<PAGE>
PROSPECTUS DATED AUGUST 15, 1996 PRICING SUPPLEMENT NO. 3 TO
PROSPECTUS SUPPLEMENT REGISTRATION STATEMENT NO. 333-07657
DATED APRIL 8, 1997 JUNE 19, 1997
RULE 424(b)(3)
Donaldson, Lufkin & Jenrette, Inc.
MEDIUM-TERM NOTES
Due Nine Months or More from Date of Issue
The Medium-Term Notes, as further described below and in the Prospectus
Supplement under Description Notes, will bear interest from the date of
issuance until the principal amount thereof is paid or made available for
payment at the rate set forth below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Principal Amount: $70,000,000 Conversion Date: June 30, 1999
Purchase Price: 99.775% Interest Rate: 3 Mos Libor + 20 b.p.
Settlement Date Day Count: ACT/360
(Original Issue Date): June 30, 1997
Specified Currency: US Dollars Interest Payment Dates: Quarterly - 15th of
Mar, June, Sept, Dec
Authorized Denomination: $1,000 First Payment: Sept 15, 1999
Maturity Date: June 30, 2000 Optional Repayment Date: Non-Call/Life
Interest Rate: 6.700% Initial Redemption Date: N / A
Day Count: 30/360 Initial Redemption N / A
Percentage:
Interest Payment Dates: Semi-annually Annual Redemption N / A
June 30, Dec 30 Percentage Reduction:
First Payment: 12/30/97 Book Entry Note or B / E
Certificated Note:
Optional Conversion: Issuers Option Total Amount of OID: $157,500
Notice Date: June 23, 1999 CUSIP: 25766CAD6
</TABLE>
Capitalized terms not defined above have the meanings given to such terms in
the accompanying Prospectus Supplement.
DONALDSON, LUFKIN & JENRETTE, INC.
SECURITIES CORPORATION
<PAGE>
PROSPECTUS DATED AUGUST 15, 1996 PRICING SUPPLEMENT NO. 2 TO
PROSPECTUS SUPPLEMENT REGISTRATION STATEMENT NO. 333-07657
DATED APRIL 8, 1997 JUNE 11, 1997
RULE 424(b)(3)
Donaldson, Lufkin & Jenrette, Inc.
MEDIUM-TERM NOTES
Due Nine Months or More from Date of Issue
The Medium-Term Notes, as further described below and in the Prospectus
Supplement under Description Notes, will bear interest from the date of
issuance until the principal amount thereof is paid or made available for
payment at the rate set forth below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Principal Amount: $10,000,000 Optional Repayment Date: Non-Call/Life
Purchase Price: 99.864% Initial Redemption Date: N/A
Settlement Date Initial Redemption
(Original Issue Date): June 18 ,1997 Percentage: N/A
Specified Currency: US Dollars Annual Redemption
Percentage Reduction: N/A
Authorized Denomination: $1,000 Book Entry Note or
Certificated Note: B/E
Maturity Date: June 19, 2002
Total Amount of OID: $13,600
Interest Rate: 6.850%
CUSIP: 25766CAC8
Interest Payment Date(s): Semi-annually
June 19, Dec 19
First Pmt: 12/19/97
</TABLE>
Capitalized terms not defined above have the meanings given to such terms in
the accompanying Prospectus Supplement.
DONALDSON, LUFKIN & JENRETTE, INC.
SECURITIES CORPORATION
<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration File No.: 333-07657
PROSPECTUS SUPPLEMENT
APRIL 8, 1997
(TO PROSPECTUS DATED AUGUST 15, 1996)
$300,000,000
DONALDSON, LUFKIN & JENRETTE, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
Donaldson, Lufkin & Jenrette, Inc. (the "Company") may from time to time
offer its Medium-Term Notes (the "Notes"), in an aggregate principal amount
(or in the case of Notes issued at a discount from the principal amount, an
aggregate initial offering price) of up to $300,000,000, or the equivalent
thereof in one or more other currencies, currency units or composite
currencies, subject to reduction as a result of the sale of certain other
Debt Securities and Preferred Stock. See "Plan of Distribution." Unless
otherwise indicated in the applicable Pricing Supplement, the interest rate
on each Note will be either a fixed rate established by the Company at the
date of issue of such Note, which may be zero in the case of certain Original
Issue Discount Notes (as defined herein), or a floating rate as set forth
therein and specified in the applicable Pricing Supplement. Notes may also be
issued as otherwise described under "Description of Notes."
The interest rate or rates and/or interest rate formula or formulae, if
any, issue price, stated maturity, and other variable terms of the Notes will
be established by the Company prior to the date of issuance of such Notes and
will be specified in the applicable Pricing Supplement. Interest rates and
interest rate formulae are subject to change by the Company, but no such
change will affect any Note which the Company has already issued or has
agreed to issue. Original Issue Discount Notes may provide that holders of
such Notes will not receive periodic payments of interest. See "Description
of Notes--Original Issue Discount Notes." Each Note will mature on a day nine
months or more from the date of issue, as set forth in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
the Notes may not be redeemed by the Company or repaid by the Company at the
option of the holders prior to maturity. Notes denominated in U.S. dollars
will be issued in denominations of $1,000 or any amount in excess thereof
which is an integral multiple of $1,000. The authorized denominations of
Notes not denominated in U.S. dollars and any terms relating to such Notes
will be set forth in the applicable Pricing Supplement.
Each Note will be issued only in fully registered form and will be
represented either by a global security registered in the name of a nominee
of The Depository Trust Company, as Depositary (a "Book-Entry Note"), or by a
certificate issued in definitive form (a "Certificated Note"), as set forth
in the applicable Pricing Supplement. Beneficial interests in global
securities representing Book-Entry Notes will be shown on, and transfer
thereof will be effected through, the records maintained by the Depositary
(with respect to participants' interests) and its participants. Book-Entry
Notes will not be issuable as Certificated Notes except in limited
circumstances. See "Description of Debt Securities--Book-Entry System" in the
accompanying Prospectus.
SEE "FOREIGN CURRENCY RISKS" BEGINNING ON PAGE S-22 HEREOF FOR CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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, ANY PRICING SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus Supplement has been prepared for use by Donaldson, Lufkin
& Jenrette Securities Corporation ("DLJSC") in connection with offers and
sales of the Notes 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 Notes; 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 Notes. DLJSC may act as
principal or agent in such transactions. See "Plan of Distribution" herein.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE DISTRIBUTION OF THE NOTES MAY ENGAGE
IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF
THE NOTES OR OTHER DEBT SECURITIES. SPECIFICALLY, THE AGENTS MAY OVERALLOT IN
CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, NOTES IN THE
OPEN MARKET.
References herein to "U.S. dollars" or "U.S. $" or "$" are to the lawful
currency of the United States of America.
S-2
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1996, previously filed by the Company with the Commission, is incorporated by
reference in this Prospectus.
All documents filed by the Company after the date of this Prospectus
Supplement pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), prior to the
termination of the offering of the Notes offered hereby, shall be deemed to
be incorporated herein by reference and to be a part hereof from the date of
filing 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 the Prospectus and this accompanying
Prospectus Supplement 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 the Prospectus and this
accompanying Prospectus Supplement.
The Company will provide without charge to each person to whom a copy of
the Prospectus and this accompanying Prospectus Supplement 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 the
Prospectus and this accompanying Prospectus Supplement (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).
S-3
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set
forth in the Prospectus, to which description reference is hereby made.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will have the terms described below, except that references to interest
payments and interest-related information do not apply to certain Original
Issue Discount Notes. See "--Original Issue Discount Notes."
The Notes will be issued under an Indenture dated as of October 25, 1995
(the "Indenture") between the Company and The Bank of New York, as trustee
(the "Trustee"). The following summaries of certain provisions of the
Indenture do not purport to be complete, and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Indenture, including the definitions therein of certain terms.
The Notes will be direct, unsecured and unsubordinated obligations of the
Company. Except as described under "Description of Debt Securities--Negative
Pledge" in the accompanying Prospectus, the Notes will not limit other
indebtedness or securities which may be incurred or issued by the Company or
any of its subsidiaries or contain financial or similar restrictions on the
Company or any of its subsidiaries. The operations of the Company are
conducted through its subsidiaries, and therefore, the Company is dependent
upon the earnings and cash flow of its subsidiaries to meet its obligations,
including obligations under the Notes. The Notes will be effectively
subordinated to all indebtedness of the Company's subsidiaries. The Company's
rights and the rights of its creditors, including holders of Notes, to
participate in the distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization will be subject to prior claims of
such subsidiary's creditors, including trade creditors, except to the extent
the Company may itself be a creditor with reorganized claims against such
subsidiary.
This Prospectus Supplement and any Pricing Supplement, may be used in
connection with the offer and sale from time to time of Notes in an aggregate
initial public offering price of up to U.S. $300,000,000 or the equivalent
thereof in other currencies, currency units or composite currencies (provided
that, with respect to Original Issue Discount Notes, the initial offering
price of such Notes shall be used in calculating the aggregate principal
amount of Notes offered hereunder). The aggregate principal amount of Notes
authorized to be issued hereunder may be increased by the Company from time
to time. The aggregate principal amount of Notes authorized to be issued
under this Prospectus Supplement is subject to reduction as a result of the
sale by the Company after the date of this Prospectus Supplement of other
issues of Debt Securities and Preferred Stock (as defined in the Prospectus)
from time to time as described in the accompanying Prospectus. See "Plan of
Distribution" herein and in the accompanying Prospectus.
The Pricing Supplement relating to a Note will describe the following
terms: (i) the currency, currency unit or composite currency in which such
Note is denominated (the "Specified Currency") and, if other than the
Specified Currency, the currency, currency unit or composite currency in
which payments of principal and interest on such Note will be made (and, if
the Specified Currency is other than U.S. dollars, certain other terms
relating to such Note (a "Foreign Currency Note") and such Specified
Currency); (ii) whether such Note bears a fixed rate of interest (a "Fixed
Rate Note") or bears a floating rate of interest (a "Floating Rate Note")
(including whether such Note is a Regular Floating Rate Note, a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note (each as defined
below)); (iii) the price at which such Note will be issued (the "Issue
Price"); (iv) the date on which such Note will be issued (the "Original Issue
Date"); (v) the date on which such Note will mature; (vi) if such Note is a
Fixed Rate Note, the rate per annum at which such Note will bear interest, if
any, and whether the maturity thereof is extendible; (vii) if such Note is a
Floating Rate Note, the Interest Rate Basis, the Initial Interest Rate, the
Interest Payment Dates, the Index Maturity, the Spread and/or Spread
Multiplier, if any (each as defined below), and any other terms relating to
the particular method of calculating the interest rate for such Note; (viii)
if such Note is an Indexed Note (as defined below), the terms relating to the
particular Note; (ix) if such Note is a Dual Currency Note (as defined below)
the terms relating to the particular
S-4
<PAGE>
Note; (x) if such Note is an Amortizing Note (as defined below), the
amortization schedule and any other terms relating to the particular Note;
(xi) whether such Note is an Original Issue Discount Note; (xii) whether such
Note may be redeemed at the option of the Company, or repaid at the option of
the holder, prior to its stated maturity as described under "--Optional
Redemption" and "--Repayment at the Noteholders' Option; Repurchase" below
and, if so, the provisions relating to such redemption or repayment,
including, in the case of any Original Issue Discount Notes, the information
necessary to determine the amount due upon redemption or repayment; (xiii)
any relevant tax consequences associated with the terms of the Notes which
have not been described under "United States Tax Considerations" below; and
(xiv) any other terms of such Note not inconsistent with the provisions of
the Indenture.
Subject to such additional restrictions as are described under "Special
Provisions Relating to Foreign Currency Notes," each Note will mature on a
day nine months or more from the date of issue, as specified in the
applicable Pricing Supplement, as selected by the initial purchaser and
agreed to by the Company. In the event that such maturity date of any Note or
any date fixed for redemption or repayment of any Note (collectively, the
"Maturity Date") is not a Business Day (as defined below), principal and
interest payable at maturity or upon such redemption or repayment will be
paid on the next succeeding Business Day with the same effect as if such
Business Day were the Maturity Date. No interest shall accrue for the period
from and after the Maturity Date to such next succeeding Business Day. Except
as may be provided in the applicable Pricing Supplement and except for
Indexed Notes, all Notes will mature at par.
The Notes will be offered on a continuing basis, and will be issued in
denominations of $1,000 and any integral multiples of $1,000 in excess
thereof, unless otherwise specified in the applicable Pricing Supplement;
provided, however, that Notes in Specified Currencies other than U.S. dollars
shall be issued in such denominations as are set forth in the applicable
Pricing Supplement. See "Special Provisions Relating to Foreign Currency
Notes."
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of the
Notes purchased in any single transaction.
Notes will be issued in the form of (i) one or more fully registered
global securities (each, a "Global Security") deposited with or on behalf of
The Depository Trust Company ("DTC"), as Depositary, and registered in the
name of a nominee of DTC (a "Book-Entry Note") or (ii) a certificate in
definitive form (a "Certificated Note"), in each case as specified in the
applicable Pricing Supplement. See "Description of Debt Securities--Book
Entry System" in the Prospectus. Certificated Notes will not be exchangeable
for Book-Entry Notes and, except under the circumstances described in the
Prospectus under the caption "Description of Debt Securities--Book Entry
System," Book-Entry Notes will not be exchangeable for Certificated Notes and
will not otherwise be issuable as Certificated Notes.
Principal of, premium, if any, and interest, if any, on any Notes payable
in U.S. dollars will be payable in the manner described herein, the transfer
of the Notes will be registrable, and Notes will be exchangeable for Notes
bearing identical terms and provisions at the office of The Bank of New York,
the Company's paying agent (the "Paying Agent," which term includes any
successor paying agent appointed by the Company) and registrar for the Notes
(the "Registrar," which term includes any successor registrar), currently
located at 101 Barclay Street, Floor 21W, New York, New York 10286; provided,
that payment of interest, other than interest at maturity or upon redemption
or repayment, may be made by check mailed to the address of the person
entitled thereto as it appears on the security register at the close of
business on the Regular Record Date (as defined herein) corresponding to the
relevant Interest Payment Date (as defined herein); provided, further, that
Book-Entry Notes will be exchangeable only in the manner and to the extent
set forth under "Description of Debt Securities--Book-Entry System" in the
accompanying Prospectus. Notwithstanding the foregoing, (a) a depositary, as
holder of Book-Entry Notes, shall be entitled to receive payments of interest
by wire transfer of immediately available funds and (b) a holder of
$5,000,000 (or, if the Notes are denominated in a Specified Currency other
than U.S. dollars, the equivalent thereof in such Specified Currency) or more
in aggregate principal amount of Certificated Notes having identical terms
and provisions shall be entitled to receive payments of interest, other than
interest due at maturity or upon redemption or repayment, if any, by wire
transfer
S-5
<PAGE>
of immediately available funds into an account maintained by the holder in
the United States, if appropriate wire transfer instructions have been
received by the Paying Agent not less than ten days prior to the applicable
Interest Payment Date. Certain additional payment provisions with respect to
Foreign Currency Notes are described under "Special Provisions Relating to
Foreign Currency Notes" below.
The principal and interest payable in U.S. dollars on a Note at maturity
or upon redemption or repayment will be paid by wire transfer of immediately
available funds against presentation of the Note at the office of the Paying
Agent, except as provided below under "--Replacement at the Noteholders'
Option; Repurchase" and unless otherwise provided in the applicable Pricing
Supplement.
OPTIONAL REDEMPTION
Unless otherwise provided in the applicable Pricing Supplement, the Notes
cannot be redeemed prior to maturity by the Company and will not be subject
to any sinking fund. The Notes will be redeemable at the option of the
Company prior to the maturity date thereof only if an "Initial Redemption
Date" is specified in the applicable Pricing Supplement. If so specified, the
Notes will be subject to redemption at the option of the Company on any date
on and after the applicable Initial Redemption Date in whole or from time to
time in part in increments of $1,000 or such other minimum denomination
specified in such Pricing Supplement (provided that any remaining principal
amount thereof shall be at least $1,000 or such minimum denomination), at the
applicable Redemption Price (as defined herein), together with unpaid
interest accrued to the date of redemption, on notice given not more than 60
nor less than 30 calendar days prior to the date of redemption and in
accordance with the provisions of the Indenture. "Redemption Price" means,
with respect to any Note, an amount equal to the Initial Redemption
Percentage specified in the applicable Pricing Supplement (as adjusted by the
Annual Redemption Percentage Reduction specified therein, if applicable)
multiplied by the unpaid principal amount to be redeemed. The Initial
Redemption Percentage, if any, applicable to a Note shall decline on each
anniversary of the Initial Redemption Date by an amount equal to the
applicable Annual Redemption Percentage Reduction, if any, until the
Redemption Price is equal to 100% of the unpaid principal amount to be
redeemed. The Redemption Price of Original Issue Discount Notes is described
below under "--Original Issue Discount Notes."
Foreign Currency Notes may be subject to different restrictions on
redemption. See "Special Provisions Relating to Foreign Currency
Notes--Minimum Denominations, Restrictions on Maturities, Repayment and
Redemption."
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
The Notes will be repayable by the Company at the option of the holders
thereof prior to maturity only if one or more "Optional Repayment Date" is
specified in the applicable Pricing Supplement. If so specified, the Notes
will be subject to repayment at the option of the holders thereof on any
Optional Repayment Date in whole or in part from time to time in increments
of $1,000 or such other minimum denomination specified in the applicable
Pricing Supplement (provided that any remaining principal amount thereof
shall be at least $1,000 or such other minimum denomination), at a repayment
price equal to 100% of the unpaid principal amount to be repaid, together
with unpaid interest accrued to the date of repayment. For any Note to be
repaid, such Note must be received, together with the form thereon entitled
"Option to Elect Repayment" duly completed, by the Trustee at its corporate
trust office (or such other address of which the Company shall from time to
time notify the holders of Notes) not more than 60 nor less than 30 calendar
days prior to the date of repayment. Exercise of such repayment option by the
holder will be irrevocable. The repayment price of Original Issue Discount
Notes is described below under "--Original Issue Discount Notes."
Notwithstanding the foregoing, the Company will comply with Section 14(e)
under the Exchange Act, to the extent applicable, and any other tender offer
rules under the Exchange Act which may then be applicable, in connection with
any obligation of the Company to purchase Notes at the option of the holders
thereof as described herein.
