at which a
quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Debt Securities of any series duly held in accordance with the applicable
Indenture will be binding on all Holders of Debt Securities of that series and
the related coupons. The quorum at any meeting called to adopt a resolution, and
at any reconvened meeting, will be persons holding or representing a majority in
principal amount of the Outstanding Debt Securities of a series; provided,
however, that if any action is to be taken at such meeting with respect to a
consent or waiver which may be given by the Holders of not less than 66 2/3% in
principal amount of the Outstanding Debt Securities of a series, the persons
holding or representing 66 2/3% in principal amount of the Outstanding Debt
Securities of such series will constitute a quorum (Section 1304.)
Consolidation, Merger and Sale of Assets
Holdings may, without the consent of any Holders of Outstanding Debt
Securities, consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to, any Person, and any other Person may
consolidate or merge with or into, or transfer or lease its assets substantially
as an entirety to, Holdings, provided that (i) the Person (if other than
Holdings) formed by such consolidation or into which Holdings is merged or which
acquires or leases the assets of Holdings substantially as an entirety is
organized under the laws of any United States jurisdiction and assumes Holdings'
obligations on the Debt Securities and under the Indenture, (ii) after giving
effect to the transaction, no Event of Default, and no event which, after notice
or lapse of time or both, would become an Event of Default, shall have happened
and be continuing, and (iii) certain other conditions are met. (Section 801.)
Notices
Except as may otherwise be set forth in an applicable Prospectus
Supplement relating to a series of Debt Securities, notices to Holders of Bearer
Securities will be given by publication in a daily newspaper in the English
language of general circulation in The City of New York and in London, and so
long as such Bearer Securities are listed on the Stock Exchange and the Stock
Exchange shall so require, in a daily newspaper of general circulation in
Luxembourg or, if not practical, elsewhere in Western Europe. Such publication
is expected to be made in The Wall Street Journal, the Financial Times and the
Luxemburger Wort. Notices to Holders of Registered Securities will be given by
mail to the addresses of such Holders as they appear in the Security Register.
(Sections 101 and 106.)
Title
Title to any temporary global Debt Security or permanent global Debt
Security in bearer form or any Bearer Securities and any coupons appertaining
thereto will pass by delivery. Holdings, each Trustee and any agent of Holdings
or the applicable Trustee may treat the bearer of any Bearer Security and the
bearer of any coupon and the registered owner of any Registered Security as the
absolute owner thereof (whether or not such Debt Security or coupon shall be
overdue and notwithstanding any notice to the contrary) for the purpose of
making payment and for all other purposes.
(Section 308.)
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Replacement of Debt Securities and Coupons
Any mutilated Debt Security or a Debt Security with a mutilated coupon
appertaining thereto will be replaced by Holdings at the expense of the Holder
upon surrender of such Debt Security to the applicable Trustee. Debt Securities
or coupons that become destroyed, stolen or lost will be replaced by Holdings at
the expense of the Holder upon delivery to the applicable Trustee of the Debt
Security and coupons or evidence of the destruction, loss or theft thereof
satisfactory to Holdings and the applicable Trustee; in the case of any coupon
which becomes destroyed, stolen or lost, such coupon will be replaced by
issuance of a new Debt Security in exchange for the Debt Security to which such
coupon appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon an indemnity satisfactory to the applicable Trustee and Holdings may be
required at the expense of the Holder of such Debt Security or coupon before a
replacement Debt Security will be issued. (Section 306.)
Concerning the Trustees
Business and other relationships (including other trusteeships) between,
on the one hand, Holdings and its affiliates and, on the other hand, the Trustee
under the Indenture pursuant to which any of the Debt Securities to which an
applicable Prospectus Supplement accompanying this Prospectus relates are
described in such Prospectus Supplement.
Limitations on Issuance of Bearer Securities
In compliance with United States federal tax laws and regulations, Bearer
Securities may not be offered or sold during the restricted period (as defined
under "Denominations, Registration and Transfer"), or delivered in definitive
form in connection with a sale during the restricted period, in the United
States or to United States persons other than to (a) the United States office of
(i) an international organization (as defined in Section 7701(a)(18) of the
Code), (ii) a foreign central bank (as defined in Section 895 of the Code), or
(iii) any underwriter, agent, or dealer offering or selling Bearer Securities
during the restricted period (a "Distributor") pursuant to a written contract
with the issuer or with another Distributor, that purchases Bearer Securities
for resale or for its own account and agrees to comply with the requirements of
Section 165(j)(3)(A), (B), or (C) of the Code, or (b) the foreign branch of a
United States financial institution purchasing for its own account or for
resale, which institution agrees to comply with the requirements of Section
165(j)(3)(A), (B), or (C) of the Code. In addition, a sale of a Bearer Security
may be made during the restricted period to a United States person who acquired
and holds the Bearer Security on the Certification Date through a foreign branch
of a United States financial institution that agrees to comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Code. Any Distributor
(including an affiliate of a Distributor) offering or selling Bearer Securities
during the restricted period must agree not to offer or sell Bearer Securities
in the United States or to United States persons (except as discussed above) and
must employ procedures reasonably designed to ensure that its employees or
agents directly engaged in selling Bearer Securities are aware of these
restrictions.
Bearer Securities and their interest coupons will bear a legend
substantially to the following effect: "Any United States person who holds this
obligation will be subject to limitations under the United States income tax
laws, including the limitations provided in Section 165(j) and 1287(a) of the
Internal Revenue Code."
Purchasers of Bearer Securities may be affected by certain limitations
under United States tax laws. See the applicable Prospectus Supplement for a
summary of material U.S. federal income tax consequences to United States
persons investing in Bearer Securities.
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States and an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source, and "United States" means the United States of America (including the
States and the District of Columbia) and its possessions including Puerto Rico,
the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern
Mariana Islands. The term "Non-United States Holder" means any Holder which is
not an United States person.
DESCRIPTION OF WARRANTS
The Debt Warrants, Currency Warrants, Index Warrants and Interest Rate
Warrants are to be issued under separate warrant agreements (each a "Warrant
Agreement" and respectively a "Debt Warrant Agreement", a "Currency Warrant
Agreement", an "Index Warrant Agreement" and an "Interest Rate Warrant
Agreement") to be entered into between Holdings and one or more banks or trust
companies, as warrant agent (each a "Warrant Agent" and respectively a "Debt
Warrant Agent", a "Currency Warrant Agent", an "Index Warrant Agent" and an
"Interest Rate Warrant Agent"), all as shall be set forth in the Prospectus
Supplement relating to the Warrants being offered thereby. A form of each type
of Warrant Agreement, including a form of warrant certificate representing each
type of Warrant (each a "Warrant Certificate" and respectively a "Debt Warrant
Certificate", a "Currency Warrant Certificate", an "Index Warrant Certificate"
and an "Interest Rate Warrant Certificate"), reflecting the alternative
provisions that may be included in the Warrant Agreements to be entered into
with respect to particular offerings of Warrants, are incorporated by reference
as exhibits to the Registration Statement of which this Prospectus is a part.
