<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration File No.: 333-53499
===============================================================================
Prospectus Supplement
October 30, 1998
(To Prospectus dated June 1, 1998)
DONALDSON, LUFKIN & JENRETTE, INC.
$500,000,000
MEDIUM-TERM NOTES DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
- --------------------------------------------------------------------------------
CERTAIN DATA ON THE COMPANY:
o We are a leading integrated investment and merchant bank that serves
institutional, corporate, governmental and individual clients.
o Donaldson, Lufkin & Jenrette, Inc. 277 Park Avenue New York, New York
10172 (212) 892-3000
TRADING FORMAT:
o The notes will be held in global form by The Depository Trust Company,
including on behalf of Euroclear and Cedel Bank, unless otherwise
specified.
o The notes will not be listed on a securities exchange in the United
States.
THE OFFERING:
o Offers to purchase the notes are being solicited from time to time by the
agents described in this prospectus supplement. The agents may purchase
the notes as principal or use their reasonable efforts to sell the notes
as Donaldson, Lufkin & Jenrette, Inc.'s agent.
CERTAIN TERMS OF THE NOTES:
The specific terms of any note offered will be included in a pricing
supplement. Unless the pricing supplement provides otherwise, the notes will
have the following general terms:
o The notes will bear interest at either a fixed or a floating rate.
Floating rate interest will be based on:
o CD Rate
o Commercial Paper Rate
o Federal Funds Rate
o LIBOR
o Prime Rate
o Treasury Rate
o Any other rate specified in the applicable pricing supplement
o Fixed rate interest will be paid on June 15 and December 15, accruing from
the date of issue. Floating rate interest will be paid on the dates stated
in the applicable pricing supplement.
o The notes may be either callable by Donaldson, Lufkin & Jenrette, Inc. or
puttable by you, if specified in the applicable pricing supplement.
o The notes will be denominated in U.S. dollars and have minimum
denominations of $1,000, unless otherwise specified.
--------------------------------------------------------------------------
Per Note Total
--------------------------------------------------------------------------
Public Offering Price: 100% $500,000,000
Agent Fees: 0.125%-0.875% $625,000 to $4,375,000
Net Proceeds to Company: 99.125%-99.875% $495,625,000 to $499,375,000
--------------------------------------------------------------------------
This investment involves risk. See "Foreign Currency Risks" on page S-22.
- --------------------------------------------------------------------------------
Neither the SEC nor any State securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Ratio of Earnings to Fixed Charges .................................. S-3
Description of Notes ................................................ S-3
Special Provisions Relating to Foreign Currency Notes ............... S-18
Foreign Currency Risks .............................................. S-22
United States Tax Considerations .................................... S-23
Plan of Distribution ................................................ S-31
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
Description of Warrants ............................................. 21
Plan of Distribution ................................................ 22
Legal Matters ....................................................... 23
Experts ............................................................. 23
S-2
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges (1) ......... 1.20 1.10 1.11 1.16 1.16 1.19
</TABLE>
- ----------
(1) For the purpose of calculating the ratio of earnings to fixed charges (i)
earnings consist of income before provision for income taxes and fixed
charges and (ii) fixed charges consist of interest expense and one-third
of rental expense which is deemed representative of an interest factor.
DESCRIPTION OF NOTES
GENERAL
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Debt Securities",
"Senior Debt Securities" or "Offered Securities") supplements, and to the
extent inconsistent therewith replaces, the description of the general terms
and provisions of the Senior Debt Securities set forth in the Prospectus, to
which description reference is hereby made. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will have the terms described below,
except that references to interest payments and interest-related information do
not apply to certain Original Issue Discount Notes. See "--Original Issue
Discount Notes."
The Notes will be issued under an Indenture dated as of June 8, 1998 (the
"Indenture") between the Company and The Chase Manhattan Bank, as trustee (the
"Trustee"). The following summaries of certain provisions of the Indenture do
not purport to be complete, and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Indenture, including the
definitions therein of certain terms.
The Notes will be direct, unsecured and unsubordinated obligations of the
Company. Except as described under "Description of Debt Securities--Negative
Pledge" in the accompanying Prospectus, the Notes will not limit other
indebtedness or securities which may be incurred or issued by the Company or
any of its subsidiaries or contain financial or similar restrictions on the
Company or any of its subsidiaries. The operations of the Company are conducted
through its subsidiaries, and therefore, the Company is dependent upon the
earnings and cash flow of its subsidiaries to meet its obligations, including
obligations under the Notes. The Notes will be effectively subordinated to all
indebtedness of the Company's subsidiaries. The Company's rights and the rights
of its creditors, including holders of Notes, to participate in the
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization will be subject to prior claims of such subsidiary's creditors,
including trade creditors, except to the extent the Company may itself be a
creditor with reorganized claims against such subsidiary.
This Prospectus Supplement and any Pricing Supplement, may be used in
connection with the offer and sale from time to time of Notes in an aggregate
initial public offering price of up to U.S. $500,000,000 or the equivalent
thereof in other currencies, currency units or composite currencies (provided
that, with respect to Original Issue Discount Notes, the initial offering price
of such Notes shall be used in calculating the aggregate principal amount of
Notes offered hereunder). The aggregate principal amount of Notes authorized to
be issued hereunder may be increased by the Company from time to time. The
aggregate principal amount of Notes authorized to be issued under this
Prospectus Supplement is subject to reduction as a result of the sale by the
Company of other Securities (as defined in the Prospectus) from time to time as
described in the accompanying Prospectus to the extent the aggregate offering
prices of such Securities exceeds $1,125,000,000, including $500,000,000 of
Securities issued prior to the date of this Prospectus Supplement. See "Plan of
Distribution" herein and in the accompanying Prospectus.
S-3
<PAGE>
The Pricing Supplement relating to a Note will describe the following
terms: (i) the currency or currency unit in which such Note is denominated (the
"Specified Currency") and, if other than the Specified Currency, the currency
or currency unit in which payments of principal and interest on such Note will
be made (and, if the Specified Currency is other than U.S. dollars, certain
other terms relating to such Note (a "Foreign Currency Note") and such
Specified Currency); (ii) whether such Note bears a fixed rate of interest (a
"Fixed Rate Note") or bears a floating rate of interest (a "Floating Rate
Note") (including whether such Note is a Regular Floating Rate Note, a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note (each as defined below));
(iii) the price at which such Note will be issued (the "Issue Price"); (iv) the
date on which such Note will be issued (the "Original Issue Date"); (v) the
date on which such Note will mature; (vi) if such Note is a Fixed Rate Note,
the rate per annum at which such Note will bear interest, if any, and whether
the maturity thereof is extendible; (vii) if such Note is a Floating Rate Note,
the Interest Rate Basis, the Initial Interest Rate, the Interest Payment Dates,
the Index Maturity, the Spread and/or Spread Multiplier, if any (each as
defined below), and any other terms relating to the particular method of
calculating the interest rate for such Note; (viii) if such Note is an Indexed
Note (as defined below), the terms relating to the particular Note; (ix) if
such Note is a Dual Currency Note (as defined below) the terms relating to the
particular Note; (x) if such Note is an Amortizing Note (as defined below), the
amortization schedule and any other terms relating to the particular Note; (xi)
whether such Note is an Original Issue Discount Note; (xii) whether such Note
may be redeemed at the option of the Company, or repaid at the option of the
holder, prior to its stated maturity as described under "--Optional Redemption
by the Company" and "--Repayment at the Noteholders' Option; Repurchase" below
and, if so, the provisions relating to such redemption or repayment, including,
in the case of any Original Issue Discount Notes, the information necessary to
determine the amount due upon redemption or repayment; (xiii) any relevant tax
consequences associated with the terms of the Notes which have not been
described under "United States Tax Considerations" below; and (xiv) any other
terms of such Note not inconsistent with the provisions of the Indenture.
Subject to such additional restrictions as are described under "Special
Provisions Relating to Foreign Currency Notes," each Note will mature on a day,
nine months or more from the date of issue, as specified in the applicable
Pricing Supplement, as selected by the initial purchaser and agreed to by the
Company. In the event that such maturity date of any Note or any date fixed for
redemption or repayment of any Note (collectively, the "Maturity Date") is not
a Business Day (as defined below), principal and interest payable at maturity
or upon such redemption or repayment will be paid on the next succeeding
Business Day with the same effect as if such Business Day were the Maturity
Date. No interest shall accrue for the period from and after the Maturity Date
to such next succeeding Business Day. Except as may be provided in the
applicable Pricing Supplement and except for Indexed Notes, all Notes will
mature at par.
The Notes will be offered on a continuing basis, and will be issued in
denominations of $1,000 and any integral multiples of $1,000 in excess thereof,
unless otherwise specified in the applicable Pricing Supplement; provided,
however, that Notes in Specified Currencies other than U.S. dollars shall be
issued in such denominations as are set forth in the applicable Pricing
Supplement. See "Special Provisions Relating to Foreign Currency Notes."
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of the Notes
purchased in any single transaction.
Notes will be issued in the form of (i) one or more fully registered
global securities (each, a "Global Security") deposited with or on behalf of a
depositary (the "Depositary") which, unless otherwise specified in the
applicable Pricing Supplement, will be The Depository Trust Company ("DTC"),
and registered in the name of a nominee of the Depositary (a "Book-Entry Note")
or (ii) a certificate in definitive form (a "Certificated Note"), in each case
as specified in the applicable Pricing Supplement. See "Description of Debt
Securities--Book-Entry System" in the Prospectus. Certificated Notes will not
be exchangeable for Book-Entry Notes and, except under the circumstances
described in the Prospectus under the caption "Description of Debt
Securities--Book-Entry System," Book-Entry Notes will not be exchangeable for
Certificated Notes and will not otherwise be issuable as Certificated Notes.
S-4
<PAGE>
DTC has advised the Company that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of the New York banking law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of section 17A of the Exchange Act. DTC was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. DTC's participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations, some of whom (and/or their representatives) own DTC.
Access to DTC's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Principal of, premium, if any, and interest, if any, on any Notes payable
in U.S. dollars will be payable in the manner described herein, the transfer of
the Notes will be registrable, and Notes will be exchangeable for Notes bearing
identical terms and provisions at the office of The Chase Manhattan Bank, the
Company's paying agent (the "Paying Agent," which term includes any successor
paying agent appointed by the Company) and registrar for the Notes (the
"Registrar," which term includes any successor registrar), currently located at
450 West 33rd Street, New York, New York 10001, or such other person or persons
as may be specified in the applicable Pricing Supplement; provided, that
payment of interest, other than interest at maturity or upon redemption or
repayment, may be made by check mailed to the address of the person entitled
thereto as it appears on the security register at the close of business on the
Regular Record Date (as defined herein) corresponding to the relevant Interest
Payment Date (as defined herein); provided, further, that Book-Entry Notes will
be exchangeable only in the manner and to the extent set forth under
"Description of Debt Securities--Book-Entry System" in the accompanying
Prospectus. Notwithstanding the foregoing, (i) a depositary, as holder of
Book-Entry Notes, shall be entitled to receive payments of interest by wire
transfer of immediately available funds and (ii) a holder of $5,000,000 (or, if
the Notes are denominated in a Specified Currency other than U.S. dollars, the
equivalent thereof in such Specified Currency) or more in aggregate principal
amount of Certificated Notes having identical terms and provisions shall be
entitled to receive payments of interest, other than interest due at maturity
or upon redemption or repayment, if any, by wire transfer of immediately
available funds into an account maintained by the holder in the United States,
if appropriate wire transfer instructions have been received by the Paying
Agent not less than ten days prior to the applicable Interest Payment Date.
Certain additional payment provisions with respect to Foreign Currency Notes
are described under "Special Provisions Relating to Foreign Currency Notes"
below.
The principal and interest payable in U.S. dollars on a Certificated Note
at maturity or upon redemption or repayment will be paid by wire transfer of
immediately available funds against presentation of such Certificated Note at
the office of the Paying Agent, unless otherwise provided in the applicable
Pricing Supplement.
INTEREST AND INTEREST RATES
General
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest at either (a) a fixed rate or (b) a floating rate determined
by reference to an Interest Rate Basis, which may be adjusted by a Spread
and/or Spread Multiplier (each as defined below). Any Floating Rate Note may
also have either or both of the following: (i) a maximum interest rate
limitation, or ceiling, on the rate at which interest may accrue during any
interest period; and (ii) a minimum interest rate limitation, or floor, on the
rate at which interest may accrue during any interest period. The applicable
Pricing Supplement will designate (a) a fixed rate per annum, in which case
such Notes will be Fixed Rate Notes; or (b) one or more of the following
Interest Rate Bases as applicable to such Notes, in which case such Notes will
be Floating Rate Notes: (i) the CD Rate, in which case such Notes will be "CD
Rate Notes;" (ii) the Commercial Paper Rate, in which case such Notes will be
"Commercial Paper Rate Notes;" (iii) the Federal Funds Rate, in which case such
Notes will be "Federal Funds Rate Notes;" (iv) LIBOR, in which
S-5
<PAGE>
case such Notes will be "LIBOR Notes;" (v) the Prime Rate, in which case such
Notes will be "Prime Rate Notes;" (vi) the Treasury Rate, in which case such
Notes will be "Treasury Rate Notes;" or (vii) such other interest rate basis or
formula as is set forth in such Pricing Supplement.
Each Note will bear interest from its date of issue or from the most
recent date to which interest on such Note has been paid or duly provided for,
at the annual rate or at a rate determined pursuant to an interest rate
formula, stated therein, until the principal thereof is paid or made available
for payment. Interest will be payable on each Interest Payment Date (except for
certain Original Issue Discount Notes and except for Notes originally issued
between a Regular Record Date and an Interest Payment Date) and at maturity or
on redemption or repayment, if any. Unless otherwise indicated in the
applicable Pricing Supplement, interest payments in respect of the Notes will
equal the amount of interest accrued from and including the immediately
preceding Interest Payment Date in respect of which interest has been paid or
duly made available for payment (or from and including the date of issue, if no
interest has been paid with respect to the applicable Note) to but excluding
the related Interest Payment Date or the Maturity Date, as the case may be.