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, beneficial owners of
Global Securities that desire to have all or any
S-6
<PAGE>
portion of the Book-Entry Notes represented by such Global Securities repaid
must direct the participant of DTC through which they own their interest
(each, a "Participant") to direct DTC to exercise the repayment option on
their behalf by delivering the related Global Security and duly completed
election form to the Trustee as aforesaid. In order to ensure that such
Global Security and election form are received by the Trustee on a particular
day, the applicable beneficial owner must so direct the Participant through
which it owns its interest before such Participant's deadline for accepting
instructions for that day. Different firms may have different deadlines for
accepting instructions from their customers. Accordingly, such beneficial
owners should consult the Participants through which they own their interest
for the respective deadlines for such Participants. All instructions given to
Participants from beneficial owners of Global Securities relating to the
option to elect repayment shall be irrevocable. In addition, at the time such
instructions are given, each such beneficial owner shall cause the
Participant through which it owns its interest to transfer such beneficial
owner's interest in the Global Security or Securities representing the
related Book-Entry Notes, on DTC's records, to the Trustee. See "Description
of Debt Securities--Book-Entry System" in the accompanying Prospectus.
Foreign Currency Notes may be subject to different restrictions on
repayment. See "Special Provisions Relating to Foreign Currency
Notes--Minimum Denominations, Restrictions on Maturities, Repayment and
Redemption."
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes purchased by the Company may, at its discretion, be held,
resold or surrendered to the Registrar for cancellation.
INTEREST AND INTEREST RATES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest at either (a) a fixed rate or (b) a floating rate
determined by reference to an Interest Rate Basis, which may be adjusted by a
Spread and/or Spread Multiplier (each as defined below). Any Floating Rate
Note may also have either or both of the following: (i) a maximum interest
rate limitation, or ceiling, on the rate at which interest may accrue during
any interest period; and (ii) a minimum interest rate limitation, or floor,
on the rate at which interest may accrue during any interest period. The
applicable Pricing Supplement will designate (a) a fixed rate per annum, in
which case such Notes will be Fixed Rate Notes; or (b) one or more of the
following Interest Rate Bases as applicable to such Notes, in which case such
Notes will be Floating Rate Notes: (i) the CD Rate, in which case such Notes
will be "CD Rate Notes;" (ii) the Commercial Paper Rate, in which case such
Notes will be "Commercial Paper Rate Notes;" (iii) the Federal Funds Rate, in
which case such Notes will be "Federal Funds Rate Notes;" (iv) LIBOR, in
which case such Notes will be "LIBOR Notes;" (v) the Prime Rate, in which
case such Notes will be "Prime Rate Notes;" (vi) the Treasury Rate, in which
case such Notes will be "Treasury Rate Notes;" or (vii) such other interest
rate basis or formula as is set forth in such Pricing Supplement.
Each Note will bear interest from its date of issue or from the most
recent date to which interest on such Note has been paid or duly provided
for, at the annual rate or at a rate determined pursuant to an interest rate
formula, stated therein, until the principal thereof is paid or made
available for payment. Interest will be payable on each Interest Payment Date
(except for certain Original Issue Discount Notes and except for Notes
originally issued between a Regular Record Date and an Interest Payment Date)
and at maturity or on redemption or repayment, if any. Unless otherwise
indicated in the applicable Pricing Supplement, interest payments in respect
of the Notes will equal the amount of interest accrued from and including the
immediately preceding Interest Payment Date in respect of which interest has
been paid or duly made available for payment (or from and including the date
of issue, if no interest has been paid with respect to the applicable Note)
to but excluding the related Interest Payment Date or the Maturity Date, as
the case may be.
Interest will be payable to the person in whose name a Note is registered
at the close of business on the Regular Record Date next preceding the
related Interest Payment date; provided, however, that (i) if the Company
fails to pay such interest on such Interest Payment Date, such defaulted
interest will be paid
S-7
<PAGE>
to the person in whose name such Note is registered at the close of business
on the record date to be established for the payment of defaulted interest
and (ii) interest payable at maturity, redemption or repayment will be
payable to the person to whom principal shall be payable. The first payment
of interest on any Note originally issued between a Regular Record Date and
an Interest Payment Date will be made on the Interest Payment Date following
the next succeeding Regular Record Date to the registered owner on such next
succeeding Regular Record Date. Interest rates and interest rate formulae are
subject to change by the Company from time to time but no such change will
affect any Note theretofore issued or which the Company has agreed to issue.
Unless otherwise indicated in the applicable Pricing Supplement, the Interest
Payment Dates and the Regular Record Dates for Fixed Rate Notes shall be as
described below under "Fixed Rate Notes." The Interest Payment Dates for
Floating Rate Notes shall be as indicated in the applicable Pricing
Supplement and in such Note, and, unless otherwise specified in the
applicable Pricing Supplement, each Regular Record Date for a Floating Rate
Note will be the fifteenth calendar day (whether or not a Business Day) next
preceding each Interest Payment Date (a "Regular Record Date").
FIXED RATE NOTES
Each Fixed Rate Note will bear interest at the annual rate specified
therein and in the applicable Pricing Supplement. Unless otherwise specified
in the applicable Pricing Supplement, the Interest Payment Dates for the
Fixed Rate Notes will be on June 15 and December 15 of each year and the
Regular Record Dates will be the fifteenth calendar day (whether or not a
Business Day) next preceding each Interest Payment Date. Unless otherwise
specified in the applicable Pricing Supplement, interest on Fixed Rate Notes
will be computed and paid on the basis of a 360-day year of twelve 30-day
months. In the event that any Interest Payment Date or Maturity Date for any
Fixed Rate Note is not a Business Day, payment of interest, premium, if any,
or principal otherwise payable on such Fixed Rate Note will be made on the
next succeeding Business Day and no interest on such payment shall accrue for
the period from and after such Interest Payment Date or Maturity Date to such
next succeeding Business Day.
FLOATING RATE NOTES
Unless otherwise specified in an applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. Each applicable Pricing
Supplement will specify certain terms with respect to which such Floating
Rate Note is being delivered, including: whether such Floating Rate Note is a
Regular Floating Rate Note, an Inverse Floating Rate Note or a Floating
Rate/Fixed Rate Note; the Interest Rate Basis or Bases, Initial Interest
Rate, Interest Reset Dates, Interest Reset Period, Regular Record Dates,
Interest Payment Dates, Index Maturity, maximum interest rate and minimum
interest rate, if any, and the Spread and/or Spread Multiplier, if any, and
if one or more of the specified Interest Rate Bases is LIBOR, the Index
Currency, if any, as described below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(a) Unless such Floating Rate Note is designated as a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note, such Floating Rate
Note will be designated a "Regular Floating Rate Note" and, except as
described below or in an applicable Pricing Supplement, will bear interest
at the rate determined by reference to the applicable Interest Rate Basis or
Bases (i) plus or minus the applicable Spread, if any, and/or (ii)
multiplied by the applicable Spread Multiplier, if any. Unless otherwise
specified in the applicable Pricing Supplement, commencing on the Initial
Interest Reset Date, the rate at which interest on such Regular Floating
Rate Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that the interest rate in effect for the period from the
Original Issue Date to the Initial Interest Reset Date will be the Initial
Interest Rate.
(b) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," then, except as described below or in an applicable Pricing
Supplement, such Floating Rate Note will initially bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (i)
plus or minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any. Commencing on the Initial Interest
Reset Date, the rate at which interest on such
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Floating Rate/Fixed Rate Note shall be payable shall be reset as of each
Interest Reset Date; provided, however, that (i) the interest rate in effect
for the period from the Original Issue Date to the Initial Interest Reset
Date will be the Initial Interest Rate; and (ii) the interest rate in effect
commencing on, and including, the Fixed Rate Commencement Date (as defined
in the applicable Pricing Supplement) to the Maturity Date shall be the
Fixed Interest Rate, if such rate is specified in the applicable Pricing
Supplement, or if no such Fixed Interest Rate is so specified and the
Floating Rate/Fixed Rate Note is still outstanding on such day, the interest
rate in effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
(c) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in an applicable Pricing
Supplement, such Floating Rate Note will bear interest equal to the Fixed
Interest Rate specified in the related Pricing Supplement minus the rate
determined by reference to the Interest Rate Basis or Bases (i) plus or
minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any; provided, however, unless otherwise
specified in the applicable Pricing Supplement, the interest rate thereon
will not be less than zero. Commencing on the Initial Interest Reset Date,
the rate at which interest on such Inverse Floating Rate Note is payable
shall be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the Original Issue Date to the
Initial Interest Reset Date will be the Initial Interest Rate.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating
Rate Note shall bear interest in accordance with the terms described in such
Addendum and the applicable Pricing Supplement. See "--Other Provisions,
Addenda" below.
Unless otherwise provided in the applicable Pricing Supplement, each
Interest Rate Basis shall be the rate determined in accordance with the
applicable provisions below. Except as set forth above or in a Pricing
Supplement, the interest rate in effect on each day shall be (a) if such day
is an Interest Reset Date, the interest rate determined on the Interest
Determination Date (as defined below) immediately preceding such Interest
Reset Date or (b) if such day is not an Interest Reset Date, the interest
rate determined on the Interest Determination Date immediately preceding the
next preceding Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to an
"Interest Rate Basis," which may be one or more of (i) the CD Rate, (ii) the
Commercial Paper Rate, (iii) the Federal Funds Rate, (iv) LIBOR, (v) the
Prime Rate, (vi) the Treasury Rate, or (vii) such other Interest Rate Basis
or interest rate formula as may be set in the applicable Pricing Supplement;
provided, however, that with respect to a Floating Rate/Fixed Rate Note, the
interest rate commencing on the Fixed Rate Commencement Date and continuing,
unless otherwise specified in the applicable Pricing Supplement, until the
Maturity Date shall be the Fixed Interest Rate, if such rate is specified in
the applicable Pricing Supplement, or if no such Fixed Interest Rate is so
specified, the interest rate in effect thereon on the day immediately
preceding the Fixed Rate Commencement Date. In addition, if so specified in
the applicable Pricing Supplement, a Floating Rate Note may bear interest
calculated based upon two or more Interest Rate Bases.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating
Rate Note. The "Spread Multiplier" is the percentage of the related Interest
Rate Basis or Bases applicable to such Floating Rate Note by which such
Interest Rate Basis or Bases will be multiplied to determine the applicable
interest rate on such Floating Rate Note. The "Index Maturity" is the period
to maturity of the instrument or obligation with respect to which the
Interest Rate Basis or Bases will be calculated. The Spread, Spread
Multiplier, Index Maturity and other variable terms of the Floating Rate
Notes are subject to change by the Company from time to time, but no such
change will affect any Floating Rate Note previously issued or as to which an
offer has been accepted by the Company.
Each applicable Pricing Supplement will specify whether the rate of
interest on the related Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually, annually or such other specified period
(each, an "Interest Reset Period") and the dates on which such interest rate
will be reset (each,
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an "Interest Reset Date"). Unless otherwise specified in the applicable
Pricing Supplement, the Interest Reset Date will be, in the case of Floating
Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, a Business
Day that occurs in each week as specified in the applicable Pricing
Supplement (with the exception of weekly reset Treasury Rate Notes, which
will reset the Tuesday of each week except as specified below); (iii)
monthly, a Business Day that occurs in each month as specified in the
applicable Pricing Supplement; (iv) quarterly, a Business Day that occurs in
each third month as specified in the applicable Pricing Supplement; (v)
semiannually, a Business Day that occurs in each of two months of each year
as specified in the applicable Pricing Supplement; and (vi) annually, a
Business Day that occurs in one month of each year as specified in the
applicable Pricing Supplement; provided, however, that, with respect to
Floating Rate/Fixed Rate Notes, the fixed rate of interest in effect for the
period from the Fixed Rate Commencement Date until the Maturity Date shall be
the Fixed Interest Rate or the interest rate in effect on the day immediately
preceding the Fixed Rate Commencement Date, as specified in the applicable
Pricing Supplement. If any Interest Reset Date for any Floating Rate Note
would otherwise be a day that is not a Business Day, such Interest Reset Date
will be postponed to the next succeeding day that is a Business Day, except
that in the case of a Floating Rate Note as to which LIBOR is an applicable
Interest Rate Basis, in which case if such Business Day falls in the next
succeeding calendar month, such Interest Reset Date will be the immediately
preceding Business Day. As used herein, "Business Day" means, unless
otherwise specified in the applicable Pricing Supplement, any day that is not
a Saturday or Sunday and that is not a day on which banking institutions are
generally authorized or obligated by law, regulation or executive order to
close in The City of New York and (i) with respect to LIBOR Notes, such day
is also a day on which dealings in U.S. dollars are transacted in the London
Interbank Market (a "London Business Day"), (ii) with respect to Notes
denominated in a Specified Currency other than U.S. dollars or ECUs, such day
is not a day on which banking institutions are generally authorized or
obligated by law, regulation or executive order to close in the principal
financial center of the country of the Specified Currency, or (iii) with
respect to Notes denominated in ECUs, a day that is a non-ECU clearing day as
determined by the ECU Banking Association in Paris.
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period and (ii) a minimum numerical limitation, or
floor, on the rate at which interest may accrue during any interest period.
In addition to any maximum interest rate that may be applicable to any
Floating Rate Note pursuant to the above provisions, the interest rate on
Floating Rate Notes will in no event be higher than the maximum rate
permitted by New York law, as the same may be modified by United States law
of general application.
Except as provided below or in an applicable Pricing Supplement, interest
will be payable in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on a Business Day that occurs in each week or each month
as applicable, as specified in the applicable Pricing Supplement, (ii)
quarterly, on a Business Day that occurs in each third month, as specified in
the applicable Pricing Supplement, (iii) semi-annually, on a Business Day
that occurs in each of two months of each year as specified in the applicable
Pricing Supplement and (iv) annually, on a Business Day that occurs in one
month of each year, as specified in the applicable Pricing Supplement (each,
an "Interest Payment Date") and, in each case, on the Maturity Date. If any
Interest Payment Date for any Floating Rate Note would otherwise be a day
that is not a Business Day, such Interest Payment Date will be the next
succeeding day that is a Business Day and no interest shall accrue for the
period from and after such Interest Payment Date, except that if such Note is
a LIBOR Note and if such Business Day falls in the next succeeding calendar
month, such Interest Payment Date will be the immediately preceding Business
Day. If the Maturity Date of a Floating Rate Note falls on a day that is not
a Business Day, the payment of principal, premium, if any, and interest, if
any, will be made on the next succeeding Business Day, and no interest shall
accrue for the period from and after such Maturity Date.
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All percentages resulting from any calculation on Floating Rate Notes
will be to the nearest one hundred-thousandth of a percentage point, with
five one millionths of a percentage point rounded upwards (e.g., 9.876545%
(or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar
amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day from and including the later of (i) the date of issue and (ii) the last
day to which interest has been paid or duly provided for to and including the
last date for which accrued interest is being calculated as described in the
immediately preceding paragraph. Unless otherwise specified in the applicable
Pricing Supplement, the interest factor for each such day will be computed by
dividing the interest rate applicable to such day by 360, in the case of
Notes for which the Interest Rate Basis is the CD Rate, the Commercial Paper
Rate, the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual
number of days in the year in the case of Notes for which the Interest Rate
Basis is the Treasury Rate. The accrued interest factor for Notes for which
the interest rate may be calculated with reference to two or more Interest
Rate Bases will be calculated in each period by selecting one such Interest
Rate Basis for such period in accordance with the provisions of the
applicable Pricing Supplement.
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date with respect to such Interest Reset Period will be
the rate determined on the "Interest Determination Date." Unless otherwise
specified in the applicable Pricing Supplement, the Interest Determination
Date with respect to the CD Rate, the Commercial Paper Rate, the Federal
Funds Rate and the Prime Rate will be the second Business Day preceding each
Interest Reset Date for the related Note; and the Interest Determination Date
with respect to LIBOR will be the second London Business Day preceding each
Interest Reset Date. With respect to the Treasury Rate, unless otherwise
specified in an applicable Pricing Supplement, the Interest Determination
Date will be the day in the week in which the related Interest Reset Date
falls on which day Treasury Bills (as defined below) are normally auctioned
(Treasury Bills are normally sold at auction on Monday of each week, unless
that day is a legal holiday, in which case the auction is normally held on
the following Tuesday, except that such auction may be held on the preceding
Friday); provided, however, that if an auction is held on the Friday on the
week preceding the related Interest Reset Date, the related Interest
Determination Date will be such preceding Friday; and provided, further, that
if an auction falls on any Interest Reset Date then the related Interest
Reset Date will instead be the first Business Day following such auction.
Unless otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to a Floating Rate Note the interest rate of
which is determined with reference to two or more Interest Rate Bases will be
the latest Business Day which is at least two Business Days prior to each
Interest Reset Date for such Floating Rate Note. Each Interest Rate Basis
will be determined and compared on such date, and the applicable interest
rate will take effect on the related Interest Reset Date, as specified in the
applicable Pricing Supplement.
Unless otherwise provided for in the applicable Pricing Supplement, The
Bank of New York will be the Calculation Agent (the "Calculation Agent,"
which term includes any successor calculation agent appointed by the
Company), and for each Interest Reset Date will determine the interest rate
with respect to any Floating Rate Note as described below. The Calculation
Agent will notify the Company, the Paying Agent and the Trustee of each
determination of the interest rate applicable to any such Floating Rate Note
promptly after such determination is made. The Trustee will, upon the request
of the holder of any Floating Rate Note, provide the interest rate then in
effect and, if determined, the interest rate which will become effective as a
result of a determination made with respect to the most recent Interest
Determination Date relating to such Note. Unless otherwise specified in the
applicable Pricing Supplement, the "Calculation Date," where applicable,
pertaining to any Interest Determination Date will be the earlier of (i) the
tenth calendar day after such Interest Determination Date or, if such day is
not a Business Day, the next succeeding Business Day or (ii) the Business Day
preceding the applicable Interest Payment Date or Maturity Date, as the case
may be.
