As filed with the Securities and Exchange Commission on September 11, 1997
Securities Act Registration No. 33-15927
Investment Company Act File No. 811-7847
===========================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-2
|X| REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
|X| Pre-Effective Amendment No. 2
|_| Post-Effective Amendment No.
and
|X| REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
|X| Amendment No. 2
MANDATORY COMMON EXCHANGE TRUST
(Exact name of Registrant as specified in charter)
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
(Address of principal executive offices)
(212) 272-7332
(Registrant's Telephone Number, including Area Code)
Don Puglisi
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
(Name and address of Agent for Service)
with a copy to:
Richard T. Prins, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
--------------------------------------
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the Registration Statement. If any securities on this form are
to be offered on a delayed or continuous basis in reliance on Rule 415 under the
Securities Act of 1933, other than securities offered in connection with a
dividend reinvestment plan, check the following box . . . . . . . . . . . .|_|
|_| This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is 33-__________.
--------------------------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
===================================================================================================================================
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Securities Being Offering Price Aggregate Registration
Being Registered Registered Per Share(1) Offering Price Fee(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mandatory Exchange Securities,
no par value 2,205,000 49 7/8 109,974,370 33,322
===================================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c).
(2) $606 previously paid with respect to Registration Statement filed on
November 12, 1996, and $26,954 paid with respect to PreEffective Amendment No. 1
to Registration Statement filed on August 1, 1997.
<PAGE>
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8 (a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.
2
<PAGE>
MANDATORY COMMON EXCHANGE TRUST
CROSS REFERENCE SHEET
(Pursuant to Rule 404(c) under the Securities Act of 1933)
Parts A & B of Prospectus*
<TABLE>
<S> <C> <C> <C>
Item 1. Outside Front Cover ............................................. Front Cover Page
Item 2. Inside Front and Outside
Back Cover Page.............................................. Front Cover Page; Inside Front
Cover Page; Outside Back Cover
Page
Item 3. Fee Table and Synopsis........................................... Prospectus Summary; Fee Table
Item 4. Financial Highlights............................................. Not Applicable
Item 5. Plan of Distribution............................................. Front Cover Page; Prospectus
Summary; Underwriting
Item 6. Selling Shareholders............................................. Not Applicable
Item 7. Use of Proceeds.................................................. Use of Proceeds; Investment
Objective and Policies
Item 8. General Description of the
Registrant................................................... Front Cover Page; Prospectus
Summary; The Trust; Investment
Objective and Policies; Risk
Factors
Item 9. Management....................................................... Management and Administration
of the Trust
Item 10. Capital Stock, Long-Term Debt,
and Other Securities......................................... Description of the Securities
Item 11. Defaults and Arrears on Senior
Securities................................................... Not Applicable
Item 12. Legal Proceedings................................................ Not Applicable
Item 13. Table of Contents of the Statement
of Additional Information.................................... Not Applicable
Item 14. Cover Page....................................................... Not Applicable
Item 15. Table of Contents................................................ Not Applicable
Item 16. General Information and History.................................. The Trust
Item 17. Investment Objective
and Policies................................................. Investment Objective and Policies
Item 18. Management....................................................... Management and Administration
of the Trust
Item 19. Control Persons and Principal
Holders of Securities.......................................... Management and Administration
of the Trust
Item 20. Investment Advisory
and Other Services............................................ Management and Administration
of the Trust
Item 21. Brokerage Allocation and
Other Practices............................................... Investment Objective and Policies
Item 22. Tax Status...................................................... Certain Federal Income Tax
Considerations
Item 23. Financial Statements............................................. Statements of Assets and
Liabilities
</TABLE>
3
<PAGE>
* Pursuant to the General Instructions of Form N-2, all information required to
be set forth in Part B: Statement of Additional Information has been included in
Part A: The Prospectus. Information required to be included in Part C is set
forth under the appropriate item, so numbered in Part C of this Registration
Statement.
4
<PAGE>
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 $ , and will be exchanged for between shares
and 1 share of common stock, $0.01 par value per share (the 'Common Stock'), of
FIRSTPLUS Financial Group, Inc. (the 'Company') on , (the
'Exchange Date'), subject to a cash settlement feature. The annual distribution
of $ per TIMES is payable quarterly on each , , and
, commencing , 1997. The TIMES are not subject to early redemption.