The descriptions contained herein of the Warrant Agreements and the Warrant
Certificates and summaries of certain provisions of the Warrant Agreements
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and the Warrant Certificates do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all the provisions of the
applicable Warrant Agreements and the Warrant Certificates, including the
definitions therein of certain terms not otherwise defined in this Prospectus.
Wherever particular sections of, or terms defined in, the Warrant Agreements are
referred to, such sections or defined terms are incorporated herein by
reference.
The particular terms of each issue of Warrants, as well as any
modifications or additions to the general terms of the applicable Warrant
Agreement or Warrant Certificate, will be described in the Prospectus Supplement
relating to such Warrants. Accordingly, for a description of the terms of a
particular issue of Warrants, reference must be made to the Prospectus
Supplement relating thereto and to the descriptions set forth below.
Debt Warrants
Holdings may issue, together with Debt Securities, Currency Warrants,
Index Warrants or Interest Rate Warrants, or separately, Debt Warrants for the
purchase of Debt Securities. If any of the Debt Warrants are sold for foreign
currencies or foreign currency units or if any series of Debt Warrants is
exercisable in foreign currencies or foreign currency units, the restrictions,
elections, tax consequences, specific terms and other information with respect
to such issue of Debt Warrants and such currencies or currency units will be set
forth in an applicable Prospectus Supplement relating thereto.
If so specified in the applicable Prospectus Supplement, the Debt Warrants
may, in certain circumstances, be cancelled by Holdings prior to their
expiration date and the holders thereof will be entitled to receive only the
applicable Cancellation Amount. The Cancellation Amount may be either a fixed
amount or an amount that varies during the term of the Debt Warrants in
accordance with a schedule or formula.
General
The Prospectus Supplement will describe the terms of any Debt Warrants
offered thereby, the Debt Warrant Agreement relating to such Debt Warrants and
the Debt Warrant Certificates representing such Debt Warrants, including the
following: (1) the title of such Debt Warrants; (2) the aggregate amount of such
Debt Warrants; (3) the initial offering price of such Debt Warrants; (4) the
exercise price; (5) the currency or currency unit in which the initial offering
price and/or the exercise price of such Debt Warrants is payable; (6) whether
the Debt Warrants are to be issuable in registered or bearer form or both, and
if in bearer form, whether such Debt Warrants may be exchanged for Debt Warrants
in registered form and the circumstances and places for such exchange, if
permitted; (7) if applicable, the title and terms of related Debt Securities
with which such Debt Warrants are issued, the number of such Debt Warrants
issued with each such Debt Security and the date, if any, on and after which
such Debt Warrants and such Debt Securities will be separately transferable; (8)
the title, aggregate principal amount and terms of the Debt Securities
purchasable upon exercise of all of such Debt Warrants; (9) the principal amount
of Debt Securities purchasable upon exercise of each Debt Warrant and the price
at which such principal amount of Debt Securities may be purchased upon such
exercise; (10) the date on which the right to exercise such Debt Warrants shall
commence and the date (the "Debt Warrant Expiration Date") on which such right
shall expire; (11) any minimum number of Debt Warrants which must be exercised
at any one time, other than upon automatic exercise; (12) the maximum number, if
any, of such Debt Warrants that may, subject to election by Holdings, be
exercised by all owners (or by any person or entity) on any day; (13) any
provisions for the automatic exercise of such Debt Warrants; (14) whether and
under what circumstances such Debt Warrants may be cancelled by Holdings prior
to expiration; (15) any other procedures and conditions relating to the exercise
of such Debt Warrants; (16) the identity of the Debt Warrant Agent; (17) any
national securities exchange on which such Debt Warrants will be listed; (18)
provisions, if any, for issuing such Debt Warrants in certificated form; (19) if
applicable, a discussion of certain United States federal income tax, accounting
or other special considerations applicable thereto; and (20) any other terms of
the Debt Warrants.
Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations and, if in registered form, may be
presented for registration of transfer and Debt Warrants may be exercised at the
corporate trust office of the Debt Warrant Agent or any other office indicated
in the Prospectus Supplement relating thereto (Section 3.1). Prior to the
exercise of Debt Warrants, holders of Debt Warrants will not be entitled to
payments of principal of (or premium, if any) or interest, if any, on the Debt
Securities purchasable upon such exercise, or to enforce any of the covenants in
the applicable Indenture (Section 4.1).
Exercise of Debt Warrants
Unless otherwise provided in the Prospectus Supplement, each Debt Warrant
will entitle the holder thereof to purchase for cash such principal amount of
Debt Securities at such exercise price as shall in each case be set forth in, or
be determinable as set forth in, the Prospectus Supplement relating to the Debt
Warrants offered thereby (Section 2.1). Debt Warrants may be exercised at any
time up to the close of business on the Debt Warrant Expiration Date specified
in the Prospectus Supplement relating to the Debt Warrants offered thereby.
After the close of business on the Debt Warrant Expiration Date (or such later
date to which such Debt Warrant Expiration Date may be extended by Holdings),
unexercised Debt Warrants will become void (Section 2.2).
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Debt Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Debt Warrants offered thereby. Upon receipt of payment and the
Debt Warrant Certificate properly completed and duly executed at the corporate
trust office of the Debt Warrant Agent or any other office indicated in the
Prospectus Supplement, Holdings will, as soon as practicable, forward to the
person entitled thereto the Debt Securities purchasable upon such exercise. If
fewer than all of the Debt Warrants represented by such Debt Warrant Certificate
are exercised, a new Debt Warrant Certificate will be issued for the remaining
amount of Debt Warrants (Section 2.3).
Other Information
Other important information concerning Debt Warrants is set forth below
under "Certain Items Applicable to All Warrants--Modifications", "--Merger,
Consolidation, Sale or Other Dispositions", "--Enforceability of Rights by
Beneficial Owner; Governing Law" and "--Unsecured Obligations of a Holding
Company".