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Unless otherwise specified in the applicable Pricing Supplement, the
Interest Rate Basis with respect to Floating Rate Notes will be determined by
the Calculation Agent as follows:
CD Rate Notes. CD Rate Notes will bear interest at the interest rate
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any) specified in the CD Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note, the rate on such date for negotiable certificates of deposit having the
Index Maturity designated in the applicable Pricing Supplement as published
by the Board of Governors of the Federal Reserve System in "Statistical
Release H.15(519), Selected Interest Rates," or any successor publication
("H.15(519)") under the heading "CDs (Secondary Market)," or, if not so
published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate
on such Interest Determination Date for negotiable certificates of deposit of
the Index Maturity designated in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 p.m. Quotations for U.S. Government Securities" or
any successor publication (the "Composite Quotations") under the heading
"Certificates of Deposit." If such rate is not yet published in either
H.15(519) or the Composite Quotations by 3:00 p.m., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, the CD
Rate on such Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 a.m., New York City time, on such Interest
Determination Date, for negotiable certificates of deposit of major United
States money market banks with a remaining maturity closest to the Index
Maturity designated in the applicable Pricing Supplement in an amount that is
representative for a single transaction in that market at that time as quoted
by three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent
are not quoting as set forth above, the CD Rate with respect to such Interest
Determination Date shall be the CD Rate as in effect on such Interest
Determination Date.
Commercial Paper Rate Notes. Commercial Paper Rate Notes will bear
interest at the interest rate (calculated with reference to the Commercial
Paper Rate and the Spread and/or Spread Multiplier, if any) specified in the
Commercial Paper Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination
Date relating to a Commercial Paper Note, the Money Market Yield (as defined
below) of the rate on that date for commercial paper having the Index
Maturity designated in the applicable Pricing Supplement, as such rate shall
be published in H.15(519), under the heading "Commercial Paper." In the event
that such rate is not published prior to 3:00 p.m., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, then the
Commercial Paper Rate shall be the Money Market Yield of the rate on such
Interest Determination Date for commercial paper of the specified Index
Maturity as published in Composite Quotations under the heading "Commercial
Paper" (with an Index Maturity of one month or three months being deemed to
be equivalent to an Index Maturity of 30 days or 90 days, respectively). If
by 3:00 p.m., New York City time, on such Calculation Date such rate is not
yet available in either H.15(519) or Composite Quotations, then the
Commercial Paper Rate on such Interest Determination Date shall be calculated
by the Calculation Agent and shall be the Money Market Yield corresponding to
the arithmetic mean of the offered rates as of approximately 11:00 a.m., New
York City time, on such Interest Determination Date for commercial paper of
the specified Index Maturity placed for an industrial issuer whose bond
rating is "AA," or the equivalent, from a nationally recognized rating agency
as quoted by three leading dealers of commercial paper in The City of New
York selected by the Calculation Agent; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting
offered rates as set forth above, the Commercial Paper Rate with respect to
such Interest Determination Date shall be the Commercial Paper Rate in effect
on such Interest Determination Date.
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"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
D x 360
Money Market Yield = ------------- x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the period for which interest is being calculated.
Federal Funds Rate Notes. Federal Funds Rate Notes will bear interest at
the interest rate (calculated with reference to the Federal Funds Rate and
the Spread and/or Spread Multiplier, if any) specified in the Federal Funds
Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date
relating to a Federal Funds Rate Note, the rate on such date for Federal
Funds as published in H.15(519) under the heading "Federal Funds (Effective)"
or, if not so published by 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, the Federal Funds Rate
will be the rate on such Interest Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If
such rate is not published in either H.15(519) or the Composite Quotations by
3:00 p.m., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the Federal Funds Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be
the arithmetic mean of the rates for the last transaction in overnight United
States dollar Federal Funds as of 9:00 a.m., New York City time, on such
Interest Determination Date arranged by three leading brokers of Federal
Funds transactions in The City of New York selected by the Calculation Agent;
provided, however, that if the brokers selected as aforesaid by the
Calculation Agent are not quoting as set forth above, the Federal Funds Rate
with respect to such Interest Determination Date shall be the Federal Funds
Rate in effect on such Interest Determination Date.
LIBOR Notes. LIBOR Notes will bear interest at the interest rate
(calculated with reference to LIBOR and the Spread and/or Spread Multiplier,
if any) specified in the LIBOR Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
for each Interest Reset Date will be determined by the Calculation Agent as
follows:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note, LIBOR will be either: (A) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement or if such Pricing Supplement does not specify
a source for LIBOR, the rate for deposits in the London interbank market in
the Index Currency (as defined below) having the Index Maturity designated
in the applicable Pricing Supplement commencing on the second London
Business Day immediately following such Interest Determination Date that
appears on the Designated LIBOR Page (as defined below) as of 11:00 a.m.,
London time, on such Interest Determination Date, or (B) if "LIBOR Reuters"
is specified in the applicable Pricing Supplement, the arithmetic mean of
the offered rates (unless the specified Designated LIBOR Page by its terms
provides only for a single rate, in which case such single rate shall be
used) for deposits in the London interbank market in the Index Currency
having the Index Maturity designated in the applicable Pricing Supplement
and commencing on the second London Business day immediately following such
Interest Determination Date that appear on the Designated LIBOR Page as of
11:00 a.m., London time, on such Interest Determination Date, if at least
two such offered rates appear (unless, as aforesaid, only a single rate is
required) on such Designated LIBOR Page. If no rate appears on the
Designated LIBOR Page (or, in the case of clause (i)(B) above, if the
Designated LIBOR Page by its terms provides for more than a single rate but
fewer than two offered rates appear on such Page), LIBOR in respect of such
Interest Determination Date will be determined as if the parties had
specified the rate described in clause (ii) below.
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(ii) With respect to an Interest Determination Date relating to a LIBOR
Note to which the last sentence of clause (i) above applies, the Calculation
Agent will request the principal London offices of each of four major
reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity designated in the applicable Pricing Supplement commencing on the
second London Business Day immediately following such Interest Determination
Date to prime banks in the London interbank market at approximately 11:00
a.m., London time on such Interest Determination Date and in a principal
amount that is representative for a single transaction in such Index
Currency in such market at such time. If at least two such quotations are
provided, LIBOR determined on such Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR determined on such Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 a.m. (or such
other time specified in the applicable Pricing Supplement), in the
applicable Principal Financial Center (as defined below), on such Interest
Determination Date for loans made in the Index Currency to leading European
banks having the Index Maturity designated in the applicable Pricing
Supplement commencing on the second London Business Day immediately
following such Interest Determination Date and in a principal amount that is
representative for a single transaction in such Index Currency in such
market at such time by three major banks in such Principal Financial Center
selected by the Calculation Agent; provided, however, that if the banks so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR with respect to such Interest Determination Date will be
LIBOR in effect on such Interest Determination Date.
"Index Currency" means the currency (including currency units and
composite currencies) specified in the applicable Pricing Supplement as the
currency with respect to which LIBOR shall be calculated. If no such currency
is specified in the applicable Pricing Supplement, the Index Currency shall
be U.S. dollars.
"Designated LIBOR Page" means the display on Page 3750 (or such other page
as is specified in the applicable Pricing Supplement) of the Dow Jones
Telerate Service for the purpose of displaying the London interbank offered
rates of major banks for the applicable Index Currency (or such other page as
may replace that page on that service for the purpose of displaying such
rates), unless "LIBOR Reuters" is designated in the applicable Pricing
Supplement, in which case the Designated LIBOR Page shall be the display on
the Reuters Monitor Money Rates Service for the purpose of displaying the
London interbank offered rates of major banks for the applicable Index
Currency.
Unless provided otherwise in the applicable Pricing Supplement, "Principal
Financial Center" will be the capital city of the country of the specified
Index Currency, except that with respect to U.S. dollars and ECUs, the
Principal Financial Center shall be The City of New York and Brussels,
respectively.
Prime Rate Notes. Prime Rate Notes will bear interest at the interest rate
(calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified in the Prime Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set
forth in H.15(519) for such date opposite the caption "Bank Prime Loan." If
such rate is not yet published by 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Prime
Rate for such Interest Determination Date will be the arithmetic mean of the
rates of interest publicly announced by each bank named on the Reuters Screen
NYMF Page (as defined below) as such bank's prime rate or base lending rate
as in effect for such Interest Determination Date as quoted on the Reuters
Screen NYMF Page on such Interest Determination Date, or, if fewer than four
such rates appear on the Reuters Screen NYMF Page for such Interest
Determination Date, the rate shall be the arithmetic mean of the prime rates
quoted on the basis of the actual number of days in the year divided by 360
as of the close of business on such Interest Determination Date by at least
two of the three major money center banks in The City of New York selected by
the Calculation Agent from which quotations are requested. If fewer than two
quotations are provided, the Prime Rate shall be calculated by the
Calculation Agent and shall be
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determined as the arithmetic mean on the basis of the prime rates in The City
of New York by the appropriate number of substitute banks or trust companies
organized and doing business under the laws of the United States, or any
State thereof, in each case having total equity capital of at least $500
million and being subject to supervision or examination by federal or state
authority, selected by the Calculation Agent to quote such rate or rates.
"Reuters Screen NYMF Page" means the display designated as Page "NYMF" on the
Reuters Monitor Money Rates Service (or such other page as may replace the
NYMF Page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
Treasury Rate Notes. Treasury Rate Notes will bear interest at the
interest rate (calculated with reference to the Treasury Rate and the Spread
and/or Spread Multiplier, if any) specified in the Treasury Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date
relating to a Treasury Rate Note, the rate applicable to the most recent
auction of direct obligations of the United States ("Treasury Bills") having
the Index Maturity designated in the applicable Pricing Supplement, as
published in H.15(519) under the heading "Treasury Bills--auction average
(investment)" or, if not so published by 3:00 p.m., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, the
auction average rate on such Interest Determination Date (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States
Department of the Treasury. In the event that the results of the auction of
Treasury Bills having the Index Maturity designated in the applicable Pricing
Supplement are not published or reported as provided above by 3:00 p.m., New
York City time, on such Calculation Date or if no such auction is held in a
particular week, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) calculated using the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City
time, on such Interest Determination Date, of three leading primary United
States government securities dealers (which may include one or more of the
Agents) selected by the Calculation Agent for the issue of Treasury Bills
with a remaining maturity closest to the Index Maturity designated in the
applicable Pricing Supplement; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting bid rates as
mentioned in this sentence, the Treasury Rate with respect to such Interest
Determination Date will be the Treasury Rate in effect on such Interest
Determination Date.
INDEXED NOTES
Notes also may be issued with the principal amount payable at maturity or
interest to be paid thereon, or both, to be determined with reference to the
price or prices of specified commodities or stocks, the exchange rate of the
Specified Currency relative to one or more other currencies, currency units
or composite currencies specified in the Prospectus Supplement, or such other
price or exchange rate as may be specified in such Note ("Indexed Notes"), as
set forth in a Pricing Supplement relating to such Indexed Notes. In certain
cases, holders of such Indexed Notes may receive a principal amount on the
Maturity Date that is greater than or less than the face amount of the
Indexed Notes, or an interest rate that is greater than or less than the
stated interest rate on the Indexed Notes, or both, depending upon the
structure of the Indexed Note and the relative value on the Maturity Date or
at the relevant Interest Payment Date, as the case may be, of the specified
indexed item. Information as to the method for determining the principal
amount payable on the Maturity Date, the manner of determining the interest
rate, certain historical information with respect to the specified indexed
item and tax considerations associated with an investment in Indexed Notes
will be set forth in the applicable Pricing Supplement.
An investment in Indexed Notes entails significant risks that are not
associated with similar investments in a conventional fixed-rate debt
security. If the interest rate of an Indexed Note is indexed, it may result
in an interest rate that is less than that payable on a conventional
fixed-rate debt security issued by the Company at the same time, including
the possibility that no interest will be paid, and, if the principal amount
of an Indexed Note is indexed, the principal amount payable at maturity may
be less
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than the original purchase price of such Indexed Note, including the
possibility that no principal will be paid (but in no event shall the amount
of interest or principal paid with respect to an Indexed Note be less than
zero). Additionally, if the formula used to determine the principal amount or
interest payable with respect to such Indexed Notes contains a multiple or
leverage factor, the effect of any change in the applicable currency,
commodity or interest rate index may be increased. See "Foreign Currency
Risks."
DUAL CURRENCY NOTES
Dual Currency Notes are Notes as to which the Company has a one time
option, exercisable on a specified date (the "Option Election Date") in
whole, but not in part, with respect to all Dual Currency Notes issued on the
same day and having the same terms, of making all payments of principal,
premium, if any, and interest after the exercise of such option, whether at
maturity or otherwise (which payments would otherwise be made in the face
amount currency of such Notes specified in the applicable Pricing
Supplement), in the optional payment currency specified in the applicable
Pricing Supplement ("Dual Currency Notes"). The terms of the Dual Currency
Notes together with information as to the relative value of the face amount
currency compared to the optional payment currency and as to tax
considerations associated with an investment in Dual Currency Notes will also
be set forth in the applicable Pricing Supplement.
If the Company elects on any Option Election Date specified in the
applicable Pricing Supplement to pay in the optional payment currency instead
of the face amount currency, payments of interest, premium, if any, and
principal made after such Option Election Date may be worth less, at the
then-current exchange rate, than if the Company had made such payment in the
face amount currency. See "Foreign Currency Risks."
RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable Notes
("Renewable Notes") which will mature on an Interest Payment Date specified
in the applicable Prospectus Supplement unless the maturity of all or a
portion of the principal amount thereof is extended in accordance with the
procedures set forth in the applicable Pricing Supplement.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Fixed Rate Note (other than an
Amortizing Note) will indicate whether the Company has the option to extend
the maturity of such Fixed Rate Note for one or more periods of one or more
whole years up to but not beyond the final Maturity Date set forth in such
Pricing Supplement. If the Company has such option with respect to any such
Fixed Rate Note, the procedures will be as set forth in the applicable
Pricing Supplement.
AMORTIZING NOTES
Amortizing Notes are Notes for which payments combining principal and
interest are made in installments over the life of the Note ("Amortizing
Notes"). Payments with respect to Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. Further information concerning additional terms and
conditions of any issue of Amortizing Notes will be provided in the
applicable Pricing Supplement. A table setting forth repayment information in
respect of each Amortizing Note will be included in the applicable Pricing
Supplement and set forth on such Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Notes ("Original Issue Discount Notes") from time to
time at an issue price (as specified in the applicable Pricing Supplement)
that is less than 100% of the principal amount thereof (i.e., par). Original
Issue Discount Notes may not bear any interest currently or may bear interest
at a rate that is below market rates at the time of issuance. The difference
between the issue price of an Original Discount Note and par is referred to
herein as the "Discount." In the event of redemption, acceleration
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or acceleration of maturity of an Original Issue Discount Note, the amount
payable to the holder of such Original Issue Discount Note will be equal to
the sum of (i) the issue price (increased by any accruals of Discount) and,
in the event of any redemption by the Company of such Original Issue Discount
Note (if applicable), multiplied by the Initial Redemption Percentage
specified in the applicable Pricing Supplement (as adjusted by the Annual
Redemption Percentage Reduction, if applicable) and (ii) any unpaid interest
on such Original Issue Discount Note accrued from the date of issue to the
date of such redemption, repayment or acceleration of maturity.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any
date on which a redemption, repayment or acceleration of maturity occurs for
an Original Issue Discount Note, such Discount will be accrued using a
constant yield method. The constant yield will be calculated using a 30-day
month, 360-day year convention, a compounding period that, except for the
Initial Period (as defined below), corresponds to the shortest period between
Interest Payment Dates for the applicable Original Issue Discount Note (with
ratable accruals within a compounding period), a coupon rate equal to the
initial coupon rate applicable to such Original Issue Discount Note and an
assumption that the maturity of such Original Issue Discount Note will not be
accelerated. If the period from the date of issue to the initial Interest
Payment Date for an Original Issue Discount Note (the "Initial Period") is
shorter than the compounding period for such Original Issue Discount Note, a
proportionate amount of the yield for an entire compounding period will be
accrued. If the Initial Period is longer than the compounding period, then
such period will be divided into a regular compounding period and a short
period with the short period being treated as provided in the preceding
sentence. The accrual of the applicable Discount may differ from the accrual
of original issue discount for purposes of the Internal Revenue Code of 1986,
as amended (the "Code").
Certain Original Issue Discount Notes may not be treated as having
original issue discount for federal income tax purposes, and Notes other than
Original Issue Discount Notes may be treated as issued with original issue
discount for federal income tax purposes. See "United States Tax
Considerations."
OTHER PROVISIONS, ADDENDA
Any provisions with respect to Notes, including the determination of an
Interest Rate Basis, the specification of Interest Rates Basis, calculation
of the interest rate applicable to a Floating Rate Note, its Interest Payment
Dates or any other matter relating thereto may be modified by the terms
specified under "Other Provisions" on the face thereof or in an Addendum
relating thereto, if so specified on the face thereof and in the applicable
Pricing Supplement.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in
accordance with the laws of the State of New York.
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SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, the
following provisions shall apply to Foreign Currency Notes which are in
addition to, and to the extent inconsistent therewith replace, the
description of general terms and provisions of the Notes set forth herein and
in the Prospectus.
Foreign Currency Notes may be issued as either Certificated Notes or
Book-Entry Notes. Unless otherwise indicated in the applicable Pricing
Supplement, payment of the purchase price of Foreign Currency Notes will be
made in immediately available funds in the Specified Currency, as described
below.
PAYMENT CURRENCY
Unless otherwise indicated in the applicable Pricing Supplement,
purchasers are required to pay for Foreign Currency Notes in the Specified
Currency. Currently, there are limited facilities in the United States for
the conversion of U.S. dollars into foreign currencies. Therefore, unless
otherwise indicated in the applicable Pricing Supplement, the exchange rate
agent appointed by the Company and identified in the applicable Pricing
Supplement (the "Exchange Rate Agent," which term includes any successor
exchange rate agent appointed by the Company) will arrange for the conversion
of U.S. dollars into a Specified Currency on behalf of any purchaser of a
Foreign Currency Note to enable a prospective purchaser to deliver the
Specified Currency in payment for such Foreign Currency Note. The Exchange
Rate Agent must receive a request for any such conversion on or prior to the
third Business Day preceding the date of delivery of the Foreign Currency
Note. All costs of such exchange will be borne by such purchaser.
Unless the holder of such Foreign Currency Note elects to receive payments
in the Specified Currency, payments made by the Company of principal of,
premium, if any, and interest, if any, on a Foreign Currency Note will be
made in U.S. dollars. Such U.S. dollar amount to be received by a holder will
be based on the highest bid quotation in The City of New York received by the
Exchange Rate Agent at approximately 11:00 a.m., New York City time, on the
second Business Day preceding the applicable payment date from three
recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of such Specified Currency for
U.S. dollars for settlement on such payment date in the aggregate amount of
the Specified Currency payable to the holders of Notes scheduled to receive
U.S. dollar payment and at which the applicable dealer commits to execute a
contract. If such bid quotations are not available, payments to holders will
be made in the Specified Currency.
