<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
LEHMAN BROTHERS HOLDINGS INC.
(NAME OF ISSUER)
LEHMAN BROTHERS HOLDINGS INC.
(NAME OF PERSON(S) FILING STATEMENT)
CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK, SERIES A
(TITLE OF CLASS OF SECURITIES)
524908407
(CUSIP NUMBER OF CLASS OF SECURITIES)
THOMAS A. RUSSO, ESQ.
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-7000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
<TABLE>
<S> <C>
RAYMOND W. WAGNER, ESQ. JENNIFER MARRE, ESQ.
SIMPSON THACHER & BARTLETT LEHMAN BROTHERS INC.
425 LEXINGTON AVENUE 3 WORLD FINANCIAL CENTER
NEW YORK, NY 10017 NEW YORK, NY 10285
</TABLE>
------------------------
JUNE 12, 1997
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
------------------------
CALCULATION OF FILING FEE
================================================================================
<TABLE>
<CAPTION>
TRANSACTION VALUATION AMOUNT OF FILING FEE
- ---------------------------------------------------------------------------------------------
<S> <C>
The value of the securities proposed to be acquired equals
$377,000,000, calculated pursuant to Rule 0-11 under the
Securities Exchange Act of 1934, as follows: the product of
$29.00 (the market value of the Cumulative Convertible Voting
Preferred Stock, Series A based on the average of the bid and
asked price on June 11, 1997) and 13,000,000 (the maximum
number of shares of such Preferred Stock which may be tendered
pursuant to the Exchange Offer described herein).............. $75,400
=============================================================================================
</TABLE>
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which this offsetting fee was previously paid.
Identify the previous filing by registration number, or the form or schedule
and the date of its filing.
<TABLE>
<S> <C>
Amount previously paid: $103,764 Filing Party: Lehman Brothers Holdings Inc.
Form or registration no.: Form S-4; 333-25227 Date Filed: April 15, 1997
</TABLE>
================================================================================
<PAGE> 2
ITEM 1. SECURITY AND ISSUER
(a) The name of the issuer is Lehman Brothers Holdings Inc., a Delaware
corporation (the "Company"), which has its principal executive offices at 3
World Financial Center, New York, New York 10285 (telephone number (212)
526-7000).
(b) The information set forth in the second paragraph of the front cover
page of the Prospectus dated June 12, 1997, a copy of which is attached hereto
as Exhibit (a)(1) (the "Prospectus"), is incorporated herein by reference.
(c) There is no established trading market for the Company's Cumulative
Convertible Voting Preferred Stock, Series A (the "Series A Preferred Stock").
(d) This statement is being filed by the Issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS
(a) The information set forth on the front cover page of the Prospectus and
the information set forth in the Prospectus under the caption "Description of
Series B Preferred Stock" is incorporated herein by reference.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE
The information set forth in the Prospectus under the caption "The Exchange
Offer -- Purpose of the Exchange Offer" is incorporated herein by reference. The
shares of Series A Preferred Stock exchanged will be retired.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER
None.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIP WITH RESPECT TO
THE ISSUER'S SECURITIES
None.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth in the Prospectus under the captions, "The
Exchange Offer -- Dealer Manager"; "-- Exchange Agent" and "-- Solicitation of
Tenders; Expenses" is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION
(a) Not applicable.
(b) Not applicable.
ITEM 8. ADDITIONAL INFORMATION
(a) None.
(b) None.
(c) Section 7 of the Exchange Act does not apply because these are not
margin securities.
(d) None.
(e) Reference is hereby made to the Prospectus, the Letter of Transmittal
and the other exhibits to this Schedule, all of which are attached hereto and
incorporated in their entirety by reference.
<PAGE> 3
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
(a)(1) Prospectus dated June 12, 1997.
(a)(2) Letter of Transmittal.
Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
(a)(3) Nominees.
(a)(4) Letter to Clients.
(b) Not applicable.
(c) Not applicable.
(d) Legal opinion of Simpson Thacher & Bartlett, special tax counsel to the Company.
(e) See Exhibit (a)(1).
(f) Not applicable.
</TABLE>
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
LEHMAN BROTHERS HOLDINGS INC.
By: /s/ JENNIFER MARRE
------------------------------------
Name: Jennifer Marre
--------------------------------
Title: Vice President
---------------------------------
June 12, 1997
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------
<S> <C> <C>
(a)(1) -- Prospectus dated June 12, 1997.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(4) -- Letter to Clients.
(b) -- Not applicable.
(c) -- Not applicable.
(d) -- Legal opinion of Simpson Thacher & Bartlett, special tax counsel to the Company.
(e) -- See Exhibit (a)(1).
(f) -- Not applicable.
</TABLE>
<PAGE> 1
EXHIBIT (a)(1)
PROSPECTUS
LEHMAN BROTHERS HOLDINGS INC.
Offer to Exchange
13,000,000 Shares of Cumulative Convertible Voting
Preferred Stock, Series B, par value $1.00 per share, for its
Outstanding Cumulative Convertible Voting Preferred Stock,
Series A, par value $1.00 per share.
------------------------
The Exchange Offer will expire at 12:00 midnight, New York City time, on
July 10, 1997, unless extended (the "Expiration Date").
Lehman Brothers Holdings Inc. (the "Company") hereby offers to exchange (the
"Exchange Offer"), on a share-for-share basis, up to 13,000,000 shares of its
new Cumulative Convertible Voting Preferred Stock, Series B (the "Series B
Preferred Stock") for up to 13,000,000 shares of its outstanding Cumulative
Convertible Voting Preferred Stock, Series A (the "Series A Preferred Stock").
Such 13,000,000 shares of Series A Preferred Stock constitute all outstanding
shares of the Series A Preferred Stock.
The terms of the Series B Preferred Stock (including dividend rate, voting
rights and liquidation preference) are identical in all material respects to the
terms of the Series A Preferred Stock for which they may be exchanged pursuant
to the Exchange Offer, except that conversion of the Series B Preferred Stock
will not be subject to the restriction in the terms of the Series A Preferred
Stock requiring that at least 250,000 shares thereof be converted at any one
time.
The annual dividend rate per share on the Series B Preferred Stock will be
in an amount equal to $1.955 per share. Dividends on the shares of Series B
Preferred Stock, when and as declared by the Board of Directors of the Company,
will be cumulative and will be payable on March 15, June 15, September 15 and
December 15 in each year (the "Dividend Payment Dates"), commencing on September
15, 1997. Dividends on the Series B Preferred Stock will be paid to the holders
of record of shares of Series B Preferred Stock of the Company on a record date,
not exceeding 40 days preceding the payment date thereof.
The Series B Preferred Stock will be redeemable at the option of the Company
on any Dividend Payment Date, in specified cumulative amounts increasing to
13,000,000 shares on and after June 15, 1998 (subject to reduction as described
herein), upon at least 30 days' and not more than 45 days' notice to the holders
thereof, at $39.10 per share plus accumulated and unpaid dividends (whether or
not earned or declared) to the date fixed for redemption, provided that the
Average Market Price (as defined) of the Common Stock on the date such notice is
given is greater than the Conversion Price (as defined). As of March 31, 1997,
the Average Market Price would have been $33.60 and the Conversion Price would
have been $123.0212380. Accordingly, at that date the Series B Preferred Stock
would not have been redeemable at the option of the Company. The Series B
Preferred Stock will not be subject to any mandatory sinking fund.
Each share of Series B Preferred Stock will be convertible at the option of
the holder at any time, unless previously redeemed, into a number of shares of
Common Stock equal to $39.10 divided by the Conversion Price in effect at the
time of such conversion. As of the date of this Prospectus, the Conversion
Price, which is subject to adjustment under certain conditions, would have been
$123.0212380.
The liquidation preference of each share of Series B Preferred Stock will be
equal to $39.10 plus an amount equal to accumulated and unpaid dividends
(whether or not earned or declared) on such share of Series B Preferred Stock.
The Exchange Offer is not conditioned upon any minimum number of shares of
Series B Preferred Stock being tendered for exchange. The date of acceptance and
exchange of the Series A Preferred Stock (the "Exchange Date") will be the first
business day following the Expiration Date. Shares of Series A Preferred Stock
tendered pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date. The Company will pay all expenses incident to the Exchange
Offer. The Company will not receive any proceeds from the Exchange Offer.
A HOLDER OF SERIES A PREFERRED STOCK WHO EXCHANGES SERIES A PREFERRED STOCK
FOR SERIES B PREFERRED STOCK WILL NOT RECOGNIZE ANY GAIN OR LOSS FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES AS A RESULT OF SUCH EXCHANGE.
------------------------
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 Dealer Manager for this Offering is:
LEHMAN BROTHERS
June 12, 1997
<PAGE> 2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"SEC"). Such reports and information may be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the SEC: New
York Regional Office, 7 World Trade Center, New York, New York 10048; and
Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500 W. Madison
Street, Chicago, Illinois 60661-2511; and copies of such material can be
obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The SEC also maintains a Web site
at http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
SEC. The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") and the Pacific Stock Exchange Inc. (the "PSE"). The Company's 8 3/4%
Notes Due 2002 and 8.3% Quarterly Income Capital Securities (Series A
Subordinated Interest Deferrable Debentures Due 2035) are listed on the NYSE.
The Company's $55 Million Serial Zero Coupon Senior Notes Due May 16, 1998,
Global Telecommunications Stock Upside Note Securities SM Due 2000, 9 1/8%
Micron Yield Enhanced Equity Linked Debt Securities Due 1997 and AMEX Hong Kong
30 Index Call Warrants expiring January 23, 1998 are listed on the American
Stock Exchange, Inc. (the "ASE"). Reports and other information concerning the
Company may also be inspected at the offices of the NYSE at 20 Broad Street, New
York, New York 10005, at the offices of the ASE, at 86 Trinity Place, New York,
New York 10006 and at the offices of the PSE, 301 Pine Street, San Francisco,
California 94104.
The Company has filed with the SEC a registration statement on Form S-4
(herein, together with all amendments and exhibits, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act").
The Company has filed an Issuer Tender Offer Statement on Schedule 13E-4
(herein, together with all exhibits and schedules thereto, the "Schedule 13E-4")
with the SEC under the Exchange Act and the rules and regulations thereunder,
which includes certain additional information relating to the Exchange Offer and
the Series B Preferred Stock offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement or the Schedule
13E-4, certain parts of which are omitted in accordance with the rules and
regulations of the SEC, and to which reference is hereby made. For further
information, reference is hereby made to the Registration Statement and the
Schedule 13E-4.
2
<PAGE> 3
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the SEC
pursuant to the Exchange Act are hereby incorporated by reference in this
Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended
November 30, 1996.
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997.
(3) The Company's Current Reports on Form 8-K dated January 8, 1997
and March 26, 1997.
(4) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form S-1, File No. 33-52977.
Each document filed by the Company 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
Expiration Date 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 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 statements or this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of any of the Series A Preferred Stock, 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 Jo Capko, the Controller's Office, Lehman Brothers Holdings Inc., 3 World
Financial Center, 8th Floor, New York, New York 10285 (telephone (212)
526-0660). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS ANY REQUEST
SHOULD BE MADE BY FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
3
<PAGE> 4
SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with, the more detailed information contained elsewhere in this
Prospectus. Holders of Series A Preferred Stock are urged to read this
Prospectus in its entirety. All references to the "Company" shall mean Lehman
Brothers Holdings Inc. and its consolidated subsidiaries, unless the context
requires otherwise.
