<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration File No.: 333-40925
PROSPECTUS SUPPLEMENT
JANUARY 6, 1998
(TO PROSPECTUS DATED DECEMBER 3, 1997)
3,500,000 SHARES
DONALDSON, LUFKIN & JENRETTE, INC.
FIXED/ADJUSTABLE RATE CUMULATIVE
PREFERRED STOCK, SERIES B
This Prospectus Supplement relates to 3,500,000 shares of Fixed/Adjustable
Rate Cumulative Preferred Stock, Series B, $50 liquidation preference per
share (the "Preferred Stock"), of Donaldson, Lufkin & Jenrette, Inc. (the
"Company"). Dividends on the Preferred Stock are cumulative from the date of
original issue and are payable quarterly on January 15, April 15, July 15,
and October 15 of each year, commencing April 15, 1998, at a rate of 5.30%
per annum through January 15, 2003. Thereafter, the dividend rate on the
Preferred Stock will be the Applicable Rate from time to time in effect. The
Applicable Rate per annum for any dividend period beginning January 15, 2003
will be equal to 0.40% plus the highest of the Treasury Bill Rate, the Ten
Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate (each
as defined herein), as determined in advance of such dividend period, however
the Applicable Rate per annum for each dividend period beginning January 15,
2003 will not be less than 5.70% nor greater than 11.30%. The amount of
dividends payable in respect of the Preferred Stock will be adjusted in the
event of certain amendments to the Internal Revenue Code of 1986, as amended
(the "Code"), in respect of the dividends received deduction. See "Description
of Preferred Stock--Dividends."
The Preferred Stock is redeemable at any time on or after January 15,
2003, at the option of the Company, in whole or in part, at $50 per share
plus accrued and unpaid dividends (whether or not declared) to the date fixed
for redemption. See "Description of Preferred Stock--Redemption." For a
description of the rights and preferences of the Preferred Stock, see
"Description of Preferred Stock."
Application has been made to list the Preferred Stock on the New York
Stock Exchange, Inc. (the "NYSE"). See "Underwriting."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
<S> <C> <C> <C>
Per Share .. $ 50.00 $ 0.625 $ 49.375
- ------------ -------------- -------------- -------------
Total ....... $175,000,000 $2,187,500 $172,812,500
</TABLE>
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(1) Plus accrued dividends, if any, from January 9, 1998 to the date of
delivery.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $300,000.
The shares of Preferred Stock are offered by the Underwriters, subject to
prior sale, when, as and if issued to and accepted by them and subject to
approval of certain legal matters by counsel for the Underwriters. The
Underwriters reserve the right to withdraw, cancel or modify such offer and
to reject orders in whole or in part. It is expected that the Preferred Stock
will be ready for delivery in book-entry form only through the facilities of
the Depository Trust Company of New York on or about January 9, 1998, against
payment therefor in immediately available funds.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE
OFFERING, AND MAY BID FOR, AND PURCHASE, THE PREFERRED STOCK IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
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USE OF PROCEEDS
The proceeds from the sale of the Preferred Stock will be used by the
Company for the reduction of short-term indebtedness and general corporate
purposes.
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to combined fixed
charges and preferred stock dividends for the Company for the periods
indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined
fixed charges and preferred
stock dividends (1) ......... -- -- 1.09 1.10 1.16 1.17
</TABLE>
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(1) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.
S-3
<PAGE>
DESCRIPTION OF PREFERRED STOCK
The following description of the particular terms of the 3,500,000 shares
of Preferred Stock supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of Preferred
Stock set forth in the accompanying Prospectus, to which description
reference is hereby made. The description of certain provisions of the
Preferred Stock set forth below does not purport to be complete and is
subject to and qualified in its entirety by reference to the provisions of
the Certificate of Designation relating to the Preferred Stock, a form of
which will be filed with the Securities and Exchange Commission at or prior
to the time of sale of the Preferred Stock. Capitalized terms not defined
herein have the meanings assigned to such terms in the Prospectus.
GENERAL
The Preferred Stock is a single series consisting of 3,500,000 shares. The
holders of Preferred Stock will have no preemptive rights. The Preferred
Stock will not be convertible into shares of Common Stock of the Company. The
Preferred Stock will be fully paid and nonassessable.
The Preferred Stock will, on the date of original issuance, rank on a
parity as to payment of dividends and distribution of assets upon
dissolution, liquidation or winding up of the Company with each other
outstanding series of preferred stock, including the Series A,
Fixed/Adjustable Rate Cumulative preferred stock issued in November 1996 (the
"Series A Preferred Stock"). See "Description of Capital Stock--Preferred
Stock" in the Prospectus. The Preferred Stock, together with each other
series of preferred stock, will rank prior to the Common Stock of the Company
as to the payment of dividends and distribution of assets upon dissolution,
liquidation or winding up of the Company.
DIVIDENDS
General. Cumulative cash dividends will be payable on each share of
Preferred Stock when, as and if declared by the Board of Directors of the
Company or a duly authorized committee thereof out of the assets of the
Company legally available therefor.
The initial dividend for the dividend period commencing on January 9, 1998
to (but excluding) April 15, 1998 will be $.7067 per share and will be
payable on April 15, 1998. Thereafter, dividends on the Preferred Stock will
be payable quarterly, as, if and when declared by the Board of Directors of
the Company on January 15, April 15, July 15 and October 15 of each year
(each a "Dividend Payment Date") at the annual rate of 5.30% or $2.65 per
share through January 15, 2003. After January 15, 2003, dividends on the
Preferred Stock will be payable on each Dividend Payment Date, as, if and
when declared by the Board of Directors of the Company at the Applicable Rate
from time to time in effect. The Applicable Rate per annum for each dividend
period beginning January 15, 2003 will be equal to 0.40% plus the highest of
the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty
Year Constant Maturity Rate (each as defined below under "Adjustable Rate
Dividends"), as determined in advance of such dividend period, however the
Applicable Rate per annum for each dividend period beginning January 15, 2003,
will not be less than 5.70% nor greater than 11.30%.
If a Dividend Payment Date is not a business day, dividends (if declared)
on the Preferred Stock will be paid on the next business day, without
interest. A dividend period with respect to a Dividend Payment Date is the
period commencing on the preceding Dividend Payment Date and ending on the
day immediately prior to the next Dividend Payment Date. Dividends will be
payable to holders of record as they appear on the stock books of the Company
on the record date fixed by the Board of Directors of the Company which will
not be more than 60 days or less than 10 days preceding the payment date
thereof.
Dividends on the Preferred Stock will be cumulative and rights will accrue
to the holders of the Preferred Stock if the Company fails to declare one or
more dividends on the Preferred Stock in any amount, whether or not the
earnings or financial condition of the Company were sufficient to pay such
dividends in whole or in part.
Adjustable Rate Dividends. The "Applicable Rate" per annum for each
dividend period beginning January 15, 2003 will be equal to 0.40% plus the
Effective Rate (as defined below) for such dividend
S-4
<PAGE>
period, but not less than 5.70% nor greater than 11.30% except as provided
below in this paragraph. The "Effective Rate" for each dividend period
beginning January 15, 2003 will be equal to the highest of the Treasury Bill
Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant
Maturity Rate (each as defined below) for such dividend period. In the event
that the Company determines in good faith that for any reason: (i) any one of
the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty
Year Constant Maturity Rate cannot be determined for any dividend period,
then the Effective Rate for such dividend period will be equal to the higher
of whichever two of such rates can be so determined; (ii) only one of the
Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year
Constant Maturity Rate can be determined for any dividend period, then the
Effective Rate for such dividend period will be equal to whichever one of
such rates as can be so determined; or (iii) none of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate
can be determined for any dividend period, then the Effective Rate for the
preceding dividend period will be continued for the succeeding dividend
period.
The "Treasury Bill Rate" will be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate is published during the relevant
Calendar Period (as defined below)) for three-month U.S. Treasury bills, as
published weekly by the Federal Reserve Board (as defined below) during the
Calendar Period immediately preceding the last ten calendar days preceding
the dividend period for which the dividend rate on the Preferred Stock is
being determined, except as described below in this paragraph. In the event
that the Federal Reserve Board does not publish such a weekly per annum
market discount rate during any such Calendar Period, then the Treasury Bill
Rate for such dividend period will be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate is published during the relevant
Calendar Period) for three-month U.S. Treasury bills, as published weekly
during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Company. In the event that a
per annum market discount rate for three-month U.S. Treasury bills is not
published by the Federal Reserve Board or by any Federal Reserve Bank or by
any U.S. Government department or agency during such Calendar Period, then
the Treasury Bill Rate for such dividend period will be the arithmetic
average of the two most recent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only one such rate is published
during the relevant Calendar Period) for all of the U.S. Treasury bills then
having remaining maturities of not less than 80 nor more than 100 days, as
published during such Calendar Period by the Federal Reserve Board, or if the
Federal Reserve Board does not publish such rates, by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the Company.
In the event that the Company determines in good faith that for any reason no
such U.S. Treasury Bill Rates are published as provided above during such
Calendar Period, then the Treasury Bill Rate for such dividend period will be
the arithmetic average of the per annum market discount rates based upon the
closing bids during such Calendar Period for each of the issues of marketable
non-interest-bearing U.S. Treasury securities with a remaining maturity of
not less than 80 nor more than 100 days from the date of each such quotation,
as chosen and quoted daily for each business day in New York City (or less
frequently if daily quotations are not generally available) to the Company by
at least three recognized dealers in U.S. Government securities selected by
the Company. In the event that the Company determines in good faith that for
any reason the Company cannot determine the Treasury Bill Rate for any
dividend period as provided above in this paragraph, the Treasury Bill Rate
for such dividend period will be the arithmetic average of the per annum
market discount rates based upon the closing bids during such Calendar Period
for each of the issues of marketable interest-bearing U.S. Treasury
securities with a remaining maturity of not less than 80 nor more than 100
days, as chosen and quoted daily for each business day in New York City (or
less frequently if daily quotations are not generally available) to the
Company by at least three recognized dealers in U.S. Government securities
selected by the Company.
The "Ten Year Constant Maturity Rate" will be the arithmetic average of
the two most recent weekly per annum Ten Year Average Yields (as defined
below) (or the one weekly per annum Ten Year Average Yield, if only one such
yield is published during the relevant Calendar Period), as published weekly
by the Federal Reserve Board during the Calendar Period immediately preceding
the last ten calendar days
S-5
<PAGE>
preceding the dividend period for which the dividend rate on the Preferred
Stock is being determined, except as described below in this paragraph. In
the event that the Federal Reserve Board does not publish such weekly per
annum Ten Year Average Yield during such Calendar Period, then the Ten Year
Constant Maturity Rate for such dividend period will be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or
the one weekly per annum Ten Year Average Yield, if only one such yield is
published during the relevant Calendar Period), as published weekly during
such Calendar Period by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event that a per annum
Ten Year Average Yield is not published by the Federal Reserve Board or by
any Federal Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Ten Year Constant Maturity Rate for
such dividend period will be the arithmetic average of the two most recent
weekly per annum average yields to maturity (or the one weekly per annum
average yield to maturity, if only one such yield is published during the
relevant Calendar Period) for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities (as
defined below)) then having remaining maturities of not less than eight nor
more than twelve years, as published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve Board does not publish such
yields, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Company. In the event that the Company determined in
good faith that for any reason the Company cannot determine the Ten Year
Constant Maturity Rate for any dividend period as provided above in this
paragraph, then the Ten Year Constant Maturity Rate for such dividend period
will be the arithmetic average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period for each of the
issues of actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final maturity date not
less than eight nor more than twelve years from the date of each such
quotation, as chosen and quoted daily for each business day in New York City
(or less frequently if daily quotations are not generally available) to the
Company by at least three recognized dealers in U.S. Government securities
selected by the Company.
The "Thirty Year Constant Maturity Rate" will be the arithmetic average of
the two most recent weekly per annum Thirty Year Average Yields (as defined
below) (or the one weekly per annum Thirty Year Average Yield, if only one
such yield is published during the relevant Calendar Period), as published
weekly by the Federal Reserve Board during the Calendar Period immediately
preceding the last ten calendar days preceding the dividend period for which
the dividend rate on the Preferred Stock is being determined, except as
described below in this paragraph. In the event that the Federal Reserve Board
does not publish such a weekly per annum Thirty Year Average Yield during such
Calendar Period, then the Thirty Year Constant Maturity Rate for such dividend
period will be the arithmetic average of the two most recent weekly per annum
Thirty Year Average Yields (or the one weekly per annum Thirty Year Average
Yield, if only one such yield is published during the relevant Calendar
Period), as published weekly during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Company. In the event that a per annum Thirty Year Average Yield in not
published by the Federal Reserve Board or by any Federal Reserve Bank or by
any U.S. Government department or agency during such Calendar Period then the
Thirty Year Constant Maturity Rate for such dividend period will be arithmetic
average of the two most recent weekly per annum average yields to maturity
(or the one weekly per annum average yield to maturity, if only one such yield
is published during the relevant Calendar Period) for all of the actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) than having remaining maturities of not less than
twenty-eight nor more than thirty years, as published during such Calendar
Period by the Federal Reserve Board or, if the Federal Reserve Board does
not publish such yields, by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event that the Company
determines in good faith that for any reason the Company cannot determine
the Thirty Year Constant Maturity Rate for any dividend period as provided
above in this paragraph, then the Thirty Year Constant Maturity Rate for such
dividend period will be the arithmetic average of the per annum average yields
to maturity based upon the closing bids during such Calendar Period for each
of the issues of actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with
S-6
<PAGE>
a final maturity date not less than twenty-eight nor more than thirty years
from the date of each such quotation, as chosen and quoted daily for each
business day in New York City (or less frequently if daily quotations are not
generally available) to the Company by at least three recognized dealers in
U.S. Government securities selected by the Company.
The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty
Year Constant Maturity Rate will each be rounded to the nearest five
hundredths of a percent.
The Applicable Rate with respect to each dividend period beginning January
15, 2003 will be calculated as promptly as practicable by the Company
according to the appropriate method described above. The Company will cause
notice of the Applicable Rate for the next dividend period to be enclosed
with each dividend payment check mailed to the holders of Preferred Stock.
As used above, the term "Calendar Period" means a period of fourteen
calendar days; the term "Federal Reserve Board" means the Board of Governors
of the Federal Reserve System; the term "Special Securities" means securities
which can, at the option of the holder, be surrendered at face value in
payment of any Federal estate tax or which provide tax benefits to the holder
and are priced to reflect such tax benefits or which were originally issued
at a deep or substantial discount; the term "Ten Year Average Yield" means
the average yield to maturity for actively traded marketable U.S. Treasury
fixed interest rate securities (adjusted to constant maturities of ten
years); and the term "Thirty Year Average Yield" means the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of thirty years).
Changes in the Dividends Received Percentage. If, prior to 18 months after
the date of the original issuance of the Preferred Stock, one or more
amendments to the Internal Revenue Code of 1986, as amended (the "Code"), are
enacted which change the percentage of the dividends received deduction
(currently 70%) as specified in Section 243(a)(1) of the Code or any
successor provision (the "Dividends Received Percentage"), the amount of each
dividend on each share of the Preferred Stock for dividend payments made on
or after the date of enactment of such change will be adjusted by multiplying
the amount of the dividend payable determined as described above under
"Dividends" (before adjustment) by a factor, which will be the number
determined in accordance with the following formula (the "DRD Formula"), and
rounding the result to the nearest cent:
1-[.35 (1-.70)]
-------------------
1-[.35 (1-DRP)]
For the purposes of the DRD Formula, "DRP" means the Dividends Received
Percentage applicable to the dividend in question; provided however, that if
the Dividends Received Percentage applicable to the dividend in question
shall be less than 50%, then the DRP shall equal .50. No amendment to the
Code, other than a change in the percentage of the dividends received
deduction set forth in Section 243(a)(1) of the Code or any successor
provision, will give rise to an adjustment. Notwithstanding the foregoing
provisions, in the event that, with respect to any such amendment, the
Company receives either an unqualified opinion of nationally recognized
independent tax counsel selected by the Company or a private letter ruling or
similar form of authorization from the Internal Revenue Service to the effect
that such an amendment does not apply to dividends payable on the Preferred
Stock, then any such amendment will not result in the adjustment provided for
pursuant to the DRD Formula. The opinion referenced in the previous sentence
will be based upon a specific exception in the legislation amending the DRP
or upon a published pronouncement of the Internal Revenue Service addressing
such legislation. Unless the context otherwise requires, references to
dividends in this Prospectus Supplement will mean dividends as adjusted by
the DRD Formula. The Company's calculation of the dividends payable as so
adjusted and as certified accurate as to calculation and reasonable as to the
method by the independent certified public accountants then regularly engaged
by the Company, will be final and not subject to review.
If any amendment to the Code which reduces the Dividends Received
Percentage is enacted after a record date and before the next Dividend
Payment Date, the amount of dividend payable on such Dividend Payment Date
will not be increased; but instead, an amount, equal to the excess of (x) the
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<PAGE>
product of the dividends paid by the Company on such Dividend Payment Date
and the DRD Formula (where the DRP used in the DRD Formula would be equal to
the greater of the Dividends Received Percentage applicable to the dividend
in question and .50) over (y) the dividends paid by the Company on such
Dividend Payment Date, will be payable (if declared) to holders of record on
the next succeeding Dividend Payment Date in addition to any other amounts
payable on such date.
In addition, if any such amendment to the Code is enacted that reduces the
Dividends Received Percentage and such reduction retroactively applies to a
Dividend Payment Date as to which the Company previously paid dividends on
the Preferred Stock (each an "Affected Dividend Payment Date"), the Company
will pay (if declared) additional dividends (the "Additional Dividends") on
the next succeeding Dividend Payment Date (or if such amendment is enacted
after the dividend payable on such Dividend Payment Date has been declared,
on the second succeeding Dividend Payment Date following the date of
enactment) to holders of record on such succeeding Dividend Payment Date in
an amount equal to the excess of (x) the product of the dividends paid by the
Company on each Affected Dividend Payment Date and the DRD Formula (where the
DRP used in the DRD Formula would be equal to the greater of the Dividends
Received Percentage and .50 applied to each Affected Dividend Payment Date)
over (y) the dividends paid by the Company on each Affected Dividend Payment
Date.
Notwithstanding the foregoing, Additional Dividends will not be paid as a
result of the enactment of any amendment to the Code 18 months or more after
the date of original issuance of the Preferred Stock which retroactively
reduces the Dividends Received Percentage, or if such amendment would not
result in an adjustment due to the Company having received either an opinion
of counsel or tax ruling referred to in the third preceding paragraph. The
Company will make only one payment of Additional Dividends.
In the event that the amount of dividend payable per share of the
Preferred Stock will be adjusted pursuant to the DRD Formula and/or
Additional Dividends are to be paid, the Company will cause notice of each
such adjustment and, if applicable, any Additional Dividends, to be sent to
the holders of the Preferred Stock with the payment of dividends on the next
Dividend Payment Date after the date of such adjustment.
