<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1999
REGISTRATION NO. 333-75723
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LEHMAN BROTHERS HOLDINGS INC. DELAWARE 13-3216325
LEHMAN BROTHERS HOLDINGS DELAWARE 13-4054198
CAPITAL TRUST III
LEHMAN BROTHERS HOLDINGS DELAWARE TO BE APPLIED
CAPITAL TRUST IV FOR
LEHMAN BROTHERS HOLDINGS DELAWARE TO BE APPLIED
CAPITAL TRUST V FOR
LEHMAN BROTHERS HOLDINGS DELAWARE TO BE APPLIED
CAPITAL TRUST VI FOR
(Exact Name of Registrant as (State or Other Jurisdiction (I.R.S. Employer
Specified in its Charter) of Incorporation or Identification
Organization) Number)
</TABLE>
--------------------------
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
THOMAS A. RUSSO, ESQ.
LEHMAN BROTHERS HOLDINGS INC.
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
Copies To:
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RAYMOND W. WAGNER, ESQ. JENNIFER MARRE, ESQ.
SIMPSON THACHER & BARTLETT LEHMAN BROTHERS HOLDINGS INC.
425 LEXINGTON AVENUE 3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10285
(212) 455-2000 (212) 526-7000
</TABLE>
--------------------------
Approximate Date of Commencement of Proposed Sale of the Securities to the
Public: From time to time after the effective date of this Registration
Statement, as determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. / /
--------------------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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INTRODUCTORY NOTE
This Registration Statement contains:
- a form of base prospectus relating to debt securities, preferred stock and
depositary shares of Lehman Brothers Holdings Inc.; and
- a form of base prospectus relating to junior subordinated debt securities
of Lehman Brothers Holdings and to the preferred securities of Lehman
Brothers Holdings Capital Trust III, Lehman Brothers Holdings Capital
Trust IV, Lehman Brothers Holdings Capital Trust V and Lehman Brothers
Holdings Capital Trust VI.
To the extent required, the information in the prospectuses, including
financial information, will be updated at the time of each offering. Upon each
such offering, a prospectus supplement to the appropriate base prospectus will
be filed.
<PAGE>
PROSPECTUS
$15,000,000,000
LEHMAN BROTHERS HOLDINGS INC.
MAY OFFER--
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
----------------
Lehman Brothers Holdings will provide the specific terms of these securities
in supplements to this prospectus. You should read this prospectus and the
accompanying prospectus supplement carefully before you invest.
The securities offered pursuant to this prospectus are offered in an
aggregate principal amount of up to $15,000,000,000 subject to reduction as a
result of the sale under certain circumstances of other securities.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus or any accompanying prospectus supplement is truthful or complete.
Any representation to the contrary is a criminal offense.
---------------------
April 28, 1999
<PAGE>
PROSPECTUS SUMMARY
This summary provides a brief overview of the key aspects of Lehman Brothers
Holdings and all material terms of the offered securities that are known as of
the date of this prospectus. For a more complete understanding of the terms of
the offered securities, before making your investment decision, you should
carefully read:
- this prospectus, which explains the general terms of the securities that
Lehman Brothers Holdings may offer;
- the accompanying prospectus supplement, which (1) explains the specific
terms of the securities being offered and (2) updates and changes
information in this prospectus; and
- the documents referred to in "Where You Can Find More Information" on page
5 for information about Lehman Brothers Holdings, including its financial
statements.
LEHMAN BROTHERS HOLDINGS INC.
Lehman Brothers Holdings is one of the leading global investment banks,
serving institutional, corporate, government and high net worth 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 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, derivative products
and certain commodities. Through one or more subsidiaries, the company acts as a
market maker in all major equity and fixed income products in both the domestic
and international markets. The company is a member of all principal securities
and commodities exchanges in the United States, as well as the National
Association of Securities Dealers, Inc., and holds memberships or associate
memberships on several principal international securities and commodities
exchanges, including the London, Tokyo, Hong Kong, Frankfurt and Milan stock
exchanges.
Lehman Brothers Holdings' principal executive office is at 3 World Financial
Center, New York, New York 10285, and its telephone number is (212) 526-7000.
THE SECURITIES LEHMAN BROTHERS HOLDINGS MAY OFFER
Lehman Brothers Holdings may use this prospectus to offer up to
$15,000,000,000 of:
- debt securities,
- preferred stock, and
- depositary shares.
A prospectus supplement will describe the specific types, amounts, prices,
and detailed terms of any of these offered securities.
DEBT SECURITIES
Debt securities are unsecured general obligations of Lehman Brothers
Holdings in the form of senior or subordinated debt. Senior debt includes Lehman
Brothers Holdings' notes, debt and guarantees and any other debt for money
borrowed that is not subordinated. Subordinated debt, so designated at the time
it is issued, would not be entitled to interest and principal payments if
payments on the senior debt were not made.
The senior and subordinated debt will be issued under separate indentures
between Lehman Brothers Holdings and a trustee. Below are summaries of the
general features of the debt securities from these indentures. For a more
detailed description of these features, see "Description of Debt
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Securities" below. You are also encouraged to read the indentures, which are
incorporated by reference in or filed as exhibits to Lehman Brothers Holdings'
registration statement no. 333-75723. You can receive copies of these documents
by following the directions on page 5.
GENERAL INDENTURE PROVISIONS THAT APPLY TO SENIOR AND SUBORDINATED DEBT
- Neither indenture limits the amount of debt that Lehman Brothers Holdings
may issue or provides holders any protection should there be a highly
leveraged transaction involving Lehman Brothers Holdings, although the
indentures do limit Lehman Brothers Holdings' ability to pledge the stock
of any subsidiary that meets the financial thresholds in the indenture.
These thresholds are described below under "Description of Debt
Securities." Each indenture allows for different types of debt securities,
including indexed securities, to be issued in series.
- The indentures allow Lehman Brothers Holdings to merge or to consolidate
with another company, or sell all or substantially all of its assets to
another company. If any of these events occur, the other company would be
required to assume Lehman Brothers Holdings' responsibilities for the
debt. Unless the transaction resulted in an event of default, Lehman
Brothers Holdings would be released from all liabilities and obligations
under the debt securities when the other company assumed its
responsibilities.
- The indentures provide that holders of 66 2/3% of the principal amount of
the debt securities outstanding in any series may vote to change Lehman
Brothers Holdings' obligations or your rights concerning those securities.
However, changes to the financial terms of that security, including
changes in the payment of principal or interest on that security or the
currency of payment, cannot be made unless every holder of that security
consents to the change.
- Lehman Brothers Holdings may satisfy its obligations under the debt
securities or be released from its obligation to comply with the
limitations discussed above at any time by depositing sufficient amounts
of cash or U.S. government securities with the trustee to pay Lehman
Brothers Holdings' obligations under the particular securities when due.
- The indentures govern the actions of the trustee with regard to the debt
securities, including when the trustee is required to give notices to
holders of the securities and when lost or stolen debt securities may be
replaced.
EVENTS OF DEFAULT
The events of default specified in the indentures include:
- failure to pay principal when due;
- failure to pay required interest for 30 days;
- failure to make a required scheduled installment payment for 30 days;
- failure to perform other covenants for 90 days after notice; and
- certain events of insolvency or bankruptcy, whether voluntary or not.
REMEDIES
If there were a default, the trustee or holders of 25% of the principal
amount of debt securities outstanding in a series could demand that the
principal be paid immediately. However, holders of a majority in principal
amount of the securities in that series could rescind that acceleration of the
debt securities.
PREFERRED STOCK
Lehman Brothers Holdings may issue preferred stock with various terms to be
established by its board of directors or a committee designated by the board.
Each series of preferred stock will be more
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fully described in the particular prospectus supplement that will accompany this
prospectus, including redemption provisions, rights in the event of liquidation,
dissolution or winding up of Lehman Brothers Holdings, voting rights and
conversion rights.
Generally, each series of preferred stock will rank on an equal basis with
each other series of preferred stock and will rank prior to Lehman Brothers
Holdings' common stock. The prospectus supplement will also describe how and
when dividends will be paid on the series of preferred stock.
DEPOSITARY SHARES
Lehman Brothers Holdings may issue depositary shares representing fractional
shares of preferred stock. Each particular series of depositary shares will be
more fully described in the prospectus supplement that will accompany this
prospectus.
These depositary shares will be evidenced by depositary receipts and issued
under a deposit agreement between Lehman Brothers Holdings and a bank or trust
company. You are encouraged to read the standard form of the deposit agreement,
which is incorporated by reference in Lehman Brothers Holdings' registration
statement no. 333-75723. You can receive copies of this document by following
the directions on page 5.
USE OF PROCEEDS
Lehman Brothers Holdings will use the net proceeds it receives from any
offering of these securities for general corporate purposes, primarily to fund
its operating units and subsidiaries. Lehman Brothers Holdings may use some of
the proceeds to refinance or extend the maturity of existing debt obligations.
Lehman Brothers Holdings may use a portion of the proceeds from the sale of
indexed notes to hedge its exposure to payments that it may have to make on such
indexed notes as described below under "Use of Proceeds and Hedging."
PLAN OF DISTRIBUTION
Lehman Brothers Holdings may sell the offered securities in any of the
following ways:
- to or through underwriters or dealers;
- by itself directly;
- through agents; or
- through a combination of any of these methods of sale.
The prospectus supplement will explain the ways Lehman Brothers Holdings
sells specific securities, including the names of any underwriters and details
of the pricing of the securities, as well as the commissions, concessions or
discounts Lehman Brothers Holdings is granting the underwriters, dealers or
agents.
If Lehman Brothers Holdings uses underwriters in any sale, the underwriters
will buy the securities for their own account and may resell the securities from
time to time in one or more transactions, at a fixed public offering price or at
varying prices determined at the time of sale. In connection with an offering,
underwriters and selling group members and their affiliates may engage in
transactions to stabilize, maintain or otherwise affect the market price of the
securities, in accordance with applicable law.
Lehman Brothers Holdings expects that the underwriters for any offering will
include its broker-dealer subsidiary, Lehman Brothers Inc. Lehman Brothers Inc.
also expects to offer and sell previously issued offered securities as part of
its business, and may act as a principal or agent in such transactions. Lehman
Brothers Holdings or Lehman Brothers Inc. may use this prospectus and the
related prospectus supplements and pricing supplements in connection with these
activities.
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WHERE YOU CAN FIND MORE INFORMATION
As required by the Securities Act of 1933, Lehman Brothers Holdings filed a
registration statement (No. 333-75723) relating to the securities offered by
this prospectus with the Securities and Exchange Commission. This prospectus is
a part of that registration statement, which includes additional information.
Lehman Brothers Holdings files annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
document Lehman Brothers Holdings files at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. You can also request
copies of the documents, upon payment of a duplicating fee, by writing the
Public Reference Section of the SEC. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. These SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov.
The SEC allows Lehman Brothers Holdings to "incorporate by reference" the
information it files with the SEC, which means that it can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information that Lehman Brothers Holdings files later with the SEC will
automatically update information in this prospectus. In all cases, you should
rely on the later information over different information included in this
prospectus or the prospectus supplement. Lehman Brothers Holdings incorporates
by reference the documents listed below and any future filings made with the SEC
under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934:
- Amended Annual Report on Form 10-K for the year ended November 30, 1998,
filed with the SEC on March 5, 1999;
- Quarterly Report on Form 10-Q for the quarter ended February 28, 1999,
filed with the SEC on April 14, 1999; and
- Current Reports on Form 8-K, filed with the SEC on January 7, January 27,
March 19 and April 20, 1999.
All documents Lehman Brothers Holdings files pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and
before the later of (1) the completion of the offering of the securities
described in this prospectus and (2) the date Lehman Brothers Inc. stops
offering securities pursuant to this prospectus shall be incorporated by
reference in this prospectus from the date of filing of such documents.
You may request a copy of these filings, at no cost, by writing or
telephoning Lehman Brothers Holdings at the following address:
Controller's Office
Lehman Brothers Holdings Inc.
3 World Financial Center
New York, New York 10285
(212) 526-0660
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED IN THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT, AS WELL AS THE INFORMATION INCORPORATED BY REFERENCE.
LEHMAN BROTHERS HOLDINGS HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. LEHMAN BROTHERS HOLDINGS IS NOT MAKING AN OFFER OF THESE SECURITIES
IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT
THE INFORMATION IN THIS PROSPECTUS, THE PROSPECTUS SUPPLEMENT OR ANY DOCUMENTS
INCORPORATED BY REFERENCE IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THE
APPLICABLE DOCUMENT.
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USE OF PROCEEDS AND HEDGING
GENERAL. Lehman Brothers Holdings will use the proceeds it receives from
the sale of the offered securities for general corporate purposes, principally
to:
- fund the business of its operating units;
- fund investments in, or extensions of credit or capital contributions to,
its subsidiaries; and
- lengthen the average maturity of liabilities, which means that it could
reduce its short-term liabilities or refund maturing indebtedness.
Lehman Brothers Holdings expects to incur additional indebtedness in the
future to fund its businesses. Lehman Brothers Holdings or an affiliate may
enter into a swap agreement in connection with the sale of the offered
securities and may earn additional income from that transaction.
USE OF PROCEEDS RELATING TO INDEXED NOTES. Lehman Brothers Holdings or one
or more of its subsidiaries may use all or some of the proceeds received from
the sale of indexed notes to purchase or maintain positions in the assets that
are used to determine the relevant index or indices. Lehman Brothers Holdings or
one or more of its subsidiaries may also purchase or maintain positions in
options, futures contracts, forward contracts or swaps, or options on such
securities, or other derivative or similar instruments relating to the relevant
index or underlying assets. Lehman Brothers Holdings may also use the proceeds
to pay the costs and expenses of hedging any currency, interest rate or other
index-related risk relating to such indexed notes.
Lehman Brothers Holdings expects that it or one or more of its subsidiaries
will increase or decrease their initial hedging position over time using
techniques which help evaluate the size of any hedge based upon a variety of
factors affecting the value of the underlying instrument. These factors may
include the history of price changes in that underlying instrument and the time
remaining to maturity. Lehman Brothers Holdings may take long or short positions
in the index, the underlying assets, options, futures contracts, forward
contracts, swaps, or other derivative or similar instruments related to the
index and the underlying assets. These other hedging activities may occur from
time to time before the indexed notes mature and will depend on market
conditions and the value of the index and the underlying assets.
In addition, Lehman Brothers Holdings or one or more of its subsidiaries may
purchase or otherwise acquire a long or short position in indexed notes from
time to time and may, in their sole discretion, hold, resell, exercise, cancel
or retire such offered securities. Lehman Brothers Holdings or one or more of
its subsidiaries may also take hedging positions in other types of appropriate
financial instruments that may become available in the future.
If Lehman Brothers Holdings or one or more of its subsidiaries has a long
hedge position in, options contracts in, or other derivative or similar
instruments related to, the underlying assets or index, Lehman Brothers Holdings
or one or more of its subsidiaries may liquidate all or a portion of its
holdings at or about the time of the maturity of the indexed notes. The
aggregate amount and type of such positions are likely to vary over time
depending on future market conditions and other factors. Lehman Brothers
Holdings is only able to determine profits or losses from any such position when
the position is closed out and any offsetting position or positions are taken
into account.
Lehman Brothers Holdings has no reason to believe that its hedging activity
will have a material impact on the price of such options, swaps, futures
contracts, options on the foregoing, or other derivative or similar instruments,
or on the value of the index or the underlying assets. However, Lehman Brothers
Holdings cannot guarantee you that its hedging activities will not affect such
prices or value. Lehman Brothers Holdings will use the remainder of the proceeds
from the sale of indexed notes for the general corporate purposes described
above.
6
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RATIO OF EARNINGS TO FIXED CHARGES AND OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
ELEVEN
MONTHS
ENDED YEAR ENDED NOVEMBER 30,
NOVEMBER 30, ------------------------------------------
1994 1995 1996 1997 1998
--------------- --------- --------- --------- ---------
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Ratio of Earnings to Fixed Charges...................... 1.03 1.03 1.06 1.07 1.07
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends......................... 1.02 1.03 1.05 1.06 1.06
<CAPTION>
THREE MONTHS
ENDED FEBRUARY
28,
1999
---------------
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Ratio of Earnings to Fixed Charges...................... 1.08
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends......................... 1.08
</TABLE>
In computing the ratios above, "earnings" consist of earnings from
continuing operations before income taxes and fixed charges; "fixed charges"
consist principally of interest expense and one-third of office rentals and
one-fifth of equipment rentals, which are deemed to be representative of the
interest factor.
EUROPEAN MONETARY UNION
The foreign currencies in which debt securities may be denominated or by
which amounts due on the offered securities may be calculated could be issued by
countries participating in Stage III of the European Economic and Monetary
Union.
Stage III began on January 1, 1999 for the eleven participating member
states of the European Union that satisfied the economic convergence criteria in
the Treaty on European Union: Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain. Other member
states of the European Union may still become participating member states after
January 1, 1999.
Stage III includes the introduction of the Euro, which, along with the
present national currency of each participating member state, is legal tender in
the participating member states. It is currently anticipated that on and after
January 1, 2002, the national currencies of participating member states will
cease to exist and the sole legal tender in such states will be the Euro. The
European Union has adopted regulations providing specific rules for the
introduction of the Euro in substitution for the respective current national
currencies of such member states, and may adopt additional regulations or
legislation in the future relating to the Euro. It is anticipated that these
regulations or legislation will be supplemented by legislation of the individual
member states.
Pursuant to European Council Regulation No. 2866/98 of December 31, 1998,
one Euro equals:
- 13.7603 Austrian schillings,
- 40.3399 Belgian francs,
- 5.94573 Finnish marks,
- 6.55957 French francs,
- 1.95583 German marks,
- 0.787564 Irish pounds,
- 1,936.27 Italian lire,
- 40.3399 Luxembourg francs,
- 2.20371 Dutch guilders,
- 200.482 Portuguese escudos, or
- 166.386 Spanish pesetas.
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DESCRIPTION OF DEBT SECURITIES
The debt securities offered by this prospectus will be unsecured obligations
of Lehman Brothers Holdings and will be either senior or subordinated debt.
Senior debt will be issued under a senior debt indenture. Subordinated debt will
be issued under a subordinated debt indenture. The senior debt indenture and the
subordinated debt indenture are sometimes referred to in this prospectus
individually as an "indenture" and collectively as the "indentures." The
indentures (including all amendments and a separate related document containing
standard multiple series indenture provisions) have been filed with the SEC and
are incorporated by reference in the registration statement of which this
prospectus forms a part.
The following briefly summarizes the material provisions of the indentures
and the debt securities, other than pricing and related terms disclosed in the
accompanying prospectus supplement. You should read the more detailed provisions
of the applicable indenture, including the defined terms, for provisions that
may be important to you. You should also read the particular terms of a series
of debt securities, which will be described in more detail in the applicable
prospectus supplement. Copies of the indentures may be obtained from Lehman
Brothers Holdings or the applicable trustee. So that you may easily locate the
more detailed provisions, the numbers in parentheses below refer to sections in
the applicable indenture or, if no indenture is specified, to sections in each
of the indentures. Wherever particular sections or defined terms of the
applicable indenture are referred to, such sections or defined terms are
incorporated into this prospectus by reference, and the statement in this
prospectus is qualified by that reference.
Unless otherwise provided in the applicable prospectus supplement, the
trustee under the senior debt indenture will be Citibank, N.A., and the trustee
under the subordinated debt indenture will be The Chase Manhattan Bank (formerly
known as Chemical Bank).
GENERAL
The indentures provide that unsecured senior or subordinated debt securities
of Lehman Brothers Holdings may be issued in one or more series, with different
terms, in each case as authorized from time to time by Lehman Brothers Holdings.
Lehman Brothers Holdings also has the right to "reopen" a previous issue of a
series of debt securities by issuing additional debt securities of such series.
Federal income tax consequences and other special considerations applicable
to any debt securities issued by Lehman Brothers Holdings at a discount will be
described in the applicable prospectus supplement.
Because Lehman Brothers Holdings is a holding company, the claims of
creditors of Lehman Brothers Holdings' subsidiaries will have a priority over
Lehman Brothers Holdings' equity rights and the rights of Lehman Brothers
Holdings' creditors, including the holders of debt securities, to participate in
the assets of the subsidiary upon the subsidiary's liquidation.
The applicable prospectus supplement relating to any series of debt
securities will describe the following terms, where applicable:
- the title of the debt securities;
- whether the debt securities will be senior or subordinated debt;
- the total principal amount of the debt securities;
- the percentage of the principal amount at which the debt securities will
be sold and, if applicable, the method of determining the price;
- the maturity date or dates;
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- the interest rate or the method of computing the interest rate;
- the date or dates from which any interest will accrue, or how such date or
dates will be determined, and the interest payment date or dates and any
related record dates;
- if other than in United States dollars, the currency or currency unit in
which payment will be made;
- any provisions for the payment of additional amounts for taxes;
- the denominations in which the currency or currency unit of any debt
securities will be issuable if other than denominations of $1,000 and any
integral multiple thereof;
- the location where payments on the debt securities will be made;
- the terms and conditions on which the debt securities may be redeemed at
the option of Lehman Brothers Holdings;
- any obligation of Lehman Brothers Holdings to redeem, purchase or repay
the debt securities at the option of a holder upon the happening of any
event and the terms and conditions of redemption, purchase or repayment;
- any provisions for the discharge of Lehman Brothers Holdings' obligations
relating to the debt securities by deposit of funds or United States
government obligations;
- whether the debt securities are to trade in book-entry form and the terms
and any conditions for exchanging the global security in whole or in part
for paper certificates;
- any material provisions of the applicable indenture described in this
prospectus that do not apply to the debt securities; and
- any other specific terms of the debt securities.
The terms on which a series of debt securities may be convertible into or
exchangeable for other securities of Lehman Brothers Holdings will be set forth
in the prospectus supplement relating to such series. Such terms will include
provisions as to whether conversion or exchange is mandatory, at the option of
the holder or at the option of Lehman Brothers Holdings. The terms may include
provisions pursuant to which the number of other securities of Lehman Brothers
Holdings to be received by the holders of such series of debt securities may be
adjusted.
The debt securities will be issued only in registered form. As currently
anticipated, debt securities of a series will trade in book-entry form, and
global notes will be issued in physical (paper) form, as described below under
"Book-Entry Procedures and Settlement." Unless otherwise provided in the
accompanying prospectus supplement, debt securities denominated in United States
dollars will be issued only in denominations of $1,000 and whole multiples of
$1,000. The prospectus supplement relating to offered securities denominated in
a foreign or composite currency will specify the denomination of the offered
securities.
The debt securities may be presented for exchange, and debt securities other
than a global security may be presented for registration of transfer, at the
principal corporate trust office of the relevant trustee in New York City.
Holders will not have to pay any service charge for any registration of transfer
or exchange of debt securities, but Lehman Brothers Holdings may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection with such registration of transfer (Section 305).
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PAYMENT AND PAYING AGENTS
Distributions on the debt securities other than those represented by global
notes will be made in the designated currency against surrender of the debt
securities at the principal corporate trust office of the relevant trustee in
New York City. Payment will be made to the registered holder at the close of
business on the record date for such payment. Interest payments will be made at
the principal corporate trust office of the relevant trustee in New York City,
or by a check mailed to the holder at his registered address. Payments in any
other manner will be specified in the prospectus supplement (Sections 307 and
1002).
SENIOR DEBT
The senior debt securities will be issued under the senior debt indenture
and will rank on an equal basis with all other unsecured debt of Lehman Brothers
Holdings except subordinated debt.
SUBORDINATED DEBT
The subordinated debt securities will be issued under the subordinated debt
indenture and will rank subordinated and junior in right of payment, to the
extent set forth in the subordinated debt indenture, to all "senior debt" (as
defined below) of Lehman Brothers Holdings.
If Lehman Brothers Holdings defaults in the payment of any principal of, or
premium, if any, or interest on any senior debt when it becomes due and payable
after any applicable grace period, then, unless and until the default is cured
or waived or ceases to exist, Lehman Brothers Holdings cannot make a payment on
account of or redeem or otherwise acquire the subordinated debt securities.
If there is any insolvency, bankruptcy, liquidation or other similar
proceeding relating to Lehman Brothers Holdings, its creditors or its property,
then all senior debt must be paid in full before any payment may be made to any
holders of subordinated debt securities.
Furthermore, if Lehman Brothers Holdings defaults in the payment of the
principal of and accrued interest on any subordinated debt securities that is
declared due and payable upon an event of default under the subordinated debt
indenture, holders of all senior debt will first be entitled to receive payment
in full in cash before holders of such debt can receive any payments.
"Senior debt" means:
(1) the principal, premium, if any, and interest in respect of (A)
indebtedness of Lehman Brothers Holdings for money borrowed and (B)
indebtedness evidenced by securities, notes, debentures, bonds or other
similar instruments issued by Lehman Brothers Holdings, including the
senior debt securities;
(2) all capitalized lease obligations of Lehman Brothers Holdings;
(3) all obligations of Lehman Brothers Holdings representing the deferred
purchase price of property; and
(4) all deferrals, renewals, extensions and refundings of obligations of the
type referred to in clauses (1) through (3);
but senior debt does not include:
(a) subordinated debt securities;
(b) any indebtedness that by its terms is subordinated to, or ranks on an
equal basis with, subordinated debt securities;
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(c) indebtedness for goods or materials purchased in the ordinary course of
business or for services obtained in the ordinary course of business or
indebtedness consisting of trade payables; and
(d) indebtedness that is subordinated to an obligation of Lehman Brothers
Holdings of the type specified in clauses (1) through (4) above
(Subordinated Debt Indenture, Section 1401).
The effect of clause (d) is that Lehman Brothers Holdings may not issue,
assume or guarantee any indebtedness for money borrowed which is junior to the
senior debt securities and senior to the subordinated debt securities.
COVENANTS
LIMITATIONS ON LIENS. The indentures provide that Lehman Brothers Holdings
will not, and will not permit any designated subsidiary to, incur, issue, assume
or guarantee any indebtedness for money borrowed if such indebtedness is secured
by a pledge of, lien on, or security interest in any shares of common stock of
any designated subsidiary, without providing that each series of debt securities
and, at Lehman Brothers Holdings' option, any other indebtedness ranking equally
and ratably with such indebtedness, is secured equally and ratably with (or
prior to) such other secured indebtedness (Section 1005).
"Designated subsidiary" means any subsidiary of Lehman Brothers Holdings,
the consolidated net worth of which represents at least 5% of the consolidated
net worth of Lehman Brothers Holdings. As of February 28, 1999, the designated
subsidiaries were Global Thai Property Fund, Lehman Brothers Inc., Lehman
Brothers Holdings Plc, Lehman Brothers (International) Europe, Lehman Brothers
Japan Inc., Lehman Brothers U.K. Holdings (Delaware) Inc., Lehman Brothers UK
Holdings Ltd., Lehman Commercial Paper Inc., Lehman Re Ltd. and Structured Asset
Securities Corp. (Section 101).
LIMITATIONS ON MERGERS AND SALES OF ASSETS. The indentures provide that
Lehman Brothers Holdings will not merge or consolidate or transfer or lease all
or substantially all its assets, and another person may not transfer or lease
all or substantially all of its assets to Lehman Brothers Holdings unless:
- either (1) Lehman Brothers Holdings is the continuing corporation, or (2)
the successor corporation, if other than Lehman Brothers Holdings, is a
U.S. corporation and expressly assumes by supplemental indenture the
obligations evidenced by the securities issued pursuant to the indenture
and
- immediately after the transaction, there would not be any default in the
performance of any covenant or condition of the indenture (Section 801).
Other than the restrictions described above, the indentures do not contain
any covenants or provisions that would protect holders of the debt securities in
the event of a highly leveraged transaction.
MODIFICATION OF THE INDENTURES
Under the indentures, Lehman Brothers Holdings and the relevant trustee can
enter into supplemental indentures to establish the form and terms of any new
series of debt securities without obtaining the consent of any holder of debt
securities (Section 901).
Lehman Brothers Holdings and the trustee may, with the consent of the
holders of at least 66 2/3% in aggregate principal amount of the debt securities
of a series, modify the applicable indenture or the rights of the holders of the
securities of such series to be affected.
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No such modification may, without the consent of the holder of each security
so affected:
- extend the fixed maturity of any such securities,
- reduce the rate or change the time of payment of interest on such
securities,
- reduce the principal amount of such securities or the premium, if any, on
such securities,
- change any obligation of Lehman Brothers Holdings to pay additional
amounts,
- reduce the amount of the principal payable on acceleration of any
securities issued originally at a discount,
- adversely affect the right of repayment or repurchase at the option of the
holder,
- reduce or postpone any sinking fund or similar provision,
- change the currency or currency unit in which any such securities are
payable or the right of selection thereof,
- impair the right to sue for the enforcement of any such payment on or
after the maturity of such securities,
- reduce the percentage of securities referred to above whose holders need
to consent to the modification or a waiver without the consent of such
holders,
- change any obligation of Lehman Brothers Holdings to maintain an office or
agency (Section 902).
DEFAULTS
Each indenture provides that events of default regarding any series of debt
securities will be:
- failure to pay required interest on any debt security of such series for
30 days;
- failure to pay principal or premium, if any, on any debt security of such
series when due;
- failure to make any required scheduled installment payment for 30 days on
debt securities of such series;
- failure to perform for 90 days after notice any other covenant in the
relevant indenture other than a covenant included in the relevant
indenture solely for the benefit of a series of debt securities other than
such series; and
- certain events of bankruptcy or insolvency, whether voluntary or not
(Section 501).
If an event of default regarding debt securities of any series issued under
the indentures should occur and be continuing, either the trustee or the holders
of 25% in the principal amount of outstanding debt securities of such series may
declare each debt security of that series due and payable. Lehman Brothers
Holdings is required to file annually with the trustee a statement of an officer
as to the fulfillment by Lehman Brothers Holdings of its obligations under the
indenture during the preceding year (Section 1006).
No event of default regarding one series of debt securities issued under an
indenture is necessarily an event of default regarding any other series of debt
securities.
Holders of a majority in principal amount of the outstanding debt securities
of any series will be entitled to control certain actions of the trustee under
the indentures and to waive past defaults regarding such series (Sections 502
and 512). The trustee generally will not be requested, ordered or directed by
any of the holders of debt securities, unless one or more of such holders shall
have offered to the trustee reasonable security or indemnity (Section 603).
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If an event of default occurs and is continuing regarding a series of debt
securities, the trustee may use any sums that it holds under the relevant
indenture for its own reasonable compensation and expenses incurred prior to
paying the holders of debt securities of such series (Section 506).
Before any holder of any series of debt securities may institute action for
any remedy, except payment on such holder's debt security when due, the holders
of not less than 25% in principal amount of the debt securities of that series
outstanding must request the trustee to take action. Holders must also offer and
give the satisfactory security and indemnity against liabilities incurred by the
trustee for taking such action (Sections 502, 507 and 603).
DEFEASANCE
Except as may otherwise be set forth in an accompanying prospectus
supplement, after Lehman Brothers Holdings has deposited with the trustee, cash
or government securities, in trust for the benefit of the holders sufficient to
pay the principal of, premium, if any, and interest on the debt securities of
such series when due, then:
- if the terms of the debt securities so provide, Lehman Brothers Holdings
will be deemed to have paid and satisfied its obligations on all
outstanding debt securities of such series, which is known as "defeasance
and discharge" (Section 401); or
- Lehman Brothers Holdings will cease to be under any obligation, other than
to pay when due the principal of, premium, if any, and interest on such
debt securities, relating to the debt securities of such series, which is
known as "covenant defeasance" (Section 1009).
When there is a defeasance and discharge, (1) the applicable indenture will
no longer govern the debt securities of such series, (2) Lehman Brothers
Holdings will no longer be liable for payment and (3) the holders of such debt
securities will be entitled only to the deposited funds. When there is a
covenant defeasance, however, Lehman Brothers Holdings will continue to be
obligated to make payments when due if the deposited funds are not sufficient.
For a discussion of the principal United States federal income tax
consequences of covenant defeasance and defeasance and discharge, see "United
States Federal Income Tax Consequences--Tax Consequences of Defeasance" below.
CONCERNING THE TRUSTEES
Lehman Brothers Holdings has had and may continue to have banking
relationships with the trustees in the ordinary course of business.
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DESCRIPTION OF OUTSTANDING PREFERRED STOCK
As of the date of this prospectus, Lehman Brothers Holdings' authorized
capital stock includes 38 million shares of preferred stock. The following
briefly summarizes the material terms of Lehman Brothers Holdings' outstanding
preferred stock. You should read the more detailed provisions of Lehman Brothers
Holdings' certificate of incorporation or the certificate of designation
relating to a series of preferred stock for provisions that may be important to
you.
The general terms of Lehman Brothers Holdings' preferred stock are described
below under "Description of Offered Preferred Stock."
As of February 28, 1999, Lehman Brothers Holdings had outstanding the
following series of preferred stock with the following terms:
<TABLE>
<CAPTION>
DATE NEXT
REDEEMABLE
NUMBER OF REDEMPTION BY LEHMAN GENERAL
SHARES DIVIDENDS PRICE PER BROTHERS VOTING
TITLE OF SERIES OUTSTANDING PER YEAR SHARE HOLDINGS RIGHTS
- ------------------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Redeemable Voting Preferred Stock......... 1,000 Variable(2) $ 1.00 Variable(3) Yes(5)
Cumulative Convertible Voting Preferred
Stock, Series A......................... 2,300(1) $ 1.955 $ 39.10 Variable(4) Yes(5)
Cumulative Convertible Voting Preferred
Stock, Series B......................... 9,161,384(1) $ 1.955 $ 39.10 Variable(4) Yes(5)
5.94% Cumulative Preferred Stock, Series
C....................................... 500,000 $ 29.70 $ 500.00 05/31/08 No
5.67% Cumulative Preferred Stock, Series
D....................................... 40,000 $283.50 $5,000.00 08/31/08 No
</TABLE>
Where the above table indicates that the holders of the preferred stock have
no general voting rights, this means that they do not vote on matters submitted
to a vote of the common stockholders. However, the holders of this preferred
stock do have other special voting rights (1) that are required by law, (2) that
apply if there is a default in paying dividends for the equivalent of six
calendar quarters, and (3) when Lehman Brothers Holdings wants to create any
class of stock having a preference as to dividends or distributions of assets
over such series or alter or change the provisions of the certificate of
incorporation so as to adversely affect the powers, preferences or rights of the
holders of such series. Some or all of these special voting rights apply to each
series of preferred stock listed above. In the event of a default in paying
dividends for the equivalent of six calendar quarters, the holders of the
Redeemable Voting Preferred Stock, the 5.94% Cumulative Preferred Stock, Series
C, and the 5.67% Cumulative Preferred Stock, Series D have the right
collectively to elect two additional directors to Lehman Brothers Holdings'
board of directors until such dividends are paid.
- ------------------------
(1) Each share of Cumulative Convertible Voting Preferred Stock, Series A and B,
is convertible at the holder's option into 0.3178313 of a share of common
stock, subject to anti-dilution adjustment.
(2) The holders of the Redeemable Voting Preferred Stock (as of the date of this
prospectus, The American Express Company and Nippon Life Insurance Company)
are entitled to 50% of the amount by which Lehman Brothers Holdings' net
income for a fiscal year exceeds $400 million, to a maximum of $50 million
per year (prorated for the final dividend period, which runs from December
1, 2001 to May 31, 2002).
(3) Redemption is mandatory on May 31, 2002. The holders also have the right to
require Lehman Brothers Holdings to redeem the Redeemable Voting Preferred
Stock if a Designated Event (as defined in Lehman Brothers Holdings'
certificate of incorporation) occurs, for an aggregate
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redemption payment of $150 million if such event occurs prior to November
30, 1999, declining $50 million per year thereafter.
(4) Redeemable at any time that there is a public market for Lehman Brothers
Holdings' common stock and the average market price per share thereof
exceeds the conversion price (at the date of this prospectus) of
$123.0212380.
(5) Holders of shares of Redeemable Voting Preferred Stock are entitled to 1,059
votes per share, and holders of shares of Cumulative Convertible Voting
Preferred Stock, Series A and B, are entitled to the number of votes per
share equal to the quotient obtained by dividing $39.10 by the conversion
price (at the date of this prospectus) of $123.0212380, when voting as a
class with the common stock, subject to anti-dilution adjustment. American
Express has agreed that as long as it holds Redeemable Voting Preferred
Stock, it will vote it in the same proportion as the common stock holders on
matters voted on generally.
DESCRIPTION OF OFFERED PREFERRED STOCK
The following briefly summarizes the material terms of Lehman Brothers
Holdings' preferred stock, other than pricing and related terms disclosed in the
accompanying prospectus supplement. You should read the particular terms of any
series of preferred stock offered by Lehman Brothers Holdings which will be
described in more detail in any prospectus supplement relating to such series,
together with the more detailed provisions of Lehman Brothers Holdings' restated
certificate of incorporation and the certificate of designation relating to each
particular series of preferred stock for provisions that may be important to
you. The certificate of designation relating to the particular series of
preferred stock offered by the accompanying prospectus supplement and this
prospectus will be filed as an exhibit to a document incorporated by reference
in the registration statement. The prospectus supplement will also state whether
any of the terms summarized below do not apply to the series of preferred stock
being offered. For a description of Lehman Brothers Holdings' outstanding
preferred stock, see "Description of Outstanding Preferred Stock."
GENERAL
Under Lehman Brothers Holdings' certificate of incorporation, the board of
directors of Lehman Brothers Holdings is authorized to issue shares of preferred
stock in one or more series, and to establish from time to time a series of
preferred stock with the following terms specified:
- the number of shares to be included in the series;
- the designation, powers, preferences and rights of the shares of the
series; and
- the qualifications, limitations or restrictions of such series, except as
otherwise stated in the certificate of incorporation.
Prior to the issuance of any series of preferred stock, the board of
directors of Lehman Brothers Holdings will adopt resolutions creating and
designating the series as a series of preferred stock and the resolutions will
be filed in a certificate of designation as an amendment to the certificate of
incorporation. The term "board of directors of Lehman Brothers Holdings"
includes any duly authorized committee.
The rights of holders of the preferred stock offered may be adversely
affected by the rights of holders of any shares of preferred stock that may be
issued in the future. The board of directors may cause shares of preferred stock
to be issued in public or private transactions for any proper corporate purpose.
Examples of proper corporate purposes include issuances to obtain additional
financing in connection with acquisitions or otherwise, and issuances to
officers, directors and employees of Lehman Brothers Holdings and its
subsidiaries pursuant to benefit plans or otherwise. Shares of preferred stock
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issued by Lehman Brothers Holdings may have the effect of rendering more
difficult or discouraging an acquisition of Lehman Brothers Holdings deemed
undesirable by the board of directors of Lehman Brothers Holdings.
The preferred stock will be, when issued, fully paid and nonassessable.
Holders of preferred stock will not have any preemptive or subscription rights
to acquire more stock of Lehman Brothers Holdings.
The transfer agent, registrar, dividend disbursing agent and redemption
agent for shares of each series of preferred stock will be named in the
prospectus supplement relating to such series.
RANK
Unless otherwise specified in the prospectus supplement relating to the
shares of any series of preferred stock, such shares will rank on an equal basis
with each other series of preferred stock and prior to the common stock as to
dividends and distributions of assets.
DIVIDENDS
Holders of each series of preferred stock will be entitled to receive cash
dividends, when, as and if declared by the board of directors of Lehman Brothers
Holdings out of funds legally available for dividends. The rates and dates of
payment of dividends will be set forth in the prospectus supplement relating to
each series of preferred stock. Dividends will be payable to holders of record
of preferred stock as they appear on the books of Lehman Brothers Holdings or,
if applicable, the records of the depositary referred to below under
"Description of Depositary Shares," on the record dates fixed by the board of
directors. Dividends on any series of preferred stock may be cumulative or
noncumulative.
Lehman Brothers Holdings may not declare, pay or set apart for payment
dividends on the preferred stock unless full dividends on any other series of
preferred stock that ranks on an equal or senior basis have been paid or
sufficient funds have been set apart for payment for
- all prior dividend periods of the other series of preferred stock that pay
dividends on a cumulative basis; or
- the immediately preceding dividend period of the other series of preferred
stock that pay dividends on a noncumulative basis.