THE COMPANY
The Company 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; asset
management; research; and the trading of foreign exchange and derivative
products. 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.
("NASD"), and holds memberships or associate memberships on several principal
international securities and commodities exchanges, including the London, Tokyo,
Hong Kong, Frankfurt, Milan and Stockholm stock exchanges.
The Company was incorporated in Delaware on December 29, 1983. The
Company's principal executive offices are located at 3 World Financial Center,
New York, New York 10285 (telephone (212) 526-7000).
THE EXCHANGE OFFER
THE EXCHANGE OFFER......... The Company is offering to exchange pursuant to the
Exchange Offer, on a share-for-share basis, up to
13,000,000 shares of its new Cumulative Convertible
Voting Preferred Stock, Series B (the "Series B
Preferred Stock") for up to 13,000,000 shares of
its outstanding Cumulative Convertible Voting
Preferred Stock, Series A (the "Series A Preferred
Stock"). The terms of the Series B Preferred Stock
(including dividend rate, voting rights and
liquidation preference) are identical in all
material respects to the terms of the Series A
Preferred Stock for which they may be exchanged
pursuant to the Exchange Offer, except that
conversion of the Series B Preferred Stock will not
be subject to the restriction in the terms of the
Senior A Preferred Stock requiring that at least
250,000 shares thereof be converted at any one
time. The Series A Preferred Stock was originally
issued on April 15, 1987. See "The Exchange
Offer -- Terms of the Exchange" and "--Terms and
Conditions of the Letter of Transmittal" and
"Description of Series B Preferred Stock."
DIVIDEND PAYMENTS.......... Holders of shares of Series A Preferred Stock
accepted for exchange pursuant to the Exchange
Offer will not receive dividends accrued from June
15, 1997 (the last regular dividend payment period
with respect to the Series A Preferred Stock) on
such Series A Preferred Stock. Holders whose shares
of Series A Preferred Stock are accepted for
exchange will be entitled to receive dividends on
the Series B Preferred Stock, when and as declared
by the Board of Directors, or any duly authorized
committee thereof, accruing in the amount of
$0.48875 per share (equal to the indicated annual
dividend amount per share of Series A Preferred
Stock divided by four) from June 15, 1997 to, but
excluding, September 15, 1997 (the first Dividend
Payment Date for the Series B Preferred Stock). See
"The Exchange Offer -- Accrued Dividends."
4
<PAGE> 5
MINIMUM CONDITION.......... The Exchange Offer is not conditioned upon any
minimum number of shares of Series A Preferred
Stock being tendered for exchange.
EXPIRATION DATE............ The Exchange Offer will expire at 12:00 midnight,
New York City time, on July 10, 1997, unless
extended (the "Expiration Date"). See "The Exchange
Offer -- Expiration Date; Extension; Amendments."
Any share of Series A Preferred Stock not accepted
for exchange for any reason will be returned
without expense to the tendering holder thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer. See "The
Exchange Offer -- Acceptance of Series A Preferred
Stock for Exchange; Delivery of Series B Preferred
Stock."
EXCHANGE DATE.............. The date of acceptance for exchange of the Series A
Preferred Stock will be the first business day
following the Expiration Date.
CONDITIONS OF THE EXCHANGE
OFFER.................... The Company's obligation to consummate the Exchange
Offer will be subject to certain conditions. See
"The Exchange Offer -- Conditions to the Exchange
Offer." The Company reserves the right to terminate
or amend the Exchange Offer at any time prior to
the Expiration Date upon the occurrence of any such
condition.
WITHDRAWAL RIGHTS.......... The tender of Series A Preferred Stock pursuant to
the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. See "The Exchange
Offer -- Withdrawal Rights."
PROCEDURES FOR TENDERING... See "The Exchange Offer -- Tender Procedure."
FEDERAL INCOME
TAX CONSEQUENCES......... In the opinion of Simpson Thacher & Bartlett,
special tax counsel to the Company, a holder of
Series A Preferred Stock who exchanges Series A
Preferred Stock for Series B Preferred Stock will
not recognize any gain or loss for United States
federal income tax purposes as a result of such
exchange. See "Material United States Federal
Income Tax Consequences." With respect to dividends
paid on the Series B Preferred Stock, holders of
Series B Preferred Stock will be eligible for the
dividends-received deduction available to domestic
corporate holders to the extent they were eligible
for the dividends-received deduction with respect
to dividends paid on the Series A Preferred Stock.
USE OF PROCEEDS............ There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer. See
"Use of Proceeds."
DEALER MANAGER............. Lehman Brothers Inc., the Company's wholly-owned
subsidiary ("Lehman Brothers"), is serving as
Dealer Manager in connection with the Exchange
Offer. See "The Exchange Offer -- Dealer Manager."
EXCHANGE AGENT............. BankBoston, c/o Boston EquiServe, L.P. is serving
as Exchange Agent in connection with the Exchange
Offer. See "The Exchange Offer -- Exchange Agent."
CONSEQUENCE OF FAILURE
TO EXCHANGE.............. Holders of shares of Series A Preferred Stock who
do not exchange their shares of Series A Preferred
Stock for shares of Series B Preferred Stock
pursuant to the Exchange Offer will continue to be
subject to the restriction on conversion of such
Series A Preferred Stock requiring the conversion
of at least 250,000 shares thereof at any one time.
See "The Exchange Offer -- Consequence of Failure
to Exchange."
5
<PAGE> 6
POTENTIALLY LIMITED MARKET
FOR
SERIES B PREFERRED
STOCK.................... The Series B Preferred Stock will be a new issue of
securities with no established trading market. The
Company has been advised by Lehman Brothers that it
intends to make a market in the Series B Preferred
Stock but is not obligated to do so and may
discontinue market making at any time without
notice. No assurance can be given as to the
liquidity of the trading market for the Series B
Preferred Stock. The trading market for the Series
A Preferred Stock generally has not been liquid.
See "Market and Trading Information."
TERMS OF THE SERIES B PREFERRED STOCK
ISSUER..................... Lehman Brothers Holdings Inc.
SECURITIES OFFERED......... Up to 13,000,000 shares of Cumulative Convertible
Voting Preferred Stock, Series B, par value $1.00
per share (the "Series B Preferred Stock").
DIVIDENDS.................. The annual dividend rate per share of Series B
Preferred Stock will be in an amount equal to
$1.955 per share. Dividends on the shares of Series
B Preferred Stock, when and as declared by the
Board of Directors of the Company, will be
cumulative and payable on March 15, June 15,
September 15 and December 15 in each year,
commencing on September 15, 1997. See "Description
of Series B Preferred Stock -- Dividends."
MANDATORY REDEMPTION....... None.
OPTIONAL REDEMPTION........ Series B Preferred Stock is redeemable at the
option of the Company on any Dividend Payment Date,
in specified cumulative amounts increasing to
13,000,000 shares on and after June 15, 1998
(subject to reduction as described herein), upon at
least 30 days' and not more than 45 days' notice to
the holders thereof, at $39.10 per share plus
accumulated and unpaid dividends (whether or not
earned or declared) to the date fixed for
redemption, provided that the Average Market Price
of the Common Stock on the date such notice is
given is greater than the Conversion Price. As of
March 31, 1997, the Average Market Price would have
been $33.60 and the Conversion Price would have
been $123.0212380. Accordingly, at that date the
Series B Preferred Stock would not have been
redeemable at the option of the Company. See
"Description of Series B Preferred
Stock -- Redemption."
CONVERSION................. Each share of Series B Preferred Stock will be
convertible at the option of the holder at any
time, unless previously redeemed, into a number of
shares of Common Stock equal to $39.10 divided by
the Conversion Price in effect at the time of such
conversion. As of the date of this Prospectus, the
Conversion Price, which is subject to adjustment
under certain conditions, would have been
$123.0212380. See "Description of Series B
Preferred Stock -- Conversion."
LIQUIDATION................ The liquidation preference of each share of Series
B Preferred Stock will be equal to $39.10 plus an
amount equal to accumulated and unpaid dividends
(whether or not earned or declared) on such share
of Series B Preferred Stock. See "Description of
Series B Preferred Stock -- Liquidation."
6
<PAGE> 7
SELECTED FINANCIAL DATA
The following table summarizes certain consolidated financial information
based upon the Company's historical results included in the Company's audited
financial statements for the twelve months ended November 30, 1996 and 1995, the
eleven months ended November 30, 1994 and the twelve months ended December 31,
1993 and 1992. During 1993, the Company completed the sales of three businesses.
As a result, the Company's 1993 historical results are not directly comparable
with financial information of prior years presented. In addition, the Company's
1994 results presented below are for the eleven month period ended November 30,
due to the Company's decision to change its year-end from December 31. For these
reasons, the Company's 1994 results are not fully comparable with all periods
presented below. The information set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's 1996 Consolidated Financial Statements and notes
thereto, incorporated by reference in the Company's Annual Report on Form 10-K
for the year ended November 30, 1996, incorporated herein by reference.
