As filed with the Securities and Exchange Commission on July 31, 1997
Securities Act Registration No. 33-15927
Investment Company Act File No. 811-7847
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-2
(X) REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(X) Pre-Effective Amendment No. 1
( ) Post-Effective Amendment No.
and
(X) REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
(X) Amendment No. 1
MANDATORY COMMON EXCHANGE TRUST
(Exact name of Registrant as specified in charter)
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
(Address of principal executive offices)
(212) 272-7332
(Registrant's Telephone Number, including Area Code)
Wesley M. Jones
245 Park Avenue
New York, New York 10167
(Name and address of Agent for Service)
with a copy to:
Richard T. Prins, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
______________________________________
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the Registration Statement.
If any securities on this form are to be offered on a delayed or continuous
basis in reliance on Rule 415 under the Securities Act of 1933, other than
securities offered in connection with a dividend reinvestment plan, check
the following box . . . . . . . . . . . .( )
( ) This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration
statement for the same offering is 33-__________.
______________________________________
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Proposed Proposed
Amount Maximum Maximum Amount of
Being Offering Aggregate Registra-
Title of Securities Regis- Price Per Offering tion
Being Registered tered Share(1) Price Fee(2)
Mandatory Exchange
Securities,
no par value 2,205,000 $41.25 $90,956,250 $26,954
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c).
(2) $606 previously paid.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Regis-
trant shall file a further amendment which specifically states that the
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 dates as the Commission, acting
pursuant to said Section 8(a), may determine.
MANDATORY COMMON EXCHANGE TRUST
CROSS REFERENCE SHEET
(Pursuant to Rule 404(c) under the Securities Act of 1933)
Parts A & B of Prospectus*
Item 1. Outside Front Cover . . . . . . . Front Cover Page
Item 2. Inside Front and Outside
Back Cover Page . . . . . . . Front Cover Page; Inside Front
Cover Page; Outside Back Cover
Page
Item 3. Fee Table and Synopsis . . . . Prospectus Summary; Fee Table
Item 4. Financial Highlights . . . . . Not Applicable
Item 5. Plan of Distribution . . . . . Front Cover Page; Prospectus
Summary; Underwriting
Item 6. Selling Shareholders . . . . . Not Applicable
Item 7. Use of Proceeds . . . . . . . . Use of Proceeds; Investment
Objective and Policies
Item 8. General Description of the
Registrant . . . . . . . . . Front Cover Page; Prospectus
Summary; The Trust; Investment
Objective and Policies; Risk
Factors
Item 9. Management . . . . . . . . . . Management and Administration
of the Trust
Item 10. Capital Stock, Long-Term Debt,
and Other Securities . . . . Description of the Securities
Item 11. Defaults and Arrears on Senior
Securities . . . . . . . . . Not Applicable
Item 12. Legal Proceedings . . . . . . . Not Applicable
Item 13. Table of Contents of the Statement
of Additional Information . . Not Applicable
Item 14. Cover Page . . . . . . . . . . Not Applicable
Item 15. Table of Contents . . . . . . . Not Applicable
Item 16. General Information and History The Trust
Item 17. Investment Objective
and Policies . . . . . . . . Investment Objective and Poli-
cies
Item 18. Management . . . . . . . . . . Management and Administration
of the Trust
Item 19. Control Persons and Principal
Holders of Securities . . . . Management and Administration
of the Trust
Item 20. Investment Advisory
and Other Services . . . . . Management and Administration
of the Trust
Item 21. Brokerage Allocation and
Other Practices . . . . . . . Investment Objective and Poli-
cies
Item 22. Tax Status . . . . . . . . . Certain Federal Income Tax
Considerations
Item 23. Financial Statements . . . . . Statements of Assets and Lia-
bilities
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS, DATED AUGUST 1, 1997
2,000,000 SHARES
FIRSTPLUS FINANCIAL GROUP, INC.
MANDATORY COMMON EXCHANGE TRUST
$_______ TRUST ISSUED MANDATORY EXCHANGE SECURITIES (TIMES)
(SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK OF
FIRSTPLUS FINANCIAL GROUP, INC.)
___________________
Each of the $_______ Trust Issued Mandatory Exchange
Securities (the "TIMES") of Mandatory Common Exchange Trust (the
"Trust") represents the right to receive an annual distribution
of $_____, and will be exchanged for between [ ]
shares and 1 share of common stock, no par value (the "Common
Stock"), of FIRSTPLUS Financial Group, Inc. (the "Company") on
________ __, ____ (the "Exchange Date"), subject to a cash
settlement feature. The annual distribution of $ per
TIMES is payable quarterly on each ,
, and
, commencing , 1997. The
TIMES are not subject to early redemption.
The Trust is a newly organized, finite-term Trust
established to purchase and hold a portfolio of stripped U.S.
Treasury securities maturing on a quarterly basis through the
Exchange Date, and a forward purchase contract (the "Contract")
with an existing shareholder (the "Seller") of the Company
relating to the Common Stock. The Trust's investment objective
is to provide each holder of TIMES (the "Holder") with a
quarterly distribution of $______ per TIMES and, on the Exchange
Date, a number of shares of Common Stock per TIMES equal to the
Exchange Rate or the cash equivalent. The Exchange Rate is equal
to (i) if the Reference Market Price on the Exchange Date is less
than $[ ] but equal to or greater than $_____, a number
(or fractional number) of shares of Common Stock per TIMES having
a value (determined at the Reference Market Price) equal to
$[ ], (ii) if the Reference Market Price on the Exchange
Date is equal to or greater than $[ ], [ ]
shares of Common Stock per TIMES and (iii) if the Reference
Market Price on the Exchange Date is less than $[ ],
1 share of Common Stock per TIMES, subject in each case to
adjustment in certain events. The "Reference Market Price" means
the average Closing Price (as hereinafter defined) per share of
Common Stock for the 20 Trading Days (as hereinafter defined)
immediately prior to, but not including, the Exchange Date. In
lieu of delivery of the Common Stock, the Seller may elect under
the Contract to pay cash on the Exchange Date in an amount equal
to the Reference Market Price times the number of shares of the
Common Stock determined under the above formula (the "Cash
Settlement Alternative"). If the Seller elects the Cash
Settlement Alternative, holders of TIMES will receive cash
instead of shares of Common Stock on the Exchange Date. Holders
otherwise entitled to receive fractional shares in respect of
their aggregate holdings of TIMES will receive cash in lieu
thereof.
Holders of TIMES will receive quarterly distributions
whereas the Company does not currently pay dividends on the
Common Stock. However, the Company could commence paying
dividends on its Common Stock at any time and there is no
assurance that the yield on the TIMES 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 TIMES is less than that afforded by an
investment in the Common Stock because holders of TIMES will
realize no equity appreciation unless the Reference Market Price
of the Common Stock on the Exchange Date exceeds $[ ],
and less than all of the appreciation even if at that time the
Reference Market Price is above $[ ]. Moreover,
because a Holder will only receive [ ] shares of Common
Stock per TIMES (or the Reference Market Price thereof) if the
Reference Market Price on the Exchange Date exceeds
$[ ], Holders will only be entitled to receive upon
exchange [ ]% of any appreciation of the value of
the Common Stock over that amount. Holders of TIMES will realize
the entire decline in equity value if the Reference Market Price
on the Exchange Date is less than the price to public per TIMES
shown below. Accordingly, the value of the Common Stock or cash
equivalent received by a Holder may be less than the amount paid
by such Holder for its TIMES, in which event its investment will
result in a loss.
The Company is not affiliated with the Trust or the Seller.
Application has been made to list the TIMES on the American
Stock Exchange (the "ASE") under the symbol [ ]. Prior to
this offering there has been no public market for the TIMES. The
last reported sale price of the Common Stock on NASDAQ on July
30, 1997 was $43.375 per share.
SEE "RISK FACTORS" ON PAGE 9 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE
TIMES.
________________________
THESE TIMES 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 SALES LOAD(1) PROCEEDS TO THE
PUBLIC TRUST (2)
Per TIMES . . $[ ] $[ ] $[ ]
Total(3) . . $[ ] $[ ] $[ ]
(1) The Seller has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the
Securities Act of 1933 (the "Securities Act"). See
"Underwriting." In light of the fact that the proceeds of
the sale of the TIMES will be used in part by the Trust to
purchase the Contract from the Seller, the Underwriting
Agreement provides that the Seller will pay to the
Underwriters as compensation ("Underwriters Compensation")
$______ per TIMES. See "Underwriting."
(2) Before deducting estimated offering expenses, which are
payable by the Trust and estimated to be
$[ ].
(3) The Trust has granted to the Underwriters an option for 30
days to purchase up to an additional 205,000 TIMES at the
price to the public per TIMES, solely to cover over-
allotments. If the option is exercised in full, the total
Price to Public, Sales Load and Proceeds to the Trust will
be $______, $_____ and $_____, respectively. See "Underwriting."
_________________________
The TIMES are offered by Bear, Stearns & Co. Inc. and
Salomon Brothers Inc (the "Underwriters") as specified herein,
subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected
that certificates for the TIMES will be ready to deliver through
the Facilities of the Depository Trust Company on or about
___________ ____, 1997.
Joint Book-Running Managers
BEAR, STEARNS & CO. INC. SALOMON BROTHERS INC
______________
THE DATE OF THIS PROSPECTUS IS [_________ ___, _____]
The Trust has adopted a policy that the Contract may not be
disposed of during the term of the Trust. The Trust will
continue to hold the Contract despite any significant decline in
the market price of the Common Stock or adverse changes in the
financial condition of the Company.
The TIMES may be a suitable investment for those investors
who are able to understand the unique nature of the Trust and the
economic characteristics of the Contract and the U.S. Treasury
securities held by the Trust.
The Trust will be a grantor trust for federal income tax
purposes and each holder of TIMES will be treated as the owner of
its pro rata portions of the stripped U.S. Treasury securities
and the Contract. For a discussion of the principal United
States federal income tax consequences ownership of the TIMES,
see "Certain Federal Income Tax Considerations."
This Prospectus sets forth concisely 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.
THE TRUST IS A NEWLY ORGANIZED CLOSED-END INVESTMENT COMPANY
WITH NO PREVIOUS HISTORY OF PUBLIC TRADING. TYPICAL CLOSED-END
FUND SHARES FREQUENTLY TRADE AT A PREMIUM TO OR 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 ITS SHARES 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 MAY BE GREATER FOR
INVESTORS WHO WISH TO SELL THEIR INVESTMENTS SOON AFTER
COMPLETION OF AN INITIAL PUBLIC OFFERING.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-
ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE TIMES OR THE COMMON STOCK AT LEVELS ABOVE
THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE
AMERICAN STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
PROSPECTUS SUMMARY
THIS SUMMARY OF THE PROVISIONS RELATING TO THE TIMES DOES
NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
CERTAIN TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS
PROSPECTUS.
THE TRUST
GENERAL. The Trust is a newly organized, finite-term trust.
The Trust will be registered as a non-diversified, closed-end
management investment company under the Investment Company Act of
1940 (the "Investment Company Act"). Consistent with 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.
INVESTMENT OBJECTIVE AND POLICIES. The Trust will purchase
and hold a portfolio of stripped U.S. Treasury securities
maturing on a quarterly basis through the Exchange Date and the a
forward purchase contract with the Seller obligating the Seller,
on the Exchange Date, to deliver to the Trust a number of shares
of Common Stock equal to the product of the Exchange Rate times
the initial number of shares subject to the Contract (or the
Reference Market Price thereof). It is the Trust's investment
objective to provide the Holders of TIMES with a quarterly
distribution of $[ ] per TIMES (which amount equals a
pro rata portion of the fixed quarterly cash distributions from
the proceeds of the maturing U.S. Treasury securities) and, on
the Exchange Date, a number of shares of Common Stock per TIMES
equal to the Exchange Rate or, if the Seller elects the Cash
Settlement Alternative, which election must be made not later
than 20 trading days prior to but not including the Exchange
Date, an amount in cash equal to the Reference Market Price of
that number of shares. The Exchange Rate is equal to (i) if the
Reference Market Price is less than $_____ but equal to or
greater than $____, a number (or fractional number) of shares of
Common Stock per TIMES having a value (determined at the
Reference Market Price) equal to $________ , (ii) if the
Reference Market Price is equal to or greater than $_____, _____
shares of Common Stock per TIMES and (iii) if the Reference
Market Price is less than $_____, 1 share of Common Stock per
TIMES, subject in each case to adjustment in certain events.
This provides the Trust with the potential for a portion of any
capital appreciation above $_____ on the Common Stock, but no
protection from depreciation of the Common Stock and no
participation in appreciation through $_____. Holders otherwise
entitled to receive fractional shares in respect of their
aggregate holdings of TIMES will receive cash in lieu thereof.
See "Investment Objective and Policies -- Trust Termination."
The purchase price under the Contract is equal to $[ ]
per share of Common Stock initially subject thereto and
$_____ (2,000,000 shares of Common Stock) in the aggregate
(exclusive of the over-allotment option) and is payable to the
Seller by the Trust at the closing of the offering of the TIMES
(the "Closing"). The obligations of the Seller under the
Contract will be secured by a pledge of Common Stock and/or
shares of nonvoting common stock, no par value (the "Nonvoting
Common"), of the Company that is convertible at any time by any
person other than the Seller and its affiliates into shares of
Common Stock on a one-for-one basis or, at the election of the
Seller, by substitute collateral consisting of short-term, direct
obligations of the U.S. Government. See "Investment Objective
and Policies -- The Contract -- Collateral Arrangements;
Acceleration."
THE OFFERING
The Trust is offering 2,000,000 TIMES to the public at a
purchase price of $_____ per TIMES (which is equal to the last
reported bid-side price of the Common Stock on the date of the
Offering) through the Underwriters. In addition, the
Underwriters have been granted options to purchase up to 205,000
additional TIMES solely for the purpose of covering over-
allotments. See "Underwriting."