Interest will be payable to the person in whose name a Note is registered
at the close of business on the Regular Record Date next preceding the related
Interest Payment date; provided, however, that (i) if the Company fails to pay
such interest on such Interest Payment Date, such defaulted interest will be
paid to the person in whose name such Note is registered at the close of
business on the record date to be established for the payment of defaulted
interest and (ii) interest payable at maturity, redemption or repayment will be
payable to the person to whom principal shall be payable. The first payment of
interest on any Note originally issued between a Regular Record Date and an
Interest Payment Date will be made on the Interest Payment Date following the
next succeeding Regular Record Date to the registered owner on such next
succeeding Regular Record Date. Interest rates and interest rate formulae are
subject to change by the Company from time to time but no such change will
affect any Note theretofore issued or which the Company has agreed to issue.
Unless otherwise indicated in the applicable Pricing Supplement, the Interest
Payment Dates and the Regular Record Dates for Fixed Rate Notes shall be as
described below under "Fixed Rate Notes." The Interest Payment Dates for
Floating Rate Notes shall be as indicated in the applicable Pricing Supplement
and in such Note, and, unless otherwise specified in the applicable Pricing
Supplement, each Regular Record Date for a Floating Rate Note will be the
fifteenth calendar day (whether or not a Business Day) next preceding each
Interest Payment Date (a "Regular Record Date").
Fixed Rate Notes
Each Fixed Rate Note will bear interest at the annual rate specified
therein and in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, the Interest Payment Dates for the Fixed
Rate Notes will be on June 15 and December 15 of each year and the Regular
Record Dates will be the fifteenth calendar day (whether or not a Business Day)
next preceding each Interest Payment Date. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed
and paid on the basis of a 360-day year of twelve 30-day months. In the event
that any Interest Payment Date or Maturity Date for any Fixed Rate Note is not
a Business Day, payment of interest, premium, if any, or principal otherwise
payable on such Fixed Rate Note will be made on the next succeeding Business
Day and no interest on such payment shall accrue for the period from and after
such Interest Payment Date or Maturity Date to such next succeeding Business
Day.
Floating Rate Notes
Unless otherwise specified in an applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. Each applicable Pricing
Supplement will specify certain terms with respect to which such Floating Rate
Note is being delivered, including: whether such Floating Rate Note is a
Regular Floating Rate Note, an Inverse Floating Rate Note or a Floating
Rate/Fixed Rate Note; the Interest Rate Basis or Bases, Initial Interest Rate,
Interest Reset Dates, Interest Reset Period, Regular Record Dates, Interest
Payment Dates, Index Maturity, maximum interest rate and minimum interest rate,
if any, and the Spread and/or Spread Multiplier, if any, and if one or more of
the specified Interest Rate Bases is LIBOR, the Index Currency, if any, as
described below.
S-6
<PAGE>
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(a) Unless such Floating Rate Note is designated as a Floating Rate/Fixed
Rate Note or an Inverse Floating Rate Note, such Floating Rate Note will be
designated a "Regular Floating Rate Note" and, except as described below or
in an applicable Pricing Supplement, will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (i)
plus or minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any. Unless otherwise specified in the
applicable Pricing Supplement, commencing on the Initial Interest Reset
Date, the rate at which interest on such Regular Floating Rate Note shall
be payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period from the Original
Issue Date to the Initial Interest Reset Date will be the Initial Interest
Rate.
(b) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," then, except as described below or in an applicable Pricing
Supplement, such Floating Rate Note will initially bear interest at the
rate determined by reference to the applicable Interest Rate Basis or Bases
(i) plus or minus the applicable Spread, if any, and/or (ii) multiplied by
the applicable Spread Multiplier, if any. Commencing on the Initial
Interest Reset Date, the rate at which interest on such Floating Rate/Fixed
Rate Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (x) the interest rate in effect for the period from
the Original Issue Date to the Initial Interest Reset Date will be the
Initial Interest Rate; and (y) the interest rate in effect commencing on,
and including, the Fixed Rate Commencement Date (as defined in the
applicable Pricing Supplement) to the Maturity Date shall be the Fixed
Interest Rate, if such rate is specified in the applicable Pricing
Supplement, or if no such Fixed Interest Rate is so specified and the
Floating Rate/Fixed Rate Note is still outstanding on such day, the
interest rate in effect thereon on the day immediately preceding the Fixed
Rate Commencement Date.
(c) If such Floating Rate Note is designated as an "Inverse Floating Rate
Note," then, except as described below or in an applicable Pricing
Supplement, such Floating Rate Note will bear interest equal to the Fixed
Interest Rate specified in the related Pricing Supplement minus the rate
determined by reference to the Interest Rate Basis or Bases (i) plus or
minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any; provided, however, unless otherwise
specified in the applicable Pricing Supplement, the interest rate thereon
will not be less than zero. Commencing on the Initial Interest Reset Date,
the rate at which interest on such Inverse Floating Rate Note is payable
shall be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the Original Issue Date to the
Initial Interest Reset Date will be the Initial Interest Rate.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating
Rate Note shall bear interest in accordance with the terms described in such
Addendum and the applicable Pricing Supplement. See "--Other Provisions,
Addenda" below.
Unless otherwise provided in the applicable Pricing Supplement, each
Interest Rate Basis shall be the rate determined in accordance with the
applicable provisions below. Except as set forth above or in a Pricing
Supplement, the interest rate in effect on each day shall be (a) if such day is
an Interest Reset Date, the interest rate as determined on the Interest
Determination Date (as defined below) immediately preceding such Interest Reset
Date or (b) if such day is not an Interest Reset Date, the interest rate
determined on the Interest Determination Date immediately preceding the next
preceding Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to an
"Interest Rate Basis," which may be one or more of (i) the CD Rate, (ii) the
Commercial Paper Rate, (iii) the Federal Funds Rate, (iv) LIBOR, (v) the Prime
Rate, (vi) the Treasury Rate, or (vii) such other Interest Rate Basis or
interest rate formula as may be set in the applicable Pricing Supplement;
provided, however, that with respect to a Floating Rate/Fixed Rate Note, the
interest rate commencing on the Fixed Rate Commencement Date and continuing,
unless otherwise specified in the applicable Pricing Supplement, until the
Maturity Date shall be the Fixed Interest Rate, if such rate is specified in
the applicable Pricing Supplement, or if no such
S-7
<PAGE>
Fixed Interest Rate is so specified, the interest rate in effect thereon on the
day immediately preceding the Fixed Rate Commencement Date. In addition, if so
specified in the applicable Pricing Supplement, a Floating Rate Note may bear
interest calculated based upon two or more Interest Rate Bases.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest
Rate Basis or Bases will be multiplied to determine the applicable interest
rate on such Floating Rate Note. The "Index Maturity" is the period to maturity
of the instrument or obligation with respect to which the Interest Rate Basis
or Bases will be calculated. The Spread, Spread Multiplier, Index Maturity and
other variable terms of the Floating Rate Notes are subject to change by the
Company from time to time, but no such change will affect any Floating Rate
Note previously issued or as to which an offer has been accepted by the
Company.
Each applicable Pricing Supplement will specify whether the rate of
interest on the related Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually, annually or such other specified period
(each, an "Interest Reset Period") and the dates on which such interest rate
will be reset (each, an "Interest Reset Date"). Unless otherwise specified in
the applicable Pricing Supplement, the Interest Reset Date will be, in the case
of Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly,
a Business Day that occurs in each week as specified in the applicable Pricing
Supplement (with the exception of weekly reset Treasury Rate Notes, which will
reset the Tuesday of each week except as specified below); (iii) monthly, a
Business Day that occurs in each month as specified in the applicable Pricing
Supplement; (iv) quarterly, a Business Day that occurs in each third month as
specified in the applicable Pricing Supplement; (v) semiannually, a Business
Day that occurs in each of two months of each year as specified in the
applicable Pricing Supplement; and (vi) annually, a Business Day that occurs in
one month of each year as specified in the applicable Pricing Supplement;
provided, however, that, with respect to Floating Rate/Fixed Rate Notes, the
fixed rate of interest in effect for the period from the Fixed Rate
Commencement Date until the Maturity Date shall be specified in the applicable
Pricing Supplement as either the Fixed Interest Rate or the interest rate in
effect on the day immediately preceding the Fixed Rate Commencement Date, or if
no such Fixed Interest Rate is so specified, the interest rate in effect
thereon on the date immediately preceding the Fixed Rate Commencement Date. If
any Interest Reset Date for any Floating Rate Note would otherwise be a day
that is not a Business Day, such Interest Reset Date will be postponed to the
next succeeding day that is a Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis, in
which case if such Business Day falls in the next succeeding calendar month,
such Interest Reset Date will be the immediately preceding Business Day. As
used herein, "Business Day" means, unless otherwise specified in the applicable
Pricing Supplement, any day that is not a Saturday or Sunday and that is not a
day on which banking institutions are generally authorized or obligated by law,
regulation or executive order to close in The City of New York and any other
place of payment with respect to the applicable Notes and (i) with respect to
LIBOR Notes, "Business Day" shall also include a day on which dealings in U.S.
dollars are transacted in the London Interbank Market (a "London Business
Day"), (ii) with respect to Notes denominated in a Specified Currency other
than U.S. dollars or ECUs, "Business Day" shall not include a day on which
banking institutions are generally authorized or obligated by law, regulation
or executive order to close in the principal financial center of the country of
the Specified Currency, or (iii) with respect to Notes denominated in ECUs,
"Business Day" shall also include a day that is designated as an ECU settlement
day by the ECU Banking Association in Paris; provided that after the start of
the third stage of the European economic and monetary union (expected to be
January 1, 1999), the foregoing reference to an "ECU settlement day" shall be
read as a reference to any day which the TransEuropean Real-Time Gross
Settlement Express Transfer (TARGET) System is in place.
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period and (ii) a minimum numerical limitation, or
floor, on the rate at which interest may accrue during any interest period. In
addition to any maximum interest rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on Floating Rate
Notes will in no event be higher than the maximum rate permitted by New York
law, as the same may be modified by United States law of general application.
S-8
<PAGE>
Except as provided below or in an applicable Pricing Supplement, interest
will be payable in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on a Business Day that occurs in each month, as specified in
the applicable Pricing Supplement, (ii) quarterly, on a Business Day that
occurs in each third month, as specified in the applicable Pricing Supplement,
(iii) semi-annually, on a Business Day that occurs in each of two months of
each year as specified in the applicable Pricing Supplement and (iv) annually,
on a Business Day that occurs in one month of each year, as specified in the
applicable Pricing Supplement (each, an "Interest Payment Date") and, in each
case, on the Maturity Date. If any Interest Payment Date for any Floating Rate
Note would otherwise be a day that is not a Business Day, such Interest Payment
Date will be the next succeeding day that is a Business Day and no interest
shall accrue for the period from and after such Interest Payment Date, except
that if such Note is a LIBOR Note and if such Business Day falls in the next
succeeding calendar month, such Interest Payment Date will be the immediately
preceding Business Day. If the Maturity Date of a Floating Rate Note falls on a
day that is not a Business Day, the payment of principal, premium, if any, and
interest, if any, will be made on the next succeeding Business Day, and no
interest shall accrue for the period from and after such Maturity Date.
All percentages resulting from any calculation on Floating Rate Notes will
be to the nearest one hundred-thousandth of a percentage point, with five one
millionths of a percentage point rounded upwards (e.g., 5.876545% (or
.05876545) would be rounded to 5.87655% (or .0587655)), and all dollar amounts
used in or resulting from such calculation will be rounded to the nearest cent
(with one-half cent being rounded upward).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day from and including the later of (i) the date of issue and (ii) the last day
to which interest has been paid or duly provided for to and including the last
date for which accrued interest is being calculated as described in the
immediately preceding paragraph. Unless otherwise specified in the applicable
Pricing Supplement, the interest factor for each such day will be computed by
dividing the interest rate applicable to such day by 360, in the case of Notes
for which the Interest Rate Basis is the CD Rate, the Commercial Paper Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of
days in the year in the case of Notes for which the Interest Rate Basis is the
Treasury Rate. The accrued interest factor for Notes for which the interest
rate may be calculated with reference to two or more Interest Rate Bases will
be calculated in each period by selecting one such Interest Rate Basis for such
period in accordance with the provisions of the applicable Pricing Supplement.
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date with respect to such Interest Reset Period will be the
rate determined as of the "Interest Determination Date." Unless otherwise
specified in the applicable Pricing Supplement, the Interest Determination Date
with respect to the CD Rate, the Commercial Paper Rate, the Federal Funds Rate
and the Prime Rate will be the second Business Day preceding each Interest
Reset Date for the related Note; and the Interest Determination Date with
respect to LIBOR will be the second London Business Day preceding each Interest
Reset Date. With respect to the Treasury Rate, unless otherwise specified in an
applicable Pricing Supplement, the Interest Determination Date will be the day
in the week in which the related Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned (Treasury Bills are
normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday); provided,
however, that if an auction is held on the Friday on the week preceding the
related Interest Reset Date, the related Interest Determination Date will be
such preceding Friday; and provided, further, that if an auction falls on any
Interest Reset Date then the related Interest Reset Date will instead be the
first Business Day following such auction. Unless otherwise specified in the
applicable Pricing Supplement, the Interest Determination Date pertaining to a
Floating Rate Note the interest rate of which is determined with reference to
two or more Interest Rate Bases will be the latest Business Day which is at
least two Business Days prior to each Interest Reset Date for such Floating
Rate Note. Each Interest Rate Basis will be determined and compared on such
date, and the applicable interest rate will take effect on the related Interest
Reset Date, as specified in the applicable Pricing Supplement.
