<PAGE> 1
As filed with the Securities and Exchange Commission on July 15, 1994
Registration No. 33-54265
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________________
JEFFERIES GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 6211 95-2848406
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
11100 Santa Monica Boulevard, 10th Floor
Los Angeles, California 90025
(310) 445-1199
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
_________________
Frank E. Baxter
Chief Executive Officer
11100 Santa Monica Boulevard, 10th Floor
Los Angeles, California 90025
(310) 445-1199
(Name, address, including zip code, and
telephone number, including area code,
of agent for service of process)
____________________________
with a copy to:
Michael L. Klowden, Esq.
Morgan, Lewis & Bockius
Twenty-Second Floor
801 South Grand Avenue
Los Angeles, California 90017
____________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
____________________________
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
================================================================================
<PAGE> 2
JEFFERIES GROUP, INC.
CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Item
Number Item Location in Prospectus
------ ------------------------------------------------ ------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus . . . Facing Page; Cross-Reference Sheet; Outside
Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . . . . . . . Inside Front and Outside Back Cover Pages
3. Risk Factors, Ratio of Earnings to Fixed
Charges, and Other Information . . . . . . . Prospectus Summary; Investment Considerations;
Selected Consolidated Financial Information
4. Terms of the Transaction . . . . . . . . . . . Outside Front Cover Page; Prospectus Summary;
The Exchange Offer
5. Pro Forma Financial Information . . . . . . . . Not Applicable
6. Material Contracts with the Company Being
Acquired . . . . . . . . . . . . . . . . . . Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters . . . . . . . . . . . . . Not Applicable
8. Interests of Named Experts and Counsel . . . . Experts; Legal Matters
9. Disclosure of Commission Position of
Indemnification for Securities Act Not Applicable
Liabilities . . . . . . . . . . . . . . . . .
10. Information with Respect to S-3 Registrants . . Prospectus Summary; Recent Financial Results;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business
11. Incorporation of Certain Information
by Reference . . . . . . . . . . . . . . . . Incorporation of Certain Information by Reference
</TABLE>
ii
<PAGE> 3
Subject to Completion, dated July 15, 1994
PROSPECTUS
JEFFERIES GROUP, INC.
OFFER TO EXCHANGE ITS
8 7/8% SERIES B SENIOR NOTES
DUE 2004
[LOGO] FOR
ANY AND ALL OF ITS OUTSTANDING
8 7/8% SENIOR NOTES
DUE 2004
_____________________________________________
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON AUGUST 18, 1994, UNLESS EXTENDED
_____________________________________________
Jefferies Group, Inc., a Delaware corporation (the "Company"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to an aggregate $50,000,000 principal amount of its
8 7/8% Series B Senior Notes due 2004 (the "New Notes") for an equal principal
amount of its issued and outstanding 8 7/8% Senior Notes due 2004 (the "Old
Notes"). The Old Notes and the New Notes are collectively referred to herein
as the "Notes."
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement,
dated April 28, 1994, between the Company and purchasers of the Old Notes (the
"Registration Rights Agreement"). Based on interpretations by the staff of the
Securities and Exchange Commission (the "Commission"), New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any Holder thereof (other than any
such Holder which is (i) an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act of 1933, as amended (the "Securities Act") or
(ii) a Broker-Dealer, except as provided below), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such Holder's
business and such Holder has no arrangement with any person to participate in
the distribution of such New Notes. Notwithstanding the foregoing, each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with any resale of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The
Company has agreed that, for a period of 90 days after the Expiration Date (as
defined herein), it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all the expenses incident to the Exchange Offer (which shall not
include the expenses of any Holder in connection with resales of the New
Notes). Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. In the event the Company terminates
the Exchange Offer and does not accept for exchange any Old Notes, the Company
will promptly return the Old Notes to the Holders thereof. See "The Exchange
Offer."
Prior to this Exchange Offer, there has been no public market for the Notes.
If a market for the New Notes should develop, the New Notes could trade at a
discount from their principal amount. The Company does not currently intend to
list the New Notes on any securities exchange or to seek approval for quotation
through any automated quotation system. Accordingly, there can be no assurance
as to the development or liquidity of any public market for the New Notes.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
___________, 1994
<PAGE> 4
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE> 5
ADDITIONAL 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 and information statements and other information
with the Commission. Such reports, proxy and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as at the following
Regional Offices, Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp 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 Judiciary Plaza, 450
Fifth Street, N.W. Washington, D.C. 20549.
The Company intends, and is required by the terms of the indenture, dated as of
April 28, 1994 (the "Indenture"), by and between the Company and The Bank of New
York, as trustee (the "Trustee"), to furnish Holders of the Notes with annual
reports containing consolidated financial statements audited by its independent
auditors and with quarterly reports containing unaudited condensed consolidated
financial information for each of the first three quarters of each fiscal year.
This Prospectus is part of a Registration Statement on Form S-4 (together with
all amendments and exhibits thereto, the "Registration Statement") which the
Company has filed with the Commission under the Securities Act, relating to the
New Notes offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
JEFFERIES GROUP, INC., 11100 SANTA MONICA BOULEVARD, 12TH FLOOR, LOS ANGELES,
CALIFORNIA 90025, ATTENTION: JERRY GLUCK (TELEPHONE: (310) 914-1300). IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
THE DATE FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference and made a part hereof: (i) the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993; and (ii) the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 25, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering described herein shall be deemed to be
incorporated by reference in this Prospectus from the respective dates those
documents are filed. 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 statement so modified or superseded shall not 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 has been delivered, on the 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 in this Prospectus by reference, other than exhibits to such
documents.
2
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed information
and financial statements (including notes thereto) appearing elsewhere, and
incorporated by reference, in this Prospectus. The term "Company" refers,
unless the context requires otherwise, to Jefferies Group, Inc., its
subsidiaries, predecessor entities and W & D Securities, Inc.
THE COMPANY
Jefferies Group, Inc. is a holding company which, through its four primary
subsidiaries, Jefferies & Company, Inc. ("JEFCO"), Investment Technology Group,
Inc. ("ITG Holding"), Jefferies International Limited ("JIL") and Jefferies
Pacific Limited ("JPL"), is engaged in securities brokerage and trading,
corporate finance and other financial services. Total revenues and net
earnings of the Company for fiscal 1993 were a record $318.1 million and
$28.9 million, respectively, representing a 35.1% and 54.5% increase from
fiscal 1992.
The Company's principal subsidiary, JEFCO, was founded in 1962 and is
engaged in equity, convertible debt and taxable fixed income securities
brokerage and trading and corporate finance. JEFCO is one of the leading
national firms engaged in the distribution and trading of blocks of equity
securities and conducts such activities primarily in the "third market." The
term "third market" refers to transactions in listed equity securities effected
away from national securities exchanges.
ITG Holding is a publicly traded corporation of which the Company owns 80.2% of
the outstanding shares of common stock. ITG Holding, through its wholly owned
broker-dealer subsidiary ITG Inc. ("ITG"), is a leading provider of automated
securities trade execution and analysis services to institutional equity
investors. ITG's two principal services are POSIT((R)), the largest automated
stock crossing system operated during trading hours, and QuantEX((R)), a
proprietary decision support system with integrated trade analysis, routing and
management capabilities. POSIT((R)), which is accessed through direct computer
links or by communicating with ITG's trading desk, allows customers to place
confidential buy and sell orders on equity securities and portfolios of equity
securities. POSIT((R)) analyzes these buy and sell orders and determines the
maximum number of securities which may be matched or "crossed" among
participants. After determining the optimal cross, POSIT((R)) executes trades
at the midpoint of the primary market best bid and offer for each security at
the time of the cross.
QuantEX((R)) is a proprietary trade execution and analysis system that provides
valuable support to investment managers in the development and implementation
of portfolio trading strategies and allows equity traders to organize, process
and manage large trading lists. Through its direct routing capabilities,
QuantEX((R)) also allows investment managers and equity traders to route orders
to POSIT((R)), major national and regional stock exchanges, over-the-counter
("OTC") market makers, ITG's trading desk or selected broker-dealers, including
JEFCO.
JIL, a broker-dealer subsidiary of the Company, was incorporated in 1986 in
England. JIL is a member of The International Stock Exchange and The
Securities and Futures Authority. JIL introduces customers trading in U.S.
securities to JEFCO and also trades as a broker-dealer in international equity
and convertible securities and American Depositary Receipts ("ADRs") .
JPL, also a broker-dealer subsidiary of the Company, was incorporated in 1992
in Hong Kong. JPL presently introduces foreign customers trading in U.S.
securities to JEFCO.
The Company's Common Stock trades in the NASDAQ National Market System under
the symbol JEFG. On July 14, 1994, the Company's stock price was $34.00 per
share.
The Company and its various subsidiaries maintain offices in Los Angeles, New
York, Short Hills, Chicago, Dallas, Boston, Atlanta, New Orleans, Houston, San
Francisco, Stamford, London and Hong Kong. The Company's executive offices are
located at 11100 Santa Monica Boulevard, 11th Floor, Los Angeles, California
90025, and its telephone number is (310) 445-1199.
3
<PAGE> 7
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
Termination of Certain Rights: The Old Notes were sold by the Company on
April 28, 1994, pursuant to the purchase
agreements, dated April 28, 1994 (the
"Purchase Agreement"), by and between the
Company and each of the purchasers of the Old
Notes (the "Purchasers"). Each of the
Purchasers is an accredited investor, as
defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act.
Pursuant to the Purchase Agreement, the
Company and the Purchasers entered into the
Registration Rights Agreement, which grants
the Holders of the Old Notes certain
registration rights. See "The Exchange Offer
-- Termination of Certain Rights." The
Exchange Offer is intended to satisfy such
rights which terminate upon the consummation
of the Exchange Offer. The Holders of the
Old Notes not accepted for exchange in the
Exchange Offer will no longer have the
benefits of registration rights, and the
Holders of the New Notes will not be entitled
to registration rights with respect to the
New Notes.
The Exchange Offer: The Company is offering to exchange $1,000
principal amount of its New Notes for each
$1,000 principal amount of its outstanding
Old Notes that are properly tendered and
accepted. As of the date of this Prospectus,
$50,000,000 in aggregate principal amount of
Old Notes were outstanding, which is the
maximum aggregate amount authorized by the
Indenture for all Notes. As of the date of
this Prospectus, there were two registered
Holders of Old Notes. Only a registered
Holder of Old Notes (or such Holder's legal
representative or attorney-in-fact) as
reflected on the records of the Trustee under
the Indenture (each an "Eligible Holder") may
participate in the Exchange Offer. See "The
Exchange Offer -- Terms of the Exchange
Offer."
Expiration Date: The Exchange Offer will expire at 5:00 p.m.,
New York City time, on August 18, 1994,
or, at the Company's option, such earlier
date upon which 100% of the Old Notes have
been validly tendered pursuant to the
Exchange Offer and not withdrawn, unless the
Company, in its sole discretion, extends the
Exchange Offer (the "Expiration Date"). See
"The Exchange Offer - Terms of the Exchange
Offer; Expiration Date; Extensions;
Amendments."
Accrued Interest
on the New
Notes and Old Notes: The New Notes will bear interest from their
respective issuance dates at the same rate and
upon the same terms as the Old Notes.
Eligible Holders whose Old Notes are accepted
for exchange will be entitled to receive
accrued but unpaid interest thereon to, but
not including, the issuance date of the New
Notes and will be deemed to have waived the
right to receive any payment in respect of
interest on the Old Notes accrued from and
after the date of issuance of the New Notes.
Such accrued but unpaid interest on the Old
Notes will be payable with the first interest
payment on the New Notes to the registered
Holder of the New Notes.
Certain Conditions of
the Exchange Offer: The Exchange Offer is subject to certain
customary conditions, including (i) no
commencement of any action, legal or
governmental, with respect to the Exchange
Offer or which the Company reasonably
determines would make it inadvisable to
proceed with the Exchange Offer, (ii) no
banking moratorium or similar event or
international calamity involving the United
States, (iii) no change in the business or
prospects of the Company that may have a
material adverse effect on the Company and
(iv) the Exchange Offer not violating any
applicable law. The Company expects that the
foregoing conditions will be satisfied. All
such conditions may be waived by the Company.
Holders of Old Notes may have certain rights
and remedies against the Company under the
Registration Rights Agreement should the
Company fail to consummate the Exchange
Offer. See "The Exchange Offer - Certain
Conditions of the Exchange Offer."
4
<PAGE> 8
Procedures for
Tendering Old Notes: Each Eligible Holder desiring to accept the
Exchange Offer must transmit a properly
completed and duly executed Letter of
Transmittal, including all other documents
required by the Letter of Transmittal, with
the signatures thereon guaranteed if required
by the instructions to the Letter of
Transmittal, to the Exchange Agent (as
defined below) at the address set forth in
the Letter of Transmittal on or prior to 5:00
p.m., New York City time on the Expiration
Date. In addition, prior to 5:00 p.m., New
York City time, on the Expiration Date,
either (i) certificates for such Old Notes
must be received by the Exchange Agent,
together with the Letter of Transmittal;
(ii) confirmation of a book-entry transfer
(a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into
the Exchange Agent's account at The
Depository Trust Company (the "Depository")
pursuant to the book-entry transfer
procedures set forth in "The Exchange
Offer -- Book-Entry Transfer," must be
received by the Exchange Agent; or (iii)
the Holder must comply with the guaranteed
delivery procedures described below. Any
beneficial owner of Old Notes ("Beneficial
Owner") whose Old Notes are registered
in the name of a nominee, such as
a broker, dealer, commercial bank, or trust
company, and who wishes to tender Old Notes
in the Exchange Offer, should contact such
nominee promptly and instruct it to tender on
such Beneficial Owner's behalf.
Guaranteed Delivery
Procedures: If an Eligible Holder wishes to tender its
Old Notes and either (i) such Old Notes are
not immediately available, (ii) time will
not permit such Old Notes or other required
documents to reach the Exchange Agent on or
prior to the Expiration Date, or (iii) the
procedure for book-entry transfer cannot be
completed on or prior to the Expiration Date,
tenders may be effected pursuant to the
guaranteed delivery procedures set forth in
"The Exchange Offer - Guaranteed Delivery
Procedures."
Withdrawal of
Tenders: Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on the Expiration Date. See "The Exchange
Offer - Withdrawal Rights."
Acceptance of Old
Notes and Delivery
of New Notes: Subject to the satisfaction or waiver of all
conditions of the Exchange Offer, the Company
will accept for exchange any and all Old
Note which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer
will be delivered in exchange for the
applicable Old Notes accepted in the
Exchange Offer promptly following the
Expiration Date. See "The Exchange Offer -
Acceptance of Old Notes in
Exchange; Delivery of New Notes."
Certain Federal
Income Tax
Consequences: For a discussion of certain federal income
tax consequences of the exchange of the Old
Notes, see "Certain Federal Income Tax
Consequences."
Exchange Agent: The Bank of New York is the Exchange Agent
(the "Exchange Agent"). The address and
telephone number of the Exchange Agent are
set forth in "The Exchange Offer - Exchange
Agent."
5
<PAGE> 9
SUMMARY DESCRIPTION OF NOTES
The terms of the Old Notes and the New Notes are identical in all
material respects, except for certain transfer and registration rights relating
to the Old Notes.
Securities Offered . . . . . . . . Up to $50,000,000 aggregate principal
amount of New Notes, less the
principal amount of Old Notes not
exchanged. See "Description of the
Notes."
Issuer . . . . . . . . . . . . . . The Company
Maturity . . . . . . . . . . . . . May 1, 2004.
Interest Payment Dates . . . . . . May 1 and November 1, commencing
November 1, 1994.
Optional Redemption . . . . . . . . The New Notes are not redeemable
prior to May 1, 1999. On or after
May 1, 1999, the New Notes are
redeemable at the option of the
Company, in whole or in part, at the
redemption prices set forth herein
plus accrued interest to the date of
redemption.
Mandatory Redemption . . . . . . . None.
Ranking . . . . . . . . . . . . . . The New Notes are senior unsecured
obligations of the Company. The New
Notes are senior in right of payment
to all existing and future
subordinated indebtedness of the
Company and rank pari passu in right
of payment with all existing and
future senior indebtedness of the
Company.
