<PAGE>
Filed Pursuant to Rule 424(b)(1)
Registration File No.: 333-34149
PROSPECTUS SUPPLEMENT
SEPTEMBER 3, 1997
(TO PROSPECTUS DATED AUGUST 22, 1997)
$500,000,000
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 $500,000,000 or the equivalent
thereof in one or more other currencies, composite currencies, or currency
units, subject to reduction as a result of the sale of certain other Debt
Securities. 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 (unless otherwise specified in the applicable Pricing Supplement) 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 transfers
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 OVER-ALLOT
IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, NOTES IN THE
OPEN MARKET.
References herein to "U.S. dollars" or "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
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"
or the "Offered 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 September 3, 1997
(the "Indenture") between the Company and The Chase Manhattan Bank, 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. $500,000,000 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 (as defined in the Prospectus) from time to time as
described in the accompanying Prospectus to the extent the aggregate
principal amount of such other Debt Securities exceeds $500,000,000. 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 or currency unit in which such Note is denominated
(the "Specified Currency") and, if other than the Specified Currency, the
currency or currency unit 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
S-4
<PAGE>
Currency Note (as defined below) the terms relating to the particular 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 "Certain United States Federal Income 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
a depositary (the "Depositary") which unless specified otherwise on the
applicable Pricing Supplement, will be The Depository Trust Company ("DTC"),
and registered in the name of a nominee of the Depositary (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.
DTC has advised the Company that DTC 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. DTC 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. DTC's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations, some of whom (and/or their
representatives) own DTC. Access to DTC'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.
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 Chase Manhattan
Bank, 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
S-5
<PAGE>
successor registrar), currently located at 450 West 33rd Street, New York
10001, or such other person or persons as may be specified on the applicable
Pricing Supplement; 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, (i) a depositary, as holder of Book-Entry
Notes, shall be entitled to receive payments of interest by wire transfer of
immediately available funds and (ii) 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 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 "--Repayment at the Noteholders'
Option; Repurchase" and unless otherwise provided in the applicable Pricing
Supplement.
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.
Interest payments on the Notes will accrue from and including the most
recent Interest Payment Date to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for, from and including
the Original Issue Date to but excluding the related Interest Payment Date,
the Maturity Date or any date of redemption, as the case may be. Each Note
will bear interest 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. Unless otherwise specified in the applicable
Pricing Supplement, interest will be calculated by reference to each period
(an "Interest Accrual Period") beginning on the Original Issue Date and
ending on (but excluding) the first Interest Payment Date and each successive
period beginning on (and including) an Interest Payment Date and ending on
(but excluding) the next succeeding Interest Payment Date, Maturity Date or
any date of redemption of a Note. Interest will be payable on each Interest
Payment Date and at maturity or on redemption, if any.
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)
S-6
<PAGE>
if the Company fails to pay such interest on such Interest Payment Date, such
defaulted interest will be paid 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.
S-7
<PAGE>
Commencing on the Initial Interest Reset Date, the rate at which interest
on such Floating Rate/Fixed Rate Note shall be payable shall be reset as of
each Interest Reset Date; provided, however, that (x) 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 (y) 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 any Interest Reset Date will be
the applicable rate as reset on such date. The interest rate applicable to
any other day is the interest rate from the immediately preceding Interest
Reset Date (or, if none, the Initial Interest 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, an "Interest Reset Date"). Unless otherwise specified in
the applicable Pricing Supplement, the Interest
S-8
<PAGE>
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 specified in the applicable Pricing Supplement as
either the Fixed Interest Rate or the interest rate in effect on the day
immediately preceding the Fixed Rate Commencement Date, or if no such Fixed
Interest Rate is so specified, the interest rate in effect thereon on the
date immediately preceding the Fixed Rate Commencement Date. 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 any
other place of payment with respect to the applicable Notes 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.
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).
S-9
<PAGE>
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 as of 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
Chase Manhattan Bank 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.
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
S-10
<PAGE>
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 same as the CD Rate
in effect for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the rate of interest shall be the Initial
Interest Rate).
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 same as the Commercial Paper
Rate for the immediately preceding Interest Reset Period (or, if there was no
such Interest Reset Period, the rate of interest shall be the Initial
Interest Rate).
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
Money Market Yield = D X 360
------------ 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.
S-11
<PAGE>
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 same as the
Federal Funds Rate in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of interest
shall be the Initial Interest Rate).
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.
(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
S-12
<PAGE>
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
the same as LIBOR in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of
interest shall be the Initial Interest Rate).
"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 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).
S-13
<PAGE>
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 same as the Treasury Rate in effect for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest shall be the Initial Interest
Rate).
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 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."
S-14
<PAGE>
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 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.
S-15
<PAGE>
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 "Certain United States Federal
Income Tax Considerations."
OPTIONAL REDEMPTION BY THE COMPANY
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 Dates" 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
S-16
<PAGE>
entitled "Option to Elect Repayment" duly completed, by the Trustee at
its corporate trust office (or such other address specified on the
applicable Pricing Supplement or 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 portion of the Book-Entry
Notes represented by such Global Securities repaid must direct the
participant of the Depositary through which they own their interest (each, a
"Participant") to direct the Depositary 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 the Depositary'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.
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.
S-17
<PAGE>
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. Notes denominated or payable in foreign currency units,
including ECU, are Foreign Currency Notes.
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 EC, 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.
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 otherwise specified on the applicable Pricing Supplement or 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.
Unless otherwise specified in the applicable Pricing Supplement, a holder
of a Foreign Currency Note may elect to receive payment in such Specified
Currency for all such payments and need not file a separate
S-18
<PAGE>
election for each such payment, and such election shall remain in effect
until revoked by written notice to the Paying Agent at its corporate trust
office in The City of New York received on a date prior to the Record Date
for the relevant Interest Payment Date or at least 10 calendar days prior to
the Maturity Date (or any Redemption Date or Repayment Date), as the case may
be; provided, that such election is irrevocable as to the next succeeding
payment to which it relates; if such election is made as to full payment on
this Note, such election may thereafter be revoked so long as the Paying
Agent is notified of the revocation within the time period set forth above.