LIQUIDATION PREFERENCE
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of shares of Preferred Stock will be
entitled to receive out of the assets of the Company available for
distribution to stockholders, before any distribution of assets is made on
the Company's Common Stock or any other class or series of stock of the
Company ranking junior to the Preferred Stock upon liquidation, liquidating
distributions in the amount of $50 per share, plus an amount equal to the sum
of all accrued and unpaid dividends including any increase in dividends
payable due to changes in the Dividends Received Percentage and Additional
Dividends (whether or not earned or declared) for the then-current dividend
period and all dividend periods prior thereto. See "Description of Capital
Stock--Preferred Stock" in the accompanying Prospectus.
VOTING RIGHTS
The holders of shares of Preferred Stock will not be entitled to vote,
except as set forth below or as expressly required by applicable law.
If the equivalent of six quarterly dividends payable on the Preferred
Stock or any other class or series of preferred stock are in default, the
number of directors of the Company will be increased by two (without
duplication of any increase made pursuant to the terms of any other series of
preferred stock of the Company), and the holders of the Preferred Stock,
voting as a single class with the holders of shares of any other class of the
Company's preferred stock ranking on a parity with the Preferred Stock either
as to dividends or distribution of assets and upon which like voting rights
have been conferred and are exercisable, including the Series A Preferred
Stock, will be entitled to elect such two directors to fill such
newly-created directorships. Such right shall continue until full cumulative
dividends for all past dividend periods on all preferred shares of the
Company, including any shares of the Preferred Stock, have been paid or
declared and set apart for payment. Any such elected directors shall serve
until the Company's
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<PAGE>
next annual meeting of stockholders (notwithstanding that prior to the end of
such term the dividend default shall cease to exist) or until their
respective successors shall be elected and qualify.
The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding shares of the Preferred Stock will be required for any amendment
of the articles of incorporation of the Company (or any certificate
supplemental thereto) which will adversely affect the powers, preferences,
privileges or rights of the Preferred Stock. The affirmative vote or consent
of the holders of at least 66 2/3% of the outstanding shares of the Preferred
Stock and any other series of the Company's preferred stock ranking on a
parity with the Preferred Stock either as to dividends or upon liquidation,
voting as a single class without regard to series, will be required to issue,
authorize or increase the authorized amount of, or issue or authorize any
obligation or security convertible into or evidencing a right to purchase,
any additional class or series of stock ranking prior to the Preferred Stock
as to dividends or upon liquidation, or to reclassify any authorized stock of
the Company into such prior shares, but such vote will not be required for
the Company to take any such actions with respect to any stock ranking on a
parity with or junior to the Preferred Stock.
REDEMPTION
Prior to January 15, 2003, the Preferred Stock is not redeemable. On or
after such date, each share of Preferred Stock will be redeemable, in whole
or in part, at the option of the Company, at any time and from time to time
upon not less than thirty nor more than sixty days' notice, at $50 per share,
plus accrued and unpaid dividends (whether or not declared) to the date fixed
for redemption, including any increase in dividends payable due to changes in
the Dividends Received Percentage and Additional Dividends. If fewer than all
the outstanding shares of Preferred Stock are to be redeemed, the Company
will select those to be redeemed by lot or pro rata or by any other method as
may be determined by the Board of Directors to be equitable.
In addition, if the holders of the shares of the Preferred Stock are
entitled to vote upon or consent to a merger or consolidation of the Company,
and if the Company offers to purchase all of the outstanding shares of the
Preferred Stock (the "Offer"), then each holder of Preferred Stock who does
not sell their shares of Preferred Stock pursuant to the Offer shall be
deemed irrevocably to have voted or consented all shares of Preferred Stock
owned by such holder in favor of the merger or consolidation of the Company
without any further action by the holder. The Offer shall be at a price of
$50 per share, together with accrued and unpaid dividends, if any, to the
date fixed for redemption, including any increase in dividends payable due to
increases in the Dividends Received Percentage and Additional Dividends. The
Offer must remain open for acceptance for a period of at least 30 days.
Holders of Preferred Stock will have no right to require redemption of the
Preferred Stock.
The Preferred Stock is not subject to any mandatory redemption, sinking
fund or other similar provisions.
Transfer Agent and Registrar. The Chase Manhattan Bank will be the transfer
agent, registrar, dividend disbursing agent and redemption agent for the
Preferred Stock.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated the date hereof (the "Underwriting Agreement"), the Company has agreed
to sell to each of the Underwriters named below (the "Underwriters"), and
each of the Underwriters, for whom Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJSC") is acting as representative, has severally agreed to
purchase the number of shares of Preferred Stock set forth opposite its name
below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------- -----------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation 875,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................. 875,000
Prudential Securities Incorporated................... 875,000
Salomon Brothers Inc ................................ 875,000
-----------
Total ............................................... 3,500,000
===========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the Preferred Stock offered
hereby are subject to approval of certain legal matters by counsel and to
certain other conditions. If any Preferred Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, all such Preferred Stock
must be purchased.
The Underwriters propose to offer the Preferred Stock in part directly to
the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement, and in part to certain securities dealers at
such price less a concession of $0.375 per share of Preferred Stock. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $0.25 per share of Preferred Stock to certain brokers and dealers.
After the Preferred Stock are released for sale to the public, the offering
price and other selling terms may from time to time be varied by DLJSC.
The Company has agreed not to offer, sell, contract to sell, grant any
option to purchase, or otherwise dispose of any preferred stock or any
securities convertible into or exercisable or exchangeable for such preferred
stock or in any other manner transfer all or a portion of the economic
consequences associated with the ownership of any such preferred stock,
except to the Underwriters, for a period of 30 days after the date of this
Prospectus Supplement without the prior written consent of the majority of
the Underwriters excluding DLJSC.
Application has been made to list the Preferred Stock on the NYSE. DLJSC
has advised the Company that it intends to make a market in the Preferred
Stock. DLJSC will have no obligation to make a market in the Preferred Stock,
however, and may cease market making activities, if commenced, at any time
without notice.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments that the Underwriters may be required
to make in respect thereof.
DLJSC is a wholly-owned subsidiary of the Company. DLJSC has committed to
purchase from the Company 875,000 shares of the Preferred Stock to be
purchased in the offering on the same basis as the other Underwriters.
Although the amount of proceeds derived from the offering by the Company will
not be affected by DLJSC's participation as an Underwriter to the extent that
part or all of the Preferred Stock to be purchased by DLJSC are not resold,
the Preferred Stock owned by DLJSC will be eliminated in consolidation and
will not be shown as outstanding in the consolidated financial statements of
the Company. DLJSC intends to resell any Preferred Stock which it is unable
to resell in the offering from time to time, at prevailing market prices.
This Prospectus Supplement, together with the accompanying Prospectus, may
also be used by DLJSC in connection with offers and sales of the Preferred
Stock related to market-making transactions by and through DLJSC, at
negotiated prices related to prevailing market prices at the time of sale or
otherwise. DLJSC may act as principal or agent in such transactions. The
offering of the Preferred Stock is being conducted in accordance with Section
2720 of the NASD Conduct Rules.
S-10
<PAGE>
Certain Underwriters and their affiliates have engaged and may in the
future engage in commercial banking and investment banking transactions with
the Company and its affiliates in the ordinary course of business.
In order to facilitate the offering of the Preferred Stock, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Preferred Stock. Specifically, the Underwriters may
overallot in connection with the offering, creating a short position in the
Preferred Stock for their own account. In addition, to cover overallotments
or to stabilize the price of Preferred Stock, the Underwriters may bid for,
and purchase, the Preferred Stock in the open market. Finally, the
Underwriters may reclaim selling concessions allowed to an Underwriter or a
dealer for distributing the Preferred Stock in the offering, if the
Underwriters repurchase previously distributed Preferred Stock in
transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain
the market price of the Preferred Stock above independent market level. The
Underwriters are not required to engage in these activities and may end any
of these activities at any time.
S-11
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PROSPECTUS
DECEMBER 3, 1997
$300,000,000
DONALDSON, LUFKIN & JENRETTE, INC.
DEBT SECURITIES AND PREFERRED STOCK
Donaldson Lufkin & Jenrette, Inc. (the "Company") may from time to time
offer, together or separately, (i) senior or subordinated debt securities
(the "Debt Securities") or (ii) shares of its preferred stock, par value
$0.01 per share (the "Preferred Stock"). The Debt Securities and Preferred
Stock are collectively called the "Securities."
The Securities 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
shall not exceed $300,000,000 (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"), together with the terms of the
offering of the Offered Securities, the initial price thereof and the net
proceeds from the sale thereof. The Prospectus Supplement will set forth with
regard to the particular Offered Securities, without limitation, the
following: (i) in the case of Debt Securities, the ranking as senior or
subordinated debt securities, the specific designation, aggregate principal
amount, authorized denomination, maturity, rate (which may be fixed or
variable) or method of calculation of interest and dates for payment thereof,
and any exchangeability, redemption, prepayment or sinking fund provisions
and any listing on a securities exchange and (ii) in the case of Preferred
Stock, the specific designation, number of shares, purchase price and the
rights, preferences and privileges thereof and any qualifications or
restrictions thereon (including dividends, liquidation value, voting rights,
terms for the redemption or exchange thereof and any other specific terms of
the Preferred Stock) and any listing on a securities exchange. Unless
otherwise indicated in the Prospectus Supplement, the Company does not intend
to list any of the Securities on a national securities exchange.
The Offered Securities may be offered directly, through agents designated
from time to time, through dealers or through underwriters. Such agents or
underwriters may act alone or with other agents or underwriters. See "Plan of
Distribution." Any such agents, dealers or underwriters will be set forth in
a Prospectus Supplement. If an agent of the Company, or a dealer or
underwriter is involved in the offering of the Offered Securities, the
agent's commission, dealer's purchase price, underwriter's discount and net
proceeds to the Company, as the case may be, will be set forth in, or may be
calculated from, the Prospectus Supplement. Any underwriters, dealers or
agents participating in the offering may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended.
This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The registration
statement of which this Prospectus forms a part, as well as reports, proxy
statements and other information filed by the Company, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, New York,
New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
at prescribed rates from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be
accessed electronically by means of the Commission's home page on the
Internet at http: //www.sec.gov. The Company's common stock, par value $0.10
per share (the "Common Stock"), is listed on the New York Stock Exchange,
Inc. and reports and other information concerning the Company can also be
inspected at the office of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
This Prospectus constitutes a part of the Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Offered Securities. This
Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Offered Securities. Any
statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission or incorporated by reference herein are not necessarily complete,
and in each instance reference is made to the copy of such document so filed
for a more complete description of the matter involved. Each such statement
is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1996, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997 and Current Reports on Form 8-K filed on
April 11, 1997, September 9, 1997, September 17, 1997 and October 16, 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).
2
<PAGE>
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement,
proceeds from the sale of the Offered Securities will be used by the Company
for general corporate purposes, including refinancing of existing
indebtedness and the financing of potential acquisitions, and initially may
be temporarily invested in short-term securities.
RATIOS OF EARNINGS
TO FIXED CHARGES AND EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for the
Company for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 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
Ratio of earnings to combined
fixed charges and preferred
stock dividends (2).......... -- -- 1.09 1.10 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.
(2) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.
3
<PAGE>
THE COMPANY
Donaldson, Lufkin & Jenrette, Inc. (the "Company) is a leading integrated
investment and merchant bank that serves institutional, corporate,
governmental and individual clients both domestically and internationally.
The Company is a holding company which conducts its business through various
subsidiaries including its principal broker-dealer subsidiary, Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJSC"). The business of the
Company includes securities underwriting; sales and trading; merchant
banking; financial advisory services; investment research; correspondent
brokerage services; and asset management.
Founded in 1959, the Company initially focused on providing in-depth
investment research to institutional investors. In 1970, the Company became
the first member firm of the New York Stock Exchange ("NYSE") to be owned
publicly. Fifteen years later, the Company was purchased by The Equitable
Life Assurance Society of the United States ("Equitable Life"). Prior to
October 1995 the Company was an independently operated indirect wholly owned
subsidiary of The Equitable Companies Incorporated ("Equitable"). After the
completion of the Company's initial public offering in October 1995,
Equitable's ownership in the Company was reduced from 100% to 80.2%. At
December 31, 1996, following a sale by Equitable to AXA-UAP ("AXA") of 85,000
shares of the Company's stock, Equitable owned 79.9% of the Company's issued
and outstanding common stock. Equitable is a diversified financial services
organization and one of the world's largest investment management
organizations. AXA, a French holding company for an international group of
insurance and related financial services companies, is Equitable's largest
stockholder, beneficially owning, at December 31, 1996, $392.2 million of
Equitable's Series E convertible preferred stock and approximately 60.8% of
Equitable's outstanding common stock (without giving effect to the conversion
on August 4, 1997, of the Series E convertible preferred stock beneficially
owned by AXA).
The Company's business activities are highly integrated and constitute a
single industry segment. The assets and revenues related to the Company's
foreign operations are not significant; however the Company has begun
expanding its activities abroad. In particular, in March 1997, the Company
acquired the London based financial advisory firm Phoenix Group Limited
("Phoenix") and in October 1997 the Company acquired London Global Securities
("London Global"), a securities financing intermediary located in London.
The Company conducts its business through three principal operating
groups: the Banking Group, which includes the Company's Investment Banking,
Merchant Banking and Emerging Markets Groups and Phoenix; the Capital Markets
Group, consisting of the Company's Fixed Income, Institutional Equities and
Equity Derivatives Divisions, Autranet, a distributor of investment research
products, and Sprout, its venture capital affiliate; and the Financial
Services Group, comprised of the Pershing Division, the Investment Services
Group, the Asset Management Group and London Global.
The following table sets forth the revenues, net of all interest, of the
Company and each of its principal operating groups. Net revenues, however,
are not necessarily indicative of the profitability of each group.
NET REVENUES BY OPERATING GROUP:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Banking Group............ $ 428.4 $ 491.8 $ 390.0 $ 689.2 $ 935.8
Capital Markets Group ... 713.0 994.6 638.1 780.0 1,015.2
Financial Services
Group................... 336.9 455.3 458.2 619.5 827.6
Other ................... (26.5) (38.1) 18.6 (10.7) (21.1)
---------- ---------- ---------- ---------- ---------
Total net revenues....... $1,451.8 $1,903.6 $1,504.9 $2,078.0 $2,757.5
========== ========== ========== ========== =========
</TABLE>
4
<PAGE>
The Company currently conducts its operations through 17 offices in 14
locations in the U.S., including Atlanta, Austin, Boston, Chicago, Dallas,
Houston, Jersey City, Los Angeles, Menlo Park, Miami, New York, Oak Brook,
Philadelphia and San Francisco. The Company also has 11 international offices
located in 10 cities, including Bangalore, Buenos Aires, Geneva, Hong Kong,
London, Lugano, Mexico City, Paris, Sao Paulo and Tokyo and conducts business
through a joint venture in South Africa.
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.
5
<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 September 30, 1997, the Company had
55,808,358 shares of Common Stock and 4,000,000 shares of Series A Fixed
Adjustable Rate Preferred Stock outstanding. The following summary
description of the capital stock of the Company is qualified in its entirety
by reference to the Certificate of Incorporation and the Bylaws of the
Company, copies of which have been filed with the Commission.
COMMON STOCK
Subject to the rights of the holders of any Preferred Stock which may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefor, and, in the event of
liquidation, to share pro rata in any distribution of the Company's assets
after payment or providing for the payment of liabilities and the liquidation
preference of any outstanding Preferred Stock. Each holder of Common Stock is
entitled to one vote for each share held of record on the applicable record
date on all matters presented to a vote of stockholders, including the
election of directors. Holders of Common Stock have no cumulative voting
rights or preemptive rights to purchase or subscribe for any stock or other
securities and there are no conversion rights or redemption or sinking fund
provisions with respect to such stock. All outstanding shares of Common Stock
are fully paid and nonassessable.
The Common Stock is listed on the New York Stock Exchange under the symbol
"DLJ."
The transfer agent for the Common Stock is First Chicago Trust Company of
New York.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes 25,000,000 shares of
Preferred Stock. The Company's Board of Directors has the authority to issue
shares of Preferred Stock in one or more series and to fix, by resolution,
the terms of such securities, without any further vote or action by the
stockholders.
The applicable Prospectus Supplement will describe the following terms of
any Preferred Stock in respect of which this Prospectus is being delivered
(to the extent applicable to such Preferred Stock): (i) the specific
designation, number of shares, seniority and purchase price; (ii) any
liquidation preference per share; (iii) any date of maturity; (iv) any
redemption, repayment or sinking fund provisions; (v) any dividend rate or
rates and the dates on which any such dividends will be payable (or the
method by which such rates or dates will be determined); (vi) any voting
rights; (vii) if other than the currency of the United States of America, the
currency or currencies including composite currencies in which such Preferred
Stock is denominated and/or in which payments will or may be payable; (viii)
the method by which amounts in respect of such Preferred Stock may be
calculated and any commodities, currencies or indices, or value, rate or
price, relevant to such calculation; (ix) whether such Preferred Stock is
exchangeable and, if so, the securities or rights into which such Preferred
Stock is exchangeable, and the terms and conditions upon which such exchanges
will be effected including the initial exchange prices or rates, the exchange
period and any other related provisions; (x) the place or places where
dividends and other payments on the Preferred Stock will be payable; and (xi)
any additional voting, dividend, liquidation, redemption and other rights,
preferences, privileges, limitations and restrictions.
All shares of Preferred Stock offered hereby, or issuable upon exchange or
exercise of any Offered Securities, will, when issued, be fully paid and
non-assessable. Any shares of Preferred Stock so issued would have priority
over the Common Stock with respect to dividend or liquidation rights or both.
SERIES A FIXED ADJUSTABLE RATE PREFERRED STOCK
General. The Series A Fixed Adjustable Rate Preferred Stock (the "Series A
Preferred Stock") is a single series consisting of 4,000,000 shares with a
liquidation preference of $50 per share. The holders of Series A Preferred
Stock have no preemptive rights. The Series A Preferred Stock is not
convertible into shares of Common Stock of the Company and is fully paid and
nonassessable.
6
<PAGE>
Unless otherwise specified in the Prospectus Supplement, the Series A
Preferred Stock will rank on a parity as to payment of dividends and
distribution of assets upon dissolution, liquidation or winding up of the
Company with each series of Preferred Stock issued hereunder. The Series A
Preferred Stock ranks prior to the Common Stock of the Company as to the
payment of dividends and distribution of assets upon dissolution, liquidation
or winding up of the Company.
Dividends. Dividends on the Series A Preferred Stock are payable
quarterly at the annual rate of 5.94% or $2.97 per share through November 30,
2001. After November 30, 2001, dividends on the Series A Preferred Stock are
payable at the Applicable Rate from time to time in effect. The Applicable
Rate per annum for each dividend period beginning November 30, 2001 will
generally be equal to 0.50% plus the highest of the Treasury Bill Rate, the
Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate
(each as defined by the terms of the Series A Preferred Stock). The
Applicable Rate per annum for each dividend period beginning November 30,
2001, will not be less than 6.44% nor greater than 12.44% (without taking
into account any adjustments as described below under "Changes in the
Dividends Received Percentage").
