Filed Pursuant to Rule 424(b)(2)
Registration File No.: 333-07657
<PAGE>
PROSPECTUS SUPPLEMENT
AUGUST 22, 1996
(TO PROSPECTUS DATED AUGUST 15, 1996)
7,000,000 PREFERRED SECURITIES
DLJ CAPITAL TRUST I
8.42% PREFERRED TRUST SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
DONALDSON, LUFKIN & JENRETTE, INC.
The 8.42% Preferred Trust Securities (the "Preferred Securities") offered
hereby represent preferred undivided beneficial interests in the assets of
DLJ Capital Trust I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"). Donaldson, Lufkin & Jenrette, Inc., a
Delaware corporation (the "Company"), will directly or indirectly own all the
common securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing common undivided beneficial
interests in the assets of the Trust. The Trust exists for the sole purpose
of issuing the Preferred Securities and Common Securities and investing the
proceeds thereof in an equivalent amount of 8.42% Junior Subordinated
Debentures due 2046 of the Company ("Junior Subordinated Debentures").
(continued on next page)
The Preferred Securities have been approved for listing on the New York
Stock Exchange, Inc. (the "NYSE"), subject to official notice of issuance.
See "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 FOR A DISCUSSION OF CERTAIN
FACTORS RELATING TO THE PREFERRED SECURITIES THAT SHOULD BE CONSIDERED BY
INVESTORS, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH
PAYMENTS ON THE JUNIOR SUBORDINATED DEBENTURES AND THE PREFERRED SECURITIES
MAY BE DEFERRED AND THE RELATED FEDERAL INCOME TAX CONSEQUENCES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
INITIAL PUBLIC PROCEEDS TO DLJ
OFFERING UNDERWRITING CAPITAL TRUST I
PRICE(1) COMMISSION(2) (3)(4)
<S> <C> <C> <C>
Per Preferred Security $ 25.00 (3) $ 25.00
Total(5) ............... $175,000,000 (3) $175,000,000
</TABLE>
(1) Plus accrued distributions, if any, from August 27, 1996.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in Junior Subordinated Debentures, the
Company has agreed to pay to the Underwriters as compensation
("Underwriters' Compensation") for their arranging the investment
therein of such proceeds, $.7875 per Preferred Security (or $5,512,500
in the aggregate). See "Underwriting."
(4) Expenses of the offering which are payable by the Company are estimated
to be $560,000.
(5) The Trust and the Company have granted to the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to
1,050,000 additional Preferred Securities at the Initial Public
Offering Price for the purpose of covering overallotments, if any. If
such option is exercised in full, the total Initial Public Offering
Price, Underwriting Commission and Proceeds to DLJ Capital Trust I will
be $201,250,000, $6,339,375 and $201,250,000, respectively.
The Preferred Securities offered hereby are being offered by the several
Underwriters, subject to prior sale, when, as and if delivered to and
accepted by them and subject to various prior conditions, including their
rights to reject orders in whole or in part. See "Underwriting" herein. It is
expected that the Preferred Securities will be ready for delivery in
book-entry form only through the facilities of the Depository Trust Company
of New York on or about August 27, 1996, against payment therefor in
immediately available funds.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEAN WITTER REYNOLDS INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
<PAGE>
(Continued from previous page)
The Preferred Securities and the Common Securities will rank pari passu
with each other and will have equivalent terms; provided that (i) if an Event
of Default (as defined herein) under the Declaration (as defined herein)
occurs and is continuing, the holders of Preferred Securities will have a
priority over holders of the Common Securities with respect to payments in
respect of distributions and payments upon liquidation, redemption or
otherwise and (ii) holders of Common Securities have the exclusive right
(subject to the terms of the Declaration) to appoint, replace or remove
Trustees (as defined in the accompanying Prospectus) and to increase or
decrease the number of Trustees.
Holders of the Preferred Securities will be entitled to receive cumulative
cash distributions at an annual rate of 8.42% of the liquidation amount of
$25 per Preferred Security, accruing from the date of original issuance of
the Preferred Securities and payable monthly, in arrears, on the last day of
each month, commencing on September 30, 1996 ("distributions"). Cash
distributions in arrears for more than one month will bear interest thereon
at the rate per annum of 8.42% of the stated liquidation amount of $25 per
Preferred Security (to the extent permitted by applicable law), compounded
monthly. The term "distributions" as used herein includes such cash
distributions and any such interest payable unless otherwise stated. The
distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and the interest
and other payment dates on the Junior Subordinated Debentures deposited in
the Trust as trust assets. If principal or interest is not paid on the Junior
Subordinated Debentures, including as a result of the Company's election to
extend the interest payment period on the Junior Subordinated Debentures as
described below, the Trust will not make payments on the Trust Securities.
The Junior Subordinated Debentures provide that, so long as the Company shall
not be in default in the payment of interest on the Junior Subordinated
Debentures, the Company shall have the right to defer payments of interest on
the Junior Subordinated Debentures by extending the interest payment period
from time to time for a period not exceeding 60 consecutive monthly interest
periods (each, an "Extension Period"). No interest shall be due and payable
during an Extension Period and, as a consequence, distributions on the Trust
Securities will also be deferred, but at the end of such Extension Period the
Company shall pay all interest then accrued and unpaid on the Junior
Subordinated Debentures, together with interest thereon at the rate specified
for the Junior Subordinated Debentures to the extent permitted by applicable
law, compounded monthly ("Compounded Interest"). All references herein to
interest shall include Compounded Interest unless otherwise stated. There
could be multiple Extension Periods of varying lengths throughout the term of
the Junior Subordinated Debentures, not to exceed 60 consecutive months or to
cause any extension beyond the maturity of the Junior Subordinated
Debentures. During any such Extension Period, the Company may not declare or
pay dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred
stock; provided that (i) the Company will be permitted to pay accrued
dividends upon the exchange or redemption of any series of preferred stock of
the Company as may be outstanding from time to time, in accordance with the
terms of such stock, and (ii) the foregoing will not apply to any stock
dividends paid by the Company. See "Risk Factors--Option to Extend Interest
Payment Period; Tax Impact of Extension"; "Description of the Junior
Subordinated Debentures--Interest" and "--Option to Extend Interest Payment
Period."
The payment of distributions out of moneys held by the Property Trustee
(as defined in the accompanying Prospectus) and payments on liquidation of
the Trust and the redemption of Preferred Securities, as set forth below, are
guaranteed by the Company on a subordinated basis as and to the extent
described herein (the "Preferred Securities Guarantee"). See "Description of
the Preferred Securities Guarantee" in the accompanying Prospectus. The
Preferred Securities Guarantee is a full and unconditional guarantee from the
time of issuance of the Preferred Securities, but the Preferred Securities
Guarantee covers distributions and other payments on the Preferred Securities
only if and to the extent that the Company has made a payment to the Property
Trustee of interest or principal on the Junior Subordinated Debentures
deposited in the Trust as trust assets. The obligations of the Company under
the Preferred Securities Guarantee are subordinate and junior in right of
payment to all other liabilities of the
S-2
<PAGE>
(Continued from previous page)
Company, including Junior Subordinated Debt Securities (as defined in the
accompanying Prospectus) and senior to all capital stock now or hereafter
issued by the Company and to any guarantee now or hereafter entered into by
the Company in respect of its capital stock. The obligations of the Company
under the Junior Subordinated Debentures are subordinate and junior in right
of payment to all present and future Senior Indebtedness (as defined in the
accompanying Prospectus). Because the Company is a holding company, the
Junior Subordinated Debentures (and the Company's obligations under the
Preferred Securities Guarantee) are also effectively subordinated to all
existing and future liabilities, including trade payables, of the Company's
subsidiaries, except to the extent that the Company is a creditor of the
subsidiaries recognized as such.
The Junior Subordinated Debentures are redeemable by the Company (in whole
or in part) from time to time, on or after August 31, 2001 or at any time in
certain circumstances upon the occurrence of a Tax Event (as defined herein).
If the Company redeems Junior Subordinated Debentures, the Trust must redeem
Trust Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Junior Subordinated Debentures so redeemed
at $25 per Trust Security plus accrued and unpaid distributions thereon (the
"Redemption Price") to the date fixed for redemption. See "Description of the
Preferred Securities--Mandatory Redemption." The Preferred Securities will be
redeemed upon maturity of the Junior Subordinated Debentures. The Junior
Subordinated Debentures mature on June 30, 2046. In addition, upon the
occurrence of a Special Event (as defined herein) arising from a change in
law or a change in legal interpretation, unless the Junior Subordinated
Debentures are redeemed in the limited circumstances described below, the
Trust shall be dissolved with the result that the Junior Subordinated
Debentures will be distributed to the holders of the Preferred Securities, on
a pro rata basis, in lieu of any cash distribution. In the case of a Special
Event that is a Tax Event, the Company will have the right in certain
circumstances to redeem the Junior Subordinated Debentures, which would
result in the redemption by the Trust of the Trust Securities in the same
amount on a pro rata basis. If the Junior Subordinated Debentures are
distributed to the holders of the Preferred Securities, the Company will use
its best efforts to have the Junior Subordinated Debentures listed on the New
York Stock Exchange or on such other exchange as the Preferred Securities are
then listed. See "Description of the Preferred Securities--Special Event
Redemption or Distribution" and "Description of the Junior Subordinated
Debentures."
In the event of the voluntary or involuntary dissolution, winding up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive, for each Preferred Security, a liquidation amount of $25
plus accrued and unpaid distributions thereon (including interest thereon) to
the date of payment, unless in connection with such dissolution, the Junior
Subordinated Debentures are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities--Liquidation
Distribution Upon Dissolution."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following
matters:
RANKING OF SUBORDINATED OBLIGATIONS UNDER PREFERRED SECURITIES GUARANTEE AND
JUNIOR SUBORDINATED DEBENTURES; DEPENDENCE ON THE COMPANY
The obligations of the Company under the Junior Subordinated Debentures
are unsecured obligations of the Company and will be subordinate and junior
in right of payment to Senior Indebtedness of the Company but senior to its
capital stock. The Company's obligations under the Preferred Securities
Guarantee are unsecured and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Company, including the Junior
Subordinated Debentures, except those made pari passu or subordinate by their
terms, and (ii) senior to all capital stock now or hereafter issued by the
Company and to any guarantee now or hereafter entered into by the Company in
respect of its capital stock. Because the Company is a holding company, the
Junior Subordinated Debentures (and the Company's obligations under the
Preferred Securities Guarantee) are also effectively subordinated to all
existing and future liabilities, including trade payables, of the Company's
subsidiaries, except to the extent that the Company is a creditor of the
subsidiaries recognized as such. There are no terms in the Preferred
Securities, the Junior Subordinated Debentures or the Preferred Securities
Guarantee that limit the Company's ability to incur additional indebtedness,
including indebtedness that ranks senior to or pari passu with the Junior
Subordinated Debentures and the Preferred Securities Guarantee, or the
ability of its subsidiaries to incur additional indebtedness. See
"Description of the Preferred Securities Guarantees--Status of the Preferred
Securities Guarantees" and "Description of the Junior Subordinated Debt
Securities--Subordination" in the accompanying Prospectus.
The Trust's ability to make distributions and other payments on the
Preferred Securities is solely dependent upon the Company making interest and
other payments on the Junior Subordinated Debentures deposited as trust
assets as and when required. If the Company were not to make distributions or
other payments on the Junior Subordinated Debentures for any reason,
including as a result of the Company's election to defer the payment of
interest on the Junior Subordinated Debentures by extending the interest
period on the Junior Subordinated Debentures, the Trust will not make
payments on the Trust Securities. In such an event, holders of the Preferred
Securities would not be able to rely on the Preferred Securities Guarantee
since distributions and other payments on the Preferred Securities are
subject to such Guarantee only if and to the extent that the Company has made
a payment to the Property Trustee of interest or principal on the Junior
Subordinated Debentures deposited in the Trust as trust assets. Instead,
holders of Preferred Securities would rely on the enforcement by the Property
Trustee of its rights as registered holder of the Junior Subordinated
Debentures against the Company pursuant to the terms of the Indenture.
However, if the Trust's failure to make distributions on the Preferred
Securities is a consequence of the Company's exercise of its right to extend
the interest payment period for the Junior Subordinated Debentures, the
Property Trustee will have no right to enforce the payment of distributions
on the Preferred Securities until an Event of Default under the Declaration
shall have occurred. The Company's obligations under the Preferred Securities
Guarantee are subordinate and junior in right of payment to all other
liabilities of the Company, including the Junior Subordinated Debentures,
except those made pari passu or subordinate by their terms to the Preferred
Securities Guarantee and senior to its capital stock or to any guarantee of
the Company in respect of its capital stock.
The Declaration provides that the Company shall pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs
and expenses of the Trust, including any taxes and all costs and expenses
with respect thereto, to which the Trust may become subject, except for
United States withholding taxes. No assurance can be given that the Company
will have sufficient resources to enable it to pay such debts, obligations,
costs and expenses on behalf of the Trust.
S-4
<PAGE>
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX IMPACT OF EXTENSION
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures
by extending the interest payment period from time to time on the Junior
Subordinated Debentures for an Extension Period not exceeding 60 consecutive
monthly interest periods, during which no interest shall be due and payable.
In such an event, monthly distributions on the Preferred Securities would not
be made (but would continue to accrue with interest thereon at the rate of
8.42% per annum, compounded monthly) by the Trust during any such Extension
Period. If the Company exercises the right to extend an interest payment
period, the Company may not during such Extension Period declare or pay
dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred
stock; provided that (i) the Company will be permitted to pay accrued
dividends upon the exchange or redemption of any series of preferred stock of
the Company as may be outstanding from time to time, in accordance with the
terms of such stock and (ii) the foregoing will not apply to stock dividends
paid by the Company. As of June 30, 1996, the Company had 2,250,000 Shares of
Cumulative Exchangeable $8.83 Preferred Stock outstanding. Each holder of
Cumulative Exchangeable Preferred Stock is entitled to receive when, as and
if it is declared by the Board of Directors, out of funds legally available
therefor, cumulative cash dividends of $8.83 per share per annum, payable
quarterly in arrears. Subject to certain conditions, after October 15, 1996,
the Company may exchange the Cumulative Exchangeable $8.83 Preferred Stock
for an equal principal amount of subordinated notes of the Company bearing a
rate of interest of 9.58% per annum and having the same redemption provisions
as the Cumulative Exchangeable $8.83 Preferred Stock (as described under
"Description of Capital Stock" in the accompanying Prospectus.) The Company
is required to redeem all outstanding shares of the Cumulative Exchangeable
$8.83 Preferred Stock on October 15, 2003 and may redeem such Preferred Stock
in whole or in part at any time at its option in certain circumstances.
Prior to the termination of any Extension Period, the Company may further
extend such Extension Period; provided that such Extension Period together
with all such previous and further extensions thereof may not exceed 60
consecutive monthly interest periods. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may commence a
new Extension Period, subject to the above requirements. The Company may also
prepay at any time all or any portion of the interest accrued during an
Extension Period. Consequently, there could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures,
not to exceed 60 consecutive months or to cause any extension beyond the
maturity of the Junior Subordinated Debentures. See "Description of the
Preferred Securities--Distributions" and "Description of the Junior
Subordinated Debentures--Option to Extend Interest Payment Period."
Because the Company has the right to extend the interest payment period
for an Extension Period of up to 60 consecutive monthly interest periods on
various occasions, it is more likely than not that the Junior Subordinated
Debentures will be treated as issued with "original issue discount" for
United States Federal income tax purposes and the Company intends to take
that position in filing related information returns. As a result, holders of
Preferred Securities will be required to include their pro rata share of
original issue discount in gross income as it accrues for United States
Federal income tax purposes in advance of the receipt of cash. Generally, all
of a securityholder's taxable interest income with respect to the Junior
Subordinated Debentures will be accounted for as "original issue discount"
and actual distributions of stated interest will not be separately reported
as taxable income. See "Taxation--Accrual of Original Issue Discount and
Premium" and "--Potential Extension of Payment Period on the Junior
Subordinated Debentures."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence and during the continuation of a Tax Event or
Investment Company Event (each as defined herein), which may occur at any
time, the Trust shall, unless the Junior Subordinated Debentures are redeemed
in the limited circumstances described below, be dissolved with the result
that, in the manner described in "Description of the Preferred
Securities--Liquidation Distribution Upon
S-5
<PAGE>
Dissolution," Junior Subordinated Debentures having an aggregate principal
amount equal to the aggregate stated liquidation amount of, and bearing
accrued and unpaid distributions on, the Preferred Securities and Common
Securities would be distributed on a Pro Rata Basis (as defined under "The
DLJ Trusts" in the accompanying Prospectus) to the holders of the Preferred
Securities and Common Securities in liquidation of the Trust. In the case of
a Tax Event, in certain circumstances, the Company shall have the right to
redeem at any time the Junior Subordinated Debentures, in whole or in part,
in which event the Trust will redeem Preferred Securities and Common
Securities on a Pro Rata Basis to the same extent as the Junior Subordinated
Debentures are redeemed. There can be no assurance as to the market prices
for Preferred Securities or the Junior Subordinated Debentures which may be
distributed in exchange for Preferred Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Preferred Securities
that an investor may purchase, or the Junior Subordinated Debentures that the
investor may receive on dissolution and liquidation of the Trust, may trade
at a discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may
receive Junior Subordinated Debentures upon the occurrence of a Special
Event, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and
should carefully review all the information regarding the Junior Subordinated
Debentures contained herein and in the accompanying Prospectus. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution" and "Description of the Junior Subordinated
Debentures--General."
If enacted in their present form, certain legislative proposals in the
Revenue Reconciliation Bill of 1996 (the "Bill") would prevent the Company
from deducting interest on the Junior Subordinated Debentures. The Bill as
proposed would be effective generally for instruments issued on or after
December 7, 1995. However, on March 29, 1996, the Chairmen of the Senate
Finance and House Ways and Means Committees issued a joint statement to the
effect that it was their intention that the effective date of the President's
legislative proposals, if adopted, will be no earlier than the date of
appropriate Congressional action. There can be no assurance, however, that
current or future legislative proposals if enacted would not prevent the
Company from deducting interest on the Junior Subordinated Debentures. This
would constitute a Tax Event and could result in the distribution of the
Junior Subordinated Debentures to holders of the Preferred Securities or, in
certain circumstances, the redemption of such securities by the Company and
the distribution of the resulting cash in redemption of the Preferred
Securities. See "Description of the Preferred Securities--Special Event
Redemption or Distribution."
Under current United States Federal income tax law, a distribution of the
Junior Subordinated Debentures upon a Tax Event or Investment Company Event
would not be a taxable event to holders of the Preferred Securities. See
"Taxation--Distribution of Junior Subordinated Debentures to Holders of
Preferred Securities."
LIMITING VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights, but will
not be able to appoint, remove or replace, or to increase or decrease the
number of, Trustees, which rights are vested exclusively in the Common
Securities.
LISTING OF PREFERRED SECURITIES; TRADING PRICES
The Preferred Securities constitute a new issue of securities with no
established trading market. While the Preferred Securities have been approved
for listing on the NYSE, subject to official notice of issuance, there can be
no assurance that an active market for the Preferred Securities will develop
or be sustained in the future on such exchange. Although Donaldson, Lufkin &
Jenrette Securities Corporation has indicated to the Company and the Trust
that it intends to make a market in the Preferred Securities as permitted by
applicable laws and regulations prior to the commencement of trading on the
NYSE, it is not obligated to do so and may discontinue any such market-making
at any time without notice. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Preferred Securities.
S-6
<PAGE>
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Debentures. A holder who disposes of his Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income, and
to add such amount to his adjusted tax basis in his pro rata share of the
underlying Junior Subordinated Debentures deemed disposed of. Accordingly,
such a holder will recognize a capital loss to the extent the selling price
(which may not fully reflect the value of accrued but unpaid interest) is
less than the holder's adjusted tax basis (which will include accrued but
unpaid interest). Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States Federal income
tax purposes. See "Taxation--Accrual of Original Issue Discount and Premium"
and "--Disposition of the Preferred Securities."
POTENTIAL MARKET VOLATILITY DURING EXTENSION PERIOD
As described above, the Company has the right to extend an interest
payment period on the Junior Subordinated Debentures from time to time for a
period not exceeding 60 consecutive monthly interest periods. If the Company
determines to extend an interest payment period, or if the Company thereafter
extends an Extension Period or prepays interest accrued during an Extension
Period as described above, the market price of the Preferred Securities is
likely to be affected. In addition, as a result of such rights, the market
price of the Preferred Securities (which represent an undivided interest in
Junior Subordinated Debentures) may be more volatile than other securities on
which original issue discount accrues that do not have such rights. A holder
that disposes of its Preferred Securities during an Extension Period,
therefore, may not receive the same return on its investment as a holder that
continues to hold its Preferred Securities. See "Description of the Junior
Subordinated Debentures--Option to Extend Interest Payment Period."
S-7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial information is qualified by
reference to and should be read in conjunction with, the Company's
Consolidated Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Form 10-K"), which is incorporated by reference
in the accompanying Prospectus. The selected consolidated statement of income
data for the years ended December 31, 1993, 1994 and 1995 and the selected
consolidated statement of financial condition data as of December 31, 1994
and 1995 are derived from the Company's audited Consolidated Financial
Statements which are incorporated by reference herein. The selected unaudited
financial information as of and for the six months ended June 30, 1995 and
1996 should be read in conjunction with the Company's audited Consolidated
Financial Statements and Notes thereto contained in the Form 10-K and the
Company's unaudited Consolidated Financial Statements and Notes thereto
contained in Company's quarterly report on Form 10-Q for the quarter ended
June 30, 1996 (the "Form 10-Q"), which report is also incorporated by
reference in the accompanying Prospectus. Such unaudited information
reflects, in the opinion of management, all adjustments, consisting of normal
recurring adjustments which the Company considers necessary for a fair
presentation of its financial position and results of operations for these
periods. Operating results for the six months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the entire
year ending December 31, 1996. The selected consolidated statement of
financial condition data as of December 31, 1991, 1992, 1993 and the selected
consolidated statement of income data for the years ended December 31, 1991
and 1992 are derived from the audited Consolidated Financial Statements of
the Company which are not included or incorporated by reference in the
accompanying Prospectus.
S-8
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA AND FINANCIAL RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Commissions ............................... $ 257.9 $ 289.7 $ 358.8 $ 376.1 $ 460.2 $ 225.0 $ 299.1
Underwritings ............................. 170.9 350.3 574.6 261.1 441.5 171.2 391.0
Fees ...................................... 166.2 158.1 211.3 281.3 369.1 173.5 184.7
Interest-net(1) ........................... 323.0 381.7 657.3 791.9 904.1 423.6 481.9
Principal transactions-net:
Trading ................................... 264.2 272.0 381.5 165.7 364.9 154.9 275.0
Investment ................................ 17.3 195.9 79.9 97.6 163.7 99.1 111.1
Other ...................................... 15.1 16.4 21.9 35.0 55.1 26.4 24.3
--------- --------- --------- --------- --------- --------- ---------
Total Revenues ........................... 1,214.6 1,664.1 2,285.3 2,008.7 2,758.6 1,273.7 1,767.1
--------- --------- --------- --------- --------- --------- ---------
Costs and Expenses:
Compensation and benefits ................. 567.9 886.6 1,200.4 897.8 1,261.4 598.1 809.0
Compensation expense--restricted stock
units .................................... -- -- -- -- 6.2 -- --
Interest .................................. 236.4 212.3 381.7 503.8 680.6 308.9 352.5
Other expenses ............................ 321.3 320.2 401.2 402.1 511.9 234.2 339.8
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses ................. 1,125.6 1,419.1 1,983.3 1,803.7 2,460.1 1,141.2 1,501.3
--------- --------- --------- --------- --------- --------- ---------
Income before provision for income taxes .. 89.0 245.0 302.0 205.0 298.5 132.5 265.8
Provision for income taxes ................. 31.2 98.0 115.9 82.0 119.4 53.0 103.7
--------- --------- --------- --------- --------- --------- ---------
Net income ................................. $ 57.8 $ 147.0 $ 186.1 $ 123.0 $ 179.1 $ 79.5 $ 162.1
--------- --------- --------- --------- --------- --------- ---------
Dividends on preferred stock ............... -- -- -- $ 21.0 $ 19.9 $ 9.9 $ 9.9
--------- --------- --------- --------- --------- --------- ---------
Earnings applicable to common stock ....... $ 57.8 $ 147.0 $ 186.1 $ 102.0 $ 159.2 $ 69.6 $ 152.2
========= ========= ========= ========= ========= ========= =========
Weighted average common shares
outstanding(2) ............................ 51.7 59.8
========= =========
Earnings per common share(2) ............... $ 3.08 $ 2.54
========= =========
Pro forma weighted average common shares(3) 51.5 51.5
========= =========
Pro forma earnings per common share(3) .... $ 1.98 $ 1.35
========= =========
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE DATA AND FINANCIAL RATIOS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Securities purchased under agreements to resell
and securities borrowed ....................... $10,942.5 $14,378.4 $21,575.2 $19,166.9 $27,793.1
Total assets ................................... 18,721.7 24,436.2 38,766.7 33,261.6 44,576.5
Securities sold under agreements to repurchase
and securities loaned ......................... 11,200.8 14,732.4 24,116.7 20,385.4 29,369.0
Long-term borrowings ........................... 268.1 478.6 549.0 539.9 958.9
Preferred stock ................................ -- -- 225.0 225.0 225.0
Stockholders' equity ........................... 340.3 454.6 750.3 820.3 1,198.7
OTHER FINANCIAL DATA (AT END OF PERIOD):
Book value per common share outstanding ....... $ 6.81 $ 9.09 $ 15.01 $ 16.41 $ 20.50
Ratio of net assets to stockholders' equity (4) 22.86x 22.12x 22.91x 17.18x 14.00x
Ratio of long-term borrowings to total
capitalization (5) ............................ 0.42x 0.51x 0.34x 0.30x 0.37x
Return on average equity (6) ................... 18.2% 36.8% 30.5% 13.1% 17.1%
Pre-tax profit margin (7) ...................... 9.1% 16.9% 15.9% 13.6% 14.4%
After-tax profit margin (7) .................... 5.9% 10.1% 9.8% 8.2% 8.6%
Ratio of earnings to fixed charges (8) ........ 1.07x 1.21x 1.20x 1.10x 1.11x
Ratio of earnings to combined fixed charges and
preferred stock dividends (9) ................. -- -- -- 1.09x 1.10x
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Securities purchased under agreements to resell
and securities borrowed ....................... $26,750.8 $29,872.7
Total assets ................................... 42,417.1 47,746.6
Securities sold under agreements to repurchase
and securities loaned ......................... 27,895.9 29,703.2
Long-term borrowings ........................... 723.1 1,103.9
Preferred stock ................................ 225.0 225.0
Stockholders' equity ........................... 873.6 1,337.5
OTHER FINANCIAL DATA (AT END OF PERIOD):
Book value per common share outstanding ....... $ 17.47 $ 22.89
Ratio of net assets to stockholders' equity (4) 17.93x 13.36x
Ratio of long-term borrowings to total
capitalization (5) ............................ 0.35x 0.41x
Return on average equity (6) ................... 16.4% 24.1%
Pre-tax profit margin (7) ...................... 13.7% 18.8%
After-tax profit margin (7) .................... 8.2% 11.5%
Ratio of earnings to fixed charges (8) ........ 1.10x 1.20x
Ratio of earnings to combined fixed charges and
preferred stock dividends (9) ................. 1.09x 1.19x
</TABLE>
- ------------
(1)Interest is net of interest expense to finance U.S. government and
agency instruments of $1,008.0 million, $918.4 million, $1,083.6
million, $1,612.8 million, $2,109.2 million, $977.9 million and $991.3
million, respectively.
(2)Earnings per common share has been calculated by dividing earnings
applicable to common share (net income less preferred dividends) by the
weighted average number of common shares and common share equivalents
outstanding. Common share equivalents include shares of common stock
issuable under the Restricted Stock Unit Plan and the dilutive effect
of options under the treasury stock method. Weighted average common
shares outstanding are the same for both primary and fully diluted
earnings per common shares. Earnings per common share prior to 1994
were not presented because the amounts would not be meaningful.
(3)Pro forma earnings per common share are calculated by dividing earnings
applicable to common shares (net income less preferred dividends) by
the pro forma weighted average common shares and common share
equivalents outstanding. Pro forma common shares outstanding represent
actual historical shares outstanding adjusted for the dilutive effect
of the Restricted Stock Units ("RSUs") using the treasury stock method.
(4)Net assets excludes securities purchased under agreements to resell and
securities borrowed.
(5)Long-term borrowings and total capitalization (the sum of long-term
borrowings, preferred stock and stockholders' equity) exclude current
maturities of long-term borrowings.
(6)After payment of dividends on the Company's Cumulative Exchangeable
$8.83 Preferred Stock.
(7)Based on net revenues.
(8)For the purpose of calculating the ratio of earnings to fixed charges
(i) earnings consist of income before provision for income taxes and
fixed charges and (ii) fixed charges consist of interest expense and
one-third of rental expense which is deemed representative of an
interest factor.
(9)For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before the provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.
S-10
<PAGE>
THE FOLLOWING INFORMATION CONCERNING THE COMPANY, DLJ CAPITAL TRUST I, THE
PREFERRED SECURITIES, THE PREFERRED SECURITIES GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES IS IN ADDITION TO, AND SHOULD BE READ IN CONJUNCTION
WITH, THE INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS. CAPITALIZED
TERMS USED IN THIS PROSPECTUS SUPPLEMENT HAVE THE SAME MEANINGS AS IN THE
ACCOMPANYING PROSPECTUS.
THE COMPANY
The Company is a leading integrated investment and merchant bank that
serves institutional, corporate, governmental and individual clients. The
Company's businesses include securities underwriting, sales and trading;
merchant banking; financial advisory services; investment research;
correspondent brokerage services; and asset management. While results have
fluctuated from year to year, for the years 1991 through 1995, the Company's
total revenues and net income increased by a compound annual growth rate of
22.8% and 32.7%, respectively. The Company's average annual after-tax return
on common equity for the past five years was 23.1%. At June 30, 1996, the
Company had total assets of $47.7 billion and total stockholders' equity of
$1.3 billion.
The Company's principal strategy is to focus its resources on certain core
businesses where management believes the Company can compete profitably and
be among the leading participants in each targeted market. Over the past
several years, the Company has significantly expanded the scope of its
business activities and its customer base, both in the U.S. and
internationally. It has established strong positions in selected high-margin
activities, including equity and high-yield corporate securities underwriting
as well as merchant banking, and has increased its market share in a broad
range of businesses. Key elements of this expansion have been the Company's
recruitment of experienced professionals during periods of turmoil in the
securities industry, the continued development and retention of the Company's
existing personnel at all levels and the continuity of senior management. In
addition, the Company has historically emphasized economic and investment
research in the development of its business and believes that its commitment
to research has been an important contributor to its success.
The Company conducts its business through three principal operating
groups, each of which is an important contributor to revenues and earnings:
the Banking Group, which includes the Company's Investment Banking, Merchant
Banking and Emerging Markets groups; the Capital Markets Group, consisting of
the Company's institutional debt and equity businesses as well as Sprout, its
venture capital affiliate; and the Financial Services Group, comprised of its
Pershing clearing division, high-net-worth retail brokerage and asset
management businesses.
The Company's Banking Group is a major participant in the raising of
capital and the providing of financial advice to companies throughout the
U.S. and has significantly expanded its activities abroad. Through its
Investment Banking group, the Company manages and underwrites public
offerings of securities, arranges private placements and provides advisory
and other services in connection with mergers, acquisitions, restructurings
and other financial transactions. Since 1991, the Investment Banking group
has raised over $190.0 billion for clients from the public and private
markets in corporate equity and debt securities and has completed over 350
merger and acquisition, restructuring and divesture assignments aggregating
in excess of $89.0 billion. Its Merchant Banking group pursues direct
investments in a variety of areas through a number of investment vehicles
funded with capital provided primarily by institutional investors, the
Company and its employees. Since the Company began investing in leveraged
investments in 1985, it invested over $1.0 billion on behalf of the Company,
its employees and funds it manages in over 50 companies with an aggregate
purchase price of over $19.5 billion and achieved an average annual internal
rate of return substantially in excess of comparable industry benchmarks. The
Emerging Markets group specializes in client advisory services, merchant
banking and the underwriting, sales and trading of securities in Latin
America, Asia and certain other international markets.
The Capital Markets Group encompasses a broad range of activities
including trading, research, origination and distribution of equity and
fixed-income securities, private equity investments and venture capital. Its
focus is primarily client-driven, in contrast to that of many other
securities firms which emphasize proprietary trading, an approach that
reduces the Company's exposure to market volatility. Its
S-11
<PAGE>
Taxable Fixed-Income division provides institutional clients with research,
trading and sales services for a broad range of taxable fixed-income products
including high-yield corporate, investment-grade corporate, U.S. government
and mortgage-backed securities. The Institutional Equities division provides
institutional clients with research, trading and sales services in U.S.
listed and over-the-counter equity securities. The Company's equity sales and
trading capabilities, combined with its research expertise, have contributed
to commission revenues increasing, for the years 1991 through 1995, at a
compound annual growth rate of 15.6%. In addition, the Company's Equity
Derivatives division provides a broad range of equity and index options
products, while Sprout is one of the oldest and largest groups in the private
equity investment and venture capital industry.
The Financial Services Group provides a broad array of services to
individual investors and the financial intermediaries which represent them.
Pershing is a leading provider of correspondent brokerage services, clearing
transactions for over 600 U.S. brokerage firms which collectively maintain
over 1.3 million client accounts. These client accounts held over $143.6
billion of assets at June 30, 1996. During 1995, Pershing accounted for more
than 10% of the daily reported trading volume on the NYSE. In addition,
Pershing's PC Financial Network (Service Mark), a leading on-line discount
broker in the U.S., has experienced significant growth over the past several
years. The Company's Investment Services Group, which consists of
approximately 270 account executives, provides high-net worth individuals and
medium to smaller size institutions with access to the Company's equity and
fixed-income research, trading services and underwriting and has one of the
highest revenues per account executive in the industry. Through Wood,
Struthers & Winthrop Management Corp. and affiliates the Company provides
investment management and trust services primarily to high-net-worth
individual investors and institutions, and at June 30, 1996 had over $4.8
billion in assets under management.
Apart from its three principal operating groups, the Company also
maintains a separate brokerage subsidiary, Autranet, Inc., which provides
institutional investors with research generated by independent originators
that are not affiliated with Wall Street brokerage firms.
Founded in 1959, the Company initially focused on providing in-depth
investment research to institutional investors. In 1970, the Company became
the first member firm of the New York Stock Exchange, Inc. to be owned
publicly. Fifteen years later, the Company was purchased by subsidiaries of
the Equitable Companies Incorporated ("EQ") (EQ and its subsidiaries other
than the Company, collectively, "Equitable"). Equitable, which as of June 30,
1996, owned an approximately 80% interest in the Company following the
Company's initial public offering in October 1995, is a diversified financial
services organization and one of the world's largest investment management
organizations. AXA is EQ's largest stockholder, beneficially owning at June
30, 1996, approximately 60.7% of EQ's outstanding shares of common stock and
$392.2 million stated value of EQ's Series E convertible preferred stock.
S-12
<PAGE>
DLJ CAPITAL TRUST I
DLJ Capital Trust I is a statutory business trust formed on June 19, 1996
under the Delaware Business Trust Act (the "Business Trust Act") pursuant to
a declaration of trust among the Trustees and the Company and the filing of a
certificate of trust with the Secretary of State of the State of Delaware.
Such declaration will be amended and restated in its entirety (as so amended
and restated, the "Declaration") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus Supplement and
the accompanying Prospectus form a part, as of the date the Preferred
Securities are initially issued. The Declaration is qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon issuance
of the Preferred Securities, the holders thereof will own all of the issued
and outstanding Preferred Securities. The Company will acquire Common
Securities in an amount equal to at least 3% of the total capital of the
Trust and will own, directly or indirectly, all of the issued and outstanding
Common Securities. The Trust exists for the purpose of (a) issuing its Trust
Securities for cash and investing the proceeds thereof in an equivalent
amount of Junior Subordinated Debentures and (b) engaging in such other
activities as are necessary, convenient and incidental thereto. The rights of
the holders of the Trust Securities, including economic rights, rights to
information and voting rights, are as set forth in the Declaration, the
Business Trust Act and the Trust Indenture Act. The Declaration does not
permit the incurrence by the Trust of any indebtedness for borrowed money or
the making of any investment other than in the Junior Subordinated
Debentures. In the Declaration, the Company has agreed to pay for all debts
and obligations (other than with respect to the Trust Securities) and all
costs and expenses of the Trust, including the fees and expenses of the
Trustees and any income taxes, duties and other governmental charges, and all
costs and expenses with respect thereto, to which the Trust may become
subject, except for United States withholding taxes.
S-13
<PAGE>
CAPITALIZATION OF THE COMPANY
The following table sets forth the unaudited consolidated capitalization
of the Company at June 30, 1996, and as adjusted to reflect the application
of the estimated net proceeds from the sale of the Preferred Securities
(assuming no exercise of the Underwriters overallotment option). See "Use of
Proceeds." The table should be read in conjunction with the Company's
consolidated financial statements and notes thereto included in the documents
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Short-term borrowings .............................................. $1,410,585 $1,241,657
============ =============
Long-term borrowings:
Senior Notes ...................................................... $ 496,998 $ 496,998
Senior subordinated revolving credit .............................. 250,000 250,000
Medium-term notes ................................................. 337,525 337,525
Other borrowings .................................................. 19,351 19,351
------------ -------------
Total long-term borrowings ........................................ 1,103,874 1,103,874
Company-obligated mandatorily redeemable preferred securities of
grantor trusts (1) ................................................ -- 168,928
Cumulative Exchangeable $8.83 Preferred Stock, at redemption value 225,000 225,000
Stockholders' equity:
Common stock ($0.10 par value) 150,000,000 shares authorized;
53,300,000 shares issued and outstanding ......................... 5,330 5,330
Restricted stock units; 5,179,147 units authorized, 5,140,205
units issued and outstanding ..................................... 105,365 105,365
Paid-in capital ................................................... 364,791 364,791
Retained earnings ................................................. 862,700 862,700
Cumulative translation adjustment ................................. (650) (650)
------------ -------------
Total stockholders' equity ........................................ 1,337,536 1,337,536
------------ -------------
Total capitalization .............................................. $2,666,410 $2,835,338
============ =============
</TABLE>
- ------------
(1) As described in this Prospectus Supplement, the sole asset of the Trust
will be the Junior Subordinated Debentures.
S-14
<PAGE>
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with the
Company's financial statements, with the Preferred Securities shown as
Company-obligated mandatorily redeemable preferred securities in grantor
trusts holding junior subordinated debentures of the Company.
USE OF PROCEEDS
The proceeds of the sale of the Preferred Securities will be invested by
the Trust in Junior Subordinated Debentures of the Company. The proceeds from
the issuance of such Junior Subordinated Debentures will be used by the
Company for the reduction of short-term borrowings, and for general corporate
purposes. Short-term borrowings are from banks and other financial
institutions and are generally demand obligations at interest rates
approximating Federal fund rates.