A holder of a Foreign Currency Note may elect to receive such payments in
the Specified Currency by submitting a written request, which may apply to
one or more payment dates, for such payment to the Paying Agent on or prior
to the Regular Record Date relating to an Interest Payment Date or at least
ten calendar days prior to the applicable Maturity Date, as the case may be.
Once made, such election is irrevocable as to the next succeeding payment
date; if such election applied to more than one payment date, such election
may thereafter be revoked as to all but the next succeeding payment date so
long as the Exchange Rate Agent is notified of such revocation in writing on
or prior to the Regular Record Date relating to an Interest Payment Date or
at least ten calendar days prior to the applicable Maturity Date, as the case
may be. The costs of any such conversion will be borne by the holder of a
Foreign Currency Note through deductions from such payments.
Banks in the United States offer non-U.S. dollar denominated checking or
savings account facilities in the United States only on a limited basis.
Accordingly, unless otherwise indicated in the applicable Pricing Supplement,
payments of principal of, premium, if any, and interest, if any, on, Foreign
Currency Notes to be made in a Specified Currency other than U.S. dollars
will be made to an account at a bank outside the United States, unless
alternative arrangements are made.
If a Specified Currency is not available to the Company for making
payments of principal, premium, if any, or interest, if any, on any Foreign
Currency Note with respect to which a holder has validly elected
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to receive such payment in the relevant Specified Currency, due to the
imposition of exchange controls or other circumstances beyond the control of
the Company, or is no longer used by the government of the country issuing,
or authority sponsoring, such Specified Currency or for the settlement of
transactions by public institutions in the international banking community,
then the Company will be entitled to satisfy its obligations to holders of
such Foreign Currency Notes by making such payments in U.S. dollars on the
basis of the noon U.S. dollar buying rate in The City of New York for cable
transfers of the Specified Currency as certified for customs purposes by the
Federal Reserve Bank of New York, as determined by the Exchange Rate Agent on
the date of such payment or, if such rate is not available on such date, as
of the most recent practicable date. Any payment made under such
circumstances in U.S. dollars will not constitute an Event of Default.
All determinations referred to above made by the Company or the Exchange
Rate Agent shall be at its sole discretion and shall, in the absence of
manifest error, be conclusive for all purposes and binding on holders of
Notes.
Specific information about the currency, currency unit or composite
currency in which a particular Foreign Currency Note is denominated,
including historical exchange rates and a description of the currency and any
exchange controls, will be set forth in the applicable Pricing Supplement.
The information therein concerning exchange rates is furnished as a matter of
information only and should not be regarded as indicative of the range of or
trends in fluctuations in currency exchange rates that may occur in the
future.
MINIMUM DENOMINATIONS, RESTRICTIONS ON MATURITIES, REPAYMENT AND REDEMPTION
Notes denominated in Specified Currencies other than U.S. dollars will
have such minimum denominations and be subject to such restrictions on
maturities, repayment and redemption as are set forth in the applicable
Pricing Supplement. Any other restrictions applicable to Notes denominated in
Specified Currencies other than U.S. dollars, including restrictions related
to the distribution of such Notes, will be set forth in the related Pricing
Supplement.
NOTES DENOMINATED IN ECU
THE ECU
Subject to the provisions under "--Payment in a Component Currency" below,
the ECU in which the Notes may be denominated or may be payable is the same
as the ECU that is from time to time used as the unit of account of the
European Community (the "EC"). Changes to the ECU may be made by the European
Communities, in which event the ECU will change accordingly.
Under Article 109G of the treaty establishing the European Community, as
amended by the Treaty on European Union (the "Treaty"), the currency
composition of the ECU may not be changed. The Treaty contemplates that
European monetary union will occur in three stages, the second of which began
on January 1, 1994 with the entry into force of the Treaty on European Union.
The Treaty provides that, at the start of the third stage of European
monetary union, the value of the ECU as against the currencies of the member
states participating in the third stage will be irrevocably fixed, and the
ECU will become a currency in its own right. In contemplation of that third
stage, the European Council meeting in Madrid on December 16, 1995 decided
that the name of that currency will be the Euro and that, in accordance with
the Treaty, substitution of the Euro for the ECU will be at the rate of one
Euro for one ECU. From the start of the third stage of European monetary
union, all payments in respect of the Notes denominated or payable in the ECU
will be payable in Euro at the rate then established in accordance with the
Treaty.
PAYMENT IN A COMPONENT CURRENCY
With respect to each due date for the payment of principal of, premium, if
any, or interest on, the Notes, if, on or prior to such due date, the ECU is
used neither as the unit of account of the EC nor as a currency in its own
right, replacing all or some of the currencies of the member countries of the
EC, the Company or its agent shall (in the case of an agent, without
liability on its part but after consultation with
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the Company and having regard to the availability to the Company of the
relevant currency) choose a substitute currency (the "Chosen Currency"),
which shall be a component currency of the ECU or U.S. dollars, in which all
payments to be calculated by reference to or made in ECU due on or after such
due date with respect to the Notes shall be made. Notice of the Chosen
Currency so selected shall be mailed to registered holders of Notes. The
amount of each payment calculated with reference to or made in such Chosen
Currency shall be computed on the basis of the equivalent of the ECU in that
currency determined as described below, as of the fourth Business Day prior
to the date on which such payment is due.
On or about the first Business Day following the day on which the ECU is
used neither as the unit of account of the EC nor as a currency in its own
right, replacing all or some of the currencies of the member countries of the
EC, the Company or its agent shall (in the case of an agent, without
liability on its part but after consultation with the Company and having
regard to the availability to the Company of the relevant currency) choose a
Chosen Currency in which all payments to be calculated by reference to or
made in ECU with respect to Notes having a due date prior thereto but not yet
presented for payment are to be made. The amount of each payment calculated
with reference to or made in such Chosen Currency shall be computed on the
basis of the equivalent of the ECU in that currency, determined as described
below, as of such first business day.
The equivalent of the ECU in the relevant Chosen Currency as of any date
(the "Day of Valuation") shall be determined by the Exchange Rate Agent on
the following basis. The amounts and components composing the ECU for this
purpose (the "Components") shall be the amounts and components which composed
the ECU as of the last date on which the ECU was used as the unit of account
of the EC. The equivalent of the ECU in the Chosen Currency shall be
calculated by, first, aggregating the U.S. dollar equivalents of the
Components; and then, in the case of a Chosen Currency other than U.S.
dollars, using the rate used for determining the U.S. dollar equivalent of
the Components in the Chosen Currency as set forth below, calculating the
equivalent in the Chosen Currency of such aggregate amount in U.S. dollars.
The U.S. dollar equivalent of each of the Components shall be determined
by the Exchange Rate Agent on the basis of the middle spot delivery
quotations prevailing at 2:30 p.m., Brussels time, on the Day of Valuation,
as obtained by the Exchange Rate Agent from one or more major banks, as
selected by the Company or its agent, in the country of issue of the
component currency in question.
If for any reason no direct quotations are available for a Component as of
a Day of Valuation from any of the banks selected for this purpose, in
computing the U.S. dollar equivalent of such Component, the Exchange Rate
Agent shall (except as provided below) use the most recent direct quotations
for such Component obtained by it or on its behalf, provided that such
quotations were prevailing in the country of issue not more than two Business
Days before such Day of Valuation. If such most recent quotations were so
prevailing more than two Business Days in the country of issue before such
Day of Valuation, the Exchange Rate Agent shall determine the U.S. dollar
equivalent of such Component on the basis of cross rates derived from the
middle spot delivery quotations for such component currency and for the U.S.
dollar prevailing at 2:30 p.m. Brussels time on such Day of Valuation, as
obtained by or on behalf of, the Exchange Rate Agent from one or more major
banks, as selected by the Company or its agents, in a country other than the
country of issue of such component currency. Notwithstanding the foregoing,
the Exchange Rate Agent shall determine the U.S. dollar equivalent of such
Component on the basis of such cross rates if the Company or such agent
judges that the equivalent so calculated is more representative than the U.S.
dollar equivalent calculated as provided in the first sentence of this
paragraph. Unless otherwise specified by the Company or its agent, if there
is more than one market for dealing in any component currency by reason of
foreign exchange regulations or for any other reason, the market to be
referred to in respect of such currency shall be that upon which a
non-resident issuer of notes denominated in such currency would purchase such
currency in order to make payments in respect of such notes.
All determinations made by the Company or its agent shall be at its sole
discretion and shall, in the absence of manifest error, be conclusive for all
purposes and binding on the Company and all holders of Notes.
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NOTES DENOMINATED IN THE CURRENCIES OF EC MEMBER COUNTRIES
If, pursuant to the Treaty, all or some of the currencies of the member
countries of the EC (including the Austrian schilling, the Belgian franc, the
Danish krone, the Dutch guilder, the Finish markka, the French franc, the
German mark, the Greek drachma, the Irish pound, the Italian lire, the
Luxembourg franc, the Portuguese escudo, the Spanish peseta, the Swedish
krona and U.K. sterling) are replaced by the Euro, the payment of principal
of, or interest on, the Notes denominated in such currencies shall be
effected in Euro in conformity with legally applicable measures taken
pursuant to, or by virtue of, the Treaty.
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FOREIGN CURRENCY RISKS
THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS AND ANY PRICING SUPPLEMENT DO
NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN FOREIGN CURRENCY NOTES OR
INDEXED NOTES THE PAYMENT OF WHICH IS TO BE MADE IN OR RELATED TO THE VALUE
OF A FOREIGN CURRENCY OR A COMPOSITE CURRENCY AND THE COMPANY DISCLAIMS ANY
RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST
AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM
TIME TO TIME. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND
LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN SUCH NOTES. SUCH
NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED
WITH RESPECT TO FOREIGN CURRENCY, COMPOSITE CURRENCY OR INDEXED TRANSACTIONS.
The information set forth in this Prospectus Supplement with respect to
foreign currency risks is directed to prospective purchasers who are United
States residents, and the Company disclaims any responsibility to advise
prospective purchasers of Foreign Currency Notes who are residents of
countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, premium,
if any, and interest on, the Notes. Such persons should consult their own
counsel with regard to such matters.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in, or the payment of which is
to be or may be made in, or related to the value of, a Specified Currency
other than U.S. dollars entails significant risks that are not associated
with a similar investment in a security denominated in U.S. dollars. Such
risks include the possibility of significant changes in rates of exchange
between the U.S. dollar and the various foreign currencies (or composite
currencies) after the issuance of such Note and the possibility of the
imposition or modification of foreign exchange controls by either the U.S. or
foreign governments. Such risks generally depend on economic and political
events over which the Company has no control. In recent years, rates of
exchange between U.S. dollars and certain foreign currencies have been highly
volatile and such volatility may be expected to continue in the future.
Fluctuations in any particular exchange rate that have occurred in the past
are not necessarily indicative, however, of fluctuations in such rate that
may occur during the term of any Note. Depreciation of the Specified Currency
of a Foreign Currency Note against the U.S. dollar would result in a decrease
in the effective yield of such Note below its coupon rate and, in certain
circumstances, could result in a loss to the investor on a U.S. dollar basis.
In addition, depending on a specific term of a currency-linked Indexed Note,
changes in exchange rates relating to any of the currencies involved may
result in a decrease in the effective yield of such currency-linked Indexed
Note and, in certain circumstances, could result in a loss of all or a
substantial portion of the principal of a currency-linked Indexed Note to the
investor.
Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed nations are permitted to
fluctuate in value relative to the U.S. dollar. National governments,
however, rarely voluntarily allow their currencies to float freely in
response to economic forces. Governments in fact use a variety of techniques,
such as intervention by a country's central bank or imposition of regulatory
controls or taxes, to affect the exchange rate of their currencies.
Governments may also issue a new currency to replace an existing currency or
alter the exchange rate or relative exchange characteristics by devaluation
or revaluation of a currency. Thus, a special risk in purchasing Foreign
Currency Notes or currency-linked Indexed Notes is that their U.S.
dollar-equivalent yields could be affected by governmental actions, which
could change or interfere with theretofore freely determined currency
valuation, fluctuations in response to other market forces, and the movement
of currencies across borders. There will be no adjustment or change in the
terms of such Notes in the event that exchange rates should become fixed, or
in the event of any devaluation or revaluation or imposition of exchange or
other regulatory controls or taxes, or in the event of other developments
affecting the U.S. dollar or any applicable Specified Currency.
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Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the
availability of a specified foreign currency at the time of payment of
principal of, and premium, if any, or interest, if any, on a Note. Even if
there are no actual exchange controls, it is possible that the Specified
Currency for any particular Note not denominated in U.S. dollars would not be
available at such Note's maturity. In that event, the Company would make
required payments in U.S. dollars on the basis of the market exchange rate on
the date of such payment, or if such rate of exchange is not then available,
on the basis of the market exchange rate as of the most recent practicable
date. See "Special Provisions Relating to Foreign Currency Notes--Payment
Currency."
FOREIGN CURRENCY JUDGMENTS
The Indenture and Notes will be governed by and construed in accordance
with the laws of the State of New York. If an action based on Foreign
Currency Notes were commenced in a New York court, such court would render or
enter a judgment or decree in the Specified Currency. Such judgment would
then be converted into U.S. dollars at the rate of exchange prevailing on the
date of entry of the judgment or decree. In the event an action based on
Foreign Currency Notes were commenced in a court in the United States outside
New York, it is likely that the judgment currency would be U.S. dollars, but
the method of determining the applicable exchange rate may differ.
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UNITED STATES TAX CONSIDERATIONS
In the opinion of Davis Polk & Wardwell, special tax counsel to the
Company, the following summary accurately describes the principal United
States federal income tax consequences of ownership and disposition of the
Notes to initial holders purchasing Notes at the "issue price" (as defined
below). This summary is based on the Code, administrative pronouncements,
judicial decisions and existing and proposed Treasury regulations, including
regulations concerning the treatment of debt instruments issued with original
issue discount (the "OID Regulations"), changes to any of which subsequent to
the date of this Prospectus Supplement may affect the tax consequences
described herein. This summary discusses only Notes held as capital assets
within the meaning of Section 1221 of the Code. It does not discuss all of
the tax consequences that may be relevant to a holder in light of his
particular circumstances or to holders subject to special rules, such as
certain financial institutions, insurance companies, dealers in securities or
foreign currencies, persons holding Notes as part of a straddle or hedging
transaction, or United States Holders whose functional currency (as defined
in Code Section 985) is not the U.S. dollar. Finally, this summary does not
discuss Original Issue Discount Notes (as defined below for the purposes of
this summary) which qualify as "applicable high-yield discount obligations"
under Section 163(i) of the Code. Holders of Original Issue Discount Notes
which are "applicable high-yield discount obligations" may be subject to
special rules. Persons considering the purchase of Notes should consult their
tax advisors with regard to the application of the United States federal
income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
As used in this summary under "United States Tax Considerations," the term
"United States Holder" means an owner of a Note that is (i) for United States
federal income tax purposes a citizen or resident of the United States, (ii)
a corporation, partnership or other entity created or organized in or under
the laws of the United States or of any political subdivision thereof, or
(iii) an estate or trust the income of which is subject to United States
federal income taxation regardless of its source. For taxable years beginning
after December 31, 1996 (and, if a trustee so elects, for taxable years
ending after August 20, 1996), a trust will be a United States Holder if a
court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States fiduciaries
have authority to control all substantial decisions of the trust. The term
also includes certain former citizens and long term residents of the United
States.
As used in this summary under "United States Tax Considerations," the term
"United States Alien Holder" means an owner of a Note that is, for United
States federal income tax purposes, (i) a nonresident alien individual, (ii)
a foreign corporation, (iii) a nonresident alien fiduciary of a foreign
estate or trust or (iv) a foreign partnership one or more of the members of
which is, for United States federal income tax purposes, a nonresident alien
individual, a foreign corporation or a nonresident alien fiduciary of a
foreign estate or trust.
As used in this summary under "United States Tax Considerations," the term
"Original Issue Discount Note" has the meaning described under "--Original
Issue Discount Notes" below. Certain Notes that constitute "Original Issue
Discount Notes" for purposes of other portions of this Prospectus Supplement
may not be treated as Original Issue Discount Notes for purposes of this
summary, and Notes other than those constituting "Original Issue Discount
Notes" for purposes of other portions of this Prospectus Supplement may be
treated as Original Issue Discount Notes for purposes of this summary. See
"Description of Notes--Original Issue Discount Notes" above.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Interest paid on a Note will generally be taxable to a United States
Holder as ordinary interest income at the time it accrues or is received in
accordance with the United States Holder's method of accounting for federal
income tax purposes. Under the OID Regulations, all payments of interest on a
Note that matures one year or less from its date of issuance will be included
in the stated redemption price at maturity of the Note and will be taxed in
the manner described below under "--Original Issue Discount
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Notes." Special rules governing the treatment of interest paid with respect
to Original Issue Discount Notes (including certain Floating Rate Notes and
Indexed Notes), Notes the principal of which and the interest on which are
denominated in or determined by reference to a single foreign currency or the
ECU ("Foreign Currency-Denominated Notes"), Notes (other than Foreign
Currency-Denominated Notes) the principal of which or the interest on which
(or both) is determined using a formula based on the exchange rate of one or
more foreign currencies, currency units or composite currencies ("Currency
Indexed Notes"), and Dual Currency Notes are described under "--Original
Issue Discount Notes," "--Foreign Currency-Denominated Notes" and "--Currency
Indexed Notes and Dual Currency Notes" below.
ORIGINAL ISSUE DISCOUNT NOTES
For purposes of the summary under "United States Tax Considerations," a
Note that is issued for an amount less than its stated redemption price at
maturity will generally be considered to have been issued at an original
issue discount for federal income tax purposes (an "Original Issue Discount
Note"). The "issue price" of a Note will equal the first price to the public
(not including bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters, placement agents or wholesalers) at
which a substantial amount of the Notes is sold for money. The stated
redemption price at maturity of a Note will equal the sum of all payments
required under the Note other than payments of "qualified stated interest."