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.
Except as set forth below with respect to Notes denominated or payable in
a Component Currency of the EC, if a Specified Currency (other than the U.S.
dollar) in which this Note is denominated or payable: (i) ceases to be
recognized by the government of the country which issued such currency or for
the settlement of transactions by public institutions of or within the
international banking community, (ii) is a currency unit and such currency
unit ceases to be used for the purposes for which it was established, or
(iii) is not available to the Company for making payments thereof due to the
imposition of exchange controls or other circumstances beyond the control of
the Company, in each such case as determined in good faith by the Company,
then with respect to each date for the payment of principal of and interest,
if any, on this Note denominated or payable in such Specified Currency
occurring after the last date on which such Specified Currency was so used
(the "Conversion Date"), the U.S. dollar or such Foreign Currency or currency
unit as may be specified by the Company (the "Substitute Currency") shall
become the currency of payment for use on each such payment date (but such
Specified Currency shall, at the Company's election, resume being the
currency of payment on the first such payment date preceded by 15 Business
Days during which the circumstances which gave rise to the change of currency
no longer prevail, in each case as determined in good faith by the Company).
The Substitute Currency amount to be paid by the Company to the Trustee and
by the Trustee or any Paying Agent to the Holder of this Note with respect to
such payment date shall be the Currency Equivalent or Currency Unit
Equivalent (each as defined below) of the Specified Currency as determined by
the Exchange Rate Agent (which determination shall be delivered in writing to
the Trustee not later than the fifth Business Day prior to the applicable
payment date) as of the Conversion Date or, if later, the date most recently
preceding the payment date in question on which such determination is
possible of performance, but not more than 15 days before such payment date
(such Conversion Date or date preceding a payment date as aforesaid being
called the "Valuation Date"). Any payment in a Substitute Currency under the
circumstances described above will not constitute an Event of Default.
The "Currency Equivalent" shall be determined by the Exchange Rate Agent
as of each Valuation Date and shall be obtained by converting the Specified
Currency (unless such Specified Currency is a currency unit) into the
Substitute Currency at the Market Exchange Rate (as defined below) on the
Valuation Date.
The "Currency Unit Equivalent" shall be determined by the Exchange Rate
Agent as of each Valuation Date and shall be the sum obtained by adding
together the results obtained by converting the Specified Amount of each
initial Component Currency into the Substitute Currency at the Market
Exchange Rate on the Valuation Date for such Component Currency.
As used herein:
(a) "Business Day" means 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 Notes denominated in a Specified Currency
other than U.S. dollars or ECU, such day that 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 (ii) with respect to Notes denominated in
ECU, a day that is a non-ECU clearing day as determined by the ECU Banking
Association in Paris;
S-19
<PAGE>
(b) "Component Currency" means any currency which, on the Conversion
Date, was a component currency of the relevant currency unit, including
without limitation ECU;
(c) "Market Exchange Rate" means, as of any date, for any currency or
currency unit the noon U.S. dollar buying rate for that currency or
currency unit, as the case may be, for cable transfers quoted in New York
City on such date as certified for customs purposes by the Federal Reserve
Bank of New York. If such rates are not available for any reason with
respect to one or more currencies or currency units for which an Exchange
Rate is required, the Exchange Rate Agent will use, in its sole discretion
and without liability on its part, such quotation of the Federal Reserve
Bank of New York as of the most recent available date, or quotations from
one or more major banks in New York City or in the country of issue of the
currency or currency unit in question, or such other quotations as the
Exchange Rate Agent shall deem appropriate. Unless otherwise specified by
the Exchange Rate Agent if there is more than one market for dealing in any
currency or currency unit by reason of foreign exchange regulations or
otherwise, the market to be used in respect of such currency or currency
unit will be that upon which a nonresident issuer of securities designated
in such currency or currency unit would, as determined in its sole
discretion and without liability on the part of the Exchange Rate Agent,
purchase such currency or currency unit in order to make payments in
respect of such securities; and
(d) "Specified Amount" of a Component Currency means the number of units
(including decimals) which such Component Currency represented in the
relevant currency unit, on the Conversion Date or, if ECU and such currency
unit is being used for settlement of transactions by public institutions of
or within the European Communities or was so used after the Conversion
Date, the Valuation Date or the last date the currency unit was so used,
whichever is later. If after such date the official unit of any Component
Currency is altered by way of combination or subdivision, the Specified
Amount of such Component Currency shall be divided or multiplied in the
same proportion. If after such date two or more Component Currencies are
consolidated into a single currency, the respective Specified Amounts of
such Component Currencies shall be replaced by an amount in such single
currency equal to the sum of the respective Specified Amounts of such
consolidated Component Currencies expressed in such single currency, and
such amount shall thereafter be a Specified Amount and such single currency
shall thereafter be a Component Currency. If after such date any Component
Currency shall be divided into two or more currencies, the Specified Amount
of such Component Currency shall be replaced by specified amounts of such
two or more currencies, the sum of which, at the Market Exchange Rate of
such two or more currencies on the date of such replacement, shall be equal
to the Specified Amount of such former Component Currency and such amounts
shall thereafter be Specified Amounts an such currencies shall thereafter
be Component Currencies.
All determinations referred to above made by the Company or its agents
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.