S-15
<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration which is qualified under the Trust Indenture Act. The Property
Trustee, The Bank of New York, but not the other Trustees of the Trust, will
act as the indenture trustee for purposes of the Trust Indenture Act. The
terms of the Preferred Securities and the Declaration include those stated in
the Declaration and those made part of the Declaration by the Trust Indenture
Act and the Business Trust Act. The following summarizes the material terms
and provisions of the Preferred Securities and is qualified in its entirety
by reference to, the Declaration, which has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement forms a part, the
Business Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Trust to issue the Preferred Securities,
which represent preferred undivided beneficial interests in the assets of the
Trust, and the Common Securities, which represent common undivided beneficial
interests in the assets of the Trust. All of the Common Securities will be
owned, directly or indirectly, by the Company. The Common Securities and the
Preferred Securities rank pari passu with each other and will have equivalent
terms except that (i) if an Event of Default under the Declaration occurs and
is continuing, the rights of the holders of the Common Securities to payment
in respect of periodic distributions and payments upon liquidation,
redemption or otherwise are subordinated to the rights of the holders of the
Preferred Securities and (ii) holders of Common Securities have the exclusive
right (subject to the terms of the Declaration) to appoint, remove or replace
Trustees and to increase or decrease the number of Trustees. The Declaration
does not permit the issuance by the Trust of any securities or other
evidences of beneficial ownership of, or beneficial interests in, the Trust
other than the Preferred Securities and the Common Securities, the incurrence
of any indebtedness for borrowed money by the Trust or the making of any
investment other than in the Junior Subordinated Debentures. Pursuant to the
Declaration, the Property Trustee will own and hold the Junior Subordinated
Debentures as trust assets for the benefit of the holders of the Preferred
Securities and the Common Securities. The payment of distributions out of
moneys held by the Property Trustee and payments on redemption of the
Preferred Securities or liquidation of the Trust are guaranteed by the
Company on a subordinated basis as and to the extent described under
"Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. The Property Trustee will hold the Preferred Securities Guarantee
for the benefit of holders of the Preferred Securities. The Preferred
Securities Guarantee is a full and unconditional guarantee from the time of
issuance of the Preferred Securities, but the Preferred Securities Guarantee
covers distributions and other payments on the Preferred Securities only if
and to the extent that the Company has made a payment to the Property Trustee
of interest or principal on the Junior Subordinated Debentures deposited in
the Trust as trust assets. See "Voting Rights."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per
annum of 8.42% of the stated liquidation amount of $25 per Preferred
Security. Distributions in arrears for more than one month will bear interest
thereon at the rate per annum of 8.42% of the stated liquidation amount of
$25 per Preferred Security (to the extent permitted by law), compounded
monthly. The term "distributions" as used herein includes any such interest
payable unless otherwise stated. The amount of distributions payable for any
period will be computed on the basis of a 360-day year of twelve 30-day
months.
Distributions on the Preferred Securities will be cumulative, will accrue
from the original date of issuance and, except as otherwise described below,
will be payable monthly in arrears on the last day of each month, commencing
on September 30, 1996, but only if, and to the extent that, interest payments
are made in respect of Junior Subordinated Debentures held by the Property
Trustee.
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures
by extending the interest payment period from time to time on the Junior
Subordinated Debentures for a period not exceeding 60 consecutive monthly
interest periods and, as a
S-16
<PAGE>
consequence, the Trust would defer monthly distributions on the Preferred
Securities (though such distributions would continue to accrue with interest
thereon at the rate of 8.42% per annum, compounded monthly) during any such
Extension Period. If the Company exercises the right to extend an interest
payment period, the Company may not declare or pay dividends on, or redeem,
purchase, acquire or make a distribution or liquidation payment with respect
to, any of its common stock or preferred stock during such Extension Period;
provided that (i) the Company will be permitted to pay accrued dividends upon
the exchange or redemption of any series of preferred stock of the Company as
may be outstanding from time to time, in accordance with the terms of such
stock, and (ii) the foregoing will not apply to any stock dividend by the
Company. Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period; provided that such Extension Period
together with all such previous and further extensions thereof may not exceed
60 consecutive monthly interest periods. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. The
Company may also prepay at any time all or any portion of the interest
accrued during an Extension Period. Consequently, there could be multiple
Extension Periods of varying lengths throughout the term of the Junior
Subordinated Debentures, not to exceed 60 consecutive months or to cause any
extension beyond the maturity of the Junior Subordinated Debentures. See
"Risk Factors" "--Option to Extend Interest Payment Period; Tax Impact of
Extension"; "Description of the Junior Subordinated Debentures--Interest" and
"--Option to Extend Interest Payment Period." Payments of accrued
distributions will be payable to holders of Preferred Securities as they
appear on the books and records of the Trust on the first record date after
the end of an Extension Period.
Distributions on the Preferred Securities must be paid on the dates
payable to the extent that the Property Trustee has cash on hand in the
Property Account to permit such payment. The funds available for distribution
to the holders of the Preferred Securities will be limited to payments
received by the Property Trustee in respect of the Junior Subordinated
Debentures that are deposited in the Trust as trust assets. See "Description
of the Junior Subordinated Debentures." If the Company does not make interest
payments on the Junior Subordinated Debentures, the Property Trustee will not
make distributions on the Preferred Securities. Under the Declaration, if and
to the extent the Company does make interest payments on the Junior
Subordinated Debentures deposited in the Trust as trust assets, the Property
Trustee is obligated to make distributions on the Trust Securities on a Pro
Rata Basis. The payment of distributions on the Preferred Securities is
guaranteed by the Company on a subordinated basis as and to the extent set
forth under "Description of the Preferred Securities Guarantees" in the
accompanying Prospectus. The Preferred Securities Guarantee is a full and
unconditional guarantee from the time of issuance of the Preferred Securities
but the Preferred Securities Guarantee covers distributions and other
payments on the Preferred Securities only if and to the extent that the
Company has made a payment to the Property Trustee of interest or principal
on the Junior Subordinated Debentures deposited in the Trust as trust assets.
Distributions on the Preferred Securities will be made to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
form, will be one Business Day (as defined herein) prior to the relevant
Distribution payment date. Distributions payable on any Preferred Securities
that are not punctually paid on any Distribution payment date as a result of
the Company having failed to make the corresponding interest payment on the
Junior Subordinated Debentures will forthwith cease to be payable to the
person in whose name such Preferred Security is registered on the relevant
record date, and such defaulted Distribution will instead be payable to the
person in whose name such Preferred Security is registered on the special
record date established by the Regular Trustees, which record date shall
correspond to the special record date or other specified date determined in
accordance with the Indenture; provided, however, that Distributions shall
not be considered payable on any Distribution payment date falling within an
Extension Period unless the Company has elected to make a full or partial
payment of interest accrued on the Junior Subordinated Debentures on such
Distribution payment date. Distributions on the Preferred Securities will be
paid through the Property Trustee who will hold amounts received in respect
of the Junior Subordinated Debentures in the Property Account for the benefit
of the holders of the Preferred and Common Securities. Subject to any
applicable laws and regulations and the provisions of
S-17
<PAGE>
the Declaration, each such payment will be made as described under
"Book-Entry Only Issuance--The Depository Trust Company" below. In the event
that the Preferred Securities do not continue to remain in book-entry form,
the Regular Trustees shall have the right to select relevant record dates
which shall be more than one Business Day prior to the relevant payment
dates. The Declaration provides that the payment dates or record dates for
the Preferred Securities shall be the same as the payment dates and record
dates for the Junior Subordinated Debentures. All distributions paid with
respect to the Trust Securities shall be paid on a Pro Rata Basis to the
holders thereof entitled thereto. If any date on which distributions are to
be made on the Preferred Securities is not a Business Day, then payment of
the distribution to be made on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in
respect of any such delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if
made on such date. "Business Day" shall mean any day other than Saturday,
Sunday or any other day on which banking institutions in the City of New York
in the State of New York) are permitted or required by any applicable law to
close.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event or an Investment Company Event (each as
hereinafter defined, and each a "Special Event") shall occur and be
continuing, the Trust shall, unless the Junior Subordinated Debentures are
redeemed in the limited circumstances described below, be dissolved with the
result that, after satisfaction of creditors of the Trust, Junior
Subordinated Debentures with an aggregate principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities and the
Common Securities would be distributed on a Pro Rata Basis to the holders of
the Preferred Securities and the Common Securities in liquidation of such
holders' interests in the Trust, within 90 days following the occurrence of
such Special Event; provided, however, that in the case of the occurrence of
a Tax Event, as a condition of such dissolution and distribution, the Regular
Trustees shall have received an opinion of nationally recognized independent
tax counsel experienced in such matters (a "No Recognition Opinion"), which
opinion may rely on any then applicable published revenue rulings of the
Internal Revenue Service, to the effect that the holders of the Preferred
Securities will not recognize any gain or loss for United States Federal
income tax purposes as a result of such dissolution and distribution of
Junior Subordinated Debentures; and, provided, further, that, if at the time
there is available to the Trust the opportunity to eliminate, within such 90
day period, the Special Event by taking some ministerial action, such as
filing a form or making an election, or pursuing some other similar
reasonable measure, which has no adverse effect on the Trust or the Company
or the holders of the Preferred Securities, the Trust will pursue such
measure in lieu of dissolution. Furthermore, if in the case of the occurrence
of a Tax Event, (i) the Regular Trustees have received an opinion (a
"Redemption Tax Opinion") of nationally recognized independent tax counsel
experienced in such matters that, as a result of a Tax Event, there is more
than an insubstantial risk that the Company would be precluded from deducting
the interest on the Junior Subordinated Debentures for United States Federal
income tax purposes even if the Junior Subordinated Debentures were
distributed to the holders of Preferred Securities and Common Securities in
liquidation of such holders' interests in the Trust as described above or
(ii) the Regular Trustees shall have been informed by such tax counsel that a
No Recognition Opinion cannot be delivered to the Trust, the Company shall
have the right, upon not less than 30 nor more than 60 days notice, to redeem
the Junior Subordinated Debentures in whole or in part for cash within 90
days following the occurrence of such Tax Event, and promptly following such
redemption Preferred Securities and Common Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debentures so redeemed will be redeemed by the Trust at the
Redemption Price on a Pro Rata Basis; provided, however, that if at the time
there is available to the Company or the Regular Trustees the opportunity to
eliminate, within such 90 day period, the Tax Event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure, which has no adverse effect on the
Trust, the Company or the holders of the Preferred Securities, the Company
will pursue such measure in lieu of redemption and provided further that the
Company shall have no right to redeem the Junior Subordinated Debentures
while the Regular Trustees on behalf of the
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Trust are pursuing any such ministerial action. The Common Securities will be
redeemed on a Pro Rata Basis with the Preferred Securities, except that if an
Event of Default under the Declaration has occurred and is continuing, the
Preferred Securities will have a priority over the Common Securities with
respect to payment of the Redemption Price.
"Tax Event" means that the Regular Trustees shall have obtained an opinion
of a nationally recognized independent tax counsel experienced in such
matters (a "Dissolution Tax Opinion") to the effect that on or after the date
of this Prospectus Supplement as a result of (a) any amendment to, or change
in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, (b) any
amendment to, or change in, an interpretation or application of any such laws
or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
effective or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after the date of this Prospectus
Supplement, there is more than an insubstantial risk that (i) the Trust is,
or will be within 90 days of the date thereof, subject to United States
Federal income tax with respect to income accrued or received on the Junior
Subordinated Debentures, (ii) the Trust is, or will be within 90 days of the
date thereof, subject to more than a de minimis amount of other taxes, duties
or other governmental charges or (iii) interest payable by the Company to the
Trust on the Junior Subordinated Debentures is not, or within 90 days of the
date thereof will not be, deductible by the Company for United States Federal
income tax purposes.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced
in practice under the Investment Company Act of 1940, as amended (the "1940
Act"), that as a result of the occurrence of a change in law or regulation or
a change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), there is more than an insubstantial risk that the
Trust is or will be considered an "investment company" which is required to
be registered under the 1940 Act, which Change in 1940 Act Law becomes
effective on or after the date of this Prospectus Supplement.
On the date fixed for any distribution of Junior Subordinated Debentures,
upon dissolution of the Trust, (i) the Preferred Securities and the Common
Securities will no longer be deemed to be outstanding, (ii) the depositary or
its nominee, as the record holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution, and (iii) any
certificates representing Preferred Securities not held by the depositary or
its nominee will be deemed to represent Junior Subordinated Debentures having
an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on,
such Preferred Securities, until such certificates are presented to the
Company or its agent for transfer or reissuance.
There can be no assurance as to the market price for the Junior
Subordinated Debentures which may be distributed in exchange for Preferred
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Junior Subordinated Debentures which the investor may
subsequently receive on dissolution and liquidation of the Trust, may trade
at a discount to the price of the Preferred Securities exchanged. If the
Junior Subordinated Debentures are distributed to the holders of Preferred
Securities upon the dissolution of the Trust, the Company will use its best
efforts to list the Junior Subordinated Debentures on the NYSE or on such
other exchange on which the Preferred Securities are then listed.
MANDATORY REDEMPTION
Upon the repayment of the Junior Subordinated Debentures, whether at
maturity, upon redemption or otherwise, the proceeds from such repayment or
payment will be promptly applied to redeem Preferred Securities and Common
Securities having an aggregate liquidation amount equal to the Junior
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Subordinated Debentures so repaid, upon not less than 30 nor more than 60
days' notice, at the Redemption Price. The Common Securities will be entitled
to be redeemed on a Pro Rata Basis with the Preferred Securities, except that
if an Event of Default under the Declaration has occurred and is continuing,
the Preferred Securities will have a priority over the Common Securities with
respect to payment of the Redemption Price. Subject to the foregoing, if
fewer than all outstanding Preferred Securities and Common Securities are to
be redeemed, the Preferred Securities and Common Securities will be redeemed
on a Pro Rata Basis. In the event fewer than all outstanding Preferred
Securities are to be redeemed, Preferred Securities registered in the name of
and held by DTC or its nominee will be redeemed as described under
"Book-Entry-Only; Delivery and Form" below.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all monthly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable) then, by 12:00 noon, New York
City time, on the redemption date and provided that the Company has paid to
the Property Trustee a sufficient amount of cash in connection with the
related redemption or maturity of the Junior Subordinated Debentures, the
Trust will irrevocably deposit with the Depositary funds sufficient to pay
the applicable Redemption Price and will give the Depositary irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Preferred Securities. See "Book-Entry Only Issuance--The Depository Trust
Company." If notice of redemption shall have been given and funds deposited
as required, then, immediately prior to the close of business on the date of
such deposit, distributions will cease to accrue on the Preferred Securities
called for redemption, such Preferred Securities shall no longer be deemed to
be outstanding and all rights of holders of such Preferred Securities so
called for redemption will cease, except the right of the holders of such
Preferred Securities to receive the Redemption Price, but without interest on
such Redemption Price. Neither the Trustees nor the Trust shall be required
to register or cause to be registered the transfer of any Preferred
Securities which have been so called for redemption. If any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect
of any such delay) except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If the Company fails to repay Junior Subordinated
Debentures on maturity or on the date fixed for this redemption or if payment
of the Redemption Price in respect of Preferred Securities is improperly
withheld or refused and not paid by the Property Trustee or by the Company
pursuant to the Preferred Securities Guarantee described under "Description
of the Preferred Securities Guarantee" in the accompanying Prospectus,
distributions on such Preferred Securities will continue to accrue, from the
original redemption date of the Preferred Securities to the date of payment,
in which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities
are to be redeemed, the Preferred Securities will be redeemed as described
below under "Book-Entry Only Issuance--The Depository Trust Company."
If a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by any national securities exchange or
other organization on which the Preferred Securities are then listed, the
Company pursuant to the Indenture will only redeem Debentures in whole and,
as a result, the Trust may only redeem the Preferred Securities in whole.
Subject to the foregoing and applicable law (including, without
limitation, United States Federal securities laws), the Company or any of its
subsidiaries may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
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LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, liquidation,
winding-up or termination of the Trust, the holders of the Preferred
Securities and Common Securities at the date of dissolution, winding-up or
termination of the Trust will be entitled to receive on a Pro Rata Basis
solely out of the assets of the Trust, after satisfaction of liabilities of
creditors (to the extent not satisfied by the Company as provided in the
Declaration), an amount equal to the aggregate of the stated liquidation
amount of $25 per Trust Security plus accrued and unpaid distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"), unless, in connection with such dissolution, liquidation,
winding-up or termination, Junior Subordinated Debentures in an aggregate
principal amount equal to the aggregate stated liquidation amount of such
Trust Securities and bearing accrued and unpaid interest in an amount equal
to the accrued and unpaid distributions on such Trust Securities, shall be
distributed on a Pro Rata Basis to the holders of the Preferred Securities
and Common Securities in exchange therefor.
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Preferred Securities and the Common Securities
shall be paid on a Pro Rata Basis. The holders of the Common Securities will
be entitled to receive distributions upon any such dissolution on a Pro Rata
Basis with the holders of the Preferred Securities, except that if an Event
of Default under the Declaration has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities with
respect to payment of the Liquidation Distribution.
Pursuant to the Declaration, the Trust shall terminate: (i) on June 30,
2046; (ii) when all of the Trust Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have been
paid to the holders of Trust Securities in accordance with the terms of the
Trust Securities; or (iii) when all of the Junior Subordinated Debentures
shall have been distributed to the holders of Trust Securities in exchange
for all of the Trust Securities in accordance with the terms of the Trust
Securities.
NO MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets to, any
corporation or other entity.
DECLARATION EVENTS OF DEFAULT
An Indenture Event of Default (as defined in the accompanying Prospectus)
will constitute an event of default under the Declaration with respect to the
Trust Securities (an "Event of Default"); provided that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have
waived any such Event of Default with respect to the Common Securities until
all Events of Default with respect to the Preferred Securities have been
cured or waived. Until all such Events of Default with respect to the
Preferred Securities have been so cured or waived, the Property Trustee will
be deemed to be acting solely on behalf of the holders of the Preferred
Securities, and only the holders of the Preferred Securities will have the
right to direct the Property Trustee with respect to certain matters under
the Declaration and consequently under the Indenture. In the event that any
Event of Default with respect to the Preferred Securities is waived by the
holders of the Preferred Securities as provided in the Declaration, the
holders of Common Securities pursuant to the Declaration have agreed that
such waiver also constitutes a waiver of such Event of Default with respect
to the Common Securities for all purposes under the Declaration without any
further act, vote or consent of the holders of the Common Securities. See
"Voting Rights."
Upon the occurrence of an Event of Default, the Property Trustee as the
holder of all of the Junior Subordinated Debentures will have the right under
the Indenture to declare the principal of and interest on the Junior
Subordinated Debentures to be immediately due and payable. In addition, the
Property Trustee will have the power to exercise all rights, powers and
privileges under the Indenture. See "Description of the Junior Subordinated
Debentures."
VOTING RIGHTS
Except as provided below, under "Modification and Amendment of the
Declaration" and "Description of the Preferred Securities
Guarantee--Amendments and Assignment" in the accompanying
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Prospectus and as otherwise required by the Business Trust Act, the Trust
Indenture Act and the Declaration, the holders of the Preferred Securities
will have no voting rights.
Subject to the requirements of the second to last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right (i) on behalf of all holders of Preferred
Securities, to waive any past default that is waivable under the Declaration
and (ii) to direct the time, method and place of conducting any proceeding
for any remedy available to the Property Trustee, or exercising any trust or
power conferred upon the Property Trustee under the Declaration, including
the right to direct the Property Trustee, as the holder of the Junior
Subordinated Debentures, to (A) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee
(as defined herein), or executing any trust or power conferred on the
Indenture Trustee with respect to the Junior Subordinated Debentures, (B)
waive any past default that is waivable under Section 6.06 of the Indenture,
or (C) exercise any right to rescind or annul a declaration that the
principal of all the Junior Subordinated Debentures shall be due and payable;
provided that where a consent under the Indenture would require the consent
of (a) holders of Junior Subordinated Debentures representing a specified
percentage greater than a majority in principal amount of the Junior
Subordinated Debentures or (b) each holder of Junior Subordinated Debentures
affected thereby, no such consent shall be given by the Property Trustee
without the prior consent of, in the case of clause (a) above, holders of
Preferred Securities representing such specified percentage of the aggregate
liquidation amount of the Preferred Securities or, in the case of clause (b)
above, each holder of all Preferred Securities affected thereby. The Property
Trustee shall not revoke any action previously authorized or approved by a
vote of the holders of Preferred Securities. The Property Trustee shall
notify all holders of record of Preferred Securities of any notice of default
received from the Indenture Trustee with respect to the Junior Subordinated
Debentures. Other than with respect to directing the time, method and place
of conducting any proceeding for any remedy available to the Property Trustee
or the Indenture Trustee as set forth above, the Property Trustee shall be
under no obligation to take any of the foregoing actions at the direction of
the holders of the Preferred Securities unless the Property Trustee shall
have obtained an opinion of nationally recognized independent tax counsel
recognized as expert in such matters to the effect that the Trust will not be
classified for United States Federal income tax purposes as an association
taxable as a corporation or a partnership on account of such action and will
be treated as a grantor trust for United States Federal income tax purposes
following such action. If the Property Trustee fails to enforce its rights
under the Declaration (including, without limitation, its rights, powers and
privileges as a holder of the Debentures under the Indenture), any holder of
Preferred Securities may, to the extent permitted by applicable law, after a
period of 30 days has elapsed from such holder's written request to the
Property Trustee to enforce such rights, institute a legal proceeding
directly against the Company to enforce the Property Trustee's rights under
the Declaration, without first instituting a legal proceeding against the
Property Trustee or any other Person.
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of holders of the Preferred Securities will constitute a waiver of
the corresponding Event of Default under the Declaration in respect of the
Trust Securities.
In the event the consent of the Property Trustee as the holder of the
Junior Subordinated Debentures is required under the Indenture with respect
to any amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, the Property Trustee shall request the direction of
the holders of the Trust Securities with respect to such amendment,
modification or termination and shall vote with respect to such amendment,
modification or termination as directed by a majority in liquidation amount
of the Trust Securities voting together as a single class; provided, however,
that where any such amendment, modification or termination under the
Indenture would require the consent of holders of Junior Subordinated
Debentures representing a specified percentage greater than a majority in
principal amount of the Junior Subordinated Debentures, the Property Trustee
may only give such consent at the direction of the holders of Trust
Securities representing such specified percentage of the aggregate
liquidation amount of the Trust Securities; and, provided, further, that the
Property Trustee shall be under no obligation to take any such action in
accordance with the directions of the holders of the Trust Securities unless
the Property Trustee has obtained an opinion of nationally recognized
independent tax
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counsel recognized as expert in such matters to the effect that the Trust
will not be classified for United States Federal income tax purposes as an
association taxable as a corporation or a partnership on account of such
action and will be treated as a grantor trust for United States Federal
income tax purposes following such action.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened
for such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth (i) the date of such
meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought;
and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the holders of Preferred Securities will be required
for the Trust to redeem and cancel Preferred Securities or distribute Junior
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the
Preferred Securities at such time that are owned by the Company or by any
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if
they were not outstanding.
The procedures by which persons owning Preferred Securities registered in
the name of and held by DTC or its nominee may exercise their voting rights
are described under "Book-Entry; Delivery and Form" below.
Holders of the Preferred Securities will have no rights to increase or
decrease the number of Trustees or to appoint, remove or replace a Trustee,
which rights are vested exclusively in the holders of the Common Securities.
MODIFICATION AND AMENDMENT OF THE DECLARATION
The Declaration may be modified and amended on approval of a majority of
the Regular Trustees, provided, that, if any proposed modification or
amendment provides for, or the Regular Trustees otherwise propose to effect,
(a) any action that would adversely affect the powers, preferences or special
rights of the Trust Securities, whether by way of amendment to the
Declaration or otherwise, or (b) the dissolution, winding-up or termination
of the Trust other than pursuant to the terms of the Declaration, then the
holders of the outstanding Trust Securities as a class will be entitled to
vote on such amendment or proposal and such amendment or proposal shall not
be effective except with the approval of at least 66 2/3% in liquidation
amount of the Trust Securities, provided that if any amendment or proposal
referred to above would adversely affect only the Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of 66 2/3% in liquidation amount of such
class of Securities.
Notwithstanding the foregoing, (i) no amendment or modification may be
made to the Declaration unless the Regular Trustees shall have obtained (a)
either a ruling from the Internal Revenue Service or a written unqualified
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that such amendment will not cause the Trust to be
classified for United States Federal income tax purposes as an association
taxable as a corporation or a partnership and to the effect that the Trust
will continue to be treated as a grantor trust for purposes of United States
Federal income taxation and (b) a written unqualified opinion of nationally
recognized independent counsel experienced in such matters to the effect that
such amendment will not cause the Trust to be an "investment company" which
is required to be registered under the 1940 Act; (ii) certain specified
provisions of the Declaration may not be amended without the consent of all
of the holders of the Trust Securities; (iii) no amendment which adversely
affects the rights, powers and privileges of the Property Trustee shall be
made without
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the consent of the Property Trustee; (iv) Article IV of the Declaration
relating to the obligation of the Company to purchase the Common Securities
and to pay certain obligations and expenses of the Trust as described under
"The DLJ Trusts" in the accompanying Prospectus may not be amended without
the consent of the Company; and (v) the rights of holders of Common
Securities under Article V of the Declaration to increase or decrease the
number of, and to appoint, replace or remove, Trustees shall not be amended
without the consent of each holder of Common Securities.
The Declaration further provides that it may be amended without the
consent of the holders of the Trust Securities to (i) cure any ambiguity;
(ii) correct or supplement any provision in the Declaration that may be
defective or inconsistent with any other provision of the Declaration; (iii)
to add to the covenants, restrictions or obligations of the Company; and (iv)
to conform to changes in, or a change in interpretation or application of
certain 1940 Act requirements by the Commission, which amendment does not
adversely affect the rights, preferences or privileges of the holders.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as
fully registered securities registered in the name of DTC or its nominee. One
or more fully-registered global Preferred Securities certificates (each a
"Preferred Securities Global Certificate"), representing the total aggregate
number of Preferred Securities, will be issued and will be deposited with
DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in a global Preferred
Security.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC holds securities that its participants ("Participants") deposit with
DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations ("Direct
Participants"). DTC is owned by a number of its Direct Participants and by
the NYSE, the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable
to DTC and its Participants are on file with the Securities and Exchange
Commission.
Upon issuance of a Preferred Securities Global Certificate, DTC will
credit on its book-entry registration and transfer system the number of
Preferred Securities represented by such Preferred Securities Global
Certificate to the accounts of institutions that have accounts with DTC.
Ownership of beneficial interests in a Preferred Securities Global
Certificate will be limited to Participants or persons that may hold
interests through Participants. The ownership interest of each actual
purchaser of each Preferred Security ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the
Beneficial Owners purchased Preferred Securities. Transfers of ownership
interests in the Preferred Securities are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Preferred Securities are
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credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers. So long as DTC, or its nominee, is the owner of a Preferred
Securities Global Certificate, DTC or such nominee, as the case may be, will
be considered the sole owner and holder of record of the Preferred Securities
represented by such Preferred Securities Global Certificate for all purposes.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce pro rata (subject to
adjustment to eliminate fractional Preferred Securities) the amount of
interest of each Direct Participant in the Preferred Securities to be
redeemed.
Although voting with respect to the Preferred Securities is limited, in
those instances in which a vote is required, neither DTC nor Cede & Co.
itself will consent or vote with respect to Preferred Securities. Under its
usual procedures, DTC would mail an Omnibus Proxy to the Trust as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts
the Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus proxy).
Distribution payments on the Preferred Securities represented by a
Preferred Series Global Certificate will be made by the Property Trustee to
DTC. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payments on such payment date. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices and will be
the responsibility of such Participants and not of DTC, the Trust or the
Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of distributions to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments
to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
Except as provided herein, a Beneficial Owner in a global Preferred
Security certificate will not be entitled to receive physical delivery of
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving reasonable notice
to the Trust. Under such circumstances, if a successor securities depository
is not obtained, Preferred Security certificates will be required to be
printed and delivered. Additionally, the Trust may decide to discontinue use
of the system of book-entry transfers through DTC (or a successor
depository). In that event, certificates for the Preferred Securities will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trust and the Company believe to be
reliable, but the Trust and the Company take no responsibility for the
accuracy thereof.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
In the event the Preferred Securities do not remain in book-entry only
form, the following provisions will apply:
Payment of distributions and payments on redemption of the Preferred
Securities will be payable, the transfer of the Preferred Securities will be
registrable, and Preferred Securities will be exchangeable for Preferred
Securities of other denominations of a like aggregate liquidation amount, at
the principal corporate trust office of the Property Trustee in The City of
New York; provided that payment of
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distributions may be made at the option of the Regular Trustees on behalf of
the Trust by check mailed to the address of the persons entitled thereto and
that the payment on redemption of any Preferred Security will be made only
upon surrender of such Preferred Security to the Property Trustee.
The Bank of New York or one of its affiliates will act as registrar and
transfer agent for the Preferred Securities. The Bank of New York will also
act as paying agent and, with the consent of the Regular Trustees, may
designate additional paying agents.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of
such indemnity as the Trust or the Company may require) in respect of any tax
or other governmental charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to a default with respect to the Trust
Securities, undertakes to perform only such duties as are specifically set
forth in the Declaration and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her
own affairs. Subject to such provision, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. The Property Trustee is not required to expend or
risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Property Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
The Company and certain of its affiliates maintain a deposit account and
banking relationship with the Property Trustee.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to take such action as
they deem reasonable in order that the Trust will not be deemed to be an
"investment company" required to be registered under the 1940 Act or that the
Trust will not be classified for United States Federal income tax purposes as
an association taxable as a corporation or a partnership and will be treated
as a grantor trust for United States Federal income tax purposes. In this
connection, the Regular Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust or the
Declaration, that the Regular Trustees determine in their discretion to be
reasonable and necessary or desirable for such purposes, as long as such
action does not adversely affect the interests of holders of the Trust
Securities.
The Company and the Regular Trustees on behalf of the Trust will be
required to provide to the Property Trustee annually a certificate as to
whether or not the Company and the Trust, respectively, is in compliance with
all the conditions and covenants under the Declaration.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the Junior Subordinated Debentures in
which the Trust will invest the proceeds from the issuance and sale of the
Trust Securities and which will be deposited in the Trust as trust assets.
The terms of the Junior Subordinated Debentures include those stated in the
Indenture dated August 27, 1996 between the Company and The Bank of New York,
as trustee (the "Indenture Trustee") as supplemented by the First
Supplemental Indenture dated August 27, 1996 between the Company and the
Indenture Trustee (as so supplemented, the "Indenture"), forms of which have
been filed as exhibits to the Registration Statement of which this Prospectus
Supplement forms a part, and those made part of the Indenture by the Trust
Indenture Act. This description supplements the description of the general
terms and provisions of the Subordinated Debt Securities set forth in the
accompanying Prospectus under the caption "Description of the Junior
Subordinated Debt Securities." The following description does not purport to
be complete and is qualified in its entirety by reference to the Indenture
and the Trust Indenture Act. Whenever particular provisions or defined terms
in the Indenture are referred to herein, such provisions or defined terms are
incorporated by reference herein. Section and Article references used herein
are references to provisions of the Indenture.
The Indenture does not limit the aggregate principal amount of
indebtedness which may be issued thereunder and provides that junior
subordinated debentures may be issued thereunder from time to time in one or
more series (collectively, together with the Junior Subordinated Debentures,
the "Subordinated Debentures"). The Junior Subordinated Debentures constitute
a separate series under the Indenture.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Junior Subordinated Debentures
may be distributed to the holders of the Trust Securities in liquidation of
the Trust. See "Description of the Preferred Securities--Special Event
Redemption or Distribution."
GENERAL
The Junior Subordinated Debentures are unsecured, subordinated obligations
of the Company, limited in aggregate principal amount to an amount equal to
the sum of (i) the stated liquidation amount of the Preferred Securities
issued by the Trust and (ii) the proceeds received by the Trust upon issuance
of the Common Securities to the Company (which proceeds will be used to
purchase an equal principal amount of Junior Subordinated Debentures).
The entire principal amount of the Junior Subordinated Debentures will
become due and payable, together with any accrued and unpaid interest
thereon, on June 30, 2046. The Junior Subordinated Debentures are not subject
to any sinking fund.
If Junior Subordinated Debentures are distributed to holders of Preferred
Securities in dissolution of the Trust, such Junior Subordinated Debentures
will initially be issued as a Global Security (as defined below). As
described herein, under certain limited circumstances, Junior Subordinated
Debentures may be issued in certificated form in exchange for a Global
Security. See "Book-Entry and Settlement" below. In the event that Junior
Subordinated Debentures are issued in certificated form, such Junior
Subordinated Debentures will be in denominations of $25 and integral
multiples thereof and may be transferred or exchanged at the offices
described below. Payments on Junior Subordinated Debentures issued as a
Global Security will be made to DTC, a successor depositary or, in the event
that no depositary is used, to a paying agent for the Junior Subordinated
Debentures.
In the event that Junior Subordinated Debentures are issued in
certificated form, payments of principal and interest will be payable, the
transfer of the Junior Subordinated Debentures will be registrable, and
Junior Subordinated Debentures will be exchangeable for Junior Subordinated
Debentures of other denominations of a like aggregate principal amount, at
the corporate trust office of the Indenture Trustee in The City of New York;
provided that payment of interest may be made at the option of the Company by
check mailed to the address of the persons entitled thereto and that the
payment of principal with respect to any Junior Subordinated Debenture will
be made only upon surrender of such Junior Subordinated Debenture to the
Indenture Trustee.
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If the Junior Subordinated Debentures are distributed to the holders of
Preferred Securities upon the dissolution of the Trust, the Company will use
its best efforts to list the Junior Subordinated Debentures on the NYSE or on
such other exchange on which the Preferred Securities are then listed.
OPTIONAL REDEMPTION
Except as provided below, the Junior Subordinated Debentures may not be
redeemed prior to August 31, 2001. The Company shall have the right to redeem
the Junior Subordinated Debentures, in whole or in part, from time to time,
on or after August 31, 2001 upon not less than 30 nor more than 60 days'
notice, at a redemption price equal to 100% of the principal amount to be
redeemed, plus any accrued and unpaid interest, to the redemption date,
including interest accrued during an Extension Period. The Company will also
have the right to redeem the Junior Subordinated Debentures at any time upon
the occurrence of a Tax Event if certain conditions are met as described
under "Description of the Preferred Securities--Special Event Redemption or
Distribution."
If the Company gives a notice of redemption in respect of Junior
Subordinated Debentures (which notice will be irrevocable) then, by 12:00
noon, New York City time, on the redemption date, the Company will deposit
irrevocably with the Indenture Trustee funds sufficient to pay the applicable
redemption price and will give irrevocable instructions and authority to pay
such redemption price to the holders of the Junior Subordinated Debentures.
If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, interest will cease to accrue
on the Junior Subordinated Debentures called for redemption, such Junior
Subordinated Debentures will no longer be deemed to be outstanding and all
rights of holders of such Junior Subordinated Debentures so called for
redemption will cease, except the right of the holders of such Junior
Subordinated Debentures to receive the applicable redemption price, but
without interest on such redemption price. If any date fixed for redemption
of Junior Subordinated Debentures is not a Business Day, then payment of the
redemption price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect
of any such delay) except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If payment of the redemption price in respect of
Junior Subordinated Debentures is improperly withheld or refused and not paid
by the Company, interest on such Junior Subordinated Debentures will continue
to accrue, from the original redemption date to the date of payment, in which
case the actual payment date will be considered the date fixed for redemption
for purposes of calculating the applicable redemption price. If fewer than
all of the Junior Subordinated Debentures are to be redeemed, the Junior
Subordinated Debentures to be redeemed shall be selected by lot or pro rata
or in some other equitable manner determined by the Indenture Trustee.
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange any Junior Subordinated
Debentures during a period beginning at the opening of business 15 days
before any selection for redemption of Junior Subordinated Debentures and
ending at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all holders of Junior
Subordinated Debentures to be redeemed and (ii) register the transfer of or
exchange any Junior Subordinated Debentures so selected for redemption, in
whole or in part, except the unredeemed portion of any Junior Subordinated
Debentures being redeemed in part. (Section 2.05)
INTEREST
The Junior Subordinated Debentures will bear interest at the rate of 8.42%
per annum from the original date of issuance. Interest will be payable
monthly in arrears on the last day of each month (each, an "Interest Payment
Date"), commencing on September 30, 1996 to the person in whose name such
Junior Subordinated Debenture is registered, subject to certain exceptions,
at the close of business on the Business Day next preceding such Interest
Payment Date. In the event (i) the Preferred Securities shall not continue to
remain in book-entry only form or (ii) if following distribution of the
Junior Subordinated Debentures to holders of Trust Securities upon
dissolution of the Trust as described under "Description
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of the Preferred Securities," the Junior Subordinated Debentures shall not
continue to remain in book-entry only form, the relevant record date will be
the fifteenth day of the month prior to the relevant Interest Payment Date.
Interest payable on any Junior Subordinated Debenture that is not punctually
paid or duly provided for on any interest payment date will forthwith cease
to be payable to the person in whose name such Junior Subordinated Debenture
is registered on the relevant record date, and such defaulted interest will
instead be payable to the person in whose name such Junior Subordinated
Debenture is registered on the special record date or other specified date
determined in accordance with the Indenture; provided, however, that interest
shall not be considered payable by the Company on any interest payment date
falling within an Extension Period unless the Company has elected to make a
full or partial payment of interest accrued on the Junior Subordinated
Debentures on such interest payment date.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months and for any period shorter
than a full monthly period for which interest is computed, the amount of
interest payable will be computed on the basis of the actual number of days
lapsed. If any date on which interest is payable on the Junior Subordinated
Debentures is not a Business Day, then payment of the interest payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company shall have the right to
extend the interest payment period from time to time for period not exceeding
60 consecutive months. The Company has no current intention of exercising its
right to extend an interest payment period. No interest shall be due and
payable during an Extension Period, except at the end thereof. During any
Extension Period, the Company shall not declare or pay any dividends on, or
redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its common stock or preferred stock or make any guarantee
payments with respect thereto; provided that (i) the Company will be
permitted to pay accrued dividends upon exchange or redemption of any series
of preferred stock of the Company as may be outstanding from time to time, in
accordance with the terms of such stock and (ii) the foregoing will not apply
to stock dividends paid by the Company. Prior to the termination of any such
Extension Period, the Company may further extend the interest payment period;
provided that such Extension Period together with all such previous and
further extensions thereof may not exceed 60 consecutive months. On the
interest payment date occurring at the end of each Extension Period, the
Company shall pay to the holders of Junior Subordinated Debentures of record
on the record date for such interest payment date (regardless of who the
holders of record may have been on other dates during the Extension Period)
all accrued and unpaid interest on the Junior Subordinated Debentures,
together with interest thereon at the rate specified for the Junior
Subordinated Debentures to the extent permitted by applicable law, compounded
monthly ("Compounded Interest"). Upon the termination of any Extension Period
and the payment of all amounts then due, the Company may commence a new
Extension Period, subject to the above requirements. The Company may also
prepay at any time all or any portion of the interest accrued during an
Extension Period. Consequently, there could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures,
not to exceed 60 consecutive months or to cause any extension beyond maturity
of the Junior Subordinated Debentures. The failure by the Company to make
interest payments during an Extension Period would not constitute a default
or an event of default under the Indenture or the Company's currently
outstanding indebtedness.
If the Property Trustee shall be the sole holder of the Junior
Subordinated Debentures, the Company shall give the Property Trustee notice
of its selection of such Extension Period one Business Day prior to the
earlier of (i) the date the distributions on the Preferred Securities are
payable or (ii) the date the Trust is required to give notice to the NYSE or
other applicable self-regulatory organization or to holders of the Preferred
Securities of the record date or the date such distribution is payable. The
Trust shall give notice of the Company's selection of such Extension Period
to the holders of the Preferred Securities.
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If Junior Subordinated Debentures have been distributed to holders of
Trust Securities, the Company shall give the holders of the Junior
Subordinated Debentures notice of its selection of such Extension Period ten
Business Days prior to the earlier of (i) the next succeeding Interest
Payment Date or (ii) the date the Company is required to give notice to the
NYSE (if the Junior Subordinated Debentures are then listed thereon) or other
applicable self-regulatory organization or to holders of the Junior
Subordinated Debentures of the record or payment date of such related
interest payment.
COMPOUNDED INTEREST
Payments of Compounded Interest on the Junior Subordinated Debentures held
by the Trust will make funds available to pay any interest on distributions
in arrears in respect of the Preferred Securities pursuant to the terms
thereof.
BOOK-ENTRY AND SETTLEMENT
If any Junior Subordinated Debentures are distributed to holders of
Preferred Securities (see "Description of the Preferred Securities"), such
Junior Subordinated Debentures will be issued in the form of one or more
global certificates (each a "Global Security") registered in the name of the
Depositary or its nominee. Except under the limited circumstances described
below, Junior Subordinated Debentures represented by the Global Security will
not be exchangeable for, and will not otherwise be issuable as, Junior
Subordinated Debentures in definitive form. The Global Securities described
above may not be transferred except by the depositary to a nominee of the
depositary or by a nominee of the depositary to the depositary or another
nominee of the depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debentures in definitive form and will not be considered the
holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debentures
shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the Depositary or its
nominee or to a successor Depositary or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of the Depositary or if such
person is not a Participant, on the procedures of the Participant through
which such person owns its interest to exercise any rights of a holder under
the Indenture. If Junior Subordinated Debentures are distributed to holder of
Preferred Securities, DTC will act as securities depositary for the Junior
Subordinated Debentures.
