<PAGE>
RULE NO. 424(b)(2)
REGISTRATION NO. 33-62085
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE +
+ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY PROSPECTUS SUPPLEMENT
dated February 6, 1996
(To Prospectus dated October 30, 1995)
$150,000,000
LEHMAN BROTHERS HOLDINGS INC.
SERIES A QUICS SM
% QUARTERLY INCOME CAPITAL SECURITIES
(SERIES A SUBORDINATED INTEREST DEFERRABLE DEBENTURES, DUE 2035)
----------
The % Quarterly Income Capital Securities (Series A Subordinated Interest
Deferrable Debentures, Due 2035) (the "QUICS") will mature on ,
2035. Interest on the QUICS will be payable quarterly in arrears, on March 31,
June 30, September 30 and December 31 of each year, commencing March 31, 1996;
provided that so long as an Event of Default (as defined in the accompanying
Prospectus) has not occurred and is not continuing with respect to the QUICS,
Lehman Brothers Holdings Inc. ("Holdings") will have the right at any time, on
one or more occasions, to defer interest payments on the QUICS for a period of
up to 20 consecutive quarters each (each, a "Deferral Period"), except that no
Deferral Period may extend beyond the maturity of the QUICS. No interest will
be due and payable during a Deferral Period, but at the end of each Deferral
Period Holdings will pay all interest then accrued and unpaid on the QUICS,
together with interest thereon, compounded quarterly. Prior to the termination
of any Deferral Period, Holdings may further defer quarterly interest payments
by extending the Deferral Period; provided that any such extended Deferral
Period, together with all further extensions of such Deferral Period, may not
exceed 20 consecutive quarters or extend beyond the maturity of the QUICS. In
the event that Holdings exercises its right to defer interest payments,
Holdings will not declare or pay any dividend on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of its Capital Stock (as
defined) or make any guarantee payments with respect to the foregoing during
such Deferral Period. See "Description of QUICS--Quarterly Interest Payments"
and "--Deferrals of Interest Payments" in this Prospectus Supplement.
The QUICS will be redeemable at the option of Holdings, in whole or in part,
on or after , 2001 at 100% of the principal amount to be redeemed,
together with accrued and unpaid interest to the date fixed for redemption.
The QUICS will be available for purchase in denominations of $25 and any
integral multiple thereof.
The QUICS will be unsecured obligations of Holdings and will be subordinate
to all existing and future Senior Debt (as defined in the accompanying
Prospectus) of Holdings, but senior to all Capital Stock of Holdings. On
December 31, 1995, approximately $8.3 billion of such Senior Debt was
outstanding. In addition, the QUICS will also be effectively subordinate to all
existing and future obligations of Holdings' subsidiaries. On December 31,
1995, approximately $4.6 billion of indebtedness of Holdings' subsidiaries not
included in Senior Debt was outstanding.
Application will be made for the listing of the QUICS on the New York Stock
Exchange.
----------
SEE "RISK FACTORS" AT PAGE S-4 OF THIS PROSPECTUS SUPPLEMENT FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE QUICS.
----------
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 TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discount(2)(3) Holdings (1)(3)(4)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per QUICS........................................... $25.00 $ $
- -----------------------------------------------------------------------------------------------
Total............................................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from February , 1996.
(2) Holdings has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) The Underwriting Discount will be $ for each QUICS sold to certain
institutions. Therefore, to the extent that the QUICS are sold to such
institutions, the actual Underwriting Discount will be less than, and the
Proceeds to Holdings will be greater than, the amounts shown.
(4) Before deducting estimated expenses of $ payable by Holdings.
----------
The QUICS offered by this Prospectus Supplement are offered by the several
Underwriters named herein, subject to prior sale, withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
Underwriters and to certain further conditions. It is expected that delivery of
the QUICS will be made at the office of Lehman Brothers Inc., New York, New
York, on or about February , 1996.
- -----
SMLehman Brothers Inc. has applied for a service mark for QUICS.
