-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ax6EPtsP54DCLS/UCgSdhOve8J54wP+L1KcabAl2OyEe57jNVpb/9j5gNvOWNJwr uxvT4Ujx4X2J5aASE0B+wA== 0000950123-97-003240.txt : 19970416 0000950123-97-003240.hdr.sgml : 19970416 ACCESSION NUMBER: 0000950123-97-003240 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19970415 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEHMAN BROTHERS HOLDINGS INC CENTRAL INDEX KEY: 0000806085 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 133216325 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-25227 FILM NUMBER: 97581529 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 S-4 1 FORM S-4 -- LEHMAN BROTHERS HOLDINGS INC. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1997 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ LEHMAN BROTHERS HOLDINGS INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 6211 13-3216325 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
------------------------ THOMAS A. RUSSO, ESQ. 3 WORLD FINANCIAL CENTER 3 WORLD FINANCIAL CENTER NEW YORK, NEW YORK 10285 NEW YORK, NEW YORK 10285 (212) 526-7000 (212) 526-7000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE (NAME, ADDRESS, INCLUDING ZIP CODE, AND NUMBER, INCLUDING TELEPHONE AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE NUMBER, INCLUDING AREA CODE, OF AGENT FOR OFFICES) SERVICE)
COPY TO: RAYMOND W. WAGNER, ESQ. JENNIFER MARRE, ESQ. SIMPSON THACHER & BARTLETT LEHMAN BROTHERS INC. 425 LEXINGTON AVENUE 3 WORLD FINANCIAL CENTER NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10285
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction 6, check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE =================================================================================================
MAXIMUM PROPOSED MAXIMUM PROPOSED AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING REGISTRATION SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) PRICE(1) FEE - ------------------------------------------------------------------------------------------------- Cumulative Convertible Voting Preferred Stock, Series B, 13,000,000 par value $1.00 per share... shares $26.34 $342,420,000 $103,764 =================================================================================================
(1) Calculated pursuant to Rule 457(c) based on the average of the bid and asked price of the Registrant's Cumulative Convertible Voting Preferred Stock, Series A, par value $1.00 per share, on April 14, 1997. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. Subject to Completion, dated April 15, 1997 PROSPECTUS LEHMAN BROTHERS HOLDINGS INC. Offer to Exchange 13,000,000 Shares of Cumulative Convertible Voting Preferred Stock, Series B, par value $1.00 per share, for its Outstanding Cumulative Convertible Voting Preferred Stock, Series A, par value $1.00 per share. ------------------------ The Exchange Offer will expire at 12:00 midnight, New York City time, on May , 1997, unless extended (the "Expiration Date"). Lehman Brothers Holdings Inc. (the "Company") hereby offers to exchange (the "Exchange Offer"), on a share-for-share basis, up to 13,000,000 shares of its new Cumulative Convertible Voting Preferred Stock, Series B (the "Series B Preferred Stock") for up to 13,000,000 shares of its outstanding Cumulative Convertible Voting Preferred Stock, Series A (the "Series A Preferred Stock"). Such 13,000,000 shares of Series A Preferred Stock constitute all outstanding shares of the Series A Preferred Stock. The terms of the Series B Preferred Stock (including dividend rate, voting rights and liquidation preference) are identical in all material respects to the terms of the Series A Preferred Stock for which they may be exchanged pursuant to the Exchange Offer, except that conversion of the Series B Preferred Stock will not be subject to the restriction in the terms of the Series A Preferred Stock requiring that at least 250,000 shares thereof be converted at any one time. The annual dividend rate per share on the Series B Preferred Stock will be in an amount equal to $1.955 per share. Dividends on the shares of Series B Preferred Stock, when and as declared by the Board of Directors of the Company, will be cumulative and will be payable on March 15, June 15, September 15 and December 15 in each year (the "Dividend Payment Dates"), commencing on June 15, 1997. Dividends on the Series B Preferred Stock will be paid to the holders of record of shares of Series B Preferred Stock of the Company on a record date, not exceeding 40 days preceding the payment date thereof. The Series B Preferred Stock will be redeemable at the option of the Company on any Dividend Payment Date, in specified cumulative amounts increasing to 13,000,000 shares on and after June 15, 1998 (subject to reduction as described herein), upon at least 30 days' and not more than 45 days' notice to the holders thereof, at $39.10 per share plus accumulated and unpaid dividends (whether or not earned or declared) to the date fixed for redemption, provided that the Average Market Price (as defined) of the Common Stock on the date such notice is given is greater than the Conversion Price (as defined). As of March 31, 1997, the Average Market Price would have been $33.60 and the Conversion Price would have been $123.0212380. Accordingly, at that date the Series B Preferred Stock would not have been redeemable at the option of the Company. The Series B Preferred Stock will not be subject to any mandatory sinking fund. Each share of Series B Preferred Stock will be convertible at the option of the holder at any time, unless previously redeemed, into a number of shares of Common Stock equal to $39.10 divided by the Conversion Price in effect at the time of such conversion. As of the date of this Prospectus, the Conversion Price, which is subject to adjustment under certain conditions, would have been $123.0212380. The liquidation preference of each share of Series B Preferred Stock will be equal to $39.10 plus an amount equal to accumulated and unpaid dividends (whether or not earned or declared) on such share of Series B Preferred Stock. The Exchange Offer is not conditioned upon any minimum number of shares of Series B Preferred Stock being tendered for exchange. The date of acceptance and exchange of the Series A Preferred Stock (the "Exchange Date") will be the first business day following the Expiration Date. Shares of Series A Preferred Stock tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. The Company will pay all expenses incident to the Exchange Offer. The Company will not receive any proceeds from the Exchange Offer. A HOLDER OF SERIES A PREFERRED STOCK WHO EXCHANGES SERIES A PREFERRED STOCK FOR SERIES B PREFERRED STOCK WILL NOT RECOGNIZE ANY GAIN OR LOSS FOR UNITED STATES FEDERAL INCOME TAX PURPOSES AS A RESULT OF SUCH EXCHANGE. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ The Dealer Manager for this Offering is: LEHMAN BROTHERS , 1997 3 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "SEC"). Such reports and information may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of the SEC: New York Regional Office, 7 World Trade Center, New York, New York 10048; and Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500 W. Madison Street, Chicago, Illinois 60661-2511; and copies of such material can be obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The SEC also maintains a Web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The Company's Common Stock is listed on the New York Stock Exchange ("NYSE") and the Pacific Stock Exchange Inc. (the "PSE"). The Company's 8 3/4% Notes Due 2002 and 8.3% Quarterly Income Capital Securities (Series A Subordinated Interest Deferrable Debentures Due 2035) are listed on the NYSE. The Company's $55 Million Serial Zero Coupon Senior Notes Due May 16, 1998, Global Telecommunications Stock Upside Note Securities SM Due 2000, 9 1/8% Micron Yield Enhanced Equity Linked Debt Securities Due 1997 and AMEX Hong Kong 30 Index Call Warrants expiring January 23, 1998 are listed on the American Stock Exchange, Inc. (the "ASE"). Reports and other information concerning the Company may also be inspected at the offices of the NYSE at 20 Broad Street, New York, New York 10005, at the offices of the ASE, at 86 Trinity Place, New York, New York 10006 and at the offices of the PSE, 301 Pine Street, San Francisco, California 94104. The Company has filed with the SEC a registration statement on Form S-4 (herein, together with all amendments and exhibits, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). The Company has filed an Issuer Tender Offer Statement on Schedule 13E-4 (herein, together with all exhibits and schedules thereto, the "Schedule 13E-4") with the SEC under the Exchange Act and the rules and regulations thereunder, which includes certain additional information relating to the Exchange Offer and the Series B Preferred Stock offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement or the Schedule 13E-4, certain parts of which are omitted in accordance with the rules and regulations of the SEC, and to which reference is hereby made. For further information, reference is hereby made to the Registration Statement and the Schedule 13E-4. 2 4 DOCUMENTS INCORPORATED BY REFERENCE The following documents previously filed by the Company with the SEC pursuant to the Exchange Act are hereby incorporated by reference in this Prospectus: (1) The Company's Annual Report on Form 10-K for the year ended November 30, 1996. (2) The Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997. (3) The Company's Current Reports on Form 8-K dated January 8, 1997 and March 26, 1997. Each document filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the Expiration Date shall be deemed to be incorporated by reference into this Prospectus from the date of filing of such document. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of the Registration Statement and this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration statements or this Prospectus. The Company will provide without charge to each person, including any beneficial owner of any of the Series A Preferred Stock, to whom a copy of this Prospectus is delivered, upon the written or oral request of any such person, a copy of any or all of the documents which are incorporated herein by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to Mary Jo Capko, the Controller's Office, Lehman Brothers Holdings Inc., 3 World Financial Center, 8th Floor, New York, New York 10285 (telephone (212) 526-0660). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS ANY REQUEST SHOULD BE MADE BY FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE. 3 5 SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with, the more detailed information contained elsewhere in this Prospectus. Holders of Series A Preferred Stock are urged to read this Prospectus in its entirety. All references to the "Company" shall mean Lehman Brothers Holdings Inc. and its consolidated subsidiaries, unless the context requires otherwise. THE COMPANY The Company is one of the leading global investment banks serving institutional, corporate, government and high net worth individual clients and customers. The Company's worldwide headquarters in New York and regional headquarters in London and Tokyo are complemented by offices in additional locations in the United States, Europe, the Middle East, Latin and South America and the Asia-Pacific region. The Company's business includes capital raising for clients through securities underwriting and direct placements; corporate finance and strategic advisory services; merchant banking; securities sales and trading; asset management; research; and the trading of foreign exchange and derivative products. The Company acts as a market marker in all major equity and fixed income products in both the domestic and international markets. The Company is a member of all principal securities and commodities exchanges in the United States, as well as the National Association of Securities Dealers, Inc. ("NASD"), and holds memberships or associate memberships on several principal international securities and commodities exchanges, including the London, Tokyo, Hong Kong, Frankfurt, Milan and Stockholm stock exchanges. The Company was incorporated in Delaware on December 29, 1983. The Company's principal executive offices are located at 3 World Financial Center, New York, New York 10285 (telephone (212) 526-7000). THE EXCHANGE OFFER THE EXCHANGE OFFER......... The Company is offering to exchange pursuant to the Exchange Offer, on a share-for-share basis, up to 13,000,000 shares of its new Cumulative Convertible Voting Preferred Stock, Series B (the "Series B Preferred Stock") for up to 13,000,000 shares of its outstanding Cumulative Convertible Voting Preferred Stock, Series A (the "Series A Preferred Stock"). The terms of the Series B Preferred Stock (including dividend rate, voting rights and liquidation preference) are identical in all material respects to the terms of the Series A Preferred Stock for which they may be exchanged pursuant to the Exchange Offer, except that conversion of the Series B Preferred Stock will not be subject to the restriction in the terms of the Senior A Preferred Stock requiring that at least 250,000 shares thereof be converted at any one time. See "The Exchange Offer -- Terms of the Exchange" and "--Terms and Conditions of the Letter of Transmittal" and "Description of Series B Preferred Stock." DIVIDEND PAYMENTS.......... Holders of shares of Series A Preferred Stock accepted for exchange pursuant to the Exchange Offer will not receive dividends accrued from March 15, 1997 (the last regular dividend payment period with respect to the Series A Preferred Stock) on such Series A Preferred Stock. Holders whose shares of Series A Preferred Stock are accepted for exchange will be entitled to receive dividends on the Series B Preferred Stock, when and as declared by the Board of Directors, or any duly authorized committee thereof, accruing in the amount of $0.48875 per share (equal to the indicated annual dividend amount per share of Series A Preferred Stock divided by four) from March 15, 1997 to, but excluding, June 15, 1997 (the first Dividend Payment Date for the Series B Preferred Stock). 4 6 MINIMUM CONDITION.......... The Exchange Offer is not conditioned upon any minimum number of shares of Series A Preferred Stock being tendered for exchange. EXPIRATION DATE............ The Exchange Offer will expire at 12:00 midnight, New York City time, on May , 1997, unless extended (the "Expiration Date"). Any share of Series A Preferred Stock not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. EXCHANGE DATE.............. The date of acceptance for exchange of the Series A Preferred Stock will be the first business day following the Expiration Date. CONDITIONS OF THE EXCHANGE OFFER.................... The Company's obligation to consummate the Exchange Offer will be subject to certain conditions. See "The Exchange Offer -- Conditions to the Exchange Offer." The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition. WITHDRAWAL RIGHTS.......... The tender of Series A Preferred Stock pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. PROCEDURES FOR TENDERING NOTES...................... See "The Exchange Offer -- Tender Procedure." FEDERAL INCOME TAX CONSEQUENCES......... In the opinion of counsel, a holder of Series A Preferred Stock who exchanges Series A Preferred Stock for Series B Preferred Stock will not recognize any gain or loss for United States federal income tax purposes as a result of such exchange. See "Certain United States Federal Income Tax Consequences." With respect to dividends paid on the Series B Preferred Stock, holders of Series B Preferred Stock will be eligible for the dividends-received deduction available to domestic corporate holders to the extent they were eligible for the dividends-received deduction with respect to dividends paid on the Series A Preferred Stock. USE OF PROCEEDS............ There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. EXCHANGE AGENT AND INFORMATION AGENT........ Lehman Brothers Inc. ("Lehman Brothers") is serving as Exchange Agent and Information Agent in connection with the Exchange Offer. CONSEQUENCE OF FAILURE TO EXCHANGE.............. Holders of shares of Series A Preferred Stock who do not exchange their shares of Series A Preferred Stock for shares of Series B Preferred Stock pursuant to the Exchange Offer will continue to be subject to the restriction on conversion of such Series A Preferred Stock requiring the conversion of at least 250,000 shares thereof at any one time. MARKET FOR SERIES B PREFERRED STOCK.................... The Series B Preferred Stock will be a new issue of securities with no established trading market. The Company has been advised by Lehman Brothers that it intends to make a market in the Series B Preferred Stock but is not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Series B Preferred Stock. 5 7 TERMS OF THE SERIES B PREFERRED STOCK ISSUER..................... Lehman Brothers Holdings Inc. SECURITIES OFFERED......... Up to 13,000,000 shares of Cumulative Convertible Voting Preferred Stock, Series B, par value $1.00 per share (the "Series B Preferred Stock"). DIVIDENDS.................. The annual dividend rate per share of Series B Preferred Stock will be in an amount equal to $1.955 per share. Dividends on the shares of Series B Preferred Stock, when and as declared by the Board of Directors of the Company, will be cumulative and payable on March 15, June 15, September 15 and December 15 in each year, commencing on June 15, 1997. MANDATORY REDEMPTION....... None. OPTIONAL REDEMPTION........ Series B Preferred Stock is redeemable at the option of the Company on any Dividend Payment Date, in specified cumulative amounts increasing to 13,000,000 shares on and after June 15, 1998 (subject to reduction as described herein), upon at least 30 days' and not more than 45 days' notice to the holders thereof, at $39.10 per share plus accumulated and unpaid dividends (whether or not earned or declared) to the date fixed for redemption, provided that the Average Market Price of the Common Stock on the date such notice is given is greater than the Conversion Price. As of March 31, 1997, the Average Market Price would have been $33.60 and the Conversion Price would have been $123.0212380. Accordingly, at that date the Series B Preferred Stock would not have been redeemable at the option of the Company. See "Description of Series B Preferred Stock -- Redemption." CONVERSION................. Each share of Series B Preferred Stock will be convertible at the option of the holder at any time, unless previously redeemed, into a number of shares of Common Stock equal to $39.10 divided by the Conversion Price in effect at the time of such conversion. As of the date of this Prospectus, the Conversion Price, which is subject to adjustment under certain conditions, would have been $123.0212380. LIQUIDATION................ The liquidation preference of each share of Series B Preferred Stock will be equal to $39.10 plus an amount equal to accumulated and unpaid dividends (whether or not earned or declared) on such share of Series B Preferred Stock. 6 8 SELECTED FINANCIAL DATA The following table summarizes certain consolidated financial information based upon the Company's historical results included in the Company's audited financial statements for the twelve months ended November 30, 1996 and 1995, the eleven months ended November 30, 1994 and the twelve months ended December 31, 1993 and 1992. During 1993, the Company completed the sales of three businesses. As a result, the Company's 1993 historical results are not directly comparable with financial information of prior years presented. In addition, the Company's 1994 results presented below are for the eleven month period ended November 30, due to the Company's decision to change its year-end from December 31. For these reasons, the Company's 1994 results are not fully comparable with all periods presented below. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's 1996 Consolidated Financial Statements and notes thereto, incorporated by reference in the Company's Annual Report on Form 10-K for the year ended November 30, 1996, incorporated herein by reference.
