-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, NvDnxQK1k7J5y4PcwdLQm5p+k3at0OzFBys0TXXYb+uZkNdl0TDrbMaRnPStbAdG l3yGPH+Yyp/RBit/GwH80w== 0000950123-94-001876.txt : 19941116 0000950123-94-001876.hdr.sgml : 19941116 ACCESSION NUMBER: 0000950123-94-001876 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19941114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEHMAN BROTHERS HOLDINGS INC CENTRAL INDEX KEY: 0000806085 STANDARD INDUSTRIAL CLASSIFICATION: 6211 IRS NUMBER: 133216325 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 033-58548 FILM NUMBER: 94559970 BUSINESS ADDRESS: STREET 1: AMERICAN EXPRESS TWR STREET 2: 3 WORLD FINANCIAL CNTR CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2125267000 MAIL ADDRESS: STREET 1: AMERICAN EXPRESS TOWER 15TH FL STREET 2: 2 WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON LEHMAN HUTTON HOLDINGS INC DATE OF NAME CHANGE: 19901017 424B2 1 LEHMAN BROTHERS HOLDINGS PROSPECTUS SUPPLEMENT 1 Filed Pursuant to Rule 424(b)(2) Registration No. 033-58548 PROSPECTUS SUPPLEMENT (To Prospectus Supplement dated November 10, 1994) LEHMAN BROTHERS HOLDINGS INC. INDUSTRIAL COMMODITY BASKET NOTES [Stylized depiction of various aspects of the recovery and refinement of certain of the commodities included in the basket.] LEHMAN BROTHERS This brochure must be attached to the Prospectus and Prospectus Supplement that provides a description of Industrial Commodity Basket Notes, including details on the risks associated with an investment in Industrial Commodity Basket Notes. 2 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED OCTOBER 14, 1994) $25,000,000 LEHMAN BROTHERS HOLDINGS INC. INDUSTRIAL COMMODITY BASKET NOTES DUE 1996 The Industrial Commodity Basket Notes Due 1996 (the "Securities") of Lehman Brothers Holdings Inc. ("Holdings") will mature on November 18, 1996 (the "Stated Maturity Date"). Each Holder in whose name Securities are registered at the close of business on the day preceding the Stated Maturity Date will be entitled to receive a payment in respect of such Securities (the "Settlement Amount") which shall, subject to certain exceptions, be calculated based on the average of the Market Prices (as defined herein) of a basket of certain non-financial commodities (the "Basket") for the first three Determination Days (as defined herein) occurring between November 11, 1996 and the Stated Maturity Date, inclusively. If the average of the Market Prices of the Basket over such Determination Days (the "Basket Maturity Value") exceeds $1,000, each Holder will be entitled to a Settlement Amount that will be greater than the principal amount of such Holder's Securities; if the Basket Maturity Value is $1,000 or less, each Holder will be entitled to a Settlement Amount that will be equal to the principal amount of such Holder's Securities. The Calculation Agent (as defined herein) has estimated that, based on forward prices, the value of the Basket on November 9, 1994, was $1,000. Although each Holder will be entitled to receive, on or after the Stated Maturity Date, the Settlement Amount with respect to such Holder's Securities, there will be no payment of interest, periodic or otherwise, with respect to the Securities. For information as to the calculation of the Settlement Amount, which will be payable on the Stated Maturity Date (unless accelerated upon an Event of Default or delayed due to a Market Disruption Event), the calculation of the value of the Basket, the composition of the Basket and certain tax consequences to holders of the Securities, see "Description of Securities," "The Basket" and "Certain United States Federal Income Tax Consequences" in this Prospectus Supplement. FOR OTHER INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "SPECIAL CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT. The Securities are to be issued as a series of Debt Securities under the Senior Indenture described in the accompanying Prospectus and will constitute "Senior Debt" of Holdings as described in the accompanying Prospectus. The Securities may not be redeemed prior to the Stated Maturity Date and are not subject to any sinking fund. Application has been made to list the Securities on the Luxembourg Stock Exchange. Lehman Brothers Inc., a wholly owned subsidiary of Holdings, may, but is not obligated to, purchase and sell Securities for its own account for the purpose of making a market in the Securities. --------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
========================================================================================================== Price to Underwriting Proceeds to Public Discount(1) Holdings(2) - ---------------------------------------------------------------------------------------------------------- Per Security............................ 100% 2% 98% - ---------------------------------------------------------------------------------------------------------- Total................................... $25,000,000 $500,000 $24,500,000 ==========================================================================================================
(1) Holdings has agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting." (2) Before deducting other expenses payable by Holdings estimated at $150,000. --------------------------- The Securities offered by this Prospectus Supplement are offered by the Underwriter subject to prior sale, withdrawal, cancellation or modification of the offer without notice, to delivery to and acceptance by the Underwriter and to certain further conditions. The Underwriter reserves the right to reject orders in whole or in part. It is expected that delivery of the Securities will be made at the offices of Lehman Brothers Inc., New York, New York, on or about November 17, 1994. This Prospectus Supplement together with the accompanying Prospectus may also be used by Lehman Brothers Inc. in connection with offers and sales of Securities related to market making transactions, by and through Lehman Brothers Inc., at negotiated prices related to prevailing market prices at the time of sale or otherwise. Lehman Brothers Inc. may act as principal or agent in such transactions. --------------------------- LEHMAN BROTHERS November 10, 1994 3 The Securities offered by Holdings for sale in the United States will initially be evidenced by certificates in fully registered form (each, a "Certificate"). The Securities offered by Holdings for sale in Europe will be issued in book-entry form and will be evidenced by one or more registered global certificates as described under "Form of Securities -- Book-Entry Form" in this Prospectus Supplement. One hundred and eighty calendar days after the closing of the offering, each registered holder of Certificates will have the option to convert the form of such holder's Securities from certificated to book-entry form within a forty-five calendar day period as described herein. Ownership of converted Securities will be maintained in book-entry form by or through the Depository. Beneficial owners of Securities in book-entry form will not have the right to receive physical certificates evidencing their ownership except under the limited circumstances described herein. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 4 SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the more detailed information set forth elsewhere or incorporated by reference in this Prospectus Supplement and the accompanying Prospectus. Certain capitalized terms used herein have the meanings ascribed thereto in the accompanying Prospectus. Reference is also made to the "Glossary" appearing at the end of this Prospectus Supplement for certain defined terms used herein and the locations of other defined terms used herein. Issuer..................... Lehman Brothers Holdings Inc. ("Holdings"). Securities Offered......... $25,000,000 of Industrial Commodity Basket Notes Due 1996 (the "Securities"). The Securities are to be issued as a series of Debt Securities under the Senior Indenture described in the accompanying Prospectus and will constitute Senior Debt of Holdings. Denominations.............. $25,000 principal amount, and $5,000 principal amount increments in excess thereof. Interest Payments.......... The Securities will not bear interest. Stated Maturity Date....... November 18, 1996 (the "Stated Maturity Date"). Settlement Amount.......... Each Holder in whose name Securities are registered at the close of business on the day preceding the Stated Maturity Date will be entitled to receive a payment (the "Settlement Amount") with respect to the principal amount of Securities registered to such Holder equal to such principal amount multiplied by the following: 1 + (1.25 X (Basket Maturity Value -- $1,000) ) $1,000 provided, however, if the Basket Maturity Value is less than $1,000, then such Settlement Amount will be equal to such principal amount. The Basket Maturity Value will be equal to the sum of the Settlement Prices of the Commodities included in the Basket. Subject to the occurrence of Market Disruption Events, the Settlement Price of each Commodity will be equal to the average of the Market Prices (determined as described herein) of such Commodity for the first three Determination Days occurring between November 11, 1996 (the "Calculation Initiation Date") and the Stated Maturity Date, inclusively (such period, the "Determination Period"). See "Description of Securities -- Settlement Amount" in this Prospectus Supplement. See also "Description of Securities -- Events of Default and Acceleration" for a description of the calculation of payments upon any acceleration of the Maturity of the Securities. The Settlement Prices of certain of the Commodities will be determined by reference to settlement prices of certain contracts traded on the New York Mercantile Exchange, Inc. (the "NYMEX") and the London Metal Exchange (the "LME"). The Settlement Prices of the balance of the Commodities will be determined by reference to the Fixing Prices of such Commodities reported by the London Bullion Market Association (the "LBM"). See "Description of Securities -- Settlement Amount" in this Prospectus Supplement. The Basket................. The "Basket" is made up of different quantities of the following Commodities: Aluminum, Copper, Crude Oil, Gold, Lead, Nickel, S-3 5 Silver and Zinc. Ownership of Securities will not entitle any Holder to invest in or to receive any of the Commodities. The Basket is not equally weighted; that is, on the date the Securities are issued, the various Commodities will represent differing percentages of the Basket Value on that date, ranging from 3.5% for Lead to 30% for Gold. See "Description of Securities -- Commodities" and "The Basket" in this Prospectus Supplement. The inclusion of a Commodity in the Basket is not a recommendation to buy or sell such Commodity, and neither Holdings nor any of its affiliates makes any representation or warranty as to the performance of the Basket or any Commodity. Basket Value............... The value of the Basket at any given time will equal the sum of the current forward prices for each Commodity multiplied in each case by the quantity of such Commodity in the Basket (the "Basket Value"). To determine the appropriate forward prices for the Commodities in the Basket, Holders should refer: (i) in the case of Aluminum, Copper, Lead, Nickel and Zinc, to the current price for the appropriate Contract on the LME for delivery in November 1996 (or, with respect to Lead and Nickel prior to July 1995, to the estimated forward price for delivery of such Commodity on or about the Calculation Initiation Date), (ii) in the case of Crude Oil, to the current price for the Crude Oil Contract on the NYMEX for delivery in December 1996, and (iii) in the case of Gold and Silver, to the estimated forward price for delivery of Gold and Silver, respectively, on or about the Calculation Initiation Date. Lehman Brothers Inc., a wholly-owned subsidiary of Holdings (the "Calculation Agent"), has estimated that the Basket Value at the close of business on November 9, 1994 was $1,000. Subject to the occurrence of Market Disruption Events, the Basket Maturity Value will be calculated based on the average of the Market Prices of the respective Commodities during the first three Trading Days during the Determination Period. See "Description of Securities -- Settlement Amount" in this Prospectus Supplement. See also "Description of Securities -- Events of Default and Acceleration" for a description of the calculation of payments upon any acceleration of the Maturity of the Securities. Special Considerations..... The Securities are subject to certain special considerations. Investors should be aware that if the Basket Maturity Value is equal to or less than $1,000, the Settlement Amount payable with respect to each Security shall be limited to the principal amount of such Security, even if the Basket Value as of some date or dates prior to the Calculation Initiation Date may have exceeded $1,000, because the Settlement Amount will be calculated only on the basis of Market Prices (or other prices, in the case of a Market Disruption Event) during the Determination Period. Moreover, there can be no assurance as to how the Securities will trade in the secondary market or whether such market will be liquid. The price at which a Holder will be able to sell Securities prior to Maturity may be at a discount from the face amount thereof, if, among other things, the Basket Value at such time is below, equal to or not sufficiently above $1,000. It is expected that the secondary market for the Securities will be affected by a number of factors, including the Basket Value, fluctuations in interest rates, the volatility of the Basket Value and the time remaining to the Stated S-4 6 Maturity Date. See "Special Considerations" in this Prospectus Supplement. Payment of the Settlement Amount could be deferred beyond the Stated Maturity Date for up to three Business Days in the event that a Market Disruption Event with respect to any Commodity occurs during the Determination Period. In that event, interest in respect of the Securities will not accrue or be payable on or after the Stated Maturity Date. See "Description of Securities -- Settlement Amount" in this Prospectus Supplement. Holders of Securities will not, by virtue of their ownership of Securities, have any right at any time to invest in or receive any of the Commodities, even though the return on an investment in the Securities will be based on the Settlement Prices of such Commodities. The Market Prices of certain of the Commodities will be determined by reference to settlement prices of contracts traded on the NYMEX, a U.S. commodity exchange, and the LME, a foreign commodity exchange, or by reference to prices reported by the LBM, an industry association of bullion market participants. Trading on commodity exchanges involves certain risks, and trading on the LME may involve additional risks. See "Special Considerations -- LME Trading," "-- LBM Trading," "-- Effect of Adverse Changes in Market Prices," and "-- Suspension or Material Disruption of Futures Trading; Temporary