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL DATA
---------------------------------------------------------------------
TWELVE MONTHS
TWELVE MONTHS TWELVE MONTHS ELEVEN MONTHS ENDED
ENDED ENDED ENDED DECEMBER 31,
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, ------------------
1996 1995 1994 1993 1992
------------- ------------- ------------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AND EMPLOYEE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenues:
Principal transactions................ $ 1,579 $ 1,393 $ 1,345 $ 2,055 $ 1,767
Investment banking.................... 981 801 572 972 892
Commissions........................... 362 450 445 1,316 1,677
Interest and dividends................ 11,298 10,788 6,761 5,840 5,661
Other................................. 40 44 67 491 684
-------- -------- -------- ------- -------
Total revenues...................... 14,260 13,476 9,190 10,674 10,681
Interest expense...................... 10,816 10,405 6,452 5,368 5,185
-------- -------- -------- ------- -------
Net revenues........................ 3,444 3,071 2,738 5,306 5,496
-------- -------- -------- ------- -------
Non-interest expenses:
Compensation and benefits............. 1,747 1,544 1,413 2,989 3,310
Other expenses........................ 976 1,061 1,084 1,603 2,188
Loss on sale of Shearson.............. 535
Severance and other charges........... 84 97 48 152 245
-------- -------- -------- ------- -------
Total non-interest expenses......... 2,807 2,702 2,545 5,279 5,743
-------- -------- -------- ------- -------
Income (loss) from continuing operations
before taxes and cumulative effect of
changes in accounting principles...... 637 369 193 27 (247)
Provision for (benefit from) income
taxes................................. 221 127 67 318 (54)
-------- -------- -------- ------- -------
Income (loss) from continuing operations
before cumulative effect of changes in
accounting principles................. 416 242 126 (291) (193)
Income (loss) from discontinued
operations............................ 189 77
Cumulative effect of changes in
accounting principles, net of taxes... (13) (7)
-------- -------- -------- ------- -------
Net income (loss)....................... $ 416 $ 242 $ 113 $ (102) $ (123)
======== ======== ======== ======= =======
Net income (loss) applicable to common
stock................................. $ 378 $ 200 $ 75 $ (150) $ (171)
======== ======== ======== ======= =======
STATEMENT OF FINANCIAL CONDITION
(at period end)
Total assets............................ $ 128,596 $ 115,303 $ 109,947 $80,474 $85,232
Total assets excluding matched
book(a)............................... 96,256 79,069 72,457 54,428 58,866
Long-term debt(b)....................... 15,922 12,765 11,321 9,899 7,680
Total stockholders' equity.............. 3,874 3,698 3,395 2,052 2,361
Total capital(c)........................ 19,796 16,463 14,716 11,951 10,041
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL DATA
---------------------------------------------------------------------
TWELVE MONTHS
TWELVE MONTHS TWELVE MONTHS ELEVEN MONTHS ENDED
ENDED ENDED ENDED DECEMBER 31,
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, ------------------
1996 1995 1994 1993 1992
-------- -------- -------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AND EMPLOYEE DATA)
<S> <C> <C> <C> <C> <C>
PER SHARE DATA(d)
Income (loss) from continuing operations
before cumulative effect of change in
accounting principle.................. $ 3.24 $ 1.76 $ 0.81 $ (3.20)
Discontinued operations................. 1.79
Cumulative effect of change in
accounting principle.................. (0.12)
Net income (loss)....................... 3.24 1.76 0.69 (1.41)
Dividends declared per common share..... 0.20 0.20 0.175
Book value per common share (at period
end).................................. 28.84 25.67 24.35
OTHER DATA (at period end)
Ratio of total assets to total
stockholders' equity.................. 33.2x 31.2x 32.4x 39.2x 36.1x
Ratio of total assets excluding matched
book to total stockholders'
equity(a)............................. 24.8x 21.4x 21.3x 26.5x 24.9x
Return on common equity
(annualized)(e)....................... 13.9% 7.5% 6.2%
Ratio of earnings to combined fixed
charges and preferred stock
dividends(f).......................... 1.05 1.03 1.02 (g) (g)
Employees............................... 7,556 7,771 8,512 9,300
</TABLE>
- ---------------
(a) Matched book represents "securities purchased under agreements to resell"
("reverse repos") to the extent that such balance is less than "securities
sold under agreements to repurchase" ("repos") as of the statement of
financial condition date. Several nationally recognized rating agencies
consider such reverse repos to be a proxy for matched book assets when
evaluating the Company's capital strength and financial ratios. Such
agencies consider matched book assets to have a low risk profile and
exclude such amounts in the calculation of leverage (total assets divided
by total stockholders' equity). Although there are other assets with
similar risk characteristics on the Company's Statement of Financial
Condition, the exclusion of reverse repos from total assets in this
calculation reflects the fact that these assets are matched against
liabilities of a similar nature, and therefore require minimal amounts of
capital support. Accordingly, the Company believes the ratio of total
assets excluding matched book to total stockholders' equity to be a more
meaningful measure of the Company's leverage.
(b) Long-term debt includes senior notes and subordinated indebtedness.
(c) Total capital includes total stockholders' equity and long-term debt.
(d) Earnings per common share data for the year ended 1993 includes Common
Stock issued as of May 31, 1994, when all of the shares of Common Stock of
the Company were distributed to American Express Company common
shareholders of record on May 20, 1994.
(e) Financial ratios exclude reserves and other charges and for the twelve
months ended November 30, 1995 exclude the effect of the sale of Omnitel.
(f) In computing the ratio of earnings to combined fixed charges and
preferred stock dividends, "earnings" 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.
(g) Earnings were inadequate to cover fixed charges and preferred dividends
and would have had to increase approximately $295 million in 1992 and $27
million in 1993 in order to cover the deficiencies for the respective
periods.
8
<PAGE> 9
USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The principal purpose of the Exchange Offer is to permit holders of the
Series A Preferred Stock to convert shares of Series B Preferred Stock into
shares of Common Stock without requiring that at least 250,000 shares of Series
B Preferred Stock be converted at any one time.
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, one share
of Series B Preferred Stock for each share of Series A Preferred Stock. The
terms of the Series B Preferred Stock are identical in all material respects to
the rights of the Series A Preferred Stock for which it may be exchanged
pursuant to this Exchange Offer, except that the Series B Preferred Stock is not
subject to any restriction requiring that at least 250,000 shares of Series B
Preferred Stock be converted at any one time. The Series A Preferred Stock was
originally issued on April 15, 1987. See "Description of Series B Preferred
Stock."
The Exchange Offer is not conditioned upon any minimum number of shares of
Series B Preferred Stock being tendered for exchange.
Tendering holders of the Series A Preferred Stock will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of the Series A
Preferred Stock pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSION; AMENDMENTS
The Exchange Offer will expire on the Expiration Date. The term "Expiration
Date" means 12:00 midnight, New York City time, on July 10, 1997, unless the
Company in its sole discretion extends the period during which the Exchange
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date on which the Exchange Offer, as so extended by the Company, shall
expire. The Company reserves the right to extend the Exchange Offer at any time
and from time to time by giving oral or written notice to Lehman Brothers (the
"Exchange Agent") and making a public announcement thereof. There can be no
assurance that the Company will exercise its right to extend the Exchange Offer.
During any extension of the Exchange Offer, all Series A Preferred Stock
previously tendered and not withdrawn pursuant to the Exchange Offer will remain
subject to the Exchange Offer subject to the right of a tendering holder to
withdraw its shares of Series A Preferred Stock. See "-- Withdrawal Rights."
The Company also expressly reserves the right subject to applicable law,
(i) to delay acceptance for exchange of any shares of Series A Preferred Stock
or terminate the Exchange Offer and not accept for exchange any shares of Series
A Preferred Stock and promptly return all such shares to the tendering holders
thereof in the event that any of the conditions specified in "-- Conditions of
the Exchange Offer" below are not satisfied or waived by the Company or to
comply in whole or in part with applicable law, by giving oral or written notice
of such delay or termination to the Exchange Agent, (ii) to waive any condition
to the Exchange Offer and accept all shares of Series A Preferred Stock
previously tendered pursuant thereto, or (iii) to amend the Exchange Offer in
any respect. If the Exchange Offer is so amended, the term "Exchange Offer"
shall mean the Exchange Offer as so amended. The reservation by the Company of
the right to delay acceptance for exchange of shares of Series A Preferred Stock
is subject to the provisions of Rule 13e-4 and Rule 14e-1(c) under the Exchange
Act, which require that the Company pay the consideration offered or return the
shares of Series A Preferred Stock deposited by or on behalf of holders thereof
promptly after the termination or withdrawal of the Exchange Offer.
9
<PAGE> 10
Any extension, delay, termination or amendment of the Exchange Offer will
be followed as promptly as practicable by a public announcement thereof. Without
limiting the manner in which the Company may choose to make a public
announcement of any extension, delay, termination or amendment of the Exchange
Offer, the Company will have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by issuing a release to the
Dow Jones News Service, except in the case of an announcement of an extension of
the Exchange Offer, in which case the Company will have no obligation to
publish, advertise or otherwise communicate such announcement other than by
issuing a notice of such extension by press release or other public
announcement, which notice will be issued no later than 9:00 A.M., New York City
time, on the next business day after the previously scheduled expiration time of
the Exchange Offer.
TENDER PROCEDURE
The tender to the Company of Series A Preferred Stock by a holder thereof
pursuant to one of the procedures set forth below and the acceptance thereof by
the Company will constitute a binding agreement between such holder and the
Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal. This Prospectus, together with the
Letter of Transmittal, will first be sent out on or about June 11, 1997, to all
holders of Series A Preferred Stock known to the Company and the Exchange Agent.
A holder of Series A Preferred Stock may tender the same by properly
completing and signing the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with the
certificate or certificates representing the shares of Series A Preferred Stock
being tendered and any other documents required by the Letter of Transmittal, to
the Exchange Agent at its address set forth on the Letter of Transmittal on or
prior to the Expiration Date (or complying with the procedure for book entry
transfer described below).
If tendered shares of Series A Preferred Stock are registered in the name
of the signer of the Letter of Transmittal and the Series B Preferred Stock to
be issued in exchange therefor are to be issued (and any untendered shares of
Series A Preferred Stock are to be reissued) in the name of the registered
holder (which term, for the purposes described herein, shall include any
participant in The Depository Trust Company (also referred to as a "book-entry
transfer facility") whose name appears on a security listing as the owner of the
shares of Series A Preferred Stock), the signature of such signer need not be
guaranteed. In any other case, the tendered shares of Series A Preferred Stock
must be endorsed or accompanied by written instruments of transfer in form
satisfactory to the Company and duly executed by the registered holder, and the
signature on the endorsement or instrument of transfer must be guaranteed by a
commercial bank or trust company located or having an office, branch, agency or
correspondent in the United States, or by a member firm of a registered national
securities exchange or of the NASD (any of the foregoing hereinafter referred to
as an "Eligible Institution"). If the Series B Preferred Stock and/or Series A
Preferred Stock not exchanged are to be delivered to an address other than that
of the registered holder appearing on the stock register for the Series A
Preferred Stock, the signature in the Letter of Transmittal must be guaranteed
by an Eligible Institution.
THE METHOD OF DELIVERY OF THE SERIES A PREFERRED STOCK AND ALL OTHER
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS
RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER
INSURANCE OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE
EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR SERIES A PREFERRED STOCK SHOULD BE
SENT TO THE COMPANY.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Series A Preferred Stock at
the book-entry transfer facility for the purpose of facilitating the Exchange
Offer, and subject to the establishment thereof, any financial institution that
is a participant in the book-entry transfer facility's system may make
book-entry delivery of the Series A Preferred Stock by causing such book-entry
transfer facility to transfer such Series A Preferred Stock into the Exchange
Agent's account with respect to the Series A Preferred Stock in accordance with
the book-entry transfer facility's procedures for such transfer. Although
delivery of Series A Preferred Stock may be effected through book-
10
<PAGE> 11
entry transfer into the Exchange Agent's accounts at the book-entry transfer
facility, an appropriate Letter of Transmittal with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth on the
Letter of Transmittal on or prior to the Expiration Date.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Series A Preferred Stock (or a confirmation of book-entry
transfer of such Series A Preferred Stock into the Exchange Agent's account at
the book-entry transfer facility) is received by the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of shares of Series A
Preferred Stock will be determined by the Company, whose determination will be
final and binding. The Company reserves the absolute right to reject any shares
of Series A Preferred Stock not properly tendered or the acceptance for exchange
of which may, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the absolute right to waive any defect or irregularity in the
tender of any shares of Series A Preferred Stock. Unless waived, any defects or
irregularities in connection with tenders of shares of Series A Preferred Stock
for exchange must be cured within such reasonable period of time as the Company
will determine. None of the Company, the Exchange Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Series A Preferred Stock for exchange (the
"Transferor") exchanges, assigns and transfers the Series A Preferred Stock to
the Company and irrevocably constitutes and appoints the Exchange Agent as the
Transferor's agent and attorney-in-fact to cause the Series A Preferred Stock to
be assigned, transferred and exchanged. The Transferor represents and warrants
that it has full power and authority to tender, exchange, assign and transfer
the Series A Preferred Stock and to acquire Series B Preferred Stock issuable
upon the exchange of such tendered Series A Preferred Stock, and that, when the
same are accepted for exchange, the Company will acquire good and unencumbered
title to the tendered Series A Preferred Stock, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be necessary
or desirable to complete the exchange, assignment and transfer of tendered
Series A Preferred Stock or transfer ownership of such Series A Preferred Stock
on the account books maintained by a book-entry transfer facility. All authority
conferred by the Transferor will survive the death or incapacity of the
Transferor and every obligation of the Transferor will be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
WITHDRAWAL RIGHTS
Tenders of Series A Preferred Stock pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the Letter of Transmittal, and with respect to a facsimile
transmission, must be confirmed by telephone and an original delivered by
guaranteed overnight delivery. Any such notice of withdrawal must specify the
person named in the Letter of Transmittal as having tendered Series A Preferred
Stock to be withdrawn, the certificate numbers of the shares of Series A
Preferred Stock to be withdrawn, a statement that such holder is withdrawing his
election to have such shares of Series A Preferred Stock exchanged, and the name
of the registered holder of such shares of Series A Preferred Stock, and must be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal (including any required signature guarantees) or be accompanied
by evidence satisfactory to the Company that the person withdrawing the tender
has succeeded to the beneficial ownership of the shares
11
<PAGE> 12
of Series A Preferred Stock being withdrawn. The Exchange Agent will return the
properly withdrawn shares of Series A Preferred Stock promptly following receipt
of notice of withdrawal. If shares of Series A Preferred Stock have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn shares of Series A Preferred
Stock or otherwise comply with the book-entry transfer procedure. All questions
as to the validity of notices of withdrawals, including time of receipt, will be
determined by the Issuer, and such determination will be final and binding on
all parties.