Dividends on the Series A Preferred Stock are cumulative and rights accrue
to the holders of the Series A Preferred Stock if the Company fails to
declare one or more dividends on the Series A Preferred Stock in any amount,
whether or not the earnings or financial condition of the Company were
sufficient to pay such dividends in whole or in part.
Changes in the Dividends Received Percentage. If one or more amendments to
the Internal Revenue Code of 1986, as amended (the "Code"), are enacted which
reduce the percentage of the dividends received deduction (currently 70%) as
specified in Section 243(a)(1) of the Code or any successor provision (the
"Dividends Received Percentage"), the amount of each dividend on each share
of the Series A Preferred Stock for dividend payments made on or after the
date of enactment of such change will generally be adjusted upward pursuant
to a specified formula set forth in the terms of the Series A Preferred
Stock.
In addition, if the Dividends Received Percentage is reduced to 50% or
less, the Company may at its option, redeem the Series A Preferred Stock as a
whole but not in part as described below. See "Redemption."
Voting Rights. The holders of shares of Series A Preferred Stock are not
entitled to vote, except as set forth below or as expressly required by
applicable law.
If the equivalent of six quarterly dividends payable on the Series A
Preferred Stock or any other class or series of preferred stock are in
default, the number of directors of the Company will be increased by two, and
the holders of the Series A Preferred Stock, voting as a single class with
the holders of shares of any other class of the Company's preferred stock
ranking on a parity with the Series A Preferred Stock upon which like voting
rights have been conferred and are exercisable, will be entitled to elect
such two directors to fill such newly-created directorships.
In addition, the affirmative vote or consent of the holders of at least
66 2/3% of the outstanding shares of the Series A Preferred Stock will be
required for any amendment of the certificate of incorporation of the Company
which will adversely affect the powers, preferences, privileges or rights of
the Series A Preferred Stock. The affirmative vote or consent of the holders
of at least 66 2/3% of the outstanding shares of the Series A Preferred Stock
and any other series of the Company's preferred stock ranking on a parity
with the Series A Preferred Stock, voting as a single class without regard to
series, will be required to issue, authorize or increase the authorized
amount of, or issue or authorize any obligation or security convertible into
or evidencing a right to purchase, any additional class or series of stock
ranking prior to the Series A Preferred Stock, or to reclassify any
authorized stock of the Company into such prior shares, but such vote will
not be required for the Company to take any such actions with respect to any
stock ranking on a parity with or junior to the Series A Preferred Stock.
Redemption. Prior to November 30, 2001, the Series A Preferred Stock is
not redeemable, except under certain limited circumstances as described
below. On or after such date, each share of Series A Preferred Stock will be
redeemable, in whole or in part, at the option of the Company, at $50 per
share,
7
<PAGE>
plus accrued and unpaid dividends. However, if the Dividends Received
Percentage is equal to or less than 50% and, as a result, the amount of
dividends on the Series A Preferred Stock will be or is adjusted as described
above under "Changes in the Dividends Received Percentage," the Company, at
its option, may redeem all, but not less than all, of the outstanding shares
of the Series A Preferred Stock notwithstanding the preceding paragraph at a
redemption price specified by the terms of the Series A Preferred Stock.
In addition, if the holders of the shares of the Series A Preferred Stock
are entitled to vote upon or consent to a merger or consolidation of the
Company, and if the Company offers to purchase all of the outstanding shares
of the Series A Preferred Stock (the "Offer"), then each holder of Series A
Preferred Stock who does not sell their shares of Series A Preferred Stock
pursuant to the Offer shall be deemed irrevocably to have voted or consented
all shares of Series A Preferred Stock owned by such holder in favor of the
merger or consolidation of the Company without any further action by the
holder. The Offer shall be at a price of $50 per share, together with accrued
and unpaid dividends, if any, to the date fixed for redemption.
Holders of Series A Preferred Stock have no right to require redemption of
the Series A Preferred Stock and the Series A Preferred Stock is not subject
to any mandatory redemption, sinking fund or other similar provisions.
Transfer Agent and Registrar. The Bank of New York is the transfer agent,
registrar, dividend disbursing agent and redemption agent for the Series A
Preferred Stock.
8
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Company's Debt Securities, may constitute either senior debt
securities ("Senior Debt Securities") or subordinated debt securities
("Subordinated Debt Securities") of the Company and will be issued in the
case of Senior Debt Securities under an indenture (the "Senior Debt
Indenture") between Donaldson, Lufkin & Jenrette, Inc., as issuer, and The
Chase Manhattan Bank, as trustee and in the case of Subordinated Debt
Securities under an indenture (the "Subordinated Debt Indenture") between
Donaldson, Lufkin & Jenrette, Inc., as issuer and The Chase Manhattan Bank,
as trustee. The Senior Debt Indenture and the Subordinated Debt Indenture are
sometimes hereinafter referred to individually as an "Indenture" and
collectively as the "Indentures." The Chase Manhattan Bank, in its capacity
as trustee under either or both of the Indentures is referred to herein as
the "Trustee."
Copies of the Indentures have been included as exhibits to the
Registration Statement of which this Prospectus is a part and are also
available for inspection at the office of the Trustee. The Indentures are
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). Section references contained herein are to the
applicable Indenture. The following summaries of certain provisions of the
Indentures do not purport to be complete, and where reference is made to
particular provisions of the Indentures, such provisions, including
definitions of certain terms, are incorporated by reference as a part of such
summaries or terms, which are qualified in their entirety by such reference.
The Indentures are substantially identical except for provisions relating to
subordination and the Company's negative pledge.
GENERAL
Neither of the Indentures limits the aggregate principal amount of Debt
Securities which may be issued thereunder and each Indenture provides that
Debt Securities may be issued thereunder from time to time in one or more
series. The Debt Securities will be direct, unsecured senior or subordinated
obligations of the Company. Except as described under "--Negative Pledge,"
neither Indenture limits other indebtedness or securities which may be
incurred or issued by the Company or any of its subsidiaries or contains
financial or similar restrictions on the Company or any of its subsidiaries.
The operations of the Company are conducted through its subsidiaries, and,
therefore, the Company is dependent upon the earnings and cash flow of its
subsidiaries to meet its obligations, including obligations under the Debt
Securities. The Debt Securities will be effectively subordinated to all
indebtedness of the Company's subsidiaries. The Company's rights and the
rights of its creditors, including holders of Debt Securities, to participate
in the distribution of assets of any subsidiary upon such subsidiary's
liquidation or reorganization will be subject to prior claims of such
subsidiary's creditors, including trade creditors, except to the extent the
Company may itself be a creditor with recognized claims against such
subsidiary. In addition, net capital requirements under the Exchange Act and
New York Stock Exchange rules applicable to certain of the Company's
subsidiaries could limit the payment of dividends and the making of loans and
advances to the Company by such subsidiaries.
The applicable Prospectus Supplement which accompanies this Prospectus,
sets forth where applicable the following terms of, and information relating
to, the Debt Securities offered thereby: (i) the ranking of such Debt
Securities as senior or subordinated debt securities; (ii) the designation of
such Debt Securities; (iii) the aggregate principal amount of such Debt
Securities; (iv) the date or dates on which principal of and premium, if any,
on such Debt Securities is payable; (v) the rate or rates at which such Debt
Securities shall bear interest, if any, or the method by which such rate
shall be determined, and the basis on which interest shall be calculated if
other than a 360-day year consisting of twelve 30-day months, the date or
dates from which such interest will accrue and on which such interest will be
payable and the related record dates; (vi) if other than the offices of the
Trustee, the place where the principal of and any premium or interest on such
Debt Securities will be payable; (vii) any redemption, repayment or sinking
fund provisions; (viii) if other than denominations of $1,000 or multiples
thereof, the denominations in which such Debt Securities will be issuable;
(ix) if other than the principal amount thereof, the portion of the principal
amount due upon acceleration; (x) if other than U.S. dollars, the currency or
currencies (including composite currencies) in which such Debt Securities are
denominated or payable; (xi) whether
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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, which, unless otherwise
specified in the accompanying Prospectus Supplement, will be The Depository
Trust Company, New York, New York (the "Depositary"). The Global Securities
will be registered in the name of the Depositary or its nominee.
The Depositary has advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of the New York banking law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of section 17A of the Exchange Act. The
Depositary was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
securities certificates. The Depositary's participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and
certain other organizations, some of whom (and/or their representatives) own
the Depositary. Access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a Global Security in registered form, the Depositary
will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such
Global Security to the accounts of participants. The accounts to be credited
will be designated by the underwriters, dealers or agents. Ownership of
beneficial interests in the Global Security will be limited to participants
or persons that may hold interests through participants. Ownership of
beneficial interests by participants in the Global Security will be shown on,
and the transfer of that ownership interest will be effected only through,
records maintained by such participants. The laws of some jurisdictions may
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may impair the ability to own,
transfer or pledge beneficial interest in a Global Security.
So long as the Depositary or its nominee is the registered owner of a
Global Security, it will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as set forth below, owners of a beneficial
interest in such
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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. The Company understands
that under existing practice, in the event that the Company requests any
action of a holder or a beneficial owner desires to take any action a holder
is entitled to take, the Depositary would act upon the instructions of, or
authorize, the participant to take such action.
Payment of principal of, and interest on, the Debt Securities will be made
to the Depositary or its nominee, as the case may be, as the registered owner
and holder of the Global Security representing such Debt Securities. None of
the Company, the Trustee, any paying agent or registrar for the Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company has been advised by the Depositary that the Depositary will
credit participants' accounts with payments of principal or interest on the
payment date thereof in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Security as shown on the
records of the Depositary. The Company expects that payments by participants
to owners of beneficial interests in the Global Security held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in "street name," and will be the responsibility of such
participants.
A Global Security may not be transferred except as a whole by the
Depositary to a nominee or successor of the Depositary or by a nominee of the
Depositary to another nominee of the Depositary. A Global Security
representing all but not part of the Debt Securities being offered pursuant
to the applicable Prospectus Supplement is exchangeable for Debt Securities
in definitive form of like tenor and terms if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as depositary for such
Global Security or if at any time the Depositary is no longer eligible to be,
or is not in good standing as, a clearing agency registered under the
Exchange Act, and in either case, a successor depositary is not appointed by
the Company within 90 days of receipt by the Company of such notice or of the
Company becoming aware of such ineligibility, or (ii) the Company in its sole
discretion at any time determines not to have all of the Debt Securities
represented by a Global Security and notifies the Trustee thereof. A Global
Security exchangeable pursuant to the preceding sentence shall be
exchangeable for Debt Securities registered in such names and in such
authorized denominations as the Depositary for such Global Security shall
direct.
SENIOR DEBT
Payment of the principal of, premium, if any, and interest on Senior Debt
Securities issued under the Senior Debt Indenture will rank pari passu with
all other unsecured and unsubordinated debt of the Company.
SUBORDINATED DEBT
Payment of the principal of, premium, if any, and interest on Subordinated
Debt Securities issued under the Subordinated Debt Indenture will be
subordinate and junior in right of payment, to the extent and in the manner
set forth in the Subordinated Debt Indenture, to all Senior Indebtedness of
the Company. The Subordinated Debt Indenture does not contain any limitation
on the amount of Senior Indebtedness that can be incurred by the Company.
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
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of), defease (other than payments made by the Trustee pursuant to the
provisions of the Indenture described under "--Discharge, Defeasance and
Covenant Defeasance" with respect to a defeasance permitted by the Indenture,
including the subordination provisions thereof) or acquire any of the
Subordinated Debt Securities for cash, property or securities, (i) upon the
maturity of the Designated Senior Indebtedness or any other Senior
Indebtedness with an aggregate principal amount in excess of $1.0 million by
lapse of time, acceleration or otherwise, unless and until all principal of,
premium, if any, and interest on such Senior Indebtedness and all other
obligations in respect thereof are first paid in full in cash or cash
equivalents or such payment is duly provided for, or unless and until any
such maturity by acceleration has been rescinded or waived or (ii) in the
event of default in the payment of any principal of, premium, if any, or
interest on or any other amount payable in respect of the Designated Senior
Indebtedness or any other Senior Indebtedness with an aggregate principal
amount in excess of $1.0 million when it becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise,
unless and until such payment default has been cured or waived or has
otherwise ceased to exist.
Upon the happening of a default (any event that, after notice or passage
of time would be an event of default) or an event of default (any event that
permits the holders of Senior Indebtedness or their representative or
representatives immediately to accelerate its maturity) with respect to any
Senior Indebtedness, other than a default in payment of the principal of,
premium, if any, or interest on such Senior Indebtedness, upon written notice
of such default or event of default given to the Company and the Trustee by
the holders of a majority of the principal amount outstanding of the
Designated Senior Indebtedness or their representative or, at such time as
there is no Designated Senior Indebtedness, by the holders of a majority of
the principal amount outstanding of all Senior Indebtedness or their
representative or representatives or, if such default or event of default
results from the acceleration of the Subordinated Debt Securities,
immediately upon such acceleration, then, unless and until such default or
event of default has been cured or waived or otherwise has ceased to exist,
no payment may be made by or on behalf of the Company with respect to any
obligation or claim in respect of the Subordinated Debt Securities, including
the principal of, premium, if any, or interest on the Subordinated Debt
Securities or to redeem (or make a deposit in redemption of), defease or
acquire any of the Subordinated Debt Securities for cash, property or
securities. Notwithstanding the foregoing, unless the Senior Indebtedness in
respect of which such default or event of default exists has been declared
due and payable in its entirety within 180 days after the date written notice
of such default or event of default is delivered as set forth above or the
date of such acceleration as the case may be (the "Payment Blockage Period"),
and such declaration or acceleration has not been rescinded, the Company
shall be required then to pay all sums not paid to the Holders of the
Subordinated Debt Securities during the Payment Blockage Period due to the
foregoing prohibitions and to resume all other payments as and when due on
the Subordinated Debt Securities. Any number of such notices may be given;
provided however, that (i) during any 360 consecutive days, only one Payment
Blockage Period shall commence and (ii) any such default or event of default
that existed upon the commencement of a Payment Blockage Period may not be
the basis for the commencement of any other Payment Blockage Period, unless
such default or event of default shall have been cured or waived for a period
of not less than 90 consecutive days.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company from any source whether in cash,
property or securities, shall be received by the Trustee or the Holders on
account of any obligation or claim in respect of the Subordinated Debt
Securities at a time when such payment or distribution is prohibited by the
foregoing provisions, such payment or distribution shall be held in trust for
the benefit of the holders of Senior Indebtedness, and shall be paid or
delivered by the Trustee or such Holders, as the case may be, to the holders
of the Senior Indebtedness remaining unpaid or unprovided for or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or represented by
each, for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay or to provide for the payment in full
in cash or cash equivalents of all such Senior Indebtedness, after giving
effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness.
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Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization or readjustment of
the Company, whether voluntary or involuntary, in bankruptcy, insolvency,
receivership or a similar proceeding or upon assignment for the benefit of
creditors, or any other marshaling of the assets and liabilities of the
Company or otherwise, (i) the holders of all Senior Indebtedness would first
be entitled to receive payment in full in cash or cash equivalents (or have
such payment duly provided for) of the principal, premium, if any, and
interest payable in respect therefor before the Holders would be entitled to
receive any payment on account of the principal of, premium, if any, and
interest on the Subordinated Debt Securities, and (ii) any payment or
distribution of assets of the Company of any kind or character, from any
source, whether in cash, property or securities to which the Holders or the
Trustee on behalf of the Holders would be entitled, except for the
subordination provisions contained in the Indenture, would be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of Senior Indebtedness remaining unpaid
or unprovided for or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the Senior
Indebtedness held or represented by each, for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay or
provide for the payment in full in cash or cash equivalents of all such
Senior Indebtedness, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.
The holders of the Senior Indebtedness and their respective
representatives are authorized to demand specific performance of the
provisions with respect to subordination in the Indenture at any time when
the Company or any Holder shall have failed to comply with any provision with
respect to subordination in the Indenture applicable to it, and the Company
and each Holder irrevocably waives any defense based on the adequacy of a
remedy at law that might be asserted as a bar to the remedy of specific
performance of such subordination provision in any action brought therefor by
the holders of the Senior Indebtedness and their respective representatives.
By reasons of such subordination, in the event of the liquidation or
insolvency of the Company, creditors of the Company who are not holders of
Senior Indebtedness, including Holders of the Subordinated Debt Securities,
may recover less, ratably, than holders of Senior Indebtedness.
No provision contained in the Indenture or the Subordinated Debt
Securities will affect the obligation of the Company, which is absolute and
unconditional, to pay, when due, principal of, premium, if any, and interest
on the Subordinated Debt Securities. The subordination provisions of the
Indenture and the Subordinated Debt Securities will not prevent the
occurrence of any Event of Default under the Indenture or limit the rights of
the Trustee or any Holder, except as provided in the seven preceding
paragraphs, to pursue any other rights or remedies with respect to the
Subordinated Debt Securities.
NEGATIVE PLEDGE
The Senior Debt Indenture provides that the Company and any successor
corporation will not, and will not permit any Subsidiary to, create, assume,
incur or guarantee any indebtedness for borrowed money secured by a pledge,
lien or other encumbrance except for Permitted Liens (as defined in the
Senior Debt Indenture) on the Voting Stock of DLJSC or any other Subsidiary
of the Company which shall hereafter succeed by merger or otherwise to all or
substantially all of the business of DLJSC (a "DLJSC Successor"), without
making effective provision whereby the Senior Debt Securities will be secured
equally and ratably with such secured indebtedness. (Senior Debt Indenture,
Section 4.3)
CERTAIN DEFINITIONS
The term "Holder" or "Securityholder" as defined in the applicable
Indenture means the registered holder of any Debt Security with respect to
registered Debt Securities and the bearer of any unregistered Debt Security
or any coupon appertaining thereto, as the case may be.
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The term "Designated Senior Indebtedness" means any class of Senior
Indebtedness the aggregate principal amount outstanding of which exceeds $50
million and which is specifically designated in the instrument evidencing
such Senior Indebtedness or the agreement under which such Senior
Indebtedness arises as "Designated Senior Indebtedness."
The term "Original Issue Discount Security" as defined in the applicable
Indenture means any Debt Security that provides for an amount less than the
principal amount thereof to be due and payable upon declaration of
acceleration of the maturity thereof pursuant to Section 6.2 of the
applicable Indenture.
