As Filed with the Securities and Exchange Commission
on September 23, 1997
Securities Act File No. 33-99752
Investment Company Act File No. 811-09138
=================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM N-2
Registration Statement Under The
Securities Act of 1933 |X|
Pre-Effective Amendment No. 4 |X|
Post-Effective Amendment No.____ |_|
Registration Statement Under The
Investment Company Act of 1940 |X|
Amendment No. 4 |X|
--------------------------
DECS 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)
Registrant's Telephone Number,
including Area Code: (302) 738-6680
Donald J. Puglisi
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
With copies to:
Raymond B. Check, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
(212) 225-2000
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. |_|
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
=================================================================
Proposed Proposed Amount
Title of Amount Maximum Maximum of
Securities being Offering Aggregate Regis-
Being Regis- Price Per Offering tration
Registered tered(1) DECS(2) Price(2) Fee
- -----------------------------------------------------------------
DECS
representing
shares of
beneficial
interest .... 3,484,104 $25.00 87,102,600.00 $26,394.73(3)
=================================================================
(1) Includes an aggregate of 384,104 DECS that (i) may be
issued in connection with the exercise of an over-allotment
option and (ii) were subscribed for and purchased by Salomon
Brothers Inc in connection with the formation of the DECS
Trust.
(2) Estimated solely for the purpose of calculating the
registration fee.
(3) Of this amount, $4,448.28 was previously paid by the
Registrant in connection with the initial filing of this
registration statement on November 22, 1995 and $21,188.87
was previously paid by the Registrant in connection with the
filing of Amendment No. 3 to this registration statement on
September 10, 1997. The balance of $757.58 is submitted herewith.
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.
=================================================================
<PAGE>
DECS TRUST
Cross-Reference Sheet
Parts A and B of Prospectus*
Item No.Caption Prospectus Caption
--------------- ------------------
1. Outside Front Cover ........... Front Cover Page
2. Inside Front and Outside
Back Cover .................... Front Cover Page; Inside
Front Cover Page
3. Fee Table and Synopsis ........ Prospectus Summary; Fees
and Expenses
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
Objectives and Policies
8. General Description
of the Registrant ............. Front Cover Page;
Prospectus Summary; The
Trust; Investment
Restrictions; Investment
Objectives and Policies;
Risk Factors Relating to
DECS
9. Management .................... Management and Administration
of the Trust
10. Capital Stock, Long-Term
Debt and Other Securities;
Federal Income Tax
Considerations ................ Description of DECS
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
14. Cover Page .................... Not Applicable
15. Table of Contents ............. Not Applicable
16. General Information
and History ................... The Trust
17. Investment Objective
and Policies .................. Investment Objectives and
Policies; Investment
Restrictions
18. Management .................... Management and Adminis-
tration of the Trust
19. Control Persons and
Principal Holders of
Securities .................... Management and Adminis-
tration of the Trust
20. Investment Advisory
and Other Services ............ Management and Adminis-
tration of the Trust
21. Brokerage Allocation
and Other Practices ........... Investment Objectives and
Policies
22. Tax Status .................... Certain United States
Federal Income Tax
Considerations
23. Financial Statements .......... Statement of Assets,
Liabilities and Capital
- ----------------
* 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. Information required to be included in Part C
is set forth under the appropriate item, so numbered, in
Part C of the N-2 Registration Statement.
<PAGE>
**********************************************************************
* 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 ANY 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. *
**********************************************************************
Subject to Completion
September 23, 1997
Prospectus
3,100,000 DECS SM
DECS TRUST
(Subject to Exchange into Shares of Common Stock, without
Par Value , of DIMON Incorporated)
The issue price (the "Initial Price") of each of the DECS (each,
a "DECS") of the DECS Trust (the "Trust") being offered hereby
will be $ (the last sale price of the common stock, without
par value (the "Common Stock"), of DIMON Incorporated, a Virginia
corporation (the "Company") on , 1997, as reported on the New
York Stock Exchange Composite Tape). Each of the DECS represents
the right to receive (a) an annual distribution of $ , payable
quarterly on each , , and , during the term of the Trust,
beginning , 1997 and (b) upon the conclusion of the term
of the Trust on , 2000 (the "Exchange Date"), between and 1.0
shares of Common Stock or cash with an equivalent value. The DECS
are not subject to redemption prior to the Exchange Date or the
earlier termination of the Trust.
The Trust is a newly organized Delaware business trust esta-
blished to purchase and hold (a) a series of zero-coupon U.S.
Treasury securities maturing on a quarterly basis during the term
of the Trust (the "Treasury Securities") and (b) forward purchase
contracts (the "Contracts") with certain stockholders (the
"Sellers") of the Company relating to the Common Stock.
The investment objectives of the Trust are to provide holders
of DECS with a quarterly distribution of $ per DECS over
the term of the Trust and to provide holders of DECS, at the
Exchange Date, a number of shares of Common Stock (or, if some or
all of the Sellers exercise their cash settlement option in the
Contracts under the circumstances described herein, the cash
equivalent of all or part thereof or a combination of Common
Stock and cash) at the Exchange Rate (as defined herein). The
Exchange Rate is equal to, subject to certain adjustments, (a) if
the Exchange Price (as defined herein) is greater than $ per
share of Common Stock (the "Threshold Appreciation Price"),
shares of Common Stock per DECS, (b) if the Exchange Price
is less than or equal to the Threshold Appreciation Price but is
greater than the Initial Price, a fraction equal to the Initial
Price divided by the Exchange Price of one share of Common Stock
per DECS such that the value (determined at the Exchange Price)
of the Common Stock delivered at the Exchange Date equals the
Initial Price and (c) if the Exchange Price is less than or equal
to the Initial Price, one share of Common Stock per DECS. The
"Exchange Price" means the average Closing Price (as defined
herein) per share of Common Stock on the 20 Trading Days (as
defined herein) immediately prior to the Exchange Date, except as
otherwise described herein. Accordingly, the value of the Common
Stock to be received by holders of the DECS at the Exchange Date
will not necessarily equal the Initial Price. If the Exchange
Price is less than the Initial Price, the value of the Common
Stock to be received at the Exchange Date will generally be less
than the price paid for the DECS.
SEE "INVESTMENT OBJECTIVES AND POLICIES." SEE "RISK FACTORS
RELATING TO DECS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY
PROSPECTIVE PURCHASERS.
(Cover continued on next page)
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.
- -----------------------------------------------------------------
Price to Proceeds to
Public Sales Load the Trust(2)
Per DECS $ $ (3) $
Total (1) $ $ (3) $
- -----------------------------------------------------------------
(1) The Trust has granted to the Underwriter an option,
exercisable within 30 days from the date hereof, to purchase
up to an additional DECS to cover over-allotments, if
any. If the Underwriter exercises such option in full, the
total Price to Public, Sales Load and Proceeds to the Trust
will be $ , $ and $ , respectively. See
"Underwriting."
(2) Before deducting estimated expenses of $371,000, payable by
Salomon Brothers Inc, which will be reimbursed by the
Sellers.
(3) In light of the fact that the proceeds of the sale of the
DECS will be used in part by the Trust to purchase the
Contracts from the Sellers, the Underwriting Agreement
provides that the Sellers will pay to the Underwriter as
compensation $ per DECS. See "Underwriting."
The DECS are offered subject to receipt and acceptance by the
Underwriter, to prior sales and to the Underwriter's right to
reject any order in whole or in part and to withdraw, cancel or
modify the offer without notice. It is expected that delivery of
the DECS will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the
facilities of The Depository Trust Company, on or about ,
1997.
- --------------------
Salomon Brothers Inc
- -----------------------------------------------------------------
The date of this Prospectus is , 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE
PRICE OF THE DECS OR THE COMMON STOCK, INCLUDING PURCHASES OF THE
DECS OR THE COMMON STOCK TO STABILIZE THEIR MARKET PRICE AND
PURCHASES OF THE DECS OR THE COMMON STOCK TO COVER SOME OR ALL OF
A SHORT POSITION IN THE DECS OR THE COMMON STOCK MAINTAINED BY
THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES SEE "UNDERWRITING."
----------------------------
(Continued from previous page)
In the event of certain Adjustment Events (as defined herein),
holders may receive property other than (or in addition to)
Common Stock or a combination of such property and cash. See
"Investment Objectives and Policies--The Contracts--Dilution
Adjustments; Adjustment Events." In addition, holders otherwise
entitled to receive fractional shares in respect of their
aggregate holdings of DECS will receive cash in lieu thereof.
The Trust has adopted a policy that the Contracts may not be
disposed of during the term of the Trust. The Trust will continue
to hold the Contracts despite any significant decline in the
market price of the Common Stock or adverse changes in the
financial condition of the Company.
This Prospectus sets forth information about the Trust that
a prospective investor ought to know before investing. Potential
investors are advised to read this Prospectus and to retain it
for future reference.
DECS may be a suitable investment for those investors who
are capable of evaluating the risks involved in making an
investment in the Common Stock of the Company and the advantages
and disadvantages of doing so in a manner which will give
investors in the DECS a potentially higher yield but a lesser
opportunity for equity appreciation than would be afforded by a
direct investment in the Common Stock. There is no assurance that
the yield on the DECS will be higher than the dividend yield on
the Common Stock over the term of the Trust. See "Investment
Objectives and Policies."
Attached hereto for convenience of reference is a prospectus
of the Company relating to the shares of Common Stock that may be
received by holders of DECS at the Exchange Date. The Company is
not affiliated with the Trust, will not receive any of the
proceeds from the sale of the DECS and will have no obligations
with respect to the DECS or the Contracts. The Common Stock is
listed on the New York Stock Exchange ("NYSE") under the symbol
"DMN."
The Trust will be a grantor trust owned solely by the
present and furute holders of DECS for U.S. federal income tax
purposes and each holder will be treated as the owner of its pro
rata portion of the Treasury Securities and the Contracts. The
Treasury Securities will be treated as having "original issue
discount" which holders must recognize currently as income as it
accrues. Holders will not recognize income, gain or loss upon the
Trust's entry into the Contracts nor will the delivery of Common
Stock pursuant to the Contracts be taxable to holders. Holders
should not recognize income, gain or loss with respect to the
Contracts over their term. See "Certain United States Federal
Income Tax Considerations."
THE TRUST IS A NEWLY ORGANIZED CLOSED-END INVESTMENT COMPANY
WITH NO PREVIOUS HISTORY OF PUBLIC TRADING. APPLICATION HAS BEEN
MADE TO LIST THE DECS ON THE NYSE UNDER THE SYMBOL "DET." TYPICAL
CLOSED-END FUND SHARES FREQUENTLY TRADE AT A DISCOUNT FROM NET
ASSET VALUE. THIS CHARACTERISTIC OF INVESTMENTS IN A CLOSED-END
INVESTMENT COMPANY IS A RISK SEPARATE AND DISTINCT FROM THE RISK
THAT THE TRUST'S NET ASSET VALUE WILL DECREASE. THE TRUST CANNOT
PREDICT WHETHER THE DECS WILL TRADE AT, BELOW OR ABOVE NET ASSET
VALUE. THE RISK OF PURCHASING INVESTMENTS IN A CLOSED-END COMPANY
THAT MIGHT TRADE AT A DISCOUNT IS MORE PRONOUNCED FOR INVESTORS
WHO WISH TO SELL THEIR INVESTMENTS SOON AFTER COMPLETION OF AN
INITIAL PUBLIC OFFERING.
The address of the Trust is c/o Puglisi & Associates, 850 Library
Avenue, Suite 204, Newark, Delaware 19715, and the Trust's telephone
number is (302) 738-6680. Investors are advised to read this Prospectus
and to retain it for future reference.
"DECS" is a service mark of Salomon Brothers Inc.
2
<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to
the more detailed information included elsewhere in this
Prospectus.
The Trust
DECS Trust (the "Trust") is a newly organized Delaware
business trust that is 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 owned solely by the present and future holders of
DECS for U.S. federal income tax purposes.
The Offering
DECS representing shares of beneficial interest in the
Trust are being offered for sale by Salomon Brothers Inc (the
"Underwriter") to the public at a purchase price of $ per DECS
(the "Initial Price") (which is equal to the last sale price of
the common stock, without par value (the "Common Stock"), of
DIMON Incorporated, a Virginia corporation (the "Company") on ,
1997, as reported on the New York Stock Exchange Composite Tape).
In addition, the Underwriter has been granted an option to
purchase up to an additional 384,104 DECS (subject to decrease as a
result of the issuance and sale of DECS in connection with the
formation of the Trust) to cover over-allotments, if any. See
"Underwriting."
Purpose of the Trust
The DECS are designed to provide investors (the "Holders")
with a higher yield than the current dividend yield paid on the
Common Stock, while also providing the opportunity for Holders to
share in the appreciation, if any, of the Common Stock above the
Threshold Appreciation Price (as defined below). The annual
calendar year distribution on the DECS is $ per DECS. The annual
fiscal year dividend currently paid per share of Common Stock is
$0.60.
The yield on the DECS is higher than the current dividend
yield on the Common Stock. However, there is no assurance that
the yield on the DECS will be higher than the dividend yield on
the Common Stock over the term of the Trust. In addition, the
opportunity for equity appreciation afforded by an investment in
the DECS is less than the opportunity for equity appreciation
afforded by a direct investment in the Common Stock because the
value of the Common Stock to be received by Holders of the DECS
at the Exchange Date (the "Amount Receivable at the Exchange
Date") will generally exceed the Initial Price only if the
Exchange Price (as defined herein) exceeds $ per share of
Common Stock (the "Threshold Appreciation Price", which represents
an appreciation of % over the Initial Price) and because Holders
will be entitled to receive at the Exchange Date only % of any
appreciation of the value of the Common Stock in excess of the
Threshold Appreciation Price. Moreover, if the Exchange Price is
less than the Initial Price, the value of the Common Stock to be
received at the Exchange Date will generally be less than the
price paid for the DECS.
Distributions Prior to Exchange Date
The Holders are entitled to receive distributions at
the rate per DECS 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 (each a "Distribution Date"), to Holders
of record as of each , , and , respectively. The
first distribution will be payable on , 1997 to Holders of
record as of , 1997. See "Investment Objectives and Policies--
Trust Assets."
Distributions on Exchange Date
At the Exchange Date, in respect of each outstanding DECS, Hold-
ers will have the right to receive between and 1.0 shares of Com-
mon Stock, subject to adjustment in the event of certain dividends or
3
<PAGE>
distributions, subdivisions, splits, combinations, issuances
of certain rights or warrants or distributions of certain assets
with respect to the Common Stock. In the event of a merger of the
Company into another entity, or the liquidation of the Company,
or in certain related events, Holders would receive consideration
in the form of cash, Reported Securities (as defined under
"Investment Objectives and Policies--The Contracts--Dilution
Adjustments; Adjustment Events") or a combination thereof, rather
than (or in addition to) shares of Common Stock. If some or all
of the Sellers exercise their cash settlement option, Holders
would receive cash in lieu of all or part of the Common Stock or
Reported Securities that would otherwise be deliverable. See
"Investment Objectives and Policies--The Contracts--General."
Additionally, the occurrence of certain defaults by a Seller
under its Contract or the related collateral arrangements would
cause the acceleration of such Contract and the distribution to
the Trust for distribution pro rata to Holders of all or a
portion of the Common Stock, Reported Securities, cash or a
combination thereof subject to such Contract and of a portion of
the Treasury Securities (as defined below) then held by the
Trust. See "Investment Objectives and Policies--The
Contracts--Collateral Requirements of the Contracts;
Acceleration" and "--The Treasury Securities."
Voting Rights
Holders will not have voting rights with respect to the
Common Stock unless and until the Sellers have delivered shares
of Common Stock to the Trust pursuant to the Contracts and the
Trust has distributed such shares to the Holders. See "Investment
Objectives and Policies--The Company." The Holders have the right
to vote on matters affecting the Trust, as described under
"Description of DECS."
Assets of the Trust; Investment Objectives and Policies
The Trust will purchase and hold (i) a series of
zero-coupon U.S. Treasury securities (the "Treasury Securities")
maturing on a quarterly basis during the term of the Trust and
representing in the aggregate approximately % of the initial
assets of the Trust and (ii) one or more forward purchase
contracts (the "Contracts") with certain existing stockholders
(the "Sellers") of the Company relating to the Common Stock and
representing approximately % of the initial assets of the Trust.
The Trust's investment objective is to provide each Holder with a
quarterly distribution of $ per DECS over the term of the Trust,
equal to the pro rata portion of the quarterly cash distributions
from the Treasury Securities. It is also the Trust's investment
objective to provide each Holder, at the Exchange Date, a number
of shares of Common Stock (or, if any Seller exercises its cash
settlement option in the Contracts under the circumstances
described herein, the cash equivalent of all or part thereof) at
the Exchange Rate. The Exchange Rate is equal to, subject to
certain adjustments, (a) if the Exchange Price (as defined
herein) is greater than the Threshold Appreciation Price, shares
of Common Stock per DECS, (b) if the Exchange Price is less than
or equal to the Threshold Appreciation Price but is greater than
the Initial Price, a fraction equal to the Initial Price divided
by the Exchange Price of one share of Common Stock per DECS such
that the value (determined at the Exchange Price) of the Common
Stock delivered at the Exchange Date equals the Initial Price and
(c) if the Exchange Price is less than or equal to the Initial
Price, one share of Common Stock per DECS. Holders otherwise
entitled to receive fractional shares of Common Stock or Reported
Securities in respect of their aggregate holdings of DECS will
receive cash in lieu thereof. See "Investment Objectives and
Policies--The Contracts" and "--Delivery of Common Stock and
Reported Securities; No Fractional Shares of Common Stock or
Reported Securities."
The Trust will enter into Contracts with the Sellers
obligating the Sellers, severally and not jointly, at the
Exchange Date, to deliver to the Trust 3,100,000 shares of Common
Stock in the aggregate (excluding shares required to be delivered in
respect of DECS issued to cover the Underwriter's over-allotment option
and DECS issued in connection with the formation of the Trust),
except that (i) if the Exchange Price per share of Common Stock
is greater than the Threshold Appreciation Price, each Seller
will be obligated to deliver under its Contract a number of shares
of Common Stock equal to the product of times the initial
number of shares of Common Stock subject to such Contract, (ii)
if the Exchange Price per share of Common Stock is less than or
equal to the Threshold Appreciation Price but greater than the
Initial Price, each Seller will be obligated to deliver under its
Contract a number of shares of Common Stock equal to the product
of (A) the Initial Price divided by the Exchange Price multiplied
by (B) the initial number of shares of Common Stock subject to
such Contract and (iii) if the Exchange Price per share of
Common Stock is less than or equal to the Initial Price,
each Seller will be obligated to deliver under its contract
a number of shares of Common Stock equal to the initial
number of shares of Common Stock subject to such
4
<PAGE>
Contract. This provides the Trust with the opportunity to share
in the appreciation, if any, of the Common Stock above the
Threshold Appreciation Price. Each Seller has the right to
deliver cash in lieu of all (but not part) of its Common Stock
delivery obligation. The purchase price under the Contracts is
equal to $ per share of Common Stock and $ in the
aggregate and is payable to the Sellers by the Trust on the
closing of this offering.
The obligations of each Seller under its Contract will be
secured by a pledge of one share of Common Stock for each share
subject to the Contract or, at the election of such Seller, by
substitute collateral consisting of U.S. Government securities.
See "Investment Objectives and Policies--The
Contracts--Collateral Requirements of the Contracts;
Acceleration."
Certain United States Federal Income Tax Considerations
There are no regulations, published rulings or judicial
decisions addressing the characterization for federal income tax
purposes of securities with terms substantially the same as the
DECS. The Trust intends to treat a DECS for U.S. federal income
tax purposes as a beneficial interest in a grantor trust owned
solely by the present and future Holders of the DECS that
holds the Treasury Securities and Contracts, and to report
Holders' income to the Internal Revenue Service in accordance
with this treatment. Under this approach, the tax consequences of
holding a DECS will be as described below and as described in
"Certain United States Federal Income Tax Considerations."
Prospective investors in the DECS should be aware that the
Internal Revenue Service might take a different view as to the
proper characterization of the DECS and of the tax consequences
to a Holder.
The Treasury Securities held by the Trust will be treated
for U.S. federal income tax purposes as having "original issue
discount" that will accrue over the term of the Treasury
Securities. It is currently anticipated that a substantial
portion of each quarterly cash distribution to the Holders will
be treated as a tax-free return of the Holders' costs of the
Treasury Securities and therefore will not be considered current
income for U.S. 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
Treasury Securities as it accrues.
A Holder will not recognize income, gain or loss upon the
Trust's entry into the Contracts and should not recognize income,
gain or loss with respect to the Contracts over their term.
Prospective investors in the DECS should be aware that it is
possible that the Internal Revenue Service will assert that a
Holder should include in income over the term of the Contracts
additional amounts which together with the original issue
discount on such Holder's pro rata portion of the Treasury
Securities may exceed the aggregate amount of the quarterly cash
distributions to such Holder. See "Certain United States Federal
Income Tax Considerations."
The delivery of Common Stock to the Trust pursuant to the
Contracts will not be taxable to the Holders. The distribution of
Common Stock upon the termination of the Trust will not be
taxable to the Holders. A Holder will have taxable gain or loss
upon receipt of cash in lieu of fractional shares of Common Stock
distributed upon termination of the Trust. Each Holder's
aggregate basis in its shares of Common Stock will be equal to
its basis in its pro rata portion of the Contracts less the
portion of such basis allocable to pay any fractional shares of
Common Stock for which cash is received. A Holder will have
taxable gain or loss upon receipt of cash, if any, upon
dissolution of the Trust or if a Seller elects to exercise the
Cash Delivery Option and satisfy its obligations under the
contrast with cash.
The Company
The Company is an international company primarily engaged in
purchasing, processing, storing and selling leaf tobacco. The
Company acquired Intabex Holdings Worldwide S.A. ("Intabex") in
April 1997, and is the successor to Dibrell Brothers,
Incorporated and Monk-Austin, Inc., which merged in April 1995.
The Company purchases tobacco in approximately 32 countries,
processes purchased tobacco in 30 facilities located throughout
the world and sells its tobacco to manufacturers of cigarettes
and other consumer
5
<PAGE>
tobacco products located in about 60 countries. Following
its acquisition of Intabex, the Company's market share in the
leaf tobacco industry has increased from approximately 30% to
approximately 37% on a pro forma basis. Of the independent leaf
tobacco merchants, the Company ranks second in established
worldwide market share.
Attached hereto is a prospectus of the Company which
describes the Company and the Common Stock that may be delivered
to the Trust by the Sellers, and by the Trust to the Holders, at
the Exchange Date or upon earlier acceleration of a Contract. The
Company is not affiliated with the Trust, will not receive any of
the proceeds from the sale of the DECS and will have no
obligations with respect to the DECS or the Contracts. THE
PROSPECTUS OF THE COMPANY IS BEING ATTACHED HERETO AND DELIVERED
TO PROSPECTIVE PURCHASERS OF DECS 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.
Management and Administration of the Trust
The Trust will be internally managed and will not have an
investment adviser. The administration of the Trust will be
overseen by three 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 DECS.
Except as aforesaid, and except for its role as Collateral Agent
under the Collateral Agreements between each Seller, the Trust
and the Collateral Agent (see "Investment Objectives and
Policies--The Contracts--Collateral Requirements of the
Contracts; Acceleration"), The Bank of New York has no other
affiliation with, and is not engaged in any other transaction
with, the Trust.
Term of the Trust
The Trust will terminate automatically on or shortly after
the Exchange Date, except that the Trust may expire prior to such
date under certain limited circumstances. Promptly after the
Exchange Date the shares of Common Stock delivered under the
Contracts (or the equivalent amount of cash, to the extent any
Seller exercises its cash settlement option) and other remaining
Trust assets, if any, will be distributed pro rata to Holders.
See "Investment Objectives and Policies--Trust Termination."
Risk Factors
The Trust has adopted a policy that the Contracts may not
be disposed of during the term of the Trust and that the Treasury
Securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the
Trust except upon the acceleration of one or more Contracts as
described herein. The Trust will continue to hold the Contracts
despite any significant decline in the market price of the Common
Stock or adverse changes in the financial condition of the Company.
The yield on the DECS is higher than the current dividend
yield on the Common Stock. However, there is no assurance that
the yield on the DECS will be higher than the dividend yield on
the Common Stock over the term of the Trust.
The Amount Receivable at the Exchange Date is not fixed,
but is based on the market price of the Common Stock as reflected
in the Exchange Rate. There can be no assurance that the Amount
Receivable at the Exchange Date will be equal to or greater than
the Initial Price of the DECS. If the Exchange Price is less than
the Initial Price, the Amount Receivable at the Exchange Date
will generally be less than the amount paid for the DECS, in
which case an investment in DECS will result in a loss and, if
the Company became insolvent or bankrupt, could result in a total
loss. Holders of the DECS, therefore, bear the full risk of a decline
in the value of the Common Stock prior to the Exchange Date.
6
<PAGE>
In addition, the opportunity for equity appreciation
afforded by an investment in the DECS is less than the
opportunity for equity appreciation afforded by a direct
investment in the Common Stock because the Amount Receivable at
the Exchange Date will generally exceed the Initial Price only if
the Exchange Price exceeds the Threshold Appreciation Price,
which represents an appreciation of % over the Initial Price.
Moreover, Holders will be entitled to receive at the Exchange
Date only % of any appreciation of the value of the Common Stock
in excess of the Threshold Appreciation Price. Because the market
price of the Common Stock is subject to market fluctuations, the
Amount Receivable at the Exchange Date may be more or less than
the Initial Price of the DECS. Additionally, because the Exchange
Price is generally determined based on a 20-Trading Day average,
the value of a share of Common Stock distributed on the Exchange
Date may be more or less than the Exchange Price used to
determine the Amount Receivable at the Exchange Date.
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
Treasury Securities and the Contracts, 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 DECS in the secondary market will
be directly affected by the trading prices of the Common Stock in
the secondary market. Trading prices of the 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 the DECS will not be entitled to any rights with
respect to the 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 Sellers deliver shares of Common Stock to the Trust
pursuant to the Contracts and the Trust has distributed such
shares to the Holders.
A bankruptcy of a Seller could adversely affect the timing
of settlement and, as a result, the amount received by the
Holders in respect of the DECS.
Listing
Application has been made to list the DECS on the New York
Stock Exchange ("NYSE") under the symbol "DET."
7
<PAGE>
FEES AND EXPENSES
In light of the fact that proceeds from the sale of the
DECS will be used by the Trust to purchase the Contracts from the
Sellers, the Underwriting Agreement provides that the Sellers
will pay to the Underwriter as compensation $ per DECS. See
"Underwriting." Estimated organization costs of the Trust in the
amount of $10,000 and estimated costs of the Trust in connection with
the initial registration and public offering of the DECS in the
amount of approximately $75,000 will be paid by Salomon Brothers Inc
("Salomon") at the closing of this offering. In addition, each of the
Administrator, the Custodian and the Paying Agent, and each
Trustee will be paid by Salomon at the closing of this offering a
one-time, up-front amount in respect of its ongoing fees and, in
the case of the Administrator, anticipated expenses of the Trust
(estimated to be $286,000 in the aggregate) over the term of the Trust.
Salomon has agreed to pay any on-going expenses of the Trust in
excess of these estimated amounts and to reimburse the Trust for
any amounts it may be required to pay as indemnification to any
Trustee, the Administrator, the Custodian or the Paying Agent.
Salomon will be reimbursed by the Sellers for all expenses of the
Trust and reimbursements of indemnifications paid by it. See
"Management and Administration of the Trust--Estimated Expenses."
Regulations of the Securities and Exchange Commission (the
"Commission") applicable to closed-end investment companies
designed to assist investors in understanding the costs and
expenses that an investor will bear directly or indirectly
require the presentation of Trust expenses in the following
format. Because the Trust will not bear any ongoing fees or
expenses, investors will not bear any direct expenses. The only
expenses that an investor might be considered to be bearing
indirectly are (a) the Underwriter's compensation payable by the
Sellers with respect to such investor's DECS and (b) the ongoing
expenses of the Trust (including fees of the Administrator,
Custodian, Paying Agent and Trustees), estimated at $ per year
in the aggregate, payable by Salomon at the closing of the offering.
Investor Transaction Expenses
Sales Load (as a percentage of offering price).......... %
Annual Expenses
Management Fees......................................... 0%
Other Expenses (after reimbursement)*................... 0%
Total Annual Expenses*................................ 0%
- ----------------------
* Absent the reimbursement, the Trust's "total annual expenses"
would be equal to approximately % of the Trust's average net
assets.
Commission regulations also require that closed-end investment
companies present an illustration of cumulative expenses (both
direct and indirect) that an investor would bear. The example is
required to factor in the applicable Sales Load and to assume, in
addition to a 5% annual return, the reinvestment of all
distributions at net asset value. INVESTORS SHOULD NOTE THAT THE
ASSUMPTION OF A 5% ANNUAL RETURN DOES NOT ACCURATELY REFLECT THE
FINANCIAL TERMS OF THE TRUST. SEE "INVESTMENT OBJECTIVES AND
POLICIES--TRUST ASSETS." ADDITIONALLY, THE TRUST DOES NOT PERMIT
THE REINVESTMENT OF DISTRIBUTIONS.
1 Year 3 Years
------ -------
You would pay the following expenses (i.e.,
the applicable sales load and allocable
portion of ongoing expenses paid by Salomon
and the Sellers) on a $1,000 investment,
assuming a 5% annual return $ $ ..............
8
<PAGE>
THE TRUST
DECS Trust is a newly organized Delaware business trust that
is registered as a closed-end management investment company under
the Investment Company Act. The Trust was formed on November 21,
1995 pursuant to a Declaration of Trust dated as of November 21,
1995, as amended and restated in its entirey by the Amended and
Restated declaration of Trust, dated as of September 22, 1997,
among the Trustees, Salomon Brothers Inc, the initial trustee and
the initial sponsor (as so amended and restated, 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 address of the Trust is
c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware 19175 (telephone number: (302) 738-6680)
USE OF PROCEEDS
The net proceeds of this offering will be used on or
shortly after the date on which this offering is completed to
purchase a fixed portfolio comprised of a series of zero-coupon
U.S. Treasury securities maturing quarterly during the term of
the Trust and to pay the purchase price under the Contracts to
the Sellers.
INVESTMENT OBJECTIVES AND POLICIES
Trust Assets
The Trust's investment objectives are to provide Holders
with a quarterly distribution of $ per DECS on each Distribution
Date during the term of the Trust (representing the pro rata
portion of the quarterly distributions in respect of the maturing
Treasury Securities held by the Trust) and to provide Holders, at
the Exchange Date, a number of shares of Common Stock at the
Exchange Rate (as defined below) or, to the extent that some or
all of the Sellers elect the Cash Delivery Option (as defined
below), an amount in cash equal to the Exchange Price (as defined
below) of all or part thereof. On or prior to the 25th Business
Day prior to the Exchange Date, each of the Sellers will be
obligated to notify the Trust concerning its exercise of the Cash
Delivery Option, and the Trust in turn will notify The Depository
Trust Company and publish a notice in a daily newspaper of
national circulation stating whether Holders of DECS will receive shares
of Common Stock, cash or a combination thereof and, if a combination
of Common Stock and cash, the relative proportion of each. See
"--The Contracts--General" below. "Business Day" means any day
that is not a Saturday, a Sunday or a day on which the NYSE or
banking institutions or trust companies in The City of New York
are authorized or obligated by law or executive order to close.
The "Exchange Rate" is equal to, subject to certain
adjustments, (a) if the Exchange Price (as defined below) is
greater than the Threshold Appreciation Price, shares of
Common Stock per DECS, (b) if the Exchange Price is less than the
Threshold Appreciation Price but is greater than or equal to the
Initial Price, a fraction, equal to the Initial Price divided by
the Exchange Price, of one share of Common Stock per DECS and (c)
if the Exchange Price is less than or equal to the Initial Price,
one share of Common Stock per DECS. ACCORDINGLY, THE VALUE OF THE
COMMON STOCK TO BE RECEIVED BY HOLDERS OF THE DECS (OR, AS
DISCUSSED BELOW, THE CASH EQUIVALENT TO BE RECEIVED IN LIEU OF
SUCH COMMON STOCK) AT THE EXCHANGE DATE WILL NOT NECESSARILY
EQUAL THE INITIAL PRICE OF THE DECS. The numbers of shares of
Common Stock per DECS specified in clauses (a), (b) and (c) of
the Exchange Rate are hereinafter referred to as the "Share
Components." Any shares of Common Stock delivered by the Trust to
the Holders of the DECS that are not affiliated with the Company
will be free of any transfer restrictions and the Holders of the
DECS will be responsible for the payment of any and all brokerage
costs upon the subsequent sale of such shares. Holders otherwise
entitled to receive fractional shares in respect of their
aggregate holdings of DECS will receive cash in lieu thereof. See
"--Delivery of Common Stock and Reported Securities; No
Fractional Shares of Common Stock or Reported Securities" below.
Notwithstanding the foregoing, (i) in the case of certain
dilution events, the Exchange Rate will be subject to adjustment
and (ii) in the case of certain adjustment events, the
consideration received by Holders at the Exchange Date will be
cash or Reported Securities (as defined herein) or a combination
thereof, rather than (or in addition to) shares of Common Stock.
See "--The Contracts--Dilution Adjustments; Adjustment Events"
below.
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<PAGE>
The Trust has adopted a fundamental policy to invest at
least 65% of its portfolio in the Contracts. The Contracts will
comprise approximately % of the Trust's initial assets. The Trust
has also adopted a fundamental policy that the Contracts may not
be disposed of during the term of the Trust and that the Treasury
Securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the
Trust except for the partial liquidation of Treasury Securities
following acceleration of any Contract as described below under
"--The Treasury Securities." The foregoing fundamental policies
of the Trust may not be changed without the vote of a majority in
interest of the Holders. A "majority in interest of the Holders"
means the lesser of (i) 67% of the DECS represented at a meeting
at which more than 50% of the outstanding DECS are represented
and (ii) more than 50% of the outstanding DECS.
The "Exchange Price" means the average Closing Price per
share of Common Stock on the 20 Trading Days immediately prior to
(but not including) the Exchange Date; provided, however, that if
there are not 20 Trading Days for the Common Stock occurring
later than the 60th calendar day immediately prior to, but not
including, the Exchange Date, the Exchange Price shall be defined
as the market value per share of the Common Stock as of the
Exchange Date as determined by a nationally recognized
independent investment banking firm retained for this purpose by
the Administrator. The "Closing Price" of any security on any
date of determination means (i) the closing sale price (or, if no
closing price is reported, the last reported sale price) of such
security (regular way) on the NYSE on such date, (ii) if such
security is not listed for trading on the NYSE on any such date,
as reported in the composite transactions for the principal
United States securities exchange on which such security is so
listed, (iii) if such security is not so listed on a United
States national or regional securities exchange, as reported by
The Nasdaq Stock Market, (iv) if such security is not so
reported, the last quoted bid price for such security in the
over-the-counter market as reported by the National Quotation
Bureau or similar organization or (v) if such security is not so
quoted, the average of the mid-point of the last bid and ask
prices for such security from at least three nationally
recognized investment banking firms selected by the Administrator
for such purpose. A "Trading Day" is defined as a day on which
the 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 security.
For illustrative purposes only, the following chart shows
the number of shares of Common Stock or the amount of cash that a
Holder would receive for each DECS at various Exchange Prices.
The chart assumes that there would be no adjustments to the
Exchange Rate by reason of the occurrence of any of the events
described under "--The Contracts--Dilution Adjustments;
Adjustment Events" below, that no Contracts will be accelerated
and that either no Sellers exercise the Cash Delivery Option or
all Sellers do. There can be no assurance that the Exchange Price
will be within the range set forth below. Given the Initial Price
of $ per DECS and the Threshold Appreciation Price of $ ,
a Holder would receive at the Exchange Date the following number of
shares of Common Stock or amount of cash (if all Sellers exercise
the Cash Delivery Option) per DECS:
Exchange Price of Number of Shares of
Common Stock Common Stock Amount of Cash
As the foregoing chart illustrates, if at the Exchange
Date, the Exchange Price is greater than $ , the Trust will be
obligated to deliver shares of Common Stock per DECS, resulting
in the DECS Holder receiving only percent of the appreciation in
market value above $ . If at the Exchange Date, the Exchange
Price is greater than $ and less than or equal to $ , the Trust
will be obligated to deliver only a fraction of a share of Common
Stock having a value at the Exchange Price equal to $ , resulting
in the DECS Holder receiving none of the appreciation in market
value. If at the Exchange Date, the Exchange Price is less than
or equal to $ , the Trust will be obligated to deliver one share
of Common Stock per DECS, regardless of the market price of such
share, resulting in the DECS Holder realizing the entire loss on
the decline in market value of the Common Stock.
10
<PAGE>
The following table sets forth information regarding the
distributions to be received on the Treasury Securities held by
the Trust, the portion of each year's distributions that will
constitute a return of capital for U.S. federal income tax
purposes and the amount of original issue discount accruing on
the Treasury Securities with respect to a Holder who acquires its
DECS at the issue price from the Underwriter in the original
offering. See "Certain United States Federal Income Tax
Considerations."
Annual
Inclusion
Annual Gross of
Annual Gross Distributions Annual Original
Distributions from Return of Issue
from Treasury Capital Discount
Treasury Securities Capital in Income
Securities per DECS per DECS per DECS
---------- -------- -------- --------
Year
----
1997 $ $ $ $
1998
1999
2000
The annual distribution of $ per DECS is payable quarterly
on each , , and (or , if any such date is not a
Business Day, on the next succeeding Business Day), commencing
, 1997. Quarterly distributions on the DECS will consist
solely of the cash received from the Treasury Securities. The Trust
will not be entitled to any dividends that may be declared on the
Common Stock.
Enhanced Yield; Less Potential for Equity Appreciation
than Common Stock; No Depreciation Protection
The yield on the DECS is higher than the current dividend
yield on the Common Stock. However, there is no assurance that
the yield on the DECS will be higher than the dividend yield on
the Common Stock over the term of the Trust. In addition, the
opportunity for equity appreciation afforded by an investment in
the DECS is less than the opportunity for equity appreciation
afforded by a direct investment in the Common Stock because the
Amount Receivable at the Exchange Date will generally exceed the
Initial Price only if the Exchange Price exceeds the Threshold
Appreciation Price (which represents an appreciation of %
over the Initial Price) and because Holders will be entitled to
receive at 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 Common Stock in excess of the
Threshold Appreciation Price. Moreover, Holders of DECS will
realize the entire decline in value if the Exchange Price on the
Exchange Date is less than the Initial Price. Additionally,
because the Exchange Price is generally determined based on a
20-Trading Day average, the value of a share of Common Stock
distributed on the Exchange Date may be more or less than the
Exchange Price used to determine the Amount Receivable at the
Exchange Date.
The Company
The Company is an international company primarily engaged in
purchasing, processing, storing and selling leaf tobacco. The
Company acquired Intabex Holdings Worldwide S.A. ("Intabex") in
April 1997, and is the successor to Dibrell Brothers,
Incorporated and Monk-Austin, Inc., which merged in April 1995.
The Company purchases tobacco in approximately 32 countries,
processes purchased tobacco in 30
11
<PAGE>
facilities located throughout the world and sells its tobacco to
manufacturers of cigarettes and other consumer tobacco products
located in about 60 countries. Following its acquisition of Intabex,
the Company's market share in the leaf tobacco industry has increased
from approximately 30% to approximately 37% on a pro forma basis. Of
the independent leaf tobacco merchants, the Company ranks second in
established worldwide market share.
Holders will not be entitled to rights with respect to the
Common Stock (including, without limitation, voting rights and
rights to receive dividends or other distributions in respect
thereof) unless and until such time, if any, as the Sellers
deliver shares of Common Stock to the Trust pursuant to the
Contracts and the Trust has distributed such shares to the
Holders.
Attached hereto is a prospectus of the Company which
describes the Company and the Common Stock that may be delivered
to the Trust by the Sellers, and by the Trust to the Holders, at
the Exchange Date or upon earlier acceleration of a Contract.
The shares of Common Stock are traded on the NYSE. The
following table sets forth, for the indicated periods, the
reported high and low sales prices of the shares of Common Stock
on the NYSE Composite Tape and the cash dividends per share of
Common Stock. As of June 30, 1997, there were 1,198 record
holders of the Common Stock, including The Depository Trust
Company, which holds shares of Common Stock on behalf of an
indeterminate number of beneficial owners.
Dividend
Declared
High Low Per Share
---- --- ---------
Fiscal Year ending
June 30, 1998
First Quarter (through
September 8, 1997)...... $ 26 1/2 $ 21 1/2 $ .150
Fiscal Year ending
June 30, 1997
Fourth Quarter............ $ 26 3/4 $ 19 3/4 $ .150
Third Quarter............. 26 21 3/4 .150
Second Quarter............ 23 1/4 17 7/8 .150
First Quarter............. 19 7/8 17 7/8 .135
Fiscal Year ending
June 30, 1996
Fourth Quarter............ $ 19 1/2 $ 16 1/8 $ .135
Third Quarter............. 20 7/8 16 .135
Second Quarter............ 18 3/4 13 3/4 .135
First Quarter............. 17 5/8 14 5/8 .135
The Company is not affiliated with the Trust, will not
receive any of the proceeds from the sale of the DECS and will
have no obligations with respect to the DECS or the Contracts.
This Prospectus relates only to the DECS offered hereby and does
not relate to the Company or the Common Stock. The Company has
filed a registration statement on Form S-3 with the Commission
with respect to the shares of Common Stock that may be delivered to
the Trust by the Sellers, and by the Trust to the Holders of DECS,
at the Exchange Date or upon earlier acceleration of a Contract. The
prospectus of the Company constituting a part of such registration
12
<PAGE>
statement includes information relating to the Company and Common
Stock, including certain risk factors relevant to an investment
in Common Stock. THE PROSPECTUS OF THE COMPANY IS BEING ATTACHED
HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF DECS 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.
The Contracts
General. The Trust will enter into one or more Contracts
with the Sellers obligating each Seller, severally and not
jointly, at the Exchange Date to deliver to the Trust a number of
shares of Common Stock equal to the initial number of shares of
Common Stock subject to such Seller's Contract multiplied by the
Exchange Rate. The Exchange Rate is equal to, subject to
adjustment as described in "--Dilution Adjustments; Adjustment
Events" below, (i) if the Exchange Price per share of Common
Stock is greater than the Threshold Appreciation Price, , (ii)
if the Exchange Price per share of Common Stock is less than or
equal to the Threshold Appreciation Price but greater than the
Initial Price, the Initial Price divided by the Exchange Price
and (iii) if the Exchange Price per share of Common Stock is less
than or equal to the Initial Price, one. The purchase price under
the Contracts is equal to $ per share of Common Stock and $ in
the aggregate and is payable to the Sellers by the Trust on the
closing of this offering. The purchase price of the Contracts was
arrived at by arm's length negotiations between the Trust and the
Sellers taking into consideration factors including the price,
expected dividend level and volatility of the Common Stock,
current interest rates, the term of the Contracts, current market
volatility generally, the collateral security pledged by the
Sellers, the value of other similar instruments and the costs and
anticipated proceeds of the offering of the DECS. All matters
relating to the administration of the Contracts will be the
responsibility of either the Trust's Administrator or Custodian.
Although it is the Sellers' current intention to deliver
shares of Common Stock at the Exchange Date, each Seller may, at
its option, deliver cash in lieu of delivering all, but not less
than all, of the shares of Common Stock otherwise deliverable by
it on the Exchange Date (the "Cash Delivery Option"), except
where such delivery would violate applicable state law. The
amount of cash deliverable by a Seller upon the exercise of the
Cash Delivery Option will be equal to the product of the number
of shares of Common Stock otherwise deliverable by such Seller on
the Exchange Date multiplied by the Exchange Price. On or prior
to the 25th Business Day prior to the Exchange Date, each of the
Sellers will be obligated to notify the Trust concerning its
exercise of the Cash Delivery Option, and the Trust in turn will
notify The Depository Trust Company and publish a notice in a
daily newspaper of national circulation stating whether the
Holders of DECS will receive shares of Common Stock, cash or a
combination thereof and, if a combination of Common Stock and
cash, the relative proportion of each.
Dilution Adjustments; Adjustment Events. The Exchange Rate
is subject to adjustment if the Company shall (i) pay a stock
dividend or make a distribution, in either case, with respect to
Common Stock in shares of such stock, (ii) subdivide or split its
outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into
a smaller number of shares, (iv) issue by reclassification (other
than a reclassification pursuant to clause (ii), (iii), (iv) or
(v) of the definition of Adjustment Event below) of its shares of
Common Stock any shares of common stock of the Company or (v)
issue rights or warrants (other than rights to purchase Common
Stock pursuant to a plan for the reinvestment of dividends or
interest) to all holders of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per
share less than the Market Price (as defined below) of the Common
Stock on the Business Day next following the record date for the
determination of holders of Common Stock entitled to receive such
rights or warrants.
In the case of the events referred to in clauses (i), (ii),
(iii) and (iv) above, the Exchange Rate shall be adjusted by
adjusting each of the Share Components of the Exchange Rate in
effect immediately prior to such event so that the Trust will be
entitled to receive at the Exchange Date, with respect to each
Contract, the number of shares of Common Stock (or, in the case
of a reclassification referred to in clause (iv) above, the
number of shares of other common stock of the Company issued
pursuant thereto) which it would have owned or been entitled to
receive immediately following such event had the Exchange Date
occurred immediately prior to such event or any record date with
respect thereto. In the case of the event referred to in clause
(v) above, the Exchange Rate shall
13
<PAGE>
be adjusted by multiplying each of the Share Components of the
Exchange Rate in effect on the record date for the issuance of
the rights or warrants referred to in clause (v) above, by a
fraction, of which the numerator shall be (A) the number of
shares of Common Stock outstanding on the record date for the
issuance of such rights or warrants plus (B) the number of
additional shares of Common Stock offered for subscription or
purchase pursuant to such rights or warrants, and of which the
denominator shall be (x) the number of shares of Common Stock
outstanding on the record date for the issuance of such rights or
warrants plus (y) the number specified in clause (B) above
multiplied by the quotient of the exercise price of such rights
or warrants divided by the Market Price of the Common Stock on
the Business Day next following the record date for the
determination of holders of Common Stock entitled to receive such
rights or warrants. To the extent that such rights or warrants
expire prior to the Exchange Date of the DECS and shares of
Common Stock are not delivered pursuant to such rights or
warrants prior to such expiration, the Exchange Rate shall be
readjusted to the Exchange Rate which would then be in effect had
such adjustments for the issuance of such rights or warrants been
made upon the basis of delivery of only the number of shares of
Common Stock actually delivered pursuant to such rights or
warrants. For purposes of this paragraph, dividends will be
deemed to be paid as of the record date for such dividend.
"Market Price" means, as of any date of determination, the
average Closing Price per share of Common Stock on the 20 Trading
Days immediately prior to (but not including) the date of
determination; provided, however, that if there are not 20
Trading Days for the Common Stock occurring later than the 60th
calendar day immediately prior to, but not including, such date,
the Market Price shall be determined as the market value per
share of Common Stock as of such date as determined by a
nationally recognized investment banking firm retained for such
purpose by the Administrator. All adjustments to the Exchange
Rate will be calculated to the nearest 1/10,000th of a share of
Common Stock (or, if there is not a nearest 1/10,000th of a
share, to the next higher 1/10,000th of a share). No adjustment
in the Exchange Rate shall be required unless such adjustment
would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason
of the foregoing are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. If
an adjustment is made to the Exchange Rate pursuant to clauses
(i), (ii), (iii), (iv) or (v) above, an adjustment will also be
made to the Exchange Price as such term is used throughout the
definition of Exchange Rate. The required adjustment to the
Exchange Price shall be made at the Exchange Date by multiplying
the Exchange Price by the cumulative number or fraction
determined pursuant to the Exchange Rate adjustment procedure
described above. In the case of the reclassification of any
shares of Common Stock into any shares of common stock of the
Company other than the Common Stock, such shares of common stock
shall be deemed shares of Common Stock for all purposes. Each such
adjustment to the Exchange Rate and the Exchange Price shall be made
successively.
In the event of (i) any dividend or distribution by the
Company to all holders of Common Stock of evidences of its
indebtedness or other assets (excluding any dividends or
distributions referred to in clause (i) of the first paragraph
under the caption "--Dilution Adjustments; Adjustment Events,"
any shares of common stock issued pursuant to a reclassification
referred to in clause (iv) of such paragraph and any Ordinary
Cash Dividends (as defined below)) or any issuance by the Company
to all holders of Common Stock of rights or warrants to subscribe
for or purchase any of its securities (other than rights or
warrants referred to in clause (v) of the first paragraph under
the caption "--Dilution Adjustments; Adjustment Events"), (ii)
any consolidation or merger of the Company with or into another
entity (other than a merger or consolidation in which the Company
is the continuing corporation and in which the Common Stock
outstanding immediately prior to the merger or consolidation is
not exchanged for cash, securities or other property of the
Company or another corporation), (iii) any sale, transfer, lease
or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, (iv) any
statutory exchange of securities of the Company with another
corporation (other than in connection with a merger or
acquisition) or (v) any liquidation, dissolution or winding up of
the Company (any such event, an "Adjustment Event"), each Seller
will be obligated to deliver at the Exchange Date, in lieu of or
(in the case of an Adjustment Event described in clause (i)
above) in addition to, shares of Common Stock as described above,
cash in an amount equal to (A) if the Exchange Price is greater
than the Threshold Appreciation Price, multiplied by the
Transaction Value (as defined below), (B) if the Exchange Price
is less than or equal to the Threshold Appreciation Price but is
greater than the Initial Price, the product of (x) the Initial
Price divided by the Exchange Price multiplied by (y) the
Transaction Value and (C) if the Exchange Price is less than
or equal to the Initial Price, the Transaction Value. Following
an Adjustment Event, the Exchange Price, as such
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term is used in this paragraph and throughout the definition of
Exchange Rate, shall be deemed to equal (A) if shares of Common
Stock are outstanding at the Exchange Date, the Exchange Price of
the Common Stock, as adjusted pursuant to the method set forth in
the preceding paragraph, otherwise zero, plus (B) the Transaction
Value.
Notwithstanding the foregoing, with respect to any
securities received by holders of Common Stock in an Adjustment
Event that (A) are (i) listed on a United States national
securities exchange, (ii) reported on a United States national
securities system subject to last sale reporting, (iii) traded in
the over-the-counter market and reported on the National
Quotation Bureau or similar organization or (iv) for which bid
and ask prices are available from at least three nationally
recognized investment banking firms and (B) are either (x)
perpetual equity securities or (y) non-perpetual equity or debt
securities with a stated maturity after the Exchange Date of the
DECS ("Reported Securities"), each Seller is obligated, in lieu
of delivering cash in respect of such Reported Securities
received in an Adjustment Event, to deliver a number of such
Reported Securities with a value equal to all cash amounts that
would otherwise be deliverable in respect of Reported Securities
received in such Adjustment Event, as determined in accordance
with clause (ii) of the definition of Transaction Value, unless
such Seller has made an election to exercise the Cash Delivery
Option or such Reported Securities have not yet been delivered to
the holders entitled thereto following such Adjustment Event or
any record date with respect thereto. If a Seller delivers any
Reported Securities, upon distribution thereof by the Trust to
Holders of DECS, each Holder of a DECS will be responsible for
the payment of any and all brokerage and other transaction costs
upon the sale of such Reported Securities. If, following any
Adjustment Event, any Reported Security ceases to qualify as a
Reported Security, then (x) the Sellers shall not deliver such
Reported Security but instead shall deliver an equivalent amount
of cash and (y) notwithstanding clause (ii) of the definition of
Transaction Value, the Transaction Value of such Reported
Security shall mean the fair market value of such Reported
Security on the date such security ceases to qualify as a
Reported Security, as determined by a nationally recognized
investment banking firm retained for this purpose by the
Administrator.