NOTES DENOMINATED IN THE CURRENCIES OF EC MEMBER COUNTRIES
If, pursuant to the treaty establishing the European Community, as amended
by the treaty on European Union (the "Treaty"), one or more of the Austrian
schilling, Belgian franc, Danish krone, Dutch guilder, Finish markka, French
franc, German mark, Greek drachma, Irish pound, Italian lire, Luxembourg
franc, Pound sterling, Portuguese escudo, Spanish peseta or Swedish krona is
replaced by the ECU as a currency in its own right, then all payments in
respect of this Note required to be made in any such currency shall be
effected in ECU as a currency in its own right in conformity with legally
applicable measures taken pursuant to, or by virtue of, the Treaty and such
payment will not constitute
S-20
<PAGE>
an Event of Default. If the Specified Currency is the ECU and if the ECU is
no longer used as either the unit of account of the European Communities or a
currency in its own right, replacing all or some of the currencies of the
member countries of the European Communities, then the Substitute Currency
shall be a component currency of the ECU or U.S. dollars. If changes are made
by the European Communities to the nature or composition of the ECU,
references herein to the ECU shall be construed as references to the ECU as
so changed. References herein to the ECU as a currency in its own right shall
be construed as including references to the Euro.
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.
S-21
<PAGE>
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.
S-22
<PAGE>
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.
S-23
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Wilmer, Cutler & Pickering, special tax counsel to the
Company, the following summary accurately describes the principal United
States federal income tax consequences of the purchase, ownership and
disposition of the Notes to initial holders purchasing Notes at the "issue
price" (as defined below). This summary is based on the Internal Revenue Code
of 1986, as amended (the "Code"), administrative pronouncements, judicial
decisions and existing and proposed Treasury regulations, changes to any of
which subsequent to the date of this Prospectus Supplement may affect the tax
consequences described herein. Wilmer, Cutler & Pickering undertakes no
obligation to supplement this opinion to reflect any changes in laws that may
occur after the date hereof.
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 the holder's
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, the term "U.S. Holder" means the beneficial owner
of a Note that is: (i) for United States federal income tax purposes a
citizen or resident of the United States (including certain former citizens
and former long-term residents), (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, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust with respect to the administration of which a court within the
United States is able to exercise primary supervision and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust.
As used in this summary, the term "Non-U.S. 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 foreign
estate, (iv) a foreign trust or (v) 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 "Certain United States Federal Income 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 or accrued on Notes will be taxable to U.S. Holders as
ordinary interest income. Interest will be included in U.S. Holders' income
at the time such payments are accrued or are received in accordance with the
U.S. Holder's method of accounting for United States federal income tax
purposes, unless the Notes are classified as Original Issue Discount Notes.
The time at which interest paid or accrued with respect to Original Issue
Discount Notes is included in a U.S. Holder's income is described below.
S-24
<PAGE>
ORIGINAL ISSUE DISCOUNT NOTES
A Note that is issued for an issue price that is less than its stated
redemption price at maturity will generally be considered to have been issued
at an original issue discount for United States federal income tax purposes
(an "Original Issue Discount Note"). The "issue price" of a Note equals the
first price at which a substantial amount of the Notes is sold to the public
for money (not including sales to bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers). The "stated redemption price at maturity" of a Note equals the
sum of all payments required under the Note other than payments of qualified
stated interest.
"Qualified stated interest" generally means 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. For special rules concerning
interest payments on Notes with a fixed term of one year or less, see
"Short-Term Notes" below. In addition, interest unconditionally payable at
least annually with respect to Floating Rate Notes may in certain
circumstances be treated as qualified stated interest. 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.
See "Floating Rate and Indexed Notes" below.
A Note will not be considered to have original issue discount if the
difference between the Note's stated redemption price at maturity and its
issue price is less than a de minimis amount, i.e., 1/4 of 1 percent of the
stated redemption price at maturity multiplied by the number of complete
years to maturity. 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. Special rules apply for determining whether a Note that bears interest
for one or more accrual periods at a rate below the rate applicable for the
remaining term of such Note (e.g., Notes with teaser rates or interest
holidays) has qualified stated interest or more than a de minimis amount of
original issue discount.
A U.S. Holder of Original Issue Discount Notes will be required to include
qualified stated interest payments in income as such payments are received or
accrued in accordance with the U.S. Holder's method of accounting for federal
income tax purposes. U.S. Holders of Original Issue Discount Notes (other
than Short-Term Obligations) will be required to include original issue
discount in income for federal income tax purposes as it accrues, regardless
of their accounting method, in accordance with a constant yield method based
on a compounding of interest. (The rules for including interest on Short-Term
Obligations are described below.) As a consequence, U.S. Holders will be
required to include interest on Original Issue Discount Notes in income
before receiving the corresponding interest payments.
In general, the amount of original issue discount included in income by
the initial U.S. Holder of an Original Issue Discount Note will be the sum of
the daily portions of original issue discount with respect to such Original
Issue Discount Note for each day during the taxable year (or portion of the
taxable year) on which the U.S. Holder held the Original Issue Discount Note.
The "daily portion" of original issue discount on any Original Issue Discount
Note is determined by allocating to each day in any accrual period a ratable
portion of the original issue discount allocable to that accrual period. An
"accrual period" may be of any length and the accrual periods may vary in
length over the term of the Original Issue Discount Note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the final day of an accrual period or
on the first day of an accrual period. The amount of original issue discount
allocable to each accrual period is generally equal to the difference between
(i) the product of the Original Issue Discount Note's adjusted issue price at
the beginning of such accrual period and its yield to maturity (appropriately
adjusted to take into account the length of the particular accrual period)
and (ii) the amount of any qualified stated interest payments
S-25
<PAGE>
allocable to such accrual period. The "adjusted issue price" of an Original
Issue Discount Note at the beginning of any accrual period is the sum of the
issue price of the Original Issue Discount Note plus the amount of original
issue discount allocable to all prior accrual periods minus the amount of any
prior payments on the Original Issue Discount Note that were not qualified
stated interest payments. Under these rules, U.S. Holders generally will have
to include in income increasingly greater amounts of original issue discount
in successive accrual periods.