Currency Warrants
Holdings may issue, together with Debt Securities, Debt Warrants, Index
Warrants or Interest Rate Warrants, or separately, Currency Warrants (a) in the
form of Currency Put Warrants, entitling the owners thereof to receive from
Holdings the Currency Warrant Cash Settlement Value (as shall be defined in the
Prospectus Supplement) of the right to sell a specified amount of one currency
(whether U.S. dollars or a foreign currency or foreign currency unit) (a "Base
Currency") for a specified amount of a different currency (whether U.S. dollars
or a foreign currency or foreign currency unit) (a "Reference Currency"), (b) in
the form of Currency Call Warrants, entitling the owners thereof to receive from
Holdings the Currency Warrant Cash Settlement Value of the right to purchase a
specified amount of a Base Currency for a specified amount of a Reference
Currency, or (c) in such other form as shall be specified in the related
Prospectus Supplement. The Prospectus Supplement for an issue of Currency
Warrants will set forth the formula pursuant to which the Currency Warrant Cash
Settlement Value will be determined, including any multipliers, if applicable.
The Prospectus Supplement will describe the terms of any Currency Warrants
offered thereby, the Currency Warrant Agreement relating to such Currency
Warrants and the Currency Warrant Certificates representing such Currency
Warrants, including the following: (1) the title of such Currency Warrants; (2)
the aggregate amount of such Currency Warrants; (3) the initial offering price
of such Currency Warrants; (4) the exercise price, if any; (5) the currency or
currency unit in which the initial offering price, the exercise price, if any,
and the Currency Warrant Cash Settlement Value of such Currency Warrants is
payable; (6) the Base Currency and the Reference Currency for such Currency
Warrants; (7) whether such Currency Warrants shall be Currency Put Warrants,
Currency Call Warrants or otherwise; (8) the formula for determining the
Currency Warrant Cash Settlement Value, if applicable, of each Currency Warrant;
(9) whether and under what circumstances a minimum and/or maximum expiration
value is applicable upon the expiration or exercise of such Currency Warrants;
(10) the effect or effects, if any, of the occurrence of a Market Disruption
Event or Force Majeure Event; (11) the date on which the right to exercise such
Currency Warrants shall commence and the date (the "Currency Warrant Expiration
Date") on which such right shall expire; (12) any minimum number of Currency
Warrants which must be exercised at any one time, other than upon automatic
exercise; (13) the maximum number, if any, of such Currency Warrants that may,
subject to election by Holdings, be exercised by all owners (or by any person or
entity) on any day; (14) any provisions for the automatic exercise of such
Currency Warrants other than at expiration; (15) whether and under what
circumstances such Currency Warrants may be cancelled by Holdings prior to their
expiration date; (16) any other procedures and conditions relating to the
exercise of such Currency Warrants; (17) the identity of the Currency Warrant
Agent; (18) any national securities exchange on which such Currency Warrants
will be listed; (19) provisions, if any, for issuing such Currency Warrants in
certificated form; (20) if such Currency Warrants are not issued in book-entry
form, the place or places at which payments in respect of such Currency Warrants
are to be made by Holdings; (21) if applicable, a discussion of certain United
States federal income tax, accounting or other special considerations applicable
thereto; and (22) any other terms of the Currency Warrants.
Other important information concerning Currency Warrants is set forth
below under "Certain Items Applicable to All Warrants--Modifications",
"--Merger, Consolidation, Sale or Other Dispositions", "--Enforceability of
Rights by Beneficial Owner; Governing Law" and "--Unsecured Obligations of a
Holding Company" and "Certain Items Applicable to Currency Warrants, Index
Warrants and Interest Rate Warrants--Exercise of Warrants", "--Market Disruption
and Force Majeure Events" and "--Settlement Currency" and "--Listing".
Index Warrants
Holdings may issue, together with Debt Securities, Debt Warrants, Currency
Warrants or Interest Rate Warrants, or separately, Index Warrants (a) in the
form of Index Put Warrants, entitling the owners thereof to receive from
Holdings the Index Cash Settlement Value (as shall be defined in the Prospectus
Supplement) in cash, which amount will be determined by reference to the amount,
if any, by which the Fixed Amount (as shall be defined in the Prospectus
Supplement) at the time of exercise exceeds the Index Value (as shall be defined
in the Prospectus Supplement), (b) in the form of Index Call Warrants, entitling
the owners thereof to receive from Holdings the Index
12
<PAGE>
Cash Settlement Value in cash, which amount will be determined by reference to
the amount, if any, by which the Index Value at the time of exercise exceeds the
Fixed Amount, (c) in the form of Index Spread Warrants, entitling the owners
thereof to receive from Holdings the Index Cash Settlement Value in cash, which
amount will be determined by reference to the amount, if any, by which the
Reference Index Value (as shall be defined in the Prospectus Supplement) at the
time of exercise exceeds the Base Index Value (as shall be defined in the
Prospectus Supplement) or (d) in such other form as shall be specified in the
related Prospectus Supplement. The Prospectus Supplement for an issue of Index
Warrants will set forth the formula pursuant to which the Index Cash Settlement
Value will be determined, including any multipliers, if applicable.
The Prospectus Supplement will describe the terms of Index Warrants
offered thereby, the Index Warrant Agreement relating to such Index Warrants and
the Index Warrant Certificate representing such Index Warrants, including the
following: (1) the title of such Index Warrants; (2) the aggregate amount of
such Index Warrants; (3) the initial offering price of such Index Warrants; (4)
the exercise price, if any; (5) the currency or currency unit in which the
initial offering price, the exercise price, if any, and the Index Cash
Settlement Value of such Index Warrants is payable; (6) the Index or Indices for
such Index Warrants, which may be based on one or more U.S. or foreign stocks,
bonds, or other securities, one or more U.S. or foreign interest rates, one or
more currencies or currency units, or any combination of the foregoing, and may
be a preexisting U.S. or foreign index compiled and published by a third party
or an index based on one or more securities, interest rates or currencies
selected by Holdings solely in connection with the issuance of such Index
Warrants, and certain information regarding such Index or Indices and the
underlying securities, interest rates or currencies (including, to the extent
possible, the policies of the publisher of the Index with respect to additions,
deletions and substitutions of such securities, interest rates or currencies);
(7) whether such Index Warrants shall be Index Put Warrants, Index Call
Warrants, Index Spread Warrants or otherwise; (8) the method of providing for a
substitute Index or Indices or otherwise determining the amount payable in
connection with the exercise of such Index Warrants if any Index changes or
ceases to be made available by its publisher; (9) the formula for determining
the Index Cash Settlement Value, if applicable, of each Index Warrant; (10)
whether and under what circumstances a minimum and/or maximum expiration value
is applicable upon the expiration or exercise of such Index Warrants; (11) the
effect or effects, if any, of the occurrence of a Market Disruption Event or
Force Majeure Event; (12) the date on which the right to exercise such Index
Warrants shall commence and the date (the "Index Warrant Expiration Date") on
which such right shall expire; (13) any minimum number of Index Warrants which
must be exercised at any one time, other than upon automatic exercise; (14) the
maximum number, if any, of such Index Warrants that may, subject to election by
Holdings, be exercised by all owners (or by any person or entity) on any day;
(15) any provisions for the automatic exercise of such Index Warrants other than
at expiration; (16) whether and under what circumstances such Index Warrants may
be cancelled by Holdings prior to their expiration date; (17) any provisions
permitting a Holder to condition any notice of exercise on the absence of
certain specified changes in the Index Value, the Base Index Value or the
Reference Index Value after the date of exercise; (18) any other procedures and
conditions relating to the exercise of such Index Warrants; (19) the identity of
the Index Warrant Agent; (20) any national securities exchange on which such
Index Warrants will be listed; (21) provisions, if any, for issuing such Index
Warrants in certificated form; (22) if such Index Warrants are not issued in
book-entry form, the place or places at which payments in respect of such Index
Warrants are to be made by Holdings; (23) if applicable, a discussion of certain
United States federal income tax, accounting or other special considerations
applicable thereto; and (24) any other terms of such Index Warrants.