Because each DECS represents the Holder's right to receive
a pro rata portion of the Common Stock or other assets delivered
by the Sellers pursuant to the Contracts, the amount of cash
and/or the kind and number of securities which the Holders of
DECS are entitled to receive after an Adjustment Event shall be
subject to adjustment following the date of such Adjustment Event
in the same manner and upon the occurrence of the same type of
events as described under this caption "--Dilution
Adjustments; Adjustment Events" with respect to Common Stock and
the Company.
For purposes of the foregoing, the term "Ordinary Cash
Dividend" means, with respect to any consecutive 365-day period,
any dividend with respect to Common Stock paid in cash to the
extent that the amount of such dividend, together with the
aggregate amount of all other dividends on the Common Stock paid
in cash during such 365-day period, does not exceed on a per
share basis 10% of the average of the Closing Prices of the
Common Stock over such 365-day period.
The term "Transaction Value" means (i) for any cash
received in any Adjustment Event, the amount of cash received per
share of Common Stock, (ii) for any Reported Securities received
in any Adjustment Event, an amount equal to (x) the average
Closing Price per security of such Reported Securities on the 20
Trading Days immediately prior to (but not including) the
Exchange Date multiplied by (y) the number of such Reported
Securities (as adjusted pursuant to the second preceding
paragraph) received per share of Common Stock and (iii) for any
property received in any Adjustment Event other than cash or such
Reported Securities, an amount equal to the fair market value of
the property received per share of Common Stock on the date such
property is received, as determined by a nationally recognized
investment banking firm retained for this purpose by the
Administrator; provided, however, that in the case of clause
(ii), (x) with respect to securities that are Reported Securities
by virtue of only clause (iv) of the definition of Reported
Securities above, Transaction Value with respect to any such
Reported Security means the average of the mid-point of the last
bid and ask prices for such Reported Security as of the Exchange
Date from each of at least three nationally recognized investment
banking firms retained for such purpose by the Administrator
multiplied by the number of such Reported Securities (as adjusted
pursuant to the method set forth in the third preceding
paragraph) received per share of Common Stock and (y)
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with respect to all other Reported Securities, if there are not
20 Trading Days for any particular Reported Security occurring
after the 60th calendar day immediately prior to, but not
including, the Exchange Date, Transaction Value with respect to
such Reported Security means the fair market value per security of
such Reported Security as of the Exchange Date as determined by a
nationally recognized investment banking firm retained for such
purpose by the Administrator multiplied by the number of such
Reported Securities (as adjusted pursuant to the method set forth
in the third preceding paragraph) received per share of Common
Stock. For purposes of calculating the Transaction Value, any
cash, Reported Securities or other property receivable in an
Adjustment Event shall be deemed to have been received
immediately prior to the close of business on the record date for
such Adjustment Event or, if there is no record date for such
Adjustment Event, immediately prior to the close of business on
the effective date of such Adjustment Event.
No adjustments will be made for certain other events, such
as offerings of Common Stock by the Company for cash or in
connection with acquisitions. Likewise, no adjustments will be
made for any sales of Common Stock by the Sellers.
Each Seller is required under its Contract to notify the
Trust promptly upon becoming aware that an event that requires an
adjustment to the Exchange Rate or an Adjustment Event is pending
or has occurred. The Trust is required, within ten Business Days
following the occurrence of an event that requires an adjustment
to the Exchange Rate or the occurrence of an Adjustment Event
(or, in either case, if the Trust is not aware of such
occurrence, as soon as practicable after becoming so aware), to
provide written notice to each Holder of DECS of the occurrence
of such event including a statement in reasonable detail setting
forth the method by which the adjustment to the Exchange Rate or
change in the consideration to be received by Holders of DECS
following the Adjustment Event was determined and setting forth
the revised Exchange Rate or consideration, as the case may be;
provided, however, that, in respect of any adjustment to the
Exchange Price, such notice will only disclose the factor by
which the Exchange Price is to be multiplied in order to
determine which clause of the Exchange Rate definition will apply
at the Exchange Date.
Collateral Requirements of the Contracts; Acceleration.
Each Seller's obligations under its Contract will be secured by a
security interest in one share of Common Stock for each share of
Common Stock subject to such Contract (subject to adjustment in
accordance with the dilution provisions of such Contract),
pursuant to a Collateral Agreement among such Seller, the Trust
and The Bank of New York, as collateral agent (the "Collateral
Agent"). Unless a Seller is in default in its obligations under
the Collateral Agreement, the Seller will be permitted to
substitute for the pledged shares of Common Stock collateral
consisting of short-term, direct obligations of the U.S.
Government. Any U.S. Government obligations pledged as substitute
collateral for shares of Common Stock 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 next business day
thereafter, as described below, 200%) of the product of the
market price of the Common Stock at the time of each valuation
times the number of shares of Common Stock for which such
obligations are being substituted. Each Collateral Agreement will
provide that, in the event of an Adjustment Event, the relevant
Seller will pledge as alternative collateral any Reported
Securities, plus cash in an amount at least equal to the
Transaction Value of any consideration other than Reported
Securities, received by it in respect of the maximum number of
shares of Common Stock subject to such Seller's Contract at the
time of the Adjustment Event. The number of Reported Securities
required to be pledged shall be subject to adjustment if any
event requiring a dilution adjustment under the Contracts shall
occur. Each Seller will be permitted to substitute U.S.
Government obligations for Reported Securities or cash pledged
after any Adjustment Event. Any U.S. Government obligations so
substituted will be required to have an aggregate market value at
the time of substitution and at daily mark-to-market valuations
thereafter of: (A) in the case of obligations substituted for
pledged Reported Securities, not less than 150% (or, from and
after any Insufficiency Determination that shall not be cured by
the close of business on the next business day thereafter, as
described below, 200%) of the product of the market price per
security of Reported Securities at the time of each valuation
times the number of Reported Securities for which such
obligations are being substituted; and (B) in the case of
obligations substituted for pledged cash, not less than 105% of
the amount of cash for which such obligations are being
substituted. The Collateral Agent will promptly pay over to each
Seller any dividends, interest, principal or other payments
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received by the Collateral Agent in respect of any collateral,
including any substitute collateral, unless the relevant Seller
is in default of its obligations under its Collateral Agreement,
or unless the payment of such amount to the relevant Seller would
cause the collateral to become insufficient under the Collateral
Agreement.
If the Collateral Agent shall determine (an "Insufficiency
Determination") that U.S. Government obligations pledged by any
Seller as substitute collateral shall fail to meet the foregoing
requirements at any valuation, or that such Seller has failed to
pledge additional collateral required as a result of a dilution
adjustment increasing the maximum number of shares of Common
Stock or Reported Securities subject to such Contract, and such
failure shall not be cured by the close of business on the next
business day after such determination, then, unless a Collateral
Event of Default (as defined below) under such Collateral
Agreement shall have occurred and be continuing, the Collateral
Agent shall commence (i) sales of the collateral consisting of
U.S. Government obligations and (ii) purchases, using the
proceeds of such sales, of shares of Common Stock or Reported
Securities, in an amount sufficient to cause the collateral to
meet the requirements under such Collateral Agreement. The
Collateral Agent shall discontinue such sales and purchases if at
any time the Collateral Event of Default under such Collateral
Agreement shall have occurred and be continuing.
The occurrence of a Collateral Event of Default (as defined
below) under any Collateral Agreement, or the bankruptcy or
insolvency of any Seller, will cause an automatic acceleration of
such Seller's obligations under its Contract. A "Collateral Event
of Default" under any Collateral Agreement shall mean, at any
time, (A) if no U.S. Government obligations shall be pledged as
substitute collateral at such time, failure of the collateral to
consist of at least the maximum number of shares of Common Stock
subject to the relevant Seller's Contract at such time (or, if an
Adjustment Event shall have occurred at or prior to such time,
failure of the collateral to include the amount of cash and the
maximum number of any Reported Securities required to be pledged
as described above); (B) if any U.S. Government obligations shall
be pledged as substitute collateral for shares of Common Stock
(or Reported Securities) at such time, failure of such U.S.
Government obligations to have a market value at such time of at
least 105% of the market price of the Common Stock (or the
then-current market price per security of Reported Securities, as
the case may be) times the difference between (x) the maximum
number of shares of Common Stock (or Reported Securities) subject
to the relevant Seller's Contract at such time and (y) the number
of shares of Common Stock (or Reported Securities) pledged as
collateral at such time; and (C) if any U.S. Government
obligations shall be pledged as substitute collateral for any
cash at such time, failure of such U.S. Government obligations to
have a market value at such time of at least 105% of such cash,
if such failure shall not be cured within one Business Day after
notice thereof is delivered to the relevant Seller.
Except as described below, upon acceleration of any
Seller's Contract, the Collateral Agent will to the extent
permitted by law distribute to the Trust for distribution pro
rata to the Holders, with respect to such Seller's Contract, the
maximum number of shares of Common Stock subject to such
Contract, in the form of the shares of Common Stock then pledged
by that Seller, or cash generated from the liquidation of U.S.
Government obligations then pledged by that Seller, or a
combination thereof (or, after an Adjustment Event, in the form
of Reported Securities then pledged, cash then pledged, cash
generated from the liquidation of 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 shares of Common Stock (or, after an Adjustment
Event, cash or Reported Securities) sufficient to meet the
obligations under any Contract, the Collateral Agent will
distribute to the Trust for distribution pro rata to the Holders,
with respect to such Contract, the market value of the shares of
Common Stock required to be delivered thereunder, in the form of
any shares of Common Stock then pledged by the relevant Seller
plus cash generated from the liquidation of U.S. Government
obligations then pledged by such Seller (or, after an Adjustment
Event, the market value of the alternative consideration required
to be delivered thereunder, in the form of any Reported
Securities then pledged, plus any cash then pledged, plus cash
generated from the liquidation of U.S. Government obligations
then pledged).
If upon acceleration of a Seller's Contract, such Seller is
subject to a Bankruptcy Code or similar proceeding, the Collateral
Agent will to the extent permitted by law distribute to the Trust
for distribution pro rata to the Holders, with respect to such
Seller's Contract, a number of shares of Common Stock, in the
form of the shares of Common Stock then pledged by that Seller,
or cash generated from the liquidation of U.S. Government
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obligations then pledged by that Seller, or a combination thereof
(or, after an Adjustment Event, in the form of Reported
Securities then pledged, cash then pledged, cash generated from
the liquidation of U.S. Government obligations then pledged, or a
combination thereof), with an aggregate value equal to such
Seller's "Acceleration Value." The Acceleration Value will be
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 that would have the effect of preserving the Trust's
rights to receive the number of shares of Common Stock (or, after
an Adjustment Event, Reported Securities, cash or a combination
thereof) subject to such Seller's Contract on the Exchange Date.
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 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. If no quotations
are provided, the Acceleration Value will be the aggregate value
of the number of shares of Common Stock (or, after an Adjustment
Event, Reported Securities, cash or a combination thereof) that
would be required to be delivered under such Seller's Contract on
the date of acceleration if the Exchange Date were redefined to
be the date of acceleration.
Description of Sellers. The Sellers are various individual
members of the Monk family and trusts through which certain of
such individuals hold their shares of Common Stock. Specific
information on the holdings of the Sellers, as required by the
Securities Act of 1933, as amended (the "Securities Act"), is
included in the prospectus of the Company attached hereto under
"Selling Stockholders".
The Treasury Securities
The Trust will purchase and hold a series of zero-coupon
("stripped") U.S. Treasury securities with such face amounts and
maturities as will provide Holders with a quarterly distribution
of $ per DECS on each Distribution Date during the term of the
Trust. Up to 35% of the Trust's total assets may be invested in
these Treasury Securities. If any Contract is accelerated, a
proportionate amount of the Treasury Securities of each maturity
then held in the Trust will be liquidated by the Administrator
and the proceeds thereof distributed pro rata to the Holders,
together with proceeds from the acceleration of such Contract.
See "--The Contracts--Collateral Requirements of the Contracts;
Acceleration" above and "--Trust Termination" below.
Temporary Investments
For cash management purposes, the Trust may invest the
proceeds of the Treasury Securities held by the Trust 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 Termination
The Trust will terminate automatically on or shortly after
the Exchange Date or following the distribution of all Trust
assets to the Holders, if earlier.
In the event that all of the Contracts remaining in effect
at any time are accelerated, then any Treasury Securities then
held by the Trust will be liquidated by the Administrator and the
proceeds thereof distributed pro rata to the Holders, together
with all shares of Common Stock subject to each Seller's Contract
that are pledged by each Seller, or cash generated from the
liquidation of U.S. Government obligations then pledged by each
Seller, or a combination thereof (or, after an Adjustment Event,
in the form of Reported Securities then pledged, cash then
pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof) or in certain
cases, the Acceleration Value of a Seller's Contract, and the
term of the Trust will expire. See "--The Contracts--Collateral
Requirements of the Contracts; Acceleration" above.
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Delivery of Common Stock and Reported Securities; No
Fractional Shares of Common Stock or Reported Securities
Common Stock and Reported Securities delivered under the
Contracts at the Exchange Date are expected to be distributed by
the Trust to the Holders pro rata shortly after the Exchange
Date, except that no fractional shares of Common Stock or
Reported Securities will be distributed. If more than one DECS
shall be surrendered at one time by the same Holder, the number
of full shares of Common Stock or Reported Securities which shall
be delivered upon termination of the Trust, in whole or in part,
as the case may be, shall be computed on the basis of the
aggregate number of DECS so surrendered at the Exchange Date. In
lieu of delivering any fractional share or security, the Trust
will sell a number of shares or securities equal to the total of
all fractional shares or securities that would otherwise be
delivered to Holders of all DECS, and each such Holder will be
entitled to receive an amount in cash equal to the pro rata
portion of the proceeds of such sale (which may be at a price
lower than the Exchange Price).
INVESTMENT RESTRICTIONS
The Trust has adopted a fundamental policy that the Trust
may not purchase any securities or instruments other than the
Treasury Securities, the Contracts and the Common Stock or other
assets received pursuant to the Contracts and, for cash
management purposes, short-term obligations of the U.S.
Government; issue any securities or instruments except for the
DECS; 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 also adopted a
fundamental policy that the Contracts may not be disposed of
during the term of the Trust and that (except for a partial
liquidation of Treasury Securities following acceleration of any
Contract as described above under "Investment Objectives and
Policies--The Treasury Securities") the Treasury Securities may
not be disposed of prior to the earlier of their respective
maturities and the termination of the Trust.
RISK FACTORS RELATING TO DECS
Internal Management; No Portfolio Management
The Trust will be internally managed by its Trustees and
will not have any separate investment adviser. It is a
fundamental policy of the Trust that the Contracts may not be
disposed of during the term of the Trust and that the Treasury
Securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the
Trust, except for a partial liquidation of Treasury Securities
following acceleration of any Contract. As a result, the Trust
will continue to hold the Contracts despite any significant
decline in the market price of the Common Stock or adverse
changes in the financial condition of the Company (or, after an
Adjustment Event, comparable developments affecting any Reported
Securities or the issuer thereof). The Trust will not be managed
like a typical closed-end investment company.
Relationship to Common Stock; Limitations on Opportunity
for Equity Appreciation; Potential Losses
The yield on the DECS is higher than the current dividend
yield on the Common Stock. However, there is no assurance that
the yield on the DECS will be higher than the dividend yield on
the Common Stock over the term of the Trust.
The Amount Receivable at the Exchange Date is not fixed,
but is based on the market price of the Common Stock as reflected
in the Exchange Rate. There can be no assurance that the Amount
Receivable at the Exchange Date will be equal to or greater than
the Initial Price of the DECS. If the Exchange Price is less than
the Initial Price, the Amount Receivable at the Exchange Date
will generally be less than the amount paid for the DECS, in
which case an investment in DECS will result in a loss and, if
the Company became insolvent or bankrupt, could result in a total
loss. Holders of the DECS, therefore, bear the full risk of a
decline in the value of the Common Stock prior to the Exchange
Date.
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In addition, the opportunity for equity appreciation
afforded by an investment in the DECS is less than the
opportunity for equity appreciation afforded by a direct
investment in the Common Stock because the Amount Receivable at
the Exchange Date will generally exceed the Initial Price only if
the Exchange Price exceeds the Threshold Appreciation Price
(which represents an appreciation of % over the Initial Price)
and because Holders will be entitled to receive at the Exchange
Date only % of any appreciation of the value of the Common Stock
in excess of the Threshold Appreciation Price. See "Investment
Objectives and Policies--Trust Assets" for an illustration of the
Amount Receivable at the Exchange Date that a DECS Holder would
receive at various Exchange Prices. Because the market price of
the Common Stock is subject to market fluctuations, the Amount
Receivable at the Exchange Date may be more or less than the
Initial Price of the DECS. Additionally, because the Exchange
Price is generally determined based on a 20-Trading Day average,
the value of a share of Common Stock distributed on the Exchange
Date may be less than the Exchange Price used to determine the
Amount Receivable at the Exchange Date.
The market price of the DECS at any time will be affected
primarily by changes in the price of Common Stock. It is
impossible to predict whether the price of the Common Stock will
rise or fall. Trading prices of Common Stock will be influenced
by the Company's operational results and by complex and
interrelated political, economic, financial and other factors
that can affect the capital markets generally, the stock exchange
on which Common Stock is traded and the market segment of which
the Company is a part. See the prospectus relating to the Company
and to the Common Stock attached hereto. Trading prices of the
Common Stock also may be influenced if any of the Sellers or
another principal shareholder of the Company hereafter issues
securities with terms similar to those of the DECS or otherwise
transfers shares of the Common Stock. Concurrently with the
offering of the DECS, certain of the Company's common
stockholders (including certain of the Sellers) are offering for
sale in a separate offering (the "Stock Offering") 1,800,000
shares of Common Stock (2,040,000 shares of Common Stock if the
over allotment option granted to the underwriters in the Stock
Offering is exercised in full). As of the date hereof, the
Sellers held an aggregate of 9,611,345 shares of Common Stock
(including shares that may be sold in the Stock Offering as
defined above), 3,100,000 shares of which (3,484,104 shares if
the Underwriter's over allotment option is exercised in full) the
Sellers may deliver to the Trust at the Exchange Date.
Impact of the DECS on the Market for the Common Stock
It is not possible to predict accurately how or whether the
DECS will trade in the secondary market or whether such market
will be liquid. Any market that develops for the DECS is likely
to influence and be influenced by the market for the Common
Stock. For example, the price of the Common Stock could become
more volatile and could be depressed by investors' anticipation
of the potential distribution into the market of substantial
additional amounts of Common Stock at the termination of the
Trust, by possible sales of the Common Stock by investors who
view the DECS as a more attractive means of equity participation
in the Company and by hedging or arbitrage trading activity that
may develop involving the DECS and the Common Stock.
Dilution Adjustments; Stockholder Rights
The number of shares of Common Stock that Holders are
entitled to receive at the termination of the Trust is subject to
adjustment for certain events arising from stock splits and
combinations, stock dividends and certain other actions of the
Company that modify its capital structure. See "Investment
Objectives and Policies--The Contracts--Dilution Adjustments;
Adjustment Events." Such number of shares to be received by
Holders may not be adjusted for other events, such as offerings
of Common Stock for cash or in connection with acquisitions, that
may adversely affect the price of the Common Stock and, because
of the relationship of the number of shares of Common Stock to be
received pursuant to the Contracts to the price of the Common
Stock, such other events may adversely affect the trading price
of the DECS. 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,
Common Stock in the future, or as to the amount of any such
offerings or sales. In addition, until the receipt of the Common
Stock by Holders upon a distribution thereof by the Trust,
Holders will not be entitled to any rights with respect to the
Common Stock (including without limitation voting rights and the
rights to receive any dividends or other distributions in respect
thereof).
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No Obligation on the Part of the Company With Respect
to the DECS or the Contracts
The Company has no obligations with respect to the DECS,
the Contracts or the Amount Receivable at the Exchange Date,
including any obligation to take the needs of the Trust or of
Holders of the DECS into consideration for any reason. The
Company will not receive any of the proceeds of the offering of
the DECS made hereby and is not responsible for, and has not
participated in, the determination of the time of sale of,
quantities of or prices for the DECS to be issued or the
determination or calculation of the Amount Receivable at the
Exchange Date. The Company is not involved with the
administration or trading of the DECS.
Trading Value; Listing
The DECS are innovative securities and have no trading
history, and it is not possible to predict how they will trade in
the secondary market. The trading price of the DECS may vary
considerably prior to the Exchange Date due to, among other
things, fluctuations in the price of the 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 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 Underwriter currently intends, but is not obligated, to
make a market in the DECS and any such market-making may be
discontinued at any time in the sole discretion of the
Underwriter without notice. 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 DECS with
liquidity of investment or that it will continue for the life of
the DECS.
Application has been made to list the DECS on the NYSE.
Assuming the approval of such application, there can be no
assurance that the DECS will not later be delisted or that
trading in the DECS on the NYSE will not be suspended. In the
event of a delisting or suspension of trading on such exchange,
the Trust will apply for listing of the DECS on another national
securities exchange or for quotation on another trading market.
If the DECS are not listed or traded on any securities exchange
or trading market, or if trading of the DECS is suspended,
pricing information for the DECS may be more difficult to obtain,
and the price and liquidity of the DECS may be adversely
affected.
Net Asset Value
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 DECS 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 DECS are not subject to redemption prior to the
Exchange Date or the earlier termination of the Trust.
Non-Diversified Status
The Trust is considered non-diversified under the
Investment Company Act, which means that the Trust is not limited
in the proportion of its assets that may be invested in the
obligations of a single issuer. Because the only securities held
or received by the Trust will be the Treasury Securities and the
Contracts or other assets subject to the Contracts, the Trust may
be subject to greater risk than would be the case for an
investment company with more diversified investments.
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Uncertainty of Federal Income Tax Consequences
No statutory, judicial or administrative authority directly
addresses the characterization of the DECS or instruments similar
to the DECS for U.S. federal income tax purposes. As a result,
significant aspects of the U.S. federal income tax consequences
of an investment in the DECS are not certain. No ruling is being
requested from the Internal Revenue Service with respect to the
DECS and no assurance can be given that the Internal Revenue
Service will agree with the conclusions expressed under "Certain
United States Federal Income Tax Considerations."
Risk Factors Relating to the Company
Investors in the DECS should carefully consider the
information in the prospectus of the Company attached hereto,
including the information contained therein under "Risk Factors."
Risk Relating to Bankruptcy of the Sellers
The Trust believes that the Contracts constitute
"securities contracts" for purposes of the Bankruptcy Code,
liquidation of which would not be subject to the automatic stay
provisions of the Bankruptcy Code in the event of the bankruptcy
of the Sellers. It is, however, possible that the Contracts will
be determined not to qualify as "securities contracts" for this
purpose, in which case a Seller's bankruptcy may cause a delay in
settlement of such Seller's Contract, or otherwise subject such
Contract to bankruptcy proceedings, which could adversely affect
the timing of settlement and could impair the Trust's ability to
distribute the Common Stock or other assets subject to such
Contract and the related Collateral Agreement to the Holders on a
timely basis and, as a result, could adversely affect the amount
received by the Holders in respect of the DECS.
NET ASSET VALUE
The net asset value of the portfolio will be calculated by
the Administrator 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 DECS 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 Treasury
Securities held by the Trust will be valued at the mean between
the last current bid and asked prices or, if quotations are not
available, as determined in good faith by the Trustees.
Short-term investments having a maturity of 60 days or less will
be valued at cost with accrued interest or discount earned
included in interest to be received. The Contracts 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 Contracts and with terms comparable thereto.
DESCRIPTION OF THE DECS
Each DECS represents an equal proportional interest in the
Trust. Upon liquidation of the Trust, Holders are entitled to
share pro rata in the net assets of the Trust available for
distribution. DECS have no preemptive, redemption or conversion
rights. The DECS, when issued and outstanding, will be fully paid
and nonassessable. The only securities that the Trust is
authorized to issue are the DECS offered hereby and those sold to
the initial Holder referred to below. See "Underwriting."
Holders are entitled to one vote for each DECS 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 Salomon as the initial
Holder of the Trust. The Trust intends to hold annual meetings as
required by the rules of the NYSE. The Trustees may call special
meetings of Holders for action by Holder vote as may be required
by either the Investment Company Act or the Declaration of Trust.
The Holders have the right, upon the declaration in writing or
vote of more than two-thirds of the outstanding DECS, 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
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the DECS or to vote on other matters upon the written request of
the record Holders of 51% of the DECS (unless substantially the
same matter was voted on during the preceding 12 months). The
Trustees shall establish, and notify the Holders in writing of,
the record date for each such meeting, which shall be not less
than 10 nor more than 50 days before the meeting date. Holders at
the close of business on the record date will be entitled to vote
at the meeting. The Trust will also assist in communications with
other Holders as required by the Investment Company Act.
Book-Entry System
The DECS will be issued in the form of one or more global
securities (the "Global Securities") deposited with The
Depository Trust Company (the "Depositary") and registered in the
name of a nominee of the Depositary.
The Depositary has advised the Trust and the Underwriter 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 DECS represented by such
Global Security to the accounts of participants. The accounts to
be credited shall be designated by the Underwriter. 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 DECS. Except as set
forth below, owners of beneficial interests in such Global
Securities will not be entitled to have the DECS registered in
their names and will not receive or be entitled to receive
physical delivery of the DECS in definitive form and will not be
considered the owners or holders thereof.
Shares of Common Stock or other assets deliverable in
respect of, and any quarterly distributions on, DECS 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 Paying Agent, the Administrator or
the Custodian for the DECS will have any responsibility or
liability for any aspect of the records relating to, or 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 pay-
ment in respect of a permanent Global Security, will credit immediate-
ly 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.
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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 DECS in definitive
registered form in exchange for the Global Security representing
such DECS. In that event, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in
definitive form of DECS represented by such Global Security equal
in number to that represented by such beneficial interest and to
have such DECS registered in its name.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
Trustees
The Trust will be internally managed by three Trustees,
none of whom is an "interested person" of the Trust as defined in
the Investment Company Act, and will not have an investment
adviser. Under the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), applicable to grantor trusts, the
Trustees will not have the power to vary the investments held by
the Trust. It is a fundamental policy of the Trust that the
Contracts may not be disposed of during the term of the Trust and
that the Treasury Securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities
and the termination of the Trust, except for a partial
liquidation of Treasury Securities following acceleration of any
Contract.
The names of the persons who have been elected by Salomon,
the initial Holder of the Trust, to serve as the Trustees are set
forth below. The positions and the principal occupations of the
individual Trustees during the past five years are also set forth
below.
Principal
Occupation
During Past
Name, Age and Address Title Five Years
- --------------------- ----- ----------
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 University of Delaware
Education &
Entrepreneurship
University of Delaware
Newark, DE 19716
Each Trustee who is not a director, officer or employee of
the Underwriter or the Administrator, or of any affiliate
thereof, will be paid by Salomon (which will be reimbursed by the
Sellers), in respect of its annual fee and anticipated
out-of-pocket expenses, a one-time, up-front fee of $10,800. The
Trust's Managing Trustee will also receive an additional up-front
fee of $3,600 for serving in that capacity. The Trustees will not
receive, either directly or indirectly, any compensation,
including 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.
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 DECS 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,
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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 DECS. 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 Contracts, or the settlement of the
Contracts at the Exchange Date, and upon termination of the
Trust).
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 Collateral Agreements, 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, 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 or shortly before the next quarterly
distribution date. The Custodian will also act as Collateral
Agent under the Collateral Agreement and will hold a perfected
security interest in the Common Stock and U.S. Government
obligations or other assets consistent with the terms of the
Contracts.
Paying Agent
The transfer agent, registrar and paying agent (the "Paying
Agent") for the DECS 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 Custodian and the Paying Agent 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, Custodian or Paying Agent, 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.
Salomon has agreed to reimburse the Trust for any amounts it may
be required to pay as indemnification to any Trustee, the
Administrator, the Custodian or the Paying Agent. Salomon will in
turn be reimbursed by the Sellers for all such reimbursements
paid by it.
Distributions
The Trust intends to distribute to Holders on a quarterly
basis the proceeds of the Treasury Securities held by the Trust.
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. Thereafter, distributions
will be made on , , and or, if any such
date is not a Business Day, on the next succeeding Business Day,
of each year to Holders of record as of each , , and
, respectively. A portion of each such distribution should
be treated as a tax-free return of the Holder's investment. See
"Investment Objective and Policies--Trust Assets" and "Certain
United States Federal Income Tax Considerations." If any Contract
is accelerated as described in "Investment Objectives and Policies
- --The Contracts--Collateral Requirements of the Contracts;
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<PAGE>
Acceleration," each Holder will receive its pro rata share of the
proceeds from the acceleration of such Contract and from the
liquidation of a proportionate amount of the Treasury Securities
then held in the Trust. Upon termination of the Trust as
described in "Investment Objectives and Policies--Trust
Termination," each Holder will receive its pro rata share of any
remaining net assets of the Trust.
The Trust does not permit the reinvestment of distributions.
Estimated Expenses
At the closing of this offering Salomon will pay to each of
the Administrator, the Custodian and the Paying Agent, and to
each Trustee, a one-time, up-front amount in respect of its fee
and, in the case of the Administrator, anticipated expenses of
the Trust over the term of the Trust. The anticipated Trust
expenses to be borne by the Administrator include, among other
things, expenses for legal and independent accountants' services,
costs of printing proxies, DECS certificates and Holder reports,
expenses of the Trustees, fidelity bond coverage, stock exchange
listing fees and expenses of qualifying the DECS for sale in the
various states. The aggregate of the one-time, up-front payments
described above will be in the amount of $286,000. Salomon will also
pay estimated organization costs of the Trust in the amount of
$10,000 and estimated costs of the Trust in connection with the
initial registration and public offering of the DECS in the amount
of $75,000 at the closing of the offering. Salomon will be reimbursed
by the Sellers for such payments.
The amount payable to the Administrator in respect of
ongoing expenses of the Trust was determined based on estimates
made in good faith on the basis of information currently
available to the Trust, including estimates furnished by the
Trust's agents. There cannot, however, be any assurance that
actual operating expenses of the Trust will not be substantially
more than this amount. Any excess expenses will be paid by
Salomon or, in the event of its failure to pay such amounts, the
Trust. Salomon will be reimbursed by the Sellers for all expenses
of the Trust paid by it.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal U.S. federal
income tax consequences that may be relevant to a holder of a
DECS that is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized
under the laws of the United States, an estate the income of
which is subject to U.S. federal income taxation regardless of
its source, or a trust if (i) a U.S. court is able to exercise
primary supervision over the trust's administration and (ii) one
or more United States persons have the authority to control all
of the trust's substantial decisions (a "U.S. person") or a
holder that is otherwise subject to U.S. federal income taxation
on a net income basis in respect of a DECS (such a holder and any
U.S. person, a "U.S. Holder"). The discussion below is based on
the advice of Cleary, Gottlieb, Steen & Hamilton.
This summary is based on the U.S. federal income tax laws,
regulations, rulings and decisions now in effect, all of which
are subject to change. Except to the extent discussed below under
"Non-United States Persons," this summary deals only with U.S.
Holders that will hold DECS as capital assets. This summary deals
only with initial Holders and does not address tax considerations
applicable to investors that may be subject to special tax rules,
such as banks, insurance companies, dealers in securities,
persons that will hold DECS as a position in a "straddle" for tax
purposes or as a part of a "synthetic security" or a "conversion
transaction" or other integrated investment comprised of a DECS
and one or more other investments, or persons that have a
functional currency other than the U.S. dollar. It does not
include any description of the tax laws of any state or local
governments or of any foreign government that may be applicable
to the DECS or to the Holders thereof. It also does not discuss
the tax consequences of the ownership of the Common Stock or
Reported Securities. Prospective purchasers of DECS are urged to
review the discussion under "Taxation" in the accompanying prospectus
of the Company concerning the federal income tax consequences of an
investment in the Common Stock. Investors should consult their own
tax advisors in determining the tax consequences to them of
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holding DECS, including the application to their particular
situation of the U.S. federal income tax considerations discussed
below, as well as the application of state, local or other tax
laws.
There are no regulations, published rulings or judicial
decisions addressing the characterization for federal income tax
purposes of securities with terms substantially the same as the
DECS. The Trust intends to treat a DECS for U.S. federal income
tax purposes as a beneficial interest in a trust that holds
zero-coupon U.S. Treasury securities and Contracts, and to report
Holders' income to the Internal Revenue Service in accordance
with this treatment. Under this approach, the tax consequences of
holding a DECS will be as described below. However, prospective
investors in the DECS should be aware that the Internal Revenue
Service might take a different view as to the proper
characterization of the DECS and of the tax consequences to a
Holder.
Tax Status of the Trust
The Trust will be taxable as a grantor trust owned solely by
the present and future Holders of the DECS for federal
income tax purposes, and income received by the Trust will be
treated as income of the Holders in the manner set forth below.
Tax Consequences to United States Holders
Tax Basis of the Treasury Securities and the Contracts.
Each Holder will be considered the owner of its pro rata portion
of the Treasury Securities and the Contracts in the Trust. The
cost to the Holder of its DECS will be allocated among the
Holder's pro rata portion of the Treasury Securities and the
Contracts (in proportion to the fair market values thereof on the
date on which the Holder acquires its DECS) in order to determine
the Holder's tax bases. It is currently anticipated that %
and % of the net proceeds of the offering will be used by the
Trust to purchase the Treasury Securities and as payments under
the Contracts, respectively.
Recognition of Original Issue Discount on the Treasury
Securities. The Treasury Securities in the Trust will consist of
zero-coupon U.S. Treasury securities. A Holder will be required
to treat its pro rata portion of each Treasury Security in the
Trust as a bond that was originally issued on the date the Holder
purchased its DECS and at an original issue discount equal to the
excess of the Holder's pro rata portion of the amounts payable on
such Treasury Security over the Holder's tax basis therefor as
discussed above. The Holder (whether on the cash or accrual
method of tax accounting) is required to include original issue
discount (other than original issue discount on short-term
Treasury Securities as described below) in income for federal
income tax purposes as it accrues, in accordance with a constant
yield method, prior to the receipt of cash attributable to such
income. Because it is expected that more than 20% of the Holders
will be accrual basis taxpayers, original issue discount on any
short-term Treasury Security (i.e., any Treasury Security with a
maturity of one year or less from the date it is purchased) held
by the Trust will also be required to be included in income by
the Holders as it is accrued. Unless a Holder elects to accrue
the original issue discount on a short-term Treasury Security
according to a constant yield method based on daily compounding,
such original issue discount will be accrued on a straight-line
basis. The Holder's tax basis in a Treasury Security will be
increased by the amount of any original issue discount included
in income by the Holder with respect to such Treasury Security.
Treatment of the Contracts. Each Holder will be treated as
having entered into a pro rata portion of the Contracts and, at
the Exchange Date, as having received a pro rata portion of the
Common Stock (or cash, Reported Securities or combination
thereof) delivered to the Trust. Under existing law, a Holder
will not recognize income, gain or loss upon entry into the
Contracts. A Holder should not be required under existing law to
include in income additional amounts over the term of the
Contracts.
The Internal Revenue Service may contend that a DECS should
be characterized for federal income tax purposes in a manner
different from the approach described above. For example, the
Internal Revenue Service might assert that the Contracts should
be treated as contingent debt obligations of the Sellers that are
subject to Treasury regulations promulgated in June 1996
governing contingent payment debt instruments. If the Internal
Revenue Service were to prevail in making such an assertion,
original issue discount would accrue with respect to each
Contract at a "comparable yield" for the Seller under that
Contract, determined at the time the Contract is
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<PAGE>
entered into. A Holder's pro rata portion of original issue
discount in respect of the Contracts and original issue discount
in respect of the Treasury Securities might exceed the aggregate
amount of the quarterly cash distributions to a Holder. In
addition, under this treatment, a Holder would be required to
treat any gain realized on the sale, exchange or redemption of
the DECS as ordinary income to the extent that such gain is
allocable to the Contracts. Any loss realized on such sale,
exchange or redemption that is allocable to the Contracts would
be treated as an ordinary loss to the extent of the Holder's
original issue discount inclusions with respect to the Contracts,
and as capital loss to the extent of loss in excess of such
inclusions. It is also possible that the Internal Revenue Service
could take the view that a Holder should include in income the
amount of cash actually received each year in respect of the
DECS, or that the DECS as a whole constitute a contingent payment
debt instrument subject to the rules described above.
Sale of the DECS. Upon a sale of all or some of a Holder's
DECS, a Holder will be treated as having sold its pro rata
portion of the Treasury Securities and Contracts underlying the
DECS. The selling Holder will recognize gain or loss equal to the
difference between the amount realized and the Holder's aggregate
tax bases in its pro rata portion of the Treasury Securities and
the Contracts. Any gain or loss will be long-term capital gain or
loss if the Holder has held the DECS for more than one year. The
distinction between capital gain or loss and ordinary income or
loss is important for purposes of the limitations on a Holder's
ability to offset capital losses against ordinary income. In
addition, certain individuals are subject to taxation at a
reduced rate on long-term capital gains. The Taxpayer Relief Act
of 1997 further reduces tax rates on capital gains recognized by
individuals in respect of assets held for more than 18 months.
Holders are advised to consult their own tax advisers as to the
consequences of the Taxpayer Relief Act of 1997 in their
particular circumstances.
Distribution of the Common Stock. The delivery of Common
Stock to the Trust pursuant to the Contracts will not be taxable
to the Holders. The distribution of Common Stock upon the
termination of the Trust will not be taxable to the Holders. A
Holder will have taxable gain or loss (which will be short-term
capital gain or loss) upon receipt of cash in lieu of fractional
shares of Common Stock distributed upon termination of the Trust,
in an amount equal to the difference between the cash received
and the portion of the basis of the Contracts allocable to
fractional shares (based on the relative number of fractional
shares and full shares delivered to the Holder). Each Holder's
aggregate basis in its shares of Common Stock will be equal to
its basis in its pro rata portion of the Contracts less the
portion of such basis allocable to any fractional shares of
Common Stock for which cash is received.
Distribution of Cash. If a Holder receives cash upon
dissolution of the Trust or as a result of a Seller's election to
deliver cash under the Cash Delivery Option, a Holder will
recognize capital gain or loss equal to any difference between
the amount of cash received from the Sellers and the Holder's tax
basis in the DECS at that time. Such gain or loss generally will
be long-term capital gain or loss if the Holder has held the DECS
for more than one year at the Exchange Date.
Distribution of Cash or Reported Securities as a Result of
an Adjustment Event. If as a result of an Adjustment Event, cash,
Reported Securities, or a combination of cash and Reported
Securities is delivered pursuant to the Contracts, a Holder will
have taxable gain or loss upon receipt equal to the difference
between the amount of cash received, including cash received in
lieu of fractional Reported Securities, and its basis in its pro
rata portion of the Contracts allocable to any shares of Common
Stock for which such cash or fractional Reported Securities were
received. Any gain or loss will be capital gain or loss, and if
the Holder has held the DECS for more than one year, such gain or
loss will be long-term capital gain or loss. A Holder's basis in
any Reported Securities received will be equal to its basis in
its pro rata portion of the Contracts less the portion of such
basis allocable to any shares of Common Stock for which cash or
fractional Reported Securities were received. See "Investment
Objectives and Policies--The Contracts."
Fees and Expenses of the Trust. A Holder's pro rata portion
of the expenses in connection with the organization of the Trust,
underwriting discounts and commissions and other offering
expenses should be includable in the cost to the Holder of the
DECS. However, there can be no assurance that the Internal
Revenue Service will not take a contrary view. If the Internal
Revenue Service were to prevail in treating such expenses as
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excludable from the Holder's cost of the DECS, such expenses
would not be includable in the basis of the assets of the Trust
and should instead be amortizable and deductible over the term of
the Trust. If such expenses were treated as amortizable and
deductible, an individual Holder who itemizes deductions would be
entitled to amortize and deduct (subject to any other applicable
limitations on itemized deductions) such expenses over the term
of the Trust only to the extent that such amortized annual
expenses together with such Holder's other miscellaneous
deductions exceed 2% of such Holder's adjusted gross income.
Non-United States Persons
In the case of a Holder of the DECS that is not a U.S.
person, payments made with respect to the DECS will not be
subject to U.S. withholding tax, provided that such Holder
complies with applicable certification requirements (including in
general the furnishing of an Internal Revenue Service Form W-8 or
a substitute form). Any capital gain realized upon the sale or
other disposition of the DECS by a Holder that is not a U.S.
person will generally not be subject to U.S. federal income tax
if (i) such gain is not effectively connected with a U.S. trade
or business of such Holder and (ii) in the case of an individual,
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.
Backup Withholding and Information Reporting
A Holder of a DECS may be subject to information reporting
and to backup withholding at a rate of 31 percent of certain
amounts paid to the Holder unless such Holder (a) is a
corporation or comes within certain other exempt categories and,
when required, provides proof of such exemption or (b) provides a
correct taxpayer identification number, certifies as to no loss
of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules.
Information reporting and backup withholding do not apply to
payments made to a Holder of a DECS that is not a U.S. person if
the beneficial owner of the DECS certifies as to its non-U.S.
status or otherwise establishes an exemption, provided that the
Trust or its agent does not have actual knowledge that the Holder
is a U.S. person.
Payment of the proceeds from the sale of a DECS to or
through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the
broker is a U.S. person, a controlled foreign corporation for
U.S. tax purposes or a foreign person 50 percent or more of whose
gross income from all sources for the three-year period ending
with the close of its taxable year preceding the payment was
effectively connected with a U.S. trade or business, information
reporting may apply to such payments. Payment of the proceeds
from a sale of a DECS to or through the U.S. office of a broker
is subject to information reporting and backup withholding unless
the Holder or beneficial owner certifies as to its non-U.S.
status or otherwise establishes an exemption from information
reporting and backup withholding.
Any amounts withheld under the backup withholding rules are
not an additional tax and may be credited against the U.S.
Holder's U.S. federal income tax liability, provided that the
required information is furnished to the Internal Revenue
Service.
UNDERWRITING
Subject to the terms and conditions set forth in the
Underwriting Agreement (the "Underwriting Agreement") among the
Trust, the Company, each of the Sellers and Salomon, the Trust
has agreed to sell to the Underwriter, and the Underwriter has
agreed to purchase, the number of DECS set forth below:
Underwriter Number of DECS
----------- --------------
Salomon Brothers Inc .............. 3,100,000
29
<PAGE>
In the Underwriting Agreement, the Underwriter has agreed,
subject to the terms and conditions set forth therein, that the
obligations of the Underwriter are subject to certain conditions
precedent and that the Underwriter will be obligated to purchase
all the DECS offered hereby if any of the DECS are purchased.
The Underwriter proposes to offer the DECS directly to the
public initially at the public offering price set forth on the
cover of this Prospectus, and to certain dealers at such price
less a concession not in excess of $ per DECS. The Underwriter
may allow, and such dealers may reallow, a concession not in
excess of $ per DECS to other dealers. After the initial public
offering, such public offering price and such concession and
reallowance may be changed. The sales load of $ per DECS is equal
to % of the initial public offering price.
The Company, its directors and executive officers, and the
Selling Stockholders listed under the caption "Selling
Stockholders" in the prospectus of the Company attached hereto,
including the Sellers, have agreed not to offer for sale, sell or
contract to sell, or otherwise dispose of, or announce the
offering of, or file or cause the filing of any registration
statement under the Securities Act with respect to, without the
prior written consent of the Underwriter, any shares of Common
Stock or any securities convertible into or exchangeable for, or
warrants to acquire, Common Stock for a period of 90 days after
the date of this Prospectus; provided, however, that such
restriction shall not effect the ability of (i) the Company or
the Sellers to take any such actions in connection with the
offering of the DECS made hereby or pursuant to the terms of the
Contracts and the Collateral Agreements, (ii) the Company to take
any such actions in connection with any employee stock option
plan, stock ownership plan or dividend reinvestment plan of the
Company in effect at the date of this Prospectus, (iii) the
Sellers to take any such actions in connection with the offering
of additional shares of Common Stock by certain Sellers in an
underwritten transaction concurrent with the sale of the DECS or
(iv) the Sellers to take any such actions in connection with bona
fide gifts or private transactions.
In light of the fact that proceeds from the sale of the
DECS will be used by the Trust to purchase the Contracts from the
Sellers, the Underwriting Agreement provides that the Sellers
will pay to the Underwriter as compensation $ per DECS.
The Trust has granted to the Underwriter an option,
exercisable for a 30-day period after the date of this
Prospectus, to purchase up to an additional DECS at the
same price per DECS as the initial DECS to be purchased by the
Underwriter. The Underwriter may exercise such option only for
the purpose of covering over-allotments, if any, incurred in
connection with the sale of the DECS offered hereby.
The DECS will be a new issue of securities with no
established trading market. The Underwriter intends to make a
market in the DECS, subject to applicable laws and regulations.
However, the Underwriter is not obligated to do so and any such
market-making may be discontinued at any time at the sole
discretion of the Underwriter without notice. Accordingly, no
assurances can be given as to the liquidity of such market.
The Underwriting Agreement provides that the Company and
the Sellers have agreed to indemnify the Underwriter against
certain liabilities, including liabilities under the Securities
Act, or contribute to payments the Underwriter may be required to
make in respect thereof.
In connection with the formation of the Trust, Salomon
subscribed for and purchased DECS for a purchase price of
$100,000. Under the Contracts, the Sellers will be obligated to
deliver to the Trust Common Stock in respect of such DECS on the
same terms as the DECS offered hereby.
In connection with this offering, the Underwriter and
certain selling group members and their respective affiliates may
engage in transactions that stabilize, maintain or otherwise
affect the market price of the DECS or the Common Stock. Such
transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M under the Securities
Exchange Act pursuant to which such persons may bid for or
purchase DECS or Common Stock for the purpose of stabilizing
their market price. The Underwriter also may create a short
position for its account by selling more DECS in connection with
this offering than it is committed to purchase from the Trust,
and in such case may purchase DECS in the open market following
completion of this offering to
30
<PAGE>
cover all or a portion of such short position. In addition, the
Underwriter may impose "penalty bids" under contractual
arrangements whereby it may reclaim from a dealer participating
in this offering the selling concession with respect to DECS that
are distributed in this offering but subsequently purchased of
the account of the Underwriter in the open market. Any of the
transactions described in this paragraph may result in the
maintenance of the price of the DECS at a level above that which
might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if
they are undertaken, they may be discontinued at any time.
The Underwriter has from time to time performed various
investment banking and financial advisory services for the
Company and its affiliates, for which customary compensation has
been received.
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and
the Underwriter by Cleary, Gottlieb, Steen & Hamilton, New York,
New York. Certain matters of Delaware law will be passed upon for
the Trust by Richards, Layton & Finger, Wilmington, Delaware. Certain
legal matters will be passed upon for the Sellers by Hunton & Williams,
Richmond, Virginia, and Womble Carlyle Sandridge & Rice PLLC,
Winston-Salem, North Carolina. Certain legal matters with respect
to the Contracts will be passed upon for the Sellers by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York.
EXPERTS
The statement of assets, liabilities and capital included
in this Prospectus has been audited by Arthur Andersen, independent
public accountants, as indicated in their report with respect
thereto, and is included herein in reliance upon the authority
of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Trust has filed with the Securities and Exchange
Commission, Washington, D.C. 20549, a Registration Statement
under the Securities Act with respect to the DECS offered hereby.
Further information concerning the DECS 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 Commission's office in Washington, D.C.,
and copies of all or any part thereof may be obtained from such
office after payment of the fees prescribed by the Commission.
Such Registration Statement is also available on the Commission's
website (http://www.sec.gov).
31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees of DECS Trust:
We have audited the accompanying statement of assets, liabilities and
capital of DECS Trust (a Delaware trust) as of September 9, 1997. This
financial statement is the responsibility of the Trustees of the Trust.
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 statement of assets, liabilities and capital.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets, liabilities and capital
referred to above presents fairly, in all material respects, the
financial position of DECS Trust as of September 9, 1997, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
September 9, 1997 (except with
respect to the matter discussed
in Note IV, as to which the
date is September 22, 1997).
32
<PAGE>
DECS TRUST
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
September 9, 1997
ASSETS
Cash............................................. $100,000
-------
Total Assets..................................... $100,000
-------
LIABILITIES
Total Liabilities................................ $
-------
NET ASSETS....................................... $100,000
-------
CAPITAL
DECS, 1 DECS issued and outstanding.............. $100,000
-------
The accompanying notes are an integral part of this statement.
33
<PAGE>
DECS TRUST
NOTES TO STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
SEPTEMBER 9, 1997
I. Organization
------------
DECS Trust (the "Trust"), organized as a Delaware business trust on
November 21, 1995, is a closed-end management investment company
registered under the Investment Company Act of 1940. The term of
the Trust is anticipated to expire in the year 2000; however, the
exact date will be determined in the future. The Trust may be
dissolved prior to its planned termination date under certain
circumstances as outlined in the registration statement.
The Trust has registered 3,484,104 DECS representing shares of
beneficial interest in the Trust. The only securities that the
Trust is authorized to issue are the DECS. Each of the DECS
represents the right to receive (a) quarterly distributions during
the term of the Trust, and (b) upon the conclusion of the term of
the Trust (the "Exchange Date"), certain shares of common stock
(the "Common Stock") or cash with an equivalent value (such amounts
determined as described in the registration statement). The DECS
are not subject to redemption prior to the Exchange Date or the
earlier termination of the Trust. The Trust will hold a series of
zero-coupon U.S. Treasury securities and one or more forward
purchase contracts relating to the Common Stock. The business
activities of the Trust are limited to the matters discussed above.
The Trust will be treated as a grantor trust owned solely by the
present and future holders of the DECS for U.S. federal
income tax purposes.
On September 9, 1997, the Trust issued one DECS to Salomon Brothers
Inc ("Salomon") in consideration for a purchase price of $100,000.
II. Organizational Costs, Fees and Expenses
---------------------------------------
Organizational costs and ongoing fees of the Trust will be borne
by Salomon.
III. Management and Administration of Trust
--------------------------------------
The Trust will be managed by its trustees and will not have a
separate investment adviser. The Trust will be overseen by three
trustees and the daily administration will be carried out by The
Bank of New York as the administrator. The Bank of New York will
also serve as the Trust's custodian, paying agent, registrar and
transfer agent with respect to the DECS.
IV. Subsequent Event
----------------
Subsequent to September 9, 1997, the Trust intends to register an
additional 100,000 DECS representing shares of beneficial interest
in the Trust.
34
<PAGE>
No dealer, salesperson or any other
person has been authorized to give
any information or to make any
representation not contained in
this Prospectus and, if given or
made, such information or represen-
tation must not be relied upon as
having been authorized by the
Trust or the Underwriter. Neither
the delivery of this Prospectus nor 3,100,000 DECS SM
any sale made hereunder shall, under
any circumstances, create an implica-
tion that there has been no change in DECS TRUST
the affairs of the Trust since the
date hereof or that the information
herein is correct as of any time subse-
quent to its date. However, if any
material change occurs while this
Prospectus is required by law to
be delivered, this Prospectus will
be amended or supplemented according-
ly. This Prospectus does not constitute
an offer or solicitation by anyone in
any jurisdiction in which such
offer or solicitation is not author-
ized or in which the person making
such offer or solicitation is not
qualified to do so or to any person
to whom it is unlawful to make
such an offer or solicitation.