----------
LEHMAN BROTHERS
A.G. EDWARDS & SONS, INC.
BEAR, STEARNS & CO. INC.
DEAN WITTER REYNOLDS INC.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
February , 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE QUICS AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-
COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information included or incorporated by reference in this Prospectus. See "Risk
Factors" in this Prospectus Supplement. Capitalized terms used in this
Prospectus Supplement Summary have the meanings given to such terms in this
Prospectus Supplement or the accompanying Prospectus.
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, Tokyo,
Hong Kong and Singapore are complemented by offices in additional locations in
the United States, Europe, the Middle East, Latin and South America.
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; asset
management; research; and the trading of foreign exchange, derivative products
and certain commodities. The Company acts as a market marker in all major
equity and fixed income products in both the domestic and international
markets. The Company is a member of all principal securities and commodities
exchanges in the United States, as well as the National Association of
Securities Dealers, Inc., 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.
THE QUICS
The following is a brief summary of certain of the principal terms of the
QUICS. For a further description of the material provisions of the QUICS, see
"Description of QUICS" in this Prospectus Supplement.
Principal Amount................ $150,000,000
Interest........................ % annual interest payable quarterly in
arrears on March 31, June 30, September 30
and December 31 of each year, commencing
March 31, 1996, subject to Holdings' right to
defer interest payments on the QUICS for
periods of up to 20 consecutive quarters
each, except that no Deferral Period may
extend beyond the maturity of the QUICS. No
interest shall be due and payable during a
Deferral Period, but at the end of each
Deferral Period Holdings is required to pay
all interest then accrued and unpaid on the
QUICS, together with interest thereon,
compounded quarterly. During any Deferral
Period Holdings may not make any Capital
Stock Payments. However, Holdings believes
that the exercise of its right to defer
interest payments on the QUICS is unlikely.
Maturity........................ , 2035
Optional Redemption............. Redeemable at the option of Holdings at any
time on or after , 2001, in whole or in
part, at a redemption price equal to 100% of
the principal amount redeemed ($25 for each
$25 principal amount of QUICS) plus accrued
and unpaid interest to the date fixed for
redemption.
S-2
<PAGE>
Subordination................... Subordinated to all existing and future
Senior Debt of Holdings, but senior to
Capital Stock of Holdings. Effectively
subordinated to all liabilities of Holdings'
subsidiaries.
New York Stock Exchange Application will be made to list the QUICS on
Listing......................... the NYSE.
Original Issue Discount......... The QUICS will be treated as having been
issued with original issue discount.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
TWELVE MONTHS ELEVEN MONTHS
ENDED ENDED
NOVEMBER 30, NOVEMBER 30,
1995 1994*
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Revenues:
Principal transactions............................ $1,393 $1,345
Investment banking................................ 801 572
Commissions....................................... 450 445
Interest and dividends............................ 10,788 6,761
Other............................................. 44 67
------ ------
Total revenues................................... 13,476 9,190
Interest expense.................................. 10,405 6,452
------ ------
Net revenues..................................... 3,071 2,738
------ ------
Non-interest expenses:
Compensation and benefits......................... 1,544 1,413
Other expenses.................................... 1,061 1,084
Reserves and other charges........................ 97 48
------ ------
Total non-interest expenses...................... 2,702 2,545
Income before taxes and cumulative effect of
change in accounting principle................... 369 193
Provision for income taxes........................ 127 67
------ ------
Income before cumulative effect of change in ac-
counting principle............................... 242 126
Cumulative effect of change in accounting princi- (13)
ple, net of taxes................................ ------ ------
Net income........................................ $ 242 $ 113
====== ======
Net income applicable to common stock............. $ 200 $ 75
====== ======
</TABLE>
- --------
* The Company changed its fiscal year end during 1994. Therefore, results for
the fiscal years ended November 30, 1995 and November 30, 1994 are not
directly comparable.