For a description of DTC and DTC's book-entry system, see "Description of
Preferred Securities--Book-Entry Only Issuance--The Depository Trust
Company." As of the date of this Prospectus Supplement, the description
herein of DTC's book-entry system and DTC's practices as they relate to
purchases, transfers, notices and payments with respect to the Preferred
Securities apply in all material respects to any debt obligations represented
by one or more Global Securities held by DTC. The Company may appoint a
successor to DTC or any successor depositary in the event DTC or such
successor depositary is unable or unwilling to continue as a depository for
the Global Securities.
None of the Company, the Indenture Trustee, any paying agent and any other
agent of the Company or the Indenture Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Security for such
Junior Subordinated Debentures or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
A Global Security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the depositary or its nominee
only if (i) the depositary notifies the Company that it is unwilling or
unable to continue as a depositary for such Global Security and no successor
depositary
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shall have been appointed; (ii) the depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the
depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed; (iii) the Company, in its
sole discretion, determines that such Global Security shall be so
exchangeable; or (iv) there shall have occurred an Indenture Event of Default
with respect to such Junior Subordinated Debentures. Any Global Security that
is exchangeable pursuant to the preceding sentence shall be exchangeable for
Junior Subordinated Debentures registered in such names as the depositary
shall direct. It is expected that such instructions will be based upon
directions received by the depositary from its Participants with respect to
ownership of beneficial interests in such Global Security.
RELATIONSHIP BETWEEN THE PREFERRED SECURITIES, THE JUNIOR
SUBORDINATED DEBENTURES AND THE PREFERRED SECURITIES GUARANTEE
As set forth in the Declaration, the Trust exists for the sole purpose of
(a) issuing the Trust Securities evidencing undivided beneficial interests in
the assets of the Trust, and investing the proceeds from such issuance and
sale in the Junior Subordinated Debentures and (b) engaging in such other
activities as are necessary and incidental thereto.
As long as payments of interest and other payments are made when due on
the Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Preferred Securities primarily
because (i) the aggregate principal amount of Junior Subordinated Debentures
held as trust assets will be equal to the sum of the aggregate stated
liquidation amount of the Preferred Securities and the proceeds received by
the Trust upon issuance of the Common Securities to the Company; (ii) the
interest rate and interest and other payment dates on the Junior Subordinated
Debentures will match the distribution rate and distribution and other
payment dates for the Preferred Securities; (iii) the Declaration provides
that the Company shall pay for all debts and obligations (other than with
respect to the Trust Securities) and all costs and expenses of the Trust,
including any taxes and all costs and expenses with respect thereto, to which
the Trust may become subject, except for United States withholding taxes; and
(iv) the Declaration further provides that the Trustees shall not cause or
permit the Trust, among other things, to engage in any activity that is not
consistent with the limited purposes of the Trust. With respect to clause
(iii) above, however, no assurance can be given that the Company will have
sufficient resources to enable it to pay such debts, obligations, costs and
expenses on behalf of the Trust.
Payments of distributions and other payments due on the Preferred
Securities are guaranteed by the Company on a subordinated basis as and to
the extent set forth under "Description of the Preferred Securities
Guarantee" in the accompanying Prospectus. If the Company does not make
interest or other payments on the Junior Subordinated Debentures, the Trust
will not make distributions or other payments on the Preferred Securities.
Under the Declaration, if and to the extent the Company does make interest or
other payments on the Junior Subordinated Debentures, the Property Trustee is
obligated to make distributions or other payments on the Preferred
Securities. The Preferred Securities Guarantee is a full and unconditional
guarantee from the time of issuance of the Preferred Securities, but the
Preferred Securities Guarantee covers distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment to the Property Trustee of interest or principal on the Junior
Subordinated Debentures deposited in the Trust as trust assets.
The Property Trustee will have the Power to exercise all rights, powers
and privileges under the Indenture with respect to the Junior Subordinated
Debentures, including its rights as the holder of the Junior Subordinated
Debentures to enforce the Company's obligations under the Junior Subordinated
Debentures upon the occurrence of an Indenture Event of Default, and will
also have the right to enforce the Preferred Securities Guarantee on behalf
of the holders of the Preferred Securities. In addition, the holders of at
least a majority in liquidation amount of the Preferred Securities will have
the right to direct the Property Trustee with respect to certain matters
under the Declaration and the Preferred Securities Guarantee. If the Property
Trustee fails to enforce its rights under the Indenture any holder of
Preferred Securities may, after a period of 30 days has elapsed from such
holder's written request to the Property Trustee to enforce such rights
institute a legal proceeding against the Company to enforce such rights. If
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the Property Trustee fails to enforce the Preferred Securities Guarantee, to
the extent permitted by applicable law, any holder of Preferred Securities
may institute a legal proceeding directly against the Company to enforce the
Property Trustee's rights under the Preferred Securities Guarantee. See
"Description of the Preferred Securities" and "Description of the Preferred
Securities Guarantee" in the accompanying Prospectus.
The above mechanisms and obligations, taken together, provide a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities.
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TAXATION
In the opinion of Davis Polk & Wardwell, counsel to the Company and the
Trust, the following are the material United States Federal income tax
consequences of the ownership and disposition of Preferred Securities. Unless
otherwise stated, this summary deals only with Preferred Securities held as
capital assets by holders who acquire the Preferred Securities upon original
issuance ("Initial Holders"). It does not deal with special classes of
holders, such as dealers in securities or currencies, life insurance
companies, persons holding Preferred Securities as part of a straddle or as
part of a hedging or conversion transaction, or persons whose functional
currency is not the United States dollar. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"). Treasury Regulations
thereunder and administrative and judicial interpretations thereof are of the
date hereof, all of which are subject to change (possibly on a retroactive
basis).
INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF
PREFERRED SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS
THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX LAWS.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Davis Polk &
Wardwell, counsel to the Company and the Trust, will render its opinion
generally to the effect that, under then current law and assuming full
compliance with the terms of the Declaration, the Trust will be classified
for United States Federal income tax purposes as a grantor trust and not as
an association taxable as a corporation. Accordingly, each holder of
Preferred Securities (a "Securityholder") will be considered the owner of a
pro rata portion of the Junior Subordinated Debentures held by the Trust.
Accordingly, each Securityholder will be required to include in gross income
his pro rata share of income accrued on the Junior Subordinated Debentures.
ACCRUAL OF ORIGINAL ISSUE DISCOUNT AND PREMIUM
It is more likely than not that the Junior Subordinated Debentures will be
considered to have been issued with "original issue discount" and the Company
intends to take that position in filing related information returns.
Accordingly, each Securityholder, including a taxpayer who otherwise uses the
cash method of accounting, will be required to include his pro rata share of
original issue discount on the Junior Subordinated Debentures in income as it
accrues, in accordance with a constant yield method based on a compounding of
interest, before the receipt of cash distributions on the Preferred
Securities. Generally, all of a Securityholder's taxable interest income with
respect to the Junior Subordinated Debentures will be accounted for as
"original issue discount" and actual distributions of stated interest will
not be separately reported as taxable income. So long as the interest payment
period is not extended, cash distributions received by an initial Holder for
any monthly interest period (assuming no disposition prior to the record date
for such distribution) will equal or exceed the sum of the daily accruals of
income for such monthly interest period, unless the issue price of the Junior
Subordinated Debentures (as defined below) is less than $25.
The total amount of "original issue discount" on the Junior Subordinated
Debentures will equal the difference between the "issue price" of the Junior
Subordinated Debentures and their "stated redemption price at maturity."
Because the Company has the right to extend the interest payment period of
the Junior Subordinated Debentures, all of the stated interest payments on
the Junior Subordinated Debentures will be includible in determining their
"stated redemption price at maturity." The "issue price" of each $25
principal amount of Junior Subordinated Debentures will be equal to the first
price to the public at which a substantial amount of the Preferred Securities
is sold for cash, which is expected to be $25.
A Securityholder's initial tax basis for his pro rata share of the Junior
Subordinated Debentures will be equal to his pro rata share of their "issue
price," as defined above, and will be increased by original issue discount
accrued with respect to his pro rata share of the Junior Subordinated
Debentures, and reduced by the amount of cash distributions with respect
thereto. No portion of the amounts received on the Preferred Securities will
be eligible for the dividends received deduction.
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POTENTIAL EXTENSION OF PAYMENT PERIOD ON THE JUNIOR SUBORDINATED DEBENTURES
Securityholders will continue to accrue original issue discount with
respect to their pro rata share of the Junior Subordinated Debentures during
an extended interest payment period, and any holders who dispose of Preferred
Securities prior to the record date for the payment of interest following
such extended interest payment period will not receive from the Trust any
cash related thereto.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED
SECURITIES
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures as described under the caption "Description of the Preferred
Securities--Special Event Redemption or Distribution," will be non-taxable
and will result in the Securityholder receiving directly his pro rata share
of the Junior Subordinated Debentures previously held indirectly through the
Trust, with a holding period and tax basis equal to the holding period and
adjusted tax basis such Securityholder was considered to have had in his pro
rata share of the underlying Junior Subordinated Debentures prior to such
distribution.
MARKET DISCOUNT AND BOND PREMIUM
Securityholders other than Initial Holders may be considered to have
acquired their pro rata interest in the Junior Subordinated Debentures with
market discount, acquisition premium or amortizable bond premium. Such
holders are advised to consult their tax advisors as to the income tax
consequences of the acquisition, ownership and disposition of the Preferred
Securities.
DISPOSITION OF THE PREFERRED SECURITIES
Upon a sale, exchange or other disposition of the Preferred Securities
(including a distribution of cash in redemption of a Securityholder's
Preferred Securities upon redemption or repayment of the underlying Junior
Subordinated Debentures, but excluding the distribution of Junior
Subordinated Debentures), a Securityholder will be considered to have
disposed of all or part of his pro rata share of the Junior Subordinated
Debentures, and will recognize gain or loss equal to the difference between
the amount realized and the Securityholder's adjusted tax basis in his pro
rata share of the underlying Junior Subordinated Debentures deemed disposed
of. Gain or loss will be capital gain or loss (except to the extent of any
accrued market discount with respect to such Securityholder's pro rata share
of the Junior Subordinated Debentures not previously included in income). See
"Market Discount and Bond Premium" above. Such gain or loss will be long-term
capital gain or loss if the Preferred Securities have been held for more than
one year.
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Debentures. A Securityholder who disposes of his
Preferred Securities between record dates for payments of distributions
thereon will nevertheless be required to include accrued but unpaid interest
on the Junior Subordinated Debentures through the date of disposition in
income as ordinary income, and to add such amount to his adjusted tax basis
in his pro rate share of the underlying Junior Subordinated Debentures deemed
disposed of. Accordingly, such a Securityholder will recognize a capital loss
to the extent the selling price (which may not fully reflect the value of
accrued but unpaid interest) is less than the Securityholder's adjusted tax
basis (which will include accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary
income for United States Federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is as to the
United States, a foreign corporation, a non-resident alien individual, a
foreign partnership or a non-resident fiduciary of a foreign estate or trust.
Under present United States Federal income tax law:
(i) payments by the Trust or any of its paying agents to any holder of a
Preferred Security who or which is a United States Alien Holder will not
be subject to United States federal withholding tax,
S-34
<PAGE>
provided that (a) the beneficial owner of the Preferred Security does not
actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote; (b) the
beneficial owner of the Preferred Security is not a controlled foreign
corporation that is related to the Company through stock ownership; and
(c) either (A) the beneficial owner of the Preferred Security certifies to
the Trust or its agent, under penalties of perjury, that it is not a
United States holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"Financial Institution") and holds the Preferred Security certifies to the
Trust or its agent under penalties of perjury that such statement has been
received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and furnishes the Trust or its agent
with a copy thereof; and
(ii) A United States Alien Holder of a Preferred Security will not be
subject to United States federal withholding tax on any gain realized upon
the sale or other disposition of a Preferred Security.
INFORMATION REPORTING TO HOLDERS
The Trust will report the original issue discount that accrued during the
year with respect to the Junior Subordinated Debentures, and any gross
proceeds received by the Trust from the retirement or redemption of the
Junior Subordinated Debentures, annually to the holders of record of the
Preferred Securities and the Internal Revenue Service. The Trust currently
intends to deliver such reports to holders of record prior to January 31
following each calendar year. It is anticipated that persons who hold
Preferred Securities as nominees for beneficial holders will report the
required tax information to beneficial holders on Form 1099.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of Preferred Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will generally
be allowed as a credit against the holder's Federal income tax, provided the
required information is timely filed with the Internal Revenue Service.
POSSIBLE TAX LAW CHANGES
If enacted in their present form, certain legislative proposals in the
Revenue Reconciliation Bill of 1996 (the "Bill") would prevent the Company
from deducting interest on the Junior Subordinated Debentures. The Bill as
proposed would be effective generally for instruments issued on or after
December 7, 1995. However, on March 29, 1996, the Chairmen of the Senate
Finance and House Ways and Means Committees issued a joint statement to the
effect that it was their intention that the effective date of the President's
legislative proposals, if adopted, will be no earlier than the date of
appropriate Congressional action. There can be no assurance, however, that
current or future legislative proposals if enacted would not prevent the
Company from deducting interest on the Junior Subordinated Debentures. This
would constitute a Tax Event and could result in the distribution of the
Junior Subordinated Debentures to holders of the Preferred Securities or, in
certain circumstances, the redemption of such securities by the Company and
the distribution of the resulting cash in redemption of the Preferred
Securities. See "Description of the Preferred Securities--Special Event
Redemption or Distribution."
S-35
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated the date hereof (the "Underwriting Agreement"), the Company and the
Trust have agreed that the Trust will sell to each of the Underwriters named
below (the "Underwriters"), and each of the Underwriters, has severally
agreed to purchase the number of Preferred Securities set forth opposite its
name below.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
- --------------------------------------------------- ------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation 735,000
Dean Witter Reynolds Inc. .......................... 735,000
Goldman, Sachs & Co. ............................... 735,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 735,000
Morgan Stanley & Co. Incorporated .................. 735,000
PaineWebber Incorporated ........................... 735,000
Prudential Securities Incorporated ................. 735,000
Smith Barney Inc. .................................. 735,000
Advest Inc. ........................................ 30,000
Robert W. Baird & Co. Incorporated ................. 30,000
Bear, Stearns & Co. Inc. ........................... 70,000
J.C. Bradford & Co. ................................ 30,000
CS First Boston Corporation ........................ 70,000
Cowen & Company .................................... 30,000
Craigie Incorporated ............................... 30,000
Dain Bosworth Incorporated ......................... 30,000
Davenport & Co. of Virginia Inc. ................... 30,000
Everen Securities, Inc. ............................ 30,000
Fahnestock & Co. Inc. .............................. 30,000
First Albany Corporation ........................... 30,000
First of Michigan Corporation ...................... 30,000
Furman Selz LLC .................................... 30,000
Gruntal & Co., Incorporated ........................ 30,000
Interstate/Johnson Lane Corporation ................ 30,000
Janney Montgomery Scott Inc. ....................... 30,000
Legg Mason Wood Walker, Incorporated ............... 30,000
Lehman Brothers Inc. ............................... 70,000
McDonald & Company Securities, Inc. ................ 30,000
Morgan Keegan & Company, Inc. ...................... 30,000
The Ohio Company ................................... 30,000
Oppenheimer & Co., Inc. ............................ 30,000
Parker/Hunter Incorporated ......................... 30,000
Piper Jaffray Inc. ................................. 30,000
Rauscher Pierce Refsnes, Inc. ...................... 30,000
Raymond James & Associates, Inc. ................... 30,000
The Robinson-Humphrey Company, Inc. ................ 30,000
Salomon Brothers Inc. .............................. 70,000
Scott & Stringfellow, Inc. ......................... 30,000
Tucker Anthony Incorporated ........................ 30,000
Wheat, First Securities, Inc. ...................... 30,000
------------
Total ............................................. 7,000,000
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the Preferred Securities
offered hereby are subject to approval of certain legal matters by counsel
and to certain other conditions. If any Preferred Securities are purchased by
the Underwriters pursuant to the Underwriting Agreement, all such Preferred
Securities must be purchased.
The Underwriters propose to offer the Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part to certain securities
dealers at such price less a concession of $.50 per Preferred Security. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $.35 per Preferred Security to certain brokers and dealers. After
the Preferred Securities are released for sale to the public, the offering
price and other selling terms may from time to time be varied by Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJSC").
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures of the
Company, the Underwriting Agreement provides that the
S-36
<PAGE>
Company will agree to pay as compensation ("Underwriters' Compensation") for
the Underwriters' arranging the investment therein of such proceeds, an
amount in same day funds of $.7875 per Preferred Security or $5,512,500 in
the aggregate ($6,339,375 in the aggregate if the Underwriters' overallotment
option is exercised in full) for the accounts of the several Underwriters.
Pursuant to the Underwriting Agreement, the Trust and the Company have
granted to the Underwriters an option, exercisable for 30 days from the date
hereof, to purchase up to 1,050,000 additional Preferred Securities at the
initial public offering price set forth on the cover page hereof. The
Underwriters may exercise such option to purchase solely for the purpose of
covering over-allotments, if any, made in connection with the offering. The
Company will pay Underwriters' Compensation in the amount per Preferred
Security set forth above with respect to such additional Preferred
Securities. To the extent such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional Preferred Securities as the number set
forth next to such Underwriter's name in the preceding table bears to the
total number of Preferred Securities offered by the Underwriters hereby.
The Trust and the Company have agreed not to offer, sell, contract to
sell, grant any option to purchase, or otherwise dispose of any preferred
securities or any securities convertible into or exercisable or exchangeable
for such preferred securities or in any other manner transfer all or a
portion of the economic consequences associated with the ownership of any
such preferred securities, except to the Underwriters, for a period of 30
days after the date of this Prospectus Supplement without the prior written
consent of the majority of Dean Witter Reynolds Inc., Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, PaineWebber Incorporated, Prudential Securities Incorporated
and Smith Barney Inc.
The Preferred Securities have been approved for listing on the NYSE,
subject to official notice of issuance. DLJSC has advised the Trust that it
intends to make a market in the Preferred Securities prior to the
commencement of trading on the NYSE. DLJSC will have no obligation to make a
market in the Preferred Securities, however, and may cease market making
activities, if commenced, at any time.
DLJSC is a wholly-owned subsidiary of the Company. DLJSC has committed to
purchase from the Company 735,000 of the Preferred Securities to be purchased
in the offering on the same basis as the other Underwriters. Although the
amount of proceeds derived from the offering by the Company will not be
affected by DLJSC's participation as an Underwriter to the extent that part
or all of the Preferred Securities to be purchased by DLJSC are not resold,
the Preferred Securities owned by DLJSC will be eliminated in consolidation
and will not be shown as outstanding in the consolidated financial statements
of the Company. DLJSC intends to resell any Preferred Securities which it is
unable to resell in the offering from time to time, at prevailing market
prices. This Prospectus Supplement, together with the accompanying
Prospectus, may also be used by DLJSC in connection with offers and sales of
the Preferred Securities related to market-making transactions by and through
DLJSC, at negotiated prices related to prevailing market prices at the time
of sale or otherwise. DLJSC may act as principal or agent in such
transactions. The offering of the Preferred Securities is being conducted in
accordance with Section 2720 of the NASD Conduct Rules.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the
Preferred Securities on the NYSE, the Underwriters will undertake to sell
lots of 100 or more Preferred Securities to a minimum of 400 beneficial
holders.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended or to contribute to payments that the Underwriters may be required to
make in respect thereof.
The Underwriters have reserved for sale approximately 50,000 Preferred
Securities for employees of the Company and members of their families who
have an interest in purchasing Preferred Securities in the offering. The
Underwriters have advised the Company that the price per share for such
Preferred Securities will be the initial public offering price. The number of
Preferred Securities available for sale to the general public in the offering
will be reduced to the extent such persons purchase such reserved Preferred
Securities. Any reserved Preferred Securities not so purchased will be
offered by the Underwriters to the general public on the same basis as the
other Preferred Securities offered hereby. Any employees of the Company or
members of their families who purchase any of the Preferred Securities
offered in the offering will be prohibited from selling, pledging, assigning,
hypothecating or transferring such shares for a period of five months
following the date of this Prospectus Supplement.
S-37
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PROSPECTUS
AUGUST 15, 1996
DONALDSON, LUFKIN & JENRETTE, INC.
JUNIOR SUBORDINATED DEBT SECURITIES
DLJ CAPITAL TRUST I
DLJ CAPITAL TRUST II
DLJ CAPITAL TRUST III
DLJ CAPITAL TRUST IV
PREFERRED SECURITIES GUARANTEED
TO THE EXTENT SET FORTH HEREIN BY
DONALDSON, LUFKIN & JENRETTE, INC.
Donaldson, Lufkin & Jenrette, Inc. (the "Company") may from time to time
offer unsecured junior subordinated debt securities (the "Junior Subordinated
Debt Securities") consisting of debentures, notes or other evidences of
indebtedness in one or more series and in amounts, at prices and on terms to
be determined at or prior to the time of any such offering. The Junior
Subordinated Debt Securities when issued will be unsecured obligations of the
Company. The Company's obligations under the Junior Subordinated Debt
Securities will be subordinate and junior in right of payment to all Senior
Indebtedness (as defined herein) of the Company.
DLJ Capital Trust I, DLJ Capital Trust II, DLJ Capital Trust III and DLJ
Capital Trust IV (the "DLJ Trusts"), each a statutory business trust formed
under the laws of the State of Delaware, may offer and sell, from time to
time, preferred securities representing undivided beneficial interests in the
assets of the respective DLJ Trust ("Preferred Securities"). The payment of
periodic cash distributions ("distributions") with respect to Preferred
Securities of each of the DLJ Trusts out of moneys held by the Property
Trustee (as defined herein) of each of the DLJ Trusts, and payments on
liquidation of each DLJ Trust and on redemption of Preferred Securities of
such DLJ Trust, will be guaranteed by the Company as and to the extent
described herein (each such guarantee a "Preferred Securities Guarantee").
See "Description of the Preferred Securities Guarantees." The Company's
obligation under each Preferred Securities Guarantee is an unsecured
obligation of the Company and will rank (i) subordinate and junior in right
of payment to all other liabilities of the Company, including the Junior
Subordinated Debt Securities, except those made pari passu or subordinate by
their terms, and (ii) senior to all capital stock now or hereafter issued by
the Company and to any guarantee now or hereafter entered into by the Company
in respect of any of its capital stock. Junior Subordinated Debt Securities
may be issued and sold from time to time in one or more series by the Company
to a DLJ Trust, or a trustee of such trust, in connection with the investment
of the proceeds from the offering of Preferred Securities and Common
Securities (as defined herein) of such DLJ Trust. The Junior Subordinated
Debt Securities purchased by a DLJ Trust may be subsequently distributed pro
rata to holders of Preferred Securities and Common Securities in connection
with the dissolution of such DLJ Trust, upon the occurrence of certain events
as may be described in an accompanying Prospectus Supplement.
Specific terms of the Junior Subordinated Debt Securities or any series or
the Preferred Securities of any DLJ Trust in respect of which this Prospectus
is being delivered (the "Offered Securities") will be set forth in a
Prospectus Supplement with respect to such Offered Securities, which will
describe, without limitation and where applicable, the following: (i) in the
case of Junior Subordinated Debt Securities, the specific designation,
aggregate principal amount, authorized denomination, maturity, premium, if
any, redemption or sinking fund provisions, if any, interest rate (which may
be fixed or variable), if any, the time and method of calculating interest
payments, if any, dates on which premium, if any, and interests, if any, will
be payable, the right of the Company, if any, to defer payment of interest on
the Junior Subordinated Debt Securities and the maximum length of such
deferral period, the initial public offering price, and any listing on a
securities exchange and other specific terms of the offering; and (ii) in the
case of Preferred Securities, the specific designation, number of securities,
liquidation amount per security, initial public offering price, and any
listing on a securities exchange, distribution rate (or method of calculation
thereof), dates on which distributions shall be payable and dates from which
distributions shall accrue, voting rights (if any), terms for any conversion
or exchange into other securities, any redemption or sinking fund provisions,
any other rights, preferences, privileges, limitations or restrictions
relating to the Preferred Securities and the terms upon which the proceeds of
the sale of the Preferred Securities shall be used to purchase a specific
series of Junior Subordinated Debt Securities of the Company. Unless
otherwise indicated in the Prospectus Supplement, the Company does not intend
to list any of the securities on a national securities exchange.
The Offered Securities may be offered in amounts, at prices and on terms
to be determined at the time of offering. Any Prospectus Supplement relating
to any series of Offered Securities will contain information concerning
certain United States Federal income tax considerations, if applicable, to
the Offered Securities. By separate prospectus, the form of which is included
in the Registration Statement of which this Prospectus is a part, the Company
may offer from time to time debt securities or preferred stock. The aggregate
initial public offering price of the securities to be offered by this
Prospectus and such other prospectus shall not exceed $500,000,000.
The Offered Securities may be offered directly through agents designated
from time to time, through dealers or through underwriters. Such agents or
underwriters may act alone or with other agents or underwriters. See "Plan of
Distribution." Any such agents, dealers or underwriters will be set forth in
a Prospectus Supplement. If an agent of the Company and/or any DLJ Trust, or
a dealer or underwriter is involved in the offering of the Offered
Securities, the agent's commission, dealer's purchase price, underwriter's
discount and net proceeds to the Company, as the case may be, will be set
forth in, or may be calculated from, the Prospectus Supplement. Any
underwriters, dealers or agents participating in the offering may be deemed
"underwriters" within the meaning of the Securities Act of 1933.
This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement.
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 COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The registration
statement of which this Prospectus forms a part, as well as reports, proxy
statements and other information filed by the Company, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, New York,
New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
at prescribed rates from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be
accessed electronically by means of the Commission's home page on the
Internet at http://www.sec.gov. The Company's Common Stock is listed on the
New York Stock Exchange, Inc. and reports and other information concerning
the Company can also be inspected at the office of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of the Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed with the Commission under the Securities Act of 1933 (the
"Securities Act") with respect to the Offered Securities. This Prospectus
does not contain all of the information set forth in such Registration
Statement, certain parts of which are omitted in accordance with the rules
and regulations of the Commission. Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company, the DLJ Trusts and the Offered Securities. Any
statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission or incorporated by reference herein are not necessarily complete,
and in each instance reference is made to the copy of such document so filed
for a more complete description of the matter involved. Each such statement
is qualified in its entirety by such reference.
No separate financial statements of any of the DLJ Trusts have been
included or incorporated by reference herein. The Company and the DLJ Trusts
do not consider that such financial statements would be material to holders
of the Preferred Securities because (i) all of the voting securities of each
DLJ Trust will be owned, directly or indirectly, by the Company, a reporting
company under the Exchange Act, (ii) each of the DLJ Trusts is a newly-formed
special purpose entity, has no operating history, has no independent
operations and is not engaged in, and does not propose to engage in, any
activity other than issuing Trust Securities (as defined herein) representing
undivided beneficial interests in the assets of such DLJ Trust and investing
the proceeds thereof in Junior Subordinated Debt Securities issued by the
Company and (iii) the obligations of each of the DLJ Trusts under the
Preferred Securities of that DLJ Trust are fully and unconditionally
guaranteed by the Company as and to the extent described herein. See "The DLJ
Trusts," "Description of the Preferred Securities," "Description of the
Preferred Securities Guarantees" and "Description of the Junior Subordinated
Debt Securities." The DLJ Trusts are statutory business trusts formed under
the laws of the State of Delaware. The Company, as of the date of this
Prospectus, beneficially owns all of the beneficial interests in each DLJ
Trust. Each holder of Preferred Securities of a DLJ Trust will be furnished
annually with unaudited financial statements of such Trust as soon as
available after the end of the Trust's fiscal year.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1995, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996
and June 30, 1996 and Current Reports on Form 8-K dated Febuary 9, 1996 and
February 12, 1996, previously filed by the Company with the Commission, are
incorporated by reference in this Prospectus.
All documents filed by the Company after the date of this Prospectus
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the termination of the offering of the Offered Securities offered hereby,
shall be deemed to be incorporated herein by reference and to be a part
hereof from the date of such documents. 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 this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statements as modified or superseded
shall be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may
be incorporated by reference in this Prospectus (other than certain exhibits
to such documents). Requests for such documents should be directed to
Donaldson, Lufkin & Jenrette, Inc., 277 Park Avenue, New York, New York
10172, Attention: Corporate Secretary (Telephone: (212) 892-3000).
2
<PAGE>
USE OF PROCEEDS
Each DLJ Trust will use all proceeds received from the sale of its Trust
Securities to purchase Junior Subordinated Debt Securities from the Company.
Unless otherwise set forth in the applicable Prospectus Supplement,
proceeds from the sale of Junior Subordinated Debt Securities will be used by
the Company for general corporate purposes and initially may be temporarily
invested in short-term securities.
RATIOS OF EARNINGS
TO FIXED CHARGES AND EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for the
Company for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------------- ----------------
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges (1) ................. 1.07 1.21 1.20 1.10 1.11 1.20
Ratio of earnings to combined
fixed charges and preferred
stock dividends (2) ......... -- -- -- 1.09 1.10 1.19
</TABLE>
- ------------
(1) For the purpose of calculating the ratio of earnings to fixed charges
(i) earnings consist of income before provision for income taxes and
fixed charges and (ii) fixed charges consist of interest expense and
one-third of rental expense which is deemed representative of an
interest factor.
(2) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.
3
<PAGE>
THE COMPANY
The Company is a leading integrated investment and merchant bank that
serves institutional, corporate, governmental and individual clients. The
Company's businesses include securities underwriting, sales and trading;
merchant banking; financial advisory services; investment research;
correspondent brokerage services; and asset management. While results have
fluctuated from year to year, for the years 1991 through 1995, the Company's
total revenues and net income increased by a compound annual growth rate of
22.8% and 32.7%, respectively. The Company's average annual after-tax return
on common equity for the past five years was 23.1%. At June 30, 1996, the
Company had total assets of $47.7 billion and total stockholders' equity of
$1.3 billion.
The Company's principal strategy is to focus its resources on certain core
businesses where management believes the Company can compete profitably and
be among the leading participants in each targeted market. Over the past
several years, the Company has significantly expanded the scope of its
business activities and its customer base, both in the U.S. and
internationally. It has established strong positions in selected high-margin
activities, including equity and high-yield corporate securities underwriting
as well as merchant banking, and has increased its market share in a broad
range of businesses. Key elements of this expansion have been the Company's
recruitment of experienced professionals during periods of turmoil in the
securities industry, the continued development and retention of the Company's
existing personnel at all levels and the continuity of senior management. In
addition, the Company has historically emphasized economic and investment
research in the development of its business and believes that its commitment
to research has been an important contributor to its success.
The Company conducts its business through three principal operating
groups, each of which is an important contributor to revenues and earnings:
the Banking Group, which includes the Company's Investment Banking, Merchant
Banking and Emerging Markets groups; the Capital Markets Group, consisting of
the Company's institutional debt and equity businesses as well as Sprout, its
venture capital affiliate; and the Financial Services Group, comprised of its
Pershing clearing division, high-net-worth retail brokerage and asset
management businesses.
The Company's Banking Group is a major participant in the raising of
capital and the providing of financial advice to companies throughout the
U.S. and has significantly expanded its activities abroad. Through its
Investment Banking group, the Company manages and underwrites public
offerings of securities, arranges private placements and provides advisory
and other services in connection with mergers, acquisitions, restructurings
and other financial transactions. Since 1991, the Investment Banking group
has raised over $190.0 billion for clients from the public and private
markets in corporate equity and debt securities and has completed over 350
merger and acquisition, restructuring and divestiture assignments aggregating
in excess of $89.0 billion. Its Merchant Banking group pursues direct
investments in a variety of areas through a number of investment vehicles
funded with capital provided primarily by institutional investors, the
Company and its employees. Since the Company began investing in leveraged
investments in 1985, it invested over $1.0 billion on behalf of the Company,
its employees and funds it manages over 50 companies with an aggregate
purchase price of over $19.5 billion and achieved an average annual internal
rate of return substantially in excess of comparable industry benchmarks. The
Emerging Markets group specializes in client advisory services, merchant
banking and the underwriting, sales and trading of securities in Latin
America, Asia and certain other international markets.
The Capital Markets Group encompasses a broad range of activities
including trading, research, origination and distribution of equity and
fixed-income securities, private equity investments and venture capital. Its
focus is primarily client-driven, in contrast to that of many other
securities firms which emphasize proprietary trading, an approach that
reduces the Company's exposure to market volatility. Its Taxable Fixed-Income
division provides institutional clients with research, trading and sales
services for a broad range of taxable fixed-income products including
high-yield corporate, investment-grade corporate, U.S. government and
mortgage-backed securities. The Institutional Equities division provides
institutional clients with research, trading and sales services in U.S.
listed and over-the-counter equity securities. The Company's equity sales and
trading capabilities, combined with its research expertise, have contributed
to commission revenues increasing, for the years 1991 through 1995, at a
compound annual
4
<PAGE>
growth rate of 15.6%. In addition, the Company's Equity Derivatives division
provides a broad range of equity and index options products, while Sprout is
one of the oldest and largest groups in the private equity investment and
venture capital industry.
The Financial Services Group provides a broad array of services to
individual investors and the financial intermediaries which represent them.
Pershing is a leading provider of correspondent brokerage services, clearing
transactions for over 600 U.S. brokerage firms which collectively maintain
over 1.3 million client accounts. These client accounts held over $143.6
billion of assets at June 30, 1996. During 1995, Pershing accounted for more
than 10% of the daily reported trading volume on the NYSE. In addition,
Pershing's PC Financial Network (Service Mark), a leading on-line discount
broker in the U.S., has experienced significant growth over the past several
years. The Company's Investment Services Group, which consists of
approximately 270 account executives, provides high-net-worth individuals and
medium to smaller size institutions with access to the Company's equity and
fixed-income research, trading services and underwriting and has one of the
highest revenues per account executive in the industry. Through Wood,
Struthers & Winthrop Management Corp. and affiliates the Company provides
investment management and trust services primarily to high-net-worth
individual investors and institutions, and at June 30, 1996 had over $4.8
billion in assets under management.
Apart from its three principal operating groups, the Company also
maintains a separate brokerage subsidiary, Autranet Management Corp., which
provides institutional investors with research generated by independent
originators that are not affiliated with Wall Street brokerage firms.
Founded in 1959, the Company initially focused on providing in-depth
investment research to institutional investors. In 1970, the Company became
the first member firm of the New York Stock Exchange, Inc. to be owned
publicly. Fifteen years later, the Company was purchased by subsidiaries of
The Equitable Companies Incorporated ("EQ") (EQ and its subsidiaries other
than the Company, collectively, "Equitable"). Equitable, which as of June 30,
1996 owned an approximately 80% interest in the Company following the
Company's initial public offering in October 1995, is a diversified financial
services organization and one of the world's largest investment management
organizations. AXA is EQ's largest stockholder, beneficially owning at June
30, 1996, approximately 60.7% of EQ's outstanding shares of common stock and
$392.2 million stated value of EQ's Series E convertible preferred stock.
The principal executive offices of the Company are located at 277 Park
Avenue, New York, NY, 10172 and its telephone number is (212) 892-3000. The
Company has 17 additional offices in 14 locations in the U.S., and ten
offices in Europe, Asia and Latin America.
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THE DLJ TRUSTS
Each of DLJ Capital Trust I, DLJ Capital Trust II, DLJ Capital Trust III
and DLJ Capital Trust IV is a statutory business trust formed on June 19,
1996 under the Delaware Business Trust Act (the "Business Trust Act")
pursuant to a separate declaration of trust among the Trustees (as defined
herein) of such DLJ Trust and the Company and the filing of a certificate of
trust with the Secretary of State of the State of Delaware. Such declaration
will be amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, as of the date
the Preferred Securities of such DLJ Trust are initially issued. Each
Declaration will be qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
This description summarizes the material terms of the Declarations and is
qualified in its entirety by reference to the form of Declaration, which has
been filed as an exhibit to the Registration Statement of which this
Prospectus is a part, and the Trust Indenture Act.
TRUST SECURITIES
Upon issuance of any Preferred Securities by a DLJ Trust, the holders
thereof will own all of the issued and outstanding Preferred Securities of
such DLJ Trust. The Company will acquire securities representing common
undivided beneficial interests in the assets of each DLJ Trust (the "Common
Securities" and, together with the Preferred Securities, the "Trust
Securities") in an amount equal to at least 3% of the total capital of such
DLJ Trust and will own, directly or indirectly, all of the issued and
outstanding Common Securities of each DLJ Trust. The Preferred Securities and
the Common Securities will rank pari passu with each other and will have
equivalent terms; provided that (i) if a Declaration Event of Default (as
defined herein) under the Declaration of a DLJ Trust occurs and is
continuing, the holders of Preferred Securities of such DLJ Trust will have a
priority over holders of the Common Securities of such DLJ Trust with respect
to payments in respect of distributions and payments upon liquidation,
redemption and maturity and (ii) holders of Common Securities have the
exclusive right (subject to the terms of the Declaration) to appoint, remove
or replace the Trustees and to increase or decrease the number of Trustees.
Each DLJ Trust exists for the purpose of (a) issuing its Preferred
Securities, (b) issuing its Common Securities to the Company, (c) investing
the gross proceeds from the sale of the Trust Securities in Junior
Subordinated Debt Securities of the Company and (d) engaging in only such
other activities as are necessary, convenient or incidental thereto. The
rights of the holders of the Preferred Securities, including economic rights,
rights to information and voting rights, are set forth in the applicable
Declaration, the Business Trust Act and the Trust Indenture Act.
POWERS AND DUTIES OF TRUSTEES
The number of trustees (the "Trustees") of each DLJ Trust shall initially
be five. Three of such Trustees (the "Regular Trustees") are individuals who
are employees or officers of the Company. The fourth such trustee will be The
Bank of New York, which is unaffiliated with the Company and which will serve
as the property trustee (the "Property Trustee") and act as the indenture
trustee for purposes of the Trust Indenture Act. The fifth such trustee is an
affiliate of The Bank of New York that has its principal place of business in
the State of Delaware (the "Delaware Trustee"). Pursuant to each Declaration,
legal title to the Junior Subordinated Debt Securities purchased by a DLJ
Trust will be held by the Property Trustee for the benefit of the holders of
the Trust Securities of such DLJ Trust, and the Property Trustee will have
the power to exercise all rights, powers and privileges under the Indenture
(as defined under "Description of the Junior Subordinated Debt Securities")
with respect to the Junior Subordinated Debt Securities. In addition, the
Property Trustee will maintain exclusive control of a segregated non-interest
bearing bank account (the "Property Account") to hold all payments in respect
of the Junior Subordinated Debt Securities purchased by a DLJ Trust for the
benefit of the holders of Trust Securities. The Property Trustee will
promptly make distributions to the holders of the Trust Securities out of
funds from the Property Account. The Preferred Securities Guarantees are
separately qualified under the Trust Indenture Act and will be held by The
Bank of New York, acting in its capacity as indenture trustee with respect
thereto, for the benefit of the holders of the applicable Preferred
Securities. As used in this Prospectus and any accompanying Prospectus
Supplement, the term "Property Trustee" with respect to a DLJ Trust refers to
The Bank of New York acting either in its capacity as a Trustee under the
relevant Declaration and the holder of legal title to the Junior Subordinated
Debt Securities purchased by that Trust or in its capacity as indenture
trustee under, and the holder of, the applicable Preferred Securities
Guarantee, as the context may require. The Company, as the direct or indirect
owner of all of the Common Securities of each DLJ Trust, will have the
exclusive right (subject to the terms of the related
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Declaration) to appoint, remove or replace Trustees and to increase or
decrease the number of Trustees, provided that the number of Trustees shall
be at least five and the majority of Trustees shall be Regular Trustees. The
term of a DLJ Trust will be set forth in the Prospectus Supplement, but may
terminate earlier as provided in such Declaration.