-------------
Table of Contents
Page
----
Prospectus Summary......... 4
Fees and Expenses.......... 9
The Trust.................. 10
Use of Proceeds............ 10
Investment Objectives
and Policies.............. 10
Investment Restrictions.... 19
Risk Factors Relating
to DECS................... 20
Net Asset Value............ 22
Description of the DECS.... 23
Management and Adminis-
tration of the Trust...... 24
Certain United States
Federal Income Tax
Considerations............ 26
Underwriting............... 30
Legal Matters.............. 31
Experts.................... 31
Additional Information..... 31
Report of Independent
Public Accountants........ 32
Statement of Assets,
Liabilities and Capital... 33
-------------
Until , 1997, all dealers
effecting transactions in the DECS,
whether or not participating in Salomon Brothers Inc
this distribution, may be required
to deliver a Prospectus. This is in
addition to the obligation of dealers Prospectus
to deliver a Prospectus when acting Dated September 1997
as underwriters and with respect
to their unsold allotments or sub-
scriptions.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
1. Financial Statements
Part A -- (i) Report of Independent Public Accountants
(ii) Statement of Assets, Liabilities and Capital
as of September 9, 1997
Part B -- none
2. Exhibits
(a)(1)(A) -- Declaration of Trust dated as of November
21, 1995/*/
(a)(1)(B) -- Amended and Restated Declaration of Trust
dated as of September 22, 1997
(a)(2)(A) -- Certificate of Trust dated November 21,
1995/*/
(a)(2)(B) -- Restated Certificate of Trust dated September
22, 1997
(b) -- Not applicable
(c) -- Not applicable
(d)(1) -- Form of specimen certificate of DECS
(included in Exhibit 2(a)(1)(B))
(d)(2) -- Portions of the Amended and Restated
Declaration of Trust defining the rights
of Holders of DECS (included in Exhibit
2(a)(1)(B))
(e) -- Not applicable
(f) -- Not applicable
(g) -- Not applicable
(h) -- Form of Underwriting Agreement
(i) -- Not applicable
(j) -- Conformed copy of Custodian Agreement
(k)(1) -- Form of Administration Agreement
(k)(2) -- Form of Paying Agent Agreement
(k)(3) -- Form of Purchase Agreement
(k)(4) -- Form of Collateral Agreement
(k)(5) -- Form of Fund Expense Agreement
(k)(6) -- Form of Fund Indemnity Agreement
(l) -- Opinion and Consent of Counsel to the
Trust
(m) -- Not applicable
(n)(1) -- Tax Opinion and Consent of Counsel to the Trust
(n)(2) -- Consent of Independent Public Accountants
(n)(3) -- Consents to being named as Trustee
(o) -- Not applicable
(p) -- Conformed copy of Subscription Agreement
(q) -- Not applicable
(r) -- Financial Data Schedule
- --------
/*/ Previously filed.
C-1
<PAGE>
Item 25. Marketing Arrangements
See Exhibit 2(h) to this Registration Statement.
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:
Registration fees $26,395
New York Stock Exchange listing fee 40,000
Printing (other than certificates) 10,000
Engraving and printing certificates 1,000
Fees and expenses of qualification under state
securities laws (including fees of counsel) 10,000
Accounting fees and expenses 10,000
Legal fees and expenses 10,000
NASD fees 8,000
Miscellaneous 5,363
--------
Total $120,758
========
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 and Administration of the Trust" is
incorporated herein by reference.
Item 28. Number of Holders of Securities
As of the effective date of this Registration Statement:
Title of Class Number of Record Holders
-------------- ------------------------
DECS representing shares
of beneficial interest ............ 1
Item 29. Indemnification
The Underwriting Agreement (Exhibit 2(h) to this
Registration Statement) provides for indemnification.
The Amended and Restated Declaration of Trust filed as
Exhibit 2(a)(1)(B) to this Registration Statement provides for
indemnification to each Trustee against any claim or liability
incurred in acting as Trustee of the Trust, except in the case of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the Trustee's duties. The Custodian Agreement,
Administration Agreement and Paying Agent Agreement filed as
Exhibits 2(j), 2(k)(1) and 2(k)(2) to this Registration Statement
provide for indemnification to the Custodian, Administrator and
Paying Agent against any loss or expense incurred in the
performance of their obligations under the respective agreements,
unless such loss or expense is due to willful misfeasance, bad
faith, gross negligence or reckless
C-2
<PAGE>
disregard of their obligations. The Fund Indemnity Agreement
filed as Exhibit 2(k)(6) to this Registration Statement provides
that Salomon will indemnify the Trust for certain indemnification
expenses incurred under the Amended and Restated Declaration of
Trust, the Custodian Agreement, the Administration Agreement and
the Paying Agent Agreement.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, 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 such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the 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 Securities Act and will be governed by the final adjudication
of such issue.
Item 30. Business and other Connections of Investment Adviser
Not applicable.
Item 31. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940
and the Rules thereunder are maintained as follows: journals,
ledgers, securities records and other original records are
maintained principally at the offices of the Registrant, c/o
Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware 19715 and at the offices of The Bank of New York, the
Registrant's Administrator, Custodian, paying agent, transfer agent
and registrar. All other records so required to be maintained are
maintained at the offices of the Registrant, c/o Puglisi & Associates,
850 Library Avenue, Suite 204, Newark, Delaware 19715.
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
prospectus contained herein if (1) subsequent to the effective
date of this Registration Statement, its net asset value per
share declines more than ten percent from its net asset value per
share as of the effective date of this Registration Statement or
(2) the net asset value per share increases to an amount greater
than its net proceeds as stated in its prospectus contained
herein.
(b) The Registrant hereby undertakes that (i) for the
purpose of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant under
Rule 497(h) under the Securities 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 Securities Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering thereof.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this Amendment No. 4 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the
23rd day of September, 1997.
DECS TRUST
By: /s/ Donald J. Puglisi
------------------------
Donald J. Puglisi,
Managing Trustee
Pursuant to the requirements of the Securities Act of 1933,
this Amendment No. 4 to the Registration Statement has been
signed below by the following persons, in the capacities and on
the date indicated.
Name Title Date
- ---- ----- ----
/s/ Donald J. Puglisi Managing Trustee September 23, 1997
- --------------------
Donald J. Puglisi
/s/ William R. Latham III Trustee September 23, 1997
- -------------------------
William R. Latham III
/s/ James B. O'Neill Trustee September 23, 1997
- --------------------
James B. O'Neill
<PAGE>
September 22, 1997
Exhibit Index
Exhibit Name of Exhibit
------- ---------------
(a)(1)(A) -- Declaration of Trust dated as of November
21, 1995/*/
(a)(1)(B) -- Amended and Restated Declaration of Trust
dated as of September 22, 1997
(a)(2)(A) -- Certificate of Trust dated November 21,
1995/*/
(a)(2)(B) -- Restated Certificate of Trust dated September 22,
1997
(b) -- Not applicable
(c) -- Not applicable
(d)(1) -- Form of specimen certificate of DECS
(included in Exhibit 2(a)(1)(B))
(d)(2) -- Portions of the Amended and Restated
Declaration of Trust defining the rights
of Holders of DECS (included in Exhibit
2(a)(1)(B))
(e) -- Not applicable
(f) -- Not applicable
(g) -- Not applicable
(h) -- Form of Underwriting Agreement
(i) -- Not applicable
(j) -- Conformed copy of Custodian Agreement
(k)(1) -- Form of Administration Agreement
(k)(2) -- Form of Paying Agent Agreement
(k)(3) -- Form of Purchase Agreement
(k)(4) -- Form of Collateral Agreement
(k)(5) -- Form of Fund Expense Agreement
(k)(6) -- Form of Fund Indemnity Agreement
(l) -- Opinion and Consent of Counsel to the
Trust
(m) -- Not applicable
(n)(1) -- Tax Opinion and Consent of Counsel to the Trust
(n)(2) -- Consent of Independent Public Accountants
(n)(3) -- Consents to being named as Trustee
(o) -- Not applicable
(p) -- Conformed copy of Subscription Agreement
(q) -- Not applicable
(r) -- Financial Data Schedule
- --------
/*/ Previously filed.
AMENDED AND RESTATED
DECLARATION OF
TRUST
CONSTITUTING
DECS TRUST
Dated as of September 22, 1997
<PAGE>
Table of Contents
Page
ARTICLE I
DEFINITIONS
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS AND
DUTIES OF THE TRUSTEES; ADMINISTRATION
SECTION 2.1 Name..................................................5
SECTION 2.2 Office................................................5
SECTION 2.3 Ratification and Approval of Action of Either or
Both of the Initial Sponsor and the Initial
Trustee...............................................5
SECTION 2.4 Declaration of Trust; Purposes of the Trust;
Statement of Intent...................................6
SECTION 2.5 General Powers and Duties of the Trustees.............7
SECTION 2.6 Portfolio Acquisition.................................8
SECTION 2.7 Portfolio Administration..............................8
SECTION 2.8 Manner of Sales......................................10
SECTION 2.9 Limitations on Trustees' Powers......................10
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 The Trust Account....................................11
SECTION 3.2 Payment of Fees and Expenses.........................11
SECTION 3.3 Distributions to Holders.............................11
SECTION 3.4 Segregation..........................................12
SECTION 3.5 Temporary Investments................................12
ARTICLE IV
REDEMPTION
SECTION 4.1 Redemption...........................................12
ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY;
TRANSFER OF DECS
SECTION 5.1 Form of Certificate..................................12
SECTION 5.2 Transfer of DECS; Issuance, Transfer and
Exchange of Certificates.............................13
SECTION 5.3 Replacement of Certificates..........................14
SECTION 5.4 Limitation on Liability..............................14
SECTION 5.5 General Provisions Regarding the DECS................15
ARTICLE VI
ISSUANCE OF THE CONTRACTS
SECTION 6.1 Execution of the Contracts...........................15
i
<PAGE>
Page
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees.............................................15
SECTION 7.2 Vacancies............................................15
SECTION 7.3 Powers...............................................16
SECTION 7.4 Meetings.............................................16
SECTION 7.5 Resignation and Removal..............................16
SECTION 7.6 Liability............................................17
SECTION 7.7 Compensation.........................................17
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Meetings of Holders..................................17
SECTION 8.2 Books and Records; Reports...........................18
SECTION 8.3 Termination..........................................19
SECTION 8.4 Amendment and Waiver.................................19
SECTION 8.5 Accountants.........................................20
SECTION 8.6 Nature of Holder's Interest..........................21
SECTION 8.7 Delaware Law to Govern...............................21
SECTION 8.8 Notices..............................................21
SECTION 8.9 Severability.........................................22
SECTION 8.10 Counterparts........................................22
SECTION 8.11 Successors and Assigns..............................22
ii
<PAGE>
AMENDED AND RESTATED DECLARATION OF TRUST
This Amended and Restated Declaration of Trust, dated
as of September 22, 1997 (the "Trust Agreement"), by and between
Salomon Brothers Inc, as sponsor (the "Sponsor"), Donald J.
Puglisi, William R. Latham III and James B. O'Neill as trustees
(the "Trustees"), Michael E. Sherman, as initial sponsor, Peter
B. Blanton, as initial trustee, and the Holders (as defined
herein), constituting DECS Trust (the "Trust").
WITNESSETH:
WHEREAS, Michael E. Sherman (the "Initial Sponsor")
and Peter B. Blanton, as trustee (the "Initial Trustee"), have
previously entered into a Declaration of Trust dated as of
November 21, 1995 (the "Original Agreement"), creating DECS
Trust;
WHEREAS, the Initial Sponsor desires to transfer his
interest in the Trust to the Sponsor;
WHEREAS, the Initial Trustee desires to resign as trustee of
the Trust, such resignation to be effective upon the appointment and
acceptance of the Trustees as provided herein;
WHEREAS, the Trustees hereby ratify and approve the
transfer of the interest of the Initial Sponsor in the Trust to
the Sponsor;
WHEREAS, the parties hereto desire to amend and
restate the Original Agreement in certain respects; and
WHEREAS, the Trust has previously issued to the
Sponsor one DECS in consideration of the aggregate purchase price
therefor of $100,000.00 in satisfaction of the requirements of
Section 14(a)(1) under the Investment Company Act;
NOW, THEREFORE, the parties hereto agree to amend and
restate the Original Agreement as provided herein. Upon the
execution and delivery of copies hereof by the parties hereto,
the Original Agreement will be automatically amended and restated
in its entirety to read as provided herein.
ARTICLE I
DEFINITIONS
Whenever used in this Trust Agreement, the following
words and phrases shall have the meanings listed below. Any
reference to any agreement shall be a reference to such agreement
as supplemented or amended from time to time.
"Act": The Delaware Business Trust Act, 12 Del. C.ss.3801 et seq.
"Additional Purchase Price": The Additional Purchase
Price as defined in the Contracts.
"Adjustment Event": An Adjustment Event as defined in
the Contracts.
<PAGE>
"Administration Agreement": The Administration
Agreement, dated as of the date hereof, between the Administrator
and the Trust, and any substitute agreement therefor entered into
pursuant to Section 2.5(a) hereof.
"Administrator": The Bank of New York or its successor
as permitted under Section 6.1 of the Administration Agreement or
appointed pursuant to Section 2.5(a) hereof.
"Business Day": A day on which the New York Stock
Exchange, Inc. is open for trading that is not a day on which
banks in The City of New York are authorized or obligated by law
to close.
"Cash Delivery Option": The Cash Delivery Option as
defined in the Contracts.
"Certificate": Any certificate evidencing the
ownership of DECS substantially in the form of Exhibit A hereto.
"Closing Date": The Closing Date as defined in the
Underwriting Agreement.
"Code": The Internal Revenue Code of 1986, as amended
from time to time; each reference herein to any section of the
Code or any regulation thereunder shall constitute a reference to
any successor provision thereto.
"Collateral Agent": The Bank of New York or its
successor as permitted under the Collateral Agreements.
"Collateral Agreements": The Collateral Agreements
between the Collateral Agent and each of the Sellers, securing
the Sellers' obligations under the Contracts, substantially in
the form of Exhibit B hereto.
"Commencement Date": The day on which the Underwriting
Agreement is executed.
"Commission": The United States Securities and
Exchange Commission.
"Common Stock": Common stock, no par value, of the Company.
"Company": DIMON Incorporated, a Virginia corporation.
"Contracts": The purchase agreements entered into by
the Trust with one or more existing shareholders of the Company,
substantially in the form of Exhibit C hereto.
"Custodian": The Bank of New York or its successor as
permitted under paragraph 11 of the Custodian Agreement or
appointed pursuant to Section 2.5(a) hereof.
"Custodian Agreement": The Custodian Agreement, dated
as of September 9, 1997, between the Custodian and the Trust, and
any substitute agreement therefor entered into pursuant to
Section 2.5(a) hereof.
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"DECS": The DECS issued by the Trust evidencing a
Holder's undivided interest in the Trust and right to receive a
pro rata distribution upon liquidation of the Trust Estate.
"Depositary": The Depository Trust Company, or any
successor thereto.
"Distribution Date": Each ___________, ___________,
____________ and __________ of each year commencing
_____________, to and including ___________ or if any such date
is not a Business Day, then the first Business Day thereafter.
"Event of Default": An Event of Default as defined in
the Contracts.
"Exchange": The distribution by the Trust to the
Holders of the Shares, Reported Securities and/or cash delivered
to the Trust pursuant to the Contracts (or, to the extent one or
more Sellers elect the Cash Delivery Option under the Contracts,
the amount in cash specified in such Contracts as payable in
respect thereof), on the Exchange Date.
"Exchange Date": The Exchange Date as defined in the Contracts.
"Exchange Rate": The Exchange Rate as defined in the Contracts.
"Firm Purchase Price": The Firm Purchase Price as
defined in the Contracts.
"Holder": The registered owner of any DECS as recorded
on the books of the Paying Agent.
"Indemnity Agreement": The Fund Indemnity Agreement
dated as of the date hereof between the Trust and the Sponsor
substantially in the form of Exhibit D hereto.
"Investment Company Act": The Investment Company Act
of 1940, as amended from time to time; each reference herein to
any section of such Act or any rule or regulation thereunder
shall constitute a reference to any successor provision thereto.
"Managing Trustee": The Trustee designated as such by
the Trustees, who hereby initially designate Donald J. Puglisi as
the Managing Trustee.
"Option Closing Date": The settlement date for the
sale of any Option DECS with respect to which the option provided
for in Section 4(b) of the Underwriting Agreement is exercised by
the Underwriter.
"Original Agreement": The meaning specified in the
recitals hereof.
"Participant": A Person having an account with the Depositary.
"Paying Agent": The Bank of New York or its successor
as permitted under Section 6.6 of the Paying Agent Agreement or
appointed pursuant to Section 2.5(a) hereof.
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"Paying Agent Agreement": The Paying Agent Agreement,
dated as of the date hereof, between the Paying Agent and the
Trust, and any substitute agreement therefor entered into
pursuant to Section 2.5(a) hereof.
"Person": An individual, a partnership, a corporation,
a trust, a limited liability company, an unincorporated
association, a joint venture or other entity or a government or
any agency or political subdivision thereof.
"Prospectus": The prospectus of the Trust relating to
the offering of the DECS and constituting a part of the
Registration Statement, as first filed with the Commission
pursuant to Rule 497(b) or (h) under the Securities Act, and as
subsequently amended or supplemented by the Trust.
"Quarterly Distribution": $_______ per DECS paid to
each Holder on each Distribution Date.
"Record Date": Each _________, ___________,
__________, and _________ of each year commencing __________.
"Registration Statement": Registration Statement on
Form N-2 (Registration Nos. 333-99752 and 811-09138) of the
Trust, as amended.
"Reported Securities": Reported Securities as defined
in the Contracts.
"Securities Act": The Securities Act of 1933, as
amended from time to time.
"Sellers": The persons named as Sellers in the Contracts.
"Shares": Shares of Common Stock to be delivered by
the Sellers to the Trust pursuant to the Contracts, and by the
Trust to the Holders pursuant to the DECS, on the Exchange Date.
"Temporary Investments": Direct short-term U.S.
government obligations, as specified from time to time by the
Trustees or through standing instructions from the Trustees to
the Administrator or the Paying Agent.
"Transfer Agent and Registrar": With respect to the
Common Stock or any Reported Securities at any time, the Person
then acting as Transfer Agent and Registrar for such Common Stock
or Reported Securities.
"Treasury Securities": The meaning specified in
Section 2.6(b) hereof.
"Trust Account": The account created pursuant to
Section 3.1 hereof.
"Trust Estate": The Contracts and the Treasury
Securities held at any time by the Trust, together with any
Temporary Investments held at any time pursuant to Section 3.5 hereof,
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and any proceeds thereof or therefrom and any other
moneys held at any time in the Trust Account.
"Underwriter": Salomon Brothers Inc, in its capacity
as underwriter of the DECS pursuant to the Underwriting
Agreement.
"Underwriting Agreement": The Underwriting Agreement
as described in the Prospectus.
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
SECTION 2.1 Name. The Trust is named "DECS Trust," as
such name may be modified from time to time by the Trustees
following written notice to the Holders and in which name the
Trustees may conduct the affairs of the Trust, make and execute
contracts and other instruments on behalf of the Trust and sue
and be sued on behalf of the Trust. The Trust's activities may be
conducted under the name of the Trust or any other name deemed
advisable by the Trustees.
SECTION 2.2 Office. The address of the principal office
and registered office for service of process of the Trust is c/o
Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware 19715. On ten Business Days' written notice to the
Holders, the Trustees may designate another principal office.
SECTION 2.3 Resignation of Initial Trustee; Transfer
of Beneficial Interest; Ratification and Approval of Action of
Either or Both of the Initial Sponsor and the Initial Trustee.
(a) The Initial Sponsor hereby assigns, transfers, conveys
and sets over to the Sponsor all of its rights and interests in, to
and under the Original Agreement. The Sponsor hereby accepts such assignment
effective as of the date hereof.
(b) The Initial Trustee hereby resigns as trustee of the Trust,
such resignation to be effective upon the appointment and acceptance of
the Trustees pursuant to Section 2.4(b) of this agreement. The Initial
Trustee hereby conveys, assigns and transfers to the Trustees, effective
as of the date hereof, and to its successors and assigns, all the rights,
powers and trusts of the Initial Trustee as trustee, under and pursuant
to the Original Agreement, and all property and money held by the Initial
Trustee as trustee under the Original Agreement. The Initial Trustee
hereby represents to the Sponsor and the Trustees that, at the time the
Trustees' appointment as such becomes effective, it will hold no
monies or other property as trustee under the Original Agreement.
(c) The Sponsor and the Trustees hereby ratify and approve
any and all actions taken by either or both of the Initial Sponsor and
the Initial Trustee on behalf of the Trust on or prior to the
date hereof.
SECTION 2.4 Declaration of Trust; Purposes of the
Trust; Statement of Intent.
(a) The Sponsor hereby creates the Trust in order that
it may acquire the Treasury Securities, enter into the Contracts,
issue and sell to the Sponsor and the Underwriter the DECS, hold
the Trust Estate in trust for the use and benefit of all present
and future Holders and otherwise carry out the terms and
conditions of this Trust Agreement, all for the purpose of
achieving the investment objectives set forth in the Prospectus.
(b) The Sponsor hereby appoints the Trustees of the
Trust effective as of the date hereof, to have all the rights,
powers and duties set forth herein and in the Act. Effective as
of date hereof, the Trustees shall have all rights, powers and
duties set forth herein and in the Act with respect to
accomplishing the purposes of the Trust. The Trustees hereby
accept such appointment, subject to all trusts, conditions and
provisions of this Agreement, and accept, upon the trusts expressed
in this Agreement, all the rights, powers and trusts of the Initial
Trustee as trustee under and pursuant to the Original Agreement and
agree to be bound by all the terms of the Original Agreement and this
Agreement, such acceptance and agreement to be effective as of the
close of business on the date hereof.
(c) The Trust shall not engage in any activities other
than those required or authorized by the terms of this Agreement
relating to the issuance, sale and payment of the
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DECS in accordance with their terms, and the acquisition,
management, collection and holding of the Trust Estate, all in
accordance with the terms of this Agreement.
(d) It is the intention of the parties hereto that the
Trust constitute a business trust under the Act and that this
Trust Agreement constitute the governing instrument of the Trust.
It is the intention of the parties hereto that, for purposes of
federal income taxes, state and local income and franchise taxes
imposed upon, measured by, or based upon gross or net income, the
Trust shall be treated as a grantor trust owned solely by the
present and future Holders and the provisions of this Agreement
shall be interpreted in a manner consistent with such intention.
(e) The Trustees hereby declare that they will accept
and hold the Trust Estate in trust for the use and benefit of all
present and future Holders. The Initial Trustee hereby resigns as
trustee effective upon the appointment and acceptance of the
Trustees under the terms of this Agreement. The Sponsor hereby
waives the thirty (30) day notice requirement of Section 5 of the
Original Agreement. The Initial Sponsor has heretofore deposited
with the Trustees the sum of $1 to accept and hold in trust
hereunder until the issuance and sale of the DECS to the
Underwriter, whereupon such sum shall be donated to an
organization satisfying the requirements of Section 170(c)(2) of
the Code selected by unanimous consent of the Trustees.
SECTION 2.5 General Powers and Duties of the Trustees.
In furtherance of the provisions of Section 2.4 hereof, the
Sponsor authorizes and directs the Trustees, on behalf of the
Trust:
(a) to enter into and perform (and, in accordance with
Section 8.4(a) hereof, amend), the Contracts, the
Collateral Agreements, the Underwriting Agreement, the
Indemnity Agreement, the Custodian Agreement, the
Administration Agreement and the Paying Agent Agreement and
to perform all obligations of the Trustees (including the
obligation to provide indemnity hereunder and thereunder)
and enforce all rights and remedies of the Trust under each
of such agreements; and if any of the Custodian Agreement,
the Administration Agreement, the Collateral Agreements and
the Paying Agent Agreement terminates, or the agent of the
Trust thereunder resigns or is discharged, to appoint a
substitute agent and enter into a new agreement with such
substitute agent containing provisions substantially
similar to those contained in the agreement being
terminated; provided that in any such new agreement (i) the
Custodian and the Paying Agent shall each be a commercial
bank or trust company organized and existing under the laws
of the United States of America or any state therein, shall
have full trust powers and shall have minimum capital,
surplus and retained earnings of not less than
$100,000,000; and (ii) the Administrator and the Collateral
Agent shall each be a reputable financial institution
qualified in all respects to carry out its obligations
under the Administration Agreement or the Collateral
Agreements, as the case may be;
(b) to hold the Trust Estate in trust, to create and
administer the Trust Account, to direct payments received by the
Trust to the Trust Account and to make payments out of the Trust
Account as set forth in Article III hereof;
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(c) to issue and sell to the Underwriters an aggregate
of up to 3,484,104 DECS (including those DECS subject to
the over-allotment option of the Underwriter provided for
in the Underwriting Agreement) pursuant to the Underwriting
Agreement and as contemplated by the Prospectus; provided,
however, that subsequent to the determination of the public
offering price per DECS and related underwriting discount
for the DECS to be sold to the Underwriter but prior to the
sale of the DECS to the Underwriter, the DECS originally
issued to the Sponsor shall be split into a greater number
of DECS so that immediately following such split the value
of each DECS held by the Sponsor will equal the aforesaid
public offering price less the related underwriting
discount;
(d) to select independent public accountants and,
subject to the provisions of Section 8.5 hereof, to engage
such independent public accountants;
(e) to engage legal counsel and, to the extent required
by Section 2.7 hereof, to engage professional advisors and
pay reasonable compensation thereto;
(f) to defend any action commenced against the Trustees
or the Trust and to prosecute any action which the Trustees
deem necessary to protect the Trust and the rights and
interests of Holders, and to pay the costs thereof;
(g) to arrange for the bonding of officers and
employees of the Trust as required by Section 17(g) of the
Investment Company Act and the rules and regulations
thereunder;
(h) to delegate any and all of its powers and duties
hereunder as contemplated by the Custodian Agreement, the
Paying Agent Agreement and the Administration Agreement, to
the extent permitted by applicable law; and
(i) to adopt and amend bylaws, and take any and all
such other actions as necessary or advisable to carry out
the purposes of the Trust, subject to the provisions hereof
and applicable law, including, without limitation, the
Investment Company Act.
SECTION 2.6 Portfolio Acquisition. In furtherance of
the provisions of Section 2.4 hereof, the Sponsor further
specifically authorizes and directs the Trustees, acting on
behalf of the Trust:
(a) to enter into the Contracts with respect to the
Shares subject thereto with the Sellers on the Commencement
Date for settlement on the date or dates provided
thereunder and, subject to satisfaction of the conditions
set forth in the Contracts, to pay the Firm Purchase Price
and the Additional Purchase Price, if any, thereunder with
the proceeds of the sale of the DECS, net of underwriting
commissions and net
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of the purchase price paid for the Treasury Securities as
provided in paragraph (b) below; and, subject to the
adjustments and exceptions set forth in the Contracts, the
Contracts shall entitle the Trust to receive from each of
the Sellers on the Exchange Date the Shares and/or Reported
Securities subject thereto (or, if one or more Sellers
elect the Cash Delivery Option under the Contracts, the
amount in cash specified in such Contracts in respect
thereof) so that the Trust may execute the Exchange with
the Holders; and
(b) to purchase for settlement at the Closing Date, and
at the Option Closing Date, as appropriate, with the
proceeds of the sale of the DECS, net of underwriting
commissions, U.S. Treasury securities from such brokers or
dealers as the Trustees shall designate in writing to the
Administrator having the terms set forth on Schedule I
hereto ("Treasury Securities").
SECTION 2.7 Portfolio Administration. In furtherance
of the provisions of Section 2.4 hereof, the Sponsor further
specifically authorizes and directs the Trustees:
(a) Determination of Exchange Rate Adjustments. Upon
receipt of any notice pursuant to Section 5.4(b) of the
Contracts of an event requiring an adjustment to the
Exchange Rate, Exchange Price or Closing Price, or upon
otherwise acquiring knowledge of such an event, to
calculate the required adjustment and furnish notice
thereof to the Collateral Agent, the Sellers and the
Administrator, or to request from the Sellers or the
Administrator such further information as may be necessary
to calculate or effect the required adjustment;
(b) Selection of Independent Investment Bank. At such
times and for such purposes as provided in the Contracts,
to select and retain a nationally recognized investment
banking firm to determine the market value of any property
as provided in the Contracts, and to deliver to the Sellers
notice pursuant to Section 8.1 of the Contracts identifying
the firm proposed to be selected and retained, and to
consult with the Sellers on such selection and retention as
provided in such Section 8.1;
(c) Acceleration. In the event an Acceleration Date
shall occur due to an Event of Default as provided in
Article VII of any of the Contracts, to deliver the notice
to the related Sellers contemplated in the last paragraph
of Article VII of the Contracts, if applicable, and to
liquidate a proportionate amount of Treasury Securities and
distribute the proceeds thereof pro rata to each of the
Holders of the DECS, together with any shares of Common
Stock or other amounts to be distributed to the Holders of
the DECS, in each case in accordance with the Contracts and
the Collateral Agreements;
(d) Determination of Exchange Date Amounts. To
calculate, on the Exchange Date, the number of Shares (or,
if one or more Sellers elect the Cash Delivery Option under
his or her Contract, the amount in cash) required to be
delivered by each of the Sellers under Section 1.1 of the
Contracts or, if an Adjustment Event shall have
occurred, the amount of cash required to be delivered by
the Sellers, and the number of Reported Securities
permitted to be delivered by the Sellers in lieu of all or
a portion of such cash, all as provided in Section 6.2 of
the Contracts, and to furnish notice of the amounts so
determined to the Collateral Agent and the Sellers.
(e) Distribution of Exchange Consideration. Unless an
Event of Default or an Adjustment Event shall have occurred
or one or more Sellers elect the Cash Delivery
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Option under the Contracts (in which event the cash
received in respect thereof shall be distributed pro rata
to the Holders of the DECS):
(i) Determination of Fractional Shares. To
determine, on the Exchange Date: (a) for each Holder
of DECS, such Holder's pro rata share of the total
number of Shares delivered to the Trust under the
Contracts on the Exchange Date; and (b) the number of
fractional Shares allocable to each Holder (including,
in the case of the Depositary, fractional shares
allocable to beneficial owners of Securities who own
through Participants) and in the aggregate;
(ii) Cash for Fractional Shares. To sell, in the
principal market therefor, on the Exchange Date, a
number of Shares equal to the aggregate number of
fractional Shares determined pursuant to clause (i)
(b) above, rounded down to the nearest integral
number; and to distribute to the Holders, pro rata in
accordance with the fractional shares to which they
would otherwise have been entitled, the aggregate
proceeds of such sale (net of any brokerage or related
expenses); and
(iii) Delivery of Shares. To deliver the remaining
Shares to the Transfer Agent and Registrar on the
Exchange Date, with instructions that such Shares be
re-registered and re-issued as follows: (a) for and in
the name of each Holder (other than the Depositary)
who holds DECS in definitive form, if any, the
Transfer Agent and Registrar shall be instructed to
issue definitive certificates representing a number of
Shares equal to such Holder's pro rata share of the
total delivered to the Trustees under the Contracts,
rounded down to the nearest integral number and the
Trustees shall cause the delivery of such
re-registered and re-issued Shares to each respective
Holder; (b) the Transfer Agent and Registrar shall be
instructed to transfer all remaining Shares to the
account of the Custodian held through the Depositary,
who shall then be instructed to transfer and credit
such Shares to each Participant who holds DECS, with
each Participant receiving its pro rata share of the
total Shares delivered to the Trust on the Exchange
Date, reduced by the aggregate fractional shares
allocable to such Participant as described in (i)
above; and
(iv) Distribution of Other Property. To
distribute on the Exchange Date to each Holder of DECS
such Holder's pro rata share of the total number or
amount of each other type of property owned by the
Trust at the Exchange Date, rounded to the nearest
integral number.
(v) Record Date. The distributions described in
this paragraph (e) shall be made to Holders of record
as of the close of business on the Business Day
preceding the Exchange Date.
SECTION 2.8 Manner of Sales. Any sale of Trust
property permitted under Section 8.3(c) hereof shall be made
through such executing brokers or to such dealers as the
Trustees, seeking best price and execution for the Trust, shall
designate in writing to the [Paying
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Agent], taking into account such factors as price, commission,
size of order, difficulty of execution and brokerage
skill required.
SECTION 2.9 Limitations on Trustees' Powers. The
Trustees are not permitted:
(a) to purchase or hold any securities or instruments
except for the Shares, the Contracts, the Treasury
Securities, the Temporary Investments contemplated by
Section 3.5 hereof and any Reported Securities, cash or
other property delivered pursuant to the terms of any
Contract;
(b) to dispose of the Contracts prior to the Exchange Date;
(c) to issue any securities or instruments except for
the DECS, or to issue any DECS other than the DECS sold to
the Sponsor and the DECS to be sold pursuant to the
Underwriting Agreement;
(d) to make short sales or purchases on margin;
(e) to write put or call options;
(f to borrow money;
(g) to underwrite securities;
(h) to purchase or sell real estate, commodities or commodities
contracts;
(i) to purchase restricted securities;
(j) to make loans; or
(k) to take any action, or direct or permit the
Administrator, the Paying Agent or the Custodian to take
any action, that would vary the investment of the Holders
within the meaning of Treasury Regulation Section
301.7701-4(c), or otherwise take any action or direct or
permit any action to be taken that would or could cause the
Trust not to be a "grantor trust" owned solely by the
present and future Holders under the Code.
SECTION 2.10 Legal Title to Trust Property. Legal
title to the Trust Estate shall be vested at all times in the
Trust as a separate legal entity except where applicable law in
any jurisdiction requires title to any part of the Trust Estate
to be vested in a trustee or trustees, in which case legal title
shall be deemed to be vested in the Trustees, a co-trustee and/or
a separate trustee, as the case may be.
SECTION 2.11 Situs of Trust. The Trust shall be
located and administered in, and all bank accounts of the Trust
maintained in, the State of Delaware or the State of New York.
Payments shall be received by the Trust only in the State of
Delaware or the State of New York and payments will be made by
the Trust only from the State of Delaware or the State of New
York.
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ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 The Trust Account. The Trustees shall,
upon issuance of the DECS, establish with the Paying Agent an
account to be called the "Trust Account". All moneys received by
the Trustees in respect of the Contracts, the Treasury Securities
and any Temporary Investments held pursuant to Section 3.5
hereof, all moneys received from the sale of the DECS to the
Sponsor, and any proceeds from the sale of the DECS to the
Underwriter after the purchase of the Contracts and the Treasury
Securities shall be credited to the Trust Account.
SECTION 3.2 Payment of Fees and Expenses. The Sponsor
will pay the fees and expenses of the Trust incurred in
connection with the offering of the DECS and the costs and
expenses incurred in the organization of the Trust.
SECTION 3.3 Distributions to Holders. On or shortly
after each Distribution Date the Trustees shall distribute to
each Holder of record at the close of business on the preceding
Record Date, at the post office address of the Holder appearing
on the books of the Trust or Paying Agent or by any other means
mutually agreed upon by the Holder and the Trustees, an amount
equal to such Holder's pro rata share of the Quarterly
Distribution computed as of the close of business on such
Distribution Date.
SECTION 3.4 Segregation. All moneys and other assets
deposited or received by the Trustees hereunder shall be held by
them in trust as part of the Trust Estate until required to be
disbursed or otherwise disposed of in accordance with the
provisions of this Trust Agreement, and the Trustees shall handle
such moneys and other assets in such manner as shall constitute
the segregation and holding in trust within the meaning of the
Investment Company Act.
SECTION 3.5 Temporary Investments. To the extent
necessary to enable the Paying Agent to make the next succeeding
Quarterly Distribution, any moneys deposited with or received by
the Trustees in the Trust Account shall be invested as soon as
possible by the Paying Agent in Temporary Investments maturing no
later than the Business Day preceding the next following
Distribution Date. Except as otherwise specifically provided
herein or in the Paying Agent Agreement, the Paying Agent shall
not have the power to sell, transfer or otherwise dispose of any
Temporary Investment prior to the maturity thereof, or to acquire
additional Temporary Investments. The Paying Agent shall hold any
Temporary Investment to its maturity and shall apply the proceeds
thereof upon maturity to the payment of the next succeeding
Quarterly Distribution. All such Temporary Investments shall be
selected from time to time by the Trustees or pursuant to
standing instructions from the Trustees to the Administrator, and
the Administrator and/or Paying Agent shall have no liability to
the Trust or any Holder or any other Person with respect to any
such Temporary Investment. Any interest or other income received
on any moneys in the Trust Account shall, upon receipt thereof,
be deposited into the Trust Account.
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ARTICLE IV
REDEMPTION
SECTION 4.1 Redemption. The Trustees shall have no
right or obligation to redeem DECS.
ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF DECS
SECTION 5.1 Form of Certificate. Each Certificate
evidencing DECS shall be countersigned manually or in facsimile
by the Managing Trustee and countersigned manually by the Paying
Agent in substantially the form of Exhibit A hereto with the
blanks appropriately filled in, shall be dated the date of
execution and delivery by the Paying Agent and shall represent a
fractional undivided interest in the Trust, the numerator of
which fraction shall be the number of DECS set forth on the face
of such Certificate and the denominator of which shall be the
total number of DECS outstanding at that time. All DECS shall be
issued in registered form and shall be numbered serially.
The DECS delivered to the Underwriter on the Closing
Date and on any settlement date under Section 4(b) of the
Underwriting Agreement will be issued in the form of a global
Certificate or Certificates representing the DECS issued to the
Underwriter, to be delivered to the Depositary by or on behalf of
the Trust. Such Certificate or Certificates shall initially be
registered on the books and records of the Trust in the name of
Cede & Co., the nominee of DTC, and no beneficial owner of such
DECS will receive a definitive Certificate representing such
beneficial owner's interest in such DECS, except as provided in
the next paragraph. Unless and until definitive, fully registered
Certificates have been issued pursuant to the next paragraph, the
Trust shall be entitled to deal with the Depositary for all
purposes of this Agreement as the Holder and the sole holder of
the Certificates and shall have no obligation to the beneficial
owners thereof, and none of the Trust, the Trustees, or any agent
of the Trust or the Trustees shall have any liability with
respect to or responsibility for the records of the Depositary.
If the Depositary elects to discontinue its services
as securities depository and a successor depositary is not appointed
by the Trust within 90 days, then definitive Certificates shall be
prepared by the Trust. Upon surrender of the global Certificate
or Certificates accompanied by registration instructions, the
Trustees shall cause definitive Certificates to be delivered to
the beneficial owners in accordance with the instructions of the
Depositary. Neither the Trustees nor the Trust shall be liable
for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such
instructions.
Pending the preparation of definitive Certificates,
the Trustees may execute and the Paying Agent shall authenticate
and deliver temporary Certificates (printed, lithographed,
typewritten or otherwise reproduced, in each case in form
satisfactory to the Paying Agent). Temporary Certificates shall
be issuable as registered Certificates substantially in the form
of the definitive Certificates but with such omissions,
insertions and variations as may be appropriate
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for temporary Certificates, all as may be determined
by the Trustees with the concurrence of the Paying Agent. Every
temporary Certificate shall be executed by the Managing Trustee
and be authenticated by the Paying Agent upon the same conditions
and in substantially the same manner, and with like effect, as
the definitive Certificates. Without unreasonable delay the
Managing Trustee shall execute and shall furnish definitive
Certificates and thereupon temporary Certificates may be
surrendered in exchange therefor without charge at each office or
agency of the Paying Agent and the Paying Agent shall
authenticate and deliver in exchange for such temporary
Certificates definitive Certificates for a like aggregate number
of DECS. Until so exchanged, the temporary Certificates shall be
entitled to the same benefits hereunder as definitive
Certificates.
SECTION 5.2 Transfer of DECS; Issuance, Transfer and
Exchange of Certificates. DECS may be transferred by the Holder
thereof by presentation and surrender of properly endorsed
Certificates at the office of the Paying Agent, accompanied by
such documents executed by the Holder or his authorized attorney
as the Paying Agent deems necessary to evidence the authority of
the person making the transfer. Certificates issued pursuant to
this Trust Agreement are exchangeable for one or more other
Certificates representing an equal aggregate number of DECS and
all Certificates issued as may be requested by the Holder and
deemed appropriate by the Paying Agent shall be issued in
denominations of one DECS or any multiple thereof. The Paying
Agent may deem and treat the person in whose name any DECS shall
be registered upon the books of the Paying Agent as the owner of
such DECS for all purposes hereunder and the Paying Agent shall
not be affected by any notice to the contrary. The transfer books
maintained by the Paying Agent for the purposes of this Section
5.2 hereof shall include the name and address of the record
owners of the DECS and shall be closed in connection with the
termination of the Trust pursuant to Section 8.3 hereof.
A sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
such transfer shall be paid to the Paying Agent by the Holder. A
Holder may be required to pay a fee for each new Certificate to
be issued pursuant to the preceding paragraph in such amount as
may be specified by the Paying Agent and approved by the
Trustees.
All Certificates cancelled pursuant to this Trust
Agreement may be voided by the Paying Agent in accordance with
the usual practice of the Paying Agent or in accordance with the
instructions of the Trustees; provided, however, that the Paying
Agent shall not be required to destroy cancelled Certificates.
The Paying Agent may adopt other reasonable rules and
regulations for the registration, transfer and tender of DECS as
it may, in its discretion, deem necessary.
SECTION 5.3 Replacement of Certificates. In case any
Certificate shall become mutilated or be destroyed, stolen or
lost, the Paying Agent shall execute and deliver a new
Certificate in exchange and substitution therefor upon the
Holder's furnishing the Paying Agent with proper identification
and satisfactory indemnity, complying with such other reasonable
regulations and conditions as the Paying Agent may prescribe and
paying such expenses and
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<PAGE>
charges, including any bonding fee, as the Paying Agent may incur
or reasonably impose; provided that if the Trust has terminated
or is in the process of terminating, the Paying Agent, in lieu of
issuing such new Certificate, may, upon the terms and conditions
set forth herein, make the distributions set forth in Section
8.3(c) hereof. Any mutilated Certificate shall be duly
surrendered and cancelled before any duplicate Certificate shall
be issued in exchange and substitution therefor. Upon issuance of
any duplicate Certificate pursuant to this Section 5.3 hereof,
the original Certificate claimed to have been lost, stolen or
destroyed shall become null and void and of no effect, and any
bona fide purchaser thereof shall have only such rights as are
afforded under Article 8 of the Uniform Commercial Code to a
Holder presenting a Certificate for transfer in the case of an
overissue.
SECTION 5.4 Limitation on Liability. Pursuant to
Section 3803(a) of the Act, the Holders of the DECS shall be
entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under
the General Corporation Law of the State of Delaware.
SECTION 5.5. General Provisions Regarding the DECS.
(a) The consideration received by the Trust for the
issuance of the DECS shall constitute a contribution to the
capital of the Trust and shall not constitute a loan to the
Trust.
(b) Upon issuance of the DECS as provided in this
Trust Agreement, the DECS so issued shall be deemed to be validly
issued, fully paid and non-assessable.
(c) Every person, by virtue of having become a Holder
in accordance with the terms of this Trust Agreement, shall be
deemed to have expressly assented and agreed to the terms of, and
shall be bound by, this Trust Agreement.
ARTICLE VI
ISSUANCE OF THE CONTRACTS
SECTION 6.1 Execution of the Contracts. The Contracts
shall be countersigned manually or in facsimile by the Managing
Trustee and executed manually by each of the Sellers and shall be
dated the date of execution and delivery by each of the Sellers.
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees. The Trust shall have three
Trustees who shall initially be elected by the Initial Trustee.
One Trustee shall be the Managing Trustee and, as such, is
authorized to execute documents and instruments on behalf of the
Trust. The Managing Trustee will be appointed by resolution of
the Trustees. Each Trustee shall serve until the next regular
annual or special meeting of Holders called for the purpose of
electing Trustees and, then, until such Trustee's successor is
duly elected and qualified. Holders may not cumulate their votes in
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<PAGE>
the election of Trustees. Each Trustee shall not be considered
to have qualified for the office unless such Trustee shall agree
to be bound by the terms of this Trust Agreement and shall
evidence his consent by executing this Trust Agreement or a
supplement hereto.
SECTION 7.2 Vacancies. Any vacancy in the office of a
Trustee may be filled in compliance with Sections 10 and 16 of
the Investment Company Act by the vote, within thirty days, of
the remaining Trustees; provided that if required by Section 16
of the Investment Company Act, the Trustees shall forthwith cause
to be held as promptly as possible and in any event within sixty
days (unless the Commission by order shall extend such period) a
meeting of Holders for the purpose of electing Trustees in
compliance with Sections 10 and 16 of the Investment Company Act.
Until a vacancy in the office of any Trustee is filled as
provided above, the remaining Trustees in office, regardless of
their number, shall have the powers granted to the Trustees and
shall discharge all the duties imposed upon the Trustees by this
Trust Agreement. Election shall be by the affirmative vote of
Holders of a majority of the DECS entitled to vote present in
person or by proxy at a special meeting of Holders called for the
purpose of electing any Trustee. Each individual Trustee shall be
at least 21 years of age and shall not be under any legal
disability. No Trustee who is an "interested person", as defined
in the Investment Company Act, may assume office if it would
cause the composition of the Trustees of the Trust not to be in
compliance with the percentage limitations on interested persons
in Section 10 of the Investment Company Act. Trustees need not be
Holders. Notice of the appointment or election of a successor
Trustee shall be mailed promptly after acceptance of such
appointment by the successor Trustee to each Holder.
SECTION 7.3 Powers. The Trust will be managed solely
by the Trustees, who will, subject to the provisions of Article
II hereof, have complete and exclusive control over the
management, conduct and operation of the Trust's business, and
shall have the rights, powers and authority of a board of
directors of a corporation organized under Delaware law. The
Trustees shall have fiduciary responsibility for the safekeeping
and use of all funds and assets of the Trust and shall not
employ, or permit another to employ, such funds or assets in any
manner except for the exclusive benefit of the Trust and except
in accordance with the terms of this Trust Agreement. Subject to
the continuing supervision of the Trustees and as permitted by
applicable law, the functions of the Trust shall be performed by
the Custodian, the Paying Agent, the Administrator and such other
entities engaged to perform such functions as the Trustees may
determine, including, without limitation, any or all
administrative functions.
SECTION 7.4 Meetings. Meetings of the Trustees shall
be held from time to time upon the call of any Trustee on not
less than 48 hours' notice (which may be waived by any or all of
the Trustees in writing either before or after such meeting or by
attendance at the meeting unless the Trustee attends the meeting
for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been lawfully
called or convened). The Trustees shall act either by majority
vote of the Trustees present at a meeting at which at least a
majority of the Trustees then in office are present or by a
unanimous written consent of the Trustees without a meeting.
Except as otherwise required under the Investment Company Act,
all or any of the Trustees may participate in a meeting of the
Trustees by means of a conference telephone call or similar
communications equipment by means of which all persons participating
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<PAGE>
in the meeting can hear each other, and participation
in a meeting pursuant to such communications equipment shall
constitute presence in person at such meeting.
SECTION 7.5 Resignation and Removal. Any Trustee may
resign and be discharged of the trust created by the Trust
Agreement by executing an instrument in writing resigning as
Trustee, filing the same with the Administrator and sending
notice thereof to the remaining Trustees, and such resignation
shall become effective immediately unless otherwise specified
therein. Any Trustee may be removed in the event of incapacity by
vote of the remaining Trustees and for any reason by written
declaration or vote of the Holders of more than 66 2/3% of the
outstanding DECS, notice of which vote shall be given to the
remaining Trustees and the Administrator. The resignation,
removal or failure to reelect any Trustee shall not cause the
termination of the Trust.
SECTION 7.6 Liability. The Trustees shall not be
liable to the Trust or any Holder for any action taken or for
refraining from taking any action except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties of their office. Specifically, without limitation, the
Trustees shall not be responsible for or in respect of the
recitals herein or the validity or sufficiency of this Trust
Agreement or for the due execution hereof by any other Person, or
for or in respect of the validity or sufficiency of DECS or
certificates representing DECS and shall in no event assume or
incur any liability, duty or obligation to any Holder or to any
other Person, other than as expressly provided for
herein. The Trustees may employ agents, attorneys,
administrators, accountants and auditors, and shall not be
answerable for the default or misconduct of any such Persons if
such Persons shall have been selected with reasonable care.
Action in good faith may include action taken in good faith in
accordance with an opinion of counsel. In no event shall any
Trustee be personally liable for any expenses with respect to the
Trust. Each Trustee shall be indemnified from the Trust Account
with respect to any claim, liability, loss or expense incurred in
acting as Trustee of the Trust, including the costs and expenses
of the defense against any such claim or liability, except in the
case of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties of his office.
SECTION 7.7 Compensation. Each Trustee, other than a
Trustee who is a director, officer or employee of the Sponsor,
any Underwriter, or the Administrator or any affiliate thereof,
shall receive a one-time, up-front fee of $10,800, in respect of
its annual fee and anticipated out-of-pocket expenses. In
addition, the Managing Trustee shall receive an additional
one-time, up-front fee of $3,600 for serving in such capacity.
The Trustees will not receive any pension or retirement benefits.
In the event of the resignation or removal of a Trustee, such
Trustee shall remit to the Trust the portion of its fee ratable
for the period from the day of such resignation or removal
through the Exchange Date.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Meetings of Holders. The Trustees shall
not hold annual or regular meetings of Holders except as set
forth herein. A special meeting may be called at any time by
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<PAGE>
the Trustees or upon petition of Holders of not less
than 51% of the DECS outstanding (unless substantially the same
matter was voted on during the preceding 12 months), and shall be
called as provided in Section 7.2 hereof (or as otherwise
required by the Investment Company Act and the rules and
regulations thereunder, including, without limitation, when
requested by the Holders of not less than 10% of the DECS
outstanding for the purposes of voting upon the question of the
removal of any Trustee or Trustees). The Trustees shall
establish, and notify the Holders in writing of, the record date
for each such meeting which shall be not less than 10 nor more
than 50 days before the meeting date. Holders at the close of
business on the record date will be entitled to vote at the
meeting. The Administrator shall, as soon as possible after any
such record date (or prior to such record date if appropriate),
mail by first class mail to each Holder a notice of meeting and a
proxy statement and form of proxy in the form approved by the
Trustees and complying with the Investment Company Act and the
rules and regulations thereunder. Except as otherwise specified
herein or in any provision of the Investment Company Act and the
rules and regulations thereunder, any action may be taken by vote
of Holders of a majority of the DECS outstanding present in
person or by proxy if Holders of a majority of DECS outstanding
on the record date are so represented. Each DECS shall have one
vote and may be voted in person or by duly executed proxy. Any
proxy may be revoked by notice in writing, by a subsequently
dated proxy or by voting in person at the meeting, and no proxy
shall be valid after eleven months following the date of its
execution. [Any investment company (as defined in Section 3 of
the Investment Company Act) owning DECS in excess of the limits
imposed by Sections 12(d)(1)(A)(i) and 12(d)(1)(c) of the
Investment Company Act will be required to vote its DECS in
proportion to the votes of all other Holders.]
SECTION 8.2 Books and Records; Reports. (a) The
Trustees shall keep a certified copy or duplicate original of
this Trust Agreement on file at the office of the Trust and the
office of the Administrator available for inspection at all
reasonable times during its usual business hours by any Holder.
The Trustees shall keep proper books of record and account for
all the transactions under this Trust Agreement at the office of
the Trust and the office of the Administrator, and such books and
records shall be open to inspection by any Holder at all
reasonable times during usual business hours. The Trustees shall
retain all books and records in compliance with Section 31 of the
Investment Company Act and the rules and regulations thereunder.
(b) With each payment to Holders the Paying Agent
shall set forth, either in the instruments by means of which
payment is made or in a separate statement, the amount being paid
from the Trust Account expressed as a dollar amount per DECS and
the other information required under Section 19 of the Investment
Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file or distribute reports as required
by Section 30 of the Investment Company Act and the rules and
regulations thereunder. The Trustees shall prepare and file such
reports as may from time to time be required to be filed or
distributed to Holders under any applicable state or Federal
statute or rule or regulation thereunder, and shall file such tax
returns as may from time to time be required under any applicable
state or Federal statute or rule or regulation thereunder. One of
the Trustees shall be designated by resolution of the Trustees to
make the filings and give the notices required by Rule 17g-1
under the Investment Company Act.
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(c) In calculating the net asset value of the Trust as
required by the Investment Company Act, (i) the Treasury
Securities will be valued at the mean between the last current
bid and asked prices or, if quotations are not available, as
determined in good faith by the Trustees, (ii) short-term
investments having a maturity of 60 days or less will be valued
at cost with accrued interest or discount earned included in
interest receivable and (iii) the Contracts will be valued at the
mean of the bid prices received by the Administrator from at
least three independent broker-dealer firms unaffiliated with the
Trust to be named by the Trustees who are in the business of
making bids on financial instruments similar to the Contracts and
with terms comparable thereto.