HISTORICAL FINANCIAL DATA --------------------------------------------------------------------- TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS ELEVEN MONTHS ENDED ENDED ENDED ENDED DECEMBER 31, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, ------------------ 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------- ------- (IN MILLIONS, EXCEPT PER SHARE AND EMPLOYEE DATA) STATEMENT OF OPERATIONS Revenues: Principal transactions................ $ 1,579 $ 1,393 $ 1,345 $ 2,055 $ 1,767 Investment banking.................... 981 801 572 972 892 Commissions........................... 362 450 445 1,316 1,677 Interest and dividends................ 11,298 10,788 6,761 5,840 5,661 Other................................. 40 44 67 491 684 -------- -------- -------- ------- ------- Total revenues...................... 14,260 13,476 9,190 10,674 10,681 Interest expense...................... 10,816 10,405 6,452 5,368 5,185 -------- -------- -------- ------- ------- Net revenues........................ 3,444 3,071 2,738 5,306 5,496 -------- -------- -------- ------- ------- Non-interest expenses: Compensation and benefits............. 1,747 1,544 1,413 2,989 3,310 Other expenses........................ 976 1,061 1,084 1,603 2,188 Loss on sale of Shearson.............. 535 Severance and other charges........... 84 97 48 152 245 -------- -------- -------- ------- ------- Total non-interest expenses......... 2,807 2,702 2,545 5,279 5,743 -------- -------- -------- ------- ------- Income (loss) from continuing operations before taxes and cumulative effect of changes in accounting principles...... 637 369 193 27 (247) Provision for (benefit from) income taxes................................. 221 127 67 318 (54) -------- -------- -------- ------- ------- Income (loss) from continuing operations before cumulative effect of changes in accounting principles................. 416 242 126 (291) (193) Income (loss) from discontinued operations............................ 189 77 Cumulative effect of changes in accounting principles, net of taxes... (13) (7) -------- -------- -------- ------- ------- Net income (loss)....................... $ 416 $ 242 $ 113 $ (102) $ (123) ======== ======== ======== ======= ======= Net income (loss) applicable to common stock................................. $ 378 $ 200 $ 75 $ (150) $ (171) ======== ======== ======== ======= ======= STATEMENT OF FINANCIAL CONDITION (at period end) Total assets............................ $ 128,596 $ 115,303 $ 109,947 $80,474 $85,232 Total assets excluding matched book(a)............................... 96,256 79,069 72,457 54,428 58,866 Long-term debt(b)....................... 15,922 12,765 11,321 9,899 7,680 Total stockholders' equity.............. 3,874 3,698 3,395 2,052 2,361 Total capital(c)........................ 19,796 16,463 14,716 11,951 10,041
7 9
HISTORICAL FINANCIAL DATA --------------------------------------------------------------------- TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS ELEVEN MONTHS ENDED ENDED ENDED ENDED DECEMBER 31, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, ------------------ 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------- ------- (IN MILLIONS, EXCEPT PER SHARE AND EMPLOYEE DATA) PER SHARE DATA(d) Income (loss) from continuing operations before cumulative effect of change in accounting principle.................. $ 3.24 $ 1.76 $ 0.81 $ (3.20) Discontinued operations................. 1.79 Cumulative effect of change in accounting principle.................. (0.12) Net income (loss)....................... 3.24 1.76 0.69 (1.41) Dividends declared per common share..... 0.20 0.20 0.175 Book value per common share (at period end).................................. 28.84 25.67 24.35 OTHER DATA (at period end) Ratio of total assets to total stockholders' equity.................. 33.2x 31.2x 32.4x 39.2x 36.1x Ratio of total assets excluding matched book to total stockholders' equity(a)............................. 24.8x 21.4x 21.3x 26.5x 24.9x Return on common equity (annualized)(e)....................... 13.9% 7.5% 6.2% Ratio of earnings to combined fixed charges and preferred stock dividends(f).......................... 1.05 1.03 1.02 (g) (g) Employees............................... 7,556 7,771 8,512 9,300
As noted above, the Company's historical financial statements are not fully comparable, due to the sales of three significant businesses in 1993 and the eleven month reporting period presented for 1994. To facilitate an understanding of the Company' s results, included below is a table reflecting the results of the ongoing businesses of the Company (the "Lehman Businesses") for the twelve months ended November 30, 1996 and 1995, the eleven months ended November 30, 1994 and the years ended December 31, 1993 and 1992.
LEHMAN BUSINESSES ------------------------------------------------------------------- TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS ELEVEN MONTHS ENDED ENDED ENDED ENDED DECEMBER 31, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, ---------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------ ------ (UNAUDITED) (IN MILLIONS) STATEMENT OF OPERATIONS Revenues: Principal transactions.................. $ 1,579 $ 1,393 $ 1,345 $1,732 $1,192 Investment banking...................... 981 801 572 802 674 Commissions............................. 362 450 445 488 446 Interest and dividends.................. 11,298 10,788 6,761 5,679 5,404 Other................................... 40 44 67 79 65 ------- ------- ------ ------ ------ Total revenues........................ 14,260 13,476 9,190 8,780 7,781 Interest expense........................ 10,816 10,405 6,452 5,225 4,928 ------- ------- ------ ------ ------ Net revenues.......................... 3,444 3,071 2,738 3,555 2,853 ------- ------- ------ ------ ------ Non-interest expenses: Compensation and benefits............... 1,747 1,544 1,413 1,825 1,551 Other expenses.......................... 976 1,061 1,084 1,133 1,411 Severance and other charges............. 84 97 48 32 245 ------- ------- ------ ------ ------ Total non-interest expenses........... 2,807 2,702 2,545 2,990 3,207 ------- ------- ------ ------ ------ Income (loss) from continuing operations before taxes and cumulative effect of changes in accounting principles........ 637 369 193 565 (354) Provision for (benefit from) income taxes................................... 221 127 67 210 (109) ------- ------- ------ ------ ------ Income (loss) from continuing operations before cumulative effect of changes in accounting principles................... $ 416 $ 242 $ 126 $ 355 $ (245) ------- ------- ------ ------ ------
8 10
LEHMAN BUSINESSES ------------------------------------------------------------------- TWELVE MONTHS TWELVE MONTHS ELEVEN MONTHS ENDED ENDED ENDED DECEMBER 31, TWELVE MONTHS NOVEMBER 30, NOVEMBER 30, ---------------- ENDED 1995 1994 1993 1992 NOVEMBER 30, ------------- ------------- ------ ------ 1996 ------------- (UNAUDITED) (IN MILLIONS) FINANCIAL RATIOS (%):(e) Compensation and benefits/net revenues.............................. 50.7 50.8 51.6 51.4 54.4 Pretax operating margin................. 20.9 13.2 8.8 16.8 (3.8) Effective tax rate...................... 35 35 34 37 N/M Return on common equity (annualized).... 13.9 7.5 6.2
- --------------- (a) Matched book represents "securities purchased under agreements to resell" ("reverse repos") to the extent that such balance is less than "securities sold under agreements to repurchase" ("repos") as of the statement of financial condition date. Several nationally recognized rating agencies consider such reverse repos to be a proxy for matched book assets when evaluating the Company's capital strength and financial ratios. Such agencies consider matched book assets to have a low risk profile and exclude such amounts in the calculation of leverage (total assets divided by total stockholders' equity). Although there are other assets with similar risk characteristics on the Company's Statement of Financial Condition, the exclusion of reverse repos from total assets in this calculation reflects the fact that these assets are matched against liabilities of a similar nature, and therefore require minimal amounts of capital support. Accordingly, the Company believes the ratio of total assets excluding matched book to total stockholders' equity to be a more meaningful measure of the Company's leverage. (b) Long-term debt includes senior notes and subordinated indebtedness. (c) Total capital includes total stockholders' equity and long-term debt. (d) Earnings per common share data for the year ended 1993 includes Common Stock issued as of May 31, 1994, when all of the shares of Common Stock of the Company were distributed to American Express Company common shareholders of record on May 20, 1994. (e) Financial ratios exclude reserves and other charges and for the twelve months ended November 30, 1995 exclude the effect of the sale of Omnitel. (f) In computing the ratio of earnings to combined fixed charges and preferred stock dividends, "earnings" consist principally of interest expense and one-third of office rentals and one-fifth of equipment rentals, which are deemed to be representative of the interest factor. (g) Earnings were inadequate to cover fixed charges and preferred dividends and would have had to increase approximately $295 million in 1992 and $27 million in 1993 in order to cover the deficiencies for the respective periods. N/M Not Meaningful. 9 11 USE OF PROCEEDS There will be no cash proceeds to the Company from the Exchange Offer. THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER The principal purpose of the Exchange Offer is to permit holders of the Series A Preferred Stock to convert shares of Series B Preferred Stock into shares of Common Stock without requiring that at least 250,000 shares of Series B Preferred Stock be converted at any one time. TERMS OF THE EXCHANGE The Company hereby offers to exchange, subject to the conditions set forth herein and in the Letter of Transmittal accompanying this Prospectus, one share of Series B Preferred Stock for each share of Series A Preferred Stock. The terms of the Series B Preferred Stock are identical in all material respects to the rights of the Series A Preferred Stock for which it may be exchanged pursuant to this Exchange Offer, except that the Series B Preferred Stock is not subject to any restriction requiring that at least 250,000 shares of Series B Preferred Stock be converted at any one time. See "Description of Series B Preferred Stock." The Exchange Offer is not conditioned upon any minimum number of shares of Series B Preferred Stock being tendered for exchange. Tendering holders of the Series A Preferred Stock will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of the Series A Preferred Stock pursuant to the Exchange Offer. EXPIRATION DATE; EXTENSION; AMENDMENTS The Exchange Offer will expire on the Expiration Date. The term "Expiration Date" means 12:00 midnight, New York City time, on May , 1997, unless the Company in its sole discretion extends the period during which the Exchange Offer is open, in which event the term "Expiration Date" shall mean the latest time and date on which the Exchange Offer, as so extended by the Company, shall expire. The Company reserves the right to extend the Exchange Offer at any time and from time to time by giving oral or written notice to Lehman Brothers (the "Exchange Agent") and making a public announcement thereof. There can be no assurance that the Company will exercise its right to extend the Exchange Offer. During any extension of the Exchange Offer, all Series A Preferred Stock previously tendered and not withdrawn pursuant to the Exchange Offer will remain subject to the Exchange Offer subject to the right of a tendering holder to withdraw its shares of Series A Preferred Stock. See "-- Withdrawal Rights." The Company also expressly reserves the right subject to applicable law, (i) to delay acceptance for exchange of any shares of Series A Preferred Stock or terminate the Exchange Offer and not accept for exchange any shares of Series A Preferred Stock and promptly return all such shares to the tendering holders thereof in the event that any of the conditions specified in "-- Conditions of the Exchange Offer" below are not satisfied or waived by the Company or to comply in whole or in part with applicable law, by giving oral or written notice of such delay or termination to the Exchange Agent, (ii) to waive any condition to the Exchange Offer and accept all shares of Series A Preferred Stock previously tendered pursuant thereto, or (iii) to amend the Exchange Offer in any respect. If the Exchange Offer is so amended, the term "Exchange Offer" shall mean the Exchange Offer as so amended. The reservation by the Company of the right to delay acceptance for exchange of shares of Series A Preferred Stock is subject to the provisions of Rule 13e-4 and Rule 14e-1(c) under the Exchange Act, which require that the Company pay the consideration offered or return the shares of Series A Preferred Stock deposited by or on behalf of holders thereof promptly after the termination or withdrawal of the Exchange Offer. 10 12 Any extension, delay, termination or amendment of the Exchange Offer will be followed as promptly as practicable by a public announcement thereof. Without limiting the manner in which the Company may choose to make a public announcement of any extension, delay, termination or amendment of the Exchange Offer, the Company will have no obligation to publish, advertise or otherwise communicate any such public announcement, other than by issuing a release to the Dow Jones News Service, except in the case of an announcement of an extension of the Exchange Offer, in which case the Company will have no obligation to publish, advertise or otherwise communicate such announcement other than by issuing a notice of such extension by press release or other public announcement, which notice will be issued no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled expiration time of the Exchange Offer. TENDER PROCEDURE The tender to the Company of Series A Preferred Stock by a holder thereof pursuant to one of the procedures set forth below and the acceptance thereof by the Company will constitute a binding agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. This Prospectus, together with the Letter of Transmittal, will first be sent out on or about April , 1997, to all holders of Series A Preferred Stock known to the Company and the Exchange Agent. A holder of Series A Preferred Stock may tender the same by properly completing and signing the Letter of Transmittal or a facsimile thereof (all references in this Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates representing the shares of Series A Preferred Stock being tendered and any other documents required by the Letter of Transmittal, to the Exchange Agent at its address set forth on the Letter of Transmittal on or prior to the Expiration Date (or complying with the procedure for book entry transfer described below). If tendered shares of Series A Preferred Stock are registered in the name of the signer of the Letter of Transmittal and the Series B Preferred Stock to be issued in exchange therefor are to be issued (and any untendered shares of Series A Preferred Stock are to be reissued) in the name of the registered holder (which term, for the purposes described herein, shall include any participant in The Depository Trust Company (also referred to as a "book-entry transfer facility") whose name appears on a security listing as the owner of the shares of Series A Preferred Stock), the signature of such signer need not be guaranteed. In any other case, the tendered shares of Series A Preferred Stock must be endorsed or accompanied by written instruments of transfer in form satisfactory to the Company and duly executed by the registered holder, and the signature on the endorsement or instrument of transfer must be guaranteed by a commercial bank or trust company located or having an office, branch, agency or correspondent in the United States, or by a member firm of a registered national securities exchange or of the NASD (any of the foregoing hereinafter referred to as an "Eligible Institution"). If the Series B Preferred Stock and/or Series A Preferred Stock not exchanged are to be delivered to an address other than that of the registered holder appearing on the stock register for the Series A Preferred Stock, the signature in the Letter of Transmittal must be guaranteed by an Eligible Institution. THE METHOD OF DELIVERY OF THE SERIES A PREFERRED STOCK AND ALL OTHER DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR SERIES A PREFERRED STOCK SHOULD BE SENT TO THE COMPANY. The Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the Series A Preferred Stock at the book-entry transfer facility for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in the book-entry transfer facility's system may make book-entry delivery of the Series A Preferred Stock by causing such book-entry transfer facility to transfer such Series A Preferred Stock into the Exchange Agent's account with respect to the Series A Preferred Stock in accordance with the book-entry transfer facility's procedures for such transfer. Although delivery of Series A Preferred Stock may be effected through book- 11 13 entry transfer into the Exchange Agent's accounts at the book-entry transfer facility, an appropriate Letter of Transmittal with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth on the Letter of Transmittal on or prior to the Expiration Date. A tender will be deemed to have been received as of the date when the tendering holder's properly completed and duly signed Letter of Transmittal accompanied by the Series A Preferred Stock (or a confirmation of book-entry transfer of such Series A Preferred Stock into the Exchange Agent's account at the book-entry transfer facility) is received by the Exchange Agent. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of shares of Series A Preferred Stock will be determined by the Company, whose determination will be final and binding. The Company reserves the absolute right to reject any shares of Series A Preferred Stock not properly tendered or the acceptance for exchange of which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any defect or irregularity in the tender of any shares of Series A Preferred Stock. Unless waived, any defects or irregularities in connection with tenders of shares of Series A Preferred Stock for exchange must be cured within such reasonable period of time as the Company will determine. None of the Company, the Exchange Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL The Letter of Transmittal contains, among other things, the following terms and conditions, which are part of the Exchange Offer. The party tendering Series A Preferred Stock for exchange (the "Transferor") exchanges, assigns and transfers the Series A Preferred Stock to the Company and irrevocably constitutes and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to cause the Series A Preferred Stock to be assigned, transferred and exchanged. The Transferor represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Series A Preferred Stock and to acquire Series B Preferred Stock issuable upon the exchange of such tendered Series A Preferred Stock, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Series A Preferred Stock, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The Transferor also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of tendered Series A Preferred Stock or transfer ownership of such Series A Preferred Stock on the account books maintained by a book-entry transfer facility. All authority conferred by the Transferor will survive the death or incapacity of the Transferor and every obligation of the Transferor will be binding upon the heirs, legal representatives, successors, assigns, executors and administrators of such Transferor. WITHDRAWAL RIGHTS Tenders of Series A Preferred Stock pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. To be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent at its address set forth on the Letter of Transmittal, and with respect to a facsimile transmission, must be confirmed by telephone and an original delivered by guaranteed overnight delivery. Any such notice of withdrawal must specify the person named in the Letter of Transmittal as having tendered Series A Preferred Stock to be withdrawn, the certificate numbers of the shares of Series A Preferred Stock to be withdrawn, a statement that such holder is withdrawing his election to have such shares of Series A Preferred Stock exchanged, and the name of the registered holder of such shares of Series A Preferred Stock, and must be signed by the holder in the same manner as the original signature on the Letter of Transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to the Company that the person withdrawing the tender has succeeded to the beneficial ownership of the shares 12 14 of Series A Preferred Stock being withdrawn. The Exchange Agent will return the properly withdrawn shares of Series A Preferred Stock promptly following receipt of notice of withdrawal. If shares of Series A Preferred Stock have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn shares of Series A Preferred Stock or otherwise comply with the book-entry transfer procedure. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Issuer, and such determination will be final and binding on all parties. Any shares of Series A Preferred Stock so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any shares of Series A Preferred Stock which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of shares of Series A Preferred Stock tendered by book-entry transfer into the Exchange Agent's account at the book-entry transfer facility pursuant to the book-entry transfer procedures described above, such shares will be credited to an account with such book-entry transfer facility specified by the holder) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn shares of Series A Preferred Stock may be retendered by following one of the procedures described under "-- Tender Procedure" above, at any time on or prior to the Expiration Date. ACCEPTANCE OF SERIES A PREFERRED STOCK FOR EXCHANGE; DELIVERY OF SERIES B PREFERRED STOCK Upon the satisfaction or waiver of all the terms of the Exchange Offer, the acceptance for exchange of Series A Preferred Stock validly tendered and not withdrawn and issuance of the Series B Preferred Stock will be made on the Exchange Date. The Exchange Date means the first business day following the Expiration Date. For the purposes of the Exchange Offer, the Company shall be deemed to have accepted for exchange validly tendered shares of Series A Preferred Stock when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Series A Preferred Stock for the purposes of receiving Series B Preferred Stock from the Company and causing the Series A Preferred Stock to be assigned, transferred and exchanged. Upon the terms of the Exchange Offer, delivery of Series B Preferred Stock to be issued in exchange for accepted Series A Preferred Stock will be made by the Exchange Agent promptly after acceptance of the tendered Series A Preferred Stock. Tendered Series A Preferred Stock not accepted for exchange by the Company will be returned without expense to the tendering holders promptly following the Expiration Date. ACCRUED DIVIDENDS Holders of shares of Series A Preferred Stock accepted for exchange pursuant to The Exchange Offer will not receive dividends accrued from March 15, 1997 (the last regular dividend payment period with respect to the Series A Preferred Stock) on such Series A Preferred Stock. Holders whose shares of Series A Preferred Stock are accepted for exchange will be entitled to receive dividends on the Series B Preferred Stock, when and as declared by the Board of Directors accruing in the amount of $.48875 per share (equal to the indicated annual dividend amount per share of Series A Preferred Stock divided by four) from March 15, 1997 to, but excluding June 15, 1997 (the first Dividend Payment Date for the Series B Preferred Stock). Dividends on shares of Series A Preferred Stock not exchanged in the Exchange Offer will continue to accrue and be payable, when and as declared by the Board of Directors. CONDITIONS OF THE EXCHANGE OFFER Notwithstanding any other provision of the Exchange Offer, the Company will not be required to accept for exchange, or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) (relating to the Company's obligation to exchange and issue shares of Series B Preferred Stock for or return tendered shares of Series A Preferred Stock promptly after termination of the Exchange Offer), exchange and issue shares of Series B Preferred Stock for any shares of Series A Preferred Stock tendered and may postpone the 13 15 acceptance for exchange of or, subject to the restriction set forth above, the exchange and issuance of, shares of Series B Preferred Stock for shares of Series A Preferred Stock tendered and to be exchanged and may terminate or amend the Exchange Offer, if at any time prior to the time of acceptance for exchange of, or exchange and issuance of shares of Series B Preferred Stock for, any such shares of Series A Preferred Stock (whether or not any other shares of Series A Preferred Stock have theretofore been accepted for exchange or shares of Series B Preferred Stock have been issued in respect thereof pursuant to the Exchange Offer), any of the following events shall occur: (a) any change (or any condition, event or development involving a prospective change) shall have occurred or been threatened in the business, properties, assets, liabilities, capitalization, stockholders' equity, financial condition, operations, results of operations or prospects of the Company or any of its subsidiaries, or in the general economic or financial market conditions in the United States or abroad, which is or may be materially adverse to the Company and its subsidiaries or its stockholders or to the value of the Series A Preferred Stock or there shall have been a significant decrease in the market prices of or trading in the Series A Preferred Stock, or the Company shall have become aware of any fact or occurrence which is or may be materially adverse with respect to the value of the Series A Preferred Stock or the Exchange Offer's contemplated benefits to the Company; or (b) there shall have occurred (1) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or the over-the-counter market, (2) a declaration of a banking moratorium or any suspension of payments in respect of banks in the Untied States, (3) declaration of a national emergency or a commencement of a war, armed hostilities or other national or international calamity directly or indirectly involving the United States, (4) any limitation (whether or not mandatory) by any governmental or regulatory authority on, or any other event which might affect, the nature or extension of credit by banks or other financial institutions, (5) any significant adverse change in the United States securities or financial markets, or (6) in the case of any of the foregoing existing at the time of the commencement of the Exchange Offer a material acceleration, escalation or worsening thereof; or (c) there shall have been any action taken or threatened, or any statute, rule, regulation, judgment, order or injunction proposed, sought, promulgated, enacted, entered, enforced or deemed applicable to the Exchange Offer by any local, state, federal or foreign government or governmental authority or by any court, domestic or foreign, that might, directly or indirectly, (1) make the acceptance for exchange or issuance of shares of Series B Preferred Stock for some or all of the shares of Series A Preferred Stock illegal or otherwise restrict or prohibit consummation of the Exchange Offer, (2) result in a delay in, or restrict the ability of the Company, or render the Company unable, to accept for exchange some or all of the shares of Series A Preferred Stock or to issue some or all of the shares of Series B Preferred Stock in exchange thereof, (3) otherwise adversely affect the Company or (4) result in a material limitation in the benefits expected to be derived by the Company as a result of the transactions contemplated by the Exchange Offer; or (d) there shall be threatened, instituted or pending any action, proceeding or claim by or before any court or governmental, administrative or regulatory agency or authority or any other person or tribunal, domestic or foreign, challenging the making of the Exchange Offer, the acquisition by the Company of any shares of Series A Preferred Stock, or seeking to obtain any material damages as a result thereof, or otherwise adversely affecting the Company or the value of the Series A Preferred Stock. which makes it inadvisable to proceed with the Exchange Offer or such acceptance for exchange of shares of Series A Preferred Stock or the issuance of the shares of Series B Preferred Stock in exchange therefor. All the foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to such condition and may be waived by the Company, in whole or in part, at any time and from time to time, in the sole discretion of the Company. The failure by the Company at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, and each such right will be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by the Company concerning the foregoing conditions will be final and binding. 14 16 If any of the foregoing conditions shall not be satisfied (or, with respect to the above enumerated events, shall have occurred), the Company may, subject to applicable law, (i) terminate the Exchange Offer and return all shares of Series A Preferred Stock tendered pursuant to the Exchange Offer to tendering security holders; (ii) extend the Exchange Offer and retain all tendered shares of Series A Preferred Stock until the Expiration Time for the extended Exchange Offer; or (iii) waive the unsatisfied conditions with respect to the Exchange Offer and accept all shares of Series A Preferred Stock tendered pursuant to the Exchange Offer. DEALER MANAGER Lehman Brothers Inc., the Company's wholly-owned subsidiary ("Lehman Brothers"), is acting as dealer manager (the "Dealer Manager") for the Exchange Offer. The Company will pay the Dealer Manager predetermined compensation for its services in connection with the Exchange Offer and to reimburse the Dealer Manager for all of its reasonable out-of-pocket expenses. The Dealer Manager will use its best efforts to solicit the exchange of shares of Series A Preferred Stock pursuant to the Exchange Offer. EXCHANGE AGENT AND INFORMATION AGENT Lehman Brothers has been appointed as the Exchange Agent and Information Agent for the Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent at its address set forth on the Letter of Transmittal. DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER OTHER THAN THE ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID DELIVERY. SOLICITATION OF TENDERS; EXPENSES The Company has retained Lehman Brothers Inc., its wholly-owned subsidiary, to act as Dealer Manager in connection with the Exchange Offer and will not otherwise make any payments to brokers, dealers or others for soliciting acceptances of the Exchange Offer. The Company will, however, pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for reasonable out-of-pocket expenses in connection therewith. The Company will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this Prospectus and related documents to the beneficial owners of the Series A Preferred Stock and in handling or forwarding tenders for their customers. No person has been authorized to give any information or to make any representation in connection with the Exchange Offer other than those contained in this Prospectus. If given or made, such information or representations should not be relied upon as having been authorized by the Company or the Dealer-Manager. Neither the delivery of this Prospectus nor any exchange made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the Company since the respective dates as of which information is given herein. The Exchange Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Series A Preferred Stock in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. However, the Company may, at its discretion, take such action as it may deem necessary to make the Exchange Offer in any such jurisdiction and extend the Exchange Offer to holder of Series A Preferred Stock in such jurisdiction. In any jurisdiction in which the securities laws or blue sky laws of which require the Exchange Offer to be made by a licensed broker or dealer, the Exchange Offer is being made on behalf of the Company by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. 15 17 TRANSFER TAXES Holders who tender their shares of Series A Preferred Stock for exchange will not be obligated to pay any transfer taxes in connection therewith, except that holders who instruct the Company to register shares of Series B Preferred Stock in the name of, or request that shares of Series A Preferred Stock not tendered or not accepted in the Exchange Offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. CONSEQUENCES OF FAILURE TO EXCHANGE Holders of shares of Series A Preferred Stock who do not exchange their shares of Series A Preferred Stock for shares of Series B Preferred Stock pursuant to the Exchange Offer will continue to be subject to the restriction on conversion of such Series A Preferred Stock requiring the conversion of at least 250,000 shares thereof at any one time. OTHER Participation in the Exchange Offer is voluntary, and holders of Series A Preferred Stock should carefully consider whether to participate. Holders of Series A Preferred Stock are urged to consult their financial and tax advisors in making their own decisions on which action to take. Holders of shares of Series A Preferred Stock who do not tender their shares of Series A Preferred Stock in the Exchange Offer will continue to hold such shares of Series A Preferred Stock and will be entitled to all the rights, and limitations applicable thereto. All untendered shares of Series A Preferred Stock will continue to be subject to the restrictions on conversion as described herein. To the extent that shares of Series A Preferred Stock are tendered and accepted in the Exchange Offer, the trading market for untendered shares of Series A Preferred Stock could be adversely affected. The Company may in the future seek to acquire untendered shares of Series A Preferred Stock in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. The Company has no present plan to acquire any shares of Series A Preferred Stock which are not tendered in the Exchange Offer. MARKET AND TRADING INFORMATION There is no established trading market for the Series A Preferred Stock. The Series B Preferred Stock will be a new issue of securities with no established trading market. The Company has been advised by Lehman Brothers that it intends to make a market in the Series B Preferred Stock but is not obligated to do so and may discontinue marketmaking at any time without notice. No assurance can be given as to the liquidity of the trading market for the Series B Preferred Stock. DESCRIPTION OF SERIES B PREFERRED STOCK GENERAL The following description of the Series B Preferred Stock set forth herein does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the Company's Restated Certificate of Incorporation (the "Restated Certificate of Incorporation") filed as an exhibit to the Registration Statement, and the Certificate of Designations relating to the Series B Preferred Stock (the "Certificate of Designation"), the form of which is filed as an exhibit to the Registration Statement and which will be filed with the Secretary of State of the State of Delaware prior to the issuance of the Series B Preferred Stock. Subject to the Restated Certificate of Incorporation of the Company and to any limitations contained in the outstanding preferred stock, the Company may issue additional classes or series of preferred stock, at any time or from time to time, with such powers, preferences and relative, participating, optional or other special 16 18 rights and qualifications, limitations or restrictions thereof, as the Board of Directors or any duly authorized committee thereof shall determine, all without further action of the stockholders, including holders of then outstanding preferred stock, of the Company. The Restated Certificate of Incorporation authorizes the issuance of 38,000,000 shares of preferred stock, $1.00 par value per share. As of November 30, 1996, there were 13,000,000 shares of Series A Preferred Stock and 1,000 shares of Redeemable Voting Preferred Stock (the "Redeemable Preferred Stock") issued and outstanding. Series A Preferred Stock. The terms of the Series A Preferred Stock are identical in all material respects to the terms of the Series B Preferred Stock described herein, except that the terms of the Series A Preferred Stock require the conversion of at least 250,000 shares thereof at any one time. Redeemable Preferred Stock. As of the date of this Prospectus, American Express Company ("AMEX") and Nippon Life Insurance Company ("Nippon Life") together own all of the issued and outstanding shares of Redeemable Preferred Stock. The shares of Redeemable Preferred Stock are entitled to receive preferential dividends, as and when declared by the Board of Directors out of funds legally available therefor, on a cumulative basis. For each dividend period following May 31, 1994, the holders of Redeemable Preferred Stock are entitled to receive dividends in an amount equal to, in the aggregate, 50% of the amount, if any, by which the Company's net income for the applicable dividend period exceeds $400 million, up to a maximum of $50 million for any such period (the "Dividend Formula"). The liquidation preference per share of the Redeemable Preferred Stock is $1.00 plus accumulated and unpaid dividends and accrued interest, if any, thereon at a specified rate. Subject to funds being legally available therefor, the Company is required to redeem all of the Redeemable Preferred Stock on the final dividend payment date therefor, or as soon as practicable thereafter when funds become legally available, at a price per share equal to the liquidation preference referred to above. In addition, if a Designated Event (as defined in the Restated Certificate of Incorporation) occurs, the holders of the Redeemable Preferred Stock have the right to require the Company to redeem, out of funds legally available therefor, all of the Redeemable Preferred Stock for an aggregate redemption price equal to $250 million if such Designated Event takes place prior to November 30, 1997, declining $50 million per year in each of the next five years thereafter. Holders of Redeemable Preferred Stock are entitled to vote, together with the holders of the Company's Common Stock as one class, on all matters to be voted on by stockholders of the Company. Notwithstanding the foregoing, AMEX has agreed that so long as it or any of its subsidiaries holds any shares of the Redeemable Preferred Stock, it will vote such shares in the same proportion as the votes cast by the holders of shares of the Common Stock on matters to be voted on by stockholders of the Company generally. Each share of Redeemable Preferred Stock is entitled to 1,059 votes. In addition, if the equivalent of six quarterly dividends (whether or not consecutive) to which the holders of the Redeemable Preferred Stock are entitled in accordance with the Dividend Formula, or to which the holders of any Parity Preferred Stock are entitled pursuant to the terms of such Parity Preferred Stock, are in arrears, then the authorized number of directors of the Company will be increased by two and the holders of the Redeemable Preferred Stock will have the right (voting as a class with the holders of any other Parity Preferred Stock of the Company upon which like voting rights have been conferred and are exercisable) to elect such two directors until such time as all accumulated dividends have been paid. In addition, the holders of Redeemable Preferred Stock have voting rights in certain other circumstances. DIVIDENDS The annual dividend rate per share of Series B Preferred Stock will be an amount equal to $1.955 per share. Dividends on the shares of Series B Preferred Stock, when and as declared by the Board of Directors, out of funds legally available therefor, will be cumulative and will be payable quarterly in cash on March 15, June 15, September 15 and December 15 of each year (or, if any such day is not a Business Day, then on the next succeeding Business Day) in each year (the "Dividend Payment Dates"), commencing on June 15, 1997. 