The Trust is a newly organized, finite-term Trust established to purchase
and hold a portfolio of stripped U.S. Treasury securities maturing on a
quarterly basis through the Exchange Date, and a forward purchase contract (the
'Contract') with an existing shareholder (the 'Seller') of the Company relating
to the Common Stock. The Trust's investment objective is to provide each holder
of TIMES (the 'Holder') with a quarterly distribution of $ per TIMES and,
on the Exchange Date, a number of shares of Common Stock per TIMES equal to the
Exchange Rate or the cash equivalent. The 'Exchange Rate' is equal to (i) if the
Reference Market Price on the Exchange Date is less than $ but equal to or
greater than $ , a number (or fractional number) of shares of Common Stock
per TIMES having a value (determined at the Reference Market Price) equal to
$ , (ii) if the Reference Market Price on the Exchange Date is equal to or
greater than $ , shares of Common Stock per TIMES and (iii) if the
Reference Market Price on the Exchange Date is less than $ , 1 share of
Common Stock per TIMES, subject in each case to adjustment in certain events.
The 'Reference Market Price' means the average Closing Price (as hereinafter
defined) per share of Common Stock for the 20 Trading Days (as hereinafter
defined) immediately prior to, but not including, the Exchange Date. In lieu of
delivery of the Common Stock, the Seller may elect under the Contract to pay
cash on the Exchange Date in an amount equal to the Reference Market Price times
the number of shares of the Common Stock determined under the above formula (the
'Cash Settlement Alternative'). If the Seller elects the Cash Settlement
Alternative, holders of TIMES will receive cash instead of shares of Common
Stock on the Exchange Date. Holders otherwise entitled to receive fractional
shares in respect of their aggregate holdings of TIMES will receive cash in lieu
thereof.
Holders of TIMES will receive quarterly distributions whereas the Company
does not currently pay dividends on the Common Stock. However, the Company could
commence paying dividends on its Common Stock at any time and there is no
assurance that the yield on the TIMES will be higher than the dividend yield on
the Common Stock over the term of the Trust. In addition, the opportunity for
equity appreciation afforded by an investment in the TIMES is less than that
afforded by an investment in the Common Stock because holders of TIMES will
realize no equity appreciation unless the Reference Market Price of the Common
Stock on the Exchange Date exceeds $ , and less than all of the
appreciation even if at that time the Reference Market Price is above $ .
Moreover, because a Holder will only receive shares of Common Stock per
TIMES (or the Reference Market Price thereof) if the Reference Market Price on
the Exchange Date exceeds $ , Holders will only be entitled to receive upon
exchange % of any appreciation of the value of the Common Stock over that
amount. Holders of TIMES will realize the entire decline in equity value if the
Reference Market Price on the Exchange Date is less than the price to public per
TIMES shown below. Accordingly, the value of the Common Stock or cash equivalent
received by a Holder may be less than the amount paid by such Holder for its
TIMES, in which event its investment will result in a loss.
The Company is not affiliated with the Trust or the Seller, 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 . 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 10, 1997
was $43.375 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.
------------------------------
<PAGE>
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.............................. $ $ $
Total(3)............................... $ $ $
</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') $ per TIMES. See 'Underwriting.'
(2) Before deducting estimated offering expenses, which are payable by the Trust
and estimated to be $ .
(3) The Trust has granted to the Underwriters an option for 30 days to purchase
up to an additional 205,000 TIMES at the price to the public per TIMES,
solely to cover over-allotments. If the option is exercised in full, the
total Price to Public, Sales Load and Proceeds to the Trust will be $ ,
$ and $ , respectively. See 'Underwriting.'
------------------------------
The TIMES are offered by Bear, Stearns & Co. Inc. and Salomon Brothers Inc
(the 'Underwriters') as specified herein, subject to receipt and acceptance by
them and subject to their right to reject any order in whole or in part. It is
expected that certificates for the TIMES will be ready to deliver through the
Facilities of the Depository Trust Company on or about , 1997.