SECTION 8.3 Termination. (a) The Trust created hereby
shall dissolve, and its affairs be wound up, upon the earliest of
(i) the date 90 days after the execution of this Trust Agreement
if (x) the DECS have not theretofore been issued or (y) the net
worth of the Trust is not at least $100,000 at such time, (ii)
the date of the repayment, sale or other disposition, as the case
may be, of all of the Contracts, the Treasury Securities and any
other securities held hereunder, (iii) the date 10 Business Days
after the Exchange Date (or, if the Contracts shall be
accelerated pursuant to Article VII thereof, 10 Business Days
after the date on which the Trust shall receive the Shares, cash
or other property then required to be delivered by each of the
Sellers, or the proceeds of any sale of collateral pursuant to
the Collateral Agreements), and (iv) the date which is 21 years
less 91 days after the death of the last survivor of all of the
descendants of Joseph P. Kennedy living on the date hereof. The
Trust is irrevocable, the Sponsor has no right to withdraw any
assets constituting a portion of the Trust Estate, and the
dissolution of the Sponsor shall not operate to terminate the
Trust. The death or incapacity of any Holder shall not operate to
terminate this Trust Agreement, nor entitle his legal
representatives or heirs to claim an accounting or to take any
action or proceeding in any court for a partition or winding up
of the Trust, and shall not otherwise affect the rights,
obligations and liabilities of the parties hereto.
(b) Written notice of any dissolution shall be sent to
Holders specifying the record date for any distribution to
Holders and the time of dissolution as determined by the
Trustees, upon which the books maintained by the Paying Agent
pursuant to Section 5.2 hereof shall be closed.
(c) To the extent permitted by applicable law, for
purposes of dissolution under Sections 8.3(a)(ii), (iii) and (iv)
hereof, within five Business Days after such dissolution, the
Trustees shall effect the sale of any remaining property of the
Trust, and the Paying Agent shall distribute pro rata as soon as
practicable thereafter to each Holder, upon surrender for
cancellation of its Certificates, its interest in the Trust
Estate. Together with the distribution to the Holders, the
Trustees shall furnish the Holders with a final statement as of
the date of the distribution of the amount distributable with
respect to each DECS.
(d) Upon the winding up of the Trust and its
dissolution, the Managing Trustee shall cause the Certificate of
Trust to be canceled by filing a certificate of cancellation with
the Office of the Secretary of State of the State of Delaware in
accordance with the provisions of Section 3810 of the Act. Upon
the dissolution of the Trust, the sale of Trust property and
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<PAGE>
distribution of the Trust Estate to the Holders, and the filing
of the certificate of cancellation, the Trust shall terminate and
this Agreement shall be of no further force or effect.
SECTION 8.4 Amendment and Waiver. (a) This Trust
Agreement, and any of the agreements referred to in Section
2.5(a) hereof, may be amended from time to time by the Trustees
for any purpose prior to the issuance and sale to the Underwriter
of the DECS and thereafter without the consent of any of the
Holders (i) to cure any ambiguity or to correct or supplement any
provision contained herein or therein which may be defective or
inconsistent with any other provision contained herein or
therein; (ii) to change any provision hereof or thereof as may be
required by applicable law or the Commission or any successor
governmental agency exercising similar authority; or (iii) to
make such other provisions in regard to matters or questions
arising hereunder or thereunder as shall not materially adversely
affect the interests of the Holders (as determined in good faith
by the Trustees, who may rely on an opinion of counsel).
(b) This Trust Agreement may also be amended from time
to time by the Trustees (or the performance of any of the
provisions of the Trust Agreement may be waived) with the consent
by the required vote of the Holders in accordance with Section
8.1 hereof; provided that this Trust Agreement may not be amended
(i) without the consent by vote of the Holders of all DECS then
outstanding, so as to increase the number of DECS issuable
hereunder above the number of DECS specified in Section 2.5(c)
hereof or such lesser number as may be outstanding at any time
during the term of this Trust Agreement, (ii) to reduce the
interest in the Trust represented by DECS without the consent of
the Holders of such DECS, (iii) if such amendment is prohibited
by the Investment Company Act or other applicable law, (iv)
without the consent by vote of the Holders of all DECS then
outstanding, if such amendment would effect a change in the
voting requirements set forth in Section 8.1 hereof or this
Section 8.4, or (v) without the consent by vote of the Holders of
the lesser of (x) 67% or more of the DECS represented at a
special meeting of Holders, if more than 50% of the DECS
outstanding are represented at such meeting, and (y) more than
50% of the DECS outstanding, if such amendment would effect a
change in Section 2.4 or 2.9 hereof.
(c) Promptly after the execution of any amendment, the
Trustees shall furnish written notification of the substance of
such amendment to each Holder.
(d) Notwithstanding subsections (a) and (b) of this
Section 8.4, no amendment hereof shall permit the Trust, the
Trustees, the Administrator, the Paying Agent or the Custodian to
take any action or direct or permit any Person to take any action
that (i) would vary the investment of Holders within the meaning
of Treasury Regulation Section 301.7701- 4(c), or (ii) would or
could cause the Trust, or direct or permit any action to be taken
that would or could cause the Trust, not to be a "grantor trust"
under the Code.
SECTION 8.5 Accountants.
(a) The Trustees shall, in accordance with Section 30
of the Investment Company Act, file annually with the Commission
such information, documents and reports as investment companies
having securities registered on a national securities exchange
are required to file
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annually pursuant to Section 13(a) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
issued thereunder. The Trustees shall transmit to the Holders, at
least semi-annually, the reports required by Section 30(d) of the
Investment Company Act and the rules and regulations thereunder,
including, without limitation, a balance sheet accompanied by a
statement of the aggregate value of investments on the date of
such balance sheet, a list showing the amounts and values of such
investments owned on the date of such balance sheet, and a
statement of income for the period covered by the report.
Financial statements contained in such annual reports shall be
accompanied by a certificate of independent public accounts based
upon an audit not less in scope or procedures than that which
independent public accountants would ordinarily make for the
purpose of presenting comprehensive and dependable financial
statements and shall contain such information as the Commission
may prescribe. Each such report shall state that such independent
public accountants have verified investments owned, either by
actual examination or by receipt of a certificate from the
Custodian.
(b) The independent public accountants referred to in
subsection (a) above shall be selected at a meeting held within
thirty days before or after the beginning of the fiscal year by
the vote, cast in person, of a majority of the Trustees who are
not "interested persons" as defined in the Investment Company Act
and such selection shall be submitted for ratification at the
first meeting of Holders to be held as set forth in Section 8.1
hereof, and thereafter as required by the Investment Company Act
and the rules and regulations thereunder. The employment of any
independent public accountant for the Trust shall be conditioned
upon the right of the Holders by a vote of the lesser of (i) 67%
or more of the DECS present at a special meeting of Holders, if
Holders of more than 50% of DECS outstanding are present or
represented by proxy at such meeting or (ii) more than 50% of the
DECS outstanding to terminate such employment at any time without
penalty.
(c) The foregoing provisions of this Section 8.5 are
in addition to any applicable requirements of the Investment
Company Act and the rules and regulations thereunder.
SECTION 8.6 Nature of Holder's Interest. Each Holder
holds at any given time a beneficial interest in the Trust
Estate, but does not have any right to take title or possession
of any portion of the Trust Estate. Each Holder expressly waives
any right he may have under any rule of law, or the provisions of
any statute, or otherwise, to require the Trustees at any time to
account, in any manner other than as expressly provided in this
Trust Agreement, for the Shares, the Contracts, the Treasury
Securities or other assets or monies from time to time received,
held and applied by the Trustees hereunder. No Holder shall have
any right except as provided herein to control or determine the
operation and management of the Trust or the obligations of the
parties hereto. Nothing set forth herein or in the certificates
representing DECS shall be construed to constitute the Holders
from time to time as partners or members of an association.
SECTION 8.7 Delaware Law to Govern. This Trust
Agreement is executed and delivered in the State of Delaware, and
all laws or rules of construction of the State of Delaware shall
govern the rights of the parties hereto and the Holders and the
construction, validity and effect of the provisions hereof.
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SECTION 8.8 Notices. Any notice, demand, direction or
instruction to be given to the Sponsor hereunder shall be in
writing and shall be duly given if mailed or delivered to o,
Attention: o, or at such other address as shall be specified by
the Sponsor to the other parties hereto in writing. Any notice,
demand, direction or instruction to be given to the Trust and the
Trustees hereunder shall be in writing and shall be duly given if
mailed or delivered to the Trust at o and to each Trustee at such
Trustee's address set forth beneath its signature below, or such
other address as shall be specified to the other parties hereto
by such party in writing. Any notice to be given to a Holder
shall be duly given if mailed, first class postage prepaid, or by
such other substantially equivalent means as the Trustees may
deem appropriate, or delivered to such Holder at the address of
such Holder appearing on the registry of the Paying Agent.
SECTION 8.9 Severability. If any one or more of the
covenants, agreements, provisions or terms of this Trust
Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions
and terms of this Trust Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Trust
Agreement or of the Certificates, or the rights of the Holders
thereof.
SECTION 8.10 Counterparts. This Trust Agreement may be
executed in several counterparts, each of which shall be an
original and all of which shall constitute one and the same
instrument.
SECTION 8.11 Successors and Assigns. Whenever in this
Trust Agreement any of the parties hereto is named or referred
to, the successors and assigns of such party shall be deemed to
be included, and all covenants and agreements in this Trust
Agreement by the Sponsor and Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether or
not so expressed.
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IN WITNESS WHEREOF, the parties hereto have caused
this Trust Agreement to be duly executed.
SPONSOR:
SALOMON BROTHERS INC
By:
______________________________
TRUSTEES:
Managing Trustee
______________________________
Name: Donald J. Puglisi
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
______________________________
Name: William R. Latham III
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
______________________________
Name: James B. O'Neill
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
INITIAL SPONSOR:
Michael E. Sherman
INITIAL TRUSTEE:
Peter B.Blanton
22
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Schedule I
TREASURY SECURITIES
All terms specified are for stripped principal or
interest components of U.S. Treasury debt obligations.
Aggregate Face Amount, Per
STRIPS Payment Date Security, Payable at Payment Date
----------------------------------------------------------------------
<PAGE>
Exhibit A
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
Corporation ("DTC"), to DECS Trust or its agent for registration
of transfer, exchange, or payment, and any certificate issued is
registered in the name of Cede & Co. (or in such other name as is
requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede
& Co., has an interest herein. This certificate may be exchanged
by an authorized representative of DTC in whole or in part for
securities in definitive form, registered in the names of such
holders as such representative of DTC shall specify, in which
case, a new certificate will be issued in the name of Cede & Co.
(or in such other name as is requested by such authorized
representative of DTC) representing the securities not issued in
definitive form.
THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE
TERMS, PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT REFERRED
TO BELOW TO WHICH THE HOLDER OF THIS CERTIFICATE BY VIRTUE OF THE
ACCEPTANCE HEREOF ASSENTS AND IS BOUND.
$____ DECS
DECS TRUST
CUSIP NO. ___________
NO. 1 ____________ DECS
THIS CERTIFIES THAT CEDE & CO. IS THE RECORD OWNER OF
____________ DECS OF DECS TRUST CONSTITUTING FRACTIONAL UNDIVIDED
INTERESTS IN DECS TRUST, A TRUST CREATED UNDER THE LAWS OF THE
STATE OF DELAWARE PURSUANT TO AN AMENDED AND RESTATED DECLARATION
OF TRUST BETWEEN SALOMON BROTHERS INC AND THE TRUSTEES NAMED
THEREIN. THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE
TERMS, PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT TO WHICH
THE HOLDER OF THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF
ASSENTS AND IS BOUND, A COPY OF WHICH TRUST AGREEMENT IS
AVAILABLE AT THE OFFICE OF THE TRUST'S ADMINISTRATOR AND PAYING
AGENT, [ADDRESS]. THIS CERTIFICATE IS TRANSFERABLE AND
EXCHANGEABLE BY THE REGISTERED OWNER IN PERSON OR BY HIS DULY
AUTHORIZED ATTORNEY AT THE OFFICE OF THE PAYING AGENT UPON
SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED OR ACCOMPANIED BY
A WRITTEN INSTRUMENT OF TRANSFER AND ANY OTHER DOCUMENTS THAT THE
PAYING AGENT MAY REQUIRE FOR TRANSFER, IN FORM SATISFACTORY TO
THE PAYING AGENT AND PAYMENT OF THE FEES AND EXPENSES PROVIDED IN
THE TRUST AGREEMENT.
A-1
<PAGE>
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY
COUNTERSIGNED BY THE PAYING AGENT.
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING
TRUSTEE.
DECS Trust
DATED: o, 1997
By
______________________________
Managing Trustee
COUNTERSIGNED:
, as Paying Agent
By
_________________________
Authorized Signature
A-2
RESTATED CERTIFICATE OF TRUST
OF
DECS TRUST
THIS Restated Certificate of Trust of DECS Trust (the
"Trust"), dated September 22, 1997, is being duly executed and
filed by Donald J. Puglisi, William R. Latham III and James B.
O'Neill, as trustees, to restate the original Certificate of
Trust of the Trust which was filed on November 21, 1995 with the
Secretary of State of the State of Delaware under the Delaware
Business Trust Act (12 Del. C. ss.3801 et seq.) (the "Original
Certificate of Trust").
The Original Certificate of Trust is hereby restated
in its entirety to read as follows:
1. Name. The name of the business trust formed hereby is
DECS Trust.
2. Registered Office: Registered Agent. The business
address of the registered office of the Trust in the State of
Delaware is c/o Puglisi & Associates, 850 Library Avenue, Suite 204,
Newark, Delaware 19715. The name of the Trust's registered agent at
such address is Puglisi & Associates.
3. Effective Date. This Restated Certificate of Trust will
be effective upon the date and time of filing.
4. The Trust is to be registered under the Investment
Company Act of 1940, as amended, prior to the issuance of
beneficial interests in the Trust.
IN WITNESS WHEREOF, the undersigned, being the
trustees of the Trust, have executed this Certificate of Trust as
of the date first-above written.
------------------------------
Donald J. Puglisi,
as Managing Trustee
------------------------------
William R. Latham III,
as Trustee
------------------------------
James B. O'Neill,
as Trustee
DECS TRUST
3,100,000 DECS SM*
(Representing Beneficial Interests in Contracts Relating to Shares of
Common Stock, no par value, of DIMON Incorporated)
Underwriting Agreement
New York, New York
_______, 1997
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
DECS Trust, a statutory business trust organized under
the Delaware Business Trust Act, 12 Del.C. section 3801 et seq., (the
"Delaware Act") (such trust and the trustees thereof acting in their
capacities as such being referred to herein as the "Trust"),
proposes to issue and sell to Salomon Brothers Inc ("SBI") an
aggregate of 3,100,000 DECS representing shares of beneficial
interest in the Trust (the "Underwritten DECS"). In addition, SBI
will have an option to purchase up to DECS (the "Option DECS"
and, together with the Underwritten DECS, the "DECS") to cover
over-allotments, if any. The Option DECS and the Underwritten
DECS, together with the DECS of the Trust subscribed for by SBI
pursuant to the Subscription Agreement, dated September 9, 1997,
between SBI and the Trust, are referred to herein as the
"Securities". The Securities are to be issued under an Amended
and Restated Declaration of Trust, dated as of , 1997 (the
"Trust Agreement"), among the trustees of the Trust (the
"Trustees") and SBI, as sponsor.
The Trust has entered into forward purchase contracts
(the "Contracts") with the persons listed on Schedule I hereto
(each a "Seller") pursuant to which each Seller has agreed to
sell, and the Trust has agreed to purchase, the number of shares
of common stock, no par value (the "Shares"), of DIMON
Incorporated (the "Company") specified therein on , 2000 (the
"Exchange Date") (subject to the Seller's right to deliver cash
with a value equivalent thereto as provided in the Contracts).
Each Seller's obligations under his, her or its respective Contract will
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* Plus an option to purchase from DECS Trust up to
additional DECS to cover over-allotments.
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be secured by a pledge of collateral under a collateral
agreement (each a "Collateral Agreement") between such
Seller and the Bank of New York ("BoNY"), as collateral agent (in
such capacity, the "Collateral Agent").
Certain terms used in this Agreement are defined in
paragraph (d) of Section 1 and paragraph (c) of Section 2.
1. Representations and Warranties of the Trust. The
Trust represents and warrants to, and agrees with, SBI as set
forth below in this Section 1.
(a) The Trust meets the requirements for use of Form N-2
under the Securities Act of 1933, as amended (the "Act") and has
filed with the Securities and Exchange Commission (the
"Commission") (a) a notification on Form N-8A (the
"Notification") of registration of the Trust as an investment
company under the Investment Company Act of 1940, as amended (the
"Investment Company Act") and (b) a registration statement on
Form N-2 (Nos. 33-99752 and 811-09138), including a related
preliminary prospectus, for the registration of the offering and
sale of the DECS under the Act. The Trust may have filed one or
more amendments thereto, including the related preliminary
prospectus, each of which has previously been furnished to you.
The Trust will next file with the Commission either (i) prior to
effectiveness of such registration statement, a further amendment
to such registration statement (including the form of final
prospectus) or (ii) after effectiveness of such registration
statement, a final prospectus in accordance with Rules 430A and
497(h). In the case of clause (ii), the Trust has included in
such registration statement, as amended at the Trust Effective
Date, all information (other than Rule 430A Information) required
by the Act and the rules thereunder to be included in such
prospectus with respect to the DECS and the offering thereof. As
filed, such amendment and form of final prospectus, or such final
prospectus, shall contain all Rule 430A Information, together
with all other such required information, with respect to the
DECS and the offering thereof and, except to the extent SBI shall
agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the Execution Time
or, to the extent not completed at the Execution Time, shall
contain only such specific additional information and other
changes (beyond that contained in the latest Preliminary Trust
Prospectus) as the Trust has advised you, prior to the Execution
Time, will be included or made therein.
(b) On the Trust Effective Date, the Trust Registration
Statement and the Notification did or will, and when the Trust
Prospectus is first filed (if required) in accordance with Rule
497(h) and on the Closing Date, the Trust Prospectus (and any
supplements thereto) will, comply in all material respects with
the applicable requirements of the Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the Investment
Company Act, and the respective rules thereunder.
(c) On the Trust Effective Date, the Trust Registration
Statement did not or will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein not misleading; on the Trust Effective Date, the Trust
Prospectus, if not filed pursuant to Rule 497(h), did not or will
not, and on the date of any filing pursuant to Rule 497(h) and on
the Closing Date, the Trust
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Prospectus (together with any supplement thereto) will
not, include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading.
(d) The terms which follow, when used in this Agreement,
shall have the meanings indicated. The term "Trust Effective
Date" shall mean each date that the Trust Registration Statement
and any post-effective amendment or amendments thereto became or
become effective. "Execution Time" shall mean the date and time
that this Agreement is executed and delivered by the parties
hereto. "Preliminary Trust Prospectus" shall mean any preliminary
prospectus referred to in paragraph (a) of this Section 1 and any
preliminary prospectus included in the Trust Registration
Statement at the Trust Effective Date that omits Rule 430A
Information. "Trust Prospectus" shall mean the prospectus
relating to the DECS that is first filed pursuant to Rule 497(h)
after the Execution Time or, if no filing pursuant to Rule 497(h)
is required, shall mean the form of final prospectus relating to
the DECS that is included in the Trust Registration Statement at
the Trust Effective Date. "Trust Registration Statement" shall
mean the registration statement referred to in paragraph (a) of
this Section 1, including exhibits and financial statements, as
amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective)
and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date, shall also mean such
registration statement as so amended. Such term shall include any
Rule 430A Information deemed to be included therein at the Trust
Effective Date as provided by Rule 430A. "Rule 430A" and "Rule
497(h)" refer to such rules under the Act. "Rule 430A
Information" means information with respect to the DECS, the
Shares and the offering thereof permitted to be omitted from the
Trust Registration Statement (or, as used in Section 2, the
Company Registration Statement) when it becomes effective
pursuant to Rule 430A. If the Trust has filed an abbreviated
registration statement to register additional DECS pursuant to
Rule 462(b) under the Securities Act (the "Rule 462 Trust
Registration Statement"), then any reference herein to the term
"Trust Registration Statement" shall be deemed to include such
Rule 462 Trust Registration Statement. As used herein, the terms
"Trust Registration Statement", "Preliminary Trust Prospectus"
and "Trust Prospectus" shall not include the Company Prospectus
attached thereto.
(e) No stop order suspending the effectiveness of the
Trust Registration Statement is in effect, no order preventing or
suspending the use of any Preliminary Trust Prospectus has been
issued by the Commission, no notice or order under Section 8(e)
of the Investment Company Act has been issued, and no proceedings
for any such purpose are pending before or threatened by the
Commission.
(f) The Trust has been duly created, is validly
existing as a business trust under the Delaware Act, has the
power and authority to own its properties and conduct its
business as described in the Trust Prospectus and to enter into
and perform its obligations under this Agreement, the Trust
Agreement and each of the Fundamental Documents (as defined
below) and is duly qualified to do business and is in good
standing under the laws of each jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification other than where the failure to be so qualified
would not have a material adverse effect on the Trust or its
assets. The Trust has no subsidiaries.
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(g) The Trust is registered with the Commission as a
non-diversified, closed-end management investment company under
the Investment Company Act and no order of suspension or
revocation of such registration has been issued or proceedings
therefor initiated or, to the knowledge of the Trust, threatened
by the Commission. No person is serving or acting as an officer
or trustee of the Trust except in accordance with the provisions
of the Investment Company Act.
(h) This Agreement has been duly authorized, executed and
delivered by the Trust.
(i) Each of the Contracts, the Collateral Agreements, the
Administration Agreement between BoNY and the Trust (the
"Administration Agreement"), the Custodian Agreement between BoNY
and the Trust (the "Custodian Agreement"), the Paying Agent
Agreement between BoNY and the Trust (the "Paying Agent
Agreement") and the Fund Indemnity Agreement between SBI and the
Trust (the "Fund Indemnity Agreement") (the Contracts, the
Collateral Agreements, the Administration Agreement, the
Custodian Agreement, the Paying Agent Agreement and the Fund
Indemnity Agreement are referred to herein, collectively, as the
"Fundamental Agreements") has been duly authorized, executed and
delivered by the Trust and, assuming due authorization, execution
and delivery by the other parties thereto, is a valid and binding
agreement of the Trust, enforceable against the Trust in
accordance with its terms except as such enforceability may be
limited by applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and by general equitable
principles.
(j) The execution and delivery by the Trust of, and the
performance by the Trust of its obligations under, this Agreement
and each Fundamental Agreement (including the issue and sale by
the Trust of the DECS as contemplated by this Agreement) do not
and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of,
or default under, or give the holder of any indebtedness of the
Trust the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness under, or
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Trust pursuant to,
any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which
the Trust is a party or by which it may be bound, or to which any
of the property or assets of the Trust is subject, nor will such
action result in any violation of the provisions of the Trust
Agreement or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having
jurisdiction over the Trust or any of its assets or properties;
and no consent, approval, authorization, order of, or
qualification or filing with, any governmental body or agency,
self-regulatory organization or court or other tribunal, whether
foreign or domestic, is required for the execution and delivery
by the Trust of this Agreement or the Fundamental Agreements or
the performance by the Trust of its obligations hereunder and
thereunder, except for the filing of a Certificate of Trust with the
office of the Secretary of State of the State of Delaware (which
filing has been duly made) and such as have been obtained and as may be
required by the securities or Blue Sky laws of the various states and
foreign jurisdictions in connection with the offer and sale of the DECS
by SBI.
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(k) The DECS, the Trust Agreement and the Fundamental
Agreements conform in all material respects to the descriptions
thereof contained in the Trust Prospectus.
(l) The Trust Agreement and the Fundamental Agreements
comply with all applicable provisions of the Act, the Exchange
Act and the Investment Company Act, and all approvals of such
documents required under the Investment Company Act by the
holders of the Securities and the Trustees have been obtained and
are in full force and effect.
(m) The Fundamental Agreements are in full force and
effect and the Trust is not in default thereunder and, to the
knowledge of the Trust, no event has occurred which with the
passage of time or the giving of notice or both would constitute
a default thereunder. The Trust is not currently in breach of, or
in default under, the Trust Agreement or any other written
agreement or instrument to which it or its property is bound or
affected.
(n) All of the outstanding Securities have been duly
authorized and are validly issued, fully paid and non-assessable
undivided beneficial interests in the assets of the Trust, and
the form of certificates used to evidence the Securities is in
due and proper form and complies with all provisions of
applicable law.
(o) The DECS have been duly authorized by the Trust for
issuance to SBI pursuant to this Agreement and, when issued and
delivered by the Trust in accordance with the terms of this
Agreement and the Trust Agreement against payment of the purchase price
therefor as provided herein, will be validly issued, fully paid and
non-assessable undivided beneficial interests in the assets of
the Trust, and the issuance of such DECS will not be subject to
any preemptive or similar rights. No person has rights to the
registration of any securities because of the filing of the Trust
Registration Statement, and no holder of the Securities will be
subject to personal liability by reason of being such a holder.
(p) The DECS have been approved for listing on the New
York Stock Exchange, Inc. (the "NYSE"), subject to official
notice of issuance. The Trust's Registration Statement on Form
8-A under the Exchange Act is effective.
(q) There has not occurred any material adverse change, or
any development involving a prospective material adverse change,
in the condition, financial or otherwise, of the Trust, or in the
investment objectives, investment policies, liabilities,
business, prospects or operations of the Trust from that set
forth in the Trust Prospectus (exclusive of any supplements
thereto subsequent to the date of this Agreement) and there have
been no transactions entered into by the Trust which are material
to the Trust other than those in the ordinary course of its
business or as described in the Trust Prospectus (exclusive of
any supplements thereto subsequent to the date of this
Agreement).
(r) There are no legal or governmental proceedings
pending or, to the knowledge of the Trust, threatened against or
affecting the Trust that are required to be described in the Trust
Registration Statement or the Trust Prospectus and are
not so described or any statutes, regulations, contracts or other
documents that are required to be described in the Trust
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Registration Statement or the Trust Prospectus or to be filed as
exhibits to the Trust Registration Statement that are not
described or files as required.
(s) The Trust has all necessary consents, authorizations,
approvals, orders (including exemptive orders), certificates and
permits of and from, and has made all declarations and filings
with, all governmental authorities, self-regulatory organizations
and courts and other tribunals, whether foreign or domestic, to
own and use its assets and to conduct its business in the manner
described in the Trust Prospectus, except to the extent that the
failure to obtain or file the foregoing would not have a material
adverse effect on the Trust and except such as may be required by
the securities or Blue Sky laws of the various states in
connection with the offer and sale of the DECS.
(t) There are no material restrictions, limitations or
regulations with respect to the ability of the Trust to invest
its assets as described in the Trust Prospectus, other than as
described therein.
(u) The Trust has good title to all properties owned by
it, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances
of any kind except such as (a) are described in the Trust
Prospectus or (b) do not, singly or in the aggregate, materially
affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Trust.
(v) There are no legal or governmental proceedings pending
to which the Trust is a party or of which any property of the
Trust is the subject which, if determined adversely to the Trust,
would individually or in the aggregate have a material adverse
effect on the current or future financial position or results of
operations of the Trust; and, to the best of the Trust's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(w) The statement of assets, liabilities and capital
included in the Trust Registration Statement and the Trust
Prospectus, together with the notes thereto, present fairly the
financial position of the Trust at the date indicated, and such
financial statement has been prepared in conformity with
generally accepted accounting principles.
(x) The accountants who certified the financial statements
and supporting schedules included in the Trust Registration
Statement are independent public accountants as required by the
Act and the rules and regulations of the Commission thereunder.
(y) The Trust has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or
which might reasonably be expected to cause or result, under the
Exchange Act or otherwise, in stabilization or manipulation of
the price of any security of the Company to facilitate the sale
or resale of the DECS or the Shares, and has not effected any
sales of the Company's common stock which, if effected by the
Company, would be required to be disclosed in response to Item
701 of Regulation S-K.
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2. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, SBI as set
forth below in this Section 2.
(a) The Company meets the requirements for use of Form S-3
under the Act and has filed with the Commission a registration
statement (file number 333-33267) on such Form, including a
related preliminary prospectus, for the registration under the
Act of the offering and sale of the Shares in connection with the
offering and sale of the DECS. The Company may have filed one or
more amendments thereto, including the related preliminary
prospectuses, each of which has previously been furnished to you.
The Company will next file with the Commission one of the
following: (i) prior to effectiveness of such registration
statement, a further amendment to such registration statement,
including the form of final prospectus, (ii) a final prospectus
in accordance with Rules 430A and 424(b)(1) or (4), or (iii) a
final prospectus in accordance with Rules 415 and 424(b)(2) or
(5). In the case of clause (ii), the Company has included in such
registration statement, as amended at the Company Effective Date,
all information (other than Rule 430A Information) required by
the Act and the rules thereunder to be included in such
prospectus with respect to the Shares and the offering thereof.
As filed, such amendment and form of final prospectus, or such
final prospectus, shall contain all Rule 430A Information,
together with all other such required information, with respect
to the Shares and the offering thereof and, except to the extent
SBI shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution
Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary
Company Prospectus) as the Company has advised you, prior to the
Execution Time, will be included or made therein. If the Company
Registration Statement contains the undertaking specified by
Regulation S-K Item 512(a), the Company Registration Statement,
at the Execution Time, meets the requirements set forth in Rule
415(a)(1)(x).
(b) On the Company Effective Date, the Company Registration
Statement did or will, and when the Company Prospectus is first
filed (if required) in accordance with Rule 424(b) and on the
Closing Date, the Company Prospectus (and any supplement thereto)
will, comply in all material respects with the applicable
requirements of the Act, the Exchange Act and the respective
rules thereunder; on the Company Effective Date, the Company
Registration Statement did not or will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; on the Company Effective Date, the
Company Prospectus, if not filed pursuant to Rule 424(b), did not
or will not, and on the date of any filing pursuant to Rule
424(b) and on the Closing Date, the Company Prospectus (together
with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representation or
warranty as to the information contained in or omitted from the
Company Registration Statement or the Company Prospectus (or any
supplement thereto) in reliance upon and in conformity with
information furnished in writing to the Company (i) by SBI
specifically for inclusion in the Company Registration Statement
or the Company Prospectus (or any supplement thereto) or (ii) by
any Seller specifically for inclusion in the Company Registration
Statement or the Company
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Prospectus (or any supplement thereto)
for use in the preparation of information responsive to Item 7 of
Form S-3.
(c) The terms which follow, when used in this
Agreement, shall have the meanings indicated. The term "Company
Effective Date" shall mean each date that the Company
Registration Statement and any post-effective amendment or
amendments thereto became or become effective. "Preliminary
Company Prospectus" shall mean any preliminary prospectus
referred to in paragraph (a) of this Section 2 and any
preliminary prospectus included in the Company Registration
Statement at the Company Effective Date that omits Rule 430A
Information. "Company Prospectus" shall mean the prospectus
relating to the Shares that is used in connection with the
offering and sale of the DECS and that is first filed pursuant to
Rule 424(b) after the Execution Time or, if no filing pursuant to
Rule 424(b) is required, shall mean the form of final prospectus
relating to the Shares that is used in connection with such
offering and sale and that is included in the Company
Registration Statement at the Company Effective Date. "Company
Registration Statement" shall mean the registration statement
referred to in paragraph (a) of this Section 2 including
incorporated documents, exhibits and financial statements, as
amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective)
and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date, shall also mean such
registration statement as so amended. Such term shall include any
Rule 430A Information deemed to be included therein at the
Company Effective Date as provided by Rule 430A. "Rule 415",
"Rule 424" and "Regulation S-K" refer to such rules or regulation
under the Act. Any reference herein to the Company Registration
Statement, Preliminary Company Prospectus or the Company
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
that were filed under the Exchange Act on or before the Company
Effective Date or the issue date of such Preliminary Company
Prospectus or the Company Prospectus, as the case may be; and any
reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Company Registration Statement,
any Preliminary Company Prospectus or the Company Prospectus
shall be deemed to refer to and include the filing of any
document under the Exchange Act after the Company Effective Date,
or the issue date of any Preliminary Company Prospectus or the
Company Prospectus, as the case may be, deemed to be incorporated
therein by reference.
(d) No stop order suspending the effectiveness of the
Company Registration Statement is in effect, no order preventing
or suspending the use of any Preliminary Company Prospectus has
been issued by the Commission, and no proceedings for any such
purpose are pending before or threatened by the Commission. Each
document incorporated by reference in the Company Registration
Statement or the Company Prospectus, when they were filed or are
filed with the Commission, conformed or will conform in all
material respects to the requirements of the Exchange Act and the
rules and regulations of the Commission thereunder, and none of
such documents contained or will contain an untrue statement of a
material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
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(e) Schedule II to this Agreement contains a complete
and correct list of all direct and indirect subsidiaries of the
Company (the "Subsidiaries").
(f) Neither the Company nor any of the Subsidiaries
has sustained since the date of the latest audited financial
statements included in the Company Prospectus any material loss
or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Company
Prospectus; and, since the respective dates as of which
information is given in the Company Registration Statement and
the Company Prospectus, there has not been any change in the
outstanding capital stock, long-term debt, or short-term debt
(other than in the ordinary course of business) of the Company or
a material adverse effect on (i) the business, operations,
properties, assets, liabilities, net worth, condition (financial
or otherwise) or prospects of the Company or any of its
subsidiaries or (ii) the ability of the Company to perform any of
its obligations under this Agreement (a "Company Material Adverse
Effect") or any development involving a prospective Company
Material Adverse Effect, otherwise than as set forth or
contemplated in the Company Prospectus.
(g) The Company and each of the Subsidiaries have good
and marketable title in fee simple to all real property and good
and marketable title to all personal property owned by each of
them, free and clear of all liens, encumbrances and defects
except such as are described in the Company Prospectus or such as
do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such
property by the Company and such Subsidiaries; and any real
property and buildings held under lease by the Company or any of
the Subsidiaries are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of
such property and buildings by the Company or such Subsidiaries.
(h) The Company and each of the Subsidiaries have been
duly incorporated and are validly existing as corporations in
good standing under the laws of their respective jurisdictions of
incorporation, with power and authority (corporate and other) to
own or lease their respective properties and conduct their
respective businesses as described in the Company Prospectus, and
each has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of
each other jurisdiction which requires such qualification in
which it owns or leases material properties, or conducts any
material business, except where the failure or failures to so
qualify or be in good standing would not in the aggregate result
in a Company Material Adverse Effect.
(i) The Company has an authorized capitalization as
set forth in the Company Prospectus; all of the issued shares of
capital stock of the Company have been duly and validly
authorized and issued, are fully paid and nonassessable and
conform to the description of the capital stock of the Company
contained in the Company Prospectus; except as described in the
Company Prospectus, there are no preemptive or other rights to
subscribe for or to purchase any securities of the Company;
except as described in the Company Prospectus, there are no
warrants, options or other rights to purchase any securities of
the Company; neither the filing of the Company Registration
Statement nor the offering or sale of the Shares or the DECS as
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contemplated by this Agreement and the Company Prospectus gives
rise to any rights for or relating to the registration of any
securities of the Company with respect to such filing, offering
or sale, other than rights which have been waived or satisfied.
(j) All outstanding shares of capital stock of each of
the Subsidiaries have been duly and validly authorized and
issued, are fully paid and non-assessable and, except as noted on
Schedule II, are owned by the Company, either directly or through
wholly-owned subsidiaries, free and clear of any perfected
security interest and any other security interest, claim, lien or
encumbrance.
(k) The performance of this Agreement by the Company and the
consummation of the other transactions herein contemplated will
not conflict with or result in a breach or violation of any terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any Subsidiary is a party or
by which any of the property or assets of the Company or any
Subsidiary is bound or to which any of the property or assets of
the Company or any Subsidiary is subject, nor will such action
result in any violation of the provisions of the Articles of
Incorporation or By-laws of the Company or the constituent
documents of any Subsidiary or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any Subsidiary or any of their
respective properties; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for consummation by the
Company of the transactions contemplated by this Agreement and
the Company Prospectus, except such consents, approvals,
authorizations, registrations or qualifications as may be
required under the Act and under state securities or Blue Sky
laws in connection with the offer and sale of the Shares.
(l) There are no legal or governmental proceedings
pending to which the Company or any of its Subsidiaries is a
party or of which any property of the Company or any of its
Subsidiaries is the subject, other than as set forth or
contemplated in the Company Prospectus, which, if determined
adversely to the Company or any of its Subsidiaries, would
individually or in the aggregate, result in a Company Material
Adverse Effect and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated by any
governmental authorities or by any other persons.
(m) Price Waterhouse LLP, and Ernst & Young LLP (who
have certified certain financial statements of the Company and
Dibrell Brothers, Incorporated ("Dibrell"), respectively), are
and were, with respect to the Company and Dibrell, respectively,
independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder.
(n) All employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) established, maintained or contributed to by
the Company comply in all material respects with the requirements
of ERISA and no employee pension benefit plan (as defined in
Section 3(2) of ERISA) has incurred or assumed an "accumulated
funding deficiency" within the meaning of Section 302 of ERISA or
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has incurred or assumed any material liability (other than for
the payment of premiums) to the Pension Benefit Guaranty
Corporation.
(o) The consolidated financial statements of the
Company, together with the related schedules and notes thereto,
included or incorporated in the Company Registration Statement
and the Company Prospectus (and any amendment or supplement
thereto) present fairly the consolidated financial position,
results of operations and changes in financial position of the
Company at the indicated dates and for the indicated periods;
such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied
throughout the periods presented except as noted in the notes
thereon, and all adjustments necessary for a fair presentation of
results for such periods have been made; and the selected
financial information included in the Company Prospectus presents
fairly the information shown therein and has been compiled on a
basis consistent with the financial statements presented therein.
(p) The Company and each Subsidiary have timely filed
all necessary federal, state and foreign income, franchise and
excise tax returns and have paid all taxes shown thereon as due,
and there is no tax deficiency that has been or, to the best
knowledge of the Company, might be asserted against the Company
or any Subsidiary that might result in a Company Material Adverse
Effect, except for any such assessment, fine or penalty that is
currently being contested in good faith and for which the Company
retains adequate reserves; and all tax liabilities are adequately
provided for on the books of the Company.
(q) Neither the Company nor any of the Subsidiaries is
in violation of any international, federal or state law,
regulation, or treaty relating to the storage, handling,
transportation, treatment or disposal of hazardous substances (as
defined in 42 U.S.C. Section 9601) or hazardous materials (as
defined by any international, federal or state law or regulation)
or other waste products, which violation may result in a Company
Material Adverse Effect, and the Company and each of the
Subsidiaries have received all material permits, licenses or
other approvals as may be required of them under applicable
international, federal and state environmental laws and
regulations to conduct their business as described in the Company
Prospectus; and the Company and each of the Subsidiaries are in
compliance in all material respects with the terms and conditions
of any such permit, license or approval; neither the Company nor
any of the Subsidiaries has received any notices or claims that
it is a responsible party or a potentially responsible party in
connection with any claim or notice asserted pursuant to 42
U.S.C. Section 9601 et seq. or any state superfund law; and, to
the best knowledge of the Company, the disposal of all of the
Company's and each Subsidiary's hazardous substances, hazardous
materials and other waste products, if any, has been lawful.
(r) No relationship, direct or indirect, exists
between or among the Company or any of the Subsidiaries, on the
one hand, and the directors, officers, shareholders, customers or
suppliers of the Company or any of the Subsidiaries on the other
hand, that is required by the Act or the Exchange Act, or by the
rules and regulations under either of such Acts to be described
in the Company Registration Statement and the Company Prospectus
or documents incorporated by reference therein that is not so
described.
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<PAGE>
(s) Neither the Company nor any of the Subsidiaries
has taken and none of such entities will take, directly or
indirectly, any action that is designed to or that has
constituted or that might reasonably be expected to cause or
result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Shares or the DECS.
(t) Each of the Company and the Subsidiaries owns or
possesses, or can acquire on reasonable terms, adequate licenses,
copyrights, trademarks, service marks and trade names
(collectively, "intellectual property") necessary to carry on its
business as presently operated by it, except where the failure to
own or possess or have the ability to acquire any such
intellectual property would not, individually or in the
aggregate, result in a Company Material Adverse Effect, and
neither the Company nor any of the Subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any intellectual
property or of any facts which would render any intellectual
property invalid or inadequate to protect the interest of the
Company or any of the Subsidiaries therein and which infringement
or conflict could result in a Company Material Adverse Effect.
(u) The Company holds and is operating in compliance,
in all material respects, with all franchises, grants,
authorizations, licenses, permits, easements, consents,
certificates and orders of any governmental or self-regulatory
body required for the conduct of its business as presently being
conducted ("licenses") and all licenses are valid and in full
force and effect, and the Company is in compliance, in all
material respects, with all laws, regulations, orders and decrees
applicable to it.
(v) The Company and the Subsidiaries maintain, with
financially sound insurers, insurance of the types and in the
amounts that are reasonable, customary or required for the
business operated by them, all of which insurance is in full
force and effect;
(w) This Agreement has been duly authorized, executed
and delivered by the Company.
(x) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(y) There is no document or contract of a character
required to be described in the Company Registration Statement or
the Company Prospectus or to be filed as an exhibit to the
Company Registration Statement which is not described or filed as
required. All such contracts to which the Company or any
Subsidiary is a party constitute valid and binding agreements of
the Company or such Subsidiary and are enforceable against the
Company or such Subsidiary in accordance with the terms thereof,
except as may be limited by bankruptcy,
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<PAGE>
insolvency, fraudulent transfer or other similar laws
affecting the rights and remedies of creditors generally and
subject to general principles of equity.
(z) The outstanding shares of the Company's common
stock are duly listed and admitted for trading on the NYSE.
3. Representations and Warranties of the Sellers. Each
of the Sellers (or, where expressly so limited, each of the W.C.
Monk, Jr. Trust, the Molly G. Monk Trust and the Emily Monk
Davidson Trust (the "Trust Sellers")), severally and not jointly,
represents and warrants to, and agrees with, SBI, the Company and
the Trust that:
(a) In the case of the Trust Sellers, such Trust
Seller has been duly created, is validly existing under the laws
of the State of North Carolina, has the power and authority to
own its property, and does not conduct any business in any
jurisdiction, own any property [other than securities held in
trust for its beneficiaries] or have any subsidiaries.
(b) Such Seller has full right, power and authority to
enter into and perform its obligations under this Agreement, such
Seller's Contract and Collateral Agreement and the letter
agreement between the Sellers and SBI relating to expenses of the
Trust (the "Reimbursement Agreement").
(c) This Agreement has been duly authorized (in the
case of the Trust Sellers), executed and delivered by such
Seller. The Contract and Collateral Agreement to which such
Seller is a party and the Reimbursement Agreement have been duly
authorized (in the case of the Trust Sellers), executed and
delivered by such Seller and, assuming due authorization,
execution and delivery by the other parties thereto, is each a
valid and binding agreement of such Seller, enforceable against
such Seller in accordance with its terms.
(d) The execution and delivery by such Seller of this
Agreement, the Contract and Collateral Agreement to which such
Seller is a party and the Reimbursement Agreement, the
performance by such Seller of its obligations hereunder and
thereunder and the consummation of the transactions herein and
therein contemplated do not and will not, whether with or without
the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default under, or give the holder of
any indebtedness the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by such
Seller under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of such
Seller pursuant to, any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other
agreement or instrument to which such Seller may be bound, or to
which any of the property or assets of such Seller is subject,
nor will such action result in any violation of any applicable
law, statute, rule or regulation of any government or government
instrumentality having jurisdiction over such Seller or any of
his, her or its assets, properties or operations, or any
applicable judgment, order, writ or decree of any government,
government instrumentality or court having jurisdiction over such
Seller or any of such Seller's assets, or operations.
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<PAGE>
(e) In the case of the Trust Sellers, such Seller is
not an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment
Company Act.
(f) Such Seller is the sole registered owner of and
has, and on the Closing Date (and, if any Option DECS are
purchased, at the time of delivery thereof pursuant to Section
4(b)) will have, good and valid title to the Shares to be pledged
and assigned by it under its Collateral Agreement, free and clear
of any security interests, claims, liens, equities and other
encumbrances, except for those created pursuant to its Collateral
Agreement, and such Seller has the full right, power and
authority, and all authorization and approval required by law to
pledge and assign the Shares to be pledged and assigned by such
Seller pursuant to its Collateral Agreement.
(g) Assuming payment of the purchase price on the
Closing Date, delivery of the Shares to be sold by such Seller
pursuant to such Seller's Contract on the Exchange Date will pass
to the Trust and the holders of the Securities title to such
Shares free and clear of any security interests, claims, liens,
equities and other encumbrances. The sale, transfer and delivery
of the Shares to be sold by such Seller pursuant to such Seller's
Contract is not, and at the time of delivery of such Shares will
not be, subject to any right of first refusal or similar rights
of any person pursuant to any contract to which such Seller or
(in the case of a Trust Seller) any beneficiary or subsidiary of
such Seller is a party or by which any of them is bound.
(h) Such Seller hereby repeats and confirms as if set
forth in full herein each of the representations, warranties and
agreements made by such Seller in such Seller's Contract and
Collateral Agreement and agrees that such representations,
warranties and agreements are made hereby for the benefit of, and
may be relied upon by, (i) SBI and Cleary, Gottlieb, Steen &
Hamilton, counsel to SBI, (ii) the Company and Hunton & Williams,
counsel to the Company and (iii) Skadden, Arps, Slate, Meagher &
Flom LLP, counsel to the Sellers.
(i) Such Seller will not offer for sale, sell or
contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, or file or cause the
filing of any registration statement under the Act with respect
to, any shares of common stock of the Company or any securities
convertible into or exchangeable for, or warrants to acquire,
common stock of the Company for a period of 90 days after the
date of the Company Prospectus, except (i) pursuant to this
Agreement and such Seller's Contract, (ii) pursuant to the
separate underwriting agreement for the underwritten sale of
common stock of the Company described in the Company Registration
Statement, (iii) with SBI's prior written consent or (iv) in bona
fide gifts and private transactions.
(j) Such Seller has not taken and will not take,
directly or indirectly, any action which is designed to or which
has constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Shares or the DECS.
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<PAGE>
(k) Such Seller is familiar with the Company
Registration Statement and the Company Prospectus and verifies
that the information set forth therein respecting him, her or it
is true and complete.
(l) Such Seller has no reason to believe that any of
the representations and warranties of the Company contained in
Section 2 hereof are not true and correct in all material
respects.
4. Purchase and Sale. (a) Subject to the terms and
conditions and in reliance upon the representations and
warranties herein set forth, the Trust agrees to sell to SBI, and
SBI agrees to purchase from the Trust, at a price of $ per DECS,
3,100,000 Underwritten DECS.
(b) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set
forth, the Trust hereby grants an option to SBI to purchase up to
Option DECS at the same purchase price per DECS as SBI shall
pay for the Underwritten DECS. Such option may be exercised only
to cover over-allotments in the sale of the Underwritten DECS by
SBI. Such option may be exercised in whole or in part at any time
(but not more than once) on or before the 30th day after the date
of the Trust Prospectus upon written or telecopied notice by SBI
to the Trust setting forth the number of the Option DECS as to
which SBI is exercising the option and the settlement date.
Delivery of certificates for the Option DECS, and payment
therefor, shall be made as provided in Section 5 hereof.
(c) As compensation to SBI for its commitment
hereunder, and in view of the fact that the proceeds of the sale
of the DECS will be used by the Trust as specified in the
Contracts, the Sellers agree to pay to SBI, at the time of each
delivery of DECS pursuant to Section 5, an amount equal to
$___.__ per DECS being delivered at such time; provided that the
aggregate amount payable to SBI by the Sellers shall be paid by
the Sellers on a pro rata basis according to the number of Shares
pledged by each Seller pursuant to the Collateral Agreement to
which such Seller is a party.
5. Delivery and Payment. Delivery of and payment for
the Underwritten DECS and the Option DECS (if the option provided
for in Section 4(b) hereof shall have been exercised on or before
the first business day prior to the Closing Date) shall be made
at 10:00 AM, New York City time, on , 1997, (or such later date
not later than five business days after such specified date as
SBI shall designate) which date and time may be postponed by
agreement between SBI and the Trust (such date and time of
delivery and payment for the DECS being herein called the
"Closing Date"). Delivery of the DECS shall be made to SBI for
the account of SBI against payment by SBI of the purchase price
thereof to or upon the order of the Trust by wire transfer to an
account designated in writing by the Trust at least two business
days in advance of the Closing Date, payable in same-day funds.
Delivery of the DECS shall be made through the facilities of the
Depository Trust Company.
The Trust agrees to have the DECS available for
inspection and checking by SBI in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
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<PAGE>
If the option provided for in Section 4(b) hereof is
exercised after the first business day prior to the Closing Date,
the Trust will deliver (at the expense of the Trust) to SBI at
Seven World Trade Center, New York, New York, on the date
specified by SBI (which shall be within three business days after
exercise of said option), certificates for the Option DECS in
such names and denominations SBI shall have requested against
payment of the purchase price thereof to or upon the order of the
Trust by wire transfer to an account designated in writing by the
Trust at least two business days in advance of such settlement
date, payable in same-day funds. If settlement for the Option
DECS occurs after the Closing Date, the Trust, the Company and
the Sellers will deliver to SBI on the settlement date for the
Option DECS, and the obligation of SBI to purchase the Option
DECS shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions,
certificates and letters delivered on the Closing Date pursuant
to Section 9 hereof.
6. Offering by SBI. It is understood that SBI proposes
to offer the DECS for sale to the public as set forth in the
Trust Prospectus.
7. Agreements of the Trust. The Trust agrees with SBI that:
(a) The Trust will use its best efforts to cause the
Trust Registration Statement, if not effective at the Execution
Time, and any amendment thereof, to become effective. Prior to
the termination of the offering of the DECS, the Trust will not
file any amendment of the Trust Registration Statement or
supplement to the Trust Prospectus without SBI's prior consent.
Subject to the foregoing sentence, if the Trust Registration
Statement has become or becomes effective pursuant to Rule 430A,
or filing of the Trust Prospectus is otherwise required under
Rule 424(b), the Trust will cause the Trust Prospectus, properly
completed, and any supplement thereto to be filed with the
Commission pursuant to the applicable paragraph of Rule 424(b)
within the time period prescribed and will provide evidence
satisfactory to SBI of such timely filing. The Trust will
promptly advise SBI (i) when the Trust Registration Statement, if
not effective at the Execution Time, and any amendment thereto,
shall have become effective, (ii) when the Trust Prospectus, and
any supplement thereto, shall have been filed (if required) with
the Commission pursuant to Rule 424(b), (iii) when, prior to
termination of the offering of the DECS, any amendment to the
Trust Registration Statement shall have been filed or become
effective, (iv) of any request by the Commission for any
amendment of the Trust Registration Statement or supplement to
the Trust Prospectus or for any additional information, (v) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Trust Registration Statement or the
institution or threatening of any proceeding for that purpose and
(vi) of the receipt by the Trust of any notification with respect
to the suspension of the qualification of the DECS for sale in
any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Trust will use its best efforts
to prevent the issuance of any such stop order and, if issued, to
obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the
DECS is required to be delivered under the Act, any event occurs
as a result of which the Trust Prospectus as then supplemented
would include any untrue statement of a material fact or omit to
state any material
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<PAGE>
fact necessary to make the statements therein in the
light of the circumstances under which they were made not
misleading, or if it shall be necessary to amend the Trust
Registration Statement or supplement the Trust Prospectus to
comply with the Act or the rules thereunder, the Trust promptly
will prepare and file with the Commission, subject to the second
sentence of paragraph (a) of this Section 7, an amendment or
supplement which will correct such statement or omission or
effect such compliance.