"Qualified stated interest" is stated interest unconditionally payable as a
series of payments in cash or property (other than debt instruments of the
Company) at least annually during the entire term of the Note and equal to
the outstanding principal balance of the Note multiplied by a single fixed
rate of interest. In addition, interest unconditionally payable at least
annually with respect to Floating Rate Notes may in certain circumstances be
treated as qualified stated interest. Ordinarily, interest payable at least
annually at a single Interest Rate Basis that can reasonably be expected to
measure contemporaneous variations in the cost of newly borrowed funds, such
as the CD Rate, Commercial Paper Rate, Eleventh District Cost of Funds Rate,
Federal Funds Rate, LIBOR, Prime Rate, CMT Rate and the Treasury Rate, plus
or minus a fixed Spread (or a fixed rate minus one of the above Interest Rate
Bases) will generally be treated as qualified stated interest. However,
special tax considerations (including possible original issue discount and
contingent debt treatment (see below)) may arise with respect to Floating
Rate Notes providing for (i) interest not unconditionally payable at least
annually, (ii) interest payable at more than one Interest Rate Basis, (iii)
interest payable at a fixed rate followed or preceded by an Interest Rate
Basis or Bases, (iv) a Spread Multiplier, (v) a cap, floor, governor or
similar restriction that is not fixed throughout the term of the Note, or
(vi) an interest rate, the average value of which during the first half of
the Note's term is reasonably expected to be either significantly less than
or significantly greater than the average value of the rate during the final
half of the Note's term. Purchasers of Floating Rate Notes should consult
their tax advisors since the tax consequences will depend, in part, on the
particular terms of the purchased Note.
Treasury regulations issued on June 11, 1996, address, among other things,
the accrual of original issue discount on, and the character of gain realized
on the sale, exchange or retirement of, debt instruments providing for
contingent payments. These regulations generally apply only to contingent
payment debt instruments issued on or after August 13, 1996. Prospective
Holders of Indexed Notes or Floating Rate Notes providing for contingent
payments should refer to the discussion regarding taxation in the applicable
Pricing Supplement and should consult their tax advisors regarding the
federal income tax consequences of ownership and disposition of such Notes.
If the difference between a Note's stated redemption price at maturity and
its issue price is less than a de minimis amount, i.e., 1/4 of 1% of the
stated redemption price at maturity multiplied by the number of complete
years to maturity, then the Note will not be considered to have original
issue discount. Holders of Notes with a de minimis amount of original issue
discount will generally include such original issue discount in income, as
capital gain, on a pro rata basis as principal payments are made on the Note.
A United States Holder of Original Issue Discount Notes will be required
to include any qualified stated interest payments in income in accordance
with the United States Holder's method of accounting for federal income tax
purposes. United States Holders of Original Issue Discount Notes that mature
more than one year from their date of issuance will be required to include
original issue discount in
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income for federal income tax purposes as it accrues, in accordance with a
constant yield method based on a compounding of interest, before the receipt
of cash payments attributable to such income.
Under the OID Regulations, a Note that matures one year or less from its
date of issuance will be treated as a "short-term Original Issue Discount
Note." In general, a cash method United States Holder of a short-term
Original Issue Discount Note is not required to accrue original issue
discount for United States federal income tax purposes unless it elects to do
so. United States Holders who make such an election, United States Holders
who report income for federal income tax purposes on the accrual method and
certain other United States Holders, including banks and dealers in
securities, are required to include original issue discount in income on such
short-term Original Issue Discount Notes as it accrues on a straight-line
basis, unless an election is made to accrue the original issue discount
according to a constant yield method based on daily compounding. In the case
of a United States Holder who is not required and who does not elect to
include original issue discount in income currently, any gain realized on the
sale, exchange or retirement of the short-term Original Issue Discount Note
will be ordinary income to the extent of the original issue discount accrued
on a straight-line basis (or, if elected, according to a constant yield
method based on daily compounding) through the date of sale, exchange or
retirement. In addition, such United States Holder will be required to defer
deductions for any interest paid on indebtedness incurred to purchase or
carry short-term Original Issue Discount Notes in an amount not exceeding the
deferred interest income, until such deferred interest income is recognized.
Under the OID Regulations, a United States Holder may make an election
(the "Constant Yield Election") to include in gross income all interest that
accrues on a Note (including stated interest, acquisition discount, original
issue discount, de minimis original issue discount, and unstated interest, as
adjusted by any amortizable bond premium) in accordance with a constant yield
method based on the compounding of interest.
Original Issue Discount Notes that are redeemable by the Company or
repayable at the option of the United States Holder prior to maturity may be
subject to rules that differ from the general rules discussed above.
Purchasers of Original Issue Discount Notes with such a feature should
carefully examine the applicable Pricing Supplement and should consult their
tax advisors with respect to such a feature since the tax consequences with
respect to original issue discount will depend, in part, on the particular
terms and the particular features of the purchased Note.
The OID Regulations contain aggregation rules stating that in certain
circumstances if more than one type of Note is issued as part of the same
issuance of securities to a single holder, some or all of such Notes may be
treated together as a single debt instrument with a single issue price,
maturity date, yield to maturity and stated redemption price at maturity for
purposes of calculating and accruing any original issue discount. Unless
otherwise provided in the related Pricing Supplement, the Company does not
expect to treat any of the Notes as being subject to the aggregation rules
for purposes of computing original issue discount.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a United States Holder
will recognize taxable gain or loss equal to the difference between the
amount realized on the sale, exchange or retirement and such United States
Holder's adjusted tax basis in the Note. For these purposes, the amount
realized does not include any amount attributable to accrued interest on the
Note. Amounts attributable to accrued interest are treated as interest as
described under "--Payments of Interest" above. A United States Holder's
adjusted tax basis in a Note will equal the cost of the Note to such United
States Holder, increased by the amounts of any original issue discount
previously included in income by the United States Holder with respect to
such Note and reduced by any amortized bond premium and any principal
payments received by the United States Holder and, in the case of an Original
Issue Discount Note, by the amounts of any other payments that do not
constitute qualified stated interest (as defined above).
Subject to the discussion under "--Foreign Currency-Denominated Notes"
below, gain or loss realized on the sale, exchange or retirement of a Note
will be capital gain or loss (except, in the case of a short-term Original
Issue Discount Note, to the extent of any original issue discount not
previously included in the United States Holder's taxable income), and will
be long-term capital gain or loss if at the
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time of sale, exchange or retirement the Note has been held for more than one
year. See "--Original Issue Discount Notes" above. The excess of net
long-term capital gains over net short-term capital losses is taxed at a
lower rate than ordinary income for certain non-corporate taxpayers. The
distinction between capital gain or loss and ordinary income or loss is also
relevant for purposes of, among other things, limitations on the
deductibility of capital losses.
If a United States Holder purchases a Note for an amount that is greater
than the amount payable at maturity, such United States Holder will be
considered to have purchased such Note with "amortizable bond premium" equal
in amount to such excess, and may elect (in accordance with applicable Code
provisions) to amortize such premium, using a constant yield method, over the
remaining term of the Note (where such Note is not optionally redeemable
prior to its maturity date). If such Note may be optionally redeemed prior to
maturity (as described in the applicable Pricing Supplement) after the United
States Holder has acquired it, the amount of amortizable bond premium is
determined with reference to the amount payable on maturity or, if it results
in a smaller premium attributable to the period of earlier redemption date,
with reference to the amount payable on the earlier redemption date. A United
States Holder who elects to amortize bond premium must reduce his tax basis
in the Note by the amount of the premium amortized in any year. An election
to amortize bond premium applies to all taxable debt obligations then owned
and thereafter acquired by the taxpayer and may be revoked only with the
consent of the Internal Revenue Service.
If a United States Holder makes a Constant Yield Election for a Note with
amortizable bond premium, such election will result in a deemed election to
amortize bond premium for all of the United States Holder's debt instruments
with amortizable bond premium and may be revoked only with the permission of
the Internal Revenue Service with respect to debt instruments acquired after
revocation.
FOREIGN CURRENCY-DENOMINATED NOTES
A United States Holder who uses the cash method of accounting and who
receives a payment of interest in a foreign currency with respect to a
Foreign Currency-Denominated Note (other than an Original Issue Discount Note
on which original issue discount is accrued on a current basis (except to the
extent any qualified stated interest is received)) will be required to
include in income the U.S. dollar value of the foreign currency payment
(determined on the date such payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the United States Holder's tax basis in the foreign
currency. A cash method United States Holder who receives such a payment in
U.S. dollars pursuant to an option available under such a Foreign
Currency-Denominated Note will be required to include the amount of such
payment in income upon receipt.
To the extent the above paragraph is not applicable, a United States
Holder will be required to include in income the U.S. dollar value of the
amount of interest income (including original issue discount, but reduced by
amortizable bond premium to the extent applicable) that has accrued and is
otherwise required to be taken into account with respect to a Foreign
Currency-Denominated Note during an accrual period. The U.S. dollar value of
such accrued income will be determined by translating such income at the
average rate of exchange for the accrual period or, with respect to an
accrual period that spans two taxable years, at the average rate for the
partial period within the taxable year. Such United States Holder will
recognize ordinary income or loss with respect to accrued interest income on
the date such income is actually received. The amount of ordinary income or
loss recognized will equal the difference between the U.S. dollar value of
the foreign currency payment received (determined on the date such payment is
received) in respect of such accrual period (or, where a United States Holder
receives U.S. dollars, the amount of such payment in respect of such accrual
period) and the U.S. dollar value of interest income that has accrued during
such accrual period (as determined above). A United States Holder may elect
to translate interest income (including original issue discount) into U.S.
dollars at the spot rate on the last day of the interest accrual period (or,
in the case of a partial accrual period, the spot rate on the last day of the
taxable year) or, if the date of receipt is within five business days of the
last day of the interest accrual period, the spot rate on the date of
receipt. A United States Holder that makes such an election must apply it
consistently to all debt instruments from year to year and cannot change the
election without the consent of the Internal Revenue Service. Original issue
discount and amortizable bond premium on a Foreign Currency-Denominated Note
are to be determined in the relevant foreign currency.
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Any loss realized on the sale, exchange or retirement of a Foreign
Currency-Denominated Note with amortizable bond premium by a United States
Holder who has not elected to amortize such premium under Section 171 of the
Code will be a capital loss to the extent of such bond premium. If such an
election is made, amortizable bond premium taken into account on a current
basis will reduce interest income in units of the relevant foreign currency.
Exchange gain or loss is realized on such amortized bond premium with respect
to any period by treating the bond premium amortized in such period as a
return of principal.
A United States Holder's tax basis in a Foreign Currency-Denominated Note,
and the amount of any subsequent adjustment to such United States Holder's
tax basis, will be the U.S. dollar value of the foreign currency amount paid
for such Foreign Currency-Denominated Note, or of the foreign currency amount
of the adjustment, determined on the date of such purchase or adjustment. A
United States Holder who purchases a Foreign Currency-Denominated Note with
previously owned foreign currency will recognize ordinary income or loss in
an amount equal to the difference, if any, between such United States
Holder's tax basis in the foreign currency and the U.S. dollar fair market
value of the Foreign Currency-Denominated Note on the date of purchase.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency-Denominated Note that is attributable to fluctuations in currency
exchange rates will be ordinary income or loss which will not be treated as
interest income or expense. Gain or loss attributable to fluctuations in
exchange rates will equal the difference between (i) the U.S. dollar value of
the foreign currency principal amount of such Note, and any payment with
respect to accrued interest, determined on the date such payment is received
or such Note is disposed of, and (ii) the U.S. dollar value of the foreign
currency principal amount of such Note, determined on the date such United
States Holder acquired such Note, and the U.S. dollar value of the accrued
interest received, determined by translating such interest at the average
exchange rate for the accrual period. Such foreign currency gain or loss will
be recognized only to the extent of the total gain or loss realized by a
United States Holder on the sale, exchange or retirement of the Foreign
Currency-Denominated Note. The source of such foreign currency gain or loss
will be determined by reference to the residence of the United States Holder
or the "qualified business unit" of the United States Holder on whose books
the Note is properly reflected. Any gain or loss realized by such a United
States Holder in excess of such foreign currency gain or loss will be capital
gain or loss (except, in the case of a short-term Original Issue Discount
Note, to the extent of any original issue discount not previously included in
the United States Holder's income).
A United States Holder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a Foreign
Currency-Denominated Note equal to the U.S. dollar value of such foreign
currency, determined at the time of such sale, exchange or retirement.
Treasury regulations issued under Section 988 of the Code provide a special
rule for purchases and sales of publicly traded Foreign Currency-Denominated
Notes by a cash method taxpayer under which units of foreign currency paid or
received are translated into U.S. dollars at the spot rate on the settlement
date of the purchase or sale. Accordingly, no exchange gain or loss will
result from currency fluctuations between the trade date and the settlement
of such a purchase or sale. An accrual method taxpayer may elect the same
treatment required of cash-method taxpayers with respect to the purchase and
sale of publicly traded Foreign Currency-Denominated Notes provided the
election is applied consistently. Such election cannot be changed without the
consent of the Internal Revenue Service. Any gain or loss realized by a
United States Holder on a sale or other disposition of foreign currency
(including its exchange for U.S. dollars or its use to purchase Foreign
Currency-Denominated Notes) will be ordinary income or loss.
INDEXED NOTES AND DUAL CURRENCY NOTES
The federal income tax considerations associated with an investment in
Indexed Notes and Dual Currency Notes will be set forth in the applicable
Pricing Supplement with respect to such Notes.
EXTENSION OF MATURITY AND RESET OF INTEREST RATE
Under Treasury regulations promulgated by the Internal Revenue Service the
reset of the interest rate on, or the extension of the maturity of, a Note
pursuant to its original terms generally should not be viewed as a taxable
exchange. United States Holders should consult with their own tax advisors as
to the federal income tax consequences of such a reset or extension.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain noncorporate United States Holders may be subject to backup
withholding at a rate of 31% on payments of principal, premium and interest
(including original issue discount, if any) on, and the proceeds of
disposition of, a Note. Backup withholding will apply only if the United
States Holder (i) fails to furnish its Taxpayer Identification Number ("TIN")
which, for an individual, would be his Social Security Number, (ii) furnishes
an incorrect TIN, (iii) is notified by the Internal Revenue Service that it
has failed to properly report payments of interest and dividends or (iv)
under certain circumstances, fails to certify, under penalty of perjury, that
it has furnished a correct TIN and has not been notified by the Internal
Revenue Service that it is subject to backup withholding for failure to
report interest and dividend payments. United States Holders should consult
their tax advisors regarding their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such United States Holder's United
States federal income tax liability and may entitle such United States Holder
to a refund, provided that the required information is furnished to the
Internal Revenue Service.
TAX CONSEQUENCES TO UNITED STATES ALIEN HOLDERS
Under present United States federal law, and subject to the discussion
below concerning Indexed Notes and backup withholding:
(a) payments of principal, interest (including original issue discount,
if any) and premium on the Notes by the Company or any paying agent to any
United States Alien Holder will not be subject to United States federal
withholding tax, provided that, in the case of interest, (i) such United
States Alien Holder does not own, actually or constructively, 10% or more of
the total combined voting power of all classes of stock of the Company
entitled to vote, is not a controlled foreign corporation related, directly
or indirectly, to the Company through stock ownership, and is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code and (ii)
the statement requirement set forth in Section 871(h) or Section 881(c) of
the Code has been fulfilled with respect to the beneficial owner, as
discussed below;
(b) a United States Alien Holder of a Note will not be subject to United
States federal income tax on gain realized on the sale, exchange or other
disposition of such Note, unless (i) such United States Alien Holder is an
individual who is present in the United States for 183 days or more in the
taxable year of disposition, and either (a) such individual has a "tax home"
(as defined in Code Section 911(d)(3)) in the United States (unless such
gain is attributable to a fixed place of business in a foreign country
maintained by such individual and has been subject to foreign tax of at
least 10%) or (b) the gain is attributable to an office or other fixed place
of business maintained by such individual in the United States or (ii) such
gain is effectively connected with the conduct by such United States Alien
Holder of a trade or business in the United States.
Sections 871(h) and 881(c) of the Code require that, in order to obtain
the portfolio interest exemption from withholding tax described in paragraph
(a) above, either the beneficial owner of a Note, or 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 that is holding the Note on behalf of such beneficial
owner, file a statement with the withholding agent to the effect that the
beneficial owner of the Note is not a United States Holder. Under temporary
United States Treasury regulations, such requirement will be fulfilled if the
beneficial owner of a Note certifies on United States Internal Revenue
Service Form W-8, under penalties of perjury, that it is not a United States
Holder and provides its name and address, and any Financial Institution
holding the Note on behalf of the beneficial owner files a statement with the
withholding agent to the effect that it has received such a statement (and
furnishes the withholding agent with a copy thereof). The portfolio interest
exemption from withholding tax described in paragraph (a) above will not
apply to contingent interest paid on certain Indexed Notes. Unless otherwise
provided in the applicable Pricing Supplement, the Company does not expect
any interest on the Notes to be subject to this provision.
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If a United States Alien Holder of a Note is engaged in a trade or
business in the United States, and if interest (including original issue
discount) on the Note (or gain realized on its sale, exchange or other
disposition) is effectively connected with the conduct of such trade or
business, the United States Alien Holder, although exempt from the
withholding tax discussed in the preceding paragraph, will generally be
subject to regular United States income tax on such effectively connected
income in the same manner as if it were a United States Holder. See "--Tax
Consequences to United States Holders" above. In lieu of the certificate
described in the preceding paragraph, such a United States Alien Holder will
be required to provide to the Company a properly executed Internal Revenue
Service Form 4224 or successor form in order to claim an exemption from
withholding tax. In addition, if such United States Alien Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or such
lower rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments.
For purposes of the branch profits tax, interest (including original issue
discount) on and any gain recognized on the sale, exchange or other
disposition of a Note will be included in the effectively connected earnings
and profits of such United States Alien Holder if such interest or gain, as
the case may be, is effectively connected with the conduct by the United
States Alien Holder of a trade or business in the United States.
Under Section 2105(b) of the United States federal estate tax law, a Note
or coupon held by an individual who is not a citizen or resident of the
United States at the time of his death will not be subject to United States
federal estate tax as a result of such individual's death, provided that the
individual does not own, actually or constructively, 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote
and, at the time of such individual's death, payments with respect to such
Note would not have been effectively connected to the conduct by such
individual of a trade or business in the United States.