Distortions" in this Prospectus Supplement. It is suggested that prospective investors who consider purchasing the Securities should reach an investment decision only after carefully considering with their advisers the suitability of an investment in the Securities in the light of their particular circumstances. Investors should also consider the tax consequences of investing in the Securities. See "Certain United States Federal Income Tax Consequences" in this Prospectus Supplement. S-5 7 USE OF PROCEEDS The net proceeds from the sale of the Securities will be used as described under "Use of Proceeds" in the accompanying Prospectus and to hedge market risks affecting the value of the Settlement Amount payable with respect to the Securities (the transactions used to hedge such market risks are herein called the "Hedging Transactions"). For a description of the calculation of the Settlement Amount, see "Description of Securities -- Settlement Amount" in this Prospectus Supplement. In connection with such Hedging Transactions, Holdings or one or more of its subsidiaries may purchase or maintain positions in a variety of financial instruments relating to the Basket and the Commodities. Depending on future market conditions and the actual amount of Securities outstanding from time to time, among other things, the aggregate amount and the composition of such positions are likely to vary over time. Holdings expects that it or its subsidiaries may take positions in (i) futures contracts related to the Commodities, (ii) listed or over-the-counter option contracts on the Commodities and (iii) other derivative or synthetic instruments relating to the Commodities. There can be no assurance that Holdings or one or more of its subsidiaries did not or will not affect the prices of the Commodities or the Basket as a result of its hedging activities. SPECIAL CONSIDERATIONS PAYMENT AT MATURITY If the Basket Maturity Value is equal to or less than $1,000, the Settlement Amount payable with respect to each Security will be limited to the principal amount of such Security. This will be true even though the Basket Value as of some date or dates prior to the Calculation Initiation Date may have exceeded $1,000, because the Settlement Amount will be calculated only on the basis of Market Prices (or other prices, in the case of a Market Disruption Event) during the Determination Period. Purchasers of Securities should therefore be prepared to realize no "time value" return on the principal amount of their Securities. TRADING Application has been made to list the Securities on the Luxembourg Stock Exchange. There can be no assurance as to how the Securities will trade in the secondary market or whether such market will be liquid. It is expected that the secondary market for the Securities will be affected by a number of factors. The trading value of the Securities is expected to depend primarily on the extent of the appreciation, if any, of the Basket Value over $1,000. The price at which a Holder will be able to sell Securities prior to Maturity may be at a discount from the principal amount thereof if, at such time, the Basket Value is below, equal to or not sufficiently above $1,000. In addition to discounts which could result from a decrease in the Basket Value, as discussed below, discounts could also result from fluctuations in interest rates, decreased volatility of the Basket Value or decreased time remaining to the Stated Maturity Date. The trading value of the Securities may be affected by a number of interrelated factors, including those listed below. The relationship among these factors, and how they affect the Settlement Amount, is complex. Accordingly, investors should be aware that factors other than the Basket Value are likely to affect the trading value of the Securities. The expected effect on the trading value of the Securities of each of the factors listed below, assuming in each case that all other factors are held constant, is as follows: Interest Rates. In general, due to "time value" considerations, if interest rates increase, the value of the Securities is expected to decrease and if interest rates decrease, the value of the Securities is expected to increase. However, due to the complex interaction between interest rates, commodity prices and the performance of the economy in general, it is difficult to predict the impact of interest rate movements on the Basket Value. Volatility of the Basket Value. An increase in the volatility of the Basket Value would normally have a positive impact on the trading value of the Securities although such impact will be diminished to the extent that the Basket Value is significantly less than or significantly greater than $1,000. Conversely, S-6 8 a decrease in the volatility of the Basket Value would normally have a negative impact on the trading value of the Securities although such impact will also be diminished to the extent that the Basket Value is significantly less than or significantly greater than $1,000. Time Remaining to the Stated Maturity Date. The Securities may trade at a value other than that which may be inferred from the level of interest rates, volatility and the Basket Value. This difference may be due to expectations concerning interest rates, volatility and the Basket Value during the period prior to the Stated Maturity Date. As the time remaining to the Stated Maturity Date decreases, this difference in value is expected to decrease. Relationship Between Spot Prices and Forward Prices. Prior to Maturity, the Basket Value is determined in relation to the forward prices for the Commodities in the Basket. Since the relationship between forward and spot prices depends on prevailing interest rates, supply and demand and other factors, the Basket Value may not always reflect movements in the spot prices of the Commodities. There can be no assurance that the foregoing factors will affect the Basket Value and the trading value of the Securities as described, and neither Holdings nor any of its affiliates makes any representation or warranty as to the performance of the Basket or as to the trading value of the Securities. LME TRADING The Market Prices of certain of the Commodities will be determined by reference to the settlement prices of contracts traded on the LME. As discussed below, the LME is a principals' market which operates in a manner more closely analogous to the over-the-counter physical commodity markets than the futures markets, and certain features of U.S. futures markets are not present in the context of LME trading. For example, there are no daily price limits on the LME, which would otherwise restrict the extent of daily fluctuations in the prices of LME contracts. In a declining market, therefore, it is possible that prices would continue to decline without limitation within a Trading Day or over a period of Trading Days. In addition, a contract may be entered into on the LME calling for delivery on any day from one day to three months following the date of such contract and for monthly delivery in any of the next 16 to 24 months (depending on the Commodity) following such third month, in contrast to trading on futures exchanges, which call for delivery in stated delivery months. As a result, there may be a greater risk of a concentration of positions in LME contracts on particular delivery dates, which in turn could cause temporary aberrations in the prices of LME contracts for certain delivery dates. If such aberrations occur during the Determination Period, the prices of the contracts used to determine the Settlement Prices, and consequently the Settlement Amount, could be adversely affected. LBM TRADING The Settlement Prices of Gold and Silver will be determined by reference to the Fixing Prices of such Commodities reported by the LBM. The LBM is a self-regulatory association of bullion market participants. Although all market making members of the LBM are supervised by the Bank of England and are required to satisfy a capital adequacy test, the LBM itself is not a regulated entity. If the LBM should stop operations, or if bullion trading by LBM members should become subject to a value added tax, any other tax or any other form of regulation currently not in place, the role of LBM price fixings for Gold and Silver as global benchmarks for those Commodities may be affected. EFFECT OF TRADING IN THE COMMODITIES AND RELATED INSTRUMENTS Holdings and its affiliates are and will be actively involved in the trading of the Commodities, futures and forward contracts with respect to the Commodities and other instruments and derivative products based on the Commodities and/or the Basket (collectively, "Commodity Investments"). Holdings and its affiliates may also issue or underwrite, or authorize unaffiliated entities to issue or underwrite, other Commodity Investments. In addition, affiliates of Holdings are market making members of the LBM, ring-dealing members of the LME and clearing members of the NYMEX. S-7 9 Such activities with respect to Commodity Investments could adversely affect the Basket Value, which could in turn adversely affect the value of, and the return on, the Securities. POTENTIAL CONFLICTS OF INTEREST As noted above, Holdings and its affiliates expect to engage in activities related to Commodity Investments, for their proprietary accounts or for other accounts under their management. Such activities could present certain conflicts of interest. For example, the issuance of other securities indexed to the Basket, i.e., the introduction of competing products into the marketplace, could adversely affect the value of the Securities. To the extent that Holdings or its affiliates serves as issuer, agent or underwriter of such securities or other instruments, its interests with respect to such products may be adverse to those of the Holders of Securities. Additionally, if a Market Disruption Event occurs during the Determination Period or if the Maturity of the Securities is accelerated, the Basket Maturity Value may be determined by reference to firm bid prices quoted by the Calculation Agent and/or to forward prices published by members of the LBM selected by the Calculation Agent. Finally, under certain circumstances, the Calculation Agent may adjust the Basket or the method of determining the Market Price of one or more of the Commodities. Such quotes, selections and adjustments by the Calculation Agent will directly impact the Settlement Amount payable with respect to the Securities. See "Description of Securities -- Settlement Amount," "-- Events of Default and Acceleration" and "-- Adjustments to the Basket and Market Price" in this Prospectus Supplement. Conflicts of interest may arise between the Calculation Agent's responsibilities with respect to the Securities and its status as a wholly-owned subsidiary of Holdings. EFFECT OF ADVERSE CHANGES IN MARKET PRICES OF COMMODITIES The Basket is comprised of eight distinct Commodities, and the Market Prices are determined by reference to futures contracts, forward contracts and spot prices relating to such Commodities. The Basket Value, and therefore the value of the Securities, could be adversely affected by adverse changes in the Market Prices of one or more of the Commodities. Market Prices of the Commodities can be affected by a variety of factors, including inflation, weather, governmental programs and policies, national and international political and economic events, changes in interest and exchange rates, the outbreak or cessation of war, acts of terrorism, significant accidents, natural catastrophes, technological advances, the discovery of significant additional sources of such Commodities and trading activity in Commodity Investments. SUSPENSION OR MATERIAL DISRUPTION OF TRADING; TEMPORARY DISTORTIONS The Market Prices of certain of the Commodities are determined by reference to the settlement prices of contracts traded on the LME and the NYMEX and the Market Prices of the balance of the Commodities are determined by reference to spot prices reported by the LBM. These markets are subject to temporary distortions or other disruptions due to conditions of illiquidity in the markets, the participation of speculators, government regulation and intervention and other factors. Such circumstances, particularly if they occur during the Determination Period, could adversely affect the value of the Securities. If a Market Disruption Event with respect to any Commodity exists or occurs during the first three Trading Days of the Determination Period, the Settlement Price of such Commodity will be calculated using the Market Prices of such Commodity on the first three Determination Days during the Determination Period. With respect to each Commodity, a "Determination Day" means a Trading Day on which no Market Disruption Event with respect to such Commodity has occurred. If, due to a Market Disruption Event for any Commodity, there are less than three Determination Days for such Commodity during the Determination Period, the Settlement Price for such Commodity will be calculated based on the average of (i) the Market Price for such Commodity on each Determination Day, if any, and (ii) the firm bid price for the relevant quantity of such Commodity quoted by the Calculation Agent on as many of the last three Trading Days during the Determination Period as are required to assure that the Settlement Price is based on the average of S-8 10 three prices (including Market Prices and prices quoted by the Calculation Agent) during the Determination Period. See "Description of Securities -- Settlement Amount" in this Prospectus Supplement. DEFERRAL OF SETTLEMENT DATE As discussed above under "Suspension or Material Disruption of Trading; Temporary Distortions," if a Market Disruption Event exists or occurs with respect to a Commodity during the first three Trading Days of the Determination Period, the calculation of the Settlement Price of such Commodity would be deferred until such Commodity ceased to be so affected or, if such Market Disruption Event continued through the Determination Period, until the Stated Maturity Date at which time the Calculation Agent would determine such Settlement Price in the manner described herein. Because the Settlement Amount will not be calculated until a Settlement Price for each Commodity has been determined, it is possible that settlement of the Securities will take place up to three Business Days after the Stated Maturity Date. See "Description of Securities -- Settlement Amount" in this Prospectus Supplement. If a Market Disruption Event results in the deferral of the payment of the Settlement Amount beyond the Stated Maturity Date, interest in respect of such deferred payment will not accrue or be payable. See "Description of Securities -- Settlement Amount" in this Prospectus Supplement. POTENTIAL MODIFICATIONS OF THE BASKET AND MARKET PRICE The composition of the Basket and the method of calculating Market Prices may be adjusted by the Calculation Agent, a wholly-owned subsidiary of Holdings, from time to time upon the occurrence of certain extraordinary events. By way of example, if the terms of the Contracts used for