Short-Term Notes. Interest payments on a note with a fixed term of one
year or less ("Short-Term Notes") cannot qualify as qualified stated
interest. A cash method U.S. Holder of a Short-Term Note is not required to
accrue original issue discount with respect to such Notes on a current basis
unless it elects to do so. If a cash method U.S. Holder does not so elect,
any gain realized on the sale, exchange, or retirement of the Short-Term Note
will be ordinary income to the extent of the original issue discount which
has accrued on a straight-line basis through the date of the Note's sale,
exchange or retirement. A cash method U.S. Holder reporting on this basis
will be required to defer deductions for any interest paid on indebtedness
incurred to purchase or carry the Short-Term Note in an amount up to the
amount of the interest income deferred on the Short-Term Note until the
taxable period in which the deferred interest income is taken into account.
U.S. Holders who report income for federal income tax purposes on the
accrual method and certain other U.S. Holders, including banks and dealers in
securities, as well as cash method U.S. Holders who elect to do so, are
required to include original issue discount on Short-Term Notes in income as
it accrues on a straight-line basis. U.S. Holders may elect to accrue
acquisition discount (the difference between the U.S. Holder's basis in the
Note and its stated redemption price at maturity) rather than original issue
discount on a straight-line basis. In addition, in lieu of accruing either
original issue discount or acquisition discount on a straight-line basis, a
U.S. Holder may elect to accrue on the basis of a constant yield to maturity
and daily compounding.
U.S. Holders should consult their tax advisors concerning (i) the
desirability of any of the foregoing elections and (ii) the tax treatment of
interest paid on Short-Term Notes prior to the date of their retirement.
Aggregation of Certain Notes. The OID Regulations contain aggregation
rules which require in certain circumstances that 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.
Put and Call Options. Certain of the Notes (i) may be redeemable at the
option of the Company prior to their stated maturity (a "call option") and/or
(ii) may be repayable at the option of the holder prior to their stated
maturity (a "put option"). Notes containing such features may be subject to
rules that differ from the general rules discussed above. Investors intending
to purchase Notes with such features should consult their own tax advisors,
because the original issue discount consequences will depend, in part, on the
particular terms and features of the purchased Notes.
Constant Yield Election. U.S. Holders may generally, upon election,
include in income all interest (including stated interest, acquisition
discount, original issue discount, de minimis original issue discount, market
discount, de minimis market discount, and unstated interest, as adjusted by
any amortizable bond premium or acquisition premium) that accrues on a debt
instrument by using the constant yield method applicable to original issue
discount, subject to certain limitations and exceptions. This election may be
made separately for each debt instrument or class of debt instrument.
FLOATING RATE AND INDEXED NOTES
Floating Rate Notes and Indexed Notes (hereinafter "Variable Notes")
acquired by U.S. Holders are subject to special rules for determining
qualified stated interest or original issue discount. A Variable Note will
qualify as a "variable rate debt instrument" if (i) its issue price does not
exceed the total
S-26
<PAGE>
noncontingent principal payments due under the Variable Note by more than a
specified de minimis amount and (ii) it provides for stated interest, paid or
compounded at least annually, at current values of (a) one or more qualified
floating rates, (b) a single fixed rate and one or more qualified floating
rates, (c) a single objective rate, or (d) a single fixed rate and a single
objective rate that is a qualified inverse floating rate. The specified de
minimis amount for the excess of issue price over noncontingent principal
payments is the lesser of (i) 1.5 percent times the product of the fixed
principal payments and the number of complete years to maturity from the
issue date or (ii) 15 percent of the total fixed principal payments.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating
rate will generally not itself constitute a qualified floating rate, a
variable rate equal to the product of a qualified floating rate and a fixed
multiple that is greater than .65 but no more than 1.35 will constitute a
qualified floating rate. A variable rate equal to the product of a qualified
floating rate and a fixed multiple that is greater than .65 but not more than
1.35, increased or decreased by a fixed rate, will also constitute a
qualified floating rate. In addition, two or more qualified floating rates
that can reasonably be expected to have approximately the same values
throughout the term of the Variable Note (e.g., two or more qualified
floating rates with values within 25 basis points of each other as determined
on the Variable Note's issue date) will be treated as a single qualified
floating rate. Notwithstanding the foregoing, a variable rate that would
otherwise constitute a qualified floating rate but which is subject to one or
more restrictions such as a maximum numerical limitation (i.e., a cap), a
minimum numerical limitation (i.e., a floor), or a minimum amount of increase
or decrease (i.e., a governor) may, under certain circumstances, fail to be
treated as a qualified floating rate unless such cap, floor or governor is
fixed throughout the term of the Note or is not expected, as of the issue
date, to significantly affect the expected yield on the Note (determined
without regard to the cap, floor or governor).
An "objective rate" is a rate that is not itself a qualified floating rate
but which is determined using a single fixed formula and is based on
objective financial or economic information. A rate will not qualify as an
objective rate if it is based on information that is within the control of
the issuer (or a related party) or that is unique to the circumstances of the
issuer (or a related party), such as dividends, profits, or the value of the
issuer's stock (although a rate does not fail to be an objective rate merely
because it is based on the credit quality of the issuer). A "qualified
inverse floating rate" is any objective rate where such rate is equal to a
fixed rate minus a qualified floating rate, as long as variations in the rate
can reasonably be expected to inversely reflect contemporaneous variations in
the qualified floating rate.
If a Variable Note provides for stated interest at a fixed rate for an
initial period of one year or less followed by a variable rate that is either
a qualified floating rate or an objective rate and the value of the variable
rate on the issue date is intended to approximate the fixed rate (e.g., the
value of the variable rate on the issue date does not differ from the value
of the fixed rate by more than 25 basis points), the fixed rate and the
variable rate together will constitute either a single qualified floating
rate or objective rate, as the case may be.