The term "Senior Indebtedness" as defined in the Subordinated Debt
Indenture means the principal of and premium, if any, and interest on (a) all
indebtedness of the Company, whether outstanding on the date of the
Subordinated Debt Indenture or thereafter created, (i) for money borrowed by
the Company, (ii) for money borrowed by, or obligations of, others and either
assumed or guaranteed, directly or indirectly, by the Company, (iii) in
respect of letters of credit and acceptances issued or made by banks, or (iv)
constituting purchase money indebtedness, or indebtedness secured by property
included in the property, plant and equipment accounts of the Company at the
time of the acquisition of such property by the Company, for the payment of
which the Company is directly liable, and (b) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements
to, any such indebtedness. As used in the preceding sentence, the term
"purchase money indebtedness" means indebtedness evidenced by a note,
debenture, bond or other instrument (whether or not secured by any lien or
other security interest) issued or assumed as all or a part of the
consideration for the acquisition of property, whether by purchase, merger,
consolidation or otherwise, unless by its terms such indebtedness is
subordinated to other indebtedness of the Company. Notwithstanding anything
to the contrary in the Subordinated Debt Indenture or the Subordinated Debt
Securities, Senior Indebtedness shall not include, (i) any indebtedness of
the Company which, by its terms or the terms of the instrument creating or
evidencing it, is subordinate in right of payment to or pari passu with the
Subordinated Debt Securities or (ii) any indebtedness of the Company to a
subsidiary of the Company. (Subordinated Debt Indenture, Section 1.1)
The term "Subsidiary" as defined in the applicable Indenture means with
respect to any Person, any corporation, association or other business entity
of which more than 50% of the outstanding Voting Stock (as defined in the
applicable Indenture) is owned directly or indirectly, by such Person and one
or more other Subsidiaries of such Person.
RESTRICTIONS ON MERGERS AND SALES OF ASSETS
Under each Indenture, the Company shall not consolidate with, merge with
or into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially
as an entirety in one transaction or a series of related transactions) to,
any Person (other than a consolidation with or merger with or into a
Subsidiary or a sale, conveyance, transfer, lease or other disposition to a
Subsidiary) or permit any Person to merge with or into the Company unless:
(a) either (i) the Company shall be the continuing Person or (ii) the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets of the
Company shall be a corporation organized and validly existing under the laws
of the United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, all of the obligations of the Company on all of the Debt Securities
and under the applicable Indenture and the Company shall have delivered to
the Trustee an opinion of counsel stating that such consolidation, merger or
transfer and such supplemental indenture complies with this provision and
that all conditions precedent provided for in the applicable Indenture
relating to such transaction have been complied with and that such
supplemental indenture constitutes the legal, valid and binding obligation of
the Company or such successor enforceable against such entity in accordance
with the terms, subject to customary exceptions; and (b) the Company shall
have delivered to the Trustee an officers' certificate to the effect that
immediately after giving effect to such transaction, no Default (as defined
in the applicable Indenture) shall have occurred and be continuing and an
opinion of counsel as to the matters set forth in paragraph (a) above.
(Section 5.1)
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EVENTS OF DEFAULT
Events of Default defined in the applicable Indenture with respect to the
Debt Securities of any series are: (a) the Company defaults in the payment of
all or any part of the principal of any Debt Security of such series when the
same becomes due and payable at maturity, upon acceleration, redemption or
mandatory repurchase, including as a sinking fund installment, or otherwise;
(b) the Company defaults in the payment of any interest on any Debt Security
of such series when the same becomes due and payable, and such default
continues for a period of 30 days; (c) the Company defaults in the
performance of or breaches any other covenant or agreement of the Company in
the applicable Indenture with respect to any Debt Security of such series or
in the Debt Securities of such series and such default or breach continues
for a period of 60 consecutive days after written notice thereof has been
given to the Company by the Trustee or to the Company and the Trustee by the
Holders of 25% or more in aggregate principal amount of the Debt Securities
of all series under the applicable Indenture affected thereby; (d) an
involuntary case or other proceeding shall be commenced against the Company
or DLJSC (including for purposes of paragraph (d) and (e) hereof any DLJSC
Successor) with respect to the Company or DLJSC or their respective debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of the Company or DLJSC or for any substantial part
of the property and assets of the Company or DLJSC, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Company or DLJSC
under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (e) the Company or DLJSC (i) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary
case under any such law, (ii) consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or DLJSC or for all or
substantially all of the property and assets of the Company or DLJSC or (iii)
effects any general assignment for the benefit of creditors; (f) an event of
default, as defined in any one or more indentures or instruments evidencing
or under which the Company has at the date of the applicable Indenture or
shall thereafter have outstanding an aggregate of at least $25,000,000
aggregate principal amount of indebtedness for borrowed money, shall happen
and be continuing and such indebtedness shall have been accelerated so that
the same shall be or become due and payable prior to the date on which the
same would otherwise have become due and payable, and such acceleration shall
not be rescinded or annulled within ten days after notice thereof shall have
been given to the Company by the Trustee (if such event be known to it), or
to the Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the Debt Securities at the time outstanding under the
applicable Indenture; provided that if such event of default under such
indentures or instruments shall be remedied or cured by the Company or waived
by the holders of such indebtedness, then the Event of Default under the
applicable Indenture by reason thereof shall be deemed likewise to have been
thereupon remedied, cured or waived without further action upon the part of
either the Trustee or any of the Securityholders; (g) failure by the Company
to make any payment at maturity, including any applicable grace period, in
respect of at least $25,000,000 aggregate principal amount of indebtedness
for borrowed money and such failure shall have continued for a period of ten
days after notice thereof shall have been given to the Company by the Trustee
(if such event be known to it), or to the Company and the Trustee by the
holders of at least 25% in aggregate principal amount of the Debt Securities
at the time outstanding under the applicable Indenture; provided that if such
failure shall be remedied or cured by the Company or waived by the holders of
such indebtedness, then the Event of Default under the applicable Indenture
by reason thereof shall be deemed likewise to have been thereupon remedied,
cured or waived without further action upon the part of either the Trustee or
any of the Securityholders; or (h) any other Event of Default established
with respect to any series of Debt Securities issued pursuant to the
applicable Indenture occurs. (Section 6.1)
Each Indenture provides that if an Event of Default described in clauses
(a) or (b) of the immediately preceding paragraph with respect to the Debt
Securities of any series then outstanding thereunder occurs and is
continuing, then, and in each and every such case, except for any series of
Debt Securities the principal of which shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Debt Securities of any such affected series then
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outstanding under the applicable Indenture (each such series treated as a
separate class) by notice in writing to the Company (and to the Trustee if
given by Securityholders), may declare the entire principal amount (or, if
the Debt Securities of any such series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of such series established pursuant to the applicable Indenture) of all
Debt Securities of such affected series, and the interest accrued thereon, if
any, to be due and payable immediately, and upon any such declaration the
same shall become immediately due and payable. If an Event of Default
described in clauses (c) or (h) of the immediately preceding paragraph with
respect to the Debt Securities of one or more series then outstanding under
the applicable Indenture occurs and is continuing, then, in each and every
such case, except for any series of Debt Securities the principal of which
shall have already become due and payable, either the Trustee or the Holders
of not less than 25% in aggregate principal amount (or, if the Debt
Securities of any such series are Original Issue Discount Securities, such
portion of the principal as may be specified in the terms thereof established
pursuant to the applicable Indenture) of the Debt Securities of all such
affected series then outstanding under the applicable Indenture (treated as a
single class) by notice in writing to the Company (and to the Trustee if
given by Securityholders), may declare the entire principal amount (or, if
the Debt Securities of any such series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of such series established pursuant to the applicable Indenture) of all
Debt Securities of all such affected series, and the interest accrued
thereon, if any, to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Event of
Default described in clauses (d) or (e) of the immediately preceding
paragraph occurs and is continuing, then the principal amount (or, if any
Debt Securities are Original Issue Discount Securities, such portion of the
principal as may be specified in the terms thereof established pursuant to
the applicable Indenture) of all the Debt Securities then outstanding under
the applicable Indenture and interest accrued thereon, if any, shall be and
become immediately due and payable, without any notice or other action by any
Holder or the Trustee to the full extent permitted by applicable law. If an
Event of Default described in clauses (f) or (g) of the immediately preceding
paragraph, or in clauses (c) or (h) of the immediately preceding paragraph
with respect to the Debt Securities of all series then outstanding under the
applicable Indenture, occurs and is continuing, then, in each and every such
case, either the Trustee or the Holders of not less than 25% in aggregate
principal amount (or, if the Debt Securities of any outstanding series are
Original Issue Discount Securities, such portion of the principal as may be
specified in the terms thereof established pursuant to the applicable
Indenture) of all Debt Securities of any series then outstanding under the
applicable Indenture except for any series of Debt Securities the principal
of which shall have already become due and payable (treated as a single
class) by notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the entire principal amount (or, if the Debt
Securities of any such series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of such
series established pursuant to the applicable Indenture) of all Debt
Securities of any series then outstanding under the applicable Indenture, and
the interest accrued thereon, if any, to be due and payable immediately, and
upon any such declaration the same shall become immediately due and payable.
Upon certain conditions such declarations may be rescinded and annulled and
past defaults may be waived by the Holders of a majority in principal of the
then outstanding Debt Securities of all such series that have been
accelerated under the applicable Indenture (voting as a single class).
(Section 6.2) Because the ability of Holders to declare the Debt Securities
of any series due and payable upon an Event of Default under clauses (c),
(f), (g) or (h) of the immediately preceding paragraph depends on the
requisite action by Holders of all affected series of Debt Securities under
the applicable Indenture, if there is more than one series of Debt Securities
outstanding, Holders of a particular series of Debt Securities may be unable
to declare the Debt Securities under the applicable Indenture due and payable
upon an Event of Default described in clauses (c), (f), (g) or (h) of the
immediately preceding paragraph without action by Holders of such other
series.
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
16
<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)
17
<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 clause (ii), only the Company's obligations to
execute and deliver Debt Securities of such series for
18
<PAGE>
authentication, to set the terms of the Debt Securities of such series, to
maintain an office or agency in respect of the Debt Securities of such
series, to have moneys held for payment in trust, to register the transfer or
exchange of Debt Securities of such series, to deliver Debt Securities of
such series for replacement or to be canceled, to compensate and indemnify
the Trustee and to appoint a successor trustee, and its right to recover
excess money held by the Trustee shall survive until such Debt Securities are
no longer outstanding. Thereafter, only the Company's obligations to
compensate and indemnify the Trustee, and its right to recover excess money
held by the Trustee shall survive. (Section 8.1)
Each Indenture provides that the Company (i) will be deemed to have paid
and will be discharged from any and all obligations in respect of the Debt
Securities of any series under the applicable Indenture, and the provisions
of the applicable Indenture will, except as noted below, no longer be in
effect with respect to the Debt Securities of such series ("legal
defeasance") and (ii) may, in the case of the Senior Debt Indenture, omit to
comply with any term, provision or condition of the applicable Indenture
described above under "--Negative Pledge" (or in the case of each Indenture
omit to comply with any other specific covenant relating to such series
provided for in a Board Resolution or supplemental indenture which may by its
terms be defeased pursuant to such Indenture), and such omission shall be
deemed not to be an Event of Default under clauses (c) or (h) of the first
paragraph of "--Events of Default" with respect to the outstanding Debt
Securities of a series under the applicable Indenture ("covenant
defeasance"); provided that the following conditions shall have been
satisfied: (a) the Company has irrevocably deposited in trust with the
Trustee as trust funds solely for the benefit of the Holders of the Debt
Securities of such series, for payment of the principal of and interest on
the Debt Securities of such series, money or U.S. Government Obligations or a
combination thereof sufficient (unless such funds consist solely of money, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee)
without consideration of any reinvestment and after payment of all federal,
state and local taxes or other charges and assessments in respect thereof
payable by the Trustee, to pay and discharge the principal of and accrued
interest on the outstanding Debt Securities of such series to maturity or
earlier redemption (irrevocably provided for under arrangements satisfactory
to the Trustee), as the case may be; (b) such deposit will not result in a
breach or violation of, or constitute a default under, the applicable
Indenture or any other material agreement or instrument to which the Company
is a party or by which it is bound; (c) no Default with respect to such Debt
Securities of such series shall have occurred and be continuing on the date
of such deposit; (d) the Company shall have delivered to the Trustee an
opinion of counsel that (1) the Holders of the Debt Securities of such series
will not recognize income, gain or loss for Federal income tax purposes as a
result of the Company's exercise of its option under this provision of the
applicable Indenture and will be subject to Federal income tax on the same
amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred and (2) the Holders of
the Debt Securities of such series have a valid security interest in the
trust funds subject to no prior liens under the Uniform Commercial Code, and
(e) the Company has delivered to the Trustee an officers' certificate and an
opinion of counsel, in each case stating that all conditions precedent
provided for the applicable Indenture relating to the defeasance contemplated
have been complied with. In the case of legal defeasance under clause (i)
above, the opinion of counsel referred to in clause (d)(1) above may be
replaced by a ruling directed to the Trustee received from the Internal
Revenue Service to the same effect. Subsequent to legal defeasance under
clause (i) above, the Company's obligations to execute and deliver Debt
Securities of such series for authentication, to set the terms of the Debt
Securities of such series, to maintain an office or agency in respect of the
Debt Securities of such series, to have moneys held for payment in trust, to
register the transfer or exchange of Debt Securities of such series, to
deliver Debt Securities of such series for replacement or to be canceled, to
compensate and indemnify the Trustee and to appoint a successor trustee, and
its right to recover excess money held by the Trustee shall survive until
such Debt Securities are no longer outstanding. After such Debt Securities
are no longer outstanding, in the case of legal defeasance under clause (i)
above, only the Company's obligations to compensate and indemnify the Trustee
and its right to recover excess money held by the Trustee shall survive.
(Sections 8.2 and 8.3)
MODIFICATION OF THE INDENTURES
Each Indenture provides that the Company and the Trustee may amend or
supplement the applicable Indenture or the Debt Securities of any series
without notice to or the consent of any Holder: (1) to cure
19
<PAGE>
any ambiguity, defect or inconsistency in the applicable Indenture; provided
that such amendments or supplements shall not materially and adversely affect
the interests of the Holders; (2) to comply with Article 5 of the applicable
Indenture in connection with a consolidation or merger of the Company or the
sale, conveyance, transfer, lease or other disposal of all or substantially
all of the property and assets of the Company; (3) to comply with any
requirements of the Commission in connection with the qualification of the
applicable Indenture under the Trust Indenture Act; (4) to evidence and
provide for the acceptance of appointment under the applicable Indenture with
respect to the Debt Securities of any or all series by a successor Trustee;
(5) to establish the form or forms or terms of Debt Securities of any series
or of the coupons pertaining to such Debt Securities as permitted under the
applicable Indenture; (6) to provide for uncertificated or unregistered Debt
Securities and to make all appropriate changes for such purpose; or (7) to
make any change that does not materially and adversely affect the rights of
any Holder. (Section 9.1)
Each Indenture also contains provisions whereby the Company and the
Trustee, subject to certain conditions, without prior notice to any Holders,
may amend the applicable Indenture and the outstanding Debt Securities of any
series with the written consent of the Holders of a majority in principal
amount of the Debt Securities then outstanding under the applicable Indenture
of all series affected by such amendment (all such series voting as one
class), and the Holders of a majority in principal amount of the outstanding
Debt Securities under the applicable Indenture of all series affected thereby
(all such series voting as one class) by written notice to the Trustee may
waive future compliance by the Company with any provision of the applicable
Indenture or the Debt Securities of such series. Notwithstanding the
foregoing provisions, without the consent of each Holder affected thereby, an
amendment or waiver, including a waiver pursuant to Section 6.4 of the
applicable Indenture, may not: (i) extend the stated maturity of the
principal of, or any sinking fund obligation or any installment of interest
on, such Holder's Debt Security, or reduce the principal thereof or the rate
of interest thereon (including any amount in respect of original issue
discount), or any premium payable with respect thereto, or adversely affect
the rights of such Holder under any mandatory redemption or repurchase
provision or any right of redemption or repurchase at the option of such
Holder, or reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon an acceleration of the maturity
thereof or the amount thereof provable in bankruptcy, or change any place of
payment where, or the currency in which, any Debt Security or any premium or
the interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the due date therefor; (ii)
reduce the percentage in principal amount of outstanding Debt Securities of
the relevant series the consent of whose Holders is required for any such
supplemental indenture, for any waiver of compliance with certain provisions
of the applicable Indenture or certain Defaults and their consequences
provided for in the applicable Indenture; (iii) waive a Default in the
payment of principal of or interest on any Debt Security of such Holder; or
(iv) modify any of the provisions of this provision of the applicable
Indenture, except to increase any such percentage or to provide that certain
other provisions of the applicable Indenture cannot be modified or waived
without the consent of the Holder of each outstanding Debt Security
thereunder affected thereby. A supplemental indenture which changes or
eliminates any covenant or other provision of the applicable Indenture which
has expressly been included solely for the benefit of one or more particular
series of Debt Securities, or which modifies the rights of Holders of Debt
Securities of such series with respect to such covenant or provision, shall
be deemed not to affect the rights under the applicable Indenture of the
Holders of Debt Securities of any other series or of the coupons appertaining
to such Debt Securities. It shall not be necessary for the consent of any
Holder under this provision of the applicable Indenture to approve the
particular form of any proposed amendment, supplement or waiver, but it shall
be sufficient if such consent approves the substance thereof. After an
amendment, supplement or waiver under this section of the applicable
Indenture becomes effective, the Company shall give to the Holders affected
thereby a notice briefly describing the amendment, supplement or waiver. The
Company will mail supplemental indentures to Holders upon request. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture or waiver. (Section 9.2)
GOVERNING LAW
The Indentures and the Debt Securities will be governed by the laws of the
State of New York. (Section 10.8 and Section 11.8)
20
<PAGE>
CONCERNING THE TRUSTEE
The Company and its subsidiaries maintain ordinary banking and trust
relationships with The Chase Manhattan Bank and its affiliates.
21
<PAGE>
PLAN OF DISTRIBUTION
Offered Securities may be sold (i) through agents, (ii) through
underwriters, (iii) through dealers or (iv) directly to purchasers.
Offers to purchase Offered Securities may be solicited by agents
designated by the Company from time to time. Any such agent involved in the
offer or sale of the Offered Securities will be named, and any commissions
payable by the Company to such agent will be set forth, in the Prospectus
Supplement. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its
appointment. Any such agent may be deemed to be an underwriter, as that term
is defined in the Securities Act, of the Offered Securities so offered and
sold.
If an underwriter or underwriters are utilized in the sale of Offered
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is
reached, and the names of the specific managing underwriter or underwriters,
as well as any other underwriters, and the terms of the transactions,
including compensation of the underwriters and dealers, if any, will be set
forth in the Prospectus Supplement, which will be used by the underwriters to
make resales of Offered Securities.
If a dealer is utilized in the sale of Offered Securities, the Company
will sell such Offered Securities to the dealer, as principal. The dealer may
then resell such Offered Securities to the public at varying prices to be
determined by such dealer at the time of resale. The name of the dealer and
the terms of the transactions will be set forth in the Prospectus Supplement
relating thereto.
If DLJSC, a wholly owned subsidiary of the Company, participates in the
distribution of Offered Securities, the offering of the Offered Securities
will be conducted in accordance with Section 2720 of the NASD Conduct Rules.