determining the Market Price of a Commodity are changed in a material respect by the commodity exchange upon which the Contract trades, or if a Market Price is not available for a Commodity for any reason, then the Calculation Agent may take such action, including adjustments to the Basket or to the method of calculating the Market Price of such Commodity, as it deems appropriate. See "Description of Securities -- Adjustments to the Basket and Market Price" in this Prospectus Supplement. Such changes could adversely affect the Basket Value and, consequently, the value of the Securities. OTHER CONSIDERATIONS An investment in the Securities may not be appropriate for all investors. It is suggested that prospective investors who consider purchasing the Securities should reach an investment decision only after carefully considering with their advisers the suitability of the Securities in the light of their particular circumstances. Investors should also consider the tax consequences of investing in the Securities. See "Certain United States Federal Income Tax Consequences" in this Prospectus Supplement. DESCRIPTION OF SECURITIES GENERAL The Securities are to be issued as a series of Debt Securities under the Senior Indenture, which is more fully described in the accompanying Prospectus. The following description of the particular terms of the Securities offered hereby supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the Debt Securities set forth under the heading "Description of Debt Securities" in the accompanying Prospectus. For a description of the rights attaching to different series of Debt Securities under the Senior Indenture, see "Description of Debt Securities" in the accompanying Prospectus. The Securities constitute "Senior Debt" as defined in the accompanying Prospectus. The aggregate principal amount of Securities to be issued will be $25,000,000. See "Underwriting" in this Prospectus Supplement. The Securities will be issued in denominations of $25,000 principal amount, and $5,000 principal amount increments in excess thereof. The Securities will not bear interest and will mature on November 18, 1996. Each Holder in whose name Securities are registered at the close of business on the day S-9 11 preceding the Stated Maturity Date will be entitled to receive the Settlement Amount in respect of such Securities, which shall be calculated based on the Basket Maturity Value. If the Basket Maturity Value exceeds $1,000, each Holder will be entitled to a Settlement Amount that shall be greater than the principal amount of such Holder's Securities; if the Basket Maturity Value is $1,000 or less, each Holder will be entitled to a Settlement Amount that shall be equal to the principal amount of such Holder's Securities. See "Settlement Amount" below. The Securities are not redeemable by Holdings or repayable at the option of any Holder prior to the Stated Maturity Date and are not subject to any sinking fund. Upon the occurrence of an Event of Default with respect to the Securities, Holders of the Securities may accelerate the Maturity of the Securities, as described under "Description of Securities -- Events of Default and Acceleration" in this Prospectus Supplement and "Description of Debt Securities -- Events of Default" in the accompanying Prospectus. SETTLEMENT AMOUNT Each Holder in whose name Securities are registered at the close of business on the day preceding the Stated Maturity Date will be entitled to receive a Settlement Amount with respect to the principal amount of Securities registered to such Holder, which Settlement Amount shall be equal to such principal amount multiplied by the following: 1 + (1.25 X (Basket Maturity Value -- $1,000) ) --------------------------------- $1,000 provided, however, that if the Basket Maturity Value is less than $1,000, then such Settlement Amount shall be equal to such principal amount. The value of the Basket on the Stated Maturity Date (the "Basket Maturity Value") will be determined by the Calculation Agent and will equal the sum of the Settlement Prices of all of the Commodities included in the Basket. The "Settlement Price" of each Commodity will equal the average of the Market Prices of such Commodity for the first three Determination Days occurring during the Determination Period. If, due to a Market Disruption Event for any Commodity, there are less than three Determination Days for such Commodity during the Determination Period, the Settlement Price for such Commodity will be calculated based on the average of (i) the Market Price for such Commodity on each Determination Day, if any, and (ii) the firm bid price for the relevant quantity of such Commodity quoted by the Calculation Agent on as many of the last three Trading Days during the Determination Period as are required to assure that the Settlement Price is based on the average of three prices (including Market Prices and prices quoted by the Calculation Agent) during the Determination Period. The quantity of each Commodity included in the Basket is specified under the caption "Description of Securities -- Commodities" below. The quantity of each Commodity included in the Basket will remain constant for the term of the Securities unless adjusted by the Calculation Agent upon the occurrence of certain extraordinary events as set forth under "Adjustments to the Basket and Market Price" below. "Market Price" for any day, which will be determined with respect to each Commodity based on reasonably available information, means the following: (i) in the case of Aluminum on any day (including any Determination Day), the Market Price (expressed in dollars) shall be the product of (a) the final closing price (expressed in dollars per tonne) on such day of the November 1996 Aluminum Contract, as established by the LME and displayed on Reuters LMES, and (b) .07058 tonnes; (ii) in the case of Copper on any day (including any Determination Day), the Market Price (expressed in dollars) shall be the product of (a) the final closing price (expressed in dollars per tonne) on such day of the November 1996 Copper Contract, as established by the LME and displayed on Reuters LMEN, and (b) .06272 tonnes; (iii) in the case of Crude Oil, the Market Price (expressed in dollars) shall be the product of (a) the closing settlement price (expressed in dollars per barrel) on such day of the December 1996 S-10 12 Crude Oil Contract, as established by the NYMEX and displayed on Telerate page 8810 or 8811, and (b) 7.00054 barrels; (iv) in the case of Gold on any Determination Day, the Market Price (expressed in dollars) shall be the product of (a) the London p.m. Gold Fixing Price (expressed in dollars per ounce) on such day reported by the LBM, as displayed on Reuters MTUA, and (b) .68999 ounces; and in the case of Gold on any other day, the Market Price shall be an amount (expressed in dollars) equal to the estimated forward price on such day for .68999 ounces of Gold for delivery on or about the Calculation Initiation Date, as estimated by the person making such determination; (v) in the case of Lead on any Determination Day and on any other day on and after the day that the LME first establishes prices with respect to the November 1996 Lead Contract (expected by Holdings to be in July 1995), the Market Price (expressed in dollars) shall be the product of (a) the final closing settlement price (expressed in dollars per tonne) on such day of the November 1996 Lead Contract, as established by the LME and displayed on Reuters LMEO, and (b) .05109 tonnes; and in the case of Lead on any other day, the Market Price shall be an amount (expressed in dollars) equal to the estimated forward price on such day for .05109 tonnes of Lead for delivery on or about the Calculation Initiation Date, as estimated by the person making such determination; (vi) in the case of Nickel on any Determination Day and on any other day on and after the day that the LME first establishes prices with respect to the November 1996 Nickel Contract (expected by Holdings to be in July 1995), the Market Price (expressed in dollars) shall be the product of (a) the final closing price (expressed in dollars per tonne) on such day of the November 1996 Nickel Contract, as established by the LME and displayed on Reuters LMEP, and (b) .006309 tonnes; and in the case of Nickel on any other day, the Market Price shall be an amount (expressed in dollars) equal to the estimated forward price on such day for .006309 tonnes of Nickel for delivery on or about the Calculation Initiation Date, as estimated by the person making such determination; (vii) in the case of Silver on any Determination Day, the Market Price (expressed in dollars) shall be the product of (a) the London Spot Silver Fixing Price (expressed in dollars per ounce) on such day reported by the LBM and as published in the Wall Street Journal and (b) 23.38205 ounces; and in the case of Silver on any other day, the Market Price shall be an amount (expressed in dollars) equal to the estimated forward price on such day for 23.38205 ounces of Silver for delivery on or about the Calculation Initiation Date, as estimated by the person making such determination; and (viii) in the case of Zinc on any day (including any Determination Day), the Market Price (expressed in dollars) shall be the product of (a) the final closing price (expressed in dollars per tonne) on such day of the November 1996 Zinc Contract, as established by the LME and displayed on Reuters LMEQ, and (b) .06502 tonnes. Except as otherwise provided in this paragraph, the Settlement Amount will be payable to the Holders of Securities on the Stated Maturity Date. As discussed above, if a Market Disruption Event exists or occurs with respect to a Commodity during the first three Trading Days of the Determination Period, the calculation of the Settlement Price of such Commodity would be deferred until such Commodity ceased to be so affected or, if such Market Disruption Event continued through the Determination Period, until the Stated Maturity Date at which time the Calculation Agent would determine such Settlement Price in the manner described above. Because the Settlement Amount will not be calculated until a Settlement Price for each Commodity has been determined, it is possible that settlement of the Securities will take place up to three Business Days after the Stated Maturity Date. In any event, Holders of Securities will be entitled to receive the Settlement Amount with respect to their Securities no later than the third Business Day after the Stated Maturity Date. IN THE EVENT THAT PAYMENT OF THE SETTLEMENT AMOUNT IS DEFERRED BEYOND THE STATED MATURITY DATE, INTEREST IN RESPECT OF SUCH DEFERRED PAYMENT WILL NOT ACCRUE OR BE PAYABLE. "Market Disruption Event" with respect to any of Aluminum, Copper, Lead, Nickel or Zinc (each, an "LME Metal") means either of the following events: (i) the LME fails to announce official closing prices in U.S. dollars for such LME Metal or (ii) a suspension, material limitation or termination of trading in contracts for such LME Metal or a disruption in the trading of such LME Metal such that the Calculation S-11 13 Agent determines that any Hedging Transactions in such LME Metal at the official LME settlement prices have not been or could not be executed. "Market Disruption Event" with respect to either Gold or Silver (each, a "Precious Metal") means that such Precious Metal is not traded by the LBM or is not quoted in U.S. dollars by the LBM. "Market Disruption Event" with respect to Crude Oil means either of the following events: (i) the NYMEX fails to announce official closing prices for Crude Oil or (ii) the termination or suspension of, or a material limitation or disruption in, the trading of Crude Oil on the NYMEX such that the Calculation Agent determines that any Hedging Transactions in Crude Oil at the official NYMEX settlement price have not been or could not be executed. For the purposes of the foregoing, a limitation on the hours in a Trading Day and/or number of days of trading will not constitute a Market Disruption Event if it results from a previously announced change in the regular business hours of the relevant exchange. The Calculation Agent in its sole discretion will be responsible for determining if a Market Disruption Event has occurred. All percentages resulting from any calculation with respect to the Securities will be rounded to the nearest one hundred-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent with one-half cent being rounded upwards. HYPOTHETICAL SETTLEMENT AMOUNTS Set forth below is a table demonstrating the Settlement Amount with respect to $50,000 principal amount of Securities based upon various hypothetical Basket Maturity Values. The illustrative Settlement Amounts in the table do not reflect any "time value" which may be reflected in the trading value, and are not necessarily indicative of potential profit or loss, which are affected in addition by purchase price and transaction costs. Neither Holdings nor any of its affiliates makes any representation or warranty as to the probability or magnitude of any increase or decrease in the Market Prices of the Commodities, and no assurance can be given that the Market Prices of the Commodities will increase sufficiently to cause Holders to receive a Settlement Amount in excess of the principal amount of their Securities. See "Settlement Amount" above for a description of the method of calculation of the Settlement Amount.
HYPOTHETICAL BASKET SETTLEMENT MATURITY VALUE AMOUNT -------------- ---------- $1,000 or less $50,000.00 1,025................................... 51,562.50 1,050................................... 53,125.00 1,075................................... 54,687.50 1,100................................... 56,250.00 1,125................................... 57,812.50 1,150................................... 59,375.00 1,175................................... 60,937.50 1,200................................... 62,500.00 1,225................................... 64,062.50 1,250................................... 65,625.00 1,275................................... 67,187.50 1,300................................... 68,750.00 1,325................................... 70,312.50 1,350................................... 71,875.00 1,375................................... 73,437.50 1,400................................... 75,000.00
S-12 14 COMMODITIES The commodities listed below (each, a "Commodity" and collectively, the "Commodities") comprise the Basket and, therefore, the value of such Commodities will affect the trading value of the Securities and the magnitude of the Settlement Amount. Holders of Securities will not, by virtue of their ownership of Securities, have any right at any time to invest in or to receive any of the Commodities, even though the return on the investment in the Securities is based on the Market Prices of such Commodities. The following table sets forth each Commodity, the quantity of each Commodity included in the Basket, the Market Price on November 9, 1994 of each Commodity and the percentage of the Basket Value contributed on November 9, 1994 by each Commodity.
