<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 1997
SECURITIES ACT FILE NO. 33-63795
INVESTMENT COMPANY ACT FILE NO. 811-7389
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-2
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] PRE-EFFECTIVE AMENDMENT NO. 3
[ ] POST-EFFECTIVE AMENDMENT NO.
AND/OR
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] AMENDMENT NO. 3
(check appropriate box or boxes)
NEXTEL STRYPES TRUST*
(Exact Name of Registrant as Specified in Charter)
C/O PUGLISI & ASSOCIATES
850 LIBRARY AVENUE
SUITE 204
NEWARK, DELAWARE 19715
(Address of Principal Executive Offices)
(302) 738-6680
(Registrant's Telephone Number, including Area Code)
DONALD J. PUGLISI
PUGLISI & ASSOCIATES
850 LIBRARY AVENUE
SUITE 204
NEWARK, DELAWARE 19715
(Name and Address of Agent for Service)
COPIES TO:
<TABLE>
<S> <C>
NORMAN D. SLONAKER, ESQ. WILLIAM J. PHILLIPS, ESQ.
BROWN & WOOD LLP DEWEY BALLANTINE
ONE WORLD TRADE CENTER 1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10048-0557 NEW YORK, NEW YORK 10019
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of this Registration Statement.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, as amended, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
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PROPOSED MAXIMUM
AMOUNT PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE OFFERING REGISTRATION
BEING REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
STRYPES
representing shares of beneficial
interest................................. 8,243,875 STRYPES $13.56 $111,786,945 $30,426.55(3)
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</TABLE>
(1) Includes an aggregate of 1,075,288 STRYPES that (i) may be issued in
connection with the exercise of an over-allotment option and (ii) were
subscribed for and purchased by an affiliate of Merrill Lynch, Pierce,
Fenner & Smith Incorporated in connection with the formation of Nextel
STRYPES Trust.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) A registration fee in the amount of $3,448.28 was paid with the original
filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
* Formerly ABC STRYPES Trust.
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<PAGE> 2
CROSS-REFERENCE SHEET*
<TABLE>
<CAPTION>
ITEM NUMBER IN FORM N-2 CAPTION IN PROSPECTUS
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<C> <S> <C>
PART A -- INFORMATION REQUIRED IN A PROSPECTUS
1. Outside Front Cover........................ Front Cover Page
2. Inside Front and Outside Back Cover Page... Front Cover Page; Inside Front Cover Page
3. Fee Table and Synopsis..................... Prospectus Summary; Fee Table
4. Financial Highlights....................... Not Applicable
5. Plan of Distribution....................... Front Cover Page; Prospectus Summary;
Underwriting
6. Selling Shareholders....................... Not Applicable
7. Use of Proceeds............................ Use of Proceeds; Investment Objective and
Policies
8. General Description of the Registrant...... Front Cover Page; Prospectus Summary; The
Trust; Investment Restrictions;
Investment Objective and Policies; Risk
Factors
9. Management................................. Trustees; Management Arrangements
10. Capital Stock, Long-Term Debt and Other
Securities............................... Description of STRYPES
11. Defaults and Arrears on Senior
Securities............................... Not Applicable
12. Legal Proceedings.......................... Not Applicable
13. Table of Contents of the Statement of
Additional Information................... Not Applicable
PART B -- INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
14. Cover Page................................. Not Applicable
15. Table of Contents.......................... Not Applicable
16. General Information and History............ The Trust
17. Investment Objective and Policies.......... Investment Objective and Policies;
Investment Restrictions
18. Management................................. Trustees; Management Arrangements
19. Control Persons and Principal Holders of
Securities............................... Management Arrangements
20. Investment Advisory and Other Services..... Management Arrangements
21. Brokerage Allocation and Other Practices... Investment Objective and Policies
22. Tax Status................................. Certain United States Federal Income Tax
Considerations
23. Financial Statements....................... Financial Statements
PART C -- OTHER INFORMATION
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
- ---------------
* Pursuant to the General Instructions to Form N-2, all information required to
be set forth in Part B: Statement of Additional Information has been included
in Part A: The Prospectus.
<PAGE> 3
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.
LOGO(R)
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 14, 1997
PROSPECTUS
- ----------------
7,168,587 STRYPES(SM)
NEXTEL STRYPES TRUST
(EXCHANGEABLE FOR SHARES OF CLASS A COMMON STOCK OF NEXTEL COMMUNICATIONS, INC.)
------------------------
Each of the Structured Yield Product Exchangeable for Stock(SM) (the
"STRYPES") of Nextel STRYPES Trust (the "Trust") offered hereby represents a
proportionate share of beneficial interest in the Trust, which entitles the
holder to receive an annual distribution of $ , and will be exchanged for
between % and 100% of each type of Reference Property (or, in certain
circumstances, cash, or a combination of cash and Reference Property, with an
equal value) upon conclusion of the term of the Trust on , 2000 (the
"Exchange Date"). The term "Reference Property" means initially one share of
Class A Common Stock, par value $.001 per share (the "Nextel Common Stock"), of
Nextel Communications, Inc. (the "Company") and shall be subject to adjustment
from time to time prior to the Exchange Date to reflect the addition or
substitution of any cash, securities and/or other property resulting from the
application of the adjustment provisions described herein. The annual
distribution of $ per STRYPES is payable quarterly on each , , and
, commencing , 1997. The STRYPES are not subject to redemption.
The Trust is a newly organized Delaware business trust established to
purchase and hold (i) a series of zero-coupon U.S. Government securities ("U.S.
Treasury Securities") maturing on a quarterly basis through the Exchange Date
and (ii) a forward purchase contract (the "Contract") with certain existing
stockholders (the "Contracting Stockholders") of the Company relating to the
Reference Property. The Trust's investment objective is to distribute to holders
of the STRYPES on a quarterly basis $ per STRYPES and, on the Exchange
Date, a percentage of each type of Reference Property (or, in certain
circumstances, cash, or a combination of cash and Reference Property, with an
equal value) per STRYPES equal to the Exchange Amount. The Exchange Amount is
equal to: (a) if the Reference Property Value (as defined herein) is greater
than or equal to $ (the "Threshold Appreciation Price"), % of each type
of Reference Property, (b) if the Reference Property Value is less than the
Threshold Appreciation Price but greater than the Initial Price, a percentage of
each type of Reference Property, allocated as proportionately as practicable, so
that the aggregate value thereof equals the Initial Price and (c) if the
Reference Property Value is less than or equal to the Initial Price, 100% of
each type of Reference Property. The "Initial Price" is $ , which amount is
equal to the last reported sale price of the Nextel Common Stock on the Nasdaq
National Market ("NASDAQ") on , 1997. Holders otherwise entitled to
receive fractional units or interests of any type of Reference Property in
respect of their aggregate holdings of STRYPES will receive cash in lieu
thereof. Pursuant to the terms of the Contract, the Contracting Stockholders are
obligated to deliver to the Trust immediately prior to the Exchange Date the
Reference Property required by the Trust in order to exchange all of the STRYPES
on the Exchange Date in accordance with its investment objective. To the extent
permitted by applicable law, the obligation of each Contracting Stockholder to
deliver Reference Property under the Contract may be cash settled, at the option
of such Contracting Stockholder, in whole or in part, by delivering to the Trust
immediately prior to the Exchange Date, in lieu of the portion of the Reference
Property otherwise deliverable in respect of which an election to exercise the
cash settlement option is made, cash in an amount equal to the value of such
Reference Property immediately prior to the Exchange Date (the "Cash Settlement
Option"). In the event that all or any of the Contracting Stockholders elect to
exercise the Cash Settlement Option, holders of the STRYPES will receive cash,
or a combination of cash and Reference Property, on the Exchange Date. AS
DESCRIBED HEREIN, THE REFERENCE PROPERTY VALUE WILL REPRESENT A DETERMINATION OF
THE VALUE OF THE REFERENCE PROPERTY IMMEDIATELY PRIOR TO THE EXCHANGE DATE.
ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS OF
THE STRYPES ON THE EXCHANGE DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE
PRICE OF THE STRYPES. IF THE REFERENCE PROPERTY VALUE IS LESS THAN THE INITIAL
PRICE, SUCH AMOUNT RECEIVABLE ON THE EXCHANGE DATE WILL BE LESS THAN THE ISSUE
PRICE PAID FOR THE STRYPES, IN WHICH CASE AN INVESTMENT IN THE STRYPES WILL
RESULT IN A LOSS. See "Investment Objectives and Policies -- General," "-- The
Contract."
(continued on following page)
SEE "RISK FACTORS," BEGINNING ON PAGE 20 OF THIS PROSPECTUS, FOR CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE STRYPES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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PRICE TO SALES PROCEEDS TO
PUBLIC LOAD(1) TRUST(2)
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<S> <C> <C> <C>
Per STRYPES................................. $ $ $
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Total(3).................................... $ $ $
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</TABLE>
(1) Each of the Company and the Contracting Stockholders have agreed to
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of $ payable by the Trust.
(3) The Trust has granted the Underwriters an option, exercisable for 30 days
from the date hereof, to purchase up to an additional 1,075,288 STRYPES
(subject to decrease as a result of the issuance and sale of STRYPES in
connection with the formation of the Trust) to cover over-allotments, if any.
If all such STRYPES are purchased, the total Price to Public, Sales Load and
Proceeds to Trust will be $ , $ and $ , respectively. See
"Underwriting."
------------------------
The STRYPES are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, and subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the STRYPES will be made through the facilities of The Depository
Trust Company on or about , 1997.
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(SM) Service mark of Merrill Lynch & Co., Inc.
------------------------
<TABLE>
<S> <C>
MERRILL LYNCH & CO. DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
</TABLE>
------------------------
The date of this Prospectus is , 1997.
<PAGE> 4
(continued from previous page)
In the event of a consolidation or merger of the Company or any successor
thereto into another entity, or the liquidation of the Company or any such
successor, or certain related events, or upon the occurrence of certain defaults
by any Contracting Stockholder under the Contract or the collateral arrangements
described herein, the Contract would be accelerated, the Trust's assets (other
than assets received pursuant to the Contract) would be liquidated, the net
assets of the Trust would be distributed pro rata to the holders of the STRYPES
and the term of the Trust would expire. See "Investment Objective and
Policies -- The Contract -- Reorganization Events Causing a Dissolution of the
Trust" and "-- Collateral Arrangements; Acceleration."
Reference is made to the accompanying prospectus of the Company with
respect to the shares of Nextel Common Stock which may be received by a holder
of STRYPES on the Exchange Date or upon earlier dissolution of the Trust. The
Company is not affiliated with the Trust or with any Contracting Stockholder
presently, will not receive any of the proceeds from the sale of the STRYPES and
will have no obligations with respect to the STRYPES.
The STRYPES have been approved for listing on the American Stock Exchange
("AMEX"), subject to official notice of issuance. Prior to the offering there
has been no public market for the STRYPES. Shares of closed-end investment
companies have in the past frequently traded at a discount from their net asset
values and initial public offering prices. The risks associated with this
characteristic of closed-end investment companies may be greater for investors
expecting to sell shares of a closed-end investment company soon after the
completion of an initial public offering.
The STRYPES are designed to provide investors with a current distribution
yield (the Company has not paid any dividends on the Nextel Common Stock), while
also providing the opportunity for investors to share in the appreciation, if
any, of the value of the Reference Property above the Threshold Appreciation
Price. However, the opportunity for equity appreciation afforded by an
investment in the STRYPES is less than that afforded by a direct investment in
the Reference Property because the amount receivable by a holder of a STRYPES
upon exchange on the Exchange Date will only exceed the issue price of such
STRYPES if the Reference Property Value exceeds the Threshold Appreciation
Price, which represents an appreciation of % over the Initial Price. In
addition, because each STRYPES will entitle the holder to receive only % of
each type of Reference Property if the Reference Property Value exceeds the
Threshold Appreciation Price, holders of the STRYPES will be entitled to receive
upon exchange only % of any appreciation of the value of the Reference
Property above the Threshold Appreciation Price.
The STRYPES may be a suitable investment for investors who are able to
understand the unique nature of the Trust and the economic characteristics of
the Contract and the U.S. Treasury Securities held by the Trust.
The Trust has adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that, except in limited
circumstances, the U.S. Treasury Securities may not be disposed of prior to
their respective maturities. As a result, the Trust will continue to hold the
Contract despite any significant decline in the value of the Reference Property,
including the Nextel Common Stock, or adverse changes in the financial condition
of the issuer of any Reference Security (as defined herein), including the
Company. The Trust will not be managed like a typical closed-end investment
company. The Trust will be treated as a grantor trust for United States Federal
income tax purposes and each holder of STRYPES will be treated as the owner of
its pro rata portion of the Contract and the U.S. Treasury Securities. The U.S.
Treasury Securities held by the Trust will be treated for United States Federal
income tax purposes as having original issue discount and holders of STRYPES
will be required to recognize currently as income their pro rata portion of such
original issue discount as it accrues over the term of the Trust. The quarterly
cash distributions paid to the holders of STRYPES, which distributions are
anticipated to exceed the currently includable original issue discount, will be
treated as a tax-free return of the holders' costs of the U.S. Treasury
Securities and any previously included original issue discount, and therefore
will not be considered current income to holders upon receipt thereof for United
States Federal income tax purposes. Although under current law holders of
STRYPES should not recognize income, gain or loss with respect to the Contract
over its term, holders will recognize taxable gain or loss upon receipt of cash,
if any, upon dissolution of the Trust. For a discussion of certain United States
Federal income tax considerations for holders of the STRYPES, see "Certain
United States Federal Income Tax Considerations."
This Prospectus sets forth concisely information about the Trust that a
prospective investor ought to know before investing and should be read and
retained for future reference.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE STRYPES OR THE
NEXTEL COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE
(WITH RESPECT TO THE STRYPES), THE NASDAQ NATIONAL MARKET (WITH RESPECT TO THE
NEXTEL COMMON STOCK), IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary should be read in conjunction with the more detailed
information appearing elsewhere in this Prospectus. Unless otherwise indicated,
the information contained in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised. Unless the context otherwise requires,
the following summary assumes that on the Exchange Date the Reference Property
consists only of shares of Nextel Common Stock. As used in this Prospectus, the
"Company" refers to Nextel Communications, Inc.
THE TRUST
Nextel STRYPES Trust (the "Trust") is a newly organized Delaware business
trust that will be registered as a non-diversified closed-end management
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"). The term of the Trust will expire on or shortly after
, 2000 (the "Exchange Date"), except that the Trust may be
dissolved prior to such date under certain limited circumstances. The Trust will
be treated as a grantor trust for United States Federal income tax purposes.
THE OFFERING
The Trust is offering 7,168,587 STRYPES, each representing a proportionate
share of beneficial interest in the Trust, at an initial public offering price
of $ per STRYPES (which is equal to the last reported sale price of the
Nextel Common Stock on NASDAQ on , 1997, the date of the offering
(the "Offering")). The Underwriters have been granted an option, exercisable for
30 days from the date of this Prospectus, to purchase up to an aggregate of
1,075,288 additional STRYPES (subject to decrease as a result of the issuance
and sale of STRYPES in connection with the formation of the Trust) to cover
over-allotments, if any. See "Underwriting."
THE COMPANY
The Company's business consists principally of providing wireless
communications services to its customers utilizing specialized mobile radio
("SMR") frequencies licensed to its subsidiaries by the Federal Communications
Commission. The Company provides SMR wireless communications services in Hawaii
and in nearly all 48 states in the continental United States, including all of
the top 50 metropolitan market areas in the United States. As of December 31,
1996, the Company provided service to approximately 1,114,500 units, consisting
of 300,300 units utilizing the Company's Digital Mobile networks (as defined
below) and approximately 814,200 analog units. The Company has stated that its
business plans and efforts are to a large extent directed toward replacing the
remaining traditional analog SMR systems that it currently operates with
advanced mobile communications systems employing digital technology with a
multi-site configuration permitting frequency reuse ("Digital Mobile networks").
