2,000,000 TIMES
TRUST ISSUED MANDATORY EXCHANGE SECURITIES
(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 $3.543, and will be exchanged for between 0.8475 shares
and 1 share of common stock, $0.01 par value per share (the 'Common Stock'), of
FIRSTPLUS Financial Group, Inc. (the 'Company') on August 15, 2000 (the
'Exchange Date'), subject to a cash settlement feature. The annual distribution
of $3.543 per TIMES is payable quarterly on each February 15, May 15, August 15,
and November 15, commencing November 15, 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 $0.886 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 $57.67 but equal to or
greater than $48.875, a number (or fractional number) of shares of Common Stock
per TIMES having a value (determined at the Reference Market Price) equal to
$48.875, (ii) if the Reference Market Price on the Exchange Date is equal to or
greater than $57.67, 0.8475 shares of Common Stock per TIMES and (iii) if the
Reference Market Price on the Exchange Date is less than $48.875, 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 $57.67, and less than all of the appreciation
even if at that time the Reference Market Price is above $57.67. Moreover,
because a Holder will only receive 0.8475 shares of Common Stock per TIMES (or
the Reference Market Price thereof) if the Reference Market Price on the
Exchange Date exceeds $57.67, Holders will only be entitled to receive upon
exchange 84.75% 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, 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.
Application has been made to list the TIMES on the American Stock Exchange
(the 'ASE') under the symbol 'TIM.' Prior to this offering there has been no
public market for the TIMES. The last reported sale price of the Common Stock on
the Nasdaq National Market traded under the symbol 'FPFG,' on September 11, 1997
was $48.875 per share.
(continued on following page)
------------------------------
SEE 'RISK FACTORS' ON PAGES 5 AND 17 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.
<TABLE>
<CAPTION>
PRICE TO PUBLIC SALES LOAD(1) PROCEEDS TO THE TRUST(2)
<S> <C> <C> <C>
Per TIMES.............................. $48.875 $1.466 $48.875
Total(3)............................... $97,750,000 $2,932,500 $97,750,000
</TABLE>
(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') $1.466 per TIMES. See 'Underwriting.'
(2) Expenses of the offering, which are payable by the Seller, are estimated to
be approximately $360,000.
(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
$107,769,375, $3,233,081 and $107,769,375, 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 September 17, 1997.
Joint Book-Running Managers
BEAR, STEARNS & CO. INC. SALOMON BROTHERS INC
The date of this Prospectus is September 12, 1997
<PAGE>
(continued from previous page)
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 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 SEE-- 'UNDERWRITING.'
2
<PAGE>
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 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 $0.886 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 $57.67 but equal to
or greater than $48.875, a number (or fractional number) of shares of Common
Stock per TIMES having a value (determined at the Reference Market Price) equal
to $48.875, (ii) if the Reference Market Price is equal to or greater than
$57.67, 0.8475 shares of Common Stock per TIMES and (iii) if the Reference
Market Price is less than $48.875, 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 $57.67 on the Common
Stock, but no protection from depreciation of the Common Stock and no
participation in appreciation through $57.67. 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 $39.47 per share of
Common Stock initially subject thereto and $78,944,795 (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,
$0.01 par value per share (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
$48.875 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. (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'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.'
3
<PAGE>
The Company is subject to the periodic reporting requirements of the
Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and its shares
of Common Stock are traded on the Nasdaq National Market under the symbol
'FPFG.' On September 11, 1997, the Closing Price of the Common Stock was
$48.875. 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 $3.543 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 $57.67 (which represents an
appreciation of 18.0%). Moreover, because a Holder will only receive 0.8475
shares of Common Stock per TIMES (or the Reference Market Price thereof) if the
Reference Market Price exceeds $57.67 Holders will only be entitled to receive
upon exchange 84.75% of any appreciation of the value of the Common Stock in
excess of $57.67. 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 $3.543 per annum or $0.886 per quarter, payable quarterly on each
February 15, May 15, August 15, and November 15 or, if any such date is not a
business day, on the next succeeding business day, to Holders of record as of
each February 1, May 1, August 1, and November 1, respectively. The first
distribution, in respect of the period from Closing until November 14, 1997,
will be payable on November 15, 1997 to Holders of record as of November 1, 1997
and will equal $0.561 per TIMES. See 'Investment Objective and
Policies--General.'