Other important information concerning Index Warrants is set forth below
under "Certain Items Applicable to All Warrants--Modifications", "--Merger,
Consolidation, Sale or Other Dispositions", "--Enforceability of Rights by
Beneficial Owner; Governing Law" and "--Unsecured Obligations of a Holding
Company" and "Certain Items Applicable to Currency Warrants, Index Warrants and
Interest Rate Warrants--Exercise of Warrants", "--Market Disruption and Force
Majeure Events", "--Settlement Currency" and "--Listing".
Interest Rate Warrants
Holdings may issue, together with Debt Securities, Debt Warrants, Currency
Warrants or Index Warrants or, separately, Interest Rate Warrants (a) in the
form of Interest Rate Put Warrants, entitling the owners thereof to receive from
Holdings the Interest Rate Cash Settlement Value (as shall be defined in the
Prospectus Supplement) in cash, which amount will be determined by reference to
the amount, if any, by which the Spot Amount (as shall be defined in the
Prospectus Supplement) is less than the Strike Amount (as shall be defined in
the Prospectus Supplement) on the applicable valuation date following exercise,
(b) in the form of Interest Rate Call Warrants, entitling the owners thereof to
receive from Holdings the Interest Rate Cash Settlement Value in cash, which
amount will be determined by reference to the amount, if any, by which the Spot
Amount on the applicable valuation date following exercise exceeds the Strike
Amount or (c) in such other form as shall be specified in the related Prospectus
Supplement. The Prospectus Supplement for an issue of Interest Rate Warrants
will set forth the formula pursuant to which the Interest Rate Cash Settlement
Value will be determined, including any multipliers, if applicable. The Strike
Amount may either be a fixed yield, price or rate of a Debt Instrument, a Rate
or any combination of Debt Instruments and/or Rates or a yield, price or rate
that varies during the term of the Interest Rate Warrants in accordance with a
schedule or formula. The Debt Instrument will be one or more instruments
specified in the applicable Prospectus Supplement issued either
<PAGE>
by the United States government or by a foreign government. The Rate will be one
or more interest rates or interest rate swap rates established from time to time
by one or more financial institutions specified in the applicable Prospectus
Supplement.
The Prospectus Supplement will describe the terms of Interest Rate
Warrants offered thereby, the Interest Rate Warrant Agreement relating to such
Interest Rate Warrants and the Interest Rate Warrant Certificate representing
such Interest Rate Warrants, including the following: (1) the title of such
Interest Rate Warrants, (2) the aggregate amount of such Interest Rate Warrants;
(3) the initial offering price of such Interest Rate Warrants; (4) the exercise
price, if any; (5) the currency or currency unit in which the initial offering
price, the exercise price, if any, and the Interest Rate Cash Settlement Value
of such Interest Rate Warrants is payable; (6) the Debt Instrument (which may be
one or more debt instruments issued either by the United States government or by
a foreign government), the Rate (which may be one or more interest rates or
interest rate swap rates established from time to time by one or more specified
financial institutions) or the other yield, price or rate utilized for such
Interest Rate Warrants, and certain information regarding such Debt Instrument
or Rate; (7) whether such Interest Rate Warrants shall be Interest Rate Put
Warrants, Interest Rate Call Warrants or otherwise; (8) the Strike Amount, the
method of determining the Spot Amount and the method of expressing movements in
the yield or closing price of the Debt Instrument or in the level of the Rate as
a cash amount in the currency in which the Interest Rate Cash Settlement Value
of such Warrants is payable; (9) the formula for determining the Interest Rate
Cash Settlement Value, if applicable, of each Interest Rate Warrant; (10)
whether and under what circumstances a minimum and/or maximum expiration value
is applicable upon the expiration or exercise of such Interest Rate Warrants;
(11) the effect or effects, if any, of the occurrence of a Market Disruption
Event or Force Majeure Event; (12) the date on which the right to exercise such
Interest Rate Warrants shall commence and the date (the "Interest Rate Warrant
Expiration Date") on which such right shall expire; (13) any minimum number of
Interest Rate Warrants which must be exercised at any one time, other than upon
automatic exercise; (14) the maximum number, if any, of such Interest Rate
Warrants that may, subject to election by Holdings, be exercised by all owners
(or by any person or entity) on any day; (15) any provisions for the automatic
exercise of such Interest Rate Warrants other than at expiration; (16) whether
and under what circumstances such Interest Rate Warrants may be cancelled by
Holdings prior to their expiration date; (17) any provisions permitting a Holder
to condition any notice of exercise on the absence of certain specified changes
in the Spot Amount after the date of exercise; (18) any other procedures and
conditions relating to the exercise of such Interest Rate Warrants; (19) the
identity of the Interest Rate Warrant Agent; (20) any national securities
exchange on which such Interest Rate Warrants will be listed; (21) provisions,
if any, for issuing such Interest Rate Warrants in certificated form; (22) if
such Interest Rate Warrants are not issued in book-entry form, the place or
places at which payments in respect of such Interest Rate Warrants are to be
made by Holdings; (23) if applicable, a discussion of certain United States
federal income tax, accounting or other special considerations applicable
thereto; and (24) any other terms of such Interest Rate Warrants.