Partial dividends declared on shares of preferred stock and any other series
of preferred stock ranking on an equal basis as to dividends will be declared
pro rata. A pro rata declaration means that the ratio of dividends declared per
share to accrued dividends per share will be the same for both series of
preferred stock.
Similarly, Lehman Brothers Holdings may not declare, pay or set apart for
payment non-stock dividends or make other payments on the common stock or any
other stock of Lehman Brothers Holdings ranking junior to the preferred stock
until full dividends on the preferred stock have been paid or set apart for
payment for
- all prior dividend periods if the preferred stock pays dividends on a
cumulative basis; or
- the immediately preceding dividend period if the preferred stock pays
dividends on a noncumulative basis.
CONVERSION AND EXCHANGE
The prospectus supplement for any series of preferred stock will state the
terms, if any, on which shares of that series are convertible into or
exchangeable for shares of Lehman Brothers Holdings' common stock.
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REDEMPTION
If so specified in the applicable prospectus supplement, a series of
preferred stock may be redeemable at any time, in whole or in part, at the
option of Lehman Brothers Holdings or the holder thereof and may be mandatorily
redeemed.
Any partial redemptions of preferred stock will be made in a way that the
board of directors decides is equitable.
Unless Lehman Brothers Holdings defaults in the payment of the redemption
price, dividends will cease to accrue after the redemption date on shares of
preferred stock called for redemption and all rights of holders of such shares
will terminate except for the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Lehman Brothers Holdings, holders of each series of preferred stock will be
entitled to receive distributions upon liquidation in the amount set forth in
the prospectus supplement relating to such series of preferred stock, plus an
amount equal to any accrued and unpaid dividends. Such distributions will be
made before any distribution is made on any securities ranking junior relating
to liquidation, including common stock.
If the liquidation amounts payable relating to the preferred stock of any
series and any other securities ranking on a parity regarding liquidation rights
are not paid in full, the holders of the preferred stock of such series and such
other securities will share in any such distribution of available assets of
Lehman Brothers Holdings on a ratable basis in proportion to the full
liquidation preferences. Holders of such series of preferred stock will not be
entitled to any other amounts from Lehman Brothers Holdings after they have
received their full liquidation preference.
VOTING RIGHTS
The holders of shares of preferred stock will have no voting rights, except:
- as otherwise stated in the prospectus supplement;
- as otherwise stated in the certificate of designation establishing such
series; or
- as required by applicable law.
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DESCRIPTION OF DEPOSITARY SHARES
The following briefly summarizes the material provisions of the deposit
agreement and of the depositary shares and depositary receipts, other than
pricing and related terms disclosed in the accompanying prospectus supplement.
You should read the particular terms of any depositary shares and any depositary
receipts that are offered by Lehman Brothers Holdings and any deposit agreement
relating to a particular series of preferred stock which will be described in
more detail in a prospectus supplement. The prospectus supplement will also
state whether any of the generalized provisions summarized below do not apply to
the depositary shares or depositary receipts being offered. A copy of the form
of deposit agreement, including the form of depositary receipt, is incorporated
by reference as an exhibit in the registration statement of which this
prospectus forms a part. You should read the more detailed provisions of the
deposit agreement and the form of depositary receipt for provisions that may be
important to you.
GENERAL
Lehman Brothers Holdings may, at its option, elect to offer fractional
shares of preferred stock, rather than full shares of preferred stock. In such
event, Lehman Brothers Holdings will issue receipts for depositary shares, each
of which will represent a fraction of a share of a particular series of
preferred stock.
The shares of any series of preferred stock represented by depositary shares
will be deposited under a deposit agreement between Lehman Brothers Holdings and
a bank or trust company selected by Lehman Brothers Holdings having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000, as preferred stock depositary. Each owner of a
depositary share will be entitled to all the rights and preferences of the
underlying preferred stock, including dividend, voting, redemption, conversion
and liquidation rights, in proportion to the applicable fraction of a share of
preferred stock represented by such depositary share.
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Depositary receipts will be distributed to
those persons purchasing the fractional shares of preferred stock in accordance
with the terms of the applicable prospectus supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The preferred stock depositary will distribute all cash dividends or other
cash distributions received in respect of the deposited preferred stock to the
record holders of depositary shares relating to such preferred stock in
proportion to the number of such depositary shares owned by such holders.
The preferred stock depositary will distribute any property received by it
other than cash to the record holders of depositary shares entitled thereto. If
the preferred stock depositary determines that it is not feasible to make such
distribution, it may, with the approval of Lehman Brothers Holdings, sell such
property and distribute the net proceeds from such sale to such holders.
REDEMPTION OF PREFERRED STOCK
If a series of preferred stock represented by depositary shares is to be
redeemed, the depositary shares will be redeemed from the proceeds received by
the preferred stock depositary resulting from the redemption, in whole or in
part, of such series of preferred stock. The depositary shares will be redeemed
by the preferred stock depositary at a price per depositary share equal to the
applicable fraction of the redemption price per share payable in respect of the
shares of preferred stock so redeemed.
Whenever Lehman Brothers Holdings redeems shares of preferred stock held by
the preferred stock depositary, the preferred stock depositary will redeem as of
the same date the number of
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depositary shares representing shares of preferred stock so redeemed. If fewer
than all the depositary shares are to be redeemed, the depositary shares to be
redeemed will be selected by the preferred stock depositary by lot or ratably or
by any other equitable method as the preferred stock depositary may decide.
VOTING DEPOSITED PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of any series of
deposited preferred stock are entitled to vote, the preferred stock depositary
will mail the information contained in such notice of meeting to the record
holders of the depositary shares relating to such series of preferred stock.
Each record holder of such depositary shares on the record date will be entitled
to instruct the preferred stock depositary to vote the amount of the preferred
stock represented by such holder's depositary shares. The preferred stock
depositary will try to vote the amount of such series of preferred stock
represented by such depositary shares in accordance with such instructions.
Lehman Brothers Holdings will agree to take all actions that the preferred
stock depositary determines as necessary to enable the preferred stock
depositary to vote as instructed. The preferred stock depositary will abstain
from voting shares of any series of preferred stock held by it for which it does
not receive specific instructions from the holders of depositary shares
representing such shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time be amended by agreement
between Lehman Brothers Holdings and the preferred stock depositary. However,
any amendment that materially and adversely alters any existing right of the
holders of depositary shares will not be effective unless such amendment has
been approved by the holders of at least a majority of the depositary shares
then outstanding. Every holder of an outstanding depositary receipt at the time
any such amendment becomes effective shall be deemed, by continuing to hold such
depositary receipt, to consent and agree to such amendment and to be bound by
the deposit agreement, which has been amended thereby. The deposit agreement may
be terminated only if:
- all outstanding depositary shares have been redeemed; or
- a final distribution in respect of the preferred stock has been made to
the holders of depositary shares in connection with any liquidation,
dissolution or winding up of Lehman Brothers Holdings.
CHARGES OF PREFERRED STOCK DEPOSITARY; TAXES AND OTHER GOVERNMENTAL CHARGES
Lehman Brothers Holdings will pay all transfer and other taxes and
governmental charges arising solely from the existence of the depositary
arrangements. Lehman Brothers Holdings also will pay charges of the depositary
in connection with the initial deposit of preferred stock and any redemption of
preferred stock. Holders of depositary receipts will pay other transfer and
other taxes and governmental charges and such other charges, including a fee for
the withdrawal of shares of preferred stock upon surrender of depositary
receipts, as are expressly provided in the deposit agreement to be for their
accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The preferred stock depositary may resign at any time by delivering to
Lehman Brothers Holdings notice of its intent to do so, and Lehman Brothers
Holdings may at any time remove the preferred stock depositary, any such
resignation or removal to take effect upon the appointment of a successor
preferred stock depositary and its acceptance of such appointment. Such
successor preferred stock
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depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
MISCELLANEOUS
The preferred stock depositary will forward all reports and communications
from Lehman Brothers Holdings which are delivered to the preferred stock
depositary and which Lehman Brothers Holdings is required to furnish to the
holders of the deposited preferred stock.
Neither the preferred stock depositary nor Lehman Brothers Holdings will be
liable if it is prevented or delayed by law or any circumstances beyond its
control in performing its obligations under the deposit agreement. The
obligations of Lehman Brothers Holdings and the preferred stock depositary under
the deposit agreement will be limited to performance in good faith of their
duties thereunder and they will not be obligated to prosecute or defend any
legal proceeding in respect of any depositary shares, depositary receipts or
shares of preferred stock unless satisfactory indemnity is furnished. Lehman
Brothers Holdings and the preferred stock depositary may rely upon written
advice of counsel or accountants, or upon information provided by holders of
depositary receipts or other persons believed to be competent and on documents
believed to be genuine.
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Most debt securities will be book-entry securities. Upon issuance, all
book-entry securities will be represented by one or more fully registered global
securities, without coupons. Each global security will be deposited with, or on
behalf of, The Depository Trust Company, a securities depository, and will be
registered in the name of DTC or a nominee of DTC. DTC will thus be the only
registered holder of these securities.
Purchasers of securities may only hold interests in the global notes through
DTC if they are participants in the DTC system. Purchasers may also hold
interests through a securities intermediary-- banks, brokerage houses and other
institutions that maintain securities accounts for customers--that has an
account with DTC or its nominee. DTC will maintain accounts showing the security
holdings of its participants, and these participants will in turn maintain
accounts showing the security holdings of their customers. Some of these
customers may themselves be securities intermediaries holding securities for
their customers. Thus, each beneficial owner of a book-entry security will hold
that security indirectly through a hierarchy of intermediaries, with DTC at the
"top" and the beneficial owner's own securities intermediary at the "bottom."
The securities of each beneficial owner of a book-entry security will be
evidenced solely by entries on the books of the beneficial owner's securities
intermediary. The actual purchaser of the securities will generally not be
entitled to have the securities represented by the global securities registered
in its name and will not be considered the owner under the declaration. In most
cases, a beneficial owner will also not be able to obtain a paper certificate
evidencing the holder's ownership of securities. The book-entry system for
holding securities eliminates the need for physical movement of certificates and
is the system through which most publicly traded common stock is held in the
United States. However, the laws of some jurisdictions require some purchasers
of securities to take physical delivery of their securities in definitive form.
These laws may impair the ability to transfer book-entry securities.
A beneficial owner of book-entry securities represented by a global security
may exchange the securities for definitive (paper) securities only if:
- DTC is unwilling or unable to continue as depositary for such global
security and Lehman Brothers Holdings does not appoint a qualified
replacement for DTC within 90 days; or
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- Lehman Brothers Holdings in its sole discretion decides to allow some or
all book-entry securities to be exchangeable for definitive securities in
registered form.
Unless we indicate otherwise, any global security that is exchangeable will
be exchangeable in whole for definitive securities in registered form, with the
same terms and of an equal aggregate principal amount. Definitive securities
will be registered in the name or names of the person or persons specified by
DTC in a written instruction to the registrar of the securities. DTC may base
its written instruction upon directions that it receives from its participants.
In this prospectus, for book-entry securities, references to actions taken
by security holders will mean actions taken by DTC upon instructions from its
participants, and references to payments and notices of redemption to security
holders will mean payments and notices of redemption to DTC as the registered
holder of the securities for distribution to participants in accordance with
DTC's procedures.
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered under section 17A of the Securities Exchange Act of 1934. The
rules applicable to DTC and its participants are on file with the SEC.
DTC's management is aware that some computer applications, systems, and the
like for processing dates that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter "Year 2000 problems."
DTC has informed its participants and other members of the financial community
that it has developed and is implementing a program so that its systems, as they
relate to the timely payment of distributions to securityholders, book-entry
deliveries, and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
Lehman Brothers Holdings will not have any responsibility or liability for
any aspect of the records relating to, or payments made on account of,
beneficial ownership interest in the book-entry securities or for maintaining,
supervising or reviewing any records relating to the beneficial ownership
interests.
DTC may discontinue providing its services as securities depositary at any
time by giving reasonable notice. Under such circumstances, in the event that a
successor securities depositary is not obtained, securities certificates are
required to be printed and delivered. Additionally, Lehman Brothers Holdings may
decide to discontinue use of the system of book-entry transfers through DTC or
any successor depositary with respect to the preferred securities. In that
event, certificates for the securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Lehman Brothers Holdings believes to be
reliable, but Lehman Brothers Holdings does not take responsibility for the
accuracy thereof.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, our special United States tax
counsel, the following discussion is an accurate summary of the material United
States federal income tax consequences of the purchase, ownership and
disposition of debt securities as of the date hereof. Except where noted, this
summary deals only with debt securities held as capital assets by United States
holders and does not deal with special situations. For example, this summary
does not address:
- tax consequences to holders who may be subject to special tax treatment,
such as dealers in securities or currencies, financial institutions,
tax-exempt entities or life insurance companies;
- tax consequences to persons holding debt securities as part of a hedging,
integrated, constructive sale or conversion transaction or a straddle;
- tax consequences to holders of debt securities whose "functional currency"
is not the U.S. dollar;
- alternative minimum tax consequences, if any; or
- any state, local or foreign tax consequences.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended, and regulations, rulings and judicial decisions as of
the date of this hereof. Those authorities may be changed, perhaps
retroactively, so as to result in United States federal income tax consequences
different from those discussed below. We will summarize any special United
States federal tax considerations relevant to a particular issue of the debt
securities in the applicable prospectus supplement. We will also summarize
certain federal income tax consequences, if any, applicable to any offering of
preferred stock or depositary shares in the applicable prospectus supplement.
IF YOU ARE CONSIDERING THE PURCHASE OF DEBT SECURITIES, YOU SHOULD CONSULT
YOUR OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES TO YOU AND
ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
CONSEQUENCES TO UNITED STATES HOLDERS
The following is a summary of certain United States federal tax consequences
that will apply to you if you are a United States holder of debt securities.
Certain consequences to "non-United States holders" of debt securities are
described under "--Non-United States Holders" below.
"United States holder" means a beneficial owner of a debt security that is:
- a citizen or resident of the United States;
- a corporation or partnership created or organized in or under the laws of
the United States or any political subdivision of the United States;
- an estate the income of which is subject to United States federal income
taxation regardless of its source;
- a trust that (x) is subject to the supervision of a court within the
United States and the control of one or more United States persons or (y)
has a valid election in effect under applicable United States Treasury
regulations to be treated as a United States person.
PAYMENTS OF INTEREST
Except as set forth below, interest on a debt security will generally be
taxable to you as ordinary income from domestic sources at the time it is paid
or accrued in accordance with your method of accounting for tax purposes.
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ORIGINAL ISSUE DISCOUNT
If you own debt securities issued with original issue discount ("OID"), you
will be subject to special tax accounting rules, as described in greater detail
below. In that case, you should be aware that you generally must include OID in
gross income in advance of the receipt of cash attributable to that income.
However, you generally will not be required to include separately in income cash
payments received on the debt securities, even if denominated as interest, to
the extent those payments do not constitute qualified stated interest, as
defined below. Notice will be given in the applicable prospectus supplement when
we determine that a particular debt security will be an original issue discount
debt security.
A debt security with an issue price that is less than the "stated redemption
price at maturity" (the sum of all payments to be made on the debt security
other than "qualified stated interest") generally will be issued with OID if
that difference is at least 0.25% of the stated redemption price at maturity
multiplied by the number of complete years to maturity. The "issue price" of
each debt security in a particular offering will be the first price at which a
substantial amount of that particular offering is sold to the public. The term
"qualified stated interest" means stated interest that is unconditionally
payable in cash or in property, other than debt instruments of the issuer, and
the interest to be paid meets all of the following conditions:
- it is payable at least once per year;
- it is payable over the entire term of the debt security; and
- it is payable at a single fixed rate or, subject to certain conditions,
based on one or more interest indices.
We will give you notice in the applicable prospectus supplement when we
determine that a particular debt security will bear interest that is not
qualified stated interest.
If you own a debt security issued with "DE MINIMIS" OID, which is discount
that is not OID because it is less than 0.25% of the stated redemption price at
maturity multiplied by the number of complete years to maturity, you generally
must include the DE MINIMIS OID in income at the time payments, other than
qualified stated interest, on the debt securities are made in proportion to the
amount paid. Any amount of DE MINIMIS OID that you have included in income will
be treated as capital gain.
Certain of the debt securities may contain provisions permitting them to be
redeemed prior to their stated maturity at our option and/or at your option.
Original issue discount debt securities containing those features may be subject
to rules that differ from the general rules discussed herein. If you are
considering the purchase of original issue discount debt securities with those
features, you should carefully examine the applicable prospectus supplement and
should consult your own tax advisors with respect to those features since the
tax consequences to you with respect to OID will depend, in part, on the
particular terms and features of the debt securities.
If you own original issue discount debt securities with a maturity upon
issuance of more than one year you generally must include OID in income in
advance of the receipt of some or all of the related cash payments using the
"constant yield method" described in the following paragraph. This method takes
into account the compounding of interest. The accruals of OID on an original
issue discount debt security will generally be less in the early years and more
in the later years.
The amount of OID that you must include in income if you are the initial
United States holder of an original issue discount debt security is the sum of
the "daily portions" of OID with respect to the debt security for each day
during the taxable year or portion of the taxable year in which you held that
debt security ("accrued OID"). The daily portion is determined by allocating to
each day in any "accrual period" a pro rata portion of the OID allocable to that
accrual period. The "accrual period"
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for an original issue discount debt security may be of any length and may vary
in length over the term of the debt security, provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
occurs on the first day or the final day of an accrual period. The amount of OID
allocable to any accrual period is an amount equal to the excess, if any, of:
- the debt security's adjusted issue price at the beginning of the accrual
period multiplied by its yield to maturity, determined on the basis of
compounding at the close of each accrual period and properly adjusted for
the length of the accrual period, over
- the aggregate of all qualified stated interest allocable to the accrual
period.
OID allocable to a final accrual period is the difference between the amount
payable at maturity, other than a payment of qualified stated interest, and the
adjusted issue price at the beginning of the final accrual period. The "adjusted
issue price" of a debt security at the beginning of any accrual period is equal
to its issue price increased by the accrued OID for each prior accrual period,
determined without regard to the amortization of any acquisition or bond
premium, as described below, and reduced by any payments made on the debt
security (other than qualified stated interest) on or before the first day of
the accrual period. Under these rules, you will have to include in income
increasingly greater amounts of OID in successive accrual periods. We are
required to provide information returns stating the amount of OID accrued on
debt securities held of record by persons other than corporations and other
exempt holders.
Floating rate debt securities are subject to special OID rules. In the case
of an original issue discount debt security that is a floating rate debt
security, both the "yield to maturity" and "qualified stated interest" will be
determined solely for purposes of calculating the accrual of OID as though the
debt security will bear interest in all periods at a fixed rate generally equal
to the rate that would be applicable to interest payments on the debt security
on its date of issue or, in the case of certain floating rate debt securities,
the rate that reflects the yield to maturity that is reasonably expected for the
debt security. Additional rules may apply if
- the interest on a floating rate debt security is based on more than one
interest index; or
- the principal amount of the debt security is indexed in any manner.
This discussion does not address the tax rules applicable to debt securities
with an indexed principal amount. If you are considering the purchase of
floating rate original issue discount debt securities or securities with indexed
principal amounts, you should carefully examine the applicable prospectus
supplement and should consult your own tax advisors regarding the United States
federal income tax consequences to you of holding and disposing of those debt
securities.
You may elect to treat all interest on any debt security as OID and
calculate the amount includible in gross income under the constant yield method
described above. For purposes of this election, interest includes stated
interest, acquisition discount, OID, DE MINIMIS OID, market discount, DE MINIMIS
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. You must make this election for the taxable year
in which you acquired the debt security, and you may not revoke the election
without the consent of the Internal Revenue Service. You should consult with
your own tax advisors about this election.
SHORT-TERM DEBT SECURITIES
In the case of debt securities having a term of one year or less, all
payments, including all stated interest, will be included in the stated
redemption price at maturity and will not be qualified stated interest. As a
result, you will generally be taxed on the discount instead of stated interest.
The discount will be equal to the excess of the stated redemption price at
maturity over the issue price of a short-term debt security, unless you elect to
compute this discount using tax basis instead of issue price.
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In general, individual and certain other cash method United States holders of
short-term debt securities are not required to include accrued discount in their
income currently unless they elect to do so, but may be required to include
stated interest in income as the income is received. United States holders that
report income for United States federal income tax purposes on the accrual
method and certain other United States holders are required to accrue discount
on short-term debt securities (as ordinary income) on a straight-line basis,
unless an election is made to accrue the discount according to a constant yield
method based on daily compounding. If you are not required, and do not elect, to
include discount in income currently, any gain you realize on the sale, exchange
or retirement of a short-term debt security will generally be ordinary income to
you to the extent of the discount accrued by you through the date of sale,
exchange or retirement. In addition, if you do not elect to currently include
accrued discount in income you may be required to defer deductions for a portion
of your interest expense with respect to any indebtedness attributable to the
short-term debt securities.
MARKET DISCOUNT
If you purchase a debt security, other than an original issue discount debt
security, for an amount that is less than its stated redemption price at
maturity, or, in the case of an original issue discount debt security, its
adjusted issue price, the amount of the difference will be treated as "market
discount" for United States federal income tax purposes, unless that difference
is less than a specified DE MINIMIS amount. Under the market discount rules, you
will be required to treat any payment, other than qualified stated interest, on,
or any gain on the sale, exchange, retirement or other disposition of, a debt
security as ordinary income to the extent of the market discount that you have
not previously included in income and are treated as having accrued on the debt
security at the time of its payment or disposition. In addition, you may be
required to defer, until the maturity of the debt security or its earlier
disposition in a taxable transaction, the deduction of all or a portion of the
interest expense on any indebtedness attributable to the debt security.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the debt security, unless
you elect to accrue on a constant interest method. You may elect to include
market discount in income currently as it accrues, on either a ratable or
constant interest method, in which case the rule described above regarding
deferral of interest deductions will not apply. Your election to include market
discount in income currently, once made, applies to all market discount
obligations acquired by you on or after the first taxable year to which your
election applies and may not be revoked without the consent of the IRS. You
should consult your own tax advisor before making this election.
ACQUISITION PREMIUM, AMORTIZABLE BOND PREMIUM
If you purchase an original issue discount debt security for an amount that
is greater than its adjusted issue price but equal to or less than the sum of
all amounts payable on the debt security after the purchase date other than
payments of qualified stated interest, you will be considered to have purchased
that debt security at an "acquisition premium." Under the acquisition premium
rules, the amount of OID that you must include in gross income with respect to
the debt security for any taxable year will be reduced by the portion of the
acquisition premium properly allocable to that year.
If you purchase a debt security (including an original issue discount debt
security) for an amount in excess of the sum of all amounts payable on the debt
security after the purchase date other than qualified stated interest, you will
be considered to have purchased the debt security at a "premium" and, if it is
an original issue discount debt security, you will not be required to include
any OID in income. You generally may elect to amortize the premium over the
remaining term of the debt security on a constant yield method as an offset to
interest when includible in income under your regular accounting method. In the
case of instruments that provide for alternative payment schedules, bond premium
is calculated by assuming that (a) you will exercise or not exercise options in
a manner that
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maximizes your yield, and (b) we will exercise or not exercise options in a
manner that minimizes your yield (except that we will be assumed to exercise
call options in a manner that maximizes your yield). If you do not elect to
amortize bond premium, that premium will decrease the gain or increase the loss
you would otherwise recognize on disposition of the debt security. Your election
to amortize premium on a constant yield method will also apply to all debt
obligations held or subsequently acquired by you on or after the first day of
the first taxable year to which the election applies. You may not revoke the
election without the consent of the IRS. You should consult your own tax advisor
before making this election.
SALE, EXCHANGE AND RETIREMENT OF DEBT SECURITIES
Your tax basis in a debt security will, in general, be your cost for that
debt security, increased by OID, market discount or any discount with respect to
a short-term debt security that you previously included in income, and reduced
by any amortized premium and any cash payments on the debt security other than
qualified stated interest. Upon the sale, exchange, retirement or other
disposition of a debt security, you will recognize gain or loss equal to the
difference between the amount you realize upon the sale, exchange, retirement or
other disposition (less an amount equal to any accrued qualified stated interest
that you did not previously include in income, which will be taxable as such)
and the adjusted tax basis of the debt security. Except as described above with
respect to certain short-term debt securities or with respect to market
discounts, that gain or loss will be capital gain or loss. Capital gains of
individuals derived in respect of capital assets held for more than one year are
eligible for reduced rates of taxation. The deductibility of capital losses is
subject to limitations.
TAX CONSEQUENCES OF DEFEASANCE
We may discharge our obligations under the debt securities as more fully
described under "Description of Debt Securities--Defeasance" above. Such a
discharge would generally for United States federal income tax purposes
constitute the retirement of the debt securities and the issuance of new
obligations. As a result, you would realize gain or loss (if any) on this
exchange, which would be recognized subject to certain possible exceptions.
Even though federal income tax on the deemed exchange may be imposed on you,
you would not receive any cash until the maturity or an earlier redemption of
the debt securities, except for any current interest payments.
Any gain realized would generally not be taxable to Non-United States
holders under the circumstances outlined below. Furthermore, following
discharge, the debt securities might be subject to withholding, backup
withholding and/or information reporting and might be issued with OID.
Under current federal income tax law, a covenant defeasance would not be
treated as a taxable exchange of the debt securities. You should consult your
own tax advisor as to the tax consequences of a defeasance and discharge and a
covenant defeasance, including the applicability and effect of tax laws other
than the federal income tax law.
EXTENDIBLE DEBT SECURITIES, RENEWABLE DEBT SECURITIES AND RESET DEBT
SECURITIES
If so specified in an applicable prospectus supplement relating to a debt
security, we may have the option to extend the maturity of a debt security. In
addition, we may have the option to reset the interest rate, the spread or the
spread multiplier.
The United States federal income tax treatment of a debt security with
respect to which such an option has been exercised is unclear and will depend,
in part, on the terms established for such debt securities by us pursuant to the
exercise of the option. You may be treated for federal income tax purposes as
having exchanged your debt securities for new debt securities with revised
terms. If this is
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the case, you would realize gain or loss equal to the difference between the
issue price of the new debt securities and your tax basis in the old debt
securities, and the other consequences described above under "Tax Consequences
of Defeasance" would also apply.
If the exercise of the option is not treated as an exchange of old debt
securities for new debt securities, you will not recognize gain or loss as a
result of such exchange.
ORIGINAL ISSUE DISCOUNT. The presence of such options may also affect the
calculation of OID, among other things. Solely for purposes of the accrual of
OID, if we issue a debt security and have an option or combination of options to
extend the term of the debt security, we will be presumed to exercise such
option or options in a manner that minimizes the yield on the debt security.
Conversely, if you are treated as having a put option, such an option will be
presumed to be exercised in a manner that maximizes the yield on the debt
security. If we exercise such option or options to extend the term of the debt
security, or your option to put does not occur (contrary to the assumptions
made), then solely for purposes of the accrual of OID, the debt security will be
treated as reissued on the date of the change in circumstances for an amount
equal to its adjusted issue price on the date.
You should carefully examine the applicable prospectus supplement and should
consult your own tax advisor regarding the United States federal income tax
consequences of the holding and disposition of such debt securities.
FOREIGN CURRENCY DEBT SECURITIES
PAYMENTS OF INTEREST. If you receive interest payments made in a foreign
currency and you use the cash basis method of accounting, you will be required
to include in income the U.S. dollar value of the amount received, determined by
translating the foreign currency received at the "spot rate" for such foreign
currency on the date such payment is received regardless of whether the payment
is in fact converted into U.S. dollars. You will not recognize exchange gain or
loss with respect to the receipt of such payment.
If you use the accrual method of accounting, you may determine the amount of
income recognized with respect to such interest in accordance with either of two
methods. Under the first method, you will be required to include in income for
each taxable year the U.S. dollar value of the interest that has accrued during
such year, determined by translating such interest at the average rate of
exchange for the period or periods during which such interest accrued. Under the
second method, you may elect to translate interest income at the spot rate on:
- the last day of the accrual period
- the last day of the taxable year if the accrual period straddles your
taxable year, or
- on the date the interest payment is received if such date is within five
days of the end of the accrual period.
Upon receipt of an interest payment on such debt security, you will
recognize ordinary gain or loss in an amount equal to the difference between the
U.S. dollar value of such payment (determined by translating the foreign
currency received at the "spot rate" for such foreign currency on the date such
payment is received) and the U.S. dollar value of the interest income you
previously included in income with respect to such payment.
ORIGINAL ISSUE DISCOUNT. OID on a debt security that is also a foreign
currency debt security will be determined for any accrual period in the
applicable foreign currency and then translated into U.S. dollars, in the same
manner as interest income accrued by a holder on the accrual basis, as described
above. You will recognize exchange gain or loss when OID is paid to the extent
of the difference between the U.S. dollar value of the accrued OID (determined
in the same manner as for accrued interest) and the U.S. dollar value of such
payment (determined by translating the foreign currency
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received at the "spot rate" for such foreign currency on the date such payment
is received). For these purposes, all receipts on a debt security will be
viewed:
- first, as the receipt of any stated interest payments called for under the
terms of the debt security
- second, as receipts of previously accrued OID (to the extent thereof),
with payments considered made for the earliest accrual periods first,
- third, as the receipt of principal.
MARKET DISCOUNT AND BOND PREMIUM. The amount of market discount on foreign
currency debt securities includible in income will generally be determined by
translating the market discount determined in the foreign currency into U.S.
dollars at the spot rate on the date the foreign currency debt security is
retired or otherwise disposed of. If you have elected to accrue market discount
currently, then the amount which accrues is determined in the foreign currency
and then translated into U.S. dollars on the basis of the average exchange rate
in effect during such accrual period. You will recognize exchange gain or loss
with respect to market discount which is accrued currently using the approach
applicable to the accrual of interest income as described above.
Bond premium on a foreign currency debt security will be computed in the
applicable foreign currency. If you have elected to amortize the premium, the
amortizable bond premium will reduce interest income in the applicable foreign
currency. At the time bond premium is amortized, exchange gain or loss, which is
generally ordinary gain or loss, will be realized based on the difference
between spot rates at such time and the time of acquisition of the foreign
currency debt security.
If you elect not to amortize bond premium, you must translate the bond
premium computed in the foreign currency into U.S. dollars at the spot rate on
the maturity date and such bond premium will constitute a capital loss which may
be offset or eliminated by exchange gain.
SALE, EXCHANGE OR RETIREMENT. Your tax basis in a foreign currency debt
security will be the U.S. dollar value of the foreign currency amount paid for
such foreign currency debt security determined at the time of your purchase. If
you purchased the foreign currency debt security with previously owned foreign
currency, you will recognize exchange gain or loss at the time of the purchase
attributable to the difference at the time of purchase, if any, between your tax
basis in the foreign currency and the fair market value of the debt security in
U.S. dollars on the date of purchase. Such gain or loss will be ordinary income
or loss.
For purposes of determining the amount of any gain or loss you recognize on
the sale, exchange retirement or other disposition of a foreign currency debt
security, the amount realized on such sale, exchange, retirement or other
disposition will be the U.S. dollar value of the amount realized in foreign
currency (other than amounts attributable to accrued but unpaid interest not
previously included in your income), determined at the time of the sale,
exchange, retirement or other disposition.
You may also recognize exchange gain or loss attributable to the movement in
exchange rates between the time of purchase and the time of disposition
(including the sale, exchange, retirement or other disposition) of a foreign
currency debt security. Such gain or loss will be treated as ordinary income or
loss. The realization of such gain or loss will be limited to the amount of
overall gain or loss realized on the disposition of a foreign currency debt
security.
Under proposed Treasury Regulations issued on March 17, 1992, if a foreign
currency debt security is denominated in one of certain hyperinflationary
currencies, generally:
- exchange gain or loss would be realized with respect to movements in the
exchange rate between the beginning and end of each taxable year (or such
shorter period) the debt security was held, and
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- such exchange gain or loss would be treated as an addition or offset,
respectively, to the accrued interest income on, and an adjustment to the
holder's tax basis in, the foreign currency debt security.
Your tax basis in foreign currency received as interest on (or OID with
respect to), or received on the sale, exchange, retirement or other disposition
of, a foreign currency debt security will be the U.S. dollar value thereof at
the spot rate at the time you receive such foreign currency. Any gain or loss
recognized by you on a sale, exchange or other disposition of foreign currency
will be ordinary income or loss and will not be treated as interest income or
expense, except to the extent provided in Treasury Regulations or administrative
pronouncements of the IRS.
DUAL CURRENCY DEBT SECURITIES. If so specified in an applicable prospectus
supplement relating to a foreign currency debt security, we may have the option
to make all payments of principal and interest scheduled after the exercise of
such option in a currency other than the specified currency. The United States
federal income tax treatment of dual currency debt securities is uncertain.
Treasury Regulations currently in effect do not address the tax treatment of
dual currency debt securities.
Under the approach of proposed Treasury Regulations issued on March 17,
1992, a dual currency debt security would be bifurcated into two hypothetical
instruments:
- a zero coupon bond denominated in the currency of the stated redemption
price at maturity, and
- an installment obligation denominated in the currency of the qualified
stated interest payments.
The proposed Treasury regulations are effective only for debt securities
issued or transactions occurring after final regulations are published. If you
are considering purchasing dual currency debt securities, you should carefully
examine the applicable prospectus supplement and should consult your own tax
advisors regarding the United States federal income tax consequences of the
holding and disposition of such debt securities.
If we exercise such an option, you may be considered to have exchanged your
debt security denominated in the specified currency for a debt security
denominated in the optional payment currency. If the exercise is treated as a
taxable exchange, you will recognize gain or loss if any, equal to the
difference between your basis in the debt security denominated in the specified
currency and the value of the debt security denominated in the optional payment
currency. If the exercise of the option is not treated as an exchange, you will
not recognize gain or loss and your basis in the debt security will be
unchanged.
CONTINGENT PAYMENT DEBT SECURITIES
The OID Regulations contain special rules for determining the timing and
amount of OID to be accrued with respect to certain debt securities providing
for one or more contingent payments. Under these rules, you will accrue OID each
year based on the "comparable yield" of the debt securities. The comparable
yield of the debt securities will generally be the rate at which we would issue
a fixed rate debt instrument with terms and conditions similar to the debt
securities.
We are required to provide the comparable yield to you and, solely for tax
purposes, are also required to provide a projected payment schedule that
includes the actual interest payments on the debt securities and estimates the
amount and timing of contingent payments on the debt securities. We will give
notice in the applicable prospectus supplement when we determine that a
particular debt security will be treated as contingent debt.
The amount of OID on a contingent payment debt security for each accrual
period is determined by multiplying the comparable yield of the contingent
payment debt security (adjusted for the length of the accrual period) by the
debt security's adjusted issue price at the beginning of the accrual period
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(determined in accordance with the rules set forth in the OID Regulations
relating to contingent payment debt instruments). The amount of OID so
determined will then be allocated on a ratable basis to each day in the accrual
period that you hold the contingent payment debt security.
If the actual payments made on the contingent payment debt securities in a
taxable year differ from the projected contingent payments, adjustments will be
made for such differences. A positive adjustment, for the amount by which an
actual payment exceeds a projected contingent payment, will be treated as
additional interest. A negative adjustment will:
- first, reduce the amount of interest required to be accrued in the current
year
- second, any negative adjustments that exceed the amount of interest
accrued in the current year will be treated as ordinary loss to the extent
that your total interest inclusions exceed the total amount of net
negative adjustments treated as ordinary loss in prior taxable years, and
- third, any excess negative adjustments will be carried forward to offset
future income or amount realized on disposition.
Gain on the sale, exchange or retirement of a contingent payment debt
security generally will be treated as ordinary income. Loss from the disposition
of a contingent payment debt security will be treated as ordinary loss to the
extent your prior net interest inclusions (reduced by the total net negative
adjustments previously allowed as an ordinary loss). Any loss in excess of such
amount will be treated as capital loss.
You are generally bound by the comparable yield and projected payment
schedule provided by us. However, if you believe that our projected payment
schedule is unreasonable, you may set your own projected payment schedule so
long as you explicitly disclose the use of such schedule and the reason
therefor. Unless otherwise prescribed by the Commissioner of the IRS, such
disclosure must be made in a statement attached to your timely filed federal
income tax return for the taxable year in which the debt security is acquired.
For special treatment of foreign currency debt securities or dual currency
debt securities that are also contingent payment debt securities, see the
applicable prospectus supplement.
The rules regarding contingent payment debt securities are complex. If you
are considering the purchase of debt securities providing for one or more
contingent payments, you should carefully examine the applicable prospectus
supplement and consult your own tax advisors regarding the United States federal
income tax consequences of the holding and disposition of such debt securities.
CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a summary of certain United States federal income tax
consequences that will apply to you if you are a non-United States holder of
debt securities.
UNITED STATES FEDERAL WITHHOLDING TAX
The 30% United States federal withholding tax will not apply to any payment
of principal or interest, including OID, on debt securities provided that:
- you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Code and United States Treasury Regulations;
- you are not a controlled foreign corporation that is related to us through
stock ownership;
- you are not a bank whose receipt of interest on the debt securities is
described in section 881(c)(3)(A) of the Code; and
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- either (a) you provide your name and address on an IRS Form W-8, and
certify, under penalty of perjury, that you are not a United States person
or (b) a financial institution holding the debt securities on your behalf
certifies, under penalty of perjury, that it has received an IRS Form W-8
from you as the beneficial owner and provides us with a copy.
If you cannot satisfy the requirements described above, payments of premium,
if any, and interest, including OID, made to you will be subject to the 30%
United States federal withholding tax, unless you provide us with a properly
executed
- IRS Form 1001 claiming an exemption from, or reduction in, withholding
under the benefit of a tax treaty; or
- IRS Form 4224 stating that interest paid on the debt securities is not
subject to withholding tax because it is effectively connected with your
conduct of a trade or business in the United States.
Except as discussed below, the 30% United States federal withholding tax
will not apply to any gain or income that you realize on the sale, exchange,
retirement or other disposition of debt securities.
UNITED STATES FEDERAL ESTATE TAX
Your estate will not be subject to United States federal estate tax on debt
securities beneficially owned by you at the time of your death, provided that
(1) you do not own 10% or more of the total combined voting power of all classes
of our voting stock, within the meaning of the Code and United States Treasury
Regulations, and (2) interest on those debt securities would not have been, if
received at the time of your death, effectively connected with the conduct by
you of a trade or business in the United States.
UNITED STATES FEDERAL INCOME TAX
If you are engaged in a trade or business in the United States and premium,
if any, or interest, including OID, on the debt securities is effectively
connected with the conduct of that trade or business, you will be subject to
United States federal income tax on that interest and OID on a net income basis
(although exempt from the 30% withholding tax) in the same manner as if you were
a United States holder. In addition, if you are a foreign corporation, you may
be subject to a branch profits tax equal to 30% (or lower applicable treaty
rate) of your earnings and profits for the taxable year, subject to adjustments.
For this purpose, any premium and interest, including OID, on debt securities
will be included in your earnings and profits.
You will generally not be subject to United States federal income tax on the
disposition of a debt security unless:
- the gain is effectively connected with your conduct of a trade or business
in the United States; or
- you are an individual who is present in the United States for 183 days or
more in the taxable year of that disposition, and certain other conditions
are met.
INFORMATION REPORTING AND BACKUP WITHHOLDING
UNITED STATES HOLDERS
In general, information reporting requirements will apply to certain
payments of principal, interest, OID and premium paid on debt securities and to
the proceeds of sale of a debt security made to you (unless you are an exempt
recipient such as a corporation). A 31% backup withholding tax will apply to
such payments if you fail to provide a taxpayer identification number, a
certification of exempt status, or fail to report in full dividend and interest
income.
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NON-UNITED STATES HOLDERS
In general, you will not be required to provide information reporting and
backup withholding regarding payments that we make to you provided that we do
not have actual knowledge that you are a United States person and we have
received from you the statement described above under "United States Federal
Withholding Tax."
In addition, you will not be required to pay backup withholding and provide
information reporting regarding the proceeds of the sale of a debt security made
within the United States or conducted through certain United States related
financial intermediaries, if the payor receives the statement described above
and does not have actual knowledge that you are a United States person or you
otherwise establish an exemption.
Final United States Treasury regulations generally modify the information
reporting and backup withholding rules applicable to certain payments made after
December 31, 1999. In general, the new United States Treasury Regulations would
not significantly alter the present rules discussed above, except in certain
special situations.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against your United States federal income tax liability
provided the required information is furnished to the IRS.