Change of Control . . . . . . . . . In the event that a Change of Control
(as defined in the Indenture) has
occurred, each Holder of New Notes
will have the right, at such Holder's
option, to require the Company to
repurchase all or any part of such
Holder's New Notes at a cash price
equal to 101% of the principal amount
thereof, plus accrued and unpaid
interest, if any.
Covenants . . . . . . . . . . . . . The Indenture under which the New
Notes will be issued will limit,
among other things, (i) the
incurrence of additional Long-Term
Indebtedness (as defined in the
Indenture), (ii) consolidations,
mergers or transfers of assets as an
entirety or substantially as an
entirety, (iii) transactions with
affiliates, and (iv) certain liens on
Voting Stock (as defined in the
Indenture) of Material Subsidiaries
(as defined in the Indenture).
Events of Default will include, among
other things, (i) the failure to
maintain a minimum Consolidated Net
Worth (as defined in the Indenture)
greater than or equal to $87 million
for a period of 180 consecutive days
and (ii) the failure of JEFCO to
maintain Net Capital greater than or
equal to the Minimum Net Capital
Amount (as defined in the Indenture)
for a period of 30 consecutive days.
See "Description of the Notes."
6
<PAGE> 10
INVESTMENT CONSIDERATIONS
In addition to the other information contained in this Prospectus, the
following factors should be carefully considered by Holders prior to tendering
their Old Notes in the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant
to the Exchange Offer will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the legend thereon as a consequence
of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register the Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission, New Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
or otherwise transferred by any Holder thereof (other than any such Holder
which is either (i) an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act, or (ii) a broker-dealer, except as provided
below), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes were acquired in
the ordinary course of such Holder's business and such Holder had no
arrangement with any person to participate in the distribution of such New
Notes. Notwithstanding the foregoing, each broker-dealer that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with any resale of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The
Company has agreed that, for a period of 90 days from the Expiration Date, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution." However, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or resold by any Holder unless they have been registered or
qualified for sale in such jurisdictions or an exemption from registration or
qualification is available and the requirements of such exemption have been
satisfied. The Company does not currently intend to register or qualify the
resale of the New Notes in any such jurisdictions.
ABSENCE OF PUBLIC MARKET
The Old Notes are eligible for trading in the Private Offerings, Resale and
Trading through Automated Linkages (PORTAL) market. The New Notes will be new
securities for which there currently is no market. Accordingly, there can be
no assurance as to the development or liquidity of any market for the Notes.
The Company does not intend to apply for listing of the Notes on any securities
exchange or for quotation through the National Association of Securities
Dealers Automated Quotation System. If an active market for the Notes fails to
develop or be sustained, the trading price of such Notes could be adversely
affected.
7
<PAGE> 11
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
at March 25, 1994:
<TABLE>
<CAPTION>
At March 25, 1994
----------------------------------------------------
Actual As Adjusted(1)
----------------------------------------------------
Amount % Amount %
----------- ------------- --------- ------------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Long-Term Debt:
Senior Notes due 2004 . . . $ -- 0.0% $ 50.0 23.7%
Subordinated Debt . . . . . 10.0 6.2 10.0 4.7
------ ----- ------ -----
Total Long-Term Debt. . . 10.0 6.2 60.0 28.4
Total Stockholders' Equity. . 151.2 93.8 151.2 71.6
------ ----- ------ -----
Total Capitalization. . . $161.2 100.0% $211.2 100.0%
====== ===== ====== =====
</TABLE>
------------------
(1) Adjusted to give effect to the issuance of the Notes.
8
<PAGE> 12
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected historical financial information of the Company and
consolidated subsidiaries should be read in conjunction with the Company's
Consolidated Financial Statements for the three years ended December 31, 1993,
which are included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, which report is incorporated by reference herein,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein and in such report.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------------
1993 1992 1991 1990 1989
---------------------------------------------------------------------------------
EARNINGS STATEMENT DATA (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Revenues: $ % $ % $ % $ % $ %
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commissions . . . . . . . $ 138.1 43.4% $106.8 45.4% $ 84.3 43.0% $ 82.1 48.9% $ 87.1 66.7%
Principal transactions. . 83.4 26.2 86.4 36.7 70.0 35.7 43.4 25.8 20.3 15.5
Corporate finance . . . . 72.4 22.8 23.9 10.1 16.8 8.6 8.9 5.3 1.9 1.5
Interest . . . . . . . . 21.7 6.8 16.8 7.1 23.9 12.2 33.0 19.6 20.9 16.0
Other . . . . . . . . . . 2.5 0.8 1.6 0.7 1.0 0.5 0.7 0.4 0.4 0.3
-------- ----- ------ ----- ------ ----- ------ ----- ------ -----
Total Revenues 318.1 100.0% 235.5 100.0% 196.0 100.0% 168.1 100.0% 130.6 100.0%
-------- ----- ------ ----- ------ ----- ------ ----- ------ -----
Expenses:
Compensation and benefits 167.5 52.6% 118.3 50.2% 92.3 47.1% 75.4 44.9% 59.8 45.7%
Floor brokerage and
clearing fees . . . . . 15.9 5.0 13.8 5.9 11.6 5.9 12.2 7.2 12.9 9.9
Telecommunications and
data processing
services. . . . . . . . 19.0 6.0 17.1 7.3 16.0 8.2 13.8 8.2 12.1 9.3
Interest . . . . . . . . 17.5 5.5 13.3 5.6 15.9 8.1 23.8 14.2 12.7 9.7
Occupancy and equipment
rental . . . . . . . . 12.8 4.0 12.1 5.1 12.8 6.5 7.8 4.6 6.6 5.1
Other . . . . . . . . . . 38.1 12.0 27.3 11.6 29.5 15.1 22.9 13.6 19.6 15.0
-------- ----- ------ ----- ------ ----- ----- ----- ------ -----
Total expenses . . . 270.8 85.1 201.9 85.7 178.1 90.9 155.9 92.7 123.7 94.7
-------- ----- ------ ----- ------ ----- ----- ----- ------ -----
Earnings before income
taxes and cumulative
effect of change in
accounting principle 47.3 14.9 33.6 14.3 17.9 9.1 12.2 7.3 6.9 5.3
Income taxes . . . . . . 19.8 6.2 14.9 6.3 8.0 4.1 5.5 3.3 3.2 2.5
-------- ----- ------ ----- ------ ----- ----- ----- ------ -----
Earnings before
cumulative effect of
change in accounting
principle . . . . . . 27.5 8.7 18.7 8.0 9.9 5.0 6.7 4.0 3.7 2.8
Cumulative effect on prior
years of change on
accounting principle . . 1.4 .4 -- -- -- -- -- -- -- --
Net earnings . . . . $ 28.9 9.1% $ 18.7 8.0% $ 9.9 5.0% $ 6.7 4.0% $ 3.7 2.8%
======== ===== ====== ===== ====== ===== ===== ===== ====== ====
Earnings per share of
common stock:
Primary earnings per
share -
Earnings before
cumulative effect
of change in
accounting
principle . . . . . . $ 5.37 $ 3.82 $ 1.74 $ 1.11 $ 0.58
Cumulative effect
on prior years of
change in accounting
principle . . . . . . .26 -- -- -- --
-------- ------ ------ ------ ------
Net Earnings . . $ 5.63 $ 3.82 $ 1.74 $ 1.11 $ 0.58
======== ====== ====== ====== ======
Fully diluted:
Earnings before
cumulative
effect of change in
accounting
principle . . . . . . $ 4.66 $ 3.08 $ 1.57 $ 1.10 $ 0.58
Cumulative effect
on prior years of
change in accounting
principle . . . . . . .22 -- -- -- --
-------- ------ ------ ------ ------
Net Earnings . . $ 4.88 $ 3.08 $ 1.57 $ 1.10 $ 0.58
======== ====== ====== ====== ======
SELECTED BALANCE SHEET
DATA
Total assets . . . . . . 1,388.4 531.0 $529.0 $602.2 $343.4
Subordinated debt . . . . 10.0 41.0 40.4 40.3 40.1
Total stockholders' equity 144.6 96.6 78.1 86.4 80.9
Book value per common
share . . . . . . . . . $ 25.38 $20.84 $17.05 $ 14.53 $ 13.27
INTEREST COVERAGE
Ratio of Earnings
to Fixed Charges(1) . . 3.2 2.9 1.9 1.5 1.5
</TABLE>
- ------------------------
(1) Earnings used in computing the Ratio of Earnings to Fixed
Charges consist of earnings before income taxes plus fixed
charges. Fixed Charges consist of interest expense (including
amortization of deferred debt discount and financing costs) and
the portion of rental expense that is representative of the
interest factor.
9
<PAGE> 13
RECENT FINANCIAL RESULTS
The following selected financial information of the Company and consolidated
subsidiaries for the first quarter ended March 25, 1994, compared to the first
quarter ended March 26, 1993, should be read in conjunction with the Company's
Unaudited Consolidated Financial Statements, which are included in the
Company's Quarterly Report on Form 10-Q for the quarterly period ended March
25, 1994, which report is incorporated by reference herein, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included herein and in such report.
<TABLE>
<CAPTION>
EARNINGS STATEMENT DATA FOR THE
THREE MONTHS ENDED
-----------------------------
MARCH 25, MARCH 26,
1994 1993
---------- ---------
(Dollars in Millions,
Except Per Share Amounts)
<S> <C> <C>
REVENUES:
Commission . . . . . . . . . . . . . . . . . . . . . . . . . $ 39.7 $ 31.2
Principal transactions . . . . . . . . . . . . . . . . . . . 17.7 25.6
Corporate finance . . . . . . . . . . . . . . . . . . . . . 8.9 7.7
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3 3.5
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 .4
------ -------
Total Revenues . . . . . . . . . . . . . . . . . . . 75.7 68.4
Interest expense . . . . . . . . . . . . . . . . . . . . . . 6.5 2.9
------ -------
Revenues, net of interest expense . . . . . . . . . . . . . 69.2 65.5
------ -------
Non-interest expenses:
Compensation and benefits . . . . . . . . . . . . . . . . . 36.6 36.6
Floor brokerage and clearing fees . . . . . . . . . . . . . 4.4 3.6
Telecommunications and data processing services . . . . . . 4.5 4.1
Occupancy and equipment rental . . . . . . . . . . . . . . . 3.4 3.1
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1 6.8
------ -------
Total non-interest expenses . . . . . . . . . . . . 59.0 54.2
------ -------
Earnings before income taxes and cumulative effect of
change in accounting principle . . . . . . . . . . . 10.2 11.3
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . 4.4 4.1
------ -------
Earnings before cumulative effect of change
in accounting principle . . . . . . . . . . . . . . 5.8 7.2
Cumulative effect on prior years of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . -- 1.4
------- -------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $ 5.8 $ 8.6
======= =======
Earnings per share of common stock:
Primary earnings per share -
Earnings before cumulative effect of change
in accounting principle . . . . . . . . . . $ .95 $ 1.46
Cumulative effect on prior years of change
in accounting principle . . . . . . . . . . -- .27
------- -------
Net earnings . . . . . . . . . . . . . . . $ .95 $ 1.73
======= =======
Fully diluted earnings per share -
Earnings before cumulative effect of change
in accounting principle . . . . . . . . . . $ .95 $ 1.20
Cumulative effect on prior years of change
in accounting principle . . . . . . . . . . -- .21
------- -------
Net earnings . . . . . . . . . . . . . . . $ .95 $ 1.41
======= =======
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
EARNINGS STATEMENT DATA FOR THE
THREE MONTHS ENDED
---------------------------
MARCH 25, MARCH 26,
1994 1993
---------- ---------
(Dollars in Millions,
Except Per Share Amounts)
<S> <C> <C>
Weighted average shares of common stock:
Primary . . . . . . . . . . . . . . . . 6,051,000 4,971,000
Fully diluted . . . . . . . . . . . . . 6,075,000 6,367,000
SELECTED BALANCE SHEET DATA
Total Assets . . . . . . . . . . . . . . $ 1,440.6 $ 663.1
Subordinated Debt . . . . . . . . . . . 10.0 41.0
Total Stockholders' Equity . . . . . . . 151.2 104.6
Book Value per Common Share . . . . . . $ 26.33 $ 22.63
INTEREST COVERAGE
Ratio of Earnings to Fixed Charges 2.3 3.9
</TABLE>
11
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's principal activities, securities brokerage and the trading of and
market-making in securities, are highly competitive and extremely volatile.
Total assets increased $857.4 million from $531.0 million at December 31, 1992,
to $1,388.4 million at December 31, 1993. The increase is mostly due to an
increase in receivables from brokers and dealers related to stock borrow
balances. The increased stock borrow balances are a result of an increase in
payable to customers and payable to brokers and dealers (related to stock
loan).
Total liabilities increased $840.4 million from $393.5 million at December 31,
1992, to $1,233.9 million at December 31, 1993. The increase is mostly due to
the before-mentioned increases in payable to customers and payable to brokers
and dealers. In addition, accrued expenses and other liabilities increased
$45.9 million to $92.8 million in 1993 due to bonuses, accruals related to
deferred compensation and accrued federal and state taxes.
The earnings of the Company are subject to wide fluctuations since many factors
over which the Company has little or no control, particularly the overall
volume of trading and the volatility and general level of market prices, may
significantly affect its operations. The following provides a summary of
revenues by source for the past three years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1993 1992 1991
---------------------------------------------------------------------
% OF TOTAL % OF TOTAL % OF TOTAL
AMOUNT REVENUES AMOUNT REVENUES AMOUNT REVENUES
---------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commissions and principal
transactions:
Equity Division:
Listed $ 71,888 22% $ 63,776 27% $ 58,571 30%
Over-The-Counter 41,477 13 34,125 15 23,579 12
International 8,613 3 7,934 3 8,056 4
Other 2,313 1 2,320 1 2,098 1
-------- --- -------- --- -------- ---
Sub-total 124,291 39 108,155 46 92,304 47
-------- --- -------- --- -------- ---
Investment Technology 47,450 15 28,763 12 14,255 7
Convertible 6,995 2 6,695 3 5,242 3
International Convertible 15,154 4 14,575 6 7,367 4
Taxable Fixed Income 24,928 8 33,445 14 32,107 16
Arbitrage 3,182 1 1,502 1 4,209 2
Other Trading (506) 0 (15) 0 (1,173) 0
-------- --- -------- --- -------- ---
Total 221,494 69 193,120 82 154,311 79
-------- --- -------- --- -------- ---
Corporate Finance 72,442 23 23,888 10 16,745 9
Interest 21,693 7 16,801 7 23,939 12
Other 2,512 1 1,632 1 955 0
-------- --- -------- --- -------- ---
Total revenues $318,141 100% $235,441 100% $195,950 100%
======== === ======== === ======== ===
</TABLE>
FIRST QUARTER 1994 VERSUS FIRST QUARTER 1993
Revenues, net of interest expense, increased $3.7 million, or 6%, in the first
quarter of 1994 compared to the same prior year period. The increase was due
primarily to an $8.4 million, or 27%, increase in commissions, a $1.2 million,
or 16%, increase in corporate finance, a $1.2 million increase in net interest
income (interest revenues less interest expense) and a $789,000 increase in
other revenues. These increases were partially offset by a $7.9 million, or
31%, decrease in principal transactions. Commission revenues increased mostly
due to higher commission revenues in the Equity Division and the Investment
Technology Group. Corporate finance
12
<PAGE> 16
revenues increased due to an increase in underwriting fees. Net interest
income increased as the $4.8 million increase in interest revenues exceeded the
$3.6 million increase in interest expense. Interest revenues increased due to
interest on higher stock borrow and customer margin balances. The related
increases in interest on stock loan and customer short balances only partially
offset the higher interest revenues. Partially offsetting the increase in
interest expense was the elimination of interest on the Company's convertible
debt securities, which were converted into shares of the Company's Common Stock
in late 1993. Other revenues increased due mostly to foreign currency
transaction gains. Revenues from principal transactions declined primarily due
to decreased Taxable Fixed Income Division trading revenues.