Any shares of Series A Preferred Stock so withdrawn will be deemed not to
have been validly tendered for exchange for purposes of the Exchange Offer. Any
shares of Series A Preferred Stock which have been tendered for exchange but
which are not exchanged for any reason will be returned to the holder thereof
without cost to such holder (or, in the case of shares of Series A Preferred
Stock tendered by book-entry transfer into the Exchange Agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such shares will be credited to an account with such book-entry
transfer facility specified by the holder) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn shares of Series A Preferred Stock may be retendered by following one
of the procedures described under "-- Tender Procedure" above, at any time on or
prior to the Expiration Date.
ACCEPTANCE OF SERIES A PREFERRED STOCK FOR EXCHANGE; DELIVERY OF SERIES B
PREFERRED STOCK
Upon the satisfaction or waiver of all the terms of the Exchange Offer, the
acceptance for exchange of Series A Preferred Stock validly tendered and not
withdrawn and issuance of the Series B Preferred Stock will be made on the
Exchange Date. The Exchange Date means the first business day following the
Expiration Date. For the purposes of the Exchange Offer, the Company shall be
deemed to have accepted for exchange validly tendered shares of Series A
Preferred Stock when, as and if the Company has given oral or written notice
thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Series A
Preferred Stock for the purposes of receiving Series B Preferred Stock from the
Company and causing the Series A Preferred Stock to be assigned, transferred and
exchanged. Upon the terms of the Exchange Offer, delivery of Series B Preferred
Stock to be issued in exchange for accepted Series A Preferred Stock will be
made by the Exchange Agent promptly after acceptance of the tendered Series A
Preferred Stock. Tendered Series A Preferred Stock not accepted for exchange by
the Company will be returned without expense to the tendering holders promptly
following the Expiration Date.
ACCRUED DIVIDENDS
Holders of shares of Series A Preferred Stock accepted for exchange
pursuant to The Exchange Offer will not receive dividends accrued from June 15,
1997 (the last regular dividend payment period with respect to the Series A
Preferred Stock) on such Series A Preferred Stock. Holders whose shares of
Series A Preferred Stock are accepted for exchange will be entitled to receive
dividends on the Series B Preferred Stock, when and as declared by the Board of
Directors accruing in the amount of $.48875 per share (equal to the indicated
annual dividend amount per share of Series A Preferred Stock divided by four)
from June 15, 1997 to, but excluding September 15, 1997 (the first Dividend
Payment Date for the Series B Preferred Stock).
Dividends on shares of Series A Preferred Stock not exchanged in the
Exchange Offer will continue to accrue and be payable, when and as declared by
the Board of Directors.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company will
not be required to accept for exchange, or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) (relating to the Company's
obligation to exchange and issue shares of Series B Preferred Stock for or
return tendered shares of Series A Preferred Stock promptly after termination of
the Exchange Offer), exchange and issue shares of Series B Preferred Stock for
any shares of Series A Preferred Stock tendered and may postpone the acceptance
for exchange of or, subject to the restriction set forth above, the exchange and
issuance of, shares of Series B Preferred Stock for shares of Series A Preferred
Stock tendered and to be exchanged and may
12
<PAGE> 13
terminate or amend the Exchange Offer, if at any time prior to the Expiration
Date any of the following events shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, capitalization, stockholders' equity,
financial condition, operations, results of operations or prospects of the
Company or any of its subsidiaries, or in the general economic or financial
market conditions in the United States or abroad, which is or may be
materially adverse to the Company and its subsidiaries or its stockholders
or to the value of the Series A Preferred Stock or there shall have been a
significant decrease in the market prices of or trading in the Series A
Preferred Stock, or the Company shall have become aware of any fact or
occurrence which is or may be materially adverse with respect to the value
of the Series A Preferred Stock or the Exchange Offer's contemplated
benefits to the Company; or
(b) there shall have occurred (1) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or the over-the-counter market, (2) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the Untied
States, (3) declaration of a national emergency or a commencement of a war,
armed hostilities or other national or international calamity directly or
indirectly involving the United States, (4) any limitation (whether or not
mandatory) by any governmental or regulatory authority on, or any other
event which might affect, the nature or extension of credit by banks or
other financial institutions, (5) any significant adverse change in the
United States securities or financial markets, or (6) in the case of any of
the foregoing existing at the time of the commencement of the Exchange
Offer a material acceleration, escalation or worsening thereof; or
(c) there shall have been any action taken or threatened, or any
statute, rule, regulation, judgment, order or injunction proposed, sought,
promulgated, enacted, entered, enforced or deemed applicable to the
Exchange Offer by any local, state, federal or foreign government or
governmental authority or by any court, domestic or foreign, that might,
directly or indirectly, (1) make the acceptance for exchange or issuance of
shares of Series B Preferred Stock for some or all of the shares of Series
A Preferred Stock illegal or otherwise restrict or prohibit consummation of
the Exchange Offer, (2) result in a delay in, or restrict the ability of
the Company, or render the Company unable, to accept for exchange some or
all of the shares of Series A Preferred Stock or to issue some or all of
the shares of Series B Preferred Stock in exchange thereof, (3) otherwise
adversely affect the Company or (4) result in a material limitation in the
benefits expected to be derived by the Company as a result of the
transactions contemplated by the Exchange Offer; or
(d) there shall be threatened, instituted or pending any action,
proceeding or claim by or before any court or governmental, administrative
or regulatory agency or authority or any other person or tribunal, domestic
or foreign, challenging the making of the Exchange Offer, the acquisition
by the Company of any shares of Series A Preferred Stock, or seeking to
obtain any material damages as a result thereof, or otherwise adversely
affecting the Company or the value of the Series A Preferred Stock.
which makes it inadvisable to proceed with the Exchange Offer or such acceptance
for exchange of shares of Series A Preferred Stock or the issuance of the shares
of Series B Preferred Stock in exchange therefor.
All the foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances giving rise to
such condition and may be waived by the Company, in whole or in part, at any
time and from time to time, in the sole discretion of the Company. The failure
by the Company at any time to exercise any of the foregoing rights will not be
deemed a waiver of any such right, and each such right will be deemed an ongoing
right which may be asserted at any time and from time to time. Any determination
by the Company concerning the foregoing conditions will be final and binding.
If any of the foregoing conditions shall not be satisfied (or, with respect
to the above enumerated events, shall have occurred), the Company may, subject
to applicable law, (i) terminate the Exchange Offer and return all shares of
Series A Preferred Stock tendered pursuant to the Exchange Offer to tendering
security holders; (ii) extend the Exchange Offer and retain all tendered shares
of Series A Preferred Stock until the Expiration Time for the extended Exchange
Offer; or (iii) waive the unsatisfied conditions with respect to the Exchange
Offer and accept all shares of Series A Preferred Stock tendered pursuant to the
Exchange Offer.
13
<PAGE> 14
DEALER MANAGER
Lehman Brothers is acting as dealer manager (the "Dealer Manager") for the
Exchange Offer. The Company will pay the Dealer Manager predetermined
compensation for its services in connection with the Exchange Offer and to
reimburse the Dealer Manager for all of its reasonable out-of-pocket expenses.
See "-- Solicitation of Tenders; Expenses."
Lehman Brothers is an affiliate of the Company, and this distribution will
be conducted in compliance with the NASD's Conduct Rule 2720.
The Dealer Manager will use its best efforts to solicit the exchange of
shares of Series A Preferred Stock pursuant to the Exchange Offer.
EXCHANGE AGENT
BankBoston, c/o Boston EquiServe, L.P. has been appointed as the Exchange
Agent for the Exchange Offer. Letters of Transmittal must be addressed to the
Exchange Agent at its address set forth on the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF
TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER
OTHER THAN THE ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE
A VALID DELIVERY.
SOLICITATION OF TENDERS; EXPENSES
The Company has retained Lehman Brothers to act as Dealer Manager in
connection with the Exchange Offer and will not otherwise make any payments to
brokers, dealers or others for soliciting acceptances of the Exchange Offer. The
Company will, however, pay the Exchange Agent reasonable and customary fees for
its services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. No fees will be paid to the Dealer Manager in respect of
shares of Series A Preferred Stock tendered for its own account. The Company
will also pay brokerage houses and other custodians, nominees and fiduciaries
the reasonable out-of-pocket expenses incurred by them in forwarding copies of
this Prospectus and related documents to the beneficial owners of the Series A
Preferred Stock and in handling or forwarding tenders for their customers.
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company or the
Dealer-Manager. Neither the delivery of this Prospectus nor any exchange made
hereunder will, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the respective dates as of
which information is given herein. The Exchange Offer is not being made to (nor
will tenders be accepted from or on behalf of) holders of Series A Preferred
Stock in any jurisdiction in which the making of the Exchange Offer or the
acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Company may, at its discretion, take such action as
it may deem necessary to make the Exchange Offer in any such jurisdiction and
extend the Exchange Offer to holder of Series A Preferred Stock in such
jurisdiction. In any jurisdiction in which the securities laws or blue sky laws
of which require the Exchange Offer to be made by a licensed broker or dealer,
the Exchange Offer is being made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
TRANSFER TAXES
Holders who tender their shares of Series A Preferred Stock for exchange
will not be obligated to pay any transfer taxes in connection therewith, except
that holders who instruct the Company to register shares of Series B Preferred
Stock in the name of, or request that shares of Series A Preferred Stock not
tendered or not
14
<PAGE> 15
accepted in the Exchange Offer be returned to, a person other than the
registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of shares of Series A Preferred Stock who do not exchange their
shares of Series A Preferred Stock for shares of Series B Preferred Stock
pursuant to the Exchange Offer will continue to be subject to the restriction on
conversion of such Series A Preferred Stock requiring the conversion of at least
250,000 shares thereof at any one time.