Under current United States federal income tax law, a 31% backup
withholding tax and information reporting requirements apply to certain
payments of principal, premium and interest (including original issue
discount) made to, and to the proceeds of sale before maturity by, certain
noncorporate United States persons. Under current Treasury regulations,
backup withholding will not apply to payments made by the Company or any
paying agent thereof on a Note if the certifications required by Sections
871(h) and 881(c) are received and the Company or such paying agent, as the
case may be, does not have actual knowledge that the payee is a United States
person.
Under current Treasury regulations, payments on the sale, exchange or
other disposition of a Note made to or through a foreign office of a broker
generally will not be subject to backup withholding. However, if such broker
is a United States person, a controlled foreign corporation for United States
tax purposes or a foreign person 50% or more of whose gross income is
effectively connected with a United States trade or business for a specified
three-year period, information reporting will be required unless the broker
has in its records documentary evidence that the beneficial owner is not a
United States person and certain other conditions are met or the beneficial
owner otherwise establishes an exemption. Under proposed Treasury
regulations, backup withholding may apply to any payment which such broker is
required to report if such broker has actual knowledge that the payee is a
United States person. Payments to or through the United States office of a
broker will be subject to backup withholding and information reporting unless
the United States Alien Holder certifies, under penalties of perjury, that it
is not a United States person or otherwise establishes an exemption.
United States Alien Holders of Notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and
the procedure for obtaining such an exemption, if available. Any amounts
withheld from a payment to a United States Alien Holder under the backup
withholding rules will be allowed as a credit against such United States
Alien Holder's United States federal income tax liability and may entitle
such United States Alien Holder to a refund, provided that the required
information is furnished to the United States Internal Revenue Service.
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THE FEDERAL INCOME TAX SUMMARY SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. PROSPECTIVE UNITED STATES HOLDERS AND UNITED STATES
ALIEN HOLDERS OF THE NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE EFFECTS OF CHANGES IN SUCH
LAWS.
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PLAN OF DISTRIBUTION
This Prospectus Supplement has been prepared for use by DLJSC in
connection with offers and sales of the Notes in market-making transactions
at negotiated prices related to prevailing market prices at the time of the
sale. DLJSC may act a principal or agent in such transactions. DLJSC and
certain other Agents have advised the Company that they currently intend to
make a market in the Notes, but they are 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 Notes.
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company as of December 31, 1996 and 1995 and for each of the years in the
three-year period ended December 31, 1996 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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PROSPECTUS
AUGUST 15, 1996
$500,000,000
DONALDSON, LUFKIN & JENRETTE, INC.
DEBT SECURITIES AND PREFERRED STOCK
Donaldson, Lufkin & Jenrette, Inc. (the "Company") may from time to time
offer, together or separately, (i) senior or subordinated debt securities
(the "Debt Securities") or (ii) shares of its preferred stock, par value
$0.01 per share (the "Preferred Stock"). The Debt Securities and Preferred
Stock are collectively called the "Securities."
The Securities may be issued in one or more series or issuances in U.S.
dollars or in one or more foreign currencies, currency units or composite
currencies. By separate prospectus, the form of which is included in the
Registration Statement of which this Prospectus forms a part, four Delaware
statutory business trusts (the "Trusts"), which are wholly owned subsidiaries
of the Company, may from time to time severally offer preferred securities
guaranteed by the Company to the extent set forth therein and the Company may
offer from time to time junior subordinated debt securities either directly
or to a Trust. 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 (or its equivalent in one or more foreign currencies, currency
units or composite currencies).
Specific terms of the securities in respect of which this Prospectus is
being delivered (the "Offered Securities") will be set forth in an
accompanying Prospectus Supplement (a "Prospectus Supplement"). The
Prospectus Supplement will set forth with regard to the particular Offered
Securities, without limitation, the following: (i) in the case of Debt
Securities, the ranking as senior or subordinated debt securities, the
specific designation, aggregate principal amount, authorized denomination,
maturity, rate (which may be fixed or variable) or method of calculation of
interest and dates for payment thereof, and any exchangeability, conversion,
redemption, prepayment or sinking fund provisions and any listing on a
securities exchange and (ii) in the case of Preferred Stock, the specific
designation, number of shares, purchase price and the rights, preferences and
privileges thereof and any qualifications or restrictions thereon (including
dividends, liquidation value, voting rights, terms for the redemption,
conversion or exchange thereof and any other specific terms of the Preferred
Stock) and any listing on a securities exchange. Unless otherwise indicated
in the Prospectus Supplement, the Company does not intend to list any of the
Securities on a national securities exchange.
The Senior Debt Securities, when issued, will be unsecured and will rank
equally with all other unsecured and unsubordinated indebtedness of the
Company.
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, par value $0.10
per share (the "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, as
amended (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 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.
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 February 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 filing 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).
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USE OF PROCEEDS
Donaldson, Lufkin & Jenrette, Inc. will not 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.
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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 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 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
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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.
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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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 150,000,000 shares
of Common Stock, par value $0.10 per share and 25,000,000 shares of Preferred
Stock, par value $0.01 per share. As of June 30, 1996, the Company had
53,300,000 shares of Common Stock and 2,250,000 shares of Cumulative
Exchangeable Preferred Stock outstanding. The following summary description
of the capital stock of the Company is qualified in its entirety by reference
to the Certificate of Incorporation and the Bylaws of the Company, copies of
which have been filed with the Commission.
COMMON STOCK
Subject to the rights of the holders of any Preferred Stock which may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefor, and, in the event of
liquidation, to share pro rata in any distribution of the Company's assets
after payment or providing for the payment of liabilities and the liquidation
preference of any outstanding Preferred Stock. Each holder of Common Stock is
entitled to one vote for each share held of record on the applicable record
date on all matters presented to a vote of stockholders, including the
election of directors. Holders of Common Stock have no cumulative voting
rights or preemptive rights to purchase or subscribe for any stock or other
securities and there are no conversion rights or redemption or sinking fund
provisions with respect to such stock. All outstanding shares of Common Stock
are fully paid and nonassessable.
The Common Stock is listed on the New York Stock Exchange under the symbol
"DLJ."
The transfer agent for the Common Stock is First Chicago Trust Company of
New York.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes 25,000,000 shares of
Preferred Stock. The Company's Board of Directors has the authority to issue
shares of Preferred Stock in one or more series and to fix, by resolution,
the terms of such securities, without any further vote or action by the
stockholders.
The applicable Prospectus Supplement will describe the following terms of
any Preferred Stock in respect of which this Prospectus is being delivered
(to the extent applicable to such Preferred Stock): (i) the specific
designation, number of shares, seniority and purchase price; (ii) any
liquidation preference per share; (iii) any date of maturity; (iv) any
redemption, repayment or sinking fund provisions; (v) any dividend rate or
rates and the dates on which any such dividends will be payable (or the
method by which such rates or dates will be determined); (vi) any voting
rights; (vii) if other than the currency of the United States of America, the
currency or currencies including composite currencies in which such Preferred
Stock is denominated and/or in which payments will or may be payable; (viii)
the method by which amounts in respect of such Preferred Stock may be
calculated and any commodities, currencies or indices, or value, rate or
price, relevant to such calculation; (ix) whether such Preferred Stock is
convertible or exchangeable and, if so, the securities or rights into which
such Preferred Stock is convertible or exchangeable, and the terms and
conditions upon which such conversions or exchanges will be effected
including the initial conversion or exchange prices or rates, the conversion
or exchange period and any other related provisions; (x) the place or places
where dividends and other payments on the Preferred Stock will be payable;
and (xi) any additional voting, dividend, liquidation, redemption and other
rights, preferences, privileges, limitations and restrictions.
All shares of Preferred Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and
non-assessable. Any shares of Preferred Stock so issued would have priority
over the Common Stock with respect to dividend or liquidation rights or both.
As of June 30, 1996, the Company had 2,250,000 shares of Cumulative
Exchangeable Preferred Stock outstanding.
CUMULATIVE EXCHANGEABLE PREFERRED STOCK
Dividends. Each holder of Cumulative Exchangeable Preferred Stock is
entitled to receive when, as and if 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.
6
<PAGE>
Liquidation. Upon the dissolution, liquidation or winding up of the
Company, the holders of the Cumulative Exchangeable Preferred Stock will be
entitled to receive out of the assets of the Company available for
distribution to stockholders, an amount in cash equal to (i) the Optional
Redemption Price (as defined below), if such dissolution, liquidation or
winding up is voluntary or (ii) $100 per share plus an amount in cash equal
to all dividends accrued and unpaid thereon to the date fixed for
distribution plus accrued interest thereon if such dissolution, liquidation
or winding up is involuntary, in either case before any payment or
distribution shall be made on the Common Stock or on any other class or
series of capital stock of the Company ranking junior to the Cumulative
Exchangeable Preferred Stock.
Exchangeability. Subject to certain conditions, after October 15, 1996,
the Company may exchange the Cumulative Exchangeable 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 Preferred Stock described below.
Voting Rights. The holders of the Cumulative Exchangeable Preferred Stock
are not entitled to vote at any meeting of stockholders of the Company,
except as set forth below or as otherwise required by law. In the event that
(i) the Company has failed to pay in full the dividends accumulated on the
outstanding shares of the Cumulative Exchangeable Preferred Stock for any six
quarterly dividend payment periods, whether or not consecutive, or (ii) the
Company shall have failed to comply with the provisions for mandatory
redemption described below, then, in each case, the number of directors of
the Company shall be increased by two and holders of shares of Cumulative
Exchangeable Preferred Stock will have the right, voting together as a single
class, to elect such additional directors at the next annual meeting of
stockholders of the Company and at each annual meeting thereafter until the
full dividends accumulated have been paid or the mandatory redemption
provisions have been complied with, as the case may be. Upon termination of
such voting rights, the term of office of each director elected by holders of
the Cumulative Exchangeable Preferred Stock shall terminate and the number of
directors constituting the entire Board of Directors shall be reduced
accordingly. The holders of the Cumulative Exchangeable Preferred Stock will
also be entitled to vote separately as a class in connection with certain
actions by the Company, including (i) any amendment to the Company's
Certificate of Incorporation or the Certificate of Designation relating to
the Cumulative Exchangeable Preferred Stock so as to adversely affect any
powers, preferences or special rights of the Cumulative Exchangeable
Preferred Stock, (ii) any increase in the authorized number of Cumulative
Exchangeable Preferred Stock, (iii) any authorization or issuance of a class
or series of securities ranking senior to the Cumulative Exchangeable
Preferred Stock or (iv) in certain circumstances, a merger or consolidation
or sale, exchange or conveyance of all or substantially all of the assets,
property or business of the Company.
Mandatory Redemption. The Company will redeem all the outstanding shares
of Cumulative Exchangeable Preferred Stock out of funds legally available
therefor at $100 per share plus accrued and unpaid dividends and any accrued
interest thereon on October 15, 2003.
In the event of a Change of Control (as defined below), the Company shall
notify the holders of the Cumulative Exchangeable Preferred Stock in writing
of such event and offer to purchase all of the outstanding shares of the
Cumulative Exchangeable Preferred Stock at $100 per share plus accrued and
unpaid dividends and any accrued interest thereon. "Change of Control" is
defined as (i) other than in the ordinary course of business, the sale or
other disposition of all or substantially all of the assets of the Company to
any person other than EQ or any wholly-owned subsidiary thereof, (ii) the
merger, sale or consolidation of the Company with the effect that EQ ceases
to own directly or indirectly at least 51% of the total voting power of the
surviving corporation or (iii) EQ ceases to own directly or indirectly at
least 51% of the voting stock of The Equitable Life Assurance Society of the
United States. In addition, if prior to October 15, 2003, the Company shall
sell more than 20% of the shares of common stock of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC"), the Company shall notify holders
of the Cumulative Exchangeable Preferred Stock in writing of such event and
offer to purchase all the outstanding shares of Cumulative Exchangeable
Preferred Stock at the Optional Redemption Price (as defined below).
Optional Redemption. The Cumulative Exchangeable Preferred Stock may be
redeemed in whole or in part at the option of the Company at any time at the
greater of (A) $100 plus accrued and unpaid
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dividends and any accrued interest thereon and (B) the present value of the
future mandatory redemption and dividend payments which would have been made
except for such optional redemption plus accrued and unpaid dividends and any
accrued interest thereon (the "Optional Redemption Price"). In addition, at
any time, at the option of the Company, up to 750,000 shares of the
Cumulative Exchangeable Preferred Stock may be redeemed with proceeds from
any public offering of Common Stock of the Company at the Optional Redemption
Price calculated using a higher discount rate.
Limitation on Payments. The Cumulative Exchangeable Preferred Stock also
contains certain restrictions on the ability of the Company to pay cash
dividends on, or redeem, repurchase or otherwise acquire or retire any shares
of its capital stock and on the ability of the Company to make payments under
certain long-term incentive compensation plans.
8
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Company's Debt Securities, may constitute either senior debt
securities ("Senior Debt Securities") or subordinated debt securities
("Subordinated Debt Securities") of the Company and will be issued in the
case of Senior Debt Securities under an indenture dated as of October 25,
1995 (the "Senior Debt Indenture") between Donaldson, Lufkin & Jenrette,
Inc., as issuer, and The Bank of New York, as trustee and in the case of
Subordinated Debt Securities under an indenture (the "Subordinated Debt
Indenture") between Donaldson, Lufkin & Jenrette, Inc., as issuer and The
Bank of New York, as trustee. The Senior Debt Indenture and the Subordinated
Debt Indenture are sometimes hereinafter referred to individually as an
"Indenture" and collectively as the "Indentures." The Bank of New York, in
its capacity as trustee under either or both of the Indentures is referred to
herein as the "Trustee."
Copies of the Indentures have been incorporated by reference or included
herein as exhibits to the Registration Statement of which this Prospectus is
a part and are also available for inspection at the office of the Trustee.
The Indentures are subject to and governed by the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Section references contained
herein are to the applicable Indenture. The following summaries of certain
provisions of the Indentures do not purport to be complete, and where
reference is made to particular provisions of the Indentures, such
provisions, including definitions of certain terms, are incorporated by
reference as a part of such summaries or terms, which are qualified in their
entirety by such reference. The Indentures are substantially identical except
for provisions relating to subordination and the Company's negative pledge.
GENERAL
Neither of the Indentures limits the aggregate principal amount of Debt
Securities which may be issued thereunder and each Indenture provides that
Debt Securities may be issued thereunder from time to time in one or more
series. The Debt Securities will be direct, unsecured senior or subordinated
obligations of the Company. Except as described under "--Negative Pledge,"
neither Indenture limits other indebtedness or securities which may be
incurred or issued by the Company or any of its subsidiaries or contains
financial or similar restrictions on the Company or any of its subsidiaries.
The operations of the Company are conducted through its subsidiaries, and,
therefore, the Company is dependent upon the earnings and cash flow of its
subsidiaries to meet its obligations, including obligations under the Debt
Securities. The Debt Securities will be effectively subordinated to all
indebtedness of the Company's subsidiaries. The Company's rights and the
rights of its creditors, including holders of Debt Securities, to participate
in the distribution of assets of any subsidiary upon such subsidiary's
liquidation or reorganization will be subject to prior claims of such
subsidiary's creditors, including trade creditors, except to the extent the
Company may itself be a creditor with recognized claims against such
subsidiary. In addition, net capital requirements under the Exchange Act and
New York Stock Exchange rules applicable to certain of the Company's
subsidiaries could limit the payment of dividends and the making of loans and
advances to the Company by such subsidiaries.
The applicable Prospectus Supplement which accompanies this Prospectus,
sets forth where applicable the following terms of, and information relating
to, the Debt Securities offered thereby: (i) the ranking of such Debt
Securities as senior or subordinated debt securities; (ii) the designation of
such Debt Securities; (iii) the aggregate principal amount of such Debt
Securities; (iv) the date or dates on which principal of and premium, if any,
on such Debt Securities is payable; (v) the rate or rates at which such Debt
Securities shall bear interest, if any, or the method by which such rate
shall be determined, and the basis on which interest shall be calculated if
other than a 360-day year consisting of twelve 30-day months, the date or
dates from which such interest will accrue and on which such interest will be
payable and the related record dates; (vi) if other than the offices of the
Trustee, the place where the principal of and any premium or interest on such
Debt Securities will be payable; (vii) any redemption, repayment or sinking
fund provisions; (viii) if other than denominations of $1,000 or multiples
thereof, the denominations in which such Debt Securities will be issuable;
(ix) if other than the principal amount thereof, the portion of the principal
amount due upon acceleration; (x) if other than U.S. dollars, the currency or
currencies (including composite currencies) in which such Debt Securities are
denominated or payable; (xi) whether such Debt Securities shall be issued in
the form of a Global Security or securities; (xii) any other specific
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<PAGE>
terms of such Debt Securities; and (xiii) the identity of any trustees,
depositories, authenticating or paying agents, transfer agents or registrars
with respect to such Debt Securities. (Section 2.3)
Unless otherwise specified in the accompanying Prospectus Supplement,
principal and premium, if any, will be payable, and the Debt Securities will
be transferable and exchangeable without any service charge, at the office of
the Trustee. However, the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection with any
such transfer or exchange. (Sections 2.7, 4.1 and 4.2)
Unless otherwise specified in the accompanying Prospectus Supplement,
interest on any series of Debt Securities will be payable on the interest
payment dates set forth in the accompanying Prospectus Supplement to the
persons in whose names the Debt Securities are registered at the close of
business on the related record date and will be paid, at the option of the
Company, by wire transfer or by checks mailed to such persons. (Sections 2.7,
4.1 and 4.2)
If the Debt Securities are issued as Original Issue Discount Securities
(bearing no interest or interest at a rate which at the time of issuance is
below market rates) to be sold at a substantial discount below their stated
principal amount, the Federal income tax consequences and other special
considerations applicable to such Original Issue Discount Securities will be
generally described in the Prospectus Supplement.
BOOK-ENTRY SYSTEM
If so specified in the accompanying Prospectus Supplement, Debt Securities
of any series may be issued under a book-entry system in the form of one or
more global Debt Securities (each a "Global Security"). Each Global Security
will be deposited with, or on behalf of a depositary, which, unless otherwise
specified in the accompanying Prospectus Supplement, will be The Depository
Trust Company, New York, New York (the "Depositary"). The Global Securities
will be registered in the name of the Depositary or its nominee.