S-9
<PAGE>
Unless otherwise provided for in the applicable Pricing Supplement, The
Chase Manhattan Bank will be the Calculation Agent (the "Calculation Agent,"
which term includes any successor calculation agent appointed by the Company),
and for each Interest Reset Date will determine the interest rate with respect
to any Floating Rate Note as described below. The Calculation Agent will notify
the Company, the Paying Agent and the Trustee of each determination of the
interest rate applicable to any such Floating Rate Note promptly after such
determination is made. The Trustee will, upon the request of the holder of any
Floating Rate Note, provide the interest rate then in effect and, if
determined, the interest rate which will become effective as a result of a
determination made with respect to the most recent Interest Determination Date
relating to such Note. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date," where applicable, pertaining to any
Interest Determination Date will be the earlier of (i) the tenth calendar day
after such Interest Determination Date or, if such day is not a Business Day,
the next succeeding Business Day or (ii) the Business Day preceding the
applicable Interest Payment Date or Maturity Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Rate Basis with respect to Floating Rate Notes will be determined by
the Calculation Agent as follows:
CD Rate Notes. CD Rate Notes will bear interest at the interest rate
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any) specified in the CD Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note, the rate on such date for negotiable certificates of deposit having the
Index Maturity designated in the applicable Pricing Supplement as published by
the Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates," or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)," or, if not so published by 3:00
p.m., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate will be the rate on such Interest Determination
Date for negotiable certificates of deposit of the Index Maturity designated in
the applicable Pricing Supplement as published by the Federal Reserve Bank of
New York in its daily update of H.15(519) available through the world-wide web
site of the Board of Governors of the Federal Reserve System at
"http:/www.bog.frb.fed.us/releases/H15/update" or any successor site or
publication of the Board of Governors ("H.15 Daily Update") under the heading
"Certificates of Deposit." If such rate is not yet published in either
H.15(519) or H.15 Daily Update by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the CD Rate on
such Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the secondary market offered rates as of
10:00 a.m., New York City time, on such Interest Determination Date, for
negotiable certificates of deposit of major United States money market banks
with a remaining maturity closest to the Index Maturity designated in the
applicable Pricing Supplement in an amount that is representative for a single
transaction in that market at that time as quoted by three leading nonbank
dealers in negotiable U.S. dollar certificates of deposit in The City of New
York selected by the Calculation Agent; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as set forth
above, the CD Rate with respect to such Interest Determination Date shall be
the same as the CD Rate in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of interest
shall be the Initial Interest Rate).
Commercial Paper Rate Notes. Commercial Paper Rate Notes will bear
interest at the interest rate (calculated with reference to the Commercial
Paper Rate and the Spread and/or Spread Multiplier, if any) specified in the
Commercial Paper Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Note, the Money Market Yield (as defined below)
of the rate on that date for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement, as such rate shall be
published in H.15(519), under the heading "Commercial Paper--Non-Financial." In
the event that such rate is not published prior to 3:00 p.m., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
then
S-10
<PAGE>
the Commercial Paper Rate shall be the Money Market Yield of the rate on such
Interest Determination Date for commercial paper of the specified Index
Maturity as published in H.15 Daily Update under the heading "Commercial Paper"
(with an Index Maturity of one month or three months being deemed to be
equivalent to an Index Maturity of 30 days or 90 days, respectively). If by
3:00 p.m., New York City time, on such Calculation Date such rate is not yet
available in either H.15(519) or H.15 Daily Update, then the Commercial Paper
Rate on such Interest Determination Date shall be calculated by the Calculation
Agent and shall be the Money Market Yield corresponding to the arithmetic mean
of the offered rates as of approximately 11:00 a.m., New York City time, on
such Interest Determination Date for commercial paper of the specified Index
Maturity placed for a non-financial issuer whose bond rating is "AA," or the
equivalent, from a nationally recognized rating agency as quoted by three
leading dealers of commercial paper in The City of New York selected by the
Calculation Agent; provided, however, that if the dealers selected as aforesaid
by the Calculation Agent are not quoting offered rates as set forth above, the
Commercial Paper Rate with respect to such Interest Determination Date shall be
the same as the Commercial Paper Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the rate of
interest shall be the Initial Interest Rate).
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
Money Market Yield = (D x 360 360 (divided by) (D x M)) x 100
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the period for which interest is being calculated.
Federal Funds Rate Notes. Federal Funds Rate Notes will bear interest at
the interest rate (calculated with reference to the Federal Funds Rate and the
Spread and/or Spread Multiplier, if any) specified in the Federal Funds Rate
Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date
relating to a Federal Funds Rate Note, the rate on such date for Federal Funds
as published in H.15(519) under the heading "Federal Funds (Effective)" or, if
not so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Federal Funds Rate will be
the rate on such Interest Determination Date as published in H.15 Daily Update
under the heading "Federal Funds (effective)." If such rate is not published in
either H.15(519) or H.15 Daily Update by 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Federal
Funds Rate for such Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight United States dollar Federal Funds as of 9:00 a.m.,
New York City time, on such Interest Determination Date arranged by three
leading brokers of Federal Funds transactions in The City of New York selected
by the Calculation Agent; provided, however, that if the brokers selected as
aforesaid by the Calculation Agent are not quoting as set forth above, the
Federal Funds Rate with respect to such Interest Determination Date shall be
the same as the Federal Funds Rate in effect for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the rate
of interest shall be the Initial Interest Rate).
LIBOR Notes. LIBOR Notes will bear interest at the interest rate
(calculated with reference to LIBOR and the Spread and/or Spread Multiplier, if
any) specified in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
for each Interest Reset Date will be determined by the Calculation Agent as
follows:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note, LIBOR will be the rate for deposits in the London interbank market in
the Index Currency (as defined below) having the Index Maturity designated
in the applicable Pricing Supplement commencing on the second London
Business Day immediately following such Interest Determination Date that
appears
S-11
<PAGE>
on the Designated LIBOR Page (as defined below) as of 11:00 a.m., London
time, on such Interest Determination Date. If no rate appears on the
Designated LIBOR Page, LIBOR in respect of such Interest Determination Date
will be determined as if the parties had specified the rate described in
clause (ii) below.
(ii) With respect to an Interest Determination Date relating to a LIBOR
Note to which the last sentence of clause (i) above applies, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity designated in the applicable Pricing Supplement commencing on the
second London Business Day immediately following such Interest
Determination Date to prime banks in the London interbank market at
approximately 11:00 a.m., London time on such Interest Determination Date
and in a principal amount that is representative for a single transaction
in such Index Currency in such market at such time. If at least two such
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
a.m. (or such other time specified in the applicable Pricing Supplement),
in the applicable Principal Financial Center (as defined below), on such
Interest Determination Date for loans made in the Index Currency to leading
European banks having the Index Maturity designated in the applicable
Pricing Supplement commencing on the second London Business Day immediately
following such Interest Determination Date and in a principal amount that
is representative for a single transaction in such Index Currency in such
market at such time by three major banks in such Principal Financial Center
selected by the Calculation Agent; provided, however, that if the banks so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR with respect to such Interest Determination Date will be
the same as LIBOR in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of
interest shall be the Initial Interest Rate).
"Index Currency" means the currency (including currency units and
composite currencies) specified in the applicable Pricing Supplement as the
currency with respect to which LIBOR shall be calculated. If no such currency
is specified in the applicable Pricing Supplement, the Index Currency shall be
U.S. dollars.
"Designated LIBOR Page" means the display on Page 3750 (or such other page
as is specified in the applicable Pricing Supplement) of the Dow Jones Telerate
Service for the purpose of displaying the London interbank offered rates of
major banks for the applicable Index Currency (or such other page as may
replace that page on that service for the purpose of displaying such rates).
Unless provided otherwise in the applicable Pricing Supplement, "Principal
Financial Center" will be the principal financial center of the country of the
specified Index Currency, except that with respect to U.S. dollars and ECUs,
the Principal Financial Center shall be The City of New York and Brussels,
respectively.
Prime Rate Notes. Prime Rate Notes will bear interest at the interest rate
(calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified in the Prime Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set
forth in H.15(519) for such date opposite the caption "Bank Prime Loan." If
such rate is not yet published by 9:00 a.m., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Prime Rate
for such Interest Determination Date will be the arithmetic mean of the rates
of interest publicly announced by each bank named on the Reuters Screen
USPRIME1 Page (as defined below) as such bank's prime rate or base lending rate
as in effect for such Interest Determination Date as quoted on the Reuters
Screen USPRIME1 Page on such Interest Determination Date, or, if fewer than
four such rates appear on the Reuters Screen USPRIME1 Page for such Interest
Determination Date, the rate shall be the arithmetic mean of the
S-12
<PAGE>
prime rates quoted on the basis of the actual number of days in the year
divided by 360 as of the close of business on such Interest Determination Date
by at least two of the three major money center banks in The City of New York
selected by the Calculation Agent from which quotations are requested. If fewer
than two quotations are provided, the Prime Rate shall be calculated by the
Calculation Agent and shall be determined as the arithmetic mean on the basis
of the prime rates in The City of New York by the appropriate number of
substitute banks or trust companies organized and doing business under the laws
of the United States, or any State thereof, in each case having total equity
capital of at least $500 million and being subject to supervision or
examination by federal or state authority, selected by the Calculation Agent to
quote such rate or rates. "Reuters Screen USPRIME1 Page" means the display
designated as Page "USPRIME1" on the Reuters Monitor Money Rates Service (or
such other page as may replace the USPRIME1 Page on that service for the
purpose of displaying prime rates or base lending rates of major United States
banks).
Treasury Rate Notes. Treasury Rate Notes will bear interest at the
interest rate (calculated with reference to the Treasury Rate and the Spread
and/or Spread Multiplier, if any) specified in the Treasury Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date relating
to a Treasury Rate Note, the rate applicable to the most recent auction of
direct obligations of the United States ("Treasury Bills") having the Index
Maturity designated in the applicable Pricing Supplement, as published in
H.15(519) under the heading "Treasury Bills--auction average (investment)" or,
if not so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the auction average rate on
such Interest Determination Date (expressed as a bond equivalent, on the basis
of a year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury Bills having the Index
Maturity designated in the applicable Pricing Supplement are not published or
reported as provided above by 3:00 p.m., New York City time, on such
Calculation Date or if no such auction is held in a particular week, then the
Treasury Rate shall be the rate as published in H.15(519) under the heading
"Treasury Bills-- secondary market," or any successor publication or heading.
In the event such rate is not published by 3:00 p.m., New York City time, on
such Calculation Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) calculated using the arithmetic mean of the secondary
market bid rates, as of approximately 3:30 p.m., New York City time, on such
Interest Determination Date, of three leading primary United States government
securities dealers (which may include one or more of the Agents) selected by
the Calculation Agent for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting bid rates as mentioned in this sentence, the Treasury
Rate with respect to such Interest Determination Date will be the same as the
Treasury Rate in effect for the immediately preceding Interest Reset Period
(or, if there was no such Interest Reset Period, the rate of interest shall be
the Initial Interest Rate).
INDEXED NOTES
Notes also may be issued with the principal amount payable at maturity or
interest to be paid thereon, or both, to be determined with reference to the
price or prices of specified commodities or stocks, the exchange rate of the
Specified Currency relative to one or more other currencies, currency units or
composite currencies specified in the Prospectus Supplement, or such other
price or exchange rate as may be specified in such Note ("Indexed Notes"), as
set forth in a Pricing Supplement relating to such Indexed Notes. In certain
cases, holders of such Indexed Notes may receive a principal amount on the
Maturity Date that is greater than or less than the face amount of the Indexed
Notes, or an interest rate that is greater than or less than the stated
interest rate on the Indexed Notes, or both, depending upon the structure of
the Indexed Note and the relative value on the Maturity Date or at the relevant
Interest Payment Date, as the case may be, of the specified indexed item.
Information as to the method for
S-13
<PAGE>
determining the principal amount payable on the Maturity Date, the manner of
determining the interest rate, certain historical information with respect to
the specified indexed item and tax considerations associated with an investment
in Indexed Notes will be set forth in the applicable Pricing Supplement.
An investment in Indexed Notes entails significant risks that are not
associated with similar investments in a conventional fixed-rate debt security.
If the interest rate of an Indexed Note is indexed, it may result in an
interest rate that is less than that payable on a conventional fixed-rate debt
security issued by the Company at the same time, including the possibility that
no interest will be paid, and, if the principal amount of an Indexed Note is
indexed, the principal amount payable at maturity may be less than the original
purchase price of such Indexed Note, including the possibility that no
principal will be paid (but in no event shall the amount of interest or
principal paid with respect to an Indexed Note be less than zero).
Additionally, if the formula used to determine the principal amount or interest
payable with respect to such Indexed Notes contains a multiple or leverage
factor, the effect of any change in the applicable currency, commodity or
interest rate index may be increased. See "Foreign Currency Risks."
OPTIONAL REDEMPTION BY THE COMPANY
Unless otherwise provided in the applicable Pricing Supplement, the Notes
cannot be redeemed prior to maturity by the Company and will not be subject to
any sinking fund. The Notes will be redeemable at the option of the Company
prior to the maturity date thereof only if an "Initial Redemption Date" is
specified in the applicable Pricing Supplement. If so specified, the Notes will
be subject to redemption at the option of the Company on any date on and after
the applicable Initial Redemption Date in whole or from time to time in part in
increments of $1,000 or such other minimum denomination specified in such
Pricing Supplement (provided that any remaining principal amount thereof shall
be at least $1,000 or such minimum denomination), at the applicable Redemption
Price (as defined herein), together with unpaid interest accrued to the date of
redemption, on notice given not more than 60 nor less than 30 calendar days
prior to the date of redemption and in accordance with the provisions of the
Indenture. "Redemption Price" means, with respect to any Note, an amount equal
to the Initial Redemption Percentage specified in the applicable Pricing
Supplement (as adjusted by the Annual Redemption Percentage Reduction specified
therein, if applicable) multiplied by the unpaid principal amount to be
redeemed. The Initial Redemption Percentage, if any, applicable to a Note shall
decline on each anniversary of the Initial Redemption Date by an amount equal
to the applicable Annual Redemption Percentage Reduction, if any, until the
Redemption Price is equal to 100% of the unpaid principal amount to be
redeemed. The Redemption Price of Original Issue Discount Notes is described
below under "--Original Issue Discount Notes."
Foreign Currency Notes may be subject to different restrictions on
redemption. See "Special Provisions Relating to Foreign Currency Notes--Minimum
Denominations, Restrictions on Maturities, Repayment and Redemption."