A customer using Nextel's Digital Mobile network is able to access mobile
telephone services and two-way radio dispatch, paging and in the future is
expected to be able to access data transmission.
Reference is made to the accompanying prospectus of the Company with
respect to the shares of Nextel Common Stock which may be received by a holder
of STRYPES on the Exchange Date or upon earlier dissolution of the Trust. The
Company is not affiliated with the Trust or with any Contracting Stockholder
presently, will not receive any of the proceeds from the sale of the STRYPES and
will have no obligations with respect to the STRYPES. THE PROSPECTUS OF THE
COMPANY IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF
STRYPES TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF REFERENCE ONLY. THE
PROSPECTUS OF THE COMPANY DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR IS
IT INCORPORATED BY REFERENCE HEREIN.
INVESTMENT OBJECTIVE AND POLICIES
The Trust will purchase and hold a series of zero-coupon U.S. Government
securities ("U.S. Treasury Securities") maturing on a quarterly basis through
the Exchange Date, and a forward purchase contract (the "Contract") with certain
existing stockholders (the "Contracting Stockholders") of the Company relating
to the Reference Property. The Trust's investment objective is to distribute to
holders of the STRYPES ("Holders") on a quarterly basis $ per STRYPES
(which amount equals the pro rata portion of the
3
<PAGE> 6
fixed quarterly distributions from the proceeds of the maturing U.S. Treasury
Securities held by the Trust) and, on the Exchange Date, a percentage of each
type of Reference Property (or, in certain circumstances, cash, or a combination
of cash and Reference Property, with an equal value) per STRYPES equal to the
Exchange Amount. The Exchange Amount is equal to: (i) if the Reference Property
Value (as defined herein) is greater than or equal to $ (the
"Threshold Appreciation Price"), % of each type of Reference Property, (ii)
if the Reference Property Value is less than the Threshold Appreciation Price
but greater than $ (the "Initial Price"), a percentage of each type
of Reference Property, allocated as proportionately as practicable, so that the
aggregate value thereof is equal to the Initial Price and (iii) if the Reference
Property Value is less than or equal to the Initial Price, 100% of each type of
Reference Property. The term "Reference Property" means initially one share of
Nextel Common Stock and shall be subject to adjustment from time to time prior
to the Exchange Date to reflect the addition or substitution of any cash,
securities and/or other property resulting from the application of the
adjustment provisions described herein. As more fully described under
"Investment Objective and Policies -- The Contract -- Reference Property
Adjustments," upon application of such adjustment provisions, in the future the
Reference Property may include, in addition to or in lieu of Nextel Common
Stock, other securities (including rights or warrants) of the Company,
securities of another issuer, cash or other property. Holders otherwise entitled
to receive fractional units or interests of any type of Reference Property in
respect of their aggregate holdings of STRYPES will receive cash in lieu
thereof. See "Investment Objective and Policies -- General" and "-- Fractional
Interests."
Pursuant to the terms of the Contract, the Contracting Stockholders are
obligated to deliver to the Trust immediately prior to the Exchange Date the
Reference Property required by the Trust in order to exchange all of the STRYPES
(including any STRYPES issued pursuant to the over-allotment option granted by
the Trust to the Underwriters and STRYPES issued in connection with the
formation of the Trust) on the Exchange Date in accordance with its investment
objective. To the extent permitted by applicable law, the obligation of each
Contracting Stockholder to deliver Reference Property under the Contract may be
cash settled, at the option of such Contracting Stockholder, in whole or in
part, by delivering to the Trust immediately prior to the Exchange Date, in lieu
of the portion of the Reference Property otherwise deliverable in respect of
which an election to exercise the cash settlement option is made, cash in an
amount equal to the value of such Reference Property immediately prior to the
Exchange Date (the "Cash Settlement Option"). In the event that all or any of
the Contracting Stockholders elect to exercise the Cash Settlement Option,
Holders will receive cash, or a combination of cash and Reference Property, on
the Exchange Date. See "Investment Objective and Policies -- The Contract."
Holders of the STRYPES will receive distributions at the rate per STRYPES
of $ per annum, or $ per quarter, payable quarterly on each
, , and (or, if any such date is not a
Business Day (as defined herein), on the next succeeding Business Day) to
Holders of record as of each , , and ,
respectively. The first distribution (in respect of the period from
, 1997 until , 1997) will be payable on ,
1997 to Holders of record as of , 1997, and will equal
$ per STRYPES. See "Investment Objective and Policies -- Trust Assets."
On the Exchange Date, each outstanding STRYPES will be exchanged for
between % and 100% of each type of Reference Property (or, in the event
that all or any of the Contracting Stockholders elect to exercise the Cash
Settlement Option, cash, or a combination of cash and Reference Property, with
an equal value), depending on the Reference Property Value. AS DESCRIBED HEREIN,
THE REFERENCE PROPERTY VALUE WILL REPRESENT A DETERMINATION OF THE VALUE OF THE
REFERENCE PROPERTY IMMEDIATELY PRIOR TO THE EXCHANGE DATE. ACCORDINGLY, THERE
CAN BE NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS OF THE STRYPES ON THE
EXCHANGE DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE PRICE OF THE STRYPES.
IF THE REFERENCE PROPERTY VALUE IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT
RECEIVABLE ON THE EXCHANGE DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE
STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES WILL RESULT IN A LOSS. In the
event of a consolidation or merger of the Company or any successor thereto into
another entity, or the liquidation of the Company or any such successor, or
certain related events, or upon the occurrence of certain defaults by any
Contracting Stockholder under the Contract or the collateral arrangements
described herein, the Contract
4
<PAGE> 7
would be accelerated, the Trust's assets (other than assets received pursuant to
the Contract) would be liquidated, the net assets of the Trust would be
distributed pro rata to the Holders of the STRYPES and the term of the Trust
would expire. See "Investment Objective and Policies -- The
Contract -- Reorganization Events Causing a Dissolution of the Trust" and
"-- Collateral Arrangements; Acceleration."
TRUST ASSETS
The Trust's assets will consist of: (i) a series of zero-coupon U.S.
Treasury Securities with face amounts and maturities corresponding to the
amounts and payment dates of the distributions payable with respect to the
STRYPES, comprising approximately % of the initial assets of the Trust, and
(ii) the Contract with the Contracting Stockholders relating to the Reference
Property, comprising approximately % of the initial assets of the Trust.
Pursuant to the terms of the Contract, the Contracting Stockholders are
obligated to deliver to the Trust immediately prior to the Exchange Date an
aggregate number or amount of each type of Reference Property equal to the
product of the Exchange Amount and the aggregate number of STRYPES then
outstanding, subject to the Cash Settlement Option of each Contracting
Stockholder. The purchase price under the Contract is equal to $ in the
aggregate (assuming the Underwriters' over-allotment option is not exercised)
and is payable to the Contracting Stockholders by the Trust on or about
, 1997. No other consideration is payable by the Trust to the
Contracting Stockholders in connection with its acquisition of the Contract or
the performance of the Contract by the Contracting Stockholders. See "Investment
Objective and Policies -- The Contract."
The obligations of each Contracting Stockholder under the Contract
initially will be secured by a pledge of the maximum number of shares of Nextel
Common Stock deliverable by such Contracting Stockholder pursuant the Contract
or, at the election of such Contracting Stockholder, by substitute collateral
consisting of U.S. Government obligations. See "Investment Objective and
Policies -- The Contract -- Collateral Arrangements; Acceleration."
RELATIONSHIP TO NEXTEL COMMON STOCK
Holders of the STRYPES will receive distributions at the rate of % of
the issue price per annum. The Company has not paid any dividends on the Nextel
Common Stock, and has stated that it does not plan to pay dividends on the
Nextel Common Stock for the foreseeable future. Any future determination as to
the payment of dividends will be at the discretion of the Company's Board of
Directors and will depend upon the Company's operating results, financial
condition and capital requirements, contractual restrictions, general business
conditions and such other factors as the Company's Board of Directors deems
relevant. Holders of STRYPES will not be entitled to receive any future
dividends on the Nextel Common Stock unless and until such time, if any, as the
Trust shall have delivered Nextel Common Stock in exchange for STRYPES on the
Exchange Date or upon earlier dissolution of the Trust, and unless the
applicable record date for determining stockholders entitled to receive such
dividends occurs after such delivery. See "Risk Factors -- No Stockholder
Rights."
The opportunity for equity appreciation afforded by an investment in the
STRYPES is less than that afforded by a direct investment in the Nextel Common
Stock because the amount receivable by a Holder of a STRYPES upon exchange on
the Exchange Date will only exceed the issue price of such STRYPES if the
Reference Property Value exceeds the Threshold Appreciation Price (which
represents an appreciation of % over the Initial Price). Moreover, each
STRYPES will entitle the Holder to receive on the Exchange Date only % (the
percentage equal to the Initial Price divided by the Threshold Appreciation
Price) of any appreciation of the value of Reference Property above the
Threshold Appreciation Price. Holders of STRYPES will realize the entire decline
in value if the Reference Property Value is less than the Initial Price. See
"Risk Factors -- Limitations on Opportunity for Equity Appreciation; Potential
Losses."
5
<PAGE> 8
DILUTION
The percentage of each type of Reference Property (or the amount of cash or
combination of cash and Reference Property) that Holders of STRYPES are entitled
to receive upon exchange on the Exchange Date will not be adjusted for certain
events, such as offerings of Nextel Common Stock by the Company for cash or in
connection with acquisitions. The Company is not restricted from issuing
additional shares of Nextel Common Stock during the term of the Trust and has no
obligation to consider the interests of Holders of STRYPES for any reason.
Additional issuances of shares of Nextel Common Stock may materially and
adversely affect the price of Nextel Common Stock and, because of the
relationship of the percentage of each type of Reference Property (or the amount
of cash or combination of cash and Reference Property) to be received on the
Exchange Date to the price of the Nextel Common Stock, such other events may
adversely affect the trading price of the STRYPES. See "Risk
Factors -- Reference Property Adjustments."
TERM OF THE TRUST
The Trust will dissolve on or shortly after the Exchange Date, except if
dissolved earlier under certain limited circumstances. Promptly after the
Exchange Date, the Reference Property and/or cash to be exchanged for the
STRYPES and any other remaining Trust assets, net of any remaining Trust
expenses, if any, will be distributed pro rata to Holders. In the event that the
Company or any successor thereto is the subject of a Reorganization Event (as
defined below) or a default shall have occurred with respect to any Contracting
Stockholder under the Contract or the collateral arrangements described herein,
the Contract would accelerate, the Trust's assets (other than assets received
pursuant to the Contract) would be liquidated, the net assets of the Trust would
be distributed pro rata to the Holders and the term of the Trust would expire.
See "Investment Objective and Policies -- The Contract" and "-- Trust
Dissolution," and "Risk Factors -- Limited Term."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be taxable as a grantor trust for United States Federal
income tax purposes. Accordingly, each Holder will be treated for United States
Federal income tax purposes as the owner of its pro rata portion of the U.S.
Treasury Securities and the Contract, and income received (including original
issue discount treated as received) by the Trust will generally be treated as
income of the Holders. See "Certain United States Federal Income Tax
Considerations."
The U.S. Treasury Securities held by the Trust will be treated for United
States Federal income tax purposes as having "original issue discount" which
will accrue over the term of the U.S. Treasury Securities. It is currently
anticipated that each quarterly cash distribution to the Holders will be treated
as a tax-free return of the Holders' costs of the U.S. Treasury Securities and
any previously included original issue discount, and therefore will not be
considered current income to Holders upon receipt thereof for United States
Federal income tax purposes. However, a Holder (whether on the cash or accrual
method of tax accounting) must recognize currently as income original issue
discount on the U.S. Treasury Securities as it accrues. See "Certain United
States Federal Income Tax Considerations."
Under existing law, a Holder should not recognize income, gain or loss upon
the Trust's entry into the Contract or over the term of the Contract. In
general, the delivery of Reference Property pursuant to the Contract will not be
taxable to the Holders. A Holder will have taxable gain or loss upon receipt of
cash, if any, upon dissolution of the Trust or to the extent that all or any of
the Contracting Stockholders elect to exercise the Cash Settlement Option and
satisfy their obligations under the Contract in whole or in part with cash. Each
Holder's initial tax basis in any Reference Property received from the Trust on
the Exchange Date or upon earlier dissolution of the Trust will be equal to its
basis in its pro rata portion of the Contract less the portion of such basis
allocable to any fractional shares of Reference Property for which cash is
received. See "Certain United States Federal Income Tax Considerations."
6
<PAGE> 9
MANAGEMENT ARRANGEMENTS
The Trust will be internally managed and will not have an investment
adviser. The Trust's portfolio will not be actively managed. The administration
of the Trust will be overseen by the Trustees. The day-to-day administration of
the Trust will be carried out by The Bank of New York (or its successor) as
trust administrator (the "Administrator"). The Bank of New York (or its
successor) will also act as custodian for the Trust's assets (the "Custodian")
and as paying agent, registrar and transfer agent (the "Paying Agent") with
respect to the STRYPES. Except as aforesaid, and except for its role as
Collateral Agent under the Trust's Security and Pledge Agreement (see
"Investment Objective and Policies -- The Contract -- Collateral Arrangements;
Acceleration"), The Bank of New York has no other affiliation with, and is not
engaged in any other transaction with, the Trust. For their services, the Trust
will pay each of the Custodian and the Paying Agent a one-time, up-front amount
in respect of its fee. See "Management Arrangements."
RISK FACTORS
The Trust has adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that, unless the Trust terminates
prior to the Exchange Date due to the occurrence of a "Reorganization Event"
with respect to the Company or any successor thereto or in the event of a
"Default" by any Contracting Stockholder, the U.S. Treasury Securities may not
be disposed of prior to their respective maturities. The Trust will continue to
hold the Contract despite any significant decline in the value of the Reference
Property, including the Nextel Common Stock, or adverse changes in the financial
condition of the issuer of any Reference Security (as defined herein), including
the Company.
Although the STRYPES will provide investors with a current distribution
yield (the Company has not paid any dividends on the Nextel Common Stock), the
opportunity for equity appreciation afforded by an investment in the STRYPES is
less than that afforded by a direct investment in the Nextel Common Stock. The
value of the Reference Property receivable by a Holder of a STRYPES upon
exchange on the Exchange Date will only exceed the issue price of such STRYPES
if the Reference Property Value exceeds the Threshold Appreciation Price, which
represents an appreciation of % over the Initial Price. Moreover, because
each STRYPES will entitle the Holder to receive only % of each type of
Reference Property if the Reference Property Value exceeds the Threshold
Appreciation Price, Holders of the STRYPES will be entitled to receive upon
exchange only % of any appreciation of the value of the Reference Property
above the Threshold Appreciation Price. AS DESCRIBED HEREIN, THE REFERENCE
PROPERTY VALUE WILL REPRESENT A DETERMINATION OF THE VALUE OF THE REFERENCE
PROPERTY IMMEDIATELY PRIOR TO THE EXCHANGE DATE. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS OF THE STRYPES ON THE EXCHANGE
DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE PRICE OF THE STRYPES. IF THE
REFERENCE PROPERTY VALUE IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT RECEIVABLE
ON THE EXCHANGE DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE STRYPES, IN
WHICH CASE AN INVESTMENT IN STRYPES WILL RESULT IN A LOSS.
The Trust is classified as a "non-diversified" investment company under the
Investment Company Act. Consequently, the Trust is not limited by the Investment
Company Act in the proportion of its assets that may be invested in the
securities of a single issuer. Since the only securities held by the Trust will
be the U.S. Treasury Securities and the Contract, the Trust may be subject to
greater risk than would be the case for an investment company with more
diversified investments.