Total non-interest expenses increased $4.8 million, or 9%, in the first quarter
of 1994 compared to the same prior year period. Other expenses increased $3.3
million, or 48%, primarily due to higher trade volume and business expansion
and includes increased expenses in soft dollar, marketing, research, software
royalties, reserves and corporate finance finder fees. Floor brokerage and
clearing fees increased $773,000, or 21%, due to increased volumes of business
executed on the various exchanges. Telecommunications and data processing
services increased $413,000, or 10%, due to higher trade volume and business
expansion. Occupancy and equipment rental increased $305,000, or 10%, due to
business expansion. Compensation and benefits remained relatively unchanged
from last year. An increase in commissions paid and salaries was offset by a
decrease in profitability based compensation.
As a result of the above, earnings before income taxes and cumulative effect of
change in accounting principle were down $1.0 million, or 9%.
Earnings before cumulative effect of change in accounting principle were down
20% to $5.8 million, as compared to $7.3 million in the 1993 period. The
effective tax rate was approximately 43% in the first quarter of 1994 compared
to approximately 36% in the 1993 period. The 1993 quarter included a $1.1
million adjustment of prior years' estimated tax liabilities to actual which
resulted in a lower tax rate for 1993.
The cumulative effect of the change in accounting for income taxes required by
Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for
Income Taxes" ("SFAS 109") was a $1.4 million benefit in 1993. This increased
1993's net earnings to $8.6 million.
Primary earnings per share were $.95 in the first quarter of 1994 on 6,051,000
shares compared to $1.73 in the 1993 period on 4,971,000 shares. Primary
shares increased largely due to the conversion, late in 1993, of $29,731,000
aggregate principal amount of 8 1/2% Convertible Subordinated Debentures and
$1,690,000 aggregate principal amount of 7% Convertible Subordinated Notes into
an aggregate of 1,366,092 shares of the Company's Common Stock. Fully diluted
earnings per share were $.95 in the first quarter of 1994 on 6,075,000 shares
compared to $1.41 in the 1993 period on 6,367,000 shares. The cumulative
effect of the change in accounting principle increased 1993's earnings per
share for the first quarter by $.27 on primary shares and $.21 on fully diluted
shares.
1993 COMPARED TO 1992
Total revenues for 1993 increased $82.7 million, or 35%, as compared to 1992.
The increase was primarily due to a $48.6 million, or 203%, increase in
corporate finance activity and a $18.7 million, or 65%, increase in ITG
activity. Commission revenues increased $31.4 million, or 29%, interest
revenues increased $4.9 million, or 29%, and other revenues increased $880,000,
or 54%, while principal transactions decreased $3.0 million, or 3%. The
increase in corporate finance was due to increased activity in underwriting,
private placement and financial advisory fees, including approximately $16
million in fees from one underwriting transaction. The increase in commissions
was mostly attributable to increases in transactions conducted through
POSIT((R)) and QuantEX((R)), two of the Company's investment technology
products. Interest revenues increased primarily due to an increase in stock
borrow balances. The increase in other revenues was mostly due to income
related to the termination of an office lease and foreign currency transaction
gains. Principal trading decreased mostly due to a reduction in trading gains
of the Taxable Fixed Income Division partially offset by the improved
performance of the Company's Over-The-Counter Division.
Total expenses for 1993 increased $69.0 million, or 34%, as compared to 1992.
The increase in total expenses was due to an increase of $49.3 million, or 42%,
in compensation and benefits, an increase of $10.8 million, or 40%, in other
expense, an increase of $4.2 million, or 32%, in interest expense, an increase
of $2.1 million, or 15%, in floor brokerage and clearing fees, and an increase
of $2.0 million, or 12%, in telecommunications and data processing services.
Compensation and benefits increased mostly due to an increase in
profitability-based compensation (including a $4 million increase in expense
related to ITG's performance share plan). Other expense increased mostly due
to increases in four items; travel and entertainment expenses, soft dollar
expenses, research and consulting and royalties related to POSIT((R)) revenues.
These four items not only represent the majority of the increase from 1992 to
1993, but these items also represent the majority of other expense. Interest
expense increased due to increases in
13
<PAGE> 17
customer credit balances and stock loan balances related to the increase in
stock borrow balances. Floor brokerage and clearing fees increased due to
increased volumes of business executed on the various exchanges.
Telecommunications and data processing services increased due to an increase in
the number of offices. Occupancy and equipment rental expenses remained
relatively unchanged as compared to the 1992 period.
As a result of the above, earnings before income taxes and cumulative effect of
change in accounting principle increased from $33.7 million in 1992 to $47.3
million in 1993. The $13.7 million increase was chiefly due to the increase in
revenues from corporate finance activity and investment technology commissions.
Earnings before cumulative effect of change in accounting principle were up 47%
to $27.6 million, as compared to $18.7 million in the 1992 period. The
effective tax rate was approximately 42% for 1993 compared to 44% for the 1992
period. An adjustment of prior years' estimated tax liabilities, to actual,
resulted in the lower tax rate for the 1993 period.
The cumulative effect of the change in accounting for income taxes required by
SFAS 109, was a $1.4 million benefit. This increased net earnings to $28.9
million, which represents an increase of $10.2 million, or 55%, over the 1993
period.
Primary earnings per share were $5.63 on 5.1 million shares in 1993 compared to
$3.82 on 4.9 million shares in 1992. Fully diluted earnings per share were
$4.88 on 6.2 million shares in 1993 compared to $3.08 on 6.7 million shares in
1992. The cumulative effect of the change in accounting principle increased
earnings per share in 1993 by $.26 on primary shares and $.22 on fully diluted
shares.
1992 Compared to 1991
Total revenues for 1992 increased $39.5 million, or 20%, as compared to 1991.
The increase was primarily due to a $22.4 million, or 27%, increase in
commission revenues. Principal transactions increased $16.4 million, or 23%,
and corporate finance increased $7.1 million, or 43%, while interest revenues
decreased $7.1 million, or 30%. The increase in commissions was across the
board with notable increases in POSIT((R)) and QuantEX((R)), the Company's
computerized investment technology products. The increase in principal trading
was mostly due to the Company's Over-The-Counter and International Convertible
Departments. The increase in corporate finance resulted primarily from
participation in a greater number of transactions. The decrease in interest
revenues was due primarily to a decrease in interest rates, although customer
margin debit balances also decreased.
Total expenses for 1992 increased $23.7 million, or 13%, as compared to 1991.
The increase in total expenses was due to an increase of $26.0 million, or 28%,
in compensation and benefits, an increase of $2.2 million, or 19%, in floor
brokerage and clearing fees, and an increase of $1.0 million, or 6%, in
telecommunications and data processing services. These were partially offset
by a decrease of $2.7 million, or 17%, in interest expense, a decrease of $2.2
million, or 7%, in other expense, and a decrease of $641,000, or 5%, in
occupancy and equipment rental. Compensation and benefits increased mostly due
to profitability-based compensation. In connection with the acquisition of
Integrated Analytics Corporation ("IAC") in 1991, the Company hired certain
employees of IAC. Several of these employees participated in a performance
share plan consisting of a phantom equity interest in ITG as determined by a
formula based primarily on ITG earnings and vesting requirements. The Company
expensed approximately $3.6 million under this plan in 1992. Additionally, the
increase in compensation and benefits related to increased commission revenues
and increased headcount. Floor brokerage and clearing fees increased primarily
because of increased volumes of business executed on the various exchanges.
Telecommunications and data processing services increased due to increased
trade volume and ongoing system development. Interest expense decreased due to
lower interest rates. Other expense decreased mostly due to a reduction in bad
debt and legal expenses. Occupancy and equipment rental decreased primarily
due to a reduction in moving related expenses.
As a result of the above, earnings before income taxes increased from $17.8
million in 1991 to $33.7 million in 1992. The $15.8 million increase in
earnings was chiefly due to the increase in revenues from commissions and
principal transactions.
Net earnings were $18.7 million, an increase of $8.9 million, or 90%, compared
to 1991. The effective tax rate was 44.4% in 1992 and 44.7% in 1991.
Primary earnings per share were $3.82 on 4.9 million shares in 1992 compared to
$1.74 on 5.7 million shares in 1991. Fully diluted earnings per share were
$3.08 on 6.7 million shares in 1992 compared to $1.57 on 7.5 million shares in
1991.
14
<PAGE> 18
LIQUITY AND CAPITAL RESOURCES
A substantial portion of the Company's assets are liquid, consisting of cash or
assets readily convertible into cash. The majority of securities positions
(both long and short) in the Company's trading accounts are readily marketable
and actively traded. Receivables from brokers and dealers are primarily
current open transactions or securities borrowed transactions which can be
settled or closed out within a few days. Receivables from customers, officers
and directors include margin balances and amounts due on uncompleted
transactions. Most of the Company's receivables are secured by marketable
securities.
The Company's assets are financed by equity capital, subordinated debt,
customer free credit balances, bank loans and other payables. Bank loans
represent secured and unsecured short-term borrowings (usually overnight) which
are generally payable on demand. Secured bank loans are collateralized by a
combination of customer, noncustomer and firm securities. The Company has
always been able to obtain necessary short-term borrowings in the past and
believes that it will continue to be able to do so in the future.
Additionally, the Company has letters of credit outstanding which are used in
the normal course of business to satisfy various collateral requirements in
lieu of depositing cash or securities.
The Company's broker-dealer subsidiaries are subject to the net capital
requirements of the Commission, the National Association of Securities Dealers,
Inc. ("NASD"), the Boston Stock Exchange ("BSE"), and the Pacific Stock
Exchange ("PSE"), which are designed to measure the general financial soundness
and liquidity of broker-dealers. The Company's broker-dealer subsidiaries
consistently have operated in excess of the minimum requirements. At December
31, 1993, JEFCO had regulatory net capital, after adjustments as required by
the Commission's Uniform Net Capital Rule, of $76.0 million, which exceeded the
minimum net capital requirements by $66.8 million. At December 31, 1993, ITG
had regulatory net capital, after adjustments as required by the Commission's
Uniform Net Capital Rule, of $1.9 million, which exceeded the minimum net
capital requirements by $1.7 million. At December 31, 1993, W & D had
regulatory net capital, after adjustments as required by the Commission's
Uniform Net Capital Rule, of $821,000, which exceeded the minimum net capital
requirements by $671,000. JEFCO, ITG and W & D use the alternative method of
calculating their regulatory net capital.
In 1992, the Company repurchased 479,339 shares of its Common Stock at prices
ranging from $14.375 to $19. Also in 1992, the Company exchanged $10.7 million
of new subordinated 8 7/8% non-convertible notes, due 1997, for $10.7 million
face amount of its 7% Convertible Subordinated Notes due 2010, which were
convertible into 466,521 shares of the Company's Common Stock. The new
subordinated 8 7/8% non-convertible notes provide for mandatory redemption in
1995 and 1996 of one-third of the principal face amount, respectively.
Although the exchange did not reduce the number of primary shares outstanding,
it reduced the Company's fully diluted shares outstanding by approximately 7%.
In October 1993, the Company called for redemption all of its 8 1/2%
Convertible Subordinated Debentures and all of its 7% Convertible Subordinated
Notes. Holders of $29,731,000 aggregate principal amount of 8 1/2% Convertible
Subordinated Debentures and $1,690,000 aggregate principal amount of 7%
Convertible Subordinated Notes elected to convert their securities into an
aggregate of 1,366,092 shares of the Company's Common Stock. Also in 1993, the
Company repurchased 351,837 shares of its Common Stock at prices ranging from
$23.375 to $36.50. During the first quarter of 1994, the Company repurchased
35,925 shares of its common stock versus repurchases of 15,000 shares for the
comparable 1993 period.
The repurchased shares of Common Stock are presently being held as treasury
shares.
EFFECTS OF INFLATION
Because the Company's assets are, to a large extent, liquid in nature, they are
not significantly affected by inflation. Increases in the Company's expenses,
such as employee compensation, rent and communications, due to inflation may
not be readily recoverable in the prices of services offered by the Company.
In addition, to the extent that inflation results in rising interest rates and
has other adverse effects on securities markets and on the value of securities
held in the inventory, it may adversely affect the Company's financial position
and results of operations.
EFFECTS OF CHANGES IN FOREIGN CURRENCY RATES
The Company maintains a foreign securities business in its foreign offices
(London and Hong Kong) as well as in some of its domestic offices. Most of
these activities are hedged by related foreign currency liabilities or by
forward exchange contracts. However, the Company is still subject to some
foreign currency risk. A change in the foreign currency rates could create
either a foreign currency transaction gain/loss (recorded in the Company's
Consolidated Statement of Earnings) or a foreign currency translation
adjustment to the Stockholders' Equity section of the Company's Consolidated
Statement of Financial Condition.
15
<PAGE> 19
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on April 28, 1994 to the Purchasers,
pursuant to the Purchase Agreement. The Purchasers are accredited investors,
as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act. As a condition to the Purchase Agreement, the Company and the
Purchasers entered into the Registration Rights Agreement on April 28, 1994.
Pursuant to the Registration Rights Agreement, the Company agreed to (i) file
with the Commission a registration statement under the Securities Act with
respect to the New Notes within 90 days after the date of the original issuance
of the Old Notes (the "Issue Date"), (ii) use its best efforts to cause the
Registration Statement covering the Exchange Offer to become effective under
the Securities Act within 180 days after the Issue Date, and (iii) use its best
efforts to consummate the Exchange Offer within 45 days after the Registration
Statement covering the Exchange Offer is declared effective. The Registration
Statement of which this Prospectus is a part is intended to satisfy such
obligations of the Company under the Registration Rights Agreement. A copy of
the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal, to exchange $1,000
in principal amount of New Notes for each $1,000 in principal amount of the
outstanding Old Notes. New Notes will be issued only in integral multiples of
$1,000 to each tendering Eligible Holder whose Old Notes are accepted in the
Exchange Offer. The Company will accept any Old Notes validly tendered and not
withdrawn prior to 5:00 p.m. New York City time, on the Expiration Date. Old
Notes that are not accepted for exchange will be returned as promptly as
practicable after the Expiration Date. Eligible Holders may tender all or a
portion of the Old Notes pursuant to the Exchange Offer.
The form and terms of the New Notes under the Indenture will be identical in
all material respects to the form and terms of the Old Notes. The New Notes
evidence the same debt as the Old Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the Indenture governing the Old
Notes. The New Notes will bear interest from their date of issuance at the
same rate and upon the same terms as the Old Notes. See "Description of the
Notes." Accrued and unpaid interest on the Old Notes accepted for exchange for
the period to but not including the date of issuance of the New Notes (the
"Exchange Date") will be paid to the registered Holders of New Notes on the
first interest payment date of the New Notes. Holders whose Old Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Old Notes accrued on and after the
Exchange Date.
As of the Date of this Prospectus, $50,000,000 aggregate principal amount of
the Old Notes are outstanding and there are two registered
Holders thereof. Solely for reasons of administration (and for no other
purpose) the Company has fixed the close of business of July 19,
1994, as the record date (the "Record Date") for the Exchange Offer for
purposes of determining the person to whom this Prospectus and the Letter of
Transmittal will be mailed initially. Only an Eligible Holder may participate
in the Exchange Offer. There will be no fixed record date for determining
registered Holders of Old Notes entitled to participate in the Exchange Offer.
Eligible Holders of Old Notes do not have any appraisal or dissenters' rights
under the General Corporation Law of the State of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes when,
as, and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering Holders of Old
Notes for the purposes of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
any such unaccepted Old Notes will be returned, without expense, to the
tendering Holder thereof as promptly as practicable after the Expiration Date.
Tendering Eligible Holders will not be required to pay broker commissions or
fees or, subject to the instructions in the Letter of Transmittal, transfer
taxes with respect to the exchange of Old Notes for New Notes pursuant to the
Exchange Offer. The Company will pay all charges and expenses, other than
certain taxes which may be levied in the event of any transfer of ownership, in
connection with the Exchange Offer. See "Fees and Expenses" below.