17 19 The amount of dividends payable on each share of Series B Preferred Stock for each full quarterly dividend period will be computed by dividing by four such annual rate. Dividends payable on the Series B Preferred Stock for any period less than a full quarterly period will be computed on the basis of a 360-day year consisting of twelve 30-day months for the actual number of days involved. Dividends with respect to any share of Series B Preferred Stock will accumulate from March 15, 1997. The term "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. No cash dividends will be declared and set apart for payment on any capital stock ranking on a par with the Series B Preferred Stock in the payment of dividends unless there will likewise be or have been declared and set apart for payment on all shares of Series B Preferred Stock at the time outstanding full cumulative dividends for all quarterly dividend periods ending on or before the dividend payment date for such other stock. If and so long as any full cumulative dividends payable on the shares of Series B Preferred Stock in respect of all prior dividend periods will not have been paid or set apart for payment, the Company will not pay any dividends or make any distributions of assets on or redeem, purchase or otherwise acquire for consideration shares of capital stock of the Company ranking junior to or on a par with the Series B Preferred Stock in payment of dividends. Dividends on the Series B Preferred Stock are payable to the holders of record thereof as they appear on the stock register of the Company on such record date, not exceeding 40 days preceding the payment date thereof, as will be fixed by the Board of Directors or by a duly authorized committee thereof. Dividends on account of arrears for any past dividend periods may be declared and paid at any time, without reference to any Dividend Payment Date, to holders of record on such date, not exceeding 40 days preceding the payment date thereof, as may be fixed by the Board of Directors or by a duly authorized committee thereof. Dividends will be paid to each holder of record in United States dollars by check mailed to such holders at their respective addresses appearing on the books of the Company. REDEMPTION The Company may at its option redeem outstanding shares of Series B Preferred Stock on any Dividend Payment Date in the specified amounts and during the periods set forth below (subject, in each case, to reduction by the number of shares of Series B Common Stock converted into Common Stock or converted or exchanged for common stock of AMEX or purchased by the Company pursuant to the 1990 Agreement by and between AMEX and Nippon Life upon at least 30 days' and not more than 45 days' written notice to the holders thereof, at a redemption price equal to $39.10 per share plus accumulated and unpaid dividends (whether or not earned or declared) to the date fixed for redemption,
REDEMPTION PERIOD NUMBER OF SHARES ------------------------------------------------------------- ---------------- Date of Original Issuance to and including June 15, 1997..... 7,800,000 June 16, 1997 to and including June 15, 1998................. 10,400,000 After June 15, 1998.......................................... 13,000,000
provided, however, that shares of Series B Preferred Stock are not redeemable by the Company unless (i) there is Common Stock outstanding on the dates upon which notice of redemption is first given and such redemption is effected, and (ii) the Average Market Price of the Common Stock on the date such notice is given is greater than the Conversion Price. As of March 31, 1997, the Average Market Price would have been $33.60 and the Conversion Price would have been $123.0212380. Accordingly, at that date the Series B Preferred Stock would not have been redeemable at the option of the Company. See "-- Conversion". As used herein, (i) "1990 Agreement" means the 1990 Agreement, dated as of June 12, 1990, by and between AMEX and Nippon Life, as amended by the 1994 Agreement, dated April 28, 1994, by and among AMEX, Nippon Life and the Corporation, as further amended by the Agreement, dated January 22, 1997, between Nippon Life and AMEX and (ii) "Average Market Price" means the average of the daily closing prices for the 10 consecutive trading days selected by the Company commencing no less than 20 days nor more than 30 trading days before the day in question. The closing price for each day will be the last reported sales price regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid 18 20 and asked prices regular way, in either case on the NYSE or, if such security is not listed or admitted to trading on the NYSE, on the principal national securities exchange on which such security is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the Nasdaq National Market or, if such security is not listed or admitted to trading on any national securities exchange or quoted on National Market, the average of the closing bid and asked prices in the over-the-counter-market as furnished by any NYSE member firm selected from time to time by the issuer for that purpose. For the purposes of this definition, the term "trading day" shall mean each Monday, Tuesday, Wednesday, Thursday or Friday, other than any day on which securities are not traded on such exchange or in such market. The Company is required to give notice of any proposed redemption of shares of Series B Preferred Stock by mailing a copy of such notice to holders of record of shares of Series B Preferred Stock to be redeemed at their respective addresses appearing on the books of the Company. Each such notice will specify the shares called for redemption, the redemption price and the price at which and the date on which the shares called for redemption will, upon presentation and surrender of the certificates of stock evidencing such shares, be redeemed and the redemption price therefor paid. From and after the date fixed in any such notice as the date of redemption of shares of Series B Preferred Stock, unless default shall be made by the Company in providing monies at the time and place specified for the payment of the redemption price pursuant to said notice, all dividends on the Series B Preferred Stock thereby called for redemption will cease to accrue and all rights of the holders thereof as stockholders of the Company, except the right to receive the redemption price, will cease and terminate. CONVERSION Each share of Series B Preferred Stock will be convertible, in whole or in part, at the option of the holder at any time, into a number of shares of Common Stock (calculated as to each conversion to the nearest 1/100 of a share) equal to $39.10 divided by the Conversion Price in effect at the time of such conversion. The Conversion Price is currently $123.0212380 per share. The Conversion Price will be adjusted in certain instances as described below. To convert shares of Series B Preferred Stock into Common Stock, the registered holder of such shares of Series B Preferred Stock must surrender at the office of the Transfer Agent, or at such other office or offices, if any, as the Board of Directors may designate, the certificate or certificates therefor, duly endorsed or assigned to the Company or in blank, and give written notice to the Company at such office that it elects to convert such shares. A payment or adjustment will not be made by the Company upon any conversion on account of any dividends accrued on the shares of Series B Preferred Stock surrendered for conversion or on account of any dividends on the Common Stock issued upon conversion. Shares of Series B Preferred Stock will be deemed to have been converted immediately prior to the close of business on the day of the surrender of such shares for conversion, and the person or persons entitled to receive the Common Stock issuable upon such conversion will be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Company will issue and deliver at such office a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with payment in lieu of any fraction of a share, to the person or persons entitled to receive the same. In case shares of Series B Preferred Stock are called for redemption, the right to convert such shares will terminate at the close of business on the date fixed for redemption, unless default shall be made in payment of the redemption price. The Conversion Price for shares of Series B Preferred Stock may be subject to adjustment in certain events, including (i) dividends and other distributions payable in Common Stock on any class of capital stock of the Company, (ii) the issuance to all holders of Common Stock of rights or warrants entitling them to subscribe for or purchase Common Stock at less than, depending on the circumstances, the Average Market Price (as defined under "-- Redemption" or Fair Market Value (as defined below), (iii) subdivisions, combinations and reclassifications of the Common Stock, (iv) distributions to all holders of Common Stock of evidences of indebtedness of the Company or assets (including securities, but excluding (a) any rights or 19 21 warrants referred to in (ii) above, (ii) any dividend or distribution paid in cash or other property out of the Adjusted Retained Earnings (defined below) of the Company and (iii) any dividend or distribution referred to (i) above) and (v) a consolidation or merger to which the Company is a party or the sale or transfer of all or substantially all of the assets of the Company. In addition to the foregoing adjustments, the Company is permitted to make such reductions in the Conversion Price for the Series B Preferred Stock as it considers to be advisable in order that any event treated for United States federal income tax purposes as a dividend of stock or stock rights will not be taxable to the recipients. As used herein, (i) the term "Fair Market Value" per share of Common Stock on any date means the fair market value thereof on the date in question, determined (A) if Nippon Life and its affiliates then own a majority of the shares of Series B Preferred Stock then outstanding (i) jointly by the Company and Nippon Life or (ii) if the Company and Nippon Life cannot so agree, by the Board of Directors of the Company reasonably determined in good faith or (B) if Nippon Life and its affiliates do not then own a majority of the shares of Series B Preferred Stock then outstanding, by the Board of Directors of the Company reasonably determined in good faith and (ii) the term "Adjusted Retained Earnings" means the retained earnings of the Company as of the date of the relevant dividend or distribution plus $500,000,000 plus any dividend paid after August 10, 1990 (which has been debited against retained earnings) on any preferred stock of the Company outstanding on August 10, 1990. The Company will pay any and all stamp or other similar taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of shares of Series B Preferred Stock. The Company will not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of Series B Preferred Stock so converted were registered, and no such issue or delivery will be made unless and until the person requesting such issue has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid. In any case in which an adjustment described in this "Conversion" section will become effective immediately after a record date for an event, the Company may defer until the occurrence of such event (i) issuing to the holder of any shares of Series B Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the number of shares of Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such holder any amount in cash in lieu of a fractional share of Common Stock; provided, that, upon the request of such holder, the Company will deliver to such holder a due bill or other appropriate instrument evidencing such holder's rights to receive such additional shares of Common Stock, and such cash, upon the occurrence of the event requiring such adjustment. VOTING RIGHTS The holders of Series B Preferred Stock will have the following voting rights subject to the terms and conditions described below. The holders of Series B Preferred Stock will have voting rights equal to the voting rights of holders of shares of Common Stock and the shares of Series B Preferred Stock will vote together with the shares of Common Stock (and of any other class or series which may similarly be entitled to vote with the shares of Common Stock) as a single class upon all matters upon which holders of Common Stock are entitled to vote. So long as any shares of Series B Preferred Stock remain outstanding, the Company will not, either directly or indirectly or through merger or consolidation with any other corporation, without the affirmative vote at a meeting or the written consent with or without a meeting of the holders of at least a majority of the shares of Series B Preferred Stock then outstanding, amend, alter or repeal any of the provisions of the Restated Certificate of Incorporation, or authorize any reclassification of the Series B Preferred Stock, so as in any such case to affect adversely the preferences, special rights or powers of the Series B Preferred Stock, or authorize any capital stock of the Company ranking, either as to payment of dividends or upon liquidation, dissolution or winding up of the Company, prior to the Series B Preferred Stock. 20 22 In exercising the voting rights set forth herein or when otherwise granted voting rights by operation of law, each share of Series B Preferred Stock will be entitled to a number of votes equal to the quotient obtained by dividing $39.10 by the Conversion Price in effect at the time. No consent of holders of the Series B Preferred Stock will be required for (i) the creation of any indebtedness of any kind of the Company or (ii) the authorization or issuance of any class of capital stock of the Company ranking junior or equal to the Series B Preferred Stock in payment of dividends or upon liquidation, dissolution or winding up of the Company. LIQUIDATION In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, before any distribution of the assets of the Company to holders of Common Stock or any other capital stock of the Company ranking junior to the Series B Preferred Stock upon liquidation, dissolution or winding up of the Company, the holders of the Series B Preferred Stock will be entitled to receive out of the assets of the Company available for distribution to its stockholders, whether from capital, surplus or earnings, an amount per share of Series B Preferred Stock equal to $39.10 plus an amount equal to accumulated and unpaid dividends (whether or not earned or declared) on such share of Series B Preferred Stock to the date of final distribution. If, upon any liquidation, dissolution or winding up of the Company, the amounts payable with respect to the Series B Preferred Stock or any capital stock ranking on a par with the Series B Preferred Stock are not paid in full, then such holders will share ratably in any such distribution of assets, or proceeds thereof, in proportion to the full respective preferential amounts to which they are entitled. Neither a consolidation nor a merger of the Company with one or more other corporations, nor a sale or a transfer of all or substantially all of the assets of the Company, will be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Company. SINKING FUND The Series B Preferred Stock will not be subject to any right of mandatory payment or prepayment (except for liquidation, dissolution or winding up of the Company) or to any sinking fund. TRANSFER AGENT Bank of Boston, c/o Boston Equiserve is the transfer agent for the Series B Preferred Stock. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES In the opinion of Simpson Thacher & Bartlett, special tax counsel to the Company, a holder of Series A Preferred Stock who exchanges such Series A Preferred Stock for Series B Preferred Stock in the Exchange Offer will not recognize any gain or loss for United States federal income tax purposes as a result of such exchange. Moreover, the holding period of Series B Preferred Stock will include the holding period of the Series A Preferred Stock and the basis of the Series B Preferred Stock will be the same as the basis of the Series A preferred stock immediately before the Exchange Offer. With respect to dividends paid on the Series B Preferred Stock, holders of Series B Preferred Stock will be eligible for the dividends-received deduction available to domestic corporate holders to the extent they were eligible for the dividends-received deduction with respect to dividends paid on the Series A Preferred Stock. LEGAL OPINIONS The validity of the shares of Series B Preferred Stock to be issued on the Exchange Offer will be passed upon for the Company by Jennifer Marre, Esq., Vice President and Associate General Counsel of the Company. 21 23 INDEPENDENT ACCOUNTANTS The consolidated financial statements and schedules of the Company for the year ended November 30, 1996 and 1995 and the eleven months ended November 30, 1994 appearing in the Company's Annual Report on Form 10-K for the year ended November 30, 1996, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements and schedules are, and audited financial statements included in subsequently filed documents will be, incorporated herein by reference in reliance upon the reports of Ernst & Young LLP pertaining to such financial statements (to the extent covered by consents filed with the SEC) given upon the authority of such firm as experts in accounting and auditing. 22 24 Facsimile copies of the Letter of Transmittal will be accepted. Letters of Transmittal, certificates representing shares of Series A Preferred Stock and any other required documents should be sent by each stockholder or his or her broker, dealer, commercial bank, trust company or other nominee to the Exchange Agent at one of the addresses as set forth below: The Exchange Agent and Information Agent is: LEHMAN BROTHERS INC.