RECENT DEVELOPMENTS
For the year ended November 30, 1995, the Company reported net income of $242
million, including a $47 million after-tax gain related to the Company's sale
of its interest in Omnitel Sistemi Radiocellullari Italiani S.p.A and a $58
million after-tax charge for occupancy-related real estate expenses and
severance. Excluding these special items, net income was $253 million for the
twelve months ended November 30, 1995. The Company's 1995 results reflect
improved performance in corporate finance advisory activity and in fixed income
and equity origination as well as higher levels of customer activity in a
number of businesses. The Company benefited from the continuing increase in
merger and acquisition activity throughout the year and from a stronger market
climate beginning in the second quarter of 1995. The Company's continued
investments in selective investment banking, research and sales resources,
combined with reductions in the Company's personnel and non-personnel expenses,
also had a positive effect on 1995 results.
S-3
<PAGE>
RISK FACTORS
Prospective purchasers of QUICS should carefully consider, in addition to the
other information set forth elsewhere in this Prospectus Supplement and in the
accompanying Prospectus, the following risk factors.
SUBORDINATION OF QUICS
The QUICS will be unsecured obligations of Holdings and will be subordinate
to all existing and future Senior Debt (as defined in the accompanying
Prospectus) of Holdings, but senior to all Capital Stock (as defined under
"Description of QUICS" in this Prospectus Supplement) of Holdings. On December
31, 1995, approximately $8.3 billion of such Senior Debt was outstanding. There
are no terms in the QUICS that limit Holdings' ability to incur additional
indebtedness, including indebtedness that would rank senior to the QUICS. As
the QUICS will be issued by Holdings, the QUICS will also be effectively
subordinate to all obligations of Holdings' subsidiaries. On December 31, 1995,
approximately $4.6 billion of indebtedness of Holdings' subsidiaries not
included in Senior Debt was outstanding. See "Description of QUICS--Deferrals
of Interest Payments" in this Prospectus Supplement and "Description of Debt
Securities--Subordinated Debt" in the accompanying Prospectus.
RIGHT OF HOLDINGS TO DEFER PAYMENT OF INTEREST
So long as no Event of Default with respect to the QUICS has occurred and is
continuing, Holdings will have the right, upon prior notice by public
announcement given in accordance with rules of the New York Stock Exchange,
Inc. ("NYSE") at any time, to defer interest payments on the QUICS, at any
time, on one or more occasions, for periods of up to 20 consecutive quarters
each (each, a "Deferral Period"), except that no Deferral Period may extend
beyond the maturity of the QUICS. No interest will be due and payable during a
Deferral Period, but on the interest payment date at the end of each Deferral
Period Holdings will pay to the holders of record on the record date for such
interest payment date (regardless of who the holders of record may have been on
other dates during the Deferral Period) all accrued and unpaid interest on the
QUICS, together with interest thereon, compounded quarterly. In the event that
Holdings exercises its right to defer interest payments, Holdings may not
declare or pay any dividend on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its Capital Stock (as defined under
"Description of QUICS--Deferrals of Interest Payments") or make any guarantee
payments with respect to the foregoing during such Deferral Period.
Upon the termination of any Deferral Period and the payment of all interest
then due, Holdings may commence a new Deferral Period. Consequently, there
could be multiple Deferral Periods of varying lengths throughout the term of
the QUICS. See "Description of QUICS--Deferrals of Interest Payments" in this
Prospectus Supplement.
In the event a Deferral Period occurs, holders of the QUICS would continue,
under the original issue discount rules, to accrue income on the QUICS for
United States federal income tax purposes. As a result, a holder ordinarily
would include such amounts in gross income in advance of the receipt of cash. A
holder that disposes of its QUICS prior to the record date for payment of
interest at the end of a Deferral Period will not receive cash from Holdings
related to such interest because such interest will be paid to the holder of
record on such record date, regardless of who the holders of record may have
been on other dates during the Deferral Period. The extent to which such a
holder will receive a return on the QUICS for the period it held such QUICS
will depend on the market for the QUICS at the time of such disposition. See
"Certain United States Federal Income Tax Consequences--Original Issue
Discount, Market Discount and Acquisition Premium" in this Prospectus
Supplement.