ADDITIONAL CONSIDERATIONS
Participation in the Exchange Offer is voluntary, and holders of Series A
Preferred Stock should carefully consider whether to participate. Holders of
Series A Preferred Stock are urged to consult their financial and tax advisors
in making their own decisions on which action to take.
Holders of shares of Series A Preferred Stock who do not tender their
shares of Series A Preferred Stock in the Exchange Offer will continue to hold
such shares of Series A Preferred Stock and will be entitled to all the rights,
and limitations applicable thereto. All untendered shares of Series A Preferred
Stock will continue to be subject to the restrictions on conversion as described
herein. To the extent that shares of Series A Preferred Stock are tendered and
accepted in the Exchange Offer, the trading market for untendered shares of
Series A Preferred Stock could be adversely affected.
The Company may in the future seek to acquire untendered shares of Series A
Preferred Stock in open market or privately negotiated transactions, through
subsequent exchange offers or otherwise. The Company has no present plan to
acquire any shares of Series A Preferred Stock which are not tendered in the
Exchange Offer.
MARKET AND TRADING INFORMATION
There is no established trading market for the Series A Preferred Stock.
The Series B Preferred Stock will be a new issue of securities with no
established trading market. The Company has been advised by Lehman Brothers that
it intends to make a market in the Series B Preferred Stock but is not obligated
to do so and may discontinue marketmaking at any time without notice. No
assurance can be given as to the liquidity of the trading market for the Series
B Preferred Stock. The trading market for the Series A Preferred Stock generally
has not been liquid.
DESCRIPTION OF SERIES B PREFERRED STOCK
GENERAL
The following description of the Series B Preferred Stock set forth herein
does not purport to be complete and is subject to, and qualified in its entirety
by, the provisions of the Company's Restated Certificate of Incorporation (the
"Restated Certificate of Incorporation") filed as an exhibit to the Registration
Statement, and the Certificate of Designations relating to the Series B
Preferred Stock (the "Certificate of Designation"), the form of which is filed
as an exhibit to the Registration Statement and which will be filed with the
Secretary of State of the State of Delaware prior to the issuance of the Series
B Preferred Stock.
Subject to the Restated Certificate of Incorporation of the Company and to
any limitations contained in the outstanding preferred stock, the Company may
issue additional classes or series of preferred stock, at any time or from time
to time, with such powers, preferences and relative, participating, optional or
other special rights and qualifications, limitations or restrictions thereof, as
the Board of Directors or any duly authorized committee thereof shall determine,
all without further action of the stockholders, including holders of then
outstanding preferred stock, of the Company.
15
<PAGE> 16
The Restated Certificate of Incorporation authorizes the issuance of
38,000,000 shares of preferred stock, $1.00 par value per share. As of November
30, 1996, there were 13,000,000 shares of Series A Preferred Stock and 1,000
shares of Redeemable Voting Preferred Stock (the "Redeemable Preferred Stock")
issued and outstanding.
Series A Preferred Stock. The terms of the Series A Preferred Stock are
identical in all material respects to the terms of the Series B Preferred Stock
described herein, except that the terms of the Series A Preferred Stock require
the conversion of at least 250,000 shares thereof at any one time.
Redeemable Preferred Stock. As of the date of this Prospectus, American
Express Company ("AMEX") and Nippon Life Insurance Company ("Nippon Life")
together own all of the issued and outstanding shares of Redeemable Preferred
Stock.
The shares of Redeemable Preferred Stock are entitled to receive
preferential dividends, as and when declared by the Board of Directors out of
funds legally available therefor, on a cumulative basis. For each dividend
period following May 31, 1994, the holders of Redeemable Preferred Stock are
entitled to receive dividends in an amount equal to, in the aggregate, 50% of
the amount, if any, by which the Company's net income for the applicable
dividend period exceeds $400 million, up to a maximum of $50 million for any
such period (the "Dividend Formula"). The liquidation preference per share of
the Redeemable Preferred Stock is $1.00 plus accumulated and unpaid dividends
and accrued interest, if any, thereon at a specified rate.
Subject to funds being legally available therefor, the Company is required
to redeem all of the Redeemable Preferred Stock on the final dividend payment
date therefor, or as soon as practicable thereafter when funds become legally
available, at a price per share equal to the liquidation preference referred to
above. In addition, if a Designated Event (as defined in the Restated
Certificate of Incorporation) occurs, the holders of the Redeemable Preferred
Stock have the right to require the Company to redeem, out of funds legally
available therefor, all of the Redeemable Preferred Stock for an aggregate
redemption price equal to $250 million if such Designated Event takes place
prior to November 30, 1997, declining $50 million per year in each of the next
five years thereafter.
Holders of Redeemable Preferred Stock are entitled to vote, together with
the holders of the Company's Common Stock as one class, on all matters to be
voted on by stockholders of the Company. Notwithstanding the foregoing, AMEX has
agreed that so long as it or any of its subsidiaries holds any shares of the
Redeemable Preferred Stock, it will vote such shares in the same proportion as
the votes cast by the holders of shares of the Common Stock on matters to be
voted on by stockholders of the Company generally. Each share of Redeemable
Preferred Stock is entitled to 1,059 votes. In addition, if the equivalent of
six quarterly dividends (whether or not consecutive) to which the holders of the
Redeemable Preferred Stock are entitled in accordance with the Dividend Formula,
or to which the holders of any Parity Preferred Stock are entitled pursuant to
the terms of such Parity Preferred Stock, are in arrears, then the authorized
number of directors of the Company will be increased by two and the holders of
the Redeemable Preferred Stock will have the right (voting as a class with the
holders of any other Parity Preferred Stock of the Company upon which like
voting rights have been conferred and are exercisable) to elect such two
directors until such time as all accumulated dividends have been paid. In
addition, the holders of Redeemable Preferred Stock have voting rights in
certain other circumstances.
DIVIDENDS
The annual dividend rate per share of Series B Preferred Stock will be an
amount equal to $1.955 per share. Dividends on the shares of Series B Preferred
Stock, when and as declared by the Board of Directors, out of funds legally
available therefor, will be cumulative and will be payable quarterly in cash on
March 15, June 15, September 15 and December 15 of each year (or, if any such
day is not a Business Day, then on the next succeeding Business Day) in each
year (the "Dividend Payment Dates"), commencing on September 15, 1997. The
amount of dividends payable on each share of Series B Preferred Stock for each
full quarterly dividend period will be computed by dividing by four such annual
rate. Dividends payable on the Series B Preferred Stock for any period less than
a full quarterly period will be computed on the basis of a 360-day year
consisting of twelve 30-day months for the actual number of days involved.
Dividends with
16
<PAGE> 17
respect to any share of Series B Preferred Stock will accumulate from June 15,
1997. The term "Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close.
No cash dividends will be declared and set apart for payment on any capital
stock ranking on a par with the Series B Preferred Stock in the payment of
dividends unless there will likewise be or have been declared and set apart for
payment on all shares of Series B Preferred Stock at the time outstanding full
cumulative dividends for all quarterly dividend periods ending on or before the
dividend payment date for such other stock. If and so long as any full
cumulative dividends payable on the shares of Series B Preferred Stock in
respect of all prior dividend periods will not have been paid or set apart for
payment, the Company will not pay any dividends or make any distributions of
assets on or redeem, purchase or otherwise acquire for consideration shares of
capital stock of the Company ranking junior to or on a par with the Series B
Preferred Stock in payment of dividends.
Dividends on the Series B Preferred Stock are payable to the holders of
record thereof as they appear on the stock register of the Company on such
record date, not exceeding 40 days preceding the payment date thereof, as will
be fixed by the Board of Directors or by a duly authorized committee thereof.
Dividends on account of arrears for any past dividend periods may be declared
and paid at any time, without reference to any Dividend Payment Date, to holders
of record on such date, not exceeding 40 days preceding the payment date
thereof, as may be fixed by the Board of Directors or by a duly authorized
committee thereof. Dividends will be paid to each holder of record in United
States dollars by check mailed to such holders at their respective addresses
appearing on the books of the Company.
REDEMPTION
The Company may at its option redeem outstanding shares of Series B
Preferred Stock on any Dividend Payment Date in the specified amounts and during
the periods set forth below (subject, in each case, to reduction by the number
of shares of Series B Common Stock converted into Common Stock or converted or
exchanged for common stock of AMEX or purchased by the Company pursuant to the
1990 Agreement by and between AMEX and Nippon Life upon at least 30 days' and
not more than 45 days' written notice to the holders thereof, at a redemption
price equal to $39.10 per share plus accumulated and unpaid dividends (whether
or not earned or declared) to the date fixed for redemption,
<TABLE>
<CAPTION>
REDEMPTION PERIOD NUMBER OF SHARES
------------------------------------------------------------- ----------------
<S> <C>
Date of Original Issuance to and including June 15, 1997..... 7,800,000
June 16, 1997 to and including June 15, 1998................. 10,400,000
After June 15, 1998.......................................... 13,000,000
</TABLE>
provided, however, that shares of Series B Preferred Stock are not redeemable by
the Company unless (i) there is Common Stock outstanding on the dates upon which
notice of redemption is first given and such redemption is effected, and (ii)
the Average Market Price of the Common Stock on the date such notice is given is
greater than the Conversion Price. As of March 31, 1997, the Average Market
Price would have been $33.60 and the Conversion Price would have been
$123.0212380. Accordingly, at that date the Series B Preferred Stock would not
have been redeemable at the option of the Company. See "-- Conversion". As used
herein, (i) "1990 Agreement" means the 1990 Agreement, dated as of June 12,
1990, by and between AMEX and Nippon Life, as amended by the 1994 Agreement,
dated April 28, 1994, by and among AMEX, Nippon Life and the Corporation, as
further amended by the Agreement, dated January 22, 1997, between Nippon Life
and AMEX and (ii) "Average Market Price" means the average of the daily closing
prices for the 10 consecutive trading days selected by the Company commencing no
less than 20 days nor more than 30 trading days before the day in question. The
closing price for each day will be the last reported sales price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the NYSE
or, if such security is not listed or admitted to trading on the NYSE, on the
principal national securities exchange on which such security is listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, on the Nasdaq National Market or, if such security is not
listed or admitted to trading on any national securities exchange or
17
<PAGE> 18
quoted on National Market, the average of the closing bid and asked prices in
the over-the-counter-market as furnished by any NYSE member firm selected from
time to time by the issuer for that purpose. For the purposes of this
definition, the term "trading day" shall mean each Monday, Tuesday, Wednesday,
Thursday or Friday, other than any day on which securities are not traded on
such exchange or in such market.