(c) The Trust will furnish to SBI and counsel for SBI,
without charge, copies of the Trust Registration Statement
(including exhibits thereto). The Trust will furnish to SBI not
later than (i) 6:00 PM, New York City time, on the date of
determination of the public offering price of the DECS, if such
determination occurred at or prior to 12:00 Noon, New York City
time, on such date or (ii) 6:00 PM, New York City time, on the
business day following the date on which the public offering
price was determined, if such determination occurred after 12:00
Noon, New York City time, on such date, as many copies of each
Preliminary Trust Prospectus, the Trust Prospectus and any
supplement thereto as SBI may reasonably request; further, so
long as delivery of a prospectus by SBI or any dealer may be
required by the Act, as many copies of each Preliminary Trust
Prospectus and the Trust Prospectus and any supplement thereto as
SBI may reasonably request.
(d) The Trust will arrange for the qualification of the
DECS and the Shares for sale under the laws of such jurisdictions
as SBI may designate and will maintain such qualifications in
effect so long as required for the distribution of the DECS and
will pay the fee of NASD Regulation, Inc. (the "NASD") in
connection with its review, if any, of the Trust Registration
Statement and the offering of the DECS.
8. Agreements of the Company. The Company agrees with SBI
that:
(a) The Company will use its best efforts to cause the
Company Registration Statement, if not effective at the Execution
Time, and any amendment thereof, to become effective. Prior to
the termination of the offering of the DECS, the Company will not
file any amendment of the Company Registration Statement or
supplement to the Company Prospectus without SBI's prior consent
(which shall not be unreasonably withheld). Subject to the
foregoing sentence, if the Company Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of
the Company Prospectus is otherwise required under Rule 424(b),
the Company will cause the Company Prospectus, properly
completed, and any supplement thereto to be filed with the
Commission pursuant to the applicable paragraph of Rule 424(b)
within the time period prescribed and will provide evidence
satisfactory to SBI of such timely filing. The Company will
promptly advise SBI (i) when the Company Registration Statement,
if not effective at the Execution Time, and any amendment
thereto, shall have become effective, (ii) when the Company
Prospectus, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b), (iii)
when, prior to termination of the offering of the DECS, any
amendment to the Company Registration Statement shall have been
filed or become effective, (iv) of any request by the Commission
for any amendment of the Company Registration Statement or
supplement to the Company Prospectus or for any additional
information, (v) of the issuance by the Commission of any stop
order suspending the
17
<PAGE>
effectiveness of the Company Registration Statement or
the institution or threatening of any proceeding for that purpose
and (vi) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will use its best
efforts to prevent the issuance of any such stop order and, if
issued, to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the
Shares is required to be delivered under the Act (including in
respect of the offering and sale of the DECS), any event occurs
as a result of which the Company Prospectus as then supplemented
would include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein
in the light of the circumstances under which they were made not
misleading, or if it shall be necessary to amend the Company
Registration Statement or supplement the Company Prospectus to
comply with the Act or the Exchange Act or the respective rules
thereunder, the Company (i) as soon as practicable will notify
SBI of such event or necessity and (ii) promptly will prepare and
file with the Commission, subject to the second sentence of
paragraph (a) of this Section 8, an amendment or supplement which
will correct such statement or omission or effect such
compliance.
(c) As soon as practicable, the Company will make
generally available to its security holders and to SBI an
earnings statement or statements of the Company and its
subsidiaries which will satisfy the provisions of Section 11(a)
of the Act and Rule 158 under the Act.
(d) The Company will furnish to SBI and counsel for
SBI, without charge, signed copies of the Company Registration
Statement (including exhibits thereto). The Company will furnish
to SBI not later than (A) 6:00 PM, New York City time, on the
date of determination of the public offering price of the DECS,
if such determination occurred at or prior to 12:00 Noon, New
York City time, on such date or (B) 6:00 PM, New York City time,
on the business day following the date on which the public
offering price of the DECS was determined, if such determination
occurred after 12:00 Noon, New York City time, on such date, as
many copies of each Preliminary Company Prospectus, the Company
Prospectus and any supplement thereto as SBI may reasonably
request; further, so long as delivery of a prospectus by SBI or
any dealer may be required by the Act (including in respect of
the offering and sale of the DECS), as many copies of each
Preliminary Company Prospectus and the Company Prospectus and any
supplement thereto as SBI may reasonably request. The Company
will pay the expenses of printing or other production of the
Company Registration Statement, each Preliminary Company
Prospectus and the Company Prospectus.
(e) The Company will cooperate with the Trust for
purposes of the qualification of the DECS and the Shares for sale
under the laws of such jurisdictions as SBI may designate and
will maintain such qualifications in effect so long as required
for the distribution of the DECS and the Shares and will pay the
fee of the NASD in connection with its review, if any, of the
Company Registration Statement and the offering of the Shares in
connection with the offering of the DECS; provided, however, that
in connection therewith, the Company shall not be
18
<PAGE>
required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction.
(f) The Company will not offer for sale, sell or
contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, or file or cause the
filing of any registration statement under the Act with respect
to, any shares of common stock of the Company or any securities
convertible into or exchangeable for, or warrants to acquire,
shares of common stock of the Company for a period of 90 days
after the date of the Company Prospectus without SBI's prior
written consent; provided, however, that the foregoing shall not
restrict the ability of the Company to take any of the foregoing
actions in connection with (i) the offering by the Trust of the
DECS or any delivery of Shares pursuant to the terms of the DECS,
(ii) the offering by certain of the Sellers and others of up to
2,040,000 Shares as described in the Company Registration
Statement or (iii) in connection with any employee stock option
plan, stock ownership plan or dividend reinvestment plan of the
Company in effect at the date of the Company Prospectus.
(g) The Company will furnish the Trust in sufficient
quantities for transmission to holders of the DECS the Company's
annual report to shareholders and reports on Forms 10-K and 10-Q
as soon as practicable after such reports are required to be
filed with the Commission.
(h) The Company will take such actions as may be
reasonably necessary to comply with the rules and regulations of
the NYSE in respect of the offering of the Shares contemplated
hereby.
9. Conditions to the Obligations of SBI. The
obligations of SBI to purchase the DECS shall be subject to the
accuracy of the representations and warranties on the part of the
Trust, the Company and the Sellers contained herein as of the
Execution Time, the Closing Date and any settlement date pursuant
to Section 4(b) hereof, to the accuracy of the statements of the
Trust, the Company and the Sellers made in any certificates
pursuant to the provisions hereof, to the performance by the
Trust, the Company and the Sellers of their respective
obligations hereunder and to the following additional conditions:
(a) If the Trust Registration Statement or the Company
Registration Statement has not become effective prior to the
Execution Time, unless SBI agrees in writing to a later time,
such Trust Registration Statement or Company Registration
Statement will become effective not later than (i) 6:00 PM, New
York City time, on the date of determination of the public
offering price of the DECS, if such determination occurred at or
prior to 3:00 PM, New York City time, on such date or (ii) 12:00
Noon, New York City time, on the business day following the day
on which the public offering price of the DECS was determined, if
such determination occurred after 3:00 PM, New York City time, on
such date; if filing of the Trust Prospectus or the Company
Prospectus, or any supplements thereto, is required pursuant to
Rule 497(h) or Rule 424(b), such Trust Prospectus or Company
Prospectus, and any such supplements, will be filed in the manner
and within the time period required by such Rule; and no stop
order suspending the effectiveness of the Trust Registration
Statement or the Company
19
<PAGE>
Registration Statement shall have been issued and no proceedings
for that purpose shall have been instituted or threatened.
(b) SBI shall have received the opinion of Richards,
Layton & Finger, special Delaware counsel for the Trust, dated
the Closing Date, with respect to such matters as SBI may
reasonably request. Such opinion shall also be addressed to the
Sellers.
(c) SBI shall have received the opinion of Hunton &
Williams, counsel for the Company, dated the Closing Date, in
form and substance satisfactory to SBI, to the effect that:
(i) each of the Company, [DIMON International, Inc.,
Florimex Worldwide, Inc., DIMON do Brasil Tabacos
Ltds, DIMON Zimbabwe (PVY) LTD, DIMON GMBH,
Florimex Worldwide B.V., Florimex U.S.A. and
Baardse B.V.] (individually an "Opinion
Subsidiary" and collectively the "Opinion
Subsidiaries") has been duly incorporated and is
validly existing as a corporation in good
standing under the laws of the jurisdiction in
which it is chartered or organized, with full
corporate power and authority to own its
properties and conduct its business as described
in the Company Prospectus;
(ii) all the outstanding shares of capital stock of each
Opinion Subsidiary have been duly and validly
authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth
in the Company Prospectus, all outstanding shares
of capital stock of each of the Opinion
Subsidiaries are owned by the Company either
directly or through wholly owned subsidiaries
free and clear of any perfected security interest
and, to the knowledge of such counsel, after due
inquiry, any other security interests, claims,
liens or encumbrances;
(iii) the Company's authorized equity capitalization is as
set forth in the Company Prospectus; all of the
Shares have been duly and validly authorized and
issued, are fully paid and nonassessable and
conform to the description thereof contained in
the Company Prospectus; there are no preemptive
or other similar rights to subscribe for or to
purchase any of the Shares; and the form of the
certificates evidencing the Shares complies with
all formal requirements of Virginia law;
(iv) to the best knowledge of such counsel, there is no
pending or threatened action, suit or proceeding
before any court or governmental agency,
authority or body or any arbitrator involving the
Company or any of its subsidiaries or any of
their respective properties of a character
required to be disclosed in the Company
Registration Statement which is not adequately
disclosed in the Company Prospectus, and there is
no franchise, contract or other document of a
character required to be described in the Company
Registration Statement or Company Prospectus, or
to be filed as an exhibit, which is not described
or filed as required;
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<PAGE>
(v) the Company Registration Statement has become
effective under the Act; any required filing of
any Preliminary Company Prospectus and the
Company Prospectus, and any supplements thereto,
pursuant to Rule 424(b) has been made in the
manner and within the time period required by
Rule 424(b); to the best knowledge of such
counsel, no stop order suspending the
effectiveness of the Company Registration
Statement has been issued, and no proceedings for
that purpose have been instituted or threatened;
(vi) the Company Registration Statement and the Company
Prospectus (except for financial statements and
schedules included therein, as to which such
counsel need express no opinion) comply as to
form in all material respects with the Act and
the rules and regulations of the Commission
thereunder; and the documents incorporated by
reference in the Company Registration Statement
and the Company Prospectus (other than the
financial statements and schedules included
therein, as to which such counsel need express no
opinion), when they were filed with the
Commission, complied on their face as to form in
all material respects with the requirements of
the Exchange Act and the rules and regulations of
the Commission thereunder;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) neither the performance of this Agreement by the
Company, nor the distribution of the Shares and
the consummation of the other of the transactions
herein contemplated nor the fulfillment of the
terms hereof will conflict with, result in a
breach or violation of, or constitute a default
under any law or the Articles of Incorporation or
By-laws of the Company or the terms of any
indenture or other agreement or instrument known to
such counsel and to which the Company or any of its
subsidiaries is a party or bound, or any judgment, order
or decree known to such counsel to be applicable to the
Company or any of its subsidiaries of any court, regulatory
body, administrative agency, governmental body or
arbitrator having jurisdiction over the Company
or any of its subsidiaries;
(ix) no holders of securities of the Company other
than the Sellers have rights to the registration
of such securities under the Company Registration
Statement; and
(x) no consent, approval, authorization, order,
registration or qualification of or with any such
court or governmental agency or body is required
for the consummation by the Company of the
transactions contemplated by this Agreement,
except such as have been obtained under the Act
and such as may be required under state
securities or Blue Sky laws (as to which such
21
<PAGE>
counsel need express no opinion) in connection
with the purchase and distribution of the DECS by
SBI and the distribution of the Shares pursuant
to the terms of the DECS.
In addition, such counsel shall state that they have
participated in conferences with directors, officers and other
representatives of the Company, representatives of the
independent public accountants for the Company, the Sellers and
counsel for the Sellers, SBI and counsel for SBI, at which
conferences the contents of the Company Registration Statement
and the Company Prospectus and related matters were discussed,
and, although such counsel have not independently verified and
are not passing upon and assume no responsibility for the
accuracy, completeness or fairness of the statements contained in
the Company Registration Statement and the Company Prospectus
(except to the extent specified elsewhere in such opinion or with
reference to such counsel), no facts have come to the attention
of such counsel that lead such counsel to believe that, at the
Company Effective Date, the Company Registration Statement
included any untrue statement of a material fact or omitted to
state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading or that the Company Prospectus includes any untrue
statement of a material fact or omits to state any material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it
being understood that such counsel express no view with respect
to the financial statements and related notes, the financial
statement schedules or other financial, statistical and
accounting information or data contained or incorporated by
reference in the Company Registration Statement or Company
Prospectus).
In rendering such opinion, such counsel may rely (A)
as to matters involving the application of laws of any
jurisdiction other than the Commonwealth of Virginia, the State
of North Carolina, the State of New York or the United States, to
the extent they deem proper and specified in such opinion, upon
the opinion of other counsel of good standing whom they believe
to be reliable and who are reasonably satisfactory to counsel for
SBI and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public
officials. References to the Company Prospectus in this paragraph
(c) include any supplements thereto at the Closing Date. Such
opinion shall also be addressed to the Sellers.
(d) SBI shall have received the opinion of Skadden,
Arps, Slate, Meagher & Flom LLP, counsel for the Sellers, dated
the Closing Date, in the form attached hereto as Exhibit B, and
the opinions of Hunton & Williams, North Carolina counsel for the
individual Sellers, and of Womble Carlyle Sandridge & Rice PLLC,
North Carolina counsel for the Trust Sellers, each dated the
Closing Date, in form and substance satisfactory to SBI, to the
effect that:
(i) each of the Trust Sellers has been duly created and is
validly existing and in good standing under the
law of the State of North Carolina;
(ii) this Agreement has been duly authorized by each of the
Trust Sellers and duly executed and delivered by
each of the Sellers under the law of the State of
North Carolina; each of the Contracts and
Collateral Agreements and the Reimbursement
Agreement have been duly authorized by each of
22
<PAGE>
the Trust Sellers and duly executed and delivered
by each Seller under the law of the State of
North Carolina and, assuming due authorization,
execution and delivery by the other parties
thereto, constitutes a valid and legally binding
agreement of such Seller, enforceable against
such Seller in accordance with its terms, subject
to bankruptcy, insolvency and other similar laws
affecting creditors' rights generally, and to
general equitable principles; and the compliance
by each Seller with all of the provisions of this
Agreement, the Contract and Collateral Agreement
to which such Seller is a party and the
Reimbursement Agreement, and the consummation of
the transactions herein and therein contemplated,
will not violate any North Carolina law, rule or
regulation or any order or decree known to such
counsel of any court or governmental agency or
body having jurisdiction over any Seller or any
of its properties;
(iii) no consent, approval, license, authorization, order
or validation of, and no filing, recording, or
registration with, any North Carolina
governmental authority, agency or body or, to
such counsel's knowledge, any court is required
for the compliance by each Seller with all of the
provisions of this Agreement, the Contract and
Collateral Agreement to which such Seller is a
party and the Reimbursement Agreement, except for
such consents, approvals, authorizations,
registrations or qualifications as may be
required under state securities or Blue Sky laws
in connection with the purchase and distribution
of the DECS and the Shares;
(iv) the Certificate of Spouse attached as Exhibit C to each
Collateral Agreement will, when executed and
delivered by the spouse of any individual Seller,
be effective and sufficient to foreclose any
claims such spouse may have with respect to the
Collateral (as defined therein) pledged
thereunder that may be superior to the rights of
the Trust in such Collateral in the event of a
change in the marital status of such Seller; and
(v) the enforceability of each Contract and Collateral
Agreement against the related Seller will not be
adversely affected by the death or legal
incapacity of such Seller (in the case of
individual Sellers) or any settlor or beneficiary
of such Seller (in the case of Trust Sellers).
(e) SBI shall have received from Cleary, Gottlieb,
Steen & Hamilton, counsel for SBI and the Trust, such opinion or
opinions, dated the Closing Date, with respect to the issuance
and sale of the DECS, the Trust Registration Statement, the Trust
Prospectus (together with any supplement thereto), the
Fundamental Documents, the Company Registration Statement, the
Company Prospectus (together with any supplement thereto) and
other related matters as SBI may reasonably require, and the
Trust and the Company shall have furnished to such counsel such
documents as they reasonably request for the purpose of enabling
them to pass upon such matters.
23
<PAGE>
(f) The Trust shall have furnished to SBI a certificate
of the Trust, signed by the Managing Trustee and dated the
Closing Date, to the effect that:
(i) the representations and warranties of the Trust in
this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect
as if made on the Closing Date and the Trust has complied
in all material respects with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date; and
(ii) no stop order suspending the effectiveness of the
Trust Registration Statement or the use of the Trust
Prospectus has been issued and no proceedings for that
purpose have been instituted or, to the Trust's knowledge,
threatened.
(g) The Company shall have furnished to SBI a
certificate of the Company, signed by the Chairman of the Board
and the principal financial or accounting officer of the Company,
dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Company Registration
Statement, the Company Prospectus, any supplements to the Company
Prospectus and this Agreement and that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect
as if made on the Closing Date and the Company has complied
with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the
Closing Date;
(ii) no stop order suspending the effectiveness of the
Company Registration Statement or the use of the Company
Prospectus has been issued and no proceedings for that
purpose have been instituted or, to the Company's
knowledge, threatened; and
(iii) since the date of the most recent financial
statements included in, or incorporated by reference in,
the Company Prospectus (exclusive of any supplement
thereto), there has been no Company Material Adverse
Effect, except as set forth in or contemplated in the
Company Prospectus (exclusive of any supplement thereto).
(h) Each of the Sellers shall have furnished to SBI a
certificate, dated the Closing Date, reasonably satisfactory to
SBI as to the accuracy of the respective representations and
warranties of such Seller herein at and as of the Closing Date,
as to the performance by such Seller of all of such Seller's
obligations hereunder to be performed at or prior to the Closing
Date and as to such other matters as SBI may reasonably request.
(i) At the Execution Time and at the Closing Date,
Price Waterhouse LLP shall have furnished to SBI a letter or
letters, dated as of such dates, in form and substance
satisfactory to SBI, confirming that they are independent
accountants within the meaning of the Act and the applicable
published rules and regulations thereunder [and that they have
performed a review of the Company's unaudited condensed financial
information for the nine-month
24
<PAGE>
periods ended March 31, 1997 and March 31, 1996 in accordance
with Statement of Auditing Standards No. 71] and stating in
effect that:
(i) in their opinion the audited financial
statements included in the Company Registration Statement
and the Company Prospectus and reported on by them comply
in form in all material respects with the applicable
accounting requirements of the Act and the related
published rules and regulations with respect to
registration statements on Form S-3;
(ii) on the basis of a reading of the latest
unaudited condensed consolidated financial statements made
available by the Company and its subsidiaries; [their
limited review in accordance with the standards established
by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated interim financial
information for the nine-month period ended March 31, 1997,
and as at March 31, 1997;] carrying out certain specified
procedures (but not an examination in accordance with
generally accepted audited standards) which would not
necessarily reveal matters of significance with respect to
the comments set forth in such letter; a reading of the
minutes of the meetings of the stockholders, the Board of
Directors and the audit committee of the Company and the
Subsidiaries; the inquiries of certain officials of the
Company who have responsibility for financial and
accounting matters of the Company as to whether the
unaudited condensed consolidated financial statements
included in the registration statement comply as to form in
all material respects with the applicable accounting
requirements of the Exchange Act [as it applies to Form
10-Q] and the published rules and regulations thereunder,
nothing came to their attention which caused them to
believe that:
(1) the unaudited condensed consolidated
financial statements included in the Company
Registration Statement do not comply as to form in all
material respects with the applicable accounting
requirements of the Exchange Act [as it applies to
Form 10-Q] and the applicable rules and regulations
thereunder or that any material modifications should
be made to the unaudited condensed consolidated
financial statements in order for them to be in
conformity with generally accepted accounting
principles; or
(2) with respect to the period subsequent to the
date of the most recent financial statements (other
than capsule information), audited or unaudited,
included in the Company Registration Statement and the
Company Prospectus, there were, at a specified date
not more than five business days prior to the date of
the letter, any material increases in the long-term
debt of the Company and its subsidiaries, any material
change in the number of issued shares of capital stock
of the Company, any material decreases in the total
assets or stockholders' equity of the Company or any
material decreases in the excess of current assets
over current liabilities of the Company and its
subsidiaries as compared with the amounts shown on the
most recent consolidated balance sheet included in the
Company Registration Statement and the Company
Prospectus, or for the period from the date of the
most recent financial statements included in the Company
25
<PAGE>
Registration Statement and the Company Prospectus to
such specified date there were any decreases, as
compared with the corresponding period in the
preceding year in revenues, operating income, net
income before income taxes, total or per share amounts
of net income or net interest income of the Company
and its subsidiaries; except in all instances for
changes or decreases set forth in such letter, in
which case the letter shall be accompanied by an
explanation by the Company as to the significance
thereof unless said explanation is not deemed
necessary by SBI;
(iii) they have performed certain other specified
procedures as a result of which they determined that
certain information of an accounting, financial or
statistical nature (which is limited to accounting,
financial or statistical information derived from the
general accounting records of the Company and its
subsidiaries) set forth in the Company Registration
Statement and the Company Prospectus agrees with the
accounting records of the Company and its subsidiaries,
excluding any questions of legal interpretation; and
(iv) on the basis of a reading of any unaudited
pro forma condensed financial statements included in the
Company Registration Statement and the Company Prospectus
(the "pro forma financial statements"); carrying out
certain specified procedures; inquiries of certain
officials of the Company and relevant other entities who
have responsibility for financial and accounting matters;
and proving the arithmetic accuracy of the application of
the pro forma adjustments to the historical amounts in the
pro forma financial statements, nothing came to their attention
which caused them to believe that the pro forma financial
statements do not comply in form in all material respects
with the applicable accounting requirements of Rule 11-02
of Regulation S-X or that the pro forma adjustments have
not been properly applied to the historical amounts in the
compilation of such statements.
References to the Company Prospectus in this paragraph
(i) include any supplement thereto at the date of the letter.
(j) At the Execution Time and on the Closing Date,
Ernst & Young LLP shall have delivered to SBI a letter or
letters, dated as of the date of delivery, in form and substance
satisfactory to SBI, confirming that they were independent public
accountants with respect to Dibrell within the meaning of the Act
and the Exchange Act and the respective applicable published
rules and regulations thereunder.
[(k) At the Execution Time and at the Closing Date, o
shall have furnished to SBI a letter or letters (which may refer
to letters previously delivered to SBI), dated as of the
Execution Time and as of the Closing Date, in form and substance
satisfactory to SBI, including statements and information of the
type ordinarily included in accountants "comfort letters" to
underwriters with respect to the financial statements, financial
statement schedules, and certain other financial information
contained in the Trust Registration Statement or Trust
Prospectus.]
26
<PAGE>
(l) Subsequent to the Execution Time or, if earlier,
the dates as of which information is given in each of the Trust
Registration Statement and the Company Registration Statement
(exclusive of any amendment thereof) and each of the Trust
Prospectus and the Company Prospectus (exclusive of any
supplement thereto), there shall not have been (i) any change or
decrease specified in the letter or letters referred to in
paragraphs (i) and (j) of this Section 9 or (ii) any change, or
any development involving a prospective change, in or affecting
the business or properties of the Company and its direct and
indirect subsidiaries the effect of which, in any case referred
to in clause (i) or (ii) above, is, in the judgment of SBI, so
material and adverse as to make it impractical or inadvisable to
proceed with the offering or delivery of the DECS as contemplated
by the Trust Registration Statement and the Company Registration
Statement (in either case, exclusive of any amendment thereof)
and the Trust Prospectus and the Company Prospectus (in either
case, exclusive of any supplement thereto).
(m) Subsequent to the Execution Time, there shall not
have been any decrease in the ratings of any of the Company's
debt securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the
Act) or any notice given of any intended or potential decrease in
any such rating or of a possible change in any such rating that
does not indicate the direction of the possible change.
(n) At the Execution Time, the Company shall have
furnished to SBI letters substantially in the form of Exhibit A
hereto from the directors and officers of the Company [and
certain other shareholders specified by SBI].
(o) The DECS shall have been approved for listing on
the NYSE, subject only to official notice of issuance.
(p) The NASD shall not have raised any objection with
respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(q) Each Fundamental Agreement shall have been executed
and delivered by all parties thereto, and each Seller shall have
delivered to the Collateral Agent the number of Shares required
by the Collateral Agreement to which such Seller is a party to be
initially pledged and assigned by such Seller thereunder in
accordance with the requirements of such Collateral Agreement.
(r) Prior to the Closing Date, the Trust, the Company
and each of the Sellers shall have furnished to SBI such further
information, certificates and documents as SBI may reasonably
request.
If any of the conditions specified in this Section 9
shall not have been fulfilled in all material respects when and
as provided in this Agreement, or if any of the opinions and
certificates mentioned above or elsewhere in this Agreement shall
not be in all material respects reasonably satisfactory in form
and substance to SBI and counsel for SBI, this Agreement and all
obligations of SBI hereunder may be canceled at, or at any time
prior to, the Closing Date by SBI. Notice of such cancellation
shall be given to the Trust and the Company in writing or by
telephone or facsimile confirmed in writing.
27
<PAGE>
10. Expenses. (a) The Sellers, severally in proportion
to the number of "Total Shares" set forth opposite their names on
Schedule I hereto, will pay all expenses incident to the
performance by the Trust and each Seller of their respective
obligations under this Agreement and their Contracts and
Collateral Agreements, including (i) the preparation, printing
and filing of the Notification and the Trust Registration
Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery of this Agreement, the Trust
Agreement, each of the Fundamental Agreements and such other
documents as may be required in connection with the offering,
purchase, sale, issuance or delivery of the DECS, (iii) the
preparation, issuance and delivery of the certificates for the
DECS to SBI, (iv) the fees and disbursements of the Trust's
counsel, accountants and other advisors, (v) the fees and
disbursements of the Sellers' counsel and other advisors, (vi)
the qualification of the DECS under securities laws in accordance
with the provisions of Section 7(d) hereof, including filing fees
and the reasonable fees and disbursements of the counsel for SBI
in connection therewith and in connection with the preparation of
the related blue sky survey and any supplement thereto, (vii) the
printing and delivery to SBI of copies of each Preliminary Trust
Prospectus, the Trust Prospectus and any amendments or
supplements thereto, (viii) the fees and expenses of any transfer
agent or registrar for the DECS, (ix) the filing fees incident
to, and the reasonable fees and disbursements of counsel to SBI
in connection with, securing any required review by the NASD of
the Trust Registration Statement and the offering of the DECS in
accordance with the provisions of Section 7(d) hereof, (x) the
fees and expenses incurred in connection with the listing of the
DECS on the New York Stock Exchange and (xi) the fees and
expenses incurred in connection with the preparation and filing
of a registration statement under the Exchange Act relating to
the DECS. The Sellers severally (in proportion to the number of
"Total Shares" set forth opposite their names on Schedule I
hereto) will reimburse SBI on the Closing Date in immediately
available funds for the Up-Front Fee Amount and the Up-Front
Expense Amount (each as defined in the Fund Expense Agreement
dated as of , 1997 between SBI and BoNY) and for the up-front
fees of the trustees of the Trust paid by SBI.
(b) The Company will pay all expenses incident to the
performance by the Company of its obligations under this
Agreement, including (i) the preparation, printing and filing of
the Company Registration Statement (including financial
statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, issuance and delivery of
the certificates for the Shares to the Trust, (iii) the fees and
disbursements of the Company's counsel, accountants and other
advisors, (iv) the qualification of the Shares under state
securities laws in accordance with the provisions of Section 8(e)
hereof, including filing fees and the reasonable fees and
disbursements of the counsel for SBI in connection therewith and
in connection with the preparation of any related blue sky survey
and any supplement thereto, (v) the printing and delivery to SBI
of copies of each Preliminary Company Prospectus, the Company
Prospectus and any amendments or supplements thereto, (vi) the
fees and expenses of any transfer agent or registrar for the
Shares, (vii) the filing fees incident to, and the reasonable
fees and disbursements of counsel to SBI in connection with,
securing any required review by the NASD of the Company
Registration Statement and the offering of the Shares in
accordance with the provisions of Section 8(e) hereof and (viii)
the fees and expenses incurred in connection with the listing of
the Shares on the New York Stock Exchange.
28
<PAGE>
(c) If the sale of the DECS provided for herein is not
consummated because any condition to the obligations of SBI set
forth in Section 9 hereof is not satisfied, because of any
termination pursuant to Section 12 hereof or because of any
refusal, inability or failure on the part of the Company or any
Seller to perform any agreement herein or comply with any
provision hereof other than by reason of a default by SBI, each
of the Sellers jointly and severally will reimburse SBI upon
demand for all reasonable out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have
been incurred by SBI in connection with the proposed purchase and
sale of the DECS.
11. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless each Seller (and in the
case of the Trust Sellers, each of its trustees), the Trust, each
of the Trustees, SBI, the directors, officers, employees and
agents of SBI, and each person who controls a Seller, the Trust
or SBI within the meaning of the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or
otherwise, against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or other Federal
or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material
fact contained in the Company Registration Statement as
originally filed or in any amendment thereof, or in any
Preliminary Company Prospectus or the Company Prospectus, or in
any amendment thereof or supplement thereto (each such document,
a "Company Registration Document"), or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each
such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not
be liable under the indemnity agreement in this paragraph (a) to
the extent that any such loss, claim, damage or liability arises
out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in any
Company Registration Document in reliance upon and in conformity
with (i) written information furnished to the Company by SBI
specifically for inclusion therein or (ii) written information
relating to a Seller furnished to the Company by such Seller
specifically for inclusion therein. This indemnity agreement will
be in addition to any liability which the Company may otherwise
have.
(b) Subject to paragraph (g) of this Section 11, each
Seller agrees to indemnify and hold harmless the Trust, each of
the Trustees, SBI, the directors, officers, employees and agents
of SBI, and each person who controls the Trust or SBI within the
meaning of the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, against
any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under
the Act, the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in any
Company Registration Document or the omission or alleged omission
to state in any Company Registration Document a material fact
required to be stated therein or necessary to make the statements
therein not
29
<PAGE>
misleading, but only with reference to written information
relating to such Seller furnished to the Company by
such Seller specifically for inclusion in the Company
Registration Documents, or upon (ii) any untrue statement or
alleged untrue statement of a material fact contained in the
Trust Registration Statement as originally filed or in any
amendment thereof, or in any Preliminary Trust Prospectus or the
Trust Prospectus, or in any amendment thereto or supplement
thereto (each such document, a "Trust Registration Document") or
the omission or alleged omission to state in any Trust
Registration Document a material fact required to be stated
therein or necessary to make the statements therein not
misleading; and in each such case agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action;
provided, however, that the Sellers will not be liable under the
indemnity agreement in this paragraph (b) to the extent that any
such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or
omission or alleged omission made in any Company Registration
Document or Trust Registration Document in reliance upon and in
conformity with written information furnished to the Company or
the Trust by SBI specifically for inclusion therein. The Trust,
the Company and SBI acknowledge that the names and addresses of such Seller,
the number of Shares beneficially owned by such Seller and the
statements with respect to such Seller set forth in the footnotes
to the table, in each case under the heading "Selling
Stockholders" in any Preliminary Company Prospectus or the
Company Prospectus, constitute the only information furnished in
writing by or on behalf of such Seller for inclusion in the
Company Registration Documents, and each Seller confirms that
such information is correct. This indemnity agreement will be in
addition to any liability which any Seller may otherwise have.
(c) SBI agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signs
the Company Registration Statement, and each person who controls
the Company within the meaning of the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law
or otherwise, to the same extent as the foregoing indemnity in
paragraph (a) from the Company to SBI, but only with reference to
written information furnished to the Company by SBI specifically
for inclusion in the Company Registration Documents. This
indemnity agreement will be in addition to any liability which
SBI may otherwise have. The Company acknowledges that the
statements set forth in the first paragraph of the inside cover
page and under the heading "Plan of Distribution" in any
Preliminary Company Prospectus or the Company Prospectus
constitute the only information furnished in writing by or on
behalf of SBI for inclusion in the Company Registration
Documents, and SBI confirms that such statements are correct.
(d) SBI agrees to indemnify and hold harmless each
Seller to the same extent as the foregoing indemnity in paragraph
(b) from such Seller to SBI, but only with reference to written
information furnished to the Company or the Trust by SBI
specifically for inclusion in the Company Registration Documents
or the Trust Registration Documents. This indemnity agreement
will be in addition to any liability which SBI may otherwise
have. Each Seller acknowledges that the statements set forth in
the first paragraph of the inside cover page and under the
heading "Plan of Distribution" in any Preliminary Company
Prospectus or the Company Prospectus and in the last paragraph of
the cover page, the first paragraph of the inside
30
<PAGE>
cover page and under the heading "Plan of Distribution in any
Preliminary Trust Prospectus or the Trust Prospectus constitute
the only information furnished in writing by or on behalf of SBI
for inclusion in the Company Registration Documents or the Trust
Registration Documents, and SBI confirms that such statements are
correct.
(e) Promptly after receipt by an indemnified party
under this Section 11 of notice of the commencement of any
action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this
Section 11, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from any liability
under paragraphs (a), (b), (c) or (d) above unless and to the
extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation
provided in paragraphs (a), (b), (c) or (d) above. The
indemnifying party shall be entitled to appoint counsel of
indemnifying party's choice at the indemnifying party's expense to represent
the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter
be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth
below); provided, however, that such counsel shall be
satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any
such action include both the indemnified party and the
indemnifying party and the indemnified party shall have
reasonably concluded upon the advice of its counsel that there
may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available
to the indemnifying party, (iii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after
notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying
party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim
or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(f) Subject to paragraph (h) of this Section 11, in the
event that the indemnity provided in paragraph (a), (b), (c) or
(d) of this Section 11 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Company, each
Seller and SBI agree as among themselves to contribute to the
aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to
which the Company, each Seller and SBI may be subject in such
proportion as is appropriate to reflect the
31
<PAGE>
relative benefits received by the Company, by such Seller and by
SBI from the offering of the DECS; provided, however, that in no
case shall SBI be responsible for any amount in excess of the
underwriting discount applicable to the DECS purchased by SBI
hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company,
each Seller and SBI shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also
the relative fault of the Company, such Seller and SBI in
connection with the statements or omissions which resulted in
such Losses as well as any other relevant equitable
considerations. The benefits received by the Company and the
Sellers shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses) received by the
Trust, and the benefits received by SBI shall be deemed to be
equal to the total underwriting discounts and commissions, in
each case as set forth on the cover page of the Trust Prospectus
and, as between the Company and SBI, the Company shall be deemed
for this purpose to have received such total net proceeds as are
received by the Trust. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission
relates to information provided by the Company, a Seller or SBI.
The Company, each Seller and SBI agree that it would not be just
and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (f), no person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 11, each person
who controls SBI within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of
SBI shall have the same rights to contribution as SBI, and each
person who controls the Company or any Seller within the meaning
of either the Act or the Exchange Act, each officer of the
Company who shall have signed the Company Registration Statement
and each director of the Company shall have the same rights to
contribution as the Company or such Seller, as the case may be,
subject in each case to the applicable terms and conditions of
this paragraph (f).
(g) The liability of each of the Sellers under
paragraph (b)(i) of this Section 11 with respect to any Company
Registration Document shall be limited to an amount equal to the
initial public offering price of a portion of the DECS equal to
such Seller's proportionate share of the total Shares listed on
Schedule I hereto, less the underwriting discount with respect to
such DECS.
(h) Solely as between each Seller on one hand and the
Company on the other (but without affecting the liability of any
Seller or the Company to SBI under paragraph (f) above), the
contribution obligations of any Seller and of the Company under
such paragraph (f) shall be in proportion to the relative fault
of such Seller and the Company in connection with the statements
or omissions which resulted in the applicable Losses as well as
any other relevant equitable considerations, and each Seller and
the Company agree to make additional contribution payments among
themselves to effect the agreement set forth in this paragraph
(h) if any Seller or the Company is required to make contribution
payments to SBI under paragraph (f) above.
12. Termination. This Agreement shall be subject to
termination in the absolute discretion of SBI, by notice given to
the Trust and the Company prior to delivery of and payment
32
<PAGE>
for the DECS, if prior to such time (i) trading in the Company's
common stock shall have been suspended by the Commission or the
NYSE or trading in securities generally on the NYSE shall have
been suspended or limited or minimum prices shall have been
established on the NYSE, (ii) a banking moratorium shall have
been declared by either Federal or New York State authorities or
(iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis, the effect of which
on financial markets of the United States is such as to make it,
in the judgment of SBI, impracticable or inadvisable to proceed
with the offering or delivery of the DECS as contemplated by the
Trust Prospectus (exclusive of any supplement thereto).
13. Representations and Indemnities to Survive. The
respective agreements, representations, warranties, indemnities
and other statements of the Trust, the Company, the Sellers or
their respective officers, if applicable, and of SBI set forth in
or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of
SBI, the Trust, the Company, the Sellers or any of the officers,
directors or controlling persons referred to in Section 11
hereof, and will survive delivery of and payment for the DECS.
The provisions of Sections 10 and 11 hereof shall survive the
termination or cancellation of this Agreement.
14. Notices. All communications hereunder will be in
writing and effective only on receipt, and, if sent to SBI, will
be mailed, delivered or telegraphed and confirmed to it at Seven
World Trade Center, New York, New York 10048, attention of the
Legal Department [(except that notices required by paragraphs o
of Section o will be sent by telecopy and confirmed by overnight
courier and other documents required by paragraphs o of Section o
shall be sent by overnight courier, in either case, to Salomon
Brothers Inc, Seven World Trade Center, New York, NY 10024, Attn:
Michael Sherman, Esq., Telecopy: 212-783-2274, telephone:
212-783-5573)]; if sent to the Trust, will be mailed, delivered
or telegraphed and confirmed to it at o, Attention: o; if sent to
the Company, will be mailed, delivered, telegraphed and confirmed
to it o, Attention: o and if sent to the Sellers, will be mailed,
delivered or telegraphed and confirmed to them at o.
15. Successors. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and
controlling persons referred to in Section 11 hereof, and no
other person will have any right or obligation hereunder.
16. Counterparts. This Agreement may be executed by
any one or more of the parties in any number of counterparts,
each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same
instrument.
17. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
33
<PAGE>
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to us the
enclosed duplicate hereof, whereupon this letter and your
acceptance shall represent a binding agreement among the Trust,
the Company, the Sellers and Salomon Brothers Inc.
Very truly yours,
DECS Trust
By:____________________________
DIMON Incorporated
By:_____________________________
Sellers
________________________________
A.C. Monk, Jr.
________________________________
A.C. Monk, III
________________________________
Linda Monk Page
________________________________
William S. Page
________________________________
W.C. Monk
34
<PAGE>
___________________, as Trustee of
W.C. Monk, Jr. Trust
________________________________
___________________, as Trustee of
Molly G. Monk Trust
________________________________
________________________________
Robert T. Monk
________________________________
Francis J. Monk
________________________________
Robert T. Monk, Jr.
________________________________
Emily Monk Davidson
35
<PAGE>
___________________, as Trustee of
Emily Monk Davidson Trust
_____________________________
The foregoing Agreement is hereby
confirmed and accepted as of
the date first above written.
Salomon Brothers Inc
By:___________________________
36
<PAGE>
SCHEDULE I
Firm Additional Total
Seller Shares Shares Shares
- ------------------ ------- ------- -------
A.C. Monk, Jr. 102,322 12,678 115,000
A.C. Monk, III 533,853 66,147 600,000
Linda Monk Page 343,328 42,540 385,868
William S. Page 53,830 6,670 60,500
W.C. Monk 700,565 86,803 787,368
W.C. Monk, Jr. Trust 166,384 20,616 187,000
Molly G. Monk Trust 166,384 20,616 187,000
Robert T. Monk 324,761 40,239 365,000
Francis J. Monk 13,346 1,654 15,000
Robert T. Monk, Jr. 392,710 48,658 441,368
Emily Monk Davidson 116,113 14,387 130,500
Emily Monk Davidson Trust 186,404 23,096 209,500
------- ------- -------
3,100,000 384,104 3,484,104
<PAGE>
SCHEDULE II
List of Subsidiaries
II-1
<PAGE>
EXHIBIT A
______, 1997
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
This letter is being delivered to you in connection
with the proposed Underwriting Agreement (the "Underwriting
Agreement") among DECS Trust, a Delaware statutory business trust
(the "Trust"), DIMON Incorporated, a Virginia corporation (the
"Company"), the Sellers named therein and Salomon Brothers Inc
relating to an underwritten public offering of DECS of the Trust,
representing beneficial interests in contracts relating to shares
of common stock, no par value, of the Company ("Common Stock").
In order to induce you to enter into the Underwriting
Agreement, the undersigned agrees not to offer for sale, sell or
contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, or cause the filing of
any registration statement under the Securities Act of 1933 with
respect to, any shares of Common Stock beneficially owned by the
undersigned or any securities convertible into, or exchangeable
for, or warrants to acquire, shares of Common Stock for a period
of 90 days following the day on which the Underwriting Agreement
is executed without the prior written consent of Salomon Brothers
Inc, other than shares of Common Stock disposed of as bona fide
gifts.
If for any reason the Underwriting Agreement shall be
terminated prior to the Closing Date (as defined in the
Underwriting Agreement), the agreement set forth above shall
likewise be terminated.
Yours very truly,
---------------------------------
II-1
<PAGE>
EXHIBIT B
[Form of Opinion of Skadden, Arps]
A-1
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT dated as of this 9th day of
September, 1997 by and between The Bank of New York, a New York
banking corporation (the "Custodian"), and DECS Trust (such trust
and the trustees thereof acting in their capacity as such being
referred to herein as the "Trust"), a statutory business trust
organized under the Business Trust Act of the State of Delaware
pursuant to a Declaration of Trust dated as of November 21, 1995
(as it may be amended and restated from time to time, the "Trust
Agreement").
WITNESSETH
WHEREAS the Trust is a non-diversified, closed-end
management investment company, as defined in the Investment
Company Act of 1940 (the "Investment Company Act"), formed to
purchase and hold certain U.S. treasury securities (the "Treasury
Securities"), to enter into and hold forward purchase contracts
with one or more existing shareholders of DIMON Incorporated
(individually, a "Contract" and collectively, the "Contracts"),
to hold security for the performance of such shareholders of
their obligations under the Contracts pursuant to related
collateral agreements (the "Collateral Agreements") and to issue
DECS in accordance with the terms and conditions of the Trust
Agreement;
WHEREAS the Trustees desire to engage the services of the
Custodian to perform certain custodial duties for the Trust; and
WHEREAS the Custodian is qualified and willing to assume
such duties on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the parties agree as
follows:
1. Definitions. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust
Agreement.
2. Appointment of Custodian; Transfer of Assets. The Trust
hereby constitutes and appoints the Custodian, and the Custodian
accepts such appointment, as custodian of all of the property,
including but not limited to, the Contracts, the Treasury
Securities, the Temporary Investments, any cash and any other
property at any time owned or held by the Trust (other than
Pledged Items (as defined in the Collateral Agreements) held by
the Collateral Agent thereunder) (collectively, the "Assets").
The Trust hereby deposits the Assets owned by the Trust on the
date hereof with the Custodian and the Custodian hereby accepts
such Assets into its custody, and the Trust shall deliver to the
Custodian all additional Assets, including all monies, securities
and other property, received by the Trust at any time during the
period of this Agreement, subject to the following terms and
conditions. The Custodian hereby agrees that it shall hold the
Assets in a segregated custody account, separate and distinct
from all other accounts, in accordance with Section 17(f) of, and
in such manner as shall constitute the segregation and holding in
trust
<PAGE>
within the meaning of, the Investment Company Act and the
rules and regulations thereunder. The Trust authorizes the
Custodian, for any Assets held hereunder, to use the services of
any United States securities depository permitted to perform such
services for registered investment companies and their custodians
under Rule 17f-4 under the Investment Company Act and which have
been approved by the Trust, including but not limited to, the
Depository Trust Company and the Federal Reserve Book Entry
System.
3. Asset Disposition; Examinations. The Custodian shall
have no power or authority to assign, hypothecate, pledge or
otherwise dispose of the Assets, except pursuant to a written
direction in accordance with paragraph 4 below and then only for
the account of the Trust. The Assets shall be subject to no lien
or charge of any kind in favor of the Custodian for itself or for
any other Person claiming through the Custodian. The Custodian
shall permit actual examination of the Assets by the Trust's
independent public accountant at the end of each annual and
semi-annual fiscal period of the Trust and at least one other
time during the fiscal year of the Trust chosen by such
independent public accountant and shall permit the inspection of
the Assets by the Commission through its employees or agents
during the normal business hours of the Custodian upon reasonable
request.
4. Authorized Actions. The Custodian shall take such
actions with respect to the Assets as directed in writing by any
Trustee or by any officer of the Administrator as may be received
by the Custodian from time to time.
5. Custodian's Actions Taken In Good Faith. In connection
with the performance of its duties under this Agreement, the
Custodian shall be under no liability to the Trust or any Holder
for any action taken in good faith in reliance on any paper,
order, certification, list, demand, request, consent, affidavit,
notice, opinion, direction, endorsement, assignment, resolution,
draft or other document, prima facie property executed, or for
the disposition of the Assets pursuant to the Trust Agreement or
in respect of any action taken or suffered under the Trust
Agreement in good faith, in accordance with an opinion of counsel
or at the direction of the Trustees pursuant hereto; provided
that this provision shall not protect the Custodian against any
liability to which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard
of its obligations and duties hereunder. Notwithstanding any
other provision of this Agreement, the Custodian shall under no
circumstances be liable for any indirect or consequential
damages.
6. Trust Agreement Validity. The Custodian shall not
be responsible for the validity or sufficiency of the Trust
Agreement or the due execution thereof, or for the form,
character, genuineness, sufficiency, value or validity of any of
the Assets and the Custodian shall in no event assume or incur
any liability, duty or obligation to any Holder or to the
Trustees, other than as expressly provided herein. The Custodian
shall not be responsible for or in respect of the validity of any
signature by or on behalf of the Trustees.
7. Litigation Obligations, Costs and Indemnity. The
Custodian shall not be under any obligation to appear in,
prosecute or defend any action which in its opinion may
2
<PAGE>
involve it in expense or liability, unless it shall be
furnished with such reasonable security and indemnity against
such expense or liability as it may require, and any pecuniary
costs of the Custodian from such actions shall be expenses which
are reimbursable pursuant to paragraph 13 hereof.
8. Taxes; Trust Expenses. In no event shall the
Custodian be personally liable for any taxes or other
governmental charges imposed upon or in respect of the Assets or
upon the monies, securities or other properties included therein.
The Custodian shall be reimbursed and indemnified by the Trust
for all such taxes and charges, for any tax or charge imposed
against the Trust and for any expenses, including counsel fees,
interest, penalties and additions to tax which the Custodian may
sustain or incur with respect to such taxes or charges.
9. Custodian Resignation, Succession. (a) The Custodian
may resign by executing an instrument in writing resigning as
Custodian and delivering the same to the Trustees, not less than
60 days before the date specified in such instrument when,
subject to clause (b) of this paragraph 9, such resignation is to
take effect. Upon receiving such notice of resignation, the
Trustees shall use their reasonable efforts promptly to appoint a
successor Custodian in the manner and meeting the qualifications
provided in the Trust Agreement, by written instrument or
instruments delivered to the resigning Custodian and the
successor Custodian.
(b) In case no successor Custodian shall have been
appointed within 30 days after notice of resignation has been
received by the Trustees, the resigning Custodian may forthwith
apply to a court of competent jurisdiction for the appointment of
a successor Custodian. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribed, appoint a
successor Custodian.
10. Custodian Removal. The Trust may remove the Custodian
upon 60 days' prior written notice to the Custodian and appoint a
successor Custodian. In case at any time the Custodian shall not
meet the requirements set forth in the Trust Agreement or shall
become incapable of acting or if a court having jurisdiction
shall enter a decree or order for relief in respect of the
Custodian in an involuntary case, or the Custodian shall commence
a voluntary case, under any applicable bankruptcy, insolvency, or
other similar law now or hereafter in effect, or any receiver,
liquidator, assignee, custodian, trustee, sequestrator (or
similar official) for the Custodian or for any substantial part
of its property shall be appointed, or the Custodian shall make
any general assignment for the benefit of creditors, or shall
generally fail to pay its debts as they become due, the Trust may
remove the Custodian immediately and appoint a successor
Custodian. The termination of the Administration Agreement or the
Paying Agent Agreement shall cause the removal of the Custodian
simultaneously therewith.
11. Transfers to Successor Custodian. Upon the request
of any successor Custodian, the Custodian hereunder shall, upon
payment of all amounts due it, execute and deliver an instrument
acknowledged by it transferring to such successor Custodian all
the rights and powers of the retiring Custodian; and the retiring
Custodian shall transfer, deliver and pay over to the successor
Custodian the Assets at the time held by it hereunder, if any,
together with
3
<PAGE>
all necessary instruments of transfer and assignment or
other documents property executed necessary to effect such
transfer and such of the records or copies thereof maintained by
the retiring Custodian in the administration hereof as may be
requested by the successor Custodian, and shall thereupon be
discharged from all duties and responsibilities hereunder. Any
resignation or removal of the Custodian shall become effective
upon such acceptance of appointment by the successor Custodian.
The indemnification of the resigning Custodian provided for
hereunder shall survive any resignation, discharge or removal of
the Custodian hereunder.
12. Custodian Merger, Consolidation. Any corporation
into which the Custodian may be merged or converted or with which
it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Custodian shall
be a party, shall be the successor Custodian hereunder and under
the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties
hereto or thereto, provided that such corporation meets the
requirements set forth in the Trust Agreement and provided
further that the Trust has given its prior written consent to the
Custodian with respect to any such merger, conversion or
consolidation.
13. Compensation; Expenses. The Custodian shall receive
compensation for performing the usual, ordinary, normal and
recurring services under this Custodian Agreement and, with the
prior written approval of the Trust, reimbursement for any and
all expenses and disbursements incurred hereunder, as provided in
Section 3.1 of the Administration Agreement.
14. Section 17(f) Qualification. The Custodian hereby
represents that it is qualified to act as a custodian under
Section 17(f) of the Investment Company Act.
15. Custodian's Limited Liability. The Trust shall
indemnify and hold the Custodian harmless from and against any
loss, damages, cost or expense (including the costs of
investigation, preparation for and defense of legal and/or
administrative proceedings related to a claim against it and
reasonable attorneys' fees and disbursements), liability or claim
incurred by reason of any inaccuracy in information furnished to
the Custodian by the Trustees, or any act or omission in the
course of, connected with or arising out of any services to be
rendered hereunder, provided that the Custodian shall not be
indemnified and held harmless from and against any such loss,
damages, cost, expense, liability or claim arising from its
willful misfeasance, bad faith or gross negligence in the
performance of its duties, or its reckless disregard of its
duties and obligations hereunder. Neither the Federal Reserve
Book Entry System nor the Depository Trust Company shall be
deemed to be agents of the Custodian.
16. Rights of Set-Off; Banker's Lien. The Custodian
hereby waives all rights of set-off or banker's lien it may have
with respect to the Assets held by it as Custodian hereunder.
17. Termination. This Agreement shall terminate upon the
earlier of the termination of the Trust or the appointment of a
successor Custodian.
4
<PAGE>
18. Choice of Law. This Agreement is executed and deli-
vered in the State of New York, and all laws or rules of construction
of the State of New York shall govern the right of the parties
hereto and the interpretation of the provisions hereof.
19. Notices. Any notice to be given to the Trust
hereunder shall be in writing and shall be duly given if mailed or
delivered to DECS Trust, c/o Peter B. Blanton, Salomon Brothers
Inc, Seven World Trade Center, New York, New York 10048, and to
the Custodian if mailed or delivered to The Bank of New York, 101
Barclay Street, New York, New York 10286, attention: Mark Walsh,
or at such other address as shall be specified by the addressee
to the other party hereto in writing.