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
The Notes will be repayable by the Company at the option of the holders
thereof prior to maturity only if one or more "Optional Repayment Dates" is
specified in the applicable Pricing Supplement. If so specified, the Notes will
be subject to repayment at the option of the holders thereof on any Optional
Repayment Date in whole or in part from time to time in increments of $1,000 or
such other minimum denomination specified in the applicable Pricing Supplement
(provided that any remaining principal amount thereof shall be at least $1,000
or such other minimum denomination), at a repayment price equal to 100% of the
unpaid principal amount to be repaid, together with unpaid interest accrued to
the date of repayment. For any Note to be repaid, such Note must be received,
together with the form thereon entitled "Option to Elect Repayment" duly
completed, by the Trustee at its corporate trust office (or such other address
specified on the applicable Pricing Supplement or of which the Company shall
from time to time notify the holders of Notes) not more than 60 nor less than
30 calendar days prior to the date of repayment. Exercise of such repayment
option by the holder will be irrevocable. The repayment price of Original Issue
Discount Notes is described below under "--Original Issue Discount Notes."
Notwithstanding the foregoing, the Company will comply with Section 14(e) under
the Exchange Act, to the
S-14
<PAGE>
extent applicable, and any other tender offer rules under the Exchange Act
which may then be applicable, in connection with any obligation of the Company
to purchase Notes at the option of the holders thereof as described herein.
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, beneficial owners of
Global Securities that desire to have all or any portion of the Book-Entry
Notes represented by such Global Securities repaid must direct the participant
of the Depositary through which they own their interest (each, a "Participant")
to direct the Depositary to exercise the repayment option on their behalf by
delivering the related Global Security and duly completed election form to the
Trustee as aforesaid. In order to ensure that such Global Security and election
form are received by the Trustee on a particular day, the applicable beneficial
owner must so direct the Participant through which it owns its interest before
such Participant's deadline for accepting instructions for that day. Different
firms may have different deadlines for accepting instructions from their
customers. Accordingly, such beneficial owners should consult the Participants
through which they own their interest for the respective deadlines for such
Participants. All instructions given to Participants from beneficial owners of
Global Securities relating to the option to elect repayment shall be
irrevocable. In addition, at the time such instructions are given, each such
beneficial owner shall cause the Participant through which it owns its interest
to transfer such beneficial owner's interest in the Global Security or
Securities representing the related Book-Entry Notes, on the Depositary's
records, to the Trustee. See "Description of Debt Securities--Book-Entry
System" in the accompanying Prospectus.
Foreign Currency Notes may be subject to different restrictions on
repayment. See "Special Provisions Relating to Foreign Currency Notes--Minimum
Denominations, Restrictions on Maturities, Repayment and Redemption."
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes purchased by the Company may, at its discretion, be held,
resold or surrendered to the Registrar for cancellation.
DUAL CURRENCY NOTES
Dual Currency Notes are Notes as to which the Company has a one time
option, exercisable on a specified date (the "Option Election Date") in whole,
but not in part, with respect to all Dual Currency Notes issued on the same day
and having the same terms, of making all payments of principal, premium, if
any, and interest after the exercise of such option, whether at maturity or
otherwise (which payments would otherwise be made in the face amount currency
of such Notes specified in the applicable Pricing Supplement), in the optional
payment currency specified in the applicable Pricing Supplement ("Dual Currency
Notes"). The terms of the Dual Currency Notes together with information as to
the relative value of the face amount currency compared to the optional payment
currency and as to tax considerations associated with an investment in Dual
Currency Notes will also be set forth in the applicable Pricing Supplement.
If the Company elects on any Option Election Date specified in the
applicable Pricing Supplement to pay in the optional payment currency instead
of the face amount currency, payments of interest, premium, if any, and
principal made after such Option Election Date may be worth less, at the
then-current exchange rate, than if the Company had made such payment in the
face amount currency. See "Foreign Currency Risks."
RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable Notes
("Renewable Notes") which will mature on an Interest Payment Date specified in
the applicable Prospectus Supplement unless the maturity of all or a portion of
the principal amount thereof is extended in accordance with the procedures set
forth in the applicable Pricing Supplement.
S-15
<PAGE>
EXTENSION OF MATURITY
The Pricing Supplement relating to each Fixed Rate Note (other than an
Amortizing Note) will indicate whether the Company has the option to extend the
maturity of such Fixed Rate Note for one or more periods of one or more whole
years up to but not beyond the final Maturity Date set forth in such Pricing
Supplement. If the Company has such option with respect to any such Fixed Rate
Note, the procedures will be as set forth in the applicable Pricing Supplement.
AMORTIZING NOTES
Amortizing Notes are Notes for which payments combining principal and
interest are made in installments over the life of the Note ("Amortizing
Notes"). Payments with respect to Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. Further information concerning additional terms and
conditions of any issue of Amortizing Notes will be provided in the applicable
Pricing Supplement. A table setting forth repayment information in respect of
each Amortizing Note will be included in the applicable Pricing Supplement and
set forth on such Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Notes ("Original Issue Discount Notes") from time to
time at an issue price (as specified in the applicable Pricing Supplement) that
is less than 100% of the principal amount thereof (i.e., par). Original Issue
Discount Notes may not bear any interest currently or may bear interest at a
rate that is below market rates at the time of issuance. The difference between
the issue price of an Original Discount Note and par is referred to herein as
the "Discount." In the event of redemption, acceleration or acceleration of
maturity of an Original Issue Discount Note, the amount payable to the holder
of such Original Issue Discount Note will be equal to the sum of (i) the issue
price (increased by any accruals of Discount) and, in the event of any
redemption by the Company of such Original Issue Discount Note (if applicable),
multiplied by the Initial Redemption Percentage specified in the applicable
Pricing Supplement (as adjusted by the Annual Redemption Percentage Reduction,
if applicable) and (ii) any unpaid interest on such Original Issue Discount
Note accrued from the date of issue to the date of such redemption, repayment
or acceleration of maturity.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for an
Original Issue Discount Note, such Discount will be accrued using a constant
yield method. The constant yield will be calculated using a 30-day month,
360-day year convention, a compounding period that, except for the Initial
Period (as defined below), corresponds to the shortest period between Interest
Payment Dates for the applicable Original Issue Discount Note (with ratable
accruals within a compounding period), a coupon rate equal to the initial
coupon rate applicable to such Original Issue Discount Note and an assumption
that the maturity of such Original Issue Discount Note will not be accelerated.
If the period from the date of issue to the initial Interest Payment Date for
an Original Issue Discount Note (the "Initial Period") is shorter than the
compounding period for such Original Issue Discount Note, a proportionate
amount of the yield for an entire compounding period will be accrued. If the
Initial Period is longer than the compounding period, then such period will be
divided into a regular compounding period and a short period with the short
period being treated as provided in the preceding sentence. The accrual of the
applicable Discount may differ from the accrual of original issue discount for
purposes of the Internal Revenue Code of 1986, as amended (the "Code").
Certain Original Issue Discount Notes may not be treated as having
original issue discount for federal income tax purposes, and Notes other than
Original Issue Discount Notes may be treated as issued with original issue
discount for federal income tax purposes. See "United States Tax
Considerations."
S-16
<PAGE>
OTHER PROVISIONS, ADDENDA
Any provisions with respect to Notes, including the determination of an
Interest Rate Basis, the specification of Interest Rates Basis, calculation of
the interest rate applicable to a Floating Rate Note, its Interest Payment
Dates or any other matter relating thereto may be modified by the terms
specified under "Other Provisions" on the face thereof or in an Addendum
relating thereto, if so specified on the face thereof and in the applicable
Pricing Supplement.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in
accordance with the laws of the State of New York.
S-17
<PAGE>
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, the
following provisions shall apply to Foreign Currency Notes which are in
addition to, and to the extent inconsistent therewith replace, the description
of general terms and provisions of the Notes set forth herein and in the
Prospectus. Notes denominated or payable in foreign currency units, including
ECU, are Foreign Currency Notes.
The ECU in which the Notes may be denominated or may be payable is the
same as the ECU that is from time to time used as the unit of account of the
European Community (the "EC"). Changes to the ECU may be made by the EC, in
which event the ECU will change accordingly.
Under Article 109g of the treaty establishing the European Community, as
amended by the Treaty on European Union (the "Treaty"), the currency
composition of the ECU may not be changed. The Treaty contemplates that
European monetary union will occur in three stages, the second of which began
on January 1, 1994 with the entry into force of the Treaty on European Union.
The Treaty provides that, at the start of the third stage of European monetary
union (which is expected to be January 1, 1999), the value of the ECU as
against the currencies of the member states participating in the third stage
will be irrevocably fixed, and the ECU will become a currency in its own right.
In contemplation of that third stage, the European Council meeting in Madrid on
December 16, 1995 decided that the name of that currency will be the euro and
that, in accordance with the Treaty, substitution of the euro for the ECU will
be at the rate of one euro for one ECU. From the start of the third stage of
European monetary union, all payments in respect of the Notes denominated or
payable in the ECU will be payable in euro, and such payment will not
constitute an Event of Default.
Foreign Currency Notes may be issued as either Certificated Notes or
Book-Entry Notes. Unless otherwise indicated in the applicable Pricing
Supplement, payment of the purchase price of Foreign Currency Notes will be
made in immediately available funds in the Specified Currency, as described
below.
PAYMENT CURRENCY
Unless otherwise indicated in the applicable Pricing Supplement,
purchasers are required to pay for Foreign Currency Notes in the Specified
Currency. Currently, there are limited facilities in the United States for the
conversion of U.S. dollars into foreign currencies. Therefore, unless otherwise
indicated in the applicable Pricing Supplement, the exchange rate agent
appointed by the Company and identified in the applicable Pricing Supplement
(the "Exchange Rate Agent," which term includes any successor exchange rate
agent appointed by the Company) will arrange for the conversion of U.S. dollars
into a Specified Currency on behalf of any purchaser of a Foreign Currency Note
to enable a prospective purchaser to deliver the Specified Currency in payment
for such Foreign Currency Note. The Exchange Rate Agent must receive a request
for any such conversion on or prior to the third Business Day preceding the
date of delivery of the Foreign Currency Note. All costs of such exchange will
be borne by such purchaser.
Unless otherwise specified on the applicable Pricing Supplement or unless
the holder of such Foreign Currency Note elects to receive payments in the
Specified Currency, payments made by the Company of principal of, premium, if
any, and interest, if any, on a Foreign Currency Note will be made in U.S.
dollars. Such U.S. dollar amount to be received by a holder will be based on
the highest bid quotation in The City of New York received by the Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the applicable payment date from three recognized foreign
exchange dealers (one of which may be the Exchange Rate Agent) for the purchase
by the quoting dealer of such Specified Currency for U.S. dollars for
settlement on such payment date in the aggregate amount of the
S-18
<PAGE>
Specified Currency payable to the holders of Notes scheduled to receive U.S.
dollar payment and at which the applicable dealer commits to execute a
contract. If such bid quotations are not available, payments to holders will be
made in the Specified Currency.
Unless otherwise specified in the applicable Pricing Supplement, a holder
of a Foreign Currency Note may elect to receive payment in such Specified
Currency for all such payments and need not file a separate election for each
such payment, and such election shall remain in effect until revoked by written
notice to the Paying Agent at its corporate trust office in The City of New
York received on a date prior to the Record Date for the relevant Interest
Payment Date or at least 10 calendar days prior to the Maturity Date (or any
Redemption Date or Repayment Date), as the case may be; provided, that such
election is irrevocable as to the next succeeding payment to which it relates;
if such election is made as to full payment on this Note, such election may
thereafter be revoked so long as the Paying Agent is notified of the revocation
within the time period set forth above.
Banks in the United States offer non-U.S. dollar denominated checking or
savings account facilities in the United States only on a limited basis.
Accordingly, unless otherwise indicated in the applicable Pricing Supplement,
payments of principal of, premium, if any, and interest, if any, on, Foreign
Currency Notes to be made in a Specified Currency other than U.S. dollars will
be made to an account at a bank outside the United States, unless alternative
arrangements are made.
Except as set forth below with respect to Notes denominated or payable in
ECU or currencies of European Community member states participating in the
third stage of European monetary union, if a Specified Currency (other than the
U.S. dollar) in which this Note is denominated or payable: (i) ceases to be
recognized by the government of the country which issued such currency or for
the settlement of transactions by public institutions of or within the
international banking community, (ii) is a currency unit and such currency unit
ceases to be used for the purposes for which it was established, or (iii) is
not available to the Company for making payments thereof due to the imposition
of exchange controls or other circumstances beyond the control of the Company,
in each such case as determined in good faith by the Company, then with respect
to each date for the payment of principal of and interest, if any, on this Note
denominated or payable in such Specified Currency occurring after the last date
on which such Specified Currency was so used (the "Conversion Date"), the U.S.
dollar or such Foreign Currency or currency unit as may be specified by the
Company (the "Substitute Currency") shall become the currency of payment for
use on each such payment date (but such Specified Currency shall, at the
Company's election, resume being the currency of payment on the first such
payment date preceded by 15 Business Days during which the circumstances which
gave rise to the change of currency no longer prevail, in each case as
determined in good faith by the Company). The Substitute Currency amount to be
paid by the Company to the Trustee and by the Trustee or any Paying Agent to
the Holder of this Note with respect to such payment date shall be the Currency
Equivalent or Currency Unit Equivalent (each as defined below) of the Specified
Currency as determined by the Exchange Rate Agent (which determination shall be
delivered in writing to the Trustee not later than the fifth Business Day prior
to the applicable payment date) as of the Conversion Date or, if later, the
date most recently preceding the payment date in question on which such
determination is possible of performance, but not more than 15 days before such
payment date (such Conversion Date or date preceding a payment date as
aforesaid being called the "Valuation Date"). Any payment in a Substitute
Currency under the circumstances described above will not constitute an Event
of Default.
The "Currency Equivalent" shall be determined by the Exchange Rate Agent
as of each Valuation Date and shall be obtained by converting the Specified
Currency (unless such Specified Currency is a currency unit) into the
Substitute Currency at the Market Exchange Rate (as defined below) on the
Valuation Date.