The Company is required to give notice of any proposed redemption of shares
of Series B Preferred Stock by mailing a copy of such notice to holders of
record of shares of Series B Preferred Stock to be redeemed at their respective
addresses appearing on the books of the Company. Each such notice will specify
the shares called for redemption, the redemption price and the price at which
and the date on which the shares called for redemption will, upon presentation
and surrender of the certificates of stock evidencing such shares, be redeemed
and the redemption price therefor paid. From and after the date fixed in any
such notice as the date of redemption of shares of Series B Preferred Stock,
unless default shall be made by the Company in providing monies at the time and
place specified for the payment of the redemption price pursuant to said notice,
all dividends on the Series B Preferred Stock thereby called for redemption will
cease to accrue and all rights of the holders thereof as stockholders of the
Company, except the right to receive the redemption price, will cease and
terminate.
CONVERSION
Each share of Series B Preferred Stock will be convertible, in whole or in
part, at the option of the holder at any time, into a number of shares of Common
Stock (calculated as to each conversion to the nearest 1/100 of a share) equal
to $39.10 divided by the Conversion Price in effect at the time of such
conversion. The Conversion Price is currently $123.0212380 per share. The
Conversion Price will be adjusted in certain instances as described below.
To convert shares of Series B Preferred Stock into Common Stock, the
registered holder of such shares of Series B Preferred Stock must surrender at
the office of the Transfer Agent, or at such other office or offices, if any, as
the Board of Directors may designate, the certificate or certificates therefor,
duly endorsed or assigned to the Company or in blank, and give written notice to
the Company at such office that it elects to convert such shares.
A payment or adjustment will not be made by the Company upon any conversion
on account of any dividends accrued on the shares of Series B Preferred Stock
surrendered for conversion or on account of any dividends on the Common Stock
issued upon conversion.
Shares of Series B Preferred Stock will be deemed to have been converted
immediately prior to the close of business on the day of the surrender of such
shares for conversion, and the person or persons entitled to receive the Common
Stock issuable upon such conversion will be treated for all purposes as the
record holder or holders of such Common Stock at such time. As promptly as
practicable on or after the conversion date, the Company will issue and deliver
at such office a certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion, together with payment in lieu of any
fraction of a share, to the person or persons entitled to receive the same. In
case shares of Series B Preferred Stock are called for redemption, the right to
convert such shares will terminate at the close of business on the date fixed
for redemption, unless default shall be made in payment of the redemption price.
The Conversion Price for shares of Series B Preferred Stock may be subject
to adjustment in certain events, including (i) dividends and other distributions
payable in Common Stock on any class of capital stock of the Company, (ii) the
issuance to all holders of Common Stock of rights or warrants entitling them to
subscribe for or purchase Common Stock at less than, depending on the
circumstances, the Average Market Price (as defined under "-- Redemption" or
Fair Market Value (as defined below), (iii) subdivisions, combinations and
reclassifications of the Common Stock, (iv) distributions to all holders of
Common Stock of evidences of indebtedness of the Company or assets (including
securities, but excluding (a) any rights or warrants referred to in (ii) above,
(ii) any dividend or distribution paid in cash or other property out of the
Adjusted Retained Earnings (defined below) of the Company and (iii) any dividend
or distribution referred to (i) above) and (v) a consolidation or merger to
which the Company is a party or the sale or transfer of all or substantially all
of the assets of the Company. In addition to the foregoing adjustments, the
Company is
18
<PAGE> 19
permitted to make such reductions in the Conversion Price for the Series B
Preferred Stock as it considers to be advisable in order that any event treated
for United States federal income tax purposes as a dividend of stock or stock
rights will not be taxable to the recipients. As used herein, (i) the term "Fair
Market Value" per share of Common Stock on any date means the fair market value
thereof on the date in question, determined (A) if Nippon Life and its
affiliates then own a majority of the shares of Series B Preferred Stock then
outstanding (i) jointly by the Company and Nippon Life or (ii) if the Company
and Nippon Life cannot so agree, by the Board of Directors of the Company
reasonably determined in good faith or (B) if Nippon Life and its affiliates do
not then own a majority of the shares of Series B Preferred Stock then
outstanding, by the Board of Directors of the Company reasonably determined in
good faith and (ii) the term "Adjusted Retained Earnings" means the retained
earnings of the Company as of the date of the relevant dividend or distribution
plus $500,000,000 plus any dividend paid after August 10, 1990 (which has been
debited against retained earnings) on any preferred stock of the Company
outstanding on August 10, 1990.
The Company will pay any and all stamp or other similar taxes that may be
payable in respect of the issue or delivery of shares of Common Stock on
conversion of shares of Series B Preferred Stock. The Company will not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares of Common Stock in a name other
than that in which the shares of Series B Preferred Stock so converted were
registered, and no such issue or delivery will be made unless and until the
person requesting such issue has paid to the Company the amount of any such tax,
or has established to the satisfaction of the Company that such tax has been
paid.
In any case in which an adjustment described in this "Conversion" section
will become effective immediately after a record date for an event, the Company
may defer until the occurrence of such event (i) issuing to the holder of any
shares of Series B Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Common Stock issuable upon
such conversion by reason of the adjustment required by such event over and
above the number of shares of Common Stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such holder any amount in
cash in lieu of a fractional share of Common Stock; provided, that, upon the
request of such holder, the Company will deliver to such holder a due bill or
other appropriate instrument evidencing such holder's rights to receive such
additional shares of Common Stock, and such cash, upon the occurrence of the
event requiring such adjustment.
VOTING RIGHTS
The holders of Series B Preferred Stock will have the following voting
rights subject to the terms and conditions described below.
The holders of Series B Preferred Stock will have voting rights equal to
the voting rights of holders of shares of Common Stock and the shares of Series
B Preferred Stock will vote together with the shares of Common Stock (and of any
other class or series which may similarly be entitled to vote with the shares of
Common Stock) as a single class upon all matters upon which holders of Common
Stock are entitled to vote.
So long as any shares of Series B Preferred Stock remain outstanding, the
Company will not, either directly or indirectly or through merger or
consolidation with any other corporation, without the affirmative vote at a
meeting or the written consent with or without a meeting of the holders of at
least a majority of the shares of Series B Preferred Stock then outstanding,
amend, alter or repeal any of the provisions of the Restated Certificate of
Incorporation, or authorize any reclassification of the Series B Preferred
Stock, so as in any such case to affect adversely the preferences, special
rights or powers of the Series B Preferred Stock, or authorize any capital stock
of the Company ranking, either as to payment of dividends or upon liquidation,
dissolution or winding up of the Company, prior to the Series B Preferred Stock.
In exercising the voting rights set forth herein or when otherwise granted
voting rights by operation of law, each share of Series B Preferred Stock will
be entitled to a number of votes equal to the quotient obtained by dividing
$39.10 by the Conversion Price in effect at the time.
19
<PAGE> 20
No consent of holders of the Series B Preferred Stock will be required for
(i) the creation of any indebtedness of any kind of the Company or (ii) the
authorization or issuance of any class of capital stock of the Company ranking
junior or equal to the Series B Preferred Stock in payment of dividends or upon
liquidation, dissolution or winding up of the Company.
LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, before any distribution of the assets of the Company
to holders of Common Stock or any other capital stock of the Company ranking
junior to the Series B Preferred Stock upon liquidation, dissolution or winding
up of the Company, the holders of the Series B Preferred Stock will be entitled
to receive out of the assets of the Company available for distribution to its
stockholders, whether from capital, surplus or earnings, an amount per share of
Series B Preferred Stock equal to $39.10 plus an amount equal to accumulated and
unpaid dividends (whether or not earned or declared) on such share of Series B
Preferred Stock to the date of final distribution.
If, upon any liquidation, dissolution or winding up of the Company, the
amounts payable with respect to the Series B Preferred Stock or any capital
stock ranking on a par with the Series B Preferred Stock are not paid in full,
then such holders will share ratably in any such distribution of assets, or
proceeds thereof, in proportion to the full respective preferential amounts to
which they are entitled. Neither a consolidation nor a merger of the Company
with one or more other corporations, nor a sale or a transfer of all or
substantially all of the assets of the Company, will be deemed to be a voluntary
or involuntary liquidation, dissolution or winding up of the Company.
SINKING FUND
The Series B Preferred Stock will not be subject to any right of mandatory
payment or prepayment (except for liquidation, dissolution or winding up of the
Company) or to any sinking fund.
TRANSFER AGENT
BankBoston, c/o Boston EquiServe, L.P. is the transfer agent for the Series
B Preferred Stock.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, special tax counsel to the
Company, a holder of Series A Preferred Stock who exchanges such Series A
Preferred Stock for Series B Preferred Stock in the Exchange Offer will not
recognize any gain or loss for United States federal income tax purposes as a
result of such exchange. Moreover, the holding period of Series B Preferred
Stock will include the holding period of the Series A Preferred Stock and the
basis of the Series B Preferred Stock will be the same as the basis of the
Series A preferred stock immediately before the Exchange Offer.
With respect to dividends paid on the Series B Preferred Stock, holders of
Series B Preferred Stock will be eligible for the dividends-received deduction
available to domestic corporate holders to the extent they were eligible for the
dividends-received deduction with respect to dividends paid on the Series A
Preferred Stock.
LEGAL OPINIONS
The validity of the shares of Series B Preferred Stock to be issued on the
Exchange Offer is being passed upon for the Company by Jennifer Marre, Esq.,
Vice President and Associate General Counsel of the Company. The material United
States federal income tax consequences of the Exchange Offer is being passed
upon by Simpson Thacher & Bartlett, special tax counsel to the Company.
20
<PAGE> 21
INDEPENDENT ACCOUNTANTS
The consolidated financial statements and schedules of the Company for the
year ended November 30, 1996 and 1995 and the eleven months ended November 30,
1994 appearing in the Company's Annual Report on Form 10-K for the year ended
November 30, 1996, 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 incorporated
herein by reference in reliance upon the reports of Ernst & Young LLP pertaining
to such financial statements given upon the authority of such firm as experts in
accounting and auditing.
21
<PAGE> 22
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE DEALER-MANAGER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE
SERIES B PREFERRED STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SERIES B PREFERRED STOCK
BY ANYONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Documents Incorporated by Reference... 3
Summary............................... 4
Use of Proceeds....................... 9
The Exchange Offer.................... 9
Market and Trading Information........ 15
Description of Series B Preferred
Stock............................... 15
Material United States Federal Income
Tax Consequences.................... 20
Legal Opinions........................ 20
Independent Accountants............... 21
</TABLE>
======================================================
======================================================
LEHMAN BROTHERS
HOLDINGS INC.
OFFER TO EXCHANGE
13,000,000 SHARES OF CUMULATIVE
CONVERTIBLE VOTING PREFERRED STOCK,
SERIES B, PAR VALUE $1.00 PER SHARE,
FOR ITS OUTSTANDING CUMULATIVE
CONVERTIBLE VOTING PREFERRED STOCK,
SERIES A, PAR VALUE $1.00 PER SHARE.
Lehman Brothers
June 12, 1997
======================================================
<PAGE> 1
EXHIBIT (A)(2)
LETTER OF TRANSMITTAL
TO EXCHANGE SHARES
OF THE CUMULATIVE CONVERTIBLE VOTING
PREFERRED STOCK, SERIES A
OF
LEHMAN BROTHERS HOLDINGS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON JULY 10, 1997 (THE "EXPIRATION DATE") UNLESS EXTENDED
BY LEHMAN BROTHERS HOLDINGS INC.