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<PAGE> 20
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
August 18, 1994, or, at the Company's option, such earlier date upon which
100% of the Old Notes shall have been validly tendered pursuant to the Exchange
Offer and not withdrawn, unless the Company, in its sole discretion, extends
the Exchange Offer, in which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 10:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay accepting
any Old Notes, (ii) to extend the Exchange Offer, (iii) to terminate the
Exchange Offer if it is determined that the Exchange Offer does not meet the
conditions set forth in "Certain Conditions of the Exchange Offer" below, in
each case by giving oral or written notice of such delay, extension, or
termination to the Exchange Agent, or (iv) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination, or
amendment will be followed promptly as practicable by a public announcement
thereof. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, the Company will promptly disclose
such amendment by means of a prospectus supplement that will be distributed to
the registered Holders of Old Notes, and the Company will extend the Exchange
Offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
Holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
Without limiting the manner in which the Company may choose to make a public
announcement of the delay, extension, termination, or amendment of the Exchange
Offer, the Company shall not have an obligation to publish, advertise or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE NOTES
The New Notes will bear interest from their date of issuance. Holders of Old
Notes that are accepted for exchange will be entitled to receive, in cash,
accrued and unpaid interest thereon to, but not including, the date of issuance
of the New Notes and will be deemed to have waived the right to receive any
payment in respect of interest on the Old Notes accrued from and after the date
of issuance of the New Notes. Such accrued and unpaid interest on the Old
Notes will be paid to registered Holders of the New Notes with the first
interest payment on the New Notes. Interest on the Old Notes accepted for
exchange will cease to accrue on the day prior to the issuance of the New
Notes.
The New Notes bear interest (as do the Old Notes) at a rate equal to 8 7/8% per
annum. Interest on the New Notes is payable on each May 1 and November 1,
commencing on November 1, 1994.
PROCEDURES FOR TENDERING OLD NOTES
The tender by an Eligible Holder as set forth below and the acceptance thereof
by the Company will constitute a binding agreement between the tendering
Eligible Holder and the Company upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal.
Except as set forth below, an Eligible Holder who wishes to tender Old Notes
for exchange pursuant to the Exchange Offer must transmit a properly completed
and duly executed Letter of Transmittal, including all other documents required
by such Letter of Transmittal, to the Exchange Agent at the address set forth
in the Letter of Transmittal on or prior to 5:00 p.m., New York City time, on
the Expiration Date. In addition, prior to 5:00 p.m., New York City time, on
the Expiration Date, either (i) certificates for such Old Notes must be
received by the Exchange Agent, together with the Letter of Transmittal; (ii) a
Book-Entry Confirmation, if such procedure is available, into the Exchange
Agent's account at the Depository pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent; or (iii) the
Holder must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL, AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE ELIGIBLE HOLDER. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED BE USED. INSTEAD OF DELIVERY BY MAIL, IT IS
RECOMMENDED THAT THE ELIGIBLE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereof are tendered (i) by a registered Holder of the Old Notes who
has completed either the
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<PAGE> 21
box entitled "Special Issuance Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (ii) by an Eligible
Institution (as defined below). In the event that a signature on a Letter of
Transmittal or a notice of withdrawal, as the case may be, is required to be
guaranteed, such guarantee must be by a firm which is a member of a registered
national securities exchange or a member of the NASD, a commercial bank or
trust company having an office or correspondent in the United States or is
otherwise an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). If Old
Notes are registered in the name of a person other than a signer of the Letter
of Transmittal, the Old Notes surrendered for exchange must either (i) be
endorsed by the registered Holder, with the signature thereon guaranteed by an
Eligible Institution or (ii) be accompanied by a bond power, in satisfactory
form as determined by the Company in its sole discretion, duly executed by the
registered Holder, with the signature thereon guaranteed by an Eligible
Institution along with any other documents required upon transfer. The term
"registered Holder" as used herein with respect to the Old Notes means any
person in whose name the Old Notes are registered on the books of the registrar
for the Old Notes.
Tenders may be made only in principal amounts of $1,000 and integral multiples
thereof. Subject to the foregoing, Eligible Holders may tender less than the
aggregate principal amount represented by the Old Notes deposited with the
Exchange Agent provided they appropriately indicate this fact on the Letter of
Transmittal accompanying the tendered Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of Old Notes tendered for exchange will be
determined by the Company in its sole, reasonable discretion, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders of any particular Old Notes
not properly tendered or to reject any particular Old Notes which acceptance
might, in the judgment of the Company or its counsel, be unlawful. The Company
also reserves the absolute right to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Old Notes either before
or after the Expiration Date (including the right to waive the ineligibility of
any Holder who seeks to tender Old Notes in the Exchange Offer). The
interpretation of the terms and conditions of the Exchange Offer (including the
Letter of Transmittal and the instructions thereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Notes for exchange must be cured within such
reasonable period of time as the Company shall determine. The Company will use
reasonable efforts to give notification of defects or irregularities with
respect to tenders of Old Notes for exchange but shall not incur any liability
for failure to give such notification. Tenders of the Old Notes will not be
deemed to have been made until such irregularities have been cured or waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation, or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of such person's authority to so
act must be submitted.
Any Beneficial Owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company, or other nominee and who wishes to
tender Old Notes in the Exchange Offer should contact such registered Holder
promptly and instruct such registered Holder to tender on such Beneficial
Owner's behalf. If such Beneficial Owner wishes to tender directly, such
Beneficial Owner must, prior to completing and executing the Letter of
Transmittal and tendering Old Notes, make appropriate arrangements to register
ownership of the Old Notes in such Beneficial Owner's name. Beneficial Owners
should be aware that the transfer of registered ownership may take considerable
time.
Each Eligible Holder accepting the Exchange Offer is required to make the
representations to the Company described under "Resales of the New Notes"
below.
BOOK ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect to
the Old Notes at the Depository for purposes of the Exchange Offer within two
business days after the date of this Prospectus, and any financial institution
that is a participant in the Depository's system may make book-entry delivery
of Old Notes by causing the Depository to transfer such Old Notes into the
Exchange Agent's account at the Depository in accordance with the Depository's
procedures for transfer. However, although delivery of Old Notes may be
effected through book-entry transfer at the Depository, the Letter of
Transmittal or facsimile thereof, with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and received
by the Exchange Agent at one of the addresses set forth below under "Exchange
Agent" on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with.
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<PAGE> 22
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of Old Notes desires to tender such Old Notes and such
Old Notes are not immediately available, or if time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent on
or prior to the Expiration Date, or if the procedure for book-entry transfer
cannot be completed on or prior to the Expiration Date, a tender may be
effected if (i) the tender is made by or through an Eligible Institution, (ii)
prior to the Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form
provided by the Company (by facsimile transmission, mail or hand delivery),
setting forth the name and address of the Holder of Old Notes, the certificate
number or numbers of any Old Notes which will not be tendered by book-entry
transfer, and the amount of Old Notes tendered, stating that the tender is
being made thereby and guaranteeing that within five New York Stock Exchange
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the
Letter of Transmittal, are received by the Exchange Agent within five New York
Stock Exchange trading days after the date of execution of the Notice of
Guaranteed Delivery.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Except as set forth under "Certain Conditions of the Exchange Offer" below, the
Company will accept, promptly after the Expiration Date, all Old Notes properly
tendered and will issue the New Notes promptly after acceptance of the Old
Notes. For purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered Old Notes for exchange when, as, and if the Company
has given oral or written notice thereof to the Exchange Agent.
In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Depository, a properly completed and duly executed Letter of Transmittal, and
all other required documents; provided, however, that the Company has given
oral or written notice thereof to the Exchange Agent, and provided further that
the Company reserves the absolute right to waive any defects or irregularities
in the tender or conditions of the Exchange Offer. If any tendered Old Notes
are not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount
than the Eligible Holder desires to exchange, such unaccepted or non-exchanged
Old Notes or substitute Old Notes evidencing the unaccepted portion, as
appropriate, will be returned without expense to the tendering Eligible Holder
thereof as promptly as practicable after the expiration or termination of the
Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of the Old Notes may be withdrawn at any time prior to 5:00 P.M., New
York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at its
address set forth under "Exchange Agent" below. Any such notice of withdrawal
must (i) specify the name of the person having tendered the Old Notes to be
withdrawn, (ii) identify the Old Notes to be withdrawn (including the principal
amount of such Old Notes), and (iii) if certificates for Old Notes were
tendered, specify the name in which such Old Notes were registered, if
different from that of the withdrawing Holder. If certificates for Old Notes
have been delivered or otherwise identified to the Exchange Agent then, prior
to the release of such certificates, the withdrawing Holder must also submit
the serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such Holder is an Eligible Institution. If Old Notes have been tendered
pursuant to the procedure for book-entry transfer, any notice of withdrawal
must specify the name and number of the account at the Depository to be
credited with the withdrawn Old Notes, and otherwise comply with the procedures
of the Depository. All questions as to the validity, form, and eligibility
(including time of receipt) of such notices will be determined by the Company
in its sole, reasonable discretion, which determination shall be final and
binding on all parties. The Old Notes so withdrawn, if any, will be deemed not
to have been validly tendered for exchange for purposes of the Exchange Offer.
Any Old Notes that have been tendered for exchange but which are withdrawn will
be returned to the Eligible Holder thereof without cost to such Eligible Holder
as soon as practicable after withdrawal. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "Procedures for
Tendering Old Notes" above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue the New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer if, prior to
the exchange of the New Notes for the Old Notes, the Company determines, in its
sole discretion, that (i) there has been a commencement of any action,
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<PAGE> 23
legal or governmental, with respect to the Exchange Offer or which the Company
reasonably determines would make it inadvisable to proceed with the Exchange
Offer, (ii) there has been a banking moratorium or similar event or
international calamity involving the United States, (iii) there has been a
change in the business or prospects of the Company that may have a material
adverse effect on the Company, or (iv) the Exchange Offer violates any
applicable law. If the Company makes any of the foregoing determinations, the
Company may (i) refuse to accept any Old Notes and return all tendered Old
Notes to the tendering Holders or (ii) extend the Exchange Offer, retain all
Old Notes tendered prior to the Expiration Date, and use reasonable efforts to
satisfy any such condition, subject, however, to the rights of Eligible Holders
to withdraw such Old Notes (see "Withdrawal Rights" above). In addition, the
Company will not accept for exchange any Old Notes tendered, and no New Notes
will be issued in exchange for any such Old Notes, if at such time any stop
order shall be threatened or in effect with respect to the Registration
Statement or the qualification of the Indenture under the Trust Indenture Act
of 1939, as amended, as in effect on the date of the Indenture (the "Trust
Indenture Act").
Holders of Old Notes may have certain rights and remedies against the Company
under the Registration Rights Agreement should the Company fail to consummate
the Exchange Offer, notwithstanding any nonfulfillment of the above conditions.
Such conditions are not intended to modify such rights and remedies in any
respect.
TERMINATION OF CERTAIN RIGHTS
Eligible Holders of the Old Notes to whom this Exchange Offer is made have
certain rights under the Registration Rights Agreement and Purchase Agreement
that will terminate upon the consummation of the Exchange Offer, which rights
include, without limitation, (a) the right to require the Company (i) to file
with the Commission the Exchange Offer Registration Statement under the
Securities Act within 90 days following the Issue Date; (ii) to use its best
efforts to cause such Registration Statement to become effective under the
Securities Act within 180 days after the Issue Date; (iii) to consummate the
Exchange Offer within 45 days after the Registration Statement covering the
Exchange Offer is declared effective; and (iv) if certain events described in
the Registration Rights Agreement occur (x) to file a Shelf Registration
Statement covering resales of the Old Notes, (y) to use its best efforts to
cause such Shelf Registration Statement to be declared effective under the
Securities Act and (z) to keep such Shelf Registration Statement effective for
the period described in the Registration Rights Agreement; and (b) the right to
receive liquidated damages from the Company under certain circumstances
described in the Registration Rights Agreement.
EXCHANGE AGENT
All tendered Old Notes, executed Letters of Transmittal, and other related
documents should be directed to the Exchange Agent at one of the addresses set
forth below. In addition, any questions and requests for assistance and
requests for additional copies of this Prospectus, the Letter of Transmittal,
and other related documents should be addressed to the Exchange Agent:
<TABLE>
<S> <C> <C>
If by overnight carrier or by hand: If by registered or certified mail: If by Facsimile:
The Bank of New York The Bank of New York (212) 571-3080
101 Barclay Street 101 Barclay Street - 7E
Corporate Trust Services Window New York, New York 10286 Confirm by telephone:
Ground Level Attn: Reorganization Section
New York, New York 10286 (212) 815-2742
Attention: Reorganization Section
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The principal
solicitation is being made by mail; however, additional solicitation may be
made by facsimile, telephone or in person by officers and regular employees of
the Company and its affiliates. The Company has not retained any
dealer-manager in connection with the Exchange Offer. The Company, however,
will reimburse brokers, dealers, commercial banks and trust companies for
reasonable and necessary costs and expenses incurred by them in forwarding this
Prospectus and the related Exchange Offer documents to the beneficial owners of
Old Notes held by them as
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<PAGE> 24
nominee or in a fiduciary capacity. The Company also will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection therewith. The cash
expenses to be incurred in connection with the Exchange Offer will be paid by
the Company and are estimated to be approximately $100,000. Such expenses
include fees and expenses of the Exchange Agent, accounting and legal fees,
filing fees and printing costs.
The Company will pay all transfer taxes, if any, applicable to the exchange of
Old Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered Holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes, as
reflected in the Company's accounting records on the date of the Exchange.
Accordingly, no gain or loss for accounting purposes will be recognized. The
expenses of the Exchange Offer will be amortized over the term of the New
Notes.
RESALES OF THE NEW NOTES
With respect to resales of New Notes, based on an interpretation by the Staff
of the Commission set forth in no-action letters issued to third parties, the
Company believes that an Eligible Holder (other than (i) an affiliate of the
Company within the meaning of Rule 405 under the Securities Act or (ii) a
broker-dealer, except as provided below) who exchanges Old Notes for New Notes
in the ordinary course of its business and who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate, in the distribution of the New Notes, will be allowed to resell
the New Notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the New Notes a prospectus that
satisfies the requirements of Section 10 thereof. However, if any Eligible
Holder acquires New Notes in the Exchange Offer for the purpose of distributing
or participating in a distribution of the New Notes, such Eligible Holder
cannot rely on the position of the Staff of the Commission enunciated in Exxon
Capital Holdings Corporation (available May 13, 1988) or similar no-action
letters or any similar interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, unless an exemption from
registration is otherwise available.
As contemplated by the above no-action letters and the Registration Rights
Agreement, each Holder of Old Notes accepting the Exchange Offer is required to
represent to the Company in the Letter of Transmittal that (i) any New Notes
are to be acquired in the ordinary course of business of the person receiving
such New Notes, whether or not such person is such Holder, (ii) neither the
Holder of such Old Notes nor any such other person receiving such New Notes is
participating, intends to participate, or has any arrangement or understanding
with any person to participate, in the distribution of the New Notes, and (iii)
except as otherwise disclosed, neither the Holder of such Old Notes nor any
such other person is an affiliate of the Company within the meaning of Rule 405
under the Securities Act. Further, each Holder of Old Notes accepting the
Exchange Offer must acknowledge that any person participating in the Exchange
Offer for the purpose of distributing the New Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the New Notes and cannot rely on the
no-action letters discussed above.
Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, for a period of 90 days after the Expiration Date. The Company
will make this Prospectus available to any broker-dealer, at no charge, for use
in connection with any such resale for a period of 90 days after the
Expiration Date. See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant
to the Exchange Offer will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the legend thereon. In general, the
Old Notes may not be offered or sold, unless registered under the Securities
Act and applicable state securities laws. The Company does not intend to
register the Old Notes under the Securities Act or any state securities laws.
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<PAGE> 25
BUSINESS
Jefferies Group, Inc. is a holding company which, through its four primary
subsidiaries, Jefferies & Company, Inc., Investment Technology Group, Inc.,
Jefferies International Limited and Jefferies Pacific Limited, is engaged in
securities brokerage and trading, corporate finance and other financial
services. The term "Company" refers, unless the context requires otherwise, to
the Company, its subsidiaries, predecessor entities, and W & D Securities, Inc.
The Company was originally incorporated in 1973 as a holding company for JEFCO
and was reincorporated in Delaware on August 10, 1983. The Company and its
various subsidiaries maintain offices in Los Angeles, New York, Short Hills,
Chicago, Dallas, Boston, Atlanta, New Orleans, Houston, San Francisco,
Stamford, London and Hong Kong.
As of December 31, 1993, the Company and its subsidiaries had 610 full-time
employees, including 339 representatives registered with the NASD. The
Company's executive offices are located at 11100 Santa Monica Boulevard, Los
Angeles, California 90025, and its telephone number is (310) 445-1199.
JEFFERIES & COMPANY, INC.