The trading prices of the STRYPES in the secondary market will be directly
affected by the trading prices of the Nextel Common Stock in the secondary
market. It is impossible to predict whether the price of Nextel Common Stock
will rise or fall. Trading prices of Nextel Common Stock will be influenced by
the Company's operating results and prospects and by economic, financial and
other factors and market conditions.
Holders of STRYPES will not be entitled to any rights with respect to the
Nextel Common Stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions in respect thereof) unless and
until such time, if any, as the Trust shall have delivered shares of Nextel
Common Stock in exchange for STRYPES on the Exchange Date or upon earlier
dissolution of the Trust, and unless the applicable record date, if any, for the
exercise of such rights occurs after such delivery.
7
<PAGE> 10
A bankruptcy of any of the Contracting Stockholders could adversely affect
the timing of exchange or, as a result, the amount received by the Holders of
the STRYPES. See "Risk Factors -- Risk Relating to Bankruptcy of a Contracting
Stockholder."
Holders will experience a taxable event upon receipt of cash, if any, upon
dissolution of the Trust or to the extent that all or any of the Contracting
Stockholders elect to exercise the Cash Settlement Option and satisfy their
obligations under the Contract in whole or in part with cash. Because of an
absence of authority as to the proper character of any gain or loss resulting
from such a taxable event, the ultimate tax consequences to Holders as a result
of all or any of the Contracting Stockholders electing to exercise the Cash
Settlement Option is uncertain. See "Risk Factors."
LISTING
The STRYPES have been approved for listing on the AMEX, subject to official
notice of issuance.
FEE TABLE
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load (as a percentage of offering price).................. 3%(a)
Automatic Dividend Reinvestment Plan Fees............................... Not Applicable
ANNUAL EXPENSES (as a percentage of net assets)
Management Fees(b)...................................................... 0%
Other Expenses.......................................................... 0%
-------------
TOTAL ANNUAL EXPENSES........................................... 0%
=============
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ---------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
An investor would pay the following expenses on a $1,000 investment,
including the maximum sales load of $30 and assuming (1) no annual
expenses and (2) a 5% annual return throughout the periods: $ 30 $ 30
</TABLE>
- ---------------
(a) See the cover page of this Prospectus and "Underwriting."
(b) See "Management Arrangements." The Trust will be internally managed;
consequently there is no separate investment advisory fee paid by the Trust.
The Bank of New York will act as the administrator of the Trust.
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Trust will bear directly or
indirectly. The expenses set forth under "Management Fees" and "Other Expenses"
in the Fee Table above are based on estimated amounts through the end of the
Trust's first fiscal year on an annualized basis and prorated on a straight-line
basis over the term of the Trust, including the
one-time up-front fee payable to the Administrator, the Custodian and the Paying
Agent. The Example set forth above assumes reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return as mandated by Securities
and Exchange Commission regulations. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE EXPENSES OR ANNUAL RATES OF RETURN, AND ACTUAL EXPENSES
OR ANNUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR PURPOSES OF
THE EXAMPLE.
8
<PAGE> 11
THE TRUST
Nextel STRYPES Trust is a newly organized Delaware business trust and will
be registered as a closed-end management investment company under the Investment
Company Act. The Trust was formed on October 25, 1995 pursuant to a Trust
Agreement dated as of such date (as amended and restated as of ,
1997, the "Declaration of Trust"). The term of the Trust will expire on or
shortly after , 2000, except that the Trust may be dissolved prior
to such date under certain limited circumstances. The Trust will be treated as a
grantor trust for United States Federal income tax purposes. The Trust's
principal office is located at 850 Library Avenue, Suite 204, Newark, Delaware
19715 and its telephone number is (302) 738-6680.
USE OF PROCEEDS
The net proceeds of the Offering will be approximately $ (or
approximately $ , if the Underwriters' over-allotment option is
exercised in full), after payment of the sales load and organizational and
offering costs. At the time of the closing of the Offering, or shortly
thereafter, the net proceeds of the Offering will be used to purchase a fixed
portfolio comprised of a series of zero-coupon U.S. Treasury Securities with
face amounts and maturities corresponding to the amounts and payment dates of
the distributions payable with respect to the STRYPES and to pay the purchase
price under the Contract to the Contracting Stockholders.
INVESTMENT OBJECTIVE AND POLICIES
Unless the context otherwise requires, the following discussion assumes
that on the Exchange Date the Reference Property consists only of shares of
Nextel Common Stock.
GENERAL
The Trust will purchase and hold (i) a series of zero-coupon U.S. Treasury
Securities maturing on a quarterly basis through the Exchange Date and (ii) the
Contract with the Contracting Stockholders relating to the Reference Property.
The Trust's investment objective is to distribute to Holders on a quarterly
basis $ per STRYPES (which amount equals the pro rata portion of the
fixed quarterly distributions from the proceeds of the maturing U.S. Treasury
Securities held by the Trust) and, on the Exchange Date, a percentage of the
number or amount of each type of Reference Security and other property
constituting part of the Reference Property (or, in certain circumstances, cash,
or a combination of cash, Reference Securities and other property, with an equal
value) per STRYPES equal to the Exchange Amount. The Exchange Amount is equal
to: (i) if the Reference Property Value is greater than or equal to the
Threshold Appreciation Price, % of the number or amount of each type of
Reference Security and other property constituting part of the Reference
Property, (ii) if the Reference Property Value is less than the Threshold
Appreciation Price but greater than the Initial Price, a percentage of the
number or amount of each type of Reference Security and other property
constituting part of the Reference Property, allocated as proportionately as
practicable, so that the aggregate value thereof is equal to the Initial Price
and (iii) if the Reference Property Value is less than or equal to the Initial
Price, 100% of the number or amount of each type of Reference Security and other
property constituting part of the Reference Property. THERE CAN BE NO ASSURANCE
THAT THE VALUE OF THE REFERENCE PROPERTY RECEIVABLE BY HOLDERS OF THE STRYPES ON
THE EXCHANGE DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE PRICE OF THE
STRYPES. IF THE REFERENCE PROPERTY VALUE IS LESS THAN THE INITIAL PRICE, THE
VALUE OF THE REFERENCE PROPERTY RECEIVABLE ON THE EXCHANGE DATE WILL BE LESS
THAN THE ISSUE PRICE PAID FOR THE STRYPES, IN WHICH CASE AN INVESTMENT IN
STRYPES WILL RESULT IN A LOSS. Holders otherwise entitled to receive fractional
units or interests of any Reference Security or other property constituting part
of the Reference Property in respect of their aggregate holdings of STRYPES will
receive cash in lieu thereof. See "-- Fractional Interests."
The term "Reference Property" initially means one share of Nextel Common
Stock and shall be subject to adjustment from time to time prior to the Exchange
Date to reflect the addition or substitution of any cash, securities and/or
other property resulting from the application of the adjustment provisions
described below under "-- The Contract -- Reference Property Adjustments." The
term "Reference Security" means, at any time, any security (as defined in
Section 2(1) of the Securities Act of 1933, as amended (the "Securities
9
<PAGE> 12
Act")) then constituting part of the Reference Property. The term "Reference
Property Value" means, subject to the adjustment provisions described below, the
sum of (a) for any portion of the Reference Property consisting of cash, the
amount of such cash, (b) for any portion of the Reference Property consisting of
property other than cash or Reference Securities, the fair market value (as
determined by a nationally recognized independent investment banking firm
retained for this purpose by the Administrator) as of the third Trading Day
preceding the Exchange Date of such property, and (c) for any portion of the
Reference Property consisting of a Reference Security, an amount equal to the
average Closing Price per unit of such Reference Security on the 20 Trading Days
immediately prior to, but not including, the second Trading Day preceding the
Exchange Date multiplied by the number of units of such Reference Security
constituting part of the Reference Property. The "Closing Price" of any
Reference Security on any date of determination means the closing sale price
(or, if no closing price is reported, the last reported sale price) of such
Reference Security on NASDAQ on such date or, if such Reference Security is not
listed for trading on NASDAQ on any such date, as reported in the composite
transactions for the principal United States securities exchange on which such
Reference Security is so listed, or, if such Reference Security is not listed on
a United States national or regional securities exchange, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System, or,
if such price for such Reference Security is not so reported, the last quoted
bid price for such Reference Security in the over-the-counter market as reported
by the National Quotation Bureau or similar organization, or, if such bid price
is not available, the market value of such Reference Security on such date as
determined by a nationally recognized independent investment banking firm
retained for this purpose by the Administrator. A "Trading Day" is defined as a
day on which the Reference Security the Closing Price of which is being
determined (A) is not suspended from trading on any national or regional
securities exchange or association or over-the-counter market at the close of
business and (B) has traded at least once on the national or regional securities
exchange or association or over-the-counter market that is the primary market
for the trading of such Reference Security. The term "Business Day" means any
day that is not a Saturday, a Sunday or a day on which the AMEX, NASDAQ, banking
institutions or trust companies in The City of New York are authorized or
obligated by law or executive order to close.
Pursuant to the terms of the Contract, the Contracting Stockholders are
obligated to deliver to the Trust immediately prior to the Exchange Date the
aggregate number or amount of each type of Reference Security and other property
constituting part of the Reference Property required by the Trust in order to
exchange all of the STRYPES (including any STRYPES issued pursuant to the
over-allotment option granted by the Trust to the Underwriters and STRYPES
issued in connection with the formation of the Trust) on the Exchange Date in
accordance with its investment objective. To the extent permitted by applicable
law, the obligation of each Contracting Stockholder to deliver Reference
Property under the Contract may be cash settled, at the option of such
Contracting Stockholder, in whole or in part, by delivering to the Trust
immediately prior to the Exchange Date, in lieu of the portion of the number or
amount of each type of Reference Security and other property otherwise
deliverable in respect of which an election to exercise the cash settlement
option is made, cash in an amount equal to the value of such Reference
Securities and other property immediately prior to the Exchange Date (the "Cash
Settlement Option"). In the event that all or any of the Contracting
Stockholders elect to exercise the Cash Settlement Option, Holders will receive
cash, or a combination of cash, Reference Securities and/or other property, on
the Exchange Date. On or prior to , 1999, the Administrator will
notify The Depository Trust Company (the "Depositary") and publish a notice in
The Wall Street Journal or another daily newspaper of national circulation
stating whether the applicable percentage of the number or amount of each type
of Reference Security and other property constituting part of the Reference
Property or cash, or a combination thereof, will be delivered in exchange for
the STRYPES on the Exchange Date. At the time such notice is published, the
Reference Property Value will not have been determined. If the Contracting
Stockholders elect to deliver Reference Property, Holders will be responsible
for the payment of any and all brokerage costs upon the subsequent sale thereof.
The Trust has adopted a fundamental policy as required by the Declaration
of Trust to invest at least 65% of its portfolio in the Contract. The Contract
will comprise approximately % of the Trust's initial assets. The Trust has
also adopted a fundamental policy that the Contract may not be disposed of
during the term of the Trust and that, unless the Trust dissolves prior to the
Exchange Date due to the occurrence of a
10
<PAGE> 13
"Reorganization Event" with respect to the Company or any successor thereto or
in the event of a "Default" by any Contracting Stockholder, the U.S. Treasury
Securities may not be disposed of prior to their respective maturities. The
foregoing fundamental policies of the Trust may not be changed without the vote
of 100% in interest of the Holders.
TRUST ASSETS
The Trust's assets primarily will consist of: (i) U.S. Treasury Securities,
and (ii) the Contract. The Trust may also make certain temporary investments.
See "-- Temporary Investments." For illustrative purposes only, the following
table shows the number of shares of Nextel Common Stock that a Holder would
receive for each of the STRYPES at various Reference Property Values. The table
assumes that there will be no Reference Property adjustments as described below
under "-- The Contract -- Reference Property Adjustments" and, accordingly, that
on the Exchange Date the Reference Property will consist of one share of Nextel
Common Stock. There can be no assurance that the Reference Property Value will
be within the range set forth below. Given the Initial Price of $ and
the Threshold Appreciation Price of $ , a Holder would receive on the
Exchange Date the following number of shares of Nextel Common Stock or amount of
cash (in the event that all of the Contracting Stockholders elect to exercise
the Cash Settlement Option and satisfy their obligations under the Contract, in
whole, with cash) per STRYPES:
<TABLE>
<CAPTION>
REFERENCE PROPERTY NUMBER OF SHARES OF
VALUE NEXTEL COMMON STOCK AMOUNT OF CASH
-------------------- ------------------- --------------
<S> <C> <C>
</TABLE>
The following table sets forth information regarding the distributions to
be received on the U.S. Treasury Securities, the portion of each year's
distributions that will constitute a return of capital for United States Federal
income tax purposes and the amount of original issue discount accruing, assuming
a yield-to-maturity accrual election, on the U.S. Treasury Securities with
respect to a Holder who acquires its STRYPES at the issue price from an
Underwriter pursuant to the Offering. See "Certain United States Federal Income
Tax Considerations."
<TABLE>
<CAPTION>
ANNUAL
ANNUAL GROSS ANNUAL GROSS INCLUSION OF
DISTRIBUTIONS DISTRIBUTIONS ORIGINAL ISSUE
FROM U.S. FROM U.S. ANNUAL RETURN DISCOUNT IN
TREASURY TREASURY SECURITIES PER OF CAPITAL PER INCOME PER
YEAR SECURITIES STRYPES STRYPES STRYPES
- --------------------------------------- ------------ ----------------------- -------------- --------------
<S> <C> <C> <C> <C>
1997................................... $ $ $ $
1998...................................
1999...................................
2000...................................
</TABLE>
The annual distribution of $ per STRYPES is payable quarterly on
each , , and , commencing ,
1997. Quarterly distributions on the STRYPES will consist solely of the cash
received from the proceeds of the maturing U.S. Treasury Securities held by the
Trust. The Trust will not be entitled to any future dividends that may be
declared on the Nextel Common Stock. See "Dividends and Distributions."
11
<PAGE> 14
ENHANCED YIELD; LESS POTENTIAL FOR EQUITY APPRECIATION THAN NEXTEL COMMON STOCK;
NO DEPRECIATION PROTECTION
Although the STRYPES will provide investors with a current distribution
yield (the Company has not paid any dividends on the Nextel Common Stock), the
opportunity for equity appreciation afforded by an investment in the STRYPES is
less than that afforded by a direct investment in the Nextel Common Stock. The
value of the Reference Property receivable by a Holder of a STRYPES on the
Exchange Date will only exceed the issue price of such STRYPES if the Reference
Property Value exceeds the Threshold Appreciation Price, which represents an
appreciation of % of the Initial Price. Moreover, because each STRYPES will
entitle the Holder to receive only % of the number or amount of each type
of Reference Security and other property constituting part of the Reference
Property if the Reference Property Value exceeds the Threshold Appreciation
Price, Holders of the STRYPES will be entitled to receive upon exchange only
% (the percentage equal to the Initial Price divided by the Threshold
Appreciation Price) of any appreciation of the value of the Reference Property
above the Threshold Appreciation Price. Holders of STRYPES will realize the
entire decline in value if the Reference Property Value is less than the Initial
Price.
THE COMPANY
The Company's business consists principally of providing wireless
communications services to its customers utilizing specialized mobile radio
("SMR") frequencies licensed to its subsidiaries by the Federal Communications
Commission. The Company provides SMR wireless communications services in Hawaii
and in nearly all 48 states in the continental United States, including all of
the top 50 metropolitan market areas in the United States. As of December 31,
1996, the Company provided service to approximately 814,200 analog SMR units and
300,300 units utilizing the Company's Digital Mobile networks (as defined
below). The Company has stated that its business plans and efforts are to a
large extent directed toward replacing the remaining traditional analog SMR
systems that it currently operates with advanced mobile communications systems
employing digital technology with a multi-site configuration permitting
frequency reuse ("Digital Mobile networks"). A customer using Nextel's Digital
Mobile network is able to access mobile telephone services and two-way radio
dispatch, paging and in the future is expected to be able to access data
transmission.