BY MAIL: BY FACSIMILE: BY HAND/OVERNIGHT DELIVERY: - ------------------------------------------------------------------------------------------------ (For Eligible Institutions Only) Lehman Brothers Inc. (212) 528-6154 Lehman Brothers Inc. Liability Management Group Liability Management Group 3 World Financial Center Confirm by Telephone: 3 World Financial Center 9th Floor (212) 528-7581 9th Floor New York, New York 10285 New York, New York 10285 Shareholder Inquiries: Attn: Matias J. Torrellas (800) 438-3242 (Toll Free) Attn: Matias J. Torrellas
Any questions or requests for assistance or additional copies of this Prospectus or the Letter of Transmittal may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and locations set forth on this page. You may also contact your broker, dealer, commercial bank or trust company or other nominee for assistance concerning the Exchange Offer. The Dealer Manager for the Exchange Offer is: Lehman Brothers Inc. 3 World Financial Center 200 Vesey Street New York, NY 10285 Contact: Matias J. Torrellas (212) 528-7581 25 ====================================================== NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE DEALER-MANAGER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE SERIES B PREFERRED STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SERIES B PREFERRED BY ANYONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ---- Available Information................. 2 Documents Incorporated by Reference... 3 Summary............................... 4 Use of Proceeds....................... 10 The Exchange Offer.................... 10 Market and Trading Information........ 16 Description of Series B Preferred Stock............................... 16 Certain United States Federal Income Tax Consequences.................... 21 Legal Opinions........................ 21 Independent Accountants............... 22
====================================================== ====================================================== LEHMAN BROTHERS HOLDINGS INC. OFFER TO EXCHANGE 13,000,000 SHARES OF CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK, SERIES B, PAR VALUE $1.00 PER SHARE, FOR ITS OUTSTANDING CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK, SERIES A, PAR VALUE $1.00 PER SHARE. Lehman Brothers , 1997 ====================================================== 26 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Restated Certificate of Incorporation of the registrant requires the registrant to indemnify its directors and officers to the fullest extent permitted by Delaware General Corporation Law. In addition, the directors of the registrant are insured under officers' and directors' liability insurance policies purchased by the Company. The directors, officers and employees of the registrant are also insured against fiduciary liabilities under the Employee Retirement Income Security Act of 1974. Any underwriting agreement or agency agreement with respect to an offering of securities registered hereunder will provide for indemnification of the registrant and its officers and directors by the underwriters or agents, as the case may be, against certain liabilities including liabilities under the Securities Act of 1933. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The Exhibit Index beginning on page E-1 is hereby incorporated by reference. ITEM 22. UNDERTAKINGS The undersigned hereby undertakes: (a) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (d) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-1 27 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 15th day of April, 1997. LEHMAN BROTHERS HOLDINGS INC. By /s/ MICHAEL R. MILVERSTED ------------------------------------ Name: Michael R. Milversted Title: Treasurer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE - ------------------------------------------ ----------------------------------- --------------- * Chief Executive Officer and, April 15, 1997 - ------------------------------------------ Chairman of the Board of Directors Richard S. Fuld, Jr. (principal executive officer) * Chief Financial Officer (principal April 15, 1997 - ------------------------------------------ financial and accounting officer) Charles B. Hintz * Director April 15, 1997 - ------------------------------------------ Michael L. Ainslie * Director April 15, 1997 - ------------------------------------------ John F. Akers * Director April 15, 1997 - ------------------------------------------ Roger S. Berlind * Director April 15, 1997 - ------------------------------------------ Thomas H. Cruikshank * Director April 15, 1997 - ------------------------------------------ Katsumi Funaki * Director April 15, 1997 - ------------------------------------------ Henry Kaufman * Director April 15, 1997 - ------------------------------------------ John D. Macomber * Director April 15, 1997 - ------------------------------------------ Dina Merrill * Director April 15, 1997 - ------------------------------------------ Masataka Shimasaki *By: /s/ MICHAEL R. MILVERSTED April 15, 1997 - ------------------------------------------ Michael R. Milversted Attorney-in-Fact
II-2 28 EXHIBIT INDEX
FILED HEREWITH(--) EXHIBIT OR INCORPORATED BY NUMBER DESCRIPTION REFERENCE TO - ----- --------------------------------------------------------- ------------------------------ 3(i) -- Restated Certificate of Incorporation dated May 27, 1994 Exhibit 3.1 of Registrant's Transition Report on Form 10-K for the eleven months ended November 30, 1994 3(ii) -- Amended and Restated By-Laws Exhibit 3 of Registrant's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997 4.1 -- Specimen share certificate for Series B Preferred Stock -- 4.2 -- Certificate of Designations, Powers, Preferences and -- Rights of the Series B Preferred Stock 5 -- Opinion and consent of Jennifer Marre, Esq. -- 8 -- Opinion and consent of Simpson Thacher & Bartlett -- regarding certain tax matters 10.1 -- Investment Agreement by and among American Express Exhibit 10.21 to Registration Company, Shearson Lehman Brothers Holdings Inc. and Statement No. 33-12976 Nippon Life Insurance Company dated as of April 15, 1987 10.2 -- 1990 Agreement, dated as of June 12, 1990, by and between Exhibit 10.25 to Registrant's American Express Company and Nippon Life Insurance Annual Report on Form 10-K for Company the year ended December 31, 1990 10.3 -- 1994 Agreement, dated April 27, 1994, by and among Exhibit 10.32 to Registrant's American Express Company, Nippon Life Insurance Company Transition Report on Form 10-K and the Registrant for the eleven months ended November 30, 1994 10.4 -- 1997 Letter Agreement, dated January 22, 1997, by and -- between American Express Company and Nippon Life Insurance Company 12 -- Computation of ratio of earnings to combined fixed Exhibit 12(b) to Registrant's charges and preferred dividends Annual Report on Form 10-K for the year ended November 30, 1996 23.1 -- Consent of Jennifer Marre, Esq. (included in Exhibit 5) -- 23.2 -- Consent of Simpson Thacher & Bartlett -- 23.3 -- Consent of Ernst & Young LLP, Independent Auditors -- 24 -- Power of Attorney -- 27 -- Financial Data Schedule -- 99.1 -- Form of Letter of Transmittal -- 99.2 -- Form of Letter to Brokers, Dealers, Commercial Banks, -- Trust Companies and Other Nominees 99.3 -- Form of Letter to Clients --
E-1 EX-4.1 2 SPECIMEN SHARE CERTIFICATE FOR SERIES B PREFERRED 1 EXHIBIT 4.1 [FRONT SIDE OF STOCK CERTIFICATE] CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK, SERIES B NUMBER SHARES LEHMAN BROTHERS HOLDINGS INC. INCORPORATED UNDER THE LAWS THIS CERTIFICATE IS TRANSFERABLE OF THE STATE OF DELAWARE IN BOSTON, MA OR IN NEW YORK, NY SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP THIS IS TO CERTIFY THAT IS THE OWNER OF FULLY PAID AND NON-ASSESSABLE SHARES OF THE CUMULATIVE VOTING PREFERRED STOCK, SERIES B (LIQUIDATION PREFERENCE $39.10 PER SHARE) OF THE PAR VALUE OF $1.00 EACH OF Lehman Brothers Holdings Inc., transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar. Witness the seal of the Corporation and the signatures of its duly authorized Officers. Dated: COUNTERSIGNED AND REGISTERED: THE FIRST NATIONAL BANK OF BOSTON TRANSFER AGENT AND REGISTRAR CHAIRMAN OF THE BOARD & CHIEF EXECUTIVE OFFICER BY: AUTHORIZED OFFICER SECRETARY [CORPORATE SEAL] 2 [REVERSE SIDE OF STOCK CERTIFICATE] LEHMAN BROTHERS HOLDINGS INC. The Corporation will furnish without charge to each stockholder who so requests a statement of the designations, powers, preferences and relative participating, optional or other special rights of each class of stock or series thereof of the Corporation and the qualifications, limitations or restrictions of such preferences and/or rights. Such request may be made to the Corporation or the Transfer Agent. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - ______________ Custodian ______________ (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform gifts to Minors Act ___________________________________ JT TEN - as joint tenants with (State) right of survivorship and not as tenants in common
Additional abbreviations may also be used though not in the above list. For Value Received, the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - --------------------------------------- - --------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OR ASSIGNEE) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint____________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated _________________ ---------------------- NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. SIGNATURE(S) GUARANTEED: - ------------------------- THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED GUARANTEE MEDALLION PROGRAM). PURSUANT TO S.E.C. RULE 17Ad-15 EX-4.2 3 CERTIFICATE OF DESIGNATIONS 1 EXHIBIT 4.2 CERTIFICATE OF DESIGNATIONS, POWERS, PREFERENCES AND RIGHTS OF THE SERIES B PREFERRED STOCK ($39.10 LIQUIDATION PREFERENCE PER SHARE) OF LEHMAN BROTHERS HOLDINGS INC. ------------------------ PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation having its registered office at 1013 Centre Road, in the City of Wilmington, in the County of New Castle (the "Corporation"), HEREBY CERTIFIES that resolutions were duly adopted by the Executive Committee of the Board of Directors of the Corporation, acting pursuant to Section 141(c)(2) of the General Corporation Law of the State of Delaware, pursuant to the authority conferred upon the Board of Directors of the Corporation by the provisions of the Restated Certificate of Incorporation of the Corporation, as follows: RESOLVED, that the Corporation be, and it hereby is, authorized to offer, issue and sell a series of Preferred Stock of the Corporation and the Board of Directors hereby fixes the designation, number of shares, voting powers and the other powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof (in addition to those set forth in the Restated Certificate of Incorporation of the Corporation which may be applicable to such series), as follows: 1. Designation. The Board of Directors authorizes the issuance of a series of the Preferred Stock designated as the "Cumulative Convertible Voting Preferred Stock, Series B" (the "Series B Preferred Stock"). The authorized number of shares of Series B Preferred Stock shall be thirteen million (13,000,000) shares (the "Series B Shares"). The par value of the Series B Preferred Stock shall be $1.00 per share. 2. Dividends. (a) The holders of the shares of Series B Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors or a duly authorized committee thereof, out of funds legally available for the payment of dividends, cumulative dividends payable quarterly in cash on March 15, June 15, September 15 and December 15 of each year (or, if any such day is not a Business Day, then on the next succeeding Business Day) in each year (the "Dividend Payment Dates"), commencing on June 15, 1987, in preference to dividends on shares of the Common Stock of the Corporation, or any other capital stock of the Corporation ranking junior to the Series B Preferred Stock in payment of dividends. The annual dividend rate per Series B Share shall be in an amount equal to $1.955 per share. The amount of dividends payable on each Series B Share for each full quarterly dividend period shall be computed by dividing by four such annual rate. Dividends payable on the Series B Preferred Stock for any period less than a full quarterly period shall be computed on the basis of a 360-day year consisting of twelve 30-day months for the actual number of days involved. Dividends with respect to any Series B Share shall accumulate from the date of issue thereof. No cash dividends shall be declared and set apart for payment on any capital stock ranking on a par with the Series B Preferred Stock in the payment of dividends unless there shall likewise be or have been declared and set apart for payment on all Series B Shares at the time outstanding full cumulative dividends for all quarterly dividend periods ending on or before the dividend payment date for such other stock. If and so long as any full cumulative dividends payable on the Series B Shares in respect of all prior dividend periods shall not have been paid or set apart for payment, the Corporation shall not pay any dividends or make any distributions of assets (other than dividends payable in shares of capital stock of the Corporation ranking junior to the Series B Preferred Stock in payment of dividends) on or redeem, purchase or otherwise acquire for consideration shares of capital stock of the Corporation ranking junior to or on a par with the Series B Preferred Stock in payment of dividends. 1 2 (b) Dividends on the Series B Preferred Stock shall be paid to the holders of record of Series B Shares as they appear on the stock register of the Corporation on such record date, not exceeding 40 days preceding the payment date thereof, as shall be fixed by the Board of Directors or by a duly authorized committee thereof. Dividends on account of arrears for any past dividend periods may be declared and paid at any time, without reference to any Dividend Payment Date, to holders of record on such date, not exceeding 40 days preceding the payment date thereof, as may be fixed by the Board of Directors or by a duly authorized committee thereof. Dividends shall be paid to each holder of record in United States dollars by check mailed to such holders at their respective addresses appearing on the books of the Corporation. 3. Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any distribution of the assets of the Corporation to holders of Common Stock or any other capital stock of the Corporation ranking junior upon liquidation, dissolution or winding up of the Corporation, the holders of the Series B Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to its stockholders, whether from capital, surplus or earnings, an amount per Series B Share equal to $39.10 plus an amount equal to all dividends (whether or not earned or declared) accumulated and unpaid on such Series B Share to the date of final distribution. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Series B Shares or any capital stock ranking on a par with the Series B Preferred Stock upon liquidation, dissolution or winding up of the Corporation, shall be insufficient to pay in full the preferential amounts to which such stock would be entitled, then such assets, or the proceeds thereof, shall be distributable among such holders ratably in accordance with the respective amounts which would be payable on such shares if all amounts payable thereon were payable in full. For the purposes hereof, neither a consolidation nor a merger of the Corporation with one or more other corporations, nor a sale or a transfer of all or substantially all of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. 4. Redemption. (a) The Corporation may at its option redeem outstanding Series B Shares on any Dividend Payment Date upon at least 30 days' and not more than 45 days' written notice to the holders thereof, at a redemption price equal to $39.10 per share plus accumulated and unpaid dividends (whether or not earned or declared) to the date fixed for redemption:
NUMBER OF SHARES SUBJECT TO REDEMPTION ------------------------------------------------ to and including June 15, 1997 up to 7,800,000 minus the number of Series B Shares converted into shares of Corporation Common Stock or redeemed or exchanged for AMEX Common Shares or purchased by the Corporation pursuant to Section 7.4 of the 1990 Agreement prior to the date fixed for redemption thereafter to and including up to 10,400,000 minus the number of Series B June 15, 1998 Shares converted into shares of Corporation Common Stock or redeemed or exchanged for AMEX Common Shares or purchased by the Corporation pursuant to Section 7.4 of the 1990 Agreement prior to the date fixed for redemption thereafter up to 13,000,000 minus the number of Series B Shares converted into shares of Corporation Common Stock or redeemed or exchanged for AMEX Common Shares or purchased by the Corporation pursuant to Section 7.4 of the 1990 Agreement prior to the date fixed for redemption
provided, however, such Series B Shares shall not be redeemable by the Corporation unless (i) there is Public Company Common Stock outstanding on the dates upon which notice of redemption is first given and such 2 3 redemption is effected, and (ii) the Average Market Price of the Common Stock of the Corporation on the date upon which notice of redemption is first given is above the Conversion Price (as defined in Paragraph 6 of this resolution) then in effect. As used herein, (i) "AMEX Common Shares" means the Common Shares, $.60 par value of American Express Company and (ii) "1990 Agreement" means the 1990 Agreement, dated as of June 12, 1990, by and between American Express Company and Nippon Life Insurance Company ("Nippon Life"), as amended by the 1994 Agreement, dated April 28, 1994, by and among American Express Company, Nippon Life and the Corporation, as further amended by the Agreement, dated January 22, 1996, between Nippon Life and American Express Company. (b) Notice of any proposed redemption of shares of Series B Preferred Stock shall be given by the Corporation by mailing a copy of such notice to holders of record of the Series B Shares to be redeemed at their respective addresses appearing on the books of the Corporation. Said notice shall specify the shares called for redemption, the redemption price and the price at which and the date on which the shares called for redemption will, upon presentation and surrender of the certificates of stock evidencing such shares, be redeemed and the redemption price therefor paid. From and after the date fixed in any such notice as the date of redemption of shares of Series B Preferred Stock, unless default shall be made by the Corporation in providing monies at the time and place specified for the payment of the redemption price pursuant to said notice, all dividends on the Series B Preferred Stock thereby called for redemption shall cease to accrue and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price, shall cease and terminate. 5. Shares to be Retired. All Series B Shares redeemed by the Corporation shall be retired and canceled and shall resume the status of authorized and unissued shares of Preferred Stock, provided that such shares shall not thereafter be issued as Series B Shares. 6. Conversion Rights. The Series B Shares shall be convertible, in whole or in part, at the option of the holders thereof, into shares of Common Stock of the Corporation subject to the following terms and conditions: (a) The Series B Shares shall be convertible at the office of any Transfer Agent, and at such other office or offices, if any, as the Board of Directors may designate, into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100 of a share) of Common Stock of the Corporation, at the Conversion Price, determined as hereinafter provided, in effect at the time of conversion, each Series B Share being taken by the Corporation as having a value equal to $39.10 per share. The number of shares of Common Stock into which each share of Series B Preferred Stock may be converted at any time shall be calculated as $39.10 divided by the Conversion Price in effect at the time of conversion. The price at which shares of Common Stock shall be delivered upon conversion (herein called the "Conversion Price") shall be $123.0212380 per share, subject to adjustment in certain instances as provided below in subparagraphs (c), (d), (e), (f), (g) and (i) of this Paragraph 6. 