Jefferies & Company, Inc. ("JEFCO") was founded in 1962 and is engaged in
equity, convertible debt and taxable fixed income securities brokerage and
trading and corporate finance. JEFCO is one of the leading national firms
engaged in the distribution and trading of blocks of equity securities and
conducts such activities primarily in the "third market." The term "third
market" refers to transactions in listed equity securities effected away from
national securities exchanges. JEFCO's revenues are derived primarily from
commission revenues and market-making or trading as principal in equity,
taxable fixed income and convertible securities with or on behalf of
institutional investors, with the balance generated by corporate finance and
other activities.
INVESTMENT TECHNOLOGY GROUP, INC.
Investment Technology Group, Inc. ("ITG Holding") is a publicly traded corpo-
ration of which the Company owns 80.2% of the outstanding shares of common
stock. ITG Holding, through its wholly owned broker-dealer subsidiary ITG Inc.
("ITG"), is a leading provider of automated securities trade execution and
analysis services to institutional equity investors. ITG's two principal ser-
vices are POSIT((R)), the largest automated stock crossing system operated dur-
ing trading hours, and QuantEX((R)), a proprietary decision support system with
integrated trade analysis, routing and management capabilities. These services
employ proprietary software to enhance customers' trading efficiencies, access
to market liquidity and portfolio analysis capabilities. To supplement ITG's
POSIT((R)) and QuantEX((R)) services, ITG's ISIS service uses a database of
securities, price and liquidity information to provide enhanced decision sup-
port in all aspects of its customers' trade execution and analysis activities.
POSIT((R)), which is accessed through direct computer links or by communicating
with ITG's trading desk, allows customers to place confidential buy and sell
orders on approximately 7,000 different equity securities and portfolios of
equity securities. POSIT((R)) analyzes these buy and sell orders and
determines the maximum number of securities which may be matched or "crossed"
among participants. After determining the optimal cross, POSIT((R)) executes
trades at the midpoint of the primary market best bid and offer for each
security at the time of the cross. Participants using direct computer links
are automatically notified of completed crosses. ITG currently offers three
scheduled daily crosses and can also accommodate additional crosses in response
to customer demand. The system operates on a confidential basis, allowing
customers to trade large blocks of equity securities at reduced transaction
fees while minimizing the price impact of the trade. ITG derives revenue by
collecting transaction fees on each share which is crossed through the system.
Average daily share volume on POSIT((R)) has grown from approximately 288,000
shares in 1988 to approximately 6.3 million shares in 1993. During the last
quarter of 1993, average daily share volume was approximately 8.3 million
shares. In addition to its traditional customer base of quantitative and
passive investors, POSIT((R)) has recently begun to serve fundamental
institutional investors, broker-dealers and international institutional
investors. The system is currently used by approximately 200 customers,
including corporate and government pension plans, insurance companies, bank
trust departments, investment advisors and mutual funds.
QuantEX((R)) is a proprietary trade execution and analysis system that operates
on Sun Microsystems workstations provided to customers by ITG. The integrated
trade analysis, routing and management capabilities of QuantEX((R)) provide
valuable support to investment managers in the development and implementation
of portfolio trading strategies and allow equity traders to organize, process
and manage large trading lists. The automation of these functions enables
users to analyze and trade large portfolios of securities faster and more
effectively than by other traditional means. QuantEX((R)) allows an investment
manager to develop a series of rules based upon the manager's strategy for
trading equity securities and applies these rules to a continuous flow of
current market information in order to generate real-time decision support.
Through its direct routing capabilities, QuantEX((R)) also allows investment
managers and equity traders to route orders to POSIT((R)), major national and
regional stock exchanges, OTC market makers, ITG's trading desk
22
<PAGE> 26
or selected broker-dealers, including JEFCO. QuantEX((R))'s trade management
function automatically tracks and summarizes trades routed through
QuantEX((R)). ITG generally derives revenue by collecting a transaction fee on
each share which is routed for trading through QuantEX((R)).
JEFFERIES INTERNATIONAL LIMITED AND JEFFERIES PACIFIC LIMITED
Jefferies International Limited ("JIL"), a broker-dealer subsidiary of the
Company, was incorporated in 1986 in England. JIL is a member of The
International Stock Exchange and The Securities and Futures Authority. JIL
introduces customers trading in U.S. securities to JEFCO and also trades as a
broker-dealer in international equity and convertible securities and ADRs.
Jefferies Pacific Limited ("JPL"), a broker subsidiary of the Company, was.
incorporated in 1992 in Hong Kong. JPL presently introduces foreign customers
trading in U.S. securities to JEFCO. JPL commenced operations in 1993 and has
not yet generated material revenues.
W & D SECURITIES, INC.
W & D Securities, Inc. ("W & D") provides execution services primarily on the
NYSE and other exchanges to JEFCO and ITG. In order to comply with regulatory
requirements of the New York Stock Exchange ("NYSE") that generally prohibit
NYSE members and their affiliates from executing, as principal and, in certain
cases, as agent, transactions in NYSE-listed securities off the NYSE, the
Company gave up its formal legal control of W & D, effective January 1, 1983,
by exchanging all of the W & D common stock owned by it for non-voting
preferred stock of W & D. The common stock of W & D is presently held by an
officer of W & D who has agreed with the Company that, at the option of the
Company, he will sell such stock to the Company for nominal consideration. In
the event that the Company were to regain ownership of such common stock, the
Company believes that the NYSE would assert that W & D would be in violation of
the NYSE's rules unless similar arrangements satisfactory to the NYSE were made
with respect to the ownership of the common stock.
While the NYSE has generally approved the above arrangements, there can be no
assurance that it will not raise objections in the future. In light of these
arrangements and the high proportion of the equity of W & D represented by the
non-voting preferred stock held by the Company, W & D is consolidated as a
subsidiary of the Company for financial purposes. The Company believes that it
can make satisfactory alternative arrangements for executing transactions in
listed securities on the NYSE if it were precluded from doing so through W & D.
COMMISSION BUSINESS
A substantial portion of the Company's revenues is derived from customer
commissions on brokerage transactions in equity (primarily listed) and debt
securities for domestic and international investors such as investment
advisors, banks, mutual funds, insurance companies and pension and profit
sharing plans. Such investors normally purchase and sell securities in block
transactions, the execution of which requires special marketing and trading
expertise. The Company is one of the leading national firms in the execution
of equity block transactions, and believes that its institutional customers are
attracted by the quality of the Company's execution (with respect to
considerations of quantity, timing and price) and its competitive commission
rates, which are negotiated on the basis of market conditions, the size of the
particular transaction and other factors. In addition to domestic equity
securities, the Company executes transactions in taxable fixed income
securities, domestic and international convertible securities, international
equity securities, ADRs, options, preferred stocks, financial futures and other
similar products.
Most of the Company's equity account executives are electronically
interconnected through a system permitting simultaneous verbal and graphic
communication of trading and order information by all participants. The
Company believes that its execution capability is significantly enhanced by
this system, which permits its account executives to respond to each other and
to negotiate order indications directly with customers rather than through a
separate trading department.
PRINCIPAL TRANSACTIONS
In the regular course of business, the Company takes securities positions as a
market-maker to facilitate customer transactions and for investment purposes.
In making markets and when trading for its own account, the Company exposes its
own capital to the risk of fluctuations in market value. Trading profits (or
losses) depend primarily upon the skills of the employees engaged in
market-making and position taking, the amount of capital allocated to positions
in securities and the general trend of prices in the securities markets.
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<PAGE> 27
The Company monitors its risk by maintaining its securities positions at or
below certain pre-established levels. These levels reduce certain
opportunities to realize profits in the event that the value of such securities
increases. However, they also reduce the risk of loss in the event of a
decrease in such value and result in controlled interest costs incurred on
funds provided to maintain such positions.
Equities. The Equities Division makes markets in over 400 over-the-counter
equity and ADR securities, operates six specialist posts on the PSE and two
specialist posts on the BSE, and trades securities for its own account, as well
as to accommodate customer transactions.
Taxable Fixed Income. The Taxable Fixed Income Division trades high grade and
non-investment grade public and private debt securities. The Division
specializes in trading and making markets in over 300 unrated or less than
investment grade corporate debt securities and accounts for these positions at
market value. At December 31, 1993, the aggregate long and short market value
of these positions was $34.1 million and $5.2 million, respectively. Risk of
loss upon default by the borrower is significantly greater with respect to
unrated or less than investment grade corporate debt securities than with other
corporate debt securities. These securities are generally unsecured and are
often subordinated to other creditors of the issuer. These issuers usually
have high levels of indebtedness and are more sensitive to adverse economic
conditions, such as recession or increasing interest rates, than are investment
grade issuers. There is a limited market for some of these securities and
market quotes are generally available from a small number of dealers.
Convertible Securities and Warrants. The Company also trades domestic and
international convertible securities and warrants and assists corporate and
institutional clients in identifying attractive investments in these securities
and warrants.
Arbitrage. The Company engages in arbitrage for its own account. The Company
currently conducts arbitrage activities through a relationship with an
independent management firm pursuant to which the Company delegates to the
manager investment decisions involving the purchase and/or sale of securities
in one of the Company's proprietary trading accounts. The manager receives a
fee equal to a percentage of the profits in the account after a deduction of
all costs, expenses, commissions and interest charges applicable to the trading
activity in the account. The Company also engages in international arbitrage
involving securities listed or traded in both domestic and foreign markets. In
addition, the Company has invested in a limited partnership which conducts
arbitrage activity.
CORPORATE FINANCE
JEFCO's Corporate Finance Department offers corporations a full range of
advisory as well as debt and equity financing services which include private
placements and public offerings of debt and equity securities, debt
refinancings, recapitalizations, mergers and acquisitions advice, exclusive
sales advice, structured financings and securitizations, consent and waiver
solicitations, and company and bondholder representations in corporate
restructurings.
Investment banking activity involves both economic and regulatory risks. An
underwriter may incur losses if it is unable to sell the securities it is
committed to purchase or if it is forced to liquidate its commitments at less
than the agreed-upon purchase price. In addition, under the Securities Act and
other laws and court decisions with respect to underwriters' liability and
limitations on indemnification of underwriters by issuers, an underwriter is
subject to substantial potential liability for material misstatements or
omissions in prospectuses and other communications with respect to underwritten
offerings. Further, underwriting commitments constitute a charge against net
capital and the Company's underwriting commitments may be limited by the
requirement that it must, at all times, be in compliance with the Uniform Net
Capital Rule 15c3-1 of the Commission.
The Company intends to continue to pursue opportunities for its corporate
customers which may require it to finance and/or underwrite the issuance of
securities. Under circumstances where the Company is required to act as an
underwriter or to trade on a proprietary basis with its customers, the Company
may assume greater risk than would normally be assumed in certain other
principal transactions.
INTEREST
The Company earns interest on its securities portfolio and on its operating and
segregated balances. The Company also derives net interest income in
connection with its stock borrow/stock loan and margin lending activities.
Stock Borrow/Stock Loan. In connection with both its trading and brokerage
activities, the Company borrows securities to cover short sales and to complete
transactions in which customers have failed to deliver securities by the
required settlement date, and lends securities to other brokers, and dealers
for similar purposes. The Company also has a stock borrow versus stock loan
business with other brokers. From this activity, the Company derives interest
revenues and interest expenses.
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<PAGE> 28
Margin Lending. Customers' transactions are executed on either a cash or
margin basis. In a margin transaction, the Company extends credit to the
customer, collateralized by securities and cash in the customer's account, for
a portion of the purchase price, and receives income from interest charged on
such extensions of credit.
In permitting a customer to purchase securities on margin, the Company is
subject to the risk that a market decline could reduce the value of its
collateral below the amount of the customer's indebtedness and that the
customer might otherwise be unable to repay the indebtedness.
In addition to monitoring the creditworthiness of its customers, the Company
also considers the trading liquidity and volatility of the securities it
accepts as collateral for its margin loans. Trading liquidity and volatility
may be dependent, in part, upon the market on which the security is traded, the
number of outstanding shares of the issuer, events affecting the issuer and/or
securities markets in general, and whether or not there are any legal
restrictions on the sale of the securities. Certain types of securities have
historical trading patterns which may assist the Company in making its
evaluation. Historical trading patterns, however, may not be good indicators
over relatively short time periods or in markets which are affected by unusual
or unexpected developments. The Company considers all of these factors at the
time it agrees to extend credit to customers and continues to review its
extensions of credit on an ongoing basis.
The majority of the Company's margin loans are made to United States citizens
or to corporations which are domiciled in the United States. The Company may
extend credit to investors or corporations who are citizens of foreign
countries or who may reside outside the United States. The Company believes
that should such foreign investors default upon their loans with the Company
and should the collateral for those loans be insufficient to satisfy the
investors' obligations to the Company, the Company may experience more
difficulty in collecting investors' outstanding indebtedness than would be the
case if investors were citizens or residents of the United States.
Although the Company attempts to minimize the risk associated with the
extension of credit in margin accounts, there is no assurance that the
assumptions on which the Company bases its decisions will be correct or that
the Company is in a position to predict factors or events which will have an
adverse impact on any individual customer or issuer, or the securities markets
in general.
COMPETITION
All aspects of the business of the Company are intensely competitive. The
Company competes directly with numerous other brokers and dealers, investment
banking firms and banks. In addition to competition from firms currently in
the securities business, there has been increasing competition from others
offering financial services. These developments and others have resulted, and
may continue to result, in significant additional competition for the Company.
Member firms of the NYSE generally are prohibited from effecting transactions
when acting as principal and, in certain cases, as agent, in listed equity
securities off the NYSE, and therefore, unlike JEFCO and ITG, are precluded
from effecting such transactions in the third market. Such firms may execute
certain transactions in listed equity securities in the third market for
customers, although typically they do not do so. Since firms which the Company
regards as its major competitors in the execution of transactions in equity
securities for institutional investors are members of the NYSE, any removal of
these prohibitions could adversely affect the Company's business.
REGULATION
The securities industry in the United States is subject to extensive regulation
under both federal and state laws. The Commission is the federal agency
responsible for the administration of federal securities laws. In addition,
self-regulatory organizations, principally the NASD and the securities
exchanges, are actively involved in the regulation of broker-dealers. These
self-regulatory organizations conduct periodic examinations of member
broker-dealers in accordance with rules they have adopted and amended from time
to time, subject to approval by the Commission. Securities firms are also
subject to regulation by state securities commissions in those states in which
they do business. JEFCO is registered as a broker-dealer in 50 states and the
District of Columbia. ITG is registered as a broker-dealer in 49 states and
the District of Columbia. W & D is registered as a broker-dealer in 23 states.
Broker-dealers are subject to regulations which cover all aspects of the
securities business, including sales methods, trade practices among
broker-dealers, use and safekeeping of customers' funds and securities, capital
structure of securities firms, record-keeping and the conduct of directors,
officers and employees. Additional legislation, changes in rules promulgated
by the Commission and self-regulatory organizations, or changes in the
interpretation or enforcement of existing laws and rules, may directly affect
the mode of operation and profitability of broker-dealers. The Commission,
self-regulatory organizations and state securities commissions may conduct
administrative proceedings which can result in censure, fine, suspension,
expulsion of a broker-dealer, its officers or
25
<PAGE> 29
employees, or revocation of broker-dealer licenses. The principal purpose of
regulation and discipline of broker-dealers is the protection of customers and
the securities markets, rather than protection of creditors and stockholders of
broker-dealers.
As registered broker-dealers, JEFCO, ITG and W & D are required by law to
belong to the Securities Investor Protection Corporation ("SIPC"). In the
event of a member's insolvency, the SIPC fund provides protection for customer
accounts up to $500,000 per customer, with a limitation of $100,000 on claims
for cash balances.
Net Capital Requirements. Every registered broker-dealer doing business with
the public is subject to the Commission's Uniform Net Capital Rule (the
"Rule"), which specifies minimum net capital requirements. The Company is not
a registered broker-dealer and is therefore not subject to the Rule; however,
its United States broker-dealer subsidiaries are subject thereto.
The Rule provides that a broker-dealer doing business with the public shall not
permit its aggregate indebtedness to exceed 15 times its adjusted net capital
(the "primary method") or, alternatively, that it not permit its adjusted net
capital to be less than 2% of its aggregate debit balances (primarily
receivables from customers and broker-dealers) computed in accordance with such
Rule (the "alternative method"). JEFCO, ITG and W & D use the alternative
method of calculation.