NOVEMBER 9, 1994 NOVEMBER 9, 1994 % OF COMMODITY QUANTITY MARKET PRICE BASKET VALUE - --------- -------- ---------------- ---------------- Aluminum..................................... .07058 tonnes $ 125 12.5% Copper....................................... .06272 tonnes 145 14.5 Crude Oil.................................... 7.00054 barrels 130 13.0 Gold(1)...................................... .68999 ounces 300 30.0 Lead(1)...................................... .05109 tonnes 35 3.5 Nickel(1).................................... .006309 tonnes 50 5.0 Silver(1).................................... 23.38205 ounces 140 14.0 Zinc......................................... .06502 tonnes 75 7.5 ------- ----- $ 1,000 100.0%
- --------------- (1) The Market Prices for Gold, Lead, Nickel and Silver were determined by the Calculation Agent by reference to the Lehman Brothers Inc. bid on November 9, 1994 for .68999 ounces of Gold, for .05109 tonnes of Lead, for .006309 tonnes of Nickel and for 23.38205 ounces of Silver, respectively, for delivery on November 18, 1996. As set forth in the above table, different quantities of the various Commodities are included in the Basket, and each Commodity represents a different percentage of the forward value of the Basket on November 9, 1994. The respective quantities of each Commodity included in the Basket will remain constant for the term of the Securities unless adjusted by the Calculation Agent upon the occurrence of certain extraordinary events as set forth under "Adjustments to the Basket and Market Price" below. The Basket Value, for any day, will equal the current forward prices for each Commodity multiplied in each case by the quantity of such Commodity in the Basket. To determine the appropriate forward prices for the Commodities in the Basket, Holders should refer: (i) in the case of an LME Metal, to the current price for the appropriate Contract on the LME for delivery in November 1996 (or, with respect to Lead and Nickel prior to July 1995, to the estimated forward price for delivery of such Commodity on or about the Calculation Initiation Date), (ii) in the case of Crude Oil, to the current price for the Crude Oil Contract on the NYMEX for delivery in December 1996 and (iii) in the case of a Precious Metal, to an estimated forward price for delivery of such Precious Metal on or about the Calculation Initiation Date. The Basket Maturity Value, and therefore the Settlement Amount, is calculated based on the Market Prices of the Commodities on and after the Calculation Initiation Date. See "Settlement Amount" above. Aluminum The Market Price of Aluminum is determined by reference to the LME's "High Grade Primary Aluminum Contract" (the "Aluminum Contract"). The price of the Aluminum Contract is primarily affected by the global demand for and supply of Aluminum. Demand for Aluminum is significantly influenced by the level of global industrial economic activity. Industrial sectors which are particularly important include the automobile, packaging and construction sectors. An additional, but highly volatile, component of demand is adjustments to inventory in response to changes in economic activity and/or pricing levels. S-13 15 The supply of Aluminum is widely spread around the world, and the principal factor dictating the smelting of such Aluminum is the ready availability of inexpensive power. The supply of Aluminum is also affected by current and previous price levels, which will influence investment decisions in new smelters. Other factors influencing supply include droughts, transportation problems and shortages of power and raw materials. Copper The Market Price of Copper is determined by reference to the LME's "Copper -- Grade A Contract" (the "Copper Contract"). The price of the Copper Contract is primarily affected by the global demand for and supply of Copper. Demand for Copper is significantly influenced by the level of global industrial economic activity. Industrial sectors which are particularly important include the electrical and construction sectors. In recent years demand has been supported by strong consumption from newly industrializing countries, which continue to be in a copper-intensive period of economic growth as they develop their infrastructure. An additional, but highly volatile, component of demand is adjustments to inventory in response to changes in economic activity and/or pricing levels. Apart from the United States, Canada and Australia, the majority of copper concentrate supply (the raw material) comes from outside the Organization for Economic Cooperation and Development countries. Chile is the largest producer of copper concentrate. In recent years, copper supply has been affected by strikes, financial problems and terrorist activity. Output has fallen particularly sharply in the "African Copperbelt" and in Bougainville, Papua New Guinea. Crude Oil The Market Price of Crude Oil is determined by reference to the NYMEX's "Light 'Sweet' Crude Oil Futures Contract" (the "Crude Oil Contract"). The Crude Oil Contract is based on West Texas Intermediate ("WTI") crude oil delivered to Cushing, Oklahoma. Although WTI is refined principally in the United States' mid-continent region, it forms the basis for pricing other domestic crudes as well as some foreign grades. The WTI spot price, in turn, is usually determined by global (rather than regional) supply and demand conditions due to the availability of product and crude oil pipelines that link the mid-continent to the Gulf Coast, a major crude oil trading and refining center. Demand for petroleum products by consumers, as well as agricultural, manufacturing and transportation industries, determines demand for Crude Oil by refiners. Since the precursors of product demand are linked to economic activity, Crude Oil demand will tend to reflect economic conditions. However, other factors such as weather will also influence product and crude oil demand. Crude Oil supply is determined by both economic and political factors. Oil prices (along with drilling costs, availability of attractive prospects for drilling, taxes and technology) determine exploration and development spending which influence output capacity with a lag. In the short run, production decisions by the Organization of Petroleum Exporting Countries also affects supply and prices. Oil export embargoes such as the United Nations-imposed trade sanctions on Iraq represent another route through which political developments move the market. Gold The Market Price of Gold is determined by reference to the London p.m. Gold Fixing (expressed in dollars per ounce) by the LBM. Spot market Gold prices can fluctuate widely and are affected by numerous factors, including industrial and jewelry demand, expectations with respect to the rate of inflation, the strength of the U.S. dollar (the currency in which the price of Gold is generally quoted) and of other currencies, interest rates, central bank sales, forward sales by producers, global or regional political or economic events, and production costs and disruptions in major Gold producing regions such as South Africa and the Commonwealth of Independent States ("CIS"). The demand for and supply of Gold affect Gold prices, but not necessarily in the same manner as supply and demand affect the prices of other Commodities. The supply of Gold consists of a combination of new mine production and existing stocks of bullion and formulated Gold held by governments, public and private financial institutions, industrial organizations and private individuals. As the amounts S-14 16 produced in any single year constitute a very small portion of the total potential supply of Gold, normal variations in production do not necessarily have a significant impact on the supply of Gold or on its price. In addition, the price of Gold has on occasion been subject to very rapid short-term changes due to speculative activities. Lead The Market Price of Lead is determined by reference to the LME's "Standard Lead Contract" (the "Lead Contract"). The price of the Lead Contract is primarily affected by the global demand for and supply of Lead. Demand for Lead is significantly influenced by the level of global industrial economic activity. The automobile industrial sector is particularly important given that the use of Lead in batteries accounts for approximately 60% of world-wide Lead demand. In recent years, demand has stabilized following substitution of other commodities for Lead in a number of markets -- notably gasoline and chemicals -- in the 1970s and 1980s. An additional, but highly volatile, component of demand is adjustments to inventory in response to changes in economic activity and/or pricing levels. The secondary (recycling) sector is the source of approximately 50% of the total supply of Lead and refined lead output is dominated by the developed economies. The supply of Lead is also affected by current and previous price levels, which will influence investment decisions in new mines and smelters. The low prices for Lead in the early 1990s have tended to discourage such investments. Nickel The Market Price of Nickel is determined by reference to the LME's "Primary Nickel Contract" (the "Nickel Contract"). The price of the Nickel Contract is primarily affected by the global demand for and supply of Nickel. Demand for Nickel is significantly influenced by the level of global industrial economic activity. The stainless steel industrial sector is particularly important given that the use of Nickel in the manufacture of stainless steel accounts for approximately 60% of world-wide Nickel demand. The stainless steel sector has growth potential as there is a trend for alloyed steel such as stainless steel to replace non-alloyed steel as the benefits of life-cycle costing become more clear. A number of stainless steel mills have invested in new capacity which indicates the likelihood of continued growth in stainless steel production and therefore Nickel demand. An additional, but highly volatile, component of demand is adjustments to inventory in response to changes in economic activity and/or pricing levels. Nickel supply is dominated by Canada and the CIS. Although exports from the CIS have increased sharply in recent years, there are indications that such exports have now peaked. The supply of Nickel is also affected by current and previous price levels, which will influence investment decisions in new mines and smelters. The low prices for Nickel in the early 1990s have tended to discourage such investments. Silver The Market Price of Silver is determined by reference to the London Spot Silver Fixing (expressed in dollars per ounce) by the LBM. Spot market Silver prices can fluctuate widely and are affected by numerous factors, including industrial and jewelry demand, expectations with respect to the rate of inflation, the relative strength of the U.S. dollar (the currency in which the price of Silver is generally quoted) and of other currencies, interest rates, central bank sales, forward sales by producers, global or regional political or economic events, and production costs and disruptions in major Silver producing countries such as Mexico and Peru. The demand for and supply of Silver affect Silver prices, but not necessarily in the same manner as supply and demand affect the prices of other Commodities. The supply of Silver consists of a combination of new mine production and existing stocks of bullion and fabricated Silver held by governments, public and private financial institutions, industrial organizations and private individuals. S-15 17 Zinc The Market Price of Zinc is determined by reference to the LME's "Special High Grade Zinc Contract" (the "Zinc Contract"). The price of the Zinc Contract is primarily affected by the global demand for and supply of Zinc. Demand for Zinc is significantly influenced by the level of global industrial economic activity. The galvanized steel industrial sector is particularly important given that the use of Zinc in the manufacture of galvanized steel accounts for approximately 50% of world-wide Zinc demand. The galvanized steel sector is in turn heavily dependent on the automobile and construction sectors. The galvanized steel sector has growth potential as there is a trend for coated steel such as galvanized steel to replace non-coated steel as the benefits of life-cycle costing become more clear. A number of galvanized steel mills have invested in new capacity which indicates the likelihood of continued growth in galvanized steel production and therefore Zinc demand. An additional, but highly volatile, component of demand is adjustments to inventory in response to changes in economic activity and/or pricing levels. The supply of zinc concentrate (the raw material) is dominated by Australia, North America and Latin America. The supply of Zinc is also affected by current and previous price levels, which will influence investment decisions in new mines and smelters. The low prices for Zinc in the early 1990s have tended to discourage such investments. ------------------------ Finally, in addition to supply and demand factors that influence settlement prices for the Commodities as described above, psychological and speculative forces play a major role in driving the markets for each of the Commodities. ADJUSTMENTS TO THE BASKET AND MARKET PRICE The Basket and/or the method of calculating the Market Price may be adjusted from time to time by the Calculation Agent, a wholly-owned subsidiary of Holdings, as follows: (i) In the event that a Market Price is not available for a Commodity for whatever reason, including any discontinuance of trading in the relevant Contract by the LME or the NYMEX, then the Calculation Agent may take such action, including adjustments to the Basket or to the method of calculating such Market Price as it deems appropriate. By way of example, and without limitation, if a Contract which serves as the basis for determining the Market Price of a particular Commodity is discontinued by the exchange on which it traded, the Calculation Agent may calculate such Market Price for such Commodity by reference to another contract for such Commodity traded on another exchange or to the Lehman Brothers Inc. bid for such Commodity for delivery during the Determination Period. (ii) In the event that the terms of any Contract used for determining the Market Price of any Commodity are changed in a material respect by the commodity exchange upon which the contract trades, the Calculation Agent may take such action, including adjustments to the Basket or to the method of calculating the Market Price of such Commodity, as it deems appropriate. The Calculation Agent has informed Holdings that, to its knowledge, the terms of certain of the LME Metal Contracts have been adjusted several times since 1980 with respect to the required quality of the Commodity to be delivered thereunder and the location for such delivery. Although Holdings is not aware of any planned modification of the terms of any Contract, no assurance can be given that such modifications will not occur prior to the Stated Maturity Date. No adjustment will be made unless the Calculation Agent determines, in its sole discretion, that such adjustment is appropriate to maintain the validity of the Market Price as an economic benchmark for the affected Commodity within the Basket. Such adjustments, if any, may be made by the Calculation Agent at any time, or from time to time, on or prior to the Stated Maturity Date. No adjustment will be made other than in accordance with the foregoing. See "Special Considerations -- Potential Conflicts of Interest" in this Prospectus Supplement for a description of certain conflicts of interest which may arise between the S-16 18 Calculation Agent's status as a wholly-owned