Mandatory Exchange. On the Exchange Date, each outstanding TIMES will be
exchanged automatically for between 0.8475 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 applicable
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--
4
<PAGE>
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 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 distributed on the Exchange Date. Each Holder's basis
in its Common Stock or Marketable Securities distributed on the Exchange Date
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 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.'
5
<PAGE>
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 $57.67, (which represents an appreciation of
18.0%). Moreover, because a Holder will only receive 0.8475 shares of Common
Stock per TIMES (or the Reference Market Price thereof) if the Reference Market
Price on the Exchange Date exceeds $57.67, Holders will only be entitled to
receive upon exchange 84.75% 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.'
Because of the foregoing limitations, the Trust's investments will be
concentrated initially in the consumer finance industry, which is the industry
in which the Company currently operates. However, to the extent that in the
future the Company diversifies its operations into one or more other industries,
or a Marketable Security received in an Adjustment Event includes a security of
an issuer which operates in another industry, the Trust's investments will be
less concentrated in the consumer finance industry.
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.
Application has been made to list the TIMES on the American Stock Exchange
under the symbol 'TIM.'
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 $1.466 per TIMES. See 'Underwriting.'
Estimated organization costs of the Trust in the amount of $25,000 have been
paid by Bear, Stearns & Co. Inc. and estimated costs of the Trust in connection
with the initial registration and public offering of the TIMES in the amount of
$360,000 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
6
<PAGE>
its ongoing fees and, in the case of the Administrator, anticipated expenses of
the Trust over the term of the Trust (estimated to be $350,000 in the
aggregate). Any on-going expenses of the Trust in excess of these estimated
amounts will be paid by Bear, Stearns & Co. Inc., which will be reimbursed by
the Seller. 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 $120,000 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
$117,000 per year payable by Bear, Stearns & Co. Inc. at the closing of the
offering.
INVESTOR TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load (as a percentage of offering price).............................. 3%
Dividend Reinvestment and Cash Purchase Plan Fees........................... Not Applicable
</TABLE>
ANNUAL EXPENSES
<TABLE>
<S> <C>
Management Fees............................................................. 0%
Other Expenses (after prepayment)*.......................................... 0%
--------------
Total Annual Expenses............................................. 0%*
--------------
--------------
</TABLE>
- ------------------
* Absent prepayment by the Underwriters out of their underwriting compensation,
the Trust's 'total annual expenses' would be equal to approximately 0% 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.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEAR
- --------------------------------------------------------------------------------- ------- -------
<S> <C> <C>
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........................................ $ 30 $ 30
</TABLE>
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, as amended
and restated September 11, 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.
7
<PAGE>
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 $0.886
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 $57.67 (the 'Threshold
Appreciation Price') but equal to or greater than $48.875 (the 'Floor Price'), a
number (or fractional number) of shares of Common Stock per TIMES equal to the
Floor Price divided by the Reference Market Price (i.e., the value of such
shares of Common Stock when multiplied by the Reference Market Price shall equal
$48.875) (the "Initial Value"), (ii) if the Reference Market Price is equal to
or greater than $57.67, 0.8475 shares of Common Stock per TIMES and (iii) if the
Reference Market Price is less than $48.875, 1 share 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. The Reference Market Price per share of
Common Stock means the average Closing Price 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 80.762% 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 $48.875 per TIMES
and the Reference Market Price is above $48.875 or below $57.67, a Holder would
receive
8
<PAGE>
in connection with the exchange of TIMES on the Exchange Date the following
number of shares of Common Stock:
<TABLE>
<CAPTION>
REFERENCE MARKET PRICE NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK AMOUNT OF CASH
- ---------------------- ---------------- --------------
<S> <C> <C>
$58.000 0.8475 $ 49.155
57.670 0.8475 48.875
56.000 0.8728 48.875
54.000 0.9051 48.875
52.000 0.9399 48.875
50.000 0.9775 48.875
48.875 1.0000 48.875
48.000 1.0000 48.000
</TABLE>
The following table sets forth information regarding the distributions to
be received on the U.S. Treasury securities, the portion of each year's
distributions that will constitute a return of capital for 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.'