THE COMPANY
FIRSTPLUS Financial Group, Inc. is a specialized consumer
finance company that originates, purchases, services and sells
consumer finance receivables, substantially all of which are debt
consolidation or home improvement loans secured primarily by
second liens on real property. The Company's principal office is
located at 1600 Viceroy, 8th Floor, Dallas, Texas 75235, and its
telephone number is (214) 599-6400. See "Investment Objective
and Policies -- The Company."
The Company is subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the shares of Common Stock are traded on
the Nasdaq National Market under the symbol FPFG. On June 30,
1997, the Closing Price (as hereinafter defined) of the Common
Stock was $43.375. Reference is made to the publicly available
filings of the Company for information about the Company. Such
filings can be inspected and copied at the public reference
facilities maintained by the U.S. Securities and Exchange
Commission (the "Commission") at Room 1024, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, 13th
Floor, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material also may be obtained by mail from the Public
Reference Section of the Commission, Room 1024, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, at prescribed
rates. Additionally, the Commission maintains a Web site on the
Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding issuers,
such as the Company, that file electronically with the
Commission.
The Company is not affiliated with the Trust or the Seller,
will not receive any of the proceeds from the sale of the TIMES
and will have no obligations with respect to the TIMES. This
prospectus relates only to the TIMES offered hereby and does not
relate to the Company or its Common Stock.
THE TIMES
GENERAL. The TIMES are designed to provide investors with a
quarterly distribution at the annual rate of $[ ]
per share of TIMES. The Company does not currently pay dividends
on its Common Stock. Any decision to commence paying dividends
on the Common Stock by the Company and the amount of any such
dividends would be discretionary with its Board of Directors and
subject to legal and other factors, including the Company's
future earnings, cash flow, financial condition and capital
requirements. Quarterly distributions on the TIMES will consist
solely of the cash received from the U.S. Treasury securities
held by the Trust. The Trust will not be entitled to any
dividends that may be declared on the Common Stock.
There is no assurance that the yield on the TIMES 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 TIMES is less than
that afforded by an investment in the Common Stock because
Holders will realize no equity appreciation if, on the Exchange
Date, the Reference Market Price of the Common Stock is below
$[ ] (which represents an appreciation of [ ]%).
Moreover, because a Holder will only receive [ ]
shares of Common Stock per TIMES (or the Reference Market Price
thereof) if the Reference Market Price exceeds $[ ],
Holders will only be entitled to receive upon exchange [ ]%
of any appreciation of the value of the Common Stock in
excess of $[ ]. Holders of TIMES will realize the
entire decline in equity value if the Reference Market Price is
less than the price to public per TIMES shown on the cover page
hereof. Accordingly, the value of the Common Stock or cash
equivalent received by a Holder may be less than the amount paid
by such Holder for its TIMES, in which event its investment will
result in a loss.
DISTRIBUTIONS. Holders are entitled to receive
distributions at the rate per TIMES of $[ ] per
annum or $[ ] per quarter, payable quarterly on
each ________ __, ________, __, ________ __ and _________ __ or,
if any such date is not a business day, on the next succeeding
business day, to Holders of record as of each ________ __,
_______ __, ________ __ and _________ __, respectively. The
first distribution, in respect of the period from Closing until
________ __, ____, will be payable on ________ __, ____ to
Holders of record as of ___________ ___, 1997 and will equal
$[ ] per TIMES. See "Investment Objective and Policies --
General."
MANDATORY EXCHANGE. On the Exchange Date, each outstanding
TIMES will be exchanged automatically for between [ ]
of a share and 1 share of Common Stock, subject to adjustment in
the event of certain dividends or distributions, subdivisions,
splits, combinations, issuances of certain rights or warrants or
distributions of certain assets with respect to the Common Stock.
Further, in lieu of delivering the Common Stock, the Seller may
elect under the Contract to pay cash on the Exchange Date in an
amount equal to the then Reference Market Price of such number of
shares of the Common Stock (the "Cash Settlement Alternative").
If the Seller elects the Cash Settlement Alternative, which
election shall be made not later than 20 trading days prior to
but not including the Exchange Date, Holders will receive cash
instead of Common Stock on the Exchange Date. In addition, 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 or Marketable
Securities (as defined below under the caption "Investment
Objective and Policies -- The Contract -- Dilution Adjustments")
rather than shares of Common Stock. Further, the occurrence of
certain defaults by the Seller under the Contract or the
collateral arrangements would cause the acceleration of the
Contract and the early exchange of each TIMES for an amount of
shares of Common Stock (or Marketable Securities), cash, or a
combination thereof, in respect of the shares of Common Stock and
the U.S. Treasury securities. See "Investment Objective and
Policies -- The Contract Collateral Arrangements; Acceleration";
"-- The U.S. Treasury Securities" and "--Trust Termination."
VOTING RIGHTS. Holders will have the right to vote on
matters affecting the Trust, as described below under the caption
"Description of the TIMES", but will have no voting rights with
respect to the Common Stock prior to receipt of shares of Common
Stock by the Holders as a result of the exchange of the TIMES for
the Common Stock on the Exchange Date. See "Description of the
TIMES."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be treated as a grantor trust for federal
income tax purposes. Accordingly, each Holder will be treated
for federal income tax purposes as the owner of its pro rata
portion of the U.S. Treasury securities and the Contract, and
income received (including original issue discount treated as
received) by the Trust will generally be treated as income of the
Holders. The U.S. Treasury securities held by the Trust will be
treated for federal income tax purposes as having "original issue
discount" that will accrue over the term of the U.S. 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' investment in the
U.S. Treasury securities and therefore will not be considered
current income for federal income tax purposes. However, a
Holder (whether on the cash or accrual method of tax accounting)
must recognize currently as income original issue discount on the
U.S. Treasury securities as it accrues. A Holder will have
taxable gain or loss upon receipt of cash, in lieu of Common Stock
or Marketable Securities, Other Property, or a combination thereof
distributed on the Exchange Date. Each Holder's basis in its
Common Stock, Marketable Securities or Other Property will be equal
to its basis in its pro rata portion of the Contract less the portion
of such basis allocable to any shares of Common Stock or Marketable
Securities or Other Property for which cash is received. See "Certain
Federal Income Tax Considerations."
ALTERNATIVE FEDERAL INCOME TAX CHARACTERIZATIONS
Holders should also be aware that there are alternative
characterizations of the assets of the Trust which could require
Holders to include more interest in income than they would
include in income under the analysis set out above. See "Certain
Federal Income Tax Considerations."
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
(the "Custodian") for the Trust's assets and as paying agent (the
"Paying Agent"), registrar and transfer agent with respect to the
TIMES. Except as aforesaid, The Bank of New York has no other
affiliation with, and is not engaged in any other transaction
with, the Trust. See "Management and Administration of the
Trust."
LIFE OF THE TRUST
The Trust will terminate automatically on or shortly after
the Exchange Date. Promptly after the Exchange Date the shares
of Common Stock or cash, as the case may be, to be exchanged for
the TIMES and other remaining Trust assets, if any, will be
distributed pro rata to Holders. See "Investment Objective and
Policies -- Trust Termination."
RISK FACTORS
The Trust will not be managed in the traditional sense. The
Trust has adopted a policy that the Contract may not be disposed
of during the term of the Trust and that the U.S. 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. The Trust will continue to hold the Contract despite any
significant decline in the market price of the Common Stock or
adverse changes in the financial condition of the Company. See
"Risk Factors -- Internal Management; No Portfolio Management"
and "Management and Administration of the Trust -- Trustee."
Holders of TIMES will receive quarterly distributions,
whereas the Company does not currently pay dividends on the
Common Stock. However, the Company could commence paying
dividends on its Common Stock at any time and there is no
assurance that the yield on the TIMES 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 TIMES is less than that afforded by an
investment in the Common Stock because Holders of TIMES will
realize no equity appreciation unless the Reference Market Price
of the Common Stock on the Exchange Date exceeds $[ ]
(which represents an appreciation of [ ]%).
Moreover, because a Holder will only receive [ ] shares
of Common Stock per TIMES (or the Reference Market Price thereof)
if the Reference Market Price on the Exchange Date exceeds
$[ ], Holders will only be entitled to receive upon
exchange [ ]% of any appreciation of the value of
the Common Stock over that amount. Holders of TIMES will realize
the entire decline in equity value if the Reference Market Price
is less than the price to public per TIMES shown on the cover
page hereof. Accordingly, the value of the Common Stock or cash
equivalent received by a Holder may be less than the amount paid
by such Holder for its TIMES, in which event its investment will
result in a loss.
The Trust is classified as a "non-diversified" investment
company under the Investment Company Act. Consequently, the
Trust is not limited by the Investment Company Act in the
proportion of its assets that may be invested in the securities
of a single issuer. Since the only securities held by the Trust
will be the U.S. Treasury securities and the Contract, the Trust
may be subject to greater risk than would be the case for an
investment company with diversified investments. See "Investment
Objective and Policies" and "Risk Factors -Non-Diversified
Status."
The trading prices of the TIMES in the secondary market will
be directly affected by the trading prices of the Common Stock in
the secondary market. Trading prices of 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 TIMES 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 Seller shall have delivered shares of Common Stock
pursuant to the Contract at the Exchange Date.
A bankruptcy of the Seller could adversely affect the timing
of exchange or, as a result, the amount received by the Holders
in respect of the TIMES. See "Risk Factors -- Risk Relating to
Bankruptcy of Seller."
Holders will experience a taxable event upon receipt of any
cash upon dissolution of the Trust. Because of an absence of
authority as to the proper character of any gain or loss
resulting from such event, the ultimate tax consequences to
Holders as a result of the Seller electing to exercise the Cash
Settlement Alternative are uncertain.
LISTING
Application has been made to list the TIMES on the American
Stock Exchange under the symbol [ ].
FEES AND EXPENSES
In light of the fact that the proceeds of the sale of the
TIMES will be used in part by the Trust to purchase the Contract
from the Seller, the Underwriting Agreement provides that the
Seller will pay Underwriters compensation to the Underwriters of
$[ ] per TIMES. See "Underwriting." Estimated
organization costs of the Trust in the amount of $[ ]
and estimated costs of the Trust in connection with the initial
registration and public offering of the TIMES in the amount of
$[ ] will be paid by the Trust from the proceeds of the
offering of the TIMES. Other estimated costs of the Trust in
connection with the public offering of the TIMES in the amount of
$[ ] will be paid by the Seller. Each of the
Administrator, the Custodian and the Paying Agent, and each
Trustee will be paid by the Underwriters out of the Underwriters
compensation at the closing of the offering of the TIMES 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 $[ ] in the aggregate), over the term
of the Trust. The Administrator has agreed to pay any on-going
expenses of the Trust in excess of these estimated amounts,
except that any extraordinary expense shall be payable by the
Trust. See "Management and Administration of the Trust --
Estimated Expenses."
Regulations of 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 is not expected to
bear any fees or expenses, investors are not expected to bear any
direct expenses. The expenses that an investor might be
considered to be bearing indirectly are (i) the proportion of the
Sales Load applicable to their TIMES which is payable by the
Seller to the Underwriters; and (ii) the organizational and
offering expenses of the Trust, an estimated $[ ] of
which would be allocable to each year of the Trust's existence,
and the ongoing expenses of the Trust (including fees of the
Administrator, Custodian, Paying Agent and Trustees), estimated
at $[ ] per year payable by the Underwriters at the
closing of the offering.
INVESTOR TRANSACTION EXPENSES
Sales Load (as a percentage of offering [ ]%
price) . . . . . . . . . . . . . . . . . .
Dividend Reinvestment and Cash Purchase
Plan Fees . . . . . . . . . . . . . . . . . Not Applicable
ANNUAL EXPENSES
Management Fees . . . . . . . . . . . . . . . . 0%
Other Expenses (after prepayment)* . . . . . . 0%
Total Annual Expenses . . . . . . . . . . 0%
* Absent prepayment by the Underwriters out of their
underwriting compensation, 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 OBJECTIVE AND POLICIES -- GENERAL." ADDITIONALLY, THE
TRUST DOES NOT PERMIT THE REINVESTMENT OF DISTRIBUTIONS.
EXAMPLE 1 YEAR 3 YEAR
-------------------------------- ------------- -------------
You would bear the following $ [ ] $ [ ]
expenses (i.e., the applicable
sales load and allocable portion
of ongoing expenses paid by the
Underwriters) on a $1,000
investment, assuming a 5% annual
return
THE TRUST
The Trust is a newly organized Delaware trust and is
registered as a closed-end investment company under the
Investment Company Act. The Trust was formed on October 4, 1996
and operates pursuant to a trust agreement dated ______, 1997.
The Trust is located at 850 Library Avenue, Newark, Delaware
19715, and its telephone number is (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 stripped U.S. Treasury securities
with face amounts and maturities corresponding to the quarterly
distributions payable with respect to the TIMES and the payment
dates thereof, and to pay the purchase price under the Contract
to the Seller.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust will purchase and hold a portfolio of stripped
U.S. Treasury securities maturing on a quarterly basis through
the Exchange Date and the Contract relating to the Common Stock
of the Company. The Trust's investment objective is to provide
each Holder with a quarterly cash distribution of $[ ]
per TIMES (which amount equals the portion of the fixed
quarterly distributions from the proceeds of the maturing U.S.
Treasury securities held by the Trust) and, on the Exchange Date,
a number of shares of Common Stock per TIMES equal to the
Exchange Rate or, if the Seller elects the Cash Settlement
Alternative, an amount in cash equal to the Reference Market
Price thereof. The Exchange Rate is equal to (i) if the
Reference Market Price is less than $[ ] (the "Threshold
Appreciation Price") but equal to or greater than $[ ]
(the "Floor Price"), a number (or fractional number) of shares
of Common Stock ] per TIMES equal to $[ ] (the
"Initial Value") divided by the Reference Market Price (i.e., the
value of such shares of Common Stock (determined at the Reference
Market Price) shall equal $[ ]), (ii) if the
Reference Market Price is equal to or greater than $[ ],
[ ] shares of Common Stock per TIMES and (iii) if
the Reference Market Price is less than $[ ], [ ]
shares of Common Stock per TIMES, subject in each case to
adjustment in certain events. See "-- The Contract -- Dilution
Adjustments." For purposes of the preceding clause (i) the
Exchange Rate will be rounded upward or downward to the nearest
1/10,000 (or if there is not a nearest 1/10,000, to the next
lower 1/10,000). Holders otherwise entitled to receive
fractional shares in respect of their aggregate holdings of TIMES
will receive cash in lieu thereof. See "-- Trust Termination."