The duties and obligations of the Trustees of a DLJ Trust shall be
governed by the Declaration of such DLJ Trust. Under its Declaration, each
DLJ Trust shall not, and the Trustees shall cause such DLJ Trust not to,
engage in any activity other than in connection with the purposes of such DLJ
Trust or other than as required or authorized by the related Declaration. In
particular, each DLJ Trust shall not and the Trustees shall not (a) invest
any proceeds received by such DLJ Trust from holding the Junior Subordinated
Debt Securities purchased by such DLJ Trust but shall promptly distribute
from the Property Account all such proceeds to holders of Trust Securities
pursuant to the terms of the related Declaration and of the Trust Securities;
(b) acquire any assets other than as expressly provided in the related
Declaration; (c) possess Trust property for other than a Trust purpose; (d)
make any loans, other than loans represented by the Junior Subordinated Debt
Securities; (e) possess any power or otherwise act in such a way as to vary
the assets of such DLJ Trust or the terms of its Trust Securities in any way
whatsoever; (f) issue any securities or other evidences of beneficial
ownership of, or beneficial interests in, such DLJ Trust other than its Trust
Securities; (g) incur any indebtedness for borrowed money or (h)(i) direct
the time, method and place of exercising any trust or power conferred upon
the Indenture Trustee (as defined under "Description of the Junior
Subordinated Debt Securities") with respect to the Junior Subordinated Debt
Securities deposited in that DLJ Trust as trust assets or upon the Property
Trustee of that DLJ Trust with respect to its Preferred Securities, (ii)
waive any past default that is waivable under the Indenture or the
Declaration, (iii) exercise any right to rescind or annul any declaration
that the principal of all of the Junior Subordinated Debt Securities
deposited in that DLJ Trust as trust assets shall be due and payable or (iv)
consent to any amendment, modification or termination of the Indenture or
such Junior Subordinated Debt Securities or the Declaration, in each case
where such consent shall be required, unless in the case of this clause (h)
the Property Trustee shall have received an unqualified opinion of nationally
recognized independent tax counsel recognized as expert in such matters to
the effect that such action will not cause such DLJ Trust to be classified
for United States Federal income tax purposes as an association taxable as a
corporation or a partnership and that such DLJ Trust will continue to be
classified as a grantor trust for United States Federal income tax purposes.
BOOKS AND RECORDS
The books and records of each DLJ Trust will be maintained at the
principal office of such DLJ Trust and will be open for inspection by a
holder of Preferred Securities of such DLJ Trust or his representative for
any purpose reasonably related to his interest in such DLJ Trust during
normal business hours. Each holder of Preferred Securities will be furnished
annually with unaudited financial statements of the applicable DLJ Trust as
soon as available after the end of such DLJ Trust's fiscal year.
VOTING
Except as provided under the Business Trust Act, the Declaration and the
Trust Indenture Act, holders of Preferred Securities will have no voting
rights.
THE PROPERTY TRUSTEE
The Property Trustee, for the benefit of the holders of the Trust
Securities of a DLJ Trust, is authorized under each Declaration to exercise
all rights under the Indenture with respect to the Junior Subordinated Debt
Securities deposited in such DLJ Trust as trust assets, including its rights
as the holder of such Junior Subordinated Debt Securities to enforce the
Company's obligations under such Junior Subordinated Debt Securities upon the
occurrence of an Indenture Event of Default. The Property Trustee shall also
be authorized to enforce the rights of holders of Preferred Securities of a
DLJ Trust under the related Preferred Securities Guarantee. If any DLJ
Trust's failure to make distributions on the Preferred Securities of a DLJ
Trust is a consequence of the Company's exercise of any right under the terms
of the Junior Subordinated Debt Securities deposited in such DLJ Trust as
trust assets to extend the
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interest payment period for such Junior Subordinated Debt Securities, the
Property Trustee will have no right to enforce the payment of distributions
on such Preferred Securities until a Declaration Event of Default shall have
occurred. Holders of a least a majority in liquidation amount of the
Preferred Securities held by a DLJ Trust will have the right to direct the
Property Trustee for that DLJ Trust with respect to certain matters under the
Declaration for that DLJ Trust and the related Preferred Securities
Guarantee. If the Property Trustee fails to enforce its rights under the
Indenture or fails to enforce the Preferred Securities Guarantee, to the
extent permitted by applicable law, any holder of Preferred Securities may
institute a legal proceeding against the Company to enforce such rights or
the Preferred Securities Guarantee, as the case may be.
DISTRIBUTIONS
Pursuant to each Declaration, distributions on the Preferred Securities of
a DLJ Trust must be paid on the dates payable to the extent that the Property
Trustee for that DLJ Trust has cash on hand in the applicable Property
Account to permit such payment. The funds available for distribution to the
holders of the Preferred Securities of a DLJ Trust will be limited to
payments received by the Property Trustee in respect of the Junior
Subordinated Debt Securities that are deposited in the DLJ Trust as trust
assets. If the Company does not make interest payments on the Junior
Subordinated Debt Securities deposited in a DLJ Trust as trust assets, the
Property Trustee will not make distributions on the Preferred Securities of
such DLJ Trust. Under the Declaration, if and to the extent the Company does
make interest payments on the Junior Subordinated Debt Securities deposited
in a DLJ Trust as trust assets, the Property Trustee is obligated to make
distributions on the Trust Securities of such DLJ Trust on a Pro Rata Basis
(as defined below). The payment of distributions on the Preferred Securities
of a DLJ Trust is guaranteed by DLJ on a subordinated basis as and to the
extent set forth under "Description of the Preferred Securities Guarantee." A
Preferred Securities Guarantee is a full and unconditional guarantee from the
time of issuance of the applicable Preferred Securities, but the Preferred
Securities Guarantee covers distributions and other payments on the
applicable Preferred Securities only if and to the extent that the Company
has made a payment to the Property Trustee of interest or principal on the
Junior Subordinated Debt Securities deposited in the DLJ Trust as trust
assets. As used in this Prospectus, the term "Pro Rata Basis" shall mean pro
rata to each holder of Trust Securities of a DLJ Trust according to the
aggregate liquidation amount of the Trust Securities of such DLJ Trust held
by the relevant holder in relation to the aggregate liquidation amount of all
Trust Securities of such DLJ Trust outstanding unless, in relation to a
payment, a Declaration Event of Default under the Declaration has occurred
and is continuing, in which case any funds available to make such payment
shall be paid first to each holder of the Preferred Securities of such DLJ
Trust pro rata according to the aggregate liquidation amount of the Preferred
Securities held by the relevant holder in relation to the aggregate
liquidation amount of all the Preferred Securities of such DLJ Trust
outstanding, and only after satisfaction of all amounts owed to the holders
of such Preferred Securities, to each holder of Common Securities of such DLJ
Trust pro rata according to the aggregate liquidation amount of such Common
Securities held by the relevant holder in relation to the aggregate
liquidation amount of all Common Securities of such DLJ Trust outstanding.
EVENTS OF DEFAULT
If an Indenture Event of Default occurs and is continuing with respect to
Junior Subordinated Debt Securities deposited in a DLJ Trust as trust assets,
an Event of Default under the Declaration (a "Declaration Event of Default")
of such DLJ Trust will occur and be continuing with respect to any
outstanding Trust Securities of such DLJ Trust. In such event, each
Declaration provides that the holders of Common Securities of such DLJ Trust
will be deemed to have waived any such Declaration Event of Default with
respect to the Common Securities until all Declaration Events of Default with
respect to the Preferred Securities of such DLJ Trust have been cured or
waived. Until all such Declaration Events of Default with respect to the
Preferred Securities of such DLJ Trust have been so cured or waived, the
Property Trustee will be deemed to be acting solely on behalf of the holders
of the Preferred Securities of such DLJ Trust and only the holders of such
Preferred Securities will have the right to direct the Property Trustee with
respect to certain matters under such Declaration and consequently under the
Indenture. In the event that any Declaration Event of Default with respect to
the Preferred Securities of
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such DLJ Trust is waived by the holders of the Preferred Securities of such
DLJ Trust as provided in the Declaration, the holders of Common Securities
pursuant to such Declaration have agreed that such waiver also constitutes a
waiver of such Declaration Event of Default with respect to the Common
Securities for all purposes under the Declaration without any further act,
vote or consent of the holders of the Common Securities.
RECORD HOLDERS
Each Declaration provides that the Trustees of such DLJ Trust may treat
the person in whose name a Certificate representing its Preferred Securities
is registered on the books and records of such DLJ Trust as the sole holder
thereof and of the Preferred Securities represented thereby for purposes of
receiving distributions and for all other purposes and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in such
certificate or in the Preferred Securities represented thereby on the part of
any person, whether or not such DLJ Trust shall have actual or other notice
thereof. Preferred Securities will be issued in fully registered form. Unless
otherwise specified in a Prospectus Supplement, Preferred Securities will be
represented by a global certificate registered on the books and records of
such DLJ Trust in the name of a depositary (the "Depositary") named in an
accompanying Prospectus Supplement or its nominee. Under each Declaration:
(i) such DLJ Trust and the Trustees thereof shall be entitled to deal
with the Depositary (or any successor depositary) for all purposes,
including the payment of distributions and receiving approvals, votes or
consents under the related Declaration, and except as set forth in the
related Declaration with respect to the Property Trustee, shall have no
obligation to persons owning a beneficial interest in Preferred Securities
("Preferred Security Beneficial Owners") registered in the name of and
held by the Depositary or its nominee; and
(ii) the rights of Preferred Security Beneficial Owners shall be
exercised only through the Depositary (or any successor depositary) and
shall be limited to those established by law and agreements between such
Preferred Security Beneficial Owners and the Depositary and/or its
participants. With respect to Preferred Securities registered in the name
of and held by the Depositary or its nominee, all notices and other
communications required under each Declaration shall be given to, and all
distributions on such Preferred Securities shall be given or made to, the
Depositary (or its successor).
The specific terms of the depositary arrangement with respect to the
Preferred Securities will be disclosed in the applicable Prospectus
Supplement.
DEBTS AND OBLIGATIONS
In each Declaration, the Company has agreed to pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs
and expenses of the applicable DLJ Trust, including the fees and expenses of
its Trustees and any taxes and all costs and expenses with respect thereto,
to which such DLJ Trust may become subject, except for United States
withholding taxes. The foregoing obligations of the Company under each
Declaration are for the benefit of, and shall be enforceable by, any person
to whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice thereof. Any
such Creditor may enforce such obligations of the Company directly against
the Company and the Company has irrevocably waived any right or remedy to
require that any such Creditor take any action against any DLJ Trust or any
other person before proceeding against the Company. The Company has agreed in
each Declaration to execute such additional agreements as may be necessary or
desirable in order to give full effect to the foregoing.
The business address of each DLJ Trust is c/o Donaldson, Lufkin &
Jenrette, Inc., 277 Park Avenue, New York, NY 10172, telephone number (212)
892-3000.
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DESCRIPTION OF THE PREFERRED SECURITIES
Each DLJ Trust may issue, from time to time, only one series of Preferred
Securities having terms described in the Prospectus Supplement relating
thereto. The Declaration of each DLJ Trust authorizes the Regular Trustees of
such DLJ Trust to issue on behalf of such DLJ Trust one series of Preferred
Securities. Each Declaration will be qualified as an indenture under the
Trust Indenture Act. The Preferred Securities will have such terms, including
distributions, redemption, voting, liquidation rights and such other
preferred, deferred or other special rights or such restrictions as shall be
set forth in the related Declaration or made part of such Declaration by the
Trust Indenture Act. Reference is made to the Prospectus Supplement relating
to the Preferred Securities of a DLJ Trust for specific terms, including (i)
the specific designation of such Preferred Securities, (ii) the number of
Preferred Securities issued by such DLJ Trust, (iii) the annual distribution
rate (or method of calculation thereof) for Preferred Securities issued by
such DLJ Trust, the date or dates upon which such distributions shall be
payable and the record date or dates for the payment of such distributions,
(iv) whether distributions on Preferred Securities issued by such DLJ Trust
shall be cumulative, and, in the case of Preferred Securities having such
cumulative distribution rights, the date or dates or method of determining
the date or dates from which distributions on Preferred Securities issued by
such DLJ Trust shall be cumulative, (v) the amount or amounts which shall be
paid out of the assets of such DLJ Trust to the holders of Preferred
Securities of such DLJ Trust upon voluntary or involuntary dissolution,
winding-up or termination of such DLJ Trust, (vi) the obligation or right, if
any, of such DLJ Trust to purchase or redeem Preferred Securities issued by
such DLJ Trust and the price or prices at which, the period or periods within
which and the terms and conditions upon which Preferred Securities issued by
such DLJ Trust shall or may be purchased or redeemed, in whole or in part,
pursuant to such obligation or right, (vii) the voting rights, if any, of
Preferred Securities issued by such DLJ Trust in addition to those required
by law, including the number of votes per Preferred Security and any
requirement for the approval by the holders of Preferred Securities, or of
Preferred Securities issued by one or more DLJ Trusts, or of both, as a
condition to specified actions or amendments to the Declaration of such DLJ
Trust, (viii) terms for any conversion or exchange into other securities and
(ix) any other relevant rights, preferences, privileges, limitations or
restrictions of Preferred Securities issued by such DLJ Trust consistent with
the Declaration of such DLJ Trust or with applicable law. All Preferred
Securities offered hereby will be guaranteed by the Company as and to the
extent set forth below under "Description of the Preferred Securities
Guarantees." Certain United States Federal income tax considerations
applicable to any offering of Preferred Securities will be described in the
Prospectus Supplement relating thereto.
In connection with the issuance of Preferred Securities, each DLJ Trust
will issue one series of Common Securities. The Declaration of each DLJ Trust
authorizes the Regular Trustees of such trust to issue on behalf of such DLJ
Trust one series of Common Securities having such terms including
distributions, redemption, voting, liquidation rights or such restrictions as
shall be set forth therein. The terms of the Common Securities issued by a
DLJ Trust will be substantially identical to the terms of the Preferred
Securities issued by such DLJ Trust and the Common Securities will rank pari
passu, and payments will be made thereon on a Pro Rata Basis with the
Preferred Securities except that if a Declaration Event of Default occurs and
is continuing, the rights of the holders of such Common Securities to payment
in respect of distributions and payments upon liquidation, redemption and
maturity will be subordinated to the rights of the holders of such Preferred
Securities. Except in certain limited circumstances, the Common Securities
issued by a DLJ Trust will also carry the right to vote and to appoint,
remove or replace any of the Trustees of that DLJ Trust. All of the Common
Securities of a DLJ Trust will be directly or indirectly owned by the
Company.
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DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees that will be executed and delivered by the Company for
the benefit of the holders from time to time of Preferred Securities. Each
Preferred Security Guarantee will be separately qualified under the Trust
Indenture Act and will be held by The Bank of New York, acting in its
capacity as indenture trustee with respect thereto, for the benefit of
holders of the Preferred Securities of the applicable DLJ Trust. The terms of
each Preferred Securities Guarantee will be those set forth in such Preferred
Securities Guarantee and those made part of such Guarantee by the Trust
Indenture Act. This description summarizes the material terms of the
Preferred Securities Guarantees and is qualified in its entirety by reference
to the form of Preferred Securities Guarantee, which is filed as an exhibit
to the Registration Statement of which this Prospectus forms a part, and the
Trust Indenture Act. Section and Article references used herein are
references to the provisions of the form of Preferred Securities Guarantee.
GENERAL
Pursuant to each Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to
pay in full, to the holders of the Preferred Securities issued by a DLJ
Trust, the Guarantee Payments (as defined herein) (without duplication of
amounts theretofore paid by such DLJ Trust), to the extent not paid by such
DLJ Trust, regardless of any defense, right of set-off or counterclaim that
such DLJ Trust may have or assert. The following payments or distributions
with respect to Preferred Securities issued by a DLJ Trust to the extent not
paid or made by such DLJ Trust (the "Guarantee Payments"), will be subject to
the Preferred Securities Guarantee (without duplication): (i) any accrued and
unpaid distributions on such Preferred Securities, and the redemption price,
including all accrued and unpaid distributions to the date of redemption,
with respect to any Preferred Securities called for redemption by such DLJ
Trust but if and only to the extent that in each case the Company has made a
payment to the related Property Trustee of interest or principal on the
Junior Subordinated Debt Securities deposited in such DLJ Trust as trust
assets and (ii) upon a voluntary or involuntary dissolution, winding-up or
termination of such DLJ Trust (other than in connection with the distribution
of such Junior Subordinated Debt Securities to the holders of Preferred
Securities or the redemption of all of the Preferred Securities upon the
maturity or redemption of such Junior Subordinated Debt Securities) the
lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on such Preferred Securities to the date of payment, to
the extent such DLJ Trust has funds available therefor or (b) the amount of
assets of such DLJ Trust remaining available for distribution to holders of
such Preferred Securities in liquidation of such DLJ Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Company to the holders of Preferred Securities or
by causing the applicable DLJ Trust to pay such amounts to such holders.
The Preferred Securities Guarantee is a full and unconditional guarantee
from the time of issuance of the applicable Preferred Securities, but the
Preferred Securities Guarantee covers distributions and other payments on
such Preferred Securities only if and to the extent that the Company has made
a payment to the Property Trustee of interest or principal on the Junior
Subordinated Debt Securities deposited in the applicable DLJ Trust as trust
assets. If the Company does not make interest or principal payments on the
Junior Subordinated Debt Securities deposited in the applicable DLJ Trust as
trust assets, the Property Trust will not make distributions of the Preferred
Securities of such DLJ Trust and the DLJ Trust will not have funds available
therefor.
The Company's obligations under the Declaration for each Trust, the
Preferred Securities Guarantee issued with respect to Preferred Securities
issued by that Trust, the Junior Subordinated Debt Securities purchased by
that Trust and the related Indenture (as defined below) in the aggregate will
provide a full and unconditional guarantee on a subordinated basis by the
Company of payments due on the Preferred Securities issued by that Trust.
CERTAIN COVENANTS OF THE COMPANY
In each Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities issued by the applicable DLJ Trust remain
outstanding, the Company will not (A) declare or
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pay any dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred
stock or make any guarantee payment with respect thereto, if at such time (i)
the Company shall be in default with respect to its Guarantee Payments or
other payment obligations under the Preferred Securities Guarantee, (ii)
there shall have occurred any Declaration Event of Default under the related
Declaration or (iii) in the event that Junior Subordinated Debt Securities
are issued to a DLJ Trust in connection with the issuance of Trust Securities
by such DLJ Trust, the Company shall have given notice of its election to
defer payments of interest on such Junior Subordinated Debt Securities by
extending the interest payment period as provided in the terms of the Junior
Subordinated Debt Securities and such period, or any extension thereof, is
continuing; provided that (a) the Company will be permitted to pay accrued
dividends (and cash in lieu of fractional shares) upon the conversion of
Preferred Stock of the Company as may be outstanding from time to time, in
each case in accordance with the terms of such stock and (b) the foregoing
will not apply to any stock dividends paid by the Company. In addition, so
long as any Preferred Securities remain outstanding, the Company has agreed
(i) to remain the sole direct or indirect owner of all of the outstanding
Common Securities issued by the applicable DLJ Trust and shall not cause or
permit the Common Securities to be transferred except to the extent permitted
by the related Declaration; provided that any permitted successor of the
Company under the Indenture may succeed to the Company's ownership of the
Common Securities issued by the applicable DLJ Trust and (ii) to use
reasonable efforts to cause such DLJ Trust to continue to be treated as a
grantor trust for United States Federal income tax purposes except in
connection with a distribution of Junior Subordinated Debt Securities.
(Section 6.1)
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no consent will be
required), each Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than 66 2/3% in liquidation amount
of the outstanding Preferred Securities issued by the applicable DLJ Trust.
The manner of obtaining any such approval of holders of such Preferred
Securities will be set forth in an accompanying Prospectus Supplement.
(Section 9.2) All guarantees and agreements contained in a Preferred
Securities Guarantee shall bind the successors, assignees, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Preferred Securities of the applicable DLJ Trust then
outstanding. Except in connection with a consolidation, merger or sale
involving the Company that is permitted under the Indenture, the Company may
not assign its obligations under any Preferred Securities Guarantee. (Section
9.1)
TERMINATION OF THE PREFERRED SECURITIES GUARANTEES
Each Preferred Securities Guarantee will terminate and be of no further
force and effect as to the Preferred Securities issued by the applicable DLJ
Trust upon full payment of the redemption price of all Preferred Securities
of such DLJ Trust, or upon distribution of the Junior Subordinated Debt
Securities to the holders of the Preferred Securities of such DLJ Trust in
exchange for all of the Preferred Securities issued by such DLJ Trust, or
upon full payment of the amounts payable upon liquidation of such DLJ Trust.
Notwithstanding the foregoing, each Preferred Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Preferred Securities issued by the applicable DLJ Trust
must restore payment of any sums paid under such Preferred Securities or such
Guarantee. (Section 7.1)
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The Company's obligations under each Preferred Securities Guarantee to
make the Guarantee Payments will constitute an unsecured obligation of the
Company and will rank (i) subordinate and junior in right of payment to all
other liabilities of the Company, including the Junior Subordinated Debt
Securities, except those made pari passu or subordinate by their terms, and
(ii) senior to all capital stock now or hereafter issued by the Company and
to any guarantee now or hereafter entered into by the Company in respect of
any of its capital stock. The Company's obligations under each Preferred
Securities
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Guarantee will rank pari passu with each other Preferred Securities
Guarantee. (Section 6.2) Because the Company is a holding company, the
Company's obligations under each Preferred Securities Guarantee are also
effectively subordinated to all existing and future liabilities, including
trade payables, of the Company's subsidiaries, except to the extent that the
Company is a creditor of the subsidiaries recognized as such. Each
Declaration provides that each holder of Preferred Securities issued by the
applicable DLJ Trust by acceptance thereof agrees to the subordination
provisions and other terms of the related Preferred Securities Guarantee.
Each Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without first instituting a legal proceeding against any other
person or entity). Each Preferred Securities Guarantee will be deposited with
The Bank of New York, as indenture trustee, to be held for the benefit of the
holders of the Preferred Securities issued by the applicable DLJ Trust. The
Bank of New York shall enforce the Preferred Securities Guarantee on behalf
of the holders of the Preferred Securities issued by the applicable DLJ
Trust. The holders of not less than a majority in aggregate liquidation
amount of the Preferred Securities issued by the applicable DLJ Trust have
the right to direct the time, method and place of conducting any proceeding
for any remedy available in respect of the related Preferred Securities
Guarantee, including the giving of directions to The Bank of New York. If The
Bank of New York fails to enforce such Preferred Securities Guarantee as
above provided, any holder of Preferred Securities issued by the applicable
DLJ Trust may institute a legal proceeding directly against the Company to
enforce its rights under such Preferred Securities Guarantee, without first
instituting a legal proceeding against the applicable DLJ Trust or any other
person or entity.
MISCELLANEOUS
The Company will be required to provide annually to The Bank of New York a
statement as to the performance by the Company of certain of its obligations
under the Preferred Securities Guarantees and as to any default in such
performance. The Company is required to file annually with The Bank of New
York an officer's certificate as to the Company's compliance with all
conditions under Preferred Securities Guarantees. (Section 2.4)
The Bank of New York, prior to the occurrence of a default, undertakes to
perform only such duties as are specifically set forth in the applicable
Preferred Securities Guarantee and, after default with respect to a Preferred
Securities Guarantee, shall exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject
to such provision, The Bank of New York is under no obligation to exercise
any of the powers vested in it by a Preferred Securities Guarantee at the
request of any holder of Preferred Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby. (Section 3.2)
GOVERNING LAW
The Guarantees will be governed by, and construed in accordance with, the
laws of the State of New York.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Junior Subordinated Debt Securities may be issued from time to time in one
or more series under an Indenture (the "Indenture") between the Company and
The Bank of New York, as trustee (the "Indenture Trustee"). The Indenture has
been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The following description summarizes the material
terms of the Indenture, and is qualified in its entirety by reference to the
Indenture and the Trust Indenture Act. Whenever particular provisions or
defined terms in the Indenture are referred to herein, such provisions or
defined terms are incorporated by reference herein. Section and Article
references used herein are references to provisions of the Indenture.
GENERAL
The Junior Subordinated Debt Securities will be unsecured, junior
subordinated obligations of the Company. The Indenture does not limit the
amount of additional indebtedness the Company or any of its subsidiaries may
incur. Since the Company is a holding company, the Company's rights and the
rights of its creditors, including the holders of Junior Subordinated Debt
Securities, to participate in the assets of any subsidiary upon the latter's
liquidation or recapitalization will be subject to the prior claims of the
subsidiary's creditors, except to the extent that the Company may itself be a
creditor with recognized claims against the subsidiary.
The Indenture does not limit the aggregate principal amount of
indebtedness which may be issued thereunder and provides that Junior
Subordinated Debt Securities may be issued thereunder from time to time in
one or more series. The Junior Subordinated Debt Securities are issuable in
one or more series pursuant to an indenture supplemental to the Indenture.
In the event Junior Subordinated Debt Securities are issued to a DLJ Trust
or a Trustee of such trust in connection with the issuance of Trust
Securities by such DLJ Trust, such Junior Subordinated Debt Securities
subsequently may be distributed pro rata to the holders of such Trust
Securities in connection with the dissolution of such DLJ Trust upon the
occurrence of certain events described in the Prospectus Supplement relating
to such Trust Securities. Only one series of Junior Subordinated Debt
Securities will be issued to a DLJ Trust or a trustee of such trust in
connection with the issuance of Trust Securities by such DLJ Trust.
Reference is made to the Prospectus Supplement which will accompany this
Prospectus for the following terms of the series of Junior Subordinated Debt
Securities being offered thereby (to the extent such terms are applicable to
the Junior Subordinated Debt Securities): (i) the specific designation of
such Junior Subordinated Debt Securities, aggregate principal amount and
purchase price; (ii) any limit on the aggregate principal amount of such
Junior Subordinated Debt Securities; (iii) the date or dates on which the
principal of such Junior Subordinated Debt Securities is payable and the
right, if any, to extend such date or dates; (iv) the rate or rates at which
such Junior Subordinated Debt Securities will bear interest or the method of
calculating such rate or rates, if any; (v) the date or dates from which such
interest shall accrue, the interest payment dates on which such interest will
be payable or the manner of determination of such interest payment dates and
the record dates for the determination of holders to whom interest is payable
on any such interest payment dates; (vi) the right, if any, to extend the
interest payment periods and the duration of such extension; (vii) the period
or periods within which, the price or prices at which, and the terms and
conditions upon which, such Junior Subordinated Debt Securities may be
redeemed, in whole or in part, at the option of the Company; (viii) the
obligation, if any of the Company to redeem or purchase such Junior
Subordinated Debt Securities pursuant to any sinking fund or analogous
provisions or at the option of the holder thereof and the period or periods
for which, the price or prices at which, and the terms and conditions upon
which, such Junior Subordinated Debt Securities shall be redeemed or
purchased, in whole or part, pursuant to such obligation; (ix) any applicable
United States Federal income tax consequences, including whether and under
what circumstances the Company will pay additional amounts on the Junior
Subordinated Debt Securities held by a person who is not a U.S. person in
respect of any tax, assessment or governmental charge withheld or deducted
and, if so, whether the Company will have the option to redeem such Junior
Subordinated Debt Securities rather than pay such additional amounts; (x) the
form of such Junior Subordinated Debt Securities; (xi) if other than
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<PAGE>
denominations of $25 or any integral multiple thereof, the denominations in
which such Junior Subordinated Debt Securities shall be issuable; (xii) any
and all other terms with respect to such series, including any modification
of or additions to the events of default or covenants provided for with
respect to the Junior Subordinated Debt Securities, and any terms which may
be required by or advisable under applicable laws or regulations not
inconsistent with the Indenture; and (xiii) whether such Junior Subordinated
Debt Securities are issuable as a global security, and in such case, the
identity of the depositary. (Section 2.01)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Junior Subordinated Debentures will be issued in United States dollars in
fully registered form without coupons in denominations of $25 or integral
multiples thereof. Junior Subordinated Debt Securities may be presented for
exchange and Junior Subordinated Debt Securities in registered form may be
presented for transfer in the manner, at the places and subject to the
restrictions set forth in the Junior Subordinated Debt Securities and the
Prospectus Supplement. Such services will be provided without charge, other
than any tax or other governmental charge payable in connection therewith,
but subject to the limitations provided in the Indenture. Junior Subordinated
Debt Securities in bearer form and the coupons, if any, appertaining thereto
will be transferable by delivery.
Junior Subordinated Debt Securities may bear interest at a fixed rate or a
floating rate. Junior Subordinated Debt Securities bearing no interest or
interest at a rate that at the time of issuance is below the prevailing
market rate will be sold at a discount below their stated principal amount.
Special United States Federal income tax considerations applicable to any
such discounted Junior Subordinated Debt Securities or to certain Junior
Subordinated Debt Securities issued at par which are treated as having been
issued at a discount for United States Federal income tax purposes will be
described in the relevant Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY APPLICABLE TO THE JUNIOR SUBORDINATED DEBT
SECURITIES
If Junior Subordinated Debt Securities are issued to a DLJ Trust in
connection with the issuance of Trust Securities by such DLJ Trust, the
Company will covenant in the Indenture that, so long as the Preferred
Securities issued by the applicable DLJ Trust remain outstanding, the Company
will not declare or pay any dividends on, or redeem, purchase, acquire or
make a distribution or liquidation payment with respect to, any of its common
stock or preferred stock or make any guarantee payment with respect thereto
if at such time (i) the Company shall be in default with respect to its
Guarantee Payments or other payment obligations under the related Preferred
Securities Guarantee, (ii) there shall have occurred any Indenture Event of
Default with respect to the Junior Subordinated Debt Securities or (iii) in
the event that Junior Subordinated Debt Securities are issued to a DLJ Trust
in connection with the issuance of Trust Securities by such DLJ Trust, the
Company shall have given notice of its election to defer payments of interest
on such Junior Subordinated Debt Securities by extending the interest payment
period as provided in the terms of such Junior Subordinated Debt Securities
and such period, or any extension thereof, is continuing; provided that (x)
the Company will be permitted to pay accrued dividends (and cash in lieu of
fractional shares) upon the conversion of any Preferred Stock of the Company
as may be outstanding from time to time, in each case in accordance with the
terms of such stock and (y) the foregoing will not apply to any stock
dividends paid by the Company. In addition, if Junior Subordinated Debt
Securities are issued to a DLJ Trust in connection with the issuance of Trust
Securities by such DLJ Trust, for so long as the Preferred Securities issued
by the applicable DLJ Trust remain outstanding, the Company has agreed (i) to
remain the sole direct or indirect owner of all of the outstanding Common
Securities issued by the applicable DLJ Trust and not to cause or permit the
Common Securities to be transferred except to the extent permitted by the
related Declaration; provided that any permitted successor of the Company
under the Indenture may succeed to the Company's ownership of the Common
Securities issued by the applicable DLJ Trust, (ii) to comply fully with all
of its obligations and agreements contained in the related Declaration and
(iii) not to take any action which would cause the applicable DLJ Trust to
cease to be treated as a grantor trust for United States Federal income tax
purposes, except in connection with a distribution of Junior Subordinated
Debt Securities.
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SUBORDINATION
The Indenture provides that the Junior Subordinated Debt Securities are
subordinate and junior in right of payment to all Senior Indebtedness of the
Company. In the event (a) of any insolvency or bankruptcy proceedings, any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or its property or any proceeding for voluntary
liquidation, dissolution or other winding up of the Company or any execution
sale, or (b) that Junior Subordinated Debt Securities of any series are
declared due and payable before their expressed maturity because of the
occurrence of an Indenture Event of Default pursuant to Section 6.01 of the
Indenture (under circumstances other than as set forth in clause (a) above),
then the holders of all Senior Indebtedness shall first be entitled to
receive payment of the full amount due thereon in money, before the holders
of any of the Junior Subordinated Debt Securities are entitled to receive
payment on account of the principal of, or interest, on the indebtedness
evidenced by such Junior Subordinated Debt Securities. In the event and
during the continuation of any default in payment of any Senior Indebtedness
or if any event of default shall exist under any Senior Indebtedness, as
"event of default" is defined therein or in the agreement under which the
same is outstanding, no payment of the principal, or premium, if any, or
interest, on the Junior Subordinated Debt Securities shall be made. (Section
14.02) If this Prospectus is being delivered in connection with a series of
Junior Subordinated Debt Securities, the accompanying Prospectus Supplement
will set forth the approximate amount of Senior Indebtedness outstanding as
of the end of the most recent fiscal quarter.
The term "Senior Indebtedness" shall mean the principal of and premium, if
any, and interest on (a) all indebtedness of the Company, whether outstanding
on the date of the Indenture or thereafter created, (i) for money borrowed by
the Company (including, without limitation, indebtedness issued or to be
issued pursuant to the Indenture between DLJ and The Bank of New York as
Trustee providing for the issuance of subordinated debt securities by the
Company), (ii) for money borrowed by, or obligations of, others and either
assumed or guaranteed, directly or indirectly, by the Company, (iii) in
respect of letters of credit and acceptances issued or made by banks, or (iv)
constituting purchase money indebtedness, or indebtedness secured by property
included in the property, plant and equipment accounts of the Company at the
time of the acquisition of such property by the Company for the payment of
which the Company is directly liable, and (b) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements
to, any such indebtedness. As used in the preceding sentence the term
"purchase money indebtedness" means indebtedness evidenced by a note,
debenture, bond or other instrument (whether or not secured by any lien or
other security interest) issued or assumed as all or a part of the
consideration for the acquisition of property, whether by purchase, merger,
consolidation or otherwise, unless by its terms such indebtedness is
subordinate to other indebtedness of the Company. Notwithstanding anything to
the contrary in the Indenture or the Junior Subordinated Debt Securities,
Senior Indebtedness shall not include (i) any indebtedness of the Company
which, by its terms or the terms of the instrument creating or evidencing it,
is subordinate in right of payment to or pari passu with the Junior
Subordinated Debt Securities, as the case may be, and in particular, the
Junior Subordinated Debt Securities shall rank pari passu with respect to all
other debt securities and guarantees in respect thereof issued to any other
trusts, partnerships or other entity affiliated with the Company which is a
financing vehicle of the Company in connection with the issuance of preferred
securities by such financing vehicle, or (ii) any indebtedness of the Company
to a subsidiary of the Company. (Section 1.01) The Subordinated Indenture
does not contain any limitation on the amount of Senior Indebtedness that can
be incurred by the Company.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Indenture Event
of Default" with respect to each series of Junior Subordinated Debt
Securities:
(a) failure for 30 days to pay interest on the Junior Subordinated Debt
Securities of such series when due; provided that a valid extension of the
interest payment period by the Company shall not constitute a default in
the payment of interest for this purpose;
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(b) failure to pay principal of or premium, if any, on the Junior
Subordinated Debt Securities of such series when due whether at maturity,
upon redemption, by declaration or otherwise;
(c) failure to observe or perform any other covenant contained in the
Indenture with respect to such series for 90 days after written notice to
the Company from the Indenture Trustee or the holders of at least 25% in
principal amount of the outstanding Junior Subordinated Debt Securities of
such series; or
(d) certain events in bankruptcy, insolvency or reorganization of the
Company.
In each and every such case, unless the principal of all the Junior
Subordinated Debt Securities of that series shall have already become due and
payable, either the Indenture Trustee or the holders of not less than 25% in
aggregate principal amount of the Junior Subordinated Debt Securities of that
series then outstanding, by notice in writing to the Company (and to the
Indenture Trustee if given by such holders), may declare the principal of all
the Junior Subordinated Debt Securities of that series to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable. (Section 6.01)
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of that series have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee. (Section 6.06) The Indenture Trustee or
the holders of not less than 25% in aggregate outstanding principal amount of
the Junior Subordinated Debt Securities of that series may declare the
principal due and payable immediately upon an Indenture Event of Default with
respect to such series, but the holders of a majority in aggregate
outstanding principal amount of Junior Subordinated Debt Securities of such
series may annul such declaration and waive the default if the default has
been cured and a sum sufficient to pay all matured installments of interest
and principal otherwise than by acceleration and any premium has been
deposited with the Indenture Trustee. (Sections 6.01 and 6.06)
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of that series may, on behalf of the
holders of all the Junior Subordinated Debt Securities of that series, waive
any past default, except a default in the payment of principal, premium, if
any, or interest (unless such default has been cured and a sum sufficient to
pay all matured installments of interest and principal otherwise than by
acceleration and any premium has been deposited with the Indenture Trustee)
or a call for redemption of Junior Subordinated Debt Securities. (Section
6.06) The Company is required to file annually with the Indenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants under the Indenture. (Section 5.03)
If Junior Subordinated Debt Securities are issued to a DLJ Trust in
connection with the issuance of Trust Securities of such DLJ Trust, then
under the applicable Declaration an Indenture Event of Default with respect
to such series of Junior Subordinated Debt Securities will constitute a
Declaration Event of Default.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the outstanding Junior Subordinated Debt Securities of
each series affected, to modify the Indenture or any supplemental indenture
affecting the rights of the holders of such Junior Subordinated Debt
Securities; provided that no such modification may, without the consent of
the holder of each outstanding Junior Subordinated Debt Security affected
thereby, (i) extend the fixed maturity of any Junior Subordinated Debt
Securities of any series, reduce the principal amount thereof, reduce the
rate or extend the time of payment of interest thereon, reduce any premium
payable upon the redemption thereof, without the consent of the holder of
each Junior Subordinated Debt Security so affected or (ii) reduce the
percentage of Junior Subordinated Debt Securities, the holders of which are
required to consent to any such modification, without the consent of the
holders of each Junior Subordinated Debt Security then outstanding and
affected thereby. (Section 9.02)
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BOOK-ENTRY AND SETTLEMENT
If any Junior Subordinated Debt Securities of a series are represented by
one or more global securities (each, a "Global Security"), the applicable
Prospectus Supplement will describe the circumstances, if any, under which
beneficial owners of interests in any such Global Security may exchange such
interests for Junior Subordinated Debt Securities of such series and of like
tenor and principal amount in any authorized form and denomination. Principal
of and any premium and interest on a Global Security will be payable in the
manner described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Junior Subordinated Debt Securities to be represented
by a Global Security will be described in the applicable Prospectus
Supplement.
CONSOLIDATION, MERGER AND SALE
The Indenture will provide that the Company may not consolidate with or
merge into any other person or transfer or lease its properties and assets
substantially as an entirety to any person and may not permit any person to
merge into or consolidate with the Company unless (i) either the Company will
be the resulting or surviving entity or any successor or purchaser is a
corporation organized under the laws of the United States of America, any
State or the District of Columbia, and any such successor or purchaser
expressly assumes the Company's obligations under the Indenture and (ii)
immediately after giving effect to the transaction no Event of Default shall
have occurred and be continuing. (Section 10.01)
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from any
and all obligations in respect of the Junior Subordinated Debt Securities of
a series (except in each case for certain obligations to register the
transfer or exchange of such Junior Subordinated Debt Securities, replace
stolen, lost or mutilated Junior Subordinated Debt Securities of that series,
maintain paying agencies and hold moneys for payment in trust) if (i) the
Company irrevocably deposits with the Indenture Trustee cash or U.S.
Government Obligations, as trust funds in an amount certified to be
sufficient to pay at maturity (or upon redemption) the principal of, premium,
if any, and interest on all outstanding Junior Subordinated Debt Securities
of such series; (ii) such deposit will not result in a breach or violation
of, or constitute a default under, any agreement or instrument to which the
Company is a party or by which it is bound; (iii) the Company delivers to the
Indenture Trustee an opinion of counsel to the effect that the holders of the
Junior Subordinated Debt Securities of such series will not recognize income,
gain or loss for United States Federal income tax purposes as a result of
such defeasance and that defeasance will not otherwise alter holders' United
States Federal income tax treatment of principal, premium and interest
payments on such Junior Subordinated Debt Securities of such series (such
opinion must be based on a ruling of the Internal Revenue Service or a change
in United States Federal income tax law occurring after the date of such
Indenture, since such a result would not occur under current tax law); (iv)
the Company has delivered to the Indenture Trustee an Officer's Certificate
and an opinion of counsel, each stating that all conditions precedent
provided for relating to the defeasance contemplated by such provision have
been complied with; and (v) no event or condition shall exist that, pursuant
to the subordination provisions applicable to such series, would prevent the
Company from making payments of principal of, premium, if any, and interest
on the Junior Subordinated Debt Securities of such series at the date of the
irrevocable deposit referred to above. (Section 11.01)
GOVERNING LAW
The Indenture and the Junior Subordinated Debt Securities will be governed
by the laws of the State of New York. (Section 13.05)
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default,
shall exercise the same degree of care as a prudent individual
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would exercise in the conduct of his or her own affairs. (Section 7.01)
Subject to such provision, the Indenture Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of
any holder of Junior Subordinated Debt Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities that
might be incurred thereby. (Section 7.02) The Indenture Trustee is not
required to expend or risk its own funds or otherwise incur personal
financial liability in the performance of its duties if the Trustee
reasonably believes that repayment or adequate indemnity is not reasonably
assured to it. (Section 7.01)
The Company and its subsidiaries maintain ordinary banking and trust
relationships with The Bank of New York and its affiliates.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights
or obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of the Company; provided that, in the event of any such
assignment, the Company will remain jointly and severally liable for all such
obligations. Subject to the foregoing, the Indenture will be binding upon and
inure to the benefit of the parties thereto and their respective successors
and assigns. The Indenture provides that it may not otherwise be assigned by
the parties thereto other than by the Company to a successor or purchaser
pursuant to a consolidation, merger or sale permitted by the Indenture.