The Depositary has advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, 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. The
Depositary was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
securities certificates. The Depositary's participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and
certain other organizations, some of whom (and/or their representatives) own
the Depositary. Access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a Global Security in registered form, the Depositary
will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such
Global Security to the accounts of participants. The accounts to be credited
will be designated by the underwriters, dealers or agents. Ownership of
beneficial interests in the Global Security will be limited to participants
or persons that may hold interests through participants. Ownership of
beneficial interests by participants in the Global Security will be shown on,
and the transfer of that ownership interest will be effected only through,
records maintained by such participants. The laws of some jurisdictions may
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may impair the ability to own,
transfer or pledge beneficial interest in a Global Security.
So long as the Depositary or its nominee is the registered owner of a
Global Security, it will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as set forth below, owners of a beneficial
interest in such Global Security will not be entitled to have the Debt
Securities represented thereby registered in their
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names, will not receive or be entitled to receive physical delivery of
certificates representing the Debt Securities represented thereby and will
not be considered the owners or holders thereof under the applicable
Indenture. Accordingly, each person owning a beneficial interest in such
Global Security must rely on the procedures of the Depositary and, 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 applicable Indenture. The Company understands that under existing
practice, in the event that the Company requests any action of a holder or a
beneficial owner desires to take any action a holder is entitled to take, the
Depositary would act upon the instructions of, or authorize, the participant
to take such action.
Payment of principal of, and interest on, the Debt Securities will be made
to the Depositary or its nominee, as the case may be, as the registered owner
and holder of the Global Security representing such Debt Securities. None of
the Company, the Trustee, any paying agent or registrar for the Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company has been advised by the Depositary that the Depositary will
credit participants' accounts with payments of principal or interest on the
payment date thereof in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Security as shown on the
records of the Depositary. The Company expects that payments by participants
to owners of beneficial interests in the Global Security held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in "street name," and will be the responsibility of such
participants.
A Global Security may not be transferred except as a whole by the
Depositary to a nominee or successor of the Depositary or by a nominee of the
Depositary to another nominee of the Depositary. A Global Security
representing all but not part of the Debt Securities being offered pursuant
to the applicable Prospectus Supplement is exchangeable for Debt Securities
in definitive form of like tenor and terms if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as depositary for such
Global Security or if at any time the Depositary is no longer eligible to be,
or is not in good standing as, a clearing agency registered under the
Exchange Act, and in either case, a successor depositary is not appointed by
the Company within 90 days of receipt by the Company of such notice or of the
Company becoming aware of such ineligibility, or (ii) the Company in its sole
discretion at any time determines not to have all of the Debt Securities
represented by a Global Security and notifies the Trustee thereof. A Global
Security exchangeable pursuant to the preceding sentence shall be
exchangeable for Debt Securities registered in such names and in such
authorized denominations as the Depositary for such Global Security shall
direct.
SENIOR DEBT
Payment of the principal of, premium, if any, and interest on Senior Debt
Securities issued under the Senior Debt Indenture will rank pari passu with
all other unsecured and unsubordinated debt of the Company.
SUBORDINATED DEBT
Payment of the principal of, premium, if any, and interest on Subordinated
Debt Securities issued under the Subordinated Debt Indenture will be
subordinate and junior in right of payment, to the extent and in the manner
set forth in the Subordinated Debt Indenture, to all Senior Indebtedness of
the Company. The Subordinated Debt Indenture does not contain any limitation
on the amount of Senior Indebtedness that can be incurred by the Company.
Indebtedness issued or to be issued pursuant to the Indenture between the
Company and The Bank of New York, as Trustee, providing for the issuance of
junior subordinated debt securities of the Company is subordinate in right of
payment to the Subordinated Debt Securities. As of June 30, 1996, no junior
subordinated debt securities were outstanding.
The Subordinated Debt Indenture provides that no payment may be made by or
on behalf of the Company on account of any obligation or, to the extent the
subordination thereof is permitted by
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applicable law, claim in respect of the Subordinated Debt Securities,
including the principal of, premium, if any, or interest on the Subordinated
Debt Securities, or to redeem (or make a deposit in redemption of), defease
(other than payments made by the Trustee pursuant to the provisions of the
Indenture described under "--Discharge, Defeasance and Covenant Defeasance"
with respect to a defeasance permitted by the Indenture, including the
subordination provisions thereof) or acquire any of the Subordinated Debt
Securities for cash, property or securities, (i) upon the maturity of the
Designated Senior Indebtedness or any other Senior Indebtedness with an
aggregate principal amount in excess of $1.0 million by lapse of time,
acceleration or otherwise, unless and until all principal of, premium, if
any, and interest on such Senior Indebtedness and all other obligations in
respect thereof are first paid in full in cash or cash equivalents or such
payment is duly provided for, or unless and until any such maturity by
acceleration has been rescinded or waived or (ii) in the event of default in
the payment of any principal of, premium, if any, or interest on or any other
amount payable in respect of the Designated Senior Indebtedness or any other
Senior Indebtedness with an aggregate principal amount in excess of $1.0
million when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise, unless and until such
payment default has been cured or waived or has otherwise ceased to exist.
Upon the happening of a default (any event that, after notice or passage
of time would be an event of default) or an event of default (any event that
permits the holders of Senior Indebtedness or their representative or
representatives immediately to accelerate its maturity) with respect to any
Senior Indebtedness, other than a default in payment of the principal of,
premium, if any, or interest on such Senior Indebtedness, upon written notice
of such default or event of default given to the Company and the Trustee by
the holders of a majority of the principal amount outstanding of the
Designated Senior Indebtedness or their representative or, at such time as
there is no Designated Senior Indebtedness, by the holders of a majority of
the principal amount outstanding of all Senior Indebtedness or their
representative or representatives or, if such default or event of default
results from the acceleration of the Subordinated Debt Securities,
immediately upon such acceleration, then, unless and until such default or
event of default has been cured or waived or otherwise has ceased to exist,
no payment may be made by or on behalf of the Company with respect to any
obligation or claim in respect of the Subordinated Debt Securities, including
the principal of, premium, if any, or interest on the Subordinated Debt
Securities or to redeem (or make a deposit in redemption of), defease or
acquire any of the Subordinated Debt Securities for cash, property or
securities. Notwithstanding the foregoing, unless the Senior Indebtedness in
respect of which such default or event of default exists has been declared
due and payable in its entirety within 180 days after the date written notice
of such default or event of default is delivered as set forth above or the
date of such acceleration as the case may be (the "Payment Blockage Period"),
and such declaration or acceleration has not been rescinded, the Company
shall be required then to pay all sums not paid to the Holders of the
Subordinated Debt Securities during the Payment Blockage Period due to the
foregoing prohibitions and to resume all other payments as and when due on
the Subordinated Debt Securities. Any number of such notices may be given;
provided however, that (i) during any 360 consecutive days, only one Payment
Blockage Period shall commence and (ii) any such default or event of default
that existed upon the commencement of a Payment Blockage Period may not be
the basis for the commencement of any other Payment Blockage Period, unless
such default or event of default shall have been cured or waived for a period
of not less than 90 consecutive days.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company from any source whether in cash,
property or securities, shall be received by the Trustee or the Holders on
account of any obligation or claim in respect of the Subordinated Debt
Securities at a time when such payment or distribution is prohibited by the
foregoing provisions, such payment or distribution shall be held in trust for
the benefit of the holders of Senior Indebtedness, and shall be paid or
delivered by the Trustee or such Holders, as the case may be, to the holders
of the Senior Indebtedness remaining unpaid or unprovided for or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or represented by
each, for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay or to provide for the payment in full
in cash or cash equivalents of all such Senior Indebtedness, after giving
effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness.
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Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization or readjustment of
the Company, whether voluntary or involuntary, in bankruptcy, insolvency,
receivership or a similar proceeding or upon assignment for the benefit of
creditors, or any other marshaling of the assets and liabilities of the
Company or otherwise, (i) the holders of all Senior Indebtedness would first
be entitled to receive payment in full in cash or cash equivalents (or have
such payment duly provided for) of the principal, premium, if any, and
interest payable in respect therefor before the Holders would be entitled to
receive any payment on account of the principal of, premium, if any, and
interest on the Subordinated Debt Securities, and (ii) any payment or
distribution of assets of the Company of any kind or character, from any
source, whether in cash, property or securities to which the Holders or the
Trustee on behalf of the Holders would be entitled, except for the
subordination provisions contained in the Indenture, would be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of Senior Indebtedness remaining unpaid
or unprovided for or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the Senior
Indebtedness held or represented by each, for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay or
provide for the payment in full in cash or cash equivalents of all such
Senior Indebtedness, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.
The holders of the Senior Indebtedness and their respective
representatives are authorized to demand specific performance of the
provisions with respect to subordination in the Indenture at any time when
the Company or any Holder shall have failed to comply with any provision with
respect to subordination in the Indenture applicable to it, and the Company
and each Holder irrevocably waives any defense based on the adequacy of a
remedy at law that might be asserted as a bar to the remedy of specific
performance of such subordination provision in any action brought therefor by
the holders of the Senior Indebtedness and their respective representatives.
By reasons of such subordination, in the event of the liquidation or
insolvency of the Company, creditors of the Company who are not holders of
Senior Indebtedness, including Holders of the Subordinated Debt Securities,
may recover less, ratably, than holders of Senior Indebtedness.
No provision contained in the Indenture or the Subordinated Debt
Securities will affect the obligation of the Company, which is absolute and
unconditional, to pay, when due, principal of, premium, if any, and interest
on the Subordinated Debt Securities. The subordination provisions of the
Indenture and the Subordinated Debt Securities will not prevent the
occurrence of any Event of Default under the Indenture or limit the rights of
the Trustee or any Holder, except as provided in the seven preceding
paragraphs, to pursue any other rights or remedies with respect to the
Subordinated Debt Securities.
NEGATIVE PLEDGE
The Senior Debt Indenture provides that the Company and any successor
corporation will not, and will not permit any Subsidiary to, create, assume,
incur or guarantee any indebtedness for borrowed money secured by a pledge,
lien or other encumbrance except for Permitted Liens (as defined in the
Senior Debt Indenture) on the Voting Stock of DLJSC or any other Subsidiary
of the Company which shall hereafter succeed by merger or otherwise to all or
substantially all of the business of DLJSC (a "DLJSC Successor"), without
making effective provision whereby the Senior Debt Securities will be secured
equally and ratably with such secured indebtedness. (Senior Debt Indenture,
Section 4.3)
CERTAIN DEFINITIONS
The term "Holder" or "Securityholder" as defined in the applicable
Indenture means the registered holder of any Debt Security with respect to
registered Debt Securities and the bearer of any unregistered Debt Security
or any coupon appertaining thereto, as the case may be.
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The term "Designated Senior Indebtedness" means any class of Senior
Indebtedness the aggregate principal amount outstanding of which exceeds $50
million and which is specifically designated in the instrument evidencing
such Senior Indebtedness or the agreement under which such Senior
Indebtedness arises as "Designated Senior Indebtedness."
The term "Original Issue Discount Security" as defined in the applicable
Indenture means any Debt Security that provides for an amount less than the
principal amount thereof to be due and payable upon declaration of
acceleration of the maturity thereof pursuant to Section 6.2 of the
applicable Indenture.
The term "Senior Indebtedness" as defined in the Subordinated Debt
Indenture means the principal of and premium, if any, and interest on (a) all
indebtedness of the Company, whether outstanding on the date of the
Subordinated Debt Indenture or thereafter created, (i) for money borrowed 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
subordinated to other indebtedness of the Company. Notwithstanding anything
to the contrary in the Subordinated Debt Indenture or the 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
Subordinated Debt Securities or (ii) any indebtedness of the Company to a
subsidiary of the Company. (Subordinated Debt Indenture, Section 1.1)
The term "Subsidiary" as defined in the applicable Indenture means with
respect to any Person, any corporation, association or other business entity
of which more than 50% of the outstanding Voting Stock (as defined in the
applicable Indenture) is owned directly or indirectly, by such Person and one
or more other Subsidiaries of such Person.
RESTRICTIONS ON MERGERS AND SALES OF ASSETS
Under each Indenture, the Company shall not consolidate with, merge with
or into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially
as an entirety in one transaction or a series of related transactions) to,
any Person (other than a consolidation with or merger with or into a
Subsidiary or a sale, conveyance, transfer, lease or other disposition to a
Subsidiary) or permit any Person to merge with or into the Company unless:
(a) either (i) the Company shall be the continuing Person or (ii) the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets of the
Company shall be a corporation organized and validly existing under the laws
of the United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, all of the obligations of the Company on all of the Debt Securities
and under the applicable Indenture and the Company shall have delivered to
the Trustee an opinion of counsel stating that such consolidation, merger or
transfer and such supplemental indenture complies with this provision and
that all conditions precedent provided for in the applicable Indenture
relating to such transaction have been complied with and that such
supplemental indenture constitutes the legal, valid and binding obligation of
the Company or such successor enforceable against such entity in accordance
with the terms, subject to customary exceptions; and (b) the Company shall
have delivered to the Trustee an officers' certificate to the effect that
immediately after giving effect to such transaction, no Default (as defined
in the applicable Indenture) shall have occurred and be continuing and an
opinion of counsel as to the matters set forth in paragraph (a) above.
(Section 5.1)
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EVENTS OF DEFAULT
Events of Default defined in the applicable Indenture with respect to the
Debt Securities of any series are: (a) the Company defaults in the payment of
all or any part of the principal of any Debt Security of such series when the
same becomes due and payable at maturity, upon acceleration, redemption or
mandatory repurchase, including as a sinking fund installment, or otherwise;
(b) the Company defaults in the payment of any interest on any Debt Security
of such series when the same becomes due and payable, and such default
continues for a period of 30 days; (c) the Company defaults in the
performance of or breaches any other covenant or agreement of the Company in
the applicable Indenture with respect to any Debt Security of such series or
in the Debt Securities of such series and such default or breach continues
for a period of 60 consecutive days after written notice thereof has been
given to the Company by the Trustee or to the Company and the Trustee by the
Holders of 25% or more in aggregate principal amount of the Debt Securities
of all series under the applicable Indenture affected thereby; (d) an
involuntary case or other proceeding shall be commenced against the Company
or DLJSC (including for purposes of paragraph (d) and (e) hereof any DLJSC
Successor) with respect to the Company or DLJSC or their respective debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of the Company or DLJSC or for any substantial part
of the property and assets of the Company or DLJSC, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Company or DLJSC
under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (e) the Company or DLJSC (i) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary
case under any such law, (ii) consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or DLJSC or for all or
substantially all of the property and assets of the Company or DLJSC or (iii)
effects any general assignment for the benefit of creditors; (f) an event of
default, as defined in any one or more indentures or instruments evidencing
or under which the Company has at the date of the applicable Indenture or
shall thereafter have outstanding an aggregate of at least $25,000,000
aggregate principal amount of indebtedness for borrowed money, shall happen
and be continuing and such indebtedness shall have been accelerated so that
the same shall be or become due and payable prior to the date on which the
same would otherwise have become due and payable, and such acceleration shall
not be rescinded or annulled within ten days after notice thereof shall have
been given to the Company by the Trustee (if such event be known to it), or
to the Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the Debt Securities at the time outstanding under the
applicable Indenture; provided that if such event of default under such
indentures or instruments shall be remedied or cured by the Company or waived
by the holders of such indebtedness, then the Event of Default under the
applicable Indenture by reason thereof shall be deemed likewise to have been
thereupon remedied, cured or waived without further action upon the part of
either the Trustee or any of the Securityholders; (g) failure by the Company
to make any payment at maturity, including any applicable grace period, in
respect of at least $25,000,000 aggregate principal amount of indebtedness
for borrowed money and such failure shall have continued for a period of ten
days after notice thereof shall have been given to the Company by the Trustee
(if such event be known to it), or to the Company and the Trustee by the
holders of at least 25% in aggregate principal amount of the Debt Securities
at the time outstanding under the applicable Indenture; provided that if such
failure shall be remedied or cured by the Company or waived by the holders of
such indebtedness, then the Event of Default under the applicable Indenture
by reason thereof shall be deemed likewise to have been thereupon remedied,
cured or waived without further action upon the part of either the Trustee or
any of the Securityholders; or (h) any other Event of Default established
with respect to any series of Debt Securities issued pursuant to the
applicable Indenture occurs. (Section 6.1)
Each Indenture provides that if an Event of Default described in clauses
(a) or (b) of the immediately preceding paragraph with respect to the Debt
Securities of any series then outstanding thereunder occurs and is
continuing, then, and in each and every such case, except for any series of
Debt Securities the principal of which shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Debt Securities of any such affected series then
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outstanding under the applicable Indenture (each such series treated as a
separate class) by notice in writing to the Company (and to the Trustee if
given by Securityholders), may declare the entire principal amount (or, if
the Debt Securities of any such series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of such series established pursuant to the applicable Indenture) of all
Debt Securities of such affected series, and the interest accrued thereon, if
any, to be due and payable immediately, and upon any such declaration the
same shall become immediately due and payable. If an Event of Default
described in clauses (c) or (h) of the immediately preceding paragraph with
respect to the Debt Securities of one or more series then outstanding under
the applicable Indenture occurs and is continuing, then, in each and every
such case, except for any series of Debt Securities the principal of which
shall have already become due and payable, either the Trustee or the Holders
of not less than 25% in aggregate principal amount (or, if the Debt
Securities of any such series are Original Issue Discount Securities, such
portion of the principal as may be specified in the terms thereof established
pursuant to the applicable Indenture) of the Debt Securities of all such
affected series then outstanding under the applicable Indenture (treated as a
single class) by notice in writing to the Company (and to the Trustee if
given by Securityholders), may declare the entire principal amount (or, if
the Debt Securities of any such series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of such series established pursuant to the applicable Indenture) of all
Debt Securities of all such affected series, and the interest accrued
thereon, if any, to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Event of
Default described in clauses (d) or (e) of the immediately preceding
paragraph occurs and is continuing, then the principal amount (or, if any
Debt Securities are Original Issue Discount Securities, such portion of the
principal as may be specified in the terms thereof established pursuant to
the applicable Indenture) of all the Debt Securities then outstanding under
the applicable Indenture and interest accrued thereon, if any, shall be and
become immediately due and payable, without any notice or other action by any
Holder or the Trustee to the full extent permitted by applicable law. If an
Event of Default described in clauses (f) or (g) of the immediately preceding
paragraph, or in clauses (c) or (h) of the immediately preceding paragraph
with respect to the Debt Securities of all series then outstanding under the
applicable Indenture, occurs and is continuing, then, in each and every such
case, either the Trustee or the Holders of not less than 25% in aggregate
principal amount (or, if the Debt Securities of any outstanding series are
Original Issue Discount Securities, such portion of the principal as may be
specified in the terms thereof established pursuant to the applicable
Indenture) of all Debt Securities of any series then outstanding under the
applicable Indenture except for any series of Debt Securities the principal
of which shall have already become due and payable (treated as a single
class) by notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the entire principal amount (or, if the Debt
Securities of any such series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of such
series established pursuant to the applicable Indenture) of all Debt
Securities of any series then outstanding under the applicable Indenture, and
the interest accrued thereon, if any, to be due and payable immediately, and
upon any such declaration the same shall become immediately due and payable.