The Reference Market Price per share of Common Stock means the
average Closing Price (as defined below of a share of Common
Stock on the 20 Trading Days (as defined below) immediately prior
to, but not including, the Exchange Date. The Closing Price of
the Common Stock on any date of determination means the daily
closing sale price (or, if no closing sale price is reported, the
last reported sale price) of the Common Stock as reported on
NASDAQ on such date of determination or, if the Common Stock is
not listed for trading on the Nasdaq National Market on any such
date, as reported in the composite transactions for the principal
United States securities exchange on which the Common Stock is so
listed, or if the Common Stock is not so listed on a United
States national or regional securities exchange, as reported by
the Nasdaq National Market or, if the Common Stock is not so
reported, the last quoted bid-price for the Common Stock in the
over-the-counter market as reported by the National Quotation
Bureau or similar organization, provided that if any event that
results in an adjustment to the number of shares of Common Stock
deliverable under the Contract as described under "-- The
Contract -- Dilution Adjustments" occurs prior to the Exchange
Date, the Closing Price as determined pursuant to the foregoing
will be appropriately adjusted to reflect the occurrence of such
event. A "Trading Day" means a day on which the Common Stock (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.
A fundamental policy of the Trust is to invest at least 70%
of its total assets in the Contract. The Contract will comprise
approximately __% of the Trust's initial assets. As a
consequence the Trust's investments will be concentrated in
whatever industry the Company does business in. The Trust has
also adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that the U.S.
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. The foregoing policies are fundamental
policies of the Trust that may not be changed without the
approval of 100% in interest of the Holders.
The value of the Common Stock (or cash or Marketable
Securities received in lieu thereof) that will be received by
Holders in respect of the TIMES on the Exchange Date may be more
or less than the amount paid for the TIMES offered hereby.
For illustrative purposes only, the following chart shows
the number of shares of Common Stock that a Holder would receive
for each TIMES at various Reference Market Prices. The chart
assumes that there would be no adjustments to the number of
shares of Common Stock deliverable under the Contract by reason
of the occurrence of any of the events described under "-- The
Contract --Dilution Adjustments." There can be no assurance that
the Reference Market Price will be within the range set forth
below. Given the initial price of $[ ] per TIMES and
the Reference Market Price is above $[ ] or below
$[ ], a Holder would receive in connection with the
exchange of TIMES on the Exchange Date the following number of
shares of Common Stock:
REFERENCE MARKET PRICE NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK
---------------------- ----------------
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
The following table sets forth information regarding the
distributions to be received on the U.S. Treasuries, the portion
of each year's distributions that will constitute a return of
capital for federal income tax purposes and the amount of original
issue discount accruing, assuming yield-to-maturity accrual
election, on the U.S. Treasuries with respect to a Holder who
acquires its TIMES at the issue price from an Underwriter pursuant
to the original offering. See "Certain Federal Income Tax
Considerations -- Recognition of Interest on the U.S. Treasury
Securities."
ANNUAL
ANNUAL INCLUSION
ANNUAL GROSS OF ORIGINAL
GROSS DISTRIBUTIONS ANNUAL ISSUE
DISTRIBUTIONS FROM U.S. RETURN OF DISCOUNT
FROM U.S. TREASURIES CAPITAL PER IN INCOME
TREASURIES PER TIMES TIMES PER TIMES
------------- ------------- ----------- ------------
[ ] . . $ [ ] $ [ ] $ [ ] $ [ ]
[ ] . . [ ] [ ] [ ] [ ]
[ ] . . [ ] [ ] [ ] [ ]
[ ] . . [ ] [ ] [ ] [ ]
The annual distribution of $[ ] per TIMES is
payable quarterly on each ______ __, _______ __, ________ __ and
_______ __, commencing ________ __, 1997. Quarterly distributions
on the TIMES will consist solely of the cash received from the
U.S. Treasury securities. The Trust will not be entitled to any
dividends that may be declared on the Common Stock. See
"Management and Administration of the Trust -- Distributions."
ENHANCED YIELD; LESS POTENTIAL APPRECIATION THAN COMMON STOCK; NO
DEPRECIATION PROTECTION
Holders will receive quarterly distributions, whereas the
Company does not currently pay dividends on the Common Stock.
However, the Company could commence paying dividends on its Common
Stock at any time and there is no assurance that the yield on the
TIMES 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 TIMES is less
than that afforded by an investment in the Common Stock because
Holders will realize no equity appreciation if, on the Exchange
Date, the Reference Market Price of the Common Stock is below
$[ ] (which represents an appreciation of [ ]%).
Moreover, because Holders will receive only [ ]
shares of Common Stock if the Reference Market Price exceeds
$[ ], Holders will be entitled to receive upon exchange only
[ ]% (the percentage equal to $[ ] divided by
$[ ]) of any appreciation of the value of the Common
Stock in excess of $[ ] over that amount. Holders of
TIMES will realize the entire decline in value if the Reference
Market Price is less than the price to public per TIMES shown on
the cover page hereof. Accordingly, the value of the Common Stock
or cash equivalent received by a Holder may be less than the
amount paid by such Holder for its TIMES, in which event its
investment will result in a loss.
THE COMPANY
The Company is not affiliated with the Trust or the Seller,
will not receive any of the proceeds from the sale of the TIMES
and will have no obligations with respect to the TIMES. This
Prospectus relates only to the TIMES offered hereby and does not
relate to the Company or the Common Stock. All disclosures
contained in this Prospectus regarding the Company and the Common
Stock are derived from the publicly available documents filed by
the Company with the Commission. The Company has not participated
in the preparation of such documents and there can be no assurance
that all events occurring prior to the date hereof (including
events that would affect the accuracy or completeness of the
publicly available documents filed by the Company) have been
publicly disclosed by the Company.
According to publicly available documents, the Company is a
specialized consumer finance company that originates, purchases,
services and sells consumer finance receivables, substantially all
of which are debt consolidation or home improvement loans secured
primarily by second liens on real property. The Company offers
uninsured home improvement and uninsured debt consolidation loans
("Conventional Loans") and to a lesser extent partially insured
Title I home improvement loans ("Title I Loans"). Title I Loans
are insured, subject to certain exceptions, for 90% of the
principal balance and certain interest costs under the Title I
credit insurance program administered by the Department of Housing
and Urban Development of the Federal Housing Administration. The
Company sells substantially all of its Conventional Loans and
Title I Loans that meet its securitization parameters primarily
through its securitization program and retains rights to service
these loans. The Company's principal origination channel is its
network of regional independent correspondent lenders such as
commercial banks, thrifts or finance companies that do not have
the infrastructure to hold and service portfolios of Conventional
and Title I Loans. The Company's correspondent lenders originate
Conventional and Title I Loans using the Company's underwriting
criteria and sell these loans to the Company.
The Company is subject to the periodic reporting requirements
of the Exchange Act. Reference is made to the publicly available
filings of the Company for information about the Company. Such
filings can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, 13th Floor,
New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also may be obtained by mail from the Public Reference
Section of the Commission, Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, at prescribed rates.
Additionally, the Commission maintains a Web site on the Internet
at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding issuers, such as the
Company, that file electronically with the Commission.
This prospectus relates only to the TIMES offered hereby and
does not relate to the Company or its Common Stock.
The shares of Common Stock of the Company are traded on the
Nasdaq National Market under the symbol "FPFG." The table below
sets forth the high and low bid prices for shares of Common Stock
from the inception of trading in the Company's Common Stock on
February 2, 1996 for each quarter. On July 30, 1997 the high and
low bids for the Common Stock were $43-3/4 and $41-1/4,
respectively, and the closing price was $43-3/8.
High Bid Low Bid
1996
First Quarter (commencing 11 7/8 8 3/4
February 2, 1996)
Second Quarter 16.25 10.00
Third Quarter 22 7/8 12 7/16
Fourth Quarter 30-3/4 19-3/4
1997
First Quarter 36 3/4 20 1/2
Second Quarter 35.00 20 1/2
July 1-July 30 44 3/4 32 3/4
THE CONTRACT
GENERAL. The Trust will enter into the Contract with the
Seller obligating the Seller to deliver to the Trust on the
Exchange Date a number of shares of Common Stock equal to the
product of the Exchange Rate times the initial number of shares of
Common Stock subject to the Contract, adjusted as described below.
The aggregate initial number of shares of Common Stock under the
Contract will equal the aggregate number of TIMES offered hereby
(subject to increase in the event the Underwriters exercise their
overallotment option). The Contract also provides that the Seller
may deliver to the Trust on the Exchange Date, at the Seller's
option, an amount of cash equal to the value of the Common Stock
deliverable pursuant to the Contract (the "Cash Settlement
Alternative"). If the Seller elects to deliver cash in lieu of
shares of Common Stock, it would be required to deliver cash in
respect of all shares deliverable pursuant to the Contract.
The purchase price of the Contract was arrived at by arm's-
length negotiation between the Trust and the Seller taking into
consideration factors including the price, expected dividend level
and volatility of the Common Stock, current interest rates, the
term of the Contract, current market volatility generally, the
collateral security pledged by the Seller, the value of other
similar instruments and the costs and anticipated proceeds of the
offering of the TIMES. All matters relating to the administration
of the Contract will be the responsibility of either the
Administrator or the Custodian.
DILUTION ADJUSTMENTS. The Exchange Rate is subject to
adjustment if the Company shall (i) pay a stock dividend or make a
distribution with respect to the Common Stock in shares of such
stock, (ii) subdivide or split its outstanding shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue by reclassification of its
shares of Common Stock any shares of other common stock of the
Company. In any such event, the Exchange Rate shall be multiplied
by a dilution adjustment equal to 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), or fraction thereof, that a
shareholder 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 addition, if the Company shall issue rights or warrants 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
Then-Reference Market Price of the Common Stock (as defined-below)
(other than rights to purchase Common Stock pursuant to a plan for
the reinvestment of dividends or interest) then the Exchange Rate
shall be multiplied by a dilution adjustment equal to a fraction,
of which the numerator shall be the number of shares of Common
Stock outstanding immediately prior to the time (determined as
described below) the adjustment is calculated by reason of the
issuance of such rights or warrants plus the number of an
additional shares offered for subscription or purchase pursuant to
such rights or warrants, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately prior to
the time such adjustment is calculated plus the number of
additional shares that the aggregate offering price of the shares
so offered for subscription or purchase would purchase at the
Then-Reference Market Price. To the extent that, after expiration
of such rights or warrants, the shares offered thereby shall not
have been delivered, the Exchange Rate shall be further adjusted
to equal the Exchange Rate that would have been in effect had the
foregoing adjustment been made upon the basis of delivery of only
the number of shares of Common Stock actually delivered. The
"Then-Reference Market Price" of the Common Stock means the
average Closing Price per share of Common Stock for a Calculation
Period of five Trading Days immediately prior to the time such
adjustment is calculated (or, in the case of an adjustment
calculated at the opening of business on the business day
following a record date, as described below, immediately prior to
the earlier of the time such adjustment is calculated and the
related "ex-date" on which the shares of Common Stock first trade
regular way on their principal market without the right to receive
the relevant dividend, distribution or issuance); provided that if
no Closing Price for the Common Stock is determined for one or
more (but not all) of such Trading Days, such Trading Day shall be
disregarded in the calculation of the Then-Reference Market Price
(but no additional Trading Days shall be added to the Calculation
Period). If no Closing Price for the Common Stock is determined
for any of such Trading Days, the most recently available Closing
Price for the Common Stock prior to such five Trading Days shall
be the Then-Reference Market Price.
Further, if the Company shall pay a dividend or make a
distribution to all holders of Common Stock, in either case, of
evidences of its indebtedness or other non-cash assets (excluding
any Permitted Dividends (as hereinafter defined) or distributions
in shares of Common Stock) or issue to all holders of Common Stock
rights or warrants to subscribe for or purchase any of its
securities (other than rights or warrants referred to in the
previous paragraph), then the Exchange Rate shall be multiplied by
a dilution adjustment equal to a fraction, of which the numerator
shall be the Then-Reference Market Price per share of Common
Stock, and the denominator shall be such price less the fair
market value (as determined by a nationally recognized independent
investment banking firm retained for this purpose by the
Administrator) as of the time the adjustment is calculated of the
portion of such evidences of indebtedness, non-cash assets or
rights or warrants payable in respect of one share of Common
Stock; provided, however, upon conversion the Seller may deliver
cash or Marketable Securities in an amount equal to such dividend
or distribution. .
For purposes of these adjustments, (a) the term "Permitted
Dividend" means any cash dividend in respect of the Common Stock,
other than a cash dividend that, together with any other cash
dividends during the preceding 12 months, exceeds 10% of the
average of the Closing Prices during such 12-month period and (b)
the term "Excess Purchase Payment" means the excess, if any, of
(i) the cash and the value (as determined by a national recognized
independent investment banking firm retained for this purpose by
the Administrator, whose determination shall be conclusive) of all
other consideration paid by the Company with respect to one share
of Common Stock acquired in any share repurchase, including a
tender offer or exchange offer by the Company, over (ii) the Then-
Reference Market Price per share of Common Stock, subject to
exceptions for qualifying open-market purchase programs and de
minimis repurchases.
If any adjustment in the Exchange Rate is required to be
calculated as described above, corresponding adjustments to the
initial $[ ], $[ ] and $[ ]
figures, as previously adjusted, shall be calculated.
Dilution adjustments shall be effected: (i) in the case of any
dividend, distribution or issuance described above, at the opening
of business on the business day 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 described above, on the
effective date of such transaction. There will be no adjustment
under the Contract in respect of any dividends, distributions,
issuances or repurchases that may be declared or announced after
the Exchange Date. If any announcement or declaration of a record
date in respect of a dividend, distribution, issuance or
repurchase shall subsequently be cancelled by the Company, or such
dividend, distribution, issuance or repurchase shall fail to
receive requisite approvals or shall fail to occur for any other
reason, then the Exchange Rate shall be further adjusted to equal
the Exchange Rate that would have been in effect had the
adjustment for such dividend, distribution, issuance or repurchase
not been made. All adjustments described herein shall be rounded
upward or downward to the nearest 1/10,000 (or if there is not a
nearest 1/10,000, to the next lower 1/10,000). 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.