Compliance with applicable net capital rules could limit operations of JEFCO or
ITG, such as underwriting and trading activities, that require use of
significant amounts of capital, and may also restrict loans, advances,
dividends and other payments by JEFCO or ITG to the Company. A significant
operating loss or an extraordinary charge against net capital could adversely
affect the ability of JEFCO or ITG to expand or even maintain their present
level of business. Net capital changes from day to day, but as of December 31,
1993, JEFCO's net capital of $76.0 million exceeded its minimum net capital
requirements by $66.8 million. ITG's net capital of $1.9 million exceeded its
minimum net capital requirements by $1.7 million. W & D's net capital of
$821,000 exceeded its minimum net capital requirements by $671,000.
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<PAGE> 30
PROPERTIES
The Company maintains sales offices in Los Angeles, New York, Short Hills,
Chicago, Dallas, Boston, Atlanta, New Orleans, Houston, San Francisco,
Stamford, London and Hong Kong. In addition, the Company maintains operations
offices in Los Angeles and New York. The Company leases all of its office
space which management believes is adequate for the Company's business.
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<PAGE> 31
MANAGEMENT
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Frank E. Baxter 57 Director, Chairman of the Board,
President, Chief Executive Officer
Richard G. Dooley 64 Director
Tracy G. Herrick 60 Director
Michael L. Klowden 49 Director
Frank J. Macchiarola 53 Director
Barry M. Taylor 53 Director
Mark A. Wolfson 41 Director
</TABLE>
Frank E. Baxter, 57, has been Chairman since September 26, 1990, Chief
Executive Officer since March 19, 1987, President since January 1986, a
Director of the Company and of JEFCO since 1975 and, between January 1985 and
December 1985, was Managing Director of the Company's U.K. subsidiary. Mr.
Baxter has previously served as Executive Vice President, National Sales
Manager and New York Branch Manager of JEFCO.
Richard G. Dooley, 64, has been Director of the Company since November 1993.
From 1978 until his retirement in June 1993, Mr. Dooley was Executive Vice
President and Chief Investment Officer of Massachusetts Mutual Life Insurance
Company ("Mass Mutual"); Mr. Dooley is currently a consultant to Mass Mutual.
Mr. Dooley is also a director of Advest Group, Inc. (since 1983), Hartford
Steam Boiler Inspection and Insurance Company (since 1984), Kimco Realty
Corporation (since 1990), and of various Mass Mutual sponsored investment
companies. Mr. Dooley is also a trustee of Saint Anselm College and Chairman
of the Board of The New England Education Loan Marketing Corporation. Mr.
Dooley is a member of the Company's Audit and Compensation Committees.
Tracy G. Herrick, 60, has been a Director of the Company since 1983 and of
JEFCO since 1981. He is also President of Tracy G. Herrick, Inc., an economic
consulting firm, and a Director of Anderson Capital Management, a registered
investment adviser, and of The Committee for Monetary Research and Education.
Mr. Herrick is also Chairman of the Company's Audit Committee and a member of
the Compensation Committee.
Michael L. Klowden, 49, has been a Director of the Company since May 1987. He
has been, for more than the past five years, a senior partner of Morgan, Lewis
& Bockius, a law firm which has rendered legal services to the Company. Mr.
Klowden is a member of the Audit and Compensation Committees.
Frank J. Macchiarola, 53, has been a Director of the Company since August 1991.
He is currently Dean at the Benjamin N. Cardozo School of Law at Yeshiva
University in New York City (1991-present). Previously, he was a Professor of
Business in the Graduate School of Business at Columbia University (1987-1991),
and President and Chief Executive Officer of the New York City Partnership,
Inc. (1983-1987). Prior to 1985, he was a faculty member at the City
University of New York and Chancellor of the New York City Public School
System. Mr. Macchiarola is Chairman of the Company's Compensation Committee
and a member of the Audit Committee.
Barry M. Taylor, 53, has been an Executive Vice President and Director of the
Company since 1983 and a Director of JEFCO since 1981. Mr. Taylor has been a
sales executive of JEFCO since 1974 and was Los Angeles Branch Manager from
February 1983 through June 1984.
Mark A. Wolfson, 41, has been Director of the Company since July 1991 and a
Director of Investment Technology Group, Inc. since June 1, 1994. He is
the Dean Witter Professor at the Graduate School of Business, Stanford
University, where he has been a faculty member since 1977. From 1990 through
1993, Mr. Wolfson served as Associate Dean at the Graduate School of Business,
Stanford University. He has taught at the University of Chicago (1981-1982)
and Harvard University (1988-1989). He was a Director of the Academy of
Financial Services (1989-1991), has been a Research Associate at the National
Bureau of Economic Research since 1988, has been a Visiting Scholar at M.I.T.'s
Sloan School of
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<PAGE> 32
Management (1988-1989), was Vice President of the American Accounting
Association (1990-1992), and has been a Director of New American Holdings, Inc.
since 1992. Mr. Wolfson is a member of the Company's Audit and Compensation
Committees.
OTHER EXECUTIVE OFFICERS
The Executive Officers of the Company are appointed by the Board of Directors
and serve at the discretion of the Board. Other than Messrs. Baxter and
Taylor, for whom information is provided above, the following sets forth
information as to the Executive Officers:
Christopher W. Allick, 40, has been an Executive Vice President and Managing
Director of JEFCO since May 1993, and a Director of JEFCO since January 1993,
and Director of Structure Finance of JEFCO since April 1990. From April 1990
through May 1993, Mr. Allick was a Senior Vice President of JEFCO. From
December 1985 through February 1990, Mr. Allick was a First Vice President of
Corporate Finance at Drexel Burnham Lambert, Inc., a registered securities
broker-dealer.
Louis V. Bellucci, Sr., 57, has been National Equities Sales Manager of JEFCO
since January 1991 and Executive Vice President, New York Regional Sales
Manager and a Director of JEFCO since 1985. Prior to 1985, Mr. Bellucci was
Co-Manager of JEFCO's New York branch office.
Alan D. Browning, 53, was a Director of the Company from May 1985 to May 1992,
and has been an Executive Vice President, Chief Financial Officer and Chief
Administrative Officer of the Company since 1986, and a Director, Executive
Vice President and Chief Administrative Officer of JEFCO since March 1984.
David F. Eisner, 36, has been an Executive Vice President of the Company and
Executive Vice President and a Director of JEFCO since August 1992. Prior to
August 1992, Mr. Eisner was Chairman of Madison Capital Advisors, Inc., a
consulting and financial advisory firm (April 1992 to August 1992), Senior Vice
President of Providence Capital, Inc. a securities broker-dealer (January 1991
to March 1992), and a Vice President of JEFCO (March 1988 to December 1990).
Jerry M. Gluck, 46, has been Secretary and General Counsel of the Company and
JEFCO since May 1985 and a Director of JEFCO since November 1984.
Richard B. Handler, 33, has been an Executive Vice President of JEFCO since May
1990 and a Director of JEFCO since January 1993. Prior to May 1990, Mr.
Handler was a Senior Vice President at Drexel Burnham Lambert, Inc., a
registered securities broker-dealer.
Raymond L. Killian, Jr., 56, has been an Executive Vice President of the
Company since January 1985. Mr. Killian was a Director of the Company from May
1985 to May 1992, Executive Vice President and Director of JEFCO from January
1985 to December 1991, and National Sales Manager of JEFCO for the period 1985
through 1990. In 1991, Mr. Killian was responsible for the activities of
JEFCO's Investment Technology Group, including JEFCO's POSIT((R)) and
QuantEX((R)) products. On December 30, 1991, the Company incorporated a new
wholly-owned broker-dealer subsidiary, Investment Technology Group, Inc., to
assume all the business activities of its Investment Technology Group. Mr.
Killian was elected President and Chief Executive Officer of the new
subsidiary. Prior to 1985, Mr. Killian was a Vice President of Goldman Sachs &
Co., a registered securities broker-dealer.
Jeremiah P. O'Grady, 53, has been an Executive Vice President of JEFCO since
May 1992 and a Director and Manager of the Convertible Securities Department of
JEFCO since 1986. From 1986 to May 1992, Mr. O'Grady was a Senior Vice
President of JEFCO. Prior to 1986, Mr. O'Grady was a Vice President with
Goldman Sachs & Co., a registered securities broker-dealer.
Clifford A. Siegel, 37, has been an Executive Vice President of JEFCO since May
1992 and a Director of JEFCO since May 1991. From June 1990 until May 1992,
Mr. Siegel was a Senior Vice President of JEFCO. Prior to June 1990, Mr.
Siegel was President of Cresvale International Inc., a registered securities
broker-dealer.
David A. Sydorick, 47, has been an Executive Vice President and Director of
JEFCO since May 1991, National Sales Manager of the Taxable Fixed Income Sales
Division of JEFCO from March 1990 to March 1994 and is presently Manager of
JEFCO's Capital Markets. Prior to March 1990, Mr. Sydorick was a Senior Vice
President of Drexel Burnham Lambert, Inc., a registered securities
broker-dealer.
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<PAGE> 33
Maxine Syrjamaki, 49, has been Controller of the Company since May 1987, an
Executive Vice President of JEFCO since November 1986 and Chief Financial
Officer of JEFCO since September 1984. Prior to September 1984, Ms. Syrjamaki
was First Vice President and Controller of JEFCO.
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<PAGE> 34
DESCRIPTION OF THE NOTES
The following is a summary of the material terms and provisions of the Notes.
The New Notes will be issued pursuant to the Indenture, a copy of which has
been filed as an exhibit to the Registration Statement of which this Prospectus
constitutes a part. The terms of the Notes include those set forth in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act. The Notes are subject to all such terms, and prospective
purchasers of the Notes are referred to the Indenture, and the Trust Indenture
Act for a statement thereof. The following summary does not purport to be a
complete description of the Notes and is subject to the detailed provisions of,
and qualified in its entirety by reference to, the Notes and the Indenture
(including the definitions contained therein). Definitions of certain
capitalized terms used in the following summary are set forth throughout this
description. Capitalized terms that are used but not otherwise defined herein
have the meanings assigned to them in the Indenture and such definitions are
incorporated herein by reference. References to the "Company" as used in this
"Description of the Notes" are to Jefferies Group, Inc.
GENERAL
On April 28, 1994, the Company issued $50,000,000 principal amount of Old Notes
under the Indenture. The terms of the New Notes are identical in all material
respects to the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes. The Trustee will authenticate
and deliver New Notes for original issue only in exchange for a like principal
amount of Old Notes. Any Old Notes that remain outstanding after the
consummation of the Exchange Offer, together with the New Notes, will be
treated as a single class of securities under the Indenture.
The Notes are limited in aggregate principal amount to $50,000,000 and will
mature on May 1, 2004. The Notes will bear interest at the rate stated on the
cover page hereof from April 28, 1994, or from the most recent Interest Payment
Date to which interest has been paid or provided for, payable semi-annually on
May 1 and November 1 of each year, commencing on November 1, 1994, to the
persons in whose names such Notes are registered at the close of business on
April 15 or October 15 next preceding such Interest Payment Date. Interest on
the Notes will be paid on the basis of a 360-day year consisting of twelve
30-day months. The Notes will be issued only in fully registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
The Notes are senior, unsecured obligations of the Company and rank pari passu
in right of payment with all existing and future senior indebtedness of the
Company and senior to all subordinated indebtedness of the Company. As of
March 25, 1994, the Company had approximately $10 million of subordinated
indebtedness outstanding. The Notes are effectively subordinated to claims of
creditors of the Company's subsidiaries. The business operations of the
Company are conducted through its operating subsidiaries, and therefore the
Company is dependent on the cash flow of its subsidiaries to meet its debt
obligations under the Notes. Dividends, loans and advances from certain
subsidiaries, including JEFCO, to the Company are restricted by net capital
requirements under the Exchange Act and under the rules of certain exchanges
and other regulatory bodies.
Principal of, premium, if any, and interest on the Notes will be payable, and
the Notes may be presented for registration of transfer or exchange, at the
office or agency of the Company maintained for such purpose in the Borough of
Manhattan, City of New York, and such other office or agency of the Company as
may be maintained for such purpose. At the option of the Company, payment of
interest may be made by check mailed to the Holders of the Notes at the
addresses set forth upon the registry books of the Company. No service charge
will be made for any registration of transfer or exchange of the Notes, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Until otherwise
designated by the Company, the Company's office or agency will be the corporate
trust office of the Trustee presently located at 101 Barclay Street, New York,
New York 10286.
OPTIONAL REDEMPTION
The Notes are not entitled to any mandatory redemption or sinking fund
payments. The Notes are redeemable at the option of the Company, in whole or
in part, on any date on or after May 1, 1999 and prior to maturity, upon not
less than 30 nor more than 60
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<PAGE> 35
days' notice given in accordance with the provisions of the Indenture at the
following redemption prices (expressed as a percentage of the principal
amount), in each case together with accrued and unpaid interest to the date of
redemption:
<TABLE>
<CAPTION>
IF REDEEMED DURING THE
12-MONTH PERIOD
BEGINNING MAY 1 REDEMPTION PRICE
<S> <C>
1999 . . . . . . . 103.000%
2000 . . . . . . . 102.400%
2001 . . . . . . . 101.800%
2002 . . . . . . . 101.200%
2003 and thereafter 100.600%
</TABLE>
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption pro-rata or by lot or by such other method as
the Trustee shall determine to be fair and appropriate and in such manner as
complies with any applicable legal and stock exchange requirements. The Notes
may be redeemed in part in multiples of $1,000 only. Any notice which relates
to a Note to be redeemed in part only must state the portion of the principal
amount equal to the portion to be redeemed and must state that on and after the
date fixed for redemption, upon surrender of such Note, a new Note or Notes in
a principal amount equal to the unredeemed portion thereof will be issued. On
and after the date fixed for redemption, unless the Company defaults on its
payment obligations, interest will cease to accrue on the Notes or portions
thereof called for redemption.
COVENANTS
The Indenture contains, among others, the following covenants:
Repurchase of Notes at the Option of the Holder Upon a Change of Control. In
the event that a Change of Control (as defined below) occurs, each Holder of
Notes will have the right, at such Holder's option, subject to the terms and
conditions of the Indenture, to require the Company to repurchase all or any
part of such Holder's Notes (provided that the principal amount of such Notes
must be $1,000 or an integral multiple thereof) on the date that is no later
than 40 Business Days after the occurrence of such Change of Control (the
"Change of Control Payment Date"), at a cash purchase price (the "Change of
Control Purchase Price") equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to and including the Change of Control
Payment Date.
The Company shall notify the Trustee within five Business Days after each date
upon which the Company knows, or reasonably should know, of the occurrence of a
Change of Control. Within 10 Business Days after the Company knows, or
reasonably should know, of the occurrence of each Change of Control, the
Company shall make an irrevocable, unconditional offer (a "Change of Control
Offer") to all Holders of Notes to repurchase all of the Notes at the Change of
Control Purchase Price by sending written notice of a Change of Control Offer,
by first class mail, to each Holder at its registered address, with a copy to
the Trustee. The notice to Holders shall contain all instructions and
materials required by applicable law and shall contain or make available to
Holders other information material to such Holders' decision to tender Notes
pursuant to the Change of Control Offer.
On or before the Change of Control Payment Date, the Company shall (i) accept
for payment Notes or portions thereof properly tendered pursuant to the Change
of Control Offer prior to the close of the third Business Day preceding the
Change of Control Payment Date, (ii) deposit with the Paying Agent U.S. Legal
Tender sufficient to pay the Change of Control Purchase Price (including
accrued and unpaid interest) of all Notes so tendered and (iii) deliver to the
Trustee Notes so accepted together with an Officers' Certificate listing the
Notes or portions thereof being purchased by the Company. The Paying Agent
shall promptly mail to the Holders of Notes so accepted payment in an amount
equal to the Change of Control Purchase Price (including accrued and unpaid
interest), and the Trustee shall promptly authenticate and mail or deliver to
such Holders a new Note equal in principal amount to any unpurchased portion of
the Note surrendered. Any Notes not so accepted will be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
"Change of Control" means any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) becomes the "beneficial owner" (as the term is used in Rules 13d-3
and 13d-5 under the Exchange Act, whether or not applicable, except that a
person shall be deemed to have "beneficial ownership" of all shares that any
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or
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indirectly, of more than 50% of the total voting power entitled to vote in the
election of directors of the Company; provided however, that a Change of
Control shall not be deemed to have occurred (i) as a result of the formation of
such a "group" or the acquisition of shares of Capital Stock of the Company by
such group if such group includes existing Affiliates and/or persons who
beneficially own in the aggregate, as of the date of the Indenture, 20% or more
of the outstanding shares of Capital Stock of the Company on the date of the
Indenture or (ii) by virtue of the Company, any Subsidiary of the Company, any
employee stock ownership plan or any other employee benefit plan of the Company
or any Subsidiary, or any other person holding Capital Stock of the Company for
or pursuant to the terms of any such employee benefit plan, becoming a
beneficial owner, directly or indirectly, of more than 50% of the total voting
power entitled to vote in the election of directors of the Company.