Offers to purchase Offered Securities may be solicited directly by the
Company and sales thereof may be made by the Company directly to
institutional investors or others. The terms of any such sales will be
described in the Prospectus Supplement relating thereto.
Agents, underwriters and dealers may be entitled under agreements which
may be entered into with the Company, to indemnification by the Company
against certain liabilities, including liabilities under the 1933 Act, and
any such agents, underwriters or dealers, or their affiliates may be
customers of, engage in transactions with or perform services for the
Company, in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Offered Securities from the Company at the public offering price set forth in
the Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date stated in the
Prospectus Supplement. Such Contracts will be subject to only those
conditions set forth in the Prospectus Supplement. A commission indicated in
the Prospectus Supplement will be paid to underwriters and agents soliciting
purchases of Offered Securities pursuant to any such Contracts accepted by
the Company.
This Prospectus, together with the Prospectus Supplement, may also be used
by DLJSC in connection with offers and sales of Offered Securities related to
market-making transactions by and through DLJSC, at negotiated prices related
to prevailing market prices at the time of sale or otherwise. DLJSC may act
as principal or agent in such transactions.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Securities and certain other legal matters in connection with
the offering of the Securities will be passed upon by Michael A. Boyd, Senior
Vice President and General Counsel to the Company, and Davis Polk & Wardwell.
Mr. Boyd owns 8,033 shares of Common Stock, 14,433 restricted stock units and
options to purchase 39,772 shares of Common Stock. Davis Polk & Wardwell from
time to time provides legal services to the Company and its subsidiaries.
22
<PAGE>
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company as of December 31, 1996 and 1995 and for each of the years in the
three-year period ended December 31, 1996 have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated
herein by reference, and upon the authority of said firm as experts in
accounting and auditing.
23
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY PREFERRED STOCK 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
Use of Proceeds.......................... S-3
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends .. S-3
Description of Preferred Stock........... S-4
Underwriting............................. S-10
PROSPECTUS
Available Information.................... 2
Incorporation of Certain Information by
Reference............................... 2
Use of Proceeds.......................... 3
Ratios of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and
Preferred Stock Dividends .............. 3
The Company.............................. 4
Description of Capital Stock ............ 6
Description of Debt Securities........... 9
Plan of Distribution..................... 22
Legal Matters............................ 22
Experts.................................. 23
</TABLE>
3,500,000 SHARES
DONALDSON, LUFKIN &
JENRETTE, INC.
FIXED/ADJUSTABLE RATE
CUMULATIVE PREFERRED STOCK,
SERIES B
PROSPECTUS SUPPLEMENT
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
JANUARY 6, 1998
<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration File No.: 333-40925
PROSPECTUS SUPPLEMENT
JANUARY 6, 1998
(TO PROSPECTUS DATED DECEMBER 3, 1997)
3,500,000 SHARES
DONALDSON, LUFKIN & JENRETTE, INC.
FIXED/ADJUSTABLE RATE CUMULATIVE
PREFERRED STOCK, SERIES B
This Prospectus Supplement relates to 3,500,000 shares of Fixed/Adjustable
Rate Cumulative Preferred Stock, Series B, $50 liquidation preference per
share (the "Preferred Stock"), of Donaldson, Lufkin & Jenrette, Inc. (the
"Company"). Dividends on the Preferred Stock are cumulative from the date of
original issue and are payable quarterly on January 15, April 15, July 15 and
October 15 of each year, commencing April 15, 1998, at a rate of 5.30% per
annum through January 15, 2003. Thereafter, the dividend rate on the
Preferred Stock will be the Applicable Rate from time to time in effect. The
Applicable Rate per annum for any dividend period beginning January 15, 2003
will be equal to 0.40% plus the highest of the Treasury Bill Rate, the Ten
Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate (each
as defined herein), as determined in advance of such dividend period, however
the Applicable Rate per annum for each dividend period beginning January 15,
2003 will not be less than 5.70% nor greater than 11.30%. The amount of
dividends payable in respect of the Preferred Stock will be adjusted in the
event of certain amendments to the Internal Revenue Code of 1986, as amended
(the "Code"), in respect of the dividends received deduction. See
"Description of Preferred Stock--Dividends."
The Preferred Stock is redeemable at any time on or after January 15,
2003, at the option of the Company, in whole or in part, at $50 per share
plus accrued and unpaid dividends (whether or not declared) to the date fixed
for redemption. See "Description of Preferred Stock--Redemption." For a
description of the rights and preferences of the Preferred Stock, see
"Description of Preferred Stock."
The Preferred Stock has been approved for listing on the New York Stock
Exchange, Inc.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS 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 Preferred Stock 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 Preferred Stock; however, it is not
obligated to do so. Any such market-making may be discontinued at any time,
and there is no assurance as to the liquidity of, or trading market for, the
Preferred Stock. DLJSC may act as principal or agent in such transactions.
See "Plan of Distribution."
<PAGE>
USE OF PROCEEDS
Donaldson, Lufkin & Jenrette, Inc. will not receive any proceeds from the
sale of the Preferred Stock in any market-making transaction with which this
Prospectus Supplement may be delivered.
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to combined fixed
charges and preferred stock dividends for the Company for the periods
indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined
fixed charges and preferred
stock dividends (1) ......... -- -- 1.09 1.10 1.16 1.17
</TABLE>
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(1) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.
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DESCRIPTION OF PREFERRED STOCK
The following description of the particular terms of the 3,500,000 shares
of Preferred Stock supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of Preferred
Stock set forth in the accompanying Prospectus, to which description
reference is hereby made. The description of certain provisions of the
Preferred Stock set forth below does not purport to be complete and is
subject to and qualified in its entirety by reference to the provisions of
the Certificate of Designation relating to the Preferred Stock, a form of
which will be filed with the Securities and Exchange Commission at or prior
to the time of sale of the Preferred Stock. Capitalized terms not defined
herein have the meanings assigned to such terms in the Prospectus.
GENERAL
The Preferred Stock is a single series consisting of 3,500,000 shares. The
holders of Preferred Stock will have no preemptive rights. The Preferred
Stock will not be convertible into shares of Common Stock of the Company. The
Preferred Stock will be fully paid and nonassessable.
The Preferred Stock will, on the date of original issuance, rank on a
parity as to payment of dividends and distribution of assets upon
dissolution, liquidation or winding up of the Company with each other
outstanding series of preferred stock, including the Series A,
Fixed/Adjustable Rate Cumulative preferred stock issued in November 1996 (the
"Series A Preferred Stock"). See "Description of Capital Stock--Preferred
Stock" in the Prospectus. The Preferred Stock, together with each other
series of preferred stock, will rank prior to the Common Stock of the Company
as to the payment of dividends and distribution of assets upon dissolution,
liquidation or winding up of the Company.
DIVIDENDS
General. Cumulative cash dividends will be payable on each share of
Preferred Stock when, as and if declared by the Board of Directors of the
Company or a duly authorized committee thereof out of the assets of the
Company legally available therefor.
The initial dividend for the dividend period commencing on January 9, 1998
to (but excluding) April 15, 1998 will be $.7067 per share and will be
payable on April 15, 1998. Thereafter, dividends on the Preferred Stock will
be payable quarterly, as, if and when declared by the Board of Directors of
the Company on January 15, April 15, July 15 and October 15 of each year
(each a "Dividend Payment Date") at the annual rate of 5.30% or $2.65 per
share through January 15, 2003. After January 15, 2003, dividends on the
Preferred Stock will be payable on each Dividend Payment Date, as, if and
when declared by the Board of Directors of the Company at the Applicable Rate
from time to time in effect. The Applicable Rate per annum for each dividend
period beginning January 15, 2003 will be equal to 0.40% plus the highest of
the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty
Year Constant Maturity Rate (each as defined below under "Adjustable Rate
Dividends"), as determined in advance of such dividend period, however the
Applicable Rate per annum for each dividend period beginning January 15,
2003, will not be less than 5.70% nor greater than 11.30%.
If a Dividend Payment Date is not a business day, dividends (if declared)
on the Preferred Stock will be paid on the next business day, without
interest. A dividend period with respect to a Dividend Payment Date is the
period commencing on the preceding Dividend Payment Date and ending on the
day immediately prior to the next Dividend Payment Date. Dividends will be
payable to holders of record as they appear on the stock books of the Company
on the record date fixed by the Board of Directors of the Company which will
not be more than 60 days or less than 10 days preceding the payment date
thereof.
Dividends on the Preferred Stock will be cumulative and rights will accrue
to the holders of the Preferred Stock if the Company fails to declare one or
more dividends on the Preferred Stock in any amount, whether or not the
earnings or financial condition of the Company were sufficient to pay such
dividends in whole or in part.
Adjustable Rate Dividends. The "Applicable Rate" per annum for each
dividend period beginning January 15, 2003 will be equal to 0.40% plus the
Effective Rate (as defined below) for such dividend
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period, but not less than 5.70% nor greater than 11.30% except as provided
below in this paragraph. The "Effective Rate" for each dividend period
beginning January 15, 2003 will be equal to the highest of the Treasury Bill
Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant
Maturity Rate (each as defined below) for such dividend period. In the event
that the Company determines in good faith that for any reason: (i) any one of
the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty
Year Constant Maturity Rate cannot be determined for any dividend period,
then the Effective Rate for such dividend period will be equal to the higher
of whichever two of such rates can be so determined; (ii) only one of the
Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year
Constant Maturity Rate can be determined for any dividend period, then the
Effective Rate for such dividend period will be equal to whichever one of
such rates as can be so determined; or (iii) none of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate
can be determined for any dividend period, then the Effective Rate for the
preceding dividend period will be continued for the succeeding dividend
period.
The "Treasury Bill Rate" will be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate is published during the relevant
Calendar Period (as defined below)) for three-month U.S. Treasury bills, as
published weekly by the Federal Reserve Board (as defined below) during the
Calendar Period immediately preceding the last ten calendar days preceding
the dividend period for which the dividend rate on the Preferred Stock is
being determined, except as described below in this paragraph. In the event
that the Federal Reserve Board does not publish such a weekly per annum
market discount rate during any such Calendar Period, then the Treasury Bill
Rate for such dividend period will be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate is published during the relevant
Calendar Period) for three-month U.S. Treasury bills, as published weekly
during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Company. In the event that a
per annum market discount rate for three-month U.S. Treasury bills is not
published by the Federal Reserve Board or by any Federal Reserve Bank or by
any U.S. Government department or agency during such Calendar Period, then
the Treasury Bill Rate for such dividend period will be the arithmetic
average of the two most recent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only one such rate is published
during the relevant Calendar Period) for all of the U.S. Treasury bills then
having remaining maturities of not less than 80 nor more than 100 days, as
published during such Calendar Period by the Federal Reserve Board, or if the
Federal Reserve Board does not publish such rates, by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the Company.
In the event that the Company determines in good faith that for any reason no
such U.S. Treasury Bill Rates are published as provided above during such
Calendar Period, then the Treasury Bill Rate for such dividend period will be
the arithmetic average of the per annum market discount rates based upon the
closing bids during such Calendar Period for each of the issues of marketable
non-interest-bearing U.S. Treasury securities with a remaining maturity of
not less than 80 nor more than 100 days from the date of each such quotation,
as chosen and quoted daily for each business day in New York City (or less
frequently if daily quotations are not generally available) to the Company by
at least three recognized dealers in U.S. Government securities selected by
the Company. In the event that the Company determines in good faith that for
any reason the Company cannot determine the Treasury Bill Rate for any
dividend period as provided above in this paragraph, the Treasury Bill Rate
for such dividend period will be the arithmetic average of the per annum
market discount rates based upon the closing bids during such Calendar Period
for each of the issues of marketable interest-bearing U.S. Treasury
securities with a remaining maturity of not less than 80 nor more than 100
days, as chosen and quoted daily for each business day in New York City (or
less frequently if daily quotations are not generally available) to the
Company by at least three recognized dealers in U.S. Government securities
selected by the Company.
The "Ten Year Constant Maturity Rate" will be the arithmetic average of
the two most recent weekly per annum Ten Year Average Yields (as defined
below) (or the one weekly per annum Ten Year Average Yield, if only one such
yield is published during the relevant Calendar Period), as published weekly
by the Federal Reserve Board during the Calendar Period immediately preceding
the last ten calendar days
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preceding the dividend period for which the dividend rate on the Preferred
Stock is being determined, except as described below in this paragraph. In
the event that the Federal Reserve Board does not publish such weekly per
annum Ten Year Average Yield during such Calendar Period, then the Ten Year
Constant Maturity Rate for such dividend period will be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or
the one weekly per annum Ten Year Average Yield, if only one such yield is
published during the relevant Calendar Period), as published weekly during
such Calendar Period by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event that a per annum
Ten Year Average Yield is not published by the Federal Reserve Board or by
any Federal Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Ten Year Constant Maturity Rate for
such dividend period will be the arithmetic average of the two most recent
weekly per annum average yields to maturity (or the one weekly per annum
average yield to maturity, if only one such yield is published during the
relevant Calendar Period) for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities (as
defined below)) then having remaining maturities of not less than eight nor
more than twelve years, as published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve Board does not publish such
yields, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Company. In the event that the Company determined in
good faith that for any reason the Company cannot determine the Ten Year
Constant Maturity Rate for any dividend period as provided above in this
paragraph, then the Ten Year Constant Maturity Rate for such dividend period
will be the arithmetic average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period for each of the
issues of actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final maturity date not
less than eight nor more than twelve years from the date of each such
quotation, as chosen and quoted daily for each business day in New York City
(or less frequently if daily quotations are not generally available) to the
Company by at least three recognized dealers in U.S. Government securities
selected by the Company.
The "Thirty Year Constant Maturity Rate" will be the arithmetic average of
the two most recent weekly per annum Thirty Year Average Yields (as defined
below) (or the one weekly per annum Thirty Year Average Yield, if only one
such yield is published during the relevant Calendar Period), as published
weekly by the Federal Reserve Board during the Calendar Period immediately
preceding the last ten calendar days preceding the dividend period for which
the dividend rate on the Preferred Stock is being determined, except as
described below in this paragraph. In the event that the Federal Reserve
Board does not publish such a weekly per annum Thirty Year Average Yield
during such Calendar Period, then the Thirty Year Constant Maturity Rate for
such dividend period will be the arithmetic average of the two most recent
weekly per annum Thirty Year Average Yields (or the one weekly per annum
Thirty Year Average Yield, if only one such yield is published during the
relevant Calendar Period), as published weekly during such Calendar Period by
any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Company. In the event that a per annum Thirty Year Average
Yield in not published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such Calendar
Period then the Thirty Year Constant Maturity Rate for such dividend period
will be arithmetic average of the two most recent weekly per annum average
yields to maturity (or the one weekly per annum average yield to maturity, if
only one such yield is published during the relevant Calendar Period) for all
of the actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) than having remaining maturities
of not less than twenty-eight nor more than thirty years, as published during
such Calendar Period by the Federal Reserve Board or, if the Federal Reserve
Board does not publish such yields, by any Federal Reserve Bank or by any
U.S. Government department or agency selected by the Company. In the event
that the Company determines in good faith that for any reason the Company
cannot determine the Thirty Year Constant Maturity Rate for any dividend
period as provided above in this paragraph, then the Thirty Year Constant
Maturity Rate for such dividend period will be the arithmetic average of the
per annum average yields to maturity based upon the closing bids during such
Calendar Period for each of the issues of actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) with
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a final maturity date not less than twenty-eight nor more than thirty years
from the date of each such quotation, as chosen and quoted daily for each
business day in New York City (or less frequently if daily quotations are not
generally available) to the Company by at least three recognized dealers in
U.S. Government securities selected by the Company.
The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty
Year Constant Maturity Rate will each be rounded to the nearest five
hundredths of a percent.
The Applicable Rate with respect to each dividend period beginning January
15, 2003 will be calculated as promptly as practicable by the Company
according to the appropriate method described above. The Company will cause
notice of the Applicable Rate for the next dividend period to be enclosed
with each dividend payment check mailed to the holders of Preferred Stock.
As used above, the term "Calendar Period" means a period of fourteen
calendar days; the term "Federal Reserve Board" means the Board of Governors
of the Federal Reserve System; the term "Special Securities" means securities
which can, at the option of the holder, be surrendered at face value in
payment of any Federal estate tax or which provide tax benefits to the holder
and are priced to reflect such tax benefits or which were originally issued
at a deep or substantial discount; the term "Ten Year Average Yield" means
the average yield to maturity for actively traded marketable U.S. Treasury
fixed interest rate securities (adjusted to constant maturities of ten
years); and the term "Thirty Year Average Yield" means the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of thirty years).
Changes in the Dividends Received Percentage. If, prior to 18 months after
the date of the original issuance of the Preferred Stock, one or more
amendments to the Internal Revenue Code of 1986, as amended (the "Code"), are
enacted which change the percentage of the dividends received deduction
(currently 70%) as specified in Section 243(a)(1) of the Code or any
successor provision (the "Dividends Received Percentage"), the amount of each
dividend on each share of the Preferred Stock for dividend payments made on
or after the date of enactment of such change will be adjusted by multiplying
the amount of the dividend payable determined as described above under
"Dividends" (before adjustment) by a factor, which will be the number
determined in accordance with the following formula (the "DRD Formula"), and
rounding the result to the nearest cent:
1-[.35 (1-.70)]
-------------------
1-[.35 (1-DRP)]
For the purposes of the DRD Formula, "DRP" means the Dividends Received
Percentage applicable to the dividend in question; provided however, that if
the Dividends Received Percentage applicable to the dividend in question
shall be less than 50%, then the DRP shall equal .50. No amendment to the
Code, other than a change in the percentage of the dividends received
deduction set forth in Section 243(a)(1) of the Code or any successor
provision, will give rise to an adjustment. Notwithstanding the foregoing
provisions, in the event that, with respect to any such amendment, the
Company receives either an unqualified opinion of nationally recognized
independent tax counsel selected by the Company or a private letter ruling or
similar form of authorization from the Internal Revenue Service to the effect
that such an amendment does not apply to dividends payable on the Preferred
Stock, then any such amendment will not result in the adjustment provided for
pursuant to the DRD Formula. The opinion referenced in the previous sentence
will be based upon a specific exception in the legislation amending the DRP
or upon a published pronouncement of the Internal Revenue Service addressing
such legislation. Unless the context otherwise requires, references to
dividends in this Prospectus Supplement will mean dividends as adjusted by
the DRD Formula. The Company's calculation of the dividends payable as so
adjusted and as certified accurate as to calculation and reasonable as to the
method by the independent certified public accountants then regularly engaged
by the Company, will be final and not subject to review.