20. No Third Party Beneficiaries. Nothing herein,
express or implied, shall give to any Person, other than the
Trust, the Custodian and their respective successors and assigns,
any benefit of any legal or equitable right, remedy or claim
hereunder.
21. Amendments; Trust Agreement Changes; Waiver. This
Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part,
except by a written instrument signed by a duly authorized
representative of the party to be charged. The Trustees shall
notify the Custodian of any change in the Trust Agreement prior
to the effective date of any such change. Failure of either party
hereto to exercise any right or remedy hereunder in the event of
a breach hereof by the other party shall not constitute a waiver
of any such right or remedy with respect to any subsequent
breach.
22. Counterparts. This Agreement may be signed in
counterparts with all counterparts constituting one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the day and year first
above written.
Trustee
___________________________
Peter B. Blanton
as Trustee
The Bank of New York
By:________________________
Name:
5
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT dated as of this _____ day
of _____, 1997 by and between The Bank of New York, a New York
banking corporation (the "Administrator"), and DECS Trust (such
trust and the trustees thereof acting in their capacity as such
being referred to herein as the "Trust"), a statutory business
trust organized under the Business Trust Act of the State of
Delaware pursuant to a Declaration of Trust dated as of November
21, 1995, as amended and restated as of _____, 1997 (the "Trust
Agreement").
WITNESSETH
WHEREAS the Trust is a non-diversified, closed-end
management investment company, as defined in the Investment
Company Act of 1940 (the "Investment Company Act"), formed to
purchase and hold certain U.S. treasury securities (the "Treasury
Securities"), to enter into and hold forward purchase contracts
with one or more existing shareholders (the "Sellers") of DIMON
Incorporated (the "Company") (individually, a "Contract" and
collectively, the "Contracts") and to issue DECS in accordance
with the terms and conditions of the Trust Agreement;
WHEREAS the Trust desires to engage the services of
the Administrator to assume certain duties and responsibilities
of the Trust under the Trust Agreement and the Investment Company
Act and to undertake certain services on behalf of and subject to
the supervision of the Trust as provided herein; and
WHEREAS the Administrator is qualified and willing to
assume such duties and responsibilities and to undertake to
render such services, subject to the supervision of the Trust, on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust
Agreement.
ARTICLE II
ENGAGEMENT OF ADMINISTRATOR
2.1. Engagement. The Trust hereby engages the Adminis-
trator, and the Administrator hereby agrees to be so engaged, to
provide or cause the provision of the services hereinafter enumerated.
<PAGE>
2.2. Services of Administrator. Subject to the supervi-
sion of the Trust, the Administrator shall on behalf of the Trust
take the actions set forth in Sections 2.6, 2.7 and 2.8 of the Trust
Agreement, to the extent such responsibilities can lawfully be
delegated to the Administrator; provided, however, that the
Administrator shall not (i) render investment advisory services
to the Trust as defined in the Investment Company Act or the
Investment Advisers Act of 1940; (ii) have the power of the
Trustees to sell the Treasury Securities except as provided in
Section 2.8 of the Trust Agreement; or (iii) have the power to
select the independent public accountants for the Trust.
Additionally, the Administrator shall be responsible for
rendering the following services:
(a) instruct the Paying Agent on behalf of the Trust
to take the actions set forth in Sections 2.6, 2.7, 2.8 and 3.5
of the Trust Agreement and to otherwise perform the duties of the
Paying Agent referred to in the Trust Agreement;
(b) with the approval of the Trustees, engage legal
and other professional advisors, other than the Trust's
independent accountants as provided in clause 2.2 (iii) above;
(c) receive all demands, bills and invoices for
expenses incurred by or on behalf of the Trust and pay the same,
or cause the Paying Agent to pay the same, out of moneys paid to
the Administrator pursuant to the Fund Expense Agreement dated
the date hereof between Salomon Brothers Inc and The Bank of New
York (the "Fund Expense Agreement") but in no event out of any
assets of the Trust, and give notice to Salomon Brothers Inc
pursuant to the Fund Indemnity Agreement dated the date hereof
between Salomon Brothers Inc and the Trust (the "Fund Indemnity
Agreement") of any claim for Indemnification Expenses (as defined
in the Fund Indemnity Agreement) or any threatened claim for
Indemnification Expenses;
(d) (i) keep or cause to be kept all the books and
records of the Trust (other than those to be kept by the Paying
Agent), and (ii) prepare and, as necessary, mail, file or
publish, or, as appropriate, direct the Paying Agent or cause the
legal and other professional advisors engaged pursuant to Section
2.2(b) to prepare and, as necessary, mail, file or publish any
and all notices, proxies, reports, returns and other
communications and documents as required under the Trust
Agreement, the Investment Company Act, the Securities Exchange
Act of 1934, or the Code, or, as reasonably requested by the
Trustees, under any other applicable laws, rules or regulations
or otherwise; provided, however, that responsibility for the
adequacy and accuracy of any such reports, returns, etc. shall be
that of the Trustees and provided, further, that the
Administrator shall have no liability for the adequacy or
accuracy of such reports, returns, etc.;
(e) at the request of the Trustees and upon being
furnished with such reasonable security and indemnity against any
related expense or liability as the Administrator may require,
institute and prosecute, in accordance with the instructions of
the Trustees, legal or other appropriate proceedings to enforce
any and all rights and remedies of the Trust;
(f) receive and review on behalf of the Trust all notices,
reports, certificates and other documents regarding the Contracts
and the Treasury Securities;
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(g) make or cause to be made all necessary arrangements
with respect to meetings of Trustees and meetings of Holders,
including, without limitation, the preparation of notices,
proxies and minutes, subject to the approval of the Trustees; and
(h) in conjunction with the Trustees, determine and
publish, in such manner as the Trustees shall direct in writing,
the Trust's net asset value in accordance with Section 8.2(c) of
the Trust Agreement and the Trust's policy as set forth in the
Prospectus.
2.3. Certain Rights of the Administrator. In
connection with the performance of its duties under this
Agreement, the Administrator shall not be liable to the Trust,
the Trustees or any Holder (i) for any action taken or for
refraining from taking any action hereunder except in the case of
its willful misfeasance, bad faith, gross negligence or the
reckless disregard of its duties hereunder, (ii) with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the directions of the Trustees or of any Trustee
or (iii) in connection with the performance of its duties under
Section 2.2(h) hereof, for good faith reliance upon information
furnished by third parties selected by the Administrator with due
care. The Administrator shall under no circumstances be liable
for any punitive, exemplary, indirect or consequential damages.
The Administrator may consult with counsel and the written advice
of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by
it hereunder in good faith and in reliance thereon. The
Administrator may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys
appointed with due care by it but shall be liable for the acts
and omissions of such persons to the same extent as if the
functions had been performed by the Administrator itself (except
to the extent that the Trustees shall have directed the
Administrator to retain such persons, in which event the
Administrator shall not be liable for such persons' acts or
omissions). Without limiting the generality of the preceding
sentence, the Administrator (i) may select and employ independent
accountants acceptable to the Trustees (other than the
independent public accountants referred to in clause (iii) of
Section 2.2 of this Agreement and Section 2.5(d) of the Trust
Agreement) to keep the financial books and records of the Trust,
to prepare the financial statements of the Trust and to prepare
Trust tax returns, and (ii) may select and engage attorneys
acceptable to the Trustees to prepare annual, semiannual and
periodical reports, notices of meetings and proxy statements,
annual reports to Holders and other documents required under the
Investment Company Act or the Securities Exchange Act of 1934.
The Administrator shall not be liable and shall be fully
protected in acting upon any writing or document reasonably
believed by it to be genuine and to have been given, signed or
made by the proper person or persons and shall not be held to
have any notice of any change of authority of any person until
receipt of written notice thereof from a Trustee.
2.4. Power of Attorney. The Trustees hereby appoint
the Administrator, acting through any duly appointed officer,
the attorney-in-fact and agent of the Trust for the purpose of
performing the duties prescribed in Sections 2.2(d)(ii) and
2.2(g).
2.5. Delivery of Certain Documents. The Trust will
deliver to the Administrator, promptly following the execution
hereof: (a) a complete conformed copy of the registration statement
of the Trust under the Securities Act and the Investment Company
Act,
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including all amendments, exhibits and schedules thereto; and (b)
the EDGAR access codes (Central Index Key, CIK Confirmation Code,
Password and Password Modification Access Code) employed to file
such registration statement.
ARTICLE III
COMPENSATION OF ADMINISTRATOR
3.1. Compensation. For services to be rendered by the
Administrator pursuant to this Agreement, as custodian under the
Custodian Agreement, dated as of _____, 1997, between the
Administrator, as custodian, and the Trust, as paying agent under
the Paying Agent Agreement, dated as of _____, 1997, between the
Administrator, as paying agent, and the Trust, and as collateral
agent under the Collateral Agreements, dated as of _____, 1997,
among the Administrator, as collateral agent, each of the Sellers
and the Trust, and for the payment of Trust expenses pursuant to
Section 2.2(c) hereof, the Administrator shall receive only such
fees and expenses as shall be paid to it pursuant to the terms of
the Fund Expense Agreement and shall have no recourse to the
assets of the Trust for the payment of any such amounts.
3.2. Additional Services. If and to the extent that
the Trustee shall request the Administrator to render services
for the Trust, other than those to be rendered by the
Administrator hereunder, and if the Administrator agrees to
render such services, such additional services shall be
compensated separately on terms to be agreed upon between the
Administrator and the Trustees from time to time.
ARTICLE IV
TERMINATION
4.1. Termination.
(a) This Agreement shall terminate immediately upon
written notice of termination from the Trustees to the
Administrator if any of the following events shall occur:
(i) If the Administrator shall violate or default in
the performance of any provision of this Agreement, the
Trust Agreement, or the Investment Company Act, and after
notice of such violation or default, shall not cure such
violation or default within 30 days; or
(ii) If the Administrator shall be adjudged bankrupt
or insolvent by a court of competent jurisdiction, or an
order shall be made by a court of competent jurisdiction
for the appointment of a receiver, liquidator, or trustee
of the Administrator, or of all or substantially all of its
property by reason of the foregoing, or approving any
petition filed against the Administrator for its
reorganization, and such adjudication or order shall remain
in force or unstayed for a period of 30 days; or
(iii) If the Administrator shall institute proceedings
for voluntary bankruptcy, or shall file a petition seeking
reorganization under the Federal bankruptcy laws, or for
relief under any law for the relief of debtors, or shall
consent to the appointment of a receiver of
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the Administrator or of all or substantially all of its
property, or shall make a general assignment for the
benefit of its creditors, or shall admit in writing its
inability to pay its debts generally as they become due; or
(iv) Upon the voluntary or involuntary dissolution of
the Administrator, or unless the Trust shall have given its
prior written consent thereto, the merger or consolidation
of the Administrator with any other entity.
If any of the events specified in clauses (ii), (iii)
or (iv) of this Section 4.1(a) shall occur, the Administrator
shall give immediate written notice thereof to the Trustee.
(b) Notwithstanding anything to the contrary contained
herein, this Agreement shall terminate immediately (i) upon
termination of the Trust Agreement, (ii) upon termination of the
Paying Agent Agreement, (iii) upon termination of all Collateral
Agreements, (iv) upon termination of the Custodian Agreement or
(v) upon the resignation or removal of the Custodian.
(c) The Trustees may remove the Administrator, or the
Administrator may resign, and thereby terminate this Agreement
without penalty upon 60 days' prior written notice to the other
party hereto; provided that neither party hereto may terminate
this Agreement pursuant to this Section 4.1(c) unless a successor
Administrator shall have been appointed and shall have accepted
the duties of the Administrator. If, within 30 days after notice
by the Administrator to the Trustees of termination of this
Agreement, no successor Administrator shall have been selected
and accepted the duties of the Administrator, the Administrator
may apply to a court of competent jurisdiction for the
appointment of a successor Administrator.
4.2. Effect of Termination. The Administrator shall
forthwith upon termination of this Agreement deliver to the
Trustees any records or other property of the Trust then in the
possession or custody of the Administrator. Any obligation to
indemnify the Administrator pursuant to Section 6.6 shall survive
the termination of this Agreement.
ARTICLE V
RECORDS AND REPORTS
5.1. Books and Records; Inspection and Copying. The
Administrator shall keep, or cause to be kept, appropriate, and
reasonably detailed and accurate, books and records of all its
activities pursuant to this Agreement. The Trustees shall have
the right to inspect such books and records during the
Administrator's normal business hours upon reasonable request,
and to make copies of the same at the expense of the Trust.
5.2. Access to Information. The Administrator shall
make available to each of the Trustees all information it
receives and compiles with respect to the Contracts and the
Treasury Securities, the moneys available to the Trust, the
financial condition of the Trust and all other relevant matters
concerning the Trust.
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ARTICLE VI
MISCELLANEOUS
6.1. Binding Effect. Any corporation into which the
Administrator may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Administrator shall be a
party, shall be the successor Administrator hereunder and under
the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties
hereto, provided that such corporation meets the requirements set
forth in the Trust Agreement and provided further that the
Trustees have given their prior written consent to the
Administrator with respect to any such merger, conversion or
consolidation. This Agreement shall be binding on and inure to
the benefit of the parties hereto and their respective successors
and permitted assigns.
6.2. Entire Agreement. This Agreement contains the
entire agreement between the parties with respect to the matters
contained herein and supersedes all prior agreements or
understandings, whether oral or written. This Agreement shall not
be amended, changed, modified, or discharged, in whole or in
part, except by an instrument in writing signed by both parties
hereto, or their respective successors or permitted assigns.
6.3. Notices. Any notice, report or other
communication required or permitted to be given hereunder shall
be in writing, and shall, unless some other method of giving such
notice, report or other communication is accepted by the party to
whom it is to be given or is required by the Trust Agreement or
the Investment Company Act, be given by being mailed by U.S.
first class mail, certified or registered, return receipt
requested, postage prepaid, to the following addresses of the
parties hereto:
The Trust: DECS Trust
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19716
Telephone: 302-738-6680
Telecopier: 302-738-7210
The Administrator: The Bank of New York
101 Barclay Street, Floor 12E
New York, New York 10286
Attn: Mark G. Walsh
Telephone: 212-816-5228
Telecopier: 212-816-7157
Any party may at any time give written notice to the
other party that it wishes to change its address for the purposes
of this Section 6.3.
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6.4. Applicable Law. The provisions of this Agreement
shall be construed and interpreted in accordance with the laws of the
State of New York as at the time in effect except to the extent
such law is preempted by federal law.
6.5. Non-assignability. This Agreement and the rights
and obligations of the parties hereunder may not be assigned or
delegated by either party without the prior written consent of
the other party.
6.6. Indemnification. The Trustees shall indemnify and
hold the Administrator harmless from and against any loss,
damages, cost or expense (including the costs of investigation,
preparation for and defense of legal and/or administrative
proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred
by reason of any inaccuracy in information furnished to the
Administrator by the Trustees, or any act or omission in the
course of, connected with or arising out of any services to be
rendered hereunder, provided that the Administrator shall not be
indemnified and held harmless from and against any such loss,
damages, cost, expense, liability or claim incurred by reason of
its willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or its reckless disregard of its
duties and obligations hereunder.
6.7. Provisions of Law to Control. This Agreement shall
be subject to the applicable provisions of the Investment Company
Act and the rules and regulations of the Commission thereunder.
To the extent that any provisions herein contained conflict with
any applicable provisions of the Investment Company Act or such
rules and regulations, the latter shall control.
6.8. Counterparts. This Agreement may be signed in
counterpart with all counterparts constituting one and the same
instrument.
IN WITNESS WHEREOF, the parties have hereunto executed
this Administration Agreement as of the day and year first above
written.
DECS TRUST
_________________________
Donald J. Puglisi
as Managing Trustee
THE BANK OF NEW YORK
By:______________________
Name:
Title:
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PAYING AGENT AGREEMENT
This PAYING AGENT AGREEMENT dated as of this _______ day of
______ 1997, by and between The Bank of New York, a New York banking
corporation (the "Paying Agent"), and DECS Trust (such trust and
the trustees thereof acting in their capacity as such being
referred to herein as the "Trust"), a statutory business trust
organized under the Business Trust Act of the State of Delaware
pursuant to a Declaration of Trust dated as of November 21, 1995,
as amended and restated as of _____, 1997 (the "Trust Agreement").
WITNESSETH
WHEREAS the Trust is a non-diversified, closed-end
management investment company, as defined in the Investment
Company Act of 1940 (the "Investment Company Act"), formed to
purchase and hold the U.S. treasury securities (the "Treasury
Securities"), to enter into and hold forward purchase contracts
with one or more existing shareholders of DIMON Incorporated
(individually, a "Contract" and collectively, the "Contracts")
and to issue DECS to the public in accordance with the terms and
conditions of the Trust Agreement;
WHEREAS the Trustees desire to engage the services of
the Paying Agent to assume certain responsibilities and to
perform certain duties as the transfer agent, registrar and
paying agent with respect to the DECS upon the terms and
conditions of this Agreement; and
WHEREAS the Paying Agent is qualified and willing to assume such
responsibilities and to perform such duties, subject to the
supervision of the Trustee, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms not otherwise
defined herein shall have the respective meanings specified in
the Trust Agreement.
ARTICLE II
PAYING AGENT
2.1 Appointment of Paying Agent and Acceptance. The
Trust Agreement provides that The Bank of New York shall act as
the initial Paying Agent. The Bank of New York hereby accepts
such appointment and agrees to act in accordance with its
standard procedures and the provisions of the Trust Agreement and
the provisions set forth in this Article
<PAGE>
II as Paying Agent with respect to the DECS. Without limiting the
generality of the foregoing, The Bank of New York, as Paying
Agent, agrees that it shall establish and maintain the Trust
Account, subject to the provisions of Section 2.3 hereof.
2.2 Certificates and Notices. The Trustees shall
deliver to the Paying Agent the certificates and notices required
to be delivered to the Paying Agent pursuant to the Trust
Agreement, and the Paying Agent shall mail or publish such
certificates or notices as required by the Trust Agreement, but
the Paying Agent shall have no responsibility to confirm or
verify the accuracy of certificates or notices of the Trustees so
delivered.
2.3 Payments and Investments. The Paying Agent shall
make payments out of the Trust Account as provided in Section 3.3
of the Trust Agreement. The Paying Agent on behalf of the Trust
shall effect the transactions set forth in Sections 2.6, 2.7,
2.8, 3.5 and 8.3 of the Trust Agreement upon instructions to do
so from the Administrator (except that with respect to its
obligations under Section 8.3 of the Trust Agreement, the Paying
Agent shall act without instructions from the Administrator) and
shall invest moneys on deposit in the Trust Account in the
Temporary Investments in accordance with Section 3.5 of the Trust
Agreement. Except as otherwise specifically provided herein or in
the Trust Agreement, the Paying Agent shall not have the power to
sell, transfer or otherwise dispose of any Temporary Investment
prior to the maturity thereof, or to acquire additional Temporary
Investments. The Paying Agent shall hold any Temporary
Investments to its maturity and shall apply the proceeds thereof
paid upon maturity to the payment of the next succeeding
Quarterly Distribution. All such Temporary Investments shall be
selected by the Trustees from time to time or pursuant to
standing instructions from the Trustees, and the Paying Agent
shall have no liability to the Trust or any Holder or any other
Person with respect to any such Temporary Investment.
2.4 Instructions from Administrator. The Paying Agent
shall receive and execute all instructions from the
Administrator, except to the extent they conflict with or are
contrary to the terms of the Trust Agreement or this Agreement.
ARTICLE III
TRANSFER AGENT AND REGISTRAR
3.1 Original Issue of Certificates. On the date DECS
sold pursuant to the Underwriting Agreement are originally
issued, certificates for such DECS shall be issued by the Trust,
and, at the request of the Trustees, registered in such names and
such denominations as the Underwriters shall have previously
requested of the Trustees, executed manually or in facsimile by
the Managing Trustee and countersigned by the Paying Agent. At no
time shall the aggregate number of DECS represented by such
countersigned certificates exceed the number of then outstanding
DECS except as permitted by Section 3.4.
3.2 Registry of Holders. The Paying Agent shall maintain
a registry of the Holders of the DECS.
3.3 Registration of Transfer of DECS. DECS shall be
registered for transfer or exchange, and new certificates shall
be issued, in the name of the designated transferee or
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transferees, upon surrender of the old certificates in form
deemed by the Paying Agent properly endorsed for transfer with
(a) all necessary endorsers' signatures guaranteed in such manner
and form as the Paying Agent may require by a guarantor
reasonably believed by the Paying Agent to be responsible, (b)
such assurances as the Paying Agent shall deem necessary or
appropriate to evidence the genuineness and effectiveness of each
necessary endorsement and (c) satisfactory evidence of compliance
with all applicable laws relating to the collection of taxes or
funds necessary for the payment of such taxes.
3.4 Lost Certificates. If there shall be delivered to
the Paying Agent (a) evidence to its satisfaction of the
destruction, loss or theft of any certificate for DECS and (b)
such security or indemnity as may be required by it to hold it
and any of its agents harmless, then, in the absence of notice to
the Paying Agent that such certificate has been acquired by a
bona fide purchaser, the Managing Trustee shall execute and upon
its request the Paying Agent shall countersign and deliver, in
lieu of any such destroyed, lost or stolen certificate, a new
certificate of like tenor bearing a number not contemporaneously
outstanding. Any request by the Managing Trustee to the Paying
Agent to issue a replacement or new certificate pursuant to this
Section 3.4 shall be deemed to be a representation and warranty
by the Trust to the Paying Agent that such issuance will comply
with provisions of law, the Trust Agreement and the resolutions
adopted by the Trustees with respect to lost securities. If,
after the delivery of such new certificate, a bona fide purchaser
of the original certificate, the Trust and the Paying Agent shall
be entitled to recover such new certificate from the person to
whom it was delivered or any transferee thereof, except a bona
fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Trust or the Paying
Agent in connection therewith. Upon the issuance of any new
certificate under this Section 3.4, the Trust and the Paying
Agent may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses
of the Paying Agent) connected therewith.
3.5 Transfer Books. The Paying Agent shall maintain
the transfer books listing the Holders of the DECS. In case of
any written request or demand for the inspection of the transfer
books of the Trust or any other books in the possession of the
Paying Agent, the Paying Agent will notify the Trustees and
secure instructions as to permitting or refusing such inspection.
The Paying Agent reserves the right, however, to exhibit the
transfer books or other books to any person in case it is advised
by its counsel that its failure to do so would be unlawful.
3.6 Disposition of Canceled Certificates, Records. The
Paying Agent shall retain certificates which have been canceled
in transfer or in exchange and accompanying documentation in
accordance with applicable rules and regulations of the
Commission for six calendar years from the date of such
cancellation, and shall make such records available during this
period at any time, or from time to time, for reasonable
periodic, special, or other examinations by representatives of
the Commission and the Board of Governors of the Federal Reserve
System. Thereafter such records shall not be destroyed by the
Paying Agent but will be safely stored for possible future
reference. In case of any request or demand for the inspection of
the register of the Trust or any other books in the possession of
the Paying Agent, the Paying
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Agent will notify the Trustees and to secure instructions as to
permitting or refusing such inspection. The Paying Agent reserves
the right, however, to exhibit the register or other records to
any person in case it is advised by its counsel that its failure
to do so would (i) be unlawful, or (ii) expose it to liability,
unless the Trustees shall have offered indemnification
satisfactory to the Paying Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TRUSTEES
The Trust represents and warrants to the Paying Agent
that:
(a) the Trust is a validly existing trust under the laws
of the State of Delaware and the Trustees have full
power under the Trust Agreement to execute and
deliver this Agreement and to authorize, create and
issue the DECS;
(b) this Agreement has been duly and validly authorized,
executed and delivered by the Trust and constitutes
the valid and binding agreement of the Trust,
enforceable against the Trust in accordance with its
terms, subject as to such enforceability to
bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or
affecting creditors' rights and to general equitable
principles;
(c) the form of the certificate evidencing the DECS
complies with all applicable laws of the State of
Delaware and the State of New York;
(d) the DECS have been duly and validly authorized,
executed and delivered by the Trust and are validly
issued;
(e) the DECS have been registered under the Securities
Act of 1933 and the Trust has been registered under
the Investment Company Act and no further action by
or before any governmental body or authority of the
United States or of any state thereof is required in
connection with the execution and delivery of this
Agreement or the issuance of the DECS;
(f) the execution and delivery of this Agreement and the
issuance and delivery of the DECS do not and will
not conflict with, violate, or result in a breach
of, the terms, conditions or provisions of, or
constitute a default under, the Trust Agreement, any
law or regulation, any order or decree of any court
or public authority having jurisdiction over the
Trust, or any mortgage, indenture, contract,
agreement or undertaking to which the Trustees are a
party or by which any of them are bound; and
(g) no taxes are payable upon or in respect of the
execution of this Agreement or the issuance of the
DECS.
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ARTICLE V
DUTIES AND RIGHTS
5.1 Duties.
(a) The Paying Agent is acting solely as agent for the
Trust hereunder and owes no fiduciary duties to any
other Person by reason of this Agreement.
(b) In the absence of bad faith, gross negligence or
willful misfeasance on its part in the performance
of its duties hereunder or its reckless disregard of
its duties and obligations hereunder, the Paying
Agent shall not be liable for any action taken,
suffered, or omitted in the performance of its
duties under this Agreement or in accordance with
any direction or request of the Managing Trustee not
inconsistent with the provisions of this Agreement.
The Paying Agent shall under no circumstances be
liable for any punitive, exemplary, indirect or
consequential damages hereunder.
5.2. Rights.
(a) The Paying Agent may rely and shall be protected in
acting or refraining from acting upon any
communication authorized hereby and upon any written
instruction, notice, request, direction, consent,
report, certificate, share certificate or other
instrument, paper or document reasonably believed by
it to be genuine. The Paying Agent shall not be
liable for acting upon any telephone communication
authorized hereby which the Paying Agent believes in
good faith to have been given by the Trustees.
(b) The Paying Agent may consult with legal counsel and
the advice of such counsel shall be full and
complete authorization and protection in respect of
any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Paying Agent shall not be required to advance,
expend or risk its own funds or otherwise incur or
become exposed to financial liability in the
performance of its duties hereunder.
(d) The Paying Agent may perform its duties and exercise
its rights hereunder either directly or by or
through agents or attorneys appointed with due care
by it hereunder.
5.3 Disclaimer. The Paying Agent makes no represen-
tations as to (a) the first two recitals of this Agreement or (b) the
validity or adequacy of the DECS.
5.4 Compensation, Expenses and Indemnification.
(a) The Paying Agent shall receive for all services
rendered by it under this Agreement and, upon the
prior written approval of the Trustees, for all
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expenses, disbursements and advances incurred or
made by the Paying Agent in accordance with any
provision of this Agreement (including the
reasonable compensation and the expenses and
disbursements of its agents and counsel), the
compensation set forth in Section 3.1 of the
Administration Agreement.
(b) The Trust shall indemnify the Paying Agent for and
hold it harmless against any loss, liability, claim
or expense (including the costs of investigation,
preparation for and defense of legal and/or
administrative proceedings relating to a claim
against it and reasonable attorneys' fees and
disbursements) arising out of or in connection with
the performance of its obligations under this
Agreement, provided such loss, liability or expense
is not the result of gross negligence, willful
misfeasance or bad faith on its part in the
performance of its duties hereunder or its reckless
disregard of its duties or obligations hereunder,
including the costs and expenses of defending itself
against any claim or liability in connection with
its exercise or performance of any of its duties or
obligations hereunder and thereunder. The
indemnification provided by this Section 5.4(c)
shall survive the termination of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Term of Agreement.
(a) The term of this Agreement is unlimited unless
terminated as provided in this Section 6.1 or unless
the Trust is terminated, in which case this
Agreement shall terminate ten days after the date of
termination of the Trust. This Agreement may be
terminated by either party hereto without penalty
upon 60 days' prior written notice to the other
party hereto; provided that neither party hereto may
terminate this Agreement pursuant to this Section
6.1(a) unless a successor Paying Agent shall have
been appointed and shall have accepted the duties of
the Paying Agent. The termination of the
Administration Agreement or the resignation or
removal of the Custodian shall cause the termination
of this Agreement simultaneously therewith. If,
within 30 days after notice by the Paying Agent of
termination of this Agreement, no successor Paying
Agent shall have been selected and accepted the
duties of the Paying Agent, the Paying Agent may
apply to a court of competent jurisdiction for the
appointment of a successor Paying Agent.
(b) Except as otherwise provided in this paragraph (b),
the respective rights and duties of the Trust and
the Paying Agent under this Agreement shall cease
upon termination of this Agreement. The Trust's
representations, warranties, covenants and
obligations to the Paying Agent under Sections 4 and
5.4 hereof shall survive the termination hereof.
Upon termination of the Agreement, the Paying Agent
shall, at the Trust's request, promptly deliver to
the Trust or to any successor Paying Agent as
requested by the Trust (i) copies of all books
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and records maintained by it and (ii) any funds
deposited with the Paying Agent by the Trust.
6.2 Communications. Except for communications
authorized to be made by telephone pursuant to this Agreement,
all notices, requests and other communications to any party
hereunder shall be in writing (including telecopy or similar
writing) and given to such person at its address or telecopy
number set forth below:
If to the Trust, DECS Trust
addressed: c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19716
Telephone: 302-738-6680
Telecopier: 302-738-7210
with a copy to the Administrator if the duties of the
Administrator are being performed by a Person other than the
Person performing the obligations of the Paying Agent.
If to the Paying The Bank of New York
Agent, addressed: 101 Barclay Street, Floor 12E
New York, New York 10286
Attn: Mark Walsh
Telephone: 212-815-5228
Telecopier: 212-815-7183
or such other address or telecopy number as such party may
hereafter specify for such purposes by notice to the other party.
Each such notice, request or communication shall be effective
when delivered at the address specified herein. Communications
shall be given on behalf of the Trust by the Trustees (or by the
Administrator, provided that the Trust shall not have delivered
to the Paying Agent an instrument in writing revoking the
authorization of the Administrator to act for it pursuant hereto)
and on behalf of the Paying Agent by a Senior Vice President or
Vice President of the Paying Agent assigned to its Corporate
Trust Department.
6.3 Entire Agreement. This Agreement contains the
entire agreement between the parties relating to the subject
matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral,
written or inferred, between the parties relating to the subject
matter hereof.
6.4 No Third Party Beneficiaries. Nothing herein,
express or implied, shall give to any Person, other than the
Trustees, the Paying Agent and their respective successors and
assigns, any benefit of any legal or equitable right, remedy or
claim hereunder.
6.5 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to
be modified, amended, rescinded, canceled or waived,
in whole or in part, except by a written
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<PAGE>
instrument signed by a duly authorized
representative of the party to be charged. The Trust
shall notify the Paying Agent of any change in the
Trust Agreement prior to the effective date of any
such change.
(b) Failure of either party hereto to exercise any right
or remedy hereunder in the event of a breach hereof
by the other party shall not constitute a waiver of
any such right or remedy with respect to any
subsequent breach.
6.6 Successors and Assigns. Any corporation into which
the Paying Agent may be merged or converted or with which it may
be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Paying Agent shall be a
party, shall be the successor Paying Agent under the Trust
Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties
hereto, provided that such corporation meets the requirements set
forth in the Trust Agreement and provided further that the Trust
has given its prior written consent to the Paying Agent with
respect to any such merger, conversion or consolidation. This
Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors of each of the Trust
and the Paying Agent. This Agreement shall not be assignable by
either the Trust or the Paying Agent without the prior written
consent of the other party.
6.7 Severability. If any clause, provision or section
hereof shall be ruled invalid or unenforceable by any court of
competent jurisdiction, the invalidity or unenforceability of
such clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof.
6.8 Execution in Counterparts. This Agreement may be
executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same
instrument.
6.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
without giving effect to principles of conflicts of law.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the date first above written.
DECS TRUST
____________________________
Donald J. Puglisi
as Managing Trustee
THE BANK OF NEW YORK
By:_________________________
Name:
Title:
9
CGSH Draft of 9/12/97
PURCHASE AGREEMENT*
THIS AGREEMENT is made as of this ___ day of
_________, 1997 between [Selling Shareholder] ("Seller" and,
together with the Other Sellers (as defined below), "Sellers")
and DECS Trust, a business trust organized under the laws of the
State of Delaware under and by virtue of an Amended and Restated
Declaration of Trust, dated as of _________, 1997 (the
"Declaration of Trust") (such trust and the trustees thereof
acting in their capacity as such being referred to herein as
"Purchaser").
WHEREAS, Seller owns shares of common stock, par value
$__ per share (the "Common Stock"), of DIMON Incorporated, a
Virginia corporation (including its successors, the "Company");
WHEREAS, Purchaser has filed with the Securities and
Exchange Commission a registration statement contemplating the
offering of up to 3,484,104 DECS (the "DECS"), the terms of which
contemplate delivery by Purchaser to the holders thereof of a
number of shares of Common Stock (or, if some or all of the
Sellers exercise their cash settlement option, cash in lieu of
part or all thereof), on _________, 2000 (the "Exchange Date");
WHEREAS, in exchange for certain consideration to be
paid by Purchaser hereunder and under other similar agreements,
Purchaser and Sellers desire to provide for the future
acquisition, sale and delivery of the aggregate number of shares
of Common Stock contemplated to be delivered by Purchaser in
respect of the DECS on the Exchange Date, at a price to be
established under this Agreement and such other agreements;
WHEREAS, Seller has agreed, pursuant to the Collateral
Agreement (the "Collateral Agreement") dated as of
______________, 1997, among Purchaser, Seller and The Bank of New
York, as collateral agent (the "Collateral Agent"), to grant
Purchaser a security interest in the shares of Common Stock
specified therein and in certain other circumstances certain
other collateral to secure the obligations of Seller hereunder;
WHEREAS, Purchaser has agreed, pursuant to an
underwriting agreement, dated ___________, 1997 (the
"Underwriting Agreement"), among Purchaser, Seller, the other
persons and entities named as "Sellers" therein (collectively,
the "Other Sellers"), the Company and Salomon Brothers Inc (the
"Underwriter"), to issue and sell to the Underwriter an aggregate
of ______ DECS (the "Initial DECS") and, at the Underwriter's
option, up to ________ additional DECS (the "Additional DECS") to
cover overallotments, if any;
___________________
* This is a form of Purchase Agreement. A substantially identical agreement
will be entered into by each Seller.
<PAGE>
NOW, THEREFORE, in consideration of their mutual
covenants herein contained, the parties hereto, intending to be
legally bound, hereby mutually covenant and agree as follows:
DEFINITIONS
As used herein, the following words and phrases shall
have the following meanings:
"Acceleration Date" has the meaning provided in Article VII.
"Acceleration Value" has the meaning provided in Article VII.
"Additional DECS" has the meaning provided in the recitals of this
Agreement.
"Additional Purchase Price" has the meaning provided in
Section 1.2(b).
"Additional Share Base Amount" means a number equal to
the number of Additional DECS that the Underwriter elects to
purchase under the Underwriting Agreement multiplied by a
fraction, the numerator of which is the Firm Share Base Amount
and the denominator of which is the number of Initial DECS
purchased by the Underwriter under the Underwriting Agreement.
"Additional Shares" has the meaning provided in Section 1.1(b).
"Additional STRIPS" means the U.S. Treasury
obligations purchased by Purchaser for settlement on the Option
Closing Date.
"Adjustment Event" has the meaning provided in Section 6.2.
"Administrator" means The Bank of New York,
administrator for Purchaser under the Administration Agreement
dated as of ________________, 1997, or any successor thereto.
"Affiliate" means, as to any Person, any other Person
that, directly or indirectly, controls, is controlled by or is
under common control with such Person or is a partner in, or a
director or officer of, such Person and, with respect to any
Seller that is a natural person, further includes such Seller's
immediate family members, including his or her father, mother,
spouse and children, the spouses of his or her children, his or
her siblings and their spouses and children. For purposes of this
definition, "control" (including the terms "controlled by" or
"under common control with") means, as to any Person, the
possession, direct or indirect, of the power to vote ten percent
or more of the securities having ordinary voting power for the
election of directors of such Person or the power to direct or
cause the direction of the management and policies of such
Person, whether through ownership of voting securities or by
contract or otherwise.
"Bankruptcy Code" has the meaning provided in Section 8.7.
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<PAGE>
"Business Day" means any day that is not a Saturday, a
Sunday or a day on which the NYSE or banking institutions or
trust companies in The City of New York are authorized or
obligated by law or executive order to close.
"Calculation Period" means any period of Trading Days
for which an average security price must be determined pursuant
to this Agreement.
"Cash Delivery Option" has the meaning provided in Section 1.3(d).
"Closing Price" means, for any security on any date of
determination, (i) the closing sale price (or, if no closing
price is reported, the last reported sale price) of such security
(regular way) on the NYSE on such date, (ii) if such security is
not listed for trading on the NYSE on any such date, as reported
in the composite transactions for the principal United States
securities exchange on which such security is so listed, (iii) if
such security is not so listed on a United States national or
regional securities exchange, as reported by The Nasdaq Stock
Market, (iv) if such security is not so reported, the last quoted
bid price for such security in the over-the-counter market as
reported by the National Quotation Bureau or similar organization
or (v) if such security is not so quoted, the average of the
mid-point of the last bid and ask prices for such security from
at least three nationally recognized investment banking firms
selected by the Administrator for such purpose. The Closing Price
as determined pursuant to the foregoing shall be subject to
adjustment in certain circumstances as provided in Section
6.1(c).
"Collateral Agent" has the meaning provided in the
recitals of this Agreement.
"Collateral Agreement" has the meaning provided in the
recitals of this Agreement.
"Common Stock" has the meaning provided in the
recitals of this Agreement.
"Company" has the meaning provided in the recitals of
this Agreement.
"Contract Shares" has the meaning provided in Section 1.1(b).
"Custodian" means The Bank of New York, custodian for
Purchaser under the Custodian Agreement dated as of
______________, 1997, or any successor thereto.
"Declaration of Trust" has the meaning provided in the
introductory paragraph of this Agreement.
"DECS" has the meaning provided in the recitals of this Agreement.
"Dilution Adjustment" means any fraction or number by
which the Exchange Rate shall be multiplied pursuant to Section
6.1(a) or (b) or by which Closing Prices may be divided pursuant
to Section 6.1(c).
"Event of Default" has the meaning provided in Article VII.
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<PAGE>
"Exchange Date" has the meaning provided in the
recitals of this Agreement.
"Exchange Price" means the average Closing Price per
share of Common Stock on the 20 Trading Days immediately prior to
(but not including) the Exchange Date; provided, however, that if
there are not 20 Trading Days for the Common Stock occurring
later than the 60th calendar day immediately prior to, but not
including, the Exchange Date, Exchange Price shall mean the
market value per share of the Common Stock as of the Exchange
Date as determined by a nationally recognized independent
investment banking firm retained for this purpose by the
Administrator. The Exchange Price as determined pursuant to the
foregoing shall be subject to adjustment in certain circumstances
as provided in Section 6.1(c).
"Exchange Rate" has the meaning provided in Section 1.1(c).
"Firm Payment Date" has the meaning provided in Section 1.3(a).
"Firm Purchase Price" has the meaning provided in Section 1.2(a).
"Firm Share Base Amount" has the meaning provided in
Section 1.1(a).
"Firm Shares" has the meaning provided in Section 1.1(a).
"Independent Dealers" has the meaning provided in Article VII.
"Initial DECS" has the meaning provided in the
recitals of this Agreement.
"Initial Price" has the meaning provided in Section 1.1(c).
"Market Price" means, as of any date of determination,
the average Closing Price per share of Common Stock on the 20
Trading Days immediately prior to (but not including) the date of
determination; provided, however, that if there are not 20
Trading Days for the Common Stock occurring later than the 60th
calendar day immediately prior to, but not including, such date,
the Market Price shall mean the market value per share of Common
Stock as of such date as determined by a nationally recognized
investment banking firm retained for such purpose by the
Administrator.
"NYSE" means the New York Stock Exchange.
"Option Closing Date" means the settlement dates for
the Additional DECS under Section 5 of the Underwriting
Agreement.
"Ordinary Cash Dividend" means, with respect to any
consecutive 365-day period, any dividend with respect to Common
Stock paid in cash to the extent that the amount of such
dividend, together with the aggregate amount of all other
dividends on the Common Stock paid in cash during such 365-day
period, does not exceed on a per share basis 10% of the average
of the Closing Prices of the Common Stock over such 365-day
period; provided that, for purposes of the foregoing definition,
the amount of cash dividends paid on a per share basis shall
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<PAGE>
be appropriately adjusted to reflect the occurrence
during such period of any event described in Article VI.
"Other Sellers" has the meaning provided in the
recitals of this Agreement.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, limited liability company, joint
venture or other entity, or a government or any political
subdivision or agency thereof.
"Purchaser" has the meaning provided in the
introductory paragraph of this Agreement.
"Reported Securities" has the meaning provided in Section 6.2.
"Seller" and "Sellers" have the meaning provided in
the introductory paragraph of this Agreement.
"Threshold Appreciation Price" has the meaning
provided in Section 1.1(c).
"Trading Day" means, with respect to any security the
Closing Price of which is being determined, a day on which such
security (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 security.
"Transaction Value" has the meaning provided in Section 6.2.
"Underwriter" has the meaning provided in the recitals
of this Agreement.
"Underwriting Agreement" has the meaning provided in
the recitals of this Agreement.
ARTICLE I
SALE AND PURCHASE
-----------------
1.1 Sale and Purchase.
(a) Firm Shares. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell to Purchaser,
and Purchaser agrees to purchase and acquire from Seller, the
number of shares of Common Stock (the "Firm Shares") equal to the
product of ________ (the "Firm Share Base Amount") and the
Exchange Rate.
(b) Additional Shares. Upon the terms and subject to
the conditions of this Agreement, Seller agrees to sell to
Purchaser, and Purchaser agrees to purchase and acquire from
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<PAGE>
Seller, a number of additional shares of Common Stock (the
"Additional Shares") equal to the product of the Additional Share
Base Amount and the Exchange Rate. In addition to
the other conditions set forth herein, such purchase and sale
shall be conditioned on the Underwriter's purchase of the
Additional Share Base Amount of Additional Shares pursuant to the
Underwriting Agreement on the Option Closing Date. Promptly after
receipt by Purchaser of notice that the Underwriter is exercising
its option to purchase Additional DECS, Purchaser will provide
Seller with written notice of such exercise by the Underwriter,
stating the related Additional Share Base Amount and the date on
which Purchaser shall deliver the purchase price for the
Additional Shares, which shall be the Option Closing Date for the
Additional DECS. The Firm Shares and the Additional Shares (if
any) are collectively referred to herein as the "Contract
Shares."
(c) Exchange Rate. The "Exchange Rate" shall be
determined in accordance with the following formula, subject to
adjustment as a result of certain events as provided in Article
VI: (i) if the Exchange Price is greater than $________ (the
"Threshold Appreciation Price"), [_____], (ii) if the Exchange
Price is less than or equal to the Threshold Appreciation Price
but greater than $______ (the "Initial Price"), a fraction
(rounded upward or downward to the nearest 1/10,000th or, if
there is not a nearest 1/10,000th, to the next higher 1/10,000th)
equal to the Initial Price divided by the Exchange Price and
(iii) if the Exchange Price is less than or equal to the Initial
Price, 1.
1.2 Purchase Price.
(a) Firm Purchase Price. The purchase price for the
Firm Shares (the "Firm Purchase Price") shall be $_______ in
cash.
(b) Additional Purchase Price. The purchase price for
the Additional Shares (the "Additional Purchase Price") shall be
an amount equal to (i) the difference between (1) the aggregate
proceeds to Purchaser from the sale of the Additional DECS and
(2) the aggregate cost to Purchaser, as notified by Purchaser to
Seller on the Option Closing Date for the Additional DECS, of the
Additional STRIPS, multiplied by (ii) a fraction, the numerator
of which is the Firm Share Base Amount and the denominator of
which is the number of Initial DECS purchased by the Underwriter
under the Underwriting Agreement.
1.3 Payment for and Delivery of Contract Shares.
(a) Firm Payment Date. Upon the terms and subject to
the conditions of this Agreement, Purchaser shall deliver to
Seller the Firm Purchase Price on ____________, 1997 (the "Firm
Payment Date") at the offices of Cleary, Gottlieb, Steen &
Hamilton, One Liberty Plaza, New York, New York 10006, or at such
other place as shall be agreed upon by Purchaser and Seller, paid
by wire transfer of Federal (immediately available) funds to an
account designated by Seller, against delivery by Seller to the
Collateral Agent of the number of shares of Common Stock and/or
cash, securities and other property necessary to comply with
Seller's obligations under the Collateral Agreement.
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<PAGE>
(b) Option Closing Date. Upon the terms and subject to
the conditions of this Agreement, Purchaser shall deliver to
Seller the Additional Purchase Price on the Option Closing Date
at the offices of Cleary, Gottlieb, Steen & Hamilton, New York,
New York 10006, or at such other place as shall be agreed upon by
Purchaser and Seller, paid by wire transfer of Federal
(immediately available) funds to an account designated by Seller,
against delivery by Seller to the Collateral Agent of the
additional number of shares of Common Stock and/or cash,
securities and other property necessary to comply with Seller's
obligations under the Collateral Agreement.
(c) Delivery of Contract Shares.
(i) On the Exchange Date, Seller agrees to deliver the
Contract Shares to Purchaser. Seller shall be deemed to
have instructed the Collateral Agent to deliver to the
Custodian, for the account of Purchaser, shares of Common
Stock then held by the Collateral Agent as collateral under
the Collateral Agreement, in an amount equal to the number
of Contract Shares, rounded down to the nearest whole
number. Instead of any fractional shares of Common Stock
that would otherwise be deliverable (prior to rounding) to
Purchaser at the Exchange Date, Seller agrees to make a
cash payment in respect of such fractional shares of Common
Stock in an amount equal to the value thereof at the
Exchange Price. Notwithstanding the foregoing, if an
Adjustment Event shall have occurred prior to the Exchange
Date then, in lieu of the foregoing, Seller shall be deemed
to have instructed: (A) in the case of any cash required to
be delivered on the Exchange Date as provided in Section
6.2, the Collateral Agent to wire transfer Federal
(immediately available) funds to an account designated by
Purchaser; and (B) in the case of any Reported Securities
required to be delivered by Seller in lieu of cash as
provided in Section 6.2, the Collateral Agent to deliver to
the Custodian, for the account of Purchaser, a specified
number of Reported Securities then held as collateral under
the Collateral Agreement, as provided in Section 6(g) of
the Collateral Agreement.
(ii) In the event that by the Exchange Date any
substitute collateral has not been replaced by shares of
Common Stock (or, after an Adjustment Event, cash or
Reported Securities) sufficient to meet Seller's
obligations hereunder, delivery shall be effected by
delivery by the Collateral Agent to the Custodian, for the
account of Purchaser, of the market value of the shares of
Common Stock required to be delivered hereunder, in the
form of any shares of Common Stock then pledged by Seller
plus cash generated from the liquidation of U.S. Government
obligations then pledged by Seller (or, after an Adjustment
Event, the market value of the alternative consideration
required to be delivered hereunder, in the form of any
Reported Securities then pledged, plus any cash then
pledged, plus cash generated from the liquidation of U.S.
Government obligations then pledged). In such event, Seller
shall be deemed to have instructed the Collateral Agent to
liquidate and turn into cash the U.S. Government
obligations then pledged by Seller to the extent necessary
to satisfy Seller's obligations hereunder.
(iii) Certificates representing Common Stock (or
Reported Securities) in registered form that are part of
the Contract Shares shall be registered in Purchaser's name
or in the name of a depositary or a nominee of a depositary
as requested by
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<PAGE>
Purchaser, unless such Common Stock (or Reported
Securities) is represented by one or more global
certificates registered in the name of a depositary or a
nominee of a depositary or are book entry securities, in
which event Purchaser's interest in such securities shall
be noted in a manner satisfactory to Purchaser and its
counsel.
(iv) Seller's right to deliver (or cause to be
delivered) to Purchaser hereunder Common Stock and Reported
Securities shall be conditioned upon such Common Stock and
Reported Securities to be so delivered being transferable
by Purchaser, following receipt from Seller, without any
restrictions not generally applicable to all holders of
such Common Stock or Reported Securities, as the case may
be. If the condition set forth in the preceding sentence
shall not be satisfied with respect to any Common Stock or
Reported Securities to be delivered by Seller, then,
notwithstanding the provisions hereof, Seller shall
exercise the Cash Delivery Option.
(d) Cash Delivery Option. At his or her option, Seller
may deliver to Purchaser on the Exchange Date, in lieu of the
Contract Shares, an amount in cash equal to, subject to
adjustment as provided in Section 6.2, the Exchange Price of the
Contract Shares (the "Cash Delivery Option"), paid by wire
transfer to an account designated by Purchaser, in Federal
(immediately available) funds. Seller may elect the Cash Delivery
Option in respect of all, but not less than all, Contract Shares
and may do so by notice to Purchaser, the Collateral Agent and
the Custodian not less than 25 Business Days prior to the
Exchange Date. If Seller elects the Cash Delivery Option and so
notifies Purchaser, Purchaser shall promptly notify The
Depository Trust Company and publish a notice in a daily
newspaper of national circulaion stating whether the holders of
DECS will receive shares of Common Stock, cash or a combination
thereof and, if a combination of Common Stock and cash, the
relative proportion of each.
(e) Seller represents, and Purchaser acknowledges,
that it is Seller's current intention to deliver Contract Shares
to the Purchaser on the Exchange Date and not to exercise the
Cash Delivery Option; however, Seller intends to consider all
relevant economic and market factors in ultimately determining
whether to deliver Contract Shares on the Exchange Date or to
exercise the Cash Delivery Option.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Purchaser that each
representation and warranty made by Seller in Section 3 of the
Underwriting Agreement is true and correct on the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
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Purchaser represents and warrants to Seller that each
representation and warranty made by Purchaser in Section 1 of the
Underwriting Agreement is true and correct on the date hereof.
ARTICLE IV
CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------
(a) The obligation of Purchaser to deliver the Firm
Purchase Price on the Firm Payment Date is subject to the
satisfaction of the following conditions:
(i) the purchase by the Underwriter of the Initial
DECS pursuant to the Underwriting Agreement shall have been
consummated as contemplated under the Underwriting
Agreement;
(ii) the representations and warranties of Seller
contained in Article II hereof shall be true and correct as
of the Firm Payment Date; and
(iii) the Collateral Agreement shall have been
executed by Seller and the delivery of the Collateral
thereunder shall have been made.
(b) The obligation of Purchaser to deliver the
Additional Purchase Price on the Option Closing Date is subject
to the satisfaction of the following conditions:
(i) the purchase by the Underwriter of the Additional
DECS pursuant to the Underwriting Agreement shall have been
consummated as contemplated under the Underwriting
Agreement;
(ii) the representations and warranties of Seller
contained in Article II hereof shall be true and correct as
of the Option Closing Date; and
(iii) the delivery of any additional Collateral under
the Collateral Agreement shall have been made.
ARTICLE V
COVENANTS
---------
5.1 Taxes. Seller shall pay any and all documentary,
stamp, transfer or similar taxes and charges that may be payable
in respect of the entry into this Agreement and the transfer and
delivery of the Contract Shares, cash or Reported Securities
pursuant hereto.
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<PAGE>
5.2 Forward Contract. Seller hereby agrees that: (i)
he will not treat this Agreement, any portion of this Agreement,
or any obligation hereunder as giving rise to any interest income
or other inclusions of ordinary income; (ii) he will not treat
the delivery of any portion of the Contract Shares, cash or
Reported Securities to be delivered pursuant to this Agreement as
the payment of interest or ordinary income; (iii) he will treat
this Agreement in its entirety as a forward contract for the
delivery of such Contract Shares, cash or Reported Securities;
and (iv) he will not take any action (including filing any tax
return or form or taking any position in any tax proceeding) that
is inconsistent with the obligations contained in clauses (i)
through (iii). Notwithstanding the preceding sentence, Seller may
take any action or position required by law, provided that Seller
delivers to Purchaser an unqualified opinion of counsel,
acceptable to Purchaser and nationally recognized as expert in
Federal tax matters, to the effect that such action or position
is required by a statutory change, Treasury regulation, or
applicable court decision published after the date of this
Agreement.