Failure by the Company to repurchase the Notes when required will result in an
Event of Default with respect to the Notes. The Company's ability to
repurchase the Notes upon a Change of Control may be limited by covenants
contained in future indebtedness.
To the extent applicable and if required by law, the Company will comply with
Section 14 of the Exchange Act and the provisions of Regulation 14E and any
other tender offer rules under the Exchange Act and other securities laws,
rules and regulations which may then be applicable to any offer by the Company
to repurchase the Notes at the option of Holders upon a Change of Control.
Limitation on Incurrence of Long-Term Indebtedness. Except as set forth below,
the Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, incur, issue, assume, guarantee or otherwise become
responsible for (collectively, "incur") any Long-Term Indebtedness (including
Acquired Debt).
The foregoing limitation will not apply to (a) the incurrence by the Company of
Indebtedness if, on the date of the incurrence of such Long-Term Indebtedness,
the Company's Consolidated Net Worth Ratio (after giving effect to such
incurrence of such Long-Term Indebtedness) would be less than or equal to 2.00;
(b) the incurrence by the Company's Subsidiaries of Long-Term Indebtedness if,
on the date of the incurrence of such Long-Term Indebtedness, (i) the Company's
Consolidated Net Worth Ratio (after giving effect to such Subsidiary's
incurrence of such Long-Term Indebtedness) would be less than or equal to 2.00
and (ii) the aggregate principal amount of all Long-Term Indebtedness of the
Company's Subsidiaries (after giving effect to such Subsidiary's incurrence of
such Long-Term Indebtedness) would be less than or equal to the aggregate
Consolidated Net Worth of each of the Company's Subsidiaries (but not including
the Company); (c) the incurrence by the Company of Long-Term Indebtedness
evidenced by the Notes and other obligations under the Indenture up to the
amounts specified therein; (d) the incurrence by any Subsidiary of the Company
of Long-Term Indebtedness to the Company, or to a Subsidiary of the Company,
and the incurrence by the Company of Long-Term Indebtedness to any Subsidiary
of the Company; (e) the incurrence by the Company and its Subsidiaries of
Long-Term Indebtedness so long as such indebtedness is incurred in the ordinary
course of business, consistent with past practices, under (A) Hedging
Obligations, (B) foreign currency hedge obligations, (C) performance bonds, or
letters of credit or reimbursement obligations in respect thereof or (D) letter
of credit obligations related to insurance (including self-insurance) with
respect to claims by employees for work-related injuries; (f) the incurrence by
the Company and its Subsidiaries of Long-Term Indebtedness that is Existing
Indebtedness; and (g) for the purposes of refinancing Long-Term Indebtedness
incurred pursuant to paragraphs (a), (b), (c) and (f) above, the incurrence by
the Company or any Subsidiary of the Company of Refinancing Indebtedness.
Limitation on Certain Liens. The Indenture provides that the Company shall
not, and shall not permit any of its Material Subsidiaries to, issue, incur,
assume, or guarantee any Indebtedness for borrowed money secured by a Lien
(other than Permitted Liens), directly or indirectly, upon any shares of the
Voting Stock of a Material Subsidiary which shares are owned by the Company or
its Material Subsidiaries without effectively providing that the Notes (and if
the Company so elects, any other indebtedness of the Company ranking on a
parity with the Notes) shall be secured equally and ratably with, or prior to,
any such secured Indebtedness so long as such Indebtedness remains outstanding.
Limitations on Transactions with Affiliates. The Indenture provides that the
Company will not, and will not permit any of its Subsidiaries to, sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or asset from, or enter into any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(a) such Affiliate Transaction is on terms no less favorable to the Company or
the relevant Subsidiary than those that would have been obtained in a
comparable transaction by the Company or any such Subsidiary with an unrelated
Person and (b) the Company delivers to the Trustee with respect to any
Affiliate Transaction involving aggregate payments in excess of $10 million in
any fiscal year, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (a) above and such Affiliate Transaction has been approved by a majority
of the disinterested members of the Board of Directors; provided, however, that
(i) any employment agreement entered into by the Company or any of its
Subsidiaries in the ordinary course of the business and consistent with the
past practice of the Company, such Subsidiary or W & D, (ii) transactions
between or among the Company, its Subsidiaries and/or W & D, and (iii)
Affiliate Transactions entered into prior to the Issue Date, shall be deemed
not to be Affiliate Transactions.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person: (i) Long-Term
Indebtedness of any other Person existing at the time such other Person merged
with or into such specified Person, including Long-Term Indebtedness incurred
in connection with, or in contemplation of, such other Person merging with or
into such specified Person and (ii) Long-Term Indebtedness encumbering any
asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Capital Lease Obligation" means, at the time any determination thereof is
made, the amount of the liability in respect of a capital lease that would at
such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock, including, without
limitation, partnership interests.
"Consolidated Net Worth" means, with respect to any Person as of any date, the
sum of (i) the consolidated equity of the common stockholders of such Person
and its Consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock.
"Consolidated Net Worth Ratio" means, with respect to any Person as of the date
of calculation, the ratio of Long-Term Indebtedness of such person and its
Consolidated Subsidiaries as of such date to Consolidated Net Worth of such
person as of such date.
"Default" means any event that is or with the passage of time or the giving of
notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock which by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
final date of maturity of the Notes.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company in existence on the
date of the execution of the Indenture.
"GAAP" means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Standards
Board or in such other statements by such other entity as have been approved by
a significant segment of the accounting profession, which are in effect on the
date of the Indenture.
"Guaranty" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the Obligations of
such Person under interest rate swap agreements, interest rate cap agreements,
and interest rate collar agreements, and other agreements or arrangements
designed to protect such Person against fluctuations in interest rates.
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"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of
the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, and also includes, to the extent not
otherwise included, the Guaranty of any indebtedness of such Person or any
other Person.
"Investments" means, with respect to any Person, all investments by such Person
in other Persons (including Affiliates) in the forms of loans (including a
Guaranty), advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law.
"Long-Term Indebtedness" means, with respect to a Person as of any date, the
aggregate amount of Indebtedness which is characterized as long-term
indebtedness on the balance sheet of such Person in accordance with GAAP.
"Material Subsidiary" means (i) any Subsidiary of the Company which at December
31, 1993 was a Significant Subsidiary or any successor to such Subsidiary and
(ii) any other Subsidiary of the Company or any of its Subsidiaries if the
Company's or any of its Subsidiaries' Investments in such Subsidiary at the
date of determination thereof, represent 20% or more of the Company's
Consolidated Net Worth as of such date; provided, however, that clause (ii)
shall not include any Subsidiary if, at the time that it became a Subsidiary,
the Company contemplated commencing a voluntary case or proceeding under the
Bankruptcy Law with respect to such Subsidiary.
"Minimum Net Capital Amount" means, as of any date, the product of (i) (x) the
total minimum Net Capital required by Rule 15c3-1 under the Exchange Act to be
maintained by JEFCO less (y) the portion of such total minimum Net Capital
required as a result of underwriting activities by JEFCO and (ii) 150%.
"Net Capital" shall have the meaning set forth in Rule 15c3-1 under the
Exchange Act.
"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Liens" means (a) Liens in favor of the Company; (b) Liens on any
shares of Voting Stock of any corporation existing at the time such corporation
becomes a Material Subsidiary of the Company (and any extensions, renewals or
replacements thereof); (c) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of
a like nature incurred in the ordinary course of business; and (d) Liens for
taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded; provided, that any reserve or
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor.
"Person or person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Refinancing Indebtedness" means Indebtedness (a) issued in exchange for, or
the proceeds from the issuance and sale of which are used to substantially
concurrently repay, redeem, decrease, refund, refinance, discharge or otherwise
retire for value, in whole or in part, or (b) constituting an amendment,
modification or supplement to, or a deferral or renewal of ((a) and (b) above
are, collectively a "Refinancing"), any Indebtedness in a principal amount not
to exceed (after deduction of reasonable and customary fees and expenses
incurred in connection with the Refinancing) the lesser of (i) the principal
amount of the Indebtedness to be Refinanced and (ii) if such Indebtedness being
Refinanced was issued with an original issue discount, the accredited value
thereof (as determined in accordance with GAAP) at the time of such
Refinancing; provided, that Refinancing Indebtedness shall (x) not have a
Weighted Average Life to Maturity shorter than the Indebtedness to be so
refinanced at the time of such Refinancing, (y) in all respects, be no less
subordinated, if applicable, to the rights of Holders pursuant to the
Securities than was the Indebtedness to be Refinanced and (z) have no scheduled
installment of principal earlier than any installment of principal of the
Indebtedness to be so
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refinanced scheduled to come due prior to the final maturity of the Securities;
and provided further that any Existing Indebtedness or new Indebtedness shall
remain an Obligation of the Company.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the Holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
any Person (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency).
"Weighted Average Life to Maturity" means, when applied to any Indebtedness at
any date, the number of years obtained by dividing (a) the sum of the products
obtained by multiplying (x) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (y) the number of
years (calculated to the nearest one-twelfth) that will elapse between such
date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may not, in a single transaction or
through a series of related transactions, consolidate with or merge with or
into any other Person or, directly or indirectly, sell, lease, assign, convey
or transfer its properties and assets as an entirety or substantially as an
entirety to any person or group of affiliated persons unless (A) either the
Company shall be the continuing person, or the successor (if other than the
Company) is a corporation organized under the laws of any domestic jurisdiction
and expressly assumes the Company's obligations under the Indenture and the
Notes issued thereunder; (B) immediately after giving effect to such
transaction, no Default or Event of Default, shall have occurred and be
continuing; and (C) if a supplemental indenture is required in connection with
such transaction, certain certificates and legal opinions are delivered.
The Indenture provides that, upon any consolidation or merger or transfer of
the properties and assets of the Company substantially as an entirety as
described in the preceding paragraph, the successor corporation formed by such
consolidation or into which the Company is merged or to which such conveyance
or transfer is made shall be substituted for the Company with the same effect
as if such successor corporation had been named as the Company. Thereafter,
the Company shall be relieved of the performance and observance of all
obligations and covenants of such Indenture and the Notes, including but not
limited to the obligation to make payment of the principal of and interest, if
any, on all the Notes then outstanding, and the Company may thereupon or any
time thereafter be liquidated and dissolved.
SATISFACTION AND DISCHARGE
The Company will be discharged from its obligations under the outstanding Notes
upon satisfaction of the following conditions: (a) the Company has irrevocably
deposited with the Trustee either (i) money in an amount as will, or (ii) U.S.
Government Obligations as will, together with the predetermined and certain
income to accrue thereon without consideration of any reinvestment thereof, or
(iii) a combination of (i) and (ii) as will (in a written opinion with respect
to (ii) or (iii) of independent public accountants delivered to the Trustee),
be sufficient to pay and discharge the entire principal of, premium, if any,
and each installment of principal and interest to Stated Maturity on the
outstanding Notes; (b) the Company has paid or caused to be paid all other sums
payable with respect to the outstanding Notes; (c) the Trustee has received an
Officers' Certificate and an Opinion of Counsel each stating that all
conditions precedent have been complied with; and (d) the Trustee has received
an opinion of tax counsel to the effect that such deposit and discharge will
not cause the Holders of the Notes to recognize income, gain or loss for
federal income tax purposes and that the Holders will be subject to federal
income tax in the same amounts, in the same manner and at the same times as
would have been the case if such deposit and discharge had not occurred. Upon
such discharge, the Company will be deemed to have satisfied all the
obligations under the Indenture, except for obligations with respect to
registration of transfer and exchange of the Notes, and the rights of the
Holders to receive from deposited funds payment of the principal of (and
premium, if any) and interest on the Notes.
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MODIFICATION OF THE INDENTURES
The Indenture provides that the Company and the Trustee thereunder may, without
the consent of any Holders of Notes, enter into supplemental indentures for the
purposes, among other things, of adding to the Company's covenants, adding
additional Events of Default, establishing the form or terms of Notes or curing
ambiguities or inconsistencies in such Indenture or making other provisions;
provided that such action shall not adversely affect the interests of the
Holders of Notes in any material respect.
The Indenture contains provisions permitting the Company, with the consent of
the Holders of not less than a majority in principal amount of the outstanding
Notes, to execute supplemental indentures adding any provisions to or changing
or eliminating any of the provisions of such Indenture or modifying the rights
of the Holders of the Notes, except that no such supplemental indenture may,
without the consent of the Holders of all the outstanding Notes affected
thereby, among other things: (i) reduce the percentage of principal amount of
Securities whose Holders must consent to an amendment, supplement or waiver of
any provision of this Indenture or the Securities; (ii) reduce the rate or
extend the time for payment of interest on any Security; (iii) reduce the
principal amount of any Security or the Redemption Price; (iv) change the
Stated Maturity of any Security or extend any Maturity Date of any Security;
(v) alter the redemption provisions in a manner adverse to any Holder; (vi)
make any changes in the provisions concerning waivers of Defaults or events of
Default by Holders of the Securities or the rights of Holders to recover the
principal or premium of, interest on, or redemption payment with respect to,
any Security; (vii) make the principal of, or the interest on, any Security
payable with anything or in any manner other than as provided for in this
Indenture and the Securities on the Issue Date; or (viii) make the Securities
subordinated in right of payment to any extent or under any circumstances to
any other indebtedness.
EVENTS OF DEFAULT
An Event of Default in respect of the Notes is defined in the Indenture to be:
(i) the failure by the Company to pay installments of interest on the Notes as
and when the same becomes due and payable and the continuance of such failure
for 30 days; (ii) the failure by the Company to pay all or any part of the
principal or premium, if any, on the Notes when the same becomes due and
payable, whether payable at maturity, by call for redemption, repurchase
obligation or otherwise; (iii) the failure by the Company for 60 days after a
notice of default with respect to the performance of any covenant in the
Indenture; (iv) certain events of bankruptcy, insolvency or reorganization; (v)
an event of default under any mortgage, indenture or other instrument under
which any Indebtedness of the Company or any Subsidiary is outstanding if (a)
such default either (i) results from the failure to pay any principal of any
Indebtedness at maturity (after expiration of any applicable grace period) or
(ii) relates to an obligation other than the obligation to pay any principal of
such Indebtedness at maturity and results in the Holder or Holders of such
Indebtedness causing such Indebtedness to become due prior to its stated
maturity and (b) the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to pay
principal at maturity or the maturity of which has been so accelerated,
aggregates $15,000,000 or more at any one time; (vi) the failure of the Company
to maintain a minimum Consolidated Net Worth greater than or equal to
$87,000,000, and the continuance of any such failure for a period of 180
consecutive days; or (vii) the failure of JEFCO to maintain Net Capital greater
than or equal to the Minimum Net Capital Amount, and the continuance of any
such failure for a period of 30 consecutive days.
The Indenture provides that if an Event of Default specified therein in respect
of any outstanding Notes issued under such Indenture shall have occurred and is
continuing, either the Trustee thereunder or the Holders of not less than 25%
in principal amount of the outstanding Notes may declare the principal of all
of the outstanding Notes, together with accrued interest thereon, to be
immediately due and payable.
The Indenture provides that the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee thereunder, or exercising any trust or power conferred
on such Trustee, with respect to the Notes; provided that (i) such direction
shall not be in conflict with any rule of law or with the Indenture, (ii) the
Trustee shall not determine that the action so directed would be unjustly
prejudicial to the Holders not taking part in such direction, and (iii) the
Trustee may take any other action deemed proper that is not inconsistent with
such direction.