PREFERRED STOCK AND DEPOSITARY SHARES
If you are considering the purchase of preferred stock or depositary shares,
you should carefully examine the applicable prospectus supplement regarding the
United States federal income tax consequences of the holding and disposition of
such preferred stock or depositary shares.
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PLAN OF DISTRIBUTION
Lehman Brothers Holdings may offer the offered securities in one or more of
the following ways from time to time:
- to or through underwriters or dealers;
- by itself directly;
- through agents; or
- through a combination of any of these methods of sale.
Any such underwriters, dealers or agents may include Lehman Brothers Inc.
The prospectus supplement relating to an offering of offered securities will
set forth the terms of such offering, including:
- the name or names of any underwriters, dealers or agents;
- the purchase price of the offered securities and the proceeds to Lehman
Brothers Holdings from such sale;
- any underwriting discounts and commissions or agency fees and other items
constituting underwriters' or agents' compensation;
- the initial public offering price;
- any discounts or concessions to be allowed or reallowed or paid to
dealers; and
- any securities exchanges on which such offered securities may be listed.
Any initial public offering prices, discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in an offering of offered securities, such offered
securities will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The securities may be either offered to the public through
underwriting syndicates represented by one or more managing underwriters or by
one or more underwriters without a syndicate. Unless otherwise set forth in the
prospectus supplement, the underwriters will not be obligated to purchase
offered securities unless specified conditions are satisfied, and if the
underwriters do purchase any offered securities, they will purchase all offered
securities.
In connection with underwritten offerings of the offered securities and in
accordance with applicable law and industry practice, underwriters may
over-allot or effect transactions that stabilize, maintain or otherwise affect
the market price of the offered securities at levels above those that might
otherwise prevail in the open market, including by entering stabilizing bids,
effecting syndicate covering transactions or imposing penalty bids, each of
which is described below.
- A stabilizing bid means the placing of any bid, or the effecting of any
purchase, for the purpose of pegging, fixing or maintaining the price of a
security.
- A syndicate covering transaction means the placing of any bid on behalf of
the underwriting syndicate or the effecting of any purchase to reduce a
short position created in connection with the offering.
- A penalty bid means an arrangement that permits the managing underwriter
to reclaim a selling concession from a syndicate member in connection with
the offering when offered securities originally sold by the syndicate
member are purchased in syndicate covering transactions.
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These transactions may be effected on the NYSE, in the over-the-counter
market, or otherwise. Underwriters are not required to engage in any of these
activities, or to continue such activities if commenced.
If dealers are utilized in the sale of offered securities, Lehman Brothers
Holdings will sell such offered securities to the dealers as principals. The
dealers may then resell such offered securities to the public at varying prices
to be determined by such dealers at the time of resale. The names of the dealers
and the terms of the transaction will be set forth in the prospectus supplement
relating to that transaction.
Offered securities may be sold directly by Lehman Brothers Holdings to one
or more institutional purchasers, or through agents designated by Lehman
Brothers Holdings from time to time, at a fixed price or prices, which may be
changed, or at varying prices determined at the time of sale. Any agent involved
in the offer or sale of the offered securities in respect of which this
prospectus is delivered will be named, and any commissions payable by Lehman
Brothers Holdings to such agent will be set forth, in the prospectus supplement
relating to that offering. Unless otherwise indicated in such prospectus
supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.
If so indicated in the applicable prospectus supplement, Lehman Brothers
Holdings will authorize agents, underwriters or dealers to solicit offers from
certain types of institutions to purchase offered securities from Lehman
Brothers Holdings at the public offering price set forth in such prospectus
supplement pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. Such contracts will be subject only
to those conditions set forth in the prospectus supplement and the prospectus
supplement will set forth the commission payable for solicitation of such
contracts.
Lehman Brothers Inc., the broker-dealer subsidiary of Lehman Brothers
Holdings, is a member of the National Association of Securities Dealers, Inc.
and may participate in distributions of the offered securities. Accordingly,
offerings of offered securities in which Lehman Brothers Inc. participates will
conform to the requirements set forth in Rule 2720 of the Conduct Rules of the
NASD. Furthermore, any underwriters offering the offered securities will not
confirm sales to any accounts over which they exercise discretionary authority
without the prior approval of the customer.
This prospectus together with any applicable prospectus supplement may also
be used by Lehman Brothers Inc. in connection with offers and sales of the
offered securities in market-making transactions at negotiated prices related to
prevailing market prices at the time of sale. Lehman Brothers Inc. may act as
principal or agent in such transactions. Lehman Brothers Inc. has no obligation
to make a market in any of the offered securities and may discontinue any
market-making activities at any time without notice, at its sole discretion.
Underwriters, dealers and agents may be entitled, under agreements with
Lehman Brothers Holdings, to indemnification by Lehman Brothers Holdings
relating to material misstatements and omissions. Underwriters, dealers and
agents may be customers of, engage in transactions with, or perform services
for, Lehman Brothers Holdings and affiliates of Lehman Brothers Holdings in the
ordinary course of business.
Each series of offered securities will be a new issue of securities and will
have no established trading market. Any underwriters to whom offered securities
are sold for public offering and sale may make a market in such offered
securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. The offered securities
may or may not be listed on a national securities exchange. No assurance can be
given that there will be a market for the offered securities.
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ERISA CONSIDERATIONS
Lehman Brothers Holdings has subsidiaries, including Lehman Brothers Inc.,
that provide services to many employee benefit plans. Lehman Brothers Holdings
and any direct or indirect subsidiary of Lehman Brothers Holdings may each be
considered a "party in interest" within the meaning of the Employee Retirement
Income Security Act of 1974, and a "disqualified person" under corresponding
provisions of the Internal Revenue Code of 1986, relating to many employee
benefit plans. "Prohibited transactions" within the meaning of ERISA and the
Code may result if any offered securities are acquired by an employee benefit
plan relating to which Lehman Brothers Holdings or any direct or indirect
subsidiary of Lehman Brothers Holdings is a party in interest, unless such
offered securities are acquired pursuant to an applicable exemption. Any
employee benefit plan or other entity subject to which such provisions of ERISA
or the Code apply proposing to acquire the offered securities should consult
with its legal counsel.
LEGAL MATTERS
Karen M. Muller, Esq., Deputy General Counsel of Lehman Brothers Holdings,
or counsel to be identified in the applicable prospectus supplement, will act as
legal counsel to Lehman Brothers Holdings. Ms. Muller beneficially owns, or has
rights to acquire under Lehman Brothers Holdings' employee benefit plans, an
aggregate of less than 1% of Lehman Brothers Holdings' common stock. Simpson
Thacher & Bartlett, New York, New York, or other counsel identified in the
applicable prospectus supplement, will act as legal counsel to the underwriters.
Simpson Thacher & Bartlett has from time to time acted as counsel for Lehman
Brothers Holdings and its subsidiaries and may do so in the future.
EXPERTS
The consolidated financial statements and financial statement schedule of
Lehman Brothers Holdings Inc. as of November 30, 1998 and 1997, and for each of
the years in the three-year period ended November 30, 1998, have been audited by
Ernst & Young LLP, independent certified public accountants, as set forth in
their report on the consolidated financial statements. The consolidated
financial statements and such report are incorporated by reference in Lehman
Brothers Holdings' annual report on Form 10-K for the year ended November 30,
1998, and incorporated by reference in this prospectus. The consolidated
financial statements of Lehman Brothers Holdings referred to above are
incorporated by reference in this prospectus in reliance upon such report given
on the authority of said firm as experts in accounting and auditing. To the
extent that Ernst & Young LLP audits and reports on consolidated financial
statements of Lehman Brothers Holdings issued at future dates, and consents to
the use of their report thereon, such consolidated financial statements also
will be incorporated by reference in the registration statement in reliance upon
their report given on said authority.
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PROSPECTUS
$2,500,000,000
LEHMAN BROTHERS HOLDINGS CAPITAL TRUST III
LEHMAN BROTHERS HOLDINGS CAPITAL TRUST IV
LEHMAN BROTHERS HOLDINGS CAPITAL TRUST V
LEHMAN BROTHERS HOLDINGS CAPITAL TRUST VI
PREFERRED SECURITIES
Guaranteed to the Extent Set Forth Herein By
LEHMAN BROTHERS HOLDINGS INC.
--------------
Lehman Brothers Holdings will provide the specific terms of these securities
in supplements to this prospectus. You should read this prospectus and the
accompanying prospectus supplement carefully before you invest.
The securities offered pursuant to this prospectus are offered in an
aggregate principal amount of up to $2,500,000,000 subject to reduction as a
result of the sale under certain circumstances of other securities.
---------------------
YOU ARE URGED TO CAREFULLY READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE
5, WHERE SPECIFIC RISKS ASSOCIATED WITH THESE PREFERRED SECURITIES ARE
DESCRIBED, ALONG WITH THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE YOU MAKE
YOUR INVESTMENT DECISION.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus or any accompanying prospectus supplement is truthful or complete.
Any representation to the contrary is a criminal offense.
---------------------
April 28, 1999
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SUMMARY INFORMATION-Q&A
This summary provides a brief overview of the key aspects of Lehman Brothers
Holdings and the preferred securities. The terms "trust" and "Lehman Brothers
Holdings Capital Trust" refer to the Lehman Brothers Holdings Capital Trust for
the specific transaction. You should carefully read this prospectus to
understand fully the terms of the preferred securities as well as the tax and
other considerations that are important to you in making a decision about
whether to invest in the preferred securities. You should pay special attention
to the "Risk Factors" section beginning on page 5 of this prospectus to
determine whether an investment in the preferred securities is appropriate for
you.
WHAT ARE THE PREFERRED SECURITIES?
Each preferred security represents an undivided beneficial interest in the
assets of a trust. Each preferred security will entitle the holder to receive
cash distributions as described in this prospectus.
WHO IS THE TRUST?
The trust is a Delaware business trust. Its principal place of business is
c/o Lehman Brothers Holdings Inc., 3 World Financial Center, New York, New York
10285, and its telephone number is (212) 526-7000.
All the common securities of the trust will be owned by Lehman Brothers
Holdings. The trust will use the proceeds from the sale of the preferred
securities and the common securities to buy a series of junior subordinated
deferrable interest debentures from Lehman Brothers Holdings with the same
financial terms as the preferred securities.
There are five trustees of the trust. Three of them, referred to as regular
trustees, are officers of Lehman Brothers Holdings. The Chase Manhattan Bank
will act as the property trustee of the trust, and Chase Manhattan Bank Delaware
will act as the Delaware trustee.
WHO IS LEHMAN BROTHERS HOLDINGS INC.?
Lehman Brothers Holdings is one of the leading global investment banks,
serving institutional, corporate, government and high net worth 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 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, derivative products
and certain commodities. Through one or more subsidiaries, the company acts as a
market maker in all major equity and fixed income products in both the domestic
and international markets. The company is a member of all principal securities
and commodities exchanges in the United States, as well as the National
Association of Securities Dealers, Inc., and holds memberships or associate
memberships on several principal international securities and commodities
exchanges, including the London, Tokyo, Hong Kong, Frankfurt and Milan stock
exchanges.
Lehman Brothers Holdings' principal executive office is at 3 World Financial
Center, New York, New York 10285, and its telephone number is (212) 526-7000.
WHEN WILL YOU RECEIVE DISTRIBUTIONS ON THE PREFERRED SECURITIES?
The trust's only source of cash to make payments on the preferred securities
are payments on the junior subordinated debt securities it purchases from Lehman
Brothers Holdings.
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If you purchase the preferred securities, you are entitled to receive
cumulative cash distributions at the rate specified in the applicable prospectus
supplement. Distributions will accumulate from the date the trust issues the
preferred securities and will be paid in arrears on the dates specified in such
prospectus supplement, unless distributions are deferred as described below.
WHEN WILL PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?
If Lehman Brothers Holdings defers interest payments on the junior
subordinated debt securities, the trust generally will defer distributions on
the preferred securities for up to five years. A deferral of distributions
cannot extend, however, beyond the maturity date of the junior subordinated debt
securities.
During any deferral period, except as described beginning on page 18, Lehman
Brothers Holdings will not be permitted to:
- pay a dividend or make any distributions on its capital stock;
- redeem, purchase or make a liquidation payment on any of its capital
stock;
- make an interest, principal or premium payment on, or repay, repurchase or
redeem, any of its debt securities that rank equal with or junior to the
junior subordinated debt securities; or
- make any guarantee payment with respect to any guarantee of debt
securities of any subsidiary, if that guarantee ranks equally with or
junior to the junior subordinated debt securities.
WHAT IS LEHMAN BROTHERS HOLDINGS' GUARANTEE OF THE PREFERRED SECURITIES?
Lehman Brothers Holdings' guarantee of the preferred securities consists of:
- its obligations to make payments on the junior subordinated debt
securities;
- its obligations under the preferred securities guarantee; and
- its obligations under the amended and restated declaration of trust of the
trust, which sets forth the terms of the trust.
Lehman Brothers Holdings will irrevocably guarantee that if a payment on the
junior subordinated debt securities is made to the trust but, for any reason,
the trust does not make the corresponding distribution or redemption payment to
the holders of the preferred securities, then Lehman Brothers Holdings will make
the payments directly to the holders of the preferred securities. The guarantee
will not cover payments when the trust does not have sufficient funds to make
payments on the preferred securities.
Lehman Brothers Holdings' obligations under the guarantee are subordinated
as described on page 21.
WHEN COULD THE JUNIOR SUBORDINATED DEBT SECURITIES BE DISTRIBUTED TO YOU?
Lehman Brothers Holdings has the right to dissolve the trust at any time. If
Lehman Brothers Holdings terminates the trust, the trust will distribute junior
subordinated debt securities on a proportionate basis.
WILL THE PREFERRED SECURITIES BE LISTED ON A STOCK EXCHANGE?
If specified in an accompanying prospectus supplement, application will be
made to list the preferred securities on the New York Stock Exchange. If
approved for listing, the trust expects the preferred securities will begin
trading within 30 days after they are first issued.
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WILL HOLDERS OF THE PREFERRED SECURITIES HAVE ANY VOTING RIGHTS?
Generally, the holders of the preferred securities will not have any voting
rights. See "Description of the Preferred Securities--Voting Rights."
IN WHAT FORM WILL THE PREFERRED SECURITIES BE ISSUED?
The preferred securities will be represented by one or more global
securities that will be deposited with and registered in the name of The
Depository Trust Company or its nominee. This means that you will not receive a
certificate for your preferred securities and that your broker will maintain
your position in the preferred securities.
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED IN THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT, AS WELL AS THE INFORMATION INCORPORATED BY REFERENCE.
LEHMAN BROTHERS HOLDINGS HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. LEHMAN BROTHERS HOLDINGS IS NOT MAKING AN OFFER OF THESE SECURITIES
IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT
THE INFORMATION IN THIS PROSPECTUS, THE PROSPECTUS SUPPLEMENT OR ANY DOCUMENTS
INCORPORATED BY REFERENCE IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THE
APPLICABLE DOCUMENT.
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RISK FACTORS
Your investment in the preferred securities will involve several risks. You
should carefully consider the following discussion of risks, and the other
information in this prospectus, before deciding whether an investment in the
preferred securities is suitable for you.
LEHMAN BROTHERS HOLDINGS IS NOT REQUIRED TO PAY YOU UNDER THE GUARANTEE AND THE
JUNIOR SUBORDINATED DEBT SECURITIES UNLESS IT FIRST MAKES OTHER REQUIRED
PAYMENTS.
Lehman Brothers Holdings' obligations under the junior subordinated debt
securities will rank junior to all of Lehman Brothers Holdings' senior debt as
described on page 17. This means that Lehman Brothers Holdings cannot make any
payments on the junior subordinated debt securities if it defaults on a payment
of senior debt and does not cure the default within the applicable grace period
or if the senior debt becomes immediately due because of a default and has not
yet been paid in full. In addition, Lehman Brothers Holdings' obligations under
the junior subordinated debt securities will be effectively subordinated to all
existing and future liabilities of Lehman Brothers Holdings' subsidiaries.
Lehman Brothers Holdings' obligations under the guarantee are subordinated
to all of its other liabilities as described on page 21. This means that Lehman
Brothers Holdings cannot make any payments on the guarantee if it defaults on a
payment on any of its other liabilities. In addition, in the event of the
bankruptcy, liquidation or dissolution of Lehman Brothers Holdings, its assets
would be available to pay obligations under the guarantee only after Lehman
Brothers Holdings made all payments on its other liabilities.
Neither the preferred securities, the junior subordinated debt securities
nor the guarantee limit the ability of Lehman Brothers Holdings and its
subsidiaries to incur additional indebtedness, including indebtedness that ranks
senior in priority of payment to the junior subordinated debt securities and the
guarantee. See "Description of the Guarantee--Status of the Guarantee" and
"Description of the Junior Subordinated Debt Securities--Subordination" on pages
21 and 17, respectively.
LEHMAN BROTHERS HOLDINGS IS NOT REQUIRED TO PAY YOU UNDER THE GUARANTEE IF THE
TRUST DOES NOT HAVE CASH AVAILABLE.
The ability of the trust to make payments on the preferred securities is
solely dependent upon Lehman Brothers Holdings making the related payments on
the junior subordinated debt securities when due.
If Lehman Brothers Holdings defaults on its obligations to make payments on
the junior subordinated debt securities, the trust will not have sufficient
funds to make payments on the preferred securities. In those circumstances, you
will not be able to rely upon the guarantee for payment of these amounts.
DEFERRAL OF DISTRIBUTIONS WOULD HAVE ADVERSE TAX CONSEQUENCES FOR YOU AND MAY
ADVERSELY AFFECT THE TRADING PRICE OF THE PREFERRED SECURITIES.
If distributions on the preferred securities are deferred, you will be
required to recognize interest income for United States federal income tax
purposes in respect of your ratable share of the interest on the junior
subordinated debt securities held by the trust before you receive any cash
distributions relating to this interest. In addition, you will not receive this
cash if you sold the preferred securities before the end of any deferral period
or before the record date relating to distributions which are paid.
Lehman Brothers Holdings has no current intention of deferring interest
payments on the junior subordinated debt securities and believes that such
deferral is a remote possibility. However, if Lehman Brothers Holdings exercises
its right in the future, the preferred securities may trade at a price that
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does not fully reflect the value of accrued but unpaid interest on the junior
subordinated debt securities. If you sell the preferred securities during an
interest deferral period, you may not receive the same return on investment as
someone else who continues to hold the preferred securities. In addition, the
existence of Lehman Brothers Holdings' right to defer payments of interest on
the junior subordinated debt securities may mean that the market price for the
preferred securities, which represent an undivided beneficial interest in the
junior subordinated debt securities, may be more volatile than other securities
that do not have these rights.
See "United States Federal Income Tax Consequences" on page 25 for more
information regarding the tax consequences of purchasing, holding and selling
the preferred securities.
YOU SHOULD NOT RELY ON THE DISTRIBUTIONS FROM THE PREFERRED SECURITIES THROUGH
THEIR MATURITY DATE-- THEY MAY BE REDEEMED AT ANY TIME IF CERTAIN CHANGES IN
TAX OR INVESTMENT COMPANY LAW OCCUR.
If certain changes, which are more fully described below, in tax or
investment company law occur and certain other conditions which are more fully
described below are satisfied, the preferred securities could be redeemed by the
trust at a redemption price equal to their issue price plus any accrued and
unpaid distributions. See "Description of the Preferred Securities--Distribution
of the Junior Subordinated Debt Securities" and "--Special Event Redemption" on
pages 13 and 12, respectively.
YOU SHOULD NOT RELY ON THE DISTRIBUTIONS FROM THE PREFERRED SECURITIES THROUGH
THEIR MATURITY DATE-- THEY MAY BE REDEEMED AT THE OPTION OF THE COMPANY.
The preferred securities may be redeemed, in whole, at any time, or in part,
from time to time, on or after, at a redemption price equal to their issue price
plus any accrued and unpaid distributions. You should assume that this
redemption option will be exercised if Lehman Brothers Holdings is able to
refinance at a lower interest rate or it is otherwise in the interest of Lehman
Brothers Holdings to redeem the junior subordinated debt securities. If the
junior subordinated debt securities are redeemed, the trust must redeem the
preferred securities in an aggregate liquidation amount equal to the aggregate
principal amount of junior subordinated debt securities to be redeemed. See
"Description of the Preferred Securities--Redemption" and "Description of the
Junior Subordinated Debt Securities-- Redemption" on pages 11 and 18,
respectively.
THERE CAN BE NO ASSURANCE AS TO THE MARKET PRICES FOR THE PREFERRED SECURITIES
OR THE JUNIOR SUBORDINATED DEBT SECURITIES; THEREFORE, YOU MAY SUFFER A LOSS.
Lehman Brothers Holdings cannot give you any assurance as to the market
prices for the preferred securities or the junior subordinated debt securities
that may be distributed in exchange for preferred securities. Accordingly, the
preferred securities that an investor may purchase, whether pursuant to the
offer made by this prospectus or in the secondary market, or the junior
subordinated debt securities that a holder of preferred securities may receive
in exchange for preferred securities, may trade at a discount to the price that
the investor paid to purchase the preferred securities. As a result of the right
to defer payments on the preferred securities, the market price of the preferred
securities may be more volatile than the market prices of other securities to
which such optional deferrals do not apply.
THERE COULD BE AN ADVERSE TAX CONSEQUENCE TO YOU IF LEHMAN BROTHERS HOLDINGS
TERMINATES THE TRUST AND DISTRIBUTES JUNIOR SUBORDINATED DEBT SECURITIES TO
HOLDERS, RESULTING IN POSSIBLE TAX AND LIQUIDITY CONSEQUENCES TO YOU.
Lehman Brothers Holdings has the right to terminate the trust at any time.
If Lehman Brothers Holdings decides to exercise this right, the trust will
redeem the preferred securities by distributing junior subordinated debt
securities to holders of the preferred securities on a proportionate basis.
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Under current United States federal income tax law, a distribution of junior
subordinated debt securities to you on the dissolution of the trust should not
be a taxable event to you. However, if the trust is characterized for United
States federal income tax purposes as an association taxable as a corporation at
the time it is dissolved or if there is a change in law, the distribution of
junior subordinated debt securities to you may be a taxable event to you.
SINCE YOU HAVE LIMITED VOTING RIGHTS, YOU CANNOT PREVENT THE THE TRUST TRUSTEES
FROM TAKING ACTIONS YOU MAY NOT AGREE WITH.
You will have limited voting rights. In particular, except for the limited
exceptions described below, only Lehman Brothers Holdings can elect or remove
any of the trustees. See "Description of the Preferred Securities--Voting
Rights" on page 13.
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WHERE YOU CAN FIND MORE INFORMATION
As required by the Securities Act of 1933, Lehman Brothers Holdings filed a
registration statement (No. 333-75723) relating to the securities offered by
this prospectus with the Securities and Exchange Commission. This prospectus is
a part of that registration statement, which includes additional information.
Lehman Brothers Holdings files annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
document Lehman Brothers Holdings files at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. You can also request
copies of the documents, upon payment of a duplicating fee, by writing the
Public Reference Section of the SEC. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. These SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov.
The SEC allows Lehman Brothers Holdings to "incorporate by reference" the
information it files with the SEC, which means that it can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information that Lehman Brothers Holdings files later with the SEC will
automatically update information in this prospectus. In all cases, you should
rely on the later information over different information included in this
prospectus or the prospectus supplement. Lehman Brothers Holdings incorporates
by reference the documents listed below and any future filings made with the SEC
under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934:
- Amended Annual Report on Form 10-K for the year ended November 30, 1998,
filed with the SEC on March 5, 1999;
- Quarterly Report on Form 10-Q for the quarter ended February 28, 1999,
filed with the SEC on April 14, 1999; and
- Current Reports on Form 8-K, filed with the SEC on January 7, January 27,
March 19 and April 20, 1999.
All documents Lehman Brothers Holdings files pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and
before the later of (1) the completion of the offering of the securities
described in this prospectus and (2) the date Lehman Brothers Inc. stops
offering securities pursuant to this prospectus shall be incorporated by
reference in this prospectus from the date of filing of such documents.
You may request a copy of these filings, at no cost, by writing or
telephoning Lehman Brothers Holdings at the following address:
Controller's Office
Lehman Brothers Holdings Inc.
3 World Financial Center
New York, New York 10285
(212) 526-0660
USE OF PROCEEDS
All of the net proceeds from the sale of the preferred securities will be
invested by the trust in junior subordinated debt securities of Lehman Brothers
Holdings. Lehman Brothers Holdings will use the proceeds from the sale of the
junior subordinated debt securities to the trust for general corporate purposes,
primarily to fund its operating units and subsidiaries. Lehman Brothers Holdings
may use some of the proceeds to refinance or extend the maturity of existing
debt obligations.
8
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RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED NOVEMBER 30,
NOVEMBER 30, ------------------------------------------
1994 1995 1996 1997 1998
--------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...................... 1.03 1.03 1.06 1.07 1.07
<CAPTION>
THREE MONTHS
ENDED
FEBRUARY 28,
1999
---------------
<S> <C>
Ratio of Earnings to Fixed Charges...................... 1.08
</TABLE>
In computing the ratios above, "earnings" consist of earnings from
continuing operations before income taxes and fixed charges; "fixed charges"
consist principally of interest expense and one-third of office rentals and
one-fifth of equipment rentals, which are deemed to be representative of the
interest factor.
ACCOUNTING TREATMENT
The financial statements of the trust will be reflected in Lehman Brothers
Holdings' consolidated financial statements, with the preferred securities
reflected on Lehman Brothers Holdings' balance sheet as a separate line item
after total liabilities and before stockholders' equity, similar to a minority
interest.
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DESCRIPTION OF THE PREFERRED SECURITIES
The preferred securities will be issued pursuant to an amended and restated
declaration of trust. The declaration will be qualified under the Trust
Indenture Act of 1939. The Chase Manhattan Bank will act as trustee under the
declaration for purposes of the Trust Indenture Act. The terms of the preferred
securities will include those stated in the declaration and those made part of
the declaration by the Trust Indenture Act. The following summary of the terms
of the preferred securities is not intended to be complete and is qualified by
the applicable prospectus supplement, the declaration, the Trust Indenture Act
and other applicable law. The declaration will be filed as an exhibit to a
document incorporated by reference in the registration statement of which this
prospectus forms a part.
GENERAL
The declaration authorizes the regular trustees to issue both common and
preferred securities representing undivided beneficial interests in the assets
of the trust. All the common securities will be owned, directly or indirectly,
by Lehman Brothers Holdings. The common securities rank equally, and payments
will be made on the common securities on a ratable basis, with the preferred
securities. If an event of default under the declaration occurs and continues,
however, the rights of the holders of the common securities to receive payment
of periodic distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of the preferred
securities. The declaration does not permit the issuance of any other securities
or the incurrence of any indebtedness by the trust.
Pursuant to the declaration, the property trustee will hold title to the
junior subordinated debt securities purchased by the trust for the benefit of
the holders of the trust securities. The payment of distributions out of money
held by the trust, and payments upon redemption of the trust securities or
liquidation of the trust out of money held by the trust, are guaranteed by
Lehman Brothers Holdings to the extent described under "Description of the
Guarantee." The guarantee will be held by The Chase Manhattan Bank, the
guarantee trustee, for the benefit of the holders of the preferred securities.
The guarantee does not cover payment of distributions when the trust does not
have sufficient available funds to pay such distributions. In that event, the
remedy of a holder of preferred securities is to:
- vote to direct the property trustee to enforce the property trustee's
rights under the junior subordinated debt securities; or
- if the failure of the trust to pay distributions is attributable to the
failure of Lehman Brothers Holdings to pay interest or principal on the
junior subordinated debt securities, sue Lehman Brothers Holdings for
enforcement of payment to the holder of an amount equal to the aggregate
liquidation amount of his or her preferred securities.
DISTRIBUTIONS
Distributions on the preferred securities will accrue at the rate specified
in the applicable prospectus supplement. The amount of distributions payable for
any period will be computed on the basis of a 360-day year of twelve 30-day
months.
Distributions on the preferred securities will be cumulative, will accrue
from the date the trust issues the preferred securities and will be paid in
arrears on the dates specified in the applicable prospectus supplement, unless
they are deferred as described below.
DEFERRAL OF DISTRIBUTIONS. Lehman Brothers Holdings has the right under the
indenture to defer interest payments on the junior subordinated debt securities
for a period not exceeding five years during which no interest will be due and
payable. A deferral of interest payments cannot extend, however, beyond the
maturity of the junior subordinated debt securities. As a consequence of any
such deferral, distributions on the preferred securities also would be deferred.
During a deferral period, the
10
<PAGE>
amount of distributions due to you would continue to accumulate and such
deferred distributions will themselves accrue additional distributions. When
this prospectus refers to any payment of distributions, distributions include
any such additional distributions unless otherwise stated.
Upon the termination of any deferral period and the payment of all amounts
then due, Lehman Brothers Holdings may commence a new deferral period as
discussed above. Consequently, there could be several deferral periods of
varying lengths throughout the term of the junior subordinated debt securities.
The regular trustees will give the holders of the preferred securities notice of
any deferral period upon their receipt of notice from Lehman Brothers Holdings.
If distributions are deferred, the deferred distributions on such distributions
will be paid to holders of record of the preferred securities as they appear on
the securities register of the trust on the record date following the
termination of the deferral period. See "Description of the Junior Subordinated
Debt Securities--Interest" and "--Option to Extend Interest Payment Period."
PAYMENT OF DISTRIBUTIONS. Distributions on the preferred securities will be
payable to the holders named on the securities register of the trust at the
close of business on the relevant record dates. As long as the preferred
securities remain in book-entry only form, the record dates will be one business
day before the distribution dates. Such distributions will be paid through the
property trustee who will hold amounts received on the junior subordinated debt
securities in a property account for the benefit of the holders of the trust
securities. Unless any applicable laws and regulations and the provisions of the
declaration state otherwise, each payment will be made as described under
"--Book-Entry Only Issuance--The Depository Trust Company" below.
If the preferred securities do not continue to remain in book-entry only
form, the relevant record dates will conform to the rules of any securities
exchange on which the preferred securities are listed. If any date on which
distributions are to be made on the preferred securities is not a business day,
then payment of the distributions payable on such date will be made on the next
day which is a business day, and without any interest or other payment in
respect of any delay. However, if such business day is in the next calendar
year, the payment will be made on the immediately preceding business day. A
"business day" means any day other than Saturday, Sunday or any other day on
which banking institutions in New York City are permitted or required by law to
close.
REDEMPTION
The preferred securities will be redeemed upon the maturity of the junior
subordinated debt securities or to the extent the junior subordinated debt
securities are redeemed. The junior subordinated debt securities will mature on
the date specified in the applicable prospectus supplement, and may be redeemed,
in whole or in part, at any time on or after the date specified in the
applicable prospectus supplement. The junior subordinated debt securities can
also be redeemed at any time, in whole or in part, in certain circumstances upon
the occurrence of a tax event or an investment company event.
Upon the maturity of the junior subordinated debt securities, the proceeds
of their repayment will simultaneously be applied to redeem all outstanding
trust securities at the redemption price. Upon the redemption of the junior
subordinated debt securities, whether in whole or in part, either at the option
of Lehman Brothers Holdings or pursuant to a tax or investment company event,
the trust will use the cash it receives upon the redemption to redeem trust
securities having an aggregate liquidation amount equal to the aggregate
principal amount of the junior subordinated debt securities so redeemed at the
redemption price. Before such redemption, holders of trust securities will be
given not less than 30 days' notice.
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<PAGE>
SPECIAL EVENT REDEMPTION
"Tax event" means that the regular trustees will have received an opinion of
an independent tax counsel experienced in such matters which states that, as a
result of any:
- amendment to, or change in, or announced proposed change in, the laws or
associated regulations of the United States or any political subdivision
or taxing authority of the United States; or
- official administrative pronouncement, action or judicial decision
interpreting or applying such laws or regulations, there is more than an
insubstantial risk currently or within the 90 days following such opinion
that:
- the trust would be required to pay United States federal income tax
relating to income accrued or received on the junior subordinated debt
securities;
- interest payable to the trust on the junior subordinated debt
securities would not be deductible by Lehman Brothers Holdings for
United States federal income tax purposes; or
- the trust would be required to pay more than a minimal amount of other
taxes, duties or other governmental charges.
"Investment company event" means that the regular trustees will have
received an opinion of a nationally recognized independent counsel which states
that, as a result of the occurrence of a change in law or regulation or a
written change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority, there is
more than an insubstantial risk that the trust is or will be considered an
"investment company" which is required to be registered under the Investment
Company Act of 1940.
This prospectus refers to a tax event or an investment company event as a
"special event." If a special event occurs and continues, Lehman Brothers
Holdings may, upon not less than 30 days' notice, redeem the junior subordinated
debt securities, in whole or in part, for cash within 90 days following the
occurrence of such special event.
REDEMPTION PROCEDURES
The trust may not redeem fewer than all of the outstanding preferred
securities unless all accrued and unpaid distributions thereon have been paid.
Once notice of redemption is given and funds are irrevocably deposited,
distributions will cease to accrue and all rights of holders of preferred
securities called for redemption will cease, except the right of the holders to
receive the redemption price but without interest on such redemption price. If
any redemption date is not a business day, then payment of the redemption price
payable on such date will be made on the succeeding day that is a business day,
without any interest or other payment in respect of any such delay. However, if
such business day falls in the next calendar year, payment will be made on the
preceding business day.
If payment of the redemption price for any preferred securities is
improperly withheld or refused and not paid either by the trust or by Lehman
Brothers Holdings pursuant to the guarantee, distributions on such preferred
securities will continue to accrue at the then applicable rate from the original
redemption date to the date of payment. In this case, the actual payment date
will be the redemption date for purposes of calculating the redemption price.
See "--Book-Entry Only Issuance-- The Depository Trust Company."
In the event that fewer than all of the outstanding preferred securities are
to be redeemed, the preferred securities will be redeemed in accordance with the
depositary's standard procedures. See "--Book-Entry Only Issuance--The
Depository Trust Company."
12
<PAGE>
Lehman Brothers Holdings or its subsidiaries may, at any time, and from time
to time, purchase outstanding preferred securities by tender, in the open market
or by private agreement, provided that it complies with United States federal
securities laws and any other applicable laws.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Lehman Brothers Holdings will have the right at any time to dissolve the
trust. After satisfying the liabilities of its creditors, the trust may
distribute junior subordinated debt securities in exchange for the preferred
securities.
There can be no assurance as to the market prices for either the preferred
securities or the junior subordinated debt securities that may be distributed in
exchange for the preferred securities if a dissolution and liquidation of the
trust were to occur. This means that the preferred securities that an investor
may purchase, whether pursuant to the offer made by this prospectus or in the
secondary market, or the junior subordinated debt securities that an investor
may receive if a dissolution and liquidation of the trust were to occur, may
trade at a discount to the price that the investor paid to purchase the
preferred securities offered by this prospectus.
TRUST ENFORCEMENT EVENTS
Upon the occurrence of an indenture event of default (as described below),
the property trustee as the sole holder of the junior subordinated debt
securities will have the right under the indenture to declare the principal of
and interest on the junior subordinated debt securities to be immediately due
and payable.
If the property trustee fails to enforce its rights under the junior
subordinated debt securities, any holder of preferred securities may directly
institute a legal proceeding against Lehman Brothers Holdings to enforce these
rights without first suing the property trustee or any other person or entity.
If a trust enforcement event has occurred and is continuing and such event is
attributable to the failure of Lehman Brothers Holdings to pay interest or
principal on the junior subordinated debt securities on the date such interest
or principal is otherwise payable, then a holder of preferred securities may
also bring a direct action.
An "indenture event of default" is an event of default under the indenture
and also constitutes a "trust enforcement event," which is an event of default
under the declaration relating to the trust securities. Pursuant to the
declaration, however, the holder of the common securities will be deemed to have
waived any trust enforcement event relating to the common securities until all
trust enforcement events relating to the preferred securities have been cured,
waived or otherwise eliminated. Until such trust enforcement events relating to
the preferred securities have been so cured, waived, or otherwise eliminated,
the property trustee will be deemed to be acting solely on behalf of the holders
of the preferred securities. Only the holders of the preferred securities will
have the right to direct the property trustee as to matters under the
declaration, and therefore the indenture.
VOTING RIGHTS
Except as described in this prospectus under "Description of the
Guarantee--Modification of Guarantee; Assignment," and except as required by
law, the holders of the preferred securities will have no voting rights.
The holders of a majority in aggregate liquidation amount of the preferred
securities have the right to direct any proceeding for any remedy available to
the property trustee, including to:
- exercise the remedies available to it under the indenture;
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<PAGE>
- waive any past indenture event of default and its consequences that is
waivable under the indenture; or
- consent to any amendment, modification or termination where such consent
is required.
Any required approval or direction of holders of preferred securities may be
given at a separate meeting of holders of preferred securities convened for such
purpose, at a meeting of all of the holders of trust securities or by written
consent.
If an indenture event of default has occurred and not been cured, the
holders of 25% of the aggregate liquidation amount of the preferred securities
may direct the property trustee to declare the principal and interest on the
junior subordinated debt securities due and payable. However, where a consent or
action under the indenture would require the consent of more than a majority of
the aggregate principal amount of debt securities affected thereby, consent from
the holders of that greater percentage would be required. See "Description of
the Junior Subordinated Debt Securities-- Modifications and Amendments."
Despite the fact that holders of preferred securities are entitled to vote
or consent under the circumstances described above, any of the preferred
securities that are owned at the time by Lehman Brothers Holdings or any entity
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, Lehman Brothers Holdings, will not be entitled to vote or
consent. Instead, these preferred securities will be treated as if they were not
outstanding.
The procedures by which holders of preferred securities may exercise their
voting rights are described below. See "--Book-Entry Only Issuance--The
Depository Trust Company."
Holders of the preferred securities generally will have no rights to appoint
or remove the regular trustees. Instead, the trustees may be appointed, removed
or replaced solely by Lehman Brothers Holdings as the indirect or direct holder
of all of the common securities.
MODIFICATION OF THE DECLARATION
The declaration may be amended from time to time without the consent of the
holders of the preferred securities:
- to cure any ambiguity or correct or supplement any provisions that may be
defective or inconsistent with any other provision;
- to add to the covenants, restrictions or obligations of Lehman Brothers
Holdings in its capacity as sponsor of the trust;
- to conform to any change in Rule 3a-5 under the Investment Company Act of
1940 or written change in interpretation or application of such rule by
any legislative body, court, government agency or regulatory authority; or
- to modify, eliminate or add to any provisions as necessary to ensure that
the trust will be classified for United States federal incomoe tax
purposes as a grantor trust at all times or to ensure that the trust will
not be required to register as an investment company under the Investment
Company Act of 1940.
Amendments made without the consent of the preferred securities cannot
adversely affect in any material respect the rights of the holders of preferred
or common securities.
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<PAGE>
The declaration of trust may also be amended as to other matters with the
consent of holders of at least 66 2/3% of the outstanding preferred securities.
However, without the consent of each affected holder of preferred or common
securities, the declaration of trust may not be amended to:
- change the amount or timing of any distribution or otherwise adversely
affect the amount of any distribution required to be made; or
- restrict the right of a holder to institute suit for the enforcement of
any such payment.
Despite the foregoing, no amendment or modification may be made to the
declaration if such amendment or modification would
- cause the trust to be classified for United States federal income tax
purposes as other than a grantor trust, or
- cause the trust to be deemed an "investment company" which is required to
be registered under the Investment Company Act of 1940.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The preferred securities will be book-entry securities. Upon issuance, all
book-entry securities will be represented by one or more fully registered global
securities. Each global security will be deposited with, or on behalf of, The
Depository Trust Company, a securities depository, and will be registered in the
name of DTC or a nominee of DTC. DTC will thus be the only registered holder of
these securities.
Purchasers of securities may only hold interests in the global notes through
DTC if they are participants in the DTC system. Purchasers may also hold
interests through a securities intermediary-- banks, brokerage houses and other
institutions that maintain securities accounts for customers--that has an
account with DTC or its nominee. DTC will maintain accounts showing the security
holdings of its participants, and these participants will in turn maintain
accounts showing the security holdings of their customers. Some of these
customers may themselves be securities intermediaries holding securities for
their customers. Thus, each beneficial owner of a book-entry security will hold
that security indirectly through a hierarchy of intermediaries, with DTC at the
"top" and the beneficial owner's own securities intermediary at the "bottom."