If a Variable Note provides for stated interest at either a single
qualified floating rate or a single objective rate throughout its term and
the interest on such Note is unconditionally payable at least annually, all
stated interest on the Note will constitute qualified stated interest, and
will be taxed as described above under "Original Issue Discount Notes." Such
a Variable Note will not have original issue discount unless it is issued for
an amount that is less than its stated principal amount, and the amount of
such original issue discount is more than the de minimis amount described
above under "Original Issue Discount Notes." If such a Variable Note is
issued with original issue discount, the amount of original issue discount
that accrues during an accrual period is determined under the rules
applicable to fixed rate debt instruments by converting the variable rate
into an equivalent fixed rate. The qualified stated interest allocable to an
accrual period is increased (or decreased) if the interest actually paid
during an accrual period exceeds (or is less than) the interest assumed to be
paid during the accrual period pursuant to the foregoing rules.
If a variable rate debt instrument is not described in the preceding
paragraph and does not provide for any interest payable at a fixed rate, the
amount of original issue discount and qualified stated interest
S-27
<PAGE>
is determined by converting the variable rate debt instrument into an
equivalent fixed rate debt instrument. In general, this is accomplished by
substituting a fixed interest rate that (i) equals the value of each
qualified floating rate or qualified inverse floating rate as of the Variable
Note's issue date or (ii) reflects the yield that is reasonably expected for
an objective rate (other than a qualified inverse floating rate). If a
Variable Note provides for stated interest at a fixed rate in addition to one
or more qualified floating rates or a qualified inverse floating rate, the
fixed rate is first converted into a qualified floating rate (or qualified
inverse floating rate) with a value on the issue date equal to that of the
fixed rate. An equivalent fixed rate is then substituted for the qualified
floating rate or qualified inverse floating rate, as described above. After
the fixed rates are determined, an equivalent fixed rate debt instrument is
constructed, with terms identical to those provided under the variable rate
debt instrument except that fixed rates are substituted for the qualified
floating rates or objective rates. The amount of qualified stated interest
and original issue discount is then determined by applying the rules
described above under "Original Issue Discount Notes." The amount of
qualified stated interest or original issue discount attributable to an
accrual period will be increased (or decreased) if the interest actually
accrued or paid during an accrual period exceeds (or is less than) the
interest assumed to be accrued or paid during the accrual period under the
equivalent fixed rate debt instrument.
Contingent Debt Instruments. If a Variable Note does not qualify as a
"variable rate debt instrument," the Variable Note will be treated as a
"contingent payment debt instrument." In general, a U.S. Holder of a
contingent payment debt instrument must determine the amount of interest to
take into account during each accrual period by constructing a projected
payment schedule, as of the issue date, consisting of all noncontingent
payments and the projected amount of each contingent payment. In addition,
any gain recognized by a U.S. Holder on the sale, exchange, or retirement of
a contingent payment debt instrument will generally be treated as ordinary
interest income (and loss will be ordinary loss to the extent the amount of
interest previously included in income exceeds the amount of any
noncontingent payments and the projected amount of any contingent payments
previously made or projected to have been made on the Variable Note). U.S.
Holders of Variable Notes classified as contingent payment debt instruments
should consult their tax advisors regarding the federal income tax
consequences of the ownership and disposition of such Notes.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a U.S. Holder will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and such U.S. 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 which has not
previously been included in income. Such amounts are treated as payments of
interest. See "--Payments of Interest" above. A U.S. Holder's adjusted tax
basis in a Note will equal the U.S. Holder's cost of acquiring the Note,
increased by the amount of original issue discount the U.S. Holder previously
included in income with respect to such Note and reduced by any amortized
bond premium, principal payments, and the amount of any other payments except
payments of qualified stated interest (as defined above).
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 Note, to the
extent of any original issue discount or acquisition discount not previously
included in the U.S. Holder's taxable income). See "--Original Issue Discount
Notes--Short Term Notes" above. For certain noncorporate U.S. Holders
(including individuals), the rate of taxation of capital gain will depend
upon (i) the U.S. Holder's holding period for the Note (with the lowest rate
available only for a Note held more than 18 months) and (ii) the U.S.
Holder's marginal tax rate for ordinary income. U.S. Holders should consult
their tax advisors with respect to applicable rates and holding periods, and
netting rules for capital losses.
PURCHASERS OF NOTES AT OTHER THAN ORIGINAL ISSUE PRICE OR DATE
The foregoing does not discuss special rules which may affect the
treatment of purchasers that acquire Notes either (a) other than at the time
of original issuance or (b) at the time of original issuance other than at
the issue price, including those provisions of United States tax law relating
to the treatment
S-28
<PAGE>
of "market discount," "acquisition premium," and "amortizable bond premium."
Such purchasers should consult their tax advisors as to the consequences to
them of the acquisition, ownership and disposition of the Notes.
EXTENSION OF MATURITY AND RESET OF INTEREST RATE
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. U.S. Holders should consult with their own tax advisors as
to the United States federal income tax consequences of such a reset or
extension.
FOREIGN CURRENCY-DENOMINATED NOTES
A U.S. Holder who uses the cash method of accounting and who receives a
payment of interest (including qualified stated interest on an Original Issue
Discount Note) in a foreign currency with respect to a Foreign
Currency-Denominated Note (other than a payment of interest includible as
original issue discount on an Original Issue Discount Note) will be required
to include the U.S. dollar value of the foreign currency payment (determined
on the date the payment is received) in income when it is received regardless
of whether the payment is in fact converted to U.S. dollars at that time, and
the U.S. dollar value will be the U.S. Holder's tax basis in the foreign
currency. If a cash method U.S. Holder receives a payment described above in
U.S. dollars pursuant to an option available under such a Foreign
Currency-Denominated Note, the U.S. Holder will be required to include the
amount of the payment in income when it is received.