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 (1) dividends or distributions referred to
in clause (i) of the first paragraph under this caption "
Dilution Adjustments," (2) any common shares issued pursuant to a
reclassification referred to in clause (iv) of such paragraph and
(3) Permitted Dividends made by the Company) or any issuance by
the Company to all holders of Common Stock of rights or warrants
(other than rights or warrants referred to in the second paragraph
under this caption " Dilution Adjustments", (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 entity),
(iii) any sale, transfer, lease or conveyance to another entity of
the property of the Company as an entirety or substantially as
entirety, (iv) any statutory exchange of securities of the Company
with another entity (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 holder
of a TIMES will receive on the Exchange Date, in lieu of or (in
the case of an Adjustment Event described in clause (i) above) in
addition to, Common Stock as described above, cash in an amount
equal to (A) if the Reference Market Price is greater than or
equal to the Threshold Appreciation Price, 0.xx multiplied by the
Transaction Value (as defined below), (B) if the Reference Market
Price is less than the Threshold Appreciation Price but is greater
than the Initial Price, the product of (x) the Initial Price
dividend by the Maturity Price multiplied by (y) the Transaction
Value and (C) if the Maturity Price is less than or equal to the
Initial Price, the Transaction Value. Following an Adjustment
Event, the Reference Market Price, as such term is used in this
paragraph and throughout the definition of Exchange Rate, shall be
deemed to equal (A) the Reference Market Price of the Common
Stock, as adjusted pursuant to the method set forth in the
preceding paragraph, plus (B) the Transaction Value.
Notwithstanding the foregoing, with respect to 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 stated
maturity of the TIMES ("Marketable Securities"), the Seller may,
at its option, in lieu of delivering the amount of cash
deliverable in respect of Marketable Securities received in an
Adjustment Event, as determined in accordance with the previous
paragraph, deliver a number of such Marketable Securities with a
value equal to such cash amount, as determined in accordance with
clause (ii) of the definition of Transaction Value, as applicable;
provided, however, that (i) if such option is exercised, the
Seller shall deliver Marketable Securities in respect of all, but
not less than all, cash amounts that would otherwise be
deliverable in respect of Marketable Securities received in an
Adjustment Event, (ii) the Seller may not exercise such option if
the Seller has elected to deliver cash in lieu of the Common
Stock, if any, deliverable upon the Settlement Date or if such
Marketable Securities have not yet been delivered to the holders
entitled thereto following such Adjustment Event or any record
date with respect thereto, and (iii) subject to clause (ii) of
this proviso, the Seller must exercise such option if the Seller
does not elect to deliver cash in lieu of Common Stock, if any,
deliverable upon the Settlement Date. If the Seller elects to
deliver Marketable Securities, each holder of a TIMES 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 Marketable Security ceases to
qualify as a Marketable Security, then (x) the Seller may no
longer elect to deliver such Reported Security in lieu of an
equivalent amount of cash and (y) notwithstanding clause (ii) of
the definition of Transaction Value, the Transaction Value of such
Marketable Security shall mean the fair market value of such
Marketable Security on the date such security ceases to qualify as
a Marketable Security, as determined by a nationally recognized
investment banking firm retained for this purpose by the Seller.
"Transaction Value" means (i) for any cash received in any such
Adjustment Event, the amount of cash received per share of Common
Stock, (ii) for any property other than cash or Marketable
Securities received in any such Adjustment Event, an amount equal
to the market value on the date the Adjustment Event is
consummated of such property received per share of Common Stock as
determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator and
(iii) for any Marketable Securities received in any such
Adjustment Event, an amount equal to the average Closing Price per
share of such securities on the 20 Trading Days immediately prior
to the Exchange Date multiplied by the number of such securities
received for each share of Common Stock; provided that if no
Closing Price for such Marketable Securities is determined for one
or more (but not all) of such Trading Days, such Trading Days
shall be disregarded in the calculation of such average Closing
Price (but no additional Trading Days shall be added to the
Calculation Period). If no Closing Price for the Marketable
Securities is determined for all such Trading Days, the
calculation in the preceding clause (iii) shall be based on the
most recently available Closing Price for the Marketable
Securities prior to such 20 Trading Days. The number of shares of
Marketable Securities included in the calculation of Transaction
Value for purposes of the preceding clause (iii) shall be subject
to adjustment if a dilution event of the type described-above
shall occur with respect to the issuer of the Marketable
Securities between the time of the Adjustment Event and the
Exchange Date.
"Marketable Securities" means any common equity securities
listed on a U.S. national securities exchange or reported by the
Nasdaq National Market.
No dilution adjustments will be made for events, other than
those described above, such as offerings of Common Stock (other
than through the issuance of rights or warrants described above)
for cash or in connection with acquisitions.
COLLATERAL ARRANGEMENTS; ACCELERATION. The Seller's
obligations under the Contract will be secured by a security
interest in the maximum number of shares of Common Stock subject
to the Contract and/or an equivalent number of shares of Nonvoting
Common (subject to adjustment in accordance with the dilution
adjustment provisions of the Contract, described above) or short-
term, direct obligations of the U.S. Government pursuant to a
Collateral Agreement between such Seller and The Bank of New York,
as collateral agent (the "Collateral Agent"). Unless the Seller
is in default in its obligations under the Collateral Agreement,
the Seller will be permitted to substitute for any pledged shares
of Common Stock or Nonvoting Common, collateral consisting of
short-term, direct obligations of the U.S. Government. Any U.S.
Government obligations pledged as substitute collateral will be
required to have an aggregate market value at the time of
substitution and at daily mark-to-market valuations thereafter of
not less than 150% (or, from and after any Insufficiency
Determination that shall not be cured by the close of business on
the tenth 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 or
Nonvoting Common for which such obligations are being substituted.
The Collateral Agreement will provide that, in the event of an
Adjustment Event, the Seller will pledge as alternative collateral
any Marketable Securities received by it in respect of the maximum
number of shares of Common Stock subject to the Contract at the
time of the Adjustment Event, plus U.S. Government obligations
having an aggregate market value when pledged and at daily mark-
to-market valuations thereafter of not less than 105% of the
Seller's Cash Delivery Obligations. The Seller's "Cash Delivery
Obligations" shall be the Transaction Value of any consideration
other than Marketable Securities received by the Seller in respect
of the maximum number of shares subject to the Contract at the
time of the Adjustment Event. The number of shares of Marketable
Securities required to be pledged shall be subject to adjustment
if any event requiring a dilution adjustment under the Contract
shall occur. The Seller will be permitted to substitute U.S.
Government obligations for Marketable Securities pledged at the
time of or 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 not less than 150% (or, from and
after any Insufficiency Determination that shall not be cured by
the close of business on the tenth business day thereafter, as
described below, 200%) of the product of the market price per
share of Marketable Securities at the time of each valuation times
the number of shares of Marketable Securities for which such
obligations are being substituted. The Collateral Agent will
promptly pay over to the Seller any dividends, interest, principal
or other payments received by the Collateral Agent in respect of
any collateral, including any substitute collateral, unless the
Seller is in default of its obligations under the Collateral
Agreement, or unless the payment of such amount to the Seller
would cause the collateral to become insufficient under the
Collateral Agreement. The Seller shall have the right to vote any
pledged shares of Common Stock or Marketable Securities for so
long as such shares are owned by him and pledged under the
Collateral Agreement, including after an event of default under
the Contract or the Collateral Agreement.
If the Collateral Agent shall determine (an "Insufficiency
Determination") that U.S. Government obligations pledged as
substitute collateral shall fail to meet the foregoing
requirements at any valuation, or that the 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 shares of Marketable Securities subject to the Contract, and
such failure shall not be cured by the close of business on the
tenth business day after such determination, then, unless a
Collateral Event of Default (as defined below) under the
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
shares of Marketable Securities, in an amount sufficient to cause
the collateral to meet the requirements under the Collateral
Agreement. The Collateral Agent shall discontinue such sales and
purchases if at any time a Collateral Event of Default under the
Collateral Agreement shall have occurred and be continuing. A
"Collateral Event of Default under the 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 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 maximum number of shares
of any Marketable 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 shares of
Marketable Securities) at such time, failure of such U.S.
Government obligations to have a market value at such time of at
least 150% of the market price per share of Common Stock (or the
then-current market price per share of Marketable Securities, as
the case may be) times the difference between (x) the maximum
number of shares of Common Stock (or shares of Marketable
Securities) subject to the Contract at such time and (y) the
number of shares of Common Stock (or shares of Marketable
Securities) pledged as collateral at such time; and (C) at any
time after an Adjustment Event in which consideration other than
Marketable Securities shall have been delivered, failure of the
U.S. Government obligations pledged in respect of the Cash
Delivery Obligations to have a market value at such time of at
least 105% of the Cash Delivery Obligations, if such failure shall
not be cured within ten business days after notice thereof is
delivered to the Seller.
The occurrence of a Collateral Event of Default under the
Collateral Agreement, or the bankruptcy or insolvency of the
Seller, will cause an automatic acceleration of the Seller's
obligations under the Contract. In any such event, the Seller
will become obligated to deliver shares of Common Stock or
Nonvoting Common (or, after an Adjustment Event, Marketable
Securities or cash or a combination thereof) having an aggregate
value equal to the "Aggregate Acceleration Value" under the
Contract. The Aggregate Acceleration Value will be based on an
"Acceleration Value," determined by the Administrator on the basis
of quotations from up to four nationally recognized independent
investment banking firms (each, an "Independent Dealer"). Each
quotation will be for the amount that would be paid to the
relevant Independent Dealer in consideration of an agreement
between the Trust and such dealer that would have the effect of
preserving the Trust's rights to receive Common Stock (or, after
an Adjustment Event, the alternative consideration provided under
the Contract) under a portion of the Contract that corresponds to
an initial number of shares of Common Stock equal to 1,000. The
Administrator will request quotations from four 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 equal
to such quotation. The Aggregate Acceleration Value will be
computed by multiplying the Acceleration Value by the quotient
obtained by dividing the initial number of shares of Common Stock
subject to the Contract by 1,000; except that, if no quotations
are provided, the Aggregate Acceleration Value will be (A) the
closing price per share of Common Stock on the acceleration date
times the number of shares of Common Stock that would be required
to be delivered on such date under the Contract if the Exchange
Date were redefined to be the acceleration date or (B) after an
Adjustment Event, the value of the alternative consideration that
would be required to be delivered on such date under the Contract
if the Exchange Date were redefined to be the acceleration date.
Upon the occurrence of a Collateral Event of Default or the
bankruptcy or insolvency of the Seller, the Common Stock (or,
after an Adjustment Event, Marketable Securities or cash or a
combination thereof) deliverable for each TIMES will be based
solely on the Aggregate Acceleration Value described above for the
Contract. From time to time, as determined in good faith by the
Trustees of the Fund, the Fund also may engage third parties to
provide additional valuations.
Upon any acceleration, the Collateral Agent will distribute to
the Trust, for distribution pro rata to the Holders, the Aggregate
Acceleration Value in the form of shares of Common Stock or
Nonvoting Common then pledged, or cash generated from the
liquidation of U.S. Government obligations then pledged, or a
combination thereof (or, after an Adjustment Event, in the form of
Marketable Securities 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
Common Stock (or, after an Adjustment Event, cash or Marketable
Securities) sufficient to meet the obligations under the Contract,
the Collateral Agent will distribute to the Trust for distribution
pro rata to the Holders the market value of the Common Stock
required to be delivered thereunder, in the form of any shares of
Common Stock then pledged by the Seller plus cash generated from
the liquidation of U.S. Government obligations then pledged by the
Seller (or, after an Adjustment Event, the market value of the
alternative consideration required to be delivered thereunder, in
the form of any Marketable Securities then pledged, plus any cash
then pledged, plus cash generated from the liquidation of U.S.
Government obligations then pledged).
DESCRIPTION OF SELLER
Banc One Capital Holdings Corporation (the "Seller") is a first-
tier, wholly owned subsidiary of BANC ONE CORPORATION, a bank
holding company which provides a full range of consumer and
commercial banking and related financial services. The Seller
through its various subsidiaries is principally engaged in
investment banking, merchant banking, securities brokerage
activities, asset management and servicing, commercial mortgage
loan origination and servicing, and insurance/annuity brokerage.
The Seller owns 1,605,000 shares of Common Stock and 603,415
shares of Nonvoting Common. The Nonvoting Common is convertible
at any time by any person other than the Seller and its affiliates
into shares of Common Stock on a one-for-one basis.
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon
("stripped") U.S. Treasury securities with face amounts and
maturities corresponding to the distributions payable with respect
to the TIMES and the payment dates thereof. The Trust may invest
up to 30% of its total assets in these U.S. Treasury Securities.
In the event that the Contract is accelerated or disposed of as
described under the caption "Management Administration of the
Trust -- Trustees", then any such U.S. Treasury securities then
held in the Trust shall be liquidated by the Administrator and
distributed pro rata to the Holders, together with the amounts
distributed upon acceleration or any consideration received by the
Trust upon disposition of the Contract. See "-- Collateral
Arrangements; Acceleration" and "-- Trust Termination."
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest the proceeds
of the U.S. Treasury securities and any other cash held by the
Trust in short-term obligations of the U.S. Government maturing no
later than the business day preceding the next following
distribution date. Not more than 5% of the Trust's total assets
will be invested in such short-term obligations or held in cash at
any one time.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy, the Trust may not purchase
any securities or instruments other than the U.S. Treasury
securities, the Contract and the Common Stock or other assets
received pursuant to the Contract and, for cash management
purposes, short-term obligations of the U.S. Government; issue any
securities or instruments except for the TIMES; 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 including futures contracts;
or make loans. The Trust also has adopted a fundamental policy
that the Contract may not be disposed of during the term of the
Trust and that the U.S. 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.