The shares of Nextel Common Stock are traded on NASDAQ under the symbol
"NXTL." The following table sets forth, for the periods indicated, the reported
high and low sale prices of the shares of Nextel Common Stock on NASDAQ.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995:
QUARTER HIGH LOW
----------------------------------------------------------------- ------- -------
<S> <C> <C>
First............................................................ $15.625 $ 9.375
Second........................................................... 18.000 13.000
Third............................................................ 21.750 14.000
Fourth........................................................... 18.125 13.875
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996:
QUARTER HIGH LOW
----------------------------------------------------------------- ------- -------
<S> <C> <C>
First............................................................ $18.875 $13.500
Second........................................................... 23.375 16.750
Third............................................................ 20.250 14.375
Fourth........................................................... 18.500 12.750
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997:
QUARTER HIGH LOW
----------------------------------------------------------------- ------- -------
<S> <C> <C>
First (through February 13, 1997)................................ $15.750 $13.375
</TABLE>
As of January 31, 1997, there were 2,929 holders of record of the Nextel
Common Stock, including Cede & Co., a nominee of the Depositary, which holds
shares of Nextel Common Stock on behalf of an indeterminate number of beneficial
owners. The Company has authority to issue shares of Class B Non-Voting Common
Stock, which are convertible on a share-for-share basis into shares of Nextel
Common Stock. As of
12
<PAGE> 15
January 31, 1997, there was a single stockholder of record holding all of the
17,830,000 shares of Class B Non-Voting Common Stock.
The Company has not paid any dividends on the Nextel Common Stock. Certain
indentures and other agreements to which the Company is a party presently
prohibit, and are expected to operate so as to continue to prohibit, the Company
from paying dividends. The Company has stated that it does not plan to pay
dividends on the Nextel Common Stock for the foreseeable future. Any future
determination as to the payment of dividends will be at the discretion of the
Company's Board of Directors and will depend upon the Company's operating
results, financial condition and capital requirements, contractual restrictions,
general business conditions and such other factors as the Company's Board of
Directors deems relevant.
Holders of STRYPES will not be entitled to receive any future dividends on
the Nextel Common Stock unless and until such time, if any, as the Trust shall
have delivered Nextel Common Stock in exchange for STRYPES on the Exchange Date
or upon earlier dissolution of the Trust, and unless the applicable record date
for determining stockholders entitled to receive such dividends occurs after
such delivery. See "Risk Factors -- No Stockholder Rights."
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, the Company
files reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). Copies of such material
can be inspected and copied at the public reference facilities maintained by the
Commission at the address specified under "Additional Information."
THE COMPANY IS NOT AFFILIATED WITH THE TRUST OR WITH ANY CONTRACTING
STOCKHOLDER PRESENTLY, WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF THE
STRYPES AND WILL HAVE NO OBLIGATIONS WITH RESPECT TO THE STRYPES. THIS
PROSPECTUS RELATES ONLY TO THE STRYPES OFFERED HEREBY AND DOES NOT RELATE TO THE
COMPANY OR THE NEXTEL COMMON STOCK. THE COMPANY HAS FILED A REGISTRATION
STATEMENT ON FORM S-3 WITH THE COMMISSION WITH RESPECT TO THE SHARES OF NEXTEL
COMMON STOCK THAT MAY BE RECEIVED BY A HOLDER OF STRYPES ON THE EXCHANGE DATE OR
UPON EARLIER DISSOLUTION OF THE TRUST. THE PROSPECTUS OF THE COMPANY (THE
"NEXTEL PROSPECTUS") CONSTITUTING A PART OF SUCH REGISTRATION STATEMENT INCLUDES
INFORMATION RELATING TO THE COMPANY AND THE NEXTEL COMMON STOCK, INCLUDING
CERTAIN RISK FACTORS RELEVANT TO AN INVESTMENT IN NEXTEL COMMON STOCK. THE
NEXTEL PROSPECTUS IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE
PURCHASERS OF STRYPES TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF REFERENCE
ONLY. THE NEXTEL PROSPECTUS DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR
IS IT INCORPORATED BY REFERENCE HEREIN.
THE CONTRACT
General. Pursuant to the terms of the Contract, the Contracting
Stockholders are obligated to deliver to the Trust immediately prior to the
Exchange Date an aggregate number or amount of each type of Reference Security
and other property constituting part of the Reference Property equal to the
product of the Exchange Amount and the aggregate number of STRYPES then
outstanding.
To the extent permitted by applicable law, the obligation of each
Contracting Stockholder to deliver Reference Property under the Contract may be
cash settled, at the option of such Contracting Stockholder, in whole or in
part, by delivering to the Trust immediately prior to the Exchange Date, in lieu
of the portion of the aggregate number or amount of each type of Reference
Security and other property otherwise deliverable in respect of which an
election to exercise the cash settlement option is made, cash in an amount
(calculated to the nearest 1/100th of a dollar or, if there is not a nearest
1/100th of a dollar, then to the next higher 1/100th of a dollar) equal to the
sum of (a) for any portion of such Reference Property consisting of cash in
respect of which an election to exercise the cash settlement option is made, the
amount of such cash, without interest thereon, (b) for any portion of such
Reference Property consisting of property other than cash or
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Reference Securities in respect of which an election to exercise the cash
settlement option is made, the fair market value (as determined by a nationally
recognized independent investment banking firm retained for this purpose by the
Administrator) as of the third Trading Day preceding the Exchange Date of such
property, and (c) for any portion of such Reference Property consisting of a
Reference Security (except as described under "Reference Property Adjustments"
below) in respect of which an election to exercise the cash settlement option is
made, an amount equal to the average Closing Price per unit of such Reference
Security on the 20 Trading Days immediately prior to, but not including, the
second Trading Day preceding the Exchange Date multiplied by the number of units
of such Reference Security constituting part of the Reference Property (the
"Cash Settlement Option").
Reference Property Adjustments. The Reference Property is subject to
adjustment if an issuer of a Reference Security shall: (i) subdivide or split
the outstanding units of such Reference Security into a greater number of units;
(ii) combine the outstanding units of such Reference Security into a smaller
number of units; (iii) issue by reclassification of units of such Reference
Security any units of another security of such issuer; (iv) issue rights or
warrants to all holders of such Reference Security entitling them, for a period
expiring prior to the fifteenth calendar day following the Exchange Date, to
subscribe for or purchase any of its securities or other property (other than
rights to purchase units of such Reference Security pursuant to a plan for the
reinvestment of dividends or interest); or (v) pay a dividend or make a
distribution to all holders of such Reference Security of cash, securities or
other property (excluding any cash dividend on any Reference Security consisting
of capital stock that does not constitute an Extraordinary Cash Dividend (as
defined below), excluding any payment of interest on any Reference Security
consisting of an evidence of indebtedness and excluding any dividend or
distribution referred to in clause (i), (ii), (iii) or (iv) above) or issue to
all holders of such Reference Security rights or warrants to subscribe for or
purchase any of its securities or other property (other than those referred to
in clause (iv) above) (any of the foregoing cash, securities or other property
or rights or warrants are referred to as the "Distributed Assets") (any such
event described in clause (i), (ii), (iii), (iv) or (v), a "Dilution Event").
In the case of the Dilution Events referred to in clauses (i), (ii) and
(iii) above, the Reference Property shall be adjusted to include the number of
units such Reference Security and/or security of such issuer which a holder of
units of such Reference Security would have owned or been entitled to receive
immediately following any such event had such holder held, immediately prior to
such event, the number of units of such Reference Security constituting part of
the Reference Property immediately prior to such event. Each such adjustment
shall become effective immediately after the effective date for such
subdivision, split, combination or reclassification, as the case may be. Each
such adjustment shall be made successively.
In the case of the Dilution Event referred to in clause (iv) above, the
Reference Property shall be adjusted to include an amount in cash equal to the
fair market value (determined as described below), as of the fifth Business Day
(except as provided below) following the date on which such rights or warrants
are received by securityholders entitled thereto (the "Receipt Date"), of each
such right or warrant multiplied by the product of (A) the number of such rights
or warrants issued for each unit of such Reference Security and (B) the number
of units of such Reference Security constituting part of the Reference Property
on the date of issuance of such rights or warrants, immediately prior to such
issuance, without interest thereon. For purposes of the foregoing, the fair
market value of each such right or warrant shall be the quotient of (x) the
highest net bid, as of approximately 10:00 A.M., New York City time, on the
fifth Business Day following the Receipt Date for settlement three Business Days
later, by a recognized securities dealer in The City of New York selected by or
on behalf of the Administrator from three (or such fewer number of dealers as
may be providing such bids) such recognized dealers selected by or on behalf of
the Administrator), for the purchase by such quoting dealer of the number of
rights or warrants (the "Aggregate Number") that a holder of such Reference
Security would receive if such holder held, as of the record date for
determination of stockholders entitled to receive such rights or warrants, a
number of units of such Reference Security equal to the product of (1) the
aggregate number of outstanding STRYPES as of such record date and (2) the
number of units of such Reference Security constituting part of the Reference
Property, divided by (y) the Aggregate Number. Each such adjustment shall become
effective on the fifth Business Day following the Receipt Date of such rights or
warrants. If for any reason the Administrator is unable to obtain the required
bid on the fifth Business Day
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following the Receipt Date, it shall attempt to obtain such bid at successive
intervals of three months thereafter and on the third Trading Day prior to the
Exchange Date until it is able to obtain the required bid, or, if earlier, until
the third Trading Day prior to the Exchange Date. From the date of issuance of
such rights or warrants until the required bid is obtained or those efforts end
on that Trading Day, the Reference Property shall include the number of such
rights or warrants issued for each unit of such Reference Property on the date
of issuance of such rights or warrants, immediately prior to such issuance, and
such rights or warrants constituting part of the Reference Property shall be
deemed for all purposes hereof to have a fair market value of zero.
In the case of the Dilution Event referred to in clause (v) above, the
Reference Property shall be adjusted to include, from and after such dividend,
distribution or issuance, (x) in respect of that portion, if any, of the
Distributed Assets consisting of cash, the amount of such Distributed Assets
consisting of cash received for each unit of such Reference Security multiplied
by the number of units of such Reference Security constituting part of the
Reference Property on the date of such dividend, distribution or issuance,
immediately prior to such dividend, distribution or issuance, without interest
thereon, plus (y) in respect of that portion, if any, of the Distributed Assets
which are other than cash, the number or amount of each type of Distributed
Assets other than cash received with respect to each unit of such Reference
Security multiplied by the number of units of such Reference Security
constituting part of the Reference Property on the date of such dividend,
distribution or issuance, immediately prior to such dividend, distribution or
issuance.
An "Extraordinary Cash Dividend" means, with respect to any consecutive
12-month period, the amount, if any, by which the aggregate amount of all cash
dividends on any Reference Security consisting of capital stock occurring in
such 12-month period (or, if such Reference Security was not outstanding at the
commencement of such 12-month period, occurring in such shorter period during
which such Reference Security was outstanding) exceeds on a per share basis 10%
of the average of the Closing Prices per share of such Reference Security over
such 12-month period (or such shorter period during which such Reference
Security was outstanding); provided that, for purposes of the foregoing
definition, the amount of cash dividends paid on a per share basis will be
appropriately adjusted to reflect the occurrence during such period of any stock
dividend or distribution of shares of capital stock of the issuer of such
Reference Security or any subdivision, split, combination or reclassification of
shares of such Reference Security.
In the event of (A) any consolidation or merger of an issuer of a Reference
Security with or into another entity (other than a merger or consolidation in
which such issuer is the continuing corporation and in which the Reference
Security outstanding immediately prior to the consolidation or merger is not
exchanged for cash, securities or other property of such issuer or another
entity), (B) any sale, transfer, lease or conveyance to another corporation of
the property of an issuer of a Reference Security as an entirety or
substantially as an entirety, (C) any statutory exchange of securities of an
issuer of a Reference Security with another entity (other than in connection
with a merger or acquisition) or (D) any liquidation, dissolution, winding up or
bankruptcy of an issuer of a Reference Security (excluding any distribution in
such Dilution Event referred to in clause (v) above) (any such event described
in clause (A), (B), (C) or (D), a "Reorganization Event"), the Reference
Property shall be adjusted to include, from and after the effective date for
such Reorganization Event, in lieu of the number of units of such Reference
Security constituting part of the Reference Property immediately prior to the
effective date for such Reorganization Event, the amount or number of any cash,
securities and/or other property owned or received in such Reorganization Event
with respect to each unit of such Reference Security multiplied by the number of
units of such Reference Security constituting part of the Reference Property
immediately prior to the effective date for such Reorganization Event.
The Administrator is required, within ten Business Days following the
occurrence of an event that requires an adjustment to the Reference Property (or
if the Administrator is not aware of such occurrence, as soon as practicable
after becoming so aware), to provide written notice to the Holders of the
occurrence of such event and a statement in reasonable detail setting forth the
amount or number of each type of Reference Security and other property then
constituting part of the Reference Property.
No adjustments to the Reference Property will be made for certain other
events, such as offerings of Nextel Common Stock by the Company for cash or in
connection with acquisitions. Likewise, no adjustments
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to the Reference Property will be made for any sales of Nextel Common Stock by
the Contracting Stockholders.
Reorganization Events Causing a Dissolution of the Trust. Notwithstanding
anything to the contrary contained in the Contract, if any Reorganization Event
with respect to the Company, or any surviving entity or subsequent surviving
entity of the Company (a "Company Successor"), occurs, the Contracting
Stockholders' obligations under the Contract shall be automatically accelerated
and the Contracting Stockholders shall be obligated to deliver to the Trust, on
the tenth Business Day after the effective date for such Reorganization Event
(the "Early Settlement Date"), the aggregate number or amount of each type of
Reference Security and other property constituting part of the Reference
Property that would be required to be delivered on such date under the Contract
if the Exchange Date were redefined to be the Early Settlement Date.
IF A REORGANIZATION EVENT WITH RESPECT TO THE COMPANY OR ANY COMPANY
SUCCESSOR OCCURS, THE TRUST'S ASSETS (OTHER THAN ASSETS RECEIVED PURSUANT TO THE
CONTRACT) WILL BE LIQUIDATED, THE NET ASSETS OF THE TRUST WILL BE DISTRIBUTED
PRO RATA TO THE HOLDERS AND THE TERM OF THE TRUST WILL EXPIRE. In such event,
the U.S. Treasury Securities will be sold by the Trust, and the proceeds
therefrom will be distributed along with Reference Property received under the
Contract on the Early Settlement Date after providing for any expenses of the
Trust.
Collateral Arrangements; Acceleration. Pursuant to a Security and Pledge
Agreement among the Contracting Stockholders, the Trust and the Custodian, as
collateral agent, each Contracting Stockholder's obligations under the Contract
will be secured by a security interest in the maximum number or amount of each
type of Reference Security and other property constituting part of the Reference
Property (initially shares of Nextel Common Stock) deliverable by such
Contracting Stockholder under the Contract. Unless a Contracting Stockholder is
in default in its obligations under the Security and Pledge Agreement, such
Contracting Stockholder will be permitted to substitute for the pledged
Reference Property collateral consisting of short-term, direct obligations of
the U.S. Government. Any U.S. Government obligations pledged as substitute
collateral will be required to have an aggregate market value at the time of
substitution and at daily mark-to-market valuations thereafter of not less than
150% (or, from and after any Insufficiency Determination that shall not be cured
by the close of business on the third Business Day thereafter, as described
below, 200%) of the aggregate value of the number or amount of each type of
Reference Security and other property constituting part of the Reference
Property for which such obligations are being substituted at the time of each
valuation. The Collateral Agent will promptly pay over to each Contracting
Stockholder any dividends, interest, principal or other payments received by the
Collateral Agent in respect of any collateral pledged by such Contracting
Stockholder, including any substitute collateral, unless the relevant
Contracting Stockholder is in default of its obligations under the Security and
Pledge Agreement, or unless the payment of such amount to the relevant
Contracting Stockholder would cause the collateral to become insufficient under
the Security and Pledge Agreement. Each Contracting Stockholder shall have the
right to vote any pledged units of any Reference Security for so long as such
units are owned by it and pledged under the Security and Pledge Agreement.