(Section 13.11)
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PLAN OF DISTRIBUTION
The Company may sell any series of Junior Subordinated Debt Securities and
the DLJ Trusts may sell the Preferred Securities being offered hereby
directly or through agents, underwriters or dealers.
Offers to purchase Offered Securities may be solicited by agents
designated by the Company from time to time. Any such agent involved in the
offer or sale of the Offered Securities will be named, and any commissions
payable by the Company to such agent will be set forth, in the Prospectus
Supplement. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its
appointment. Any such agent may be deemed to be an underwriter, as that term
is defined in the Securities Act, of the Offered Securities so offered and
sold.
If an underwriter or underwriters are utilized in the sale of Offered
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is
reached, and the names of the specific managing underwriter or underwriters,
as well as any other underwriters, and the terms of the transactions,
including compensation of the underwriters and dealers, if any, will be set
forth in the Prospectus Supplement, which will be used by the underwriters to
make resales of Offered Securities.
If a dealer is utilized in the sale of Offered Securities, the Company
will sell such Offered Securities to the dealer, as principal. The dealer may
then resell such Offered Securities to the public at varying prices to be
determined by such dealer at the time of resale. The name of the dealer and
the terms of the transactions will be set forth in the Prospectus Supplement
relating thereto.
If DLJSC, a wholly owned subsidiary of the Company, participates in the
distribution of Offered Securities, the offering of the Offered Securities
will be conducted in accordance with Section 2720 of the NASD Conduct Rules.
Offers to purchase Offered Securities may be solicited directly by the
Company and sales thereof may be made by the Company directly to
institutional investors or others. The terms of any such sales will be
described in the Prospectus Supplement relating thereto.
Agents, underwriters and dealers may be entitled under agreements which
may be entered into with the Company, to indemnification by the Company,
against certain liabilities, including liabilities under the 1933 Act, and
any such agents, underwriters or dealers, or their affiliates may be
customers of, engage in transactions with or perform services for the
Company, in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Offered Securities from the Company at the public offering price set forth in
the Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date stated in the
Prospectus Supplement. Such Contracts will be subject to only those
conditions set forth in the Prospectus Supplement. A commission indicated in
the Prospectus Supplement will be paid to underwriters and agents soliciting
purchases of Offered Securities pursuant to any such Contracts accepted by
the Company.
This Prospectus, together with the Prospectus Supplement, may also be used
by DLJSC in connection with offers and sales of Offered Securities related to
market-making transactions by and through DLJSC, at negotiated prices related
to prevailing market prices at the time of sale or otherwise. DLJSC may act
as principal or agent in such transactions.
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LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement,
certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon by Richards, Layton & Finger, Wilmington. The
validity of the Preferred Securities Guarantees and the Junior Subordinated
Debt Securities and certain other matters will be passed upon by Michael A.
Boyd, Senior Vice President and General Counsel to the Company and Davis Polk
& Wardwell. Mr. Boyd owns 22,466 restricted stock units of the Company and
holds options to purchase 39,772 shares of Common Stock. Davis Polk &
Wardwell from time to time provides legal services to the Company and its
subsidiaries.
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company as of December 31, 1995 and 1994 and for each of the years in the
three-year period ended December 31, 1995 have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated
herein by reference, and upon the authority of said firm as experts in
accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY DONALDSON, LUFKIN & JENRETTE,
INC., DLJ CAPITAL TRUST I OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF DONALDSON, LUFKIN & JENRETTE, INC. OR
DLJ CAPITAL TRUST I SINCE THE DATE HEREOF OR THEREOF. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY PREFERRED SECURITIES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Risk Factors ............................... S-4
Selected Consolidated Financial Data ...... S-8
The Company ................................ S-11
DLJ Capital Trust I ........................ S-13
Capitalization of the Company .............. S-14
Accounting Treatment ....................... S-15
Use of Proceeds ............................ S-15
Description of the Preferred Securities ... S-16
Description of the Junior Subordinated
Debentures ................................ S-27
Relationship Between the Preferred
Securities, the Junior Subordinated
Debentures and the Preferred Securities
Guarantee ................................. S-31
Taxation ................................... S-33
Underwriting ............................... S-36
PROSPECTUS
Available Information ...................... 2
Incorporation of Certain Documents by
Reference ................................. 2
Use of Proceeds ............................ 3
Ratios of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and
Preferred Stock Dividends ................. 3
The Company ................................ 4
The DLJ Trusts ............................. 6
Description of the Preferred Securities ... 10
Description of the Preferred Securities
Guarantees ................................ 11
Description of the Junior Subordinated
Debt Securities ........................... 14
Plan of Distribution ....................... 20
Legal Matters .............................. 21
Experts .................................... 21
</TABLE>
7,000,000 PREFERRED SECURITIES
DLJ
CAPITAL TRUST I
8.42% PREFERRED TRUST SECURITIES
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
DONALDSON, LUFKIN & JENRETTE, INC.
----------------
PROSPECTUS SUPPLEMENT
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEAN WITTER REYNOLDS INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
AUGUST 22, 1996
<PAGE>
PROSPECTUS SUPPLEMENT
AUGUST 22, 1996
(TO PROSPECTUS DATED AUGUST 15, 1996)
7,000,000 PREFERRED SECURITIES
DLJ CAPITAL TRUST I
8.42% PREFERRED TRUST SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
DONALDSON, LUFKIN & JENRETTE, INC.
The 8.42% Preferred Trust Securities (the "Preferred Securities")
represent preferred undivided beneficial interests in the assets of DLJ
Capital Trust I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"). Donaldson, Lufkin & Jenrette, Inc., a
Delaware corporation (the "Company"), will directly or indirectly own all the
common securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing common undivided beneficial
interests in the assets of the Trust. The Trust exists for the sole purpose
of issuing the Preferred Securities and Common Securities and investing the
proceeds thereof in an equivalent amount of 8.42% Junior Subordinated
Debentures due 2046 of the Company ("Junior Subordinated Debentures").
(continued on next page)
The Preferred Securities have been approved for listing on the New York
Stock Exchange, Inc. (the "NYSE"), subject to official notice of issuance.
See "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 FOR A DISCUSSION OF CERTAIN
FACTORS RELATING TO THE PREFERRED SECURITIES THAT SHOULD BE CONSIDERED BY
INVESTORS, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH
PAYMENTS ON THE JUNIOR SUBORDINATED DEBENTURES AND THE PREFERRED SECURITIES
MAY BE DEFERRED AND THE RELATED FEDERAL INCOME TAX CONSEQUENCES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus has been prepared for use by Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC") in connection with offers and sales of the
Preferred Securities which may be made by it from time to time in
market-making transactions at negotiated prices relating to prevailing market
prices at the time of sale. The Company has been advised by DLJSC that it
currently makes a market in the Preferred Securities; however, it is not
obligated to do so. Any such market making may be discontinued at any time,
and there is no assurance as to the liquidity of, or trading market for, the
Preferred Securities. DLJSC may act as principal or agent in such
transactions. See "Plan of Distribution."
<PAGE>
(Continued from previous page)
The Preferred Securities and the Common Securities rank pari passu with
each other and have equivalent terms; provided that (i) if an Event of
Default (as defined herein) under the Declaration (as defined herein) occurs
and is continuing, the holders of Preferred Securities will have a priority
over holders of the Common Securities with respect to payments in respect of
distributions and payments upon liquidation, redemption or otherwise and (ii)
holders of Common Securities have the exclusive right (subject to the terms
of the Declaration) to appoint, replace or remove Trustees (as defined in the
accompanying Prospectus) and to increase or decrease the number of Trustees.
Holders of the Preferred Securities will be entitled to receive cumulative
cash distributions at an annual rate of 8.42% of the liquidation amount of
$25 per Preferred Security, accruing from the date of original issuance of
the Preferred Securities and payable monthly, in arrears, on the last day of
each month, commencing on September 30, 1996 ("distributions"). Cash
distributions in arrears for more than one month will bear interest thereon
at the rate per annum of 8.42% of the stated liquidation amount of $25 per
Preferred Security (to the extent permitted by applicable law), compounded
monthly. The term "distributions" as used herein includes such cash
distributions and any such interest payable unless otherwise stated. The
distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and the interest
and other payment dates on the Junior Subordinated Debentures deposited in
the Trust as trust assets. If principal or interest is not paid on the Junior
Subordinated Debentures, including as a result of the Company's election to
extend the interest payment period on the Junior Subordinated Debentures as
described below, the Trust will not make payments on the Trust Securities.
The Junior Subordinated Debentures provide that, so long as the Company shall
not be in default in the payment of interest on the Junior Subordinated
Debentures, the Company shall have the right to defer payments of interest on
the Junior Subordinated Debentures by extending the interest payment period
from time to time for a period not exceeding 60 consecutive monthly interest
periods (each, an "Extension Period"). No interest shall be due and payable
during an Extension Period and, as a consequence, distributions on the Trust
Securities will also be deferred, but at the end of such Extension Period the
Company shall pay all interest then accrued and unpaid on the Junior
Subordinated Debentures, together with interest thereon at the rate specified
for the Junior Subordinated Debentures to the extent permitted by applicable
law, compounded monthly ("Compounded Interest"). All references herein to
interest shall include Compounded Interest unless otherwise stated. There
could be multiple Extension Periods of varying lengths throughout the term of
the Junior Subordinated Debentures, not to exceed 60 consecutive months or to
cause any extension beyond the maturity of the Junior Subordinated
Debentures. During any such Extension Period, the Company may not declare or
pay dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred
stock; provided that (i) the Company will be permitted to pay accrued
dividends upon the exchange or redemption of any series of preferred stock of
the Company as may be outstanding from time to time, in accordance with the
terms of such stock, and (ii) the foregoing will not apply to any stock
dividends paid by the Company. See "Risk Factors--Option to Extend Interest
Payment Period; Tax Impact of Extension"; "Description of the Junior
Subordinated Debentures--Interest" and "--Option to Extend Interest Payment
Period."
The payment of distributions out of moneys held by the Property Trustee
(as defined in the accompanying Prospectus) and payments on liquidation of
the Trust and the redemption of Preferred Securities, as set forth below, are
guaranteed by the Company on a subordinated basis as and to the extent
described herein (the "Preferred Securities Guarantee"). See "Description of
the Preferred Securities Guarantee" in the accompanying Prospectus. The
Preferred Securities Guarantee is a full and unconditional guarantee from the
time of issuance of the Preferred Securities, but the Preferred Securities
Guarantee covers distributions and other payments on the Preferred Securities
only if and to the extent that the Company has made a payment to the Property
Trustee of interest or principal on the Junior Subordinated Debentures
deposited in the Trust as trust assets. The obligations of the Company under
the Preferred Securities Guarantee are subordinate and junior in right of
payment to all other liabilities of the
S-2
<PAGE>
(Continued from previous page)
Company, including Junior Subordinated Debt Securities (as defined in the
accompanying Prospectus) and senior to all capital stock now or hereafter
issued by the Company and to any guarantee now or hereafter entered into by
the Company in respect of its capital stock. The obligations of the Company
under the Junior Subordinated Debentures are subordinate and junior in right
of payment to all present and future Senior Indebtedness (as defined in the
accompanying Prospectus). Because the Company is a holding company, the
Junior Subordinated Debentures (and the Company's obligations under the
Preferred Securities Guarantee) are also effectively subordinated to all
existing and future liabilities, including trade payables, of the Company's
subsidiaries, except to the extent that the Company is a creditor of the
subsidiaries recognized as such.
The Junior Subordinated Debentures are redeemable by the Company (in whole
or in part) from time to time, on or after August 31, 2001 or at any time in
certain circumstances upon the occurrence of a Tax Event (as defined herein).
If the Company redeems Junior Subordinated Debentures, the Trust must redeem
Trust Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Junior Subordinated Debentures so redeemed
at $25 per Trust Security plus accrued and unpaid distributions thereon (the
"Redemption Price") to the date fixed for redemption. See "Description of the
Preferred Securities--Mandatory Redemption." The Preferred Securities will be
redeemed upon maturity of the Junior Subordinated Debentures. The Junior
Subordinated Debentures mature on June 30, 2046. In addition, upon the
occurrence of a Special Event (as defined herein) arising from a change in
law or a change in legal interpretation, unless the Junior Subordinated
Debentures are redeemed in the limited circumstances described below, the
Trust shall be dissolved with the result that the Junior Subordinated
Debentures will be distributed to the holders of the Preferred Securities, on
a pro rata basis, in lieu of any cash distribution. In the case of a Special
Event that is a Tax Event, the Company will have the right in certain
circumstances to redeem the Junior Subordinated Debentures, which would
result in the redemption by the Trust of the Trust Securities in the same
amount on a pro rata basis. If the Junior Subordinated Debentures are
distributed to the holders of the Preferred Securities, the Company will use
its best efforts to have the Junior Subordinated Debentures listed on the New
York Stock Exchange or on such other exchange as the Preferred Securities are
then listed. See "Description of the Preferred Securities--Special Event
Redemption or Distribution" and "Description of the Junior Subordinated
Debentures."
In the event of the voluntary or involuntary dissolution, winding up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive, for each Preferred Security, a liquidation amount of $25
plus accrued and unpaid distributions thereon (including interest thereon) to
the date of payment, unless in connection with such dissolution, the Junior
Subordinated Debentures are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities--Liquidation
Distribution Upon Dissolution."
S-3
<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following
matters:
RANKING OF SUBORDINATED OBLIGATIONS UNDER PREFERRED SECURITIES GUARANTEE AND
JUNIOR SUBORDINATED DEBENTURES; DEPENDENCE ON THE COMPANY
The obligations of the Company under the Junior Subordinated Debentures
are unsecured obligations of the Company and will be subordinate and junior
in right of payment to Senior Indebtedness of the Company but senior to its
capital stock. The Company's obligations under the Preferred Securities
Guarantee are unsecured and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Company, including the Junior
Subordinated Debentures, except those made pari passu or subordinate by their
terms, and (ii) senior to all capital stock now or hereafter issued by the
Company and to any guarantee now or hereafter entered into by the Company in
respect of its capital stock. Because the Company is a holding company, the
Junior Subordinated Debentures (and the Company's obligations under the
Preferred Securities Guarantee) are also effectively subordinated to all
existing and future liabilities, including trade payables, of the Company's
subsidiaries, except to the extent that the Company is a creditor of the
subsidiaries recognized as such. There are no terms in the Preferred
Securities, the Junior Subordinated Debentures or the Preferred Securities
Guarantee that limit the Company's ability to incur additional indebtedness,
including indebtedness that ranks senior to or pari passu with the Junior
Subordinated Debentures and the Preferred Securities Guarantee, or the
ability of its subsidiaries to incur additional indebtedness. See
"Description of the Preferred Securities Guarantees--Status of the Preferred
Securities Guarantees" and "Description of the Junior Subordinated Debt
Securities--Subordination" in the accompanying Prospectus.
The Trust's ability to make distributions and other payments on the
Preferred Securities is solely dependent upon the Company making interest and
other payments on the Junior Subordinated Debentures deposited as trust
assets as and when required. If the Company were not to make distributions or
other payments on the Junior Subordinated Debentures for any reason,
including as a result of the Company's election to defer the payment of
interest on the Junior Subordinated Debentures by extending the interest
period on the Junior Subordinated Debentures, the Trust will not make
payments on the Trust Securities. In such an event, holders of the Preferred
Securities would not be able to rely on the Preferred Securities Guarantee
since distributions and other payments on the Preferred Securities are
subject to such Guarantee only if and to the extent that the Company has made
a payment to the Property Trustee of interest or principal on the Junior
Subordinated Debentures deposited in the Trust as trust assets. Instead,
holders of Preferred Securities would rely on the enforcement by the Property
Trustee of its rights as registered holder of the Junior Subordinated
Debentures against the Company pursuant to the terms of the Indenture.
However, if the Trust's failure to make distributions on the Preferred
Securities is a consequence of the Company's exercise of its right to extend
the interest payment period for the Junior Subordinated Debentures, the
Property Trustee will have no right to enforce the payment of distributions
on the Preferred Securities until an Event of Default under the Declaration
shall have occurred. The Company's obligations under the Preferred Securities
Guarantee are subordinate and junior in right of payment to all other
liabilities of the Company, including the Junior Subordinated Debentures,
except those made pari passu or subordinate by their terms to the Preferred
Securities Guarantee and senior to its capital stock or to any guarantee of
the Company in respect of its capital stock.
The Declaration provides that the Company shall pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs
and expenses of the Trust, including any taxes and all costs and expenses
with respect thereto, to which the Trust may become subject, except for
United States withholding taxes. No assurance can be given that the Company
will have sufficient resources to enable it to pay such debts, obligations,
costs and expenses on behalf of the Trust.
S-4
<PAGE>
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX IMPACT OF EXTENSION
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures
by extending the interest payment period from time to time on the Junior
Subordinated Debentures for an Extension Period not exceeding 60 consecutive
monthly interest periods, during which no interest shall be due and payable.
In such an event, monthly distributions on the Preferred Securities would not
be made (but would continue to accrue with interest thereon at the rate of
8.42% per annum, compounded monthly) by the Trust during any such Extension
Period. If the Company exercises the right to extend an interest payment
period, the Company may not during such Extension Period declare or pay
dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred
stock; provided that (i) the Company will be permitted to pay accrued
dividends upon the exchange or redemption of any series of preferred stock of
the Company as may be outstanding from time to time, in accordance with the
terms of such stock and (ii) the foregoing will not apply to stock dividends
paid by the Company. As of June 30, 1996, the Company had 2,250,000 Shares of
Cumulative Exchangeable $8.83 Preferred Stock outstanding. Each holder of
Cumulative Exchangeable Preferred Stock is entitled to receive when, as and
if it is declared by the Board of Directors, out of funds legally available
therefor, cumulative cash dividends of $8.83 per share per annum, payable
quarterly in arrears. Subject to certain conditions, after October 15, 1996,
the Company may exchange the Cumulative Exchangeable $8.83 Preferred Stock
for an equal principal amount of subordinated notes of the Company bearing a
rate of interest of 9.58% per annum and having the same redemption provisions
as the Cumulative Exchangeable $8.83 Preferred Stock (as described under
"Description of Capital Stock" in the accompanying Prospectus.) The Company
is required to redeem all outstanding shares of the Cumulative Exchangeable
$8.83 Preferred Stock on October 15, 2003 and may redeem such Preferred Stock
in whole or in part at any time at its option in certain circumstances.
Prior to the termination of any Extension Period, the Company may further
extend such Extension Period; provided that such Extension Period together
with all such previous and further extensions thereof may not exceed 60
consecutive monthly interest periods. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may commence a
new Extension Period, subject to the above requirements. The Company may also
prepay at any time all or any portion of the interest accrued during an
Extension Period. Consequently, there could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures,
not to exceed 60 consecutive months or to cause any extension beyond the
maturity of the Junior Subordinated Debentures. See "Description of the
Preferred Securities--Distributions" and "Description of the Junior
Subordinated Debentures--Option to Extend Interest Payment Period."
Because the Company has the right to extend the interest payment period
for an Extension Period of up to 60 consecutive monthly interest periods on
various occasions, it is more likely than not that the Junior Subordinated
Debentures will be treated as issued with "original issue discount" for
United States Federal income tax purposes and the Company intends to take
that position in filing related information returns. As a result, holders of
Preferred Securities will be required to include their pro rata share of
original issue discount in gross income as it accrues for United States
Federal income tax purposes in advance of the receipt of cash. Generally, all
of a securityholder's taxable interest income with respect to the Junior
Subordinated Debentures will be accounted for as "original issue discount"
and actual distributions of stated interest will not be separately reported
as taxable income. See "Taxation--Accrual of Original Issue Discount and
Premium" and "--Potential Extension of Payment Period on the Junior
Subordinated Debentures."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence and during the continuation of a Tax Event or
Investment Company Event (each as defined herein), which may occur at any
time, the Trust shall, unless the Junior Subordinated Debentures are redeemed
in the limited circumstances described below, be dissolved with the result
that, in the manner described in "Description of the Preferred
Securities--Liquidation Distribution Upon
S-5
<PAGE>
Dissolution," Junior Subordinated Debentures having an aggregate principal
amount equal to the aggregate stated liquidation amount of, and bearing
accrued and unpaid distributions on, the Preferred Securities and Common
Securities would be distributed on a Pro Rata Basis (as defined under "The
DLJ Trusts" in the accompanying Prospectus) to the holders of the Preferred
Securities and Common Securities in liquidation of the Trust. In the case of
a Tax Event, in certain circumstances, the Company shall have the right to
redeem at any time the Junior Subordinated Debentures, in whole or in part,
in which event the Trust will redeem Preferred Securities and Common
Securities on a Pro Rata Basis to the same extent as the Junior Subordinated
Debentures are redeemed. There can be no assurance as to the market prices
for Preferred Securities or the Junior Subordinated Debentures which may be
distributed in exchange for Preferred Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Preferred Securities
that an investor may purchase, or the Junior Subordinated Debentures that the
investor may receive on dissolution and liquidation of the Trust, may trade
at a discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may
receive Junior Subordinated Debentures upon the occurrence of a Special
Event, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and
should carefully review all the information regarding the Junior Subordinated
Debentures contained herein and in the accompanying Prospectus. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution" and "Description of the Junior Subordinated
Debentures--General."
If enacted in their present form, certain legislative proposals in the
Revenue Reconciliation Bill of 1996 (the "Bill") would prevent the Company
from deducting interest on the Junior Subordinated Debentures. The Bill as
proposed would be effective generally for instruments issued on or after
December 7, 1995. However, on March 29, 1996, the Chairmen of the Senate
Finance and House Ways and Means Committees issued a joint statement to the
effect that it was their intention that the effective date of the President's
legislative proposals, if adopted, will be no earlier than the date of
appropriate Congressional action. There can be no assurance, however, that
current or future legislative proposals if enacted would not prevent the
Company from deducting interest on the Junior Subordinated Debentures. This
would constitute a Tax Event and could result in the distribution of the
Junior Subordinated Debentures to holders of the Preferred Securities or, in
certain circumstances, the redemption of such securities by the Company and
the distribution of the resulting cash in redemption of the Preferred
Securities. See "Description of the Preferred Securities--Special Event
Redemption or Distribution."
Under current United States Federal income tax law, a distribution of the
Junior Subordinated Debentures upon a Tax Event or Investment Company Event
would not be a taxable event to holders of the Preferred Securities. See
"Taxation--Distribution of Junior Subordinated Debentures to Holders of
Preferred Securities."
LIMITING VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights, but will
not be able to appoint, remove or replace, or to increase or decrease the
number of, Trustees, which rights are vested exclusively in the Common
Securities.
LISTING OF PREFERRED SECURITIES; TRADING PRICES
The Preferred Securities constitute a new issue of securities with no
established trading market. While the Preferred Securities have been approved
for listing on the NYSE, subject to official notice of issuance, there can be
no assurance that an active market for the Preferred Securities will develop
or be sustained in the future on such exchange. Although Donaldson, Lufkin &
Jenrette Securities Corporation has indicated to the Company and the Trust
that it intends to make a market in the Preferred Securities as permitted by
applicable laws and regulations prior to the commencement of trading on the
NYSE, it is not obligated to do so and may discontinue any such market-making
at any time without notice. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Preferred Securities.
S-6
<PAGE>
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Debentures. A holder who disposes of his Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income, and
to add such amount to his adjusted tax basis in his pro rata share of the
underlying Junior Subordinated Debentures deemed disposed of. Accordingly,
such a holder will recognize a capital loss to the extent the selling price
(which may not fully reflect the value of accrued but unpaid interest) is
less than the holder's adjusted tax basis (which will include accrued but
unpaid interest). Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States Federal income
tax purposes. See "Taxation--Accrual of Original Issue Discount and Premium"
and "--Disposition of the Preferred Securities."
POTENTIAL MARKET VOLATILITY DURING EXTENSION PERIOD
As described above, the Company has the right to extend an interest
payment period on the Junior Subordinated Debentures from time to time for a
period not exceeding 60 consecutive monthly interest periods. If the Company
determines to extend an interest payment period, or if the Company thereafter
extends an Extension Period or prepays interest accrued during an Extension
Period as described above, the market price of the Preferred Securities is
likely to be affected. In addition, as a result of such rights, the market
price of the Preferred Securities (which represent an undivided interest in
Junior Subordinated Debentures) may be more volatile than other securities on
which original issue discount accrues that do not have such rights. A holder
that disposes of its Preferred Securities during an Extension Period,
therefore, may not receive the same return on its investment as a holder that
continues to hold its Preferred Securities. See "Description of the Junior
Subordinated Debentures--Option to Extend Interest Payment Period."
S-7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial information is qualified by
reference to and should be read in conjunction with, the Company's
Consolidated Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Form 10-K"), which is incorporated by reference
in the accompanying Prospectus. The selected consolidated statement of income
data for the years ended December 31, 1993, 1994 and 1995 and the selected
consolidated statement of financial condition data as of December 31, 1994
and 1995 are derived from the Company's audited Consolidated Financial
Statements which are incorporated by reference herein. The selected unaudited
financial information as of and for the six months ended June 30, 1995 and
1996 should be read in conjunction with the Company's audited Consolidated
Financial Statements and Notes thereto contained in the Form 10-K and the
Company's unaudited Consolidated Financial Statements and Notes thereto
contained in Company's quarterly report on Form 10-Q for the quarter ended
June 30, 1996 (the "Form 10-Q"), which report is also incorporated by
reference in the accompanying Prospectus. Such unaudited information
reflects, in the opinion of management, all adjustments, consisting of normal
recurring adjustments which the Company considers necessary for a fair
presentation of its financial position and results of operations for these
periods. Operating results for the six months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the entire
year ending December 31, 1996. The selected consolidated statement of
financial condition data as of December 31, 1991, 1992, 1993 and the selected
consolidated statement of income data for the years ended December 31, 1991
and 1992 are derived from the audited Consolidated Financial Statements of
the Company which are not included or incorporated by reference in the
accompanying Prospectus.
S-8
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA AND FINANCIAL RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Commissions ............................... $ 257.9 $ 289.7 $ 358.8 $ 376.1 $ 460.2 $ 225.0 $ 299.1
Underwritings ............................. 170.9 350.3 574.6 261.1 441.5 171.2 391.0
Fees ...................................... 166.2 158.1 211.3 281.3 369.1 173.5 184.7
Interest-net(1) ........................... 323.0 381.7 657.3 791.9 904.1 423.6 481.9
Principal transactions-net:
Trading ................................... 264.2 272.0 381.5 165.7 364.9 154.9 275.0
Investment ................................ 17.3 195.9 79.9 97.6 163.7 99.1 111.1
Other ...................................... 15.1 16.4 21.9 35.0 55.1 26.4 24.3
--------- --------- --------- --------- --------- --------- ---------
Total Revenues ........................... 1,214.6 1,664.1 2,285.3 2,008.7 2,758.6 1,273.7 1,767.1
--------- --------- --------- --------- --------- --------- ---------
Costs and Expenses:
Compensation and benefits ................. 567.9 886.6 1,200.4 897.8 1,261.4 598.1 809.0
Compensation expense--restricted stock
units .................................... -- -- -- -- 6.2 -- --
Interest .................................. 236.4 212.3 381.7 503.8 680.6 308.9 352.5
Other expenses ............................ 321.3 320.2 401.2 402.1 511.9 234.2 339.8
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses ................. 1,125.6 1,419.1 1,983.3 1,803.7 2,460.1 1,141.2 1,501.3
--------- --------- --------- --------- --------- --------- ---------
Income before provision for income taxes .. 89.0 245.0 302.0 205.0 298.5 132.5 265.8
Provision for income taxes ................. 31.2 98.0 115.9 82.0 119.4 53.0 103.7
--------- --------- --------- --------- --------- --------- ---------
Net income ................................. $ 57.8 $ 147.0 $ 186.1 $ 123.0 $ 179.1 $ 79.5 $ 162.1
--------- --------- --------- --------- --------- --------- ---------
Dividends on preferred stock ............... -- -- -- $ 21.0 $ 19.9 $ 9.9 $ 9.9
--------- --------- --------- --------- --------- --------- ---------
Earnings applicable to common stock ....... $ 57.8 $ 147.0 $ 186.1 $ 102.0 $ 159.2 $ 69.6 $ 152.2
========= ========= ========= ========= ========= ========= =========
Weighted average common shares
outstanding(2) ............................ 51.7 59.8
========= =========
Earnings per common share(2) ............... $ 3.08 $ 2.54
========= =========
Pro forma weighted average common shares(3) 51.5 51.5
========= =========
Pro forma earnings per common share(3) .... $ 1.98 $ 1.35
========= =========
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE DATA AND FINANCIAL RATIOS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Securities purchased under agreements to resell
and securities borrowed ....................... $10,942.5 $14,378.4 $21,575.2 $19,166.9 $27,793.1
Total assets ................................... 18,721.7 24,436.2 38,766.7 33,261.6 44,576.5
Securities sold under agreements to repurchase
and securities loaned ......................... 11,200.8 14,732.4 24,116.7 20,385.4 29,369.0
Long-term borrowings ........................... 268.1 478.6 549.0 539.9 958.9
Preferred stock ................................ -- -- 225.0 225.0 225.0
Stockholders' equity ........................... 340.3 454.6 750.3 820.3 1,198.7
OTHER FINANCIAL DATA (AT END OF PERIOD):
Book value per common share outstanding ....... $ 6.81 $ 9.09 $ 15.01 $ 16.41 $ 20.50
Ratio of net assets to stockholders' equity (4) 22.86x 22.12x 22.91x 17.18x 14.00x
Ratio of long-term borrowings to total
capitalization (5) ............................ 0.42x 0.51x 0.34x 0.30x 0.37x
Return on average equity (6) ................... 18.2% 36.8% 30.5% 13.1% 17.1%
Pre-tax profit margin (7) ...................... 9.1% 16.9% 15.9% 13.6% 14.4%
After-tax profit margin (7) .................... 5.9% 10.1% 9.8% 8.2% 8.6%
Ratio of earnings to fixed charges (8) ........ 1.07x 1.21x 1.20x 1.10x 1.11x
Ratio of earnings to combined fixed charges and
preferred stock dividends (9) ................. -- -- -- 1.09x 1.10x
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Securities purchased under agreements to resell
and securities borrowed ....................... $26,750.8 $29,872.7
Total assets ................................... 42,417.1 47,746.6
Securities sold under agreements to repurchase
and securities loaned ......................... 27,895.9 29,703.2
Long-term borrowings ........................... 723.1 1,103.9
Preferred stock ................................ 225.0 225.0
Stockholders' equity ........................... 873.6 1,337.5
OTHER FINANCIAL DATA (AT END OF PERIOD):
Book value per common share outstanding ....... $ 17.47 $ 22.89
Ratio of net assets to stockholders' equity (4) 17.93x 13.36x
Ratio of long-term borrowings to total
capitalization (5) ............................ 0.35x 0.41x
Return on average equity (6) ................... 16.4% 24.1%
Pre-tax profit margin (7) ...................... 13.7% 18.8%
After-tax profit margin (7) .................... 8.2% 11.5%
Ratio of earnings to fixed charges (8) ........ 1.10x 1.20x
Ratio of earnings to combined fixed charges and
preferred stock dividends (9) ................. 1.09x 1.19x
</TABLE>
- ------------
(1) Interest is net of interest expense to finance U.S. government and
agency instruments of $1,008.0 million, $918.4 million, $1,083.6
million, $1,612.8 million, $2,109.2 million, $977.9 million and $991.3
million, respectively.
(2) Earnings per common share has been calculated by dividing earnings
applicable to common share (net income less preferred dividends) by the
weighted average number of common shares and common share equivalents
outstanding. Common share equivalents include shares of common stock
issuable under the Restricted Stock Unit Plan and the dilutive effect
of options under the treasury stock method. Weighted average common
shares outstanding are the same for both primary and fully diluted
earnings per common shares. Earnings per common share prior to 1994
were not presented because the amounts would not be meaningful.
(3) Pro forma earnings per common share are calculated by dividing earnings
applicable to common shares (net income less preferred dividends) by
the pro forma weighted average common shares and common share
equivalents outstanding. Pro forma common shares outstanding represent
actual historical shares outstanding adjusted for the dilutive effect
of the Restricted Stock Units ("RSUs") using the treasury stock method.
(4) Net assets excludes securities purchased under agreements to resell and
securities borrowed.
(5) Long-term borrowings and total capitalization (the sum of long-term
borrowings, preferred stock and stockholders' equity) exclude current
maturities of long-term borrowings.
(6) After payment of dividends on the Company's Cumulative Exchangeable
$8.83 Preferred Stock.
(7) Based on net revenues.
(8) For the purpose of calculating the ratio of earnings to fixed charges
(i) earnings consist of income before provision for income taxes and
fixed charges and (ii) fixed charges consist of interest expense and
one-third of rental expense which is deemed representative of an
interest factor.
(9) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before the provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.
S-10
<PAGE>
THE FOLLOWING INFORMATION CONCERNING THE COMPANY, DLJ CAPITAL TRUST I, THE
PREFERRED SECURITIES, THE PREFERRED SECURITIES GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES IS IN ADDITION TO, AND SHOULD BE READ IN CONJUNCTION
WITH, THE INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS. CAPITALIZED
TERMS USED IN THIS PROSPECTUS SUPPLEMENT HAVE THE SAME MEANINGS AS IN THE
ACCOMPANYING PROSPECTUS.
THE COMPANY
The Company is a leading integrated investment and merchant bank that
serves institutional, corporate, governmental and individual clients. The
Company's businesses include securities underwriting, sales and trading;
merchant banking; financial advisory services; investment research;
correspondent brokerage services; and asset management. While results have
fluctuated from year to year, for the years 1991 through 1995, the Company's
total revenues and net income increased by a compound annual growth rate of
22.8% and 32.7%, respectively. The Company's average annual after-tax return
on common equity for the past five years was 23.1%. At June 30, 1996, the
Company had total assets of $47.7 billion and total stockholders' equity of
$1.3 billion.
The Company's principal strategy is to focus its resources on certain core
businesses where management believes the Company can compete profitably and
be among the leading participants in each targeted market. Over the past
several years, the Company has significantly expanded the scope of its
business activities and its customer base, both in the U.S. and
internationally. It has established strong positions in selected high-margin
activities, including equity and high-yield corporate securities underwriting
as well as merchant banking, and has increased its market share in a broad
range of businesses. Key elements of this expansion have been the Company's
recruitment of experienced professionals during periods of turmoil in the
securities industry, the continued development and retention of the Company's
existing personnel at all levels and the continuity of senior management. In
addition, the Company has historically emphasized economic and investment
research in the development of its business and believes that its commitment
to research has been an important contributor to its success.
The Company conducts its business through three principal operating
groups, each of which is an important contributor to revenues and earnings:
the Banking Group, which includes the Company's Investment Banking, Merchant
Banking and Emerging Markets groups; the Capital Markets Group, consisting of
the Company's institutional debt and equity businesses as well as Sprout, its
venture capital affiliate; and the Financial Services Group, comprised of its
Pershing clearing division, high-net-worth retail brokerage and asset
management businesses.
The Company's Banking Group is a major participant in the raising of
capital and the providing of financial advice to companies throughout the
U.S. and has significantly expanded its activities abroad. Through its
Investment Banking group, the Company manages and underwrites public
offerings of securities, arranges private placements and provides advisory
and other services in connection with mergers, acquisitions, restructurings
and other financial transactions. Since 1991, the Investment Banking group
has raised over $190.0 billion for clients from the public and private
markets in corporate equity and debt securities and has completed over 350
merger and acquisition, restructuring and divesture assignments aggregating
in excess of $89.0 billion. Its Merchant Banking group pursues direct
investments in a variety of areas through a number of investment vehicles
funded with capital provided primarily by institutional investors, the
Company and its employees. Since the Company began investing in leveraged
investments in 1985, it invested over $1.0 billion on behalf of the Company,
its employees and funds it manages in over 50 companies with an aggregate
purchase price of over $19.5 billion and achieved an average annual internal
rate of return substantially in excess of comparable industry benchmarks. The
Emerging Markets group specializes in client advisory services, merchant
banking and the underwriting, sales and trading of securities in Latin
America, Asia and certain other international markets.
The Capital Markets Group encompasses a broad range of activities
including trading, research, origination and distribution of equity and
fixed-income securities, private equity investments and venture capital. Its
focus is primarily client-driven, in contrast to that of many other
securities firms which emphasize proprietary trading, an approach that
reduces the Company's exposure to market volatility. Its
S-11
<PAGE>
Taxable Fixed-Income division provides institutional clients with research,
trading and sales services for a broad range of taxable fixed-income products
including high-yield corporate, investment-grade corporate, U.S. government
and mortgage-backed securities. The Institutional Equities division provides
institutional clients with research, trading and sales services in U.S.
listed and over-the-counter equity securities. The Company's equity sales and
trading capabilities, combined with its research expertise, have contributed
to commission revenues increasing, for the years 1991 through 1995, at a
compound annual growth rate of 15.6%. In addition, the Company's Equity
Derivatives division provides a broad range of equity and index options
products, while Sprout is one of the oldest and largest groups in the private
equity investment and venture capital industry.
The Financial Services Group provides a broad array of services to
individual investors and the financial intermediaries which represent them.
Pershing is a leading provider of correspondent brokerage services, clearing
transactions for over 600 U.S. brokerage firms which collectively maintain
over 1.3 million client accounts. These client accounts held over $143.6
billion of assets at June 30, 1996. During 1995, Pershing accounted for more
than 10% of the daily reported trading volume on the NYSE. In addition,
Pershing's PC Financial Network (Service Mark), a leading on-line discount
broker in the U.S., has experienced significant growth over the past several
years. The Company's Investment Services Group, which consists of
approximately 270 account executives, provides high-net worth individuals and
medium to smaller size institutions with access to the Company's equity and
fixed-income research, trading services and underwriting and has one of the
highest revenues per account executive in the industry. Through Wood,
Struthers & Winthrop Management Corp. and affiliates the Company provides
investment management and trust services primarily to high-net-worth
individual investors and institutions, and at June 30, 1996 had over $4.8
billion in assets under management.
Apart from its three principal operating groups, the Company also
maintains a separate brokerage subsidiary, Autranet, Inc., which provides
institutional investors with research generated by independent originators
that are not affiliated with Wall Street brokerage firms.
Founded in 1959, the Company initially focused on providing in-depth
investment research to institutional investors. In 1970, the Company became
the first member firm of the New York Stock Exchange, Inc. to be owned
publicly. Fifteen years later, the Company was purchased by subsidiaries of
the Equitable Companies Incorporated ("EQ") (EQ and its subsidiaries other
than the Company, collectively, "Equitable"). Equitable, which as of June 30,
1996, owned an approximately 80% interest in the Company following the
Company's initial public offering in October 1995, is a diversified financial
services organization and one of the world's largest investment management
organizations. AXA is EQ's largest stockholder, beneficially owning at June
30, 1996, approximately 60.7% of EQ's outstanding shares of common stock and
$392.2 million stated value of EQ's Series E convertible preferred stock.
S-12
<PAGE>
DLJ CAPITAL TRUST I
DLJ Capital Trust I is a statutory business trust formed on June 19, 1996
under the Delaware Business Trust Act (the "Business Trust Act") pursuant to
a declaration of trust among the Trustees and the Company and the filing of a
certificate of trust with the Secretary of State of the State of Delaware.
Such declaration will be amended and restated in its entirety (as so amended
and restated, the "Declaration") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus Supplement and
the accompanying Prospectus form a part, as of the date the Preferred
Securities are initially issued. The Declaration is qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon issuance
of the Preferred Securities, the holders thereof will own all of the issued
and outstanding Preferred Securities. The Company will acquire Common
Securities in an amount equal to at least 3% of the total capital of the
Trust and will own, directly or indirectly, all of the issued and outstanding
Common Securities. The Trust exists for the purpose of (a) issuing its Trust
Securities for cash and investing the proceeds thereof in an equivalent
amount of Junior Subordinated Debentures and (b) engaging in such other
activities as are necessary, convenient and incidental thereto. The rights of
the holders of the Trust Securities, including economic rights, rights to
information and voting rights, are as set forth in the Declaration, the
Business Trust Act and the Trust Indenture Act. The Declaration does not
permit the incurrence by the Trust of any indebtedness for borrowed money or
the making of any investment other than in the Junior Subordinated
Debentures. In the Declaration, the Company has agreed to pay for all debts
and obligations (other than with respect to the Trust Securities) and all
costs and expenses of the Trust, including the fees and expenses of the
Trustees and any income taxes, duties and other governmental charges, and all
costs and expenses with respect thereto, to which the Trust may become
subject, except for United States withholding taxes.