Upon certain conditions such declarations may be rescinded and annulled and
past defaults may be waived by the Holders of a majority in principal of the
then outstanding Debt Securities of all such series that have been
accelerated under the applicable Indenture (voting as a single class).
(Section 6.2) Because the ability of Holders to declare the Debt Securities
of any series due and payable upon an Event of Default under clauses (c),
(f), (g) or (h) of the immediately preceding paragraph depends on the
requisite action by Holders of all affected series of Debt Securities under
the applicable Indenture, if there is more than one series of Debt Securities
outstanding, Holders of a particular series of Debt Securities may be unable
to declare the Debt Securities under the applicable Indenture due and payable
upon an Event of Default described in clauses (c), (f), (g) or (h) of the
immediately preceding paragraph without action by Holders of such other
series. In October 1995, the Company issued $500,000,000 in aggregate
principal amount of 6 7/8% Senior Notes due 2005 under the Senior Debt
Indenture and in February 1996 issued $250,000,000 in aggregate principal
amount of 5 5/8% Medium-Term-Notes due 2016 under the Senior Debt Indenture,
all of which were outstanding as of the date hereof.
Each Indenture contains a provision under which, subject to the duty of
the Trustee during a default to act with the required standard of care, (i)
the Trustee may rely and shall be protected in acting or
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refraining from acting upon any officers' certificate, opinion of counsel (or
both), resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper person or persons
and the Trustee need not investigate any fact or matter stated in the
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit; (ii) before
the Trustee acts or refrains from acting, it may require an officers'
certificate and/or an opinion of counsel, which shall conform to the
requirements of the applicable Indenture and the Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or opinion; subject to the terms of the applicable Indenture,
whenever in the administration of the trusts of the applicable Indenture the
Trustee shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering or omitting to take any action under
the applicable Indenture, such matter (unless other evidence in respect
thereof be specifically prescribed in the applicable Indenture) may, in the
absence of negligence or bad faith on the part of the Trustee, be deemed to
be conclusively proved and established by an officers' certificate delivered
to the Trustee, and such certificate, in the absence of negligence or bad
faith on the part of the Trustee, shall be full warrant to the Trustee for
any action taken, suffered or omitted to be taken by it under the provisions
of the applicable Indenture upon the faith thereof; (iii) the Trustee may act
through its attorneys and agents not regularly in its employ and shall not be
responsible for the misconduct or negligence of any agent or attorney
appointed with due care; (iv) any request, direction, order or demand of the
Company mentioned in the applicable Indenture shall be sufficiently evidenced
by an officers' certificate (unless other evidence in respect thereof be
specifically prescribed in the applicable Indenture); and any Board
Resolution may be evidenced to the Trustee by a copy thereof certified by the
secretary or an assistant secretary of the Company; (v) the Trustee shall be
under no obligation to exercise any of the rights or powers vested in it by
the applicable Indenture at the request, order or direction of any of the
Holders, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might
be incurred by it in compliance with such request, order or direction; (vi)
the Trustee shall not be liable for any action it takes or omits to take in
good faith that it believes to be authorized or within its rights or powers
or for any action it takes or omits to take in accordance with the direction
of the Holders in accordance with the applicable Indenture relating to the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the Trustee,
under the applicable Indenture; (vii) the Trustee may consult with counsel of
its selection and the advice of such counsel or any opinion of counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted to be taken by it under the applicable Indenture
in good faith and in reliance thereon; and (viii) prior to the occurrence of
an Event of Default under the applicable Indenture and after the curing or
waiving of all Events of Default, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, officers' certificate, opinion of counsel, Board Resolution,
statement, instrument, opinion, report, notice, request, consent, order,
approval, appraisal, bond, debenture, note, coupon, security, or other paper
or document unless requested in writing so to do by the Holders of not less
than a majority in aggregate principal amount of the Debt Securities of all
series affected then outstanding under the applicable Indenture; provided
that, if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of the applicable
Indenture, the Trustee may require reasonable indemnity against such expenses
or liabilities as a condition to proceeding. (Section 7.2)
Subject to such provisions in the applicable Indenture for the
indemnification of the Trustee and certain other limitations, the Holders of
at least a majority in aggregate principal amount (or, if any Debt Securities
are Original Issue Discount Securities, such portion of the principal as may
be specified in the terms thereof established pursuant to the applicable
Indenture) of the outstanding Debt Securities under the applicable Indenture
of all series affected (voting as a single class) may direct the time, method
and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee with
respect to the Debt Securities of such series by the applicable Indenture;
provided, that the Trustee may refuse to follow any direction that conflicts
with law or the
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applicable Indenture, that may involve the Trustee in personal liability, or
that the Trustee determines in good faith may be unduly prejudicial to the
rights of Holders not joining in the giving of such direction; and provided
further, that the Trustee may take any other action it deems proper that is
not inconsistent with any directions received from Holders of Debt Securities
pursuant to this paragraph. (Section 6.5)
Subject to various provisions in the applicable Indenture, the Holders of
at least a majority in principal amount (or, if the Debt Securities are
Original Issue Discount Securities, such portion of the principal as may be
specified in the terms thereof established pursuant to the applicable
Indenture) of the outstanding Debt Securities under the applicable Indenture
of all series affected (voting as a single class), by notice to the Trustee,
may waive an existing Default or Event of Default with respect to the Debt
Securities of such series and its consequences, except a Default in the
payment of principal of or interest on any Debt Security as specified in
clauses (a) or (b) of Section 6.1 of the applicable Indenture or in respect
of a covenant or provision of the applicable Indenture which cannot be
modified or amended without the consent of the Holder of each outstanding
Debt Security affected. Upon any such waiver, such Default shall cease to
exist, and any Event of Default with respect to the Debt Securities of such
series arising therefrom shall be deemed to have been cured, for every
purpose of the applicable Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right
consequent thereto. (Section 6.4)
Each Indenture provides that no Holder of any Debt Securities of any
series may institute any proceeding, judicial or otherwise, with respect to
the applicable Indenture or the Debt Securities of such series, or for the
appointment of a receiver or trustee, or for any other remedy under the
applicable Indenture, unless: (i) such Holder has previously given to the
Trustee written notice of a continuing Event of Default with respect to the
Debt Securities of such series; (ii) the Holders of at least 25% in aggregate
principal amount of outstanding Debt Securities of all such series affected
under the applicable Indenture shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own name
as Trustee under the applicable Indenture; (iii) such Holder or Holders have
offered to the Trustee indemnity reasonably satisfactory to the Trustee
against any costs, liabilities or expenses to be incurred in compliance with
such request; (iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and (v) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of all such affected
series under the applicable Indenture have not given the Trustee a direction
that is inconsistent with such written request. A Holder may not use the
applicable Indenture to prejudice the rights of another Holder or to obtain a
preference or priority over such other Holder. (Section 6.6)
Each Indenture contains a covenant that the Company will file with the
Trustee, within 15 days after the Company is required to file the same with
the Commission, copies of the annual reports and of the information,
documents and other reports which the Company may be required to file with
the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act.
(Section 4.5)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Each Indenture provides with respect to each series of Debt Securities
that the Company may terminate its obligations under the Debt Securities of
any series and the applicable Indenture with respect to Debt Securities of
such series if: (i) all Debt Securities of such series previously
authenticated and delivered, with certain exceptions, have been delivered to
the Trustee for cancellation and the Company has paid all sums payable by it
under the applicable Indenture; or (ii) (a) the Debt Securities of such
series mature within one year or all of them are to be called for redemption
within one year under arrangements satisfactory to the Trustee for giving the
notice of redemption, (b) the Company irrevocably deposits in trust with the
Trustee, as trust funds solely for the benefit of the Holders of such Debt
Securities for that purpose, money or U.S. Government Obligations or a
combination thereof sufficient (unless such funds consist solely of money, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee),
without consideration of any reinvestment, to pay the principal of and
interest on the Debt Securities of such series to maturity or redemption, as
the case may be, and to pay all other sums payable by it under the applicable
Indenture, and (c) the Company delivers to the Trustee an officers'
certificate and an opinion of counsel, in each case
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stating that all conditions precedent provided for in the applicable
Indenture relating to the satisfaction and discharge of the applicable
Indenture with respect to the Debt Securities of such series have been
complied with. With respect to the foregoing clause (i), only the Company's
obligations to compensate and indemnify the Trustee under the applicable
Indenture shall survive. With respect to the foregoing clause (ii), only the
Company's obligations to execute and deliver Debt Securities of such series
for authentication, to set the terms of the Debt Securities of such series,
to maintain an office or agency in respect of the Debt Securities of such
series, to have moneys held for payment in trust, to register the transfer or
exchange of Debt Securities of such series, to deliver Debt Securities of
such series for replacement or to be canceled, to compensate and indemnify
the Trustee and to appoint a successor trustee, and its right to recover
excess money held by the Trustee shall survive until such Debt Securities are
no longer outstanding. Thereafter, only the Company's obligations to
compensate and indemnify the Trustee, and its right to recover excess money
held by the Trustee shall survive. (Section 8.1)
Each Indenture provides that the Company (i) will be deemed to have paid
and will be discharged from any and all obligations in respect of the Debt
Securities of any series under the applicable Indenture, and the provisions
of the applicable Indenture will, except as noted below, no longer be in
effect with respect to the Debt Securities of such series ("legal
defeasance") and (ii) may, in the case of the Senior Debt Indenture, omit to
comply with any term, provision or condition of the applicable Indenture
described above under "--Negative Pledge" (or in the case of each Indenture
omit to comply with any other specific covenant relating to such series
provided for in a Board Resolution or supplemental indenture which may by its
terms be defeased pursuant to such Indenture), and such omission shall be
deemed not to be an Event of Default under clauses (c) or (h) of the first
paragraph of "--Events of Default" with respect to the outstanding Debt
Securities of a series under the applicable Indenture ("covenant
defeasance"); provided that the following conditions shall have been
satisfied: (a) the Company has irrevocably deposited in trust with the
Trustee as trust funds solely for the benefit of the Holders of the Debt
Securities of such series, for payment of the principal of and interest on
the Debt Securities of such series, money or U.S. Government Obligations or a
combination thereof sufficient (unless such funds consist solely of money, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee)
without consideration of any reinvestment and after payment of all federal,
state and local taxes or other charges and assessments in respect thereof
payable by the Trustee, to pay and discharge the principal of and accrued
interest on the outstanding Debt Securities of such series to maturity or
earlier redemption (irrevocably provided for under arrangements satisfactory
to the Trustee), as the case may be; (b) such deposit will not result in a
breach or violation of, or constitute a default under, the applicable
Indenture or any other material agreement or instrument to which the Company
is a party or by which it is bound; (c) no Default with respect to such Debt
Securities of such series shall have occurred and be continuing on the date
of such deposit; (d) the Company shall have delivered to the Trustee an
opinion of counsel that (1) the Holders of the Debt Securities of such series
will not recognize income, gain or loss for Federal income tax purposes as a
result of the Company's exercise of its option under this provision of the
applicable Indenture and will be subject to Federal income tax on the same
amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred and (2) the Holders of
the Debt Securities of such series have a valid security interest in the
trust funds subject to no prior liens under the Uniform Commercial Code, and
(e) the Company has delivered to the Trustee an officers' certificate and an
opinion of counsel, in each case stating that all conditions precedent
provided for the applicable Indenture relating to the defeasance contemplated
have been complied with. In the case of legal defeasance under clause (i)
above, the opinion of counsel referred to in clause (d)(1) above may be
replaced by a ruling directed to the Trustee received from the Internal
Revenue Service to the same effect. Subsequent to legal defeasance under
clause (i) above, the Company's obligations to execute and deliver Debt
Securities of such series for authentication, to set the terms of the Debt
Securities of such series, to maintain an office or agency in respect of the
Debt Securities of such series, to have moneys held for payment in trust, to
register the transfer or exchange of Debt Securities of such series, to
deliver Debt Securities of such series for replacement or to be canceled, to
compensate and indemnify the Trustee and to appoint a successor trustee, and
its right to recover excess money held by the Trustee shall survive until
such Debt Securities are no longer
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outstanding. After such Debt Securities are no longer outstanding, in the
case of legal defeasance under clause (i) above, only the Company's
obligations to compensate and indemnify the Trustee and its right to recover
excess money held by the Trustee shall survive. (Sections 8.2 and 8.3)
MODIFICATION OF THE INDENTURES
Each Indenture provides that the Company and the Trustee may amend or
supplement the applicable Indenture or the Debt Securities of any series
without notice to or the consent of any Holder: (1) to cure any ambiguity,
defect or inconsistency in the applicable Indenture; provided that such
amendments or supplements shall not materially and adversely affect the
interests of the Holders; (2) to comply with Article 5 of the applicable
Indenture in connection with a consolidation or merger of the Company or the
sale, conveyance, transfer, lease or other disposal of all or substantially
all of the property and assets of the Company; (3) to comply with any
requirements of the Commission in connection with the qualification of the
applicable Indenture under the Trust Indenture Act; (4) to evidence and
provide for the acceptance of appointment under the applicable Indenture with
respect to the Debt Securities of any or all series by a successor Trustee;
(5) to establish the form or forms or terms of Debt Securities of any series
or of the coupons pertaining to such Debt Securities as permitted under the
applicable Indenture; (6) to provide for uncertificated or unregistered Debt
Securities and to make all appropriate changes for such purpose; or (7) to
make any change that does not materially and adversely affect the rights of
any Holder. (Section 9.1)
Each Indenture also contains provisions whereby the Company and the
Trustee, subject to certain conditions, without prior notice to any Holders,
may amend the applicable Indenture and the outstanding Debt Securities of any
series with the written consent of the Holders of a majority in principal
amount of the Debt Securities then outstanding under the applicable Indenture
of all series affected by such amendment (all such series voting as one
class), and the Holders of a majority in principal amount of the outstanding
Debt Securities under the applicable Indenture of all series affected thereby
(all such series voting as one class) by written notice to the Trustee may
waive future compliance by the Company with any provision of the applicable
Indenture or the Debt Securities of such series. Notwithstanding the
foregoing provisions, without the consent of each Holder affected thereby, an
amendment or waiver, including a waiver pursuant to Section 6.4 of the
applicable Indenture, may not: (i) extend the stated maturity of the
principal of, or any sinking fund obligation or any installment of interest
on, such Holder's Debt Security, or reduce the principal thereof or the rate
of interest thereon (including any amount in respect of original issue
discount), or any premium payable with respect thereto, or adversely affect
the rights of such Holder under any mandatory redemption or repurchase
provision or any right of redemption or repurchase at the option of such
Holder, or reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon an acceleration of the maturity
thereof or the amount thereof provable in bankruptcy, or change any place of
payment where, or the currency in which, any Debt Security or any premium or
the interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the due date therefor; (ii)
reduce the percentage in principal amount of outstanding Debt Securities of
the relevant series the consent of whose Holders is required for any such
supplemental indenture, for any waiver of compliance with certain provisions
of the applicable Indenture or certain Defaults and their consequences
provided for in the applicable Indenture; (iii) waive a Default in the
payment of principal of or interest on any Debt Security of such Holder; or
(iv) modify any of the provisions of this provision of the applicable
Indenture, except to increase any such percentage or to provide that certain
other provisions of the applicable Indenture cannot be modified or waived
without the consent of the Holder of each outstanding Debt Security
thereunder affected thereby. A supplemental indenture which changes or
eliminates any covenant or other provision of the applicable Indenture which
has expressly been included solely for the benefit of one or more particular
series of Debt Securities, or which modifies the rights of Holders of Debt
Securities of such series with respect to such covenant or provision, shall
be deemed not to affect the rights under the applicable Indenture of the
Holders of Debt Securities of any other series or of the coupons appertaining
to such Debt Securities. It shall not be necessary for the consent of any
Holder under this provision of the applicable Indenture to approve the
particular form of any proposed amendment, supplement or waiver, but it shall
be sufficient if such consent approves the substance thereof. After an
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amendment, supplement or waiver under this section of the applicable
Indenture becomes effective, the Company shall give to the Holders affected
thereby a notice briefly describing the amendment, supplement or waiver. The
Company will mail supplemental indentures to Holders upon request. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture or waiver. (Section 9.2)
GOVERNING LAW
The Indentures and the Debt Securities will be governed by the laws of the
State of New York. (Section 10.8 and Section 11.8)
CONCERNING THE TRUSTEE
The Company and its subsidiaries maintain ordinary banking and trust
relationships with The Bank of New York and its affiliates.
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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, the
validity of the Securities and certain other legal matters in connection with
the offering of the Securities 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 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, IN CONNECTION WITH
ANY OFFERING CONTEMPLATED HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY AGENT OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THEREOF. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS
SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
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 ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Incorporation of Certain Information by
Reference............................................................ S-3
Description of Notes.................................................. S-4
Special Provisions Relating to Foreign
Currency Notes....................................................... S-18
Foreign Currency Risks................................................ S-22
United States Tax Considerations...................................... S-24
Plan of Distribution.................................................. S-32
Experts............................................................... S-32
PROSPECTUS
Available Information ................................................ 2
Incorporation of Certain Information 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
Description of Capital Stock ......................................... 6
Description of Debt Securities ....................................... 9
Plan of Distribution ................................................. 22
Legal Matters ........................................................ 22
Experts .............................................................. 22
</TABLE>
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$300,000,000
DONALDSON, LUFKIN &
JENRETTE, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR
MORE FROM DATE OF ISSUE
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PROSPECTUS SUPPLEMENT
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DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
APRIL 8, 1997
===============================================================================