5.3 Limitations on Trading During Certain Days. Seller
hereby agrees that he or she will not, and will cause each of his
Affiliates that is under his or her control not to, buy or sell
shares of Common Stock or Reported Securities for his own account
during the 60 days prior to the Exchange Date.
5.4 Notices. Seller will cause to be delivered to Purchaser:
(a) Immediately upon the occurrence of any Event of
Default hereunder or under the Collateral Agreement, or upon
Seller's obtaining knowledge that any of the conditions or events
described in paragraph (a) or (b) of Article VII shall have
occurred with respect to the Company, notice of such occurrence;
and
(b) In case at any time prior to the Exchange Date
Seller receives notice, or otherwise obtains knowledge, that any
event requiring that an adjustment be effected pursuant to
Article VI hereof shall have occurred or be pending, then Seller
shall promptly cause to be delivered to Purchaser a notice
identifying such event and stating, if known to Seller, the date
on which such event is to occur and, if applicable, the record
date relating to such event. Seller shall cause further notices
to be delivered to Purchaser if Seller shall subsequently receive
notice, or shall otherwise obtain knowledge, of any further or
revised information regarding the terms or timing of such event
or any record date relating thereto.
5.5 Further Assurances. From time to time on and after
the date hereof through the Exchange Date (or, if later, the date
on which this Agreement has been fully performed), each of the
parties hereto shall use its or his reasonable best efforts to
take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper and advisable to consummate
and make effective as promptly as practicable the transactions
contemplated by this Agreement in accordance with the terms and
conditions hereof, including (i) using reasonable best efforts to
remove any legal impediment to the consummation of such
transactions and (ii) the execution and delivery of all such
deeds, agreements, assignments and further instruments of
transfer and conveyance necessary, proper or advisable to
consummate and make effective the transactions contemplated by
the Agreement in accordance with the terms and conditions hereof.
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5.6. Affirmative Covenants. During the term of this
Agreement, Seller covenants and agrees that he will:
(a) Comply in all material respects with all
applicable laws, rules, regulations and orders to the extent
noncompliance would have a material adverse effect on the ability
of Seller to perform his obligations hereunder or under the
Collateral Agreement, such compliance to include, without
limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon him or upon his
property, including the collateral pledged under the Collateral
Agreement, except to the extent contested in good faith.
(b) Furnish to Purchaser as soon as possible and in
any event within twenty calendar days after Seller shall become
aware of the occurrence of any failure by such Seller to comply
with or perform any agreement or obligation contained in this
Agreement or the Collateral Agreement, a statement of Seller
describing such failure and setting forth details of such failure
and the action which Seller has taken and proposes to take with
respect thereto.
ARTICLE VI
ADJUSTMENT OF EXCHANGE RATE, EXCHANGE PRICE AND CLOSING PRICE
6.1 Dilution Adjustments. The Exchange Rate, Exchange
Price and Closing Price shall be subject to adjustment
successively from time to time as follows:
(a) Stock Dividends, Splits, Reclassifications, Etc.
If the Company shall, after the date hereof,
(i) pay a stock dividend or make a distribution, in
either case, with respect to Common Stock in shares of such
stock;
(ii) subdivide or split its outstanding shares of Common Stock
into a greater number of shares;
(iii) combine its outstanding shares of Common Stock into
a smaller number of shares; or
(iv) issue by reclassification (other than a
reclassification pursuant to clause (b), (c), (d) or (e) of
the definition of Adjustment Event) of its shares of Common
Stock any shares of common stock of the Company;
then, in each such case, the Exchange Rate shall be multiplied by
a Dilution Adjustment equal to the number of shares of common
stock (or the fraction thereof) that a holder who
held one share of Common Stock immediately prior to such event
would be entitled solely by reason of such event to hold
immediately after such event. In the case of the reclassification
of any shares of Common Stock into any shares of common stock of
the Company other than the Common Stock, such shares of common
stock shall be deemed shares of Common Stock for all purposes
11
<PAGE>
hereunder. The Exchange Price and Closing Price shall also be
adjusted in the manner described in paragraph (c).
(b) Right or Warrant Issuances. If the Company shall,
after the date hereof, issue, or declare a record date in respect
of an issuance of, rights or warrants (other than rights to
purchase Common Stock pursuant to a plan for the reinvestment of
dividends or interest) to all holders of Common Stock entitling
them to subscribe for or purchase shares of Common Stock at a
price per share less than the Market Price of the Common Stock on
the Business Day next following the record date for the
determination of holders of Common Stock entitled to receive such
rights or warrants, then, in each such case, the Exchange Rate
shall be multiplied by the following Dilution Adjustment: a
fraction, of which the numerator shall be (A) the number of
shares of Common Stock outstanding on the record date for the
issuance of such rights or warrants plus (B) the number of
additional shares of Common Stock offered for subscription or
purchase pursuant to such rights or warrants, and of which the
denominator shall be (x) the number of shares of Common Stock
outstanding on the record date for the issuance of such rights or
warrants plus (y) the number specified in clause (B) above
multiplied by the quotient of the exercise price of such rights
or warrants divided by the Market Price of the Common Stock on
the Business Day next following the record date for the
determination of holders of Common Stock entitled to receive such
rights or warrants. To the extent that such rights or warrants
expire prior to the Exchange Date and shares of Common Stock are
delivered with respect to less than all of such rights or
warrants prior to such expiration, the Exchange Rate shall be
readjusted to the Exchange Rate which would then be in effect had
such adjustments for the issuance of such rights or warrants been
made upon the basis of delivery of only the number of shares of
Common Stock actually delivered pursuant to such rights or
warrants. The Exchange Price and Closing Price shall also be
adjusted in the manner described in paragraph (c).
(c) Corresponding Adjustments to Exchange Price;
Adjustment of Closing Price in Certain Circumstances.
(i) If any adjustment is made to the Exchange Rate
pursuant to paragraph (a) or (b) of this Section 6.1, an
adjustment shall also be made to the Exchange Price as such
term is used throughout the definition of Exchange Rate.
The required adjustment to the Exchange Price shall be made
at the Exchange Date by multiplying the Exchange Price by
the cumulative Dilution Adjustment.
(ii) If, during any Calculation Period used in
calculating the Exchange Price, the Market Price or the
Transaction Value, there shall occur any event requiring an
adjustment to be effected pursuant to this Section 6.1,
then the Closing Price for each Trading Day in the
Calculation Period occurring prior to the day on which such
adjustment is effected shall be adjusted by being divided
by the relevant Dilution Adjustment.
(d) Timing of Dilution Adjustments. Each Dilution
Adjustment shall be effected:
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(i) in the case of any dividend, distribution, or
issuance of rights or warrants, at the opening of business
on the Business Day next following the record date for
determination of holders of Common Stock entitled to
receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance
is after such record date, at the time such dividend,
distribution or issuance shall be announced by the Company;
and
(ii) in the case of any subdivision, split,
combination or reclassification, on the effective date of
such transaction.
(e) General; Failure of Dilution Event to Occur. All
Dilution Adjustments shall be rounded upward or downward to the
nearest 1/10,000th (or if there is not a nearest 1/10,000th to
the next higher 1/10,000th). No adjustment in the Exchange Rate
shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided,
however, that any adjustments which by reason of this sentence
are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. If any announcement or
declaration of a record date in respect of a dividend,
distribution or issuance requiring an adjustment pursuant to this
Section 6.1 shall subsequently be canceled by the Company, or
such dividend, distribution or issuance shall fail to receive
requisite approvals or shall fail to occur for any other reason,
then, upon such cancellation, failure of approval or failure to
occur, the Exchange Rate shall be readjusted to the Exchange Rate
which would then have been in effect had adjustment for such
event not been made. If an Adjustment Event shall occur after the
occurrence of one or more events requiring an adjustment pursuant
to this Section 6.1, the Dilution Adjustments previously applied
to the Exchange Rate in respect of such events shall not be
rescinded but shall be applied to the new Exchange Rate provided
for under Section 6.2.
6.2 Adjustment for Consolidation, Merger or Other
Adjustment Event. In the event of (a) any dividend or
distribution by the Company to all holders of Common Stock of
evidences of its indebtedness or other assets (excluding any
dividends or distributions referred to in Section 6.1(a)(i), any
shares of common stock issued pursuant to a reclassification
referred to in Section 6.1(a)(iv) and any Ordinary Cash
Dividends) or any issuance by the Company to all holders of
Common Stock of rights or warrants to subscribe for or purchase
any of its securities (other than rights or warrants referred to
in Section 6.1(b)), (b) any consolidation or merger of the
Company with or into another entity (other than a merger or
consolidation in which the Company is the continuing corporation
and in which the Common Stock outstanding immediately prior to
the merger or consolidation is not exchanged for cash, securities
or other property of the Company or another corporation), (c) any
sale, transfer, lease or conveyance to another corporation of the
property of the Company as an entirety or substantially as an
entirety, (d) any statutory exchange of securities of the Company
with another corporation (other than in connection with a merger
or acquisition) or (e) any liquidation, dissolution or winding up
of the Company (any such event described in clause (a), (b), (c),
(d) or (e), an "Adjustment Event"), the Exchange Rate shall be
adjusted so that on the Exchange Date Seller shall deliver to
Purchaser, in lieu of or (in the case of an Adjustment Event
described in clause (a) above) in addition to, the Contract
Shares, cash in an amount equal to the product of the number of
Contract Shares and the Transaction Value (as defined below).
Following an Adjustment Event, the Exchange Price, as
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such term is used throughout the definition of Exchange
Rate, shall be deemed to equal (A) if shares of Common
Stock are outstanding at the Exchange Date, the Exchange Price of
the Common Stock, as adjusted pursuant to Section 6.1(c),
otherwise zero, plus (B) the Transaction Value.
Notwithstanding the foregoing, with respect to any
Reported Securities (as defined below) received by holders of
Common Stock in an Adjustment Event, Seller shall, in lieu of
delivering cash in respect of such Reported Securities as
described above, deliver a number of such Reported Securities
with a value, as determined in accordance with clause (ii) of the
definition of Transaction Value, equal to all cash amounts that
would otherwise be deliverable in respect of Reported Securities
received in such Adjustment Event, unless Seller has made an
election to exercise the Cash Delivery Option or such Reported
Securities have not yet been delivered to the holders entitled
thereto following such Adjustment Event or any record date with
respect thereto. If, following any Adjustment Event, any Reported
Security ceases to qualify as a Reported Security, then (x)
Seller shall not deliver such Reported Security but instead shall
deliver of an equivalent amount of cash and (y) notwithstanding
clause (ii) of the definition of Transaction Value, the
Transaction Value of such Reported Security shall mean the fair
market value of such Reported Security on the date such security
ceases to qualify as a Reported Security, as determined by a
nationally recognized investment banking firm retained for this
purpose by the Administrator.
"Transaction Value" means (i) for any cash received in
any Adjustment Event, the amount of cash received per share of
Common Stock, (ii) for any Reported Securities received in any
Adjustment Event, an amount equal to (x) the average Closing
Price per security of such Reported Securities on the 20 Trading
Days immediately prior to (but not including) the Exchange Date
multiplied by (y) the number of such Reported Securities (as
adjusted pursuant to the definition thereof) received per share
of Common Stock and (iii) for any property received in any
Adjustment Event other than cash or Reported Securities, an
amount equal to the fair market value of the property received
per share of Common Stock on the date such property is received,
as determined by a nationally recognized investment banking firm
retained for this purpose by the Administrator; provided,
however, that in the case of clause (ii), (x) with respect to
securities that are Reported Securities by virtue of only clause
(iv) of the definition of Reported Securities, Transaction Value
with respect to any such Reported Security means the average of
the mid-point of the last bid and ask prices for such Reported
Security as of the Exchange Date from each of at least three
nationally recognized investment banking firms retained for such
purpose by the Administrator multiplied by the number of such
Reported Securities (as adjusted pursuant to the definition
thereof) received per share of Common Stock and (y) with respect
to all other Reported Securities, if there are not 20 Trading
Days for any particular Reported Security occurring after the
60th calendar day immediately prior to, but not including, the
Exchange Date, Transaction Value with respect to such Reported
Security means the fair market value per security of such
Reported Security as of the Exchange Date as determined by a
nationally recognized investment banking firm retained for such
purpose by the Administrator multiplied by the number of such
Reported Securities (as adjusted pursuant to the definition
thereof) received per share of Common Stock. For purposes of
calculating the Transaction Value, any cash, Reported Securities
or other property receivable in an Adjustment Event shall be deemed to
14
<PAGE>
have been received immediately prior to the close of business on
the record date for such Adjustment Event or, if there is no
record date for such Adjustment Event, immediately prior to the
close of business on the effective date of such Adjustment Event.
"Reported Securities" means any securities received in
an Adjustment Event that (A) are (i) listed on a United States
national securities exchange, (ii) reported on a United States
national securities system subject to last sale reporting, (iii)
traded in the over-the-counter market and reported on the
National Quotation Bureau or similar organization or (iv) for
which bid and ask prices are available from at least three
nationally recognized investment banking firms and (B) are either
(x) perpetual equity securities or (y) non- perpetual equity or
debt securities with a stated maturity after the Exchange Date.
The number of shares of any Reported Securities included in the
calculation of Transaction Value pursuant to clause (ii) of the
definition thereof shall be subject to adjustment if any event
that would, had it occurred with respect to the Common Stock or
the Company, have required an adjustment pursuant to Section 6.1
or 6.2, shall occur with respect to such Reported Securities or
the issuer thereof subsequent to the date the Adjustment Event is
consummated. Adjustment for such subsequent events shall be as
nearly equivalent as practicable to the adjustments provided for
in Section 6.1 or 6.2, as applicable.
ARTICLE VII
ACCELERATION
------------
If one or more of the following events (each an "Event
of Default") shall occur:
(a) Seller shall commence a voluntary case or other
proceeding seeking a liquidation, reorganization or other relief
with respect to himself or his debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of him or any substantial
part of his property, or shall consent to any such relief or to
the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against him, or
shall take any action to authorize any of the foregoing;
(b) an involuntary case or other proceeding shall be
commenced against Seller seeking liquidation, reorganization or
other relief with respect to him or his debts under any
bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of him or any
substantial part of his property; or an order for relief shall be
entered against Seller under the federal bankruptcy laws as now
or hereafter in effect; or
(c) a Collateral Event of Default within the meaning
of the Collateral Agreement;
then an "Acceleration Date" shall occur, Seller's rights
under Section 1.3(d) shall terminate immediately and (i) in
the case of clause (c), Seller shall become obligated to
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<PAGE>
the extent permitted by law to deliver to Purchaser
(and shall be deemed to instruct the Collateral
Agent to deliver to the Custodian, for the account of
Purchaser, and to liquidate and turn into cash the U.S.
Government obligations then pledged by Seller to the extent
necessary to satisfy such obligation) the Contract Shares,
in the form of the shares of Common Stock then pledged by
Seller, or cash generated from the liquidation of U.S.
Government obligations then pledged by Seller, or a
combination thereof (or, after an Adjustment Event, the
alternate consideration to be delivered, in the form of
Reported Securities then pledged, cash then pledged, cash
generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof); or
(ii) in the case of clauses (a) or (b), Seller shall
become obligated to deliver to Purchaser (and shall be
deemed to instruct the Collateral Agent to deliver to the
Custodian, for the account of Purchaser, and to liquidate
and turn into cash the U.S. Government obligations then
pledged by Seller to the extent necessary to satisfy such
obligation) a number of shares of Common Stock, in the form
of the shares of Common Stock then pledged by Seller, or
cash generated from the liquidation of U.S. Government
obligations then pledged by Seller, or a combination
thereof (or, after an Adjustment Event, the alternate
consideration to be delivered, in the form of Reported
Securities then pledged, cash then pledged, cash generated
from the liquidation of U.S. Government obligations then
pledged, or a combination thereof), with an aggregate value
(based on the Closing Price on the Acceleration Date) equal
to the Acceleration Value (as defined below).
"Acceleration Value" means an amount determined by the
Administrator on the basis of quotations from Independent Dealers
(as defined below). Each quotation will be for an amount that
would be paid to the relevant Independent Dealer in consideration
of an agreement between Purchaser and such Independent Dealer
that would have the effect of preserving for Purchaser the
economic equivalent of the payments and deliveries that Purchaser
would, but for the occurrence of the Acceleration Date, have been
entitled to receive after the Acceleration Date hereunder (taking
into account any adjustments to the Exchange Rate that may have
been effected on or prior to the Acceleration Date). On or as
soon as reasonably practicable following the Acceleration Date,
the Administrator will request each Independent Dealer to provide
its quotation as soon as reasonably practicable, but in any event
within two Business Days. The Administrator shall compute the
Acceleration Value upon receipt of each Independent Dealer's
quotation, provided that if, at the close of business on the
fourth Business Day following the Acceleration Date, the
Administrator shall have received quotations from fewer than four
of the Independent Dealers, the Administrator shall compute the
Acceleration Value using the quotations, if any, it shall have
received at or prior to such time. If four quotations are
provided, the Acceleration Value will be the arithmetic mean of
the two quotations remaining after disregarding the highest and
lowest quotations. (For this purpose, if more than one quotation
has the same highest or lowest value, then one of such quotations
shall be disregarded.) 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 equal to such quotation. If no quotations are provided,
the Acceleration Value will be the aggregate value (based on the
Closing Price on the Acceleration Date) of the number of shares
of Common Stock (or, after an
16
<PAGE>
Adjustment Event, Reported Securities, cash or a
combination thereof) that would be required to be delivered
hereunder on the Acceleration Date if the Exchange Date were
redefined to be the Acceleration Date.
"Independent Dealers" means four nationally recognized
independent investment banking firms selected in good faith by
the Administrator.
As promptly as reasonably practicable after receipt of
the quotations on which the Acceleration Value is based (or, as
the case may be, after failure to receive any such quotations
within the time period prescribed above), Purchaser shall deliver
to Seller and the Collateral Agent a notice specifying the number
of shares of Common Stock (or, after an Adjustment Event, the
alternate consideration) required to be delivered by Seller.
Purchaser and Seller agree that the obligations contained in
clauses (i) and (ii) above are a reasonable pre-estimate of loss
and not a penalty. Such amount is payable for the loss of bargain
and Purchaser will not be entitled to recover additional damage
as a consequence of loss resulting from an Event of Default.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Adjustments; Selection of Independent Investment
Banking Firm. Purchaser shall be responsible for the effectuation
and calculation of any adjustment pursuant to Article VI hereof
and shall furnish Seller notice of any such adjustment and shall
provide Seller reasonable opportunity to review the calculations
pertaining to any such adjustment. If, pursuant to the terms and
conditions hereof, the Administrator shall be required to retain
a nationally recognized independent investment banking firm for
any purpose provided herein, such nationally recognized
independent investment banking firm shall be selected and
retained by the Administrator only after consultation with
Seller; provided, however, that Seller shall be deemed to have
waived his right to consult if Seller fails to consult within five
Business Days of notice being sent by the Administrator to Seller
seeking consultation. Purchaser may delegate the effectuation and
calculation of any such adjustments to its Administrator.
8.2 Notices. Notices to Purchaser shall be directed to
it in care of the Administrator for Purchaser, The Bank of New
York, at 101 Barclay Street, New York, New York 10286, Telephone:
212-816-5228, Telecopier: 212-816-7157; notices to Seller shall
be directed to him or her at ______________________, with a copy
to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue,
New York, New York 10022, Attention: Matthew Rosen, Esq.
Notwithstanding the foregoing, notices to a party shall be
directed to such other address for such party as shall be
specified by such party in a like notice given pursuant to this
Section 8.2. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if
either (i) personally delivered (including delivery by courier
service or by Federal Express or any other nationally recognized
overnight delivery service for next day delivery) to the offices
specified in the preceding sentence, in which case they shall be
17
<PAGE>
deemed received on the first Business Day by which delivery shall
have been made to said offices; or (ii) sent by certified mail,
return receipt requested, in accordance with the preceding
sentence, in which case they shall be
deemed received when receipted for unless acknowledgment
is refused (in which case delivery shall be deemed
to have been received on the first Business Day on which such
acknowledgment is refused). Any notice, demand or other
communication to be provided by or on behalf of Purchaser
pursuant to this Agreement shall be sent to the address of Seller
provided in this Section 8.2 notwithstanding the death of Seller,
the adjudication of Seller as incompetent or the appointment of a
guardian with respect to the affairs of Seller. Any failure by
Seller or any guardian, conservator, executor, administrator or
other similarly appointed person to receive any such notice,
demand or communication shall in no way abrogate, invalidate or
otherwise affect the validity or enforceability of the notice,
demand or communication or the matters set forth therein.
8.3 Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon
the same instrument.
8.4 Entire Agreement. Except as expressly set forth
herein, this Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes
all prior agreements, understandings and negotiations, both
written and oral, among the parties with respect to the subject
matter of this Agreement.
8.5 Amendments; Waivers. Any provision of this
Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and signed, in the case of an
amendment, by Purchaser and Seller or, in the case of a waiver,
by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other
or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies
provided by law.
8.6 No Third Party Rights; Successors and Assigns.
This Agreement is not intended and shall not be construed to
create any rights in any person other than Seller and Purchaser
and their respective successors and assigns and no person shall
assert any rights as third party beneficiary hereunder. Whenever
any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such
party.
8.7. Application of Bankruptcy Code. The parties
hereto acknowledge and agree that the Collateral Agent is a
"financial institution" within the meaning of Section 101(22) of
Title 11 of the United States Code (the "Bankruptcy Code") and is
acting as agent and custodian for Purchaser in connection with
this Agreement and that Purchaser is a "customer" of the
Collateral Agent within the meaning of said Section 101(22). The
parties hereto further acknowledge and agree that this Agreement
is a "securities contract", as such term is defined in Section
741(7) of the Bankruptcy Code, entitled to the protection of
Section 555 of the Bankruptcy Code.
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<PAGE>
8.8 Governing Law; Jurisdiction; Severability; Waiver
of Jury Trial. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. For the
purpose of any suit, action or proceeding arising out of or
relating to this Agreement, the parties hereto hereby expressly
and irrevocably consent and submit to the non-exclusive
jurisdiction of any United States Federal or New York State court
sitting in the Borough of Manhattan, City and State of New York,
and expressly and irrevocably waive, to the extent permitted
under applicable law, any immunity from the jurisdiction thereof
and any claim or defense in such suit, action or proceeding based
on a claim of improper venue, forum non conveniens or any similar
basis to which it or he might otherwise be entitled. To the
extent permitted by law, the unenforceability or invalidity of
any provision or provisions of this Agreement shall not render
any other provision or provisions herein contained unenforceable
or invalid. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT
ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT
TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON
THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT
OR OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT OR HE HAS
BEEN INFORMED BY THE OTHER PARTY HERETO THAT THE PROVISIONS OF
THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH
OTHER PARTY HERETO HAS RELIED, IS RELYING AND WILL RELY IN
ENTERING INTO THIS AGREEMENT AND ANY DOCUMENT RELATED THERETO.
EACH PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
OTHER PARTY HERETO TO THE WAIVER OF ITS OR HIS RIGHTS TO TRIAL BY
JURY.
IN WITNESS WHEREOF, the parties have signed this
Agreement as of the date and year first above written.
PURCHASER: SELLER:
DECS TRUST
By:________________________
Name:
Title:
19
COLLATERAL AGREEMENT
Among
[Selling Shareholder],
As Pledgor,
The Bank of New York, As Collateral Agent
and
DECS TRUST
Dated as of
, 1997
<PAGE>
The following Table of Contents has been inserted for
convenience of reference only and does not constitute a part of
the Collateral Agreement.
TABLE OF CONTENTS
SECTION
1. The Security Interests.......................................1
2. Definitions..................................................2
3. Representations and Warranties of the Pledgor................5
4. Representations and Warranties of the Collateral Agent.......6
5. Certain Covenants of the Pledgor.............................7
6. Administration of the Collateral and Valuation of
the Securities...............................................8
7. Income and Voting Rights on Collateral......................13
8. Remedies upon Events of Default.............................13
9. The Collateral Agent........................................16
10. Miscellaneous...............................................18
11. Termination of Collateral Agreement.........................19
12. No Personal Liability of Trustees...........................20
Exhibit A - Certificate for Substituted Collateral
Exhibit B - Certificate for Additional Collateral
Exhibit C - Certificate of Spouse
i
<PAGE>
COLLATERAL AGREEMENT
THIS COLLATERAL AGREEMENT (the "Agreement"), dated as
of _________, 1997, among [Selling Shareholder] (the "Pledgor"),
The Bank of New York, a New York banking corporation, as
collateral agent (the "Collateral Agent") hereunder for the
benefit of DECS Trust, a statutory business trust organized under
the Business Trust Act of the State of Delaware (such trust and
the trustees thereof acting in their capacity as such being
referred to herein as the "Trust" or "Purchaser") and the Trust;
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (the
"Purchase Agreement"), dated as of _________, 1997, between the
Pledgor and Purchaser, the Pledgor has agreed to sell and
Purchaser has agreed to purchase Common Stock, no par value (the
"Common Stock"), of DIMON Incorporated, a Virginia corporation
(the "Company"), subject to the terms and conditions of the
Purchase Agreement; and
NOW, THEREFORE, to secure the performance by the
Pledgor of its obligations under the Purchase Agreement and to
secure the observance and performance of the covenants and
agreements contained herein and in the Purchase Agreement, the
parties hereto agree as follows:
1. The Security Interests.
In order to secure the observance and performance of
the covenants and agreements contained herein and in the Purchase
Agreement:
(a) Security Interests. The Pledgor hereby grants,
sells, conveys, assigns, transfers and pledges unto the
Collateral Agent, as agent of and for the benefit of the Trust, a
security interest in and to, and a lien upon and right of set-off
against, all of Pledgor's right, title and interest in and to (i)
the Pledged Items described in paragraphs (b) and (c); (ii) all
additions to and substitutions for such Pledged Items; (iii) all
income, proceeds and collections received or to be received, or
derived or to be derived, now or any time hereafter from or in
connection with the Pledged Items (whether such proceeds arise
before or after the commencement of any proceeding under any
applicable bankruptcy, insolvency or other similar law, by or
against the Pledgor with respect to the Pledgor); and (iv) all
powers and rights now owned or hereafter acquired under or with
respect to the Pledged Items (such Pledged Items, additions,
substitutions, proceeds, collections, powers and rights being
herein collectively called the "Collateral"). The Collateral
Agent shall have all of the rights, remedies and recourses with
respect to the Collateral afforded a secured party by the New
York Uniform Commercial Code, in addition to, and not in
limitation of, the other rights, remedies and recourses afforded
to the Collateral Agent by this Agreement.
(b) Firm Payment Date. At the Firm Payment Date, the Pledgor
shall deliver to the Collateral Agent in pledge hereunder one or
more certificates in registered form representing in the aggregate
___________ shares of the Common Stock, indorsed in blank or in
<PAGE>
the name of the Collateral Agent for the benefit of the Trust
(together with all signature guarantees and any other documents
necessary to permit the Collateral Agent to effect the
re-registration of such Common Stock without further action by
the Pledgor) or, if such Common Stock is not issuable in
certificated form but is held in book entry form by The
Depository Trust Company, the Pledgor shall transfer such number
of shares of Common Stock to an account of the Collateral Agent
or to an account (other than an account of the Pledgor)
designated by the Collateral Agent with The Depository Trust
Company.
(c) Option Closing Date. Effective upon and subject to
the receipt by the Pledgor of the Additional Purchase Price, at
the Option Closing Date, the Pledgor shall deliver to the
Collateral Agent in pledge hereunder one or more certificates in
registered form representing in the aggregate a number of shares
of Common Stock equal to the Additional Share Base Amount,
indorsed in blank or in the name of the Collateral Agent for the
benefit of the Trust (together with all signature guarantees and
any other documents necessary to permit the Collateral Agent to
effect the re-registration of such Common Stock without further
action by the Pledgor) or, if such Common Stock is not issuable
in certificated form but is held in book entry form by The
Depository Trust Company, the Pledgor shall transfer such number
of shares of Common Stock to an account of the Collateral Agent
or to an account (other than an account of the Pledgor)
designated by the Collateral Agent with The Depository Trust
Company.
(d) Reregistration. Immediately following the Firm
Payment Date and any Option Closing Date, the Collateral Agent
shall cause all certificates for Common Stock delivered pursuant
to Section 1(b) or 1(c) above to be re-registered on the books of
the transfer agent for the Common Stock into the name of the
Collateral Agent or its nominee, and shall thereafter maintain
them in such form until the termination of this Agreement.
2. Definitions.
Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to them in the Purchase
Agreement. Capitalized terms used herein shall have the meanings
as follows:
"Authorized Representative" of the Pledgor means any
trustee or other representative as to whom Pledgor shall have
delivered notice to the Collateral Agent that such trustee or
other representative is authorized to act hereunder on behalf of
Pledgor.
"Business Day" means any day except a Saturday, Sunday
or other day on which banking institutions in New York City are
authorized or obligated by law or regulation to close or a day on
which the New York Stock Exchange, Inc. is closed.
"Cash Delivery Obligations" means, at any time (A) if
no Adjustment Event shall have occurred prior to such time, zero,
and (B) from and after any Adjustment Event, the product of: (i)
the Firm Share Base Amount plus the Additional Share Base Amount
(if any) and (ii) the Transaction Value of any property other
than Reported Securities received by the Pledgor in such
Adjustment Event, multiplied successively by each number by which
the Exchange Rate shall
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have been multiplied on or prior to the Adjustment Event pursuant
to the adjustments provided for under Section 6.1 of the Purchase
Agreement.
"Collateral" has the meaning specified in Section 1(a).
"Collateral Agent" means the financial institution
identified as such in the preliminary paragraph hereof, or any
successor appointed in accordance with Section 9.
"Collateral Agreement" means this Collateral Agreement
and any exhibits hereto.
"Collateral Event of Default" has the meaning specified
in Section 6(e).
"Collateral Requirement" means, as of any date and
with respect to: (i) any Common Stock, 100%; (ii) any Reported
Securities, 100%; (iii) any U.S. Government Securities pledged in
respect of Cash Delivery Obligations, 105%; and (iv) any other
U.S. Government Securities, 150%, provided that upon and after
any failure to cure an Insufficiency Determination by 4:00 p.m.
New York City time on the Business Day following telephonic
notice of such Insufficiency Determination as described in
Section 6(e), which insufficiency shall be continuing on such
Business Day, the Collateral Requirement relating to any U.S.
Government Securities (other than U.S. Government Securities
pledged in respect of Cash Delivery Obligations) shall be 200%.
The portion of any pledged U.S. Government Securities that shall
be deemed at any time to be in respect of Cash Delivery
Obligations shall be as provided in Section 6(e).
"Delivery Date" has the meaning specified in Section 8(a).
"Eligible Collateral" means (i) Common Stock, (ii)
U.S. Government Securities, and (iii) from and after any
Adjustment Event, Reported Securities, provided, in each case,
that the Pledgor has good and marketable title thereto, free of
all Liens (other than the Liens created by this Collateral
Agreement) and Transfer Restrictions and that the Collateral
Agent has a valid, first priority perfected security interest
therein and first lien thereon, and provided further that to the
extent the number of shares of Common Stock or Reported
Securities pledged hereunder exceeds at any time the Maximum
Deliverable Number thereof, such excess shares shall not be
Eligible Collateral.
"Event of Default" means the occurrence of: (i) an
event described in clause (a) or (b) of Article VII of the
Purchase Agreement, (ii) a Collateral Event of Default, (iii) a
failure by Pledgor to have caused the Collateral to meet the
requirements described in Section 5(d), (iv) if an Adjustment
Event shall have occurred prior to the Exchange Date, failure by
Pledgor to cause to be delivered to Purchaser on the Exchange
Date the consideration then required to be delivered pursuant to
Section 6.2 of the Purchase Agreement or (v) if Pledgor shall
have exercised its Cash Delivery Option, a failure by the Pledgor
to deliver cash on the Exchange Date in the amount required under
Section 1.3(d) of the Purchase Agreement.
"Ineligible Collateral" means Collateral that does not
constitute "Eligible Collateral".
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"Lien" means any lien, mortgage, security interest, pledge,
charge or encumbrance of any kind.
"Market Value" means, as of any date: (a) with respect
to any Common Stock (except as otherwise provided in Section
6(e)(2)), the Closing Price on such date; (b) with respect to any
U.S. Government Security, the product of (x)(i) the average unit
bid price for such security as published on the Trading Day prior
to such date in the New York edition of The Wall Street Journal
or The New York Times or, if not so published, (ii) the lower bid
price quoted (which quotation shall be evidenced in writing) on
the Trading Day prior to such date by either of two nationally
recognized dealers making a market in such security which are
members of the National Association of Securities Dealers, Inc.
and (y) the number of such units comprised in the outstanding
principal amount of such U.S. Government Security; and (c) with
respect to any unit of Reported Securities, the Closing Price
thereof on the Trading Day prior to such date; provided that the
"Market Value" of any Ineligible Collateral shall be zero.
"Maximum Deliverable Number" means, on any date, with
respect to the Common Stock, the product of the Firm Share Base
Amount plus the Additional Share Base Amount (if any), multiplied
successively by each number by which the Exchange Rate shall have
been multiplied on or prior to such date pursuant to the
adjustments provided for under Section 6.1 of the Purchase
Agreement. The Maximum Deliverable Number of Reported Securities
means, on any date, the product of (i) the Firm Share Base Amount
plus the Additional Share Base Amount (if any) and (ii) the
number of Reported Securities received by the Pledgor in the
Adjustment Event for each share of Common Stock, multiplied
successively by each number by which the Exchange Rate shall have
been multiplied on or prior to such date and after the date of
such Adjustment Event pursuant to the adjustments provided for
under Article VI of the Purchase Agreement.
"Person" means an individual, a corporation, a
partnership, an association, a limited liability company, a trust
or any other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Pledge Value" means, as of any date and with respect
to any particular type of Collateral, an amount equal to the
aggregate Market Value of such Collateral divided by the
Collateral Requirement for such Collateral.
"Pledge Value Requirement" means, as of any date, (a)
the aggregate Market Value on such date of the Maximum
Deliverable Number of shares of Common Stock or, from and after
an Adjustment Event, Reported Securities, on such date plus (b)
from and after an Adjustment Event, the Cash Delivery
Obligations.
"Pledged Items" means, as of any date, any and all
securities and instruments delivered by the Pledgor to be held by
the Collateral Agent under this Collateral Agreement as
Collateral, whether Eligible Collateral or Ineligible Collateral.
"Prior Collateral" has the meaning specified in Section
6(b)(1).
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"Responsible Officer" means, when used with respect to
the Collateral Agent, any vice president, assistant vice president,
assistant treasurer or assistant secretary located in the
division or department of the Collateral Agent responsible for
performing the obligations of the Collateral Agent under this
Collateral Agreement, or in any other division or department of
the Collateral Agent performing operations substantially
equivalent to those performed by such division or department
pursuant hereto, or any other officer of the Collateral Agent or
any successor Collateral Agent customarily performing functions
similar to those performed by any of the aforesaid officers, and
also means, with respect to any matter relating to this
Collateral Agreement or the Collateral, any other officer to whom
such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Transfer Restriction" means, with respect to any item
of Collateral, any condition to or restriction on the ability of
the holder thereof to sell, assign or otherwise transfer such
item of Collateral or to enforce the provisions thereof or of any
document related thereto whether set forth in such item of
Collateral itself or in any document related thereto, including,
without limitation, (i) any requirement that any sale, assignment
or other transfer or enforcement of such item of Collateral be
consented to or approved by any Person, including, without
limitation, the issuer thereof or any other obligor thereon, (ii)
any limitations on the type or status, financial or otherwise, of
any purchaser, pledgee, assignee or transferee of such item of
Collateral, (iii) any requirement of the delivery of any
certificate, consent, agreement, opinion of counsel, notice or
any other document of any Person to the issuer of, any other
obligor on or any registrar or transfer agent for, such item of
Collateral, prior to the sale, pledge, assignment or other
transfer or enforcement of such item of Collateral and (iv) any
registration or qualification requirement for such item of
Collateral pursuant to any federal or state securities law;
provided that the required delivery of any assignment from the
seller, pledgor, assignor or transferor of such item of
Collateral, together with any evidence of the corporate or other
authority of such Person, shall not constitute a "Transfer
Restriction."
"Trustee" or "Trustees" means any trustee or trustees
of the Trust identified on the signature pages hereto, or any
successor as such trustee or trustees.
"UCC" means the Uniform Commercial Code as in effect
in the State of New York.
"U.S. Government Securities" means direct obligations
of the United States of America that mature on a date that is one
year or less from the date such obligations are pledged
hereunder, but in any event prior to the Exchange Date.
3. Representations and Warranties of the Pledgor.
The Pledgor hereby represents and warrants to the
Collateral Agent and the Trust that:
(a) Power. Pledgor has full power and authority
to execute and deliver this Collateral Agreement and to perform
and observe the provisions hereof;
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(b) Non-Contravention. The execution, delivery and
performance by the Pledgor of this Collateral Agreement do
not and will not violate, contravene or constitute a
default under any provision of applicable law or regulation
or of any material agreement, judgment, injunction, order,
decree or other instrument binding upon the Pledgor.
Pledgor is not in default under any agreement by which the
Collateral may be bound and no litigation, arbitration or
administrative proceedings are current or pending, which
default, litigation, arbitration or administrative
proceedings are material to the Collateral in the context
of this Collateral Agreement.
(c) Binding Effect. This Collateral Agreement
constitutes a valid and binding agreement of the Pledgor
enforceable against the Pledgor in accordance with its
terms.
(d) Solvency. Pledgor is presently solvent and
able to pay, and paying his, her or its debts as they
become due, and anticipates that it will continue to be
able to pay its debts as they become due for the forseeable
future.
(e) No Transfer Restrictions. Except for any
legend with respect to restrictions pursuant to applicable
federal and state securities laws on transfer of the Common
Stock pledged by the Pledgor hereunder which appears on the
[face] [back] of the certificates representing such Common
Stock (and which (i) will not be applicable to the delivery
of any such Common Stock on the Exchange Date and (ii) will
be removed at the request of the Collateral Agent to the
transfer agent for the Common Stock prior to the Exchange
Date) no Transfer Restrictions exist with respect to or
otherwise apply to the assignment of, or transfer by the
Pledgor of possession of, any items of Collateral to
the Collateral Agent hereunder, or the subsequent sale or
transfer of such items of Collateral by the Collateral Agent
pursuant to the terms hereof.
(f) Title to Collateral; Perfected Security
Interest. The Pledgor has good and marketable title to the
Pledged Items, free of all Liens (other than the Lien
created by this Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Pledged Items described
in paragraphs (b) and (c) of Section 1 to the Collateral
Agent hereunder, the Collateral Agent will obtain a valid,
first priority perfected security interest in, and a first
lien upon, such Pledged Items subject to no other Lien.
None of the Collateral is or shall be pledged by the
Pledgor as collateral for any other purpose.
4. Representations and Warranties of the Collateral Agent.
The Collateral Agent represents and warrants to the
Pledgor and the Trust that:
(a) Corporate Existence and Power. The Collateral
Agent is a banking corporation, duly incorporated, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate
powers and all material governmental licenses,
authorizations, consents and approvals required to enter
into, and perform its obligations under, this Collateral
Agreement.
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(b) Authorization and Non-Contravention. The execu-
tion, delivery and performance by the Collateral Agent of
this Collateral Agreement have been duly authorized by all
necessary corporate action on the part of the Collateral
Agent (no action by the shareholders of the Collateral
Agent being required) and do not and will not violate,
contravene or constitute a default under any provision of
applicable law or regulation or of the charter or by-laws
of the Collateral Agent or of any material agreement,
judgment, injunction, order, decree or other instrument
binding upon the Collateral Agent.
(c) Binding Effect. This Collateral Agreement
constitutes a valid and binding agreement of the Collateral
Agent enforceable against the Collateral Agent in
accordance with its terms.
5. Certain Covenants of the Pledgor.
The Pledgor agrees that, so long as any of its
obligations under the Purchase Agreement remain outstanding:
(a) Title to Collateral. The Pledgor shall at all
times hereafter have good and marketable title to the
Collateral pledged hereunder, free of all Liens (other than
the Liens created by this Collateral Agreement) and
Transfer Restrictions, and, subject to the terms of this
Collateral Agreement, will at all times hereafter have
good, right and lawful authority to assign, transfer and
pledge such Collateral and all such additions thereto and
substitutions therefor under this Collateral Agreement.
(b) Pledge Value Requirement. The Pledgor shall
cause the aggregate Pledge Value of the Collateral to be
equal to or greater than the Pledge Value Requirement at
all times, and shall pledge additional Collateral in the
manner described in Section 6(d) as necessary to cause such
requirement to be met.
(c) Pledge upon Adjustment Event. Upon the
occurrence of an Adjustment Event, the Pledgor shall
immediately cause to be delivered to the Collateral Agent,
in the manner provided in Section 6(d): (i) U.S. Government
Securities having an aggregate Market Value at least equal
to 105% of the Cash Delivery Obligations, if any; and (ii)
Reported Securities in an amount at least equal to the
Maximum Deliverable Number thereof (if any), or, at
Pledgor's election, U.S. Government Securities having an
aggregate Market Value at least equal to 150% of such
Maximum Deliverable Number of Reported Securities; in each
case to be held as substitute or additional Collateral
hereunder.
(d) Composition of Pledged Items. Notwithstanding
the Pledgor's right to substitute Collateral pursuant to
Section 6(b), the Pledgor shall cause the Collateral to
include, on the Exchange Date, unless Pledgor shall have
exercised its Cash Delivery Option, a number of shares of
Common Stock (or, if an Adjustment Event shall have
occurred, Reported Securities) at least equal to the number
of shares of Common Stock (or, if an Adjustment Event
shall have occurred, Reported Securities) required to be
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delivered under the Purchase Agreement on the Exchange Date.
If the Pledgor exercises its Cash Delivery Option, then the
Pledgor shall cause the Collateral to consist entirely of
U.S. Government Obligations at all times from and after the
date 25 Business Days prior to the Exchange Date.
(e) Further Assurances. The Pledgor shall, at his
expense and in such manner and form as the Trust or the
Collateral Agent may require, give, execute, deliver, file
and record any financing statement, notice, instrument,
document, agreement or other papers that may be necessary
or desirable in order to create, preserve, perfect,
substantiate or validate any security interest granted
pursuant hereto or to enable the Collateral Agent to
exercise and enforce its rights and the rights of the Trust
hereunder with respect to such security interest. To the
extent permitted by applicable law, the Pledgor hereby
authorizes the Collateral Agent to execute and file, in the
name of the Pledgor or otherwise, Uniform Commercial Code
financing or continuation statements (which may be carbon,
photographic, photostatic or other reproductions of this
Agreement or of a financing statement relating to this
Agreement) which the Collateral Agent in its sole
discretion may deem necessary or appropriate to further
perfect, or maintain the perfection of the security
interests granted hereby.
6. Administration of the Collateral and Valuation
of the Securities.
(a) Valuation of Collateral. The Collateral Agent
shall determine on each Business Day whether the Pledge
Value is at least equal to the Pledge Value Requirement and
whether an Insufficiency Determination or Collateral Event
of Default shall have occurred and, from and after any
substitution of U.S. Government Securities for pledged
Common Stock or Reported Securities pursuant to paragraph
(b) of this Section 6, shall determine the Pledge Value on
each Business Day and shall provide written notice of the
Pledge Value to the Pledgor.
(b) Substitution of Collateral. The Pledgor may
substitute Collateral in accordance with the following
provisions:
(1) Unless an Event of Default or a failure
by the Pledgor to meet any of its obligations under
Section 5(b) or (c) hereof has occurred and is
continuing, the Pledgor shall have the right at any
time and from time to time to deposit Eligible
Collateral with the Collateral Agent in substitution
for Pledged Items previously deposited hereunder
("Prior Collateral") and to obtain the release from
the Lien hereof of such Prior Collateral.
(2) If the Pledgor wishes to deposit Eligible
Collateral with the Collateral Agent in substitution
for Prior Collateral, the Pledgor shall (i) give
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<PAGE>
written notice to the Collateral Agent identifying the
Prior Collateral to be released from the Lien hereof,
(ii) deliver to the Collateral Agent concurrently with
such Eligible Collateral a certificate of the Pledgor
substantially in the form of Exhibit A hereto and
dated the date of such delivery, (A) identifying the
items of Eligible Collateral being substituted for the
Prior Collateral and the Prior Collateral that is to
be transferred to the Pledgor and (B) certifying that
the representations and warranties contained in such
Exhibit A hereto are true and correct on and as of the
date thereof and (iii) deliver to the Collateral Agent
concurrently with such Eligible Collateral an opinion
(dated the date of such delivery) of counsel addressed
to the Collateral Agent confirming the representations
contained in the second sentence of paragraph 3(b) of
Exhibit A hereto. The Pledgor hereby covenants and
agrees to take all actions required under Section 6(d)
and any other actions necessary to create for the
benefit of the Collateral Agent a valid, first
priority perfected security interest in, and a first
lien upon, such Eligible Collateral deposited with the
Collateral Agent in substitution for Prior Collateral.
(3) No such substitution shall be made
unless and until the Collateral Agent shall have
determined that the aggregate Pledge Value of all of
the Collateral at the time of such proposed
substitution, after giving effect to the proposed
substitution, shall at least equal the Pledge Value
Requirement.
(c) Additional Collateral. The Pledgor may pledge
additional Collateral hereunder at any time. Concurrently
with the delivery of any additional Eligible Collateral,
the Pledgor shall deliver (i) a certificate of the Pledgor
substantially in the form of Exhibit B hereto and dated the
date of such delivery, (A) identifying the additional items
of Eligible Collateral being pledged and (B) certifying
that with respect to such items of additional Eligible
Collateral the representations and warranties contained in
such Exhibit B hereto are true and correct on and as of the
date thereof and (ii) an opinion, dated the date of such
delivery, of counsel addressed to the Collateral Agent
confirming the representations contained in the second
sentence of paragraph 2(b) of Exhibit B hereto. The Pledgor
hereby covenants and agrees to take all actions required
under Section 6(d) and any other actions necessary to
create for the benefit of the Collateral Agent a valid,
first priority perfected security interest in, and a first
lien upon, such additional Eligible Collateral.
(d) Delivery of Collateral. The Pledgor shall
deliver all Collateral to the Collateral Agent in accordance
with the following provisions:
(1) Pledged Common Stock. In the case of
Collateral consisting of Common Stock, by delivery of
certificates evidencing such Common Stock, indorsed in
blank (together with all signature guarantees and any
other documents necessary to permit the Collateral Agent
to effect the re-registration thereof without further action
by the Pledgor) or registered in the name of the Collateral
Agent or its nominee or, if such Common Stock is not
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issuable in certificated form but is held in book
entry form by The Depository Trust Company, by
transfer to an account of the Collateral Agent or to
an account (other than an account of the Pledgor)
designated by the Collateral Agent with The Depository
Trust Company;
(2) Pledged U.S. Government Securities. In
the case of Collateral consisting of U.S. Government
Securities, by transfer thereof through the Book Entry
System of the Federal Reserve System to the account of the
Collateral Agent or to an account (other than an account
of the Pledgor) designated by the Collateral Agent; and
(3) Pledged Reported Securities. In the case
of Collateral consisting of Reported Securities, by
delivery of certificates evidencing such Reported
Securities, indorsed in blank (together with all
signature guarantees and any other documents necessary
to permit the Collateral Agent to effect the
re-registration thereof without further action by the
Pledgor) or registered in the name of the Collateral
Agent or its nominee or, if such Reported Securities
are not issuable in certificated form but are held in
book entry form by The Depository Trust Company, by
transfer to an account of the Collateral Agent or to
an account (other than an account of the Pledgor)
designated by the Collateral Agent with The Depository
Trust Company. Each such delivery of Reported
Securities shall be accompanied by an opinion of
counsel satisfactory to the Collateral Agent that the
Collateral Agent has obtained a valid, first priority
perfected security interest in, and a first lien upon,
such Reported Securities.
Upon delivery of any Pledged Item under this
Collateral Agreement, the Collateral Agent shall examine such
Pledged Item and any opinions and certificates delivered pursuant
to Sections 6(b), 6(c), 6(d)(3) or otherwise pursuant to the
terms hereof in connection therewith to determine that they
comply as to form with the requirements for Eligible Collateral.
Immediately following the delivery to the Collateral Agent of any
Collateral in the form of certificates indorsed in blank, the
Collateral Agent shall cause all such certificates to be
re-registered on the books of the applicable transfer agent into
the name of the Collateral Agent or its nominee, and shall
thereafter maintain all such Collateral in such form until the
termination of this Agreement. The Pledgor hereby designates the
Collateral Agent as the person in whose name any Collateral held
in book entry form in the Federal Reserve System shall be
registered.
(e) Insufficiency Determination.
(1) If on any Business Day the Collateral
Agent determines that the aggregate Pledge Value of
the Collateral is less than the Pledge Value
Requirement (any such determination, an "Insufficiency
Determination"), the Collateral Agent shall, by
telephone call to an Authorized Representative of the
Pledgor followed by a written confirmation of such
call, promptly notify the Pledgor of such
determination and of the amount of the insufficiency.
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(2) If, by 4:00 p.m., New York City time on
the Business Day following the day on which telephonic
notice shall have been given pursuant to the preceding
paragraph (e)(1), the Pledgor shall have failed to
deliver, in the manner set forth in paragraphs (c) and
(d) of this Section 6, sufficient additional Eligible
Collateral so that, after giving effect to such
delivery (and taking into account that Common Stock
and Reported Securities in excess of the Maximum
Deliverable Number thereof shall not constitute
Eligible Collateral), the aggregate Pledge Value of
the Collateral, as of such Business Day, is at least
equal to the Pledge Value Requirement, then (x) the
Collateral Requirement with respect to any U.S.
Government Securities pledged hereunder (other than in
respect of Cash Delivery Obligations) shall be
increased from 150% to 200%, and (y) unless a
Collateral Event of Default shall have occurred and be
continuing, the Collateral Agent shall:
(i) commence sales, in the manner
described in paragraph (3) below, of such portion
of the Collateral consisting of U.S. Government
Securities as may be required to be sold in order
to generate proceeds sufficient to purchase
Common Stock or, after an Adjustment Event,
Reported Securities, as described in the
following clause (ii); and
(ii) commence purchases, in the manner
described in paragraph (3) below, of Common Stock
or, after an Adjustment Event, Reported
Securities, in an amount sufficient to cause the
aggregate Pledge Value of the Collateral to be at
least equal to the Pledge Value Requirement.
Notwithstanding the foregoing, the Collateral Agent
shall discontinue sales and purchases pursuant to the preceding
clauses (i) and (ii), respectively, if at any time a Collateral
Event of Default shall have occurred and be continuing. The
Collateral Agent shall determine the Market Value and the Pledge
Value of the Collateral after each purchase of Common Stock or
Reported Securities pursuant to the preceding clause (ii) in
order to determine whether the Pledge Value Requirement is met
and whether a Collateral Event of Default has occurred. Solely
for purposes of such calculation, the Market Value of the Common
Stock or Reported Securities shall be: (A) the most recent sales
price as reported in the composite transactions for the principal
securities exchange on which the Common Stock or Reported
Securities, as the case may be, are then listed or, if such
securities are not so listed, the last quoted ask price for such
securities in the over-the-counter market as reported by The
NASDAQ National Market or, if not so reported, by the National
Quotation Bureau or a similar organization; or (B) if higher, in
the case of Common Stock, the most recent available Closing
Price.