If the Collateral Agent shall determine (an "Insufficiency Determination")
that U.S. Government obligations pledged by any Contracting Stockholder as
substitute collateral shall fail to meet the foregoing requirements at any
valuation, and such failure shall not be cured by the close of business on the
third Business Day after such determination, then, unless a Collateral Event of
Default (as defined below) under the Security and Pledge Agreement shall have
occurred and be continuing, the Collateral Agent shall, if practicable, commence
(i) sales of the collateral pledged by such Contracting Stockholder consisting
of U.S. government obligations and (ii) purchases, using the proceeds of such
sales, of each type of Reference Security and other property then constituting
part of the Reference Property, in such numbers or amounts sufficient to cause
the collateral pledged by such Contracting Stockholder to meet the requirements
of the Security and Pledge Agreement. The Collateral Agent shall discontinue
such sales and purchases if at any time a Collateral Event of Default under the
Security and Pledge Agreement shall have occurred and be continuing. A
"Collateral Event of Default" under the Security and Pledge Agreement shall
mean, with respect to any Contracting Stockholder at any time, (A) if no U.S.
Government obligations shall be pledged as substitute collateral at such time,
failure of the collateral pledged by such Contracting Stockholder to
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consist of at least the maximum number or amount of each type of Reference
Security and other property constituting part of the Reference Property
deliverable by such Contracting Stockholder under the Contract; and (B) if any
U.S. Government obligations shall be pledged by such Contracting Stockholder as
substitute collateral for Reference Property at such time, failure of such U.S.
Government obligations to have a market value at such time of at least 105% of
the difference between (x) the aggregate value of the maximum number or amount
of each type of Reference Security and other property constituting part of the
Reference Property deliverable by such Contracting Stockholder under the
Contract and (y) the aggregate value of the number or amount of each type of
Reference Security and other property constituting part of the Reference
Property pledged by such Contracting Stockholder as collateral at such time.
The occurrence of a Collateral Event of Default with respect to any
Contracting Stockholder under the Security and Pledge Agreement, or the
bankruptcy or insolvency of any Contracting Stockholder (each such event, a
"Default"), will cause an automatic acceleration of the Contracting
Stockholders' obligations under the Contract. In any such event, each
Contracting Stockholder will become obligated to deliver a number or amount of
each type of Reference Security and other property constituting part of the
Reference Property, allocated as proportionately as practicable, having an
aggregate value equal to such Contracting Stockholder's pro rata portion of the
"Aggregate Acceleration Value" of the Contract. The Aggregate Acceleration Value
will be based on an "Acceleration Value" determined by the Administrator on the
basis of quotations from independent dealers. Each quotation will be for an
amount that would be paid to the relevant dealer in consideration of an
agreement between the Trust and such dealer that would have the effect of
preserving the Trust's rights to receive the number or amount of each type of
Reference Security and other property constituting part of the Reference
Property under a portion of the Contract that corresponds to 1,000 of the
STRYPES offered hereby. The Administrator will request quotations from four
nationally recognized independent dealers on or as soon as reasonably
practicable following the date of acceleration. If four quotations are provided,
the Acceleration Value will be the arithmetic mean of the two quotations
remaining after disregarding the highest and the lowest quotations. If two or
three quotations are provided, the Acceleration Value will be the arithmetic
mean of such quotations. If one quotation is provided, the Acceleration Value
will be such quotation. The Aggregate Acceleration Value will be computed by
dividing the Acceleration Value by 1,000 and multiplying the quotient by the
aggregate number of STRYPES then outstanding, except that, if no quotations are
provided, the Aggregate Acceleration Value will be the value of the aggregate
number or amount of each type of Reference Security and other property
constituting part of the Reference Property that would be required to be
delivered on such date under the Contract if the Exchange Date were redefined to
be the acceleration date. Upon the occurrence of a Collateral Event of Default
or the bankruptcy or insolvency of any Contracting Stockholder, the number or
amount of each type of Reference Security and other property constituting part
of the Reference Property deliverable for each STRYPES will be based solely on
the Aggregate Acceleration Value described above for the Contract.
For purposes of the Security and Pledge Agreement, unless otherwise
specifically provided, the value of a number or amount of any type of Reference
Property shall be, (a) for any Reference Property consisting of cash, the amount
of such cash at the time of valuation, (b) for any Reference Property consisting
of property other than cash or Reference Securities, the fair market value (as
determined by a nationally recognized independent banking firm retained for this
purpose by the Administrator) as of the time of valuation of such property, and
(c) for any Reference Property consisting of a Reference Security, an amount
equal to the market price of a unit of such Reference Security at the time of
valuation multiplied by the number of units of such Reference Security then
being valued.
Upon any acceleration, the Collateral Agent will distribute to the Trust,
for distribution pro rata to the Holders, the Aggregate Acceleration Value in
the form of Reference Property then pledged, or cash generated from the
liquidation of the U.S. Government obligations then pledged, or a combination
thereof. In addition, in the event that by the Exchange Date any substitute
collateral has not been replaced by Reference Property sufficient to meet the
obligations of any Contracting Stockholder under the Contract, the Collateral
Agent will distribute to the Trust for distribution pro rata to the Holders the
aggregate value of the Reference Property to be delivered by such Contracting
Stockholder thereunder, in the form of Reference Property then pledged by
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such Contracting Stockholder plus cash generated from the liquidation of U.S.
Government obligations then pledged by such Contracting Stockholder. See
"-- Trust Dissolution."
Fractional Interests. No fractional units of any Reference Security will
be delivered if the Contracting Stockholders satisfy their obligations under the
Contract in whole or in part by delivering Reference Property. In lieu of any
fractional unit otherwise deliverable in respect of any Contracting
Stockholder's obligations under the Contract, the Trust shall be entitled to
receive an amount in cash equal to the value of such fractional unit based on
the average Closing Price per unit of such Reference Security on the 20 Trading
Days immediately prior to, but not including, the second Trading Day preceding
the Exchange Date.
To the extent practicable, the Contracting Stockholders will deliver
fractional interests of any Reference Property other than cash or a Reference
Security if the Contracting Stockholders satisfy their obligations under the
Contract in whole or in part by delivering Reference Property. If such delivery
is not practicable, in lieu of delivering any such fractional interest otherwise
deliverable in respect of any Contracting Stockholder's obligations under the
Contract, the Trust shall be entitled to receive an amount in cash equal to the
value of such fractional interest based on the fair market value (as determined
by a nationally recognized independent investment banking firm retained for this
purpose by the Administrator) as of the third Trading Day preceding the Exchange
Date of such Reference Property other than cash or a Reference Security.
Description of Contracting Stockholders. The Contracting Stockholders are
Cherrywood Holdings, Inc., and Vernon Investors, L.L.C. Specific information
regarding the holdings of Nextel Common Stock by the Contracting Stockholders is
included in the accompanying prospectus of the Company with respect to the
shares of Nextel Common Stock which may be received by a Holder of STRYPES on
the Exchange Date or upon earlier dissolution of the Trust.
Purchase Price. The purchase price under the Contract is equal to
$ in the aggregate and is payable to the Contracting Stockholders by
the Trust on or about , 1997. No other consideration is payable by
the Trust to the Contracting Stockholders in connection with its acquisition of
the Contract or the performance of the Contract by the Contracting Stockholders.
The Contract will be valued by the Trust at fair value as determined in
good faith at the direction of the Trustees (if necessary, through consultation
with accountants, bankers and other specialists). See "Net Asset Value."
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon U.S. Treasury
Securities with face amounts and maturities corresponding to the amounts and
payment dates of the distributions payable with respect to the STRYPES. Up to
% of the Trust's total assets may be invested in these U.S. Treasury
Securities. In the event that the Contract is accelerated as described under
"-- Reorganization Events Causing a Disssolution of the Trust" or "-- Collateral
Arrangements; Acceleration," then any such U.S. Treasury Securities then held in
the Trust shall be liquidated by the Administrator and distributed pro rata to
the Holders, together with amounts distributed upon acceleration.
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest the proceeds of the U.S.
Treasury Securities and any other cash held by the Trust in short-term
obligations of the U.S. Government maturing no later than the Business Day
preceding the next following distribution date.
TRUST DISSOLUTION
The Trust will dissolve on or shortly after the Exchange Date, except if
dissolved earlier under certain limited circumstances. Although the Trust has
adopted a fundamental policy that it will not dispose of the Contract prior to
the Exchange Date, under certain circumstances the Contract may terminate prior
to the Exchange Date. In the event that the Company or any successor thereto is
the subject of a Reorganization Event or a Default shall have occurred with
respect to any Contracting Stockholder, the Trust's assets (other
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than assets received pursuant to the Contract) would be liquidated, the net
assets of the Trust would be distributed pro rata to the Holders and the term of
the Trust would expire. See "-- The Contract -- Reorganization Events Causing a
Dissolution of the Trust" and "-- Collateral Arrangements; Acceleration."
FRACTIONAL INTERESTS
No fractional units of any Reference Security, or fractional interests of
any Reference Property other than cash or a Reference Security, will be
distributed by the Trust to Holders of STRYPES on the Exchange Date or upon
earlier dissolution of the Trust. All fractional units or interests to which
Holders of STRYPES would otherwise be entitled on the Exchange Date or upon
earlier dissolution of the Trust will be aggregated and liquidated by the
Administrator and, in lieu of the fractional unit or interest to which a Holder
would otherwise have been entitled in respect of the total number of STRYPES
held by such Holder, such Holder will receive its pro rata portion of the
proceeds from such liquidation.
INVESTMENT RESTRICTIONS
The Trust has adopted a fundamental policy that the Trust may not purchase
any securities or instruments other than the U.S. Treasury Securities, the
Contract and any Reference Security received pursuant to the Contract and, for
cash management purposes, short-term obligations of the U.S. Government; issue
any securities or instruments except for the STRYPES; make short sales or
purchase securities on margin; write put or call options; borrow money;
underwrite securities; purchase or sell real estate, commodities or commodities
contracts; or make loans. The Trust has adopted a fundamental policy to invest
at least 65% of its portfolio in the Contract. The Trust has also adopted a
fundamental policy that the Contract may not be disposed of during the term of
the Trust and that, unless the Trust dissolves prior to the Exchange Date due to
the occurrence of a Reorganization Event or a Default by any Contracting
Stockholder, the U.S. Treasury Securities may not be disposed of prior to their
respective maturities.
Because of the foregoing limitations, the Trust's investments will be
concentrated initially in the telecommunications industry, which is the industry
in which the Company currently operates. However, to the extent that in the
future the Company diversifies its operations into one or more other industries,
or the Reference Property includes a Reference Security of an issuer which
operates in another industry, the Trust's investments will be less concentrated
in the telecommunications industry.
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RISK FACTORS
NO ACTIVE PORTFOLIO MANAGEMENT
It is a fundamental policy of the Trust that the Contract may not be
disposed of during the term of the Trust and that, unless the Trust dissolves
prior to the Exchange Date due to the occurrence of a Reorganization Event or a
Default by any Contracting Stockholder, the U.S. Treasury Securities may not be
disposed of prior to their respective maturities. As a result, the Trust will
continue to hold the Contract despite any significant decline in the value of
the Reference Property, including the Nextel Common Stock, or adverse changes in
the financial condition of the issuer of any Reference Security, including the
Company. The Trust will not be managed like a typical closed-end investment
company.
ABSENCE OF TRADING HISTORY; MARKETABILITY; POSSIBILITY OF THE STRYPES TRADING AT
A DISCOUNT FROM NET ASSET VALUE
The STRYPES have no trading history and it is not possible to predict how
they will trade in the secondary market. The trading price of the STRYPES may
vary considerably prior to the Exchange Date due to, among other things,
fluctuations in trading prices of the Nextel Common Stock (which may occur due
to changes in the Company's financial condition, results of operations or
prospects, or because of complex and interrelated political, economic, financial
and other factors that can affect the capital markets generally, the stock
exchanges or quotation systems on which the Nextel Common Stock is traded and
the market segment of which the Company is a part) and fluctuations in interest
rates and other factors that are difficult to predict and beyond the Trust's
control.
The Underwriters currently intend, but are not obligated, to make a market
in the STRYPES. There can be no assurance that a secondary market will develop
or, if a secondary market does develop, that it will provide the Holders of the
STRYPES with liquidity of investment or that it will continue for the life of
the STRYPES. The STRYPES have been approved for listing on the AMEX, subject to
official notice of issuance. There can be no assurance that the STRYPES will not
later be delisted or that trading in the STRYPES on the AMEX will not be
suspended. In the event of a delisting or suspension of trading, the Trust will
apply for listing of the STRYPES on another national securities exchange or for
quotation on another trading market. If the STRYPES are not listed or traded on
any securities exchange or trading market, or if trading of the STRYPES is
suspended, pricing information for the STRYPES may be more difficult to obtain,
and the price and liquidity of the STRYPES may be adversely affected.
The Trust is a newly organized closed-end investment company with no
previous operating history. Shares of closed-end investment companies frequently
trade at a discount from their net asset value, which is a risk separate and
distinct from the risk that the Trust's net asset value will decrease. The Trust
cannot predict whether the STRYPES will trade at, below or above their net asset
value. The risk of purchasing investments that might trade at a discount is more
pronounced for investors who wish to sell their investments in a relatively
short period of time after completion of the Trust's initial public offering
because for those investors realization of a gain or loss on their investments
is likely to be more dependent upon the existence of a premium or discount than
upon portfolio performance. The STRYPES are not subject to redemption.
REFERENCE PROPERTY ADJUSTMENTS
The Reference Property (or, in the event that all or any of the Contracting
Stockholders elect to exercise the Cash Settlement Option, the amount of cash or
combination of cash and Reference Property) that the Trust is entitled to
receive pursuant to the Contract is subject to adjustment for certain events
arising from, among others, a merger or consolidation in which the Company is
not the surviving or resulting corporation and the liquidation, dissolution,
winding up or bankruptcy of the Company, as well as stock splits and
combinations, stock dividends and certain other actions of the Company that
modify its capital structure. See "Investment Objective and Policies -- The
Contract -- Reference Property Adjustments." Such Reference Property (or the
amount of cash or combination of cash and Reference Property) to be received by
the Trust pursuant to the Contract immediately prior to the Exchange Date will
not be adjusted for other events, such as
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offerings of Nextel Common Stock for cash or in connection with acquisitions. In
the event the Company is the subject of a Reorganization Event, the Trust's
assets (other than assets received pursuant to the Contract) would be
liquidated, the net assets of the Trust would be distributed pro rata to the
Holders and the term of the Trust would expire. Nextel is not restricted from
issuing additional shares of Nextel Common Stock during the term of the Trust
and neither the Company nor the Contracting Stockholders have any obligation to
consider the interests of the Holders of the STRYPES for any reason. Additional
issuances may materially and adversely affect the price of the Nextel Common
Stock and, because of the relationship of the percentage of the Reference
Property (or the amount of cash or combination of cash and Reference Property)
to be received on the Exchange Date to the price of the Nextel Common Stock,
such other events may materially and adversely affect the trading price of the
STRYPES. There can be no assurance that the Company will not take any of the
foregoing actions, or that it will not make offerings of, or that major
shareholders will not sell any, Nextel Common Stock in the future, or as to the
amount of any such offerings or sales.