If any amendment to the Code which reduces the Dividends Received
Percentage is enacted after a record date and before the next Dividend
Payment Date, the amount of dividend payable on such Dividend Payment Date
will not be increased; but instead, an amount, equal to the excess of (x) the
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product of the dividends paid by the Company on such Dividend Payment Date
and the DRD Formula (where the DRP used in the DRD Formula would be equal to
the greater of the Dividends Received Percentage applicable to the dividend
in question and .50) over (y) the dividends paid by the Company on such
Dividend Payment Date, will be payable (if declared) to holders of record on
the next succeeding Dividend Payment Date in addition to any other amounts
payable on such date.
In addition, if any such amendment to the Code is enacted that reduces the
Dividends Received Percentage and such reduction retroactively applies to a
Dividend Payment Date as to which the Company previously paid dividends on
the Preferred Stock (each an "Affected Dividend Payment Date"), the Company
will pay (if declared) additional dividends (the "Additional Dividends") on
the next succeeding Dividend Payment Date (or if such amendment is enacted
after the dividend payable on such Dividend Payment Date has been declared,
on the second succeeding Dividend Payment Date following the date of
enactment) to holders of record on such succeeding Dividend Payment Date in
an amount equal to the excess of (x) the product of the dividends paid by the
Company on each Affected Dividend Payment Date and the DRD Formula (where the
DRP used in the DRD Formula would be equal to the greater of the Dividends
Received Percentage and .50 applied to each Affected Dividend Payment Date)
over (y) the dividends paid by the Company on each Affected Dividend Payment
Date.
Notwithstanding the foregoing, Additional Dividends will not be paid as a
result of the enactment of any amendment to the Code 18 months or more after
the date of original issuance of the Preferred Stock which retroactively
reduces the Dividends Received Percentage, or if such amendment would not
result in an adjustment due to the Company having received either an opinion
of counsel or tax ruling referred to in the third preceding paragraph. The
Company will make only one payment of Additional Dividends.
In the event that the amount of dividend payable per share of the
Preferred Stock will be adjusted pursuant to the DRD Formula and/or
Additional Dividends are to be paid, the Company will cause notice of each
such adjustment and, if applicable, any Additional Dividends, to be sent to
the holders of the Preferred Stock with the payment of dividends on the next
Dividend Payment Date after the date of such adjustment.
LIQUIDATION PREFERENCE
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of shares of Preferred Stock will be
entitled to receive out of the assets of the Company available for
distribution to stockholders, before any distribution of assets is made on
the Company's Common Stock or any other class or series of stock of the
Company ranking junior to the Preferred Stock upon liquidation, liquidating
distributions in the amount of $50 per share, plus an amount equal to the sum
of all accrued and unpaid dividends including any increase in dividends
payable due to changes in the Dividends Received Percentage and Additional
Dividends (whether or not earned or declared) for the then-current dividend
period and all dividend periods prior thereto. See "Description of Capital
Stock--Preferred Stock" in the accompanying Prospectus.
VOTING RIGHTS
The holders of shares of Preferred Stock will not be entitled to vote,
except as set forth below or as expressly required by applicable law.
If the equivalent of six quarterly dividends payable on the Preferred
Stock or any other class or series of preferred stock are in default, the
number of directors of the Company will be increased by two (without
duplication of any increase made pursuant to the terms of any other series of
preferred stock of the Company), and the holders of the Preferred Stock,
voting as a single class with the holders of shares of any other class of the
Company's preferred stock ranking on a parity with the Preferred Stock either
as to dividends or distribution of assets and upon which like voting rights
have been conferred and are exercisable, including the Series A Preferred
Stock, will be entitled to elect such two directors to fill such
newly-created directorships. Such right shall continue until full cumulative
dividends for all past dividend periods on all preferred shares of the
Company, including any shares of the Preferred Stock, have been paid or
declared and set apart for payment. Any such elected directors shall serve
until the Company's
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next annual meeting of stockholders (notwithstanding that prior to the end of
such term the dividend default shall cease to exist) or until their
respective successors shall be elected and qualify.
The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding shares of the Preferred Stock will be required for any amendment
of the articles of incorporation of the Company (or any certificate
supplemental thereto) which will adversely affect the powers, preferences,
privileges or rights of the Preferred Stock. The affirmative vote or consent
of the holders of at least 66 2/3% of the outstanding shares of the Preferred
Stock and any other series of the Company's preferred stock ranking on a
parity with the Preferred Stock either as to dividends or upon liquidation,
voting as a single class without regard to series, will be required to issue,
authorize or increase the authorized amount of, or issue or authorize any
obligation or security convertible into or evidencing a right to purchase,
any additional class or series of stock ranking prior to the Preferred Stock
as to dividends or upon liquidation, or to reclassify any authorized stock of
the Company into such prior shares, but such vote will not be required for
the Company to take any such actions with respect to any stock ranking on a
parity with or junior to the Preferred Stock.
REDEMPTION
Prior to January 15, 2003, the Preferred Stock is not redeemable. On or
after such date, each share of Preferred Stock will be redeemable, in whole
or in part, at the option of the Company, at any time and from time to time
upon not less than thirty nor more than sixty days' notice, at $50 per share,
plus accrued and unpaid dividends (whether or not declared) to the date fixed
for redemption, including any increase in dividends payable due to changes in
the Dividends Received Percentage and Additional Dividends. If fewer than all
the outstanding shares of Preferred Stock are to be redeemed, the Company
will select those to be redeemed by lot or pro rata or by any other method as
may be determined by the Board of Directors to be equitable.
In addition, if the holders of the shares of the Preferred Stock are
entitled to vote upon or consent to a merger or consolidation of the Company,
and if the Company offers to purchase all of the outstanding shares of the
Preferred Stock (the "Offer"), then each holder of Preferred Stock who does
not sell their shares of Preferred Stock pursuant to the Offer shall be
deemed irrevocably to have voted or consented all shares of Preferred Stock
owned by such holder in favor of the merger or consolidation of the Company
without any further action by the holder. The Offer shall be at a price of
$50 per share, together with accrued and unpaid dividends, if any, to the
date fixed for redemption, including any increase in dividends payable due to
increases in the Dividends Received Percentage and Additional Dividends. The
Offer must remain open for acceptance for a period of at least 30 days.
Holders of Preferred Stock will have no right to require redemption of the
Preferred Stock.
The Preferred Stock is not subject to any mandatory redemption, sinking
fund or other similar provisions.
Transfer Agent and Registrar. The Chase Manhattan Bank will be the
transfer agent, registrar, dividend disbursing agent and redemption agent for
the Preferred Stock.
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PLAN OF DISTRIBUTION
This Prospectus Supplement has been prepared for use by DLJSC in
connection with offers and sales of the Preferred Stock in market-making
transactions at negotiated prices related to prevailing market prices at the
time of the sale. DLJSC may act as principal or agent in such transactions.
DLJSC has advised the Company that it currently intends to make a market in
the Preferred Stock, but it is not obligated to do so and may discontinue any
such market-making at any time without notice. Accordingly, no assurance can
be given as to the liquidity of, or the trading market for, the Preferred
Stock.
DLJSC served as an underwriter in the offering of the Preferred Stock and
received underwriting compensation in connection therewith.
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PROSPECTUS
DECEMBER 3, 1997
$300,000,000
DONALDSON, LUFKIN & JENRETTE, INC.
DEBT SECURITIES AND PREFERRED STOCK
Donaldson, Lufkin & Jenrette, Inc. (the "Company") may from time to time
offer, together or separately, (i) senior or subordinated debt securities
(the "Debt Securities") or (ii) shares of its preferred stock, par value
$0.01 per share (the "Preferred Stock"). The Debt Securities and Preferred
Stock are collectively called the "Securities."
The Securities may be issued in one or more series or issuances in U.S.
dollars or in one or more foreign currencies, currency units or composite
currencies. The aggregate initial public offering price of the securities to
be offered by this Prospectus shall not exceed $300,000,000 (or its
equivalent in one or more foreign currencies, currency units or composite
currencies). Specific terms of the securities in respect of which this
Prospectus is being delivered (the "Offered Securities") will be set forth in
an accompanying Prospectus Supplement (a "Prospectus Supplement"). The
Prospectus Supplement will set forth with regard to the particular Offered
Securities, without limitation, the following: (i) in the case of Debt
Securities, the ranking as senior or subordinated debt securities, the
specific designation, aggregate principal amount, authorized denomination,
maturity, rate (which may be fixed or variable) or method of calculation of
interest and dates for payment thereof, and any exchangeability, redemption,
prepayment or sinking fund provisions and any listing on a securities
exchange and (ii) in the case of Preferred Stock, the specific designation,
number of shares, purchase price and the rights, preferences and privileges
thereof and any qualifications or restrictions thereon (including dividends,
liquidation value, voting rights, terms for the redemption or exchange
thereof and any other specific terms of the Preferred Stock) and any listing
on a securities exchange. Unless otherwise indicated in the Prospectus
Supplement, the Company does not intend to list any of the Securities on a
national securities exchange.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus has been prepared for use by Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC") in connection with offers and sales of the
Offered Securities which may be made by it from time to time in market-making
transactions at negotiated prices relating to prevailing market prices at the
time of sale. The Company has been advised by DLJSC that it currently intends
to make a market in the Offered Securities; however, it is not obligated to
do so. Any such market-making may be discontinued at any time, and there is
no assurance as to the liquidity of, or trading market for, the Offered
Securities. DLJSC may act as principal or agent in such transactions. See
"Plan of Distribution." This Prospectus may not be used to consummate sales
of Offered Securities unless accompanied by a Prospectus Supplement.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The registration
statement of which this Prospectus forms a part, as well as reports, proxy
statements and other information filed by the Company, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, New York,
New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
at prescribed rates from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be
accessed electronically by means of the Commission's home page on the
Internet at http: //www.sec.gov. The Company's common stock, par value $0.10
per share (the "Common Stock"), is listed on the New York Stock Exchange,
Inc. and reports and other information concerning the Company can also be
inspected at the office of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
This Prospectus constitutes a part of the Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Offered Securities. This
Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Offered Securities. Any
statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission or incorporated by reference herein are not necessarily complete,
and in each instance reference is made to the copy of such document so filed
for a more complete description of the matter involved. Each such statement
is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1996, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997 and Current Reports on Form 8-K filed on
April 11, 1997, September 9, 1997, September 17, 1997 and October 16, 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).
2
<PAGE>
USE OF PROCEEDS
Donaldson, Lufkin & Jenrette, Inc. will not receive any proceeds from the
sale of the Offered Securities in any market-making transaction with which
this Prospectus may be delivered.
RATIOS OF EARNINGS
TO FIXED CHARGES AND EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for the
Company for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 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
Ratio of earnings to combined
fixed charges and preferred
stock dividends (2).......... -- -- 1.09 1.10 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.
(2) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.
3
<PAGE>
THE COMPANY
Donaldson, Lufkin & Jenrette, Inc. (the "Company) is a leading integrated
investment and merchant bank that serves institutional, corporate,
governmental and individual clients both domestically and internationally.
The Company is a holding company which conducts its business through various
subsidiaries including its principal broker-dealer subsidiary, Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJSC"). The business of the
Company includes securities underwriting; sales and trading; merchant
banking; financial advisory services; investment research; correspondent
brokerage services; and asset management.
Founded in 1959, the Company initially focused on providing in-depth
investment research to institutional investors. In 1970, the Company became
the first member firm of the New York Stock Exchange ("NYSE") to be owned
publicly. Fifteen years later, the Company was purchased by The Equitable
Life Assurance Society of the United States ("Equitable Life"). Prior to
October 1995 the Company was an independently operated indirect wholly owned
subsidiary of The Equitable Companies Incorporated ("Equitable"). After the
completion of the Company's initial public offering in October 1995,
Equitable's ownership in the Company was reduced from 100% to 80.2%. At
December 31, 1996, following a sale by Equitable to AXA-UAP ("AXA") of 85,000
shares of the Company's stock, Equitable owned 79.9% of the Company's issued
and outstanding common stock. Equitable is a diversified financial services
organization and one of the world's largest investment management
organizations. AXA, a French holding company for an international group of
insurance and related financial services companies, is Equitable's largest
stockholder, beneficially owning, at December 31, 1996, $392.2 million of
Equitable's Series E convertible preferred stock and approximately 60.8% of
Equitable's outstanding common stock (without giving effect to the conversion
on August 4, 1997, of the Series E convertible preferred stock beneficially
owned by AXA).
The Company's business activities are highly integrated and constitute a
single industry segment. The assets and revenues related to the Company's
foreign operations are not significant; however the Company has begun
expanding its activities abroad. In particular, in March 1997, the Company
acquired the London based financial advisory firm Phoenix Group Limited
("Phoenix") and in October 1997 the Company acquired London Global Securities
("London Global"), a securities financing intermediary located in London.
The Company conducts its business through three principal operating
groups: the Banking Group, which includes the Company's Investment Banking,
Merchant Banking and Emerging Markets Groups and Phoenix; the Capital Markets
Group, consisting of the Company's Fixed Income, Institutional Equities and
Equity Derivatives Divisions, Autranet, a distributor of investment research
products, and Sprout, its venture capital affiliate; and the Financial
Services Group, comprised of the Pershing Division, the Investment Services
Group, the Asset Management Group and London Global.
The following table sets forth the revenues, net of all interest, of the
Company and each of its principal operating groups. Net revenues, however,
are not necessarily indicative of the profitability of each group.
NET REVENUES BY OPERATING GROUP:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Banking Group............ $ 428.4 $ 491.8 $ 390.0 $ 689.2 $ 935.8
Capital Markets Group ... 713.0 994.6 638.1 780.0 1,015.2
Financial Services
Group................... 336.9 455.3 458.2 619.5 827.6
Other ................... (26.5) (38.1) 18.6 (10.7) (21.1)
---------- ---------- ---------- ---------- ---------
Total net revenues....... $1,451.8 $1,903.6 $1,504.9 $2,078.0 $2,757.5
========== ========== ========== ========== =========
</TABLE>
4
<PAGE>
The Company currently conducts its operations through 17 offices in 14
locations in the U.S., including Atlanta, Austin, Boston, Chicago, Dallas,
Houston, Jersey City, Los Angeles, Menlo Park, Miami, New York, Oak Brook,
Philadelphia and San Francisco. The Company also has 11 international offices
located in 10 cities, including Bangalore, Buenos Aires, Geneva, Hong Kong,
London, Lugano, Mexico City, Paris, Sao Paulo and Tokyo and conducts business
through a joint venture in South Africa.
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.
5
<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 September 30, 1997, the Company had
55,808,358 shares of Common Stock and 4,000,000 shares of Series A Fixed
Adjustable Rate Preferred Stock outstanding. The following summary
description of the capital stock of the Company is qualified in its entirety
by reference to the Certificate of Incorporation and the Bylaws of the
Company, copies of which have been filed with the Commission.
COMMON STOCK
Subject to the rights of the holders of any Preferred Stock which may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefor, and, in the event of
liquidation, to share pro rata in any distribution of the Company's assets
after payment or providing for the payment of liabilities and the liquidation
preference of any outstanding Preferred Stock. Each holder of Common Stock is
entitled to one vote for each share held of record on the applicable record
date on all matters presented to a vote of stockholders, including the
election of directors. Holders of Common Stock have no cumulative voting
rights or preemptive rights to purchase or subscribe for any stock or other
securities and there are no conversion rights or redemption or sinking fund
provisions with respect to such stock. All outstanding shares of Common Stock
are fully paid and nonassessable.
The Common Stock is listed on the New York Stock Exchange under the symbol
"DLJ."
The transfer agent for the Common Stock is First Chicago Trust Company of
New York.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes 25,000,000 shares of
Preferred Stock. The Company's Board of Directors has the authority to issue
shares of Preferred Stock in one or more series and to fix, by resolution,
the terms of such securities, without any further vote or action by the
stockholders.
The applicable Prospectus Supplement will describe the following terms of
any Preferred Stock in respect of which this Prospectus is being delivered
(to the extent applicable to such Preferred Stock): (i) the specific
designation, number of shares, seniority and purchase price; (ii) any
liquidation preference per share; (iii) any date of maturity; (iv) any
redemption, repayment or sinking fund provisions; (v) any dividend rate or
rates and the dates on which any such dividends will be payable (or the
method by which such rates or dates will be determined); (vi) any voting
rights; (vii) if other than the currency of the United States of America, the
currency or currencies including composite currencies in which such Preferred
Stock is denominated and/or in which payments will or may be payable; (viii)
the method by which amounts in respect of such Preferred Stock may be
calculated and any commodities, currencies or indices, or value, rate or
price, relevant to such calculation; (ix) whether such Preferred Stock is
exchangeable and, if so, the securities or rights into which such Preferred
Stock is exchangeable, and the terms and conditions upon which such exchanges
will be effected including the initial exchange prices or rates, the exchange
period and any other related provisions; (x) the place or places where
dividends and other payments on the Preferred Stock will be payable; and (xi)
any additional voting, dividend, liquidation, redemption and other rights,
preferences, privileges, limitations and restrictions.
All shares of Preferred Stock offered hereby, or issuable upon exchange or
exercise of any Offered Securities, will, when issued, be fully paid and
non-assessable. Any shares of Preferred Stock so issued would have priority
over the Common Stock with respect to dividend or liquidation rights or both.
SERIES A FIXED ADJUSTABLE RATE PREFERRED STOCK
General. The Series A Fixed Adjustable Rate Preferred Stock (the "Series A
Preferred Stock") is a single series consisting of 4,000,000 shares with a
liquidation preference of $50 per share. The holders of Series A Preferred
Stock have no preemptive rights. The Series A Preferred Stock is not
convertible into shares of Common Stock of the Company and is fully paid and
nonassessable.
6
<PAGE>
Unless otherwise specified in the Prospectus Supplement, the Series A
Preferred Stock will rank on a parity as to payment of dividends and
distribution of assets upon dissolution, liquidation or winding up of the
Company with each series of Preferred Stock issued hereunder. The Series A
Preferred Stock ranks prior to the Common Stock of the Company as to the
payment of dividends and distribution of assets upon dissolution, liquidation
or winding up of the Company.
Dividends. Dividends on the Series A Preferred Stock are payable
quarterly at the annual rate of 5.94% or $2.97 per share through November 30,
2001. After November 30, 2001, dividends on the Series A Preferred Stock are
payable at the Applicable Rate from time to time in effect. The Applicable
Rate per annum for each dividend period beginning November 30, 2001 will
generally be equal to 0.50% plus the highest of the Treasury Bill Rate, the
Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate
(each as defined by the terms of the Series A Preferred Stock). The
Applicable Rate per annum for each dividend period beginning November 30,
2001, will not be less than 6.44% nor greater than 12.44% (without taking
into account any adjustments as described below under "Changes in the
Dividends Received Percentage").
Dividends on the Series A Preferred Stock are cumulative and rights accrue
to the holders of the Series A Preferred Stock if the Company fails to
declare one or more dividends on the Series A Preferred Stock in any amount,
whether or not the earnings or financial condition of the Company were
sufficient to pay such dividends in whole or in part.