Holdings has no current intention of exercising its right to defer interest
payments on the QUICS.
POTENTIAL MARKET VOLATILITY IN THE EVENT OF A DEFERRED PAYMENT OF INTEREST
As described above, Holdings will have the right to defer interest payments
on the QUICS, at any time, on one or more occasions, for periods of up to 20
consecutive quarters each, except that no Deferral Period
S-4
<PAGE>
may extend beyond the maturity of the QUICS. If Holdings determines to defer
such interest payments, or if Holdings thereafter extends a Deferral Period,
the market price of the QUICS is likely to be adversely affected. In addition,
as a result of such rights, the market price of the QUICS may be more volatile
than other debt instruments that do not have such rights. A holder that
disposes of its QUICS during a Deferral Period, therefore, may not receive the
same return on its investment as a holder that continues to hold its QUICS. A
failure by Holdings to make an interest payment for 20 consecutive quarters
will constitute an Event of Default as of the last day of such 20th consecutive
quarter.
LISTING AND TRADING OF QUICS
There has not been any public market for the QUICS. While Holdings intends to
list the QUICS on the NYSE, there can be no assurance that an active market for
the QUICS will develop or be sustained in the future on the NYSE or otherwise.
Listing will depend upon the satisfaction of the NYSE's listing requirements
with respect to the QUICS, which require a minimum of 400 beneficial holders
and 1,000,000 outstanding securities. The Underwriters currently plan to make a
market in the QUICS. However, there can be no assurance that the Underwriters
will engage in such activities or that any active market in the QUICS will
develop or be maintained. Accordingly, no assurance can be given as to the
liquidity of, or trading for, the QUICS.
USE OF PROCEEDS
The proceeds from the sale of the QUICS will be used to redeem outstanding
shares of Cumulative Preferred Stock of Holdings, bearing a dividend rate of
8.44% per annum, with a liquidation preference equal to the principal amount of
the QUICS.
DESCRIPTION OF QUICS
The following description of the particular terms of the QUICS offered hereby
supplements the description of the general terms and provisions of the Debt
Securities set forth in the Prospectus, to which description reference is
hereby made. Capitalized terms not defined in this Prospectus Supplement have
the meanings given to such terms in the accompanying Prospectus.
GENERAL
The QUICS offered hereby are issued under the Indenture dated as of February
1, 1996 between Holdings and Chemical Bank, as Trustee, as supplemented and
amended by a First Supplemental Indenture dated as of February 1, 1996 (the
"First Supplemental Indenture") (collectively, the "Subordinated Indenture"). A
copy of the First Supplemental Indenture will be filed as an exhibit to a
Current Report on Form 8-K of Holdings. The QUICS will constitute a series of
unsecured, subordinated debt securities, will be subordinated to Senior Debt of
Holdings, as described under "Description of Debt Securities--Subordinated
Debt" in the accompanying Prospectus, will be limited in aggregate principal
amount to $ 150,000,000 and will mature on , 2035.
QUARTERLY INTEREST PAYMENTS
Interest on the QUICS will accrue from February , 1996 at a rate of % per
annum and will be payable quarterly in arrears on March 31, June 30, September
30 and December 31 of each year, commencing March 31, 1996 (each, an "Interest
Payment Date"), to the persons in whose names the QUICS are registered on March
15, June 15, September 15 and December 15 of each year.