LIMITED TERM
The term of the Trust will expire on or shortly after the Exchange Date,
unless the Trust is dissolved earlier under certain limited circumstances. On or
shortly after the Exchange Date, the Trust will distribute the Reference
Property and/or cash received by the Trust pursuant to the Contract and other
net assets held by the Trust pro rata to the Holders and dissolve shortly
thereafter. In the event that the Company or any successor thereto is the
subject of a Reorganization Event or a Default shall have occurred with respect
to any Contracting Stockholder, the Trust's assets (other than assets received
pursuant to the Contract) would be liquidated, the net assets of the Trust would
be distributed pro rata to the Holders and the term of the Trust would expire.
NON-DIVERSIFIED PORTFOLIO
The Trust's assets will consist almost entirely of the Contract and the
U.S. Treasury Securities. As a result, investments in the Trust may be subject
to greater risk than would be the case for a company with a more diversified
portfolio of investments.
COMPARISON TO OTHER EQUITY SECURITIES; RELATIONSHIP TO NEXTEL COMMON STOCK
The terms of the STRYPES are similar to those of ordinary equity securities
in that the value of the Reference Property (or, in the event that all or any of
the Contracting Stockholders elect to exercise the Cash Settlement Option, the
amount of cash or combination of cash and Reference Property) that a Holder of a
STRYPES will receive on the Exchange Date is not fixed, but is based on the
Reference Property Value (see "Investment Objective and Policies -- General" and
"-- The Contract"). THERE CAN BE NO ASSURANCE THAT SUCH AMOUNT RECEIVABLE BY THE
HOLDER ON THE EXCHANGE DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE PRICE
PAID FOR THE STRYPES. IF THE REFERENCE PROPERTY VALUE IS LESS THAN THE INITIAL
PRICE, SUCH AMOUNT RECEIVABLE ON THE EXCHANGE DATE WILL BE LESS THAN THE ISSUE
PRICE PAID FOR THE STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES WILL RESULT
IN A LOSS. ACCORDINGLY, A HOLDER OF STRYPES ASSUMES THE RISK THAT THE MARKET
VALUE OF THE NEXTEL COMMON STOCK MAY DECLINE, AND THAT SUCH DECLINE COULD BE
SUBSTANTIAL. REFERENCE IS MADE TO THE ACCOMPANYING PROSPECTUS OF THE COMPANY,
INCLUDING THE INFORMATION UNDER THE CAPTION "RISK FACTORS" THEREIN.
The trading prices of the STRYPES in the secondary market will be affected
by the trading prices of the Nextel Common Stock in the secondary market. It is
impossible to predict whether the price of Nextel Common Stock will rise or
fall. Trading prices of Nextel Common Stock will be influenced by the Company's
operating results and prospects and by economic, financial and other factors and
market conditions that can affect the capital markets generally, including the
level of, and fluctuations in, the trading prices of stocks generally and sales
of substantial amounts of Nextel Common Stock in the market subsequent to the
offering of the STRYPES or the perception that such sales could occur.
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LIMITATIONS ON OPPORTUNITY FOR EQUITY APPRECIATION; POTENTIAL LOSSES
The opportunity for equity appreciation afforded by an investment in the
STRYPES is less than the opportunity for equity appreciation afforded by a
direct investment in the Nextel Common Stock because the amount receivable by a
Holder of a STRYPES on the Exchange Date will only exceed the issue price of
such STRYPES if the Reference Property Value exceeds the Threshold Appreciation
Price (which represents an appreciation of % over the Initial Price).
Moreover, each STRYPES will entitle the Holder to receive on the Exchange Date
only % (the percentage equal to the Initial Price divided by the Threshold
Appreciation Price) of any appreciation of the value of the Reference Property
above the Threshold Appreciation Price. See "Investment Objective and
Policies -- The Contract." Because the value of the Reference Property is
subject to market fluctuations, the value of the Reference Property (or, in the
event that the Contracting Stockholders elect to exercise the Cash Settlement
Option, the amount of cash) received by the Trust immediately prior to the
Exchange Date, determined as described herein, may be more or less than the
issue price paid for the STRYPES.
NO STOCKHOLDER RIGHTS
Holders of the STRYPES will not be entitled to any rights with respect to
the Reference Property (including, without limitation, voting rights and rights
to receive any dividends or other distributions in respect of any Reference
Security) unless and until such time, if any, as the Trust shall have delivered
the Reference Property in exchange for STRYPES on the Exchange Date or upon
earlier dissolution of the Trust, and unless the applicable record date, if any,
for the exercise of such rights occurs after such delivery. For example, in the
event that an amendment is proposed to the Restated Certificate of Incorporation
or By-Laws of the Company and the record date for determining the stockholders
of record entitled to vote on such amendment occurs prior to such delivery,
Holders of the STRYPES will not be entitled to vote on such amendment.
The Contracting Stockholders are not responsible for the determination or
calculation of the amount receivable by Holders of the STRYPES on the Exchange
Date or upon earlier dissolution of the Trust. The Contract between the Trust
and the Contracting Stockholders is a commercial transaction and does not create
any rights in, or for the benefit of, any third party, including any holder of
STRYPES.
RISK RELATING TO BANKRUPTCY OF CONTRACTING STOCKHOLDERS
The Trust believes that the Contract will constitute a "securities
contract" for purposes of Title 11 of the United States Code (the "Bankruptcy
Code"), performance of which would not be subject to the automatic stay
provisions of the Bankruptcy Code in the event of bankruptcy of a Contracting
Stockholder. It is, however, possible that the Contract will be determined not
to qualify as a "securities contract" for this purpose, in which case the
bankruptcy of a Contracting Stockholder may cause a delay in settlement of the
Contract with such Contracting Stockholder, or otherwise subject the Contract to
the bankruptcy proceedings, which could adversely affect the time of exchange
or, as a result, the amount received by the Holders in respect of the STRYPES.
TAX MATTERS
Holders will experience a taxable event upon the exchange of STRYPES to the
extent that all or any of the Contracting Stockholders elect to exercise the
Cash Settlement Option. Because of an absence of authority as to the proper
character of any gain or loss resulting from such a taxable event, the ultimate
tax consequences to Holders as a result of an election to exercise the Cash
Settlement Option is uncertain. Accordingly, prospective investors in the
STRYPES should consult their own tax advisers in this regard. Investors should
also consult their own tax advisers concerning the proper treatment of their pro
rata share of the Trust's fees and expenses, and the application of the United
States Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the STRYPES arising
under the laws of any other taxing jurisdiction. The tax consequences of
investing in the STRYPES are described in greater detail under "Certain United
States Federal Income Tax Considerations."
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<PAGE> 25
DESCRIPTION OF THE STRYPES
Each STRYPES represents a proportionate share of beneficial interest in the
Trust, and a total of 7,168,587 STRYPES will be issued in the Offering, assuming
no exercise of the Underwriters' over-allotment option. Upon liquidation of the
Trust, Holders are entitled to share pro rata in the net assets of the Trust
available for distribution. STRYPES have no preemptive, redemption or conversion
rights. The STRYPES, when issued and outstanding, will be fully paid and
nonassessable.
Holders are entitled to one vote for each STRYPES held on all matters to be
voted on by Holders and are not able to cumulate their votes in the election of
Trustees. The Trustees of the Trust have been selected initially by ML IBK
Positions, Inc., as the initial holder of the Trust. The Trust intends to hold
annual meetings as required by the rules of the AMEX. The Holders have the
right, upon the declaration in writing or vote of more than two-thirds of the
outstanding STRYPES, to remove a Trustee. The Trustees will call a meeting of
Holders to vote on the removal of a Trustee upon the written request of the
record Holders of 10% of the STRYPES or to vote on other matters upon the
written request of the record Holders of 51% of the STRYPES (unless
substantially the same matter was voted on during the preceding 12 months).
BOOK-ENTRY SYSTEM
The STRYPES will be issued in the form of one or more global securities
(the "Global Securities") deposited with the Depositary and registered in the
name of a nominee of the Depositary.
The Depositary has advised the Trust and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. The
Depositary was created to hold securities of persons who have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of certificates. Such participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective STRYPES represented by such Global Security to the
accounts of participants. The accounts to be credited shall be designated by the
Underwriters. Ownership of beneficial interests in such Global Securities will
be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests by participants in such Global
Securities will be shown on, and the transfer of those ownership interests will
be effected only through, records maintained by the Depositary or its nominee
for such Global Securities. Ownership of beneficial interests in such Global
Securities by persons that hold through participants will be shown on, and the
transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the STRYPES.
Except as set forth below, owners of beneficial interests in such Global
Securities will not be entitled to have the STRYPES registered in their names
and will not receive or be entitled to receive physical delivery of the STRYPES
in definitive form and will not be considered the owners or Holders thereof.
Payment of Reference Property or amounts payable or other consideration
deliverable on exchange of, and any quarterly distributions on, STRYPES
registered in the name of or held by the Depositary or its nominee will be made
to the Depositary or its nominee, as the case may be, as the registered owner or
the holder of the Global Security. None of the Trust, any Trustee, the
Administrator, the Paying Agent or the Custodian for the STRYPES will have any
responsibility or liability for any aspect of the records relating to, or
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<PAGE> 26
payments made on account of, beneficial ownership interests in a Global Security
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Trust expects that the Depositary, upon receipt of any payment in
respect of a Global Security, will credit immediately participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of such Global Security as shown on the records of the
Depositary. The Trust also expects that payments by participants to owners of
beneficial interests in such Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such participants.
A Global Security may not be transferred except as a whole by the
Depositary to a nominee or a successor of the Depositary. If the Depositary is
at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Trust within ninety days, the Trust will
issue STRYPES in definitive registered form in exchange for the Global Security
representing such STRYPES. In addition, the Trust may at any time and in its
sole discretion determine not to have any STRYPES represented by one or more
Global Securities and, in such extent, will issue STRYPES in definitive form in
exchange for all of the Global Securities representing the STRYPES. Further, if
the Trust so specifies with respect to the STRYPES, an owner of a beneficial
interest in a Global Security representing STRYPES may, on terms acceptable to
the Trust and the Depositary for such Global Security, receive STRYPES in
definitive form. In any such instance, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in definitive form of
STRYPES represented by such Global Security equal in number to that represented
by such beneficial interest and to have such STRYPES registered in its name.
TRUSTEES
The Trustees of the Trust consist of three individuals, none of whom is an
"interested person" of the Trust as defined in the Investment Company Act. The
Trustees of the Trust are responsible for the overall supervision of the
operations of the Trust and perform the various duties imposed on the trustees
of management investment companies by the Investment Company Act.
The Trustees of the Trust are:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
------------------------------------------ ----------------- -----------------------
<S> <C> <C>
Donald J. Puglisi, 50..................... Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 51................. Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 57...................... Trustee Professor of Economics
Center for Economic Education University of Delaware
& Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
COMPENSATION OF TRUSTEES
The Trust will pay each unaffiliated Trustee a fee of $ per year
plus $ per meeting attended and will pay all Trustees' actual
out-of-pocket expenses relating to attendance at meetings; the Trust will also
pay an annual fee of $ to members of its audit committee and will pay
all Trustees' actual out-of-pocket expenses relating to attendance at audit
committee meetings. The Trustees will not receive any pension or retirement
benefits from the Trust. None of the Trustees receives any compensation for
serving as a trustee or director of any other affiliated investment company.
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MANAGEMENT ARRANGEMENTS
PORTFOLIO MANAGEMENT AND ADMINISTRATION
The Trust will be internally managed and will not have an investment
adviser. The Trust's portfolio will not be actively managed. The Managing
Trustee will negotiate the terms of the Contract and select the U.S. Treasury
Securities proposed for purchase by the Trust in accordance with and subject to
the terms of the Declaration of Trust. The Trustees of the Trust will authorize
the purchase of the Contract and the U.S. Treasury Securities as directed by the
Declaration of Trust. It is a fundamental policy of the Trust that the Contract
may not be disposed of during the term of the Trust and that, unless the Trust
dissolves prior to the Exchange Date due to the occurrence of a Reorganization
Event or a Default by the Contracting Stockholders, the U.S. Treasury Securities
may not be disposed of prior to their respective maturities.
The Trust will pay all expenses incurred in the operation of the Trust,
including, among other things, accounting services, expenses for legal and
auditing services, taxes, costs of printing proxies, listing fees, if any, stock
certificates and shareholder reports, charges of the Custodian (as defined
below) and the Paying Agent (as defined below), expenses of registering the
STRYPES under Federal and state securities laws, Commission fees, fees and
expenses of Trustees, accounting and pricing costs, insurance, interest,
brokerage costs, litigation and other extraordinary or non-recurring expenses,
mailing and other expenses properly payable by the Trust. See "-- Estimated
Expenses."
ADMINISTRATOR
The day-to-day affairs of the Trust will be managed by The Bank of New
York, as Trust Administrator pursuant to an Administration Agreement. Under the
Administration Agreement, the Trustees have delegated most of their operational
duties to the Administrator, including without limitation, the duties to: (i)
receive invoices for and pay, or cause to be paid, all expenses incurred by the
Trust; (ii) with the approval of the Trustees, engage legal and other
professional advisors (other than the independent public accountants for the
Trust); (iii) instruct the Paying Agent to pay distributions on STRYPES as
described herein; (iv) prepare and mail, file or publish all notices, proxies,
reports, tax returns and other communications and documents, and keep all books
and records, for the Trust; (v) at the direction of the Trustees, institute and
prosecute legal and other appropriate proceedings to enforce the rights and
remedies of the Trust; and (vi) make all necessary arrangements with respect to
meetings of Trustees and any meetings of Holders of STRYPES. The Administrator
will not, however, select the independent public accountants for the Trust or
sell or otherwise dispose of the Trust assets (except in connection with an
acceleration of the Contract as described under "Investment Objective and
Policies -- The Contract -- Reorganization Events Causing a Dissolution of the
Trust" and "-- Collateral Arrangements; Acceleration," or the settlement of the
Contract at the Exchange Date).
The Administration Agreement may be terminated by either the Trust or the
Administrator upon 60 days prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
Except for its roles as Administrator, custodian, paying agent, registrar
and transfer agent of the Trust, and except for its role as Collateral Agent
under the Security and Pledge Agreement, The Bank of New York has no other
affiliation with, and is not engaged in any other transactions with, the Trust.
The address of the Administrator is 101 Barclay Street, New York, New York
10286.
CUSTODIAN
The Trust's custodian (the "Custodian") is The Bank of New York pursuant to
a custodian agreement (the "Custodian Agreement"). In the event of any
termination of the Custodian Agreement by the Trust or the resignation of the
Custodian, the Trust must engage a new Custodian to carry out the duties of the
Custodian as set forth in the Custodian Agreement. Pursuant to the Custodian
Agreement, all net cash received by the Trust will be invested by the Custodian
in short-term U.S. Government securities maturing on
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or shortly before the next quarterly distribution date. The Custodian will also
act as collateral agent under the Security and Pledge Agreement and will hold a
perfected security interest in the Reference Property and U.S. Government
obligations or other assets consistent with the terms of the Contract pledged
thereunder.
PAYING AGENT
The transfer agent, registrar and paying agent (the "Paying Agent") for the
STRYPES is The Bank of New York pursuant to a paying agent agreement (the
"Paying Agent Agreement"). In the event of any termination of the Paying Agent
Agreement by the Trust or the resignation of the Paying Agent, the Trust will
use its best efforts to engage a new Paying Agent to carry out the duties of the
Paying Agent.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Administrator, the Paying Agent
and the Custodian with respect to any claim, liability, loss or expense
(including the costs and expenses of the defense against any claim or liability)
which it may incur in acting as Trustee, Administrator, Paying Agent or
Custodian, as the case may be, except in the case of willful misfeasance, bad
faith, gross negligence or reckless disregard of their respective duties or
where applicable law prohibits such indemnification. Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") has agreed to reimburse the Trust
for any amounts it may be required to pay as indemnification to any Trustee, the
Administrator, the Paying Agent or the Custodian. Merrill Lynch will in turn be
reimbursed by the Contracting Stockholders or an affiliate of the Contracting
Stockholders for all such reimbursements paid by it.