S-13
<PAGE>
CAPITALIZATION OF THE COMPANY
The following table sets forth the unaudited consolidated capitalization
of the Company at June 30, 1996, and as adjusted to reflect the application
of the estimated net proceeds from the sale of the Preferred Securities
(assuming no exercise of the Underwriters overallotment option). See "Use of
Proceeds." The table should be read in conjunction with the Company's
consolidated financial statements and notes thereto included in the documents
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Short-term borrowings .............................................. $1,410,585 $1,241,657
============ =============
Long-term borrowings:
Senior Notes ...................................................... $ 496,998 $ 496,998
Senior subordinated revolving credit .............................. 250,000 250,000
Medium-term notes ................................................. 337,525 337,525
Other borrowings .................................................. 19,351 19,351
------------ -------------
Total long-term borrowings ........................................ 1,103,874 1,103,874
Company-obligated mandatorily redeemable preferred securities of
grantor trusts (1) ................................................ -- 168,928
Cumulative Exchangeable $8.83 Preferred Stock, at redemption value 225,000 225,000
Stockholders' equity:
Common stock ($0.10 par value) 150,000,000 shares authorized;
53,300,000 shares issued and outstanding ......................... 5,330 5,330
Restricted stock units; 5,179,147 units authorized, 5,140,205
units issued and outstanding ..................................... 105,365 105,365
Paid-in capital ................................................... 364,791 364,791
Retained earnings ................................................. 862,700 862,700
Cumulative translation adjustment ................................. (650) (650)
------------ -------------
Total stockholders' equity ........................................ 1,337,536 1,337,536
------------ -------------
Total capitalization .............................................. $2,666,410 $2,835,338
============ =============
</TABLE>
- ------------
(1) As described in this Prospectus Supplement, the sole asset of the Trust
will be the Junior Subordinated Debentures.
S-14
<PAGE>
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with the
Company's financial statements, with the Preferred Securities shown as
Company-obligated mandatorily redeemable preferred securities in grantor
trusts holding junior subordinated debentures of the Company.
USE OF PROCEEDS
Neither Donaldson, Lufkin & Jenrette, Inc. nor the Trust will receive any
proceeds from the sale of the Preferred Securities in any market making
transaction with which this Prospectus may be delivered.
S-15
<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration which is qualified under the Trust Indenture Act. The Property
Trustee, The Bank of New York, but not the other Trustees of the Trust, will
act as the indenture trustee for purposes of the Trust Indenture Act. The
terms of the Preferred Securities and the Declaration include those stated in
the Declaration and those made part of the Declaration by the Trust Indenture
Act and the Business Trust Act. The following summarizes the material terms
and provisions of the Preferred Securities and is qualified in its entirety
by reference to, the Declaration, which has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement forms a part, the
Business Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Trust to issue the Preferred Securities,
which represent preferred undivided beneficial interests in the assets of the
Trust, and the Common Securities, which represent common undivided beneficial
interests in the assets of the Trust. All of the Common Securities will be
owned, directly or indirectly, by the Company. The Common Securities and the
Preferred Securities rank pari passu with each other and will have equivalent
terms except that (i) if an Event of Default under the Declaration occurs and
is continuing, the rights of the holders of the Common Securities to payment
in respect of periodic distributions and payments upon liquidation,
redemption or otherwise are subordinated to the rights of the holders of the
Preferred Securities and (ii) holders of Common Securities have the exclusive
right (subject to the terms of the Declaration) to appoint, remove or replace
Trustees and to increase or decrease the number of Trustees. The Declaration
does not permit the issuance by the Trust of any securities or other
evidences of beneficial ownership of, or beneficial interests in, the Trust
other than the Preferred Securities and the Common Securities, the incurrence
of any indebtedness for borrowed money by the Trust or the making of any
investment other than in the Junior Subordinated Debentures. Pursuant to the
Declaration, the Property Trustee will own and hold the Junior Subordinated
Debentures as trust assets for the benefit of the holders of the Preferred
Securities and the Common Securities. The payment of distributions out of
moneys held by the Property Trustee and payments on redemption of the
Preferred Securities or liquidation of the Trust are guaranteed by the
Company on a subordinated basis as and to the extent described under
"Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. The Property Trustee will hold the Preferred Securities Guarantee
for the benefit of holders of the Preferred Securities. The Preferred
Securities Guarantee is a full and unconditional guarantee from the time of
issuance of the Preferred Securities, but the Preferred Securities Guarantee
covers distributions and other payments on the Preferred Securities only if
and to the extent that the Company has made a payment to the Property Trustee
of interest or principal on the Junior Subordinated Debentures deposited in
the Trust as trust assets. See "Voting Rights."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per
annum of 8.42% of the stated liquidation amount of $25 per Preferred
Security. Distributions in arrears for more than one month will bear interest
thereon at the rate per annum of 8.42% of the stated liquidation amount of
$25 per Preferred Security (to the extent permitted by law), compounded
monthly. The term "distributions" as used herein includes any such interest
payable unless otherwise stated. The amount of distributions payable for any
period will be computed on the basis of a 360-day year of twelve 30-day
months.
Distributions on the Preferred Securities will be cumulative, will accrue
from the original date of issuance and, except as otherwise described below,
will be payable monthly in arrears on the last day of each month, commencing
on September 30, 1996, but only if, and to the extent that, interest payments
are made in respect of Junior Subordinated Debentures held by the Property
Trustee.
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures
by extending the interest payment period from time to time on the Junior
Subordinated Debentures for a period not exceeding 60 consecutive monthly
interest periods and, as a
S-16
<PAGE>
consequence, the Trust would defer monthly distributions on the Preferred
Securities (though such distributions would continue to accrue with interest
thereon at the rate of 8.42% per annum, compounded monthly) during any such
Extension Period. If the Company exercises the right to extend an interest
payment period, the Company may not declare or pay dividends on, or redeem,
purchase, acquire or make a distribution or liquidation payment with respect
to, any of its common stock or preferred stock during such Extension Period;
provided that (i) the Company will be permitted to pay accrued dividends upon
the exchange or redemption of any series of preferred stock of the Company as
may be outstanding from time to time, in accordance with the terms of such
stock, and (ii) the foregoing will not apply to any stock dividend by the
Company. Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period; provided that such Extension Period
together with all such previous and further extensions thereof may not exceed
60 consecutive monthly interest periods. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. The
Company may also prepay at any time all or any portion of the interest
accrued during an Extension Period. Consequently, there could be multiple
Extension Periods of varying lengths throughout the term of the Junior
Subordinated Debentures, not to exceed 60 consecutive months or to cause any
extension beyond the maturity of the Junior Subordinated Debentures. See
"Risk Factors" "--Option to Extend Interest Payment Period; Tax Impact of
Extension"; "Description of the Junior Subordinated Debentures--Interest" and
"--Option to Extend Interest Payment Period." Payments of accrued
distributions will be payable to holders of Preferred Securities as they
appear on the books and records of the Trust on the first record date after
the end of an Extension Period.
Distributions on the Preferred Securities must be paid on the dates
payable to the extent that the Property Trustee has cash on hand in the
Property Account to permit such payment. The funds available for distribution
to the holders of the Preferred Securities will be limited to payments
received by the Property Trustee in respect of the Junior Subordinated
Debentures that are deposited in the Trust as trust assets. See "Description
of the Junior Subordinated Debentures." If the Company does not make interest
payments on the Junior Subordinated Debentures, the Property Trustee will not
make distributions on the Preferred Securities. Under the Declaration, if and
to the extent the Company does make interest payments on the Junior
Subordinated Debentures deposited in the Trust as trust assets, the Property
Trustee is obligated to make distributions on the Trust Securities on a Pro
Rata Basis. The payment of distributions on the Preferred Securities is
guaranteed by the Company on a subordinated basis as and to the extent set
forth under "Description of the Preferred Securities Guarantees" in the
accompanying Prospectus. The Preferred Securities Guarantee is a full and
unconditional guarantee from the time of issuance of the Preferred Securities
but the Preferred Securities Guarantee covers distributions and other
payments on the Preferred Securities only if and to the extent that the
Company has made a payment to the Property Trustee of interest or principal
on the Junior Subordinated Debentures deposited in the Trust as trust assets.
Distributions on the Preferred Securities will be made to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
form, will be one Business Day (as defined herein) prior to the relevant
Distribution payment date. Distributions payable on any Preferred Securities
that are not punctually paid on any Distribution payment date as a result of
the Company having failed to make the corresponding interest payment on the
Junior Subordinated Debentures will forthwith cease to be payable to the
person in whose name such Preferred Security is registered on the relevant
record date, and such defaulted Distribution will instead be payable to the
person in whose name such Preferred Security is registered on the special
record date established by the Regular Trustees, which record date shall
correspond to the special record date or other specified date determined in
accordance with the Indenture; provided, however, that Distributions shall
not be considered payable on any Distribution payment date falling within an
Extension Period unless the Company has elected to make a full or partial
payment of interest accrued on the Junior Subordinated Debentures on such
Distribution payment date. Distributions on the Preferred Securities will be
paid through the Property Trustee who will hold amounts received in respect
of the Junior Subordinated Debentures in the Property Account for the benefit
of the holders of the Preferred and Common Securities. Subject to any
applicable laws and regulations and the provisions of
S-17
<PAGE>
the Declaration, each such payment will be made as described under
"Book-Entry Only Issuance--The Depository Trust Company" below. In the event
that the Preferred Securities do not continue to remain in book-entry form,
the Regular Trustees shall have the right to select relevant record dates
which shall be more than one Business Day prior to the relevant payment
dates. The Declaration provides that the payment dates or record dates for
the Preferred Securities shall be the same as the payment dates and record
dates for the Junior Subordinated Debentures. All distributions paid with
respect to the Trust Securities shall be paid on a Pro Rata Basis to the
holders thereof entitled thereto. If any date on which distributions are to
be made on the Preferred Securities is not a Business Day, then payment of
the distribution to be made on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in
respect of any such delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if
made on such date. "Business Day" shall mean any day other than Saturday,
Sunday or any other day on which banking institutions in the City of New York
in the State of New York) are permitted or required by any applicable law to
close.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event or an Investment Company Event (each as
hereinafter defined, and each a "Special Event") shall occur and be
continuing, the Trust shall, unless the Junior Subordinated Debentures are
redeemed in the limited circumstances described below, be dissolved with the
result that, after satisfaction of creditors of the Trust, Junior
Subordinated Debentures with an aggregate principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities and the
Common Securities would be distributed on a Pro Rata Basis to the holders of
the Preferred Securities and the Common Securities in liquidation of such
holders' interests in the Trust, within 90 days following the occurrence of
such Special Event; provided, however, that in the case of the occurrence of
a Tax Event, as a condition of such dissolution and distribution, the Regular
Trustees shall have received an opinion of nationally recognized independent
tax counsel experienced in such matters (a "No Recognition Opinion"), which
opinion may rely on any then applicable published revenue rulings of the
Internal Revenue Service, to the effect that the holders of the Preferred
Securities will not recognize any gain or loss for United States Federal
income tax purposes as a result of such dissolution and distribution of
Junior Subordinated Debentures; and, provided, further, that, if at the time
there is available to the Trust the opportunity to eliminate, within such 90
day period, the Special Event by taking some ministerial action, such as
filing a form or making an election, or pursuing some other similar
reasonable measure, which has no adverse effect on the Trust or the Company
or the holders of the Preferred Securities, the Trust will pursue such
measure in lieu of dissolution. Furthermore, if in the case of the occurrence
of a Tax Event, (i) the Regular Trustees have received an opinion (a
"Redemption Tax Opinion") of nationally recognized independent tax counsel
experienced in such matters that, as a result of a Tax Event, there is more
than an insubstantial risk that the Company would be precluded from deducting
the interest on the Junior Subordinated Debentures for United States Federal
income tax purposes even if the Junior Subordinated Debentures were
distributed to the holders of Preferred Securities and Common Securities in
liquidation of such holders' interests in the Trust as described above or
(ii) the Regular Trustees shall have been informed by such tax counsel that a
No Recognition Opinion cannot be delivered to the Trust, the Company shall
have the right, upon not less than 30 nor more than 60 days notice, to redeem
the Junior Subordinated Debentures in whole or in part for cash within 90
days following the occurrence of such Tax Event, and promptly following such
redemption Preferred Securities and Common Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debentures so redeemed will be redeemed by the Trust at the
Redemption Price on a Pro Rata Basis; provided, however, that if at the time
there is available to the Company or the Regular Trustees the opportunity to
eliminate, within such 90 day period, the Tax Event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure, which has no adverse effect on the
Trust, the Company or the holders of the Preferred Securities, the Company
will pursue such measure in lieu of redemption and provided further that the
Company shall have no right to redeem the Junior Subordinated Debentures
while the Regular Trustees on behalf of the
S-18
<PAGE>
Trust are pursuing any such ministerial action. The Common Securities will be
redeemed on a Pro Rata Basis with the Preferred Securities, except that if an
Event of Default under the Declaration has occurred and is continuing, the
Preferred Securities will have a priority over the Common Securities with
respect to payment of the Redemption Price.
"Tax Event" means that the Regular Trustees shall have obtained an opinion
of a nationally recognized independent tax counsel experienced in such
matters (a "Dissolution Tax Opinion") to the effect that on or after the date
of this Prospectus Supplement as a result of (a) any amendment to, or change
in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, (b) any
amendment to, or change in, an interpretation or application of any such laws
or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
effective or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after the date of this Prospectus
Supplement, there is more than an insubstantial risk that (i) the Trust is,
or will be within 90 days of the date thereof, subject to United States
Federal income tax with respect to income accrued or received on the Junior
Subordinated Debentures, (ii) the Trust is, or will be within 90 days of the
date thereof, subject to more than a de minimis amount of other taxes, duties
or other governmental charges or (iii) interest payable by the Company to the
Trust on the Junior Subordinated Debentures is not, or within 90 days of the
date thereof will not be, deductible by the Company for United States Federal
income tax purposes.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced
in practice under the Investment Company Act of 1940, as amended (the "1940
Act"), that as a result of the occurrence of a change in law or regulation or
a change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), there is more than an insubstantial risk that the
Trust is or will be considered an "investment company" which is required to
be registered under the 1940 Act, which Change in 1940 Act Law becomes
effective on or after the date of this Prospectus Supplement.
On the date fixed for any distribution of Junior Subordinated Debentures,
upon dissolution of the Trust, (i) the Preferred Securities and the Common
Securities will no longer be deemed to be outstanding, (ii) the depositary or
its nominee, as the record holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution, and (iii) any
certificates representing Preferred Securities not held by the depositary or
its nominee will be deemed to represent Junior Subordinated Debentures having
an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on,
such Preferred Securities, until such certificates are presented to the
Company or its agent for transfer or reissuance.
There can be no assurance as to the market price for the Junior
Subordinated Debentures which may be distributed in exchange for Preferred
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Junior Subordinated Debentures which the investor may
subsequently receive on dissolution and liquidation of the Trust, may trade
at a discount to the price of the Preferred Securities exchanged. If the
Junior Subordinated Debentures are distributed to the holders of Preferred
Securities upon the dissolution of the Trust, the Company will use its best
efforts to list the Junior Subordinated Debentures on the NYSE or on such
other exchange on which the Preferred Securities are then listed.
MANDATORY REDEMPTION
Upon the repayment of the Junior Subordinated Debentures, whether at
maturity, upon redemption or otherwise, the proceeds from such repayment or
payment will be promptly applied to redeem Preferred Securities and Common
Securities having an aggregate liquidation amount equal to the Junior
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Subordinated Debentures so repaid, upon not less than 30 nor more than 60
days' notice, at the Redemption Price. The Common Securities will be entitled
to be redeemed on a Pro Rata Basis with the Preferred Securities, except that
if an Event of Default under the Declaration has occurred and is continuing,
the Preferred Securities will have a priority over the Common Securities with
respect to payment of the Redemption Price. Subject to the foregoing, if
fewer than all outstanding Preferred Securities and Common Securities are to
be redeemed, the Preferred Securities and Common Securities will be redeemed
on a Pro Rata Basis. In the event fewer than all outstanding Preferred
Securities are to be redeemed, Preferred Securities registered in the name of
and held by DTC or its nominee will be redeemed as described under
"Book-Entry-Only; Delivery and Form" below.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all monthly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable) then, by 12:00 noon, New York
City time, on the redemption date and provided that the Company has paid to
the Property Trustee a sufficient amount of cash in connection with the
related redemption or maturity of the Junior Subordinated Debentures, the
Trust will irrevocably deposit with the Depositary funds sufficient to pay
the applicable Redemption Price and will give the Depositary irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Preferred Securities. See "Book-Entry Only Issuance--The Depository Trust
Company." If notice of redemption shall have been given and funds deposited
as required, then, immediately prior to the close of business on the date of
such deposit, distributions will cease to accrue on the Preferred Securities
called for redemption, such Preferred Securities shall no longer be deemed to
be outstanding and all rights of holders of such Preferred Securities so
called for redemption will cease, except the right of the holders of such
Preferred Securities to receive the Redemption Price, but without interest on
such Redemption Price. Neither the Trustees nor the Trust shall be required
to register or cause to be registered the transfer of any Preferred
Securities which have been so called for redemption. If any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect
of any such delay) except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If the Company fails to repay Junior Subordinated
Debentures on maturity or on the date fixed for this redemption or if payment
of the Redemption Price in respect of Preferred Securities is improperly
withheld or refused and not paid by the Property Trustee or by the Company
pursuant to the Preferred Securities Guarantee described under "Description
of the Preferred Securities Guarantee" in the accompanying Prospectus,
distributions on such Preferred Securities will continue to accrue, from the
original redemption date of the Preferred Securities to the date of payment,
in which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities
are to be redeemed, the Preferred Securities will be redeemed as described
below under "Book-Entry Only Issuance--The Depository Trust Company."
If a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by any national securities exchange or
other organization on which the Preferred Securities are then listed, the
Company pursuant to the Indenture will only redeem Debentures in whole and,
as a result, the Trust may only redeem the Preferred Securities in whole.
Subject to the foregoing and applicable law (including, without
limitation, United States Federal securities laws), the Company or any of its
subsidiaries may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
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LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, liquidation,
winding-up or termination of the Trust, the holders of the Preferred
Securities and Common Securities at the date of dissolution, winding-up or
termination of the Trust will be entitled to receive on a Pro Rata Basis
solely out of the assets of the Trust, after satisfaction of liabilities of
creditors (to the extent not satisfied by the Company as provided in the
Declaration), an amount equal to the aggregate of the stated liquidation
amount of $25 per Trust Security plus accrued and unpaid distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"), unless, in connection with such dissolution, liquidation,
winding-up or termination, Junior Subordinated Debentures in an aggregate
principal amount equal to the aggregate stated liquidation amount of such
Trust Securities and bearing accrued and unpaid interest in an amount equal
to the accrued and unpaid distributions on such Trust Securities, shall be
distributed on a Pro Rata Basis to the holders of the Preferred Securities
and Common Securities in exchange therefor.
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Preferred Securities and the Common Securities
shall be paid on a Pro Rata Basis. The holders of the Common Securities will
be entitled to receive distributions upon any such dissolution on a Pro Rata
Basis with the holders of the Preferred Securities, except that if an Event
of Default under the Declaration has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities with
respect to payment of the Liquidation Distribution.
Pursuant to the Declaration, the Trust shall terminate: (i) on June 30,
2046; (ii) when all of the Trust Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have been
paid to the holders of Trust Securities in accordance with the terms of the
Trust Securities; or (iii) when all of the Junior Subordinated Debentures
shall have been distributed to the holders of Trust Securities in exchange
for all of the Trust Securities in accordance with the terms of the Trust
Securities.
NO MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets to, any
corporation or other entity.
DECLARATION EVENTS OF DEFAULT
An Indenture Event of Default (as defined in the accompanying Prospectus)
will constitute an event of default under the Declaration with respect to the
Trust Securities (an "Event of Default"); provided that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have
waived any such Event of Default with respect to the Common Securities until
all Events of Default with respect to the Preferred Securities have been
cured or waived. Until all such Events of Default with respect to the
Preferred Securities have been so cured or waived, the Property Trustee will
be deemed to be acting solely on behalf of the holders of the Preferred
Securities, and only the holders of the Preferred Securities will have the
right to direct the Property Trustee with respect to certain matters under
the Declaration and consequently under the Indenture. In the event that any
Event of Default with respect to the Preferred Securities is waived by the
holders of the Preferred Securities as provided in the Declaration, the
holders of Common Securities pursuant to the Declaration have agreed that
such waiver also constitutes a waiver of such Event of Default with respect
to the Common Securities for all purposes under the Declaration without any
further act, vote or consent of the holders of the Common Securities. See
"Voting Rights."
Upon the occurrence of an Event of Default, the Property Trustee as the
holder of all of the Junior Subordinated Debentures will have the right under
the Indenture to declare the principal of and interest on the Junior
Subordinated Debentures to be immediately due and payable. In addition, the
Property Trustee will have the power to exercise all rights, powers and
privileges under the Indenture. See "Description of the Junior Subordinated
Debentures."
VOTING RIGHTS
Except as provided below, under "Modification and Amendment of the
Declaration" and "Description of the Preferred Securities
Guarantee--Amendments and Assignment" in the accompanying
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Prospectus and as otherwise required by the Business Trust Act, the Trust
Indenture Act and the Declaration, the holders of the Preferred Securities
will have no voting rights.
Subject to the requirements of the second to last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right (i) on behalf of all holders of Preferred
Securities, to waive any past default that is waivable under the Declaration
and (ii) to direct the time, method and place of conducting any proceeding
for any remedy available to the Property Trustee, or exercising any trust or
power conferred upon the Property Trustee under the Declaration, including
the right to direct the Property Trustee, as the holder of the Junior
Subordinated Debentures, to (A) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee
(as defined herein), or executing any trust or power conferred on the
Indenture Trustee with respect to the Junior Subordinated Debentures, (B)
waive any past default that is waivable under Section 6.06 of the Indenture,
or (C) exercise any right to rescind or annul a declaration that the
principal of all the Junior Subordinated Debentures shall be due and payable;
provided that where a consent under the Indenture would require the consent
of (a) holders of Junior Subordinated Debentures representing a specified
percentage greater than a majority in principal amount of the Junior
Subordinated Debentures or (b) each holder of Junior Subordinated Debentures
affected thereby, no such consent shall be given by the Property Trustee
without the prior consent of, in the case of clause (a) above, holders of
Preferred Securities representing such specified percentage of the aggregate
liquidation amount of the Preferred Securities or, in the case of clause (b)
above, each holder of all Preferred Securities affected thereby. The Property
Trustee shall not revoke any action previously authorized or approved by a
vote of the holders of Preferred Securities. The Property Trustee shall
notify all holders of record of Preferred Securities of any notice of default
received from the Indenture Trustee with respect to the Junior Subordinated
Debentures. Other than with respect to directing the time, method and place
of conducting any proceeding for any remedy available to the Property Trustee
or the Indenture Trustee as set forth above, the Property Trustee shall be
under no obligation to take any of the foregoing actions at the direction of
the holders of the Preferred Securities unless the Property Trustee shall
have obtained an opinion of nationally recognized independent tax counsel
recognized as expert in such matters to the effect that the Trust will not be
classified for United States Federal income tax purposes as an association
taxable as a corporation or a partnership on account of such action and will
be treated as a grantor trust for United States Federal income tax purposes
following such action. If the Property Trustee fails to enforce its rights
under the Declaration (including, without limitation, its rights, powers and
privileges as a holder of the Debentures under the Indenture), any holder of
Preferred Securities may, to the extent permitted by applicable law, after a
period of 30 days has elapsed from such holder's written request to the
Property Trustee to enforce such rights, institute a legal proceeding
directly against the Company to enforce the Property Trustee's rights under
the Declaration, without first instituting a legal proceeding against the
Property Trustee or any other Person.
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of holders of the Preferred Securities will constitute a waiver of
the corresponding Event of Default under the Declaration in respect of the
Trust Securities.
In the event the consent of the Property Trustee as the holder of the
Junior Subordinated Debentures is required under the Indenture with respect
to any amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, the Property Trustee shall request the direction of
the holders of the Trust Securities with respect to such amendment,
modification or termination and shall vote with respect to such amendment,
modification or termination as directed by a majority in liquidation amount
of the Trust Securities voting together as a single class; provided, however,
that where any such amendment, modification or termination under the
Indenture would require the consent of holders of Junior Subordinated
Debentures representing a specified percentage greater than a majority in
principal amount of the Junior Subordinated Debentures, the Property Trustee
may only give such consent at the direction of the holders of Trust
Securities representing such specified percentage of the aggregate
liquidation amount of the Trust Securities; and, provided, further, that the
Property Trustee shall be under no obligation to take any such action in
accordance with the directions of the holders of the Trust Securities unless
the Property Trustee has obtained an opinion of nationally recognized
independent tax
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counsel recognized as expert in such matters to the effect that the Trust
will not be classified for United States Federal income tax purposes as an
association taxable as a corporation or a partnership on account of such
action and will be treated as a grantor trust for United States Federal
income tax purposes following such action.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened
for such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth (i) the date of such
meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought;
and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the holders of Preferred Securities will be required
for the Trust to redeem and cancel Preferred Securities or distribute Junior
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the
Preferred Securities at such time that are owned by the Company or by any
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if
they were not outstanding.
The procedures by which persons owning Preferred Securities registered in
the name of and held by DTC or its nominee may exercise their voting rights
are described under "Book-Entry; Delivery and Form" below.
Holders of the Preferred Securities will have no rights to increase or
decrease the number of Trustees or to appoint, remove or replace a Trustee,
which rights are vested exclusively in the holders of the Common Securities.
MODIFICATION AND AMENDMENT OF THE DECLARATION
The Declaration may be modified and amended on approval of a majority of
the Regular Trustees, provided, that, if any proposed modification or
amendment provides for, or the Regular Trustees otherwise propose to effect,
(a) any action that would adversely affect the powers, preferences or special
rights of the Trust Securities, whether by way of amendment to the
Declaration or otherwise, or (b) the dissolution, winding-up or termination
of the Trust other than pursuant to the terms of the Declaration, then the
holders of the outstanding Trust Securities as a class will be entitled to
vote on such amendment or proposal and such amendment or proposal shall not
be effective except with the approval of at least 66 2/3% in liquidation
amount of the Trust Securities, provided that if any amendment or proposal
referred to above would adversely affect only the Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of 66 2/3% in liquidation amount of such
class of Securities.
Notwithstanding the foregoing, (i) no amendment or modification may be
made to the Declaration unless the Regular Trustees shall have obtained (a)
either a ruling from the Internal Revenue Service or a written unqualified
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that such amendment will not cause the Trust to be
classified for United States Federal income tax purposes as an association
taxable as a corporation or a partnership and to the effect that the Trust
will continue to be treated as a grantor trust for purposes of United States
Federal income taxation and (b) a written unqualified opinion of nationally
recognized independent counsel experienced in such matters to the effect that
such amendment will not cause the Trust to be an "investment company" which
is required to be registered under the 1940 Act; (ii) certain specified
provisions of the Declaration may not be amended without the consent of all
of the holders of the Trust Securities; (iii) no amendment which adversely
affects the rights, powers and privileges of the Property Trustee shall be
made without
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the consent of the Property Trustee; (iv) Article IV of the Declaration
relating to the obligation of the Company to purchase the Common Securities
and to pay certain obligations and expenses of the Trust as described under
"The DLJ Trusts" in the accompanying Prospectus may not be amended without
the consent of the Company; and (v) the rights of holders of Common
Securities under Article V of the Declaration to increase or decrease the
number of, and to appoint, replace or remove, Trustees shall not be amended
without the consent of each holder of Common Securities.
The Declaration further provides that it may be amended without the
consent of the holders of the Trust Securities to (i) cure any ambiguity;
(ii) correct or supplement any provision in the Declaration that may be
defective or inconsistent with any other provision of the Declaration; (iii)
to add to the covenants, restrictions or obligations of the Company; and (iv)
to conform to changes in, or a change in interpretation or application of
certain 1940 Act requirements by the Commission, which amendment does not
adversely affect the rights, preferences or privileges of the holders.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as
fully registered securities registered in the name of DTC or its nominee. One
or more fully-registered global Preferred Securities certificates (each a
"Preferred Securities Global Certificate"), representing the total aggregate
number of Preferred Securities, will be issued and will be deposited with
DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in a global Preferred
Security.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC holds securities that its participants ("Participants") deposit with
DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations ("Direct
Participants"). DTC is owned by a number of its Direct Participants and by
the NYSE, the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable
to DTC and its Participants are on file with the Securities and Exchange
Commission.
Upon issuance of a Preferred Securities Global Certificate, DTC will
credit on its book-entry registration and transfer system the number of
Preferred Securities represented by such Preferred Securities Global
Certificate to the accounts of institutions that have accounts with DTC.
Ownership of beneficial interests in a Preferred Securities Global
Certificate will be limited to Participants or persons that may hold
interests through Participants. The ownership interest of each actual
purchaser of each Preferred Security ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the
Beneficial Owners purchased Preferred Securities. Transfers of ownership
interests in the Preferred Securities are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Preferred Securities are
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credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers. So long as DTC, or its nominee, is the owner of a Preferred
Securities Global Certificate, DTC or such nominee, as the case may be, will
be considered the sole owner and holder of record of the Preferred Securities
represented by such Preferred Securities Global Certificate for all purposes.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce pro rata (subject to
adjustment to eliminate fractional Preferred Securities) the amount of
interest of each Direct Participant in the Preferred Securities to be
redeemed.
Although voting with respect to the Preferred Securities is limited, in
those instances in which a vote is required, neither DTC nor Cede & Co.
itself will consent or vote with respect to Preferred Securities. Under its
usual procedures, DTC would mail an Omnibus Proxy to the Trust as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts
the Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus proxy).
Distribution payments on the Preferred Securities represented by a
Preferred Series Global Certificate will be made by the Property Trustee to
DTC. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payments on such payment date. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices and will be
the responsibility of such Participants and not of DTC, the Trust or the
Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of distributions to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments
to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
Except as provided herein, a Beneficial Owner in a global Preferred
Security certificate will not be entitled to receive physical delivery of
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving reasonable notice
to the Trust. Under such circumstances, if a successor securities depository
is not obtained, Preferred Security certificates will be required to be
printed and delivered. Additionally, the Trust may decide to discontinue use
of the system of book-entry transfers through DTC (or a successor
depository). In that event, certificates for the Preferred Securities will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trust and the Company believe to be
reliable, but the Trust and the Company take no responsibility for the
accuracy thereof.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
In the event the Preferred Securities do not remain in book-entry only
form, the following provisions will apply:
Payment of distributions and payments on redemption of the Preferred
Securities will be payable, the transfer of the Preferred Securities will be
registrable, and Preferred Securities will be exchangeable for Preferred
Securities of other denominations of a like aggregate liquidation amount, at
the principal corporate trust office of the Property Trustee in The City of
New York; provided that payment of
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distributions may be made at the option of the Regular Trustees on behalf of
the Trust by check mailed to the address of the persons entitled thereto and
that the payment on redemption of any Preferred Security will be made only
upon surrender of such Preferred Security to the Property Trustee.
The Bank of New York or one of its affiliates will act as registrar and
transfer agent for the Preferred Securities. The Bank of New York will also
act as paying agent and, with the consent of the Regular Trustees, may
designate additional paying agents.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of
such indemnity as the Trust or the Company may require) in respect of any tax
or other governmental charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to a default with respect to the Trust
Securities, undertakes to perform only such duties as are specifically set
forth in the Declaration and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her
own affairs. Subject to such provision, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. The Property Trustee is not required to expend or
risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Property Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
The Company and certain of its affiliates maintain a deposit account and
banking relationship with the Property Trustee.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to take such action as
they deem reasonable in order that the Trust will not be deemed to be an
"investment company" required to be registered under the 1940 Act or that the
Trust will not be classified for United States Federal income tax purposes as
an association taxable as a corporation or a partnership and will be treated
as a grantor trust for United States Federal income tax purposes. In this
connection, the Regular Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust or the
Declaration, that the Regular Trustees determine in their discretion to be
reasonable and necessary or desirable for such purposes, as long as such
action does not adversely affect the interests of holders of the Trust
Securities.
The Company and the Regular Trustees on behalf of the Trust will be
required to provide to the Property Trustee annually a certificate as to
whether or not the Company and the Trust, respectively, is in compliance with
all the conditions and covenants under the Declaration.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the Junior Subordinated Debentures in
which the Trust will invest the proceeds from the issuance and sale of the
Trust Securities and which will be deposited in the Trust as trust assets.
The terms of the Junior Subordinated Debentures include those stated in the
Indenture dated August 27, 1996 between the Company and The Bank of New York,
as trustee (the "Indenture Trustee") as supplemented by the First
Supplemental Indenture dated August 27, 1996 between the Company and the
Indenture Trustee (as so supplemented, the "Indenture"), forms of which have
been filed as exhibits to the Registration Statement of which this Prospectus
Supplement forms a part, and those made part of the Indenture by the Trust
Indenture Act. This description supplements the description of the general
terms and provisions of the Subordinated Debt Securities set forth in the
accompanying Prospectus under the caption "Description of the Junior
Subordinated Debt Securities." The following description does not purport to
be complete and is qualified in its entirety by reference to the Indenture
and the Trust Indenture Act. Whenever particular provisions or defined terms
in the Indenture are referred to herein, such provisions or defined terms are
incorporated by reference herein. Section and Article references used herein
are references to provisions of the Indenture.
The Indenture does not limit the aggregate principal amount of
indebtedness which may be issued thereunder and provides that junior
subordinated debentures may be issued thereunder from time to time in one or
more series (collectively, together with the Junior Subordinated Debentures,
the "Subordinated Debentures"). The Junior Subordinated Debentures constitute
a separate series under the Indenture.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Junior Subordinated Debentures
may be distributed to the holders of the Trust Securities in liquidation of
the Trust. See "Description of the Preferred Securities--Special Event
Redemption or Distribution."
GENERAL
The Junior Subordinated Debentures are unsecured, subordinated obligations
of the Company, limited in aggregate principal amount to an amount equal to
the sum of (i) the stated liquidation amount of the Preferred Securities
issued by the Trust and (ii) the proceeds received by the Trust upon issuance
of the Common Securities to the Company (which proceeds will be used to
purchase an equal principal amount of Junior Subordinated Debentures).
The entire principal amount of the Junior Subordinated Debentures will
become due and payable, together with any accrued and unpaid interest
thereon, on June 30, 2046. The Junior Subordinated Debentures are not subject
to any sinking fund.
If Junior Subordinated Debentures are distributed to holders of Preferred
Securities in dissolution of the Trust, such Junior Subordinated Debentures
will initially be issued as a Global Security (as defined below). As
described herein, under certain limited circumstances, Junior Subordinated
Debentures may be issued in certificated form in exchange for a Global
Security. See "Book-Entry and Settlement" below. In the event that Junior
Subordinated Debentures are issued in certificated form, such Junior
Subordinated Debentures will be in denominations of $25 and integral
multiples thereof and may be transferred or exchanged at the offices
described below. Payments on Junior Subordinated Debentures issued as a
Global Security will be made to DTC, a successor depositary or, in the event
that no depositary is used, to a paying agent for the Junior Subordinated
Debentures.
In the event that Junior Subordinated Debentures are issued in
certificated form, payments of principal and interest will be payable, the
transfer of the Junior Subordinated Debentures will be registrable, and
Junior Subordinated Debentures will be exchangeable for Junior Subordinated
Debentures of other denominations of a like aggregate principal amount, at
the corporate trust office of the Indenture Trustee in The City of New York;
provided that payment of interest may be made at the option of the Company by
check mailed to the address of the persons entitled thereto and that the
payment of principal with respect to any Junior Subordinated Debenture will
be made only upon surrender of such Junior Subordinated Debenture to the
Indenture Trustee.
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If the Junior Subordinated Debentures are distributed to the holders of
Preferred Securities upon the dissolution of the Trust, the Company will use
its best efforts to list the Junior Subordinated Debentures on the NYSE or on
such other exchange on which the Preferred Securities are then listed.
OPTIONAL REDEMPTION
Except as provided below, the Junior Subordinated Debentures may not be
redeemed prior to August 31, 2001. The Company shall have the right to redeem
the Junior Subordinated Debentures, in whole or in part, from time to time,
on or after August 31, 2001 upon not less than 30 nor more than 60 days'
notice, at a redemption price equal to 100% of the principal amount to be
redeemed, plus any accrued and unpaid interest, to the redemption date,
including interest accrued during an Extension Period. The Company will also
have the right to redeem the Junior Subordinated Debentures at any time upon
the occurrence of a Tax Event if certain conditions are met as described
under "Description of the Preferred Securities--Special Event Redemption or
Distribution."
If the Company gives a notice of redemption in respect of Junior
Subordinated Debentures (which notice will be irrevocable) then, by 12:00
noon, New York City time, on the redemption date, the Company will deposit
irrevocably with the Indenture Trustee funds sufficient to pay the applicable
redemption price and will give irrevocable instructions and authority to pay
such redemption price to the holders of the Junior Subordinated Debentures.
If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, interest will cease to accrue
on the Junior Subordinated Debentures called for redemption, such Junior
Subordinated Debentures will no longer be deemed to be outstanding and all
rights of holders of such Junior Subordinated Debentures so called for
redemption will cease, except the right of the holders of such Junior
Subordinated Debentures to receive the applicable redemption price, but
without interest on such redemption price. If any date fixed for redemption
of Junior Subordinated Debentures is not a Business Day, then payment of the
redemption price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect
of any such delay) except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If payment of the redemption price in respect of
Junior Subordinated Debentures is improperly withheld or refused and not paid
by the Company, interest on such Junior Subordinated Debentures will continue
to accrue, from the original redemption date to the date of payment, in which
case the actual payment date will be considered the date fixed for redemption
for purposes of calculating the applicable redemption price. If fewer than
all of the Junior Subordinated Debentures are to be redeemed, the Junior
Subordinated Debentures to be redeemed shall be selected by lot or pro rata
or in some other equitable manner determined by the Indenture Trustee.
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange any Junior Subordinated
Debentures during a period beginning at the opening of business 15 days
before any selection for redemption of Junior Subordinated Debentures and
ending at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all holders of Junior
Subordinated Debentures to be redeemed and (ii) register the transfer of or
exchange any Junior Subordinated Debentures so selected for redemption, in
whole or in part, except the unredeemed portion of any Junior Subordinated
Debentures being redeemed in part. (Section 2.05)
INTEREST
The Junior Subordinated Debentures will bear interest at the rate of 8.42%
per annum from the original date of issuance. Interest will be payable
monthly in arrears on the last day of each month (each, an "Interest Payment
Date"), commencing on September 30, 1996 to the person in whose name such
Junior Subordinated Debenture is registered, subject to certain exceptions,
at the close of business on the Business Day next preceding such Interest
Payment Date. In the event (i) the Preferred Securities shall not continue to
remain in book-entry only form or (ii) if following distribution of the
Junior Subordinated Debentures to holders of Trust Securities upon
dissolution of the Trust as described under "Description
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of the Preferred Securities," the Junior Subordinated Debentures shall not
continue to remain in book-entry only form, the relevant record date will be
the fifteenth day of the month prior to the relevant Interest Payment Date.