TRUST TERMINATION
The Trust will terminate automatically on or shortly after the
Exchange Date. Alternatively, in the event that the Contract is
accelerated, then any U.S. Treasury securities then held in the
Trust shall be liquidated by the Administrator and distributed pro
rata to the Holders, together with the amounts distributed upon
acceleration, and the Trust shall be terminated. See "Collateral
Arrangements; Acceleration" and "-- The U.S. Treasury Securities."
RISK FACTORS
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 Contract may not be disposed of
during the term of the Trust and that the U.S. 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. As
a result, the Trust will continue to hold the Contract despite
significant declines 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
Marketable Securities or the issuer thereof). The Trust will not
be managed like a typical closed-end investment company.
LIMITED APPRECIATION POTENTIAL; COMMON STOCK DEPRECIATION RISK
The Trust anticipates that on the Exchange Date it will receive
the Common Stock deliverable pursuant to the Contract, which it
will then distribute to Holders. There is no assurance that the
yield on the TIMES will be higher than the dividend yield on the
Common Stock over the term of the Trust. In addition, because the
Contract calls for the Seller to deliver less than the full number
of shares of Common Stock subject to the Contract where the
Reference Market Price exceeds $[ ] (and
therefore less than one full share of Common Stock for each
outstanding TIMES), the TIMES have more limited appreciation
potential than the Common Stock. Therefore, the TIMES may trade
below the value of the Common Stock if the Common Stock
appreciates in value. The value of the Common Stock to be
received by Holders on the Exchange Date (and any cash received in
lieu thereof) may be less than the amount paid by them for their
TIMES. Holders of TIMES will realize the entire decline in value
if the Reference Market Price is less than the price to public per
TIMES shown on the cover page hereof.
DILUTION ADJUSTMENTS; SHAREHOLDER 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
Objective and Policies -- The Contract -- Dilution Adjustments."
The 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 amount
to be received pursuant to the Contract to the price of the Common
Stock, such other events may adversely affect the trading price of
the TIMES. 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 as a result of the exchange of the TIMES for the Common
Stock, 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).
TRADING VALUE; LISTING
The Trust is a newly organized closed-end investment company
with no previous operating history and the TIMES are innovative
securities. It is not possible to predict how the TIMES will
trade in the secondary market. The trading price of the TIMES 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 Trust believes, however, that because of the
yield on the TIMES and the formula for determining the number of
shares of Common Stock to be delivered on the Exchange Date, the
TIMES will tend to trade at a premium to the market value of the
Common Stock to the extent the Common Stock price falls and at a
discount to the market value of the Common Stock to the extent the
Common Stock price rises.
Shares of closed-end investment companies frequently trade at a
premium to or 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 its shares
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 may be greater for investors who wish to sell their
investments soon after completion of an 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 Underwriters currently intend, but are not obligated, to
make a market in the TIMES. There can be no assurance that a
secondary market will develop or, if a secondary market does
develop, that it will provide the Holders with liquidity of
investment or that it will continue for the life of the TIMES.
Application has been made to list the TIMES on the ASE, but there
can be no assurance that, if listed, the TIMES will not later be
delisted or that trading in the TIMES on the ASE 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
securities on another national securities exchange or for
quotation on another trading market. If the TIMES are not listed
or traded on any securities exchange or trading market, or if
trading of the TIMES is suspended, pricing information for the
TIMES may be more difficult to obtain, and the price and liquidity
of the TIMES may be adversely affected.
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. Since the only securities or instruments held
or received by the Trust will be U.S. Treasury securities and the
Contract or other assets consistent with the terms of the
Contract, the Trust may be subject to greater risk than would be
the case for an investment company with diversified investments.
RISK RELATING TO BANKRUPTCY OF SELLER
The Trust believes that the Contract constitutes a "securities
contract" for purposes of the Bankruptcy Code, performance of
which would not be subject to the automatic stay provisions of the
Bankruptcy Code in the event of bankruptcy of the Seller. It is,
however, possible that the Contract will be determined not to
qualify as a "securities contract" for this purpose, in which case
the Seller's bankruptcy may cause a delay in settlement of the
Contract, or otherwise subject the Contract to the bankruptcy
proceedings, which could adversely affect the timing of exchange
or, as a result, the amount received by the Holders in respect of
the TIMES.
DESCRIPTION OF THE TIMES
Each TIMES represents an equal proportional interest in the
Trust, and a total of 2,000,000 TIMES will be issued (or 2,205,000
if the Underwriters' overallotment option is exercised in full).
Upon liquidation of the Trust, Holders are entitled to share pro
rata in the net assets of the Trust available for distribution.
The TIMES have no preemptive, redemption or conversion rights.
TIMES are fully paid and nonassessable by the Trust. The only
securities that the Trust is authorized to issue are the TIMES
offered hereby and those sold to the initial Holders referred to
below.
Holders are entitled to a full vote for each TIMES 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 Bear, Stearns & Co. Inc. and
Salomon Brothers Inc, as the initial Holders of TIMES of the
Trust. The Trust intends to hold annual meetings as required by
the rules of the ASE. 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 Trust Agreement. The Holders have
the right, upon the declaration in writing or vote of more than
two-thirds of the outstanding TIMES, 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 Holders of record of 10%
of the TIMES or to vote on other matters upon the written request
of the Holders of record of 51% of the TIMES (unless substantially
the same matter was voted on during the preceding 12 months). The
Trust will also assist in communications with other Holders as
required by the Investment Company Act.
BOOK-ENTRY-ONLY ISSUANCE
The Depositary Trust Company ("DTC") will act as securities
depository for the TIMES. The information in this section
concerning DTC and DTC's book-entry system is based upon
information obtained from DTC. The TIMES offered hereby will
initially be issued only as fully-registered securities registered
in the name of DTC's nominee. One or more fully-registered global
TIMES certificates will be issued, representing in the aggregate
the total number of TIMES, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities
Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). Access to the DTC
system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants").
Purchases of TIMES within the DTC system must be made by or
through Direct Participants, which will receive a credit for the
TIMES on DTC's records. The ownership interest of each actual
purchaser of a TIMES ("Beneficial Owner") is in turn to be
recorded on the Direct or Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC
of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as
well as periodic statements of their holdings, from the Direct or
Indirect Participants through which the Beneficial Owners
purchased TIMES. Transfers of ownership interests in TIMES are to
be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners.
Beneficial Owners will receive certificates representing their
ownership interests in TIMES, upon a resignation of DTC, or upon
request delivered to the Trust Administrator.
DTC has no knowledge of the actual Beneficial Owners of the
TIMES; DTC's records reflect only the identity of the Direct
Participants to whose accounts such TIMES are credited, which may
or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of
their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and
by Direct Participants an Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time
to time.
In connection with payments on the TIMES, DTC's practice is to
credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive
payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and
customary practices and will be the responsibility of such
Participant and not of DTC or the Trust, subject to any statutory
or regulatory Requirements as may be in effect from time to time.
Payment of dividends to DTC is the responsibility of the Trust,
disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities
depository with respect to the TIMES at any time by giving
reasonable notice to the Trust. Under such circumstances, in the
event that a successor securities depository is not obtained,
certificates representing the TIMES will be printed and delivered.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The Trust will be internally managed by three Trustees.
Consistent with provisions of 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 Contract may not be disposed of during the term of
the Trust and that the U.S. Treasury securities held by the Trust
may not be disposed of prior to the earlier of their respective
maturities and termination of the Trust.
The names of the persons who have been elected by Bear, Stearns
& Co. Inc. and Salomon Brothers Inc, the initial Holders of the
Trust, and who will 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
NAME, AGE AND DURING PAST FIVE
ADDRESS TITLE YEARS
Donald J. Puglisi, Managing Trustee Professor of Finance
50
Department of University of
Finance Delaware
University of
Delaware
Newark, DE
19716
William R. Latham Trustee Professor of
III, 51 Economics
Department of University of
Economics Delaware
University of
Delaware
Newark, DE
19716
Trustee Professor of
James B. O'Neill, 57 Economics
Center for University of
Economic Delaware
Education &
Entrepreneur-
ship
University of
Delaware
Newark, DE
19716
Each Trustee who is not a director, officer or employee of any
Underwriter or the Administrator, or of any affiliate thereof,
will be paid by the Underwriters, on behalf of the Trust, in
respect of his annual fee and anticipated out-of-pocket expenses,
a one-time, up-front fee of $[ ]. 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 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 expenses incurred by the Trust; (ii) with the approval of the
Trustees, engage legal and other professional advisors (other than
the independent public for the Trust); (iii) instruct the Paying
Agent to pay distributions on TIMES as described herein; (iv)
prepare and mail, file or publish all notices, proxies, reports,
tax returns and other communications and documents, and keep all
books and records, for the Trust; (v) at the direction of the
Trustees, institute and prosecute legal and other appropriate
proceedings to enforce the rights and remedies of the Trust; and
(vi) make all necessary arrangements with respect to meetings of
Trustees and any meetings of Holders. The Administrator, however,
will not select the independent public accountants for the Trust
or sell or otherwise dispose of the Trust assets (except in
connection with an acceleration of the Contract or the settlement
of the Contract 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 for the Trust, The Bank of New York
has no other affiliation with, and is not engaged in any other
transactions with, the Trust.
The address of the Administrator is 101 Barclay Street, New
York, New York 10286.
CUSTODIAN
The Trust's custodian (the "Custodian") is The Bank of New York
pursuant to a custodian agreement (the "Custodian Agreement"). In
the event of any termination of the Custodian Agreement by the
Trust or the resignation of the Custodian, the Trust must engage a
new Custodian to carry out the duties of the Custodian as set
forth in the Custodian Agreement. Pursuant to the Custodian
Agreement, all net cash received by the Trust will be invested by
the Custodian in short-term U.S. Treasury 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 Contract.
PAYING AGENT
The transfer agent, registrar and paying agent (the "Paying
Agent") for the TIMES 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 Paying Agent, the
Administrator and the Custodian with respect to any claim,
liability, loss or expense (including the costs and expenses of
the defense against any claim or liability) that it may incur in
acting as Trustee, Paying Agent, Administrator or Custodian as the
case may be, except in the case of willful misfeasance, bad faith,
gross negligence or reckless disregard of their respective duties
or where applicable law prohibits such indemnification. Seller
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.
DISTRIBUTIONS
The Trust intends to distribute to Holders on a quarterly basis
an amount equal to $[ ] per TIMES (which amount equals
the pro rata portion of the fixed quarterly cash distributions
from the proceeds of the maturing U.S. Treasury securities held by
the Trust). The first distribution, in respect of the period from
the Closing until [ ], will be payable on [
] to Holders of Record as of [
] and will equal $[ ] per TIMES . Thereafter,
distributions will be made on [ ]
of each year to Holders of record as of each [
], respectively. A portion of each such
distribution will be treated as a tax-free return of the Holder's
investment. See "Investment Objective and Policies -- General",
and "Certain Federal Income Tax Considerations -- Recognition of
Interest on the U.S. Treasury Securities."
Upon termination of the Trust, as described under the caption
"Investment Objective and Policies -- Trust Termination," each
Holder will receive any remaining net assets of the Trust.
The Trust does not permit the reinvestment of distributions.
ESTIMATED EXPENSES
At the closing of this offering the Underwriters 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, TIMES certificates and Holder reports, expenses
of the Trustees, fidelity bond coverage, stock exchange listing
fees and regulatory filings. The Administrator has agreed to pay
any on-going expenses of the Trust in excess of these estimated
amounts, except that any extraordinary expense shall be payable by
the Trust. Organization costs of the Trust in the amount of
$[ ] and estimated costs of the Trust in
connection with the initial registration and public offering of
the TIMES in the amount of $[ ] will be paid by
the Fund from the proceeds of the offering of the TIMES. Other
estimated costs of the Trust in connection with the public
offering of the TIMES in the amount of $[ ] also
will be paid by the Seller.
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 the Administrator, except that any
extraordinary expense shall be payable by the Trust.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain of the principal United States
federal income tax consequences of ownership of TIMES is based
upon the opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
special tax counsel to the Trust. It deals only with TIMES held
as capital assets by a Holder who acquires its TIMES at the issue
price from an Underwriter pursuant to the original offering, and
not with special classes of Holders, such as dealers in securities
or currencies, banks, life insurance companies, persons who are
not United States Holders (as defined below), persons that hold
TIMES that are part of a straddle, hedging, or conversion
transaction, or persons whose functional currency is
not the U.S. dollar. The summary is based on the Internal Revenue
Code of 1986, as amended (the "Code"), its legislative history,
existing and proposed regulations thereunder, published rulings
and court decisions, all as currently in effect and all subject to
change at any time, perhaps with retroactive effect.
Prospective purchasers of TIMES should consult their own tax
advisors concerning the consequences, in their particular
circumstances, under the Code and the laws of any other taxing
jurisdiction, of ownership of TIMES.
A United States Holder is a beneficial owner who or that is (i)
a citizen or resident of the United States, (ii) a domestic
corporation or (iii) otherwise subject to United States federal
income taxation on a net income basis in respect of TIMES.
Holders should also be aware that there are alternative
characterizations of the assets of the Trust which could result in
different federal income tax consequences. See "Alternative
Characterizations" below. While Skadden, Arps, Slate, Meagher &
Flom LLP does not believe these alternative characterizations
should apply for federal income tax purposes, there can be no
assurance in this regard, and Holders should consult their tax
advisors concerning the risks associated with alternative
characterizations. The following discussion assumes that no such
alternative characterizations will apply.
TAX STATUS OF THE TRUST. The Trust will be treated as a
grantor trust for federal income tax purchases, and each Holder
will be considered the owner of its pro rata portions of the
stripped U.S. Treasury securities and the Contract in the Trust
under the grantor trust rules of the Code. Income received by the
Trust will be treated as income of the Holders in the manner set
forth below.
RECOGNITION OF INTEREST ON THE U.S. TREASURY SECURITIES. The
U.S. Treasury securities in the Trust will consist of stripped
U.S. Treasury securities. A Holder will be required to treat its
pro rata portion of each U.S. Treasury security in the Trust as a
bond that was originally issued on the date the Holder purchased
its TIMES at an original issue discount equal to the excess of the
Holder's pro rata portion of the amounts payable on such U.S.