Interest income (including original issue discount) that accrues on a
Foreign Currency-Denominated Note is to be determined in the relevant foreign
currency. A U.S. Holder will be required to include in income the U.S. dollar
value of the amount of foreign-denominated interest income (including
original issue discount) that has accrued and is otherwise required to be
taken into account with respect to a Foreign Currency-Denominated Note during
an accrual period (other than payments of interest to a cash method U.S.
Holder described in the preceding paragraph). The U.S. dollar value of the
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. The U.S. Holder will recognize ordinary income or
loss with respect to accrued interest income on the date payment of the
interest is actually received or the date the Foreign Currency-Denominated
Note is sold, exchanged or retired. The amount of ordinary income or loss
recognized will equal the difference between (i) the U.S. dollar value of the
foreign currency payment received (determined on the date the payment is
received or the Note is sold, exchanged or retired) with respect to the
accrual period (or, where a U.S. Holder receives U.S. dollars, the amount of
the payment with respect to the accrual period) and (ii) the U.S. dollar
value of the interest income that accrued during the accrual period (as
determined above). A U.S. Holder may elect to translate interest income
described in this paragraph (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 U.S. 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.
A U.S. Holder will recognize ordinary income or loss attributable to
fluctuations in currency exchange rates with respect to the principal amount
of a Foreign Currency-Denominated Note when principal payments are received
or the Note is sold, exchanged or retired. The amount of income or loss will
equal the difference between (i) the U.S. dollar value of the relevant
foreign currency-denominated principal amount determined at the spot rate on
the date the principal payment is received or the Note is sold, exchanged or
retired and (ii) the U.S. dollar value of the relevant foreign
currency-denominated principal amount determined at the spot rate on the date
the U.S. Holder acquired the Note.
Upon the sale, exchange or retirement of a Foreign Currency-Denominated
Note, the amount of a U.S. Holder's gain or loss attributable to fluctuations
in currency exchange rates with respect to both
S-29
<PAGE>
principal and accrued interest will be limited to the total gain or loss
realized on the disposition of the Note. Any gain or loss realized by the
U.S. Holder in excess of that attributable to fluctuations in currency
exchange rates will be capital gain or loss (except, in the case of a
Short-Term Note, to the extent of any original issue discount or acquisition
discount not previously included in the U.S. Holder's income). A special rule
for purchases and sales of publicly traded Foreign Currency-Denominated Notes
by a cash method taxpayer requires amounts of foreign currency paid or
received to be 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.
A U.S. Holder will have a tax basis in any foreign currency received as
payment of interest or principal or upon 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 payment, sale, exchange or
retirement. Any gain or loss realized by a U.S. 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.
Foreign currency gains or losses described in this section will not be
considered interest income or expense, even if attributable to payments of
interest. The source of such foreign currency gains or losses will be
determined by reference to the residence of the U.S. Holder or the "qualified
business unit" of the U.S. Holder on whose books the Note is properly
reflected. The U.S. tax consequences of a U.S. Holder's investment in Notes
denominated in more than one foreign currency will be set forth in the
applicable pricing supplement with respect to such Notes.
BACKUP WITHHOLDING AND INFORMATION REPORTING FOR U.S. HOLDERS
Information reporting to the Internal Revenue Service is required for
interest payments and original issue discount accruals for certain
noncorporate U.S. Holders (including individuals). These noncorporate U.S.
Holders may be subject to backup withholding at a rate of 31 percent 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 U.S. 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. The
application for exemption is available by providing a properly completed
Internal Revenue Service Form W-9. U.S. 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 U.S. Holder will
be allowed as a credit against such U.S. Holder's United States federal
income tax liability and may entitle such U.S. Holder to a refund, provided
that the required information is furnished to the Internal Revenue Service.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
INCOME AND WITHHOLDING TAX
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
Non-U.S. Holder will not be subject to the 30 percent United States federal
withholding tax, provided that, in the case of interest, (i) such Non-U.S.
S-30
<PAGE>
Holder does not own, actually or constructively, 10 percent 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 Non-U.S. 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 Non-U.S. 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 percent) 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
Non-U.S. 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 that the beneficial owner
of the Note is not a U.S. Holder. The financial institution must certify
under penalties of perjury, that such statement has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnish the payor with a copy thereof. 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 U.S. 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 contingent interest within
the meaning of this provision.
If a Non-U.S. 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
Non-U.S. 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 U.S. Holder. See "--Tax Consequences to United States Holders" above.
In lieu of the certificate described in the preceding paragraph, such a
Non-U.S. Holder will be required to provide to the Company a properly
executed United States Internal Revenue Service Form 4224 or successor form
in order to claim an exemption from withholding tax. In addition, if such
Non-U.S. Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30 percent (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 Non-U.S. Holder if such
interest or gain, as the case may be, is effectively connected with the
conduct by the Non-U.S. 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 percent 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.
S-31
<PAGE>
Each Non-U.S. Holder of a Note should be aware that if it does not
properly provide the required Internal Revenue Service form, or if the
Internal Revenue Service form is not properly transmitted to and received by
the United States person otherwise required to withhold United States federal
income tax, interest on the Note may be subject to United States withholding
tax at a 30 percent rate.
BACKUP WITHHOLDING AND INFORMATION REPORTING FOR NON-U.S. HOLDERS
Under certain circumstances, the United States Internal Revenue Service
requires information reporting and backup withholding of United States
federal income tax at a rate of 31 percent with respect to payments to
certain noncorporate Non-U.S. Holders (including individuals). Information
reporting and backup withholding will apply unless such noncorporate Non-U.S.
Holders certify to the withholding agent that the beneficial owner of the
Note is not a U.S. Holder. This certification requirement will generally be
satisfied by the certification provided to avoid the 30 percent withholding
tax (described above).
The payment of the proceeds of a disposition of a Note by a Non-U.S.
Holder to or through the United States office of a broker or through a
non-United States branch of a United States broker generally will be subject
to information reporting and backup withholding at a rate equal to 31 percent
of the gross proceeds unless the Non-U.S. Holder certifies on Internal
Revenue Service Form W-8 that the beneficial owner of the Note is not a U.S.