Interest payable on any Junior Subordinated Debenture that is not punctually
paid or duly provided for on any interest payment date will forthwith cease
to be payable to the person in whose name such Junior Subordinated Debenture
is registered on the relevant record date, and such defaulted interest will
instead be payable to the person in whose name such Junior Subordinated
Debenture is registered on the special record date or other specified date
determined in accordance with the Indenture; provided, however, that interest
shall not be considered payable by the Company on any interest payment date
falling within an Extension Period unless the Company has elected to make a
full or partial payment of interest accrued on the Junior Subordinated
Debentures on such interest payment date.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months and for any period shorter
than a full monthly period for which interest is computed, the amount of
interest payable will be computed on the basis of the actual number of days
lapsed. If any date on which interest is payable on the Junior Subordinated
Debentures is not a Business Day, then payment of the interest payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company shall have the right to
extend the interest payment period from time to time for period not exceeding
60 consecutive months. The Company has no current intention of exercising its
right to extend an interest payment period. No interest shall be due and
payable during an Extension Period, except at the end thereof. During any
Extension Period, the Company shall not declare or pay any dividends on, or
redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its common stock or preferred stock or make any guarantee
payments with respect thereto; provided that (i) the Company will be
permitted to pay accrued dividends upon exchange or redemption of any series
of preferred stock of the Company as may be outstanding from time to time, in
accordance with the terms of such stock and (ii) the foregoing will not apply
to stock dividends paid by the Company. Prior to the termination of any such
Extension Period, the Company may further extend the interest payment period;
provided that such Extension Period together with all such previous and
further extensions thereof may not exceed 60 consecutive months. On the
interest payment date occurring at the end of each Extension Period, the
Company shall pay to the holders of Junior Subordinated Debentures of record
on the record date for such interest payment date (regardless of who the
holders of record may have been on other dates during the Extension Period)
all accrued and unpaid interest on the Junior Subordinated Debentures,
together with interest thereon at the rate specified for the Junior
Subordinated Debentures to the extent permitted by applicable law, compounded
monthly ("Compounded Interest"). Upon the termination of any Extension Period
and the payment of all amounts then due, the Company may commence a new
Extension Period, subject to the above requirements. The Company may also
prepay at any time all or any portion of the interest accrued during an
Extension Period. Consequently, there could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures,
not to exceed 60 consecutive months or to cause any extension beyond maturity
of the Junior Subordinated Debentures. The failure by the Company to make
interest payments during an Extension Period would not constitute a default
or an event of default under the Indenture or the Company's currently
outstanding indebtedness.
If the Property Trustee shall be the sole holder of the Junior
Subordinated Debentures, the Company shall give the Property Trustee notice
of its selection of such Extension Period one Business Day prior to the
earlier of (i) the date the distributions on the Preferred Securities are
payable or (ii) the date the Trust is required to give notice to the NYSE or
other applicable self-regulatory organization or to holders of the Preferred
Securities of the record date or the date such distribution is payable. The
Trust shall give notice of the Company's selection of such Extension Period
to the holders of the Preferred Securities.
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If Junior Subordinated Debentures have been distributed to holders of
Trust Securities, the Company shall give the holders of the Junior
Subordinated Debentures notice of its selection of such Extension Period ten
Business Days prior to the earlier of (i) the next succeeding Interest
Payment Date or (ii) the date the Company is required to give notice to the
NYSE (if the Junior Subordinated Debentures are then listed thereon) or other
applicable self-regulatory organization or to holders of the Junior
Subordinated Debentures of the record or payment date of such related
interest payment.
COMPOUNDED INTEREST
Payments of Compounded Interest on the Junior Subordinated Debentures held
by the Trust will make funds available to pay any interest on distributions
in arrears in respect of the Preferred Securities pursuant to the terms
thereof.
BOOK-ENTRY AND SETTLEMENT
If any Junior Subordinated Debentures are distributed to holders of
Preferred Securities (see "Description of the Preferred Securities"), such
Junior Subordinated Debentures will be issued in the form of one or more
global certificates (each a "Global Security") registered in the name of the
Depositary or its nominee. Except under the limited circumstances described
below, Junior Subordinated Debentures represented by the Global Security will
not be exchangeable for, and will not otherwise be issuable as, Junior
Subordinated Debentures in definitive form. The Global Securities described
above may not be transferred except by the depositary to a nominee of the
depositary or by a nominee of the depositary to the depositary or another
nominee of the depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debentures in definitive form and will not be considered the
holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debentures
shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the Depositary or its
nominee or to a successor Depositary or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of the Depositary or if such
person is not a Participant, on the procedures of the Participant through
which such person owns its interest to exercise any rights of a holder under
the Indenture. If Junior Subordinated Debentures are distributed to holder of
Preferred Securities, DTC will act as securities depositary for the Junior
Subordinated Debentures.
For a description of DTC and DTC's book-entry system, see "Description of
Preferred Securities--Book-Entry Only Issuance--The Depository Trust
Company." As of the date of this Prospectus Supplement, the description
herein of DTC's book-entry system and DTC's practices as they relate to
purchases, transfers, notices and payments with respect to the Preferred
Securities apply in all material respects to any debt obligations represented
by one or more Global Securities held by DTC. The Company may appoint a
successor to DTC or any successor depositary in the event DTC or such
successor depositary is unable or unwilling to continue as a depository for
the Global Securities.
None of the Company, the Indenture Trustee, any paying agent and any other
agent of the Company or the Indenture Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Security for such
Junior Subordinated Debentures or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
A Global Security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the depositary or its nominee
only if (i) the depositary notifies the Company that it is unwilling or
unable to continue as a depositary for such Global Security and no successor
depositary
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shall have been appointed; (ii) the depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the
depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed; (iii) the Company, in its
sole discretion, determines that such Global Security shall be so
exchangeable; or (iv) there shall have occurred an Indenture Event of Default
with respect to such Junior Subordinated Debentures. Any Global Security that
is exchangeable pursuant to the preceding sentence shall be exchangeable for
Junior Subordinated Debentures registered in such names as the depositary
shall direct. It is expected that such instructions will be based upon
directions received by the depositary from its Participants with respect to
ownership of beneficial interests in such Global Security.
RELATIONSHIP BETWEEN THE PREFERRED SECURITIES, THE JUNIOR
SUBORDINATED DEBENTURES AND THE PREFERRED SECURITIES GUARANTEE
As set forth in the Declaration, the Trust exists for the sole purpose of
(a) issuing the Trust Securities evidencing undivided beneficial interests in
the assets of the Trust, and investing the proceeds from such issuance and
sale in the Junior Subordinated Debentures and (b) engaging in such other
activities as are necessary and incidental thereto.
As long as payments of interest and other payments are made when due on
the Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Preferred Securities primarily
because (i) the aggregate principal amount of Junior Subordinated Debentures
held as trust assets will be equal to the sum of the aggregate stated
liquidation amount of the Preferred Securities and the proceeds received by
the Trust upon issuance of the Common Securities to the Company; (ii) the
interest rate and interest and other payment dates on the Junior Subordinated
Debentures will match the distribution rate and distribution and other
payment dates for the Preferred Securities; (iii) the Declaration provides
that the Company shall pay for all debts and obligations (other than with
respect to the Trust Securities) and all costs and expenses of the Trust,
including any taxes and all costs and expenses with respect thereto, to which
the Trust may become subject, except for United States withholding taxes; and
(iv) the Declaration further provides that the Trustees shall not cause or
permit the Trust, among other things, to engage in any activity that is not
consistent with the limited purposes of the Trust. With respect to clause
(iii) above, however, no assurance can be given that the Company will have
sufficient resources to enable it to pay such debts, obligations, costs and
expenses on behalf of the Trust.
Payments of distributions and other payments due on the Preferred
Securities are guaranteed by the Company on a subordinated basis as and to
the extent set forth under "Description of the Preferred Securities
Guarantee" in the accompanying Prospectus. If the Company does not make
interest or other payments on the Junior Subordinated Debentures, the Trust
will not make distributions or other payments on the Preferred Securities.
Under the Declaration, if and to the extent the Company does make interest or
other payments on the Junior Subordinated Debentures, the Property Trustee is
obligated to make distributions or other payments on the Preferred
Securities. The Preferred Securities Guarantee is a full and unconditional
guarantee from the time of issuance of the Preferred Securities, but the
Preferred Securities Guarantee covers distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment to the Property Trustee of interest or principal on the Junior
Subordinated Debentures deposited in the Trust as trust assets.
The Property Trustee will have the Power to exercise all rights, powers
and privileges under the Indenture with respect to the Junior Subordinated
Debentures, including its rights as the holder of the Junior Subordinated
Debentures to enforce the Company's obligations under the Junior Subordinated
Debentures upon the occurrence of an Indenture Event of Default, and will
also have the right to enforce the Preferred Securities Guarantee on behalf
of the holders of the Preferred Securities. In addition, the holders of at
least a majority in liquidation amount of the Preferred Securities will have
the right to direct the Property Trustee with respect to certain matters
under the Declaration and the Preferred Securities Guarantee. If the Property
Trustee fails to enforce its rights under the Indenture any holder of
Preferred Securities may, after a period of 30 days has elapsed from such
holder's written request to the Property Trustee to enforce such rights
institute a legal proceeding against the Company to enforce such rights. If
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the Property Trustee fails to enforce the Preferred Securities Guarantee, to
the extent permitted by applicable law, any holder of Preferred Securities
may institute a legal proceeding directly against the Company to enforce the
Property Trustee's rights under the Preferred Securities Guarantee. See
"Description of the Preferred Securities" and "Description of the Preferred
Securities Guarantee" in the accompanying Prospectus.
The above mechanisms and obligations, taken together, provide a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities.
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TAXATION
In the opinion of Davis Polk & Wardwell, counsel to the Company and the
Trust, the following are the material United States Federal income tax
consequences of the ownership and disposition of Preferred Securities. Unless
otherwise stated, this summary deals only with Preferred Securities held as
capital assets by holders who acquire the Preferred Securities upon original
issuance ("Initial Holders"). It does not deal with special classes of
holders, such as dealers in securities or currencies, life insurance
companies, persons holding Preferred Securities as part of a straddle or as
part of a hedging or conversion transaction, or persons whose functional
currency is not the United States dollar. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"). Treasury Regulations
thereunder and administrative and judicial interpretations thereof are of the
date hereof, all of which are subject to change (possibly on a retroactive
basis).
INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF
PREFERRED SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS
THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX LAWS.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Davis Polk &
Wardwell, counsel to the Company and the Trust, will render its opinion
generally to the effect that, under then current law and assuming full
compliance with the terms of the Declaration, the Trust will be classified
for United States Federal income tax purposes as a grantor trust and not as
an association taxable as a corporation. Accordingly, each holder of
Preferred Securities (a "Securityholder") will be considered the owner of a
pro rata portion of the Junior Subordinated Debentures held by the Trust.
Accordingly, each Securityholder will be required to include in gross income
his pro rata share of income accrued on the Junior Subordinated Debentures.
ACCRUAL OF ORIGINAL ISSUE DISCOUNT AND PREMIUM
It is more likely than not that the Junior Subordinated Debentures will be
considered to have been issued with "original issue discount" and the Company
intends to take that position in filing related information returns.
Accordingly, each Securityholder, including a taxpayer who otherwise uses the
cash method of accounting, will be required to include his pro rata share of
original issue discount on the Junior Subordinated Debentures in income as it
accrues, in accordance with a constant yield method based on a compounding of
interest, before the receipt of cash distributions on the Preferred
Securities. Generally, all of a Securityholder's taxable interest income with
respect to the Junior Subordinated Debentures will be accounted for as
"original issue discount" and actual distributions of stated interest will
not be separately reported as taxable income. So long as the interest payment
period is not extended, cash distributions received by an initial Holder for
any monthly interest period (assuming no disposition prior to the record date
for such distribution) will equal or exceed the sum of the daily accruals of
income for such monthly interest period, unless the issue price of the Junior
Subordinated Debentures (as defined below) is less than $25.
The total amount of "original issue discount" on the Junior Subordinated
Debentures will equal the difference between the "issue price" of the Junior
Subordinated Debentures and their "stated redemption price at maturity."
Because the Company has the right to extend the interest payment period of
the Junior Subordinated Debentures, all of the stated interest payments on
the Junior Subordinated Debentures will be includible in determining their
"stated redemption price at maturity." The "issue price" of each $25
principal amount of Junior Subordinated Debentures will be equal to the first
price to the public at which a substantial amount of the Preferred Securities
is sold for cash, which is expected to be $25.
A Securityholder's initial tax basis for his pro rata share of the Junior
Subordinated Debentures will be equal to his pro rata share of their "issue
price," as defined above, and will be increased by original issue discount
accrued with respect to his pro rata share of the Junior Subordinated
Debentures, and reduced by the amount of cash distributions with respect
thereto. No portion of the amounts received on the Preferred Securities will
be eligible for the dividends received deduction.
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POTENTIAL EXTENSION OF PAYMENT PERIOD ON THE JUNIOR SUBORDINATED DEBENTURES
Securityholders will continue to accrue original issue discount with
respect to their pro rata share of the Junior Subordinated Debentures during
an extended interest payment period, and any holders who dispose of Preferred
Securities prior to the record date for the payment of interest following
such extended interest payment period will not receive from the Trust any
cash related thereto.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED
SECURITIES
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures as described under the caption "Description of the Preferred
Securities--Special Event Redemption or Distribution," will be non-taxable
and will result in the Securityholder receiving directly his pro rata share
of the Junior Subordinated Debentures previously held indirectly through the
Trust, with a holding period and tax basis equal to the holding period and
adjusted tax basis such Securityholder was considered to have had in his pro
rata share of the underlying Junior Subordinated Debentures prior to such
distribution.
MARKET DISCOUNT AND BOND PREMIUM
Securityholders other than Initial Holders may be considered to have
acquired their pro rata interest in the Junior Subordinated Debentures with
market discount, acquisition premium or amortizable bond premium. Such
holders are advised to consult their tax advisors as to the income tax
consequences of the acquisition, ownership and disposition of the Preferred
Securities.
DISPOSITION OF THE PREFERRED SECURITIES
Upon a sale, exchange or other disposition of the Preferred Securities
(including a distribution of cash in redemption of a Securityholder's
Preferred Securities upon redemption or repayment of the underlying Junior
Subordinated Debentures, but excluding the distribution of Junior
Subordinated Debentures), a Securityholder will be considered to have
disposed of all or part of his pro rata share of the Junior Subordinated
Debentures, and will recognize gain or loss equal to the difference between
the amount realized and the Securityholder's adjusted tax basis in his pro
rata share of the underlying Junior Subordinated Debentures deemed disposed
of. Gain or loss will be capital gain or loss (except to the extent of any
accrued market discount with respect to such Securityholder's pro rata share
of the Junior Subordinated Debentures not previously included in income). See
"Market Discount and Bond Premium" above. Such gain or loss will be long-term
capital gain or loss if the Preferred Securities have been held for more than
one year.
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Debentures. A Securityholder who disposes of his
Preferred Securities between record dates for payments of distributions
thereon will nevertheless be required to include accrued but unpaid interest
on the Junior Subordinated Debentures through the date of disposition in
income as ordinary income, and to add such amount to his adjusted tax basis
in his pro rate share of the underlying Junior Subordinated Debentures deemed
disposed of. Accordingly, such a Securityholder will recognize a capital loss
to the extent the selling price (which may not fully reflect the value of
accrued but unpaid interest) is less than the Securityholder's adjusted tax
basis (which will include accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary
income for United States Federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is as to the
United States, a foreign corporation, a non-resident alien individual, a
foreign partnership or a non-resident fiduciary of a foreign estate or trust.
Under present United States Federal income tax law:
(i) payments by the Trust or any of its paying agents to any holder of a
Preferred Security who or which is a United States Alien Holder will not
be subject to United States federal withholding tax,
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provided that (a) the beneficial owner of the Preferred Security does not
actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote; (b) the
beneficial owner of the Preferred Security is not a controlled foreign
corporation that is related to the Company through stock ownership; and
(c) either (A) the beneficial owner of the Preferred Security certifies to
the Trust or its agent, under penalties of perjury, that it is not a
United States holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"Financial Institution") and holds the Preferred Security certifies to the
Trust or its agent under penalties of perjury that such statement has been
received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and furnishes the Trust or its agent
with a copy thereof; and
(ii) A United States Alien Holder of a Preferred Security will not be
subject to United States federal withholding tax on any gain realized upon
the sale or other disposition of a Preferred Security.
INFORMATION REPORTING TO HOLDERS
The Trust will report the original issue discount that accrued during the
year with respect to the Junior Subordinated Debentures, and any gross
proceeds received by the Trust from the retirement or redemption of the
Junior Subordinated Debentures, annually to the holders of record of the
Preferred Securities and the Internal Revenue Service. The Trust currently
intends to deliver such reports to holders of record prior to January 31
following each calendar year. It is anticipated that persons who hold
Preferred Securities as nominees for beneficial holders will report the
required tax information to beneficial holders on Form 1099.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of Preferred Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will generally
be allowed as a credit against the holder's Federal income tax, provided the
required information is timely filed with the Internal Revenue Service.
POSSIBLE TAX LAW CHANGES
If enacted in their present form, certain legislative proposals in the
Revenue Reconciliation Bill of 1996 (the "Bill") would prevent the Company
from deducting interest on the Junior Subordinated Debentures. The Bill as
proposed would be effective generally for instruments issued on or after
December 7, 1995. However, on March 29, 1996, the Chairmen of the Senate
Finance and House Ways and Means Committees issued a joint statement to the
effect that it was their intention that the effective date of the President's
legislative proposals, if adopted, will be no earlier than the date of
appropriate Congressional action. There can be no assurance, however, that
current or future legislative proposals if enacted would not prevent the
Company from deducting interest on the Junior Subordinated Debentures. This
would constitute a Tax Event and could result in the distribution of the
Junior Subordinated Debentures to holders of the Preferred Securities or, in
certain circumstances, the redemption of such securities by the Company and
the distribution of the resulting cash in redemption of the Preferred
Securities. See "Description of the Preferred Securities--Special Event
Redemption or Distribution."
S-35
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus has been prepared for use by DLJSC in connection with
offers and sales of the Preferred Securities in market-making transactions at
negotiated prices related to prevailing market prices at the time of the
sale. DLJSC may act as principal or agent in such transactions. DLJSC has
advised the Company that it currently intends to make a market in the
Preferred Securities, but it is not obligated to do so and may discontinue
any such market-making at any time without notice. Accordingly, no assurance
can be given as to the liquidity of, or the trading market for, the Preferred
Securities.
DLJSC served as an underwriter in the offering of the Preferred Securities
and received underwriting compensation in connection therewith.
S-36
<PAGE>
PROSPECTUS
AUGUST 15, 1996
DONALDSON, LUFKIN & JENRETTE, INC.
JUNIOR SUBORDINATED DEBT SECURITIES
DLJ CAPITAL TRUST I
DLJ CAPITAL TRUST II
DLJ CAPITAL TRUST III
DLJ CAPITAL TRUST IV
PREFERRED SECURITIES GUARANTEED
TO THE EXTENT SET FORTH HEREIN BY
DONALDSON, LUFKIN & JENRETTE, INC.
Donaldson Lufkin & Jenrette, Inc. (the "Company") may from time to time
offer unsecured junior subordinated debt securities (the "Junior Subordinated
Debt Securities") consisting of debentures, notes or other evidences of
indebtedness in one or more series and in amounts, at prices and on terms to
be determined at or prior to the time of any such offering. The Junior
Subordinated Debt Securities when issued will be unsecured obligations of the
Company. The Company's obligations under the Junior Subordinated Debt
Securities will be subordinate and junior in right of payment to all Senior
Indebtedness (as defined herein) of the Company.
DLJ Capital Trust I, DLJ Capital Trust II, DLJ Capital Trust III and DLJ
Capital Trust IV (the "DLJ Trusts"), each a statutory business trust formed
under the laws of the State of Delaware, may offer and sell, from time to
time, preferred securities representing undivided beneficial interests in the
assets of the respective DLJ Trust ("Preferred Securities"). The payment of
periodic cash distributions ("distributions") with respect to Preferred
Securities of each of the DLJ Trusts out of moneys held by the Property
Trustee (as defined herein) of each of the DLJ Trusts, and payments on
liquidation of each DLJ Trust and on redemption of Preferred Securities of
such DLJ Trust, will be guaranteed by the Company as and to the extent
described herein (each such guarantee a "Preferred Securities Guarantee").
See "Description of the Preferred Securities Guarantees." The Company's
obligation under each Preferred Securities Guarantee is an unsecured
obligation of the Company and will rank (i) subordinate and junior in right
of payment to all other liabilities of the Company, including the Junior
Subordinated Debt Securities, except those made pari passu or subordinate by
their terms, and (ii) senior to all capital stock now or hereafter issued by
the Company and to any guarantee now or hereafter entered into by the Company
in respect of any of its capital stock. Junior Subordinated Debt Securities
may be issued and sold from time to time in one or more series by the Company
to a DLJ Trust, or a trustee of such trust, in connection with the investment
of the proceeds from the offering of Preferred Securities and Common
Securities (as defined herein) of such DLJ Trust. The Junior Subordinated
Debt Securities purchased by a DLJ Trust may be subsequently distributed pro
rata to holders of Preferred Securities and Common Securities in connection
with the dissolution of such DLJ Trust, upon the occurrence of certain events
as may be described in an accompanying Prospectus Supplement.
Specific terms of the Junior Subordinated Debt Securities or any series or
the Preferred Securities of any DLJ Trust in respect of which this Prospectus
is being delivered (the "Offered Securities") will be set forth in a
Prospectus Supplement with respect to such Offered Securities, which will
describe, without limitation and where applicable, the following: (i) in the
case of Junior Subordinated Debt Securities, the specific designation,
aggregate principal amount, authorized denomination, maturity, premium, if
any, redemption or sinking fund provisions, if any, interest rate (which may
be fixed or variable), if any, the time and method of calculating interest
payments, if any, dates on which premium, if any, and interests, if any, will
be payable, the right of the Company, if any, to defer payment of interest on
the Junior Subordinated Debt Securities and the maximum length of such
deferral period, the initial public offering price, and any listing on a
securities exchange and other specific terms of the offering; and (ii) in the
case of Preferred Securities, the specific designation, number of securities,
liquidation amount per security, initial public offering price, and any
listing on a securities exchange, distribution rate (or method of calculation
thereof), dates on which distributions shall be payable and dates from which
distributions shall accrue, voting rights (if any), terms for any conversion
or exchange into other securities, any redemption or sinking fund provisions,
any other rights, preferences, privileges, limitations or restrictions
relating to the Preferred Securities and the terms upon which the proceeds of
the sale of the Preferred Securities shall be used to purchase a specific
series of Junior Subordinated Debt Securities of the Company. Unless
otherwise indicated in the Prospectus Supplement, the Company does not intend
to list any of the securities on a national securities exchange.
Any Prospectus Supplement relating to any series of Offered Securities
will contain information concerning certain United States Federal income tax
considerations, if applicable, to the Offered Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus has been prepared for use by Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC") in connection with offers and sales of the
Offered Securities which may be made by it from time to time in market-making
transactions at negotiated prices relating to prevailing market prices at the
time of sale. The Company has been advised by DLJSC that it currently intends
to make a market in the Offered Securities; however, it is not obligated to
do so. Any such market making may be discontinued at any time, and there is
no assurance as to the liquidity of, or trading market for, the Offered
Securities. DLJSC may act as principal or agent in such transactions. See
"Plan of Distribution." This Prospectus may not be used to consummate sales
of Offered Securities unless accompanied by a Prospectus Supplement.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The registration
statement of which this Prospectus forms a part, as well as reports, proxy
statements and other information filed by the Company, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, New York,
New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
at prescribed rates from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be
accessed electronically by means of the Commission's home page on the
Internet at http://www.sec.gov. The Company's Common Stock is listed on the
New York Stock Exchange, Inc. and reports and other information concerning
the Company can also be inspected at the office of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of the Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed with the Commission under the Securities Act of 1933 (the
"Securities Act") with respect to the Offered Securities. This Prospectus
does not contain all of the information set forth in such Registration
Statement, certain parts of which are omitted in accordance with the rules
and regulations of the Commission. Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company, the DLJ Trusts and the Offered Securities. Any
statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission or incorporated by reference herein are not necessarily complete,
and in each instance reference is made to the copy of such document so filed
for a more complete description of the matter involved. Each such statement
is qualified in its entirety by such reference.
No separate financial statements of any of the DLJ Trusts have been
included or incorporated by reference herein. The Company and the DLJ Trusts
do not consider that such financial statements would be material to holders
of the Preferred Securities because (i) all of the voting securities of each
DLJ Trust will be owned, directly or indirectly, by the Company, a reporting
company under the Exchange Act, (ii) each of the DLJ Trusts is a newly-formed
special purpose entity, has no operating history, has no independent
operations and is not engaged in, and does not propose to engage in, any
activity other than issuing Trust Securities (as defined herein) representing
undivided beneficial interests in the assets of such DLJ Trust and investing
the proceeds thereof in Junior Subordinated Debt Securities issued by the
Company and (iii) the obligations of each of the DLJ Trusts under the
Preferred Securities of that DLJ Trust are fully and unconditionally
guaranteed by the Company as and to the extent described herein. See "The DLJ
Trusts," "Description of the Preferred Securities," "Description of the
Preferred Securities Guarantees" and "Description of the Junior Subordinated
Debt Securities." The DLJ Trusts are statutory business trusts formed under
the laws of the State of Delaware. The Company, as of the date of this
Prospectus, beneficially owns all of the beneficial interests in each DLJ
Trust. Each holder of Preferred Securities of a DLJ Trust will be furnished
annually with unaudited financial statements of such Trust as soon as
available after the end of the Trust's fiscal year.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1995, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996
and June 30, 1996 and Current Reports on Form 8-K dated Febuary 9, 1996 and
February 12, 1996, previously filed by the Company with the Commission, are
incorporated by reference in this Prospectus.
All documents filed by the Company after the date of this Prospectus
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the termination of the offering of the Offered Securities offered hereby,
shall be deemed to be incorporated herein by reference and to be a part
hereof from the date of such documents. 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 this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statements as modified or superseded
shall be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may
be incorporated by reference in this Prospectus (other than certain exhibits
to such documents). Requests for such documents should be directed to
Donaldson, Lufkin & Jenrette, Inc., 277 Park Avenue, New York, New York
10172, Attention: Corporate Secretary (Telephone: (212) 892-3000).
2
<PAGE>
USE OF PROCEEDS
Neither Donaldson, Lufkin & Jenrette, Inc. nor the DLJ Trusts will receive
any proceeds from the sale of the Offered Securities in any market making
transaction with which this Prospectus may be delivered.
RATIOS OF EARNINGS
TO FIXED CHARGES AND EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for the
Company for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------------- ----------------
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges (1) ................. 1.07 1.21 1.20 1.10 1.11 1.20
Ratio of earnings to combined
fixed charges and preferred
stock dividends (2) ......... -- -- -- 1.09 1.10 1.19
</TABLE>
- ------------
(1) For the purpose of calculating the ratio of earnings to fixed charges
(i) earnings consist of income before provision for income taxes and
fixed charges and (ii) fixed charges consist of interest expense and
one-third of rental expense which is deemed representative of an
interest factor.
(2) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.
3
<PAGE>
THE COMPANY
The Company is a leading integrated investment and merchant bank that
serves institutional, corporate, governmental and individual clients. The
Company's businesses include securities underwriting, sales and trading;
merchant banking; financial advisory services; investment research;
correspondent brokerage services; and asset management. While results have
fluctuated from year to year, for the years 1991 through 1995, the Company's
total revenues and net income increased by a compound annual growth rate of
22.8% and 32.7%, respectively. The Company's average annual after-tax return
on common equity for the past five years was 23.1%. At June 30, 1996, the
Company had total assets of $47.7 billion and total stockholders' equity of
$1.3 billion.
The Company's principal strategy is to focus its resources on certain core
businesses where management believes the Company can compete profitably and
be among the leading participants in each targeted market. Over the past
several years, the Company has significantly expanded the scope of its
business activities and its customer base, both in the U.S. and
internationally. It has established strong positions in selected high-margin
activities, including equity and high-yield corporate securities underwriting
as well as merchant banking, and has increased its market share in a broad
range of businesses. Key elements of this expansion have been the Company's
recruitment of experienced professionals during periods of turmoil in the
securities industry, the continued development and retention of the Company's
existing personnel at all levels and the continuity of senior management. In
addition, the Company has historically emphasized economic and investment
research in the development of its business and believes that its commitment
to research has been an important contributor to its success.
The Company conducts its business through three principal operating
groups, each of which is an important contributor to revenues and earnings:
the Banking Group, which includes the Company's Investment Banking, Merchant
Banking and Emerging Markets groups; the Capital Markets Group, consisting of
the Company's institutional debt and equity businesses as well as Sprout, its
venture capital affiliate; and the Financial Services Group, comprised of its
Pershing clearing division, high-net-worth retail brokerage and asset
management businesses.
The Company's Banking Group is a major participant in the raising of
capital and the providing of financial advice to companies throughout the
U.S. and has significantly expanded its activities abroad. Through its
Investment Banking group, the Company manages and underwrites public
offerings of securities, arranges private placements and provides advisory
and other services in connection with mergers, acquisitions, restructurings
and other financial transactions. Since 1991, the Investment Banking group
has raised over $190.0 billion for clients from the public and private
markets in corporate equity and debt securities and has completed over 350
merger and acquisition, restructuring and divestiture assignments aggregating
in excess of $89.0 billion. Its Merchant Banking group pursues direct
investments in a variety of areas through a number of investment vehicles
funded with capital provided primarily by institutional investors, the
Company and its employees. Since the Company began investing in leveraged
investments in 1985, it invested over $1.0 billion on behalf of the Company,
its employees and funds it manages over 50 companies with an aggregate
purchase price of over $19.5 billion and achieved an average annual internal
rate of return substantially in excess of comparable industry benchmarks. The
Emerging Markets group specializes in client advisory services, merchant
banking and the underwriting, sales and trading of securities in Latin
America, Asia and certain other international markets.
The Capital Markets Group encompasses a broad range of activities
including trading, research, origination and distribution of equity and
fixed-income securities, private equity investments and venture capital. Its
focus is primarily client-driven, in contrast to that of many other
securities firms which emphasize proprietary trading, an approach that
reduces the Company's exposure to market volatility. Its Taxable Fixed-Income
division provides institutional clients with research, trading and sales
services for a broad range of taxable fixed-income products including
high-yield corporate, investment-grade corporate, U.S. government and
mortgage-backed securities. The Institutional Equities division provides
institutional clients with research, trading and sales services in U.S.
listed and over-the-counter equity securities. The Company's equity sales and
trading capabilities, combined with its research expertise, have contributed
to commission revenues increasing, for the years 1991 through 1995, at a
compound annual
4
<PAGE>
growth rate of 15.6%. In addition, the Company's Equity Derivatives division
provides a broad range of equity and index options products, while Sprout is
one of the oldest and largest groups in the private equity investment and
venture capital industry.
The Financial Services Group provides a broad array of services to
individual investors and the financial intermediaries which represent them.
Pershing is a leading provider of correspondent brokerage services, clearing
transactions for over 600 U.S. brokerage firms which collectively maintain
over 1.3 million client accounts. These client accounts held over $143.6
billion of assets at June 30, 1996. During 1995, Pershing accounted for more
than 10% of the daily reported trading volume on the NYSE. In addition,
Pershing's PC Financial Network (Service Mark), a leading on-line discount
broker in the U.S., has experienced significant growth over the past several
years. The Company's Investment Services Group, which consists of
approximately 270 account executives, provides high-net-worth individuals and
medium to smaller size institutions with access to the Company's equity and
fixed-income research, trading services and underwriting and has one of the
highest revenues per account executive in the industry. Through Wood,
Struthers & Winthrop Management Corp. and affiliates the Company provides
investment management and trust services primarily to high-net-worth
individual investors and institutions, and at June 30, 1996 had over $4.8
billion in assets under management.
Apart from its three principal operating groups, the Company also
maintains a separate brokerage subsidiary, Autranet Management Corp., which
provides institutional investors with research generated by independent
originators that are not affiliated with Wall Street brokerage firms.
Founded in 1959, the Company initially focused on providing in-depth
investment research to institutional investors. In 1970, the Company became
the first member firm of the New York Stock Exchange, Inc. to be owned
publicly. Fifteen years later, the Company was purchased by subsidiaries of
The Equitable Companies Incorporated ("EQ") (EQ and its subsidiaries other
than the Company, collectively, "Equitable"). Equitable, which as of June 30,
1996 owned an approximately 80% interest in the Company following the
Company's initial public offering in October 1995, is a diversified financial
services organization and one of the world's largest investment management
organizations. AXA is EQ's largest stockholder, beneficially owning at June
30, 1996, approximately 60.7% of EQ's outstanding shares of common stock and
$392.2 million stated value of EQ's Series E convertible preferred stock.
The principal executive offices of the Company are located at 277 Park
Avenue, New York, NY, 10172 and its telephone number is (212) 892-3000. The
Company has 17 additional offices in 14 locations in the U.S., and ten
offices in Europe, Asia and Latin America.
5
<PAGE>
THE DLJ TRUSTS
Each of DLJ Capital Trust I, DLJ Capital Trust II, DLJ Capital Trust III
and DLJ Capital Trust IV is a statutory business trust formed on June 19,
1996 under the Delaware Business Trust Act (the "Business Trust Act")
pursuant to a separate declaration of trust among the Trustees (as defined
herein) of such DLJ Trust and the Company and the filing of a certificate of
trust with the Secretary of State of the State of Delaware. Such declaration
will be amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, as of the date
the Preferred Securities of such DLJ Trust are initially issued. Each
Declaration will be qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
This description summarizes the material terms of the Declarations and is
qualified in its entirety by reference to the form of Declaration, which has
been filed as an exhibit to the Registration Statement of which this
Prospectus is a part, and the Trust Indenture Act.
TRUST SECURITIES
Upon issuance of any Preferred Securities by a DLJ Trust, the holders
thereof will own all of the issued and outstanding Preferred Securities of
such DLJ Trust. The Company will acquire securities representing common
undivided beneficial interests in the assets of each DLJ Trust (the "Common
Securities" and, together with the Preferred Securities, the "Trust
Securities") in an amount equal to at least 3% of the total capital of such
DLJ Trust and will own, directly or indirectly, all of the issued and
outstanding Common Securities of each DLJ Trust. The Preferred Securities and
the Common Securities will rank pari passu with each other and will have
equivalent terms; provided that (i) if a Declaration Event of Default (as
defined herein) under the Declaration of a DLJ Trust occurs and is
continuing, the holders of Preferred Securities of such DLJ Trust will have a
priority over holders of the Common Securities of such DLJ Trust with respect
to payments in respect of distributions and payments upon liquidation,
redemption and maturity and (ii) holders of Common Securities have the
exclusive right (subject to the terms of the Declaration) to appoint, remove
or replace the Trustees and to increase or decrease the number of Trustees.
Each DLJ Trust exists for the purpose of (a) issuing its Preferred
Securities, (b) issuing its Common Securities to the Company, (c) investing
the gross proceeds from the sale of the Trust Securities in Junior
Subordinated Debt Securities of the Company and (d) engaging in only such
other activities as are necessary, convenient or incidental thereto. The
rights of the holders of the Preferred Securities, including economic rights,
rights to information and voting rights, are set forth in the applicable
Declaration, the Business Trust Act and the Trust Indenture Act.
POWERS AND DUTIES OF TRUSTEES
The number of trustees (the "Trustees") of each DLJ Trust shall initially
be five. Three of such Trustees (the "Regular Trustees") are individuals who
are employees or officers of the Company. The fourth such trustee will be The
Bank of New York, which is unaffiliated with the Company and which will serve
as the property trustee (the "Property Trustee") and act as the indenture
trustee for purposes of the Trust Indenture Act. The fifth such trustee is an
affiliate of The Bank of New York that has its principal place of business in
the State of Delaware (the "Delaware Trustee"). Pursuant to each Declaration,
legal title to the Junior Subordinated Debt Securities purchased by a DLJ
Trust will be held by the Property Trustee for the benefit of the holders of
the Trust Securities of such DLJ Trust, and the Property Trustee will have
the power to exercise all rights, powers and privileges under the Indenture
(as defined under "Description of the Junior Subordinated Debt Securities")
with respect to the Junior Subordinated Debt Securities. In addition, the
Property Trustee will maintain exclusive control of a segregated non-interest
bearing bank account (the "Property Account") to hold all payments in respect
of the Junior Subordinated Debt Securities purchased by a DLJ Trust for the
benefit of the holders of Trust Securities. The Property Trustee will
promptly make distributions to the holders of the Trust Securities out of
funds from the Property Account. The Preferred Securities Guarantees are
separately qualified under the Trust Indenture Act and will be held by The
Bank of New York, acting in its capacity as indenture trustee with respect
thereto, for the benefit of the holders of the applicable Preferred
Securities. As used in this Prospectus and any accompanying Prospectus
Supplement, the term "Property Trustee" with respect to a DLJ Trust refers to
The Bank of New York acting either in its capacity as a Trustee under the
relevant Declaration and the holder of legal title to the Junior Subordinated
Debt Securities purchased by that Trust or in its capacity as indenture
trustee under, and the holder of, the applicable Preferred Securities
Guarantee, as the context may require. The Company, as the direct or indirect
owner of all of the Common Securities of each DLJ Trust, will have the
exclusive right (subject to the terms of the related
6
<PAGE>
Declaration) to appoint, remove or replace Trustees and to increase or
decrease the number of Trustees, provided that the number of Trustees shall
be at least five and the majority of Trustees shall be Regular Trustees. The
term of a DLJ Trust will be set forth in the Prospectus Supplement, but may
terminate earlier as provided in such Declaration.
The duties and obligations of the Trustees of a DLJ Trust shall be
governed by the Declaration of such DLJ Trust. Under its Declaration, each
DLJ Trust shall not, and the Trustees shall cause such DLJ Trust not to,
engage in any activity other than in connection with the purposes of such DLJ
Trust or other than as required or authorized by the related Declaration. In
particular, each DLJ Trust shall not and the Trustees shall not (a) invest
any proceeds received by such DLJ Trust from holding the Junior Subordinated
Debt Securities purchased by such DLJ Trust but shall promptly distribute
from the Property Account all such proceeds to holders of Trust Securities
pursuant to the terms of the related Declaration and of the Trust Securities;
(b) acquire any assets other than as expressly provided in the related
Declaration; (c) possess Trust property for other than a Trust purpose; (d)
make any loans, other than loans represented by the Junior Subordinated Debt
Securities; (e) possess any power or otherwise act in such a way as to vary
the assets of such DLJ Trust or the terms of its Trust Securities in any way
whatsoever; (f) issue any securities or other evidences of beneficial
ownership of, or beneficial interests in, such DLJ Trust other than its Trust
Securities; (g) incur any indebtedness for borrowed money or (h)(i) direct
the time, method and place of exercising any trust or power conferred upon
the Indenture Trustee (as defined under "Description of the Junior
Subordinated Debt Securities") with respect to the Junior Subordinated Debt
Securities deposited in that DLJ Trust as trust assets or upon the Property
Trustee of that DLJ Trust with respect to its Preferred Securities, (ii)
waive any past default that is waivable under the Indenture or the
Declaration, (iii) exercise any right to rescind or annul any declaration
that the principal of all of the Junior Subordinated Debt Securities
deposited in that DLJ Trust as trust assets shall be due and payable or (iv)
consent to any amendment, modification or termination of the Indenture or
such Junior Subordinated Debt Securities or the Declaration, in each case
where such consent shall be required, unless in the case of this clause (h)
the Property Trustee shall have received an unqualified opinion of nationally
recognized independent tax counsel recognized as expert in such matters to
the effect that such action will not cause such DLJ Trust to be classified
for United States Federal income tax purposes as an association taxable as a
corporation or a partnership and that such DLJ Trust will continue to be
classified as a grantor trust for United States Federal income tax purposes.
BOOKS AND RECORDS
The books and records of each DLJ Trust will be maintained at the
principal office of such DLJ Trust and will be open for inspection by a
holder of Preferred Securities of such DLJ Trust or his representative for
any purpose reasonably related to his interest in such DLJ Trust during
normal business hours. Each holder of Preferred Securities will be furnished
annually with unaudited financial statements of the applicable DLJ Trust as
soon as available after the end of such DLJ Trust's fiscal year.
VOTING
Except as provided under the Business Trust Act, the Declaration and the
Trust Indenture Act, holders of Preferred Securities will have no voting
rights.
THE PROPERTY TRUSTEE
The Property Trustee, for the benefit of the holders of the Trust
Securities of a DLJ Trust, is authorized under each Declaration to exercise
all rights under the Indenture with respect to the Junior Subordinated Debt
Securities deposited in such DLJ Trust as trust assets, including its rights
as the holder of such Junior Subordinated Debt Securities to enforce the
Company's obligations under such Junior Subordinated Debt Securities upon the
occurrence of an Indenture Event of Default. The Property Trustee shall also
be authorized to enforce the rights of holders of Preferred Securities of a
DLJ Trust under the related Preferred Securities Guarantee. If any DLJ
Trust's failure to make distributions on the Preferred Securities of a DLJ
Trust is a consequence of the Company's exercise of any right under the terms
of the Junior Subordinated Debt Securities deposited in such DLJ Trust as
trust assets to extend the
7
<PAGE>
interest payment period for such Junior Subordinated Debt Securities, the
Property Trustee will have no right to enforce the payment of distributions
on such Preferred Securities until a Declaration Event of Default shall have
occurred. Holders of a least a majority in liquidation amount of the
Preferred Securities held by a DLJ Trust will have the right to direct the
Property Trustee for that DLJ Trust with respect to certain matters under the
Declaration for that DLJ Trust and the related Preferred Securities
Guarantee. If the Property Trustee fails to enforce its rights under the
Indenture or fails to enforce the Preferred Securities Guarantee, to the
extent permitted by applicable law, any holder of Preferred Securities may
institute a legal proceeding against the Company to enforce such rights or
the Preferred Securities Guarantee, as the case may be.