The Indenture provides that the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes may on behalf of the
Holders of all of the outstanding Notes waive any past default under the
Indenture and its consequences, except a default (i) in the payment of the
principal of (or premium, if any) or any interest on any of the Notes or (ii)
in respect of a covenant or provision of the Indenture which, under the terms
of the Indenture, cannot be modified or amended without the consent of the
Holders of all of the outstanding Notes affected thereby.
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The Indenture contains provisions entitling the Trustee thereunder, subject to
the duty of such Trustee during an Event of Default in respect of any Notes to
act with the required standard of care, to be indemnified by the Holders of the
Notes before proceeding to exercise any right or power under the Indenture at
the request of the Holders of the Notes.
The Indenture provides that the Trustee thereunder will, within 90 days after
the occurrence of a Default in respect of any Notes, give to the Holders of the
Notes notice of all uncured and unwaived defaults known to it; provided,
however, that, except in the case of a default in the payment of the principal
of (or premium, if any) or any interest on any of the Notes such Trustee will
be protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interests of the Holders of the Notes.
NOTICES
Except as otherwise provided in the Indenture, notices to Holders will be given
by mail to the addresses of such Holders as they appear in the Note Register.
REPORTS
The Company is required to furnish to the Trustee annually a statement as to
the fulfillment by the Company of all of its covenants under the Indenture.
The Company will mail copies of its annual reports and quarterly reports mailed
to its shareholders to Holders of the Notes. If the Company is not required to
furnish annual or quarterly reports to its shareholders, the Company will, upon
request, mail to each Holder, at such Holder's address as appearing on the Note
Register, audited annual financial statements prepared in accordance with GAAP
and unaudited condensed quarterly financial statements. Such financial
statements shall be accompanied by management's discussion and analysis of the
results of operations and financial condition of the Company for the period
reported upon in substantially the form required under the rules and
regulations of the Commission currently in effect.
THE TRUSTEE
The Trustee is a New York banking corporation. The Indenture will provide
that, in case an Event of Default shall occur and be continuing, the Trustee
will be required to use the degree of care of a prudent person in the conduct
of his own affairs in the exercise of its power. Subject to such provisions,
the Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any of the Holders, unless they shall
have offered to the Trustee security and indemnity satisfactory to it. The
Trustee will be permitted to engage in other transactions with the Company and
its subsidiaries; provided, however, that if such Trustee acquires any
conflicting interest at such time as a default is pending under the Indenture,
such Trustee must (with certain exceptions) eliminate such conflict or resign.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company will
have any liability for any obligations of the Company under the Notes, the
Indenture, or the Registration Rights Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder
of the Notes by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 Business Days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
38
<PAGE> 42
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
considerations applicable to the exchange of Old Notes for New Notes and the
ownership and disposition of the New Notes by Holders who acquire the New
Notes. This discussion is based on laws, regulations, rulings and decisions
now in effect, all of which are subject to change, possibly retroactively. The
discussion does not cover all aspects of Federal income taxation that may be
relevant to Holders, in light of their specific circumstances, particularly
Holders subject to special treatment under the Federal income tax laws (such as
insurance companies, financial institutions, tax exempt organizations, foreign
persons, and taxpayers subject to the alternative minimum tax). It also does
not address state, local, foreign or other tax laws. The description assumes
that Holders of the New Notes will hold the New Notes as "capital assets"
(generally, property held for investment purposes) under the Internal Revenue
Code of 1986, as amended (the "Code"). EACH HOLDER SHOULD CONSULT HIS TAX
ADVISOR IN DETERMINING THE FEDERAL, STATE, LOCAL AND ANY OTHER TAX CONSEQUENCES
TO THE PARTICULAR HOLDER OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES AND THE
OWNERSHIP AND DISPOSITION OF THE NEW NOTES.
EXCHANGE OF NOTES
There will be no Federal income tax consequences to Holders exchanging Old
Notes for New Notes pursuant to the Exchange Offer and such a Holder will have
the same adjusted basis and holding period in the New Notes as it had in the
Old Notes immediately before the exchange.
DISPOSITION OF NEW NOTES
In general, the Holder of a New Note will recognize gain or loss upon the sale,
exchange, redemption, retirement or other disposition of the New Note measured
by the difference between the amount of cash and the fair market value of
property received (except to the extent attributable to the payment of accrued
interest), and the Holder's tax basis in the New Note. Subject to the market
discount rules discussed below, the gain or loss on the sale, exchange,
redemption or retirement of the New Note should be long-term capital gain or
loss, provided the Holder has a holding period for the New Note (which would
include the holding period of the Old Note) of more than one year.
MARKET DISCOUNT ON RESALE
Holders, other than original purchasers of Old Notes in the Offering, should be
aware that the resale of the New Notes may be affected by the market discount
provisions of the Code. These rules generally provide that if a subsequent
Holder of a Note purchases it at a market discount in excess of a statutorily
defined de minimis amount, and thereafter recognizes gain upon a disposition
(including a partial redemption) of the Note, the lesser of such gain or the
portion of the market discount that accrued while the Note was held by such
Holder will be treated as ordinary interest income at the time of the
disposition. The rules also provide that a Holder who acquires a Note at a
market discount may be required to defer all or a portion of any interest
expense that may otherwise be deductible on any indebtedness incurred or
continued to purchase or carry such Note. Such deferred interest may be taken
into account upon disposition of the Note in a taxable transaction, to the
extent of gain recognized on disposition of the Note in a nonrecognition
transaction and, if the Holder so elects, over the term of the Note to the
extent that interest income on the Note includable in income for any taxable
year exceeds the amount of interest paid or accrued during the taxable year on
indebtedness incurred or accrued to purchase or carry the Note. If a Holder of
a Note elects to include market discount in income currently, neither of the
foregoing rules would apply.
39
<PAGE> 43
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that for a period of 90 days after
the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer, at no charge, for use in
connection with any such resale. In addition, until a period of 90 days after
the Expiration Date, all dealers effecting transactions in the New Notes,
whether or not participating in the Exchange Offer, may be required to deliver
a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer (which shall not include the expenses of any Holder in
connection with resales of the New Notes or commissions or concessions of any
brokers or dealers).
EXPERTS
The consolidated financial statements and schedule of Jefferies Group, Inc. and
subsidiaries as of December 31, 1993 and 1992, and for each of the years in the
three-year period ended December 31, 1993, have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
LEGAL MATTERS
The validity of the New Notes will be passed upon for the Company by Morgan,
Lewis & Bockius, Los Angeles, California.
Michael L. Klowden, a member of Morgan, Lewis & Bockius, is a director of the
Company.
40
<PAGE> 44
<TABLE>
<S> <C>
No dealer, salesperson or other person has been $50,000,000
authorized to give any information or to make any
representations other than those contained in this
Prospectus, and, if given or made, such information
or representations must not be relied upon as
having been authorized by the Company. This
Prospectus does not constitute an offer to sell, or
a solicitation of an offer to buy, the New Notes in
any jurisdiction where, or to any person to whom, [LOGO]
it is unlawful to make such offer or solicitation. JEFFERIES
Neither the delivery of this Prospectus nor any Group, Inc.
sale made hereunder shall, under any circumstances,
create any implication that the information
contained herein is correct as of any time
subsequent to the date hereof or that there has Series B
been no change in the affairs of the Company since 8 7/8% Senior Notes due 2004
such date.
_____________________________
TABLE OF CONTENTS ______________
Page
Additional Information . . . . . . . . . . . . . . . 2 PROSPECTUS
Incorporation of Certain Information by Reference. . 2 ______________
Prospectus Summary . . . . . . . . . . . . . . . . . 3
Investment Considerations. . . . . . . . . . . . . . 7
Capitalization . . . . . . . . . . . . . . . . . . . 8
Selected Consolidated Financial
Information. . . . . . . . . . . . . . . . . . . . 9
Recent Financial Results . . . . . . . . . . . . . . 10
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . 12
The Exchange Offer . . . . . . . . . . . . . . . . . 16
Business . . . . . . . . . . . . . . . . . . . . . . 22
Properties . . . . . . . . . . . . . . . . . . . . . 27
Management . . . . . . . . . . . . . . . . . . . . . 28
Description of the Notes . . . . . . . . . . . . . . 31
Certain Federal Income Tax Consequences. . . . . . . 39
Plan of Distribution . . . . . . . . . . . . . . . . 40
Experts. . . . . . . . . . . . . . . . . . . . . . . 40
Legal Matters. . . . . . . . . . . . . . . . . . . . 40
_____________________, 1994
</TABLE>
<PAGE> 45
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware permits a
corporation, under specified circumstances, to indemnify its directors,
officers, employees or agents against expenses (including attorney's fees),
judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, unless and only to the extent that the court in which the action
or suit was brought shall determine upon application that the defendant
directors, officers, employees, or agents are fairly and reasonably entitled to
indemnity for such expenses despite such adjudication of liability.
The Company's By-laws provide that the Company shall, to the fullest extent
authorized or permitted by law, indemnify any current or former director or
officer of the Company. Subject to applicable law, the Company may indemnify
an employee or agent of the Company to the extent that the Board of Directors
may determine in its discretion.
Article Seven of the Company's Restated Certificate of Incorporation provides
that a director of the Company shall not be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (a) for any breach of the duty of loyalty to the
Company or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the General Corporation Law of the State of Delaware, or (d) for
any transaction from which a director derives an improper personal benefit.
The Company's directors and officers are covered by insurance policies
indemnifying them against certain civil liabilities, including liabilities
under the federal securities laws, which might be incurred by them in such
capacity.
ITEM 21. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
- ----------- -----------------------
<S> <C> <C>
4.1* -- Indenture, dated as of April 28, 1994, by and between the
Company and The Bank of New York, as trustee.
4.2** -- Form of First Supplemental Indenture, dated as of July 14,
1994, by and between the Company and The Bank of New York,
as trustee.
5.1* -- Opinion of Morgan, Lewis & Bockius.
10.1* -- Form of Purchase Agreement, dated as of April 28, 1994,
by and among the Company and each of the purchasers
signatories thereto.
10.2* -- Form of Registration Rights Agreement, dated as of April
28, 1994, by and among the Company and the purchasers
signatories thereto.
12.1* -- Computation of Ratio of Earnings to Fixed Charges.
23.1** -- Consent of KPMG Peat Marwick, independent certified public
accountants.
23.2* -- Consent of Morgan, Lewis & Bockius (included in the
opinion filed as Exhibit No. 5.1 to the Registration
Statement).
24.1* -- Power of Attorney
</TABLE>
II-1
<PAGE> 46
<TABLE>
<S> <C> <C>
25.1* -- Form T-1 of The Bank of New York, as Trustee under the
Indenture filed as Exhibit 4.1 to the Registration
Statement.
99.1* -- Form of Letter of Transmittal.
_____________
* Previously filed
** Filed herewith
</TABLE>
ITEM 22. UNDERTAKINGS.
A. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
B. (1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the
Company pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement to include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
D. The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of any employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
E. The Company hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Item 4,
10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
II-2
<PAGE> 47
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Los Angeles, State of
California, on July 14, 1994.
JEFFERIES GROUP, INC.
By: /s/ FRANK E. BAXTER
-------------------------------
Frank E. Baxter, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ FRANK E. BAXTER Director, President July 14, 1994
- ----------------------------------------- and Chief Executive Officer
Frank E. Baxter (Principal Executive Officer)
* Executive Vice President and Chief July 14, 1994
- ------------------------------------------ Financial Officer (Principal
Alan D. Browning Financial and Accounting Officer)
_________________________________________ Director _________, 1994
Richard G. Dooley
_________________________________________ Director _________, 1994
Tracy G. Herrick
_________________________________________ Director _________, 1994
Michael L. Klowden
</TABLE>
II-3
<PAGE> 48
<TABLE>
<S> <C> <C>
* Director July 14, 1994
- ------------------------------------------
Frank J. Macchiarola
* Director July 14, 1994
- ------------------------------------------
Barry M. Taylor
* Director July 14, 1994
- ------------------------------------------
Mark A. Wolfson
By: /s/ FRANK E. BAXTER July 14, 1994
- ------------------------------------------
Frank E. Baxter
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 49
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
- ----------- -----------------------
<S> <C> <C>
4.1* -- Indenture, dated as of April 28, 1994, by and between The
Company and The Bank of New York, as trustee.
4.2** -- Form of First Supplemental Indenture, dated as of July 14,
1994, by and between the Company and The Bank of New York,
as trustee.
5.1* -- Opinion of Morgan, Lewis & Bockius.
10.1* -- Form of Purchase Agreement, dated as of April 28, 1994,
by and among the Company and each of the purchasers
signatories thereto.
10.2* -- Form of Registration Rights Agreement, dated as of April
28, 1994, by and among the Company and the purchasers
signatories thereto.
12.1* -- Computation of Ratio of Earnings to Fixed Charges.
23.1** -- Consent of KPMG Peat Marwick, independent certified public
accountants.
23.2* -- Consent of Morgan, Lewis & Bockius (included in the
opinion filed as Exhibit No. 5.1 to the Registration
Statement).
24.1* -- Power of Attorney.
25.1* -- Form T-1 of The Bank of New York, as Trustee under the
Indenture filed as Exhibit 4.1 to the Registration
Statement.
99.1* -- Form of Letter of Transmittal.
_____________
* Previously filed
** Filed herewith
</TABLE>
<PAGE> 1
EXHIBIT 4.2
===============================================================================
JEFFERIES GROUP, INC.,
ISSUER
AND
THE BANK OF NEW YORK,
TRUSTEE
___________________________
FIRST SUPPLEMENTAL INDENTURE
DATED AS OF JULY 14, 1994
___________________________
$50,000,000
8 7/8% SENIOR NOTES DUE 2004
____________________________
SUPPLEMENTING THE INDENTURE DATED AS OF APRIL 28, 1994
===============================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of July 14, 1994,
between Jefferies Group, Inc., a Delaware corporation (the "Company"), and The
Bank of New York, a New York banking corporation, as trustee (the "Trustee").
WHEREAS, the Company and the Trustee executed and delivered
that certain indenture, dated as of April 28, 1994 (the "Indenture"), providing
for the issuance thereunder by the Company, and the authentication and delivery
by the Trustee, of the Company's 8 7/8% Senior Notes due 2004 (the "Notes").
WHEREAS, Section 9.01 of the Indenture authorizes the Company
and the Trustee, without notice to or the consent of any holders of the Notes
("Holders"), to enter into a supplemental indenture to cure any ambiguity,
defect or inconsistency.
WHEREAS, the Company and the Trustee, by appropriate corporate
action, have determined to supplement the Indenture in the manner described
below and all acts and proceedings required by law, by the Indenture, and by
the Articles of Incorporation and the Bylaws of the Company necessary to
authorize and constitute this First Supplemental Indenture a valid and binding
agreement in accordance with the terms hereof, have been done and taken.
NOW, THEREFORE, in consideration of the foregoing, the Company
covenants and agrees with the Trustee, for the equal and proportionate benefit
of the respective Holders from time to time of the Notes, as follows:
1. Amendment to Section 1.01 of the Indenture. The
definition of Minimum Net Capital Amount is amended in its entirety to read as
follows:
"Minimum Net Capital Amount" means, as of any date,
the product of (i)(x) the total minimum Net Capital required
by Rule 15c3-1 under the Exchange Act to be maintained by
Jefferies & Company, Inc. less (y) the portion of such total
minimum Net Capital required as a result of underwriting
activities by Jefferies & Company, Inc. and (ii) 150%.
2. Full Force and Effect. The Indenture, as amended and
supplemented by this First Supplemental Indenture, shall be and remain in full
force and effect. Any capitalized terms used herein and not otherwise defined
shall have the meanings given thereto in the Indenture.
3. Governing Law. This First Supplemental Indenture
shall be governed by and construed in accordance with the laws of the State of
New York without regard to principles of conflict of laws.
4. Duplicate Originals. This First Supplemental
Indenture may be executed in any number of counterparts and by the parties
hereto in separate counterparts,
- 1 -
<PAGE> 3
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first written above.
JEFFERIES GROUP, INC.
By:____________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By:____________________________
Name:
Title:
- 2 -
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Jefferies Group, Inc.:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK
Los Angeles, California
July 13, 1994