Changes in the Dividends Received Percentage. If one or more amendments to
the Internal Revenue Code of 1986, as amended (the "Code"), are enacted which
reduce the percentage of the dividends received deduction (currently 70%) as
specified in Section 243(a)(1) of the Code or any successor provision (the
"Dividends Received Percentage"), the amount of each dividend on each share
of the Series A Preferred Stock for dividend payments made on or after the
date of enactment of such change will generally be adjusted upward pursuant
to a specified formula set forth in the terms of the Series A Preferred
Stock.
In addition, if the Dividends Received Percentage is reduced to 50% or
less, the Company may at its option, redeem the Series A Preferred Stock as a
whole but not in part as described below. See "Redemption."
Voting Rights. The holders of shares of Series A Preferred Stock are not
entitled to vote, except as set forth below or as expressly required by
applicable law.
If the equivalent of six quarterly dividends payable on the Series A
Preferred Stock or any other class or series of preferred stock are in
default, the number of directors of the Company will be increased by two, and
the holders of the Series A Preferred Stock, voting as a single class with
the holders of shares of any other class of the Company's preferred stock
ranking on a parity with the Series A Preferred Stock upon which like voting
rights have been conferred and are exercisable, will be entitled to elect
such two directors to fill such newly-created directorships.
In addition, the affirmative vote or consent of the holders of at least 66
2/3% of the outstanding shares of the Series A Preferred Stock will be
required for any amendment of the certificate of incorporation of the Company
which will adversely affect the powers, preferences, privileges or rights of
the Series A Preferred Stock. The affirmative vote or consent of the holders
of at least 66 2/3% of the outstanding shares of the Series A Preferred Stock
and any other series of the Company's preferred stock ranking on a parity
with the Series A Preferred Stock, voting as a single class without regard to
series, will be required to issue, authorize or increase the authorized
amount of, or issue or authorize any obligation or security convertible into
or evidencing a right to purchase, any additional class or series of stock
ranking prior to the Series A Preferred Stock, or to reclassify any
authorized stock of the Company into such prior shares, but such vote will
not be required for the Company to take any such actions with respect to any
stock ranking on a parity with or junior to the Series A Preferred Stock.
Redemption. Prior to November 30, 2001, the Series A Preferred Stock is
not redeemable, except under certain limited circumstances as described
below. On or after such date, each share of Series A Preferred Stock will be
redeemable, in whole or in part, at the option of the Company, at $50 per
share,
7
<PAGE>
plus accrued and unpaid dividends. However, if the Dividends Received
Percentage is equal to or less than 50% and, as a result, the amount of
dividends on the Series A Preferred Stock will be or is adjusted as described
above under "Changes in the Dividends Received Percentage," the Company, at
its option, may redeem all, but not less than all, of the outstanding shares
of the Series A Preferred Stock notwithstanding the preceding paragraph at a
redemption price specified by the terms of the Series A Preferred Stock.
In addition, if the holders of the shares of the Series A Preferred Stock
are entitled to vote upon or consent to a merger or consolidation of the
Company, and if the Company offers to purchase all of the outstanding shares
of the Series A Preferred Stock (the "Offer"), then each holder of Series A
Preferred Stock who does not sell their shares of Series A Preferred Stock
pursuant to the Offer shall be deemed irrevocably to have voted or consented
all shares of Series A Preferred Stock owned by such holder in favor of the
merger or consolidation of the Company without any further action by the
holder. The Offer shall be at a price of $50 per share, together with accrued
and unpaid dividends, if any, to the date fixed for redemption.
Holders of Series A Preferred Stock have no right to require redemption of
the Series A Preferred Stock and the Series A Preferred Stock is not subject
to any mandatory redemption, sinking fund or other similar provisions.
Transfer Agent and Registrar. The Bank of New York is the transfer agent,
registrar, dividend disbursing agent and redemption agent for the Series A
Preferred Stock.
8
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Company's Debt Securities, may constitute either senior debt
securities ("Senior Debt Securities") or subordinated debt securities
("Subordinated Debt Securities") of the Company and will be issued in the
case of Senior Debt Securities under an indenture (the "Senior Debt
Indenture") between Donaldson, Lufkin & Jenrette, Inc., as issuer, and The
Chase Manhattan Bank, as trustee and in the case of Subordinated Debt
Securities under an indenture (the "Subordinated Debt Indenture") between
Donaldson, Lufkin & Jenrette, Inc., as issuer and The Chase Manhattan Bank,
as trustee. The Senior Debt Indenture and the Subordinated Debt Indenture are
sometimes hereinafter referred to individually as an "Indenture" and
collectively as the "Indentures." The Chase Manhattan Bank, in its capacity
as trustee under either or both of the Indentures is referred to herein as
the "Trustee."
Copies of the Indentures have been included as exhibits to the
Registration Statement of which this Prospectus is a part and are also
available for inspection at the office of the Trustee. The Indentures are
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). Section references contained herein are to the
applicable Indenture. The following summaries of certain provisions of the
Indentures do not purport to be complete, and where reference is made to
particular provisions of the Indentures, such provisions, including
definitions of certain terms, are incorporated by reference as a part of such
summaries or terms, which are qualified in their entirety by such reference.
The Indentures are substantially identical except for provisions relating to
subordination and the Company's negative pledge.
GENERAL
Neither of the Indentures limits the aggregate principal amount of Debt
Securities which may be issued thereunder and each Indenture provides that
Debt Securities may be issued thereunder from time to time in one or more
series. The Debt Securities will be direct, unsecured senior or subordinated
obligations of the Company. Except as described under "--Negative Pledge,"
neither Indenture limits other indebtedness or securities which may be
incurred or issued by the Company or any of its subsidiaries or contains
financial or similar restrictions on the Company or any of its subsidiaries.
The operations of the Company are conducted through its subsidiaries, and,
therefore, the Company is dependent upon the earnings and cash flow of its
subsidiaries to meet its obligations, including obligations under the Debt
Securities. The Debt Securities will be effectively subordinated to all
indebtedness of the Company's subsidiaries. The Company's rights and the
rights of its creditors, including holders of Debt Securities, to participate
in the distribution of assets of any subsidiary upon such subsidiary's
liquidation or reorganization will be subject to prior claims of such
subsidiary's creditors, including trade creditors, except to the extent the
Company may itself be a creditor with recognized claims against such
subsidiary. In addition, net capital requirements under the Exchange Act and
New York Stock Exchange rules applicable to certain of the Company's
subsidiaries could limit the payment of dividends and the making of loans and
advances to the Company by such subsidiaries.
The applicable Prospectus Supplement which accompanies this Prospectus,
sets forth where applicable the following terms of, and information relating
to, the Debt Securities offered thereby: (i) the ranking of such Debt
Securities as senior or subordinated debt securities; (ii) the designation of
such Debt Securities; (iii) the aggregate principal amount of such Debt
Securities; (iv) the date or dates on which principal of and premium, if any,
on such Debt Securities is payable; (v) the rate or rates at which such Debt
Securities shall bear interest, if any, or the method by which such rate
shall be determined, and the basis on which interest shall be calculated if
other than a 360-day year consisting of twelve 30-day months, the date or
dates from which such interest will accrue and on which such interest will be
payable and the related record dates; (vi) if other than the offices of the
Trustee, the place where the principal of and any premium or interest on such
Debt Securities will be payable; (vii) any redemption, repayment or sinking
fund provisions; (viii) if other than denominations of $1,000 or multiples
thereof, the denominations in which such Debt Securities will be issuable;
(ix) if other than the principal amount thereof, the portion of the principal
amount due upon acceleration; (x) if other than U.S. dollars, the currency or
currencies (including composite currencies) in which such Debt Securities are
denominated or payable; (xi) whether
9
<PAGE>
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, which, unless otherwise
specified in the accompanying Prospectus Supplement, will be The Depository
Trust Company, New York, New York (the "Depositary"). The Global Securities
will be registered in the name of the Depositary or its nominee.
The Depositary has advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of the New York banking law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of section 17A of the Exchange Act. The
Depositary was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
securities certificates. The Depositary's participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and
certain other organizations, some of whom (and/or their representatives) own
the Depositary. Access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a Global Security in registered form, the Depositary
will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such
Global Security to the accounts of participants. The accounts to be credited
will be designated by the underwriters, dealers or agents. Ownership of
beneficial interests in the Global Security will be limited to participants
or persons that may hold interests through participants. Ownership of
beneficial interests by participants in the Global Security will be shown on,
and the transfer of that ownership interest will be effected only through,
records maintained by such participants. The laws of some jurisdictions may
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may impair the ability to own,
transfer or pledge beneficial interest in a Global Security.
So long as the Depositary or its nominee is the registered owner of a
Global Security, it will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as set forth below, owners of a beneficial
interest in such
10
<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. The Company understands
that under existing practice, in the event that the Company requests any
action of a holder or a beneficial owner desires to take any action a holder
is entitled to take, the Depositary would act upon the instructions of, or
authorize, the participant to take such action.
Payment of principal of, and interest on, the Debt Securities will be made
to the Depositary or its nominee, as the case may be, as the registered owner
and holder of the Global Security representing such Debt Securities. None of
the Company, the Trustee, any paying agent or registrar for the Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company has been advised by the Depositary that the Depositary will
credit participants' accounts with payments of principal or interest on the
payment date thereof in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Security as shown on the
records of the Depositary. The Company expects that payments by participants
to owners of beneficial interests in the Global Security held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in "street name," and will be the responsibility of such
participants.
A Global Security may not be transferred except as a whole by the
Depositary to a nominee or successor of the Depositary or by a nominee of the
Depositary to another nominee of the Depositary. A Global Security
representing all but not part of the Debt Securities being offered pursuant
to the applicable Prospectus Supplement is exchangeable for Debt Securities
in definitive form of like tenor and terms if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as depositary for such
Global Security or if at any time the Depositary is no longer eligible to be,
or is not in good standing as, a clearing agency registered under the
Exchange Act, and in either case, a successor depositary is not appointed by
the Company within 90 days of receipt by the Company of such notice or of the
Company becoming aware of such ineligibility, or (ii) the Company in its sole
discretion at any time determines not to have all of the Debt Securities
represented by a Global Security and notifies the Trustee thereof. A Global
Security exchangeable pursuant to the preceding sentence shall be
exchangeable for Debt Securities registered in such names and in such
authorized denominations as the Depositary for such Global Security shall
direct.
SENIOR DEBT
Payment of the principal of, premium, if any, and interest on Senior Debt
Securities issued under the Senior Debt Indenture will rank pari passu with
all other unsecured and unsubordinated debt of the Company.
SUBORDINATED DEBT
Payment of the principal of, premium, if any, and interest on Subordinated
Debt Securities issued under the Subordinated Debt Indenture will be
subordinate and junior in right of payment, to the extent and in the manner
set forth in the Subordinated Debt Indenture, to all Senior Indebtedness of
the Company. The Subordinated Debt Indenture does not contain any limitation
on the amount of Senior Indebtedness that can be incurred by the Company.
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
11
<PAGE>
of), defease (other than payments made by the Trustee pursuant to the
provisions of the Indenture described under "--Discharge, Defeasance and
Covenant Defeasance" with respect to a defeasance permitted by the Indenture,
including the subordination provisions thereof) or acquire any of the
Subordinated Debt Securities for cash, property or securities, (i) upon the
maturity of the Designated Senior Indebtedness or any other Senior
Indebtedness with an aggregate principal amount in excess of $1.0 million by
lapse of time, acceleration or otherwise, unless and until all principal of,
premium, if any, and interest on such Senior Indebtedness and all other
obligations in respect thereof are first paid in full in cash or cash
equivalents or such payment is duly provided for, or unless and until any
such maturity by acceleration has been rescinded or waived or (ii) in the
event of default in the payment of any principal of, premium, if any, or
interest on or any other amount payable in respect of the Designated Senior
Indebtedness or any other Senior Indebtedness with an aggregate principal
amount in excess of $1.0 million when it becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise,
unless and until such payment default has been cured or waived or has
otherwise ceased to exist.
Upon the happening of a default (any event that, after notice or passage
of time would be an event of default) or an event of default (any event that
permits the holders of Senior Indebtedness or their representative or
representatives immediately to accelerate its maturity) with respect to any
Senior Indebtedness, other than a default in payment of the principal of,
premium, if any, or interest on such Senior Indebtedness, upon written notice
of such default or event of default given to the Company and the Trustee by
the holders of a majority of the principal amount outstanding of the
Designated Senior Indebtedness or their representative or, at such time as
there is no Designated Senior Indebtedness, by the holders of a majority of
the principal amount outstanding of all Senior Indebtedness or their
representative or representatives or, if such default or event of default
results from the acceleration of the Subordinated Debt Securities,
immediately upon such acceleration, then, unless and until such default or
event of default has been cured or waived or otherwise has ceased to exist,
no payment may be made by or on behalf of the Company with respect to any
obligation or claim in respect of the Subordinated Debt Securities, including
the principal of, premium, if any, or interest on the Subordinated Debt
Securities or to redeem (or make a deposit in redemption of), defease or
acquire any of the Subordinated Debt Securities for cash, property or
securities. Notwithstanding the foregoing, unless the Senior Indebtedness in
respect of which such default or event of default exists has been declared
due and payable in its entirety within 180 days after the date written notice
of such default or event of default is delivered as set forth above or the
date of such acceleration as the case may be (the "Payment Blockage Period"),
and such declaration or acceleration has not been rescinded, the Company
shall be required then to pay all sums not paid to the Holders of the
Subordinated Debt Securities during the Payment Blockage Period due to the
foregoing prohibitions and to resume all other payments as and when due on
the Subordinated Debt Securities. Any number of such notices may be given;
provided however, that (i) during any 360 consecutive days, only one Payment
Blockage Period shall commence and (ii) any such default or event of default
that existed upon the commencement of a Payment Blockage Period may not be
the basis for the commencement of any other Payment Blockage Period, unless
such default or event of default shall have been cured or waived for a period
of not less than 90 consecutive days.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company from any source whether in cash,
property or securities, shall be received by the Trustee or the Holders on
account of any obligation or claim in respect of the Subordinated Debt
Securities at a time when such payment or distribution is prohibited by the
foregoing provisions, such payment or distribution shall be held in trust for
the benefit of the holders of Senior Indebtedness, and shall be paid or
delivered by the Trustee or such Holders, as the case may be, to the holders
of the Senior Indebtedness remaining unpaid or unprovided for or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or represented by
each, for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay or to provide for the payment in full
in cash or cash equivalents of all such Senior Indebtedness, after giving
effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness.
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Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization or readjustment of
the Company, whether voluntary or involuntary, in bankruptcy, insolvency,
receivership or a similar proceeding or upon assignment for the benefit of
creditors, or any other marshaling of the assets and liabilities of the
Company or otherwise, (i) the holders of all Senior Indebtedness would first
be entitled to receive payment in full in cash or cash equivalents (or have
such payment duly provided for) of the principal, premium, if any, and
interest payable in respect therefor before the Holders would be entitled to
receive any payment on account of the principal of, premium, if any, and
interest on the Subordinated Debt Securities, and (ii) any payment or
distribution of assets of the Company of any kind or character, from any
source, whether in cash, property or securities to which the Holders or the
Trustee on behalf of the Holders would be entitled, except for the
subordination provisions contained in the Indenture, would be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of Senior Indebtedness remaining unpaid
or unprovided for or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the Senior
Indebtedness held or represented by each, for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay or
provide for the payment in full in cash or cash equivalents of all such
Senior Indebtedness, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.
The holders of the Senior Indebtedness and their respective
representatives are authorized to demand specific performance of the
provisions with respect to subordination in the Indenture at any time when
the Company or any Holder shall have failed to comply with any provision with
respect to subordination in the Indenture applicable to it, and the Company
and each Holder irrevocably waives any defense based on the adequacy of a
remedy at law that might be asserted as a bar to the remedy of specific
performance of such subordination provision in any action brought therefor by
the holders of the Senior Indebtedness and their respective representatives.
By reasons of such subordination, in the event of the liquidation or
insolvency of the Company, creditors of the Company who are not holders of
Senior Indebtedness, including Holders of the Subordinated Debt Securities,
may recover less, ratably, than holders of Senior Indebtedness.
No provision contained in the Indenture or the Subordinated Debt
Securities will affect the obligation of the Company, which is absolute and
unconditional, to pay, when due, principal of, premium, if any, and interest
on the Subordinated Debt Securities. The subordination provisions of the
Indenture and the Subordinated Debt Securities will not prevent the
occurrence of any Event of Default under the Indenture or limit the rights of
the Trustee or any Holder, except as provided in the seven preceding
paragraphs, to pursue any other rights or remedies with respect to the
Subordinated Debt Securities.
NEGATIVE PLEDGE
The Senior Debt Indenture provides that the Company and any successor
corporation will not, and will not permit any Subsidiary to, create, assume,
incur or guarantee any indebtedness for borrowed money secured by a pledge,
lien or other encumbrance except for Permitted Liens (as defined in the
Senior Debt Indenture) on the Voting Stock of DLJSC or any other Subsidiary
of the Company which shall hereafter succeed by merger or otherwise to all or
substantially all of the business of DLJSC (a "DLJSC Successor"), without
making effective provision whereby the Senior Debt Securities will be secured
equally and ratably with such secured indebtedness. (Senior Debt Indenture,
Section 4.3)
CERTAIN DEFINITIONS
The term "Holder" or "Securityholder" as defined in the applicable
Indenture means the registered holder of any Debt Security with respect to
registered Debt Securities and the bearer of any unregistered Debt Security
or any coupon appertaining thereto, as the case may be.
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The term "Designated Senior Indebtedness" means any class of Senior
Indebtedness the aggregate principal amount outstanding of which exceeds $50
million and which is specifically designated in the instrument evidencing
such Senior Indebtedness or the agreement under which such Senior
Indebtedness arises as "Designated Senior Indebtedness."
The term "Original Issue Discount Security" as defined in the applicable
Indenture means any Debt Security that provides for an amount less than the
principal amount thereof to be due and payable upon declaration of
acceleration of the maturity thereof pursuant to Section 6.2 of the
applicable Indenture.
The term "Senior Indebtedness" as defined in the Subordinated Debt
Indenture means the principal of and premium, if any, and interest on (a) all
indebtedness of the Company, whether outstanding on the date of the
Subordinated Debt Indenture or thereafter created, (i) for money borrowed by
the Company, (ii) for money borrowed by, or obligations of, others and either
assumed or guaranteed, directly or indirectly, by the Company, (iii) in
respect of letters of credit and acceptances issued or made by banks, or (iv)
constituting purchase money indebtedness, or indebtedness secured by property
included in the property, plant and equipment accounts of the Company at the
time of the acquisition of such property by the Company, for the payment of
which the Company is directly liable, and (b) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements
to, any such indebtedness. As used in the preceding sentence, the term
"purchase money indebtedness" means indebtedness evidenced by a note,
debenture, bond or other instrument (whether or not secured by any lien or
other security interest) issued or assumed as all or a part of the
consideration for the acquisition of property, whether by purchase, merger,
consolidation or otherwise, unless by its terms such indebtedness is
subordinated to other indebtedness of the Company. Notwithstanding anything
to the contrary in the Subordinated Debt Indenture or the Subordinated Debt
Securities, Senior Indebtedness shall not include, (i) any indebtedness of
the Company which, by its terms or the terms of the instrument creating or
evidencing it, is subordinate in right of payment to or pari passu with the
Subordinated Debt Securities or (ii) any indebtedness of the Company to a
subsidiary of the Company. (Subordinated Debt Indenture, Section 1.1)
The term "Subsidiary" as defined in the applicable Indenture means with
respect to any Person, any corporation, association or other business entity
of which more than 50% of the outstanding Voting Stock (as defined in the
applicable Indenture) is owned directly or indirectly, by such Person and one
or more other Subsidiaries of such Person.