The securities of each beneficial owner of a book-entry security will be
evidenced solely by entries on the books of the beneficial owner's securities
intermediary. The actual purchaser of the securities will generally not be
entitled to have the securities represented by the global securities registered
in its name and will not be considered the owner under the declaration. In most
cases, a beneficial owner will also not be able to obtain a paper certificate
evidencing the holder's ownership of securities. The book-entry system for
holding securities eliminates the need for physical movement of certificates and
is the system through which most publicly traded common stock is held in the
United States. However, the laws of some jurisdictions require some purchasers
of securities to take physical delivery of their securities in definitive form.
These laws may impair the ability to transfer book-entry securities.
A beneficial owner of book-entry securities represented by a global security
may exchange the securities for definitive (paper) securities only if:
- DTC is unwilling or unable to continue as depositary for such global
security and Lehman Brothers Holdings does not appoint a qualified
replacement for DTC within 90 days; or
- Lehman Brothers Holdings in its sole discretion decides to allow some or
all book-entry securities to be exchangeable for definitive securities in
registered form.
Unless we indicate otherwise, any global security that is exchangeable will
be exchangeable in whole for definitive securities in registered form, with the
same terms and of an equal aggregate
15
<PAGE>
principal amount. Definitive securities will be registered in the name or names
of the person or persons specified by DTC in a written instruction to the
registrar of the securities. DTC may base its written instruction upon
directions that it receives from its participants.
In this prospectus, for book-entry securities, references to actions taken
by security holders will mean actions taken by DTC upon instructions from its
participants, and references to payments and notices of redemption to security
holders will mean payments and notices of redemption to DTC as the registered
holder of the securities for distribution to participants in accordance with
DTC's procedures.
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered under section 17A of the Securities Exchange Act of 1934. The
rules applicable to DTC and its participants are on file with the SEC.
DTC's management is aware that some computer applications, systems, and the
like for processing dates that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter "Year 2000 problems."
DTC has informed its participants and other members of the financial community
that it has developed and is implementing a program so that its systems, as they
relate to the timely payment of distributions to securityholders, book-entry
deliveries, and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
Lehman Brothers Holdings and the trustees will not have any responsibility
or liability for any aspect of the records relating to, or payments made on
account of, beneficial ownership interest in the book-entry securities or for
maintaining, supervising or reviewing any records relating to the beneficial
ownership interests.
DTC may discontinue providing its services as securities depositary at any
time by giving reasonable notice. Under such circumstances, in the event that a
successor securities depositary is not obtained, securities certificates are
required to be printed and delivered. Additionally, Lehman Brothers Holdings may
decide to discontinue use of the system of book-entry transfers through DTC or
any successor depositary with respect to the preferred securities. In that
event, certificates for the securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Lehman Brothers Holdings believes to be
reliable, but Lehman Brothers Holdings does not take responsibility for the
accuracy thereof.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
Prior to the occurrence of a default relating to the trust securities, the
property trustee undertakes to perform only such duties as are specifically set
forth in the declaration. After such a default, the property trustee will
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. The property trustee is under no obligation
to exercise any of the powers vested in it by the declaration at the request of
any holder of preferred securities unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby.
PAYING AGENT
If the preferred securities do not remain in book-entry only form, the
following provisions will apply:
- the property trustee will act as paying agent; and
- registration of transfers of preferred securities will be effected without
charge (other than in respect of any tax or other government charge).
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<PAGE>
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
The junior subordinated debt securities in which the trust will invest the
proceeds from the issuance and sale of the trust securities will be issued
pursuant to the indenture between Lehman Brothers Holdings and The Chase
Manhattan Bank (formerly known as Chemical Bank), as the indenture trustee. The
indenture will be qualified under the Trust Indenture Act of 1939. The terms of
the junior subordinated debt securities will include those stated in the
indenture and those made a part of the indenture by the Trust Indenture Act. The
following summary of the material terms of the junior subordinated debt
securities is not intended to be complete and is qualified by the applicable
prospectus supplement, the indenture, the Trust Indenture Act and other
applicable law. The indenture (including all amendments and a separate related
document containing standard multiple series indenture provisions) has been
filed with the SEC as an exhibit to, and is incorporated by reference in, the
registration statement of which this prospectus forms a part.
GENERAL
The junior subordinated debt securities will be issued as unsecured debt
under the indenture. The junior subordinated debt securities will be limited in
aggregate principal amount to the sum of the aggregate stated liquidation amount
of the preferred securities and the capital contributed by Lehman Brothers
Holdings to the trust in exchange for the common securities.
The entire principal amount of the junior subordinated debt securities will
mature and become due and payable, together with any accrued and unpaid interest
thereon, on the date specified in the applicable prospectus supplement.
If junior subordinated debt securities are distributed to holders of
preferred securities in liquidation of such holders' interests in the trust,
such junior subordinated debt securities will initially be issued in the form of
one or more global securities under depositary arrangements similar to those in
effect for the preferred securities. See "Description of the Preferred
Securities--Book-Entry Only Issuance--The Depository Trust Company." In the
event junior subordinated debt securities are issued in certificated form,
principal and interest will be payable, the transfer of the junior subordinated
debt securities will be registrable and junior subordinated debt securities will
be exchangeable for securities of other denominations of a like aggregate
principal amount at the corporate trust office of the indenture trustee in New
York, New York.
SUBORDINATION
The indenture provides that the junior subordinated debt securities are
subordinated and junior in right of payment to all senior debt (as defined
below) of Lehman Brothers Holdings. This means that no payment of principal,
including redemption payments, premium, if any, or interest on the junior
subordinated debt securities may be made if Lehman Brothers Holdings defaults in
the payment of any principal of, or premium, if any, or interest on any senior
debt when it becomes due and payable after any applicable grace period.
"Senior debt" means:
(1) the principal, premium, if any, and interest in respect of (A)
indebtedness of Lehman Brothers Holdings for money borrowed and (B)
indebtedness evidenced by securities, notes, debentures, bonds or other
similar instruments issued by Lehman Brothers Holdings, including the
senior debt securities;
(2) all capitalized lease obligations of Lehman Brothers Holdings;
(3) all obligations of Lehman Brothers Holdings representing the deferred
purchase price of property; and
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(4) all deferrals, renewals, extensions and refundings of obligations of the
type referred to in clauses (1) through (3);
but senior debt does not include:
(a) subordinated debt securities;
(b) any indebtedness that by its terms is subordinated to, or ranks on an
equal basis with, subordinated debt securities;
(c) indebtedness for goods or materials purchased in the ordinary course of
business or for services obtained in the ordinary course of business or
indebtedness consisting of trade payables; and
(d) indebtedness which is subordinated to an obligation of Lehman Brothers
Holdings of the type specified in clauses (1) through (4) above.
The indenture does not limit the aggregate amount of senior debt that may be
issued by Lehman Brothers Holdings.
REDEMPTION
Lehman Brothers Holdings shall have the right to redeem the junior
subordinated debt securities as described above under "Description of the
Preferred Securities--Special Event Redemption." The redemption price will be
equal to 100% of the principal amount to be redeemed plus any accrued and unpaid
interest.
INTEREST
The junior subordinated debt securities will bear interest at the rate
specified in the applicable prospectus supplement, payable in arrears on the
dates specified in the applicable prospectus supplement, unless interest is
deferred as described below. Interest will be paid to the person in whose name
such junior subordinated debt security is registered, with limited exceptions,
at the close of business on the business day next preceding such interest
payment date. In the event the junior subordinated debt securities shall not
continue to remain in book-entry only form, Lehman Brothers Holdings will select
appropriate record dates.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full period will be computed on the basis of the
actual number of days elapsed per 30-day month. If any date on which interest is
payable on the junior subordinated debt securities is not a business day, then
payment of the interest payable on such date will be made on the succeeding day
that is a business day, and without any interest or other payment in respect of
any such delay. However, if such business day is in the succeeding calendar
year, then such payment shall be made on the preceding business day, in each
case with the same force and effect as if made on such date.
OPTION TO DEFER INTEREST PAYMENTS
Lehman Brothers Holdings can defer interest payments for up to five years.
However, no deferral period may extend beyond the maturity of the junior
subordinated debt securities. At the end of the deferral period, Lehman Brothers
Holdings will pay all interest then accrued and unpaid.
During any deferral period, neither Lehman Brothers Holdings nor any of its
subsidiaries will be permitted to:
- pay a dividend or make any other payment or distribution on Lehman
Brothers Holdings' capital stock;
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- redeem, purchase or make a liquidation payment on any of Lehman Brothers
Holdings' capital stock;
- make an interest, principal or premium payment, or repay, repurchase or
redeem, any of Lehman Brothers Holdings' debt securities that rank equal
with or junior to the junior subordinated debt securities; or
- make any guarantee payment with respect to any guarantee by Lehman
Brothers Holdings of debt securities of any of its subsidiaries, if the
guarantee ranks equal to or junior to the junior subordinated debt
securities.
During any deferral period, however, Lehman Brothers Holdings will be
permitted to:
- pay dividends or distributions by way of issuance of its common stock;
- make payments under the guarantee in respect of the preferred and common
securities;
- declare or pay a dividend in connection with the implementation of a
shareholders' rights plan, or the issuing of stock under such a plan or
repurchase such rights; and
- purchase common stock relating to the issuing of common stock or rights
under any of Holdings' benefit plans.
Lehman Brothers Holdings has no present intention of exercising its right to
defer payments of interest by extending the interest payment period on the
junior subordinated debt securities.
If the property trustee is the sole holder of the junior subordinated debt
securities, Lehman Brothers Holdings will give the regular trustees and the
property trustee notice of its election to defer interest payments one business
day prior to the earlier of:
- the date distributions on the preferred securities would be payable, if
not for such deferral period, or
- the date the regular trustees are required to give notice to the NYSE or
other applicable self-regulatory organization or to holders of the
preferred securities of the record date or the date such distribution
would be payable, if not for such deferral period,
but in any event one business day prior to such record date. The regular
trustees will give notice of Lehman Brothers Holdings' selection of such
deferral period to the holders of the preferred securities.
If the property trustee is not the sole holder of the junior subordinated
debt securities, Lehman Brothers Holdings shall give the holders of the junior
subordinated debt securities notice of its election to defer interest payments
ten business days prior to the earlier of
- the next succeeding interest payment date or
- the date upon which Lehman Brothers Holdings is required to give notice to
the NYSE or other applicable self-regulatory organization or to holders of
the junior subordinated debt securities of the record or payment date of
such related interest payment,
but in any event two business days prior to such record date.
INDENTURE EVENTS OF DEFAULT
The indenture provides that the following are events of default relating to
the junior subordinated debt securities:
- failure to pay required interest on any debt security of such series for
30 days;
- failure to pay principal or premium, if any, on any debt security of such
series when due;
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- failure to make any required scheduled installment payment for 30 days on
debt securities of such series;
- failure to perform for 90 days after notice any other covenant in the
relevant indenture other than a covenant included in the relevant
indenture solely for the benefit of a series of debt securities other than
such series;
- certain events of bankruptcy or insolvency, whether voluntary or not; and
- certain dissolutions of the related trust.
If any indenture event of default shall occur and be continuing, the
property trustee, as the holder of the junior subordinated debt securities, will
have the right to declare the principal of and the interest on the junior
subordinated debt securities and any other amounts payable under the indenture
to be immediately due and payable. An indenture event of default also
constitutes a trust enforcement event. The holders of preferred securities in
limited circumstances have the right to direct the property trustee to exercise
its rights as the holder of the junior subordinated debt securities. See
"Description of the Preferred Securities--Trust Enforcement Events" and
"--Voting Rights."
Despite the foregoing, if a trust enforcement event has occurred and is
continuing and such event is attributable to the failure of Lehman Brothers
Holdings to pay interest or principal on the junior subordinated debt securities
when such interest or principal is payable, Lehman Brothers Holdings
acknowledges that, in such event, a holder of preferred securities may sue for
payment. Lehman Brothers Holdings may not amend the indenture to remove this
right to bring a direct action without the prior written consent of all of the
holders of preferred securities.
CONCERNING THE INDENTURE TRUSTEE
Lehman Brothers Holdings and certain of its subsidiaries maintain bank
accounts, borrow money and have other customary commercial banking or investment
banking relationships with the indenture trustee in the ordinary course of
business.
MISCELLANEOUS
The indenture provides that Lehman Brothers Holdings will pay all fees and
expenses related to:
- the issuance and exchange of the trust securities and the junior
subordinated debt securities;
- the organization, maintenance and dissolution of the trust;
- the retention of the trustees; and
- the enforcement by the property trustee of the rights of the holders of
the preferred securities.
DESCRIPTION OF THE GUARANTEE
The guarantee to be executed and delivered by Lehman Brothers Holdings for
the benefit of the holders of preferred securities will be qualified as an
indenture under the Trust Indenture Act of 1939. The Chase Manhattan Bank will
act as guarantee trustee for purposes of the Trust Indenture Act. The terms of
the guarantee will include those set forth in the guarantee and those made part
of the guarantee by the Trust Indenture Act. The following summary of the
material terms of the guarantee is not intended to be complete and is qualified
in all respects by the applicable prospectus supplement, the guarantee, the
Trust Indenture Act and other applicable law. The guarantee will be filed as an
exhibit to a document incorporated by reference in the registration statement of
which this prospectus forms a part.
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GENERAL
Pursuant to and to the extent set forth in the guarantee, Lehman Brothers
Holdings will irrevocably and unconditionally agree to pay in full to the
holders of the preferred securities, as and when due, regardless of any defense,
right of set-off or counterclaim which the trust may have or assert, the
following payments without duplication:
- any accrued and unpaid distributions that are required to be paid on the
preferred securities, to the extent the trust has funds available for such
distributions;
- the redemption price per preferred security, to the extent the trust has
funds available for such redemptions; and
- upon a voluntary or involuntary dissolution, winding-up or liquidation of
the trust, other than in connection with the distribution of junior
subordinated debt securities to the holders of preferred securities, the
lesser of
- the aggregate liquidation amount of the preferred securities and all
accrued and unpaid distributions thereon, or
- the amount of assets of the trust remaining for distribution to holders
of the preferred securities upon a liquidation of the trust.
STATUS OF THE GUARANTEES
The guarantee will constitute an unsecured obligation of Lehman Brothers
Holdings and will rank:
- subordinate and junior in right of payment to all other liabilities of
Lehman Brothers Holdings,
- on a parity with the most senior preferred or preference stock now or
hereafter issued by Lehman Brothers Holdings and with any guarantee now or
hereafter entered into by Lehman Brothers Holdings in respect of any
preferred securities of any affiliate of Lehman Brothers Holdings, and
- senior to Lehman Brothers Holding's common stock.
The guarantee will not place a limitation on the amount of additional senior
debt that may be incurred by Lehman Brothers Holdings.
The guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
Lehman Brothers Holdings to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or entity). The
guarantee will not be discharged except by payment of the guarantee payments in
full to the extent not paid by the trust or upon distribution of the junior
subordinated debt securities to the holders of the preferred securities in
exchange for all such preferred securities.
The guarantee, when taken together with Lehman Brothers Holdings'
obligations under the junior subordinated debt securities, the indenture and the
declaration, including its obligations to pay costs, expenses, debts and
liabilities of the trust, other than those relating to trust securities, will
provide a full and unconditional guarantee on a subordinated basis by Lehman
Brothers Holdings of payments due on the preferred securities. See "Effect of
Obligations Under the Junior Subordinated Debt Securities and the Guarantee."
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IMPORTANT COVENANTS OF LEHMAN BROTHERS HOLDINGS
In the guarantee, Lehman Brothers Holdings will covenant that, so long as
any trust securities remain outstanding, if:
- there shall have occurred any event of default under the indenture,
- Lehman Brothers Holdings shall be in default with respect to its payment
of any obligations under the guarantee, or
- Lehman Brothers Holdings shall have given notice of its election to defer
interest payments and shall not have rescinded such notice, and while such
interest is deferred,
then Lehman Brothers Holdings will not, and will not permit any subsidiary to:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of Lehman
Brothers Holdings' capital stock, or
- make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of Lehman Brothers Holdings that
rank on a parity with or junior in interest to the junior subordinated
debt securities or make any guarantee payments with respect to any
guarantee by Lehman Brothers Holdings of the debt securities of any
subsidiary of Lehman Brothers Holdings if such guarantee ranks on a parity
with or junior in interest to such junior subordinated debt securities,
other than
- dividends or distributions in common stock of Lehman Brothers Holdings,
- payments under the guarantee made by Lehman Brothers Holdings in
respect of the trust securities of the trust,
- any declaration of a dividend in connection with the implementation of
a shareholders' rights plan, or the issuance of stock under any such
plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, and
- purchases of common stock related to the issuance of common stock or
rights under any of Lehman Brothers Holdings' benefit plans.
EVENTS OF DEFAULT
An event of default under the guarantee will occur upon the failure of
Lehman Brothers Holdings to perform any of its payment or other obligations
required by the guarantee. The holders of a majority in aggregate liquidation
amount of the preferred securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the guarantee
trustee in respect of the guarantee or to direct the exercise of any trust or
power conferred upon the guarantee trustee under the guarantee.
If the guarantee trustee fails to enforce the guarantee trustee's rights
under the guarantee, any holder of related preferred securities may directly sue
Lehman Brothers Holdings to enforce the guarantee trustee's rights under the
guarantee without first suing the trust, the guarantee trustee or any other
person or entity.
Lehman Brothers Holdings, as guarantor, will be required to file annually
with the guarantee trustee a certificate as to whether or not Lehman Brothers
Holdings is in compliance with all the conditions and covenants applicable to it
under the guarantee.
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MODIFICATION OF GUARANTEE; ASSIGNMENT
The guarantee may be amended only with the prior approval of the holders of
not less than 66 2/3% in aggregate liquidation amount of the outstanding
preferred securities. No vote will be required, however, for any changes that do
not materially adversely affect the rights of holders of preferred securities.
All guarantees and agreements contained in the guarantee shall bind the
successors, assignees, receivers, trustees and representatives of Lehman
Brothers Holdings and shall inure to the benefit of the holders of the preferred
securities then outstanding.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
Prior to the occurrence of a default relating to the guarantee, the
guarantee trustee undertakes to perform only such duties as are specifically set
forth in the guarantee. After such default, the guarantee trustee will exercise
the same degree of care as a prudent individual would exercise in the conduct of
his or her own affairs. Provided that the foregoing requirements have been met,
the guarantee trustee is under no obligation to exercise any of the powers
vested in it by the guarantee at the request of any holder of preferred
securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The guarantee will terminate as to the preferred securities upon full
payment of the redemption price of all preferred securities, upon distribution
of the junior subordinated debt securities to the holders of the preferred
securities or upon full payment of the amounts payable upon liquidation of the
trust. The guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of preferred securities must restore
payment of any sums paid under the preferred securities or the guarantee.
GOVERNING LAW
The guarantee will be governed by and construed in accordance with the laws
of New York.
EFFECT OF OBLIGATIONS UNDER THE JUNIOR SUBORDINATED DEBT SECURITIES AND THE
GUARANTEE
As set forth in the declaration, the sole purpose of the trust is to issue
the trust securities and to invest the proceeds from such issuance and sale in
the junior subordinated debt securities. As long as payments of interest and
other payments are made when due on the junior subordinated debt securities,
such payments will be sufficient to cover the distributions and payments due on
the trust securities. This is due to the following factors:
- the aggregate principal amount of junior subordinated debt securities will
be equal to the sum of the aggregate stated liquidation amount of the
trust securities;
- the interest rate and the interest and other payment dates on the junior
subordinated debt securities will match the distribution rate and
distribution and other payment dates for the preferred securities;
- under the indenture, Lehman Brothers Holdings will pay, and the trust will
not be obligated to pay, directly or indirectly, all costs, expenses and
obligations of the trust other than those relating to the trust
securities; and
- the declaration further provides that the Lehman Brothers Holdings
trustees may not cause or permit the trust to engage in any activity that
is not consistent with the purposes of the trust.
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Payments of distributions, to the extent there are available funds, and
other payments due on the preferred securities, to the extent there are
available funds, are guaranteed by Lehman Brothers Holdings to the extent
described in this prospectus. If Lehman Brothers Holdings does not make interest
payments on the junior subordinated debt securities, the trust will not have
sufficient funds to pay distributions on the preferred securities. The guarantee
is a subordinated guarantee in relation to the preferred securities. The
guarantee does not apply to any payment of distributions unless and until the
trust has sufficient funds for the payment of such distributions. See
"Description of the Guarantee."
The guarantee covers the payment of distributions and other payments on the
preferred securities only if and to the extent that Lehman Brothers Holdings has
made a payment of interest or principal or other payments on the junior
subordinated debt securities. The guarantee, when taken together with Lehman
Brothers Holdings' obligations under the junior subordinated debt securities and
the indenture and its obligations under the declaration, will provide a full and
unconditional guarantee of distributions and all other amounts due on the
preferred securities.
Lehman Brothers Holdings acknowledges that the guarantee trustee shall
enforce the guarantee on behalf of the holders of the preferred securities. If
Lehman Brothers Holdings fails to make payments under the guarantee, the
guarantee allows the holders of the preferred securities to direct the guarantee
trustee to enforce its rights thereunder. If the guarantee trustee fails to
enforce the guarantee, any holder of preferred securities may directly sue
Lehman Brothers Holdings to enforce the guarantee trustee's rights under the
guarantee. Such holder need not first sue the trust, the guarantee trustee, or
any other person or entity. A holder of preferred securities may also directly
sue Lehman Brothers Holdings to enforce such holder' right to receive payment
under the guarantee. Such holder need not first (1) direct the guarantee trustee
to enforce the terms of the guarantee or (2) sue the trust or any other person
or entity.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, special United States tax
counsel to Lehman Brothers Holdings, the following discussion is an accurate
summary of the material United States federal income tax consequences of the
purchase, ownership and disposition of the preferred securities.
Except where we state otherwise, this summary deals only with preferred
securities held as capital assets by a holder who:
- is a United States person (as defined below), and
- purchases the preferred securities upon original issuance at their
original issue price.
A "United States person" is a holder who is one of the following:
- a citizen or resident of the United States,
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision of the
United States,
- an estate the income of which is subject to United States federal income
taxation regardless of its source,
- any trust that (x) is subject to the supervision of a court within the
United States and the control of one or more United States persons or (y)
has a valid election in effect under applicable United States Treasury
regulations to be treated as a United States person.
Your tax treatment may vary depending on your particular situation. This
summary does not address all the tax consequences that may be relevant to
holders that are subject to special tax treatment, such as:
- banks;
- real estate investment trusts;
- regulated investment companies;
- insurance companies;
- dealers in securities or currencies;
- tax-exempt investors;
- persons holding preferred securities as part of a (1) hedging, (2)
integrated, (3) conversion or (4) constructive sale transaction;
- persons holding preferred securities as part of a straddle; or
- foreign investors.
In addition, this summary does not include any description of the following,
either of which may be applicable to you:
- any alternative minimum tax consequences; or
- the tax laws of any state, local or foreign government.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury regulations promulgated under the Code and administrative
and judicial interpretations. These income tax laws, regulations and
interpretations, however, may change at any time. Any change could be
retroactive to the issuance date of the preferred securities.
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The authorities on which this summary is based are subject to various
interpretations. Either the Internal Revenue Service ("IRS") or the courts could
disagree with the explanations or conclusions contained in this summary.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES
TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED SECURITIES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS.
FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE PREFERRED SECURITIES UPON THE
OCCURRENCE OF A TAX EVENT SEE "CERTAIN TERMS OF THE PREFERRED
SECURITIES--SPECIAL EVENT REDEMPTION."
CLASSIFICATION OF THE TRUST
We intend to take the position that the trust will be classified as a
grantor trust for United States federal income tax purposes and not as an
association taxable as a corporation. As a condition to the issuance of the
junior subordinated debt securities, Simpson Thacher & Bartlett will deliver an
opinion that under current law and assuming full compliance with the terms of
the trust's amended and restated declaration, and based upon certain facts and
assumptions contained in such opinion, the trust will be classified as a grantor
trust for United States federal income tax purposes. As a result, for United
States federal income tax purposes, you generally will be treated as owning an
undivided beneficial ownership interest in the junior subordinated debt
securities. Thus, you will be required to include in your gross income your pro
rata share of the interest income or original issue discount that is paid or
accrued on the junior subordinated debt securities. See "--Interest Income and
Original Issue Discount."
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Lehman Brothers Holdings, the trust and you (by your acceptance of a
beneficial ownership interest in a preferred security) will agree to treat the
junior subordinated debt securities as indebtedness for all United States tax
purposes. As a condition to the issuance of the junior subordinated debt
securities, Simpson Thacher & Bartlett will deliver an opinion that under
current law, and based upon certain facts and assumptions contained in such
opinion, the junior subordinated debt securities will be classified as
indebtedness for United States federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
You will generally be taxed on the stated interest on the junior
subordinated debt securities as ordinary income at the time it is paid or
accrued in accordance with your regular method of tax accounting. We anticipate
that the junior subordinated debt securities will not be issued with an issue
price that is less than their stated redemption price at maturity. Thus, the
junior subordinated debt securities will not be subject to the special original
issue discount ("OID") rules, at least upon initial issuance.
If, however, Lehman Brothers Holdings exercises its right to defer payments
of interest on the junior subordinated debt securities, the junior subordinated
debt securities will become OID instruments at such time. In such case, you will
be subject to the special OID rules described below. Once the junior
subordinated debt securities become OID instruments, they will be taxed as OID
instruments for as long as they remain outstanding.
Under the OID economic accrual rules, the following occurs:
- you would accrue an amount of interest income each year that approximates
the stated interest payments called for under the terms of the junior
subordinated debt securities using the constant- yield-to-maturity method
of accrual described in section 1272 of the Code;
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- the actual cash payments of interest you receive on the junior
subordinated debt securities would not be reported separately as taxable
income;
- any amount of OID included in your gross income (whether or not during a
deferral period) with respect to the preferred securities will increase
your tax basis in such preferred securities; and
- the amount of distributions that you receive in respect of such accrued
OID will reduce your tax basis in such preferred securities.
The Treasury regulations dealing with OID have not yet been addressed in any
rulings or other interpretations by the IRS. It is possible that the IRS could
assert that the junior subordinated debt securities were issued initially with
OID. If the IRS were successful, regardless of whether Lehman Brothers Holdings
exercises its option to defer payments of interest on such junior subordinated
debt securities, you would be subject to the special OID rules described above.
If you are a corporate holder of preferred securities, you will not be
entitled to a dividends-received deduction with respect to any income you
recognize with respect to the preferred securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF
THE TRUST
As described under the caption "Certain Terms of the Preferred
Securities--Distribution of the Junior Subordinated Debt Securities," the junior
subordinated debt securities held by the trust may be distributed to you in
exchange for your preferred securities when the trust is liquidated. Under
current law, except as described below, this type of distribution would not be
taxable. Upon a distribution, you will receive your pro rata share of the junior
subordinated debt securities previously held indirectly through the trust. Your
holding period and aggregate tax basis in the junior subordinated debt
securities will equal the holding period and aggregate tax basis that you had in
your preferred securities before the distribution.
Lehman Brothers Holdings has the option to redeem the junior subordinated
debt securities and distribute the resulting cash in liquidation of the trust.
This distribution of cash would be taxable as described below in "--Sales of
Preferred Securities." Further, in other circumstances described under "Certain
Terms of the Preferred Securities--Special Event Redemption," Lehman Brothers
Holdings may redeem the junior subordinated debt securities and distribute cash
in liquidation of the trust. This distribution of cash would also be taxable as
described below in "--Sales of Preferred Securities."
If you receive junior subordinated debt securities in exchange for your
preferred securities, you would accrue interest in respect of the junior
subordinated debt securities received from the trust in the manner described
above under "--Interest Income and Original Issue Discount."
If the trust is treated as an association taxable as a corporation, a tax
event will occur. If Lehman Brothers Holdings elects to distribute the junior
subordinated debt securities to you at this time, or to redeem the securities
and distribute the resulting cash, the distribution or the redemption and
distribution, would likely constitute a taxable event to the trust and to you.
SALES OF PREFERRED SECURITIES
If you sell or redeem your preferred securities, you will recognize gain or
loss equal to the difference between:
- your amount realized on the sale or redemption of the preferred securities
(less an amount equal to any accrued but unpaid qualified stated interest
that you did not previously include in income, which will be taxable as
such); and
- your adjusted tax basis in your preferred securities sold or redeemed.
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The gain or loss will generally be a long-term capital gain or loss if you
have held your preferred securities for more than one year. Long-term capital
gains of individuals derived with respect to capital assets held for more than
one year are taxed at a maximum rate of 20%. The deductibility of capital losses
is subject to limitations.
NON-UNITED STATES HOLDERS
The following discussion only applies to you if you are not a United States
person. As discussed above, the preferred securities will be treated as evidence
of an indirect beneficial ownership interest in the junior subordinated debt
securities. See "--Classification of the Trust." Thus, under present United
States federal income tax law, and subject to the discussion below concerning
backup withholding:
(1) no withholding of United States federal income tax will be required with
respect to the payment by Lehman Brothers Holdings or any paying agent of
principal or interest (which for purposes of this discussion includes any
OID) to you on the preferred securities (or the junior subordinated debt
securities) if you meet all of the following requirements:
- you do not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Lehman Brothers Holdings
entitled to vote within the meaning of section 871(h)(3) of the Code and
the regulations thereunder;
- you are not a controlled foreign corporation that is related to Lehman
Brothers Holdings through stock ownership;
- you are not a bank whose receipt of interest on the junior subordinated
debt securities is described in section 881(c)(3)(A) of the Code; and
- you satisfy the statement requirement (described generally below) set
forth in section 871(h) and section 881(c) of the Code and the regulations
thereunder; and
(2) no withholding of United States federal income tax generally will be
required with respect to any gain you realize upon the sale or other
disposition of the preferred securities (or the junior subordinated debt
securities).
To satisfy the requirement referred to in (1) above, you, or a financial
institution holding the preferred securities on your behalf, must provide, in
accordance with specified procedures, to the trust or its paying agent, a
statement to the effect that you are not a United States person. Currently, you
can meet this requirement if one of the following is performed:
- you provide your name and address, and certify, under penalties of
perjury, that you are not a United States person (this certification may
be made on an IRS Form W-8 (or successor form)); or
- a financial institution holding the preferred securities on your behalf
certifies, under penalties of perjury, that:
(1) you provided it with a statement described above; and
(2) the financial institution furnishes a paying agent with a copy
of the statement.
Under final Treasury regulations (the "Final Regulations"), the statement
requirement referred to in (1) above may also be satisfied with other
documentary evidence for interest paid after December 31, 1999 with respect to
an offshore account or through certain foreign intermediaries.
If you cannot satisfy the requirements of the "portfolio interest" exception
described in (1) above, payments of premium, if any, and interest (including any
OID) made to you, will be subject to a 30%
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United States withholding tax unless you provide Lehman Brothers Holdings or its
paying agent, as the case may be, with one of the following properly executed
forms:
- IRS Form 1001 (or successor form) claiming an exemption from, or a
reduction of, this withholding tax under the benefit of a tax treaty; or
- IRS Form 4224 (or successor form) stating that interest paid on the
preferred securities (or the junior subordinated debt securities) is not
subject to this withholding tax because it is effectively connected with
your conduct of a trade or business in the United States.
Under the Final Regulations, you will generally be required to provide IRS
Form W-8 in lieu of IRS Form 1001 and IRS Form 4224, although alternative
documentation may be applicable in certain situations.
If you are engaged in a trade or business in the United States and interest
on the preferred securities (or junior subordinated debt securities) is
effectively connected with the conduct of your trade or business, you will be
subject to United States federal income tax on such interest on a net income
basis in the same manner as if you were a United States person. However, you
will not be subject to withholding described above.
In addition, if you are a foreign corporation, you may be subject to a
branch profits tax equal to 30% (or lesser rate under an applicable tax treaty)
of your effectively connected earnings and profits for the taxable year, subject
to adjustments. For this purpose, such interest would be included in your
earnings and profits.
You will generally not be subject to United States federal income tax on any
gain you realize upon the sale or other disposition of the preferred securities
(or the junior subordinated debt securities) unless:
- the gain is effectively connected with your trade or business in the
United States; or
- you are an individual and you are present in the United States for 183
days or more in the taxable year of such sale, exchange or retirement and
certain other conditions are met.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Income on the preferred securities held of record by United States persons
(other than corporations and other exempt holders) will be reported annually to
such holders and to the IRS. Such income will be reported to you on Forms 1099,
which should be mailed to the holders of record by January 31 following each
calendar year.
"Backup withholding" at a rate of 31% will apply to payments of interest to
non-exempt United States persons unless you:
- furnish your taxpayer identification number in the manner prescribed in
applicable Treasury regulations;
- certify that such number is correct;
- certify as to no loss of exemption from backup withholding; and
- meet certain other conditions.
In general, no information reporting or backup withholding will be required
with respect to payments made by the trust or any paying agent to non-United
States persons if a statement described in (1) under "Non-United States Holders"
has been received and the payor does not have actual knowledge that you are a
United States person.
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In addition, backup withholding and information reporting may apply to the
proceeds from disposition of preferred securities (or junior subordinated debt
securities) within the United States or conducted through certain United States
related financial intermediaries unless the statement described in (1) under
"Non-United States Holders" has been received (and the payor does not have
actual knowledge that you are a United States person) or you otherwise establish
an exemption.
Any amounts withheld from you under the backup withholding rules generally
will be allowed as a refund or a credit against your United States federal
income tax liability, provided the required information is furnished to the IRS.
PLAN OF DISTRIBUTION
The trust may offer the preferred securities in one or more of the following
ways from time to time:
- to or through underwriters or dealers;
- by itself directly;
- through agents; or
- through a combination of any of these methods of sale.
Any such underwriters, dealers or agents may include Lehman Brothers Inc.
The prospectus supplement relating to an offering of preferred securities
will set forth the terms of such offering, including:
- the name or names of any underwriters, dealers or agents;
- the purchase price of the preferred securities and the proceeds to Lehman
Brothers Holdings from such sale;
- any underwriting discounts and commissions or agency fees and other items
constituting underwriters' or agents' compensation;
- the initial public offering price;
- any discounts or concessions to be allowed or reallowed or paid to
dealers; and
- any securities exchanges on which such preferred securities may be listed.
Any initial public offering prices, discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in an offering of preferred securities, such
preferred securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The securities may be either offered to the
public through underwriting syndicates represented by one or more managing
underwriters or by one or more underwriters without a syndicate. Unless
otherwise set forth in the prospectus supplement, the underwriters will not be
obligated to purchase preferred securities unless specified conditions are
satisfied, and if the underwriters do purchase any preferred securities, they
will purchase all preferred securities.
In connection with underwritten offerings of the preferred securities and in
accordance with applicable law and industry practice, underwriters may
over-allot or effect transactions that stabilize, maintain or otherwise affect
the market price of the preferred securities at levels above those that might
otherwise prevail in the open market, including by entering stabilizing bids,
effecting syndicate covering transactions or imposing penalty bids, each of
which is described below.
30
<PAGE>
- A stabilizing bid means the placing of any bid, or the effecting of any
purchase, for the purpose of pegging, fixing or maintaining the price of a
security.
- A syndicate covering transaction means the placing of any bid on behalf of
the underwriting syndicate or the effecting of any purchase to reduce a
short position created in connection with the offering.
- A penalty bid means an arrangement that permits the managing underwriter
to reclaim a selling concession from a syndicate member in connection with
the offering when offered securities originally sold by the syndicate
member are purchased in syndicate covering transactions.
These transactions may be effected on the NYSE, in the over-the-counter
market, or otherwise. Underwriters are not required to engage in any of these
activities, or to continue such activities if commenced.
If dealers are utilized in the sale of preferred securities, Lehman Brothers
Holdings will sell such preferred securities to the dealers as principals. The
dealers may then resell such preferred securities to the public at varying
prices to be determined by such dealers at the time of resale. The names of the
dealers and the terms of the transaction will be set forth in the prospectus
supplement relating to that transaction.
Preferred securities may be sold directly by Lehman Brothers Holdings to one
or more institutional purchasers, or through agents designated by Lehman
Brothers Holdings from time to time, at a fixed price or prices, which may be
changed, or at varying prices determined at the time of sale. Any agent involved
in the offer or sale of the preferred securities in respect of which this
prospectus is delivered will be named, and any commissions payable by Lehman
Brothers Holdings to such agent will be set forth, in the prospectus supplement
relating to that offering. Unless otherwise indicated in such prospectus
supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.
If so indicated in the applicable prospectus supplement, Lehman Brothers
Holdings will authorize agents, underwriters or dealers to solicit offers from
certain types of institutions to purchase preferred securities from Lehman
Brothers Holdings at the public offering price set forth in such prospectus
supplement pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. Such contracts will be subject only
to those conditions set forth in the prospectus supplement and the prospectus
supplement will set forth the commission payable for solicitation of such
contracts.
Lehman Brothers Inc., the broker-dealer subsidiary of Lehman Brothers
Holdings, is a member of the National Association of Securities Dealers, Inc.
and may participate in distributions of the preferred securities. Accordingly,
offerings of preferred securities in which Lehman Brothers Inc. participates
will conform to the requirements set forth in Rule 2720 of the Conduct Rules of
the NASD. Furthermore, any underwriters offering the preferred securities will
not confirm sales to any accounts over which they exercise discretionary
authority without the prior approval of the customer.
This prospectus together with any applicable prospectus supplement may also
be used by Lehman Brothers Inc. in connection with offers and sales of the
preferred securities in market-making transactions at negotiated prices related
to prevailing market prices at the time of sale. Lehman Brothers Inc. may act as
principal or agent in such transactions. Lehman Brothers Inc. has no obligation
to make a market in any of the preferred securities and may discontinue any
market-making activities at any time without notice, at its sole discretion.
Underwriters, dealers and agents may be entitled, under agreements with
Lehman Brothers Holdings, to indemnification by Lehman Brothers Holdings
relating to material misstatements and omissions. Underwriters, dealers and
agents may be customers of, engage in transactions with, or
31
<PAGE>
perform services for, Lehman Brothers Holdings and affiliates of Lehman Brothers
Holdings in the ordinary course of business.
Each series of preferred securities will be a new issue of securities and
will have no established trading market. Any underwriters to whom preferred
securities are sold for public offering and sale may make a market in such
preferred securities, but such underwriters will not be obligated to do so and
may discontinue any market making at any time without notice. The preferred
securities may or may not be listed on a national securities exchange. No
assurance can be given that there will be a market for the preferred securities.
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
governed by the Employee Retirement Income Security Act of 1974, should consider
the fiduciary standards of ERISA in the context of the ERISA plan's particular
circumstances before authorizing an investment in the preferred securities of
the trust. Among other factors, the fiduciary should consider whether such an
investment is in accordance with the documents governing the ERISA plan and
whether the investment is appropriate for the ERISA plan in view of its overall
investment policy and diversification of its portfolio.
ERISA and the Code prohibit ERISA plans, as well as individual retirement
accounts and Keogh plans governed by section 4975 of the Code, from engaging in
certain transactions involving "plan assets" with parties that are "parties in
interest" under ERISA or "disqualified persons" under the Code relating to the
plan. The U.S. Department of Labor has issued a final regulation with regard to
whether the underlying assets of an entity in which employee benefit plans
acquire equity interests are deemed to be plan assets.
Under such regulation, for purposes of ERISA and section 4975 of the Code,
the assets of the trust would be deemed to be "plan assets" of a plan whose
assets were used to purchase preferred securities of the trust if the preferred
securities of the trust were considered to be equity interests in the trust and
no exception to plan asset status were applicable under such regulation.
If the assets of the trust were deemed to be plan assets of plans that are
holders of the preferred securities of the trust, a plan's investment in the
preferred securities of the trust might be deemed to constitute a delegation
under ERISA of the duty to manage plan assets by a fiduciary investing in
preferred securities of the trust. Also, Lehman Brothers Holdings might be
considered a "party in interest" or "disqualified person" relating to plans
whose assets were used to purchase preferred securities of the trust. If this
were the case, an investment in preferred securities of the trust by a plan
might constitute, or in the course of the operation of the trust give rise to, a
prohibited transaction under ERISA or the Code. In particular, it is likely that
under such circumstances a prohibited extension of credit to Lehman Brothers
Holdings would be considered to occur under ERISA and the Code.