Other important information concerning Interest Rate Warrants is set forth
below under "Certain Items Applicable to All Warrants--Modifications",
"--Merger, Consolidation, Sale or Other Dispositions", "--Enforceability of
Rights by Beneficial Owner; Governing Law" and "--Unsecured Obligations of a
Holding Company" and "Certain Items Applicable to Currency Warrants, Index
Warrants and Interest Rate Warrants--Exercise of Warrants", "--Market Disruption
and Force Majeure Events", "--Settlement Currency" and "--Listing".
Certain Items Applicable to all Warrants
Modifications
Each Warrant Agreement and the terms of each issue of Warrants may be
amended by Holdings and the applicable Warrant Agent, without the consent of the
beneficial owners or the registered holders, for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision contained therein, or in any other manner which Holdings
may deem necessary or desirable and which will not adversely affect the
interests of the beneficial owners of the then outstanding unexercised Warrants
in any material respect (Section 6.1).
Holdings and each Warrant Agent also may modify or amend the applicable
Warrant Agreement and the terms of the related Warrants, with the consent of the
beneficial owners of not less than a majority in number of the then outstanding
unexercised Warrants affected, provided that no such modification or amendment
that reduces the amount receivable upon exercise, cancellation or expiration,
shortens the period of time during which the Warrants may be exercised or
otherwise materially and adversely affects the exercise rights of the beneficial
owners of the Warrants or reduces the percentage number of outstanding Warrants
the consent of whose beneficial owners is required for modification or amendment
of the applicable Warrant Agreement or the terms of the Warrants may be made
without the consent of the beneficial owners affected thereby (Section 6.1).
<PAGE>
Merger, Consolidation, Sale or Other Dispositions
If at any time there is a merger or consolidation involving Holdings or a
sale, transfer, conveyance or other disposition of all or substantially all of
the assets of Holdings, then in any such event the successor or assuming
corporation shall succeed to and be substituted for Holdings, with the same
effect as if it had been named in the applicable Warrant Agreement and in the
applicable Warrants as Holdings. Holdings shall thereupon be relieved of any
further obligation under such Warrant Agreement or under such Warrants, and, in
the event of any such merger, consolidation, sale, transfer, conveyance or other
disposition, Holdings as the predecessor corporation may thereupon or at any
time thereafter be dissolved, wound up or liquidated (Section 6.2 of the Debt
Warrant Agreement and Section 3.2 of each other Warrant Agreement).
Enforceability of Rights by Beneficial Owner; Governing Law
Each Warrant Agent will act solely as an agent of Holdings in connection
with the issuance and exercise of the applicable Warrants and will not assume
any obligation or relationship of agency or trust for or with any owner of a
beneficial interest in any Warrant or with the registered holder thereof
(Section 5.2). A Warrant Agent shall have no duty or responsibility in case of
any default by Holdings in the performance of its obligations under the
applicable Warrant Agreement or Warrant Certificate including, without
limitation, any duty or responsibility to initiate any proceedings at law or
otherwise or to make any demand upon Holdings (Section 5.2). Beneficial owners
may, without the consent of the applicable Warrant Agent, enforce by appropriate
legal action, on their own behalf, their right to exercise their Warrants, to
receive Debt Securities, in the case of Debt Warrants, and to receive payment,
if any, for their Warrants, in the case of Currency Warrants, Index Warrants or
Interest Rate Warrants (Section 4.2 of the Debt Warrant Agreement and Section
3.1 of each other Warrant Agreement). Except as may otherwise be provided in the
Prospectus Supplement relating thereto, each issue of Warrants and the
applicable Warrant Agreement will be governed by and construed in accordance
with the law of the State of New York (Section 6.5).
Unsecured Obligations of a Holding Company
The Warrants are unsecured obligations of Holdings and, therefore, changes
in the perceived creditworthiness of Holdings may be expected to affect trading
prices in Warrants. Since Holdings, as a holding company, does not have any
significant assets other than the equity securities of its subsidiaries, its
cash flow and consequent ability to satisfy its financial obligations, including
Warrants, are dependent upon the earnings of its subsidiaries and the
distribution of those earnings to Holdings, or upon loans or other payments of
funds by those subsidiaries to Holdings. Holdings' subsidiaries, including
Lehman Brothers, are separate and distinct legal entities and will have no
obligation, contingent or otherwise, to pay any amount in respect of Warrants or
to make any funds available therefor, whether by dividends, loans or other
payments. Dividends, loans and other payments by Lehman Brothers are restricted
by net capital and other rules of various regulatory bodies. See "Capital
Requirements." The payment of dividends by Holdings' subsidiaries is contingent
upon the earnings of those subsidiaries and is subject to various business
considerations in addition to net capital requirements and contractual
restrictions. Additionally, since Warrants will be obligations of a holding
company, the ability of holders of Warrants to benefit from any distribution of
assets of any subsidiary upon the liquidation or reorganization of such
subsidiary is subordinate to the prior claims of present and future creditors of
such subsidiary.
Certain Items Applicable to Currency Warrants, Index Warrants and Interest Rate
Warrants
Exercise of Warrants
Except as may otherwise be provided in the applicable Prospectus
Supplement relating thereto, (a) each Currency Warrant, Index Warrant and
Interest Rate Warrant will entitle the owner, upon payment of the exercise
price, if any, to receive the applicable Cash Settlement Value of such Warrant,
on the applicable Exercise Date, in each case as such terms will further be
defined in the applicable Prospectus Supplement relating thereto (Section 2.2)
and (b) if not exercised prior to 1:30 p.m., New York City time, on the Business
Day preceding the applicable Warrant Expiration Date, the Warrants will be
deemed automatically exercised on such Warrant Expiration Date (Section 2.3). As
described below, Currency Warrants, Index Warrants and Interest Rate Warrants
may also be deemed to be automatically exercised if they are delisted.
Procedures for exercise of the Currency Warrants, Index Warrants and Interest
Rate Warrants will be set out in the applicable Prospectus Supplement.
Market Disruption and Force Majeure Events
If so specified in the applicable Prospectus Supplement, following the
occurrence of a Market Disruption Event or Force Majeure Event (as each term
shall be defined therein), the Cash Settlement Value of a Currency Warrant, an
Index Warrant or an Interest Rate Warrant may be determined on a different basis
than under normal exercise of a Warrant or the determination of the applicable
Cash Settlement Value. In addition, if so specified in the applicable Prospectus
Supplement, Currency Warrants, Index Warrants and Interest Rate Warrants may, in
certain circumstances, be cancelled by Holdings prior to their expiration date
and the holders thereof will be entitied to receive only the applicable
<PAGE>
Cancellation Amount. The Cancellation Amount may be either a fixed amount or an
amount that varies during the term of the Warrants in accordance with a schedule
or formula.