Holder or otherwise establishes an exemption. The payment of the proceeds of
a disposition of a note by a Non-U.S. Holder to or through a non-United
States office of a non-United States broker will not be subject to backup
withholding or information reporting unless the non-United States broker has
certain United States relationships.
Non-U.S. Holders of Notes should consult their tax advisors regarding the
application of withholding, 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 Non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such Non-U.S. Holder's
United States federal income tax liability and may entitle such Non-U.S.
Holder to a refund, provided that the required information is furnished to
the United States Internal Revenue Service.
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 U.S. HOLDERS AND NON-U.S. 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.
S-32
<PAGE>
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 as 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.
S-33
<PAGE>
[THIS PAGE INTENTIONALY LEFT BLANK]
<PAGE>
PROSPECTUS
AUGUST 22, 1997
$1,000,000,000
DONALDSON, LUFKIN & JENRETTE, INC.
DEBT SECURITIES
Donaldson Lufkin & Jenrette, Inc. (the "Company") may from time to time
offer, together or separately, (i) senior debt securities ("Senior Debt
Securities") or (ii) subordinated debt securities ("Subordinated Debt
Securities") (collectively, the "Debt Securities").
The Debt Securities offered pursuant to this Prospectus 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. The aggregate initial
public offering price of the securities to be offered by this Prospectus and
such other prospectuses shall not exceed $1,000,000,000 (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: 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. Unless otherwise
indicated in the Prospectus Supplement, the Company does not intend to list
any of the Debt 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>
CERTAIN PERSONS PARTICIPATING IN THE DISTRIBUTION OF THE OFFERED
SECURITIES MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE
AFFECT THE PRICE OF THE OFFERED SECURITIES OR OTHER DEBT SECURITIES.
SPECIFICALLY, THE AGENTS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING, AND
MAY BID FOR, AND PURCHASE, OFFERED SECURITIES IN THE OPEN MARKET. SUCH
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME AND WILL BE
CARRIED OUT IN ACCORDANCE WITH APPLICABLE LAWS AND REGULATIONS.
2
<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 (the
"NYSE"), 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,
1996, Quarterly Report on Form 10-Q for the quarter ended March 31, 1997,
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and Current
Report on Form 8-K filed on April 11, 1997, 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).
3
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Offered
Securities in any market-making transaction with which this Prospectus may be
delivered.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED
---------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges (1)............... 1.21 1.20 1.10 1.11 1.16 1.17
</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.
4
<PAGE>
THE COMPANY
The Company is a leading integrated investment and merchant bank that
serves institutional, corporate, governmental and individual clients. The
Company's businesses include securities underwriting, sales and trading;
merchant banking; financial advisory services; investment research;
correspondent brokerage services; and asset management. While results have
fluctuated from year to year, for the years 1992 through 1996, the Company's
total revenues and net income increased by a compound annual growth rate of
20.4% and 18.7%, respectively. The Company's average annual after-tax return
on common equity for the past five years was 23.6%. At June 30, 1997, the
Company had total assets of $69.7 billion and total stockholders' equity of
$1.8 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 historically has 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, composed 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. 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 has achieved an average annual internal rate of
return substantially higher than 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. In addition, the Company recently
acquired Phoenix Group Limited, a leading financial advisory firm in the
United Kingdom.
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 Fixed-Income
division provides institutional clients with research, trading and sales
services for a broad range of 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. 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 Company's Financial Services Group consists of those businesses that
serve individual investors and financial intermediaries. The group's largest
unit, the Pershing Division, provides trade execution,
5
<PAGE>
clearing and communications services. The group's three other businesses deal
primarily with individual investors. DLJ Asset Management provides money
management and trust services to corporations, high-net-worth individuals and
families. The Company's 300-broker Investment Services Group provides a full
range of traditional, research-based brokerage services, and PC Financial
Network is one of the country's largest on-line discount brokerage services.
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 NYSE to be owned publicly. Fifteen years later,
the Company was purchased by The Equitable Life Assurance Society of the
United States. Prior to October 1995, the Company was an independently
operated, wholly owned (direct and indirect) subsidiary of The Equitable
Companies Incorporated ("EQ") (EQ and its subsidiaries other than the
Company, collectively, "Equitable"). After the completion of an initial
public offering in October 1995, Equitable's ownership in the Company was
reduced from 100% to 80.2%. Equitable, which as of March 31, 1997, owned
approximately 78.2% of the Company's issued and outstanding common stock, is
a diversified financial services organization and one of the world's largest
investment management organizations. AXA-UAP is EQ's largest stockholder,
beneficially owning at March 31, 1997, 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.
6
<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 August 8, 1997, the Company had
55,801,730 shares of Common Stock outstanding. In October 1996, the Company
exercised its option under the terms of the $8.83 Cumulative Preferred Stock
agreement to exchange all outstanding shares of Cumulative Exchangeable
Preferred Stock for $225 million in aggregate principal amount of 9.58%
Subordinated Exchange Notes due October 15, 2003. In November 1996, the
Company issued 4,000,000 shares of Fixed/Adjustable Rate Cumulative Preferred
Stock, Series A, with a liquidation preference of $50 per share. 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 NYSE 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 Company has designated 4,000,000 shares of Preferred Stock
as Fixed/Adjustable Rate Cumulative Preferred Stock, Series A.
As of June 30, 1997, the Company had outstanding 4,000,000 shares of
Fixed/Adjustable Rate Cumulative Preferred Stock, Series A (the "Series A
Preferred Stock") with an aggregate liquidation value of $200 million. The
Series A Preferred Stock is entitled to cumulative cash dividends, as, if and
when declared by the Board of Directors or a duly authorized committee
thereof, out of funds legally available therefor. The initial dividend for
the dividend period commencing on November 22, 1996 to (but excluding)
February 28, 1997 was $0.8085 per share and was payable on February 28, 1997.