ESTIMATED EXPENSES
The Trust will pay at its inception to each of the Administrator, the
Custodian and the Paying Agent a one-time, up-front amount in respect of its
fee. The Trust will also pay anticipated expenses over the term of the Trust.
The anticipated Trust expenses include, among other things, expenses for legal
and independent accountants' services, costs of printing proxies, STRYPES
certificates and Holder reports, expenses of the Trustees and stock exchange
fees. Organization costs of the Trust in the amount of $ , offering
costs estimated to be $ , and the aggregate of the one-time, up-front
payments described above in the amount of $ , will be paid from the
proceeds of the offering of the STRYPES.
A portion of the initial assets of the Trust will be used to purchase U.S.
Treasury Securities with face amounts and maturities corresponding to the
anticipated expenses over the term of the Trust. The portfolio of U.S. Treasury
Securities to be purchased in respect of the anticipated expenses of the Trust
will be determined based on expense estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. Any unanticipated expenses will be paid by Merrill Lynch.
Merrill Lynch will be reimbursed by the Contracting Stockholders or an affiliate
of the Contracting Stockholders for all fees and expenses of the Trust paid by
it.
DIVIDENDS AND DISTRIBUTIONS
The Trust intends to distribute to Holders on a quarterly basis the
proceeds of the U.S. Treasury Securities held by the Trust, net of any Trust
expenses. The first distribution, reflecting the Trust's operations from the
date of the Offering, will be made on , 1997 to Holders of record as
of , 1997, and will equal $ per STRYPES. Thereafter,
distributions will be made on , , , and of each
year to Holders of record as of each , , , and
, respectively. Upon dissolution of the Trust as described in
"Investment Objective and Policies -- Trust Dissolution," each Holder will share
pro rata in any remaining net assets of the Trust.
NET ASSET VALUE
The net asset value of the STRYPES will be calculated by the Trust no less
frequently than quarterly by dividing the value of the net assets of the Trust
(the value of its assets less its liabilities) by the total number of STRYPES
outstanding. The Trust's net asset value will be published semi-annually as part
of the Trust's semi-annual report to Holders and at such other times as the
Trustees may determine. The U.S. Treasury Securities held by the Trust will be
valued at the mean between the last current bid and asked prices or, if
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<PAGE> 29
quotations are not available, as determined in good faith by the Trust under the
direction of the Trustees. Short-term investments having a maturity of 60 days
or less are valued at cost with accrued interest or discount earned included in
interest receivable. The Contract will be valued at the mean of the bid prices
received by the Trust from at least three independent broker-dealer firms
unaffiliated with the Trust who are in the business of making bids on financial
instruments similar to the Contract and with terms comparable thereto.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Set forth in full below is the opinion of Brown & Wood LLP, counsel to the
Trust, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the STRYPES. Such opinion is based upon
laws, regulations, rulings and decisions now in effect, all of which are subject
to change (including retroactive changes) or possible differing interpretations.
The discussion below deals only with STRYPES held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, tax-exempt entities, or persons holding STRYPES as a
hedge against currency risks or as a position in a "straddle" for tax purposes.
It also does not deal with Holders of STRYPES other than original purchasers
thereof (except where otherwise specifically noted herein). Moreover, the
discussion below does not address the tax consequences of ownership of the
Reference Property or Marketable Securities. The following discussion also does
not address the tax consequences of investing in the STRYPES arising under the
laws of any state, local or foreign jurisdiction. Persons considering the
purchase of the STRYPES should consult their own tax advisors concerning the
application of the United States Federal income tax laws to their particular
situations as well as any consequences of the purchase, ownership and
disposition of the STRYPES arising under the laws of any other taxing
jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of STRYPES
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, a partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate that is described in Section 7701(a)(30)(D)
of the Internal Revenue Code of 1986, as amended (the "Code") or (iv) a trust
that is described in Section 7701(a)(30)(E) of the Code. As used herein, the
term "non-U.S. Holder" means a beneficial owner of STRYPES that is not a U.S.
Holder. Unless otherwise specifically provided, the following opinion of Brown &
Wood LLP assumes that on the Exchange Date the Reference Property consists only
of shares of Nextel Common Stock.
CLASSIFICATION OF THE TRUST
The Trust will be classified as a grantor trust under subpart E, Part I of
subchapter J of the Code. As such, Holders of the STRYPES will be treated for
United States Federal income tax purposes as owners of a pro rata undivided
interest in the Trust's assets which will consist of the U.S. Treasury
Securities and the Contract. Accordingly, each Holder will be required to report
on its United States Federal income tax return its pro rata share of the entire
income on the Trust's assets in accordance with such Holder's regular method of
tax accounting.
U.S. HOLDERS
As previously discussed, each U.S. Holder will be considered the owner of
its pro rata portion of the U.S. Treasury Securities and the Contract held by
the Trust. The cost to a U.S. Holder of its STRYPES (net of its pro rata portion
of the one-time fees payable to the Administrator, the Custodian and the Paying
Agent) will be allocated among such U.S. Holder's pro rata portion of the U.S.
Treasury Securities and the Contract (in proportion to the relative fair market
values thereof on the date on which the U.S. Holder acquires its STRYPES) in
order to determine the U.S. Holder's initial tax basis in the U.S. Holder's pro
rata portion of the U.S. Treasury Securities and the Contract. It is currently
anticipated that approximately % and approximately % of the net proceeds of
the Offering will be used by the Trust to purchase the U.S. Treasury Securities
and as payments under the Contract, respectively.
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<PAGE> 30
The U.S. Treasury Securities held by the Trust will be treated for United
States Federal income tax purposes as having original issue discount which will
accrue over the term of the U.S. Treasury Securities. In general, a U.S. Holder
will be treated as having purchased each U.S. Treasury Security held by the
Trust with original issue discount in an amount equal to the excess of the U.S.
Holder's pro rata portion of the amount payable on such U.S. Treasury Security
over the Holder's initial tax basis therefor as discussed above. A U.S. Holder
(whether on the cash or accrual method of tax accounting) will be required to
include such original issue discount in income for United States Federal income
tax purposes as it accrues in accordance with a constant yield method. Because
it is expected that % or more of the Holders of STRYPES will be accrual
basis taxpayers, original issue discount on any short-term U.S. Treasury
Securities (i.e., any U.S. Treasury Security with a maturity of one year or less
from the date it is purchased by the Trust) held by the Trust will also be
currently includable in income by U.S. Holders as it accrues on a straight-line
basis (unless a U.S. Holder elects to accrue such original issue discount on a
constant yield basis). A U.S. Holder's tax basis in its pro rata portion of a
U.S. Treasury Security will be increased by the amount of any original issue
discount included in income by the U.S. Holder with respect to such U.S.
Treasury Security (as described above).
Each U.S. Holder will also be treated as having entered into a pro rata
portion of the Contract. Under current law, a U.S. Holder should not be required
to recognize any income, gain or loss with respect to the Contract until the
Exchange Date. On the Exchange Date, if the Contracting Stockholders deliver
Reference Property pursuant to the Contract, a U.S. Holder will generally not
realize any taxable gain or loss upon the receipt of such Reference Property.
However, a U.S. Holder will generally be required to recognize taxable gain or
loss with respect to any cash received in lieu of fractional units of any
Reference Security, fractional interests of any Reference Property other than
cash, and any Reference Property consisting of cash. The amount of such gain or
loss recognized by a U.S. Holder will be equal to the difference, if any,
between the amount of cash received by the U.S. Holder and the portion of the
U.S. Holder's tax basis in the Contract that is allocable to the fractional
units of any Reference Security, fractional interests of any Reference Property
other than cash, and any Reference Property consisting of cash. Any such taxable
gain or loss attributable to cash received in lieu of fractional units of any
Reference Security and fractional interests of any Reference Property other than
cash will be treated as short-term capital gain or loss and, because the matter
is uncertain, any such taxable gain or loss attributable to any Reference
Property consisting of cash could be treated as short-term capital gain or loss,
as long-term capital gain or loss (depending upon the U.S. Holder's holding
period for the STRYPES), or as ordinary income or loss. A U.S. Holder will have
an initial tax basis in any Reference Property (as allocated among the Reference
Property in accordance with the relative fair market values thereof, as
determined in the Exchange Date) received thereby on the Exchange Date (other
than cash received in lieu of fractional units, fractional interests and any
Reference Property consisting of cash) in an amount equal to the U.S. Holder's
tax basis in the Contract less the portion of such tax basis that is allocable
to any fractional units of any Reference Security, fractional interests of any
Reference Property and any Reference Property consisting of cash (as described
above) and will realize taxable gain or loss with respect to any such Reference
Property received thereby on the Exchange Date only upon the subsequent sale or
disposition by the U.S. Holder of such Reference Property. In addition, a U.S.
Holder's holding period for any Reference Property received by such U.S. Holder
on the Exchange Date will begin on the day immediately following the Exchange
Date and will not include the period during which the U.S. Holder held the
related STRYPES.
Alternatively, if the Contracting Stockholders satisfy the Contract either
partially or entirely in cash on the Exchange Date, a U.S. Holder will recognize
taxable gain or loss on the Exchange Date with respect to the Contract in an
amount equal to the difference, if any, between the total amount of cash
received by such U.S. Holder on the Exchange Date and an amount equal to the
U.S. Holder's tax basis in the Contract. It is uncertain whether such gain or
loss would be treated as capital or ordinary. If such gain or loss is properly
treated as capital, then such gain or loss will be treated as long-term capital
gain or loss if the STRYPES has been held by the U.S. Holder for more than one
year as of the Exchange Date. If such gain or loss is properly treated as
ordinary gain or loss, it is possible that the deductibility of any loss
recognized on the Exchange Date with respect to the Contract by a U.S. Holder
who is an individual could be subject to the limitations applicable to
miscellaneous itemized deductions provided for under Section 67(a) of the Code.
In general, Section 67(a) of the Code provides that an individual may only
deduct miscellaneous itemized deductions for
28
<PAGE> 31
a particular taxable year to the extent that the aggregate amount of the
individuals's miscellaneous itemized deductions for such taxable year exceed two
percent of the individual's adjusted gross income for such taxable year (the
miscellaneous itemized deductions and other itemized deductions allowable to
high-income individuals, however, are generally subject to further limitations
under Section 68 of the Code). Prospective investors in the STRYPES who are
individuals should also be aware that miscellaneous itemized deductions are not
allowable in computing the United States Federal alternative minimum tax imposed
by Section 55 of the Code. Prospective investors in the STRYPES are urged to
consult their own tax advisors concerning the character of any gain or loss
realized on the Exchange Date with respect to the Contract in the event that
either (i) the Reference Property consists of cash, Reference Securities (other
than Nextel Common Stock) or other property or (ii) the Contracting Stockholders
elect to satisfy their obligations under the Contract in cash on the Exchange
Date as well as the deductibility of any such loss.
In the event that some of the Contracting Stockholders satisfies their
obligations under the Contract with Reference Property and others satisfy their
obligations under the Contract with cash, a U.S. Holder would be required to
apply the foregoing rules to the STRYPES held thereby on a pro rata basis in
proportion to the amount of Reference Property and cash received thereby.
Upon the sale or other disposition of a STRYPES prior to the Exchange Date,
a U.S. Holder generally will be required to allocate the total amount realized
by such U.S. Holder upon such sale or other disposition between the U.S.
Holder's pro rata portion of the U.S. Treasury Securities and the Contract based
upon their relative fair market values (as determined on the date of
disposition). A U.S. Holder will generally be required to recognize taxable gain
or loss with respect to each such component (i.e., the U.S. Holder's pro rata
portion of the U.S. Treasury Securities and the Contract) in an amount equal to
the difference, if any, between the amount realized with respect to each such
component upon the sale or disposition of the STRYPES (as determined in the
manner described above) and the U.S. Holder's adjusted tax basis in each such
component. Any such gain or loss will generally be treated as long-term capital
gain or loss if the U.S. Holder has held the STRYPES for more than one year at
the time of disposition.
An individual U.S. Holder who itemizes deductions may amortize and deduct
over the term of the Trust (subject to any applicable limitations such as
Section 67(a) of the Code) its pro rata portion of the one-time, up-front fees
paid by the Trust to the Administrator, the Custodian and the Paying Agent, and
may deduct (subject to any applicable limitations such as those in Section 67(a)
of the Code) its pro rata portion of the other expenses described under
"Management Arrangements -- Estimated Expenses" incurred by the Trust resulting
from its ongoing operations (including the fees payable to the Trustees) as such
expenses are incurred by the Trust. Counsel believes that a U.S. Holder's pro
rata portion of the expenses incurred in connection with the organization of the
Trust, underwriting discounts and commissions and other offering expenses should
be includable in the cost to the U.S. Holder of the STRYPES. However, there can
be no assurance that the Internal Revenue Service (the "IRS") will not take a
contrary view. If the IRS were to prevail in treating such expenses as
excludible from a U.S. Holder's cost of the STRYPES, such expenses would not be
includable in the basis of the assets of the Trust and should instead, subject
to the limitations provided for under Section 67(a) of the Code, be amortizable
and deductible over the term of the Trust.
POSSIBLE ALTERNATIVE CHARACTERIZATIONS OF THE CONTRACT
Brown & Wood LLP, counsel to the Trust, believes the Contract should be
treated for United States Federal income tax purposes as a prepaid forward
contract for the purchase of a variable number of shares of Nextel Common Stock.
The IRS could conceivably take the view that the Contract should be treated as a
loan to the Contracting Stockholders in exchange for a contingent debt
obligation of the Contracting Stockholders. If the IRS were to prevail in making
such an assertion, a U.S. Holder might be required to include original issue
discount in income over the term of the STRYPES based on the excess of the
anticipated value of the Nextel Common Stock to be received in respect of the
Contract over the amount paid for the Contract. In addition, a U.S. Holder would
be required to include interest (rather than capital gain) in income on the
Exchange Date in an amount equal to the excess, if any, of the value of the
Nextel Common Stock received on the Exchange Date (or the proceeds from prior
disposition of the Contract) over the aggregate of the basis of the Contract and
any interest on the Contract previously included in income (or
29
<PAGE> 32
might be entitled to an ordinary deduction to the extent of interest previously
included in income and not ultimately received). The IRS could also conceivably
take the view that a U.S. Holder should simply include in income as interest the
amount of cash actually received each year in respect of the STRYPES.
MISCELLANEOUS TAX MATTERS
Special tax rules may apply to persons holding STRYPES as part of a
"synthetic security" or other integrated investment, or as part of a straddle,
hedging transaction or other combination of offsetting positions. For instance,
Section 1258 of the Code may possibly require certain U.S. Holders of the
STRYPES who enter into hedging transactions or offsetting positions with respect
to the STRYPES to treat all or a portion of any gain realized on the STRYPES as
ordinary income in instances where such gain may have otherwise been treated as
capital gain. U.S. Holders hedging their positions with respect to the STRYPES
or otherwise holding their STRYPES in a manner described above should consult
their own tax advisors regarding the applicability of Section 1258 of the Code,
or any other provision of the Code, to their investment in the STRYPES.
NON-U.S. HOLDERS
Subject to the discussion below concerning income that is effectively
connected with a trade or business conducted by a non-U.S. Holder in the United
States, payments of interest (including original issue discount) made with
respect to the U.S. Treasury Securities will not be subject to United States
withholding tax, provided that such non-U.S. Holder complies with applicable
certification requirements. In general, for a non-U.S. Holder to qualify for
this exemption from taxation, the last United States payor in the chain of
payment prior to payment to a non-U.S. Holder (the "Withholding Agent") must
have received in the year in which a payment of interest or principal occurs, or
in either of the two preceding calendar years, a statement that (i) is signed by
the beneficial owner of the U.S. Treasury Securities under penalties of perjury,
(ii) certifies that such owner is not a U.S. Holder and (iii) provides the name
and address of the beneficial owner. The statement may be made on an IRS Form
W-8 or a substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If STRYPES are held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution.