The amount of interest payable for any period will be computed on the basis
of twelve 30-day months and a 360-day year and, for any period shorter than a
full quarterly interest period, will be computed on the basis of the actual
number of days elapsed in such period over 360. In the event that any date on
which
S-5
<PAGE>
interest is payable on the QUICS is not a Business Day, then payment of the
amount payable on such date will be made on the next succeeding day which is a
Business Day (and without interest or other payment in respect of any such
delay), except that, if such Business Day is in the succeeding calendar year,
such payment will be made on the immediately preceding Business Day, in each
case, with the same force and effect as if made on the original Interest
Payment Date, subject to certain rights of deferral described under "Deferral
of Interest Payments" below. As used herein, "Business Day" means any day,
other than a Saturday or Sunday, that is not a day on which banking
institutions in the Borough of Manhattan, New York City are authorized or
required by law, regulation or executive order to close.
DEFERRALS OF INTEREST PAYMENTS
Holdings will have the right at any time, on one or more occasions, so long
as an Event of Default has not occurred and is not continuing with respect to
the QUICS, to defer interest payments on the QUICS for periods of up to 20
consecutive quarters each, except that no Deferral Period may extend beyond the
maturity of the QUICS. No interest will be due and payable during a Deferral
Period, but at the end of each Deferral Period Holdings will pay all interest
then accrued and unpaid on the QUICS, together with interest thereon,
compounded quarterly. Prior to the termination of any Deferral Period, Holdings
may further defer quarterly interest payments by extending the Deferral Period;
provided that any such extended Deferral Period, together with all further
extensions of such Deferral Period, may not exceed 20 consecutive quarters or
extend beyond the maturity of the QUICS. In the event that Holdings exercises
its right to defer interest payments, Holdings will not declare or pay any
dividend on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its Capital Stock or make any guarantee payments with
respect to the foregoing (each, a "Capital Stock Payment") during such Deferral
Period. All series of Holdings' preferred stock, common stock and any other
equity securities of Holdings are referred to herein as "Capital Stock".
Holdings has no current intention of exercising its right to defer interest
payments. However, if Holdings were to exercise this right, the market price of
the QUICS would likely be adversely affected. A failure by Holdings to make an
interest payment for 20 consecutive quarters will constitute an Event of
Default as of the last day of such 20th consecutive quarter.
If Holdings expects that interest will not be paid on any Interest Payment
Date, Holdings will be required to give the holders of the QUICS and the
Trustee written notice prior to the earlier of (i) such Interest Payment Date
and (ii) the date Holdings is required to give notice of the record date of
such interest payment to the NYSE or other applicable self-regulatory
organization or the holders of the QUICS, but in any event such notice shall be
given not less than two Business Days prior to such record date.
OPTIONAL REDEMPTION
The QUICS will be redeemable at the option of Holdings, in whole or in part,
at any time on or after , 2001 and prior to maturity, upon not less than
30 nor more than 60 days' notice, at a redemption price equal to 100% of the
principal amount redeemed plus accrued and unpaid interest to the date fixed
for redemption. If fewer than all the QUICS are redeemed, the Trustee under the
Subordinated Indenture will select the QUICS to be redeemed by lot or such
other method as such Trustee shall deem fair and appropriate.
SUBORDINATION
The QUICS will be expressly subordinate and junior in right of payment, to
the extent and in the manner set forth in the Subordinated Indenture, to all
Senior Debt (as defined under "Description of Debt Securities--Subordinated
Debt" in the accompanying Prospectus) of Holdings.
In the event (a) of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
respect of Holdings or a substantial part of its property, (b) that (i) a
default shall have occurred with respect to the payment of principal of or
interest on or other
S-6
<PAGE>
monetary amounts due and payable on any Senior Debt or (ii) there shall have
occurred an event of default (other than a default in the payment of principal
of or interest or other monetary amounts due and payable) with respect to any
Senior Debt, as defined therein or in the instrument under which the same is
outstanding, permitting the holder or holders thereof to accelerate the
maturity thereof (with notice or lapse of time, or both), and such event of
default shall have continued beyond the period of grace, if any, in respect
thereof, and such default or event of default shall not have been cured or
waived or shall not have ceased to exist, or (c) that the principal of and
accrued interest on the Subordinated Debt (including the QUICS) shall have been
declared due and payable upon an Event of Default under the Subordinated
Indenture and such declaration shall not have been rescinded and annulled as
provided therein, then the holders of all Senior Debt shall first be entitled
to receive payment of the full amount unpaid thereon in cash before the holders
of any of the Subordinated Debt (including the QUICS) are entitled to receive a
payment on account of the principal, premium, if any, or interest, if any, on
such Subordinated Debt. This paragraph, which summarizes a portion of the First
Supplemental Indenture, supersedes the second paragraph under "Description of
Debt Securities--Subordinated Debt" in the accompanying Prospectus.