3 4 (b) In order to convert Series B Shares into Common Stock, the holder thereof shall surrender at any office hereinabove mentioned the certificate or certificates therefor, duly endorsed or assigned to the Corporation or in blank, and give written notice to the Corporation at such office that he elects to convert such shares. Such notice shall be substantially in the following form: "NOTICE TO EXERCISE CONVERSION RIGHT The undersigned, being a holder of the Cumulative Convertible Voting Preferred Stock, Series B ("Series B Shares") of Lehman Brothers Holdings Inc., irrevocably exercises the right to convert outstanding Series B Shares on , , into shares of Common Stock of Lehman Brothers Holdings Inc. in accordance with the terms of the Series B Shares, and directs that the shares issuable and deliverable upon the conversion, together with any check in payment for fractional shares, be issued and delivered in the denominations indicated below to the registered holder hereof unless a different name has been indicated below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Dated: [On or before the date fixed for conversion] Fill in for registration of shares of Common Stock if to be issued otherwise than to the registered holder: - ------------------------------------ Name - ------------------------------------ Address - ------------------------------------ --------------------------------------- (Please print name and address, (Signature) including postal code number) Denominations: - --------------------------------- ." A payment or adjustment shall not be made by the Corporation upon any conversion on account of any dividends accrued on the Series B Shares surrendered for conversion or on account of any dividends on the Common Stock issued upon conversion. Series B Shares shall be deemed to have been converted immediately prior to the close of business on the day of the surrender of such shares for conversion in accordance with the foregoing provisions, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Corporation shall issue and shall deliver at such office a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with payment in lieu of any fraction of a share, as hereinafter provided, to the person or persons entitled to receive the same. In case shares of Series B Preferred Stock are called for redemption, the right to convert such shares shall cease and terminate at the close of business on the date fixed for redemption, unless default shall be made in payment of the redemption price. (c) In case the Corporation shall pay or make a dividend or other distribution on any class of capital stock of the Corporation in Common Stock, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such 4 5 determination. In the event that such distribution is not so made, (i) the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such distribution had not been fixed, and (ii) the holders shall have the option of reversing any exercise of their conversion rights hereunder made after such record date in contemplation of such distribution (and thereby reestablishing such conversion rights to the extent so exercised) by returning to the Corporation any Common Stock, cash and other securities or property which had been received upon such conversion; provided that the option set forth in this clause (ii) shall be exercisable by a holder only prospectively by a written instrument delivered to the Corporation at the time of such conversion, which instrument shall state that such holder revokes such conversion if such distribution is not so made. For the purposes of this subparagraph (c), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation will not pay any dividend or make any distribution in shares of Common Stock held in the treasury of the Corporation. (d) In case the Corporation shall issue rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than (i) if the Corporation shall have outstanding at the time of such issuance, and for a period of at least 30 trading days immediately prior to such issuance, Public Company Stock, the Average Market Price of the Common Stock or (ii) if otherwise, the Fair Market Value per share of the Common Stock, on the date fixed for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such Average Market Price or Fair Market Value, as the case may be, and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. In the event that such issuance is not so made, (i) the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such rights or warrants had not been fixed, and the holders shall have the option of reversing any exercise of their conversion rights hereunder made after such record date in contemplation of such issuance (and thereby re-establishing such conversion rights to the extent so exercised) by returning to the Corporation any Common Stock, cash and other securities or property which had been received upon such conversion; provided that the option set forth in this clause (ii) shall be exercisable by a holder only prospectively by a written instrument delivered to the Corporation at the time of such conversion, which instrument shall state that such holder revokes such conversion if such distribution is not so made. For the purposes of this subparagraph (d), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation will not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Corporation. (e) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the date upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. 5 6 (f) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding (i) any rights or warrants referred to in subparagraph (d) above, (ii) any dividend or distribution paid in cash or other property out of the Adjusted Retained Earnings of the Corporation and (iii) any dividend or distribution referred to in subparagraph (c) above), then either (at the option of the Corporation) (I) the Corporation shall elect to include in such distribution the holders of shares of Series B Preferred Stock in respect of the number of Series B Shares held by such holders as of the record date for such distribution as if such holders had converted such Series B Shares into Common Stock immediately prior to such record date (such conversion assumed to be made at the Conversion Price in effect without regard to the adjustment provided in the following clause (II)), or (II) the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the Fair Market Price per share of the Common Stock on the date fixed for such determination less the fair market value (as determined (A) if Nippon Life and its Affiliates then own a majority of the Series B Shares then outstanding (i) jointly by the Corporation and Nippon Life or (ii) if Nippon Life and the Corporation cannot so agree, by an internationally recognized investment banking firm selected by Nippon Life and the Corporation or (B) if Nippon Life and its Affiliates do not then own a majority of the Series B Shares then outstanding, by an independent, internationally recognized investment banking firm selected by the Corporation) on such date of the portion of the assets or evidences of indebtedness so distributed applicable to one share of Common Stock and the denominator shall be the Fair Market Price per share of the Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. In the event that such distribution is not so made, (i) the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such distribution had not been fixed, and (ii) the holders shall have the option of reversing any exercise of their conversion rights hereunder made after such record date in contemplation of such distribution (and thereby re-establishing such conversion rights to the extent so exercised) by returning to the Corporation any Common Stock, cash and other securities or property which had been received upon such conversion; provided that the option set forth in this clause (ii) shall be exercisable by a Holder only prospectively by a written instrument delivered to the Corporation at the time of such conversion, which instrument shall state that such holder revokes such conversion if such distribution is not so made. For purposes of this subparagraph (f), "Adjusted Retained Earnings" shall mean the retained earnings of the Corporation as of the date of such dividend or distribution plus $500,000,000 plus any dividend paid after August 10, 1990 (which has been debited against retained earnings) on any Preferred Stock of the Corporation outstanding on August 10, 1990. If the Corporation makes an election under clause (I) of this subparagraph (f) with respect to any such distribution payable on any Series B Share (an "Elected Company Dividend"), the Corporation may in lieu of such distribution elect to pay the fair market value (determined as provided above) of such Elected Company Dividend in cash (the "Cash Equivalent") or elect to defer payment of such Elected Company Dividend or the Cash Equivalent to the holder of such Series B Share and hold such amount (and any amounts subsequently paid or earned in respect of such deferred Elected Company Dividend or Cash Equivalent) in trust for the holder until the earlier to occur of (X) the conversion of such Series B Share into Common Stock or (Y) if the holder of such Series B Share had the right to exchange such Series B Share for AMEX Exchange Common Shares (otherwise than as a result of an exchange for AMEX Exchange Common Shares), such holder no longer has such right; provided, that payment to the holder of such Series B Share shall be made promptly after the earliest of such times; and provided, further, that any such deferred Elected Company Dividend or Cash Equivalent shall not be payable and shall be released to the Corporation and no longer held in trust for the holder with respect to any Series B Share that is exchanged for AMEX Exchange Common Shares or is redeemed or is otherwise purchased by the Corporation pursuant to Section 7.4 of the 1990 Agreement. Any cash to be held in trust for the holder as a deferred Elected Company Dividend or Cash Equivalent shall be invested by the Corporation in U.S. government treasury bills. 6 7 (g) The reclassification (including any reclassification upon a merger in which the Corporation is the continuing corporation, but not including any transaction for which an adjustment is provided in subparagraph (h) below of this Paragraph 6) of Common Stock into securities including other than Common Stock shall be deemed to involve (i) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and "the date fixed for such determination" within the meaning of subparagraph (f) above of this Paragraph 6), and (ii) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective" or "the day upon which such combination becomes effective," as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of subparagraph (e) above of this Paragraph 6). (h) In case of any consolidation of the Corporation with, or merger of the Corporation into, any other Person, any merger of another Person into the Corporation (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock) or any sale or transfer of all or substantially all of the assets of the Corporation, the Person formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, shall execute and deliver an assumption agreement satisfactory in form and substance to a majority in interest of the holders, providing that the holders of Series B Shares shall have the right thereafter, during the period such Series B Shares shall be outstanding to convert such Series B Shares only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, sale or transfer by a holder of the number of shares of Common Stock into which such Series B Shares might have been converted immediately prior to such consolidation, merger, sale or transfer. If the holders of Common Stock may elect from choices the kind or amount of securities, cash and other property receivable in respect of any Series B Share upon such consolidation, merger, sale or transfer, then for the purpose of this Paragraph 6 the kind and amount of securities, cash and other property receivable upon such consolidation, merger, sale or transfer shall be deemed to be the choice specified by the holder of such Series B Share, which specification shall be made by such holder by the later of (i) 20 Business Days after such holder is provided with a final version of all information required by law or regulation to be furnished to holders of Common Stock concerning such choice, or if no such information is required, 20 Business Days after the Corporation notifies such holder of all material facts concerning such specification and (ii) the last time at which holders of Common Stock are permitted to make their specification known to the Corporation. If such holder fails to make any specification, such holder's choice shall be deemed to be whatever choice is made by a plurality of holders of Common Stock not affiliated with the Corporation or the other Person to the merger or consolidation or, if no such holders exist, as specified by the Board of Directors in good faith. Such assumption agreement shall provide for adjustments which, for events subsequent to the effective date of such written instrument, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Paragraph 6. The above provisions of this subparagraph (h) shall similarly apply to successive consolidations, mergers, sales or transfers. (i) The Corporation may make such reductions in the Conversion Price, in addition to those required by subparagraphs (c), (d), (e), (f) and (g) above of this Paragraph 6, as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (j) Whenever the Conversion Price is adjusted as herein provided the Corporation shall compute the adjusted Conversion Price in accordance with this Paragraph 6 and shall prepare a certificate signed by the Treasurer (or other responsible financial officer) of the Corporation setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Transfer Agent or Agents for the Series B Preferred Stock and a copy air mailed as soon as practicable to the holders of record of the Series B Shares. 7 8 (k) In case: (i) the Corporation shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of its Adjusted Retained Earnings; or (ii) the Corporation shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (iii) of any reclassification of the capital stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Corporation is a party and for which approval of common stockholders of the Corporation is required, or of the sale or transfer of all or substantially all of the assets of the Corporation; or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed with the Transfer Agent or Agents, if any, for the Series B Preferred Stock, and shall cause to be air mailed to the holders of record of the outstanding shares of Series B Preferred Stock, at least 30 days (or 15 days in any case specified in clause (i) or (ii) above) prior to the applicable record or effective date hereinafter specified, a notice stating (X) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (Y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. (l) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of Series B Shares, the full number of shares of Common Stock then deliverable upon the conversion of all Series B Shares then outstanding. (m) No fractional shares of Common Stock shall be issued upon conversion, but, instead of any fraction of a share which would otherwise be issuable, the Corporation shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the market price per share of Common Stock (as determined in good faith by the Board of Directors or in any manner prescribed by the Board of Directors) at the close of business on the day of conversion. (n) The Corporation will pay any and all stamp or other similar taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Series B Shares pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the Series B Shares so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation that such tax has been paid. (o) In any case in which this Paragraph 6 shall require that an adjustment shall become effective immediately after a record date for an event, the Corporation may defer until the occurrence of such event (i) issuing to the holder of any Series B Shares converted after such record date and before the occurrence of such event the additional shares of Common Stock (and Elected Company Dividend or Cash Equivalent, if any) issuable upon such conversion by reason of the adjustment required by such event over and above the number of shares of Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such holder any amount in cash in lieu of a fractional share of Common Stock pursuant to Paragraph 6(m) of this Section A; provided, that, upon the request of such holder, the Corporation shall deliver to such holder a due bill or other appropriate instrument 8 9 evidencing such holder's rights to receive such additional shares of Common Stock, and such cash, upon the occurrence of the event requiring such adjustment. (p) For the purpose of this Paragraph 6: (i) "Adjusted Retained Earnings" shall have the meaning assigned in Paragraph 6(f) of this resolution. (ii) "Affiliate" means, with respect to a Person, any corporation or other entity in which such Person has a direct or indirect controlling interest or by which such Person is directly or indirectly controlled or which is under direct or indirect common control with such Person. (iii) "AMEX Exchange Common Shares" means the AMEX Common Shares (as defined in Paragraph 4 of this resolution) issued to Nippon Life or its Affiliates pursuant to Section 5.5 of the 1990 Agreement. (iv) "Average Market Price" of any security on any date means the average of the daily closing prices for the 10 consecutive trading days selected by the issuer commencing not less than 20 days nor more than 30 trading days before the day in question. The closing price for each day shall be the last reported sales price regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange or, if such security is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which such security is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the Nasdaq National Market or, if such security is not listed or admitted to trading on any national securities exchange or quoted on the Nasdaq National Market, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the issuer for that purpose. For the purposes of this definition, the term "trading day" shall mean each Monday, Tuesday, Wednesday, Thursday or Friday, other than any day on which securities are not traded on such exchange or in such market. (v) "Common Stock" shall include any stock of any class of the Corporation which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which is not subject to redemption by the Corporation. However, shares issuable on conversion of Series B Shares shall include only shares of the class designated as Common Stock of the Corporation as of the Closing Date, or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. (vi) "Cash Equivalent" shall have the meaning assigned in Paragraph 6(f) of this resolution. (vii) "Elected Company Dividend" shall have the meaning assigned in Paragraph 6(f) of this resolution. (viii) "Fair Market Value" per share of Common Stock on any date means the fair market value thereof on the date in question, which either (A) if Nippon Life and its Affiliates then own a majority of the Series B Shares then outstanding (i) shall be determined jointly by the Corporation and Nippon Life or (ii) if the Corporation and Nippon Life cannot agree, shall be the value reasonably determined in good faith by the Board of Directors of the Corporation or (B) if Nippon Life and its Affiliates do not then own a majority of the Series B Shares then outstanding, shall be the value reasonably determined in good faith by the Board of Directors of the Corporation. 