Thereafter, dividends on the Series A Preferred Stock will be payable
quarterly, as, if and when declared by the Board of Directors of the Company
on February 28, May 30, August 30 and November 30 of each year (each a
"Dividend Payment Date") at the annual rate of 5.94% or $2.97 per share
through November 30, 2001. After November 30, 2001, the applicable rate per
annum for each dividend period beginning on or after November 30, 2001 will
be equal to 0.50% plus the highest of three pre-selected rates as determined
in advance of such dividend period, but not less than 6.44% nor greater than
12.44% (without taking into account any adjustments). The holders of shares
of the Series A Preferred Stock generally will not be entitled to vote,
unless the equivalent of six quarterly dividends payable on the Series A
Preferred Stock or any other class or series of preferred stock is in default
or as expressly required by applicable law. On or after November 30, 2001,
each share of the Series A Preferred Stock will be redeemable by the Company,
in whole or in part, out of funds legally available therefor, at a redemption
price of $50 per share, together in each case with accrued and unpaid
dividends (whether or not declared) to the date fixed
7
<PAGE>
for redemption. Holders of the Series A Preferred Stock will have no right to
require redemption of the Series A Preferred Stock, and the Company may not
redeem the Series A Preferred Stock prior to November 30, 2001 except under
certain limited circumstances.
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. The Senior Debt Securities may be issued
under an indenture (the "Senior Debt Indenture") to be entered into between
Donaldson, Lufkin & Jenrette, Inc., as issuer, and a trustee to be named in
the applicable Prospectus Supplement (the "Senior Debt Securities Trustee").
The Subordinated Debt Securities may be issued under an indenture (the
"Subordinated Debt Indenture") to be entered into between Donaldson, Lufkin &
Jenrette, Inc., as issuer and a trustee to be named in the applicable
Prospectus Supplement (the "Subordinated Debt Securities 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 Senior Debt Securities Trustee and the Subordinated
Debt Securities Trustee, in their capacity as trustee under either or both of
the Indentures, are individually referred to herein as the "Trustee" and
collectively as the "Trustees." Defined terms with respect to the description
of the Debt Securities shall have the meaning set forth below in "Certain
Definitions."
Forms of the Indentures have been or will be incorporated by reference or
included herein as exhibits to the Registration Statement of which this
Prospectus is a part and will also be available for inspection at the offices
of the Trustees. The Indentures will be 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,
8
<PAGE>
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 currency units or 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 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 (the "Depositary"),
which will be specified in the accompanying Prospectus Supplement. The Global
Securities will be registered in the name of the Depositary or its nominee.
Participants of the Depositary may include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other
organizations. Access to the Depositary's book-entry system may also be
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with participants, 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 or another clearing
agency whose participants' accounts at that clearing agency will be credited
as 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 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
a 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
9
<PAGE>
Global Security will not be entitled to have the Debt Securities represented
thereby registered in their 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.
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 receiving
any records relating to such beneficial ownership interests.
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 in other cases specified in the Prospectus Supplement, 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.
Other specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
and a description of the Depositary will be provided in the Prospectus
Supplement.
SENIOR DEBT
Payment of the principal of, premium, if any, and interest, if any, 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, if any, 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.
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 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
10
<PAGE>
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.
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
11
<PAGE>
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 Donaldson, Lufkin & Jenrette
Securities Corporation ("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.
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.
12
<PAGE>
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 officer's 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)
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
13
<PAGE>
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; provided further, however,
that the Trustee shall not be charged with knowledge of any such default
unless written notice thereof shall have been given to the Trustee by the
Company, by the holder or an agent of the holder of any such indebtedness, by
the Trustee then acting under any indenture or other instrument under which
such default shall have occurred, or by the Holders of not less than 25% in
the aggregate principal amount of the Debt Securities at the time
outstanding; (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
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
14
<PAGE>
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), but no
such waiver or rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon. (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.
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 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
15
<PAGE>
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 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)
16
<PAGE>
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 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
17
<PAGE>
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 in 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
pay principal of and interest on the Debt Securities, 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. 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)
18
<PAGE>
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: (i) 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; (ii) 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; (iii) to comply with any
requirements of the Commission in connection with the qualification of the
applicable Indenture under the Trust Indenture Act; (iv) 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;
(v) 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; (vi) to provide for uncertificated or unregistered Debt
Securities and to make all appropriate changes for such purpose; or (vii) 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
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)
19
<PAGE>
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 Chase Manhattan Bank and its affiliates.
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 Debt Securities and certain other legal matters in connection
with the offering of the Offered Securities will be passed upon by Michael A.
Boyd, Senior Vice President and General Counsel to the Company, and Wilmer,
Cutler & Pickering. Mr. Boyd owns 8,033 shares of Common Stock and 14,433
restricted stock units of the Company and holds options to purchase 39,772
shares of Common Stock. Wilmer, Cutler & Pickering 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, 1996 and 1995, and for each of the years in
the three-year period ended December 31, 1996, have been incorporated by
reference in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in
accounting and auditing.
20
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
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
REPRESENTATIONS 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<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
Certain United States Federal Income Tax
Considerations ........................... S-24
Plan of Distribution ...................... S-33
PROSPECTUS
Available Information ..................... 3
Incorporation of Certain Information by
Reference ................................ 3
Use of Proceeds ........................... 4
Ratio of Earnings to Fixed Charges ....... 4
The Company ............................... 5
Description of Capital Stock .............. 7
Description of Debt Securities ............ 8
Plan of Distribution....................... 20
Legal Matters ............................. 20
Experts.................................... 20
</TABLE>
$500,000,000
DONALDSON, LUFKIN &
JENRETTE, INC.
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
PROSPECTUS SUPPLEMENT
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SEPTEMBER 3, 1997