subsidiary of Holdings and its responsibilities to adjust the Basket and/or the method of calculating the Market Price. EVENTS OF DEFAULT AND ACCELERATION If an Event of Default with respect to the Securities shall have occurred and be continuing, the amount payable to a Holder with respect to any Security upon any acceleration permitted under the Senior Indenture will be equal to an amount calculated as though the Basket Maturity Value is equal to the sum of the Market Prices on the date of acceleration for each Commodity other than Gold and Silver plus the Acceleration Value on the date of acceleration for each of Gold and Silver; provided, that if the date of acceleration is not a Determination Day for any Commodity, the Basket Maturity Value will be calculated by reference to the bid price for the relevant quantity of such Commodity quoted on such day by the Calculation Agent, a wholly-owned subsidiary of Holdings. If a bankruptcy proceeding is commenced in respect of Holdings, the claim of the Holder of a Security may be limited, under Section 502(b)(2) of Title 11 of the United States Code, to the principal amount of the Security plus an additional amount, if any, of contingent interest calculated as though the Basket Maturity Value is equal to the sum of the Market Prices on the date of the commencement of the proceeding for each Commodity other than Gold and Silver plus the Acceleration Value on the date of acceleration for each of Gold and Silver; provided, that if the date of acceleration is not a Determination Day for any Commodity, the Basket Maturity Value will be calculated by reference to the bid price for the relevant quantity of such Commodity quoted on such day by the Calculation Agent, a wholly-owned subsidiary of Holdings. The "Acceleration Value" for each of Gold and Silver shall be the forward price for .68999 ounces of Gold and for 23.38205 ounces of Silver, respectively, for delivery during the Determination Period, as determined by the Calculation Agent by reference to the arithmetic mean of such forward prices published by three members of the LBM selected by the Calculation Agent. See "Description of Securities -- Settlement Amount" in this Prospectus Supplement for a description of the calculation of the Settlement Amount and see "Special Considerations -- Potential Conflicts of Interest" in this Prospectus Supplement for a description of certain conflicts of interest which may arise between the Calculation Agent's status as a wholly-owned subsidiary of Holdings and its foregoing responsibilities with respect to the Securities. CALCULATION AGENT All selections, adjustments and determinations made by Lehman Brothers Inc., a wholly-owned subsidiary of Holdings, as the Calculation Agent shall be at the sole discretion of the Calculation Agent and, in the absence of manifest error, shall be conclusive for all purposes and binding on Holdings and the Holders of the Securities, and the Calculation Agent shall have no liability therefor. THE BASKET GENERAL The Basket is comprised of eight distinct non-financial (i.e., physical) Commodities, each of which falls within one of the following three general sectors (the "Sectors"): precious metals, base metals and energy. Holdings has included the Sectors in the Basket because it believes that, as a general matter, the prices of commodities in these Sectors are broadly reflective of economic recovery; that is, prices of such Commodities generally increase during periods of economic recovery. NEITHER HOLDINGS NOR ANY OF ITS AFFILIATES MAKES ANY REPRESENTATION OR WARRANTY AS TO THE PERFORMANCE OF THE COMMODITIES OR THE BASKET, AND NEITHER HOLDINGS NOR THE CALCULATION AGENT WILL ADJUST THE BASKET FOR THE PURPOSE OF CAUSING OR ENCOURAGING THE PERFORMANCE INDICATED IN THE PRECEDING SENTENCE. The specific Commodities which comprise the Basket (namely Aluminum, Copper, Crude Oil, Gold, Lead, Nickel, Silver and Zinc) were selected by Holdings on the basis of, among other things, their liquidity, their general lack of seasonality and the ready availability of price information. Holdings has included in the Basket the specified quantity of each Commodity such that, as of November 9, 1994, each Sector represented not less than 10% and not more than 50% of the Basket Value and such that no individual Commodity represented more than 30% of the Basket Value. S-17 19 THE INCLUSION OF A COMMODITY IN THE BASKET IS NOT A RECOMMENDATION TO INVEST IN OR DIVEST ANY INTEREST IN SUCH COMMODITY, AND NEITHER HOLDINGS NOR ANY OF ITS AFFILIATES MAKE ANY REPRESENTATION OR WARRANTY TO ANY PURCHASER OF SECURITIES AS TO THE PERFORMANCE OF THE BASKET, ANY COMMODITY OR ANY SECTOR. Holdings or its affiliates may presently or from time to time invest in, or divest an interest in, one or more Commodity Investments, may render investment advice to a third party with respect to one or more Commodity Investments, or may facilitate on behalf of a third party an investment in, or a divestiture of an interest in, one or more Commodity Investments. In the course of such business, Holdings or its affiliates may acquire nonpublic information with respect to such Commodity Investments and, in addition, one or more affiliates of Holdings may produce and/or publish research reports with respect to such Commodity Investments. Holdings does not make any representation or warranty to any purchaser of a Security with respect to any matters whatsoever relating to such activities. ANY PROSPECTIVE PURCHASER OF A SECURITY SHOULD UNDERSTAND THE COMMODITY FUTURES, FORWARD AND SPOT MARKETS AND SHOULD UNDERTAKE AN INDEPENDENT INVESTIGATION OF THE COMMODITIES SUCH AS IN ITS JUDGMENT IS APPROPRIATE TO MAKE AN INFORMED DECISION WITH RESPECT TO AN INVESTMENT IN THE SECURITIES. THE COMMODITIES MARKETS The Market Prices of certain of the Commodities (i.e., Crude Oil and the LME Metals) are determined by reference to the settlement prices of futures and forward contracts traded on the NYMEX and the LME, respectively, and the Market Prices of the Precious Metals are determined by reference to spot prices on the LBM. An exchange-traded futures contract is a bilateral agreement providing for the purchase and sale of a specified type and quantity of a commodity or financial instrument during a stated delivery month for a fixed price or, in the case of a futures contract on an index, providing for the payment and receipt of a cash settlement. By its terms, a futures contract provides for a specified settlement month in which the commodity or financial instrument is to be delivered by the seller (whose position is therefore described as "short") and acquired by the purchaser (whose position is therefore described as "long") or in which the cash settlement amount is required to be paid. Prior to the date on which delivery is to be made under a futures contract, the exchange clearing house will require the holders of short positions to state their intentions with respect to delivery and, to the extent that such holders elect to make delivery (as opposed to cash settlement), the clearing house will match them with holders of long positions, who will then be required to accept delivery. In the vast majority of cases, actual delivery under contracts never takes place, as contracts are often liquidated with offsetting futures transactions prior to the maturity of the original contract. No purchase price is paid or received on the purchase or sale of a futures contract. Instead, an amount of cash or cash equivalents, which varies based on the requirements imposed by the exchange clearing houses, but which may be as low as 5% or less of the value of the contract, must be deposited with the broker as "initial margin." This margin deposit collateralizes the obligations of the parties to the futures contract to perform their obligations under such contract. By depositing margin in the most advantageous form (which may vary depending on the exchange, clearing house or broker involved), a market participant may be able to earn interest on its margin funds, thereby increasing the potential total return which may be realized from an investment in futures contracts. Subsequent payments to and from the broker, referred to as "variation margin," are then normally made on a daily basis as the price of the futures contract fluctuates, thereby making existing positions in the futures contract more or less valuable, a process known as "marking to the market." Futures contracts are traded on organized exchanges, known as "contract markets," through the facilities of a centralized clearing house and a brokerage firm which is a member of the clearing house. The clearing house guarantees the performance of each clearing member which is a party to a futures contract by, in effect, taking the opposite side of the transaction. At any time prior to the expiration of a futures contract, subject to the availability of a liquid secondary market, a trader may elect to close out its position by taking an opposite position on the exchange on which the position was entered into, which operates to terminate the position and fix the trader's profit or loss. U.S. contract markets (including the NYMEX), as well as brokers and market S-18 20 participants, are subject to regulation by the Commodity Futures Trading Commission. Futures markets outside the U.S. are generally subject to regulation by comparable regulatory authorities (such as the Securities and Investment Board in the United Kingdom (the "SIB")). The NYMEX The NYMEX, located in New York City, is the principal exchange for the trading of oil futures contracts. NYMEX began commodities trading in 1872, organized as the Butter and Cheese Exchange of New York, and has since traded a variety of commodity products. The establishment of energy futures on the NYMEX occurred in 1978, with the introduction of heating oil futures contracts. NYMEX opened trading in leaded gasoline futures in 1981, followed by the Crude Oil Contract in March 1983 and unleaded gasoline futures in 1984. The LME The LME was established in 1877 and is the principal base-metal exchange in the world on which contracts for delivery of copper, lead, zinc, tin, aluminum, aluminum alloy and nickel are traded. In contrast to U.S. futures exchanges, the LME operates as a principals' market for the trading of forward contracts, and is therefore more closely analogous to over-the-counter physical commodity markets than futures markets. As a result, members of the LME trade with each other as principals and not as agents for customers, although such members may enter into offsetting "back-to-back" contracts with their customers. In addition, while futures exchanges permit trading to be conducted in contracts for monthly delivery in stated delivery months, LME contracts may be established for delivery on any day (referred to as a "prompt date") from one day to three months following the date of contract, and for monthly delivery in any of the next 16 to 24 months (depending on the Commodity) following such third month. Further, because it is a principals' forward market, there are no price limits applicable to LME contracts, and prices could decline without limitation over a period of time. Trading is conducted on the basis of warrants that cover physical material held in listed warehouses. The LME is not a cash cleared market; its interoffice and floor trading procedure is combined with a clearing system operating between principals based on bank guarantees and other forms of collateral. Both interoffice and floor trading are covered by a matching system run by the London Clearing House, whose role is to act as a central counterparty to trades executed between clearing members and thereby reduce risk and settlement costs. The LME is subject to regulation by the SIB. The bulk of trading on the LME is transacted through interoffice dealing which allows the LME to operate as a 24-hour market. Trading on the floor takes place in two sessions daily, from 11:50 am to 1:35 pm and from 3:20 to 5:00 pm, London time. The two sessions are each broken down into two rings made up of five minutes' trading in each contract. After the second ring of the first session the official prices for the day are announced. Contracts may be settled by offset or delivery and can be cleared in U.S. dollars, Pounds Sterling, Japanese Yen and German Marks. Copper and Tin have traded on the LME since its establishment. The Copper Contract was upgraded to High Grade Copper in November 1981 and again to today's Grade-A Contract which began trading in June 1986. Lead and Zinc were officially introduced in 1920, but were traded unofficially before that. The Lead Contract has remained virtually unchanged since its reintroduction in 1952 following the closure of the Exchange brought about by the second World War. Zinc, on the other hand, has undergone a number of upgradings, most recently with the introduction of the present Special High Grade Zinc Contract in June 1986. Primary Aluminum was introduced as a 99.5% contract in December 1978 and today's 99.7% High Grade Aluminum Contract began trading in August 1987. Nickel joined the Exchange the year after Aluminum, in April 1979. The LME share (by weight) of world terminal market trading is over 90% of all Copper and virtually all Aluminum, Lead, Nickel, Tin and Zinc. The LME, therefore, is well established to reflect changes in supply and demand for these metals worldwide. S-19 21 The LBM The Market Prices of Gold and Silver will be determined by reference to the "Fixing Prices" of such Commodities on the LBM. The Fixing Prices represent the matching of orders from customers and bullion markets throughout the world. The LBM, located in London, England, was formally incorporated in 1987. The LBM is a self-regulatory association of bullion market participants. All market making members of the LBM are supervised by the Bank of England and are required to satisfy a capital adequacy test. Market making members of the LBM quote spot and forward delivery prices (in U.S. dollars per ounce) for Gold and Silver throughout each business day. In addition, the LBM publishes the Fixing Price for Gold in the morning and in the evening of each business day and the Fixing Price for Silver in the afternoon of each business day. HISTORICAL INFORMATION The following table sets forth for the days indicated during 1990, 1991, 1992, 1993 and 1994 (through November 1, 1994) (a) in the case of Gold and Silver, the spot prices for the days indicated (b) in the case of each of the other Commodities, the settlement prices for the nearby Contract for such Commodity and (c) the spot value of the Basket (i.e., the value of the Basket calculated by reference to the spot prices and to the quantity of each Commodity in the Basket). The spot value of the Basket has been calculated and included in this table for the benefit of prospective investors; prospective investors should note that the Basket Value (as such term is defined and used in this Prospectus Supplement) is calculated by reference to forward prices for the Commodities rather than by reference to spot prices for the Commodities. By way of example, although the spot value of the Basket on November 9, 1994 was $962.44, the Calculation Agent has estimated that the Basket Value on November 9, 1994 was $1,000. The historical prices of the Commodities should not be taken as an indication of future performance, and no assurance can be given that the prices of the Commodities will increase sufficiently to cause the Holders of Securities to receive a Settlement Amount in excess of the principal amount of such Securities. S-20 22 The historical spot prices set forth below have been obtained from commercial data services unaffiliated with Holdings, which services are believed by Holdings to be reliable.