In addition, Lehman Brothers Holdings might be considered a "party in
interest" or "disqualified person" for certain plans for reasons unrelated to
the operation of the trust, e.g., because of the provision of services by Lehman
Brothers Holdings or an affiliate to the plan. A purchase of preferred
securities of the trust by any such plan would be likely to result in a
prohibited extension of credit to Lehman Brothers Holdings, without regard to
whether the assets of the trust constituted plan assets.
Because of the possibility that a prohibited extension of credit could occur
as a result of the purchase or holding of the preferred securities of the trust
by a plan, the preferred securities of the
32
<PAGE>
trust may be not purchased or held by any plan or any person investing "plan
assets" of any plan, unless such purchaser or holder is eligible for the
exemptive relief available under:
- Prohibited Transaction Class Exemption 96-23 for transactions determined
by in-house asset managers,
- PTCE 95-60 for transactions involving insurance company general accounts,
- PTCE 91-38 for transactions involving bank collective investment funds,
- PTCE 90-1 for transactions involving insurance company separate accounts,
or
- PTCE 84-14 for transactions determined by independent qualified asset
managers.
Any purchaser of the preferred securities of the trust or any interest
therein will be deemed to have represented to the trust that either
(a) it is not a plan and is not purchasing such securities or interest
therein on behalf of or with "plan assets" of any plan or
(b) its purchase and holding of the preferred securities of the trust or
interest therein is eligible for the exemptive relief available under
PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is important that any person considering
the purchase of preferred securities of the trust with plan assets consult with
its counsel regarding the consequences under ERISA and the Code of the
acquisition and ownership of preferred securities and the availability of
exemptive relief under the class exemptions listed above. In JOHN HANCOCK MUTUAL
LIFE INSURANCE CO. V. HARRIS TRUST AND SAVINGS BANK, 114 S.Ct. 517 (1993), the
Supreme Court ruled that assets held in an insurance company's general account
may be deemed to be "plan assets" for ERISA purposes under certain
circumstances. The issues raised in HARRIS TRUST have also been the subject of
legislative action, and have been addressed in proposed regulations issued by
the U.S. Department of Labor in December 1997.
33
<PAGE>
LEGAL MATTERS
Karen M. Muller, Esq., Deputy General Counsel of Lehman Brothers Holdings,
or counsel to be identified in the applicable prospectus supplement, will act as
legal counsel to Lehman Brothers Holdings. Ms. Muller beneficially owns, or has
rights to acquire under Lehman Brothers Holdings' employee benefit plans, an
aggregate of less than 1% of Lehman Brothers Holdings' common stock. Richards,
Layton & Finger, Wilmington, Delaware, or counsel to be identified in the
applicable prospectus supplement, will act as legal counsel to the trust.
Simpson Thacher & Bartlett, New York, New York, or counsel to be identified in
the applicable prospectus supplement, will act as legal counsel to the
underwriters. Simpson Thacher & Bartlett has from time to time acted as counsel
for Lehman Brothers Holdings and its subsidiaries and may do so in the future.
EXPERTS
The consolidated financial statements and financial statement schedule of
Lehman Brothers Holdings Inc. as of November 30, 1998 and 1997, and for each of
the years in the three-year period ended November 30, 1998, have been audited by
Ernst & Young LLP, independent certified public accountants, as set forth in
their report on the consolidated financial statements. The consolidated
financial statements and such report are incorporated by reference in Lehman
Brothers Holdings' annual report on Form 10-K for the year ended November 30,
1998, and incorporated by reference in this prospectus. The consolidated
financial statements of Lehman Brothers Holdings referred to above are
incorporated by reference in this prospectus in reliance upon such report given
on the authority of said firm as experts in accounting and auditing. To the
extent that Ernst & Young LLP audits and reports on consolidated financial
statements of Lehman Brothers Holdings issued at future dates, and consents to
the use of their report thereon, such consolidated financial statements also
will be incorporated by reference in the registration statement in reliance upon
their report given on said authority.
34
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses to be incurred and paid by the
Registrants in connection with the offerings described in this Registration
Statement (other than underwriting discounts and commissions).
<TABLE>
<S> <C>
SEC registration fee............................................ $4,170,000
NASD fee........................................................ 30,500
Rating Agency fees.............................................. 1,000,000*
New York Stock Exchange listing fee............................. 250,000*
Legal fees and expenses......................................... 200,000*
Accounting fees and expenses.................................... 200,000*
Transfer Agent and Trustees fees and expenses................... 150,000*
Blue Sky qualification fees and expenses........................ 15,000*
Printing and engraving fees and expenses........................ 600,000*
Miscellaneous fees and expenses................................. 384,500*
---------
Total......................................................... $7,000,000
---------
---------
</TABLE>
- ------------------------
* Estimated and subject to future contingencies.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Restated Certificate of Incorporation of Lehman Brothers Holdings
requires Lehman Brothers Holdings to indemnify its directors and officers to the
fullest extent permitted by the Delaware General Corporation Law. In addition,
the officers and directors of Lehman Brothers Holdings are insured under
officers' and directors' liability insurance policies purchased by Lehman
Brothers Holdings. The directors, officers and employees of Lehman Brothers
Holdings and the Regular Trustees of each Trust are also insured against
fiduciary liabilities under the Employee Retirement Income Security Act of 1974.
The Declaration of each Trust provides that Lehman Brothers Holdings shall
indemnify the Property Trustee or any of its affiliates, the Delaware Trustee or
any of its affiliates, or any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee and the Delaware Trustee (each, a "Fiduciary Indemnified
Person") for, and hold each Fiduciary Indemnified Person harmless against, any
loss, liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or investigating
any claim or liability in connection with the exercise or performance of any of
its powers or duties under such Declaration.
The Declaration of each Trust also provides that Lehman Brothers Holdings
will indemnify, to the full extent permitted by law, any Regular Trustee,
affiliate of any Regular Trustee or any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular Trustee
or any affiliate thereof; or any officer, employee or agent of such Trust or its
affiliates (each, a "Debenture Issuer Indemnified Person") who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such Trust) by reason
of the fact that he is or was a Debenture Issuer Indemnified Person against
expenses (including attorney fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action,
II-1
<PAGE>
suit or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of such Trust, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Debenture Issuer
Indemnified Person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of such Trust, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful. The Declaration of each Trust also provides that
Lehman Brothers Holdings shall indemnify, to the full extent permitted by law,
any Debenture Issuer Indemnified Person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Trust to procure a judgment in its favor by reason of the
fact that he is or was a Debenture Issuer Indemnified Person against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust and except that no such indemnification shall be
made in respect of any claim, issue or matter as to which such Debenture Issuer
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that the Court of Chancery of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which such Court of Chancery or such other court shall deem proper. The
Declaration of each Trust further provides that expenses (including attorneys'
fees) incurred by a Debenture Issuer Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding referred to
in the immediately preceding two sentences shall be paid by Lehman Brothers
Holdings in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such Debenture Issuer
Indemnified Person to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by Lehman Brothers Holdings as
authorized in the Declaration.
Any underwriting agreement or agency agreement with respect to an offering
of securities registered hereunder will provide for indemnification of Lehman
Brothers Holdings and its officers and directors and the Trustees who signed
this Registration Statement by the underwriters or agents, as the case may be,
against certain liabilities including liabilities under the Securities Act of
1933 (the "Act").
ITEM 16. EXHIBITS
The Exhibit Index beginning on page E-1 is hereby incorporated by reference.
ITEM 17. UNDERTAKINGS
<TABLE>
<CAPTION>
1) The undersigned Registrants hereby undertake:
<S> <C> <C>
a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
i) To include any prospectus required by section 10(a)(3) of the Act;
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C> <C>
ii) To reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which has registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
iii) To include any material information with respect to the plan of distribution
not previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii) above
do not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by Lehman
Brothers Holdings pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement.
b) That, for the purposes of determining any liability under the Act, each such
post-effective amendment shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
c) To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the offering.
2) That, for purposes of determining any liability under the Act, each filing of Lehman Brothers
Holdings' annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3) Insofar as indemnification for liabilities arising under the Act may be permitted to
directors, officers and controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrants will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of such issue.
</TABLE>
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Lehman Brothers
Holdings Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement or Amendment thereto to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York, on April 27,
1999.
<TABLE>
<S> <C> <C>
LEHMAN BROTHERS HOLDINGS INC.
/s/ KAREN M. MULLER
-----------------------------------------
Karen M. Muller
VICE PRESIDENT
By:
</TABLE>
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment thereto has been signed below by the
following persons in the capacities indicated.
Dated: April 27, 1999
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
Chief Executive Officer
* and Chairman of the
- ------------------------------ Board of Directors
Richard S. Fuld, Jr. (principal executive
officer)
Chief Financial and
* Administrative Officer
- ------------------------------ (principal financial and
John L. Cecil accounting officer)
*
- ------------------------------ Director
Michael L. Ainslie
*
- ------------------------------ Director
John F. Akers
*
- ------------------------------ Director
Roger S. Berlind
*
- ------------------------------ Director
Thomas H. Cruikshank
*
- ------------------------------ Director
Henry Kaufman
*
- ------------------------------ Director
Hideichiro Kobayashi
*
- ------------------------------ Director
John D. Macomber
*
- ------------------------------ Director
Dina Merrill
</TABLE>
<TABLE>
<S> <C> <C> <C>
By: /s/ KAREN M. MULLER
-------------------------
Karen M. Muller
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, Lehman Brothers
Holdings Capital Trust III, Lehman Brothers Holdings Capital Trust IV, Lehman
Brothers Holdings Capital Trust V and Lehman Brothers Holdings Capital Trust VI
each certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement or Amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in New York, New York, on April 27, 1999.
<TABLE>
<S> <C> <C> <C>
LEHMAN BROTHERS HOLDINGS CAPITAL TRUST III
By: /s/ KAREN M. MULLER
-------------------------
Karen M. Muller
TRUSTEE
By: /s/ JENNIFER MARRE
-------------------------
Jennifer Marre
TRUSTEE
By: /s/ OLIVER BUDDE
-------------------------
Oliver Budde
TRUSTEE
LEHMAN BROTHERS HOLDINGS CAPITAL TRUST IV
By: /s/ KAREN M. MULLER
-------------------------
Karen M. Muller
TRUSTEE
By: /s/ JENNIFER MARRE
-------------------------
Jennifer Marre
TRUSTEE
By: /s/ OLIVER BUDDE
-------------------------
Oliver Budde
TRUSTEE
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C> <C>
LEHMAN BROTHERS HOLDINGS CAPITAL TRUST V
By: /s/ KAREN M. MULLER
-------------------------
Karen M. Muller
TRUSTEE
By: /s/ JENNIFER MARRE
-------------------------
Jennifer Marre
TRUSTEE
By: /s/ OLIVER BUDDE
-------------------------
Oliver Budde
TRUSTEE
LEHMAN BROTHERS HOLDINGS CAPITAL TRUST VI
By: /s/ KAREN M. MULLER
-------------------------
Karen M. Muller
TRUSTEE
By: /s/ JENNIFER MARRE
-------------------------
Jennifer Marre
TRUSTEE
By: /s/ OLIVER BUDDE
-------------------------
Oliver Budde
TRUSTEE
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.01 Form of underwriting agreement (including delayed delivery contract) for debt
securities
-- Filed previously
1.02 Form of underwriting agreement for preferred stock
-- Filed previously
1.03 Form of underwriting agreement for depositary shares
-- Filed previously
1.04 Form of underwriting agreement for trust preferred securities
-- Filed previously
4.01 Standard multiple series indenture provisions with respect to the senior and
subordinated debt securities
-- Incorporated by reference to Exhibit 4(a) of Post-Effective Amendment No. 1 to
Registration Statement (No. 33-16141) filed with the SEC on November 16, 1987
4.02 Indenture with respect to the senior debt securities
-- Incorporated by reference to Exhibit 4(b) of Post-Effective Amendment No. 1 to
Registration Statement (No. 33-16141) filed with the SEC on November 16, 1987
4.03 First supplemental indenture with respect to the senior debt securities
-- Incorporated by reference to Exhibit 4(m) of Registration Statement (No. 33-25797)
filed with the SEC on November 25, 1988
4.04 Second supplemental indenture with respect to the senior debt securities
-- Incorporated by reference to Exhibit 4(e) of Registration Statement (No. 33-49062)
filed with the SEC on June 30, 1992
4.05 Third supplemental indenture with respect to the senior debt securities
-- Incorporated by reference to Exhibit 4(f) of Registration Statement (No. 33-46146)
filed with the SEC on March 10, 1992
4.06 Fourth supplemental indenture with respect to the senior debt securities
-- Incorporated by reference to Exhibit 4(f) of Form 8-A filed with the SEC on
October 7, 1993
4.07 Fifth supplemental indenture with respect to the senior debt securities
-- Incorporated by reference to Exhibit 4(h) of Post-Effective Amendment No. 1 to
Registration Statement (No. 33-56615) filed with the SEC on August 24, 1995
4.08 Sixth supplemental indenture with respect to the senior debt securities
-- Incorporated by reference to Exhibit 4(h) of S-3 Registration Statement (No.
333-38227) filed with the SEC on October 17, 1997
4.09 Form of senior debt security--fixed rate note
-- Filed previously
4 .10 Form of senior debt security--variable rate note
-- Filed previously
</TABLE>
E-1
<PAGE>
<TABLE>
<C> <S>
4.11 Form of senior debt security--zero coupon note
-- Incorporated by reference to Exhibit 4.1 of Current Report on Form 8-K filed with
the SEC on April 27, 1988
4.12 Form of senior debt security--medium-term note (fixed rate)
-- Filed herewith
4.13 Form of senior debt security--medium-term note (floating rate)
-- Filed herewith
4.14 Form of senior debt security--medium-term note (currency indexed)
-- Filed herewith
4.15 Indenture with respect to the subordinated debt securities
-- Incorporated by reference to Exhibit 2 of Form 8-A filed with the SEC on February
8, 1996
4.16 Supplemental indenture with respect to the subordinated debt securities
-- Incorporated by reference to Exhibit 3 of Form 8-A filed with the SEC on February
8, 1996
4.17 Form of subordinated debt security
-- Filed previously
4.18 Form of subordinated debt security to be issued to each trust
-- Filed previously
4.19 Certificate(s) of designations with respect to the offered preferred stock
-- Upon issuance of any such stock, will be filed as Exhibit 4.19 of a Current Report
on Form 8-K and thereby incorporated by reference
4.20 Form of deposit agreement with respect to the depositary shares (including the form
of depositary receipt to be issued thereunder)
-- Filed previously
4.21 [Reserved]
4.22 Certificate of Trust of Lehman Brothers Holdings Capital Trust III
-- Incorporated by reference to Exhibit 4(w) of S-3 Registration Statement (No.
333-50197) filed with the SEC on April 15, 1998
4.23 Certificate of Trust of Lehman Brothers Holdings Capital Trust IV
-- Filed previously
4 .24 Certificate of Trust of Lehman Brothers Holdings Capital Trust V
-- Filed previously
</TABLE>
E-2
<PAGE>
<TABLE>
<C> <S>
4.25 Certificate of Trust of Lehman Brothers Holdings Capital Trust VI
-- Filed previously
4.26 [Reserved]
4.27 Declaration of Trust of Lehman Brothers Holdings Capital Trust III
-- Incorporated by reference to Exhibit 4(z) of S-3 Registration Statement (No.
333-50197) filed with the SEC on April 15, 1998
4.28 Declaration of Trust of Lehman Brothers Holdings Capital Trust IV
-- Filed previously
4.29 Declaration of Trust of Lehman Brothers Holdings Capital Trust V
-- Filed previously
4.30 Declaration of Trust of Lehman Brothers Holdings Capital Trust VI
-- Filed previously
4.31 Form of Amended and Restated Declaration of Trust for each trust (including the forms
of preferred security and common security to be issued thereunder)
-- Filed previously
4.32 Form of Guarantee with respect to the preferred securities of each trust
-- Filed previously
5.01 Opinion and consent of Karen M. Muller, Esq. as to the validity of the debt
securities, preferred stock, depositary shares and guarantees of Lehman Brothers
Holdings being registered
-- Filed previously
5.02 Opinion and consent of Richards, Layton & Finger as to the validity of the trust
preferred securities being registered
-- Filed previously
8.01 Opinion and consent of Simpson Thacher & Bartlett regarding certain tax matters
-- Filed previously
12.01 Computation in support of ratio of earnings to fixed charges
-- Incorporated by reference to Exhibit 12.1 of Annual Report on Form 10-Q filed with
the SEC on April 14, 1999
12.02 Computation in support of ratio of earnings to combined fixed charges and preferred
dividends
-- Incorporated by reference to Exhibit 12.2 of Annual Report on Form 10-Q filed with
the SEC on April 14, 1999
23.01 Consent of Karen M. Muller, Esq.
-- Included in Exhibit 5.01 above
23.02 Consent of Richards, Layton & Finger
-- Included in Exhibit 5.02 above
23.03 Consent of Ernst & Young LLP
-- Filed herewith
23 .04 Consent of Simpson Thacher & Bartlett
-- Included in Exhibit 8.01 above
</TABLE>
E-3
<PAGE>
<TABLE>
<C> <S>
24.01 Powers of attorney
-- Filed previously
25.1 Form T-1 statement of eligibility and qualification under the Trust Indenture Act of
1939 (a "Form T-1") of Citibank, N.A. as trustee under the indenture with respect to
the senior debt securities
-- Filed previously
25.2 Form T-1 of The Chase Manhattan Bank ("Chase") as trustee under the indenture with
respect to the subordinated debt securities
-- Filed previously
25.3 Form T-1 of Chase as trustee under the declaration of trust of Lehman Brothers
Holdings Capital Trust II
-- Filed previously
25.4 Form T-1 of Chase as trustee under the declaration of trust of Lehman Brothers
Holdings Capital Trust III
-- Filed previously
25.5 Form T-1 of Chase as trustee under the declaration of trust of Lehman Brothers
Holdings Capital Trust IV
-- Filed previously
25.6 Form T-1 of Chase as trustee under the declaration of trust of Lehman Brothers
Holdings Capital Trust V
-- Filed previously
25.7 Form T-1 of Chase as trustee under the declaration of trust of Lehman Brothers
Holdings Capital Trust VI
-- Filed previously
25.8 Form T-1 of Chase as trustee under the guarantee for the benefit of holders of trust
preferred securities of Lehman Brothers Holdings Capital Trust II
-- Filed previously
25.9 Form T-1 of Chase as trustee under the guarantee for the benefit of holders of trust
preferred securities of Lehman Brothers Holdings Capital Trust III
-- Filed previously
25.10 Form T-1 of Chase as trustee under the guarantee for the benefit of holders of trust
preferred securities of Lehman Brothers Holdings Capital Trust IV
-- Filed previously
25.11 Form T-1 of Chase as trustee under the guarantee for the benefit of holders of trust
preferred securities of Lehman Brothers Holdings Capital Trust V
-- Filed previously
25.12 Form T-1 of Chase as trustee under the guarantee for the benefit of holders of trust
preferred securities of Lehman Brothers Holdings Capital Trust VI
-- Filed previously
</TABLE>
E-4
<PAGE>
Exhibit 4.12
CUSIP NO. ___________
REGISTERED FACE AMOUNT:.
No. ___
If this Note is an OID Note (as defined below) the following legend is
applicable:
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES
INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE ISSUE PRICE OF THIS
NOTE IS _____% OF ITS PRINCIPAL AMOUNT, AND THE AMOUNT OF ORIGINAL
ISSUE DISCOUNT, THE YIELD TO MATURITY COMPOUNDED _____________, THE
ISSUE DATE AND THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ALLOCABLE TO THE
SHORT PERIOD DETERMINED USING THE EXACT METHOD WITHIN THE MEANING OF
PROPOSED TREASURY REGULATION SECTION 1.1272- 1(c)(2)(ii) ARE AS SET
FORTH BELOW.
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTE, SERIES
(FIXED RATE)
If the registered owner of this Note (as indicated below) is The
Depository Trust Company (the "Depository") or a nominee of the Depository,
this Note is a Note in global form (a "Global Security") and the following
legends are applicable except as specified on the reverse hereof:
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY OR A NOMINEE OF
THE DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK,
NEW YORK) TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO
CEDE& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY.
<PAGE>
2
<TABLE>
<S> <C> <C>
ISSUE PRICE: $ OPTION TO RECEIVE PAYMENTS OPTIONAL REPAYMENT PRICES:
IN THE SPECIFIED CURRENCY:
ISSUE DATE: [ ] YES [ ] NO OPTIONAL INTEREST RATE RESET:
[ ] YES [ ] NO
MATURITY DATE: SPECIFIED CURRENCY:
OPTIONAL RESET DATES:
INTEREST RATE: AMORTIZING NOTE:
[ ] YES [ ] NO OPTIONAL REDEMPTION:
INTEREST PAYMENT DATES: [ ] YES [ ] NO
SINKING FUND:
REGULAR RECORD DATES: INITIAL REDEMPTION DATE:
TOTAL AMOUNT OF OID:
EXCHANGE RATE AGENT: INITIAL REDEMPTION
YIELD TO MATURITY: PERCENTAGE: %
DEPOSITORY:
INITIAL ACCRUAL PERIOD OID: APPLICABILITY OF ANNUAL REDEMPTION
DUAL CURRENCY NOTE: PERCENTAGE REDUCTION:
[ ] YES [ ] NO AUTHORIZED DENOMINATIONS: [ ] YES [ ] NO
If yes, state Annual Percentage
OPTION ELECTION DATES: EXTENDIBLE NOTE: Reduction: %
[ ] YES [ ] NO
OPTIONAL PAYMENT RENEWABLE NOTE:
CURRENCY: EXTENSION PERIOD: [ ] YES [ ] NO
DESIGNATED EXCHANGE NUMBER OF EXTENSION PERIODS: INITIAL MATURITY DATE:
RATE:
OPTION TO ELECT REPAYMENT: SPECIAL ELECTION INTERVAL:
OPTION VALUE CALCULATION [ ] YES [ ] NO
AGENT: RENEWABLE IN PART:
OPTIONAL REPAYMENT DATES: [ ] YES [ ] NO
OTHER PROVISIONS:
AUTHORIZED RENEWABLE AMOUNTS:
SPECIAL ELECTION PERIOD:
</TABLE>
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the
"Company," which term includes any successor corporation under the Indenture
referred to on the reverse hereof), for value received, hereby promises to
pay to ___________, or registered assigns, on the Maturity Date the Principal
Amount hereof (as defined below) and, if so specified above, to pay interest
thereon from the Issue Date specified above or from the most recent Interest
Payment Date specified above to which interest has been paid or duly provided
for at the Interest Rate specified above until the principal hereof is paid
or made available for payment and (to the extent that the payment of such
interest shall be legally enforceable) at such rate per annum on any overdue
principal and premium and on any overdue instalment of interest. Unless
otherwise specified above, and except as provided in Section 8 on the reverse
hereof if this Note is a Dual Currency Note (as hereinafter defined),
payments of principal, premium, if any, and interest hereon will be made in
U.S. dollars; if the Specified Currency set forth above is a currency other
than U.S. dollars(a "Foreign Currency"), such payments will be made in U.S.
dollars based on the equivalent of that Foreign Currency converted into U.S.
dollars in the manner set forth in Section 2 on the reverse hereof. If the
Specified
<PAGE>
3
Currency is a Foreign Currency and it is so provided above, the Holder may
elect to receive such payments in that Foreign Currency by delivery of a
written request to the Trustee (or to any duly appointed Paying Agent) at the
Corporate Trust Office (as defined below) not later than 10 calendar days
prior to the applicable payment date, and such election will remain in effect
for the Holder until revoked by written notice to the Trustee (or to any such
Paying Agent) at the Corporate Trust Office received not later than 10 calendar
days prior to the applicable payment date; provided, however, no such
election or revocation may be made if, with respect to this Note, (i) an
Event of Default has occurred, (ii) the Company has exercised any discharge
or defeasance options or (iii) the Company has given a notice of redemption.
In the event the Holder makes any such election pursuant to the preceding
sentence, such election will not be effective on any transferee of such
Holder and such transferee shall be paid in U.S. dollars unless such
transferee makes an election pursuant to the preceding sentence; provided,
however, that such election, if in effect while funds are on deposit with the
Trustee to satisfy and discharge this Note, will be effective on any such
transferee unless otherwise specified above. The "Principal Amount" of this
Note at any time means (i) if this Note is an OID Note, the Amortized Face
Amount at such time as described in Section 7 on the reverse hereof, (ii) if
this Note is an Amortizing Note, the Outstanding Face Amount at such time as
described in Section 4 on the reverse hereof, (iii) in all other cases, the
Face Amount hereof.
If this Note is subject to an Annual Percentage Reduction as
specified above, the Redemption Price shall initially be the Initial
Redemption Percentage of the Principal Amount of this Note on the Initial
Redemption Date and shall decline at each anniversary of the Initial
Redemption Date (each such date, a "Redemption Date") by the Annual
Percentage Reduction of such Principal Amount until the Redemption Price is
100% of such Principal Amount.
In the event of any optional redemption by the Company, any repayment
at the option of the Holder, acceleration of the maturity of this Note or other
prepayment of this Note prior to the Maturity Date specified above, the term
"Maturity" when used herein shall refer, where applicable, to the date of
redemption, repayment, acceleration or other prepayment of this Note.
An "OID Note" is any Note (a) that has been issued at an Issue
Price lower, by more than a de minimis amount (as determined under United
States federal income tax rules applicable to original issue discount
instruments), than the Face Amount thereof and (b) any other Note that for
United States federal income tax purposes would be considered an original
issue discount instrument.
Except as provided in the following paragraph, the Company will pay
interest semiannually on February 15 and August
<PAGE>
4
15 of each year (unless other Interest Payment Dates are specified above)
(each an "Interest Payment Date"), commencing with the first Interest Payment
Date next succeeding the Issue Date, and at Maturity; provided that any
payment of principal, premium, if any, or interest to be made on any Interest
Payment Date or on a date of Maturity that is not a Business Day shall be
made on the next succeeding Business Day with the same force and effect as if
made on such Interest Payment Date or such date of Maturity, as the case may
be, and no additional interest shall accrue as a result of such delayed
payment. The term "Business Day" means any day, other than a Saturday or
Sunday, that meets each of the following applicable requirements: such day
is (a) not a day on which banking institutions in New York City are
authorized or required by law or executive order to close; (b) if the
Specified Currency is a Foreign Currency other than Euros, not a day on which
banking institutions are authorized or required by law to close in the
principal financial center of the country issuing the Foreign Currency and
(c) if the Specified Currency is Euros, a day on which the Trans-European
Automated Real-Time Gross Settlement Express Transfer is open. Each payment of
interest hereon shall include interest accrued through the day before the
Interest Payment Date or date of Maturity, as the case may be. Unless
otherwise specified above, interest on this Note will be computed on the
basis of a 360-day year of twelve 30-day months. In no event shall the
interest rate of this Note be higher than the maximum rate permitted by
applicable law, as the same may be modified by United States law of general
application.
Unless otherwise specified above, the interest payable on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Note (or one or more predecessor Notes) is registered at the
close of business on the Regular Record Date indicated above (whether or not a
Business Day) next preceding such Interest Payment Date; provided that,
notwithstanding any provision of the Indenture to the contrary, interest
payable on any date of Maturity shall be payable to the Person to whom
principal shall be payable; and provided, further, that, unless otherwise
specified above, in the case of a Note initially issued between a Regular
Record Date and the Interest Payment Date relating to such Regular Record Date,
interest for the period beginning on the Issue Date and ending on such Interest
Payment Date shall be paid on the Interest Payment Date following the next
succeeding Regular Record Date to the registered Holder on such next succeeding
Regular Record Date.
Unless otherwise indicated above, and except as provided below if this
Note is a Global Security, all payments of interest on this Note and all
principal payments hereon if this Note is an Amortizing Note (other than
interest and, in the case
<PAGE>
5
of Amortizing Notes, principal payable at Maturity) will be made by check
(unless otherwise provided above, from an account at a bank located outside the
United States if such amount is payable in a Foreign Currency); provided that,
if the Holder hereof is the Holder of U.S. $10,000,000 or more in aggregate
Principal Amount of Notes of this series of like tenor and term (or a Holder of
the equivalent thereof in a Foreign Currency determined as provided in Section
2 on the reverse hereof), such Holder shall be entitled to receive interest
payments (and principal payments, if this Note is an Amortizing Note) in
immediately available funds, but only if complete and appropriate instructions
have been received in writing by the Trustee (or any such Paying Agent) on or
prior to the applicable Regular Record Date. Simultaneously with any election
by the Holder hereof to receive payments in respect hereof in a Foreign
Currency, such Holder may, if so entitled (as provided above), elect to receive
such payments in immediately available funds by providing complete and
appropriate instructions to the Trustee (or any such Paying Agent), and all such
payments will be made in immediately available funds to an account maintained by
the payee with a bank located outside the United States or as otherwise provided
above.
Unless otherwise indicated above, and except as provided below if
this Note is a Global Security, payments of principal, premium, if any, and
interest payable at Maturity will be made in immediately available funds
(unless otherwise indicated above, payable to an account at a bank located
outside the United States if payable in a Foreign Currency) upon surrender of
this Note at the corporate trust office or agency of the Trustee (or any duly
appointed Paying Agent) maintained for that purpose in the Borough of
Manhattan, The City of New York (the "Corporate Trust Office";), provided
that this Note is presented to the Trustee (or any such Paying Agent) in time
for the Trustee (or any such Paying Agent) to make such payments in such
funds in accordance with its normal procedures.
Unless otherwise specified above, if this Note is a Global Security,
payments of interest hereon and principal hereon if this Note is an Amortizing
Note (in each case, other than at Maturity), will be made in same-day funds in
accordance with existing arrangements between the Trustee (or any duly appointed
Paying Agent) and the Depository. Unless otherwise specified above, if this
Note is a Global Security, any principal, premium and/or interest payable hereon
at Maturity will be paid by wire transfer in immediately available funds to an
account specified by the Depository (which account, unless otherwise provided
above, will be at a bank located outside the United States if payable in a
Foreign Currency).
The Company will pay any administrative costs imposed by banks in
making payments in immediately available funds, but any tax, assessment or
governmental charge imposed upon payments hereunder, including, without
limitation, any withholding tax, will be borne by the Holder hereof.
<PAGE>
6
References herein to "U.S. dollars" or "U.S. $" or "$" are to the coin
or currency of the United States as at the time of payment is legal tender for
the payment of public and private debts.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET
FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by the
Trustee under the Indenture.
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused this
instrument to be signed by its Chairman of the Board, its President, its Vice
Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer, by manual or facsimile signature under its corporate seal, attested
by its Secretary or one of its Assistant Secretaries by manual or facsimile
signature.
Dated:
[SEAL] LEHMAN BROTHERS HOLDINGS INC.
By:
------------------------------
Chairman of the Board
Attest:
--------------------------
Assistant Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned Indenture.
CITIBANK, N.A.
as Trustee
By:
-------------------------
Authorized Officer
<PAGE>
7
[REVERSE OF NOTE]
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTES, SERIES
(Fixed Rate)
Section 1. General. This Note is one of a duly authorized series
of Notes of the Company designated as the Medium-Term Notes, Series (Fixed
Rate) of the Company (herein called the "Notes"), limited in aggregate
principal amount to $ (or (i) the equivalent thereof in Foreign
Currencies or (ii) such greater amount, if OID Notes are issued, as shall
result in aggregate gross proceeds to the Company of $ ), subject
to reduction as a result of the sale under certain circumstances of other
debt securities of the Company. The foregoing limit, however, may be
increased by the Company if in the future it determines that it may wish to
sell additional Notes. The Notes are one of an indefinite number of series
of debt securities of the Company (collectively, the "Securities") issued or
issuable under and pursuant to an indenture dated as of September 1, 1987, as
amended (the "Indenture"), duly executed and delivered by the Company and
Citibank, N.A., as Trustee (herein called the "Trustee"), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the
Securities. The separate series of Securities may be issued in various
aggregate principal amounts, may mature at different times, may bear interest
(if any) at different rates, may be subject to different redemption
provisions or repayment or repurchase rights (if any), may be subject to
different sinking, purchase or analogous funds (if any), may be subject to
different covenants and Events of Default and may otherwise vary as in the
Indenture provided.
Section 2. Currency Exchanges and Payments. If the Specified
Currency hereof is a Foreign Currency and the Holder is either not entitled
to elect to receive payments in respect hereof in such Foreign Currency or
any such election is not in effect, the amount of any U.S. dollar payment to
be made in respect hereof will be determined by the Exchange Rate Agent
specified on the face hereof or a successor thereto (the "Exchange Rate
Agent"), based on the indicative quotation in The City of New York selected
by the Exchange Rate Agent at approximately 11:00 a.m., New York City time,
on the second Business Day preceding the applicable payment date that yields
the least number of U.S. dollars upon conversion of such Foreign Currency.
Unless otherwise provided on the face hereof, such selection shall be made
from among the quotations appearing on the bank composite or multi-
contributor pages of the Reuters Monitor Foreign Exchange Service or, if not
available, the Telerate Monitor Foreign Exchange Service. If such quotations
<PAGE>
8
are unavailable from either such foreign exchange service, unless otherwise
provided on the face hereof, such selection shall be made from the quotations
received by the Exchange Rate Agent from no more than three nor less than two
recognized foreign exchange dealers in The City of New York selected by the
Exchange Rate Agent and approved by the Company (one of which may be the
Exchange Rate Agent) for the purchase by the quoting dealer, for settlement on
such payment date, of the aggregate amount of such Foreign Currency payable on
such payment date in respect of all Notes denominated in such Foreign Currency
and for which the applicable dealer commits to execute a contract. If no such
bid quotations are available, payments will be made in the Foreign Currency.
Unless otherwise specified on the face hereof, if payment hereon is
required to be made in a Foreign Currency and such currency is unavailable to
the Company for making payments thereof due to the imposition of exchange
controls or other circumstances beyond the Company's control, or is no longer
used by the government of the country which issued such currency or for the
settlement of transactions by public institutions of or within the
international banking community, then the Company will be entitled to make
payments with respect hereto in U.S. dollars until such Foreign Currency is
again available or so used. The amount so payable on any date in such
Foreign Currency shall be converted into U.S. dollars at a rate determined by
the Exchange Rate Agent on the basis of the noon buying rate in The City of
New York for cable transfers in the Foreign Currency as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate")
for such Foreign Currency on the second Business Day prior to such payment
date, or on such other basis as may be specified on the face hereof. In the
event such Market Exchange Rate is not then available, the Company will be
entitled to make payments in U.S. dollars (i) if such Foreign Currency is not
a composite currency, on the basis of the most recently available Market
Exchange Rate for such Foreign Currency or (ii) if such Foreign Currency is a
composite currency, including, without limitation, the ECU, in an amount
determined by the Exchange Rate Agent to be the sum of the results obtained
by multiplying the number of units of each component currency of such
composite currency, as of the most recent date on which such composite
currency was used, by the Market Exchange Rate for such component currency on
the second Business Day prior to such payment date (or if such Market
Exchange Rate is not then available, by the most recently available Market
Exchange Rate for such component currency, or as otherwise specified on the
face hereof). Any payment in respect hereof made under such circumstances in
U.S. dollars will not constitute an Event of Default under the Indenture.
If the official unit of any component currency of a composite
currency is altered by way of combination or subdivision, the number of units
of that currency as a component shall be divided or multiplied in the same
proportion. If two or
<PAGE>
9
more component currencies are consolidated into a single currency, the
amounts of those currencies as components shall be replaced by an amount in
such single currency equal to the sum of the amounts of the consolidated
component currencies expressed in such single currency. If any component
currency is divided into two or more currencies, the amount of that original
component currency as a component shall be replaced by amounts of such two or
more currencies having an aggregate value on the date of division equal to
the amount of the former component currency immediately before such division.
In the event of an official redenomination of the Specified
Currency or the Optional Payment Currency (including, without limitation, an
official redenomination of any such currency that is a composite currency),
the obligations of the Company to make payments in or with reference to such
currency shall, in all cases, be deemed immediately following such
redenomination to be obligations to make payments in or with reference to
that amount of redenominated currency representing the amount of such
currency immediately before such redenomination. In no event shall any
adjustment be made to any amount payable hereunder as a result of any
redenomination of any component currency of any composite currency (unless
such composite currency is itself officially redenominated).
All determinations referred to above made by the Exchange Rate
Agent shall be at its sole discretion (except to the extent expressly
provided herein that any determination is subject to approval by the Company)
and, in the absence of manifest error, shall be conclusive for all purposes
and binding on the Holder hereof, and the Exchange Rate Agent shall have no
liability therefor.
All currency exchange costs will be borne by the Holder hereof by
deduction from the payments made hereon.
Section 3. Redemption. If so specified on the face hereof, the
Company may at its option redeem this Note in whole or from time to time in
part on or after the date designated as the Initial Redemption Date on the
face hereof at either a price based on a constant percentage of the Principal
Amount of this Note as specified on the face hereof or at prices declining
from the premium specified on the face hereof, if any, to 100% of the
Principal Amount hereof, together, in each case, with accrued interest to the
Redemption Date. The Company may exercise such option by causing the Trustee
to mail by first-class mail to the Holder hereof a notice of such redemption
at least 30 but not more than 60 days prior to the Redemption Date. In the
event of redemption of this Note in part only, a new Note or Notes of this
series for the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof in accordance with the terms of
the Indenture. Unless otherwise specified on the face hereof, if less than
all of the Notes with like tenor and terms to this Note are to be redeemed,
the Notes
<PAGE>
10
to be redeemed shall be selected by the Trustee by such method as the Trustee
shall deem fair and appropriate.
Section 4. Sinking Funds and Amortizing Notes. Unless
otherwise specified on the face hereof or unless this Note is an Amortizing
Note, this Note will not be subject to any sinking fund. If it is specified on
the face hereof that this Note is an Amortizing Note, the Company will make
payments combining principal and interest on the dates and in the amounts set
forth in the table appearing in Schedule I, attached to this Note. If this
Note is an Amortizing Note, payments made hereon will be applied first to
interest due and payable on each such payment date and then to the reduction of
the Outstanding Face Amount. The term "Outstanding Face Amount" means, at any
time, the amount of unpaid principal hereof at such time.
Section 5. Optional Repayment. If so specified on the face
hereof, this Note will be repayable prior to the Maturity Date at the option
of the Holder on the Optional Repayment Dates specified on the face hereof at
the Optional Repayment Prices specified on the face hereof, together with
accrued interest to the applicable Optional Repayment Date. Unless otherwise
specified on the face hereof, in order for this Note to be so repaid, the
Company must receive, at least 30 but not more than 45 days prior to an
Optional Repayment Date, either (i) this Note with the form below entitled
"Option to Elect Repayment" duly completed or (ii) a telegram, telex, fax or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States setting forth the name of the Holder hereof, the Face
Amount hereof, the Face Amount to be repaid, the certificate number hereof or
a description of the tenor and terms of this Note, a statement that the
option to elect repayment is being exercised thereby and a guarantee that
this Note with the form below entitled "Option to Elect Repayment" duly
completed will be received by the Paying Agent not later than five Business
Days after the date of such telegram, telex, fax or letter and this Note and
form duly completed are received by the Paying Agent by such fifth Business
Day. Exercise of this repayment option shall be irrevocable, except as
otherwise provided under Section 6 or Section 9. The repayment option may be
exercised by the Holder of this Note with respect to less than the Face
Amount then outstanding provided that the Face Amount of the Note remaining
outstanding after repayment is an authorized denomination. Upon such partial
repayment this Note shall be cancelled and a new Note or Notes for the
remaining Face Amount hereof shall be issued in the name of the Holder of
this Note.
Section 6. Optional Interest Reset. If so specified on the
face hereof, the Interest Rate on this Note may be reset at the option of the
Company, in the manner set forth below (unless otherwise specified on the face
hereof), on the Optional Reset Date or Optional Reset Dates specified on the
face hereof.