Settlement Currency
Currency Warrants, Index Warrants and Interest Rate Warrants will be
settled only in U.S. dollars (unless settlement in a foreign currency is
specified in the applicable Prospectus Supplement and is permissible under
applicable law) and accordingly will not require or entitle an owner to sell,
deliver, purchase or take delivery of the currency, security or other instrument
underlying such Warrants. If any of the Currency Warrants, Index Warrants or
Interest Rate Warrants are sold for, or if the exercise price, if any, is
payable in, foreign currencies or foreign currency units or if the amount
payable by Holdings in respect of any series of Currency Warrants, Index
Warrants or Interest Rate Warrants is payable in foreign currencies or foreign
currency units, the restrictions, elections, tax consequences, specific terms
and other information with respect to such issue of Warrants and such currencies
or currency units will be set forth in an applicable Prospectus Supplement
relating thereto.
Listing
Unless otherwise provided in the Prospectus Supplement, each issue of
Currency Warrants, Index Warrants and Interest Rate Warrants will be listed on a
national securities exchange, as specified in the applicable Prospectus
Supplement, subject only to official notice of issuance, as a precondition to
the sale of any such Warrants. It may be necessary in certain circumstances for
such national securities exchange to obtain the approval of the SEC in
connection with any such listing. In the event that such Warrants are delisted
from, or permanently suspended from trading on, such exchange, and, at or prior
to such delisting or suspension, such Warrants shall not have been listed on
another national securities exchange, any such Warrants not previously exercised
will be deemed automatically exercised on the date such delisting or permanent
trading suspension becomes effective (Section 2.3). The applicable Cash
Settlement Value to be paid in such event will be as set forth in the applicable
Prospectus Supplement. Holdings will notify holders of such Warrants as soon as
practicable of such delisting or permanent trading suspension. The applicable
Warrant Agreement will contain a covenant of Holdings not to seek delisting of
such Warrants from, or permanent suspension of their trading on, such exchange
(Section 2.4 of the Currency Warrant Agreement and the Interest Rate Warrant
Agreement and Section 2.5 of the Index Warrant Agreement).
GLOBAL SECURITIES
The Securities of a series may be issued in whole or in part in the form
of one or more Global Securities that will be deposited with or on behalf of a
depository (a "Depository") identified in the Prospectus Supplement relating to
such series. Global Securities representing Debt Securities or Debt Warrants may
be issued in either registered or bearer form. Global Securities representing
Currency Warrants, Index Warrants or Interest Rate Warrants will be issued in
registered form only. Global Securities may be issued in either temporary or
permanent form.
The specific terms of the depository arrangement with respect to any
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will apply
to all depository arrangements.
Unless otherwise specified in an applicable Prospectus Supplement,
Securities which are to be represented by a Global Security in registered form
to be deposited with or on behalf of a Depository will be registered in the name
of such Depository or its nominee. Upon the issuance of a Global Security in
registered form, the Depository for such Global Security will credit the
respective principal amounts, in the case of Debt Securities, and the respective
number of warrants, in the case of Warrants represented by such Global Security
to the accounts of institutions that have accounts with such Depository or its
nominee ("participants"). The accounts to be credited shall be designated by the
underwriters or agents of such Securities or by Holdings, if such Securities are
offered and sold directly by Holdings. Ownership of beneficial interests in such
Global Securities will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests by
participants in such Global Securities will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depository or its nominee for such Global Security. Ownership of beneficial
interests in Global Securities by persons that hold through participants will be
shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global
Security.
So long as the Depository for a Global Security in registered form, or its
nominee, is the registered owner of such Global Security, such Depository or
such nominee, as the case may be, will be considered the sole owner or holder of
the Securities represented by such Global Security for all purposes under the
applicable Indenture, in the case of Debt Securities, or under the applicable
Warrant Agreement, in the case of Warrants, governing such Securities. Except as
set forth below, owners of beneficial interests in such Global Security will not
be entitled to have Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
<PAGE>
delivery of Securities of such series in definitive form and will not be
considered the owners or holders thereof under the applicable Indenture, in the
case of Debt Securities, or under the applicable Warrant Agreement, in the case
of Warrants.
Payments in respect of Securities registered in the name of or held by a
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the registered owner or the holder of the Global Security. None
of Holdings, the underwriters, the applicable Trustee or Warrant Agent, any
Paying Agent or any Security Registrar for such Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Holdings expects that the Depository for a permanent Global Security in
registered form, upon receipt of any payment in respect of a permanent Global
Security, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in such Global
Security as shown on the records of such Depository. Holdings also expects that
payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
A Global Security in registered form may not be transferred except as a
whole by the Depository for such Global Security to a nominee of such Depository
or by a nominee of such Depository to such Depository or another nominee of such
Depository or by such Depository or any such nominee to a successor of such
Depository or a nominee of such successor. If a Depository for a permanent
Global Security in registered form is at any time unwilling or unable to
continue as Depository and a successor Depository is not appointed by Holdings
within 90 days, Holdings will issue Securities in definitive registered form in
exchange for the Global Security representing such Securities. In addition,
Holdings may at any time and in its sole discretion determine not to have any
Securities in registered form represented by one or more Global Securities and,
in such event, will issue Securities in definitive form in exchange for all of
the Global Securities representing such Securities. Further, if Holdings so
specifies with respect to the Securities of a series, an owner of a beneficial
interest in a Global Security representing Securities of such series may, on
terms acceptable to Holdings and the Depository for such Global Security,
receive Securities of such series in definitive form. In any such instance, an
owner of a beneficial interest in a Global Security will be entitled to physical
delivery in definitive form of Securities of the series represented by such
Global Security equal in principal amount, in the case of Debt Securities, or
number, in the case of Warrants, to such beneficial interest and to have such
Securities registered in its name (if the Securities of such series are issuable
as registered securities). Unless otherwise specified by Holdings, Securities of
such series so issued in definitive form will be issued either as registered or
bearer securities (if the Securities of such series are issuable in such form)
and in authorized denominations, in the case of Debt Securities, or in
authorized numbers, in the case of Warrants, as specified in the applicable
Prospectus Supplement. See, however, "Description of Debt
Securities--Limitations on Issuance of Bearer Securities" above for a
description of certain restrictions on the issuance of a Bearer Security in
definitive form in exchange for an interest in a Global Security.