<TABLE>
<CAPTION>
ANNUAL GROSS ANNUAL INCLUSION
ANNUAL GROSS DISTRIBUTIONS OF ORIGINAL ISSUE
DISTRIBUTIONS FROM ANNUAL RETURN DISCOUNT IN
FROM U.S. TREASURIES OF CAPITAL INCOME
U.S. TREASURIES PER TIMES PER TIMES PER TIMES
--------------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
1997............................................ $1,220,000 $0.5610 $0.5562 $0.0048
1998............................................ 7,088,000 3.5440 3.3906 0.1534
1999............................................ 7,088,000 3.5440 3.1900 0.3540
2000............................................ 5,316,000 2.6580 2.2658 0.3922
</TABLE>
The annual distribution of $3.543 per TIMES is payable quarterly on each
February 15, May 15, August 15 and November 15, commencing November 15, 1997.
Quarterly distributions on the TIMES will consist solely of the cash received
from the U.S. Treasury securities. The first distribution, in respect of the
period from Closing until November 14, 1997, will be payable on November 15,
1997 to Holders of record as of November 1, 1997 and will equal $0.561 per
TIMES. 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 $57.67 (which represents an appreciation of 18.0%). Moreover,
because Holders will receive only 0.8475 shares of Common Stock if the Reference
Market Price exceeds $57.67, Holders will be entitled to receive upon exchange
only 84.75% (the percentage equal to $48.875 divided by $57.67) of any
appreciation of the value of the Common Stock in excess of $57.67 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.
9
<PAGE>
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 Company's Common Stock is 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 September 11, 1997 the high and
low bids for the Common Stock were $51.000 and $48.875, respectively, and
the closing price was $48.875.
<TABLE>
<CAPTION>
HIGH BID LOW BID
-------- -------
<S> <C> <C>
1996
First Quarter (commencing February 2, 1996)........................... $ 11.250 $ 9.125
Second Quarter........................................................ 15.875 11.250
Third Quarter......................................................... 22.500 12.750
Fourth Quarter........................................................ 30.000 20.250
1997
First Quarter......................................................... $ 36.125 $20.875
Second Quarter........................................................ 34.375 20.750
July 1--September 11.................................................. 51.125 33.500
</TABLE>
10
<PAGE>
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 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 as of which 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.
11
<PAGE>
If, after the date hereof, the Company makes an Excess Purchase Payment,
then the Exchange Rate will be multiplied by a fraction of which the numerator
shall be the Then-Reference Market Price of the Common Stock, and of which the
denominator shall be such Then-Reference Market Price less the amount of such
distribution applicable to one share of Common Stock which would not be a
Permitted Dividend (or in the case of an Excess Purchase Payment, less the
aggregate amount of such Excess Purchase Payments for which adjustment is being
made at such time divided by the number of outstanding shares of Common Stock on
the date the adjustment is effected).
For purposes of these adjustments, the term 'Excess Purchase Payment' means
the excess, if any, of (x) the cash and the value (as determined by a nationally
recognized independent investment banking firm retained for this purpose by the
Trust) of all other consideration paid by the Company with respect to one share
of Common Stock acquired in any share repurchase (excluding share repurchases by
the Company effected in compliance with Rule 10b-18 under the Securities
Exchange Act of 1934, as amended) whether made by the Company in the open
market, by private purchase by tender offer, by exchange offer or otherwise,
over (y) the Then-Reference Market Price of the Common Stock. Notwithstanding
the foregoing, the Company may pay up to $150,000,000 in aggregate consideration
in respect of share repurchases without any adjustment being required, provided
that no such repurchase involves an Excess Purchase Payment of more than 5% of
the Then-Reference Market Price of the Common Stock on the date an adjustment
therefor would otherwise be required to be effected.