A "Collateral Event of Default" shall mean, at any
time, the occurrence of any of the following: (A) failure of the
aggregate Market Value of the Collateral to equal or exceed the
Pledge Value Requirement; (B) failure of the Market Value of any
U.S. Government Securities pledged at such time (not including
any U.S. Government Securities pledged in respect of Cash
Delivery Obligations at such time) to have an aggregate Market
Value of at least 105% of the
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Market Value of a number of shares of Common Stock (or, from
and after any Adjustment Event, Reported Securities) equal to (x)
the Maximum Deliverable Number thereof minus (y) the number
thereof pledged as Collateral hereunder at such time; or (C) from
and after any Adjustment Event, failure of the U.S. Government
Securities pledged in respect of Cash Delivery Obligations to
have an aggregate Market Value at least equal to 105% of the Cash
Delivery Obligations at such time, if, in the case of a failure
described in this clause (C), such failure shall continue to be
in effect at 4:00 p.m., New York City time, on the Business Day
following the day on which telephonic notice in respect thereof
shall have been given pursuant to paragraph (e)(1) above. For
purposes of this Agreement, the portion of any pledged U.S.
Government Securities that shall be deemed to be in respect of
Cash Delivery Obligations at any time shall be a portion having a
Market Value equal to 105% of the Cash Delivery Obligations at
such time (or, if less, the aggregate Market Value of all U.S.
Government Securities pledged at such time).
(3) Collateral sold and Common Stock or
shares of Reported Securities purchased by the
Collateral Agent pursuant to the preceding paragraphs
(e)(2)(i) and (ii) may be sold and purchased on any
securities exchange or in any over-the-counter market
or in any private purchase transaction, and at such
price or prices, in each case as the Collateral Agent
may deem satisfactory. The Pledgor covenants and
agrees that it will execute and deliver such documents
and take such other action as the Collateral Agent
deems necessary or advisable in order that any such
sales and purchases may be made in compliance with
law.
(f) Release of Excess Collateral. If on any
Business Day the Collateral Agent determines that the
aggregate Pledge Value of the Pledgor's Eligible Collateral
exceeds the Pledge Value Requirement and no Event of
Default or failure by the Pledgor to meet any of its
obligations under Sections 5 or 6 hereof has occurred and
is continuing, the Pledgor may obtain the release from the
Lien hereof of any Collateral having an aggregate Pledge
Value on such Business Day less than or equal to such
excess, upon delivery to the Collateral Agent of a written
notice from an Authorized Representative of the Pledgor
indicating the items of Collateral to be released. Such
Collateral shall be released only after the Collateral
Agent shall have determined that the aggregate Pledge Value
of all of the Collateral remaining after such release as
determined on such Business Day is at least equal to the
Pledge Value Requirement.
(g) Delivery of Purchase Agreement Consideration.
On the Exchange Date, unless Pledgor shall have exercised
its Cash Delivery Option, the Collateral Agent shall
deliver to the Trust Common Stock (or, if an Adjustment
Event shall have occurred, Reported Securities) then held
by it hereunder representing the number of shares of Common
Stock (or, if an Adjustment Event shall have occurred,
Reported Securities) then required to be delivered under
the Purchase Agreement. Upon such delivery, the Trust shall
hold such Common Stock or Reported Securities, as the case
may be, absolutely and free from any claim or right
whatsoever.
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(h) Investment of Cash Collateral. The Collateral
Agent shall invest any cash received by it pursuant to
Section 6.2 of the Purchase Agreement in U.S. Treasury
Securities maturing on or before _________, 2000.
7. Income and Voting Rights on Collateral.
(a) Unless an Event of Default or failure by the
Pledgor to meet any of Pledgor's obligations under Section 5(b)
or (c) hereof has occurred and is continuing, the Pledgor shall
be entitled to receive for Pledgor's own account all dividends,
interest and, if any, principal and premium relating to all of
the Collateral, unless the payment thereof to the Pledgor would
reduce the aggregate Pledge Value of the Collateral below the
Pledge Value Requirement. The Collateral Agent agrees to remit to
the Pledgor on the Business Day received or the first Business
Day thereafter all such payments received by it. If an Event of
Default or failure by the Pledgor to meet any of its obligations
under Section 5(b) or (c) hereof has occurred and is continuing,
all such payments made or accrued after and during the
continuance of such Event of Default or failure shall be retained
by the Collateral Agent, and any such payments which are received
by the Pledgor shall be received in trust for the benefit of the
Trust, shall be segregated from other funds of the Pledgor and
shall forthwith be paid over to the Collateral Agent. Any such
payments so retained by, or paid over to, the Collateral Agent
shall be held by the Collateral Agent as Collateral hereunder.
(b) Unless an Event of Default has occurred and is
continuing, the Pledgor shall have the right, from time to time,
to vote and to give consents, ratifications and waivers with
respect to the Collateral, and the Collateral Agent shall, upon
receiving a written request from the Pledgor, deliver to the
Pledgor or as specified in such request such proxies, powers of
attorney, consents, ratifications and waivers in respect of any
of the Collateral which is registered in the name of the
Collateral Agent or its nominee as shall be specified in such
request and be in form and substance satisfactory to the
Collateral Agent.
If an Event of Default shall have occurred and be
continuing, the Collateral Agent shall have the right to the
extent permitted by law, and the Pledgor shall take all such
action as may be necessary or appropriate to give effect to such
right, to vote and to give consents, ratifications and waivers,
and take any other action with respect to any or all of the
Collateral with the same force and effect as if the Collateral
Agent were the absolute and sole owner thereof.
8. Remedies upon Events of Default.
(a) If any Event of Default shall have occurred and be
continuing, the Collateral Agent may exercise on behalf of the
Trust all the rights of a secured party under the UCC (whether or
not in effect in the jurisdiction where such rights are
exercised) and, in addition, without being required to give any
notice, except as herein provided or as may be required by
mandatory provisions of law, shall: (i) deliver all Collateral
consisting of Common Stock or Reported Securities (but not, in
either case, in excess of the number of shares thereof
deliverable under the Purchase Agreement at such time) to the
Trust on the date of the notice delivered to the Collateral Agent
pursuant to Article VII(c) of the Purchase Agreement relating to
13
<PAGE>
such Event of Default (or, in the case of an Event of Default
described in clause (iii), (iv) or (v) of the definition thereof,
on the Exchange Date) (in either case, the "Delivery Date"),
whereupon the Trust shall hold such Common Stock or Reported
Securities absolutely free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor
which may be waived, and the Pledgor, to the extent permitted by
law, hereby specifically waives all rights of redemption, stay or
appraisal which Pledgor has or may have under any law now
existing or hereafter adopted; and (ii) if such delivery shall be
insufficient to satisfy in full all of the obligations of Pledgor
under the Purchase Agreement, sell all of the remaining
Collateral, or such lesser portion thereof as may be necessary to
generate proceeds sufficient to satisfy in full all of the
obligations of Pledgor under the Purchase Agreement, at public or
private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery, and at
such price or prices as the Collateral Agent may deem
satisfactory. The Pledgor covenants and agrees to execute and
deliver such documents and take such other action as the
Collateral Agent deems necessary or advisable in order that any
such sale may be made in compliance with law. Upon any such sale
the Collateral Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each
purchaser at any such sale shall hold the Collateral so sold
absolutely and free from any claim or right of whatsoever kind,
including any equity or right of redemption of the Pledgor which
may be waived, and the Pledgor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or
appraisal which Pledgor has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale
required by Article 9 of the UCC shall (1) in case of a public
sale, state the time and place fixed for such sale, (2) in case
of sale at a broker's board or on a securities exchange, state
the board or exchange at which such sale is to be made and the
day on which the Collateral, or the portion thereof so being
sold, will first be offered for sale at such board or exchange,
and (3) in the case of a private sale, state the day after which
such sale may be consummated. Any such public sale shall be held
at such time or times within ordinary business hours and at such
place or places as the Collateral Agent may fix in the notice of
such sale. At any such sale the Collateral may be sold in one lot
as an entirety or in separate parcels, as the Collateral Agent
may determine. The Collateral Agent shall not be obligated to
make any such sale pursuant to any such notice. The Collateral
Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the same may
be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Collateral Agent until the selling
price is paid by the purchaser thereof, but the Collateral Agent
shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in
case of any such failure, such Collateral may again be sold upon
like notice. The Collateral Agent, instead of exercising the
power of sale herein conferred upon it, may proceed by a suit or
suits at law or in equity to foreclose the security interests and
sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(b) Power of Attorney. The Collateral Agent is hereby
irrevocably appointed the true and lawful attorney of the Pledgor
with full power and authority, in the name and stead of the
Pledgor, to do all of the following: (i) upon any delivery or
sale of all or any part of any Collateral made either under the
power of delivery or sale given hereunder or under judgment or
14
<PAGE>
decree in any judicial proceedings for foreclosure or
otherwise for the enforcement of this Collateral Agreement, to
make all necessary deeds, bills of sale and instruments of
assignment, transfer or conveyance of the property thus delivered
or sold; (ii) upon the occurrence of an Adjustment Event while
any shares of Common Stock are Pledged Items, to take any
necessary actions with respect to such shares of Common Stock to
cause the Pledged Items to conform to the requirements of this
Agreement following the occurrence of the Adjustment Event,
including, without limitation, the tender of shares of Common
Stock and the sale of property (other than Reported Securities)
received in respect of Common Stock. For such purposes the
Collateral Agent may execute all necessary documents and
instruments. This power of attorney shall be deemed coupled with
an interest, and the Pledgor hereby ratifies and confirms all
that his attorneys acting under such power, or such attorneys'
successors or agents, shall lawfully do by virtue of this
Collateral Agreement. If so requested by the Collateral Agent, by
the Trustees or by any purchaser of the Collateral or a portion
thereof, the Pledgor shall further ratify and confirm any such
delivery or sale by executing and delivering to the Collateral
Agent, to the Trustees or to such purchaser or purchasers at the
expense of the Pledgor all proper deeds, bills of sale,
instruments of assignment, conveyance of transfer and releases as
may be designated in any such request. The Pledgor's obligations
and authorizations hereunder shall not be terminated by operation
of law or the occurrence of any event whatsoever, including the
death or disability of the Pledgor, or the occurrence of any
other event.
(c) Application of Collateral and Proceeds. In the
case of an Event of Default, the Collateral Agent may proceed to
realize upon the security interest in the Collateral against any
one or more of the types of Collateral, at any one time, as the
Collateral Agent shall determine in its sole discretion subject
to the foregoing provisions of this Section 8. The proceeds of
any sale of, or other realization upon, or other receipt from,
any of the Collateral remaining after delivery to the Trust
pursuant to Section 8(a) shall be applied by the Collateral Agent
in the following order of priorities:
first, to the payment to the Trust of an amount equal
to: (A) the aggregate Market Value of a number of
shares of Common Stock equal to (1) the number of
shares of Common Stock required to be delivered under
the Purchase Agreement on the Delivery Date minus (2)
the number of shares of Common Stock delivered by the
Collateral Agent to the Trust on the Delivery Date as
described above; or (B) from and after an Adjustment
Event, the sum of (1) the Cash Delivery Obligations on
the Delivery Date and (2) the aggregate Market Value
on the Delivery Date of a number of Reported
Securities (and, if applicable, shares of Common
Stock) equal to (x) the number thereof required to be
delivered on the Delivery Date under Section 6.2 of
the Purchase Agreement minus (y) the number thereof
delivered by the Collateral Agent to the Trust on the
Delivery Date as described above; or (C) if the
Pledgor shall have exercised its Cash Delivery Option,
the amount of cash required to be delivered under
Section 1.3(d) of the Purchase Agreement minus the
amount of cash so delivered;
second, to the payment to the Collateral Agent of the
expenses of such sale or other realization, including
reasonable compensation to the Collateral Agent and
15
<PAGE>
its agents and counsel, and all expenses, liabilities
and advances incurred or made by the Collateral Agent
in connection therewith, including brokerage fees in
connection with the sale by the Collateral Agent of
any Pledged Item; and
finally, if all of the obligations of the Pledgor
hereunder and under the Purchase Agreement have been
fully discharged or sufficient funds have been set
aside by the Collateral Agent at the request of the
Pledgor for the discharge thereof, any remaining
proceeds shall be released to the Pledgor.
9. The Collateral Agent.
The Collateral Agent accepts its duties and
responsibilities hereunder as agent for the Trust, on and subject
to the following terms and conditions:
(a) Performance of Duties. The Collateral Agent
undertakes to perform such duties and only such duties as are
expressly set forth herein and, beyond the exercise of reasonable
care in the performance of such duties, no implied covenants or
obligations shall be read into this Collateral Agreement against
the Collateral Agent. No provision hereof shall be construed to
relieve the Collateral Agent from liability for its own grossly
negligent action, grossly negligent failure to act or its own
willful misconduct, subject to the following:
(1) The Collateral Agent may consult with
counsel, and the advice or opinion of such counsel shall be
full and complete authorization and protection in respect
of an action taken or suffered hereunder in good faith and
in accordance with such advice or opinion of counsel.
(2) The Collateral Agent shall not be liable with
respect to any action taken, suffered or omitted by it in
good faith (i) reasonably believed by it to be authorized
or within the discretion or rights or powers conferred on
it by this Collateral Agreement or (ii) in accordance with
any direction or request of the Trustees.
(3) The Collateral Agent shall not be liable for
any error of judgment made in good faith by any of its
officers, unless the Collateral Agent was grossly negligent
in ascertaining the pertinent facts.
(4) In the absence of bad faith on its part, the
Collateral Agent may conclusively rely, as to the truth of
the statements and the correctness of the opinions
expressed therein, upon any note, notice, resolution,
consent, certificate, affidavit, letter, telegram, teletype
message, statement, order or other document believed by it
to be genuine and correct and to have been signed or sent
by the proper Person or Persons.
(5) No provision of this Collateral Agreement
shall require the Collateral Agent to expend or risk its
own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
16
<PAGE>
(6) The Collateral Agent may perform any duties
hereunder either directly or by or through agents or
attorneys, and the Collateral Agent shall not be
responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it
hereunder. In furtherance thereof, any subsidiary owned or
controlled by the Collateral Agent, or its successors, as
agent for the Collateral Agent, may perform any or all of
the duties of the Collateral Agent relating to the
valuation of securities and other instruments constituting
Collateral hereunder.
(7) In no event shall the Collateral Agent be
personally liable for any taxes or other governmental
charges imposed upon or in respect of (i) the collateral or
(ii) the income or other distributions thereon.
(8) Unless and until the Collateral Agent shall
have received notice from the Pledgor, or unless and until
a Responsible Officer of the Collateral Agent shall have
actual knowledge to the contrary, the Collateral Agent
shall be entitled to deem and treat all Collateral
delivered to it hereunder as Eligible Collateral hereunder,
provided that the Collateral Agent has carried out the
duties specified in Section 6 with respect to such
Collateral at the time of delivery thereof.
The Collateral Agent shall not be responsible for the
correctness of the recitals and statements herein which are made
by the Pledgor or for any statement or certificate delivered by
the Pledgor pursuant hereto. Except as specifically provided
herein, the Collateral Agent shall not be responsible for the
validity, sufficiency, collectibility or marketability of any
Collateral given to or held by it hereunder or for the validity
or sufficiency of the Purchase Agreement or the Lien on the
Collateral purported to be created hereby.
(b) Knowledge. The Collateral Agent shall not be
deemed to have knowledge of any Event of Default (except a
Collateral Event of Default), unless and until a Responsible
Officer of the Collateral Agent shall have actual knowledge
thereof or shall have received written notice thereof.
(c) Merger. Any corporation or association into which
the Collateral Agent may be converted or merged, or with which it
may be consolidated, or to which it may sell or transfer its
agency business and assets as a whole or substantially as a
whole, or any corporation or association resulting from any such
conversion, sale, merger, consolidation or transfer to which it
is a party, shall, subject to the prior written consent of the
Trust, be and become a successor Collateral Agent hereunder and
vested with all of the title to the Collateral and all of the
powers, discretions, immunities, privileges and other matters as
was its predecessor without, except as provided above, the
execution or filing of any instrument or any further act, deed or
conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
(d) Resignation. The Collateral Agent and any successor
Collateral Agent may at any time resign by giving thirty days'
written notice by registered or certified mail to the Pledgor and
notice to the Trust in accordance with the provisions of Section
10(d) hereof. Such resignation shall take effect upon the
appointment of a successor Collateral Agent by the Trust.
17
<PAGE>
(e) Removal. The Collateral Agent may be removed at
any time by an instrument or concurrent instruments in writing
delivered to the Collateral Agent and to the Pledgor and signed
by the Trust.
(f) Appointment of Successor. (1) If the Collateral
Agent hereunder shall resign or be removed, or be dissolved or
shall be in the course of dissolution or liquidation or otherwise
become incapable of action hereunder, or if it shall be taken
under the control of any public officer or officers or of a
receiver appointed by a court, a successor may be appointed by
the Trust by an instrument or concurrent instruments in writing
signed by the Trust or by its attorneys in fact fully authorized
a copy of such instrument or concurrent instruments shall be sent
by registered mail to the Pledgor.
(2) Every such temporary or permanent successor
Collateral Agent appointed pursuant to the provisions
hereof shall be a trust company or bank in good standing,
having a reported capital and surplus of not less than
$100,000,000 and capable of holding the Collateral in the
State of New York, if there be such an institution willing,
qualified and able to accept the duties of the Collateral
Agent hereunder upon customary terms.
(g) Acceptance by Successor. Every temporary or
permanent successor Collateral Agent appointed hereunder shall
execute, acknowledge and deliver to its predecessor and also to
the Pledgor an instrument in writing accepting such appointment
hereunder, whereupon such successor, without any further act,
deed or conveyance, shall become fully vested with all the
estates, properties, rights, powers, duties and obligations of
its predecessors. Such predecessor shall, nevertheless, on the
written request of its successor or the Pledgor, execute and
deliver an instrument transferring to such successor all the
estates, properties, rights and powers of such predecessor
hereunder. Every predecessor Collateral Agent shall deliver all
Collateral held by it as the Collateral Agent hereunder to its
successor. Should any instrument in writing from the Pledgor be
required by a successor Collateral Agent for more fully and
certainly vesting in such successor the estates, properties,
rights, powers, duties and obligations hereby vested or intended
to be vested in the predecessor, any and all such instruments in
writing shall, at the request of the temporary or permanent
successor Collateral Agent, be forthwith executed, acknowledged
and delivered by the Pledgor.
10. Miscellaneous.
(a) Benefit of Agreement; Successors and Assigns.
Whenever any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such
party. All the covenants and agreements herein contained by or on
behalf of the Pledgor and the Collateral Agent shall bind, and
inure to the benefit of, their respective successors and
assigns whether so expressed or not, and shall be enforceable by
and inure to the benefit of the Trust and its successors and
assigns.
(b) Separability. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of
this Collateral Agreement shall not render any other provision or
provisions herein contained unenforceable or invalid.
18
<PAGE>
(c) Amendments and Waivers. Any term, covenant,
agreement or condition of this Collateral Agreement may be
amended or compliance therewith may be waived (either generally
or in a particular instance and either retrospectively or
prospectively) but only by a writing signed by the Collateral
Agent, the Pledgor and the Trust.
(d) Notices.
(1) Any notice provided for herein, unless
otherwise specified, shall be in writing (including
transmittals by telex or telecopier) and shall be given to
a party at the address set forth opposite such party's name
on the signature pages hereto or at such other address as
may be designated by notice duly given in accordance with
this Section 10(d) to each other party hereto.
(2) Each such notice given pursuant to paragraph
(1) shall be effective (i) if sent by certified mail
(return receipt requested), 72 hours after being deposited
in the United States mail, postage prepaid; (ii) if given
by telex or telecopier, when such telex or telecopied
notice is transmitted; or (iii) if given by any other
means, when delivered at the address specified in this
Section 10(d).
(e) Governing Law. This Collateral Agreement shall in
all respects be construed in accordance with and governed by the
laws of the State of New York; provided that as to Pledged Items
located in any jurisdiction other than the State of New York, the
Collateral Agent on behalf of the Trust shall have all of the
rights to which a secured party is entitled under the laws of
such other jurisdiction.
(f) Counterparts. This Collateral Agreement may be
executed, acknowledged and delivered in any number of
counterparts and such counterparts taken together shall
constitute one and the same instrument.
(g) Application of Bankruptcy Code. The parties hereto
acknowledge and agree that the Collateral Agent is a "financial
institution" within the meaning of Section 101(22) of Title 11 of
the United States Code (the "Bankruptcy Code") and is acting as
agent and custodian for the Trust in connection with the Purchase
Agreement and that the Trust is a "customer" of the Collateral
Agent within the meaning of said Section 101(22).
11. Termination of Collateral Agreement.
This Collateral Agreement and the rights hereby
granted by the Pledgor in the Collateral shall cease, terminate
and be void upon fulfillment of all of the obligations of the
Pledgor under the Purchase Agreement, and the Pledgor shall have
no further liability hereunder upon such termination. Any
Collateral remaining at the time of such termination shall be
fully released and discharged from the Lien hereof and delivered
to the Pledgor by the Collateral Agent, all at the expense of the
Pledgor.
19
<PAGE>
12. No Personal Liability of Trustees.
By executing this Collateral Agreement none of the
Trustees assumes any personal liability hereunder.
20
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Collateral
Agreement to be duly executed on its behalf, and the Collateral
Agent has caused this Collateral Agreement to be duly executed on
its behalf, as of the date hereof.
PLEDGOR:
___________________________
By:
___________________________
Name:
Title:
Address for Notices:
Attention:
COLLATERAL AGENT:
____________________________,
as Collateral Agent
By:
_____________________________
Name:
Title:
Address for Notices:
Attention:
21
<PAGE>
THE TRUST:
DECS TRUST
_____________________________
Donald J. Puglisi
as Managing Trustee
Address for Notices:
Attention:
22
<PAGE>
Exhibit A
to
Collateral Agreement
CERTIFICATE FOR SUBSTITUTED COLLATERAL
The undersigned, _____________ (the "Pledgor"), hereby certifies,
pursuant to Section 6(b) of the Collateral Agreement dated as of
_________, 1997 among the Pledgor, The Bank of New York, as
Collateral Agent, and DECS TRUST (the "Collateral Agreement";
terms defined in the Collateral Agreement being used herein as
defined therein), that:
1. The Pledgor is delivering the following securities
to the Collateral Agent to be held by the Collateral Agent as
substituted Collateral (the "Substituted Collateral"):
2. The Pledgor requests that the Collateral Agent
transfer to the Pledgor the following Prior Collateral, pursuant
to Section 6(b) of the Collateral Agreement:
3. The Pledgor hereby represents and warrants to the
Collateral Agent and the Trust that:
(a) Consents to Transfer. No Transfer
Restrictions exist with respect to or otherwise apply
to the assignment of, or transfer by the Pledgor of
possession of, any items of Substituted Collateral to
the Collateral Agent under the Collateral Agreement,
or the subsequent sale or transfer of such items of
Substituted Collateral by the Collateral Agent
pursuant to the terms of the Collateral Agreement.
(b) Title to Collateral; Perfected Security
Interest. The Pledgor has good and marketable title to
the Substituted Collateral, free of all Liens (other
than the Lien created by the Collateral Agreement) and
Transfer Restrictions. Upon delivery of the Collateral
to the Collateral Agent, the Collateral Agent will
obtain a valid, first priority perfected security
interest in, and a first lien upon, such Substituted
Collateral subject to no other Lien. None of such
Substituted Collateral is or shall be pledged by the
Pledgor as collateral for any other purpose.
This Certificate may be relied upon by the Trust as
fully and to the same extent as if this Certificate had been
specifically addressed to the Trust.
A-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of ____________, 199__.
_____________________________
Name:
Title:
A-2
<PAGE>
Exhibit B
to
Collateral Agreement
CERTIFICATE FOR ADDITIONAL COLLATERAL
The undersigned, __________________ (the "Pledgor"),
hereby certifies, pursuant to Section 6(c) of the Collateral
Agreement, dated as of , 1997, among the Pledgor, The Bank of New
York, as Collateral Agent and DECS TRUST (the "Collateral
Agreement"; terms defined in the Collateral Agreement being used
herein as defined therein), that:
1. The Pledgor is delivering the following securities
to the Collateral Agent to be held by the Collateral Agent as
additional Collateral (the "Additional Collateral"):
2. The Pledgor hereby represents and warrants to the
Collateral Agent that:
(a) Consents to Transfer. No Transfer
Restrictions exist with respect to or otherwise apply to
the assignment of, or transfer by the Pledgor of possession
of, any items of Additional Collateral to the Collateral
Agent under the Collateral Agreement, or the subsequent
sale or transfer of such items of Additional Collateral by
the Collateral Agent pursuant to the terms of the
Collateral Agreement.
(b) Title to Collateral; Perfected Security
Interest. The Pledgor has good and marketable title to the
Additional Collateral, free of all Liens (other than the
Lien created by the Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Collateral to the
Collateral Agent, the Collateral Agent will obtain a valid,
first priority perfected security interest in, and a first
lien upon, such additional Collateral subject to no other
Lien. None of such Additional Collateral is or shall be
pledged by the Pledgor as collateral for any other purpose.
This Certificate may be relied upon by the Trust as
fully and to the same extent as if this Certificate had been
specifically addressed to the Trust.
B-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of ____________, 199__.
_____________________________
Name:
Title:
B-2
<PAGE>
Exhibit C
to
Collateral Agreement
CERTIFICATE OF SPOUSE
Reference is made to the Collateral Agreement (the
"Collateral Agreement"), dated as of ___________, 1997, among the
undersigned person's husband or wife (the "Pledgor"), The Bank of
New York, as Collateral Agent, and DECS Trust (the "Trust"), and
to the related Purchase Agreement (the "Purchase Agreement")
between the Pledgor and the Trust. Terms defined in the
Collateral Agreement or the Purchase Agreement are used herein as
defined therein.
By his or her signature below, the undersigned hereby
acknowledges and consents to the transfers of Collateral by the
Pledgor as contemplated in the Collateral Agreement and agrees
that his or her legal and/or beneficial rights, if any, in any
such Collateral shall be subordinate to the rights of the Trust
in such Collateral as a secured party as provided in the
Collateral Agreement and as provided by applicable law. In
accordance with the terms of the Collateral Agreement, the Trust
shall be entitled to apply the Collateral (and any proceeds
thereof) to satisfy the Pledgor's obligations to the Trust under
the Collateral Agreement and the Purchase Agreement prior to any
claim or right which the undersigned may have in the Collateral.
_____________________
[Spouse]
C-1
FUND EXPENSE AGREEMENT
Agreement dated as of ______, 1997 between Salomon
Brothers Inc ("Salomon") and The Bank of New York (the "Service
Provider"), in its capacities as administrator, custodian, paying
agent and collateral agent for DECS Trust (the "Trust").
WHEREAS the Trust is a statutory business trust
organized under the Business Trust Act of the State of Delaware
pursuant to a Declaration of Trust dated as of November 21, 1995,
as amended and restated as of _____, 1997 (the "Trust Agreement");
and
WHEREAS Salomon desires to make provision for the payment
of certain initial and ongoing expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained in this Agreement, the parties
agree as follows:
1. Definitions. (a) Capitalized terms used herein and not
defined herein shall have the meanings ascribed thereto in the
Trust Agreement.
(b) The following terms shall have the following
meanings:
"Additional Expense" means the Ordinary Expense the
incurring of which will require the Service Provider to provide
the Additional Expense Notice pursuant to Section 3(a) hereof and
any Ordinary Expense incurred thereafter.
"Additional Expense Notice" means the notice required
to be given by the Service Provider to Salomon pursuant to
Section 3(a)(i) hereof.
"Closing Date" shall have the meaning ascribed thereto
in the Underwriting Agreement.
"Ordinary Expense" of the Trust means any expense of
the Trust other than any expense of the Trust arising under
Sections 2.2(e) and 6.6 of the Administration Agreement,
Section 15 of the Custodian Agreement, Section 5.4(b) of the
Paying Agent Agreement and Section 7.6 of the Trust Agreement.
"Up-front Fee Amount" means the amount set forth as
such on Schedule I hereto payable as a one-time payment to the
Service Provider in respect of its collective services as
Administrator, Custodian, Paying Agent and Collateral Agent for
the entire term of the Trust.
"Up-front Expense Amount" means the amount set forth
as such on Schedule I hereto payable as a one-time payment to the
Service Provider in respect of Ordinary Expenses anticipated to
be incurred by the Administrator on behalf of the Trust, pursuant
to the Administration Agreement, during the term of the Trust.
<PAGE>
2. Agreement to Pay Up-front Fees and Expenses. Salomon
agrees to pay to the Service Provider in New York Clearing House
funds on the Closing Date the Up-front Fee Amount and the
Up-front Expense Amount.
3. Agreement to Pay Additional Expenses. (a) Prior to
incurring any Ordinary Expense on behalf of the Trust that,
together with all prior Ordinary Expenses incurred by the
Administrator on behalf of the Trust, would cause the aggregate
amount of Ordinary Expenses of the Trust to exceed the Up-front
Expense Amount, the Administrator shall provide to Salomon (i)
prompt written notice to the effect that the aggregate amount of
Ordinary Expenses of the Trust will exceed the Up-front Expense
Amount, and (ii) an accounting, in such detail as shall be
reasonably acceptable to Salomon, of all Ordinary Expenses
incurred on behalf of the Trust through the date of the
Additional Expense Notice.
(b) From and after the date of the Additional Expense
Notice, the Service Provider agrees that it will not, without the
prior written consent of Salomon, incur on behalf of the Trust
(i) any single expense in excess of $3,000 or (ii) in any
calendar quarter, expenses aggregating in excess of $15,000.
Subject to the foregoing, the Service Provider shall give notice
to Salomon in writing promptly following the incurring of any
Additional Expense. Such notice shall be accompanied by any
demand, bill, invoice or other similar document in respect of
such Additional Expense.
(c) Subject to the first sentence of paragraph (b) of
this Section 3, Salomon agrees to pay to the Service Provider
from time to time the amount of any Additional Expense. Payment
by Salomon of any Additional Expense shall be made in New York
Clearing House funds by the later of (i) five Business Days after
the receipt by Salomon of written notice from the Service
Provider of the incurring thereof or (ii) the due date for the
payment of such Additional Expense.
(d) Salomon may contest in good faith the
reasonableness of any Additional Expense and the parties shall
attempt to resolve amicably the disagreement; provided that if
the parties cannot resolve the dispute by the due date hereunder
with respect to such Additional Expense, subject to the first
sentence of paragraph (b) of this Section 3, Salomon shall pay
the amount of such Additional Expense, subject to later
adjustment and credit if such dispute is resolved in favor of
Salomon.
4. Condition to Payment. The obligations of Salomon
hereunder shall be subject to the condition that the Trust's DECS
shall have been issued and paid for on the Closing Date.
5. Trust Termination; Refund of Unused Expense Funds. If
at the termination of the Trust in accordance with Section 8.3 of
the Trust Agreement the aggregate amount of Ordinary Expenses
incurred by the Service Provider on behalf of the Trust through
the date of termination shall be less than the Up-front Expense
Amount, the Service Provider shall, promptly following the date
of such termination, pay to Salomon in New York Clearing House
funds the amount of such excess.
2
<PAGE>
6. Termination of Administration Agreement. If the
Administration Agreement is terminated in accordance with Section
4.1 thereof, the Service Provider shall promptly pay to Salomon
(i) the ratable portion of its Up-front Fee Amount for the period
from the date of the termination of the Administration Agreement
to the Exchange Date and (ii) any unexpended portion of the
Up-front Expense Amount.
7. Statements and Reports. The Service Provider shall
collect and safekeep all demands, bills, invoices or other
written communications received from third parties in connection
with any Ordinary Expenses and Additional Expenses and shall
prepare and maintain adequate books and records showing all
receipts and disbursements of funds in connection therewith.
Salomon shall have the right to inspect and to copy, at its
expense, all such documents, books and records at all reasonable
times and from time to time during the term of this Agreement.
8. Term of Contract. This Agreement shall continue in
effect until the termination of the Trust in accordance with
Section 8.3 of the Trust Agreement.
9. No Assignment. No party to this Agreement may assign
its rights or delegate its duties hereunder without the prior
written consent of the other party.
10. Amendments. The Service Provider agrees that it
will not consent to any amendment to any of the Administration
Agreement, the Custodian Agreement, the Paying Agent Agreement or
the Collateral Agreement without the prior written consent of
Salomon.
11. Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the matters contained
herein and supersedes all prior agreements or understandings. No
amendment or modification of this Agreement shall be valid unless
the amendment or modification is in writing and is signed by all
the parties to this Agreement.
12. Notices. All notices, demands, reports, statements,
approvals or consents given by any party under this Agreement
shall be in writing and shall be delivered in person or by
telecopy or other facsimile communication or sent by first-class
U.S. mail, registered or certified, postage prepaid, to the
appropriate party at its address on the signature pages hereof or
at such other address subsequently notified to the other parties
hereto. Any party may change its address for purposes hereof by
delivering a written notice of the change to the other parties.
All notices given under this Agreement shall be deemed received
(a) in the case of hand delivery, on the day of delivery, (b) in
the case of telecopy or other facsimile communication, on the day
of transmission, and (c) in the case of mailing, on the third day
after such notice was deposited in the mail.
13. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
14. Governing Law. This Agreement shall be governed by
and be construed in accordance with the laws of the State of New
York.
3
<PAGE>
15. Counterparts. This Agreement may be signed in
counterpart with all of such counterparts constituting one and
the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their authorized representatives the
date first above written.
SALOMON BROTHERS INC
By:_________________________
Address: Seven World Trade Center
New York, New York 10048
Attention:
THE BANK OF NEW YORK
By:_________________________
Address: 101 Barclay Street
New York, New York 10286
Attention: Mark Walsh
4
<PAGE>
SCHEDULE I
to Fund Expense Agreement
Up-front Fee Amount: $130,000
Up-front Expense Amount: $110,000
5
FUND INDEMNITY AGREEMENT
Agreement dated as of ______, 1997 between Salomon
Brothers Inc ("Salomon") and DECS Trust (such trust and the trustees
thereof acting in their capacity as such being referred to herein
as the "Trust").
WHEREAS the Trust is a statutory business trust
organized under the Business Trust Act of the State of Delaware
pursuant to a Declaration of Trust dated as of November 21, 1995,
as amended and restated as of ______, 1997 (the "Trust Agreement");
and
WHEREAS, Salomon, as sponsor under the Trust
Agreement, desires to make provision for the payment of certain
indemnification expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained in this Agreement, the parties
agree as follows:
1. Definitions. Capitalized terms used herein and not
defined herein shall have the meanings ascribed thereto in the
Trust Agreement.
2. Agreement to Pay Expenses. Salomon agrees to pay to
the Trust, and hold the Trust harmless from, any expenses of the
Trust arising under Sections 2.2(e) and 6.6 of the Administration
Agreement, Section 15 of the Custodian Agreement, Section 5.4(b)
of the Paying Agent Agreement and Section 7.6 of the Trust
Agreement (collectively, together with any amounts paid pursuant
to paragraph 4 of this Agreement, "Indemnification Expenses").
Subject to paragraph 4 hereof, payment hereunder by Salomon shall
be made in New York Clearing House funds no later than five
Business Days after the receipt by Salomon, pursuant to paragraph
3 hereof, of written notice of any claim for Indemnification
Expenses.
3. Notice of Receipt of Claim. The Trust shall give
notice to, or cause notice to be given to, Salomon in writing of
any claim for Indemnification Expenses or any threatened claim
for Indemnification Expenses immediately upon the Trust acquiring
knowledge thereof. Such written notice shall be accompanied by
any demand, bill, invoice or other communication received from
any third party claimant (a "Claimant") in respect of such
Indemnification Expense.
4. Right to Contest. The Trust agrees that Salomon may,
and Salomon is authorized on behalf of the Trust to, contest in
good faith with any Claimant any amount contained in any claim
for Indemnification Expense, provided, that if, within such time
period as Salomon shall determine to be reasonable, Salomon and
such Claimant are unable to resolve amicably any disagreement
regarding such claim for Indemnification Expense, Salomon shall
retain counsel reasonably satisfactory to the Trustees to
represent the Trustees in any resulting proceeding and shall pay
the fees and disbursements of such counsel related to such
proceeding. Notwithstanding any other provision herein, it is
understood that (a) Salomon shall not, in
<PAGE>
respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel), and (b)
Salomon shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such
consent or if there be a final judgment for the Claimant, Salomon
agrees to indemnify the Trust from and against any loss or
liability by reason of such settlement or judgment.
5. Statements and Reports. The Trust shall collect and
safekeep all demands, bills, invoices or other written
communications received from third parties in connection with any
claim for Indemnification Expenses and shall prepare and maintain
adequate books and records showing all receipts and disbursements
of funds in connection therewith. Salomon shall have the right to
inspect and to copy, at its expense, all such documents, books
and records at all reasonable times and from time to time during
the term of this Agreement.
6. Term of Contract. This Agreement shall continue in
effect until the termination of the Trust in accordance with
Section 8.3 of the Trust Agreement.
7. No Assignment. No party to this Agreement may assign
its rights or delegate its duties hereunder without the prior
written consent of the other parties, except that the Trust may
delegate any and all duties hereunder to the Administrator to the
extent permitted by law.
8. Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the matters contained
herein and supersedes all prior agreements or understandings. No
amendment or modification of this Agreement shall be valid unless
the amendment or modification is in writing and is signed by all
the parties to this Agreement.
9. Notices. All notices, demands, reports, statements,
approvals or consents given by any party under this Agreement
shall be in writing and shall be delivered in person or by
telecopy or other facsimile communication or sent by first-class
U.S. mail, registered or certified, postage prepaid, to the
appropriate party at its address on the signature pages hereof or
at such other address subsequently notified to the other parties
hereto. A copy of any communication to Salomon shall be furnished
to Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New
York, New York 10006, Attention: Raymond B. Check, provided that
the failure to furnish such copy shall not affect the
effectiveness of any such communication. Any party may change its
address for purposes hereof by delivering a written notice of the
change to the other parties. All notices given under this
Agreement shall be deemed received (a) in the case of hand
delivery, on the day of delivery, (b) in the case of telecopy or
other facsimile communication, on the day of transmission, and
(c) in the case of mailing, on the third day after such notice
was deposited in the mail.
10. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11. Governing Law. This Agreement shall be governed by
and be construed in accordance with the laws of the State of New
York.
2
<PAGE>
12. Counterparts. This Agreement may be signed in
counterpart with all of such counterparts constituting one and
the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their authorized representatives the
date first above written.
SALOMON BROTHERS INC
By:___________________________
Address: Seven World Trade enter
New York, New York 10048
Attention:
DECS TRUST
By:___________________________
Donald J. Puglisi,
as Managing Trustee
Address: c/o Puglisi & Associates
850 Library Avenue,
Suite 204
Newark, Delaware 19716
Telephone: 302-738-6680
Telecopier: 302-738-7210
3
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Phone: (302) 658 - 6541
Fax: (302) 658 - 6548
September 22, 1997
DECS Trust
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Re: DECS Trust
Ladies and Gentlemen:
We have acted as special Delaware counsel for DECS
Trust, a Delaware business trust (the "Trust"), in connection
with the matters set forth herein. At your request, this opinion
is being furnished to you.
For purposes of giving the opinions hereinafter set
forth, our examination of documents has been limited to the
examination of executed or conformed counterparts, or copies
otherwise proved to our satisfaction, of the following:
(a) The Certificate of Trust of the Trust (the
"Original Certificate of Trust"), dated November 21, 1995, as
filed in the office of the Secretary of State of the State of
Delaware (the "Secretary of State") on November 21, 1995;
(b) The Restated Certificate of Trust of the Trust
(the "Restated Certificate of Trust"; and together with the
Original Certificate of Trust, the "Certificate of Trust"), dated
September 22, 1997, as filed in the office of the Secretary of
State on September 22, 1997;
(c) The Declaration of Trust of the Trust, dated as
of November 21, 1995, between Michael E. Sherman, as sponsor (the
"Initial Sponsor"), and Peter B. Blanton, as trustee (the
"Initial Trustee");
(d) The registration statement (the "Initial
Registration Statement") on Form N-2, including a prospectus (the
"Prospectus), relating to the issuance of up to 3,484,104 DECS of
the Trust representing undivided beneficial interests in the
assets of the Trust (the "DECS"), as filed by the Trust with the
Securities and Exchange Commission (the "SEC") on November 22,
1995, as amended by Pre-Effective Amendment No. 1 to the Initial
Registration Statement ("Amendment No. 1"), filed by the Trust
with the SEC on February 26, 1996, as amended by Pre-Effective
Amendment No. 2 to the Initial Registration Statement ("Amendment
No. 2"), filed by the Trust with the SEC on July 7, 1997, as
amended by Pre-Effective Amendment No. 3
<PAGE>
DECS Trust
September 23, 1997
Page 2
to the Initial Registration Statement ("Amendment No. 3"),
filed by the Trust with the SEC on September 10, 1997, and as
amended by Pre-Effective Amendment No. 4 to the Initial
Registration Statement ("Amendment No. 4"), filed by the Trust
with the SEC on September 23, 1997 (the Initial Registration
Statement, as amended by Amendment No. 1, Amendment No. 2,
Amendment No. 3 and Amendment No. 4, being hereinafter referred
to as the "Registration Statement");
(e) A form of Amended and Restated Trust Agreement of
the Trust to be entered into among the Initial Sponsor, the
Initial Trustee, Salomon Brothers Inc, as sponsor, Donald J.
Puglisi, William R. Latham III and James B. O'Neil, as trustees,
and the Holders (as defined therein), including Exhibit A
attached thereto (the "Trust Agreement"); and
(f) A Certificate of Good Standing for the Trust,
dated September 22, 1997, obtained from the Secretary of State.
Initially capitalized terms used herein and not
otherwise defined are used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed in paragraphs (a)
through (f) above. In particular, we have not reviewed any
document (other than the documents listed in paragraphs (a)
through (f) above) that is referred to in or incorporated by
reference into the documents reviewed by us. We have assumed that
there exists no provision in any document that we have not
reviewed that bears upon or is inconsistent with the opinions
stated herein. We have conducted no independent factual
investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth
therein and the additional matters recited or assumed herein, all
of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have
assumed that (i) all signatures on documents examined by us are
genuine, (ii) all documents submitted to us as originals are
authentic, and (iii) all documents submitted to us as copies
conform with the original copies of those documents.
For purposes of this opinion, we have assumed (i) that
the Trust Agreement and the Certificate of Trust constitute the
entire agreement among the parties thereto with respect to the
subject matter thereof, including with respect to the creation,
operation and termination of the Trust, and that the Trust
Agreement and the Certificate of Trust are in full force and
effect and have not been amended, (ii) except to the extent
provided in paragraph 1 below, the due creation or due
organization or due formation, as the case may be, and valid
existence in good standing of each party to the documents
examined by us under the laws of the jurisdiction governing its
creation, organization or formation, (iii) the legal capacity of
natural persons who are parties to the documents examined by us,
(iv) that each of the parties to the documents examined by us has
the power and authority to execute and deliver, and to perform
its obligations under, such
<PAGE>
DECS Trust
September 23, 1997
Page 3
documents, (v) the due authorization, execution and delivery by
all parties thereto of all documents examined by us, (vi) the
receipt by each Person to whom a DECS is to be issued by the
Trust (collectively, the "DECS Holders") of an interest in the
DECS Certificate (substantially in the form of Exhibit A to the
Trust Agreement) and the payment for the DECS acquired by it, in
accordance with the Trust Agreement and the Registration
Statement, and (vii) that the DECS are issued and sold to the
DECS Holders in accordance with the Trust Agreement and the
Registration Statement. We have not participated in the
preparation of the Registration Statement and assume no
responsibility for its contents.
This opinion is limited to the laws of the State of
Delaware (excluding the securities laws of the State of
Delaware), and we have not considered and express no opinion on
the laws of any other jurisdiction, including federal laws and
rules and regulations relating thereto. Our opinions are rendered
only with respect to Delaware laws and rules, regulations and
orders thereunder which are currently in effect.
Based upon the foregoing, and upon our examination of
such questions of law and statutes of the State of Delaware as we
have considered necessary or appropriate, and subject to the
assumptions, qualifications, limitations and exceptions set forth
herein, we are of the opinion that:
1. The Trust has been duly created and is validly
existing in good standing as a business trust under the Delaware
Business Trust Act, 12 Del. C. ss.3801, et seq.
2. When issued and sold, the DECS will represent valid
and, subject to the qualifications set forth in paragraph 3
below, fully paid and nonassessable undivided beneficial
interests in the assets of the Trust.
3. The DECS Holders, as beneficial owners of the
Trust, will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for
profit organized under the General Corporation Law of the State
of Delaware. We note that the DECS Holders may be obligated to
make payments as set forth in the Trust Agreement.
We consent to the filing of this opinion with the SEC
as an exhibit to the Registration Statement. In addition, we
hereby consent to the use of our name under the heading "Legal
Matters" in the Prospectus. In giving the foregoing consents, we
do not thereby admit that we come within the category of Persons
whose consent is required under Section 7 of the Securities Act
of 1933, as amended, or the rules and regulations of the SEC
thereunder. Except as stated above, without our prior written
consent, this opinion may not be furnished or quoted to, or
relied upon by, any other Person for any purpose.
Very truly yours,
/s/ RICHARDS, LAYTON & FINGER
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Telephone: (212) 225-2000
Facsimile: (212) 225-3999
September 22, 1997
DECS Trust
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Ladies and Gentlemen:
We have acted as special tax counsel to DECS Trust
(the "Trust") in connection with the registration statement on
Form N-2 of the Trust (the "Registration Statement") with the
Securities and Exchange Commission and hereby confirm to you our
advice as set forth under the heading "Certain United States
Federal Income Tax Considerations" in the Prospectus included in
the Registration Statement.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the use of our name
under the caption "Certain United States Federal Income Tax
Considerations" in the Prospectus. In giving such consent, we do
not thereby admit that we are in the capacity of persons whose
consent is required under Section 7 of the Act.
Very truly yours,
Cleary, Gottlieb, Steen & Hamilton
By: /s/ Erika W. Nijenhuis
-------------------------------
Erika W. Nijenhuis, a Partner
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
use of our report (and to all references to our Firm) included in
or made a part of this registration statement.
/s/ Arthur Andersen LLP
New York, New York
September 22, 1997
Exhibit (n)(3)
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the
Registration Statement on Form N-2 of DECS Trust (the "Trust")
and any amendments thereto, as a person about to become a Trustee
of the Trust.
Dated: September , 1997
/s/ James B. O'Neill
-------------------------
James B. O'Neill
<PAGE>
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the
Registration Statement on Form N-2 of DECS Trust (the "Trust")
and any amendments thereto, as a person about to become a Trustee
of the Trust.
Dated: September , 1997
/s/ Donald J. Puglisi
-------------------------
Donald J. Puglisi
<PAGE>
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the
Registration Statement on Form N-2 of DECS Trust (the "Trust")
and any amendments thereto, as a person about to become a Trustee
of the Trust.
Dated: September , 1997
/s/ William R. Latham, III
-------------------------
William R. Latham, III
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is entered into as of the
9th day of September, 1997, between DECS Trust, a statutory
business trust organized under the Business Trust Act of the
State of Delaware (such trust and the trustees thereof acting in
their capacity as such being referred to herein as the "Trust"),
and Salomon Brothers Inc (the "Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of the DECS.
1.1. Sale and Issuance of DECS. Subject to the terms
and conditions of this Agreement, the Trust agrees to sell to the
Purchaser, and the Purchaser agrees to purchase from the Trust,
one DECS (the "Subscription DECS"), representing an undivided
beneficial interest in the Trust, at a purchase price of
$100,000.
1.2. Closing. The purchase and sale of the
Subscription DECS shall take place at the offices of Cleary,
Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York
10006 at 10:00 a.m., on September 9th, 1997, or at such other
time ("Closing Date") and place as the Trust and the Purchaser
mutually agree upon. At or after the Closing, the Trust shall
deliver to the Purchaser a certificate representing the
Subscription DECS, registered in the name of the Purchaser or its
nominee. Payment for the Subscription DECS shall be made on the
Closing Date by the Purchaser by bank wire transfer or by
delivery of a certified or official bank check, in either case in
immediately available funds, of an amount equal to the purchase
price of the Subscription DECS.
2. Representations, Warranties and Covenants of the
Purchaser. The Purchaser hereby represents and warrants to, and
covenants for the benefit of, the Trust that:
2.1. Purchase Entirely for Own Account. This Agreement
is made by the Trust with the Purchaser in reliance upon the
Purchaser's representation to the Trust, which by the Purchaser's
execution of this Agreement the Purchaser hereby confirms, that
the Subscription DECS are being acquired for investment for the
Purchaser's own account, and not as a nominee or agent and not
with a view to the resale or distribution by the Purchaser of
such Subscription DECS, and that the Purchaser has no present
intention of selling, granting any participation in, or otherwise
distributing such Subscription DECS, in either case in violation
of any securities registration requirement under applicable law,
but subject nevertheless, to any requirement of law that the
disposition of its property shall at all times by within its
control. By executing this Agreement, the Purchaser further
represents that the Purchaser does not have any contract,
undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third
person, with respect to any of the Subscription DECS.
2.2. Investment Experience. The Purchaser acknowledges
that it can bear the economic risk of the investment for an
indefinite period of time and has such knowledge and
<PAGE>
experience in financial and business matters (and particularly
in the business in which the Trust operates) as to be capable
of evaluating the merits and risks of the investment
in the Subscription DECS. The Purchaser is an "accredited
investor" as defined in Rule 501(a) of Regulation D under the
Securities Act of 1933 (the "Act").
2.3. Restricted Securities. The Purchaser understands
that the Subscription DECS are characterized as "restricted
securities" under the United States securities laws inasmuch as
they are being acquired from the Trust in a transaction not
involving a public offering and that under such laws and
applicable regulations such Subscription DECS may be resold
without registration under the Act only in certain circumstances.
In this connection, the Purchaser represents that it understands
the resale limitations imposed by the Act and is generally
familiar with the existing resale limitations imposed by Rule
144.
2.4. Further Limitations on Disposition. The Purchaser
further agrees not to make any disposition directly or indirectly
of all or any portion of the Subscription DECS unless and until:
(a) There is then in effect a registration statement
under the Act covering such proposed disposition and
such disposition is made in accordance with such
registration statement; or
(b) The Purchaser shall have furnished the Trust with an
opinion of counsel, reasonably satisfactory to the
Trust, that such disposition will not require
registration of such Subscription DECS under the Act.
(c) Notwithstanding the provisions of subsections (a) and
(b) above, no such registration statement or opinion
of counsel shall be necessary for a transfer by the
Purchaser to any affiliate of the Purchaser, if the
transferee agrees in writing to be subject to the
terms hereof to the same extent as if it were the
original Purchaser hereunder.
2.5. Legends. It is understood that the certificate
evidencing the Subscription DECS may bear either or both of the
following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered
for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the
securities under such Act or an opinion of counsel
reasonably satisfactory to the Trustee of DECS Trust
that such registration is not required."
(b) Any legend required by the laws of any other
applicable jurisdiction.
The Purchaser and the Trust agree that the legend
contained in paragraph (a) above shall be removed at a holder's
request when it is no longer necessary to ensure compliance with
federal securities laws.
2
<PAGE>
2.6. Amendment to Declaration of Trust; Split of DECS.
The Purchaser consents to (a) the execution and delivery by the
Trustees and Salomon Brothers Inc, as sponsor of the Trust, of an
Amended and Restated Declaration of Trust in the form attached
hereto and (b) the split of the Subscription DECS subsequent to
the determination of the public offering price per DECS and
related underwriting discount for the DECS to be sold to the
Underwriter (as defined in such Amended and Restated Declaration
of Trust) but prior to the sale of the DECS to the Underwriter
into a greater number of DECS so that immediately following such
split the value of the Subscription DECS will equal the aforesaid
public offering price per DECS less the related underwriting
discount.
2.7. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all
of which shall constitute but one and the same instrument.
2.8. Governing Law. This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the
State of New York applicable to agreements made and to be
performed wholly within such state.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
DECS TRUST
By_____________________________
Peter B. Blanton, as Trustee
SALOMON BROTHERS INC
By_____________________________
Name:
Title:
3
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECS TRUST
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<NAME> DECS TRUST
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> SEP-22-1997
<PERIOD-END> SEP-22-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 100,000
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 100,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