For information concerning the principal amount outstanding at December 31,
1995 of Holdings' Senior Debt and obligations of Holdings' subsidiaries to
which the QUICS are effectively subordinated, see "Risk Factors--Subordination
of QUICS" in this Prospectus Supplement.
SATISFACTION AND DISCHARGE
Upon satisfaction of certain terms of the Subordinated Indenture, Holdings
may discharge certain obligations to holders of the QUICS which are by their
terms due and payable within one year by following the procedure described
under "Debt Securities--Satisfaction and Discharge" in the accompanying
Prospectus.
MODIFICATION OF THE SUBORDINATED INDENTURE
In addition to the modifications and amendments of the Subordinated Indenture
which may not be made by Holdings without the consent of the holder of each
QUICS affected thereby, as described under "Debt Securities--Meetings,
Modification and Waiver" in the accompanying Prospectus, Holdings may not amend
the Subordinated Indenture to modify its provisions relating to the
subordination of each of the QUICS in a manner adverse to such holder without
such holder's consent.
S-7
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary, which supplements information contained under "United
States Taxation" in the accompanying Prospectus, describes certain United
States federal income tax consequences of the ownership of the QUICS as of the
date hereof and represents the opinion of Simpson Thacher & Bartlett, special
tax counsel to Holdings, insofar as it relates to matters of law or legal
conclusions. Except where noted, it deals only with the QUICS held by initial
purchasers who have purchased the QUICS at the initial offering price thereof
and who hold such QUICS as capital assets and does not deal with special
situations, such as those of dealers in securities or currencies, financial
institutions, life insurance companies, persons holding the QUICS as a part of
a hedging or conversion transaction or a straddle, United States Holders (as
defined below) whose "functional currency" is not the U.S. dollar, or Non-
United States Holders (as defined below) who are present in the United States
or who have any other special status with respect to the United States.
Furthermore, the discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may
be repealed, revoked or modified so as to result in federal income tax
consequences different from those discussed below. PERSONS CONSIDERING THE
PURCHASE, OWNERSHIP OR DISPOSITION OF THE QUICS SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
OTHER TAXING JURISDICTION.
UNITED STATES HOLDERS
As used herein, a "United States Holder" of a QUICS means a holder that is a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. A
"Non-United States Holder" is a holder that is not a United States Holder.
ORIGINAL ISSUE DISCOUNT, MARKET DISCOUNT AND ACQUISITION PREMIUM
Under the terms of the QUICS, Holdings has the option to defer payments of
interest for a Deferral Period and to pay as a lump sum at the end of such
period all of the interest that has accrued during such period. See
"Description of QUICS--Deferrals of Interest Payments" in this Prospectus
Supplement. Because of this option to extend the interest payment periods, all
of the stated interest on the QUICS will be treated as "original issue
discount" ("OID"). As a result, United States Holders will, in effect, be
required to accrue interest income even if the holders are on the cash method
of tax accounting. Consequently, in the event that the interest payment period
is extended, a United States Holder would be required to include OID in income
on an economic accrual basis notwithstanding that Holdings will not make any
interest payments during such period on the QUICS.
United States Holders other than initial United States Holders may be deemed
to have acquired the QUICS with market discount or acquisition premium. Such
holders should consult their own tax advisors concerning the effect of the
market discount and premium rules on their holding of the QUICS.