If any adjustment in the Exchange Rate is required to be calculated as
described above, corresponding adjustments to the Threshold Appreciation Price,
Floor Price and Initial Value, 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; (ii) in the case of any subdivision, split, combination or
reclassification described above, on the effective date of such transaction;
(iii) in the case of any Excess Purchase Payment for which the Company shall
announce, at or prior to the time it commences the relevant share repurchase,
the repurchase price per share for shares proposed to be repurchased, on the
date of such announcement; and (iv) in the case of any other Excess Purchase
Payment, on the date that the holders of the repurchased shares become entitled
to payment in respect thereof. There will be no adjustment under the Contract in
respect of any dividends, distributions or issuances 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 or issuance shall
subsequently be cancelled by the Company, or such dividend, distribution or
issuance shall fail to receive requisite approvals or shall fail to occur for
any other reason, then 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 or issuance 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.
12
<PAGE>
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 an 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, 0.8475 multiplied by the Transaction
Value (as defined below), (B) if the Reference Market Price is less than the
Threshold Appreciation Price but is equal to or greater than the Floor Price,
the product of (x) the Floor Price divided by the Reference Market Price
multiplied by (y) the Transaction Value and (C) if the Reference Market Price is
less than the Floor 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. For
purposes of these provisions, 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.
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 Exchange 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 Exchange
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 Marketable 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 Marketable
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 the sum of (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 for the 20 Trading Days immediately
prior to the Exchange Date multiplied by the number of such
13
<PAGE>
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.
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
the Seller, the Trust 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 150% 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 it 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 that U.S. Government obligations
pledged as substitute collateral shall fail to meet the foregoing requirements
at any valuation (an 'Insufficiency Determination'), 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
14
<PAGE>
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 105% 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
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<PAGE>
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 or Farm Bureau Life
Insurance Company and their respective 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.'
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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 $48.875 (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.
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<PAGE>
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.
The 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.
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<PAGE>
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 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
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.
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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.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- ---------------------------------- ---------------- ----------------------------------
<S> <C> <C>
Donald J. Puglisi, 50 ............ Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 51 ........ Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 57 ............. Trustee Professor of Economics
Center for Economic University of Delaware
Education & Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
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 $10,800. The
Trust's Managing Trustee will also receive an additional up-front fee of $3,600
for serving in that capacity. The Trustees will not receive, either directly or
indirectly, any compensation, including any pension or retirement benefits, from
the Trust. None of the Trustees receives any compensation for serving as a
trustee or director of any other affiliated investment company.
ADMINISTRATOR
The day-to-day affairs of the Trust will be managed by The Bank of New York
as 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 accountants 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.
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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 $0.886 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 November 14, 1997 will be payable on November 15, 1997 to
Holders of record as of November 1 and will equal $0.561 per TIMES. Thereafter,
distributions will be made on February 15, May 15, August 15, and November 15 of
each year to Holders of record as of each February 1, May 1, August 1, and
November 1, 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. Organization costs of the Trust in the amount of $25,000 have been paid
by Bear, Stearns & Co. Inc., and estimated costs of the Trust in connection with
the initial registration and public offering of the TIMES in the amount of
$360,000 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
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<PAGE>
Trust will not be substantially more than this amount. Any on-going expenses of
the Trust in excess of these estimated amounts will be paid by Bear, Stearns &
Co. Inc., which will be reimbursed by the Seller.
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.