CRUDE DATE GOLD(1) SILVER(1) ALUMINUM(2) COPPER(2) NICKEL(2) LEAD(2) ZINC(2) OIL(3) - -------- -------- --------- ----------- --------- ---------- -------- --------- ------- 1/2/90 $399.000 $5.210 $1637.000 $2418.111 $ 7900.000 $721.728 $1395.000 $22.890 2/1/90 415.800 5.265 1405.000 2252.523 6400.000 703.703 1300.500 22.700 3/1/90 406.300 5.140 1532.000 2494.170 8315.000 882.450 1512.000 21.170 4/2/90 368.400 4.940 1595.000 2758.468 8975.000 824.932 1608.000 20.480 5/2/90 369.600 4.995 1494.000 2735.595 9300.000 798.005 1750.000 18.680 6/1/90 363.400 5.035 1591.000 2639.728 8275.000 824.915 1745.000 17.500 7/2/90 357.400 4.920 1530.000 2629.173 8605.000 906.915 1723.000 16.720 8/1/90 370.600 4.830 1715.000 2867.830 10330.000 876.488 1569.000 21.540 9/4/90 381.400 4.740 1875.000 2934.846 11135.000 867.881 1606.000 29.120 10/1/90 396.300 4.665 1930.000 2776.095 9850.000 768.620 1382.000 37.090 11/1/90 380.400 4.200 1922.000 2598.445 8750.000 723.309 1300.000 35.170 12/3/90 380.600 4.120 1494.000 2497.627 8365.000 656.059 1249.500 29.150 1/2/91 390.800 4.125 1542.000 2638.808 8325.000 621.866 1257.000 26.490 2/1/91 364.500 3.835 1481.000 2401.600 8593.000 586.575 1180.000 21.340 3/1/91 366.900 3.735 1540.000 2495.870 8561.000 597.870 1226.000 19.380 4/2/91 357.500 4.015 1435.000 2453.946 9095.000 617.462 1227.000 19.700 5/1/91 356.500 3.955 1346.000 2438.877 9040.000 588.992 1152.000 21.250 6/3/91 363.000 4.170 1226.000 2161.978 8140.000 532.858 1052.700 21.130 7/1/91 368.900 4.450 1316.000 2256.853 8585.000 559.771 1077.000 20.760 8/1/91 363.400 4.055 1266.000 2260.599 8220.000 546.620 1058.000 21.270 9/3/91 347.300 3.895 1250.500 2297.064 7786.000 531.069 1023.500 22.240 10/1/91 353.900 4.140 1143.500 2315.438 7532.000 535.609 997.500 22.220 11/1/91 357.700 4.105 1156.500 2375.157 7436.000 513.713 989.700 23.820 12/2/91 368.300 4.065 1102.200 2383.392 7127.000 519.480 1218.000 21.080 1/2/92 350.900 3.935 1117.000 2150.500 7188.000 540.430 1173.700 19.490 2/3/92 356.400 4.150 1216.700 2159.079 7718.000 505.370 1162.500 18.960 3/2/92 350.400 4.100 1270.000 2285.610 7592.000 518.214 1176.000 18.340 4/1/92 344.000 4.140 1288.200 2242.890 7461.000 533.463 1278.700 19.840 5/1/92 337.500 3.995 1288.000 2196.040 7372.000 519.955 1371.500 20.850 6/1/92 336.800 4.030 1304.400 2216.766 7332.000 535.521 1436.000 22.030 7/1/92 343.500 4.030 1309.700 2429.256 7485.000 611.331 1323.000 21.860 8/3/92 354.000 3.900 1318.600 2496.076 7325.000 681.465 1358.500 21.580 9/1/92 341.700 3.750 1294.400 2501.496 7203.000 660.339 1411.100 21.640 10/1/92 348.500 3.730 1239.300 2310.800 6693.000 587.205 1325.200 21.830 11/2/92 339.500 3.760 1144.200 2253.174 5964.000 484.497 1082.000 20.770 12/1/92 334.600 3.725 1199.300 2166.601 5512.000 460.135 1075.000 19.510 1/4/93 328.200 3.640 1238.300 2346.813 6150.000 454.052 1066.700 19.040 2/1/93 329.700 3.665 1196.100 2217.488 5776.000 416.125 1106.500 20.310 3/1/93 328.500 3.565 1174.200 2125.728 5907.000 409.104 992.000 20.600 4/1/93 336.300 3.870 1128.000 2148.091 6086.000 412.766 980.500 20.520 5/4/93 356.100 4.270 1125.500 1838.270 5953.000 415.711 1006.700 20.390 6/1/93 377.300 4.585 1122.700 1794.435 5609.000 398.470 922.700 20.240 7/1/93 379.000 4.710 1227.400 1922.500 5320.000 388.000 919.400 18.450 8/2/93 405.600 5.350 1213.400 1963.500 4915.000 391.800 920.700 17.970 9/1/93 369.100 4.800 1140.300 1967.200 4573.000 384.000 872.200 17.970 10/1/93 354.000 4.060 1098.200 1680.200 4056.000 364.300 877.700 18.630 11/1/93 363.200 4.200 1025.800 1604.500 4520.000 396.100 937.700 17.430 12/1/93 373.100 4.555 1054.400 1645.200 4679.000 427.700 937.000 15.480 1/4/94 394.100 5.200 1114.500 1733.500 5196.000 463.000 993.700 14.670 2/1/94 381.600 5.190 1245.700 1865.200 5835.000 509.300 994.500 15.920 3/1/94 381.300 5.340 1286.000 1848.000 5822.000 459.800 948.000 14.670 4/5/94 384.700 5.580 1289.000 1888.000 5539.000 442.100 935.500 15.740 5/3/94 375.100 5.240 1302.500 1951.000 5541.000 458.500 929.200 16.890 6/1/94 386.300 5.400 1313.500 2200.000 6101.000 499.000 952.200 18.210 7/1/94 384.600 5.350 1463.200 2365.500 6121.000 545.100 952.200 19.530 8/1/94 383.800 5.295 1444.600 2421.000 6112.000 587.100 946.300 20.550 9/1/94 386.000 5.425 1535.500 2497.500 6338.000 601.800 985.700 17.470 10/3/94 393.100 5.640 1603.000 2476.700 6283.000 623.000 1005.500 18.190 11/1/94 384.500 5.275 1836.200 2726.000 7426.000 662.400 1142.700 18.680
SPOT VALUE OF DATE BASKET - -------- ---------- 1/2/90 $1001.9862 2/1/90 970.2448 3/1/90 1009.1421 4/2/90 1001.9742 5/2/90 992.8314 6/1/90 976.6451 7/2/90 964.2298 8/1/90 1032.3167 9/4/90 1113.2692 10/1/90 1143.7729 11/1/90 1082.1954 12/3/90 992.6391 1/2/91 991.9030 2/1/91 906.6216 3/1/91 905.6610 4/2/91 902.3570 5/1/91 897.2100 6/3/91 865.0433 7/1/91 891.1362 8/1/91 874.1713 9/3/91 861.5289 10/1/91 862.2105 11/1/91 877.6463 12/2/91 874.7164 1/2/92 833.5535 2/3/92 847.0645 3/2/92 849.8518 4/1/92 862.1074 5/1/92 863.1324 6/1/92 878.9225 7/1/92 893.5476 8/3/92 905.4938 9/1/92 894.1224 10/1/92 871.2884 11/2/92 822.3730 12/1/92 803.2609 1/4/93 810.7969 2/1/93 808.5080 3/1/93 793.0945 4/1/93 803.7582 5/4/93 807.2704 6/1/93 816.7536 7/1/93 821.1672 8/2/93 850.4319 9/1/93 801.7500 10/1/93 753.7670 11/1/93 753.5834 12/1/93 762.2073 1/4/94 804.6399 2/1/94 828.5012 3/1/94 819.1819 4/5/94 833.8479 5/3/94 832.6697 6/1/94 876.8701 7/1/94 907.1960 8/1/94 916.3720 9/1/94 915.3204 10/3/94 935.7702 11/1/94 974.9721
- --------------- (1) Expressed in dollars per ounce. (2) Expressed in dollars per tonne. (3) Expressed in dollars per barrel. S-21 23 FORM OF SECURITIES The Securities offered by Holdings for sale in the United States will initially be evidenced by Certificates in fully registered form. The Securities offered by Holdings for sale in Europe will be issued in book-entry form and will be evidenced by one or more registered global certificates as described under "Book-Entry Form" below. CONVERSION OPTION One hundred and eighty calendar days after the closing of the offering, each Holder of a Certificate will have the option to convert the form of such Holder's Securities from certificated to book-entry form within a forty-five calendar day period (the "Conversion Option Period"). In order to be exchanged for Securities in book-entry form (represented by a beneficial interest in a Global Security described below), a Certificate must be delivered to the Depository in the manner referred to below. The Conversion Option Period will run from May 16, 1995, through June 30, 1995. Certificates received by the Depository for exchange during the Conversion Option Period will be exchanged for Securities in book-entry form by the close of business on the Business Day so received by the Depository (if received by the Depository at its then applicable cut-off time for same day credit) or on the following Business Day (if received by the Depository at its then applicable cut-off time for next day credit). After the last day of the Conversion Option Period, the Depository will not be required to accept delivery of Certificates for exchange for book-entry Securities, but may permit Certificates to be so exchanged on a case-by-case basis. It is anticipated that after the Conversion Option Period, Certificates delivered to the Depository in proper form for deposit will be accepted by the Depository for exchange for book-entry Securities, generally within three to four Business Days after delivery to the Depository. However, there can be no assurance that such Certificates will be accepted for exchange. Further, there can be no assurance, with respect to Certificates accepted for exchange, that exchange will occur within that time period. Securities surrendered at any time for exchange for book-entry Securities may not be delivered for transfer until such exchange has been effected. Since Certificates are not required to be exchanged for Securities in book-entry form, it is likely that not all Certificates will be so exchanged. Accordingly, Holders purchasing Securities in secondary market trading may wish to make specific arrangements with brokers or other participants or indirect participants if they wish to purchase only Securities in book-entry form and not Certificates. In order to be exchanged for a Security in book-entry form, a Certificate must be delivered to the Depository, in proper form for deposit, by a participant of the Depository. Accordingly, a Holder which is not a participant must deliver its Certificate, in proper form for deposit, to such a participant either directly or through an indirect participant or brokerage firm which maintains an account with the participant, in order to have its Certificate exchanged for a Security in book-entry form. Such Holders who desire to exchange their Certificates for Securities in book-entry form should contact their brokers or other participants or indirect participants to obtain information on procedures for submitting their Certificates to the Depository, including the proper form for submission and (during the Conversion Option Period) the cut-off times for same day and next day exchange. Certificates which are held by the Holder in nominee or "street" name may be automatically exchanged into book-entry form by the broker or other entity in whose name such Certificates are registered, without action of or consent by the beneficial owner of the related Security (i.e., such beneficial owner need not deliver a Certificate). Securities in book-entry form, including Certificates which have been exchanged into book-entry form, may not be exchanged for Certificates except under the limited circumstances described in the accompanying Prospectus under "Global Securities." CERTIFICATES FOR SECURITIES The Trustee will maintain a register (the "Security Register") for registering the ownership of and transfers of Securities represented by Certificates. Prior to due presentment for registration of transfer, Holdings, the Trustee, and any agent of either of them may deem and treat the person in whose name a Certificate is registered (the "registered holder") as the absolute owner of the Securities evidenced by such S-22 24 Certificate for any purpose whatsoever, and as the person entitled to exercise the rights represented by the Securities evidenced thereby, and neither Holdings, the Trustee, nor any agent of either of them shall be affected by any notice to the contrary. Accordingly, if a beneficial owner of a Security evidenced by a Certificate is not the registered holder thereof (for example, if it holds the Certificate through a broker holding such Certificate in nominee or "street" name), it may exercise its rights as a Holder only through the registered holder. The Trustee shall from time to time register the transfer of any outstanding Certificates upon surrender thereof at the Trustee's office, duly endorsed, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Trustee duly executed by the registered holder thereof, by the duly appointed legal representative thereof or by its duly authorized attorney, such signature to be guaranteed by a bank or trust company located, or with a correspondent office, in The City of New York or by a broker or dealer which is a member of a national securities exchange. A new Certificate shall be issued to the transferee upon any such registration of transfer. At the option of a Holder, Certificates may be exchanged for other Certificates, representing a like face amount of Securities upon surrender to the Trustee at the Trustee's office of the Certificates to be exchanged. Holdings shall thereupon execute, and the Trustee shall countersign and deliver, one or more new Certificates representing a like principal amount of Securities. If any Certificate is mutilated, lost, stolen or destroyed, Holdings may in its discretion execute, and the Trustee may countersign and deliver, in exchange and substitution for and upon cancellation of the mutilated Certificate, or in lieu of the lost, stolen or destroyed Certificate, a new Certificate of like tenor and representing an equivalent principal amount of Securities, but only (in the case of loss, theft or destruction) upon receipt of evidence satisfactory to Holdings and the Trustee of such loss, theft or destruction of such Certificate and security or indemnity, if requested, also satisfactory to them. Applicants for substitute Certificates must also comply with such other reasonable regulations and pay such other reasonable charges as Holdings or the Trustee may prescribe. Payments on Securities in certificated form will be payable when due at the office of the Trustee, Citibank, N.A., Corporate Trust Services, at 111 Wall Street, 5th Floor, New York, New York 10043. BOOK-ENTRY FORM Securities held in book-entry form will be held in the form of one or more global certificates (the "Global Security") registered in the name of the nominee of the depository, The Depository Trust Company ("DTC", and together with any successor depository, the "Depository"). Holdings anticipates that the Depository's initial nominee will be CEDE & Co. ("CEDE"). Accordingly, CEDE is expected to be the registered holder of the Securities in book-entry form. Holders of Securities in book-entry form may elect to hold interests in the Global Securities through DTC in the United States or through Cedel, S.A. ("CEDEL") or Morgan Guaranty Trust Company of New York, Brussels Office as operator of the Euroclear System ("Euroclear") in Europe, if they are participants in such systems, or indirectly through organizations which are participants in such systems. Euroclear and CEDEL will hold interests on behalf of their participants through their respective depositaries, Morgan Guaranty Trust Company of New York ("Morgan") and Citibank N.A. ("Citibank"), which in turn will hold such interests in accounts as participants in DTC. DTC, Euroclear and CEDEL have advised Holdings as follows: DTC is a limited-purpose trust company which was created to hold securities for its participating organizations ("participants") and to facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers (including the Underwriter), banks and trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). S-23 25 Persons who are not participants may beneficially own securities held by DTC only through participants or indirect participants. Euroclear and CEDEL hold securities for participating organizations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in accounts of such participants. Euroclear and CEDEL provide to their participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and CEDEL interface with domestic securities markets. Euroclear and CEDEL participants are financial institutions such as underwriters, securities brokers and dealers, banks, trust companies and certain other organizations. Indirect access to Euroclear or CEDEL is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Euroclear or CEDEL participant either directly or indirectly. DTC's nominee for all purposes will be considered the sole owner or holder of the Securities which are held in book-entry form. Holders which own Securities in book-entry form will not be entitled to have Securities registered in their names, will not be considered the holders thereof under the Senior Indenture, and will not