SALE, EXCHANGE AND RETIREMENT OF THE QUICS
Upon the sale, exchange or retirement of a QUICS, a United States Holder will
recognize gain or loss equal to the difference between the amount realized upon
the sale, exchange or retirement and the adjusted tax basis of the QUICS. A
United States Holder's adjusted tax basis in a QUICS will, in general, be the
United States Holder's initial basis therefor, increased by OID previously
included in income by the United States Holder and reduced by any cash payments
on the QUICS. Such gain or loss will be capital gain or loss and will be long-
term capital gain or loss if at the time of sale, exchange or retirement the
QUICS has been held for more than one year. Under current law, net capital
gains of individuals are, under certain circumstances, taxed at lower rates
than items of ordinary income. The deductibility of capital losses is subject
to limitations.
S-8
<PAGE>
UNDERWRITING
The Underwriters listed below, for whom Lehman Brothers Inc., A.G. Edwards &
Sons, Inc., Bear, Stearns & Co. Inc., Dean Witter Reynolds Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated,
PaineWebber Incorporated, Prudential Securities Incorporated and Smith Barney
Inc. are acting as representatives (the "Representatives"), have severally
agreed, subject to the terms and conditions contained in the Underwriting
Agreement, to purchase from Holdings the principal amount of the QUICS set
forth opposite their respective names below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER QUICS
----------- ------------
<S> <C>
Lehman Brothers Inc. ........................................... $
A.G. Edwards & Sons, Inc. ......................................
Bear, Stearns & Co. Inc. .......................................
Dean Witter Reynolds Inc. ......................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated .............
Morgan Stanley & Co. Incorporated...............................
PaineWebber Incorporated........................................
Prudential Securities Incorporated..............................
Smith Barney Inc. ..............................................
------------
Total................................................. $150,000,000
============
</TABLE>
Holdings has been advised by the Representatives that the Underwriters
propose initially to offer the QUICS to the public at the public offering price
set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of $ per QUICS of the
principal amount. The Underwriters may allow and such dealers (who may include
the Underwriters) may reallow a concession not in excess of $ per QUICS to
certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed by the Representatives.
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, and that the Underwriters will be
obligated to purchase all of the QUICS to be purchased by them pursuant to such
Underwriting Agreement if any of such QUICS are purchased.
Holdings has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
The underwriting arrangements for this offering comply with the requirements
of Schedule E of the By-laws of the NASD regarding an NASD member firm
underwriting securities of an affiliate.
S-9
<PAGE>
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. NEITHER THIS PROSPECTUS
SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
----
Prospectus Supplement
Prospectus Supplement Summary.............................................. S-2
Risk Factors............................................................... S-4
Use of Proceeds............................................................ S-5
Description of QUICS....................................................... S-5
Certain United States Federal Income
Tax Consequences.......................................................... S-8
Underwriting............................................................... S-9
<CAPTION>
Prospectus
<S> <C>
Available Information...................................................... 2
Documents Incorporated by Reference........................................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Ratio of Earnings Combined Fixed Charges and Preferred Stock Dividends..... 4
Description of Debt Securities............................................. 4
Description of Offered Preferred Stock..................................... 15
Limitations on Issuance of Bearer Securities............................... 19
United States Taxation..................................................... 20
Capital Requirements....................................................... 23
Plan of Distribution....................................................... 23
ERISA Matters.............................................................. 25
Legal Opinions............................................................. 25
Independent Accountants.................................................... 25
</TABLE>
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$150,000,000
LEHMAN BROTHERS
HOLDINGS INC.
% QUARTERLY INCOME CAPITAL SECURITIES
(SERIES A SUBORDINATED INTEREST DEFERRABLE
DEBENTURES, DUE 2035)
----------------
PROSPECTUS SUPPLEMENT
, 1996
----------------
LEHMAN BROTHERS
A.G. EDWARDS & SONS, INC.
BEAR, STEARNS & CO. INC.
DEAN WITTER REYNOLDS INC.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
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