DISTRIBUTIONS
Pursuant to each Declaration, distributions on the Preferred Securities of
a DLJ Trust must be paid on the dates payable to the extent that the Property
Trustee for that DLJ Trust has cash on hand in the applicable Property
Account to permit such payment. The funds available for distribution to the
holders of the Preferred Securities of a DLJ Trust will be limited to
payments received by the Property Trustee in respect of the Junior
Subordinated Debt Securities that are deposited in the DLJ Trust as trust
assets. If the Company does not make interest payments on the Junior
Subordinated Debt Securities deposited in a DLJ Trust as trust assets, the
Property Trustee will not make distributions on the Preferred Securities of
such DLJ Trust. Under the Declaration, if and to the extent the Company does
make interest payments on the Junior Subordinated Debt Securities deposited
in a DLJ Trust as trust assets, the Property Trustee is obligated to make
distributions on the Trust Securities of such DLJ Trust on a Pro Rata Basis
(as defined below). The payment of distributions on the Preferred Securities
of a DLJ Trust is guaranteed by DLJ on a subordinated basis as and to the
extent set forth under "Description of the Preferred Securities Guarantee." A
Preferred Securities Guarantee is a full and unconditional guarantee from the
time of issuance of the applicable Preferred Securities, but the Preferred
Securities Guarantee covers distributions and other payments on the
applicable Preferred Securities only if and to the extent that the Company
has made a payment to the Property Trustee of interest or principal on the
Junior Subordinated Debt Securities deposited in the DLJ Trust as trust
assets. As used in this Prospectus, the term "Pro Rata Basis" shall mean pro
rata to each holder of Trust Securities of a DLJ Trust according to the
aggregate liquidation amount of the Trust Securities of such DLJ Trust held
by the relevant holder in relation to the aggregate liquidation amount of all
Trust Securities of such DLJ Trust outstanding unless, in relation to a
payment, a Declaration Event of Default under the Declaration has occurred
and is continuing, in which case any funds available to make such payment
shall be paid first to each holder of the Preferred Securities of such DLJ
Trust pro rata according to the aggregate liquidation amount of the Preferred
Securities held by the relevant holder in relation to the aggregate
liquidation amount of all the Preferred Securities of such DLJ Trust
outstanding, and only after satisfaction of all amounts owed to the holders
of such Preferred Securities, to each holder of Common Securities of such DLJ
Trust pro rata according to the aggregate liquidation amount of such Common
Securities held by the relevant holder in relation to the aggregate
liquidation amount of all Common Securities of such DLJ Trust outstanding.
EVENTS OF DEFAULT
If an Indenture Event of Default occurs and is continuing with respect to
Junior Subordinated Debt Securities deposited in a DLJ Trust as trust assets,
an Event of Default under the Declaration (a "Declaration Event of Default")
of such DLJ Trust will occur and be continuing with respect to any
outstanding Trust Securities of such DLJ Trust. In such event, each
Declaration provides that the holders of Common Securities of such DLJ Trust
will be deemed to have waived any such Declaration Event of Default with
respect to the Common Securities until all Declaration Events of Default with
respect to the Preferred Securities of such DLJ Trust have been cured or
waived. Until all such Declaration Events of Default with respect to the
Preferred Securities of such DLJ Trust have been so cured or waived, the
Property Trustee will be deemed to be acting solely on behalf of the holders
of the Preferred Securities of such DLJ Trust and only the holders of such
Preferred Securities will have the right to direct the Property Trustee with
respect to certain matters under such Declaration and consequently under the
Indenture. In the event that any Declaration Event of Default with respect to
the Preferred Securities of
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such DLJ Trust is waived by the holders of the Preferred Securities of such
DLJ Trust as provided in the Declaration, the holders of Common Securities
pursuant to such Declaration have agreed that such waiver also constitutes a
waiver of such Declaration Event of Default with respect to the Common
Securities for all purposes under the Declaration without any further act,
vote or consent of the holders of the Common Securities.
RECORD HOLDERS
Each Declaration provides that the Trustees of such DLJ Trust may treat
the person in whose name a Certificate representing its Preferred Securities
is registered on the books and records of such DLJ Trust as the sole holder
thereof and of the Preferred Securities represented thereby for purposes of
receiving distributions and for all other purposes and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in such
certificate or in the Preferred Securities represented thereby on the part of
any person, whether or not such DLJ Trust shall have actual or other notice
thereof. Preferred Securities will be issued in fully registered form. Unless
otherwise specified in a Prospectus Supplement, Preferred Securities will be
represented by a global certificate registered on the books and records of
such DLJ Trust in the name of a depositary (the "Depositary") named in an
accompanying Prospectus Supplement or its nominee. Under each Declaration:
(i) such DLJ Trust and the Trustees thereof shall be entitled to deal
with the Depositary (or any successor depositary) for all purposes,
including the payment of distributions and receiving approvals, votes or
consents under the related Declaration, and except as set forth in the
related Declaration with respect to the Property Trustee, shall have no
obligation to persons owning a beneficial interest in Preferred Securities
("Preferred Security Beneficial Owners") registered in the name of and
held by the Depositary or its nominee; and
(ii) the rights of Preferred Security Beneficial Owners shall be
exercised only through the Depositary (or any successor depositary) and
shall be limited to those established by law and agreements between such
Preferred Security Beneficial Owners and the Depositary and/or its
participants. With respect to Preferred Securities registered in the name
of and held by the Depositary or its nominee, all notices and other
communications required under each Declaration shall be given to, and all
distributions on such Preferred Securities shall be given or made to, the
Depositary (or its successor).
The specific terms of the depositary arrangement with respect to the
Preferred Securities will be disclosed in the applicable Prospectus
Supplement.
DEBTS AND OBLIGATIONS
In each Declaration, the Company has agreed to pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs
and expenses of the applicable DLJ Trust, including the fees and expenses of
its Trustees and any taxes and all costs and expenses with respect thereto,
to which such DLJ Trust may become subject, except for United States
withholding taxes. The foregoing obligations of the Company under each
Declaration are for the benefit of, and shall be enforceable by, any person
to whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice thereof. Any
such Creditor may enforce such obligations of the Company directly against
the Company and the Company has irrevocably waived any right or remedy to
require that any such Creditor take any action against any DLJ Trust or any
other person before proceeding against the Company. The Company has agreed in
each Declaration to execute such additional agreements as may be necessary or
desirable in order to give full effect to the foregoing.
The business address of each DLJ Trust is c/o Donaldson, Lufkin &
Jenrette, Inc., 277 Park Avenue, New York, NY 10172, telephone number (212)
892-3000.
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DESCRIPTION OF THE PREFERRED SECURITIES
Each DLJ Trust may issue, from time to time, only one series of Preferred
Securities having terms described in the Prospectus Supplement relating
thereto. The Declaration of each DLJ Trust authorizes the Regular Trustees of
such DLJ Trust to issue on behalf of such DLJ Trust one series of Preferred
Securities. Each Declaration will be qualified as an indenture under the
Trust Indenture Act. The Preferred Securities will have such terms, including
distributions, redemption, voting, liquidation rights and such other
preferred, deferred or other special rights or such restrictions as shall be
set forth in the related Declaration or made part of such Declaration by the
Trust Indenture Act. Reference is made to the Prospectus Supplement relating
to the Preferred Securities of a DLJ Trust for specific terms, including (i)
the specific designation of such Preferred Securities, (ii) the number of
Preferred Securities issued by such DLJ Trust, (iii) the annual distribution
rate (or method of calculation thereof) for Preferred Securities issued by
such DLJ Trust, the date or dates upon which such distributions shall be
payable and the record date or dates for the payment of such distributions,
(iv) whether distributions on Preferred Securities issued by such DLJ Trust
shall be cumulative, and, in the case of Preferred Securities having such
cumulative distribution rights, the date or dates or method of determining
the date or dates from which distributions on Preferred Securities issued by
such DLJ Trust shall be cumulative, (v) the amount or amounts which shall be
paid out of the assets of such DLJ Trust to the holders of Preferred
Securities of such DLJ Trust upon voluntary or involuntary dissolution,
winding-up or termination of such DLJ Trust, (vi) the obligation or right, if
any, of such DLJ Trust to purchase or redeem Preferred Securities issued by
such DLJ Trust and the price or prices at which, the period or periods within
which and the terms and conditions upon which Preferred Securities issued by
such DLJ Trust shall or may be purchased or redeemed, in whole or in part,
pursuant to such obligation or right, (vii) the voting rights, if any, of
Preferred Securities issued by such DLJ Trust in addition to those required
by law, including the number of votes per Preferred Security and any
requirement for the approval by the holders of Preferred Securities, or of
Preferred Securities issued by one or more DLJ Trusts, or of both, as a
condition to specified actions or amendments to the Declaration of such DLJ
Trust, (viii) terms for any conversion or exchange into other securities and
(ix) any other relevant rights, preferences, privileges, limitations or
restrictions of Preferred Securities issued by such DLJ Trust consistent with
the Declaration of such DLJ Trust or with applicable law. All Preferred
Securities offered hereby will be guaranteed by the Company as and to the
extent set forth below under "Description of the Preferred Securities
Guarantees." Certain United States Federal income tax considerations
applicable to any offering of Preferred Securities will be described in the
Prospectus Supplement relating thereto.
In connection with the issuance of Preferred Securities, each DLJ Trust
will issue one series of Common Securities. The Declaration of each DLJ Trust
authorizes the Regular Trustees of such trust to issue on behalf of such DLJ
Trust one series of Common Securities having such terms including
distributions, redemption, voting, liquidation rights or such restrictions as
shall be set forth therein. The terms of the Common Securities issued by a
DLJ Trust will be substantially identical to the terms of the Preferred
Securities issued by such DLJ Trust and the Common Securities will rank pari
passu, and payments will be made thereon on a Pro Rata Basis with the
Preferred Securities except that if a Declaration Event of Default occurs and
is continuing, the rights of the holders of such Common Securities to payment
in respect of distributions and payments upon liquidation, redemption and
maturity will be subordinated to the rights of the holders of such Preferred
Securities. Except in certain limited circumstances, the Common Securities
issued by a DLJ Trust will also carry the right to vote and to appoint,
remove or replace any of the Trustees of that DLJ Trust. All of the Common
Securities of a DLJ Trust will be directly or indirectly owned by the
Company.
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DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees that will be executed and delivered by the Company for
the benefit of the holders from time to time of Preferred Securities. Each
Preferred Security Guarantee will be separately qualified under the Trust
Indenture Act and will be held by The Bank of New York, acting in its
capacity as indenture trustee with respect thereto, for the benefit of
holders of the Preferred Securities of the applicable DLJ Trust. The terms of
each Preferred Securities Guarantee will be those set forth in such Preferred
Securities Guarantee and those made part of such Guarantee by the Trust
Indenture Act. This description summarizes the material terms of the
Preferred Securities Guarantees and is qualified in its entirety by reference
to the form of Preferred Securities Guarantee, which is filed as an exhibit
to the Registration Statement of which this Prospectus forms a part, and the
Trust Indenture Act. Section and Article references used herein are
references to the provisions of the form of Preferred Securities Guarantee.
GENERAL
Pursuant to each Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to
pay in full, to the holders of the Preferred Securities issued by a DLJ
Trust, the Guarantee Payments (as defined herein) (without duplication of
amounts theretofore paid by such DLJ Trust), to the extent not paid by such
DLJ Trust, regardless of any defense, right of set-off or counterclaim that
such DLJ Trust may have or assert. The following payments or distributions
with respect to Preferred Securities issued by a DLJ Trust to the extent not
paid or made by such DLJ Trust (the "Guarantee Payments"), will be subject to
the Preferred Securities Guarantee (without duplication): (i) any accrued and
unpaid distributions on such Preferred Securities, and the redemption price,
including all accrued and unpaid distributions to the date of redemption,
with respect to any Preferred Securities called for redemption by such DLJ
Trust but if and only to the extent that in each case the Company has made a
payment to the related Property Trustee of interest or principal on the
Junior Subordinated Debt Securities deposited in such DLJ Trust as trust
assets and (ii) upon a voluntary or involuntary dissolution, winding-up or
termination of such DLJ Trust (other than in connection with the distribution
of such Junior Subordinated Debt Securities to the holders of Preferred
Securities or the redemption of all of the Preferred Securities upon the
maturity or redemption of such Junior Subordinated Debt Securities) the
lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on such Preferred Securities to the date of payment, to
the extent such DLJ Trust has funds available therefor or (b) the amount of
assets of such DLJ Trust remaining available for distribution to holders of
such Preferred Securities in liquidation of such DLJ Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Company to the holders of Preferred Securities or
by causing the applicable DLJ Trust to pay such amounts to such holders.
The Preferred Securities Guarantee is a full and unconditional guarantee
from the time of issuance of the applicable Preferred Securities, but the
Preferred Securities Guarantee covers distributions and other payments on
such Preferred Securities only if and to the extent that the Company has made
a payment to the Property Trustee of interest or principal on the Junior
Subordinated Debt Securities deposited in the applicable DLJ Trust as trust
assets. If the Company does not make interest or principal payments on the
Junior Subordinated Debt Securities deposited in the applicable DLJ Trust as
trust assets, the Property Trust will not make distributions of the Preferred
Securities of such DLJ Trust and the DLJ Trust will not have funds available
therefor.
The Company's obligations under the Declaration for each Trust, the
Preferred Securities Guarantee issued with respect to Preferred Securities
issued by that Trust, the Junior Subordinated Debt Securities purchased by
that Trust and the related Indenture (as defined below) in the aggregate will
provide a full and unconditional guarantee on a subordinated basis by the
Company of payments due on the Preferred Securities issued by that Trust.
CERTAIN COVENANTS OF THE COMPANY
In each Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities issued by the applicable DLJ Trust remain
outstanding, the Company will not (A) declare or
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pay any dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred
stock or make any guarantee payment with respect thereto, if at such time (i)
the Company shall be in default with respect to its Guarantee Payments or
other payment obligations under the Preferred Securities Guarantee, (ii)
there shall have occurred any Declaration Event of Default under the related
Declaration or (iii) in the event that Junior Subordinated Debt Securities
are issued to a DLJ Trust in connection with the issuance of Trust Securities
by such DLJ Trust, the Company shall have given notice of its election to
defer payments of interest on such Junior Subordinated Debt Securities by
extending the interest payment period as provided in the terms of the Junior
Subordinated Debt Securities and such period, or any extension thereof, is
continuing; provided that (a) the Company will be permitted to pay accrued
dividends (and cash in lieu of fractional shares) upon the conversion of
Preferred Stock of the Company as may be outstanding from time to time, in
each case in accordance with the terms of such stock and (b) the foregoing
will not apply to any stock dividends paid by the Company. In addition, so
long as any Preferred Securities remain outstanding, the Company has agreed
(i) to remain the sole direct or indirect owner of all of the outstanding
Common Securities issued by the applicable DLJ Trust and shall not cause or
permit the Common Securities to be transferred except to the extent permitted
by the related Declaration; provided that any permitted successor of the
Company under the Indenture may succeed to the Company's ownership of the
Common Securities issued by the applicable DLJ Trust and (ii) to use
reasonable efforts to cause such DLJ Trust to continue to be treated as a
grantor trust for United States Federal income tax purposes except in
connection with a distribution of Junior Subordinated Debt Securities.
(Section 6.1)
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no consent will be
required), each Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than 66 2/3% in liquidation amount
of the outstanding Preferred Securities issued by the applicable DLJ Trust.
The manner of obtaining any such approval of holders of such Preferred
Securities will be set forth in an accompanying Prospectus Supplement.
(Section 9.2) All guarantees and agreements contained in a Preferred
Securities Guarantee shall bind the successors, assignees, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Preferred Securities of the applicable DLJ Trust then
outstanding. Except in connection with a consolidation, merger or sale
involving the Company that is permitted under the Indenture, the Company may
not assign its obligations under any Preferred Securities Guarantee. (Section
9.1)
TERMINATION OF THE PREFERRED SECURITIES GUARANTEES
Each Preferred Securities Guarantee will terminate and be of no further
force and effect as to the Preferred Securities issued by the applicable DLJ
Trust upon full payment of the redemption price of all Preferred Securities
of such DLJ Trust, or upon distribution of the Junior Subordinated Debt
Securities to the holders of the Preferred Securities of such DLJ Trust in
exchange for all of the Preferred Securities issued by such DLJ Trust, or
upon full payment of the amounts payable upon liquidation of such DLJ Trust.
Notwithstanding the foregoing, each Preferred Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Preferred Securities issued by the applicable DLJ Trust
must restore payment of any sums paid under such Preferred Securities or such
Guarantee. (Section 7.1)
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The Company's obligations under each Preferred Securities Guarantee to
make the Guarantee Payments will constitute an unsecured obligation of the
Company and will rank (i) subordinate and junior in right of payment to all
other liabilities of the Company, including the Junior Subordinated Debt
Securities, except those made pari passu or subordinate by their terms, and
(ii) senior to all capital stock now or hereafter issued by the Company and
to any guarantee now or hereafter entered into by the Company in respect of
any of its capital stock. The Company's obligations under each Preferred
Securities
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Guarantee will rank pari passu with each other Preferred Securities
Guarantee. (Section 6.2) Because the Company is a holding company, the
Company's obligations under each Preferred Securities Guarantee are also
effectively subordinated to all existing and future liabilities, including
trade payables, of the Company's subsidiaries, except to the extent that the
Company is a creditor of the subsidiaries recognized as such. Each
Declaration provides that each holder of Preferred Securities issued by the
applicable DLJ Trust by acceptance thereof agrees to the subordination
provisions and other terms of the related Preferred Securities Guarantee.
Each Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without first instituting a legal proceeding against any other
person or entity). Each Preferred Securities Guarantee will be deposited with
The Bank of New York, as indenture trustee, to be held for the benefit of the
holders of the Preferred Securities issued by the applicable DLJ Trust. The
Bank of New York shall enforce the Preferred Securities Guarantee on behalf
of the holders of the Preferred Securities issued by the applicable DLJ
Trust. The holders of not less than a majority in aggregate liquidation
amount of the Preferred Securities issued by the applicable DLJ Trust have
the right to direct the time, method and place of conducting any proceeding
for any remedy available in respect of the related Preferred Securities
Guarantee, including the giving of directions to The Bank of New York. If The
Bank of New York fails to enforce such Preferred Securities Guarantee as
above provided, any holder of Preferred Securities issued by the applicable
DLJ Trust may institute a legal proceeding directly against the Company to
enforce its rights under such Preferred Securities Guarantee, without first
instituting a legal proceeding against the applicable DLJ Trust or any other
person or entity.
MISCELLANEOUS
The Company will be required to provide annually to The Bank of New York a
statement as to the performance by the Company of certain of its obligations
under the Preferred Securities Guarantees and as to any default in such
performance. The Company is required to file annually with The Bank of New
York an officer's certificate as to the Company's compliance with all
conditions under Preferred Securities Guarantees. (Section 2.4)
The Bank of New York, prior to the occurrence of a default, undertakes to
perform only such duties as are specifically set forth in the applicable
Preferred Securities Guarantee and, after default with respect to a Preferred
Securities Guarantee, shall exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject
to such provision, The Bank of New York is under no obligation to exercise
any of the powers vested in it by a Preferred Securities Guarantee at the
request of any holder of Preferred Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby. (Section 3.2)
GOVERNING LAW
The Guarantees will be governed by, and construed in accordance with, the
laws of the State of New York.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Junior Subordinated Debt Securities may be issued from time to time in one
or more series under an Indenture (the "Indenture") between the Company and
The Bank of New York, as trustee (the "Indenture Trustee"). The Indenture has
been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The following description summarizes the material
terms of the Indenture, and is qualified in its entirety by reference to the
Indenture and the Trust Indenture Act. Whenever particular provisions or
defined terms in the Indenture are referred to herein, such provisions or
defined terms are incorporated by reference herein. Section and Article
references used herein are references to provisions of the Indenture.
GENERAL
The Junior Subordinated Debt Securities will be unsecured, junior
subordinated obligations of the Company. The Indenture does not limit the
amount of additional indebtedness the Company or any of its subsidiaries may
incur. Since the Company is a holding company, the Company's rights and the
rights of its creditors, including the holders of Junior Subordinated Debt
Securities, to participate in the assets of any subsidiary upon the latter's
liquidation or recapitalization will be subject to the prior claims of the
subsidiary's creditors, except to the extent that the Company may itself be a
creditor with recognized claims against the subsidiary.
The Indenture does not limit the aggregate principal amount of
indebtedness which may be issued thereunder and provides that Junior
Subordinated Debt Securities may be issued thereunder from time to time in
one or more series. The Junior Subordinated Debt Securities are issuable in
one or more series pursuant to an indenture supplemental to the Indenture.
In the event Junior Subordinated Debt Securities are issued to a DLJ Trust
or a Trustee of such trust in connection with the issuance of Trust
Securities by such DLJ Trust, such Junior Subordinated Debt Securities
subsequently may be distributed pro rata to the holders of such Trust
Securities in connection with the dissolution of such DLJ Trust upon the
occurrence of certain events described in the Prospectus Supplement relating
to such Trust Securities. Only one series of Junior Subordinated Debt
Securities will be issued to a DLJ Trust or a trustee of such trust in
connection with the issuance of Trust Securities by such DLJ Trust.
Reference is made to the Prospectus Supplement which will accompany this
Prospectus for the following terms of the series of Junior Subordinated Debt
Securities being offered thereby (to the extent such terms are applicable to
the Junior Subordinated Debt Securities): (i) the specific designation of
such Junior Subordinated Debt Securities, aggregate principal amount and
purchase price; (ii) any limit on the aggregate principal amount of such
Junior Subordinated Debt Securities; (iii) the date or dates on which the
principal of such Junior Subordinated Debt Securities is payable and the
right, if any, to extend such date or dates; (iv) the rate or rates at which
such Junior Subordinated Debt Securities will bear interest or the method of
calculating such rate or rates, if any; (v) the date or dates from which such
interest shall accrue, the interest payment dates on which such interest will
be payable or the manner of determination of such interest payment dates and
the record dates for the determination of holders to whom interest is payable
on any such interest payment dates; (vi) the right, if any, to extend the
interest payment periods and the duration of such extension; (vii) the period
or periods within which, the price or prices at which, and the terms and
conditions upon which, such Junior Subordinated Debt Securities may be
redeemed, in whole or in part, at the option of the Company; (viii) the
obligation, if any of the Company to redeem or purchase such Junior
Subordinated Debt Securities pursuant to any sinking fund or analogous
provisions or at the option of the holder thereof and the period or periods
for which, the price or prices at which, and the terms and conditions upon
which, such Junior Subordinated Debt Securities shall be redeemed or
purchased, in whole or part, pursuant to such obligation; (ix) any applicable
United States Federal income tax consequences, including whether and under
what circumstances the Company will pay additional amounts on the Junior
Subordinated Debt Securities held by a person who is not a U.S. person in
respect of any tax, assessment or governmental charge withheld or deducted
and, if so, whether the Company will have the option to redeem such Junior
Subordinated Debt Securities rather than pay such additional amounts; (x) the
form of such Junior Subordinated Debt Securities; (xi) if other than
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denominations of $25 or any integral multiple thereof, the denominations in
which such Junior Subordinated Debt Securities shall be issuable; (xii) any
and all other terms with respect to such series, including any modification
of or additions to the events of default or covenants provided for with
respect to the Junior Subordinated Debt Securities, and any terms which may
be required by or advisable under applicable laws or regulations not
inconsistent with the Indenture; and (xiii) whether such Junior Subordinated
Debt Securities are issuable as a global security, and in such case, the
identity of the depositary. (Section 2.01)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Junior Subordinated Debentures will be issued in United States dollars in
fully registered form without coupons in denominations of $25 or integral
multiples thereof. Junior Subordinated Debt Securities may be presented for
exchange and Junior Subordinated Debt Securities in registered form may be
presented for transfer in the manner, at the places and subject to the
restrictions set forth in the Junior Subordinated Debt Securities and the
Prospectus Supplement. Such services will be provided without charge, other
than any tax or other governmental charge payable in connection therewith,
but subject to the limitations provided in the Indenture. Junior Subordinated
Debt Securities in bearer form and the coupons, if any, appertaining thereto
will be transferable by delivery.
Junior Subordinated Debt Securities may bear interest at a fixed rate or a
floating rate. Junior Subordinated Debt Securities bearing no interest or
interest at a rate that at the time of issuance is below the prevailing
market rate will be sold at a discount below their stated principal amount.
Special United States Federal income tax considerations applicable to any
such discounted Junior Subordinated Debt Securities or to certain Junior
Subordinated Debt Securities issued at par which are treated as having been
issued at a discount for United States Federal income tax purposes will be
described in the relevant Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY APPLICABLE TO THE JUNIOR SUBORDINATED DEBT
SECURITIES
If Junior Subordinated Debt Securities are issued to a DLJ Trust in
connection with the issuance of Trust Securities by such DLJ Trust, the
Company will covenant in the Indenture that, so long as the Preferred
Securities issued by the applicable DLJ Trust remain outstanding, the Company
will not declare or pay any dividends on, or redeem, purchase, acquire or
make a distribution or liquidation payment with respect to, any of its common
stock or preferred stock or make any guarantee payment with respect thereto
if at such time (i) the Company shall be in default with respect to its
Guarantee Payments or other payment obligations under the related Preferred
Securities Guarantee, (ii) there shall have occurred any Indenture Event of
Default with respect to the Junior Subordinated Debt Securities or (iii) in
the event that Junior Subordinated Debt Securities are issued to a DLJ Trust
in connection with the issuance of Trust Securities by such DLJ Trust, the
Company shall have given notice of its election to defer payments of interest
on such Junior Subordinated Debt Securities by extending the interest payment
period as provided in the terms of such Junior Subordinated Debt Securities
and such period, or any extension thereof, is continuing; provided that (x)
the Company will be permitted to pay accrued dividends (and cash in lieu of
fractional shares) upon the conversion of any Preferred Stock of the Company
as may be outstanding from time to time, in each case in accordance with the
terms of such stock and (y) the foregoing will not apply to any stock
dividends paid by the Company. In addition, if Junior Subordinated Debt
Securities are issued to a DLJ Trust in connection with the issuance of Trust
Securities by such DLJ Trust, for so long as the Preferred Securities issued
by the applicable DLJ Trust remain outstanding, the Company has agreed (i) to
remain the sole direct or indirect owner of all of the outstanding Common
Securities issued by the applicable DLJ Trust and not to cause or permit the
Common Securities to be transferred except to the extent permitted by the
related Declaration; provided that any permitted successor of the Company
under the Indenture may succeed to the Company's ownership of the Common
Securities issued by the applicable DLJ Trust, (ii) to comply fully with all
of its obligations and agreements contained in the related Declaration and
(iii) not to take any action which would cause the applicable DLJ Trust to
cease to be treated as a grantor trust for United States Federal income tax
purposes, except in connection with a distribution of Junior Subordinated
Debt Securities.
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SUBORDINATION
The Indenture provides that the Junior Subordinated Debt Securities are
subordinate and junior in right of payment to all Senior Indebtedness of the
Company. In the event (a) of any insolvency or bankruptcy proceedings, any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or its property or any proceeding for voluntary
liquidation, dissolution or other winding up of the Company or any execution
sale, or (b) that Junior Subordinated Debt Securities of any series are
declared due and payable before their expressed maturity because of the
occurrence of an Indenture Event of Default pursuant to Section 6.01 of the
Indenture (under circumstances other than as set forth in clause (a) above),
then the holders of all Senior Indebtedness shall first be entitled to
receive payment of the full amount due thereon in money, before the holders
of any of the Junior Subordinated Debt Securities are entitled to receive
payment on account of the principal of, or interest, on the indebtedness
evidenced by such Junior Subordinated Debt Securities. In the event and
during the continuation of any default in payment of any Senior Indebtedness
or if any event of default shall exist under any Senior Indebtedness, as
"event of default" is defined therein or in the agreement under which the
same is outstanding, no payment of the principal, or premium, if any, or
interest, on the Junior Subordinated Debt Securities shall be made. (Section
14.02) If this Prospectus is being delivered in connection with a series of
Junior Subordinated Debt Securities, the accompanying Prospectus Supplement
will set forth the approximate amount of Senior Indebtedness outstanding as
of the end of the most recent fiscal quarter.
The term "Senior Indebtedness" shall mean the principal of and premium, if
any, and interest on (a) all indebtedness of the Company, whether outstanding
on the date of the Indenture or thereafter created, (i) for money borrowed by
the Company (including, without limitation, indebtedness issued or to be
issued pursuant to the Indenture between DLJ and The Bank of New York as
Trustee providing for the issuance of subordinated debt securities by the
Company), (ii) for money borrowed by, or obligations of, others and either
assumed or guaranteed, directly or indirectly, by the Company, (iii) in
respect of letters of credit and acceptances issued or made by banks, or (iv)
constituting purchase money indebtedness, or indebtedness secured by property
included in the property, plant and equipment accounts of the Company at the
time of the acquisition of such property by the Company for the payment of
which the Company is directly liable, and (b) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements
to, any such indebtedness. As used in the preceding sentence the term
"purchase money indebtedness" means indebtedness evidenced by a note,
debenture, bond or other instrument (whether or not secured by any lien or
other security interest) issued or assumed as all or a part of the
consideration for the acquisition of property, whether by purchase, merger,
consolidation or otherwise, unless by its terms such indebtedness is
subordinate to other indebtedness of the Company. Notwithstanding anything to
the contrary in the Indenture or the Junior Subordinated Debt Securities,
Senior Indebtedness shall not include (i) any indebtedness of the Company
which, by its terms or the terms of the instrument creating or evidencing it,
is subordinate in right of payment to or pari passu with the Junior
Subordinated Debt Securities, as the case may be, and in particular, the
Junior Subordinated Debt Securities shall rank pari passu with respect to all
other debt securities and guarantees in respect thereof issued to any other
trusts, partnerships or other entity affiliated with the Company which is a
financing vehicle of the Company in connection with the issuance of preferred
securities by such financing vehicle, or (ii) any indebtedness of the Company
to a subsidiary of the Company. (Section 1.01) The Subordinated Indenture
does not contain any limitation on the amount of Senior Indebtedness that can
be incurred by the Company.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Indenture Event
of Default" with respect to each series of Junior Subordinated Debt
Securities:
(a) failure for 30 days to pay interest on the Junior Subordinated Debt
Securities of such series when due; provided that a valid extension of the
interest payment period by the Company shall not constitute a default in
the payment of interest for this purpose;
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(b) failure to pay principal of or premium, if any, on the Junior
Subordinated Debt Securities of such series when due whether at maturity,
upon redemption, by declaration or otherwise;
(c) failure to observe or perform any other covenant contained in the
Indenture with respect to such series for 90 days after written notice to
the Company from the Indenture Trustee or the holders of at least 25% in
principal amount of the outstanding Junior Subordinated Debt Securities of
such series; or
(d) certain events in bankruptcy, insolvency or reorganization of the
Company.
In each and every such case, unless the principal of all the Junior
Subordinated Debt Securities of that series shall have already become due and
payable, either the Indenture Trustee or the holders of not less than 25% in
aggregate principal amount of the Junior Subordinated Debt Securities of that
series then outstanding, by notice in writing to the Company (and to the
Indenture Trustee if given by such holders), may declare the principal of all
the Junior Subordinated Debt Securities of that series to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable. (Section 6.01)
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of that series have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee. (Section 6.06) The Indenture Trustee or
the holders of not less than 25% in aggregate outstanding principal amount of
the Junior Subordinated Debt Securities of that series may declare the
principal due and payable immediately upon an Indenture Event of Default with
respect to such series, but the holders of a majority in aggregate
outstanding principal amount of Junior Subordinated Debt Securities of such
series may annul such declaration and waive the default if the default has
been cured and a sum sufficient to pay all matured installments of interest
and principal otherwise than by acceleration and any premium has been
deposited with the Indenture Trustee. (Sections 6.01 and 6.06)
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of that series may, on behalf of the
holders of all the Junior Subordinated Debt Securities of that series, waive
any past default, except a default in the payment of principal, premium, if
any, or interest (unless such default has been cured and a sum sufficient to
pay all matured installments of interest and principal otherwise than by
acceleration and any premium has been deposited with the Indenture Trustee)
or a call for redemption of Junior Subordinated Debt Securities. (Section
6.06) The Company is required to file annually with the Indenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants under the Indenture. (Section 5.03)
If Junior Subordinated Debt Securities are issued to a DLJ Trust in
connection with the issuance of Trust Securities of such DLJ Trust, then
under the applicable Declaration an Indenture Event of Default with respect
to such series of Junior Subordinated Debt Securities will constitute a
Declaration Event of Default.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the outstanding Junior Subordinated Debt Securities of
each series affected, to modify the Indenture or any supplemental indenture
affecting the rights of the holders of such Junior Subordinated Debt
Securities; provided that no such modification may, without the consent of
the holder of each outstanding Junior Subordinated Debt Security affected
thereby, (i) extend the fixed maturity of any Junior Subordinated Debt
Securities of any series, reduce the principal amount thereof, reduce the
rate or extend the time of payment of interest thereon, reduce any premium
payable upon the redemption thereof, without the consent of the holder of
each Junior Subordinated Debt Security so affected or (ii) reduce the
percentage of Junior Subordinated Debt Securities, the holders of which are
required to consent to any such modification, without the consent of the
holders of each Junior Subordinated Debt Security then outstanding and
affected thereby. (Section 9.02)
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BOOK-ENTRY AND SETTLEMENT
If any Junior Subordinated Debt Securities of a series are represented by
one or more global securities (each, a "Global Security"), the applicable
Prospectus Supplement will describe the circumstances, if any, under which
beneficial owners of interests in any such Global Security may exchange such
interests for Junior Subordinated Debt Securities of such series and of like
tenor and principal amount in any authorized form and denomination. Principal
of and any premium and interest on a Global Security will be payable in the
manner described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Junior Subordinated Debt Securities to be represented
by a Global Security will be described in the applicable Prospectus
Supplement.
CONSOLIDATION, MERGER AND SALE
The Indenture will provide that the Company may not consolidate with or
merge into any other person or transfer or lease its properties and assets
substantially as an entirety to any person and may not permit any person to
merge into or consolidate with the Company unless (i) either the Company will
be the resulting or surviving entity or any successor or purchaser is a
corporation organized under the laws of the United States of America, any
State or the District of Columbia, and any such successor or purchaser
expressly assumes the Company's obligations under the Indenture and (ii)
immediately after giving effect to the transaction no Event of Default shall
have occurred and be continuing. (Section 10.01)
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from any
and all obligations in respect of the Junior Subordinated Debt Securities of
a series (except in each case for certain obligations to register the
transfer or exchange of such Junior Subordinated Debt Securities, replace
stolen, lost or mutilated Junior Subordinated Debt Securities of that series,
maintain paying agencies and hold moneys for payment in trust) if (i) the
Company irrevocably deposits with the Indenture Trustee cash or U.S.
Government Obligations, as trust funds in an amount certified to be
sufficient to pay at maturity (or upon redemption) the principal of, premium,
if any, and interest on all outstanding Junior Subordinated Debt Securities
of such series; (ii) such deposit will not result in a breach or violation
of, or constitute a default under, any agreement or instrument to which the
Company is a party or by which it is bound; (iii) the Company delivers to the
Indenture Trustee an opinion of counsel to the effect that the holders of the
Junior Subordinated Debt Securities of such series will not recognize income,
gain or loss for United States Federal income tax purposes as a result of
such defeasance and that defeasance will not otherwise alter holders' United
States Federal income tax treatment of principal, premium and interest
payments on such Junior Subordinated Debt Securities of such series (such
opinion must be based on a ruling of the Internal Revenue Service or a change
in United States Federal income tax law occurring after the date of such
Indenture, since such a result would not occur under current tax law); (iv)
the Company has delivered to the Indenture Trustee an Officer's Certificate
and an opinion of counsel, each stating that all conditions precedent
provided for relating to the defeasance contemplated by such provision have
been complied with; and (v) no event or condition shall exist that, pursuant
to the subordination provisions applicable to such series, would prevent the
Company from making payments of principal of, premium, if any, and interest
on the Junior Subordinated Debt Securities of such series at the date of the
irrevocable deposit referred to above. (Section 11.01)
GOVERNING LAW
The Indenture and the Junior Subordinated Debt Securities will be governed
by the laws of the State of New York. (Section 13.05)
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default,
shall exercise the same degree of care as a prudent individual
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would exercise in the conduct of his or her own affairs. (Section 7.01)
Subject to such provision, the Indenture Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of
any holder of Junior Subordinated Debt Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities that
might be incurred thereby. (Section 7.02) The Indenture Trustee is not
required to expend or risk its own funds or otherwise incur personal
financial liability in the performance of its duties if the Trustee
reasonably believes that repayment or adequate indemnity is not reasonably
assured to it. (Section 7.01)
The Company and its subsidiaries maintain ordinary banking and trust
relationships with The Bank of New York and its affiliates.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights
or obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of the Company; provided that, in the event of any such
assignment, the Company will remain jointly and severally liable for all such
obligations. Subject to the foregoing, the Indenture will be binding upon and
inure to the benefit of the parties thereto and their respective successors
and assigns. The Indenture provides that it may not otherwise be assigned by
the parties thereto other than by the Company to a successor or purchaser
pursuant to a consolidation, merger or sale permitted by the Indenture.
(Section 13.11)
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PLAN OF DISTRIBUTION
This Prospectus has been prepared for use by DLJSC in connection with
offers and sales of the Offered Securities in market-making transactions at
negotiated prices related to prevailing market prices at the time of the
sale. DLJSC may act as principal or agent in such transactions. DLJSC has
advised the Company that it currently intends to make a market in the Offered
Securities, but it is not obligated to do so and may discontinue any such
market-making at any time without notice. Accordingly, no assurance can be
given as to the liquidity of, or the trading market for, the Offered
Securities.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement,
certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon by Richards, Layton & Finger, Wilmington. The
validity of the Preferred Securities Guarantees and the Junior Subordinated
Debt Securities and certain other matters will be passed upon by Michael A.
Boyd, Senior Vice President and General Counsel to the Company and Davis Polk
& Wardwell. Mr. Boyd owns 22,466 restricted stock units of the Company and
holds options to purchase 39,772 shares of Common Stock. Davis Polk &
Wardwell from time to time provides legal services to the Company and its
subsidiaries.
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company as of December 31, 1995 and 1994 and for each of the years in the
three-year period ended December 31, 1995 have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated
herein by reference, and upon the authority of said firm as experts in
accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY DONALDSON, LUFKIN & JENRETTE,
INC., DLJ CAPITAL TRUST I OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF DONALDSON, LUFKIN & JENRETTE, INC. OR
DLJ CAPITAL TRUST I SINCE THE DATE HEREOF OR THEREOF. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY PREFERRED SECURITIES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Risk Factors ............................... S-4
Selected Consolidated Financial Data ...... S-8
The Company ................................ S-11
DLJ Capital Trust I ........................ S-13
Capitalization of the Company .............. S-14
Accounting Treatment ....................... S-15
Use of Proceeds ............................ S-15
Description of the Preferred Securities ... S-16
Description of the Junior Subordinated
Debentures ................................ S-27
Relationship Between the Preferred
Securities, the Junior Subordinated
Debentures and the Preferred Securities
Guarantee ................................. S-31
Taxation ................................... S-33
Plan of Distribution ....................... S-36
PROSPECTUS
Available Information ...................... 2
Incorporation of Certain Documents by
Reference ................................. 2
Use of Proceeds ............................ 3
Ratios of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and
Preferred Stock Dividends ................. 3
The Company ................................ 4
The DLJ Trusts ............................. 6
Description of the Preferred Securities ... 10
Description of the Preferred Securities
Guarantees ................................ 11
Description of the Junior Subordinated
Debt Securities ........................... 14
Plan of Distribution ....................... 20
Legal Matters .............................. 20
Experts .................................... 20
</TABLE>
7,000,000 PREFERRED SECURITIES
DLJ
CAPITAL TRUST I
8.42% PREFERRED TRUST SECURITIES
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
DONALDSON, LUFKIN & JENRETTE, INC.
----------------
PROSPECTUS SUPPLEMENT
----------------
AUGUST 22, 1996