<PAGE>
11
The Company may exercise such option by notifying the Trustee of such exercise
at least 45 but not more than 60 days prior to an Optional Reset Date. Not
later than five Business Days after receipt thereof, the Trustee will mail by
first-class mail to the Holder of this Note a notice (the "Reset Notice")
setting forth (i) the election of the Company to reset the interest rate, (ii)
such new interest rate and (iii) the provisions, if any, for redemption during
the period from such Optional Reset Date to the next Optional Reset Date or, if
there is no such next Optional Reset Date, to the Maturity Date of this Note
(each such period a "Subsequent Interest Period"), including the date or dates
on which or the period or periods during which and the price or prices at which
such redemption may occur during such Subsequent Interest Period. The Reset
Notice shall be substantially in the form of Exhibit A to this Note. Upon the
transmittal by the Trustee of a Reset Notice to the Holder of this Note, such
new interest rate shall take effect automatically, and, except as modified by
the Reset Notice and as described in the next paragraph, this Note will have
the same terms as prior to the transmittal of such Reset Notice.
Notwithstanding the foregoing, not later than 20 days prior to an
Optional Reset Date, the Company may, at its option, revoke the interest rate
provided for in the Reset Notice and establish an interest rate that is
higher than the interest rate provided for in the Reset Notice for the
Subsequent Interest Period commencing on such Optional Reset Date by causing
the Trustee to mail by first-class mail notice of such higher interest rate
to the Holder of this Note. Such notice shall be irrevocable and shall be
mailed by the Trustee within five Business Days after receipt thereof. All
Notes with respect to which the interest rate is reset on an Optional Reset
Date will bear such higher interest rate for the Subsequent Interest Period.
If the Company elects to reset the interest rate of this Note,
the Holder of this Note will have the option to elect repayment by the Company
of this Note, or any portion hereof, on any Optional Reset Date at a price
calculated with reference to the Face Amount hereof to be repaid, plus any
interest accrued to, such Optional Reset Date. In order to obtain repayment on
an Optional Reset Date, the Holder must follow the procedures set forth above
in Section 5 for optional repayment except that the period for delivery or
notification to the Trustee shall be at least 25 but not more than 35 days
prior to such Optional Reset Date and except that, if the Holder has tendered
this Note for repayment pursuant to the Reset Notice, the Holder may, by
written notice to the Trustee, revoke such tender for repayment until the close
of business on the tenth day prior to such Optional Reset Date; provided,
however, that if such day is not a Business Day, then such notice may be given
on the next succeeding Business Day.
<PAGE>
12
Section 7. OID Notes. If this Note is an OID Note, unless
otherwise specified on the face hereof, the amount payable in the event of
redemption by the Company, repayment at the option of the Holder or
acceleration of Maturity shall be the Amortized Face Amount of this Note as of
the date of such redemption, repayment or acceleration rather than the Face
Amount hereof. The "Amortized Face Amount" of this Note shall be the amount
equal to (a) the Issue Price (as set forth on the face hereof) plus (b) that
portion of the difference between the Issue Price and the Face Amount hereof
that has accrued at the Yield to Maturity set forth on the face hereof
(computed in accordance with generally accepted United States bond yield
computation principles) at the date as of which the Amortized Face Amount is
calculated, but in no event shall the Amortized Face Amount of this Note exceed
the Face Amount.
Section 8. Dual Currency Notes. If it is specified on the
face hereof that this Note is a Dual Currency Note, the Company has a one time
option, exercisable on any one of the Option Election Dates specified on the
face hereof in whole, but not in part, with respect to all Dual Currency Notes
issued on the same day and having the same terms as this Note (this "Tranche"),
of thereafter making all payments of principal, premium, if any, and interest
(which payments would otherwise be made in the Specified Currency of such
Notes) in the Optional Payment Currency specified on the face hereof. If the
Company makes such an election, the amount of Optional Payment Currency payable
in respect hereof shall be determined by the Exchange Rate Agent by converting
the amount of Specified Currency that would otherwise be payable into the
Optional Payment Currency at the Designated Exchange Rate specified on the face
hereof.
The Company may exercise such option by notifying the Trustee
of such exercise on or prior to the Option Election Date. The Trustee will
mail by first-class mail to each holder of a Note of this Tranche a notice of
such election within five Business Days of the Option Election Date which shall
state (i) the first date, whether an Interest Payment Date and/or the Maturity
Date, on which scheduled payments in the Optional Payment Currency will be made
and (ii) the Designated Exchange Rate. Any such notice by the Company, once
given, may not be withdrawn.
If this Note is a Dual Currency Note, unless otherwise
specified on the face hereof and notwithstanding any prior election made by the
Company, the amount payable hereon in the event of any optional redemption by
the Company, any repayment at the option of the Holder, any acceleration of the
Maturity of this Note or other prepayment of this Note prior to the Maturity
Date shall be an amount equal to the Principal Amount hereof otherwise due and
payable plus accrued interest to but excluding the date of redemption,
repayment, acceleration or other prepayment minus the Total Option Value
multiplied by a fraction, the numerator of which is the Principal Amount hereof
and the
<PAGE>
13
denominator of which is the aggregate Principal Amount of all Dual Currency
Notes of this Tranche. In no event will such payment be less than zero.
Notwithstanding any prior election made by the Company, such payment shall be
made in the Specified Currency unless otherwise provided on the face hereof.
The term "Total Option Value" means, with respect to any Dual
Currency Note on any date, an amount (calculated as of such date by the
Option Value Calculation Agent) equal to the sum of the Option Values
(calculated as of such date by the Option Value Calculation Agent) for all
Interest Payment Dates occurring after the date of calculation up to and
including the Maturity Date. The term "Option Value" means, with respect to
an Interest Payment Date or the Maturity Date, the amount calculated by the
Option Value Calculation Agent to be the arithmetic average of the prices
quoted on the date of calculation by three reference banks (which banks shall
be selected by the Option Value Calculation Agent and shall be reasonably
acceptable to the Company) for the right on the Option Election Date
immediately preceding such Interest Payment Date or Maturity Date to purchase
for value on such Interest Payment Date or Maturity Date from such reference
banks (A) the aggregate amount of the Specified Currency due on such Interest
Payment Date or Maturity Date with respect to all of the Dual Currency Notes
of this Tranche in exchange for (B) the amount of the Optional Payment
Currency that would be received if the amount in clause (A) were converted
into the Optional Payment Currency at the Designated Exchange Rate.
All determinations referred to above made by the Exchange Rate
Agent or the Option Value Calculation Agent shall be at their sole discretion
(except to the extent expressly provided herein that any determination is
subject to approval by the Company) and, in the absence of manifest error,
shall be conclusive for all purposes and binding on the Holder hereof, and
neither the Exchange Rate Agent nor the Option Value Calculation Agent shall
have any liability therefor.
Section 9. Extendible Notes. If it is specified on the face
hereof that this Note is an Extendible Note, the Company has the option to
extend the Maturity Date hereof for the number of Extension Periods set forth
on the face hereof, each of which Extension Periods shall be a period of from
one to five whole years. Unless otherwise specified on the face hereof, the
following procedures shall apply if this Note is an Extendible Note.
The Company may exercise its option by notifying the Trustee
of such exercise at least 45 but not more than 60 days prior to the Maturity
Date hereof in effect prior to the exercise of such option (the "Original
Stated Maturity"). Not later than five Business Days after receipt thereof,
the Trustee will mail to the Holder a notice (the "Extension Notice"), first
class, postage prepaid, setting forth (i) the election of the Company to extend
the Maturity Date, (ii) the new Maturity Date, (iii) the
<PAGE>
14
Interest Rate applicable to the Extension Period and (iv) the provisions, if
any, for redemption during the Extension Period, including the date on which or
the period or periods during which and the price at which such redemption may
occur during the Extension Period. Upon the mailing by the Trustee of an
Extension Notice to the Holder, the Maturity Date hereof shall be extended
automatically, and, except as modified by the Extension Notice and as described
in the next paragraph, this Note will have the same terms as prior to the
mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to
the Original Stated Maturity hereof, the Company may, at its option, revoke the
interest rate provided for in the Extension Notice and establish a higher
interest rate for the Extension Period by causing the Trustee to mail notice of
such higher interest rate, first class, postage prepaid, to the Holder. Such
notice shall be irrevocable and shall be mailed by the Trustee within three
Business Days after receipt thereof. This Note will bear such higher interest
rate for the Extension Period, whether or not tendered for repayment.
If the Company extends the Maturity Date of this Note, the Holder
will have the option to elect repayment by the Company of this Note, or any
portion hereof, on the Original Stated Maturity at a price calculated with
reference to the Face Amount hereof to be repaid plus any accrued interest to
such date. In order for this Note to be so repaid on the Original Stated
Maturity, the Holder must follow the procedures set forth in Section 5 hereof
for optional repayment, except that the period for delivery of this Note or
notification to the Trustee shall be at least 25 but not more than 35 days
prior to the Original Stated Maturity and except that the Holder may, by
written notice to the Trustee, revoke any such tender for repayment until the
close of business on the tenth day prior to the Original Stated Maturity;
provided, however, that if such day is not a Business Day, then such notice
may be given on the next succeeding Business Day.
Section 10. Renewable Notes. If it is specified on the face
hereof that this Note is a Renewable Note, this Note will mature on the Initial
Maturity Date specified on the face hereof unless the Maturity of all or any
portion of this Note is extended in accordance with the procedures described
below.
On the Interest Payment Date occurring in the sixth month
(unless a different Special Election Interval is specified on the face hereof)
prior to the Initial Maturity Date hereof (the "Initial Maturity Extension
Date") and on the Interest Payment Date occurring in each sixth month (or the
last month of each Special Election Interval) after such Initial Maturity
Extension Date (each, together with the Initial Maturity Extension Date, a
"Maturity Extension Date"), the Maturity of this Note will be extended to the
Interest Payment Date occurring
<PAGE>
15
in the twelfth month (or, if a Special Election Interval is specified on the
face hereof, the last month in a period equal to twice the Special Election
Interval) after such Maturity Extension Date, unless the Holder elects to
terminate the automatic extension of the Maturity hereof or any portion hereof
as described below.
If the Holder elects to terminate the automatic extension of
the Maturity of any portion of the principal amount of this Note during the
specified period prior to any Maturity Extension Date, such portion will become
due and payable on the Interest Payment Date occurring in the sixth month (or
the last month in the Special Election Interval) after such Maturity Extension
Date (the "Extended Maturity Date").
The Holder may elect to terminate the automatic extension of the
Maturity of this Note, or if so specified above, any portion hereof, by
delivering a notice to such effect to the Trustee (or any duly appointed
Paying Agent) at the Corporate Trust Office not less than 15 nor more than 30
days prior to such Maturity Extension Date (unless another period is
specified on the face hereof as the "Special Election Period"). Such
election will be irrevocable and will be binding upon each subsequent Holder
of this Note. An election to terminate the automatic extension of the
Maturity of this Note may be exercised with respect to less than the entire
Face Amount hereof only if so specified on the face hereof and only in such
Face Amount, or any integral multiple in excess thereof, as is specified on
the face hereof. Notwithstanding the foregoing, the Maturity of this Note
will not be extended beyond the Maturity Date specified on the face hereof.
Unless otherwise specified above, any such election to terminate
will be effective only if this Note, with the "Option to Elect Termination of
Automatic Extension" included herein duly executed, is presented to the
Trustee (or any duly appointed Paying Agent) simultaneously with notice of
such election (or, in the event notice of such election, together with a
guarantee of delivery within five Business Days, is transmitted on behalf of
the Holder from a member of a national securities exchange, the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States, within five Business Days of the date of such notice).
As soon as practicable following receipt of this Note the Trustee (or any
duly appointed Paying Agent) shall issue in exchange herefor in the name of
the Holder (i) a Note, in a face amount equal to the face amount of this Note
for which the election to terminate the automatic extension of Maturity was
exercised, with terms identical to those specified herein (except for the
Issue Date and the Initial Interest Rate and except that such Note shall have
a fixed, non- extendable Maturity on the Extended Maturity Date) and (ii) if
such election is made with respect to less than the full Face Amount hereof,
a replacement Renewable Note, in a face amount
<PAGE>
16
equal to the Face Amount of this Note for which no election was made, with
terms identical to this Note.
Section 11. Principal Amount For Indenture Purposes. For the
purpose of determining whether Holders of the requisite amount of Notes
outstanding under the Indenture have made a demand, given a notice or waiver or
taken any other action, the outstanding principal amount of this Note will be
deemed to be the Principal Amount, provided, however, if this Note is an OID
Note, the outstanding, principal amount of this Note will be deemed to be the
Face Amount set forth above.
Section 12. Modification and Waivers. The Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
holders of not less than 66-2/3% in aggregate principal amount of each series
of the Securities at the time Outstanding to be affected, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) extend the fixed maturity
of any Security, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon or reduce any premium payable on
redemption, or make the principal thereof, or premium, if any, or interest
thereon payable in any coin or currency other than that hereinabove provided,
without the consent of the holder of each Security so affected, or (ii) change
the place of payment on any Security, or impair the right to institute suit for
payment on any Security, or reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each Security so affected. It is also
provided in the Indenture that, prior to any declaration accelerating the
Maturity of any series of Securities, the holders of a majority in aggregate
principal amount of the Securities of such series Outstanding may on behalf of
the holders of all the Securities of such series waive any past default or
Event of Default under the Indenture with respect to such series and its
consequences, except a default in the payment of interest, if any, on or the
principal of, or premium if any, on any of the Securities of such series, or in
the payment of any sinking fund installment or analogous obligation with
respect to Securities of such series. Any such consent or waiver by the Holder
of this Note shall be conclusive and binding upon such Holder and upon all
future holders and owners of this Note and any Notes which may be issued in
exchange or substitution herefor, irrespective of whether or not any notation
thereof is made upon this Note or such other Notes.
Section 13. Obligations Unconditional. No reference herein
to the Indenture and no provisions of this Note or of the Indenture shall alter
or impair the obligation of the Company,
<PAGE>
17
which is absolute and unconditional, to pay the principal of, premium, if any,
and interest, if any, on this Note at the place, at the respective times, at
the rate, and in the coin or currency herein prescribed.
Section 14. Defeasance. The Indenture contains provisions
for the discharge of the Indenture and defeasance at any time of the
indebtedness on this Note upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Note.
Section 15. Authorized Form and Denominations. The Notes of
this series are issuable in registered form, without coupons. Unless otherwise
set forth on the face hereof, Notes denominated in U.S. dollars will be issued
in Face Amount denominations of U.S. $100,000 and any integral multiple of U.S.
$1,000 in excess thereof. Notes denominated in a Foreign Currency will be
issued in the denomination or denominations set forth on the face hereof. Each
Note will be issued initially as either a Global Security or a Certificated
Note, at the option of the holders thereof, either at the office or agency to
be designated and maintained by the Company for such purpose in the Borough of
Manhattan, The City of New York, pursuant to the provisions of the Indenture or
at any of such other offices or agencies as may be designated and maintained by
the Company for such purpose pursuant to the provisions of the Indenture, and
in the manner and subject to the limitations provided in the Indenture, but
without the payment of any service charge, except for any tax or other
governmental charges imposed in connection therewith. Notes of this series are
exchangeable for a like aggregate Face Amount of Notes of this series of a
different authorized denomination, except that Global Securities will not be
exchangeable for Certificated Notes.
Section 16. Registration of Transfer. As provided in the
Indenture and subject to certain limitations as therein set forth, the transfer
of this Note is registrable in the Security Register, upon surrender of this
Note for registration of transfer, at the Corporate Trust Office or agency in a
Place of Payment for this Note, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar requiring such written instrument of transfer duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of this series, of authorized denominations and for the same
aggregate Face Amount, will be issued to the designated transferee or
transferees.
If this Note is a Global Security and if at any time the
Depository notifies the Company that it is unwilling or unable to continue as
Depository or if at any time the Depository shall no longer be eligible under
the Indenture, the Company shall appoint a successor Depository. If a
successor Depository for the Securities of such series is not appointed by the
Company
<PAGE>
18
within 90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company will issue, and the Trustee will authenticate and
deliver, Notes in definitive form in an aggregate Face Amount equal to the Face
Amount hereof.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name this Note is registered as the owner hereof
for all purposes, and neither the Company nor the Trustee nor any agent of the
Company or of the Trustee shall be affected by any notice to the contrary.
Section 17. Events of Default. If an Event of Default with
respect to Notes of this series shall occur and be continuing, the principal of
the Notes of this series may be declared due and payable in the manner and with
the effect provided in the Indenture. In the event that this Note is an OID
Note or a Dual Currency Note, the amount of principal of this Note that becomes
due and payable upon such acceleration shall be equal to the amount calculated
as set forth in Section 7 or Section 8, respectively, hereof. Upon payment (i)
of the aggregate applicable amounts of principal of the Notes of this series so
declared due and payable and (ii) of interest on any overdue principal and
overdue interest (in each case to the extent that the payment of such interest
shall be legally enforceable), all of the Company's obligations in respect of
the payment of the principal of and interest, if any, on the Notes of this
series shall terminate.
Section 18. No Recourse Against Certain Persons. No recourse
for the payment of the principal of, premium, if any, or interest on this Note,
or for any claim based hereon or otherwise in respect hereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in the
Indenture or any Indenture supplemental thereto or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.
Section 19. Defined Terms. All terms used but not defined in
this Note are used herein as defined in the Indenture.
<PAGE>
19
Section 20. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
20
OPTION TO ELECT REPAYMENT
The undersigned owner of this Note hereby irrevocably elects
to have the Company repay the Face Amount of this Note or portion hereof below
designated at (i) the Optional Repayment Percentage multiplied by the Principal
Amount of this Note to be repaid in respect of such Face Amount plus accrued
interest to the Optional Repayment Date, if this Note is to be repaid pursuant
to the Optional Repayment provision described in Section 5 hereof, or (ii) 100%
of the Principal Amount of this Note to be repaid in respect of such Face
Amount plus accrued interest to the Optional Reset Date, if this Note is to be
repaid pursuant to the Optional Interest Reset provision described in Section 6
hereof or the Extendible Notes provision described in Section 9 hereof. Any
such election is irrevocable except as provided in Section 6 or Section 9
hereof.
Dated:_________________ _______________________________
Signature
Sign exactly as name appears on the front of
this Note [SIGNATURE GUARANTEED - required
only if Notes are to be issued and delivered
to other than the registered Holder]
Face Amount to be Fill in for registration of
repaid, if amount to be Notes if to be issued otherwise
repaid is less than the than to the registered Holder:
Face Amount of this
Note (Face Amount Name: ___________________________
remaining must be an Address: ________________________
authorized denomination) ______________________
(Please print name
$_______________________ and address including
zip code)
SOCIAL SECURITY OR OTHER TAXPAYER ID
NUMBER
_________________________________
<PAGE>
21
OPTION TO ELECT TERMINATION OF AUTOMATIC EXTENSION
The undersigned owner of this Note hereby irrevocably elects
to terminate the automatic extension of this Note or of the portion of the Face
Amount of this Note below designated. Any such election is irrevocable and
will be binding on any subsequent Holder hereof.
Dated:_________________ _______________________________
Signature
Sign exactly as name appears on the front of
this Note [SIGNATURE GUARANTEED - required
only if Notes are to be issued and delivered
to other than the registered Holder]
Face Amount to be Fill in for registration of
terminated, if amount to be Notes if to be issued otherwise
terminated is less than the than to the registered Holder:
Face Amount of this
Note (such Face Amount Name: ___________________________
must be an authorized Address: ________________________
denomination) ______________________
(Please print name
$_______________________ and address including
zip code)
SOCIAL SECURITY OR OTHER TAXPAYER
ID NUMBER
_________________________________
<PAGE>
22
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenant by the entireties
JT TEN - as joint tenants with right of
survivorship and not as
tenants in common
UNIF GIFT
MIN ACT - __________Custodian__________
(Cust) (Minor)
Under Uniform Gifts to
Minors Act
_____________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned
hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________________________________
Please print or type name and address, including zip code of assignee
__________________________________________________________________
the within Note of LEHMAN BROTHERS HOLDINGS INC. and all rights thereunder and
does hereby irrevocably constitute and appoint
<PAGE>
23
______________________________________________________Attorney to transfer the
said Note on the books of the within-named Company, with full power of
substitution in the premises.
Dated:______________________________
SIGNATURE GUARANTEED:__________________________________________
NOTICE: The signature to this
assignment must correspond with the
name as it appears upon the face of
the within Note in every particular,
without alteration or enlargement or
any change whatsoever.
<PAGE>
SCHEDULE I
Amortization Table
Date Payment
---- -------
<PAGE>
EXHIBIT A
RESET NOTICE
LEHMAN BROTHERS HOLDINGS INC.
Medium-Term Notes, Series
(Fixed Rate)
CUSIP No. ___________
Registered Nos. ___-___
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized
and existing under the laws of the State of Delaware (the "Company"), is the
issuer of the above-referenced Notes (the "Notes"). Capitalized terms used
herein and not defined are used as defined in the Notes.
The Company hereby elects to reset the Interest Rate set forth
on the face of the Notes. On and after _________________1/, the Interest Rate
shall be _______________.
Each Holder of a Note has the option to elect repayment by the
Company of such Note, or any portion thereof, on any Optional Reset Date
pursuant to the terms of such Note. The Notes may be repaid on the dates and
at the prices set forth below:
Date Redemption Price
---- ----------------
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused
this Reset Notice to be signed by its Chairman of the Board, its President, its
Vice Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer and to be attested by its Secretary or one of its Assistant
Secretaries.
Dated: LEHMAN BROTHERS HOLDINGS INC.
By:
-------------------------------
Title:
Attest:
---------------------------
Title:
- --------------------------
1/ Insert applicable Optional Reset Date.
<PAGE>
Exhibit 4.13
CUSIP NO. ___________
REGISTERED FACE AMOUNT:.
No. ___
If this Note is an OID Note (as defined below) the following legend is
applicable:
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES
INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE ISSUE PRICE OF THIS
NOTE IS _____% OF ITS PRINCIPAL AMOUNT, AND THE AMOUNT OF ORIGINAL
ISSUE DISCOUNT, THE YIELD TO MATURITY COMPOUNDED _____________, THE
ISSUE DATE AND THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ALLOCABLE TO THE
SHORT PERIOD DETERMINED USING THE EXACT METHOD WITHIN THE MEANING OF
PROPOSED TREASURY REGULATION SECTION 1.1272- 1(c)(2)(ii) ARE AS SET
FORTH BELOW.
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTE, SERIES
(FLOATING RATE)
If the registered owner of this Note (as indicated below) is The
Depository Trust Company (the "Depository") or a nominee of the Depository,
this Note is a Note in global form (a "Global Security") and the following
legends are applicable except as specified on the reverse hereof:
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY OR A
NOMINEE OF THE DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET,
NEW YORK, NEW YORK) TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY.
<PAGE>
2
<TABLE>
<S> <C> <C>
ISSUE PRICE: $ OPTION TO RECEIVE PAYMENTS OPTIONAL REPAYMENT PRICES:
IN THE SPECIFIED CURRENCY:
ISSUE DATE: [ ] YES [ ] NO OPTIONAL INTEREST RATE RESET:
[ ] YES [ ] NO
MATURITY DATE: SPECIFIED CURRENCY:
OPTIONAL RESET DATES:
INTEREST RATE: AMORTIZING NOTE:
[ ] YES [ ] NO OPTIONAL REDEMPTION:
INTEREST PAYMENT DATES: [ ] YES [ ] NO
SINKING FUND:
REGULAR RECORD DATES: INITIAL REDEMPTION DATE:
TOTAL AMOUNT OF OID:
EXCHANGE RATE AGENT: INITIAL REDEMPTION
YIELD TO MATURITY: PERCENTAGE: %
DEPOSITORY:
INITIAL ACCRUAL PERIOD OID: APPLICABILITY OF ANNUAL REDEMPTION
DUAL CURRENCY NOTE: PERCENTAGE REDUCTION:
[ ] YES [ ] NO AUTHORIZED DENOMINATIONS: [ ] YES [ ] NO
If yes, state Annual Percentage
OPTION ELECTION DATES: EXTENDIBLE NOTE: Reduction: %
[ ] YES [ ] NO
OPTIONAL PAYMENT RENEWABLE NOTE:
CURRENCY: EXTENSION PERIOD: [ ] YES [ ] NO
DESIGNATED EXCHANGE NUMBER OF EXTENSION PERIODS: INITIAL MATURITY DATE:
RATE:
OPTION TO ELECT REPAYMENT: SPECIAL ELECTION INTERVAL:
OPTION VALUE CALCULATION [ ] YES [ ] NO
AGENT: RENEWABLE IN PART:
OPTIONAL REPAYMENT DATES: [ ] YES [ ] NO
OTHER PROVISIONS:
AUTHORIZED RENEWABLE AMOUNTS:
SPECIAL ELECTION PERIOD:
</TABLE>
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the
"Company," which term includes any successor corporation under the Indenture
referred to on the reverse hereof), for value received, hereby promises to
pay to ___________, or registered assigns, on the Maturity Date the Principal
Amount hereof (as defined below) and, if so specified above, to pay interest
thereon from the Issue Date specified above or from the most recent Interest
Payment Date specified above to which interest has been paid or duly provided
for at the rate per annum determined in accordance with the provisions on the
reverse hereof, depending on the Interest Rate Basis specified above, until
the principal hereof is paid or made available for payment and (to the extent
that the payment of such interest shall be legally enforceable) at such rate
per annum on any overdue principal and premium and on any overdue instalment
of interest. Unless otherwise specified above, and except as provided in
Section 9 on the reverse hereof if this Note is a Dual Currency Note (as
hereinafter defined), payments of principal, premium, if any, and interest
hereon will be made in U.S. dollars; if the Specified Currency set forth
above is a currency other than U.S. dollars (a "Foreign Currency"), such
<PAGE>
3
payments will be made in U.S. dollars based on the equivalent of that Foreign
Currency converted into U.S. dollars in the manner set forth in Section 2 on
the reverse hereof. If the Specified Currency is a Foreign Currency and it is
so provided above, the Holder may elect to receive such payments in that
Foreign Currency by delivery of a written request to the Trustee (or to any
duly appointed Paying Agent) at the Corporate Trust Office (as defined below)
not later than 10 calendar days prior to the applicable payment date, and
such election will remain in effect for the Holder until revoked by written
notice to the Trustee (or to any such Paying Agent) at the Corporate Trust
Office received not later than 10 calendar days prior to the applicable
payment date; provided, however, no such election or revocation may be made
if, with respect to this Note, (i) an Event of Default has occurred, (ii) the
Company has exercised any discharge or defeasance options or (iii) the
Company has given a notice of redemption. In the event the Holder makes any
such election pursuant to the preceding sentence, such election will not be
effective on any transferee of such Holder and such transferee shall be paid
in U.S. dollars unless such transferee makes an election pursuant to the
preceding sentence; provided, however, that such election, if in effect while
funds are on deposit with the Trustee to satisfy and discharge this Note,
will be effective on any such transferee unless otherwise specified above.
The "Principal Amount" of this Note at any time means (i) if this Note is an
OID Note, the Amortized Face Amount at such time as described in Section 8 on
the reverse hereof and (ii) in all other cases, the Face Amount hereof.
If this Note is subject to an Annual Percentage Reduction as specified
above, the Redemption Price shall initially be the Initial Redemption Percentage
of the Principal Amount of this Note on the Initial Redemption Date and shall
decline at each anniversary of the Initial Redemption Date (each such, a
"Redemption Date") by the Annual Percentage Reduction of such Principal Amount
until the Redemption Price is 100% of such Principal Amount.
In the event of any optional redemption by the Company, any
repayment at the option of the Holder, acceleration of the maturity of this
Note or other prepayment of this Note prior to the Maturity Date specified
above, the term "Maturity" when used herein shall refer, where applicable, to
the date of redemption, repayment, acceleration or other prepayment of this
Note.
An "OID Note" is any Note (a) that has been issued at an Issue
Price lower, by more than a de minimis amount (as determined under United
States federal income tax rules applicable to original issue discount
instruments), than the Face Amount thereof and (b) any other Note that for
United States federal income tax purposes would be considered an original
issue discount instrument.
Except as provided in the following paragraph, the Company will pay
interest on each Interest Payment Date specified above, commencing with the
<PAGE>
4
first Interest Payment Date next succeeding the Issue Date, and at Maturity;
provided that any payment of principal, premium, if any, or interest to be
made on any Interest Payment Date or on a date of Maturity that is not a
Business Day shall be made on the next succeeding Business Day with the same
force and effect as if made on such Interest Payment Date or such date of
Maturity, as the case may be, and no additional interest shall accrue as a
result of such delayed payment, except that if this Note is a LIBOR Note (as
defined in Section 3 on the reverse hereof) and such next succeeding Business
Day falls in the next calendar month, such payment shall be made on the
preceding day that is a London Banking Day. The term "Business Day" means any
day, other than a Saturday or Sunday, that meets each of the following
applicable requirements: such day is (a) not a day on which banking
institutions in New York City are authorized or required by law or executive
order to close; (b) if the Specified Currency is a Foreign Currency other
than Euros, not a day on which banking institutions are authorized or
required by law to close in the principal financial center of the country
issuing the Foreign Currency; (c) if the Specified Currency is Euros, the
Trans-European Automated Real-Time Gross Settlement Express Transfer System
is open; and (d) if this Note is a LIBOR Note, a London Banking Day. The term
"London Banking Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market. Unless otherwise
specified above, the interest payable on each Interest Payment Date or at
Maturity will be the amount of interest accrued from and including the Issue
Date or from and including the last Interest Payment Date to which interest
has been paid, as the case may be, to, but excluding, such Interest Payment
Date or the date of Maturity, as the case may be; provided, however, that if
interest on this Note is reset daily or weekly, interest payable on each
Interest Payment Date will be the amount of interest accrued from and
including the Issue Date or from and excluding the last date to which
interest has been paid, as the case may be, to, and including, the Regular
Record Date immediately preceding such Interest Payment Date, except that at
Maturity the interest payable will include interest accrued to, but
excluding, the date of Maturity.
Unless otherwise specified above, the interest payable on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Note (or one or more predecessor Notes) is registered at the
close of business on the Regular Record Date indicated above (whether or not a
Business Day) next preceding such Interest Payment Date; provided that,
notwithstanding any provision of the Indenture to the contrary, interest
payable on any date of Maturity shall be payable to the Person to whom
principal shall be payable; and provided, further, that, unless otherwise
specified above, in the case of a Note initially issued between a Regular
Record Date and the Interest Payment Date relating to such Regular Record Date,
interest for the period beginning on the Issue Date and ending on such Interest
Payment Date shall be paid on the Interest Payment Date following the next
succeeding Regular Record Date to the registered Holder on such next succeeding
Regular Record Date.
Unless otherwise indicated above, and except as provided below if
this Note is a Global Security, all payments of interest on this Note (other
than interest payable at Maturity) will be made by check (unless otherwise
<PAGE>
5
provided above, from an account at a bank located outside the United States
if such amount is payable in a Foreign Currency); provided that, if the
Holder hereof is the Holder of U.S.$10,000,000 or more in aggregate Principal
Amount of Notes of this series of like tenor and term (or a Holder of the
equivalent thereof in a Foreign Currency determined as provided in Section 2
on the reverse hereof), such Holder shall be entitled to receive interest
payments in immediately available funds, but only if complete and appropriate
instructions have been received in writing by the Trustee (or any such Paying
Agent) on or prior to the applicable Regular Record Date. Simultaneously with
any election by the Holder hereof to receive payments in respect hereof in a
Foreign Currency, such Holder may, if so entitled (as provided above), elect
to receive such payments in immediately available funds by providing complete
and appropriate instructions to the Trustee (or any such Paying Agent), and
all such payments will be made in immediately available funds to an account
maintained by the payee with a bank located outside the United States or as
otherwise provided above.
Unless otherwise indicated above, and except as provided below if
this Note is a Global Security, payments of principal, premium, if any, and
interest payable at Maturity will be made in immediately available funds
(unless otherwise indicated above, payable to an account at a bank located
outside the United States if payable in a Foreign Currency) upon surrender of
this Note at the corporate trust office or agency of the Trustee (or any duly
appointed Paying Agent) maintained for that purpose in the Borough of
Manhattan, The City of New York (the "Corporate Trust Office"), provided
that this Note is presented to the Trustee (or any such Paying Agent) in time
for the Trustee (or any such Paying Agent) to make such payments in such
funds in accordance with its normal procedures.
Unless otherwise specified above, if this Note is a Global
Security, payments of interest hereon (other than at Maturity) will be made
in same-day funds in accordance with existing arrangements between the
Trustee (or any duly appointed Paying Agent) and the Depository. Unless
otherwise specified above, if this Note is a Global Security, any principal,
premium and/or interest payable hereon at Maturity will be paid by wire
transfer in immediately available funds to an account specified by the
Depository (which account, unless otherwise provided above, will be at a bank
located outside the United States if payable in a Foreign Currency).
The Company will pay any administrative costs imposed by banks in
making payments in immediately available funds, but any tax, assessment or
governmental charge imposed upon payments hereunder, including, without
limitation, any withholding tax, will be borne by the Holder hereof.
<PAGE>
6
References herein to "U.S. dollars" or "U.S. $" or "$" are to the coin
or currency of the United States as at the time of payment is legal tender for
the payment of public and private debts.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET
FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by the
Trustee under the Indenture.
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused this
instrument to be signed by its Chairman of the Board, its President, its Vice
Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer, by manual or facsimile signature under its corporate seal, attested
by its Secretary or one of its Assistant Secretaries by manual or facsimile
signature.
Dated:
[SEAL] LEHMAN BROTHERS HOLDINGS INC.
By:
------------------------------
Chairman of the Board
Attest:
--------------------------
Assistant Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned Indenture.
CITIBANK, N.A.
as Trustee
By:
-------------------------
Authorized Officer
<PAGE>
7
[REVERSE OF NOTE]
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTES, SERIES
(Floating Rate)
Section 1. General. This Note is one of a duly authorized series
of Notes of the Company designated as the Medium-Term Notes, Series __
(Floating Rate) of the Company (herein called the "Notes"), limited in
aggregate principal amount to $ (or (i) the equivalent thereof in
Foreign Currencies or (ii) such greater amount, if OID Notes are issued, as
shall result in aggregate gross proceeds to the Company of $ ),
subject to reduction as a result of the sale under certain circumstances of
other debt securities of the Company. The foregoing limit, however, may be
increased by the Company if in the future it determines that it may wish to
sell additional Notes. The Notes are one of an indefinite number of series
of debt securities of the Company (collectively, the "Securities") issued or
issuable under and pursuant to an indenture dated as of September 1, 1987, as
amended (the "Indenture"), duly executed and delivered by the Company and
Citibank, N.A., as Trustee (herein called the "Trustee"), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the
Securities. The separate series of Securities may be issued in various
aggregate principal amounts, may mature at different times, may bear interest
(if any) at different rates, may be subject to different redemption
provisions or repayment or repurchase rights (if any), may be subject to
different sinking, purchase or analogous funds (if any), may be subject to
different covenants and Events of Default and may otherwise vary as in the
Indenture provided.
Section 2. Currency Exchanges and Payments. If the Specified
Currency hereof is a Foreign Currency and the Holder is either not entitled to
elect to receive payments in respect hereof in such Foreign Currency or any
such election is not in effect, the amount of any U.S. dollar payment to be
made in respect hereof will be determined by the Exchange Rate Agent specified
on the face hereof or a successor thereto (the "Exchange Rate Agent"), based on
the indicative quotation in The City of New York selected by the Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the applicable payment date that yields the least number of U.S.
dollars upon conversion of such Foreign Currency. Unless otherwise provided on
the face hereof, such selection shall be made from among the quotations
appearing on the bank composite or multi- contributor pages of the Reuters
Monitor Foreign Exchange Service or, if not available, the Telerate Monitor
Foreign Exchange Service. If such quotations
<PAGE>
8
are unavailable from either such foreign exchange service, unless otherwise
provided on the face hereof, such selection shall be made from the quotations
received by the Exchange Rate Agent from no more than three nor less than two
recognized foreign exchange dealers in The City of New York selected by the
Exchange Rate Agent and approved by the Company (one of which may be the
Exchange Rate Agent) for the purchase by the quoting dealer, for settlement on
such payment date, of the aggregate amount of such Foreign Currency payable on
such payment date in respect of all Notes denominated in such Foreign Currency
and for which the applicable dealer commits to execute a contract. If no such
bid quotations are available, payments will be made in the Foreign Currency.
Unless otherwise specified on the face hereof, if payment
hereon is required to be made in a Foreign Currency and such currency is
unavailable to the Company for making payments thereof due to the imposition of
exchange controls or other circumstances beyond the Company's control, or is no
longer used by the government of the country which issued such currency or for
the settlement of transactions by public institutions of or within the
international banking community, then the Company will be entitled to make
payments with respect hereto in U.S. dollars until such Foreign Currency is
again available or so used. The amount so payable on any date in such Foreign
Currency shall be converted into U.S. dollars at a rate determined by the
Exchange Rate Agent on the basis of the noon buying rate in The City of New
York for cable transfers in the Foreign Currency as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate")
for such Foreign Currency on the second Business Day prior to such payment
date, or on such other basis as may be specified on the face hereof. In the
event such Market Exchange Rate is not then available, the Company will be
entitled to make payments in U.S. dollars (i) if such Foreign Currency is not a
composite currency, on the basis of the most recently available Market Exchange
Rate for such Foreign Currency or (ii) if such Foreign Currency is a composite
currency, including, without limitation, Euros, in an amount determined by
the Exchange Rate Agent to be the sum of the results obtained by multiplying
the number of units of each component currency of such composite currency, as
of the most recent date on which such composite currency was used, by the
Market Exchange Rate for such component currency on the second Business Day
prior to such payment date (or if such Market Exchange Rate is not then
available, by the most recently available Market Exchange Rate for such
component currency, or as otherwise specified on the face hereof). Any payment
in respect hereof made under such circumstances in U.S. dollars will not
constitute an Event of Default under the Indenture.
If the official unit of any component currency of a composite
currency is altered by way of combination or subdivision, the number of units
of that currency as a component shall be divided or multiplied in the same
proportion. If two or
<PAGE>
9
more component currencies are consolidated into a single currency, the amounts
of those currencies as components shall be replaced by an amount in such single
currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that original component
currency as a component shall be replaced by amounts of such two or more
currencies having an aggregate value on the date of division equal to the
amount of the former component currency immediately before such division.
In the event of an official redenomination of the Specified
Currency or the Optional Payment Currency (including, without limitation, an
official redenomination of any such currency that is a composite currency), the
obligations of the Company to make payments in or with reference to such
currency shall, in all cases, be deemed immediately following such
redenomination to be obligations to make payments in or with reference to that
amount of redenominated currency representing the amount of such currency
immediately before such redenomination. In no event shall any adjustment be
made to any amount payable hereunder as a result of any redenomination of any
component currency of any composite currency (unless such composite currency is
itself officially redenominated).
All determinations referred to above made by the Exchange Rate
Agent shall be at its sole discretion (except to the extent expressly provided
herein that any determination is subject to approval by the Company) and, in
the absence of manifest error, shall be conclusive for all purposes and binding
on the Holder hereof, and the Exchange Rate Agent shall have no liability
therefor.
All currency exchange costs will be borne by the Holder hereof
by deduction from the payments made hereon.
<PAGE>
10
Section 3. Determination of Interest Rate. For the period
from the Issue Date to the first Interest Reset Date set forth on the face
hereof, the interest rate hereon shall be the Initial Interest Rate specified
on the face hereof. Thereafter, the interest rate hereon will be reset on
each Interest Reset Date; provided, however, that the interest rate in effect
for the ten days immediately prior to Maturity will be that in effect on the
tenth day preceding such Maturity. If any Interest Reset Date would otherwise
be a day that is not a Business Day (or, if this Note is a LIBOR Note, to the
next day that is a London Banking Day), except that if this Note is a LIBOR
Note and such London Banking Day is in the next succeeding calendar month,
such Interest Reset Date shall be the immediately preceding London Banking
Day. If this Note is a Treasury Rate Note (as defined below) and an auction
date for Treasury bills shall fall on any Reset Date, then such Interest
Reset Date shall instead be the first Business Day immediately following such
auction date. Subject to applicable provisions of law and except as specified
herein, on each Interest Reset Date, the rate of interest on this NOte on and
after the first Interest Reset Date shall be the rate determined in
accordance with the provisions of the heading below which has been designated
as the Interest Rate Basis on the face hereof plus or minus the Spread, if
any, specified on the face hereof or multiplied by the Spread Multiplier, if
any, specified on the face hereof.