9 10 (ix) "Fair Market Price" per share of Common Stock on any date means the fair market value thereof on the date in question, determined (A) if Nippon Life and its Affiliates then own a majority of the Series B Shares then outstanding (i) jointly by the Corporation and Nippon Life or (ii) if the Corporation and Nippon Life cannot so agree, by an independent internationally recognized investment banking firm selected by the Corporation and Nippon Life or (B) if Nippon Life and its Affiliates do not then own a majority of the Series B Shares then outstanding, shall be determined by an independent, internationally recognized investment banking firm selected by the Corporation, which determination in any such case shall include the value attributable to any assets or securities to be distributed to the holders of Common Stock. (x) "1990 Agreement" shall have the meaning assigned in Paragraph 4 of this resolution. (xi) "Nippon Life" shall have the meaning assigned in Paragraph 4 of this resolution. (xii) "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or governmental or any agency or political subdivision thereof. (xiii) "Public Company Stock" means any class or series of Voting Stock registered under the Securities Exchange Act of 1934 and broadly held and actively traded by public stockholders. (xiv) "Voting Stock" means all securities issued by the Company having the ordinary power to vote in the election of directors of the Company, other than securities having such power only upon the occurrence of a default or any other extraordinary contingency. 7. Voting Rights. The holders of Series B Preferred Stock shall have the following voting rights subject to the following terms and conditions: (a) The holders of Series B Preferred Stock shall have voting rights equal to the voting rights of holders of shares of Common Stock and the Series B Shares shall vote together with the shares of Common Stock (and of any other class or series which may similarly be entitled to vote with the shares of Common Stock) as a single class upon all matters upon which holders of Common Stock are entitled to vote; (b) So long as any of the Series B Shares remain outstanding, the Corporation will not, either directly or indirectly or through merger or consolidation with any other corporation, without the affirmative vote at a meeting or the written consent with or without a meeting of the holders of at least a majority of the Series B Shares then outstanding, amend, alter or repeal any of the provisions of the Certificate of Designations, Powers, Preferences and Rights of the Series B Preferred Stock or the Restated Certificate of Incorporation of the Corporation, or authorize any reclassification of the Series B Preferred Stock, so as in any such case to affect adversely the preferences, special rights or powers of the Series B Preferred Stock, or authorize any capital stock of the Corporation ranking, either as to payment of dividends or upon liquidation, dissolution or winding up of the Corporation, prior to the Series B Preferred Stock; and (c) In exercising the voting rights set forth in this Paragraph 7 or when otherwise granted voting rights by operation of law, each share of Series B Preferred Stock shall be entitled to a number of votes equal to the quotient obtained by dividing $39.10 by the Conversion Price in effect at the time. No consent of holders of the Series B Preferred Stock shall be required for (i) the creation of any indebtedness of any kind of the Corporation or (ii) the authorization or issuance of any class of capital stock of the Corporation ranking junior or equal to the Series B Preferred Stock in payment of dividends or upon liquidation, dissolution or winding up of the Corporation. 8. Sinking Fund. The Series B Preferred Stock shall not be subject to any right of mandatory payment or prepayment (except for liquidation, dissolution or winding up of the Corporation) or to any sinking fund. 10 11 9. Exchanges. Certificates representing Series B Shares shall be exchangeable, at the option of the holder, for a new certificate or certificates of the same or different denominations representing in the aggregate the same number of Series B Shares. 10. Term. Subject to redemption as set forth in Paragraph 4 of this resolution or to conversion as set forth in Paragraph 6 of this resolution the Series B Preferred Stock shall be perpetual. IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused this certificate to be signed by Jennifer Marre, Vice President, and attested by Karen C. Manson, its Secretary, this 10th day of April, 1997. LEHMAN BROTHERS HOLDINGS INC. By: /s/ JENNIFER MARRE ------------------------------------ Jennifer Marre, Vice President ATTEST: /s/ KAREN C. MANSON - -------------------------------------- Karen C. Manson, Secretary 11 EX-5 4 OPINION AND CONSENT OF JENNIFER MARRE 1 EXHIBIT 5 LEHMAN BROTHERS HOLDINGS INC. THREE WORLD FINANCIAL CENTER NEW YORK, NY 10285 April 15, 1997 Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Ladies and Gentlemen: I am an Associate General Counsel of Lehman Brothers Holdings Inc., a Delaware corporation ("Holdings"). A Registration Statement on Form S-4 (the "Registration Statement"), under the Securities Act of 1933, as amended (the "Act"), was filed by Holdings with the Securities and Exchange Commission on the date hereof. The Registration Statement relates to the exchange of Holdings' Series A Preferred Stock for a new series of preferred stock (the "Series B Preferred Stock"), par value $1.00 per share, which Holdings may offer from time to time in one or more series. In that connection, I or members of my staff have examined and relied upon originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates and instruments relating to Holdings as I have deemed relevant and necessary to the formation of the opinion hereinafter set forth. In such examination, I have assumed the genuineness and authenticity of all documents examined by me or members of my staff and all signatures thereon, the legal capacity of all persons executing such documents, the conformity to originals of all copies of documents submitted to us and the truth and correctness of any representations and warranties contained therein. Based upon the foregoing, I am of the opinion that: The Series B Preferred Stock is duly authorized, and when and to the extent issued, the shares of Series B Preferred Stock will be validly issued, fully paid and non-assessable, and no holder thereof will be subject to personal liability by reason of being such a holder. 2 LETTER TO SECURITIES AND EXCHANGE COMMISSION APRIL 15, 1997 PAGE 2 In rendering this opinion, I express no opinion as to the laws of any jurisdiction other than the State of New York, the General Corporation Law of the State of Delaware and the United States of America. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to me under the caption "Legal Opinions" in the Registration Statement, without admitting that I am an "expert" under the Act, or the rules and regulations of the Securities and Exchange Commission issued thereunder, with respect to any part of the Registration Statement, including this exhibit. Very truly yours, /s/ Jennifer Marre Jennifer Marre Associate General Counsel EX-8 5 OPINION AND CONSENT OF SIMPSON THACHER & BARTLETT 1 EXHIBIT 8 [SIMPSON THACHER & BARTLETT LETTERHEAD] April 15, 1997 Re: Lehman Brothers Holdings Inc. Offer to Exchange Up to 13,000,000 shares of Cumulative Convertible Voting Preferred Stock, Series B, par value $1.00 per share, for its Outstanding Cumulative Convertible Voting Preferred Stock, Series A, par value $1.00 per share Lehman Brothers Holdings Inc. 3 World Financial Center New York, NY 10285 Ladies and Gentlemen: You have requested our opinion with respect to certain United States federal income tax consequences of the proposed transaction in which Lehman Brothers Holdings Inc. (the "Company") offers to exchange (the "Exchange Offer") up to 13,000,000 shares of its new Cumulative Convertible Voting Preferred Stock, Series B (the "Series B Preferred Stock") for 13,000,000 shares of its outstanding Cumulative Convertible Voting Preferred Stock, Series A (the "Series A Preferred Stock"). All capitalized terms used but not defined herein have the meanings ascribed to them in the draft of the Prospectus, dated as of April 15, 1997 (the "Prospectus"). We have examined a draft dated April 15, 1997 of the Prospectus relating to the Exchange Offer. In addition, we have 2 SIMPSON THACHER & BARTLETT -2- April 15, 1997 examined such other documents, and have made such other and further investigations, as we have deemed relevant and necessary as a basis for the opinion hereinafter set forth. We have not, however, undertaken any independent investigation of any factual matter in the foregoing. In addition, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as drafts or as certified, conformed, photostatic or facsimile copies, and the authenticity of the originals of such latter documents. We have also assumed that the Prospectus will be in the form of the draft examined by us as set forth above. Our examination of the Prospectus has, consistent with the nature of our engagement, not included a review or investigation of the information concerning the Company set forth therein or any other information set forth therein, and, accordingly, we express no opinion or view with respect thereto. Our opinion is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, administrative interpretations, and judicial precedents as of the date hereof. If there is any subsequent change in the applicable law or regulations, or if there are subsequently any new administrative or judicial interpretations of the law or regulations, the opinion expressed herein may become inapplicable. 3 SIMPSON THACHER & BARTLETT -3- April 15, 1997 We hereby advise you that, in our opinion, the statements set forth in the Prospectus under the caption "Certain United States Federal Income Tax Consequences" insofar as they purport to constitute summaries of matters of United States federal tax law and regulations or legal conclusions with respect thereto, constitute accurate summaries of the matters described therein in all material respects. We are members of the Bar of the State of New York, and we do not express any opinion herein concerning any law other than the federal law of the United States. This opinion is rendered to you in connection with the above-described transaction. This opinion may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other person, firm or corporation without our prior written consent. Very truly yours, /s/ Simpson Thacher & Bartlett SIMPSON THACHER & BARTLETT EX-10.4 6 1997 LETTER AGREEMENT 1 EXHIBIT 10.4 NIPPON LIFE INSURANCE COMPANY January 22, 1997 Mr. Richard K. Goeltz Vice Chairman and Chief Financial Officer American Express Company American Express Tower World Financial Center New York, New York 10285 Dear Mr. Goeltz: We refer to the 1990 Agreement by and between American Express and us, dated as of June 12, 1990. We are discussing with Lehman the possibility of Lehman issuing to us in exchange for our Cumulative Convertible Voting Preferred Stock, Series A ("Series A Preferred Stock") an equal number of shares of a new series of preferred stock ("New Preferred Stock"). The terms, rights and privileges of the New Preferred Stock would be identical to the terms, rights and privileges of the Series A Preferred Stock in all respects except that there would no longer be any minimum number of shares that must be converted into Lehman common stock at any one time. Lehman would make a representation to Nippon to the effect that the New Preferred Stock would be legally and validly issued, free of all liens and we would place no liens on the New Preferred Stock. Immediately following this transaction, we would own no shares of Series A Preferred Stock. At the time of the transaction, the foregoing would be the only change involving our equity investments in Lehman. If the transaction described above is completed, the parties agree that the rights in Section 5.5 and Exhibit 12 of the 1990 Agreement will apply to the New Preferred Stock to the same extent that they currently apply to the Series A Preferred Stock. In addition, Section 10.6 of the 1990 Agreement will apply to the New Preferred Stock. The foregoing is an expression of our mutual intent, but remains subject to American Express' right to review the final terms of the New Preferred Stock to ensure that the terms of and the rights provided by the New Preferred Stock are identical to the terms and rights of the Series A Preferred Stock except for the minimum conversion requirement. 2 Except as described herein, the 1990 Agreement will remain unchanged. Please confirm the foregoing by signing a counterpart of this letter and returning it to us, whereupon this letter will become a binding agreement between American Express and us. Very truly yours, Nippon Life Insurance Company By: /s/Kiyoshi Ujihara ------------------------- Name: Kiyoshi Ujihara Title: Chief Representative Agreed as of the date set forth above: American Express Company By: /s/Richard K. Goeltz --------------------------- Name: Richard K. Goeltz Title: Vice Chairman and Chief Financial Officer EX-23.2 7 CONSENT OF SIMPSON THACHER & BARTLETT 1 EXHIBIT 23.2 CONSENT OF SIMPSON THACHER & BARTLETT We consent to the reference to our firm under the caption "Certain United States Federal Income Tax Consequences" in the Registration Statement on Form S-4 and related prospectus of Lehman Brothers Holdings Inc. (the "Company") for the registration of 13,000,000 shares of Cumulative Convertible Voting Preferred Stock, Series B of the Company. /s/ Simpson Thacher & Bartlett - ------------------------------ New York, New York April 15, 1997 EX-23.3 8 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm as experts under the caption "Independent Accountants" in the Registration Statement on Form S-4 and related prospectus of Lehman Brothers Holdings Inc. (the "Company") for the registration of 13,000,000 shares of Cumulative Convertible Voting Preferred Stock, Series B of the Company and to the incorporation by reference therein of our report dated January 7, 1997, appearing in the Company's Annual Report on Form 10-K for the year ended November 30, 1996. /s/ Ernst & Young LLP - ---------------------- New York, New York April 14, 1997 EX-24 9 POWER OF ATTORNEY 1 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas A. Russo, Karen M. Muller and Michael R. Milversted and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) and supplements to this Registration Statement and any Registration Statement previously filed by the Registrant or a predecessor in interest, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. SIGNATURES TITLE DATE ---------- ----- ---- Chief Executive Officer and /s/ Richard S. Fuld, Jr. Chairman of the Board of April 15, 1997 - ---------------------------- Directors Richard S. Fuld, Jr. (principal executive officer) /s/ Charles B. Hintz Chief Financial Officer - ---------------------------- (principal financial officer) April 15, 1997 Charles B. Hintz /s/ Michael L. Ainslie Director April 15, 1997 - ---------------------------- Michael L. Ainslie /s/ John F. Akers Director April 15, 1997 - ---------------------------- John F. Akers /s/ Roger S. Berlind Director April 15, 1997 - ---------------------------- Roger S. Berlind /s/ Thomas H. Cruikshank Director April 15, 1997 - ---------------------------- Thomas H. Cruikshank /s/ Katsumi Funaki Director April 15, 1997 - ---------------------------- Katsumi Funaki /s/ Henry Kaufman Director April 15, 1997 - ---------------------------- Henry Kaufman 2 SIGNATURES TITLE DATE ---------- ----- ---- /s/ John D. Macomber Director April 15, 1997 - ---------------------------- John D. Macomber /s/ Dina Merrill Director April 15, 1997 - ---------------------------- Dina Merrill /s/ Masataka Shimasaki Director April 15, 1997 - ---------------------------- Masataka Shimasaki EX-27 10 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AT NOVEMBER 30, 1996 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS NOV-30-1996 DEC-01-1995 NOV-30-1996 2,837 9,944 32,340 20,651 61,453 477 128,596 8,202 8,586 56,119 6,296 26,364 15,922 0 508 11 3,335 128,596 1,579 11,298 362 981 0 10,816 1,747 637 416 0 0 416 3.24 3.24
EX-99.1 11 LETTER OF TRANSMITTAL 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL TO TENDER SHARES OF THE CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK, SERIES A OF LEHMAN BROTHERS HOLDINGS INC. THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON , 1997 (THE "EXPIRATION DATE") UNLESS EXTENDED BY LEHMAN BROTHERS HOLDINGS INC. EXCHANGE AGENT: By Hand: By Mail: Lehman Brothers Inc. (insured or registered recommended) Liability Management Group Lehman Brothers Inc. 3 World Financial Center Liability Management Group 9th Floor 3 World Financial Center New York, New York 10285 9th Floor Attn: Matias J. Torrellas New York, New York 10285 Attn: Matias J. Torrellas By Overnight Express: By Facsimile: Lehman Brothers Inc. (212) 528-6154 Liability Management Group (For Eligible Institutions Only) 3 World Financial Center 9th Floor By Telephone: New York, New York 10285 (212) 528-7581 Attn: Matias J. Torrellas