Bearer Debt Securities
If so specified in an applicable Prospectus Supplement, pending the
availability of a permanent Global Security, all or any portion of the Debt
Securities of a series which may be issuable as bearer securities will initially
be represented by one or more temporary Global Securities, without interest
coupons, to be deposited with a common depositary in London for Morgan Guaranty
Trust Company of New York, Brussels Office, as operator of the Euroclear System
("Euroclear") and Cedel Bank, societe anonyme ("Cedel") for credit to the
designated accounts. The interests of the beneficial owner or owners in such a
temporary Global Security in bearer form will be exchangeable for (i) in whole,
definitive Bearer Securities, (ii) in whole, Senior Debt Securities to be
represented thereafter by one or more permanent Global Securities in bearer
form, without interest coupons, and/or (iii) in whole or in part, definitive
Registered Securities (the date of such exchange, the "Exchange Date");
provided, however, that if definitive Bearer Securities have previously been
issued in exchange for an interest in a permanent Global Security in bearer form
representing Senior Debt Securities of the same series, then interests in such
Senior Debt Securities (with certain exceptions) shall only thereafter be
exchangeable, in whole, for definitive Bearer Securities, definitive Registered
Securities, or any combination thereof (with certain exceptions) representing
Debt Securities having the same interest rate and Stated Maturity, but only upon
written certification in the form and to the effect described under
"Denominations, Registration and Transfer" unless such certification has been
provided on an earlier interest payment date. The beneficial owner of a Debt
Security represented by a permanent Global Security in bearer form may, on the
applicable Exchange Date and upon 30 days' notice to the applicable Trustee
given through Euroclear or Cedel, exchange its interest in whole for definitive
Bearer Securities or, if specified in an applicable Prospectus Supplement, in
whole or in part, for definitive Registered Securities of any authorized
denomination, provided, however, that if definitive Bearer Securities are issued
in partial exchange for Senior Debt Securities represented by such permanent
Global Security or by a temporary Global Security in bearer form of the same
series, such issuance (with certain exceptions) shall give rise to the exchange
of such permanent Global Security in whole for, at the option of the Holders,
definitive Bearer
<PAGE>
Securities, definitive Registered Securities, or any combination thereof. No
Bearer Security delivered in exchange for a portion of a permanent Global
Security shall be mailed or otherwise delivered to any location in the United
States in connection with such exchange.
Unless otherwise specified in an applicable Prospectus Supplement,
interest in respect of any portion of such a temporary Global Security in bearer
form payable in respect of an Interest Payment Date occurring prior to the
issuance of a permanent Global Security in bearer form will be paid to each of
Euroclear and Cedel with respect to the portion of the temporary Global Security
in bearer form held for its account. Each of Euroclear and Cedel will undertake
in such circumstances to credit such interest received by it in respect of a
temporary Global Security in bearer form to the respective accounts for which it
holds such temporary Global Security in bearer form as of the relevant Interest
Payment Date, but only upon receipt in each case of written certification, in
the form and to the effect described under "Description of Debt
Securities--Denomination, Registration and Transfer."
UNITED STATES TAXATION
A summary of the material U.S. federal income tax consequences to U.S.
persons investing in Securities will be set forth in the applicable Prospectus
Supplement. The summary of U.S. federal income tax consequences contained in the
Prospectus Supplement will be presented for informational purposes only,
however, and will not be intended as legal or tax advice to prospective
purchasers. Prospective purchasers of Securities are urged to consult their own
tax advisors prior to any acquisition of Securities.
CAPITAL REQUIREMENTS
As a registered broker-dealer, Lehman Brothers is subject to the SEC's net
capital rule (Rule 15c3-1, the "Net Capital Rule"), promulgated under the
Exchange Act. The Exchange monitors the application of the Net Capital Rule by
Lehman Brothers. Lehman Brothers computes net capital under the alternative
method of the Net Capital Rule which requires the maintenance of minimum net
capital, as defined. A broker-dealer may be required to reduce its business if
its net capital is less than 4% of aggregate debit balances and may also be
prohibited from expanding its business or paying cash dividends if resulting net
capital would be less than 5% of aggregate debit balances. In addition, the Net
Capital Rule does not allow withdrawal of subordinated capital if net capital
would be less than 5% of such debit balances.
The Net Capital Rule also limits the ability of broker-dealers to transfer
large amounts of capital to parent companies and other affiliates. Under the Net
Capital Rule equity capital cannot be withdrawn from a broker-dealer without the
prior approval of the SEC when net capital after the withdrawal would be less
than 25% of its securities positions haircuts (which are deductions from capital
of certain specified percentages of the market value of securities to reflect
the possibility of a market decline prior to disposition). In addition, the Net
Capital Rule requires broker-dealers to notify the SEC and the appropriate
self-regulatory organization two business days before a withdrawal of excess net
capital if the withdrawal would exceed the greater of $500,000 or 30% of the
broker-dealer's excess net capital, and two business days after a withdrawal
that exceeds the greater of $500,000 or 20% of excess net capital. Finally, the
Net Capital Rule authorizes the SEC to order a freeze on the transfer of capital
if a broker-dealer plans a withdrawal of more than 30% of its excess net capital
and the SEC believes that such a withdrawal would be detrimental to the
financial integrity of the firm or would jeopardize the broker-dealer's ability
to pay its customers.
Compliance with the Net Capital Rule could limit those operations of
Lehman Brothers that require the intensive use of capital, such as underwriting
and trading activities and the financing of customer account balances, and also
could restrict Holdings' ability to withdraw capital from Lehman Brothers which
in turn could limit Holdings' ability to pay dividends, repay debt and redeem or
purchase shares of its outstanding capital stock.
The Company is subject to other domestic and international regulatory
requirements with which it is required to comply.
PLAN OF DISTRIBUTION
Holdings may sell Securities in any one or more of the following ways: (i)
through, or through underwriting syndicates managed by, Lehman Brothers alone or
with one or more other underwriters; (ii) through one or more dealers or agents
(which may include Lehman Brothers); or (iii) directly to one or more
purchasers. The specific managing underwriter or underwriters or agent or agents
with respect to the offer and sale of Securities are set forth on the cover of a
Prospectus Supplement relating to such Securities and the members of the
underwriting syndicate, if any, are named in such Prospectus Supplement. Only
the underwriters or agents so named in a Prospectus Supplement are underwriters
or agents, respectively, in connection with such Securities. The applicable
Prospectus Supplement also describes the discounts and commissions to be allowed
or paid to the underwriters or agents, all other items constituting underwriting
or agency compensation, the discounts and commissions to be allowed or paid to
dealers, if any, and the exchanges, if any, on which such Securities will be
listed.