Treasury security over the Holder's tax basis therefor (determined
as described below). The amount of such excess, however, will
constitute only a portion of the total amounts payable in respect
of U.S. Treasury securities held by the Trust and, consequently, a
substantial portion of each quarterly cash distribution to the
Holders will be treated as a tax-free return of the Holders'
investment in the U.S. Treasury securities and will not be
considered current income for federal income tax purposes. See
"Investment Objective and Policies -- General."
A Holder (whether on the cash or accrual method of tax
accounting) will be required to include original issue discount
(other than original issue discount on short-term U.S. Treasury
securities as defined below) in income for federal income tax
purposes as it accrues on a constant yield basis. The Trust
expects that more than 20% of the Holders will be accrual basis
taxpayers, in which case original issue discount on any short-term
U.S. Treasury security (i.e., any U.S. Treasury security with a
maturity of one year or less from the date it is purchased) held
by the Trust also will be required to be included in income by the
Holders as it accrues. Unless a Holder elects to accrue the
original issue discount on a short-term U.S. 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 U.S. Treasury security will be
increased by the amounts of any original issue discount included
in income by the Holder with respect to such U.S. Treasury
security.
TAX BASIS OF THE U.S. TREASURY SECURITIES AND THE CONTRACT. A
Holder's tax basis in the Contract and the U.S. Treasury
securities, respectively, will equal its pro rata portion of the
amounts paid for them by the Trust. It is currently anticipated
that [ ] and [ ] of the proceeds of the
offering will be used by the Trust to purchase the U.S. Treasury
securities and as payments for the Contract, respectively.
TREATMENT OF THE CONTRACT. Each Holder will be treated as
having entered into a pro rata portion of the Contract and, at the
Exchange Date, as having received a pro rata portion of the Common
Stock, cash, Marketable Securities, Other Property, or a
combination thereof delivered to the Trust.
DISTRIBUTION OF THE COMMON STOCK. The delivery of Common Stock
pursuant to the Contract will not be taxable to the Holders. Each
Holder's basis in its Common Stock will be equal to its basis in
its pro rata portion of the Contract less the portion of such
basis allocable to any fractional share of Common Stock for which
cash is received. A Holder will recognize capital gain or loss
upon receipt of cash in lieu of a fractional share of Common Stock
distributed upon termination of the Trust equal to the difference
between the amount of cash received and the basis of such
fractional share. The holding period for the Common Stock will
begin on the date it is acquired.
DISTRIBUTION OF CASH, MARKETABLE SECURITIES OR OTHER PROPERTY.
If the Seller elects the Cash Settlement Alternative or, as a result
of an Adjustment Event, cash, Marketable Securities, Other Property,
or a combination of Common Stock, Marketable Securities or Other
Property is
delivered pursuant to the Contract, a Holder will recognize
capital gain or loss upon receipt equal to the difference between
the amount of cash received and its basis in its pro rata portion
of the Contract allocable to any shares for which such cash was
received. Any gain or loss will be capital gain or loss and, if
the Holder has held the TIMES for more than one year, such gain or
loss will be long-term capital gain or loss. A Holder's basis in
any Marketable Securities or Other Property received will be equal
to its basis in its pro rata portion of the Contract less the
portion of such basis allocable to any shares of Common Stock for
which cash was received. See "Investment Objective and Policies -
- The Contract."
SALE OF TIMES. Upon a sale of all or some of a Holder's TIMES,
a Holder will be treated as having sold its pro rata portions of
the U.S. Treasury securities and the Contract underlying the
TIMES. 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 portions of the U.S. Treasury
securities and the Contract. Any gain or loss will be long-term
capital gain or loss if the Holder has held the TIMES for more
than one year.
ALTERNATIVE CHARACTERIZATIONS. Skadden, Arps, Slate, Meagher &
Flom LLP believes the Contract should be treated for federal
income tax purposes as a prepaid forward contract for the purchase
of a variable number of shares of Common Stock. The Internal
Revenue Service could conceivably take the view that the Contract
should be treated as a loan to the Seller in exchange for a
contingent debt obligation of the Seller. If the Internal Revenue
Service were to prevail in making such an assertion, a Holder
would be required to include original issue discount in income
over the life of the TIMES at a market rate of interest for the
Seller, taking account of all the relevant facts and
circumstances. In addition, a Holder might be required to treat
any gain realized on the sale, exchange, or redemption of the
TIMES as ordinary income to the extent that such gain is allocable
to the Contract. Any loss realized on such sale, exchange or
redemption that is allocable to the Contract would be treated as
an ordinary loss to the extent of the Holder's original issue
discount inclusions with respect to the Contract, and as capital
loss to the extent in excess of such inclusions. The Internal
Revenue Service could also conceivably take the view that a Holder
should simply include in income as interest the amount of cash
actually received each year in respect of the TIMES.
BACKUP WITHHOLDING AND INFORMATION REPORTING. The payments of
principal and interest (including original issue discount) on, and
the proceeds received from the sale of, TIMES may be subject to
U.S. backup withholding tax at the rate of 31% if the Holder
thereof fails to supply an accurate taxpayer identification number
or otherwise to comply with applicable U.S. information reporting
or certification requirements. Any amounts so withheld will be
allowed as a credit against such Holders U.S. federal income tax
liability and may entitle such Holder to a refund, provided that
the required information is furnished to the Internal Revenue
Service.
After the end of each calendar year, the Trust will furnish to
each record Holder of TIMES an annual statement containing
information relating to the payments on the U.S. Treasury
securities received by the Trust. The Trust will also furnish
annual information returns to each record Holder of the TIMES and
to the Internal Revenue Service.
UNDERWRITING
Subject to the terms and conditions of the Underwriting
Agreement, the Trust has agreed to sell to Bear, Stearns & Co.
Inc. and Salomon Brothers Inc (the "Underwriters"), and the
Underwriters have agreed to purchase from the Trust 2,000,000
TIMES.
Under the terms and conditions of the Underwriting Agreement,
the Underwriters are committed to take and pay for all of the
TIMES offered hereby (other than the TIMES subject to the
Underwriters' over-allotment option), if any, are taken.
The Underwriters propose to offer the TIMES in part directly to
the public at the price to the public set forth on the cover page
of this Prospectus and in part to certain securities dealers at
such price less a concession of $[ ] per TIMES. The
Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $[ ] per TIMES to certain
brokers and dealers. After the TIMES are released for sale to the
public, the offering price and other selling terms may from time
to time be varied by the Underwriters.
In light of the fact that the proceeds of the sale of the TIMES
will be used in part by the Trust to purchase the Contract from
the Seller, the Underwriting Agreement provides that the Seller
will pay to the Underwriters as compensation $[ ] per
TIMES.
The Trust has granted the Underwriters an option exercisable
for 30 calendar days after the date of this Prospectus to purchase
up to an aggregate of 205,000 TIMES solely to cover over-
allotments, if any. If the Underwriters exercise their over-
allotment option, they will receive the Underwriters' Compensation
referred to above for each TIMES so purchased. In addition, in
connection with any such exercise, the Underwriters have severally
agreed, subject to certain conditions, to purchase approximately
the same percentage thereof that the number of the TIMES to be
purchased by each of them, as shown in the foregoing table, bears
to the 2,000,000 TIMES initially offered.
The Seller have agreed that, during the period beginning from
the date of this Prospectus and continuing to and including the
date 90 days after the date of this Prospectus, the Seller will
not offer, sell, contract to sell or otherwise dispose of any
Common Stock or other securities of the Company which are
substantially similar to the Common Stock or which are convertible
or exchangeable into Common Stock or other securities which are
substantially similar to the Common Stock, without the prior
written consent of Bear, Stearns & Co. Inc. as representative of
the Underwriters; provided, however, to the extent that the Seller
borrows under a margin loan (which loan shall not be in excess of
$[ ]) the foregoing restrictions shall not apply to
those shares of Common Stock that are pledged by the Seller as
collateral for such margin loan, provided, further, that the
foregoing restrictions shall not apply to pledges of Common Stock
as collateral pursuant to any margin loans existing on the date of
this Prospectus.
The TIMES will be a new issue of securities with no established
trading market. Application has been made to list the TIMES on
the ASE. The Underwriters have advised the Company that they
intend to make a market in the TIMES, but they are not obligated
to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the
trading market for the TIMES.
The Seller has agreed to indemnify the Underwriters against
certain liabilities, including certain liabilities under the
Securities Act. The [Underwriters] have agreed to pay certain
expenses of the Trust.
Until distribution of the TIMES is completed, rules of the
Commission may limit the ability of the Underwriters and any
selling group members to bid for and purchase the TIMES or shares
of Common Stock. As an exception to these rules, Bear, Stearns &
Co. Inc. and Salomon Brothers Inc (the "Underwriters") are
permitted to engage in certain transactions to stabilize the price
of the TIMES or the Common Stock. Such transactions consist of
bids or offers for the purpose of pegging, fixing or maintaining
the price of the TIMES or the Common Stock.
If the Underwriters create a short position in the TIMES in
connection with the Offering, i.e., if they sell more TIMES than
are set forth on the cover page of this Prospectus, the
Underwriters may reduce that short position by purchasing TIMES in
the open market. The Underwriters may also elect to reduce any
short position by exercising all or part of the over-allotment
option described above.
The Underwriters may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the
Underwriters purchase TIMES in the open market to reduce the
Underwriters' short position or to stabilize the price of the
TIMES, they may reclaim the amount of the selling concession to
any of the Underwriters and any selling group members who sold
those TIMES as part of the Offering.
The purchase of a TIMES for the purpose of stabilization or to
reduce a short position could cause the price of the security to
be higher than it might be in the absence of such purchases. The
imposition of a penalty might also have an effect on the price of
a security to the extent that it were to discourage resales of
such securities.
Neither the Trust nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of
any effect that the transactions described above may have on the
price of the TIMES or on the Common Stock. In addition, neither
the Trust nor any of the Underwriters makes any representation
that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued
without notice.
Certain of the Underwriters render investment banking and other
financial services to the Company and/or the Seller from time to
time. In addition, in February 1996 and January 1997, Bear,
Stearns & Co. Inc. acted as managing underwriter for the Company's
initial public offering and secondary offering respectively. In
August 1996, Bear, Stearns & Co. Inc. acted as one of the initial
purchasers in the Company's convertible notes offering. From
November 1995 through June 1997 Bear, Stearns & Co. Inc. acted as
co-placement agent for seven securitization transactions for the
Company. In addition, Sheldon I. Stein, a Senior Managing
Director of Bear, Stearns & Co. Inc., is a director of the
Company.
VALIDITY OF TIMES
The validity of the TIMES will be passed upon for the Trust and
the Underwriters by their counsel, Skadden, Arps, Slate, Meagher &
Flom LLP, 919 Third Avenue, New York, New York 10022.
EXPERTS
The financial statement included in this Prospectus has been
audited by Deloitte & Touche LLP independent accountants, as
stated in their opinion appearing herein, and has been so included
in reliance upon such opinion given upon the authority of that
firm as experts in accounting and auditing.
FURTHER 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 TIMES offered hereby.
Further information concerning the TIMES 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. In
addition, the Registration Statement may be accessed
electronically at the Commission's site on the World Wide Web
located at http://www.sec.gov.
REPORT OF INDEPENDENT ACCOUNTANTS
FIRSTPLUS FINANCIAL GROUP, INC.
MANDATORY COMMON EXCHANGE TRUST
STATEMENT OF ASSETS AND LIABILITIES
[ ]
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000
Total Assets . . . . . . . . . . . . . . . . . . . . . $100,000
LIABILITIES
. . . . . . . . . . . . . . . . . . . . . $ 0
NET ASSETS
Balance applicable to 1 TIMES outstanding . . . . . . . . $100,000
Net asset value per TIMES . . . . . . . . . . . . . . . . $100,000
_____________________________
The Amended and Restated Trust Agreement provides that prior to
the offering, the Trust will split the outstanding TIMES to be
effected on the date that the price and underwriting discount of
the TIMES being offered to the public is determined, but prior to
the sale of the TIMES to Bear, Stearns & Co. Inc. and Salomon
Brothers Inc. The initial TIMES will be split into the smallest
whole number of TIMES that would result in the per TIMES amount
recorded as shareholders, equity after effecting the split not
exceeding the Public Offering price per TIMES .
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY TIMES OTHER THAN THE TIMES TO WHICH IT RELATES OR
ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY SUCH
TIMES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
--------------
TABLE OF CONTENTS
PAGE
Prospectus Summary . . . . . . . . . . . .
The Trust . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . .
Investment Objective and Policies . . . . .
Risk Factors . . . . . . . . . . . . . . .
Description of the TIMES . . . . . . . . .
Management and Administration of the Trust
Certain Federal Income Tax Considerations .
Underwriting . . . . . . . . . . . . . . .
Validity of TIMES . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . .
Further Information . . . . . . . . . . . .
Report of Independent Accountants . . . . .
Statement of Assets and Liabilities . . . .
UNTIL [ ] (25 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE TIMES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
FIRSTPLUS FINANCIAL GROUP, INC.
MANDATORY COMMON EXCHANGE TRUST
TRUST ISSUED MANDATORY EXCHANGEABLE SECURITIES (TIMES)
------------
PROSPECTUS
-----------
Joint Book-Running Managers
Bear, Stearns & Co. Inc. Salomon Brothers Inc
* Pursuant to the General Instructions of 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 this Registration Statement.
PART C
[/R]
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
*Part A - Report of Independent Accountants.
Statement of Assets and Liabilities.
Part B - None.
(b) Exhibits:
2.a.(i) Form of Declaration of Trust
2.a.(ii) Certificate of Trust
*2.d Form of Specimen Certificate of Mandatory Exchange Security
*2.h Form of Underwriting Agreement
*2.j Form of Custodian Agreement
*2.k(i) Form of Administration Agreement
*2.k(ii) Form of Paying Agent Agreement
*2.k(iii) Form of Purchase Agreement
*2.k(iv) Form of Collateral Agreement
*2.l Opinion and Consent of Counsel to the Trust
*2.n(i) Tax Opinion of Counsel to the Trust (Consent contained in
Exhibit 2.n.i)
*2.n(iii) Consent of Independent Public Accountants
*2.n(iv) Consents to Being Named as Trustee
*2.p Form of Subscription Agreement
_______________
* To be furnished by amendment.