The "Currency Unit Equivalent" shall be determined by the Exchange Rate
Agent as of each Valuation Date and shall be the sum obtained by adding
together the results obtained by converting the Specified Amount of each
initial Component Currency into the Substitute Currency at the Market Exchange
Rate on the Valuation Date for such Component Currency.
S-19
<PAGE>
As used herein:
(a) "Component Currency" means any currency which, on the Conversion
Date, was a component currency of the relevant currency unit, including
without limitation ECU;
(b) "Market Exchange Rate" means, as of any date, for any currency or
currency unit the noon U.S. dollar buying rate for that currency or
currency unit, as the case may be, for cable transfers quoted in New York
City on such date as certified for customs purposes by the Federal Reserve
Bank of New York. If such rates are not available for any reason with
respect to one or more currencies or currency units for which an Exchange
Rate is required, the Exchange Rate Agent will use, in its sole discretion
and without liability on its part, such quotation of the Federal Reserve
Bank of New York as of the most recent available date, or quotations from
one or more major banks in New York City or in the country of issue of the
currency or currency unit in question, or such other quotations as the
Exchange Rate Agent shall deem appropriate. Unless otherwise specified by
the Exchange Rate Agent if there is more than one market for dealing in any
currency or currency unit by reason of foreign exchange regulations or
otherwise, the market to be used in respect of such currency or currency
unit will be that upon which a nonresident issuer of securities designated
in such currency or currency unit would, as determined in its sole
discretion and without liability on the part of the Exchange Rate Agent,
purchase such currency or currency unit in order to make payments in
respect of such securities;
(c) "Specified Amount" of a Component Currency means the number of units
(including decimals) which such Component Currency represented in the
relevant currency unit, on the Conversion Date or, if ECU and such currency
unit is being used for settlement of transactions by public institutions of
or within the European Communities or was so used after the Conversion
Date, the Valuation Date or the last date the currency unit was so used,
whichever is later. If after such date the official unit of any Component
Currency is altered by way of combination or subdivision, the Specified
Amount of such Component Currency shall be divided or multiplied in the
same proportion. If after such date two or more Component Currencies are
consolidated into a single currency, the respective Specified Amounts of
such Component Currencies shall be replaced by an amount in such single
currency equal to the sum of the respective Specified Amounts of such
consolidated Component Currencies expressed in such single currency, and
such amount shall thereafter be a Specified Amount and such single currency
shall thereafter be a Component Currency. If after such date any Component
Currency shall be divided into two or more currencies, the Specified Amount
of such Component Currency shall be replaced by specified amounts of such
two or more currencies, the sum of which, at the Market Exchange Rate of
such two or more currencies on the date of such replacement, shall be equal
to the Specified Amount of such former Component Currency and such amounts
shall thereafter be Specified Amounts an such currencies shall thereafter
be Component Currencies.
All determinations referred to above made by the Company or its agents
shall be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.
Specific information about the currency, currency unit or composite
currency in which a particular Foreign Currency Note is denominated, including
historical exchange rates and a description of the currency and any exchange
controls, will be set forth in the applicable Pricing Supplement. The
information therein concerning exchange rates is furnished as a matter of
information only and should not be regarded as indicative of the range of or
trends in fluctuations in currency exchange rates that may occur in the future.
Notes Denominated in the Currencies of EC Member Countries
If, pursuant to the Treaty, one or more of the Austrian schilling, Belgian
franc, Danish krone, Dutch guilder, Finish markka, French franc, German mark,
Greek drachma, Irish pound, Italian lire, Luxembourg franc, Pound sterling,
Portuguese escudo, Spanish peseta or Swedish krona is replaced by the euro,
then all payments in respect of Notes denominated in such currencies shall be
effected in euro in conformity with legally applicable measures taken pursuant
to, or by virtue of, the Treaty and such payment will not constitute an Event
of Default.
S-20
<PAGE>
MINIMUM DENOMINATIONS, RESTRICTIONS ON MATURITIES, REPAYMENT AND REDEMPTION
Notes denominated in Specified Currencies other than U.S. dollars will
have such minimum denominations and be subject to such restrictions on
maturities, repayment and redemption as are set forth in the applicable Pricing
Supplement. Any other restrictions applicable to Notes denominated in Specified
Currencies other than U.S. dollars, including restrictions related to the
distribution of such Notes, will be set forth in the related Pricing
Supplement.
S-21
<PAGE>
FOREIGN CURRENCY RISKS
This Prospectus Supplement and any applicable Pricing Supplement do not
describe all of the possible risks of an investment in Foreign Currency Notes
or Indexed Notes whose payment will be made in, or affected by the value of, a
foreign currency or a composite currency. You should not invest in such Notes
if you are not knowledgeable about foreign currency and indexed transactions.
You should consult your own financial and legal advisors about such risks as
such risks may change from time to time.
We are providing the following information for the benefit of U.S.
residents. If you are not a U.S. resident, you should consult your own
financial and legal advisors before investing in any Notes.
EXCHANGE RATES AND EXCHANGE CONTROLS
A Note denominated in, or affected by the value of, a currency other than
U.S. dollars has additional risks that don't exist for U.S. dollar denominated
Notes. The most important risks are (i) possible changes in exchange rates
between the U.S. dollar and the other currency after the issuance of the Note
and (ii) imposition or modification of foreign exchange controls by either the
U.S. government or foreign governments. Such risks generally depend on economic
and political events over which the Company has no control.
Exchange rates have fluctuated greatly in recent years and are likely to
continue to fluctuate. These fluctuations are caused by economic forces as well
as political factors. However, you cannot predict future fluctuations based on
past exchange rates. If the foreign currency decreases in value relative to the
U.S. dollar, the yield on a Foreign Currency Note or currency-linked Indexed
Note for a U.S. investor will be less than the coupon rate and you may lose
money at maturity or if you sell the Note. In addition, you may lose all or
most of your investment in a currency-linked Indexed Note as a result of
changes in exchange rates.
Governments often impose exchange controls which can affect exchange rates
or the availability of the foreign currency to make payments of principal and
interest on the Notes. If the specified foreign currency is not available, the
Company would make the required payments in U.S. dollars on the basis of the
market exchange rate on the date of such payment, or if such rate of exchange
is not then available, on the basis of the market exchange rate as of a recent
date. See "Special Provisions Relating to Foreign Currency Notes--Payment
Currency".
FOREIGN CURRENCY JUDGEMENTS
The Indenture and the Notes are governed by New York State law. If you
bring a lawsuit in a New York State court or in a Federal court located in New
York State for payment of a Foreign Currency Note, the court would award a
judgment in the foreign currency and convert the judgment into U.S. dollars on
the date of the judgment. U.S. courts located outside New York State would
probably award a judgment in U.S. dollars but it is unclear what rate of
exchange they would use.
S-22
<PAGE>
UNITED STATES TAX CONSIDERATIONS
In the opinion of Davis Polk & Wardwell, special tax counsel to the
Company, the following summary accurately describes the principal United States
federal income tax consequences of ownership and disposition of the Notes to
initial holders purchasing Notes at the "issue price" (as defined below). This
summary is based on the Code, administrative pronouncements, judicial decisions
and existing and proposed Treasury regulations, including regulations
concerning the treatment of debt instruments issued with original issue
discount (the "OID Regulations"), changes to any of which subsequent to the
date of this Prospectus Supplement may affect the tax consequences described
herein, possibly with retroactive effect. This summary discusses only Notes
held as capital assets within the meaning of Section 1221 of the Code. It does
not discuss all of the tax consequences that may be relevant to a holder in
light of his particular circumstances or to holders subject to special rules,
such as certain financial institutions, insurance companies, dealers in
securities or foreign currencies, persons holding Notes in connection with a
hedging transaction, "straddle," conversion transaction or other integrated
transaction, persons who have ceased to be United States Citizens or to be
taxed as resident aliens, or United States Holders whose functional currency
(as defined in Code Section 985) is not the U.S. dollar. Finally, this summary
does not discuss Original Issue Discount Notes (as defined below for the
purposes of this summary) which qualify as "applicable high-yield discount
obligations" under Section 163(i) of the Code. Holders of Original Issue
Discount Notes which are "applicable high-yield discount obligations" may be
subject to special rules. Persons considering the purchase of Notes should
consult their tax advisors with regard to the application of the United States
federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
As used in this summary under "United States Tax Considerations," the term
"United States Holder" means an owner of a Note that is for United States
federal income tax purposes, (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or organized in or
under the laws of the United States or of any political subdivision thereof, or
(iii) an estate or trust the income of which is subject to United States
federal income taxation regardless of its source. The term also includes
certain former citizens and long term residents of the United States.
As used in this summary under "United States Tax Considerations," the term
"United States Alien Holder" means an owner of a Note that is, for United
States federal income tax purposes, (i) a nonresident alien individual, (ii) a
foreign corporation, (iii) a nonresident alien fiduciary of a foreign estate or
trust or (iv) a foreign partnership one or more of the members of which is, for
United States federal income tax purposes, a nonresident alien individual, a
foreign corporation or a nonresident alien fiduciary of a foreign estate or
trust.
As used in this summary under "United States Tax Considerations," the term
"Original Issue Discount Note" has the meaning described under "--Original
Issue Discount Notes" below. Certain Notes that constitute "Original Issue
Discount Notes" for purposes of other portions of this Prospectus Supplement
may not be treated as Original Issue Discount Notes for purposes of this
summary, and Notes other than those constituting "Original Issue Discount
Notes" for purposes of other portions of this Prospectus Supplement may be
treated as Original Issue Discount Notes for purposes of this summary. See
"Description of Notes--Original Issue Discount Notes" above.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Interest paid on a Note will generally be taxable to a United States
Holder as ordinary interest income at the time it accrues or is received in
accordance with the United States Holder's method of accounting for federal
income tax purposes. Under the OID Regulations, all payments of interest on a
Note that matures one year or less from its date of issuance will be included
in the stated redemption price at maturity of the Note and will be taxed in the
manner described below under "--Original Issue Discount Notes." Special rules
governing the treatment of interest paid with respect to Original Issue
Discount Notes (including certain Floating Rate Notes and Indexed Notes), Notes
the principal of which and the interest on which are denominated in or
determined by reference to a single foreign currency or the ECU
S-23
<PAGE>
("Foreign Currency Notes"), Notes (other than Foreign Currency Notes) the
principal of which or the interest on which (or both) is determined using a
formula based on the exchange rate of one or more foreign currencies, currency
units or composite currencies ("Currency Indexed Notes"), and Dual Currency
Notes are described under "--Original Issue Discount Notes," "--Foreign
Currency Notes" and "--Currency Indexed Notes and Dual Currency Notes" below.
ORIGINAL ISSUE DISCOUNT NOTES
For purposes of the summary under "United States Tax Considerations," a
Note that is issued for an amount less than its stated redemption price at
maturity will generally be considered to have been issued at an original issue
discount for federal income tax purposes (an "Original Issue Discount Note").
The "issue price" of a Note will equal the first price to the public (not
including bond houses, brokers or similar persons or organizations acting in
the capacity of underwriters, placement agents or wholesalers) at which a
substantial amount of the Notes is sold for money. The stated redemption price
at maturity of a Note will equal the sum of all payments required under the
Note other than payments of "qualified stated interest." "Qualified stated
interest" is stated interest unconditionally payable as a series of payments in
cash or property (other than debt instruments of the Company) at least annually
during the entire term of the Note and equal to the outstanding principal
balance of the Note multiplied by a single fixed rate of interest. In addition,
interest unconditionally payable at least annually with respect to Floating
Rate Notes may in certain circumstances be treated as qualified stated
interest. Ordinarily, interest payable at least annually at a single Interest
Rate Basis that can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds, such as the CD Rate, Commercial
Paper Rate, Eleventh District Cost of Funds Rate, Federal Funds Rate, LIBOR,
Prime Rate, CMT Rate and the Treasury Rate, plus or minus a fixed Spread (or a
fixed rate minus one of the above Interest Rate Bases) will generally be
treated as qualified stated interest. However, special tax considerations
(including possible original issue discount and contingent debt treatment (see
below)) may arise with respect to Floating Rate Notes providing for (i)
interest not unconditionally payable at least annually, (ii) interest payable
at more than one Interest Rate Basis, (iii) interest payable at a fixed rate
followed or preceded by an Interest Rate Basis or Bases, (iv) a Spread
Multiplier, (v) a cap, floor, governor or similar restriction that is not fixed
throughout the term of the Note, or (vi) an interest rate, the average value of
which during the first half of the Note's term is reasonably expected to be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Note's term. Purchasers of Floating
Rate Notes should consult their tax advisors since the tax consequences will
depend, in part, on the particular terms of the purchased Note.
Prospective Holders of Indexed Notes or Floating Rate Notes providing for
contingent payments should refer to the discussion regarding taxation in the
applicable Pricing Supplement and should consult their tax advisers regarding
the federal income tax consequences of ownership and disposition of such Notes.
If the difference between a Note's stated redemption price at maturity and
its issue price is less than a de minimis amount, i.e., 1/4 of 1% of the
stated redemption price at maturity multiplied by the number of complete years
to maturity, then the Note will not be considered to have original issue
discount. Holders of Notes with a de minimis amount of original issue discount
will generally include such original issue discount in income, as capital gain,
on a pro rata basis as principal payments are made on the Note.
A United States Holder of Original Issue Discount Notes will be required
to include any qualified stated interest payments in income in accordance with
the United States Holder's method of accounting for federal income tax
purposes. United States Holders of Original Issue Discount Notes that mature
more than one year from their date of issuance will be required to include
original issue discount in income for federal income tax purposes as it
accrues, in accordance with a constant yield method based on a compounding of
interest, before the receipt of cash payments attributable to such income.