be entitled to exchange their book-entry Securities for definitive form Certificates, except under the limited circumstances described below. A Holder that is not a participant will have its ownership of a Security in book-entry form recorded on or through the records of the brokerage firm or other entity that maintains such Holder's account. In turn, the total number of Securities in book-entry form held by an individual brokerage firm for its clients will be maintained on the records of the Depository in the name of such brokerage firm (or in the name of a participant that acts as agent for the Holder's brokerage firm if such firm is not a participant). Therefore, a Holder must rely upon the foregoing procedures to evidence such Holder's ownership of a Security in book-entry form. Transfer of ownership of a Security in book-entry form may be effected only through the Depository, and, if applicable, the brokerage firm or other entity that maintains the selling Holder's book-entry account. The laws of some states of the United States and of other jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits on transfer and such laws may impair the ability to own, transfer or pledge securities in book-entry form. Persons interested in trading in Securities in book-entry form should determine the locations of both the purchaser's and the seller's accounts in order to ensure that settlement can be made on the desired date. Secondary market trading between DTC participants (other than Morgan and Citibank as depositaries for Euroclear and CEDEL, respectively) will be settled using the procedures applicable to United States corporate debt obligations in same-day funds. Secondary market trading between Euroclear participants and/or CEDEL participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. When Securities are to be transferred from the account of a DTC participant (other than Morgan and Citibank as depositaries for Euroclear and CEDEL, respectively) to the account of a Euroclear participant or a CEDEL participant, the purchaser must send instructions to Euroclear or CEDEL through a participant at least one business day prior to settlement. Euroclear or CEDEL, as the case may be, will instruct Morgan or Citibank, respectively, to receive the Securities against payment. Payment will then be made by Morgan or Citibank, as the case may be, to the DTC participant's account against delivery of the Securities. After settlement has been completed, the Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Euroclear participant's or CEDEL participant's account. Credit for the Securities will appear on the next day (European time) and the cash debit will be back-valued to the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Euroclear or CEDEL cash debit will be valued instead as of the actual settlement date. Euroclear participants and CEDEL participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either from cash on hand or existing lines of credit, as they would for any S-24 26 settlement occurring within Euroclear or CEDEL. Under this approach, they may take on credit exposure to Euroclear or CEDEL until the Securities are credited to their accounts one day later. As an alternative, if Euroclear or CEDEL has extended a line of credit to them, participants can elect not to preposition funds and allow that credit line to be drawn upon to finance settlement. Under this procedure, Euroclear participants or CEDEL participants purchasing Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Securities were credited to their accounts. Since the settlement is taking place during New York business hours, DTC participants can employ their usual procedures for sending Securities to Morgan or Citibank for the benefit of Euroclear participants or CEDEL participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC participant, a cross-market transaction will settle no differently from a trade between two DTC participants. Due to time zone differences in their favor, Euroclear and CEDEL participants may employ their customary procedures for transactions in which Securities are to be transferred by the respective clearing system, through Morgan or Citibank, to another DTC participant. The seller must send instructions to Euroclear or CEDEL through a participant at least one business day prior to settlement. In these cases, Euroclear or CEDEL will instruct Morgan or Citibank, as appropriate, to credit the Securities to the DTC participant's account against payment. The payment will then be reflected in the account of the Euroclear participant or CEDEL participant the following day, and receipt of the cash proceeds in the Euroclear or CEDEL participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurs in New York). If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Euroclear or CEDEL participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Euroclear or CEDEL and that purchase Securities from DTC participants for credit to Euroclear participants or CEDEL participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: (i) borrowing through Euroclear or CEDEL for one day (until the purchase side of the day trade is reflected in their Euroclear or CEDEL accounts) in accordance with the clearing system's customary procedures; (ii) borrowing the Securities in the United States from a DTC participant no later than one day prior to settlement, which would give the Securities sufficient time to be reflected in their Euroclear account or CEDEL account in order to settle the sale side of the trade; or (iii) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Euroclear participant or CEDEL participant. Although DTC, Euroclear and CEDEL have agreed to the procedures described above in order to facilitate transfers of Securities among participants of DTC, Euroclear and CEDEL, they are under no obligation to perform or continue to perform such procedures and such procedures may be modified or discontinued at any time. Neither Holdings nor the Trustee will have any responsibility for the performance by DTC, Euroclear or CEDEL or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Holdings understands that under existing industry practices, in the event that Holdings requests any action of Holders or that Holders which own Securities in book-entry form desire to give or take any action which Holders are entitled to give or take under the Senior Indenture, the Depository would authorize the participants to give or take such action, and such participants would authorize Holders owning through such participants to give or take such action or would otherwise act upon the instructions of Holders owning through them. Accordingly, each Holder which owns a Security in book-entry form must rely on the S-25 27 procedures of the Depository and, if such Holder is not a participant, on the procedures of the participant through which such Holder owns its Security, to exercise any rights of a Holder under the Senior Indenture. Payment of the Settlement Amount with respect to Securities registered in the name of the Depository or its nominee will be made to the Depository or its nominee, as the case may be, as the holder of the Global Securities representing such Securities. None of Holdings, the Trustee or any other agent of Holdings or any agent of the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests or for supervising or reviewing any records relating to such beneficial ownership interests. Holdings expects that the Depository, upon receipt of any Settlement Amount payment in respect of a Global Security, will credit the accounts of the participants with payment in amounts proportionate to their respective holdings in principal amount of beneficial interest in such Global Security as shown on the records of the Depository. Holdings also expects that payments by participants to Holders will be governed by standing customer instructions and customary practices, as is now the case with Securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of such participants. If at any time (i) the Depository notifies Holdings that it is unwilling or unable to continue as Depository or (ii) Holdings becomes aware that the Depository shall no longer be eligible under the Senior Indenture, Holdings shall appoint a successor Depository. If a successor Depository for the Securities is not appointed by Holdings within 90 days after any such event, Holdings will issue, and the Trustee will authenticate and deliver, Securities in definitive form in an aggregate principal amount equal to the aggregate principal amount of the Global Securities, in denominations of $25,000 principal amount, and $5,000 principal amount increments in excess thereof. Such definitive Securities shall be registered in such name or names as the Depository shall instruct the Trustee. It is expected that such instructions will be based upon directions received by the Depository from participants with respect to ownership of beneficial interests in such Global Securities. LISTING Application has been made to list the Securities on the Luxembourg Stock Exchange. Copies of the constitutional documents of Holdings will be available for inspection by Holders of Securities, for so long as any Securities are listed on the Luxembourg Stock Exchange, at the office of Citibank (Luxembourg) S.A. (the "Luxembourg Paying Agent") at 16, avenue Marie-Therese, L-2132 in Luxembourg. Copies of the most recent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q of Holdings will be available to any holders of Securities free of charge from the office of the Luxembourg Paying Agent in Luxembourg so long as the Securities are listed on the Luxembourg Stock Exchange. Copies of the Global Securities and the Senior Indenture will be available for inspection by holders of Securities, for so long as any Securities are outstanding, during usual business hours at the specified office of the Luxembourg Paying Agent. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES In the opinion of Simpson Thacher & Bartlett, special counsel to Holdings, the following discussion is an accurate summary of certain United States federal income tax consequences of the ownership of Securities as of the date hereof. Except where noted, it deals only with Securities held by initial purchasers as capital assets and does not deal with special situations, such as those of dealers in securities or currencies, financial institutions, life insurance companies, persons holding Securities as part of a hedging or conversion transaction or United States Holders whose "functional currency" is not the U.S. dollar. Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in federal income tax consequences different from those discussed below. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF SECURITIES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION. S-26 28 As used herein, a "United States Holder" of a Security means a Holder that is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, or an estate or trust the income of which is subject to United States federal income taxation regardless of its source. A "Non-United States Holder" is a Holder that is not a United States Holder. GENERAL There are no regulations, cases or rulings directly addressing the treatment of securities similar to the Security other than the proposed regulations discussed below. Although not free from doubt, Holdings believes that the Securities should be treated as debt of Holdings for federal income tax purposes. Accordingly, Holdings intends to treat the Securities as debt for U.S. federal income tax purposes and file information returns with the Internal Revenue Service (the "IRS") consistent with such treatment. The discussion that follows is based on such approach. UNITED STATES HOLDERS Taxation of the Settlement Amount Under general principles of U.S. federal income tax law, interest is included in income as ordinary income when paid or accrued, in accordance with a holder's regular method of accounting. Moreover, in accordance with such principles, "contingent interest" on debt is generally not includable in income before the amount of such interest becomes fixed. Accordingly, Holdings intends to treat amounts payable at Maturity in excess of the principal amount of the Securities, if any, as contingent interest includable in income by United States Holders as ordinary income at such time. There are no regulations, cases or rulings directly applicable to the treatment of the Securities. The IRS may contend, however, that the Securities should be treated differently for U.S. federal income tax purposes from the treatment described above. Moreover, there can be no assurance that regulations that would apply different rules to the Securities from those described above will not come into effect and apply retroactively to the Securities. In such cases, the timing and character of a United States Holder's income could be affected. For example, under certain proposed regulations (the "Bifurcation Regulations"), a Security could be treated for federal income tax purposes as two separate instruments: (1) a debt instrument of Holdings with a stated redemption price at maturity equal to its principal amount (the "noncontingent debt instrument") and (2) a cash settlement option based upon the value of the Basket that must be exercised by delivering the Security (the "property right"). If the Bifurcation Regulations were to apply to the Securities, the timing of income could be significantly accelerated. Moreover, the IRS may contend that rules similar to proposed regulations which were released to replace the Bifurcation Regulations, but which were withdrawn (the "Withdrawn Regulations"), should apply to the Securities. Under the Withdrawn Regulations, United States Holders would be required to accrue some minimum amount of interest income currently over the life of the Security (based on the estimated value of the Basket) with the result that all or a portion of amounts realized by a United States Holder at Maturity or on sale of a Security would be treated as ordinary income and not capital gain. As described above, however, Holdings intends to treat the Securities as requiring no accrual of contingent interest by United States Holders until such amounts are fixed and Holdings will file information returns with the IRS consistent with such treatment. Sale or Exchange of Securities A United States Holder's tax basis in a Security will, in general, be the United States Holder's cost therefor, increased by any amounts previously included in income by the United States Holder. Upon the sale or exchange of a Security, a United States Holder will recognize gain or loss equal to the difference between the amount realized and the adjusted tax basis of the Security. Although the matter is not free from doubt, under current law such gain or loss should be treated as capital gain or loss. It is possible, however, that the S-27 29 IRS could promulgate regulations that treat all or part of such gain or loss as ordinary and that such regulations could apply retroactively to the Securities. NON-UNITED STATES HOLDERS Under present United States federal income and estate tax law, and subject to the discussion below concerning backup