Joint Book-Running Managers
BEAR, STEARNS & CO. INC. SALOMON BROTHERS INC
The date of this Prospectus is , 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 $ per TIMES (which amount equals a pro rata
portion of the fixed quarterly cash distributions from the proceeds of the
maturing U.S. Treasury securities) and, on the Exchange Date, a number of shares
of Common Stock per TIMES equal to the Exchange Rate or, if the Seller elects
the Cash Settlement Alternative, which election must be made not later than 20
trading days prior to but not including the Exchange Date, an amount in cash
equal to the Reference Market Price of that number of shares. The Exchange Rate
is equal to (i) if the Reference Market Price is less than $ but equal to
or greater than $ , a number (or fractional number) of shares of Common
Stock per TIMES having a value (determined at the Reference Market Price) equal
to $ , (ii) if the Reference Market Price is equal to or greater than
$ , shares of Common Stock per TIMES and (iii) if the Reference
Market Price is less than $ , 1 share of Common Stock per TIMES, subject
in each case to adjustment in certain events. This provides the Trust with the
potential for a portion of any capital appreciation above $ on the Common
Stock, but no protection from depreciation of the Common Stock and no
participation in appreciation through $ . Holders otherwise entitled to
receive fractional shares in respect of their aggregate holdings of TIMES will
receive cash in lieu thereof. See 'Investment Objective and Policies--Trust
Termination.'
The purchase price under the Contract is equal to $ per share of
Common Stock initially subject thereto and $ (2,000,000 shares of Common
Stock) in the aggregate (exclusive of the over-allotment option) and is payable
to the Seller by the Trust at the closing of the offering of the TIMES (the
'Closing'). The obligations of the Seller under the Contract will be secured by
a pledge of Common Stock and/or shares of nonvoting common stock, no par value
(the 'Nonvoting Common'), of the Company that is convertible at any time by any
person other than the Seller and its affiliates into shares of Common Stock on a
one-for-one basis or, at the election of the Seller, by substitute collateral
consisting of short-term, direct obligations of the U.S. Government. See
'Investment Objective and Policies--The Contract--Collateral Arrangements;
Acceleration.'
THE OFFERING
The Trust is offering 2,000,000 TIMES to the public at a purchase price of
$ per TIMES (which is equal to the last reported bid-side price of the
Common Stock on the date of the Offering) through the Underwriters. In addition,
the Underwriters have been granted options to purchase up to 205,000 additional
TIMES solely for the purpose of covering over-allotments. See 'Underwriting.'
THE COMPANY
FIRSTPLUS Financial Group, Inc. (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 10, 1997, the Closing Price of the Common Stock was
$_________. Reference is made to the publicly available filings of the Company
for information about the Company. Such filings can be inspected and copied at
the public reference facilities maintained by the U.S. Securities and Exchange
Commission (the 'Commission') at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also may be obtained by mail from the Public Reference Section of the
Commission, Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549, at prescribed rates. Additionally, the Commission maintains a Web site on
the Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding issuers, such as the Company, that
file electronically with the Commission.
The Company is not affiliated with the Trust or the Seller, will not
receive any of the proceeds from the sale of the TIMES and will have no
obligations with respect to the TIMES. This Prospectus relates only to the TIMES
offered hereby and does not relate to the Company or its Common Stock.
THE TIMES
General. The TIMES are designed to provide investors with a quarterly
distribution at the annual rate of $ per share of TIMES. The Company does
not currently pay dividends on its Common Stock. Any decision to commence paying
dividends on the Common Stock by the Company and the amount of any such
dividends would be discretionary with its Board of Directors and subject to
legal and other factors, including the Company's future earnings, cash flow,
financial condition and capital requirements. Quarterly distributions on the
TIMES will consist solely of the cash received from the U.S. Treasury securities
held by the Trust. The Trust will not be entitled to any dividends that may be
declared on the Common Stock.
There is no assurance that the yield on the TIMES will be higher than the
dividend yield on the Common Stock over the term of the Trust. In addition, the
opportunity for equity appreciation afforded by an investment in the TIMES is
less than that afforded by an investment in the Common Stock because Holders
will realize no equity appreciation if, on the Exchange Date, the Reference
Market Price of the Common Stock is below $
(which represents an appreciation of %). Moreover, because a Holder will
only receive shares of Common Stock per TIMES (or the Reference Market
Price thereof) if the Reference Market Price exceeds $ , Holders will only
be entitled to receive upon exchange % of any appreciation of the value of
the Common Stock in excess of $ . Holders of TIMES will realize the entire
decline in equity value if the Reference Market Price is less than the price to
public per TIMES shown on the cover page hereof. Accordingly, the value of the
Common Stock or cash equivalent received by a Holder may be less than the amount
paid by such Holder for its TIMES, in which event its investment will result in
a loss.