Under the OID Regulations, a Note that matures one year or less from its
date of issuance will be treated as a "short-term Original Issue Discount
Note." In general, a cash method United States Holder of a short-term Original
Issue Discount Note is not required to accrue original issue discount for
United States federal income tax purposes unless it elects to do so. United
States Holders who make such an
S-24
<PAGE>
election, United States Holders who report income for federal income tax
purposes on the accrual method and certain other United States Holders,
including banks and dealers in securities, are required to include original
issue discount in income on such short-term Original Issue Discount Notes as it
accrues on a straight-line basis, unless an election is made to accrue the
original issue discount according to a constant yield method based on daily
compounding. In the case of a United States Holder who is not required and who
does not elect to include original issue discount in income currently, any gain
realized on the sale, exchange or retirement of the short-term Original Issue
Discount Note will be ordinary income to the extent of the original issue
discount accrued on a straight-line basis (or, if elected, according to a
constant yield method based on daily compounding), reduced by any interest
received, through the date of sale, exchange or retirement. In addition, such
United States Holder will be required to defer deductions for any interest paid
on indebtedness incurred to purchase or carry short-term Original Issue
Discount Notes in an amount not exceeding the deferred interest income, until
such deferred interest income is recognized.
Under the OID Regulations, a United States Holder may make an election
(the "Constant Yield Election") to include in gross income all interest that
accrues on a Note (including stated interest, acquisition discount, original
issue discount, de minimis original issue discount, and unstated interest, as
adjusted by any amortizable bond premium) in accordance with a constant yield
method based on the compounding of interest.
Original Issue Discount Notes that are redeemable by the Company or
repayable at the option of the United States Holder prior to maturity may be
subject to rules that differ from the general rules discussed above. Purchasers
of Original Issue Discount Notes with such a feature should carefully examine
the applicable Pricing Supplement and should consult their tax advisors with
respect to such a feature since the tax consequences with respect to original
issue discount will depend, in part, on the particular terms and the particular
features of the purchased Note.
The OID Regulations contain aggregation rules stating that in certain
circumstances if more than one type of Note is issued as part of the same
issuance of securities to a single holder, some or all of such Notes may be
treated together as a single debt instrument with a single issue price,
maturity date, yield to maturity and stated redemption price at maturity for
purposes of calculating and accruing any original issue discount. Unless
otherwise provided in the related Pricing Supplement, the Company does not
expect to treat any of the Notes as being subject to the aggregation rules for
purposes of computing original issue discount.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a United States Holder
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and such United States Holder's
adjusted tax basis in the Note. For these purposes, the amount realized does
not include any amount attributable to accrued interest on the Note. Amounts
attributable to accrued interest are treated as interest as described under
"--Payments of Interest" above. A United States Holder's adjusted tax basis in
a Note will equal the cost of the Note to such United States Holder, increased
by the amounts of any original issue discount previously includible in income
by the United States Holder with respect to such Note and reduced by any
amortizable bond premium used to offset qualified stated interest and certain
bond premium allowed as a deduction and any principal payments received by the
United States Holder and, in the case of an Original Issue Discount Note, by
the amounts of any other payments that do not constitute qualified stated
interest (as defined above).
Subject to the discussion under "--Foreign Currency-Denominated Notes"
below, gain or loss realized on the sale, exchange or retirement of a Note will
be capital gain or loss (except, in the case of a short-term Original Issue
Discount Note, to the extent of any original issue discount not previously
included in the United States Holder's taxable income), and will be long-term
capital gain or loss if at the time of sale, exchange or retirement the Note
has been held for more than one year. See "--Original Issue Discount Notes"
above. The excess of net long-term capital gains over net short-term capital
losses is taxed at a lower rate than ordinary income for certain non-corporate
taxpayers. The distinction between capital gain or loss and ordinary income or
loss is also relevant for purposes of, among other things, limitations on the
deductibility of capital losses.
S-25
<PAGE>
If a U.S. Holder purchases a Note for an amount that is greater than the
amount payable at maturity, the U.S. Holder will be considered to have
purchased the Note with "amortizable bond premium" equal in amount to such
excess, and may elect to amortize such premium over the remaining term of the
Note, based on the U.S. Holder's yield to maturity with respect to the Note as
determined under the bond premium rules. A U.S. Holder may generally use the
amortizable bond premium allocable to an accrual period to offset qualified
stated interest required to be included in the U.S. Holder's income with
respect to the Note in that accrual period. Under recently promulgated
regulations, if the amortizable bond premium allocable to an accrual period
exceeds the amount of qualified stated interest allocable to such accrual
period, such excess would be allowed as a deduction for such accrual period,
but only to the extent of the U.S. Holder's prior interest inclusions on the
Note. Any excess is generally carried forward and allocable to the next accrual
period. A Holder who elects to amortize bond premium must reduce his tax basis
in the Note as described above under "Sale, Exchange or Retirement of the
Notes". An election to amortize bond premium applies to all taxable debt
obligations held by the U.S. Holder at the beginning of the first taxable year
to which the election applies or thereafter acquired and may be revoked only
with the consent of the Internal Revenue Service. The recent regulations
provide limited automatic consent for a U.S. Holder to change its method of
accounting for bond premium to the constant yield method if the change is made
for the first taxable year (by a statement on the relevant return) for which
the U.S. Holder must account for a bond under the recent regulations.
If a United States Holder makes a Constant Yield Election for a Note with
amortizable bond premium, such election will result in a deemed election to
amortize bond premium for all of the United States Holder's debt instruments
with amortizable bond premium acquired in the same or a later taxable year and
may be revoked only with the permission of the Internal Revenue Service with
respect to debt instruments acquired after revocation.
FOREIGN CURRENCY NOTES
A United States Holder who uses the cash method of accounting and who
receives a payment of interest in a foreign currency with respect to a Foreign
Currency Note (other than an Original Issue Discount Note on which original
issue discount is accrued on a current basis (except to the extent any
qualified stated interest is received)) will be required to include in income
the U.S. dollar value of the foreign currency payment (determined on the date
such payment is received) regardless of whether the payment is in fact
converted to U.S. dollars at that time, and such U.S. dollar value will be the
United States Holder's tax basis in the foreign currency. A cash method United
States Holder who receives such a payment in U.S. dollars pursuant to an option
available under such a Foreign Currency Note will be required to include the
amount of such payment in income upon receipt.
To the extent the above paragraph is not applicable, a United States
Holder will be required to include in income the U.S. dollar value of the
amount of interest income (including original issue discount, but reduced by
amortizable bond premium to the extent applicable) that is required to be
accrued with respect to a Foreign Currency Note during an accrual period. The
U.S. dollar value of such accrued income will be determined by translating such
income at the average rate of exchange for the accrual period or, with respect
to an accrual period that spans two taxable years, at the average rate for the
partial period within the taxable year. Such United States Holder will
recognize ordinary income or loss with respect to accrued interest income on
the date such income is actually received. The amount of ordinary income or
loss recognized will equal the difference between the U.S. dollar value of the
foreign currency payment received (determined on the date such payment is
received) in respect of such accrual period (or, where a United States Holder
receives U.S. dollars, the amount of such payment in respect of such accrual
period) and the U.S. dollar value of interest income that has accrued during
such accrual period (as determined above). A United States Holder may elect to
translate interest income (including original issue discount) into U.S. dollars
at the spot rate on the last day of the interest accrual period (or, in the
case of a partial accrual period, the spot rate on the last day of the taxable
year) or, if the date of receipt is within five business days of the last day
of the interest accrual period, the spot rate on the date of receipt. A United
States Holder that makes such an election must apply it consistently to all
debt instruments from year to year and cannot change the election without the
consent of the Internal Revenue Service. Original issue discount and
amortizable bond premium on a Foreign Currency Note are to be determined in the
relevant foreign currency.
S-26
<PAGE>
Any loss realized on the sale, exchange or retirement of a Foreign
Currency Note with amortizable bond premium by a United States Holder who has
not elected to amortize such premium under Section 171 of the Code will be a
capital loss to the extent of such bond premium. If such an election is made,
amortizable bond premium taken into account under the applicable rules
described above will reduce interest income in units of the relevant foreign
currency. Exchange gain or loss is realized on such amortized bond premium with
respect to any period by treating the bond premium amortized in such period as
a return of principal.
A United States Holder's tax basis in a Foreign Currency Note, and the
amount of any subsequent adjustment to such United States Holder's tax basis,
will be the U.S. dollar value of the foreign currency amount paid for such
Foreign Currency Note, or of the foreign currency amount of the adjustment,
determined on the date of such purchase or adjustment. A United States Holder
who purchases a Foreign Currency Note with previously owned foreign currency
will recognize ordinary income or loss in an amount equal to the difference, if
any, between such United States Holder's tax basis in the foreign currency and
the U.S. dollar fair market value of the Foreign Currency Note on the date of
purchase.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates will equal
the difference between (i) the U.S. dollar value of the foreign currency
principal amount (as determined pursuant to regulations under Code Section 988)
of such Note, and any payment with respect to accrued interest, determined on
the date such payment is received or such Note is disposed of, and (ii) the
U.S. dollar value of the foreign currency principal amount of such Note,
determined on the date such United States Holder acquired such Note, and the
U.S. dollar value of the accrued interest received, determined by translating
such interest at the average exchange rate for the accrual period. Such foreign
currency gain or loss will be recognized only to the extent of the total gain
or loss realized by a United States Holder on the sale, exchange or retirement
of the Foreign Currency Note. The source of such foreign currency gain or loss
will be determined by reference to the residence of the United States Holder or
the "qualified business unit" of the United States Holder on whose books the
Note is properly reflected. Any gain or loss realized by such a United States
Holder in excess of such foreign currency gain or loss will be capital gain or
loss (except, in the case of a short-term Original Issue Discount Note, to the
extent of any original issue discount not previously included in the United
States Holder's income).
A United States Holder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a Foreign Currency Note equal
to the U.S. dollar value of such foreign currency, determined at the time of
such sale, exchange or retirement. Treasury regulations issued under Section
988 of the Code provide a special rule for purchases and sales of publicly
traded Foreign Currency Notes by a cash method taxpayer under which units of
foreign currency paid or received are translated into U.S. dollars at the spot
rate on the settlement date of the purchase or sale. Accordingly, no exchange
gain or loss will result from currency fluctuations between the trade date and
the settlement of such a purchase or sale. An accrual method taxpayer may elect
the same treatment required of cash-method taxpayers with respect to the
purchase and sale of publicly traded Foreign Currency Notes provided the
election is applied consistently. Such election cannot be changed without the
consent of the Internal Revenue Service. Any gain or loss realized by a United
States Holder on a sale or other disposition of foreign currency (including its
exchange for U.S. dollars or its use to purchase Foreign Currency Notes) will
be ordinary income or loss.
CURRENCY INDEXED NOTES AND DUAL CURRENCY NOTES
The federal income tax considerations associated with an investment in
Indexed Notes and Dual Currency Notes will be set forth in the applicable
Pricing Supplement with respect to such Notes.
EXTENSION OF MATURITY AND RESET OF INTEREST RATE
While it is not free from doubt, under Treasury regulations promulgated by
the Internal Revenue Service the reset of the interest rate on, or the
extension of the maturity of, a Note pursuant to its original terms generally
should not be viewed as a taxable exchange. United States Holders should
consult with their own tax advisors as to the federal income tax consequences
of such a reset or extension.
S-27
<PAGE>
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain noncorporate United States Holders may be subject to backup
withholding at a rate of 31% on payments of principal, premium and interest
(including original issue discount, if any) on, and the proceeds of disposition
of, a Note. Backup withholding will apply only if the United States Holder (i)
fails to furnish its Taxpayer Identification Number ("TIN") which, for an
individual, would be his Social Security Number, (ii) furnishes an incorrect
TIN, (iii) is notified by the Internal Revenue Service that it has failed to
properly report payments of interest and dividends or (iv) under certain
circumstances, fails to certify, under penalties of perjury, that it has
furnished a correct TIN and has not been notified by the Internal Revenue
Service that it is subject to backup withholding for failure to report interest
and dividend payments. United States Holders should consult their tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such United States Holder's United
States federal income tax liability and may entitle such United States Holder
to a refund, provided that the required information is furnished to the
Internal Revenue Service.
TAX CONSEQUENCES TO UNITED STATES ALIEN HOLDERS
Under present United States federal tax law, and subject to the discussion
below concerning Indexed Notes and backup withholding:
(a) payments of principal, interest (including original issue discount,
if any) and premium on the Notes by the Company or any paying agent to any
United States Alien Holder will not be subject to United States federal
withholding tax, provided that, in the case of interest, (i) such United
States Alien Holder does not own, actually or constructively, 10% or more
of the total combined voting power of all classes of stock of the Company
entitled to vote, is not a controlled foreign corporation related, directly
or indirectly, to the Company through stock ownership, and is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code and (ii)
the statement requirement set forth in Section 871(h) or Section 881(c) of
the Code has been fulfilled with respect to the beneficial owner, as
discussed below;
(b) a United States Alien Holder of a Note will not be subject to United
States federal income tax on gain realized on the sale, exchange or other
disposition of such Note, unless (i) such United States Alien Holder is an
individual who is present in the United States for 183 days or more in the
taxable year of disposition, and either (a) such individual has a "tax
home" (as defined in Code Section 911(d)(3)) in the United States (unless
such gain is attributable to a fixed place of business in a foreign country
maintained by such individual and has been subject to foreign tax of at
least 10%) or (b) the gain is attributable to an office or other fixed
place of business maintained by such individual in the United States or
(ii) such gain is effectively connected with the conduct by such United
States Alien Holder of a trade or business in the United States.
(c) a Note held by an individual who is not, for United States estate tax
purposes, a resident or citizen of the United States at the time of his
death generally will not be subject to United States federal estate tax as
a result of such individual's death, provided that the individual does not
own, actually or constructively, 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote and, at the
time of such individual's death, payments with respect to such Note would
not have been effectively connected to the conduct by such individual of a
trade or business in the United States.
The rules described in subparagraphs (a) and (c) above will not apply to
contingent interest if the amount of such interest is contingent interest
described in Section 871(h)(4) of the Code (generally, interest determined with
reference to the profitability or similar indicia of financial performance of
the Company or a related person).