Commercial Paper Rate Notes
If the Interest Rate Basis is the Commercial Paper Rate, this Note
is a "Commercial Paper Rate Note." A Commercial Paper Rate Note will bear
interest at the interest rate calculated with reference to the Commercial
Paper Rate and the Spread or Spread Multiplier, if any. Unless otherwise
specified on the face hereof, "Commercial Paper Rate" means, with respect to
any Interest Determination Date, the Money Market Yield (calculated as
described below) of the rate on that date for commercial paper having the
applicable Index Maturity as such rate is published in the publication
entitled "Statistical Release H.15(519), Selected Interest Rates," or any
successor publication, published by the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "Commercial Paper". If such
rate is not published by 3:00 P.M., New York City time, on the Calculation
Date (as defined below) pertaining to such Interest Determination Date, then
the Commercial Paper Rate shall be the Money Market Yield of the rate on such
Interest Determination Date for commercial paper having the applicable Index
Maturity as published in the "H.15 Daily Update" (the daily update of the
Board of Governors of the Federal Reserve System at
http://www.bog.frb.fed.us/releases/H15/update or any successor site or
publication). If such rate is not yet published in either H.15(519) or the
H.15 Daily Update by 3:00 P.M., New York City time, on such Calculation Date,
then the Commercial Paper Rate for such Interest Determination Date shall be
calculated by the Calculation Agent and shall be the Money Market Yield of
the arithmetic mean of the offered rates as of 11:00 A.M., New York City
time, on such Interest Determination Date of three leading dealers of
commercial paper in New York City selected by the Calculation Agent after
consultation with the Company for commercial paper having the applicable
Index Maturity, placed for industrial issuers whose bond rating is "AA" or
the equivalent, from a nationally recognized securities rating agency;
provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the
Commercial Paper Rate for the applicable period will be Commercial Paper Rate
in effect on such Interest Determination Date.
<PAGE>
11
"Money Market Yield" shall be a yield calculated in accordance with
the following formula:
D X 360
Money Market Yield= ------------- x 100
360 - (D X M)
where "D" refers to the per annum rate for the commercial paper,
quoted on a bank discount basis expressed as a decimal; and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
Federal Funds Rate Notes
If the Interest Rate Basis is the Federal Funds Rate, this Note is
a "Federal Funds Rate Note." A Federal Funds Rate Note will bear interest at
the interest rate calculated with reference to the Federal Funds Rate and the
Spread or Spread Multiplier, if any. Unless otherwise specified on the face
hereof, "Federal Funds Rate" means, with respect to any Interest
Determination Date, the rate on that day for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)" or, if not so
published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Federal Funds Rate will
be the rate on such Interest Determination Date as published in the H.15
Daily Update under the heading "Federal Funds/Effective Rate." If such rate
is not yet published in either H.15(519) or the H.15 Daily Update by 3:00 P.M.,
New York City time, on the Calculation Date pertaining to such Interest
determination Date, then the Federal Funds Rate for such Interest
Determination Date will be the rate on that date which the Federal Reserve
Bank of New York makes publicly available that is equivalent to the rate
which appears in H.15(519) under the heading "Federal Funds (Effective)." If
such rate, however, is not made publicly available by 3:00 P.M., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, the Federal Funds Rate for the applicable period will be the Federal
Funds Rate in effect on such Interest Determination Date.
CD Rate Notes
If the Interest Rate Basis is the CD Rate, this Note is a "CD Rate
Note." A CD Rate Note will bear interest at the interest rate calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any. Unless
otherwise specified on the face hereof, "CD Rate" means, with respect to any
Interest Determination Date, the rate on such date for negotiable
certificates of deposit having the applicable Index Maturity as published in
H.15(519) under the heading "CDs (Secondary Market)" or, if not so published
by 3:00 P.M., New York City time, on the
<PAGE>
12
Calculation Date pertaining to such Interest Determination Date, the CD Rate
will be the rate on such Interest Determination Date for negotiable
certificates of deposit of the applicable Index Maturity as published in the
H.15 Daily Update. If such rate is not yet published in either H.15(519) or
the H.15 Daily Update by 3:00 P.M., New York City time, on such Calculation
Date, then the CD Rate for such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such
Interest Determination Date, of three leading nonbank dealers in negotiable
U.S. dollar certificates of deposit in New York City selected by the
Calculation Agent after consultation with the Company for negotiable
certificates of deposit of major United States money center banks of the
highest credit standing (in the market for negotiable certificates of
deposit) with a remaining maturity closest to the applicable Index Maturity
in a denomination of $5,000,000; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned
in this sentence, the CD Rate for the applicable period will be the CD Rate
in effect on such Interest Determination Date.
LIBOR Notes
If the Interest Rate Basis is LIBOR, this Note is a "LIBOR Note." A
LIBOR Note will bear interest at the interest rate calculated with reference
to LIBOR and the Spread or Spread Multiplier, if any. Unless otherwise
indicated on the face hereof, "LIBOR" means the rate determined by the
Calculation Agent as follows:
(a) With respect to an Interest Determination Date, LIBOR will be,
as specified on the face hereof, either (i) the arithmetic mean of the
offered rates for deposits in U.S. dollars for the period (commencing on the
Interest Reset Date) of the applicable Index Maturity which appears on the
display designated as page "LIBO" on the Reuters Monitor Money Rates Service,
or such other page as may replace the LIBO page on that service for the
purpose of displaying London interbank offered rates of major banks (the
"Reuters Screen LIBO Page"), at approximately 11:00 A.M., London time, on
such Interest Determination Date, if at least two such offered rates appear
on the Reuters Screen LIBO Page ("LIBOR Reuters"), or (ii) the offered rate
for deposits in U.S. dollars or the applicable Foreign Currency specified on
the face hereof for the period (commencing on the Interest Reset Date) of the
applicable Index Maturity which appears on the Telerate Page 3750 (as defined
below), as applicable, at approximately 11:00 A.M., London time, on such
Interest Determination Date ("LIBOR Telerate"). If neither LIBOR Reuters nor
LIBOR Telerate is specified on the face hereof, LIBOR will be determined as
if LIBOR Telerate had been specified.
<PAGE>
13
(b) With respect to an Interest Determination Date on which fewer than
two offered rates appear on the Reuters Screen LIBO Page as specified in
(a)(i) above, or on which no rate appears on Telerate Page 3750, as specified
in a (a)(ii) above, as applicable, the Calculation Agent will request the
principal London office of each of four major banks in the London interbank
market, as selected by the Calculation Agent after consultation with the
Company, to provide the Calculation Agent with its offered quotation for
deposits in the applicable currency for the period (commencing on the
Interest Reset Date) of the applicable Index Maturity to prime banks in the
London interbank market at approximately 11:00 A.M., London time, on such
Interest Determination Date and in a principal amount equal to an amount of
not less than $1,000,000 (or the equivalent thereof in the applicable
currency if such currency is a Foreign Currency) that is representative of a
single transaction in such market at such Interest Determination Date. If two
or more quotations are provided, LIBOR in respect of such Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two such quotations are provided, LIBOR in respect of such Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., New York City time, on such Interest Determination
Date by three major banks in New York City selected by the Calculation Agent
after consultation with the Company for loans in the applicable currency to
leading European banks, for the period (commencing on the Interest Reset
Date) of the applicable Index Maturity and in a principal amount equal to an
amount of not less than $1,000,000 (or the equivalent thereof in the
applicable currency if such currency is a Foreign Currency) that is
representative of a single transaction in such market at such time, provided,
however, that if the banks in New York City selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, LIBOR for
the applicable period will be LIBOR as in effect on such Interest
Determination Date.
The term "Telerate Page 3750" means the display designated as page "3750"
on the Bridge Telerate Service, or such other page designated in replacement
thereof, or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates.
<PAGE>
14
Prime Rate Notes
If the Interest Rate Basis is the Prime Rate, this Note is a "Prime Rate
Note." A Prime Rate Note will bear interest at the interest rate calculated
with reference to the Prime Rate and the Spread or Spread Multiplier, if any.
Unless otherwise specified on the face hereof, "Prime Rate" means, with
respect to any Interest Determination Date, the rate on that day as published
in H.15(519) under the heading "Bank Prime Loan" or, if not so published by
9:00 A.M., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the Prime Rate will be the rate on that day as
published in the H.15 Daily Update under the heading "Bank Prime Loan," or if
neither such rate is published by 3:00 P.M., New York City time, on such
Calculation Date, the Prime Rate will be determined by the Calculation Agent
and will be the arithmetic mean of the rates of interest publicly announced
by each bank named on the display designated as page "USPRIME1" on the
Reuters Monitor Money Rates Service as such bank's prime rate or base lending
rate as in effect for such Interest Determination Date. If fewer than four
such rates but more than one such rate appear on the Reuters Screen USPRIME1
Page for such Interest Determination Date, the Prime Rate will be determined
by the Calculation Agent and will be the arithmetic mean of the Prime Rates
quoted on the basis of the actual number of days in the year divided by 360
as of the close of business on such Interest Determination Date by four major
money center banks in New York City selected by the Calculation Agent after
consultation with the Company. If all four banks do not provide quotations,
the Prime Rate will be calculated by the Calculation Agent and will be the
arithmetic mean of four prime rates in effect for such Interest Determination
Date quoted on the same basis as described above, provided by the selected
bank and by a reasonable number of substitute domestic banks or trust
companies, in each case having total equity capital of at least $500,000,000,
selected by the Calculation Agent after consultation with the Company to
provide such rate or rates; provided, however, that if the banks or trust
companies selected as aforesaid are not quoting as mentioned in this
sentence, the Prime Rate for the applicable period will be the Prime Rate in
effect on such Interest Determination Date.
Treasury Rate Notes
If the Interest Rate Basis is the Treasury Rate, this Note is a
"Treasury Rate Note." A Treasury Rate Note will bear interest at the interest
rate calculated with reference to the Treasury Rate and the Spread or Spread
Multiplier, if any. Unless "Treasury Rate Constant Maturity" is specified on the
face hereof, "Treasury Rate" means, with respect to any Interest Determination
Date, the rate for the auction held on the Treasury Rate Determination Date (as
defined below) for such Interest Reset Period of direct obligations of the
United States ("Treasury bills") having the Index Maturity specified on the face
hereof, as published in H.15(519) under the heading "U.S. Government
Securities-Treasury bills-auction average (investment)" or, if not so published
by 3:00 P.M., New York City time, on the tenth calendar day after such Treasury
Rate Determination Date (or, if such day is not a Business Day, the next
succeeding Business Day) (the "Calculation Date"), the auction average rate
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) on such Treasury Rate Determination
Date as otherwise announced by the United States Department of the Treasury. In
the event that the results of the auction of Treasury bills having the Index
Maturity specified on the face hereof are not published or reported as provided
above by 3:00 P.M., New York City time, on such Calculation Date, or if no such
auction is held on such Treasury Rate Determination Date, then the "Treasury
Rate" for such Interest Reset Period shall be calculated by the Calculation
Agent and shall be a yield to maturity (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates as of approximately
3:30 P.M., New York City time, on such Treasury Rate Determination Date, of
three leading primary United States government securities dealers selected by
the Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the Index Maturity specified on the face hereof, PROVIDED, HOWEVER,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting bid rates as mentioned in this sentence, then the "Treasury Rate" for
such Interest Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Interest Rate).
The "Treasury Rate Determination Date" for each Interest Reset Period
will be the day of the week in which the Interest Reset Date for such Interest
Reset Period falls on which Treasury bills would normally be auctioned. Treasury
bills are normally sold at auction on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Rate Determination Date pertaining to the
Interest Reset Period commencing in the next succeeding week. If an auction date
shall fall on any day that would otherwise be an Interest Reset Date for a Note
whose Base Rate is the Treasury Rate, then such Interest Reset Date shall
instead be the Business Day immediately following such auction date.
<PAGE>
If "Constant Maturity" is specified in the applicable Pricing
Supplement, the "Treasury Rate" for each Interest Reset Period will be the rate
that is set forth in the Federal Reserve Board publication H.15(519) opposite
the caption "U.S. Government/Securities/Treasury Constant Maturities/" in the
Index Maturity with respect to the applicable Constant Maturity Treasury Rate
Determination Date (as defined below). If H.15(519) is not published, the
"Treasury Rate" shall be the rate that was set forth on Telerate Page 7055, or
its successor page (as determined by the Calculation Agent after consultation
with the Company), on the applicable Constant Maturity Treasury Rate
Determination Date opposite the applicable Index Maturity. If no such rate is
set forth, then the Treasury Rate for such Interest Reset Period shall be
established by the Calculation Agent as follows. The Calculation Agent will
contact the Federal Reserve Board and request the Treasury Rate, in the
applicable Index Maturity, for the Constant Maturity Treasury Rate Determination
Date. If the Federal Reserve Board does not provide such information, then the
Treasury Rate for such Interest Reset Date will be the arithmetic mean of
bid-side quotations, expressed in terms of yield, reported by three leading U.S.
government securities dealers (one or more of which may be an Agent), according
to their written records, as of 3:00 P.M. (New York City time) on the Constant
Maturity Treasury Rate Determination Date, for the noncallable U.S. Treasury
Note that is nearest in maturity to the Index Maturity, but not less than
exactly the Index Maturity and for the noncallable U.S. Treasury Note that is
nearest in maturity to the Index Maturity, but not more than exactly the Index
Maturity. The Calculation Agent shall calculate the Treasury Rate by
interpolating to the Index Maturity based on an actual/actual date count basis,
the yield on the two Treasury Notes selected. If the Calculation Agent cannot
obtain three such adjusted quotations, the Treasury Rate for such Interest Reset
Date will be the arithmetic mean of all such quotations, or if only one such
quotation is obtained, such quotation, obtained by the Calculation Agent. In all
events, the Calculation Agent shall continue polling dealers until at least one
adjusted yield quotation can be determined.
"The Constant Maturity Treasury Rate Determination Date" shall be the
tenth Business Day prior to the Interest Reset Date for the applicable Interest
Reset Period.
The "Calculation Date" pertaining to any Treasury Rate Determination
Date or Constant Maturity Treasury Rate Determination Date, as applicable, shall
be the tenth calendar day after such Treasury Rate Determination Date or
Constant Maturity Treasury Rate Determination Date, as applicable, or, if such a
day is not a Business Day, the next succeeding Business Day.
J.J. Kenny Rate Notes
If the Interest Rate Basis is the J.J. Kenny Rate, this Note is a
"J.J. Kenny Rate Note." J.J. Kenny Rate Notes will bear interest at the
interest rates (calculated by reference to the J.J. Kenny Rate and the Spread
and/or Spread Multiplier, if any) specified in the J.J. Kenny Rate Notes and
in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, the
"J.J. Kenny Rate" for each Interest Reset Period will
<PAGE>
be determined by the Calculation Agent for such J.J. Kenny Rate Note as of
the second Business Day prior to the Interest Reset Date for such Interest
Reset Period (a "J.J. Kenny Rate Determination Date") and shall be the per
annum rate on such date equal to the index made available and subsequently
published by Kenny Information Systems or its successor, based upon 30-day
yield evaluations at par of bonds, the interest on which is excludable from
gross income for federal income tax purposes under the Internal Revenue Code
of 1986, as amended (the "Code"), of not less than five "high grade"
component issuers selected from time to time by Kenny Information Systems,
including without limitation, issuers of general obligation bonds; PROVIDED,
HOWEVER, that the bonds on which the index is based shall not include any
bonds the interest on which is subject to an "alternate minimum tax" or
similar tax under the Code, unless all tax-exempt bonds are subject to such
tax. If such rate is not made available by 3:00 P.M., New York City time, on
the Calculation Date (as defined below) pertaining to such J.J. Kenny Rate
Determination Date, the J.J. Kenny Rate shall be the rate quoted by a
successor indexing agent selected by the Company equaling the prevailing rate
for bonds rated in the highest short-term rating category by Moody's
Investors Service, Inc. and Standard & Poor's Corporation in respect of
issuers selected by such successor indexing agent most closely resembling the
"high grade" component issuers selected by Kenny Information Systems that are
subject to tender by the holders thereof for purchase on not more than seven
days' notice and the interest on which is (A) variable on a weekly basis, (B)
excludable from gross income for federal income tax purposes under the Code,
and (C) not subject to an "alternate minimum tax" or similar tax under the
Code, unless all tax-exempt bonds are subject to such tax; PROVIDED, HOWEVER,
that if a successor indexing agent is not available, the J.J. Kenny Rate with
respect to such J.J. Kenny Rate Determination Date will be the J.J. Kenny
Rate for the immediately preceding Interest Reset Period (or, if there was no
such Interest Reset Period, the Initial Interest Rate).
The "Calculation Date" pertaining to any J.J. Kenny Rate Determination
Date shall be the tenth calendar day after such J.J. Kenny Rate Determination
Date or, if such day is not a Business Day, the next succeeding Business Day.
Eleventh District Cost of Funds Rate Notes
If the Interest Rate Basis is the Eleventh District Cost of Funds
Rate, this Note is an "Eleventh District Cost of Funds Rate Note." Eleventh
District Cost of Funds Rate Notes will bear interest at the interest rates
(calculated by reference to the Eleventh District Cost of Funds Rate and the
Spread and/or Spread Multiplier, if any) specified in the Eleventh District Cost
of Funds Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, the
"Eleventh District Cost of Funds Rate," for each Interest Reset Period will be
determined by the Calculation Agent for such Eleventh District Cost of Funds
Rate Note as of the last working day of the month immediately prior to such
Interest Reset Date for such Interest Reset Period on which the Federal Home
Loan Bank of San Francisco (the "FHLB of San Francisco") publishes the Eleventh
District Cost of Funds Index (as defined below) (the "Eleventh District Cost of
<PAGE>
Funds Rate Determination Date"), and shall be the rate equal to the monthly
weighted average cost of funds for the calendar month preceding such Eleventh
District Cost of Funds Rate Determination Date as set forth under the caption
"Eleventh District" on the Telerate Page 7058 as of 11:00 A.M., San Francisco
time, on such Eleventh District Cost of Funds Rate Determination Date. If such
rate does not appear on Telerate Page 7058 on any related Eleventh District Cost
of Funds Rate Determination Date, the Eleventh District Cost of Funds Rate for
such Eleventh District Cost of Funds Rate Determination Date shall be the
monthly weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District that was most recently announced (the
"Eleventh District Cost of Funds Rate Index") by the FHLB of San Francisco as
such cost of funds for the calendar month preceding the date of such
announcement. If the FHLB of San Francisco fails to announce such rate for the
calendar month next preceding such Eleventh District Cost of Funds Rate
Determination Date, then the Eleventh District Cost of Funds Rate for such
Eleventh District Cost of Funds Rate Determination Date will be the Eleventh
District Cost of Funds Rate in effect on such Eleventh District Cost of Funds
Rate Determination Date.
Inverse Floating Rate Notes
If this Note is designated as an Inverse Floating Rate Note on the
face hereof, the Inverse Floating Rate shall be equal to (i) in the case of the
period, if any, commencing on the Issue Date (or such other date which may be
specified on the face hereof as the date on which this Note shall begin to
accrue interest), up to the first Interest Reset Date, the Initial Fixed
Interest Rate shown above, and (ii) in the case of each period commencing on an
Interest Reset Date, the Reset Fixed Reference Rate shown above minus the
interest rate determined by reference to the Base Rate shown above, as adjusted
by the Spread or Spread Multiplier, if any, as determined in accordance with the
provisions hereof, PROVIDED, HOWEVER, that (x) the interest rate thereon will
not be less than zero and (y) the interest rate in effect for the ten days
immediately prior to the date of Maturity will be the rate in effect on the
tenth day preceding such date.
Floating Rate/Fixed Rate Notes
If this Note is designated as a Floating Rate/Fixed Rate Note, this
Note will be a Floating Rate note for a specified portion of its term and a
Fixed Rate Note for the remainder of its term, in which event the interest rate
on this Note will be determined as provided herein as if it were a Floating Rate
Note and a Fixed Rate Note hereunder for each such respective period, all as
described herein and in the applicable Pricing Supplement.
<PAGE>
The term "Calculation Date" means the date on which the Calculation
Agent is to calculate an interest rate for this Note, which shall be the
earlier of (i) the tenth calendar day after the related Interest
Determination Date or if such day is not a Business Day, the next succeeding
Business Day, and (ii) the Business Day preceding the applicable interest
payment date or Stated Maturity, unless otherwise specified on the face
hereof.
Notwithstanding the foregoing, the Interest rate hereof shall not be
greater than the Maximum Interest Rate, if any, or less than the Minimum
Interest Rate, if any, shown on the face hereof. The interest rate on this
Note will in no event be higher than the maximum rate permitted by New York
law as the same may be modified by United States law of general
applicability.
The Calculation Agent will, upon the request of the Holder of this
Note, provide the interest rate then in effect and, if determined, the
interest rate which will become effective as a result of a determination made
on the most recent Interest Determination Date with respect to this Note.
Unless otherwise specified on the face hereof, the Interest
Determination Date pertaining to an Interest Reset Date will be the second
Business Day prior to the Interest Reset Date for a CD Rate Note, Commercial
Paper Rate Note, Federal Funds Rate Note, Constant Maturity Treasury Rate
Note, Prime Rate Note or J.J. Kenny Rate Note. Unless otherwise specified on
the face
<PAGE>
16
hereof, the Interest Determination Date pertaining to an Interest Reset Date
for a LIBOR Note will be the second London Banking Day preceding such
Interest Reset Date. Unless otherwise specified on the face hereof, the
Interest Determination Date pertaining to an Interest Reset Date for a
Treasury Rate Note (other than a Constant Maturity Treasury Rate Note) will
be the day of the week in which such Interest Reset Date falls on which
Treasury bills of the applicable Index Maturity would normally be auctioned.
Treasury bills are usually sold at auction on Monday of each week, unless
that day is a legal holiday, in which case the auction is usually held on the
following Tuesday, except that such auction may be held on the preceding
Friday. If, as the result of a legal holiday, an auction is so held on the
preceding Friday, such Friday will be the Interest Determination Date
pertaining to the Interest Reset Date occurring in the next succeeding week.
Unless otherwise specified on the face hereof, the Interest Determination
Date pertaining to an Interest Reset Date for an Eleventh District Cost of
Funds Rate Note will be the last working day of the month immediately prior
to such Interest Reset Date.
Accrued interest from the Issue Date or from the last date to which
interest has been paid shall be calculated by multiplying the face amount of
this Note by an accrued interest factor. This accrued interest factor shall
be computed by adding the interest factors calculated for each day from the
Issue Date or from the last date to which interest has been paid, to the date
for which accrued interest is being calculated. The interest factor for each
such day is computed by dividing the interest rate applicable to such date by
360, in the case of Commercial Paper Rate Notes, Federal Funds Rate Notes, CD
Rate Notes, LIBOR Notes, Prime Rate Notes, J.J. Kenny Rate Notes and Eleventh
District Cost of Funds Rate Notes, or by the actual number of days in the
year, in the case of Treasury Rate Notes. The interest rate applicable to any
day that is an Interest Reset Date is the interest rate as determined, in
accordance with the procedures set forth above, with respect to the Interest
Determination Date pertaining to such Interest Reset Date. The interest rate
applicable to any other day is the interest rate for the immediately
preceding Interest Reset Date (or, if none, the Initial Interest Rate).
Unless otherwise specified on the face hereof, all percentages
resulting from any calculation of the rate of interest on this Note will be
rounded, if necessary, to the nearest one hundred-thousandth of a percent
(.0000001), with five one- millionths of a percentage point rounded upward,
and all currency amounts used in or resulting from such calculation will be
rounded to the nearest one-hundredth of a unit (with five one-thousandths of
a unit being rounded upwards).
Section 4. Redemption. If so specified on the face hereof, the
Company may at its option redeem this Note in whole or from time to time in
part on or after the date designated as the Initial Redemption Date on the
face hereof at either a price based on a constant percentage of the Principal
Amount of this Note as specified on the face hereof or at prices declining
from the premium specified on the face hereof, if any, to 100% of the
Principal Amount hereof, together, in each case, with accrued interest to the
Redemption Date. The Company may exercise such to be redeemed shall be
selected by the Trustee by such method as the Trustee shall deem fair and
appropriate.
<PAGE>
17
Section 5. Sinking Funds and Amortizing Notes. Unless
otherwise specified on the face hereof this Note will not be subject to any
sinking fund.
Section 6. Optional Repayment. If so specified on the face
hereof, this Note will be repayable prior to the Maturity Date at the option
of the Holder on the Optional Repayment Dates specified on the face hereof at
the Optional Repayment Prices specified on the face hereof, together with
accrued interest to the applicable Optional Repayment Date. Unless otherwise
specified on the face hereof, in order for this Note to be so repaid, the
Company must receive, at least 30 but not more than 45 days prior to an
Optional Repayment Date, either (i) this Note with the form below entitled
"Option to Elect Repayment" duly completed or (ii) a telegram, telex, fax or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States setting forth the name of the Holder hereof, the Face
Amount hereof, the Face Amount to be repaid, the certificate number hereof or
a description of the tenor and terms of this Note, a statement that the
option to elect repayment is being exercised thereby and a guarantee that
this Note with the form below entitled "Option to Elect Repayment" duly
completed will be received by the Paying Agent not later than five Business
Days after the date of such telegram, telex, fax or letter and this Note and
form duly completed are received by the Paying Agent by such fifth Business
Day. Exercise of this repayment option shall be irrevocable, except as
otherwise provided under Section 7 or Section 10. The repayment option may
be exercised by the Holder of this Note with respect to less than the Face
Amount then outstanding provided that the Face Amount of the Note remaining
outstanding after repayment is an authorized denomination. Upon such partial
repayment this Note shall be cancelled and a new Note or Notes for the
remaining Face Amount hereof shall be issued in the name of the Holder of
this Note.
Section 7. Optional Interest Reset or Spread Multiplier Reset. If
so specified on the face hereof, the Spread or Spread Multiplier, if any, set
forth on the face hereof may be reset at the option of the Company, in the
manner set forth below (unless otherwise specified on the face hereof), on
the Optional Reset Date or Optional Reset Dates specified on the face hereof.
<PAGE>
18
The Company may exercise such option by notifying the Trustee in writing
of such exercise at least 45 but not more than 60 days prior to an Optional
Reset Date. Not later than five Business Days after receipt thereof, the
Trustee will mail by first-class mail to the Holder of this Note a notice
(the "Reset Notice") setting forth (i) the election of the Company to reset
the Spread or Spread Multiplier, (ii) such new Spread or Spread Multiplier
and (iii) the provisions, if any, for redemption during the period from
such Optional Reset Date to the next Optional Reset Date or, if there
is no such next Optional Reset Date, to the Maturity Date of this Note
(each such period a "Subsequent Interest Period"), including the date or dates
on which or the period or periods during which and the price or prices at which
such redemption may occur during such Subsequent Interest Period. The Reset
Notice shall be substantially in the form of Exhibit A to this Note. Upon the
transmittal by the Trustee of a Reset Notice to the Holder of this Note, such
new Spread or Spread Multiplier shall take effect automatically, and, except
as modified by the Reset Notice and as described in the next paragraph, this
Note will have the same terms as prior to the transmittal of such Reset Notice.
Notwithstanding the foregoing, not later than 20 days prior to
an Optional Reset Date, the Company may, at its option, revoke the Spread or
Spread Multiplier provided for in the Reset Notice and establish Spread or
Spread Multiplier that is higher than the interest rate provided for in the
Reset Notice for the Subsequent Interest Period commencing on such Optional
Reset Date by causing the Trustee to mail by first-class mail notice of such
higher Spread or Spread Multiplier to the Holder of this Note. Such notice
shall be irrevocable and shall be mailed by the Trustee within five Business
Days after receipt thereof. All Notes with respect to which the Spread or
Spread Multiplier is reset on an Optional Reset Date will bear
such higher Spread or Spread Multiplier for the Subsequent Interest Period.
If the Company elects to reset the Spread or Spread Multiplier of
this Note, the Holder of this Note will have the option to elect repayment by
the Company of this Note, or any portion hereof, on any Optional Reset Date at
a price calculated with reference to the Face Amount hereof to be repaid, plus
any interest accrued to, such Optional Reset Date. In order to obtain
repayment on an Optional Reset Date, the Holder must follow the procedures set
forth above in Section 6 for optional repayment except that the period for
delivery or notification to the Trustee shall be at least 25 but not more than
35 days prior to such Optional Reset Date and except that, if the Holder has
tendered this Note for repayment pursuant to the Reset Notice, the Holder may,
by written notice to the Trustee, revoke such tender for repayment until the
close of business on the tenth day prior to such Optional Reset Date; provided,
however, that if such day is not a Business Day, then such notice may be given
on the next succeeding Business Day.
<PAGE>
19
Section 8. OID Notes. If this Note is an OID Note, unless
otherwise specified on the face hereof, the amount payable in the event of
redemption by the Company, repayment at the option of the Holder or
acceleration of Maturity shall be the Amortized Face Amount of this Note as of
the date of such redemption, repayment or acceleration rather than the Face
Amount hereof. The "Amortized Face Amount" of this Note shall be the amount
equal to (a) the Issue Price (as set forth on the face hereof) plus (b) that
portion of the difference between the Issue Price and the Face Amount hereof
that has accrued at the Yield to Maturity set forth on the face hereof
(computed in accordance with generally accepted United States bond yield
computation principles) at the date as of which the Amortized Face Amount is
calculated, but in no event shall the Amortized Face Amount of this Note exceed
the Face Amount.
Section 9. Dual Currency Notes. If it is specified on the
face hereof that this Note is a Dual Currency Note, the Company has a one time
option, exercisable on any one of the Option Election Dates specified on the
face hereof in whole, but not in part, with respect to all Dual Currency Notes
issued on the same day and having the same terms as this Note (this "Tranche"),
of thereafter making all payments of principal, premium, if any, and interest
(which payments would otherwise be made in the Specified Currency of such
Notes) in the Optional Payment Currency specified on the face hereof. If the
Company makes such an election, the amount of Optional Payment Currency payable
in respect hereof shall be determined by the Exchange Rate Agent by converting
the amount of Specified Currency that would otherwise be payable into the
Optional Payment Currency at the Designated Exchange Rate specified on the face
hereof.
The Company may exercise such option by notifying the Trustee
of such exercise on or prior to the Option Election Date. The Trustee will
mail by first-class mail to each holder of a Note of this Tranche a notice of
such election within five Business Days of the Option Election Date which shall
state (i) the first date, whether an Interest Payment Date and/or the Maturity
Date, on which scheduled payments in the Optional Payment Currency will be made
and (ii) the Designated Exchange Rate. Any such notice by the Company, once
given, may not be withdrawn.
If this Note is a Dual Currency Note, unless otherwise
specified on the face hereof and notwithstanding any prior election made by the
Company, the amount payable hereon in the event of any optional redemption by
the Company, any repayment at the option of the Holder, any acceleration of the
Maturity of this Note or other prepayment of this Note prior to the Maturity
Date shall be an amount equal to the Principal Amount hereof otherwise due and
payable plus accrued interest to but excluding the date of redemption,
repayment, acceleration or other prepayment minus the Total Option Value
multiplied by a fraction, the numerator of which is the Principal Amount hereof
and the
<PAGE>
20
denominator of which is the aggregate Principal Amount of all Dual Currency
Notes of this Tranche. In no event will such payment be less than zero.
Notwithstanding any prior election made by the Company, such payment shall be
made in the Specified Currency unless otherwise provided on the face hereof.
The term "Total Option Value" means, with respect to any Dual
Currency Note on any date, an amount (calculated as of such date by the Option
Value Calculation Agent) equal to the sum of the Option Values (calculated as
of such date by the Option Value Calculation Agent) for all Interest Payment
Dates occurring after the date of calculation up to and including the Maturity
Date. The term "Option Value: means, with respect to an Interest Payment Date
or the Maturity Date, the amount calculated by the Option Value Calculation
Agent to be the arithmetic average of the prices quoted on the date of
calculation by three reference banks (which banks shall be selected by the
Option Value Calculation Agent and shall be reasonably acceptable to the
Company) for the right on the Option Election Date immediately preceding such
Interest Payment Date or Maturity Date to purchase for value on such Interest
Payment Date or Maturity Date from such reference banks (A) the aggregate
amount of the Specified Currency due on such Interest Payment Date or Maturity
Date with respect to all of the Dual Currency Notes of this Tranche in exchange
for (B) the amount of the Optional Payment Currency that would be received if
the amount in clause (A) were converted into the Optional Payment Currency at
the Designated Exchange Rate.
All determinations referred to above made by the Exchange Rate
Agent or the Option Value Calculation Agent shall be at their sole discretion
(except to the extent expressly provided herein that any determination is
subject to approval by the Company) and, in the absence of manifest error,
shall be conclusive for all purposes and binding on the Holder hereof, and
neither the Exchange Rate Agent nor the Option Value Calculation Agent shall
have any liability therefor.
Section 10. Extendible Notes. If it is specified on the face
hereof that this Note is an Extendible Note, the Company has the option to
extend the Maturity Date hereof for the number of Extension Periods set forth
on the face hereof, each of which Extension Periods shall be a period of from
one to five whole years. Unless otherwise specified on the face hereof, the
following procedures shall apply if this Note is an Extendible Note.
The Company may exercise its option by notifying the Trustee
of such exercise at least 45 but not more than 60 days prior to the Maturity
Date hereof in effect prior to the exercise of such option (the "Original
Stated Maturity"). Not later than five Business Days after receipt thereof,
the Trustee will mail to the Holder a notice (the "Extension Notice"), first
class, postage prepaid, setting forth (i) the election of the Company to extend
the Maturity Date, (ii) the new Maturity Date, (iii) the
<PAGE>
21
Spread or Spread Multiplier applicable to the Extension Period and (iv) the
provisions, if any, for redemption during the Extension Period, including the
date on which or the period or periods during which and the price at which
such redemption may occur during the Extension Period. Upon the mailing by
the Trustee of an Extension Notice to the Holder, the Maturity Date hereof
shall be extended automatically, and, except as modified by the Extension
Notice and as described in the next paragraph, this Note will have the same
terms as prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to
the Original Stated Maturity hereof, the Company may, at its option, revoke the
interest rate provided for in the Extension Notice and establish a higher
interest rate for the Extension Period by causing the Trustee to mail notice of
such higher interest rate, first class, postage prepaid, to the Holder. Such
notice shall be irrevocable and shall be mailed by the Trustee within three
Business Days after receipt thereof. This Note will bear such higher interest
rate for the Extension Period, whether or not tendered for repayment.
If the Company extends the Maturity Date of this Note, the
Holder will have the option to elect repayment by the Company of this Note, or
any portion hereof, on the Original Stated Maturity at a price calculated with
reference to the Face Amount hereof to be repaid plus any accrued interest to
such date. In order for this Note to be so repaid on the Original Stated
Maturity, the Holder must follow the procedures set forth in Section 5 hereof
for optional repayment, except that the period for delivery of this Note or
notification to the Trustee shall be at least 25 but not more than 35 days
prior to the Original Stated Maturity and except that the Holder may, by
written notice to the Trustee, revoke any such tender for repayment until the
close of business on the tenth day prior to the Original Stated Maturity;
provided, however, that if such day is not a Business Day, then such notice may
be given on the next succeeding Business Day.
Section 11. Renewable Notes. If it is specified on the face
hereof that this Note is a Renewable Note, this Note will mature on the Initial
Maturity Date specified on the face hereof unless the Maturity of all or any
portion of this Note is extended in accordance with the procedures described
below.
On the Interest Payment Date occurring in the sixth month
(unless a different Special Election Interval is specified on the face hereof)
prior to the Initial Maturity Date hereof (the "Initial Maturity Extension
Date") and on the Interest Payment Date occurring in each sixth month (or the
last month of each Special Election Interval) after such Initial Maturity
Extension Date (each, together with the Initial Maturity Extension Date, a
"Maturity Extension Date"), the Maturity of this Note will be extended to the
Interest Payment Date occurring
<PAGE>
22
in the twelfth month (or, if a Special Election Interval is specified on the
face hereof, the last month in a period equal to twice the Special Election
Interval) after such Maturity Extension Date, unless the Holder elects to
terminate the automatic extension of the Maturity hereof or any portion hereof
as described below.
If the Holder elects to terminate the automatic extension of
the Maturity of any portion of the principal amount of this Note during the
specified period prior to any Maturity Extension Date, such portion will become
due and payable on the Interest Payment Date occurring in the sixth month (or
the last month in the Special Election Interval) after such Maturity Extension
Date (the "Extended Maturity Date").
The Holder may elect to terminate the automatic extension of
the Maturity of this Note, or if so specified above, any portion hereof, by
delivering a notice to such effect to the Trustee (or any duly appointed Paying
Agent) at the Corporate Trust Office not less than 15 nor more than 30 days
prior to such Maturity Extension Date (unless another period is specified on
the face hereof as the "Special Election Period"). Such election will be
irrevocable and will be binding upon each subsequent Holder of this Note. An
election to terminate the automatic extension of the Maturity of this Note may
be exercised with respect to less than the entire Face Amount hereof only if so
specified on the face hereof and only in such Face Amount, or any integral
multiple in excess thereof, as is specified on the face hereof.
Notwithstanding the foregoing, the Maturity of this Note will not be extended
beyond the Maturity Date specified on the face hereof.
Unless otherwise specified above, any such election to
terminate will be effective only if this Note, with the "Option to Elect
Termination of Automatic Extension" included herein duly executed, is presented
to the Trustee (or any duly appointed Paying Agent) simultaneously with notice
of such election (or, in the event notice of such election, together with a
guarantee of delivery within five Business Days, is transmitted on behalf of
the Holder from a member of a national securities exchange, the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States, within five Business Days of the date of such notice).
As soon as practicable following receipt of this Note the Trustee (or any duly
appointed Paying Agent) shall issue in exchange herefor in the name of the
Holder (i) a Note, in a face amount equal to the face amount of this Note for
which the election to terminate the automatic extension of Maturity was
exercised, with terms identical to those specified herein (except for the Issue
Date and the Initial Interest Rate and except that such Note shall have a
fixed, non- extendable Maturity on the Extended Maturity Date) and (ii) if such
election is made with respect to less than the full Face Amount hereof, a
replacement Renewable Note, in a face amount
<PAGE>
23
equal to the Face Amount of this Note for which no election was made, with
terms identical to this Note.
Section 12. Principal Amount For Indenture Purposes. For the
purpose of determining whether Holders of the requisite amount of Notes
outstanding under the Indenture have made a demand, given a notice or waiver or
taken any other action, the outstanding principal amount of this Note will be
deemed to be the Principal Amount, provided, however, if this Note is an OID
Note, the outstanding, principal amount of this Note will be deemed to be the
Face Amount set forth above.
Section 13. Modification and Waivers. The Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
holders of not less than 66-2/3% in aggregate principal amount of each series
of the Securities at the time Outstanding to be affected, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) extend the fixed maturity
of any Security, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon or reduce any premium payable on
redemption, or make the principal thereof, or premium, if any, or interest
thereon payable in any coin or currency other than that hereinabove provided,
without the consent of the holder of each Security so affected, or (ii) change
the place of payment on any Security, or impair the right to institute suit for
payment on any Security, or reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each Security so affected. It is also
provided in the Indenture that, prior to any declaration accelerating the
Maturity of any series of Securities, the holders of a majority in aggregate
principal amount of the Securities of such series Outstanding may on behalf of
the holders of all the Securities of such series waive any past default or
Event of Default under the Indenture with respect to such series and its
consequences, except a default in the payment of interest, if any, on or the
principal of, or premium if any, on any of the Securities of such series, or in
the payment of any sinking fund installment or analogous obligation with
respect to Securities of such series. Any such consent or waiver by the Holder
of this Note shall be conclusive and binding upon such Holder and upon all
future holders and owners of this Note and any Notes which may be issued in
exchange or substitution herefor, irrespective of whether or not any notation
thereof is made upon this Note or such other Notes.
Section 13. Obligations Unconditional. No reference herein
to the Indenture and no provisions of this Note or of the Indenture shall alter
or impair the obligation of the Company,
<PAGE>
24
which is absolute and unconditional, to pay the principal of, premium, if any,
and interest, if any, on this Note at the place, at the respective times, at
the rate, and in the coin or currency herein prescribed.