Item 25. Marketing Arrangements
See the form of Underwriting Agreement to be filed as 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 . . . . . . . . . . . . . . . $27,560
American Stock Exchange listing fee . . . . . . *
Printing (other than certificates) . . . . . . . *
Engraving and printing certificates . . . . . . *
Fees and expenses of qualification under
state securities laws (excluding fees
of counsel) . . . . . . . . . . . . . . . . . *
Accounting fees and expenses . . . . . . . . . . *
Legal fees and expenses . . . . . . . . . . . . *
NASD fee . . . . . . . . . . . . . . . . . . . . *
Miscellaneous . . . . . . . . . . . . . . . . . *
Total . . . . . . . . . . . . . . . . . . . $27,560
__________
* To be furnished by amendment.
Item 27. Person Controlled by or under Common Control with Registrant
Prior to October 4, 1996 the Trust had no existence. As of the
effective date, the Trust will have entered into a Subscription Agreement
for _____ TIMES with Bear, Stearns & Co. Inc. and Salomon Brothers Inc and
an Underwriting Agreement with respect to _____ TIMES with the Underwrit-
ers.
Item 28. Number of Holders of TIMES
Number of
Title of class Record Holders
Mandatory Exchange Securities 0
Item 29. Indemnification
The Underwriting Agreement, filed as Exhibit 2.h to this Registration
Statement, provides for indemnification to the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Act").
Insofar as indemnification for liabilities arising under the Act, may
be permitted to trustees, officers and controlling persons of the Regis-
trant, 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 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or control-
ling person of the Registrant in the successful defense of any action, suit
or proceeding) is asserted by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the 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 Trust's accounts, books and other documents are currently located
at the offices of the Registrant, c/o Bear, Stearns & Co. Inc., 245 Park
Avenue, New York, New York 10167 and at the offices of , the
Registrant's Administrator, Custodian, paying agent, transfer agent and
registrar.
Item 32. Management Services
Not Applicable
Item 33. Undertakings
(a) The Registrant hereby undertakes to suspend offering of its units
until it amends its prospectus if (1) subsequent to the effective date of
its Registration Statement, the net asset value declines more than 10
percent from its net asset value as of the effective date of the Registra-
tion Statement or (2) the net asset value increases to an amount greater
than its net proceeds as stated in the prospectus.
(b) The Registrant hereby undertakes that (i) for the purpose of
determining any liability under the 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 Regis-
trant under Rule 497(h) under the 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 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.
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York,
on the _____th day of __________, 199__.
MANDATORY COMMON EXCHANGE TRUST
By: ______________________________
Wesley M. Jones, Trustee
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Name Title Date
____________________ Principal Executive July __, _____
Wesley M. Jones Officer, Principal
Financial Officer,
Principal Accounting
Officer, and Trustee
EXHIBIT INDEX
Sequential
Exhibit Page
Number Description Number
2.a.(i) Declaration of Trust
2.a.(ii) Certificate of Trust
*2.d Form of Specimen
Certificate of Trust
Issued Mandatory Exchange
Securities
*2.h Form of Underwriting
Agreement
*2.j Form of Custodian
Agreement
*2.k.(i) Form of Administration
Agreement
*2.k.(ii) Form of Paying Agent
Agreement
*2.k.(iii) Form of Purchase Agreement
*2.k.(iv) Form of Collateral
Agreement
*2.l Opinion and Consent
of Counsel to the Trust
*2.n.(i) Tax Opinion of Counsel
to the Trust (Consent contained
in Exhibit 2.n.i)
*2.n.(iii) Consent of Independent
Public Accountants
*2.n.(iv) Consents to Being Named
as Trustee
*2.p Form of Subscription Agreement
_______________
* To be furnished by amendment.
Draft of July 29, 1997
TRUST AGREEMENT
CONSTITUTING
FIRSTPLUS FINANCIAL, INC.
MANDATORY EXCHANGE TRUST
Dated as of July 29, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . 1
ARTICLE II TRUST DECLARATION; PURPOSES,
POWERS AND DUTIES OF THE TRUSTEES;
ADMINISTRATION . . . . . . . . . . . . 6
SECTION 2.1 Declaration of Trust; Purposes of
the Trust . . . . . . . . . . . . 6
SECTION 2.2 General Powers and Duties of the
Trustees . . . . . . . . . . . . . 7
SECTION 2.3 Portfolio Acquisition . . . . . . 9
SECTION 2.4 Portfolio Administration . . . . . 9
SECTION 2.5 Manner of Sales . . . . . . . . . 12
SECTION 2.6 Limitations on Trustees' Powers . 13
ARTICLE III ACCOUNTS AND PAYMENTS . . . . . . . . . 14
SECTION 3.1 The Trust Account . . . . . . . . 14
SECTION 3.2 Payment of Fees and Expenses . . . 14
SECTION 3.3 Distributions to Holders . . . . . 14
SECTION 3.4 Segregation . . . . . . . . . . . 14
SECTION 3.5 Investments . . . . . . . . . . . 14
ARTICLE IV REDEMPTION . . . . . . . . . . . . . . 15
SECTION 4.1 Redemption . . . . . . . . . . . . 15
ARTICLE V ISSUANCE OF CERTIFICATES; REGISTRY;
TRANSFER OF TIMES . . . . . . . . . . . 15
SECTION 5.1 Form of Certificate . . . . . . . 15
SECTION 5.2 Transfer of Times; Issuance,
Transfer and Interchange of
Certificates . . . . . . . . . . . 16
SECTION 5.3 Replacement of Certificates . . . 17
ARTICLE VI ISSUANCE OF THE CONTRACT . . . . . . . 18
SECTION 6.1 Execution of the Contract . . . . 18
ARTICLE VII TRUSTEES . . . . . . . . . . . . . . . 18
SECTION 7.1 Trustees . . . . . . . . . . . . . 18
SECTION 7.2 Vacancies . . . . . . . . . . . . 18
SECTION 7.3 Powers . . . . . . . . . . . . . . 19
SECTION 7.4 Meetings . . . . . . . . . . . . . 20
SECTION 7.5 Resignation and Removal . . . . . 20
SECTION 7.6 Liability . . . . . . . . . . . . 20
SECTION 7.7 Compensation . . . . . . . . . . . 21
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . 21
SECTION 8.1 Meetings of Holders . . . . . . . 21
SECTION 8.2 Books and Records; Reports . . . . 22
SECTION 8.3 Termination . . . . . . . . . . . 23
SECTION 8.4 Amendment and Waiver . . . . . . . 24
SECTION 8.5 Accountants . . . . . . . . . . . 26
SECTION 8.6 Nature of Holder's Interest . . . 27
SECTION 8.7 Delaware Law to Govern . . . . . . 27
SECTION 8.8 Notices . . . . . . . . . . . . . 28
SECTION 8.9 Severability . . . . . . . . . . . 28
SECTION 8.10 Counterparts . . . . . . . . . . . 28
TRUST AGREEMENT
This Trust Agreement, dated as of July __, 1997
(the "Trust Agreement"), by and between Bear, Stearns &
Co. Inc., as sponsor (the "Sponsor"), and
________________,__________________ and _______________
as trustees (the "Trustees"), constituting the FirstPlus
Financial, Inc. Mandatory Common Exchange Trust (the
"Trust") .
W I T N E S S E T H:
WHEREAS, Wesley M. Jones, as sole trustee, had
previously filed in the State of Delaware a Certificate
of Trust dated October 4, 1996 (the "Trust Certificate"),
creating Mandatory Common Exchange Trust; and
WHEREAS, the parties hereto desire to create
the TIMES Trust Agreement;
NOW, THEREFORE, the parties hereto agree to the
provisions set forth 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.
"ACCELERATION AMOUNT NOTICE" - An Acceleration
Amount Notice as defined in the Contract.
"ACCELERATION VALUE" - The Acceleration Value
as defined in the Contract.
"ADMINISTRATION AGREEMENT" - The Administration
Agreement, dated as of the date hereof, between the
Administrator and the Trustees, and any substitute
agreement therefor entered into pursuant to Section
2.2(a) hereof.
"ADMINISTRATOR" - The [ ] or its
successor as permitted under [Section 6.1] of the
Administration Agreement or appointed pursuant to Section
2.2(a) hereof.
"AGGREGATE ACCELERATION VALUE" - The Aggregate
Acceleration Value as defined in the Contract.
"BUSINESS DAY" - A day on which the American
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 SETTLEMENT ALTERNATIVE" - The Cash
Settlement Alternative as defined in the Contract.
"CERTIFICATE" - Any certificate evidencing the
ownership of TIMES substantially in the form of Exhibit A
hereto.
"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 [ ] or its
successor as permitted under the Collateral Agreement.
"COLLATERAL AGREEMENT" - The Collateral
Agreement between the Collateral Agent and the Seller,
securing the Seller's obligations under the Contract,
substantially in the form of Exhibit B hereto.
"COLLATERAL EVENT OF DEFAULT" - A Collateral
Event of Default as defined in the Contract.
"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
FirstPlus Financial, Inc.
"COMPANY" - FirstPlus Financial, Inc., a
[ ] corporation.
"CONTRACT" - The forward purchase contract
entered into by the Trustees, the Seller and the other
parties thereto, substantially in the form of Exhibit C
hereto.
"CUSTODIAN" - [ ] or its successor
as permitted under [paragraph 11] of the Custodian
Agreement or appointed pursuant to Section 2.2(a) hereof.
"CUSTODIAN AGREEMENT" - The Custodian
Agreement, dated as of the date hereof, between the
Custodian and the Trustees, and any substitute agreement
therefor entered into pursuant to Section 2.2(a) hereof.
"DEPOSITARY" - The Depository Trust Company, or
any successor thereto.
"DISTRIBUTION DATE" - Each ________, ________,
________ and ________ of each year commencing ________,
1997, to and including ________ __, ____ or if any such
date is not a Business Day, then the first Business Day
thereafter.
"EXCESS PURCHASE PAYMENT" - Excess Purchase
Payment as defined under the Contract.
"EXCHANGE DATE" - ________ __, ____.
"EXCHANGE RATE" - The Exchange Rate as defined
in the Contract.
"FIRM PURCHASE PRICE" - The Firm Purchase Price
as defined in the Contract.
"FIRST TIME OF DELIVERY" - The First Time of
Delivery as defined in the Underwriting Agreement.
"HOLDER" - The registered owner of any TIMES as
recorded on the books of the Paying Agent.
"INDEPENDENT DEALERS" - Independent Dealers as
defined in the Contract.
"INDEMNITY AGREEMENT" - The Fund Indemnity
Agreement dated as of the date hereof between the
Trustees 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 the
Managing Trustee by resolution of the Trustees.
"MANDATORY EXCHANGE" - The delivery by the
Trustees to the Holders of Shares (or, if the seller
elects the Cash Settlement Alternative under the
Contract, the amount in cash specified in the Contract as
payable in respect thereof) in mandatory exchange for the
TIMES on the Exchange Date.
"MARKETABLE SECURITIES" - Marketable Securities
as defined in the Contract.
"PARTICIPANT" - A Person having a book-entry
only system account with the Depositary.
"PAYING AGENT" - [ ] or its
successor as permitted under Section 6.6 of the Paying
Agent Agreement or appointed pursuant to Section 2.2(a)
hereof.
"PAYING AGENT AGREEMENT" - The Paying Agent
Agreement, dated as of the date hereof, between the
Paying Agent and the Trustees, and any substitute
agreement therefor entered into pursuant to Section
2.2(a) hereof.
"PERSON" - An individual, a partnership, a
corporation, a trust, an unincorporated association, a
joint venture or other entity or a government or any
agency or political subdivision thereof.
"PROSPECTUS" - The prospectus relating to the
Trust 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 TIMES
paid to each Holder on each Distribution Date.
"RECORD DATE" - Each ________, ________,
________, and ________ of each year commencing ________,
1997.
"REFERENCE MARKET PRICE" - Reference Market
Price as defined in the Contract.
"REGISTRATION STATEMENT" - Registration
Statement on Form N-2 (Registration No. [ ]) of the
Trust, as amended.
"REORGANIZATION EVENT" - A Reorganization Event
as defined in the Contract.
"SECOND TIME OF DELIVERY" - The Second Time of
Delivery as defined in the Underwriting Agreement.
"SECURITIES ACT" - The Securities Act of 1933,
as amended from time to time.
"SELLER" - The person named as Seller in the
Contract.
"SHARES" - Shares of Common Stock to be
exchanged by the Trustees for the TIMES on the Exchange
Date.
"TEMPORARY INVESTMENTS" - U.S. Treasury
securities and any other cash held by the Trust in 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.
"TIMES" - $.___ Trust Issued Mandatory Common
Exchange Security of 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.
"TRANSFER AGENT AND REGISTRAR" - [ ],
as Transfer Agent and Registrar for the Common Stock.
"TREASURY SECURITIES" - The meaning specified
in Section 2.3(b) hereof.
"TRUST ACCOUNT" - The account created pursuant
to Section 3.1 hereof.
"TRUST ESTATE" - The Contract 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, and any proceeds thereof or therefrom
and any other moneys held at any time in the Trust
Account.