<PAGE>
Securities acquired by any underwriter will be acquired for its own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The obligations of the
underwriters to purchase such Securities will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all such
Securities if any of such Securities are purchased. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time. To the extent, if any, that Securities to be
purchased by Lehman Brothers, as underwriter, are not resold by it or are not
resold at the public offering price set forth in an applicable Prospectus
Supplement, the funds derived from such offering by the Company on a
consolidated basis may be reduced.
If so indicated in an applicable Prospectus Supplement, Holdings will
authorize the underwriters named therein to solicit offers to certain
institutional investors to purchase Securities providing for payment and
delivery on a future date specified in an applicable Prospectus Supplement.
There may be limitations on the minimum amount which may be purchased by any
such institutional investor or on the portion of the aggregate proceeds to
Holdings of the particular Securities which may be sold pursuant to such
arrangements. Institutional investors to which such offers may be made, when
authorized, include commercial and savings banks, insurance companies, pension
funds, educational charitable institutions and such other institutions as may be
approved by Holdings. The obligations of any such purchasers pursuant to such
delayed delivery and payment arrangements will not be subject to any conditions
except (i) the purchase by an institution of the particular Securities shall not
at the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject, and (ii) Holdings shall have
sold to such underwriters all of such Securities less the amount of such
securities covered by such arrangements. Underwriters named therein will not
have any responsibility in respect of the validity of such arrangements or the
performance of Holdings or such institutional investors thereunder.
Each distributor of Bearer Securities will agree that it will not offer or
sell during the restricted period, directly or indirectly, Bearer Securities in
the United States or to United States persons (other than as discussed under
"Description of Debt Securities-Limitations on Issuance of Bearer Securities")
and in connection with the sale of Bearer Securities during the restricted
period, will not deliver definitive Bearer Securities within the United States.
See "Description of Debt Securities--Limitations on Issuance of Bearer
Securities."
Each underwriter or agent will represent and agree that (i) it has not
offered and sold and will not offer or sell, prior to the date six months after
the date of issue in the case of the Debt Securities, any Securities to persons
in the United Kingdom, except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offer of Securities Regulations 1995;
(ii) it has complied with and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the Securities in, from or otherwise involving the United Kingdom; and (iii) it
has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995
or is a person to whom such document may otherwise lawfully be issued or passed
on.
The underwriters and agents named in an applicable Prospectus Supplement
may be entitled under agreements entered into with Holdings to indemnification
by Holdings against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which the
underwriters and agents may be required to make in respect thereof. The
underwriters and agents may engage in transactions with, or perform services
for, Holdings in the ordinary course of business.
Holdings has been advised by Lehman Brothers that Lehman Brothers may from
time to time purchase and sell Securities in the secondary market. Each offering
of Securities and any marketmaking activities by Lehman Brothers with respect to
Securities will be conducted in compliance with the requirements of Schedule E
of the By-Laws of the NASD regarding an NASD member firm's participation in
distributing its affiliate's securities. Lehman Brothers may act as principal or
agent in such transactions. This Prospectus may be used by Lehman Brothers in
connection with such transactions. Such sales, if any, will be made at varying
prices related to prevailing market prices at the time of sale. Lehman Brothers
is not obligated to make a market in any Securities and may discontinue any
market-making activities at any time without notice. No assurance can be given
that there will be a secondary market for the Securities.
ERISA MATTERS
Each of Holdings and Lehman Brothers may be considered a "party in
interest" within the meaning of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and a "disqualified person" under corresponding
provisions of the Code, with respect to certain employee benefit plans. Certain
transactions between an employee benefit plan and a party in interest or
disqualified person may result in "prohibited transactions" within the meaning
of ERISA and the Code. ANY EMPLOYEE BENEFIT PLAN PROPOSING TO INVEST IN THE
SECURITIES SHOULD CONSULT WITH ITS LEGAL COUNSEL.
<PAGE>
LEGAL OPINIONS
Unless otherwise indicated in an applicable Prospectus Supplement relating
to offered Securities, the validity of the Securities offered hereby will be
passed upon for Holdings by Karen M. Muller, Esq., Deputy General Counsel of
Holdings and for the underwriters or agents by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), 425 Lexington Avenue, New
York, New York 10017. Simpson Thacher & Bartlett acts as counsel in various
matters for Holdings, Lehman Brothers and certain of their subsidiaries.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements and schedules of the Company for the
year ended November 30, 1995, for the eleven months ended November 30, 1994 and
for the year ended December 31, 1993, appearing in the Company's Annual Report
on Form 10-K for the fiscal year ended November 30, 1995 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements and schedules are, and audited financial statements
included in subsequently filed documents will be, incorporated herein by
reference in reliance upon the reports of Ernst & Young LLP pertaining to such
financial statements (to the extent covered by consents filed with the
Securities and Exchange Commission) given upon the authority of such firm as
experts in accounting and auditing.`
<PAGE>
No dealer, salesman or other person 126,646 YEELDS
has been authorized to give any
information or to make any
representations other than those
contained in this Prospectus or the
accompanying Prospectus Supplement and, if LEHMAN BROTHERS
given or made, suchinformation or HOLDINGS INC.
representations must not be relied upon as
having been authorized by Holdings or any
agent or underwriter. This Prospectus
and the accompanying Prospectus Supplement 6% Black & Decker Yield Enhanced
do not constitute an offer to sell or a Equity Linked Debt Securities
solicitation of an offer to buy any of the Due 1998
securities offered hereby in any
jurisdiction to any person to whom it is
unlawful to make such offer or
solicitation in such jurisdiction.
Neither the delivery of this Prospectus
and the accompanying Prospectus Supplement
nor any sale made hereunder shall,under any
circumstances, create any implication that
there has been no change in the affairs of
Holdings since the date hereof.
TABLE OF CONTENTS
Prospectus Supplement Page
Summary.......................................S-3 PROSPECTUS SUPPLEMENT
September 5, 1996
Risk Factors..................................S-5
Use of Proceeds...............................S-6
The Black & Decker Corporation................S-7
Price Range of Black & Decker Common
Stock...................................S-7
Description of Securities.....................S-8
Certain United States Federal Income Tax
Considerations.........................S-10
Underwriting.................................S-12
Glossary.....................................S-13
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........................14
Global Securities..............................21
United States Taxation.........................24
Capital Requirements...........................24 LEHMAN BROTHERS
Plan of Distribution...........................24
ERISA Matters..................................26
Legal Opinions.................................26
Independent Accountants........................26