The certification requirement referred to in subparagraph (a) will be
fulfilled if the beneficial owner of a Note certifies on Internal Revenue
Service Form W-8, under penalties of perjury, that it is not a
S-28
<PAGE>
United States person and provides its name and address, and (i) such beneficial
owner files such Form W-8 with the withholding agent or (ii) in the case of a
Note held on behalf of the beneficial owners by a securities clearing
organization, bank or other financial institution holding customers' securities
in the ordinary course of its trade or business, such financial institution
files with the withholding agent a statement that it has received the Form W-8
from the United States Alien Holder and furnishes the withholding agent with a
copy thereof. With respect to Notes held by a foreign partnership, under
current law, the Form W-8 may be provided by the foreign partnership. However,
unless a foreign partnership has entered into a withholding agreement with the
Internal Revenue Service, for interest (including Original issue discount) and
disposition proceeds paid with respect to a Note after December 31, 1999, the
foreign partnership will be required (and may be permitted earlier), in
addition to providing an intermediary Form W-8, to attach an appropriate
certification by each partner. Prospective investors, including foreign
partnerships and their partners, should consult their tax advisers regarding
possible additional reporting requirements.
If a United States Alien Holder of a Note is engaged in a trade or
business in the United States, and if interest (including original issue
discount) on the Note (or gain realized on its sale, exchange or other
disposition) is effectively connected with the conduct of such trade or
business, the United States Alien Holder, although exempt from the withholding
tax discussed in the preceding paragraph, will generally be subject to regular
United States income tax on such effectively connected income in the same
manner as if it were a United States Holder. See "--Tax Consequences to United
States Holders" above. In lieu of the certificate described in the preceding
paragraph, such a United States Alien Holder will be required to provide to the
withholding agent a properly executed Internal Revenue Service Form 4224 (or,
by January 1, 2000, a Form W-8) to claim an exemption from withholding tax. In
addition, if such United States Alien Holder is a foreign corporation, it may
be subject to a branch profits tax equal to 30% (or such lower rate provided by
an applicable treaty) of its effectively connected earnings and profits for the
taxable year, subject to certain adjustments. For purposes of the branch
profits tax, interest (including original issue discount) on and any gain
recognized on the sale, exchange or other disposition of a Note will be
included in the effectively connected earnings and profits of such United
States Alien Holder if such interest or gain, as the case may be, is
effectively connected with the conduct by the United States Alien Holder of a
trade or business in the United States.
Under current United States federal income tax law, a 31% backup
withholding tax and information reporting requirements apply to certain
payments of principal, premium and interest (including original issue discount)
made to, and to the proceeds of sale before maturity by, certain noncorporate
United States persons. Under current Treasury regulations, backup withholding
will not apply to payments made by the Company or any paying agent thereof on a
Note if the certifications required by Sections 871(h) and 881(c) are received
and the Company or such paying agent, as the case may be, does not have actual
knowledge that the payee is a United States person.
Under current Treasury regulations, payments on the sale, exchange or
other disposition of a Note made to or through a foreign office of a broker
generally will not be subject to backup withholding. However, if such broker is
a United States person, a controlled foreign corporation for United States tax
purposes, a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period or, in the case of payments made after December 31, 1999, a foreign
partnership with certain connections to the United States, information
reporting will be required unless the broker has in its records documentary
evidence that the beneficial owner is not a United States person and certain
other conditions are met or the beneficial owner otherwise establishes an
exemption. Backup withholding may apply to any payment which such broker is
required to report if such broker has actual knowledge that the payee is a
United States person. Payments to or through the United States office of a
broker will be subject to backup withholding and information reporting unless
the United States Alien Holder certifies, under penalties of perjury, that it
is not a United States person or otherwise establishes an exemption.
United States Alien Holders of Notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and
the procedure for obtaining such an exemption, if available. Any amounts
S-29
<PAGE>
withheld from a payment to a United States Alien Holder under the backup
withholding rules will be allowed as a credit against such United States Alien
Holder's United States federal income tax liability and may entitle such United
States Alien Holder to a refund, provided that the required information is
furnished to the United States Internal Revenue Service.
THE FEDERAL INCOME TAX SUMMARY SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. PROSPECTIVE UNITED STATES HOLDERS AND UNITED STATES ALIEN HOLDERS OF
THE NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE EFFECTS OF CHANGES IN SUCH LAWS.
S-30
<PAGE>
PLAN OF DISTRIBUTION
Under the terms of the Distribution Agreement dated as of October 30, 1998
(the "Distribution Agreement"), the Notes are being offered on a continuing
basis by the Company through Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJSC" or the "Agent" and, together with any additional agents
appointed from time to time, the "Agents"), which has agreed to use its
reasonable efforts to solicit purchases of the Notes. Except as otherwise
agreed by the Company and an Agent with respect to a particular Note, the
Company will pay each Agent a commission ranging from 0.125% to 0.875% of the
principal amount of each Note, depending on its maturity, sold through such
Agent. The Company will have the sole right to accept offers to purchase Notes
and may reject any such offer, in whole or in part. Each Agent shall have the
right, in its sole discretion, to reject any offer to purchase Notes received
by it, in whole or in part, that it reasonably considers to be unacceptable.
The Company also may sell Notes to any Agent, acting as principal, at a
discount or concession to be agreed upon at the time of sale, for resale to one
or more investors or other purchasers at a fixed offering price or at varying
prices related to prevailing market prices at the time of such resale or
otherwise, as determined by such Agent and specified in the applicable Pricing
Supplement. The Agents may offer the Notes they have purchased as principal to
other dealers. The Agents may sell Notes to any dealer at a discount and,
unless otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer will not be in excess of the discount to be received by
such Agent from the Company. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical maturity, and may be resold by the Agent to investors and other
purchasers from time to time in one or more transactions, including negotiated
transactions as described above. After the initial public offering of Notes to
be resold to investors and other purchasers, the public offering price,
concession and discount may be changed.
The Notes may also be sold by the Company directly to investors (other
than broker-dealers) in those jurisdictions in which the Company is permitted
to do so. No commission will be paid on Notes sold directly by the Company.
The Company may appoint, from time to time, one or more additional agents
with respect to particular Notes or with respect to the Notes in general,
acting either as agent or principal, on substantially the same terms as those
applicable to sales of Notes to or through DLJSC pursuant to the Distribution
Agreement. Any such additional agent shall, with respect to such Notes, or with
respect to the Notes in general, if such appointment is being made in respect
of the Notes in general, be deemed to be included in all references to an
"Agent" or the "Agents" hereunder.
The Company reserves the right to withdraw, cancel or modify the offer
made hereby without notice.
Each purchaser of a Note will arrange for payment as instructed by the
applicable Agent. The Agents are required to deliver the proceeds of the Notes
to the Company in immediately available funds, to a bank designated by the
Company in accordance with the terms of the Distribution Agreement, on the date
of settlement.
An Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify the Agents against and contribute toward certain liabilities,
including liabilities under the Act. The Company has also agreed to reimburse
the Agents for certain expenses.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange in the United States, but has been advised by
DLJSC that it intends to make a market in the Notes, as permitted by applicable
laws and regulation. DLJSC is not obligated to do so, however, and may
discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
This Prospectus Supplement, together with the Prospectus, may also be used
by DLJSC in connection with offers and sales of Notes 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.
S-31
<PAGE>
In connection with the sale of the Notes, the Agents may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Agents may over-allot an offering, creating a short
position. In addition, the Agents may bid for, and purchase, Notes in the open
market to cover short positions and may make such bids and purchases to
stabilize the price of the Notes. Any of these activities may stabilize or
maintain the market price of the Notes above independent market levels. No
representation is made that the Agents will engage in such activities, or that
such activities, once commenced, will not be discontinued without notice.
If DLJSC, a wholly owned subsidiary of the Company, participates in the
distribution of Notes, the offering of the Notes will be conducted in
accordance with Section 2720 of the NASD Conduct Rules.
Concurrently with the offering of the Notes through the Agents as
described herein, the Company may issue other Securities from time to time as
described in the accompanying Prospectus. Other Securities so issued may reduce
correspondingly the maximum aggregate principal amount of Notes that may be
offered by this Prospectus Supplement and the accompanying Prospectus. See
"Description of Notes."
Certain Agents 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.
S-32
<PAGE>
PROSPECTUS
JUNE 1, 1998
$1,625,000,000
DONALDSON, LUFKIN & JENRETTE, INC.
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
Donaldson Lufkin & Jenrette, Inc. (the "Company") may from time to time
offer, together or separately, (i) senior or subordinated debt securities
("Debt Securities"), (ii) shares of its preferred stock, par value $0.01 per
share ("Preferred Stock"), (iii) shares of its common stock, par value $0.10
per share ("Common Stock"), or (iv) warrants ("Warrants"), including Warrants
to purchase Debt Securities, Preferred Stock or Common Stock. The Debt
Securities, Preferred Stock, Common Stock and Warrants 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
$1,625,000,000 (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 also set forth with regard to the particular Offered
Securities, without limitation, the following: (i) in the case of Debt
Securities, the ranking as senior or subordinated debt securities, the specific
designation, aggregate principal amount, authorized denomination, maturity,
rate (which may be fixed or variable) or method of calculation of interest and
dates for payment thereof, and any exchangeability, conversion, redemption,
prepayment or sinking fund provisions and any listing on a securities exchange,
(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 or conversion
thereof and any other specific terms of the Preferred Stock) and any listing on
a securities exchange and (iii) in the case of Warrants, the specific
designation, the number, purchase price and terms thereof, any listing of the
Warrants or related securities on a securities exchange and any other terms in
connection with the offering, sale and exercise of the Warrants, as well as the
terms of the securities that can be purchased with such Warrants. Unless
otherwise indicated in the Prospectus Supplement, the Company does not intend
to list any of the Securities on a national securities exchange.
The Common Stock is listed on the New York Stock Exchange, Inc. ("NYSE")
under the symbol "DLJ".
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 Common Stock and Series A and B Fixed Adjustable Rate
Preferred Stock are listed on the NYSE and reports and other information
concerning the Company can also be inspected at the office of the NYSE, 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,
1997, Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and
Current Report on Form 8-K filed on April 14, 1998, 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 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>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges (1) ................. 1.20 1.10 1.11 1.16 1.16 1.19
Ratio of earnings to combined
fixed charges and preferred
stock dividends (2) ......... 1.20 1.09 1.10 1.16 1.16 1.18
</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 serving 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, venture capital, correspondent
brokerage services, online interactive brokerage services, asset management and
other advisory services.
Founded in 1959, the Company initially focused on providing in-depth
investment research to institutional investors. In 1970, the Company became the
first member firm of the NYSE to be owned publicly. Fifteen years later, the
Company was purchased by The Equitable Life Assurance Society of the United
States ("Equitable Life"). Prior to the Company's initial public offering in
October 1995, the Company was an independently operated indirect wholly owned
subsidiary of The Equitable Companies Incorporated ("Equitable"). At March 1,
1998, Equitable owned 73.1% 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 March 1,
1998, approximately 59.0% of Equitable's outstanding common stock.
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; the Capital Markets Group,
consisting of the Company's Fixed Income, Institutional Equities and Equity
Derivatives Divisions and Sprout, its venture capital affiliate; and the
Financial Services Group, comprised of the Pershing Division, the Investment
Services Group and the Asset Management Group.
In 1997, the Company took steps toward achieving its goal of establishing
a strong international presence. The acquisition of the Phoenix Securities
Group ("Phoenix"), a London-based investment bank provided the opportunity to
enhance the Company's international merger and acquisition and leveraged
financing capabilities. In 1997, the Company also acquired London Global
Securities ("London Global"), a leading international securities financing
intermediary. In addition to these acquisitions, a new high-yield group was
established in London.
All business groups have planned expansion of their international
activities. An investment banking group is in the process of being established
in Paris, joining the Company's institutional equity sales operation, as well
as investment banking and foreign equity trading operations in Russia and
Germany. The Company continues to target selected areas in the emerging markets
of Eastern Europe, Latin America and Asia. The Merchant Banking Group has
expanded its international efforts, with significant investments in the United
Kingdom, Italy, France, Argentina and Brazil. By year-end 1997, the Company's
London operation employed more than 800 individuals. Total assets and total
revenues related to the Company's foreign operations approximated $8.6 billion
and $535.2 million, respectively, at December 31, 1997. The Company's foreign
operations were not significant in 1996.
The following table illustrates the Company's revenue breakdown by its
principal operating groups, net of all interest. Net revenues, however, are not
necessarily indicative of the profitability of each group. Certain
reclassifications of prior years' amounts have been made to conform to the 1997
presentation.
NET REVENUES BY OPERATING GROUP:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Banking Group .................... $ 491.8 $ 390.0 $ 689.2 $ 935.8 $ 1,311.8
Capital Markets Group ............ 1,058.2 702.3 851.9 1,086.4 1,292.5
Financial Services Group ......... 455.3 458.2 619.5 827.6 1,008.9
Other ............................ (101.7) (45.6) (82.6) (92.3) (125.9)
--------- --------- --------- --------- ----------
Total net revenues ............... $ 1,903.6 $ 1,504.9 $ 2,078.0 $ 2,757.5 $ 3,487.3
========= ========= ========= ========= ==========
</TABLE>
4
<PAGE>
The Company currently conducts its operations in 14 cities in the United
States, 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 international offices located in 11 cities,
including Bangalore, Buenos Aires, Geneva, Hong Kong, London, Lugano, Mexico
City, Moscow, Paris, Sao Paulo and Tokyo.
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 300,000,000 shares
of common stock, par value $0.10 per share, and 50,000,000 shares of preferred
stock, par value $0.01 per share. As of March 31, 1998, the Company had
116,926,356 shares (after giving effect to a stock dividend paid to holders of
record on April 27, 1998) of Common Stock, 4,000,000 shares of Series A Fixed
Adjustable Rate Preferred Stock (the "Series A Preferred Stock") and 3,500,000
shares of Series B Fixed Adjustable Rate Preferred Stock (the "Series B
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 NYSE under the symbol "DLJ."
The transfer agent for the Common Stock is First Chicago Trust Company of
New York.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes 50,000,000 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 or convertible and, if so, the securities
or rights into which such preferred stock is exchangeable or convertible, 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 pursuant to the applicable
Prospectus Supplement, 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.