"UNDERWRITERS" - The Underwriters named in 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 DECLARATION OF TRUST; PURPOSES OF
THE TRUST. The Sponsor hereby creates the Trust in order
that it may acquire the Treasury Securities, enter into
the Contract, issue and sell to the Sponsor and the
Underwriters the TIMES, 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. 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 Sponsor has heretofore
deposited with the Trustees the sum of $10 to accept and
hold in trust hereunder until the issuance and sale of
the TIMES to the Underwriters, 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 2.2 GENERAL POWERS AND DUTIES OF THE
TRUSTEES. In furtherance of the provisions of Section
2.1 hereof, the Sponsor authorizes and directs the
Trustees:
(a) to enter into and perform (and, in
accordance with Section 8.4(a) hereof, amend), the
Contract, the Collateral Agreement, 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 Agreement 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
Agreement, 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;
(c) to issue and sell to the Underwriters
an aggregate of up to ______ TIMES (including those
TIMES subject to the over-allotment option of the
Underwriters 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 TIMES and related
underwriting discount for the TIMES to be sold to
the Underwriters but prior to the sale of the TIMES
to the Underwriters, the TIMES originally issued to
the Sponsor shall be split into a greater number of
TIMES so that immediately following such split the
value of each TIMES 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 2.4 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 2.3 PORTFOLIO ACQUISITION. In
furtherance of the provisions of Section 2.1 hereof, the
Sponsor further specifically authorizes and directs the
Trustees:
(a) to enter into the Contract with
respect to the Shares subject thereto with the
Seller 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 TIMES, net of
underwriting commissions and other expenses payable
in connection with the public offering of the TIMES
as described in Section 3.2 hereof and net 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
Contract, the Contract shall entitle the Trust to
receive from the Seller on the Exchange Date the
Shares subject thereto (or, if the Seller elects the
Cash Settlement Alternative under the Contract, the
amount in cash specified in the Contract in respect
thereof) so that the Trust may execute the Exchange
with the Holders; and
(b) to purchase for settlement at the
First Time of Delivery, and at the Second Time of
Delivery, as appropriate, with the proceeds of the
sale the TIMES, net of underwriting commissions and
other expenses payable in connection with the public
offering of the TIMES, 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 2.4 PORTFOLIO ADMINISTRATION. In
furtherance of the provisions of Section 2.1 hereof, the
Sponsor further specifically authorizes and directs the
Trustees:
(a) DETERMINATION OF DILUTION OR MERGER
ADJUSTMENTS. Upon receipt of any notice pursuant to
[Section 5.4(b)] of the Contract of an event
requiring an adjustment to the Exchange Rate, or
upon otherwise acquiring knowledge of such an event,
to calculate the required adjustment and furnish
notice thereof to the Collateral Agent and the
Seller, or to request from the Seller such further
information as may be necessary to calculate or
effect the required adjustment;
(b) SELECTION OF INDEPENDENT INVESTMENT
BANK. Upon receipt of notice of (i) the occurrence
of a Reorganization Event in which property other
than cash or Marketable Securities is to be received
in respect of the Common Stock as described in
Section 6.2 of the Contract or (ii) an Excess
Purchase Payment in which the Company has paid or
will pay consideration other than cash as described
in Section 6.1(d) of the Contract, to select and
retain a nationally recognized investment banking
firm to determine the market value of such property
as provided in the Contract, and to deliver to the
Seller notice pursuant to Section 8.1 of the
Contract identifying the firm proposed to be
selected and retained, and to consult with the
Seller on such selection and retention as provided
in such Section 8.1;
(c) ACCELERATION. Upon receipt of any
notice pursuant to Section 5.4(a) of the Contract or
pursuant to Section 6(a) of the Collateral
Agreement that a Collateral Event of Default has
occurred, or upon otherwise acquiring notice that an
Event of Default has occurred, to request quotations
from Independent Dealers, compute Acceleration Value
and Aggregate Acceleration Value and deliver an
Acceleration Amount Notice, in each case with
respect to the Contract, all as described in Article
VII of the Contract;
(d) DETERMINATION OF EXCHANGE DATE
AMOUNTS. To calculate, on the Exchange Date, the
number of Shares (or, if the Seller elects the Cash
Settlement Alternative under the Contract, the
amount in cash) required to be delivered by the
Seller under Section 1.1 of the Contract or, if a
Reorganization Event shall have occurred, the amount
of cash required to be delivered by the Seller, and
the number of Marketable Securities permitted to be
delivered by the Seller in lieu of all or a portion
of such cash, all as provided in Section 6.2 of the
Contract; and to furnish Notice of the amounts so
determined to the Collateral Agent and the Seller;
(e) DISTRIBUTION OF EXCHANGE
CONSIDERATION. Unless a Reorganization Event shall
have occurred (in which event distribution of
proceeds shall be governed by Section 8.3 below) or
the Seller elects the Cash Settlement Alternative
under the Contract (in which event the cash received
in respect thereof shall be distributed pro rata to
the Holders of TIMES):
(i) DETERMINATION OF FRACTIONAL
SHARES. To determine, on the Exchange Date:
(A) for each Holder of TIMES, such Holder's
pro rata share of the total number of Shares
delivered to the Trustees under the Contract 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 TIMES 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 determine the difference between (A) the
aggregate proceeds of such sale (net of any
brokerage or related expenses) and (B) the
product of the number of Shares so sold and
the Reference Market Price; and, in accordance
with the Indemnity Agreement, to pay such
difference, if positive, to Bear, Stearns & Co.
Inc., or to request payment of such difference,
if negative, from Bear, Stearns & Co. Inc.;
(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 TIMES in definitive form,
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 Contract, rounded
down to the nearest integral number; (B) the
Transfer Agent and Registrar Shares 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 TIMES, 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;
(iv) DISTRIBUTION OF CASH IN RESPECT
OF FRACTIONAL SHARES. To distribute to each
Holder of TIMES cash in the amount of: (A) the
fraction of a Share, if any, allocable to such
Holder as determined pursuant to clause (i) (B)
above; times (B) the Reference Market Price;
and
(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 2.5 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
Agent, taking into account such factors as price,
commission, size of order, difficulty of execution and
brokerage skill required.
SECTION 2.6 LIMITATIONS ON TRUSTEES' POWERS.
The Trustees are not permitted:
(a) to purchase or hold any securities or
instruments except for the Shares, the Contract, the
Treasury Securities, the Temporary Investments
contemplated by Section 3.5 hereof and, in the event
of a Reorganization Event, Marketable Securities;
[(b) to dispose of the Contract prior to
the Exchange Date;]
(c) to issue any securities or
instruments except for the TIMES, or to issue any
TIMES other than the TIMES sold to the Sponsor and
the TIMES to be sold pursuant to the Underwriting
Agreement and until such TIMES have been so
purchased and paid for in full;
(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" under the Code.
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 THE TRUST ACCOUNT. The Trustees
shall, upon issuance of the TIMES, establish with the
Paying Agent an account to be called the "Trust Account".
All moneys received by the Trustees in respect of the
Contract, the Treasury Securities and any Temporary
Investments held pursuant to Section 3.5 hereof, all
moneys received from the sale of the TIMES to the
Sponsor, and any proceeds from the sale to the
Underwriters of the TIMES after the purchase of the
Contract and the Treasury Securities and the payment of
the Trust's expenses described in Section 3.2 hereof
shall be credited to the Trust Account.
SECTION 3.2 PAYMENT OF FEES AND EXPENSES. The
Administrator is authorized to pay from the Trust Account
out of the net proceeds of the sale of the TIMES, the
fees and expenses of the Trust incurred in connection
with the offering of the TIMES 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 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 Investments 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. Notwithstanding the
foregoing, not more than 5% of the assets of the Trust
may be held at any time in the form of cash and Temporary
Investments, and the Trustees shall distribute cash, or
liquidate Temporary Investments and distribute the
proceeds thereof, if, when and to the extent needed to
maintain compliance with the foregoing restriction.
ARTICLE IV
REDEMPTION
SECTION 4.1 REDEMPTION. The Trustees shall
have no right or obligation to redeem TIMES.
ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY;
TRANSFER OF TIMES
SECTION 5.1 FORM OF CERTIFICATE. Each
Certificate evidencing TIMES shall be countersigned
manually or in facsimile by the Managing Trustee and
executed 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
TIMES set forth on the face of such Certificate and the
denominator of which shall be the total number of TIMES
outstanding at that time. All TIMES shall be issued in
registered form and shall be numbered serially.
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 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 TIMES. Until
so exchanged, the temporary Certificates shall be
entitled to the same benefits hereunder as definitive
Certificates.
SECTION 5.2 TRANSFER OF TIMES; ISSUANCE,
TRANSFER AND INTERCHANGE OF CERTIFICATES. TIMES 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 interchangeable for
one or more other Certificates in an equal aggregate
number of TIMES 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
TIMES or any multiple thereof. The Paying Agent may deem
and treat the person in whose name any TIMES shall be
registered upon the books of the Paying Agent as the
owner of such TIMES 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
TIMES 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 TIMES 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 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.
ARTICLE VI
ISSUANCE OF THE CONTRACT
SECTION 6.1 Execution of the Contract. The
Contract shall be countersigned manually or in facsimile
by the Managing Trustee and executed manually by the
Seller and shall be dated the date of execution and
delivery by the Seller.
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees. The Trust shall have
three Trustees who shall initially be elected by the
Sponsor. 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 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 TIMES
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 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 TIMES, 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 TIMES or
certificates representing TIMES 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 [$ ], 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 [$ ] 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 the Trustees or upon petition of
Holders of not less than 51% of the TIMES 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 TIMES
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 TIMES outstanding
present in person or by proxy if Holders of a majority of
TIMES outstanding on the record date are so represented.
Each TIMES 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.
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 TIMES
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.
(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 Contract 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 Contract and
with terms comparable thereto.
SECTION 8.3 TERMINATION. (a) This Trust
Agreement and the Trust created hereby shall terminate
upon the earliest of (i) the date 90 days after the
execution of this Trust Agreement if (x) the TIMES 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 Contract, 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
VIII thereof, 10 Business Days after the date on which
the Trust shall receive the Shares then required to be
delivered by the Seller, or the proceeds of any sale of
collateral pursuant to Section 8(c) of the Collateral
Agreement), and (iv) the date which is 21 years less 91
days after the death of the last survivor of all of the
descendants of [ ] 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 termination
shall be sent to Holders specifying the record date
for any distribution to Holders and the time of
termination as determined by the Trustees, upon
which the books maintained by the Paying Agent
pursuant to Section 5.2 hereof shall be closed.
(c) For purposes of termination under
Sections 8.3(a)(ii), (iii) and (iv) hereof, within
five Business Days after such termination, the
Trustees shall, subject to any applicable provisions
of law, 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 TIMES.
SECTION 8.4 AMENDMENT AND WAIVER. (a) This
Trust Agreement, and any of the agreements referred to in
Section 2.2(a) hereof, may be amended from time to time
by the Trustees for any purpose prior to the issuance and
sale to the Underwriters of the TIMES 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 TIMES then
outstanding, so as to increase the number of TIMES
issuable hereunder above the number of TIMES
specified in Section 2.2(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 TIMES without
the consent of the Holders of such TIMES, (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 TIMES 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 TIMES represented at a special
meeting of Holders, if more than 50% of the TIMES
outstanding are represented at such meeting, and (y)
more than 50% of the TIMES outstanding, if such
amendment would effect a change in Section 2.1 or
2.6 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 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 TIMES present at a special
meeting of Holders, if Holders of more than 50% of
TIMES outstanding are present or represented by
proxy at such meeting or (ii) more than 50% of the
TIMES 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 Contract,
the Treasury Securities or other assets or moneys 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 TIMES 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.
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 Bear, Stearns & Co., 245 Park
Avenue, New York, New York 10167, Attention: ________, 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 [ ], New York, New York [ ] 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 counterparts, and as so
executed will constitute one agreement, binding on all of
the parties hereto.
IN WITNESS WHEREOF, the parties hereto have
caused this Trust Agreement to be duly executed.
_______________________________
(Bear, Stearns & Co. Inc.)
TRUSTEES:
_______________________________
Name:
Address:
_______________________________
Name:
Address:
_______________________________
Name:
Address:
Schedule I
TREASURY SECURITIES
All terms specified are for stripped principal
or interest components of U.S. Treasury debt obligations.
TIMES Payment Date Aggregate Face Amount,
per
TIMES, Payable
at Payment Date
Exhibit A
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.
$___. TRUST ISSUED MANDATORY COMMON EXCHANGE SECURITIES
FIRSTPLUS FINANCIAL, INC. MANDATORY
COMMON EXCHANGE TRUST
CUSIP NO. _______
NO. _____ _______ SHARES
THIS CERTIFIES THAT
_____________________________________________ IS THE
RECORD OWNER OF ____________________ $___ TRUST ISSUED
MANDATORY COMMON EXCHANGE SECURITIES OF FIRSTPLUS
FINANCIAL, INC. MANDATORY COMMON EXCHANGE TRUST,
CONSTITUTING FRACTIONAL UNDIVIDED INTERESTS IN FIRSTPLUS
FINANCIAL, INC. MANDATORY COMMON EXCHANGE TRUST, A TRUST
CREATED UNDER THE LAWS OF THE STATE OF DELAWARE PURSUANT
TO A TRUST AGREEMENT BETWEEN BEAR, STEARNS & CO. 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, [ ], [ ].
THIS CERTIFICATE IS TRANSFERABLE AND INTERCHANGEABLE 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.
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY
COUNTERSIGNED BY THE PAYING AGENT.
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING
TRUSTEE.
FIRSTPLUS FINANCIAL, INC.
MANDATORY COMMON EXCHANGE TRUST
DATED: By _____________________________
Managing Trustee
COUNTERSIGNED:
[ ],
as Paying Agent
By ___________________________
Authorized Signature
CERTIFICATE OF TRUST OF MANDATORY COMMON
EXCHANGE TRUST
This Certificate of Trust of MANDATORY COMMON
EXCHANGE TRUST (the "Trust"), dated October 3, 1996, is
being duly executed and filed by Wesley M. Jones, as
trustee, to form a business trust under the Delaware
Business Trust Act (12 Del. C. Section 3801, et seq.)
1. Name. The name of the business trust
formed hereby is MANDATORY COMMON EXCHANGE TRUST.
2. Registered Office; Registered Agent. The
business address of the registered office of the Trust in
the State of Delaware is The Corporation Trust Company,
1209 Orange Street in the City of Wilmington, 19801. The
name of the Trust's registered agent at such address is
The Corporation Trust Company.
3. Effective Date. This Certificate of Trust
shall be effective upon the date and time of filing.
IN WITNESS WHEREOF, the undersigned, being the
sole trustee of the Trust, has executed this Certificate
of Trust as of the date first above-written.
Wesley M. Jones
Sole Trustee