Any capital gain realized in respect of STRYPES by a non-U.S. Holder will
generally not be subject to United States Federal income tax if (i) such gain in
not effectively connected with a United States trade or business of such
non-U.S. Holder and (ii) in the case of an individual non-U.S. Holder, such
individual is not present in the United States for 183 days or more in the
taxable year of the sale or other disposition, or the gain is not attributable
to a fixed place of business maintained by such individual in the United States
and such individual does not have a "tax home" (as defined for United States
Federal income tax purposes) in the United States.
If any interest or gain realized by a non-U.S. Holder is effectively
connected with the non-U.S. Holder's conduct of a trade or business in the
United States, such interest or gain will be subject to regular United States
Federal income tax in the same manner as if the non-U.S. Holder were a U.S.
Holder. In addition, in such event, if such non-U.S. Holder is a foreign
corporation, such interest or gain may be included in the earnings and profits
of such non-U.S. Holder in determining such non-U.S. Holder's United States
branch profits tax liability.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A beneficial owner of STRYPES may be subject to information reporting and
to backup withholding at a rate of 31 percent of certain amounts paid to the
beneficial owner unless such beneficial owner provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the backup withholding rules.
30
<PAGE> 33
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PROSPECTIVE INVESTORS IN THE STRYPES SHOULD BE AWARE THAT THERE IS NO
AUTHORITY DIRECTLY ADDRESSING THE PROPER UNITED STATES FEDERAL INCOME TAX
TREATMENT OF THE STRYPES OR SECURITIES WITH TERMS SUBSTANTIALLY THE SAME AS THE
STRYPES, AND THAT NO RULING HAS BEEN REQUESTED FROM THE IRS WITH RESPECT TO THE
STRYPES. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE IRS WILL AGREE WITH THE
FOREGOING DISCUSSION AND THAT THE IRS WILL NOT ASSERT A CONTRARY POSITION AS TO
THE PROPER UNITED STATES FEDERAL INCOME TAX TREATMENT OF THE STRYPES WHICH MIGHT
CAUSE THE CHARACTER AND TIMING OF INCOME, GAIN OR LOSS RECOGNIZED WITH RESPECT
TO A STRYPES TO DIFFER SIGNIFICANTLY FROM SUCH CHARACTER AND TIMING DISCUSSED
ABOVE. PROSPECTIVE INVESTORS IN THE STRYPES ARE THEREFORE URGED TO CONSULT WITH
THEIR OWN TAX ADVISERS PRIOR TO MAKING AN INVESTMENT IN THE STRYPES.
31
<PAGE> 34
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Trust has agreed to sell to each of the underwriters
named below (the "Underwriters"), and each of the Underwriters, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Donaldson, Lufkin & Jenrette
Securities Corporation are acting as representatives, severally has agreed to
purchase, the aggregate number of STRYPES set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER STRYPES
-----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................................
Donaldson, Lufkin & Jenrette Securities Corporation.....................
---------
Total...................................................... 7,168,587
=========
</TABLE>
In the Purchase Agreement, the several Underwriters have agreed,
respectively, subject to the terms and conditions set forth in the Purchase
Agreement, to purchase all of the STRYPES being sold pursuant to the Purchase
Agreement if any of the STRYPES are purchased. In the event of a failure to
close, any funds debited from any investor's account maintained with an
Underwriter will be credited to such account and any funds received by such
Underwriter by check or money order from any investor will be returned to such
investor by check.
The Underwriters have each advised the Trust that they propose initially to
offer the STRYPES to the public at the public offering price set forth on the
cover page of this Prospectus. The Underwriters have also advised the Trust that
they propose to offer the STRYPES to certain dealers at the initial public
offering price less a concession not in excess of $ per STRYPES. Such
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per STRYPES to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed. The
sales load of $ per STRYPES is equal to % of the initial public offering
price. Investors must pay for any STRYPES purchased in the initial public
offering on or before , 1997.
The Trust has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus to purchase up to an aggregate of 1,075,288
additional STRYPES (subject to decrease by the number of STRYPES resulting from
the split of the initial STRYPES described below) to cover over-allotments, if
any, at the initial public offering price less the sales load. To the extent the
Underwriters exercise such option, the Underwriters will have a firm commitment,
subject to certain conditions, to purchase a number of additional STRYPES.
Prior to the Offering, there has been no public market for the STRYPES. The
STRYPES have been approved for listing on the AMEX, subject to official notice
of issuance.
The Contracting Stockholders have agreed not to offer, sell, contract to
sell or otherwise dispose of, directly or indirectly, or cause to be filed a
registration statement under the Securities Act with respect to, any
32
<PAGE> 35
shares of Nextel Common Stock, securities convertible into, exchangeable for or
repayable with such shares or rights or warrants to acquire such shares, for a
period of 90 days after the date of this Prospectus without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, subject to
certain exceptions.
Each of the Company and the Contracting Stockholders have agreed to
indemnify the Underwriters against certain civil liabilities, including
liabilities under the Securities Act.
In connection with the formation of the Trust, ML IBK Positions, Inc., an
affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, has subscribed
for and purchased one STRYPES for a purchase price of $100,000. Prior to the
Offering, the initial STRYPES will be split into the smallest whole number of
STRYPES that would result in the per STRYPES amount recorded as shareholders'
equity, after effecting the split, not exceeding the public offering price per
STRYPES. Under the Contract, the Contracting Stockholders will be obligated to
deliver to the Trust immediately prior to the Exchange Date a number or amount
of each type of Reference Property (or, in certain circumstances, cash, or a
combination of cash and Reference Property, with an equal value) in respect of
such STRYPES on the same terms as the STRYPES offered hereby.
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and for the
Underwriters by their counsel, Brown & Wood LLP, New York, New York. Certain
matters of Delaware law will be passed upon for the Trust by Richards, Layton &
Finger, Wilmington, Delaware.
EXPERTS
The statement of assets, liabilities and capital included in this
Prospectus has been audited by , independent auditors, as stated in
their opinion appearing herein, and has been included in reliance upon such
opinion given on the authority of said firm as experts in auditing and
accounting.
ADDITIONAL INFORMATION
The Trust has filed with the Commission, Washington D.C. 20549, a
Registration Statement under the Securities Act with respect to the STRYPES
offered hereby. Further information concerning the STRYPES and the Trust may be
found in the Registration Statement, of which this Prospectus constitutes a
part. The Registration Statement may be inspected without charge at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of all or any part thereof may
be obtained from such office after payment of the fees prescribed by the
Commission. The Commission maintains a Web site at http://www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants, such as the Trust, that file electronically with the Commission.
33
<PAGE> 36
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholder of Nextel STRYPES Trust:
We have audited the accompanying statement of assets, liabilities and
capital of Nextel STRYPES Trust as of , 1997. This financial
statement is the responsibility of the Trust's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets, liabilities and
capital is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by the Trust's management, as well as evaluating the
overall financial statement presentation. We believe that our audit of the
financial statement provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Nextel STRYPES Trust, as of
, 1997 in conformity with generally accepted accounting principles.
New York, New York
, 1997
34
<PAGE> 37
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
, 1997
<TABLE>
<S> <C>
ASSETS
Cash.............................................................................. $100,000
Deferred organization and offering costs (Note 1).................................
--------
Total Assets............................................................ $
========
LIABILITIES
Deferred organization and offering costs payable (Note 1)......................... $
========
NET ASSETS........................................................................ $
========
CAPITAL
STRYPES, par value $.10 per share; shares authorized; 1 share issued
and outstanding (Note 3)..................................................... $
Paid-in Capital in excess of par................................................
--------
Total Capital-Equivalent of $ net asset value per share of
STRYPES (Note 1)........................................................ $
========
</TABLE>
- ---------------
(1) The Trust was established as a Delaware business trust on October 25, 1995
and is registered as a non-diversified, closed-end management investment
company under the Investment Company Act of 1940, as amended. Costs
incurred by the Trust in connection with its organization, estimated at
$ , will be amortized on a straight-line basis over a three-year
period beginning at the commencement of operations of the Trust.
(2) Offering expenses, estimated at $ , will be payable upon completion
of the offering and will be charged to capital upon the commencement of
operations of the Trust.
(3) On February , 1997, the Trust issued one STRYPES to ML IBK Positions,
Inc., an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
in consideration for the purchase price of $100,000.
The Declaration of Trust provides that prior to the Offering, the Trust
will split the outstanding STRYPES to be effected on the date that the
price and underwriting discount of the STRYPES being offered to the public
is determined, but prior to the sale of the STRYPES to the Underwriters.
The one outstanding STRYPES will be split into the smallest whole number of
STRYPES that would result in the per STRYPES amount recorded as
shareholders' equity, after effecting the split, not exceeding the public
offering price per STRYPES.
35
<PAGE> 38
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER
THAN THOSE SPECIFICALLY OFFERED HEREBY, OR OF ANY SECURITIES OFFERED HEREBY, IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE AN OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE TRUST SINCE THE DATE HEREOF OR SINCE THE DATES AS OF WHICH
INFORMATION IS SET FORTH HEREIN. IN THE EVENT THAT ANY SUCH CHANGE SHALL OCCUR
DURING THE PERIOD IN WHICH APPLICABLE LAW REQUIRES DELIVERY OF THIS PROSPECTUS,
THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Fee Table............................. 8
The Trust............................. 9
Use of Proceeds....................... 9
Investment Objective and Policies..... 9
Investment Restrictions............... 19
Risk Factors.......................... 20
Description of the STRYPES............ 23
Trustees.............................. 24
Management Arrangements............... 25
Dividends and Distributions........... 26
Net Asset Value....................... 26
Certain United States Federal Income
Tax Considerations.................. 27
Underwriting.......................... 32
Legal Matters......................... 33
Experts............................... 33
Additional Information................ 33
Independent Auditors' Report.......... 34
Statement of Assets, Liabilities
and Capital......................... 35
</TABLE>
PROSPECTUS RELATING TO CLASS A COMMON STOCK
OF NEXTEL COMMUNICATIONS, INC.
------------------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE STRYPES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
7,168,587 STRYPES(SM)
NEXTEL STRYPES TRUST
EXCHANGEABLE FOR SHARES OF
CLASS A COMMON STOCK OF
LOGO(R)
Nextel Communications, Inc.
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1997
(SM) Service mark of Merrill Lynch & Co., Inc.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 39
THE FOLLOWING PROSPECTUS OF NEXTEL COMMUNICATIONS, INC. IS ATTACHED AND
DELIVERED FOR CONVENIENCE OF REFERENCE ONLY. THE PROSPECTUS OF NEXTEL
COMMUNICATIONS, INC. DOES NOT CONSTITUTE A PART OF THE FOREGOING PROSPECTUS OF
NEXTEL STRYPES TRUST, NOR IS IT INCORPORATED BY REFERENCE THEREIN.
<PAGE> 40
[NEXTEL PROSPECTUS]
2
<PAGE> 41
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
Independent Auditors' Report
Statement of Assets, Liabilities and Capital as of , 1997
2. EXHIBITS
<TABLE>
<C> <S>
(a)(1) Trust Agreement*
(2) Form of Amended and Restated Trust Agreement**
(3) Certificate of Trust*
(4) Restated Certificate of Trust**
(b) Not applicable
(c) Not applicable
(d)(1) Form of Specimen certificate for STRYPES (included in Exhibit 2(a)(2))**
(2) Portions of the Declaration of Trust of the Registrant defining the rights of
Holders of STRYPES (included in Exhibit 2(a)(2))**
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h)(1) Form of Purchase Agreement**
(2) Form of Registration Agreement**
(3) Merrill Lynch Standard Dealer Agreement**
(i) Not applicable
(j) Form of Custodian Agreement**
(k)(1) Form of Administration Agreement**
(2) Form of Paying Agent Agreement**
(3) Form of Forward Purchase Contract**
(4) Form of Security and Pledge Agreement**
(5) Form of Fund Expense Agreement**
(6) Form of Fund Indemnity Agreement**
(l) Opinion and Consent of Brown & Wood LLP, counsel to the Trust**
(m) Not applicable
(n)(1) Tax Opinion and Consent of Brown & Wood LLP, counsel to the Trust**
(2) Consent of , independent auditors for the Trust**
(o) Not applicable
(p) Form of Subscription Agreement**
(q) Not applicable
(r) Financial Data Schedule**
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
ITEM 5. MARKETING ARRANGEMENTS
See Exhibits (h)(1), (h)(2) and (h)(3) to this Registration Statement.
C-1
<PAGE> 42
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
<TABLE>
<S> <C>
SEC Registration fees................................................... $ 37,472
AMEX listing fee........................................................ *
Printing (other than certificates)...................................... *
Engraving and printing certificates..................................... *
Fees and expenses of qualification under state securities laws
(including fees of counsel)........................................... *
Accounting fees and expenses............................................ *
Legal fees and expenses................................................. *
NASD fees............................................................... 24,044.50
Miscellaneous........................................................... *
----------
Total......................................................... $ *
==========
</TABLE>
- ---------------
* To be furnished by amendment.
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management
Arrangements" is incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
There will be one record holder of the STRYPES as of the effective date of
this Registration Statement.
ITEM 29. INDEMNIFICATION
Article of the Declaration of Trust and the Purchase Agreement and
Registration Agreement provide for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be permitted to trustees, officers and
controlling persons of the Registrant, pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the 1933 Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a trustee, officer
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant 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 1933 Act
and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Trust is internally managed and does not have an investment adviser.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
promulgated thereunder are maintained at the offices of the Registrant (850
Library Avenue, Suite 204, Newark, Delaware 19715), its custodian (101 Barclay
Street, New York, New York 10286) and its paying agent (101 Barclay Street, New
York, New York 10286).
C-2
<PAGE> 43
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend the offering of the shares
covered hereby until it amends its prospectuses contained herein if (1)
subsequent to the effective date of this Registration Statement, its net asset
value per share declines more than 10 percent from its net asset value per share
as of the effective date of the Registration Statement or (2) the net asset
value per share increases to an amount greater than its net proceeds as stated
in the prospectuses contained herein.
(b) The Registrant hereby undertakes that (i) for purpose of determining
any liability under the 1933 Act, the information omitted from the form of
prospectuses filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the registrant under Rule
497(h) under the 1933 Act shall be deemed to be part of this registration
statement as of the time it was declared effective; (ii) for the purpose of
determining any liability under the 1933 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 the securities
at that time shall be deemed to be the initial bona fide offering thereof.
C-3
<PAGE> 44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Newark, State of
Delaware, on the 14th day of February, 1997.
Nextel STRYPES TRUST
(REGISTRANT)
By: /s/ DONALD J. PUGLISI
------------------------------------
Donald J. Puglisi
Managing Trustee
Each person whose signature appears below hereby authorizes Donald J.
Puglisi, William R. Latham III, or James B O'Neill, or any of them, as
attorney-in-fact, to sign on his behalf, individually and in each capacity
stated below, any amendment to this Registration Statement (including
post-effective amendments) and to file the same, with all exhibits thereto, with
the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment to the Registrant's Registration Statement has been
signed below by the following persons, in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- --------------------------- ------------------
<C> <S> <C>
/s/ DONALD J. PUGLISI Managing Trustee February 14, 1997
- ---------------------------------------------
(Donald J. Puglisi)
/s/ WILLIAM R. LATHAM III Trustee February 14, 1997
- ---------------------------------------------
(William R. Latham III)
/s/ JAMES B. O'NEILL Trustee February 14, 1997
- ---------------------------------------------
(James B. O'Neill)
</TABLE>