Section 15. Defeasance. The Indenture contains provisions
for the discharge of the Indenture and defeasance at any time of the
indebtedness on this Note upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Note.
Section 16. Authorized Form and Denominations. The Notes of
this series are issuable in registered form, without coupons. Unless otherwise
set forth on the face hereof, Notes denominated in U.S. dollars will be issued
in Face Amount denominations of U.S. $100,000 and any integral multiple of U.S.
$1,000 in excess thereof. Notes denominated in a Foreign Currency will be
issued in the denomination or denominations set forth on the face hereof. Each
Note will be issued initially as either a Global Security or a Certificated
Note, at the option of the holders thereof, either at the office or agency to
be designated and maintained by the Company for such purpose in the Borough of
Manhattan, The City of New York, pursuant to the provisions of the Indenture or
at any of such other offices or agencies as may be designated and maintained by
the Company for such purpose pursuant to the provisions of the Indenture, and
in the manner and subject to the limitations provided in the Indenture, but
without the payment of any service charge, except for any tax or other
governmental charges imposed in connection therewith. Notes of this series are
exchangeable for a like aggregate Face Amount of Notes of this series of a
different authorized denomination, except that Global Securities will not be
exchangeable for Certificated Notes.
Section 17. Registration of Transfer. As provided in the
Indenture and subject to certain limitations as therein set forth, the transfer
of this Note is registrable in the Security Register, upon surrender of this
Note for registration of transfer, at the Corporate Trust Office or agency in a
Place of Payment for this Note, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar requiring such written instrument of transfer duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of this series, of authorized denominations and for the same
aggregate Face Amount, will be issued to the designated transferee or
transferees.
If this Note is a Global Security and if at any time the
Depository notifies the Company that it is unwilling or unable to continue as
Depository or if at any time the Depository shall no longer be eligible under
the Indenture, the Company shall appoint a successor Depository. If a
successor Depository for the Securities of such series is not appointed by the
Company
<PAGE>
25
within 90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company will issue, and the Trustee will authenticate and
deliver, Notes in definitive form in an aggregate Face Amount equal to the Face
Amount hereof.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name this Note is registered as the owner hereof
for all purposes, and neither the Company nor the Trustee nor any agent of the
Company or of the Trustee shall be affected by any notice to the contrary.
Section 18. Events of Default. If an Event of Default with
respect to Notes of this series shall occur and be continuing, the principal of
the Notes of this series may be declared due and payable in the manner and with
the effect provided in the Indenture. In the event that this Note is an OID
Note or a Dual Currency Note, the amount of principal of this Note that becomes
due and payable upon such acceleration shall be equal to the amount calculated
as set forth in Section 8 or Section 9, respectively, hereof. Upon payment (i)
of the aggregate applicable amounts of principal of the Notes of this series so
declared due and payable and (ii) of interest on any overdue principal and
overdue interest (in each case to the extent that the payment of such interest
shall be legally enforceable), all of the Company's obligations in respect of
the payment of the principal of and interest, if any, on the Notes of this
series shall terminate.
Section 19. No Recourse Against Certain Persons. No recourse
for the payment of the principal of, premium, if any, or interest on this Note,
or for any claim based hereon or otherwise in respect hereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in the
Indenture or any Indenture supplemental thereto or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.
Section 20. Defined Terms. All terms used but not defined in
this Note are used herein as defined in the Indenture.
<PAGE>
26
Section 21. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
27
OPTION TO ELECT REPAYMENT
The undersigned owner of this Note hereby irrevocably elects
to have the Company repay the Face Amount of this Note or portion hereof below
designated at (i) the Optional Repayment Percentage multiplied by the Principal
Amount of this Note to be repaid in respect of such Face Amount plus accrued
interest to the Optional Repayment Date, if this Note is to be repaid pursuant
to the Optional Repayment provision described in Section 5 hereof, or (ii) 100%
of the Principal Amount of this Note to be repaid in respect of such Face
Amount plus accrued interest to the Optional Reset Date, if this Note is to be
repaid pursuant to the Optional Interest Reset provision described in Section 7
hereof or the Extendible Notes provision described in Section 10 hereof. Any
such election is irrevocable except as provided in Section 7 or Section 10
hereof.
Dated:_________________ _______________________________
Signature
Sign exactly as name appears on the front of
this Note [SIGNATURE GUARANTEED - required
only if Notes are to be issued and delivered
to other than the registered Holder]
Face Amount to be Fill in for registration of
repaid, if amount to be Notes if to be issued otherwise
repaid is less than the than to the registered Holder:
Face Amount of this
Note (Face Amount Name: ___________________________
remaining must be an Address: ________________________
authorized denomination) ________________________
(Please print name
$_______________________ and address including
zip code)
SOCIAL SECURITY OR OTHER TAXPAYER ID
NUMBER
_________________________________
<PAGE>
28
OPTION TO ELECT TERMINATION OF AUTOMATIC EXTENSION
The undersigned owner of this Note hereby irrevocably elects
to terminate the automatic extension of this Note or of the portion of the Face
Amount of this Note below designated. Any such election is irrevocable and
will be binding on any subsequent Holder hereof.
Dated:_________________ _______________________________
Signature
Sign exactly as name appears on the front of
this Note [SIGNATURE GUARANTEED - required
only if Notes are to be issued and delivered
to other than the registered Holder]
Face Amount to be Fill in for registration of
terminated, if amount to be Notes if to be issued otherwise
terminated is less than the than to the registered Holder:
Face Amount of this
Note (such Face Amount Name: ___________________________
must be an authorized Address: ________________________
denomination) ______________________
(Please print name
$_______________________ and address including
zip code)
SOCIAL SECURITY OR OTHER TAXPAYER
ID NUMBER
_________________________________
<PAGE>
29
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenant by the entireties
JT TEN - as joint tenants with right of
survivorship and not as
tenants in common
UNIF GIFT
MIN ACT - __________Custodian__________
(Cust) (Minor)
Under Uniform Gifts to
Minors Act
_____________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned
hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________________________________
Please print or type name and address, including zip code of assignee
__________________________________________________________________
the within Note of LEHMAN BROTHERS HOLDINGS INC. and all rights thereunder and
does hereby irrevocably constitute and appoint
<PAGE>
30
______________________________________________________Attorney to transfer the
said Note on the books of the within-named Company, with full power of
substitution in the premises.
Dated:______________________________
SIGNATURE GUARANTEED:__________________________________________
NOTICE: The signature to this
assignment must correspond with the
name as it appears upon the face of
the within Note in every particular,
without alteration or enlargement or
any change whatsoever.
<PAGE>
EXHIBIT A
RESET NOTICE
LEHMAN BROTHERS HOLDINGS INC.
Medium-Term Notes, Series
(Floating Rate)
CUSIP No. ___________
Registered Nos. ___-___
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized
and existing under the laws of the State of Delaware (the "Company"), is the
issuer of the above-referenced Notes (the "Notes"). Capitalized terms used
herein and not defined are used as defined in the Notes.
The Company hereby elects to reset the [Spread] [Spread Multiplier]
set forth on the face of the Notes. On and after _________________1/, the
[Spread] [Spread Multiplier] shall be _______________.
Each Holder of a Note has the option to elect repayment by the
Company of such Note, or any portion thereof, on any Optional Reset Date
pursuant to the terms of such Note. The Notes may be repaid on the dates and
at the prices set forth below:
Date Redemption Price
---- ----------------
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused
this Reset Notice to be signed by its Chairman of the Board, its President, its
Vice Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer and to be attested by its Secretary or one of its Assistant
Secretaries.
Dated: LEHMAN BROTHERS HOLDINGS INC.
By:
-------------------------------
Title:
Attest:
---------------------------
Title:
- --------------------------
1/ Insert applicable Optional Reset Date.
<PAGE>
Exhibit 4.14
CUSIP NO. ___________
REGISTERED FACE AMOUNT:.
No. ___
If this Note is an OID Note (as defined below) the following legend is
applicable:
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES
INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE ISSUE PRICE OF THIS
NOTE IS _____% OF ITS PRINCIPAL AMOUNT, AND THE AMOUNT OF ORIGINAL
ISSUE DISCOUNT, THE YIELD TO MATURITY COMPOUNDED _____________, THE
ISSUE DATE AND THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ALLOCABLE TO THE
SHORT PERIOD DETERMINED USING THE EXACT METHOD WITHIN THE MEANING OF
PROPOSED TREASURY REGULATION SECTION 1.1272- 1(c)(2)(ii) ARE AS SET
FORTH BELOW.
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTE, SERIES
(CURRENCY INDEXED)
If the registered owner of this Note (as indicated below) is The
Depository Trust Company (the "Depository") or a nominee of the Depository,
this Note is a Note in global form (a "Global Security") and the following
legends are applicable except as specified on the reverse hereof:
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY OR A NOMINEE OF
THE DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK,
NEW YORK) TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO
CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY.
<PAGE>
2
<TABLE>
<S> <C> <C>
ISSUE PRICE: $ OPTION TO RECEIVE PAYMENTS OPTIONAL REPAYMENT PRICES:
IN THE SPECIFIED CURRENCY:
ISSUE DATE: [ ] YES [ ] NO OPTIONAL INTEREST RATE RESET:
[ ] YES [ ] NO
MATURITY DATE: SPECIFIED CURRENCY:
OPTIONAL RESET DATES:
INTEREST RATE: AMORTIZING NOTE:
[ ] YES [ ] NO OPTIONAL REDEMPTION:
INTEREST PAYMENT DATES: [ ] YES [ ] NO
SINKING FUND:
REGULAR RECORD DATES: INITIAL REDEMPTION DATE:
TOTAL AMOUNT OF OID:
EXCHANGE RATE AGENT: INITIAL REDEMPTION
YIELD TO MATURITY: PERCENTAGE: %
DEPOSITORY:
INITIAL ACCRUAL PERIOD OID: APPLICABILITY OF ANNUAL REDEMPTION
PERCENTAGE REDUCTION:
REFERENCE DEALERS: [ ] YES [ ] NO
If yes, state Annual Percentage
AUTHORIZED DENOMINATIONS: Reduction: %
</TABLE>
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the
"Company," which term includes any successor corporation under the Indenture
referred to on the reverse hereof), for value received, hereby promises to
pay to ___________, or registered assigns, on the Maturity Date the principal
sum equal to the Face Amount hereof, plus or minus an amount determined by
the Determination Agent (as defined below) in accordance with the formula set
forth below (the "Principal Amount") and to pay interest on the Face Amount
as described below and on the reverse hereof until the Principal Amount is
paid or made available for payment and (to the extent that the payment of
such interest shall be legally enforceable) to pay interest on any overdue
principal and premium and on any overdue installment of interest. Unless
otherwise specified above, all payments in respect of this Note will be made
in the Denominated Currency.
The Principal Amount of this Note payable at Maturity shall equal:
(a) if the Spot Rate equals or exceeds the Base Exchange Rate,
Spot Rate - Base Exchange Rate
------------------------------
Face Amount + (Face Amount x Spot Rate ); or
<PAGE>
3
(b) if the Base Exchange Rate exceeds the Spot Rate,
Base Exchange Rate - Spot Rate
------------------------------
Face Amount + (Face Amount x Spot Rate );
provided, however, that in no event shall such Principal Amount be greater
than twice the Face Amount or less than zero. If this Note is an OID Note,
unless otherwise specified above, the term "Face Amount" when used in the
above formula shall refer to the Amortized Face Amount, as described on the
reverse hereof. An "OID Note" is any Note (a) that has been issued at an
Issue Price lower, by more than a de minimis amount (as determined under
United States federal income tax rules applicable to original issue discount
instruments), than the Face Amount thereof and (b) any other Note that for
United States federal income tax purposes would be considered an original
issue discount instrument.
The amount of interest, if any, payable on any Interest Payment
Date (as defined below) shall equal:
Interest Rate Base Exchange Rate
------------- -------------------------------
Face Amount x 2 x Spot Rate
If the Interest Rate on this Note may be reset at the option of the Company
as set forth on the reverse hereof, the term "Interest Rate" when used in the
above formula shall refer to the interest rate in effect during the relevant
period.
The terms used in the preceding formula shall have the following
meanings:
"Business Day" means any day, other than a Saturday or Sunday, that
meets each of the following applicable requirements: such day is
(a) not a day on which banking institutions in New York City are
authorized or required by law or executive order to close; (b) if
the Denominated Currency specified above is a Foreign Currency
(as defined in Section 2 on the reverse hereof) other than Euros,
not a day on which banking institutions are authorized or required
by law to close in the principal financial center of the country
issuing the Foreign Currency, and (c) if the Denominated Currency
specified above is Euros, a day on which the Trans-European Automated
Real-Time Gross Settlement Express Transfer System is open.
"Determination Date" means the second Exchange Rate Day prior to
the date of Maturity.
<PAGE>
4
"Exchange Rate Day" means any day which is a Business Day in The
City of New York and in the principal financial center of the
country which recognizes the Denominated Currency as a unit of
domestic exchange and the principal financial center of the country
which recognizes the Indexed Currency as a unit of domestic
exchange.
"Reference Dealers" means the three banks or firms specified above
or, if any of them shall be unwilling or unable to provide the
requested quotations, such other major money center bank or banks
in The City or New York selected by the Company, in consultation
with the Determination Agent, to act as Reference Dealer or Dealers
in replacement therefor.
"Spot Rate" means the arithmetic means of the open market spot
offer quotations for the Indexed Currency (spot bid quotations for
the Denominated Currency) obtained by the Determination Agent from
the Reference Dealers in The City of New York at approximately
11:00 A.M., New York City time, on the Determination Date, for an
amount of Indexed Currency equal to the Face Amount multiplied by
the Base Exchange Rate, with settlement on the date of Maturity to
be in the Denominated Currency; provided that if such quotations
from the Reference Dealers are not available on the Determination
Date due to circumstances beyond the control of the Company or the
Determination Agent, the Spot Rate will be determined on the basis
of the most recently available quotations from the Reference
Dealers. The Spot Rate shall be expressed in units of the Indexed
Currency per one unit of Denominated Currency.
In the absence of manifest error, the determination by the
Determination Agent of the Spot Rate and of the amount of principal and
interest payable in respect of this Note shall be final and binding on the
Company and the Holder hereof.
If this Note is subject to an Annual Percentage Reduction as specified
above, the Redemption Price shall initially be the Initial Redemption Percentage
of the Principal Amount of this Note on the Initial Redemption Date and shall
decline at each anniversary of the Initial Redemption Date (each such, a
"Redemption Date") by the Annual Percentage Reduction of such Principal Amount
until the Redemption Price is 100% of such Principal Amount.
In the event of any optional redemption by the Company, any repayment
at the option of the Holder, acceleration of the maturity of this Note or other
prepayment of this Note prior to the Maturity Date specified, the term
"Maturity" when used herein shall
<PAGE>
5
refer, where applicable, to the date of redemption, repayment, acceleration
or other prepayment of this Note.
Interest shall be payable from the Issue Date specified above or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for until the principal hereof is paid or made available for
payment. Except as provided in the following paragraph, the Company will pay
interest semiannually on February 15 and August 15 of each year (unless other
Interest Payment Dates are specified above) (each an "Interest Payment
Date"), commencing with the first Interest Payment Date next succeeding
the Issue Date, and at Maturity; provided that any payment of principal,
premium, if any, or interest to be made on any Interest Payment Date or on a
date of Maturity that is not a Business Day shall be made on the next
succeeding Business Day with the same force and effect as if made on the
Interest Payment Date or date of Maturity, as the case may be, and no
additional interest shall accrue as a result of such delayed payment. Each
payment of interest hereon shall include interest accrued through the day
before the Interest Payment Date or date of Maturity, as the case may be.
Unless otherwise specified above, interest on this Note will be computed on
the basis of a 360-day year of twelve 30-day months. In no event shall the
interest rate of this Note be higher than the maximum rate permitted by
applicable law, as the same may be modified by United States law of general
application.
Unless otherwise specified above, the interest payable on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Note (or one or more predecessor Notes) is registered at the
close of business on the Regular Record Date indicated above (whether or not a
Business Day) next preceding such Interest Payment Date; provided that,
notwithstanding any provision of the Indenture to the contrary, interest
payable on any date of Maturity shall be payable to the Person to whom
principal shall be payable; and provided, further, that, unless otherwise
specified above, in the case of a Note initially issued between a Regular
Record Date and the Interest Payment Date relating to such Regular Record Date,
interest for the period beginning on the Issue Date and ending on such Interest
Payment Date shall be paid on the Interest Payment Date following the next
succeeding Regular Record Date to the registered Holder on such next succeeding
Regular Record Date.
Unless otherwise indicated above, and except as provided below if
this Note is a Global Security, all payments of interest on this Note (other
than interest payable at Maturity) will be made by check (unless otherwise
provided above, from an account at a bank located outside the United States
if such amount is payable in a Foreign Currency); provided that, if the
Holder hereof is the Holder of U.S. $10,000,000 or more in aggregate Face
Amount of Notes of this series of like tenor and term (or a Holder of the
equivalent thereof in a Foreign Currency determined as provided in Section 2
on the reverse hereof), such
<PAGE>
6
Holder shall be entitled to receive interest payments in immediately
available funds, but only if complete and appropriate instructions have been
received in writing by the Trustee (or any such Paying Agent) on or prior to
the applicable Regular Record Date. Simultaneously with any election by the
Holder hereof to receive payments in respect hereof in U.S. dollars, such
Holder may, if so entitled (as provided above), elect to receive such
payments in immediately available funds by providing complete and appropriate
instructions to the Trustee (or any such Paying Agent), and all such payments
will be made in immediately available funds to an account maintained by the
payee with a bank located outside the United States or as otherwise provided
above.
Unless otherwise indicated above, and except as provided below if
this Note is a Global Security, payments of principal, premium, if any, and
interest payable at Maturity will be made in immediately available funds
(unless otherwise indicated above, payable to an account at a bank located
outside the United States if payable in a Foreign Currency) upon surrender of
this Note at the corporate trust office or agency of the Trustee (or any duly
appointed Paying Agent) maintained for that purpose in the Borough of
Manhattan, The City of New York (the "Corporate Trust Office"), provided that
this Note is presented to the Trustee (or any such Paying Agent) in time for
the Trustee (or any such Paying Agent) to make such payments in such funds in
accordance with its normal procedures.
Unless otherwise specified above, if this Note is a Global
Security, payments of interest (other than at Maturity), will be made in
same-day funds in accordance with existing arrangements between the Trustee
(or any duly appointed Paying Agent) and the Depository. Unless otherwise
specified above, if this Note is a Global Security, any principal, premium
and/or interest payable hereon at Maturity will be paid by wire transfer in
immediately available funds to an account specified by the Depository (which
account, unless otherwise provided above, will be at a bank located outside
the United States if payable in a Foreign Currency).
The Company will pay any administrative costs imposed by banks in
making payments in immediately available funds, but any tax, assessment or
governmental charge imposed upon payments hereunder, including, without
limitation, any withholding tax, will be borne by the Holder hereof.
References herein to "U.S. dollars" or "U.S. $" or "$" are to the coin
or currency of the United States as at the time of payment is legal tender for
the payment of public and private debts.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET
FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
<PAGE>
7
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by the
Trustee under the Indenture.
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused this
instrument to be signed by its Chairman of the Board, its President, its Vice
Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer, by manual or facsimile signature under its corporate seal, attested
by its Secretary or one of its Assistant Secretaries by manual or facsimile
signature.
Dated:
[SEAL] LEHMAN BROTHERS HOLDINGS INC.
By:
------------------------------
Chairman of the Board
Attest:
--------------------------
Assistant Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned Indenture.
CITIBANK, N.A.
as Trustee
By:
-------------------------
Authorized Officer
<PAGE>
8
[REVERSE OF NOTE]
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTES, SERIES
(Currency Indexed)
Section 1. General. This Note is one of a duly authorized series
of Notes of the Company designated as the Medium-Term Notes, Series
(Currency Indexed) of the Company (herein called the "Notes"), limited in
aggregate principal amount to $ (or (i) the equivalent thereof
in Foreign Currencies or (ii) such greater amount, if OID Notes are issued,
as shall result in aggregate gross proceeds to the Company of
$ ), subject to reduction as a result of the sale under certain
circumstances of other debt securities of the Company. The foregoing limit,
however, may be increased by the Company if in the future it determines that
it may wish to sell additional Notes. The Notes are one of an indefinite
number of series of debt securities of the Company (collectively, the
"Securities") issued or issuable under and pursuant to an indenture dated as
of September 1, 1987, as amended (the "Indenture"), duly executed and
delivered by the Company and Citibank, N.A., as Trustee (herein called the
"Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Securities. The separate series of Securities
may be issued in various aggregate principal amounts, may mature at different
times, may bear interest (if any) at different rates, may be subject to
different redemption provisions or repayment or repurchase rights (if any),
may be subject to different sinking, purchase or analogous funds (if any),
may be subject to different covenants and Events of Default and may otherwise
vary as in the Indenture provided.
Section 2. Currency Exchanges and Payments. If the Denominated
Currency hereof is other than U.S. dollars (a Foreign Currency) and it is
specified on the face hereof that the Holder has the option to receive
payments in respect of this Note in U.S. dollars, the amount of any U.S.
dollar payment to be made in respect hereof will be determined by the
Exchange Rate Agent specified on the face hereof or a successor thereto (the
"Exchange Rate Agent"), based on the indicative quotation in The City of New
York selected by the Exchange Rate Agent at approximately 11:00 a.m., New
York City time, on the second Business Day preceding the applicable payment
date that yields the least number of U.S. dollars upon conversion of such
Foreign Currency. Unless otherwise provided on the face hereof, such
selection shall be made from among the quotations appearing on the bank
composite or multi- contributor pages of the Reuters Monitor Foreign Exchange
Service or, if not available, the Telerate Monitor Foreign Exchange Service.
If such quotations
<PAGE>
9
are unavailable from either such foreign exchange service, unless otherwise
provided on the face hereof, such selection shall be made from the quotations
received by the Exchange Rate Agent from no more than three nor less than two
recognized foreign exchange dealers in The City of New York selected by the
Exchange Rate Agent and approved by the Company (one of which may be the
Exchange Rate Agent) for the purchase by the quoting dealer, for settlement on
such payment date, of the aggregate amount of such Foreign Currency payable on
such payment date in respect of all Notes denominated in such Foreign Currency
and for which the applicable dealer commits to execute a contract. If no such
bid quotations are available, payments will be made in the Foreign Currency.
Unless otherwise specified on the face hereof, if payment
hereon is required to be made in a Foreign Currency and such currency is
unavailable to the Company for making payments thereof due to the imposition of
exchange controls or other circumstances beyond the Company's control, or is no
longer used by the government of the country which issued such currency or for
the settlement of transactions by public institutions of or within the
international banking community, then the Company will be entitled to make
payments with respect hereto in U.S. dollars until such Foreign Currency is
again available or so used. The amount so payable on any date in such Foreign
Currency shall be converted into U.S. dollars at a rate determined by the
Exchange Rate Agent on the basis of the noon buying rate in The City of New
York for cable transfers in the Foreign Currency as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate")
for such Foreign Currency on the second Business Day prior to such payment
date, or on such other basis as may be specified on the face hereof. In the
event such Market Exchange Rate is not then available, the Company will be
entitled to make payments in U.S. dollars (i) if such Foreign Currency is not a
composite currency, on the basis of the most recently available Market Exchange
Rate for such Foreign Currency or (ii) if such Foreign Currency is a composite
currency, including, without limitation, the ECU, in an amount determined by
the Exchange Rate Agent to be the sum of the results obtained by multiplying
the number of units of each component currency of such composite currency, as
of the most recent date on which such composite currency was used, by the
Market Exchange Rate for such component currency on the second Business Day
prior to such payment date (or if such Market Exchange Rate is not then
available, by the most recently available Market Exchange Rate for such
component currency, or as otherwise specified on the face hereof). Any payment
in respect hereof made under such circumstances in U.S. dollars will not
constitute an Event of Default under the Indenture.
If the official unit of any component currency of a composite
currency is altered by way of combination or subdivision, the number of units
of that currency as a component shall be divided or multiplied in the same
proportion. If two or
<PAGE>
10
more component currencies are consolidated into a single currency, the amounts
of those currencies as components shall be replaced by an amount in such single
currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that original component
currency as a component shall be replaced by amounts of such two or more
currencies having an aggregate value on the date of division equal to the
amount of the former component currency immediately before such division.
In the event of an official redenomination of the Specified
Currency or the Optional Payment Currency (including, without limitation, an
official redenomination of any such currency that is a composite currency), the
obligations of the Company to make payments in or with reference to such
currency shall, in all cases, be deemed immediately following such
redenomination to be obligations to make payments in or with reference to that
amount of redenominated currency representing the amount of such currency
immediately before such redenomination. In no event shall any adjustment be
made to any amount payable hereunder as a result of any redenomination of any
component currency of any composite currency (unless such composite currency is
itself officially redenominated).
All determinations referred to above made by the Exchange Rate
Agent shall be at its sole discretion (except to the extent expressly provided
herein that any determination is subject to approval by the Company) and, in
the absence of manifest error, shall be conclusive for all purposes and binding
on the Holder hereof, and the Exchange Rate Agent shall have no liability
therefor.
All currency exchange costs will be borne by the Holder hereof
by deduction from the payments made hereon.
Section 3. Redemption. If so specified on the face hereof,
the Company may at its option redeem this Note in whole or from time to time in
part on or after the date designated as the Initial Redemption Date on the face
hereof at either a price based on a constant percentage of the Principal Amount
of this Note as specified on the face hereof or at prices declining from the
premium specified on the face hereof, if any, to 100% of the Principal Amount
hereof, together, in each case, with accrued interest to the Redemption Date.
The Company may exercise such option by causing the Trustee to mail by
first-class mail to the Holder hereof a notice of such redemption at least 30
but not more than 60 days prior to the Redemption Date. In the event of
redemption of this Note in part only, a new Note or Notes of this series for
the unredeemed portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof in accordance with the terms of the Indenture.
Unless otherwise specified on the face hereof, if less than all of the Notes
with like tenor and terms to this Note are to be redeemed, the Notes
<PAGE>
11
to be redeemed shall be selected by the Trustee by such method as the Trustee
shall deem fair and appropriate.
Section 4. Sinking Funds. Unless otherwise specified on the face
hereof, this Note will not be subject to any sinking fund.
Section 5. Optional Repayment. If so specified on the face
hereof, this Note will be repayable prior to the Maturity Date at the option
of the Holder on the Optional Repayment Dates specified on the face hereof at
the Optional Repayment Prices specified on the face hereof, together with
accrued interest to the applicable Optional Repayment Date. Unless otherwise
specified on the face hereof, in order for this Note to be so repaid, the
Company must receive, at least 30 but not more than 45 days prior to an
Optional Repayment Date, either (i) this Note with the form below entitled
"Option to Elect Repayment" duly completed or (ii) a telegram, telex, fax or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
in the United States setting forth the name of the Holder hereof, the Face
Amount hereof, the Face Amount to be repaid, the certificate number hereof or
a description of the tenor and terms of this Note, a statement that the
option to elect repayment is being exercised thereby and a guarantee that
this Note with the form below entitled "Option to Elect Repayment" duly
completed will be received by the Paying Agent not later than five Business
Days after the date of such telegram, telex, fax or letter and this Note and
form duly completed are received by the Paying Agent by such fifth Business
Day. Exercise of this repayment option shall be irrevocable, except as
otherwise provided under Section 6. The repayment option may be exercised by
the Holder of this Note with respect to less than the Face Amount then
outstanding provided that the Face Amount of the Note remaining outstanding
after repayment is an authorized denomination. Upon such partial repayment
this Note shall be cancelled and a new Note or Notes for the remaining Face
Amount hereof shall be issued in the name of the Holder of this Note.
Section 6. Optional Interest Reset. If so specified on the face
hereof, the Interest Rate on this Note may be reset at the option of the
Company, in the manner set forth below (unless otherwise specified on the
face hereof), on the Optional Reset Date or Optional Reset Dates specified on
the face hereof. The Company may exercise such option by notifying the
Trustee of such exercise at least 45 but not more than 60 days prior to an
Optional Reset Date. Not later than five Business Days after receipt
thereof, the Trustee will mail by first-class mail to the Holder of this Note
a notice (the "Reset Notice") setting forth (i) the election of the Company
to reset the interest rate, (ii) such new interest rate and (iii) the
provisions, if any, for redemption during the period from such Optional Reset
Date to the next Optional Reset Date or, if there
<PAGE>
12
is no such next Optional Reset Date, to the Maturity Date of this Note (each
such period a "Subsequent Interest Period"), including the date or dates on
which or the period or periods during which and the price or prices at which
such redemption may occur during such Subsequent Interest Period. The Reset
Notice shall be substantially in the form of Exhibit A to this Note. Upon
the transmittal by the Trustee of a Reset Notice to the Holder of this Note,
such new interest rate shall take effect automatically, and, except as
modified by the Reset Notice and as described in the next paragraph, this
Note will have the same terms as prior to the transmittal of such Reset
Notice.
Notwithstanding the foregoing, not later than 20 days prior to
an Optional Reset Date, the Company may, at its option, revoke the interest
rate provided for in the Reset Notice and establish an interest rate that is
higher than the interest rate provided for in the Reset Notice for the
Subsequent Interest Period commencing on such Optional Reset Date by causing
the Trustee to mail by first-class mail notice of such higher interest rate to
the Holder of this Note. Such notice shall be irrevocable and shall be mailed
by the Trustee within five Business Days after receipt thereof. All Notes with
respect to which the interest rate is reset on an Optional Reset Date will bear
such higher interest rate for the Subsequent Interest Period.
If the Company elects to reset the interest rate of this Note,
the Holder of this Note will have the option to elect repayment by the Company
of this Note, or any portion hereof, on any Optional Reset Date at a price
calculated with reference to the Face Amount hereof to be repaid, plus any
interest accrued to, such Optional Reset Date. In order to obtain repayment on
an Optional Reset Date, the Holder must follow the procedures set forth above
in Section 5 for optional repayment except that the period for delivery or
notification to the Trustee shall be at least 25 but not more than 35 days
prior to such Optional Reset Date and except that, if the Holder has tendered
this Note for repayment pursuant to the Reset Notice, the Holder may, by
written notice to the Trustee, revoke such tender for repayment until the close
of business on the tenth day prior to such Optional Reset Date; provided,
however, that if such day is not a Business Day, then such notice may be given
on the next succeeding Business Day.
Section 7. OID Notes. If this Note is an OID Note, unless
otherwise specified on the face hereof, the amount payable in the event of
redemption by the Company, repayment at the option of the Holder or
acceleration of Maturity shall be the Amortized Face Amount of this Note as of
the date of such redemption, repayment or acceleration rather than the Face
Amount hereof. The "Amortized Face Amount" of this Note shall be the amount
equal to (a) the Issue Price (as set forth on the face hereof) plus (b) that
portion of the difference between the Issue Price and the
<PAGE>
13
Face Amount hereof that has accrued at the Yield to Maturity set forth on the
face hereof (computed in accordance with generally accepted United States
bond yield computation principles) at the date as of which the Amortized Face
Amount is calculated, but in no event shall the Amortized Face Amount of this
Note exceed the Face Amount.
Section 8. Principal Amount For Indenture Purposes. For the
purpose of determining whether Holders of the requisite amount of Notes
outstanding under the Indenture have made a demand, given a notice or waiver
or taken any other action, the outstanding principal amount of this Note will
be deemed to be the Face Amount.
Section 9. Modification and Waivers. The Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
holders of not less than 66-2/3% in aggregate principal amount of each series
of the Securities at the time Outstanding to be affected, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) extend the fixed maturity
of any Security, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon or reduce any premium payable on
redemption, or make the principal thereof, or premium, if any, or interest
thereon payable in any coin or currency other than that hereinabove provided,
without the consent of the holder of each Security so affected, or (ii) change
the place of payment on any Security, or impair the right to institute suit for
payment on any Security, or reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each Security so affected. It is also
provided in the Indenture that, prior to any declaration accelerating the
Maturity of any series of Securities, the holders of a majority in aggregate
principal amount of the Securities of such series Outstanding may on behalf of
the holders of all the Securities of such series waive any past default or
Event of Default under the Indenture with respect to such series and its
consequences, except a default in the payment of interest, if any, on or the
principal of, or premium if any, on any of the Securities of such series, or in
the payment of any sinking fund installment or analogous obligation with
respect to Securities of such series. Any such consent or waiver by the Holder
of this Note shall be conclusive and binding upon such Holder and upon all
future holders and owners of this Note and any Notes which may be issued in
exchange or substitution herefor, irrespective of whether or not any notation
thereof is made upon this Note or such other Notes.
<PAGE>
14
Section 10. Obligations Unconditional. No reference herein to the
Indenture and no provisions of this Note or of the Indenture shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, premium, if any, and interest, if any, on this Note at
the place, at the respective times, at the rate, and in the coin or currency
herein prescribed.
Section 11. Defeasance. The Indenture contains provisions
for the discharge of the Indenture and defeasance at any time of the
indebtedness on this Note upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Note.
Section 12. Authorized Form and Denominations. The Notes of this
series are issuable in registered form, without coupons. Unless otherwise
set forth on the face hereof, Notes denominated in U.S. dollars will be
issued in Face Amount denominations of U.S. $100,000 and any integral
multiple of U.S. $1,000 in excess thereof. Notes denominated in a Foreign
Currency will be issued in the denomination or denominations set forth on the
face hereof. Each Note will be issued initially as either a Book-Entry Note
or a Certificated Note, at the option of the holders thereof, either at the
office or agency to be designated and maintained by the Company for such
purpose in the Borough of Manhattan, The City of New York, pursuant to the
provisions of the Indenture or at any of such other offices or agencies as
may be designated and maintained by the Company for such purpose pursuant to
the provisions of the Indenture, and in the manner and subject to the
limitations provided in the Indenture, but without the payment of any service
charge, except for any tax or other governmental charges imposed in
connection therewith. Notes of this series are exchangeable for a like
aggregate Face Amount of Notes of this series of a different authorized
denomination, except that Book-Entry Notes will not be exchangeable for
Certificated Notes.
Section 13. Registration of Transfer. As provided in the
Indenture and subject to certain limitations as therein set forth, the transfer
of this Note is registrable in the Security Register, upon surrender of this
Note for registration of transfer, at the Corporate Trust Office or agency in a
Place of Payment for this Note, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar requiring such written instrument of transfer duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of this series, of authorized denominations and for the same
aggregate Face Amount, will be issued to the designated transferee or
transferees.
If this Note is a Global Security and if at any time the
Depository notifies the Company that it is unwilling or unable to continue as
Depository or if at any time the Depository
<PAGE>
15
shall no longer be eligible under the Indenture, the Company shall appoint a
successor Depository. If a successor Depository for the Securities of such
series is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility, the Company will
issue, and the Trustee will authenticate and deliver, Notes in definitive
form in an aggregate Face Amount equal to the Face Amount hereof.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name this Note is registered as the owner hereof
for all purposes, and neither the Company nor the Trustee nor any agent of the
Company or of the Trustee shall be affected by any notice to the contrary.
Section 14. Events of Default. If an Event of Default with
respect to Notes of this series shall occur and be continuing, the principal
of the Notes of this series may be declared due and payable in the manner and
with the effect provided in the Indenture. In the event that this Note is an
OID Note or a Dual Currency Note, the amount of principal of this Note that
becomes due and payable upon such acceleration shall be equal to the amount
calculated as set forth in Section 7 hereof. Upon payment (i) of the
aggregate applicable amounts of principal of the Notes of this series so
declared due and payable and (ii) of interest on any overdue principal and
overdue interest (in each case to the extent that the payment of such
interest shall be legally enforceable), all of the Company's obligations in
respect of the payment of the principal of and interest, if any, on the Notes
of this series shall terminate.
Section 15. No Recourse Against Certain Persons. No recourse
for the payment of the principal of, premium, if any, or interest on this Note,
or for any claim based hereon or otherwise in respect hereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in the
Indenture or any Indenture supplemental thereto or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.
<PAGE>
16
Section 16. Defined Terms. All terms used but not defined in
this Note are used herein as defined in the Indenture.
Section 17. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
17
OPTION TO ELECT REPAYMENT
The undersigned owner of this Note hereby irrevocably elects
to have the Company repay the Face Amount of this Note or portion hereof below
designated at (i) the Optional Repayment Percentage multiplied by the Principal
Amount of this Note to be repaid in respect of such Face Amount plus accrued
interest to the Optional Repayment Date, if this Note is to be repaid pursuant
to the Optional Repayment provision described in Section 5 hereof, or (ii) 100%
of the Principal Amount of this Note to be repaid in respect of such Face
Amount plus accrued interest to the Optional Reset Date, if this Note is to be
repaid pursuant to the Optional Interest Reset provision described in Section 6
hereof. Any such election is irrevocable except as provided in Section 6
hereof.
Dated:_________________ _______________________________
Signature
Sign exactly as name appears on the front of
this Note [SIGNATURE GUARANTEED - required
only if Notes are to be issued and delivered
to other than the registered Holder]
Face Amount to be Fill in for registration of
repaid, if amount to be Notes if to be issued otherwise
repaid is less than the than to the registered Holder:
Face Amount of this
Note (Face Amount Name: ___________________________
remaining must be an Address: ________________________
authorized denomination) ________________________
(Please print name
$_______________________ and address including
zip code)
SOCIAL SECURITY OR OTHER TAXPAYER ID
NUMBER
_________________________________
<PAGE>
18
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenant by the entireties
JT TEN - as joint tenants with right of
survivorship and not as
tenants in common
UNIF GIFT
MIN ACT - __________Custodian__________
(Cust) (Minor)
Under Uniform Gifts to
Minors Act
_____________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned
hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________________________________
Please print or type name and address, including zip code of assignee
__________________________________________________________________
the within Note of LEHMAN BROTHERS HOLDINGS INC. and all rights thereunder and
does hereby irrevocably constitute and appoint
<PAGE>
19
______________________________________________________Attorney to transfer the
said Note on the books of the within-named Company, with full power of
substitution in the premises.
Dated:______________________________
SIGNATURE GUARANTEED:__________________________________________
NOTICE: The signature to this
assignment must correspond with the
name as it appears upon the face of
the within Note in every particular,
without alteration or enlargement or
any change whatsoever.
<PAGE>
EXHIBIT A
RESET NOTICE
LEHMAN BROTHERS HOLDINGS INC.
Medium-Term Notes, Series
(Currency Indexed)
CUSIP No. ___________
Registered Nos. ___-___
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized
and existing under the laws of the State of Delaware (the "Company"), is the
issuer of the above-referenced Notes (the "Notes"). Capitalized terms used
herein and not defined are used as defined in the Notes.
The Company hereby elects to reset the Interest Rate set forth
on the face of the Notes. On and after _________________1/, the Interest Rate
shall be _______________.
Each Holder of a Note has the option to elect repayment by the
Company of such Note, or any portion thereof, on any Optional Reset Date
pursuant to the terms of such Note. The Notes may be repaid on the dates and
at the prices set forth below:
Date Redemption Price
---- ----------------
IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused
this Reset Notice to be signed by its Chairman of the Board, its President, its
Vice Chairman, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer and to be attested by its Secretary or one of its Assistant
Secretaries.
Dated: LEHMAN BROTHERS HOLDINGS INC.
By:
-------------------------------
Title:
Attest:
---------------------------
Title:
- --------------------------
1/ Insert applicable Optional Reset Date.
<PAGE>
Exhibit 23.03
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm as expert under the caption "Experts"
in this Registration Statement on Form S-3 and related Prospectus of Lehman
Brothers Holdings Inc. (the "Company") and Lehman Brothers Holdings Capital
Trust III, Lehman Brothers Holdings Capital Trust IV, Lehman Brothers
Holdings Capital Trust V and Lehman Brothers Holdings Capital Trust VI
(collectively, the "LBH Trusts") for the registration of $15,000,000,000 of
Debt Securities, Preferred Stock, Depositary Shares and Junior Subordinated
Debt Securities of the Company, and Guarantees of the Company of Preferred
Securities issued by the LBH Trusts and to the incorporation by reference
therein of our report dated January 7, 1999 with respect to the consolidated
financial statements and financial statement schedule of the Company included
in its Annual Report on Form 10-K for the year ended November 30, 1998, filed
with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
April 27, 1999