EXCHANGE AGENT:
<TABLE>
<S> <C>
By Hand: By Mail:
BankBoston (insured or registered recommended)
Securities Transfer & Reporting BankBoston
Services, Inc. Corporate Reorganization Department
55 Broadway - 3rd Floor P.O. Box 1889
New York, New York 10006 M/S 45-02-53
Attention: Delivery Window Boston, Massachusetts 02105-1889
By Overnight Delivery: By Facsimile:
BankBoston (615) 575-2233
Corporate Reorganization Department Confirm by Telephone:
M/S 45-02-53 (800) 730-6001
150 Royall Street
Canton, Massachusetts 02021
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE
TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated June 12, 1997
(the "Prospectus") of Lehman Brothers Holdings Inc. (the "Company") and this
Letter of Transmittal (the "Letter of Transmittal"), which together describe the
Company's offer (the "Exchange Offer") to exchange up to 13,000,000 shares of
its new Cumulative Convertible Voting Preferred Stock, Series B (the "Series B
Preferred Stock") for up to 13,000,000 shares of its outstanding Cumulative
Convertible Voting Preferred Stock, Series A (the "Series A Preferred Stock").
The terms of the Series B Preferred Stock are identical in all material respects
(including dividend rate, voting rights and liquidation preference) to the terms
of the Series A Preferred Stock for which they may be exchanged pursuant to the
Exchange Offer, except that conversion of the Series B Preferred Stock will not
be subject to the restriction in the terms of the Series A Preferred Stock
requiring that at least 250,000 shares thereof be converted at any one time.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
<PAGE> 2
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the shares of the Series A Preferred Stock to which this Letter
of Transmittal relates. If the space provided below is inadequate, the
certificate numbers and/or the number of shares of the Series A Preferred Stock
tendered should be listed on a separate signed schedule affixed hereto.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF SERIES A PREFERRED STOCK TENDERED HEREWITH
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER OF
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY SHARES
(PLEASE FILL IN) NUMBER(S)* CERTIFICATE(S)* TENDERED**
------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
TOTAL
------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full number of shares of the Series A Preferred Stock represented by the
tendered certificates. See Instruction 2.
================================================================================
<PAGE> 3
This Letter of Transmittal is to be used either if certificates of shares
of the Series A Preferred Stock are to be forwarded herewith or if delivery of
shares of the Series A Preferred Stock is to be made by book-entry transfer to
an account maintained by the Exchange Agent at The Depository Trust Company,
pursuant to the procedures set forth in "The Exchange Offer -- Tender Procedure"
in the Prospectus. Delivery of documents to the book-entry transfer facility
does not constitute delivery to the Exchange Agent.
[ ] CHECK HERE IF TENDERED SHARES OF THE SERIES A PREFERRED STOCK ARE BEING
DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE
EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution
-----------------------------------------------------------------------------
[ ] The Depository Trust Company
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES OF SERIES B PREFERRED STOCK ARE TO BE DELIVERED TO
PERSON OTHER THAN PERSON SIGNING THIS LETTER OF TRANSMITTAL:
Name
- --------------------------------------------------------------------------------
(Please Print)
[ ] CHECK HERE IF SHARES OF SERIES B PREFERRED STOCK ARE TO BE DELIVERED TO
ADDRESS DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address
- --------------------------------------------------------------------------------
(Including Zip Code)
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES TO THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
------------------------------------------------------------------------------
Address:
------------------------------------------------------------------------------
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described number of shares
of the Series A Preferred Stock indicated above. Subject to, and effective upon,
the acceptance for exchange of the shares of the Series A Preferred Stock
tendered herewith, the undersigned hereby exchanges, assigns and transfers to,
or upon the order of, the Company all right, title and interest in and to such
shares of the Series A Preferred Stock. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that said Exchange
Agent acts as the agent of the Company, in connection with the Exchange Offer)
to cause the shares of Series A Preferred Stock to be assigned, transferred and
exchanged. The undersigned represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the shares of the Series A
Preferred Stock and to acquire shares of the Series B Preferred Stock issuable
upon the exchange of such tendered shares of the Series A Preferred Stock, and
that, when the same are accepted for exchange, the Company will acquire good and
unencumbered title to the tendered shares of the Series A Preferred Stock, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The undersigned also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete the exchange, assignment and
transfer of tendered shares of the Series A Preferred Stock or transfer
ownership of such shares of the Series A Preferred Stock on the account books
maintained by the book-entry transfer facility.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions of the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by the Company), as more particularly set
forth in the Prospectus, the Company may not be required to exchange any of the
shares of Series A Preferred Stock tendered hereby and, in such event, the
shares of Series A Preferred Stock not exchanged will be returned to the
undersigned at the address shown above.
The name(s) and address(es) of the registered holder(s) should be printed
above under "Description of Shares of Series A Preferred Stock Tendered
Herewith", if not already printed thereunder, exactly as they appear on the
shares of the Series A Preferred Stock tendered hereby. The certificate
number(s) and the number of shares of the Series A Preferred Stock to which this
Letter of Transmittal relates, together with the number of shares of the Series
A Preferred Stock that the undersigned wishes to tender, should be indicated in
the appropriate boxes above under "Description of Shares of Series A Preferred
Stock Tendered Herewith".
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Shares of Series A Preferred Stock may be
withdrawn at any time prior to the Expiration Date in accordance with the terms
of the Letter of Transmittal.
Certificates for all shares of Series B Preferred Stock delivered in
exchange for tendered shares of Series A Preferred Stock and any shares of
Series A Preferred Stock delivered herewith but not exchanged, and registered in
the name of the undersigned, shall be delivered to the undersigned at the
address shown below the signature of the undersigned.
<PAGE> 5
TENDERING HOLDER(S) SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Dated
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- --------------------------------------------------------------------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) for Series A Preferred Stock. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please set forth
the full title of such person.) See Instruction 3.
Name(s) ------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
---------------------------------------------------------------
Address-------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone No.
-------------------------------------------------------
Taxpayer Identification No.
----------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 3)
Authorized Signature
---------------------------------------------------------------
Name --------------------------------------------------------------------------
Title
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
Name of Firm--------------------------------------------------------------------
Area Code and Telephone No.
-------------------------------------------------------
Dated:
- --------------------------------------------------------------------------------
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
Certificates for all physically delivered shares of Series A Preferred
Stock or confirmation of any book-entry transfer to the Exchange Agent's or its
agent's account at a book-entry transfer facility of shares of Series A
Preferred Stock tendered by book-entry transfer, as well as a properly completed
and duly executed copy of this Letter of Transmittal or facsimile thereof, and
any other documents required by this Letter of Transmittal, must be received by
the Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date (as defined in the Prospectus).
The method of delivery of this Letter of Transmittal, the shares of Series
A Preferred Stock and any other required documents is at the election and risk
of the holder, and except as otherwise provided below, the delivery will be
deemed made only when actually received or confirmed by the Exchange Agent. If
such delivery is by mail, it is suggested that registered mail with return
receipt requested, properly insured, be used. In all cases sufficient time
should be allowed to permit timely delivery.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the shares of Series A Preferred Stock for exchange.
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of shares of Series A Preferred
Stock evidenced by a submitted certificate is tendered, the tendering holder
should fill in the number of shares tendered in the box entitled "Number of
Shares Tendered." A newly issued certificate for the shares of Series A
Preferred Stock submitted but not tendered will be sent to such holder as soon
as practicable after the Expiration Date. All shares of Series A Preferred Stock
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise clearly indicated.
Tenders of shares of Series A Preferred Stock pursuant to the Exchange
Offer are irrevocable, except that shares of Series A Preferred Stock tendered
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. To be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be received by the Exchange Agent prior
to the Expiration Date unless extended by the Company. Any such notice of
withdrawal must specify the person named in the Letter of Transmittal as having
tendered shares of Series A Preferred Stock to be withdrawn, the certificate
numbers of the shares of Series A Preferred Stock to be withdrawn, a statement
that such holder is withdrawing his or her election to have such shares of
Series A Preferred Stock exchanged, and the name of the registered holder of
such shares of Series A Preferred Stock, and must be signed by the holder in the
same manner as the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accompanied by evidence satisfactory to
the Company that the person withdrawing the tender has succeeded to the
beneficial ownership of the shares of Series A Preferred Stock being withdrawn.
The Exchange Agent will return the properly withdrawn shares of Series A
Preferred Stock promptly following receipt of notice of withdrawal. If shares of
Series A Preferred Stock have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at the book-entry transfer facility to be credited with the
withdrawn shares of Series A Preferred Stock or otherwise comply with the
book-entry transfer facility's procedures. All questions as to the validity of
notices of withdrawals, including time of receipt, will be determined by the
Company, and such determination will be final and binding on all parties.
<PAGE> 7
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUCTION AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
shares of Series A Preferred Stock tendered hereby, the signature must
correspond with the name(s) as written on the face of the certificates without
alteration, enlargement or any change whatsoever.
If any of the shares of Series A Preferred Stock tendered hereby are owned
of record by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If a number of shares of Series A Preferred Stock registered in different
names are tendered, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of shares of Series A Preferred Stock.
When this Letter of Transmittal is signed by the registered holders or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the shares of Series A Preferred Stock) of shares of Series A Preferred
Stock listed and tendered hereby, no endorsements of certificates or separate
written instruments of transfer or exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the shares of Series A Preferred Stock listed,
such shares of Series A Preferred Stock must be endorsed or accompanied by
separate written instruments of transfer or exchange in form satisfactory to the
Company and duly executed by the registered holder, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificates of the shares of Series A Preferred Stock.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution (as defined in the Prospectus).
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the shares of Series A Preferred Stock are
tendered; (i) by a registered holder of such shares of Series A Preferred Stock,
for the holder of such shares of Series A Preferred Stock; or (ii) for the
account of an Eligible Institution.
4. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
transfer and exchange of shares of Series A Preferred Stock to it or its order
pursuant to the Exchange Offer. If a transfer tax is imposed for any reason
other than the transfer and exchange of shares of Series A Preferred Stock to
the Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other person)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exception therefrom is not submitted herewith the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the certificates representing shares of
Series A Preferred Stock listed in this Letter of Transmittal.
5. WAIVER OF CONDITIONS.
The Company reserves the right to waive in its reasonable judgment, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
<PAGE> 8
6. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any holder whose certificates representing shares of Series A Preferred
Stock have been mutilated, lost, stolen or destroyed, should contact the
Exchange Agent at the address indicated below for further instructions.
7. IRREGULARITIES.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of shares of Series A
Preferred Stock will be determined by the Company, whose determination will be
final and binding. The Company reserves the absolute right to reject any shares
of Series A Preferred Stock not properly tendered or the acceptance for exchange
of which may, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the absolute right to waive any defect or irregularity in the
tender of any shares of Series A Preferred Stock. Unless waived, any defects or
irregularities in connection with tenders of shares of Series A Preferred Stock
for exchange must be cured within such reasonable period of time as the Company
will determine. None of the Company, the Exchange Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
assistance or additional copies of the Prospectus and this Letter of
Transmittal, may be directed to the Exchange Agent at the address and telephone
number set forth above.