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated , 1997 (the "Prospectus") of Lehman Brothers Holdings Inc. (the "Company") and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange up to 13,000,000 shares of its new Cumulative Convertible Voting Preferred Stock, Series B (the "Series B Preferred Stock") for up to 13,000,000 shares of its outstanding Cumulative Convertible Voting Preferred Stock, Series A (the "Series A Preferred Stock"). The terms of the Series B Preferred Stock are identical in all material respects (including dividend rate, voting rights and liquidation preference) to the terms of the Series A Preferred Stock for which they may be exchanged pursuant to the Exchange Offer, except that conversion of the Series B Preferred Stock will not be subject to the restriction in the terms of the Series A Preferred Stock requiring that at least 250,000 shares thereof be converted at any one time. The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. 2 PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. List below the shares of the Series A Preferred Stock to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and/or the number of shares of the Series A Preferred Stock tendered should be listed on a separate signed schedule affixed hereto. - -------------------------------------------------------------------------------- DESCRIPTION OF SHARES OF SERIES A PREFERRED STOCK TENDERED HEREWITH - ------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES NUMBER OF NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY SHARES (PLEASE FILL IN) NUMBER(S)* CERTIFICATE(S)* TENDERED** ------------------------------------------------------------------------------------------------------------------ --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- TOTAL ------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full number of shares of the Series A Preferred Stock represented by the tendered certificates. See Instruction 2. ================================================================================ 3 This Letter of Transmittal is to be used either if certificates of shares of the Series A Preferred Stock are to be forwarded herewith or if delivery of shares of the Series A Preferred Stock is to be made by book-entry transfer to an account maintained by the Exchange Agent at The Depository Trust Company, pursuant to the procedures set forth in "The Exchange Offer -- Tender Procedure" in the Prospectus. Delivery of documents to the book-entry transfer facility does not constitute delivery to the Exchange Agent. [ ] CHECK HERE IF TENDERED SHARES OF THE SERIES A PREFERRED STOCK ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution ----------------------------------------------------------------------------- [ ] The Depository Trust Company Account Number - -------------------------------------------------------------------------------- Transaction Code Number - -------------------------------------------------------------------------------- [ ] CHECK HERE IF SHARES OF SERIES B PREFERRED STOCK ARE TO BE DELIVERED TO PERSON OTHER THAN PERSON SIGNING THIS LETTER OF TRANSMITTAL: Name - -------------------------------------------------------------------------------- (Please Print) [ ] CHECK HERE IF SHARES OF SERIES B PREFERRED STOCK ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL: Address - -------------------------------------------------------------------------------- (Including Zip Code) [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES TO THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ------------------------------------------------------------------------------ Address: ------------------------------------------------------------------------------ 4 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the above-described number of shares of the Series A Preferred Stock indicated above. Subject to, and effective upon, the acceptance for exchange of the shares of the Series A Preferred Stock tendered herewith, the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such shares of the Series A Preferred Stock. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Exchange Agent acts as the agent of the Company, in connection with the Exchange Offer) to cause the shares of Series A Preferred Stock to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the shares of the Series A Preferred Stock and to acquire shares of the Series B Preferred Stock issuable upon the exchange of such tendered shares of the Series A Preferred Stock, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered shares of the Series A Preferred Stock, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of tendered shares of the Series A Preferred Stock or transfer ownership of such shares of the Series A Preferred Stock on the account books maintained by the book-entry transfer facility. The Exchange Offer is subject to certain conditions as set forth in the Prospectus under the caption "The Exchange Offer -- Conditions of the Exchange Offer." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the shares of Series A Preferred Stock tendered hereby and, in such event, the shares of Series A Preferred Stock not exchanged will be returned to the undersigned at the address shown above. The name(s) and address(es) of the registered holder(s) should be printed above under "Description of Shares of Series A Preferred Stock Tendered Herewith", if not already printed thereunder, exactly as they appear on the shares of the Series A Preferred Stock tendered hereby. The certificate number(s) and the number of shares of the Series A Preferred Stock to which this Letter of Transmittal relates, together with the number of shares of the Series A Preferred Stock that the undersigned wishes to tender, should be indicated in the appropriate boxes above under "Description of Shares of Series A Preferred Stock Tendered Herewith". All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Shares of Series A Preferred Stock may be withdrawn at any time prior to the Expiration Date in accordance with the terms of the Letter of Transmittal. Certificates for all shares of Series B Preferred Stock delivered in exchange for tendered shares of Series A Preferred Stock and any shares of Series A Preferred Stock delivered herewith but not exchanged, and registered in the name of the undersigned, shall be delivered to the undersigned at the address shown below the signature of the undersigned. 5 TENDERING HOLDER(S) SIGN HERE (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF HOLDER(S)) Dated - -------------------------------------------------------------------------------- Area Code and Telephone Number: - -------------------------------------------------------------------------------- (Must be signed by registered holder(s) exactly as name(s) appear(s) on certificate(s) for Series A Preferred Stock. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth the full title of such person.) See Instruction 3. Name(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (Full Title) --------------------------------------------------------------- Address - -------------------------------------------------------------------------------- (INCLUDING ZIP CODE) Area Code and Telephone No. ------------------------------------------------------- Taxpayer Identification No. ---------------------------------------------------------- GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 3) Authorized Signature --------------------------------------------------------------- Name - -------------------------------------------------------------------------------- Title - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- Name of Firm - -------------------------------------------------------------------------------- Area Code and Telephone No. ------------------------------------------------------- Dated: - -------------------------------------------------------------------------------- 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates for all physically delivered shares of Series A Preferred Stock or confirmation of any book-entry transfer to the Exchange Agent's or its agent's account at a book-entry transfer facility of shares of Series A Preferred Stock tendered by book-entry transfer, as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile thereof, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at any of its addresses set forth herein on or prior to the Expiration Date (as defined in the Prospectus). The method of delivery of this Letter of Transmittal, the shares of Series A Preferred Stock and any other required documents is at the election and risk of the holder, and except as otherwise provided below, the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If such delivery is by mail, it is suggested that registered mail with return receipt requested, properly insured, be used. In all cases sufficient time should be allowed to permit timely delivery. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the shares of Series A Preferred Stock for exchange. 2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of shares of Series A Preferred Stock evidenced by a submitted certificate is tendered, the tendering holder should fill in the number of shares tendered in the box entitled "Number of Shares Tendered." A newly issued certificate for the shares of Series A Preferred Stock submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All shares of Series A Preferred Stock delivered to the Exchange Agent will be deemed to have been tendered unless otherwise clearly indicated. Tenders of shares of Series A Preferred Stock pursuant to the Exchange Offer are irrevocable, except that shares of Series A Preferred Stock tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. To be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be received by the Exchange Agent prior to the Expiration Date unless extended by the Company. Any such notice of withdrawal must specify the person named in the Letter of Transmittal as having tendered shares of Series A Preferred Stock to be withdrawn, the certificate numbers of the shares of Series A Preferred Stock to be withdrawn, a statement that such holder is withdrawing his or her election to have such shares of Series A Preferred Stock exchanged, and the name of the registered holder of such shares of Series A Preferred Stock, and must be signed by the holder in the same manner as the original signature on the Letter of Transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to the Company that the person withdrawing the tender has succeeded to the beneficial ownership of the shares of Series A Preferred Stock being withdrawn. The Exchange Agent will return the properly withdrawn shares of Series A Preferred Stock promptly following receipt of notice of withdrawal. If shares of Series A Preferred Stock have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn shares of Series A Preferred Stock or otherwise comply with the book-entry transfer facility's procedures. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties. 3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUCTION AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the shares of Series A Preferred Stock tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. 7 If any of the shares of Series A Preferred Stock tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of shares of Series A Preferred Stock registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of shares of Series A Preferred Stock. When this Letter of Transmittal is signed by the registered holders or holders (which term, for the purposes described herein, shall include the book-entry transfer facility whose name appears on a security listing as the owner of the shares of Series A Preferred Stock) of shares of Series A Preferred Stock listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required. If this Letter of Transmittal is signed by a person other than the registered holder or holders of the shares of Series A Preferred Stock listed, such shares of Series A Preferred Stock must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to the Company and duly executed by the registered holder, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificates of the shares of Series A Preferred Stock. If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Institution (as defined in the Prospectus). Signatures on this Letter of Transmittal need not be guaranteed by an Eligible Institution, provided the shares of Series A Preferred Stock are tendered; (i) by a registered holder of such shares of Series A Preferred Stock, for the holder of such shares of Series A Preferred Stock; or (ii) for the account of an Eligible Institution. 4. TRANSFER TAXES. The Company shall pay all transfer taxes, if any, applicable to the transfer and exchange of shares of Series A Preferred Stock to it or its order pursuant to the Exchange Offer. If a transfer tax is imposed for any reason other than the transfer and exchange of shares of Series A Preferred Stock to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exception therefrom is not submitted herewith the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 4, it will not be necessary for transfer tax stamps to be affixed to the certificates representing shares of Series A Preferred Stock listed in this Letter of Transmittal. 5. WAIVER OF CONDITIONS. The Company reserves the right to waive in its reasonable judgment, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 6. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any holder whose certificates representing shares of Series A Preferred Stock have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated below for further instructions. 8 7. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of shares of Series A Preferred Stock will be determined by the Company, whose determination will be final and binding. The Company reserves the absolute right to reject any shares of Series A Preferred Stock not properly tendered or the acceptance for exchange of which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any defect or irregularity in the tender of any shares of Series A Preferred Stock. Unless waived, any defects or irregularities in connection with tenders of shares of Series A Preferred Stock for exchange must be cured within such reasonable period of time as the Company will determine. None of the Company, the Exchange Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth above. IMPORTANT: This Letter of Transmittal or a facsimile thereof (together with certificates representing shares of Series A Preferred Stock or confirmation of book-entry transfer and all other required documents) or a Notice of Guaranteed Delivery must be received by the Exchange Agent on or prior to the Expiration Date. EX-99.2 12 LETTER TO BROKERS, DEALERS, ET AL 1 EXHIBIT 99.2 LEHMAN BROTHERS HOLDINGS INC. OFFER TO EXCHANGE CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK SERIES B, PAR VALUE $1.00 PER SHARE FOR CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK SERIES A, PAR VALUE $1.00 PER SHARE THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. , 1997 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: In our capacity as Dealer Manager, we are enclosing the material listed below relating to the offer (the "Exchange Offer") by Lehman Brothers Holdings Inc. (the "Company") to exchange, on a share-for-share basis, up to 13,000,000 shares of its new Cumulative Convertible Voting Preferred Stock, Series B (the "Series B Preferred Stock") for up to 13,000,000 shares of its outstanding Cumulative Convertible Voting Preferred Stock, Series A (the "Series A Preferred Stock"), upon the terms and subject to the conditions of the Exchange Offer (as described in the Prospectus) and subject to the right of the Company to amend or terminate the Exchange Offer. The Company expressly reserves the right to extend, amend or modify the terms of the Exchange Offer, and not to accept for exchange any shares of Series A Preferred Stock, at any time prior to the Expiration Date for any reason. We are asking you to contact your clients for whom you hold shares of Series A Preferred Stock registered in your name (or in the name of your nominee) or who hold shares of Series A Preferred Stock registered in their own names. Please bring the Exchange Offer to their attention as promptly as possible. The Company will pay all stock transfer taxes applicable to the exchange of shares of Series A Preferred Stock pursuant to the Exchange Offer, subject to Instruction 4 of the Letter of Transmittal referred to below. For your information and for forwarding to your clients, we are enclosing the following documents: 1. The Prospectus dated , 1997 (the "Prospectus"); 2. The Letter of Transmittal to be used by holders of shares of Series A Preferred Stock in accepting the Exchange Offer (duly executed photocopies of the Letter of Transmittal may be used to exchange shares of Series A Preferred Stock); 3. A letter which may be sent to your clients for whose accounts you hold shares of Series A Preferred Stock registered in your name or in the name of your nominee, with space for obtaining such clients' instructions with regard to the Exchange Offer; 4. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9, providing information relating to backup federal income tax withholding; and 5. A return envelope addressed to Lehman Brothers Inc. 2 WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON , 1997, UNLESS THE EXCHANGE OFFER IS EXTENDED. Any questions or requests for assistance or additional copies of the enclosed materials may be directed to Lehman Brothers Inc., the Information Agent and Dealer Manager, at the address and telephone number set forth on the inside back cover of the enclosed Prospectus. Very truly yours, Lehman Brothers NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL BE DEEMED TO APPOINT YOU THE AGENT OF THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 2 EX-99.3 13 LETTER TO CLIENTS 1 EXHIBIT 99.3 LEHMAN BROTHERS HOLDINGS INC. OFFER TO EXCHANGE CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK SERIES B, PAR VALUE $1.00 PER SHARE FOR CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK SERIES A, PAR VALUE $1.00 PER SHARE THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. , 1997 To Our Clients: Enclosed for your consideration are the Prospectus dated , 1997 ("Prospectus") of Lehman Brothers Holdings Inc. (the "Company") and the related Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange, on a share-for-share basis, up to 13,000,000 shares of its new Cumulative Convertible Voting Preferred Stock, Series B (the "Series B Preferred Stock") for up to 13,000,000 shares of its outstanding Cumulative Convertible Voting Preferred Stock, Series A (the "Series A Preferred Stock"), upon the terms and subject to the conditions of the Exchange Offer (as described in the Prospectus) and subject to the right of the Company to amend or terminate the Exchange Offer. Such 13,000,000 shares of Series A Preferred Stock constitute all the outstanding shares of Series A Preferred Stock. WE ARE THE HOLDER OF RECORD OF SHARES OF SERIES A PREFERRED STOCK HELD FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES OF SERIES A PREFERRED STOCK HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish us to tender any or all of the shares of Series A Preferred Stock held by us for your account, upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal. We urge you to read the enclosed Prospectus carefully before conveying your instructions to us. Your attention is invited to the following: (1) The Exchange Offer is for the Company's 13,000,000 outstanding shares of Series A Preferred Stock. The Exchange Offer is subject to certain conditions. See "The Exchange Offer -- Conditions of the Exchange Offer" in the Prospectus. (2) The Exchange Offer will expire at 12:00 midnight, New York City time, on , 1997, unless the Exchange Offer is extended. Your instructions to us should be forwarded to us in ample time to permit us to submit a tender on your behalf. If you would like to withdraw your shares of Series A Preferred Stock that we have tendered, you can withdraw them at any time prior to the Expiration Date (as defined in the Prospectus). (3) Exchanges will be made on the basis of one share of Series B Preferred Stock for each share of Series A Preferred Stock tendered and accepted for exchange. 2 (4) Any transfer taxes applicable to the exchange of shares of Series A Preferred Stock with the Company pursuant to the Exchange Offer will be paid by the Company, except as otherwise provided in Instruction 4 of the Letter of Transmittal. If you wish to have us tender any or all of your shares of Series A Preferred Stock held by us for your account upon the terms and subject to the conditions set forth in the Exchange Offer, please so instruct us by completing, executing, detaching and returning to us the instruction form on the detachable part hereof. An envelope to return your instructions to us is enclosed. If you authorize tender of your shares of Series A Preferred Stock, all such shares of Series A Preferred Stock will be tendered unless otherwise specified on the detachable part hereof. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf by the expiration of the Exchange Offer. 2 3 INSTRUCTIONS WITH RESPECT TO LEHMAN BROTHERS HOLDINGS INC. OFFER TO EXCHANGE CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK SERIES B, PAR VALUE $1.00 PER SHARE FOR CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK SERIES A, PAR VALUE $1.00 PER SHARE The undersigned acknowledge(s) receipt of your letter and the enclosed Prospectus dated , 1997 of Lehman Brothers Holdings Inc. (the "Company") and the related Letter of Transmittal, which together describe the Company's offer (the "Exchange Offer") to exchange, on a share-for-share basis, up to 13,000,000 shares of its new Cumulative Convertible Voting Preferred Stock, Series B for up to 13,000,000 shares of its outstanding Cumulative Convertible Voting Preferred Stock, Series A (the "Series A Preferred Stock"), upon the terms and subject to the conditions of the Exchange Offer (as described in the Prospectus) and subject to the right of the Company to amend or terminate the Exchange Offer. This will instruct you to tender to the Company the number of shares of Series A Preferred Stock indicated below (or, if no number is indicated below, all shares of Series A Preferred Stock) which are held by you for the account of the undersigned, upon the terms and subject to the conditions of the Exchange Offer. Number of Shares to be Tendered: SIGN HERE Shares* --------------------------------------------- Dated: ---------------------, 1997 Signature(s) Name(s): ------------------------------------------ Address: -------------------------------------------- ============================================= --------------------------------------------- Social Security or Taxpayer Identification No.
- --------------- * Unless otherwise indicated, it will be assumed that all shares of Series A Preferred Stock held by us for your account are to be tendered. 3 -----END PRIVACY-ENHANCED MESSAGE-----