6
<PAGE>
SERIES A AND SERIES B FIXED ADJUSTABLE RATE PREFERRED STOCK
General. The Series A Preferred Stock is a single series consisting of
4,000,000 shares with a liquidation preference of $50 per share. The Series B
Preferred Stock is a single series consisting of 3,500,000 shares with a
liquidation preference of $50 per share. The holders of the Preferred Stock
have no preemptive rights. The Preferred Stock is not convertible into shares
of Common Stock of the Company and is fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement, the 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
on a parity with the Series B Preferred Stock and 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 B Preferred Stock are payable quarterly at the
annual rate of 5.30% or $2.65 per share through January 15, 2003. After January
15, 2003, dividends on the Series B Preferred Stock are payable at the
Applicable Rate from time to time in effect. The Applicable Rate per annum for
each dividend period beginning January 15, 2003 will generally be equal to
0.40% 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 B Preferred Stock). 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% (without taking into account any adjustments as
described below under "Changes in the Dividends Received Percentage").
Dividends on the Preferred Stock are cumulative and rights accrue to the
holders of the Preferred Stock if the Company fails to declare one or more
dividends on such series of 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."
If, prior to July 9, 1999, one or more amendments to the Code are enacted
which reduce the Dividends Received Percentage, the amount of each dividend on
each share of the Series B 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 B
Preferred Stock, provided however, that if the Dividends Received Percentage
shall be less than 50%, then the Dividend Received Percentage shall be deemed
to equal 50%.
7
<PAGE>
Voting Rights. The holders of shares of the 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 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 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 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 applicable series of 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 such series of 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, 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, 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 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, 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 at a redemption price specified by the terms of the
Series A Preferred Stock.
Prior to January 15, 2003, the Series B Preferred Stock is not redeemable.
On or after such date, each share of Series B Preferred Stock will be
redeemable, in whole or in part, at the option of the Company, at $50 per
share, plus accrued and unpaid dividends.
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 a series
of Preferred Stock (the "Offer"), then each holder of such series 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.
Holders of the Preferred Stock have no right to require redemption of the
Preferred Stock and the 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 and ChaseMellon Shareholder Services, L.L.C. is the transfer
agent, registrar, dividend disbursing agent and redemption agent for the Series
B Preferred Stock.
The Series A Preferred Stock is listed on the New York Stock Exchange
under the symbol "DLJpfA" and the Series B Preferred Stock is listed on the New
York Stock Exchange under the symbol "DLJpfB."
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 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 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." 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 will describe the following terms of
any Debt Securities in respect of which this Prospectus is being delivered (to
the extent applicable to such Debt Securities): (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) whether the Debt Securities are convertible into Common Stock
and, if so, the terms and conditions upon which such conversion will be
effected, including the initial conversion price or conversion rate, the
conversion period and other conversion
9
<PAGE>
provisions; (xi) if other than U.S. dollars, the currency or currencies
(including composite currencies) in which such Debt Securities are denominated
or payable; (xii) whether such Debt Securities shall be issued in the form of a
Global Security or securities; (xiii) any other specific terms of such Debt
Securities; and (xiv) 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.
10
<PAGE>
So long as the Depositary or its nominee is the registered owner of a
Global Security, it will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as set forth below, owners of a beneficial
interest in such Global Security will not be entitled to have the Debt
Securities represented thereby registered in their 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, premium, if any, 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, premium, if any, 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
11
<PAGE>
applicable law, claim in respect of the Subordinated Debt Securities, including
the principal of, premium, if any, or interest on the Subordinated Debt
Securities, or to redeem (or make a deposit in redemption of), defease (other
than payments made by the Trustee pursuant to the provisions of the
Subordinated Debt Indenture described under "--Discharge, Defeasance and
Covenant Defeasance" with respect to a defeasance permitted by the Subordinated
Debt 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.
12
<PAGE>
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 Subordinated Debt 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 Subordinated Debt Indenture at any time
when the Company or any Holder shall have failed to comply with any provision
with respect to subordination in the Subordinated Debt 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 Subordinated Debt 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 Subordinated Debt 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.
13
<PAGE>
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 of
the Company or a sale, conveyance, transfer, lease or other disposition to a
Subsidiary of the Company) 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 the applicable
Indenture 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 its 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 clause (a) above. (Section 5.1)
14
<PAGE>
EVENTS OF DEFAULT
Events of Default defined in the applicable Indenture with respect to the
Debt Securities of any series are: (i) 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;
(ii) 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; (iii) 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; (iv) an involuntary case or
other proceeding shall be commenced against the Company or DLJSC (including for
purposes of clauses (iv) and (v) 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; (v) the Company or DLJSC (a)
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, (b) 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 (c) effects any general assignment for the benefit of creditors; (vi) 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 Holders; (vii) 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 Holders; or (viii) 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
(i) or (ii) 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
15
<PAGE>
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 Holders), 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 (iii)
or (viii) 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 Holders), 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 (iv) or (v) 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 (vi) or (vii) of the immediately preceding paragraph, or
in clauses (iii) or (viii) 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 Holders), 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
(iii), (vi), (vii) or (viii) 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 (iii), (vi), (vii) or (viii) 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 the applicable Indenture. (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 (i) or
(ii) of the first paragraph of "--Events of Default" 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 convert or exchange any Debt Security
which by its terms is convertible or exchangeable for another security or other
property, 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 (iii) or (vii) 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, premium, if any, 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, premium, if any, 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 convert or
exchange any Debt Security which by its terms is convertible or exchangeable
for another security or other property, 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)
19
<PAGE>
MODIFICATION OF THE INDENTURES
Each Indenture provides that the Company and the Trustee may amend or
supplement the applicable Indenture or the Debt Securities of any series
without notice to or the consent of any Holder: (i) to cure any ambiguity,
defect or inconsistency in the applicable Indenture; provided that such
amendments or supplements shall not materially and adversely affect the
interests of the Holders; (ii) to comply with Article 5 of the applicable
Indenture in connection with a consolidation or merger of the Company or the
sale, conveyance, transfer, lease or other disposal of all or substantially all
of the property and assets of the Company; (iii) to comply with any
requirements of the Commission in connection with the qualification of the
applicable Indenture under the Trust Indenture Act; (iv) to evidence and
provide for the acceptance of appointment under the applicable Indenture with
respect to the Debt Securities of any or all series by a successor Trustee; (v)
to establish the form or forms or terms of Debt Securities of any series or of
the coupons pertaining to such Debt Securities as permitted under the
applicable Indenture; (vi) to provide for uncertificated or unregistered Debt
Securities and to make all appropriate changes for such purpose; (vii) to
provide for the conversion or exchange rights, if any, of Holders in compliance
with the applicable Indenture; or (viii) 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; (iv) if applicable, make any change that adversely affects the
right to convert or exchange any Debt Security or, except as provided in the
applicable Indenture, decrease the conversion or exchange rate or increase the
conversion or exchange price of any such security; or (v) modify any of the
provisions of Section 9.2 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
20
<PAGE>
the applicable Indenture becomes effective, the Company shall give to the
Holders affected thereby a notice briefly describing the amendment, supplement
or waiver. The Company will mail supplemental indentures to Holders upon
request. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture or waiver. (Section 9.2)
GOVERNING LAW
The Indentures and the Debt Securities will be governed by the laws of the
State of New York. (Section 10.8 and Section 11.8)
CONCERNING THE TRUSTEE
The Company and its subsidiaries maintain ordinary banking and trust
relationships with Chase Manhattan Bank and its affiliates.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants"), Warrants to purchase Preferred Stock or Common
Stock ("Stock Warrants") as well as other types of Warrants. Warrants may be
issued independently or together with any Debt Securities, Preferred Stock or
Common Stock and may be attached to or separate from such Debt Securities,
Common Stock or Preferred Stock. Each series of Warrants will be issued under a
separate warrant agreement (each, a "Warrant Agreement") to be entered into
between the Company and a warrant agent ("Warrant Agent"). The following sets
forth certain general terms and provisions of the Warrants offered hereby.
Further terms of the Warrants and applicable Warrant Agreement will be set
forth in the applicable Prospectus Supplement.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the following terms of
the Debt Warrants in respect of which this Prospectus is being delivered: (i)
the title of such Debt Warrants; (ii) the aggregate number of such Debt
Warrants; (iii) the price or prices at which such Debt Warrants will be issued;
(iv) the currency or currencies (including composite currencies) in which the
price of such Debt Warrants may be payable; (v) the designation, aggregate
principal amount and terms of the Debt Securities purchasable upon exercise of
such Debt Warrants; (vi) the price at which and currency or currencies
(including composite currencies) in which the Debt Securities purchasable upon
exercise of such Debt Warrants may be purchased; (vii) the date on which the
right to exercise such Debt Warrants shall commence and the date on which such
right shall expire; (viii) if applicable, the minimum or maximum amount of such
Debt Warrants that may be exercised at any one time; (ix) if applicable, the
designation and terms of the Debt Securities, Common Stock or Preferred Stock
with which such Debt Warrants are issued and the number of such Debt Warrants
issued with each such Debt Security or share of Common Stock or Preferred
Stock; (x) if applicable, the date on and after which such Debt Warrants and
the related Debt Securities, Common Stock or Preferred Stock will be separately
transferable; (xi) information with respect to book-entry procedures, if any;
(xii) if applicable, a discussion of certain United States Federal income tax
considerations; and (xiii) any other terms of such Debt Warrants, including
terms, procedures and limitations relating to the exchange or exercise of such
Debt Warrants.
STOCK WARRANTS
The Company may issue Stock Warrants. The applicable Prospectus Supplement
will describe the following terms of any such Stock Warrants in respect of
which this Prospectus is being delivered: (i) the title of such Stock Warrants;
(ii) the aggregate number of such Stock Warrants; (iii) the price or prices at
which such Stock Warrants will be issued; (iv) the currency or currencies
(including composite currencies)
21
<PAGE>
in which the price of such Stock Warrants may be payable; (v) the securities
purchasable upon exercise of such Stock Warrants; (vi) the price at which and
the currency or currencies (including composite currencies) in which the
securities purchasable upon exercise of such Stock Warrants may be purchased;
(vii) the date on which the right to exercise such Stock Warrants shall
commence and the date on which such right shall expire; (viii) if applicable,
the minimum or maximum amount of such Stock Warrants which may be exercised at
any one time; (ix) if applicable, the designation and terms of the Debt
Securities, Common Stock or Preferred Stock with which such Stock Warrants are
issued and the number of such Stock Warrants issued with each such Debt
Security or share of Common Stock or Preferred Stock; (x) if applicable, the
date on and after which such Stock Warrants and the related Debt Securities,
Common Stock or Preferred Stock will be separately transferable; (xi)
information with respect to book-entry procedures, if any; (xii) if applicable,
a discussion of certain United States Federal income tax considerations; and
(xiii) any other terms of such Stock Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Stock Warrants.
UNIVERSAL WARRANTS
The Company may also issue other Warrants ("Universal Warrants") (i) to
purchase or sell securities of any entity unaffiliated with the Company, a
basket of such securities, an index or indices of such securities or any
combination of the foregoing, (ii) currencies or composite currencies or (iii)
commodities, on terms to be determined at the time of sale. The Company may
satisfy its obligations, if any, with respect to any Universal Warrants by
delivering the underlying securities, currencies or commodities or, in the case
of underlying securities or commodities, the cash value thereof, as set forth
in the applicable Prospectus Supplement. The applicable Prospectus Supplement
will describe the following terms of any such Universal Warrants in respect of
which this Prospectus is being delivered: (i) the title of such Universal
Warrants; (ii) the aggregate number of such Universal Warrants; (iii) the price
or prices at which such Universal Warrants will be issued; (iv) the currency or
currencies (including composite currencies) in which the price of such
Universal Warrants may be payable; (v) whether such Universal Warrants are put
Warrants or call Warrants, (vi) (a) the specific security, basket of
securities, index or indices of securities or any combination of the foregoing
and the amount thereof, (b) currencies or composite currencies or (c)
commodities (and, in each case, the amount thereof or the method for
determining the same) purchasable or saleable upon exercise of such Universal
Warrants; (vii) the purchase price at which and the currency or currencies
(including composite currencies) with which such underlying securities,
currencies or commodities may be purchased or sold upon such exercise (or the
method of determining the same); (viii) whether such exercise price may be paid
in cash, by the exchange of any other Security offered with such Universal
Warrants or both and the method of such exercise; (ix) whether the exercise of
such Universal Warrants is to be settled in cash or by the delivery of the
underlying securities or commodities or both; (x) the date on which the right
to exercise such Universal Warrants shall commence and when such right shall
expire; (xi) if applicable, the minimum or maximum number of such Universal
Warrants that may be exercised at any one time; (xii) if applicable, the
designation and terms of the Securities with which such Universal Warrants are
issued and the number of Universal Warrants issued with each such Security;
(xiii) if applicable, the date on and after which such Universal Warrants and
the related Securities will be separately transferable; (xiv) information with
respect to book-entry procedures, if any; (xv) if applicable, a discussion of
certain United States Federal income tax considerations; and (xvi) any other
terms of such Universal Warrants, including terms, procedures and limitations
relating to the exchange and exercise of such Universal Warrants.
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
22
<PAGE>
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 Rules of the National
Association of Securities Dealers, Inc.
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 Securities 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 36,398 shares of Common Stock, 8,534 restricted stock units and
options to purchase 79,544 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, 1997 and 1996 and for each of the years in the
three-year period ended December 31, 1997, 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 by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
23
<PAGE>
===============================================================================
October 30, 1998
DONALDSON, LUFKIN & JENRETTE, INC.
$500,000,000
MEDIUM-TERM NOTES DUE NINE MONTHS
OR MORE FROM DATE OF ISSUE
---------------------
PROSPECTUS SUPPLEMENT
---------------------
DONALDSON, LUFKIN & JENRETTE, INC.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you any
written information other than this prospectus or to make any oral
representations as to matters that are not stated in this prospectus. You must
not rely on unauthorized information. This prospectus is not an offer to sell
or a solicitation of your offer to buy the securities in any jurisdiction in
which that is not authorized, or in which the person making the offer or
solicitation is not permitted to do so, or to any person to whom such offer or
solicitation would be unlawful. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create any
implication that the information contained herein or the affairs of the company
have not changed since the date hereof.
- --------------------------------------------------------------------------------