IMPORTANT: This Letter of Transmittal or a facsimile thereof (together with
certificates representing shares of Series A Preferred Stock or confirmation of
book-entry transfer and all other required documents) or a Notice of Guaranteed
Delivery must be received by the Exchange Agent on or prior to the Expiration
Date.
<PAGE> 1
EXHIBIT (A)(3)
LEHMAN BROTHERS HOLDINGS INC.
OFFER TO EXCHANGE
CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK
SERIES B, PAR VALUE $1.00 PER SHARE
FOR
CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK
SERIES A, PAR VALUE $1.00 PER SHARE
THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON JULY 10, 1997, UNLESS EXTENDED.
June 12, 1997
To Brokers, Dealers, Commercial
Banks, Trust Companies and
Other Nominees:
In our capacity as Dealer Manager, we are enclosing the material listed
below relating to the offer (the "Exchange Offer") by Lehman Brothers Holdings
Inc. (the "Company") to exchange, on a share-for-share basis, up to 13,000,000
shares of its new Cumulative Convertible Voting Preferred Stock, Series B (the
"Series B Preferred Stock") for up to 13,000,000 shares of its outstanding
Cumulative Convertible Voting Preferred Stock, Series A (the "Series A Preferred
Stock"), upon the terms and subject to the conditions of the Exchange Offer (as
described in the Prospectus) and subject to the right of the Company to amend or
terminate the Exchange Offer.
The Company expressly reserves the right to extend, amend or modify the
terms of the Exchange Offer, and not to accept for exchange any shares of Series
A Preferred Stock, at any time prior to the Expiration Date for any reason. If
after the Expiration Date the Company rejects a portion of the shares of Series
A Preferred Stock tendered by a holder thereof, such holder may, within such
reasonable period of time as the Company will determine, withdraw the tender of
the remaining shares of Series A Preferred Stock tendered by such holder.
We are asking you to contact your clients for whom you hold shares of
Series A Preferred Stock registered in your name (or in the name of your
nominee) or who hold shares of Series A Preferred Stock registered in their own
names. Please bring the Exchange Offer to their attention as promptly as
possible.
The Company will pay all stock transfer taxes applicable to the exchange of
shares of Series A Preferred Stock pursuant to the Exchange Offer, subject to
Instruction 4 of the Letter of Transmittal referred to below.
For your information and for forwarding to your clients, we are enclosing
the following documents:
1. The Prospectus dated June 12, 1997 (the "Prospectus");
2. The Letter of Transmittal to be used by holders of shares of Series
A Preferred Stock in accepting the Exchange Offer (duly executed
photocopies of the Letter of Transmittal may be used to exchange shares of
Series A Preferred Stock);
3. A letter which may be sent to your clients for whose accounts you
hold shares of Series A Preferred Stock registered in your name or in the
name of your nominee, with space for obtaining such clients' instructions
with regard to the Exchange Offer;
<PAGE> 2
4. A return envelope addressed to BankBoston, c/o Boston Equiserve,
L.P., the Exchange Agent for the Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
JULY 10, 1997, UNLESS THE EXCHANGE OFFER IS EXTENDED.
Any questions or requests for assistance or additional copies of the
enclosed materials may be directed to the Exchange Agent or Lehman Brothers
Inc., the Dealer Manager, at their addresses and telephone numbers set forth on
the inside back cover of the enclosed Prospectus.
Very truly yours,
Lehman Brothers
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL BE DEEMED TO
APPOINT YOU THE AGENT OF THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT
OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT
OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE EXCHANGE
OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED
THEREIN.
2
<PAGE> 1
EXHIBIT (A)(4)
LEHMAN BROTHERS HOLDINGS INC.
OFFER TO EXCHANGE
CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK
SERIES B, PAR VALUE $1.00 PER SHARE
FOR
CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK
SERIES A, PAR VALUE $1.00 PER SHARE
THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON JULY 10, 1997, UNLESS EXTENDED.
June 12, 1997
To Our Clients:
Enclosed for your consideration are the Prospectus dated June 12, 1997
("Prospectus") of Lehman Brothers Holdings Inc. (the "Company") and the related
Letter of Transmittal (the "Letter of Transmittal"), which together describe the
Company's offer (the "Exchange Offer") to exchange, on a share-for-share basis,
up to 13,000,000 shares of its new Cumulative Convertible Voting Preferred
Stock, Series B (the "Series B Preferred Stock") for up to 13,000,000 shares of
its outstanding Cumulative Convertible Voting Preferred Stock, Series A (the
"Series A Preferred Stock"), upon the terms and subject to the conditions of the
Exchange Offer (as described in the Prospectus) and subject to the right of the
Company to amend or terminate the Exchange Offer. Such 13,000,000 shares of
Series A Preferred Stock constitute all the outstanding shares of Series A
Preferred Stock.
WE ARE THE HOLDER OF RECORD OF SHARES OF SERIES A PREFERRED STOCK HELD FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES OF
SERIES A PREFERRED STOCK HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish us to tender any or all of
the shares of Series A Preferred Stock held by us for your account, upon the
terms and subject to the conditions set forth in the Prospectus and the Letter
of Transmittal. We urge you to read the enclosed Prospectus carefully before
conveying your instructions to us.
Your attention is invited to the following:
(1) The Exchange Offer is for the Company's 13,000,000 outstanding
shares of Series A Preferred Stock. The Exchange Offer is subject to
certain conditions. See "The Exchange Offer -- Conditions of the Exchange
Offer" in the Prospectus.
(2) The Exchange Offer will expire at 12:00 midnight, New York City
time, on July 10, 1997, unless the Exchange Offer is extended. Your
instructions to us should be forwarded to us in ample time to permit us to
submit a tender on your behalf. If you would like to withdraw your shares
of Series A Preferred Stock that we have tendered, you can withdraw them at
any time prior to the Expiration Date (as defined in the Prospectus).
<PAGE> 2
(3) Exchanges will be made on the basis of one share of Series B
Preferred Stock for each share of Series A Preferred Stock tendered and
accepted for exchange.
(4) Any transfer taxes applicable to the exchange of shares of Series
A Preferred Stock with the Company pursuant to the Exchange Offer will be
paid by the Company, except as otherwise provided in Instruction 4 of the
Letter of Transmittal.
If you wish to have us tender any or all of your shares of Series A
Preferred Stock held by us for your account upon the terms and subject to the
conditions set forth in the Exchange Offer, please so instruct us by completing,
executing, detaching and returning to us the instruction form included herewith.
An envelope to return your instructions to us is enclosed. If you authorize
tender of your shares of Series A Preferred Stock, all such shares of Series A
Preferred Stock will be tendered unless otherwise specified on the instruction
form. Your instructions should be forwarded to us in ample time to permit us to
submit a tender on your behalf by the expiration of the Exchange Offer.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO
LEHMAN BROTHERS HOLDINGS INC.
OFFER TO EXCHANGE
CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK
SERIES B, PAR VALUE $1.00 PER SHARE
FOR
CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK
SERIES A, PAR VALUE $1.00 PER SHARE
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus dated June 12, 1997 of Lehman Brothers Holdings Inc. (the "Company")
and the related Letter of Transmittal, which together describe the Company's
offer (the "Exchange Offer") to exchange, on a share-for-share basis, up to
13,000,000 shares of its new Cumulative Convertible Voting Preferred Stock,
Series B for up to 13,000,000 shares of its outstanding Cumulative Convertible
Voting Preferred Stock, Series A (the "Series A Preferred Stock"), upon the
terms and subject to the conditions of the Exchange Offer (as described in the
Prospectus) and subject to the right of the Company to amend or terminate the
Exchange Offer.
This will instruct you to tender to the Company the number of shares of
Series A Preferred Stock indicated below (or, if no number is indicated below,
all shares of Series A Preferred Stock) which are held by you for the account of
the undersigned, upon the terms and subject to the conditions of the Exchange
Offer.
<TABLE>
<S> <C>
Number of Shares to be Tendered: SIGN HERE
________ Shares* ---------------------------------------------
---------------------------------------------
Dated: ---------------------, 1997 Signature(s)
Name(s):
------------------------------------------
Address:
--------------------------------------------
=============================================
Social Security or Taxpayer Identification
No.:
---------------------------------------------
</TABLE>
- ---------------
* Unless otherwise indicated, it will be assumed that all shares of Series A
Preferred Stock held by us for your account are to be tendered.
3
<PAGE> 1
[SIMPSON THACHER & BARTLETT LETTERHEAD]
May 23, 1997
Re: Lehman Brothers Holdings Inc. Offer to
Exchange Up to 13,000,000 shares of
Cumulative Convertible Voting Preferred
Stock, Series B, par value $1.00 per
share, for its Outstanding Cumulative
Convertible Voting Preferred Stock,
Series A, par value $1.00 per share
Lehman Brothers Holdings Inc.
3 World Financial Center
New York, NY 10285
Ladies and Gentlemen:
You have requested our opinion with respect to certain United States
federal income tax consequences of the proposed transaction in which Lehman
Brothers Holdings Inc. (the "Company") offers to exchange (the "Exchange
Offer") up to 13,000,000 shares of its new Cumulative Convertible Voting
Preferred Stock, Series B (the "Series B Preferred Stock") for 13,000,000
shares of its outstanding Cumulative Convertible Voting Preferred Stock,
Series A (the "Series A Preferred Stock"). All capitalized terms used but not
defined herein have the meanings ascribed to them in the draft of the
Prospectus, dated as of May 23, 1997 (the "Prospectus").
We have examined a draft dated May 23, 1997 of the Prospectus relating
to the Exchange Offer. In addition, we have
<PAGE> 2
SIMPSON THACHER & BARTLETT
-2- May 23, 1997
examined such other documents, and have made such other and further
investigations, as we have deemed relevant and necessary as a basis for the
opinion hereinafter set forth. We have not, however, undertaken any independent
investigation of any factual matter in the foregoing. In addition, we have
assumed the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as drafts or
as certified, conformed, photostatic or facsimile copies, and the authenticity
of the originals of such latter documents. We have also assumed that the
Prospectus will be in the form of the draft examined by us as set forth above.
Our examination of the Prospectus has, consistent with the nature of our
engagement, not included a review or investigation of the information
concerning the Company set forth therein or any other information set forth
therein, and, accordingly, we express no opinion or view with respect thereto.
Our opinion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations, administrative interpretations, and
judicial precedents as of the date hereof. If there is any subsequent change in
the applicable law or regulations, or if there are subsequently any new
administrative or judicial interpretations of the law or regulations, the
opinion expressed herein may become inapplicable.
<PAGE> 3
SIMPSON THACHER & BARTLETT
-3- May 23, 1997
We hereby advise you that, in our opinion, the statements set forth in
the Prospectus under the caption "Material United States Federal Income Tax
Consequences" insofar as they purport to constitute summaries of matters of
United States federal tax law and regulations or legal conclusions with respect
thereto, constitute accurate summaries of the matters described therein in all
material respects. We hereby consent to the filing of the letter as an Exhibit
to the Registration Statement.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the federal law of the
United States.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