withholding: (a) no withholding of United States federal income tax will be required with respect to the payment by Holdings or any paying agent of the Settlement Amount on a Security owned by a Non-United States Holder, provided (i) that the beneficial owner does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Holdings entitled to vote within the meaning of section 871(h)(3) of the Code and the regulations thereunder, (ii) the beneficial owner is not a controlled foreign corporation that is related to Holdings through stock ownership, (iii) the beneficial owner is not a bank whose receipt of interest on a Security is described in section 881(c)(3)(A) of the Code and (iv) the beneficial owner satisfies the statement requirement (described generally below) set forth in section 871(h) and section 881(c) of the Code and the regulations thereunder; (b) no withholding of United States federal income tax will be required with respect to any gain or income realized by a Non-United States Holder upon the sale, exchange or retirement of a Security; and (c) a Security beneficially owned by an individual who at the time of death is a Non-United States Holder will not be subject to United States federal estate tax as a result of such individual's death, provided that such individual does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of Holdings entitled to vote within the meaning of section 871(h)(3) of the Code and provided that the Settlement Amount with respect to such Security would not have been, if received at the time of such individual's death, effectively connected with the conduct of a United States trade or business by such individual. To satisfy the requirement referred to in (a)(iv) above, the beneficial owner of such Security, or a financial institution holding the Security on behalf of such owner, must provide, in accordance with specified procedures, a paying agent of Holdings with a statement to the effect that the beneficial owner is not a United States person, citizen or resident. Pursuant to current temporary Treasury regulations, these requirements will be met if (1) the beneficial owner provides his name and address, and certifies, under penalties of perjury, that he is not a United States person, citizen or resident (which certification may be made on an IRS Form W-8 (or successor form)) or (2) a financial institution holding the Security on behalf of the beneficial owner certifies, under penalties of perjury, that such statement has been received by it and furnishes a paying agent with a copy thereof. Payments to Non-United States Holders not meeting the requirements of paragraph (a) above and thus subject to withholding of United States federal income tax may nevertheless be exempt from such withholding if the beneficial owner of the Security provides Holdings with a properly executed (1) IRS Form 1001 (or successor form) claiming an exemption from withholding under the benefit of a tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid on the Security is not subject to withholding tax because it is effectively connected with the owner's conduct of a trade or business in the United States. BACKUP WITHHOLDING AND INFORMATION REPORTING In general, information reporting requirements will apply to payment of the Settlement Amount on a Security and to the proceeds of sale of a Security made to United States Holders other than certain exempt recipients (such as corporations). A 31 percent backup withholding tax will apply to such payments if the United States Holder fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. No information reporting or backup withholding will be required with respect to payment of the Settlement Amount by Holdings or any paying agent to Non-United States Holders if a statement described S-28 30 above in (a)(iv) under "Non-United States Holders" has been received and the payor does not have actual knowledge that the beneficial owner is a United States person. In addition, backup withholding and information reporting will not apply if payment of the Settlement Amount on a Security is paid or collected by a foreign office of a custodian, nominee or other foreign agent on behalf of the beneficial owner of such Security, or if a foreign office of a broker (as defined in applicable Treasury regulations) pays the proceeds of the sale of a Security to the owner thereof. If, however, such nominee, custodian, agent or broker is, for United States federal income tax purposes, a United States person, a controlled foreign corporation or a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States, such payments will not be subject to backup withholding but will be subject to information reporting, unless (1) such custodian, nominee, agent or broker has documentary evidence in its records that the beneficial owner is not a United States person and certain other conditions are met or (2) the beneficial owner otherwise establishes an exemption. Temporary Treasury regulations provide that the Treasury is considering whether backup withholding will apply with respect to such payment of the Settlement Amount or the proceeds of a sale that are not subject to backup withholding under the current regulations. Under proposed Treasury regulations not currently in effect backup withholding will not apply to such payments absent actual knowledge that the payee is a United States person. Payment of the Settlement Amount on a Security paid to the beneficial owner of a Security by a United States office of a custodian, nominee or agent, or the payment by the United States office of a broker of the proceeds of sale of a Security, will be subject to both backup withholding and information reporting unless the beneficial owner provides the statement referred to in (a)(iv) above and the payor does not have actual knowledge that the beneficial owner is a United States person or otherwise establishes an exemption. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against such Holder's U.S. federal income tax liability provided the required information is furnished to the IRS. UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement dated as of November 10, 1994 (the "Underwriting Agreement"), Holdings has agreed to sell to Lehman Brothers Inc. (the "Underwriter"), and the Underwriter has agreed to purchase, $25,000,000 principal amount of the Securities. Holdings has been advised that the Underwriter proposes initially to offer the Securities to the public at the public offering price set forth on the cover page of this Prospectus Supplement. After the initial public offering, the public offering price may be changed. Lehman Brothers Inc. is a wholly owned subsidiary of Holdings. The participation of Lehman Brothers Inc. in the offer and sale of the Securities complies with the requirements of Schedule E of the By Laws of the National Association of Securities Dealers, Inc. regarding underwriting securities of an affiliate. The Underwriter has advised Holdings that it intends to make a market in the Securities but the Underwriter is not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Securities. Holdings has agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act of 1933. GLOSSARY Set forth below are definitions of some of the terms used in this Prospectus Supplement and not defined in the accompanying Prospectus. "Business Day" means a day of the week which is not a day on which banking institutions in New York, New York, are authorized or required by law to close. "Contract" means any of the Aluminum Contract, the Copper Contract, the Crude Oil Contract, the Lead Contract, the Nickel Contract and the Zinc Contract. S-29 31 "Holder" means, with respect to any certificated Security, the Person in whose name the certificate is registered in the Security Register and, with respect to any Global Security, any Beneficial Holder thereof to the extent of such Beneficial Holder's interest therein. "Maturity" of any Security means the date on which the Settlement Amount of such Security becomes due and payable as provided therein or in the Senior Indenture, whether at Stated Maturity or by declaration of acceleration or otherwise. "Trading Day" shall mean a calendar day on which the NYMEX, the LME, the LBM and any other exchange, the trading prices of which will be used to determine the Market Price of any Commodity, is scheduled to be open for business and all of the Commodities are scheduled to be available for trading. In addition, definitions for the following terms are set forth in this Prospectus Supplement at the pages indicated:
DEFINED TERM PAGE ------------ ---- Acceleration Value......................................................... S-17 Aluminum Contract.......................................................... S-13 Basket..................................................................... S-3 Basket Maturity Value...................................................... S-10 Basket Value............................................................... S-4 Bifurcation Regulations.................................................... S-27 Calculation Agent.......................................................... S-4 Calculation Initiation Date................................................ S-3 CEDE....................................................................... S-23 CEDEL...................................................................... S-23 Certificate................................................................ S-2 CIS........................................................................ S-14 Citibank................................................................... S-23 Code....................................................................... S-26 Commodity.................................................................. S-13 Commodity Investments...................................................... S-7 Conversion Option Period................................................... S-22 Copper Contract............................................................ S-14 Crude Oil Contract......................................................... S-14 Depository................................................................. S-23 Determination Day.......................................................... S-8 Determination Period....................................................... S-3 DTC........................................................................ S-23 Euroclear.................................................................. S-23 Fixing Prices.............................................................. S-20 Global Security............................................................ S-23 Hedging Transactions....................................................... S-6 Holdings................................................................... S-3 indirect participants...................................................... S-23 IRS........................................................................ S-27 Lead Contract.............................................................. S-15 LBM........................................................................ S-3 LME........................................................................ S-3 LME Metal.................................................................. S-11 Luxembourg Paying Agent.................................................... S-26
S-30 32
DEFINED TERM PAGE ------------ ---- Market Disruption Event.................................................... S-12 Market Price............................................................... S-10 Morgan..................................................................... S-23 Nickel Contract............................................................ S-15 noncontingent debt instrument.............................................. S-27 Non-United States Holder................................................... S-27 NYMEX...................................................................... S-3 participants............................................................... S-23 Precious Metal............................................................. S-12 property right............................................................. S-27 registered holder.......................................................... S-22 Sectors.................................................................... S-17 Securities................................................................. S-3 Security Register.......................................................... S-22 Settlement Amount.......................................................... S-3 Settlement Price........................................................... S-10 SIB........................................................................ S-19 Stated Maturity Date....................................................... S-3 Underwriter................................................................ S-29 Underwriting Agreement..................................................... S-29 United States Holder....................................................... S-27 Withdrawn Regulations...................................................... S-27 WTI........................................................................ S-14 Zinc Contract.............................................................. S-16
S-31 33 ================================================================================ NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HOLDINGS SINCE THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ------------------------ TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUPPLEMENT Summary............................... S-3 Use of Proceeds....................... S-6 Special Considerations................ S-6 Description of Securities............. S-9 The Basket............................ S-17 Form of Securities.................... S-22 Certain United States Federal Income Tax Consequences.................... S-26 Underwriting.......................... S-29 Glossary.............................. S-29 PROSPECTUS Available Information................. 2 Documents Incorporated by Reference... 2 The Company........................... 3 Use of Proceeds....................... 3 Ratio of Earnings to Fixed Charges.... 3 Description of Debt Securities........ 4 Description of Warrants............... 13 Global Securities..................... 20 United States Taxation................ 22 Capital Requirements.................. 22 Plan of Distribution.................. 23 ERISA Matters......................... 24 Legal Opinions........................ 24 Independent Accountants............... 25
================================================================================ ================================================================================ $25,000,000 LEHMAN BROTHERS HOLDINGS INC. INDUSTRIAL COMMODITY BASKET NOTES DUE 1996 --------------------------- PROSPECTUS SUPPLEMENT NOVEMBER 10, 1994 --------------------------- LEHMAN BROTHERS ================================================================================ 34 LBP11ICB Cover Image (c)1994 Lehman Brothers Holdings Inc. All Rights Reserved. -----END PRIVACY-ENHANCED MESSAGE-----