RESTRICTIONS ON MERGERS AND SALES OF ASSETS
Under each Indenture, the Company shall not consolidate with, merge with
or into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially
as an entirety in one transaction or a series of related transactions) to,
any Person (other than a consolidation with or merger with or into a
Subsidiary or a sale, conveyance, transfer, lease or other disposition to a
Subsidiary) or permit any Person to merge with or into the Company unless:
(a) either (i) the Company shall be the continuing Person or (ii) the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets of the
Company shall be a corporation organized and validly existing under the laws
of the United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, all of the obligations of the Company on all of the Debt Securities
and under the applicable Indenture and the Company shall have delivered to
the Trustee an opinion of counsel stating that such consolidation, merger or
transfer and such supplemental indenture complies with this provision and
that all conditions precedent provided for in the applicable Indenture
relating to such transaction have been complied with and that such
supplemental indenture constitutes the legal, valid and binding obligation of
the Company or such successor enforceable against such entity in accordance
with the terms, subject to customary exceptions; and (b) the Company shall
have delivered to the Trustee an officers' certificate to the effect that
immediately after giving effect to such transaction, no Default (as defined
in the applicable Indenture) shall have occurred and be continuing and an
opinion of counsel as to the matters set forth in paragraph (a) above.
(Section 5.1)
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EVENTS OF DEFAULT
Events of Default defined in the applicable Indenture with respect to the
Debt Securities of any series are: (a) the Company defaults in the payment of
all or any part of the principal of any Debt Security of such series when the
same becomes due and payable at maturity, upon acceleration, redemption or
mandatory repurchase, including as a sinking fund installment, or otherwise;
(b) the Company defaults in the payment of any interest on any Debt Security
of such series when the same becomes due and payable, and such default
continues for a period of 30 days; (c) the Company defaults in the
performance of or breaches any other covenant or agreement of the Company in
the applicable Indenture with respect to any Debt Security of such series or
in the Debt Securities of such series and such default or breach continues
for a period of 60 consecutive days after written notice thereof has been
given to the Company by the Trustee or to the Company and the Trustee by the
Holders of 25% or more in aggregate principal amount of the Debt Securities
of all series under the applicable Indenture affected thereby; (d) an
involuntary case or other proceeding shall be commenced against the Company
or DLJSC (including for purposes of paragraph (d) and (e) hereof any DLJSC
Successor) with respect to the Company or DLJSC or their respective debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of the Company or DLJSC or for any substantial part
of the property and assets of the Company or DLJSC, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Company or DLJSC
under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (e) the Company or DLJSC (i) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary
case under any such law, (ii) consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or DLJSC or for all or
substantially all of the property and assets of the Company or DLJSC or (iii)
effects any general assignment for the benefit of creditors; (f) an event of
default, as defined in any one or more indentures or instruments evidencing
or under which the Company has at the date of the applicable Indenture or
shall thereafter have outstanding an aggregate of at least $25,000,000
aggregate principal amount of indebtedness for borrowed money, shall happen
and be continuing and such indebtedness shall have been accelerated so that
the same shall be or become due and payable prior to the date on which the
same would otherwise have become due and payable, and such acceleration shall
not be rescinded or annulled within ten days after notice thereof shall have
been given to the Company by the Trustee (if such event be known to it), or
to the Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the Debt Securities at the time outstanding under the
applicable Indenture; provided that if such event of default under such
indentures or instruments shall be remedied or cured by the Company or waived
by the holders of such indebtedness, then the Event of Default under the
applicable Indenture by reason thereof shall be deemed likewise to have been
thereupon remedied, cured or waived without further action upon the part of
either the Trustee or any of the Securityholders; (g) failure by the Company
to make any payment at maturity, including any applicable grace period, in
respect of at least $25,000,000 aggregate principal amount of indebtedness
for borrowed money and such failure shall have continued for a period of ten
days after notice thereof shall have been given to the Company by the Trustee
(if such event be known to it), or to the Company and the Trustee by the
holders of at least 25% in aggregate principal amount of the Debt Securities
at the time outstanding under the applicable Indenture; provided that if such
failure shall be remedied or cured by the Company or waived by the holders of
such indebtedness, then the Event of Default under the applicable Indenture
by reason thereof shall be deemed likewise to have been thereupon remedied,
cured or waived without further action upon the part of either the Trustee or
any of the Securityholders; or (h) any other Event of Default established
with respect to any series of Debt Securities issued pursuant to the
applicable Indenture occurs. (Section 6.1)
Each Indenture provides that if an Event of Default described in clauses
(a) or (b) of the immediately preceding paragraph with respect to the Debt
Securities of any series then outstanding thereunder occurs and is
continuing, then, and in each and every such case, except for any series of
Debt Securities the principal of which shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Debt Securities of any such affected series then
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outstanding under the applicable Indenture (each such series treated as a
separate class) by notice in writing to the Company (and to the Trustee if
given by Securityholders), may declare the entire principal amount (or, if
the Debt Securities of any such series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of such series established pursuant to the applicable Indenture) of all
Debt Securities of such affected series, and the interest accrued thereon, if
any, to be due and payable immediately, and upon any such declaration the
same shall become immediately due and payable. If an Event of Default
described in clauses (c) or (h) of the immediately preceding paragraph with
respect to the Debt Securities of one or more series then outstanding under
the applicable Indenture occurs and is continuing, then, in each and every
such case, except for any series of Debt Securities the principal of which
shall have already become due and payable, either the Trustee or the Holders
of not less than 25% in aggregate principal amount (or, if the Debt
Securities of any such series are Original Issue Discount Securities, such
portion of the principal as may be specified in the terms thereof established
pursuant to the applicable Indenture) of the Debt Securities of all such
affected series then outstanding under the applicable Indenture (treated as a
single class) by notice in writing to the Company (and to the Trustee if
given by Securityholders), may declare the entire principal amount (or, if
the Debt Securities of any such series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of such series established pursuant to the applicable Indenture) of all
Debt Securities of all such affected series, and the interest accrued
thereon, if any, to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Event of
Default described in clauses (d) or (e) of the immediately preceding
paragraph occurs and is continuing, then the principal amount (or, if any
Debt Securities are Original Issue Discount Securities, such portion of the
principal as may be specified in the terms thereof established pursuant to
the applicable Indenture) of all the Debt Securities then outstanding under
the applicable Indenture and interest accrued thereon, if any, shall be and
become immediately due and payable, without any notice or other action by any
Holder or the Trustee to the full extent permitted by applicable law. If an
Event of Default described in clauses (f) or (g) of the immediately preceding
paragraph, or in clauses (c) or (h) of the immediately preceding paragraph
with respect to the Debt Securities of all series then outstanding under the
applicable Indenture, occurs and is continuing, then, in each and every such
case, either the Trustee or the Holders of not less than 25% in aggregate
principal amount (or, if the Debt Securities of any outstanding series are
Original Issue Discount Securities, such portion of the principal as may be
specified in the terms thereof established pursuant to the applicable
Indenture) of all Debt Securities of any series then outstanding under the
applicable Indenture except for any series of Debt Securities the principal
of which shall have already become due and payable (treated as a single
class) by notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the entire principal amount (or, if the Debt
Securities of any such series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of such
series established pursuant to the applicable Indenture) of all Debt
Securities of any series then outstanding under the applicable Indenture, and
the interest accrued thereon, if any, to be due and payable immediately, and
upon any such declaration the same shall become immediately due and payable.
Upon certain conditions such declarations may be rescinded and annulled and
past defaults may be waived by the Holders of a majority in principal of the
then outstanding Debt Securities of all such series that have been
accelerated under the applicable Indenture (voting as a single class).
(Section 6.2) Because the ability of Holders to declare the Debt Securities
of any series due and payable upon an Event of Default under clauses (c),
(f), (g) or (h) of the immediately preceding paragraph depends on the
requisite action by Holders of all affected series of Debt Securities under
the applicable Indenture, if there is more than one series of Debt Securities
outstanding, Holders of a particular series of Debt Securities may be unable
to declare the Debt Securities under the applicable Indenture due and payable
upon an Event of Default described in clauses (c), (f), (g) or (h) of the
immediately preceding paragraph without action by Holders of such other
series.
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
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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)
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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 clause (ii), only the Company's obligations to
execute and deliver Debt Securities of such series for
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authentication, to set the terms of the Debt Securities of such series, to
maintain an office or agency in respect of the Debt Securities of such
series, to have moneys held for payment in trust, to register the transfer or
exchange of Debt Securities of such series, to deliver Debt Securities of
such series for replacement or to be canceled, to compensate and indemnify
the Trustee and to appoint a successor trustee, and its right to recover
excess money held by the Trustee shall survive until such Debt Securities are
no longer outstanding. Thereafter, only the Company's obligations to
compensate and indemnify the Trustee, and its right to recover excess money
held by the Trustee shall survive. (Section 8.1)
Each Indenture provides that the Company (i) will be deemed to have paid
and will be discharged from any and all obligations in respect of the Debt
Securities of any series under the applicable Indenture, and the provisions
of the applicable Indenture will, except as noted below, no longer be in
effect with respect to the Debt Securities of such series ("legal
defeasance") and (ii) may, in the case of the Senior Debt Indenture, omit to
comply with any term, provision or condition of the applicable Indenture
described above under "--Negative Pledge" (or in the case of each Indenture
omit to comply with any other specific covenant relating to such series
provided for in a Board Resolution or supplemental indenture which may by its
terms be defeased pursuant to such Indenture), and such omission shall be
deemed not to be an Event of Default under clauses (c) or (h) of the first
paragraph of "--Events of Default" with respect to the outstanding Debt
Securities of a series under the applicable Indenture ("covenant
defeasance"); provided that the following conditions shall have been
satisfied: (a) the Company has irrevocably deposited in trust with the
Trustee as trust funds solely for the benefit of the Holders of the Debt
Securities of such series, for payment of the principal of and interest on
the Debt Securities of such series, money or U.S. Government Obligations or a
combination thereof sufficient (unless such funds consist solely of money, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee)
without consideration of any reinvestment and after payment of all federal,
state and local taxes or other charges and assessments in respect thereof
payable by the Trustee, to pay and discharge the principal of and accrued
interest on the outstanding Debt Securities of such series to maturity or
earlier redemption (irrevocably provided for under arrangements satisfactory
to the Trustee), as the case may be; (b) such deposit will not result in a
breach or violation of, or constitute a default under, the applicable
Indenture or any other material agreement or instrument to which the Company
is a party or by which it is bound; (c) no Default with respect to such Debt
Securities of such series shall have occurred and be continuing on the date
of such deposit; (d) the Company shall have delivered to the Trustee an
opinion of counsel that (1) the Holders of the Debt Securities of such series
will not recognize income, gain or loss for Federal income tax purposes as a
result of the Company's exercise of its option under this provision of the
applicable Indenture and will be subject to Federal income tax on the same
amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred and (2) the Holders of
the Debt Securities of such series have a valid security interest in the
trust funds subject to no prior liens under the Uniform Commercial Code, and
(e) the Company has delivered to the Trustee an officers' certificate and an
opinion of counsel, in each case stating that all conditions precedent
provided for the applicable Indenture relating to the defeasance contemplated
have been complied with. In the case of legal defeasance under clause (i)
above, the opinion of counsel referred to in clause (d)(1) above may be
replaced by a ruling directed to the Trustee received from the Internal
Revenue Service to the same effect. Subsequent to legal defeasance under
clause (i) above, the Company's obligations to execute and deliver Debt
Securities of such series for authentication, to set the terms of the Debt
Securities of such series, to maintain an office or agency in respect of the
Debt Securities of such series, to have moneys held for payment in trust, to
register the transfer or exchange of Debt Securities of such series, to
deliver Debt Securities of such series for replacement or to be canceled, to
compensate and indemnify the Trustee and to appoint a successor trustee, and
its right to recover excess money held by the Trustee shall survive until
such Debt Securities are no longer outstanding. After such Debt Securities
are no longer outstanding, in the case of legal defeasance under clause (i)
above, only the Company's obligations to compensate and indemnify the Trustee
and its right to recover excess money held by the Trustee shall survive.
(Sections 8.2 and 8.3)
MODIFICATION OF THE INDENTURES
Each Indenture provides that the Company and the Trustee may amend or
supplement the applicable Indenture or the Debt Securities of any series
without notice to or the consent of any Holder: (1) to cure
19
<PAGE>
any ambiguity, defect or inconsistency in the applicable Indenture; provided
that such amendments or supplements shall not materially and adversely affect
the interests of the Holders; (2) to comply with Article 5 of the applicable
Indenture in connection with a consolidation or merger of the Company or the
sale, conveyance, transfer, lease or other disposal of all or substantially
all of the property and assets of the Company; (3) to comply with any
requirements of the Commission in connection with the qualification of the
applicable Indenture under the Trust Indenture Act; (4) to evidence and
provide for the acceptance of appointment under the applicable Indenture with
respect to the Debt Securities of any or all series by a successor Trustee;
(5) to establish the form or forms or terms of Debt Securities of any series
or of the coupons pertaining to such Debt Securities as permitted under the
applicable Indenture; (6) to provide for uncertificated or unregistered Debt
Securities and to make all appropriate changes for such purpose; or (7) to
make any change that does not materially and adversely affect the rights of
any Holder. (Section 9.1)
Each Indenture also contains provisions whereby the Company and the
Trustee, subject to certain conditions, without prior notice to any Holders,
may amend the applicable Indenture and the outstanding Debt Securities of any
series with the written consent of the Holders of a majority in principal
amount of the Debt Securities then outstanding under the applicable Indenture
of all series affected by such amendment (all such series voting as one
class), and the Holders of a majority in principal amount of the outstanding
Debt Securities under the applicable Indenture of all series affected thereby
(all such series voting as one class) by written notice to the Trustee may
waive future compliance by the Company with any provision of the applicable
Indenture or the Debt Securities of such series. Notwithstanding the
foregoing provisions, without the consent of each Holder affected thereby, an
amendment or waiver, including a waiver pursuant to Section 6.4 of the
applicable Indenture, may not: (i) extend the stated maturity of the
principal of, or any sinking fund obligation or any installment of interest
on, such Holder's Debt Security, or reduce the principal thereof or the rate
of interest thereon (including any amount in respect of original issue
discount), or any premium payable with respect thereto, or adversely affect
the rights of such Holder under any mandatory redemption or repurchase
provision or any right of redemption or repurchase at the option of such
Holder, or reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon an acceleration of the maturity
thereof or the amount thereof provable in bankruptcy, or change any place of
payment where, or the currency in which, any Debt Security or any premium or
the interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the due date therefor; (ii)
reduce the percentage in principal amount of outstanding Debt Securities of
the relevant series the consent of whose Holders is required for any such
supplemental indenture, for any waiver of compliance with certain provisions
of the applicable Indenture or certain Defaults and their consequences
provided for in the applicable Indenture; (iii) waive a Default in the
payment of principal of or interest on any Debt Security of such Holder; or
(iv) modify any of the provisions of this provision of the applicable
Indenture, except to increase any such percentage or to provide that certain
other provisions of the applicable Indenture cannot be modified or waived
without the consent of the Holder of each outstanding Debt Security
thereunder affected thereby. A supplemental indenture which changes or
eliminates any covenant or other provision of the applicable Indenture which
has expressly been included solely for the benefit of one or more particular
series of Debt Securities, or which modifies the rights of Holders of Debt
Securities of such series with respect to such covenant or provision, shall
be deemed not to affect the rights under the applicable Indenture of the
Holders of Debt Securities of any other series or of the coupons appertaining
to such Debt Securities. It shall not be necessary for the consent of any
Holder under this provision of the applicable Indenture to approve the
particular form of any proposed amendment, supplement or waiver, but it shall
be sufficient if such consent approves the substance thereof. After an
amendment, supplement or waiver under this section of the applicable
Indenture becomes effective, the Company shall give to the Holders affected
thereby a notice briefly describing the amendment, supplement or waiver. The
Company will mail supplemental indentures to Holders upon request. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture or waiver. (Section 9.2)
GOVERNING LAW
The Indentures and the Debt Securities will be governed by the laws of the
State of New York. (Section 10.8 and Section 11.8)
20
<PAGE>
CONCERNING THE TRUSTEE
The Company and its subsidiaries maintain ordinary banking and trust
relationships with The Chase Manhattan Bank and its affiliates.
21
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PLAN OF DISTRIBUTION
This Prospectus has been prepared for use by DLJSC in connection with
offers and sales of the Offered Securities in market-making transactions at
negotiated prices related to prevailing market prices at the time of the
sale. DLJSC may act as principal or agent in such transactions. DLJSC has
advised the Company that it currently intends to make a market in the Offered
Securities, but it is not obligated to do so and may discontinue any such
market-making at any time without notice. Accordingly, no assurance can be
given as to the liquidity of, or the trading market for, the Offered
Securities.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Securities and certain other legal matters in connection with
the offering of the Securities will be passed upon by Michael A. Boyd, Senior
Vice President and General Counsel to the Company, and Davis Polk & Wardwell.
Mr. Boyd owns 8,033 shares of Common Stock, 14,433 restricted stock units and
options to purchase 39,772 shares of Common Stock. Davis Polk & Wardwell from
time to time provides legal services to the Company and its subsidiaries.
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company as of December 31, 1996 and 1995 and for each of the years in the
three-year period ended December 31, 1996 have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated
herein by reference, and upon the authority of said firm as experts in
accounting and auditing.
22
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY PREFERRED STOCK 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
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<S> <C>
PROSPECTUS SUPPLEMENT
Use of Proceeds.......................... S-2
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends .. S-2
Description of Preferred Stock........... S-3
Plan of Distribution..................... S-9
PROSPECTUS
Available Information.................... 2
Incorporation of Certain Information by
Reference............................... 2
Use of Proceeds.......................... 3
Ratios of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and
Preferred Stock Dividends .............. 3
The Company.............................. 4
Description of Capital Stock ............ 6
Description of Debt Securities .......... 9
Plan of Distribution..................... 22
Legal Matters............................ 22
Experts.................................. 23
</TABLE>
3,500,000 SHARES
DONALDSON, LUFKIN &
JENRETTE, INC.
FIXED/ADJUSTABLE RATE
CUMULATIVE PREFERRED
STOCK, SERIES B
PROSPECTUS SUPPLEMENT
JANUARY 6, 1998