22
<PAGE>
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 19.238% and 80.762% 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 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 AND MARKETABLE SECURITIES OR OTHER PROPERTY
If the Seller elects the Cash Settlement Alternative or, as a result of an
Adjustment Event, cash, Marketable Securities or a combination thereof 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 Common Stock 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. Recent legislation reduces the maximum tax
rate applicable to the sale or exchange of a capital asset held for more than
eighteen months. A Holder's basis in any Marketable Securities received will be
equal to its basis in its pro rata portion of the Contract less the portion of
such basis allocable to any 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. Recent legislation reduces the
maximum tax rate applicable to the sale or exchange of a capital asset held for
more than eighteen months.
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.
23
<PAGE>
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 Holder's 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 the following aggregate principal amount of TIMES (assuming no exercise of
the Underwriters' over-allotment option).
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- -------------------------------------------------------- ----------------
<S> <C>
Bear, Stearns & Co. Inc................................. 1,000,000
Salomon Brothers Inc.................................... 1,000,000
----------------
2,000,000
----------------
----------------
</TABLE>
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 $0.880 per
TIMES. The Underwriters may allow, and such dealers may re-allow, a concession
not in excess of $0.100 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 $1.466 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 has 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 $48,875,000) 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
24
<PAGE>
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, 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.
25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of Mandatory Common Exchange
Trust:
We have audited the accompanying statement of assets and liabilities of
Mandatory Common Exchange Trust (the 'Trust') as of September 10, 1997. This
financial statement is the responsibility of the Trust's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by the Trust's management, as well as evaluating the
overall statement of assets and liabilities presentation. We believe that our
audit of the statement of assets and liabilities provides a reasonable basis for
our opinion.
In our opinion, such statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Mandatory
Common Exchange Trust, as of September 10, 1997 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
September 11, 1997
26
<PAGE>
MANDATORY COMMON EXCHANGE TRUST
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 10, 1997
<TABLE>
<S> <C>
ASSETS
Cash................................................................................... $100,000
--------
Total Assets......................................................................... $100,000
--------
--------
LIABILITIES
Total Liabilities...................................................................... $ 0
--------
Net Assets............................................................................. $100,000
--------
Balance applicable to 2 TIMES issued and outstanding................................... $100,000
--------
--------
Net Asset Value....................................................................... $ 50,000
--------
--------
</TABLE>
NOTE 1. ORGANIZATION
The Trust was established on October 4, 1996 and is registered as a
non-diversified, closed-end management investment company under the Investment
Company Act of 1940.
NOTE 2. ISSUANCE OF TRUST ISSUED MANDATORY EXCHANGED SECURITIES ('TIMES')
The Trust proposes to sell Trust Issued Mandatory Exchanged Securities
('TIMES') to the public pursuant to a Registration Statement on Form N-2 under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, as filed on November 12, 1996. The Trust intends to use the proceeds
to purchase a portfolio comprised of stripped U.S. Treasury securities and to
pay the purchase price of forward contracts relating to shares of common stock
of FIRSTPLUS Financial Group, Inc. The proceeds of the Public Offering will be
recorded as shareholders' equity upon receipt of such proceeds by the Trust. All
offering costs of the Trust will be paid by the seller of the forward contracts.
Organizational costs have been paid by Bear, Stearns & Co. Inc.
27
<PAGE>
================================================================================
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................ 3
The Trust..................................... 7
Use of Proceeds............................... 7
Investment Objective and Policies............. 8
Risk Factors.................................. 17
Description of the TIMES...................... 18
Management and Administration of the Trust.... 20
Certain Federal Income Tax Considerations..... 22
Underwriting.................................. 24
Validity of TIMES............................. 25
Experts....................................... 25
Further Information........................... 25
Report of Independent Accountants............. 26
Statement of Assets and Liabilities........... 27
</TABLE>
UNTIL OCTOBER 7, 1997 (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.
================================================================================
<PAGE>
================================================================================
2,000,000 TIMES
TRUST ISSUED MANDATORY
EXCHANGE SECURITIES
(SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK OF
FIRSTPLUS FINANCIAL GROUP, INC.)
---------------------------------------------
PROSPECTUS
---------------------------------------------
JOINT BOOK-RUNNING MANAGERS
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
SEPTEMBER 12, 1997
================================================================================