Distributions. Holders are entitled to receive distributions at the rate
per TIMES of $ per annum or $ per quarter, payable quarterly on each
, , and or, if any such date
is not a business day, on the next succeeding business day, to Holders of record
as of each , , and ,
respectively. The first distribution, in respect of the period from Closing
until , 1997, will be payable on , 1997 to Holders of
record as of , 1997 and will equal $ per TIMES. See 'Investment
Objective and Policies--General.'
Mandatory Exchange. On the Exchange Date, each outstanding TIMES will be
exchanged automatically for between of a share and 1 share of Common Stock,
subject to adjustment in the event of certain dividends or distributions,
subdivisions, splits, combinations, issuances of certain rights or warrants or
distributions of certain assets with respect to the Common Stock. Further, in
lieu of delivering the Common Stock, the Seller may elect under the Contract to
pay cash on the Exchange Date in an amount equal to the then 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 $ (which represents an appreciation of
%). Moreover, because a Holder will only receive shares of Common
Stock per TIMES (or the Reference Market Price thereof) if the Reference Market
Price on the Exchange Date exceeds $ , Holders will only be entitled to
receive upon exchange % of any appreciation of the value of the Common
Stock over that amount. Holders of TIMES will realize the entire decline in
equity value if the Reference Market Price is less than the price to public per
TIMES shown on the cover page hereof. Accordingly, the value of the Common Stock
or cash equivalent received by a Holder may be less than the amount paid by such
Holder for its TIMES, in which event its investment will result in a loss.
The Trust is classified as a 'non-diversified' investment company under the
Investment Company Act. Consequently, the Trust is not limited by the Investment
Company Act in the proportion of its assets that may be invested in the
securities of a single issuer. Since the only securities held by the Trust will
be the U.S. Treasury securities and the Contract, the Trust may be subject to
greater risk than would be the case for an investment company with diversified
investments. See 'Investment Objective and Policies' and 'Risk Factors--Non-
Diversified Status.'
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.
LISTING
Application has been made to list the TIMES on the American Stock Exchange
under the symbol [ ].
FEES AND EXPENSES
In light of the fact that the proceeds of the sale of the TIMES will be
used in part by the Trust to purchase the Contract from the Seller, the
Underwriting Agreement provides that the Seller will pay Underwriters
Compensation to the Underwriters of $ per TIMES. See 'Underwriting.'
Estimated organization costs of the Trust in the amount of $ 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
$ will be paid by the Trust from the proceeds of the offering of the TIMES.
Other estimated costs of the Trust in connection with the public offering of the
TIMES in the amount of $ will be paid by the Seller. Each of the
Administrator, the Custodian and the Paying Agent, and each Trustee will be paid
by the Underwriters out of the Underwriters Compensation at the closing of the
offering of the TIMES a one-time, up-front amount in respect of its ongoing
6
<PAGE>
fees and, in the case of the Administrator, anticipated expenses of the Trust
(estimated to be $ in the aggregate), over the term of the Trust. Any
on-going expenses of the Trust in excess of these estimated amounts will be paid
by Bear, Stearns & Co., 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 $ of which would be allocable to each
year of the Trust's existence, and the ongoing expenses of the Trust (including
fees of the Administrator, Custodian, Paying Agent and Trustees), estimated at
$ per year payable by the Underwriters at the closing of the offering.
INVESTOR TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load (as a percentage of offering price).............................. %
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 % 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........................................ $ $
</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 dated
, 1997. The Trust is located at 850 Library Avenue, Newark, Delaware
19715, and its telephone number is (302) 738-6680.
USE OF PROCEEDS
The net proceeds of this offering will be used on or shortly after the date
on which this offering is completed to purchase a fixed portfolio comprised of
stripped U.S. Treasury securities with face amounts and maturities corresponding
to the quarterly distributions payable with respect to the TIMES and the payment
dates thereof, and to pay the purchase price under the Contract to the Seller.
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 $
per TIMES (which amount equals the portion of the fixed quarterly distributions
from the proceeds of the maturing U.S. Treasury securities held by the Trust)
and, on the Exchange Date, a number of shares of Common Stock per TIMES equal to
the Exchange Rate or, if the Seller elects the Cash Settlement Alternative, an
amount in cash equal to the Reference Market Price thereof. The Exchange Rate is
equal to (i) if the Reference Market Price is less than $ (the 'Threshold
Appreciation Price') but equal to or greater than $ (the 'Floor Price'), a
number (or fractional number) of shares of Common Stock per TIMES equal to
$ (the 'Initial Value') divided by the Reference Market Price (i.e., the
value of such shares of Common Stock (determined at the Reference Market Price)
shall equal $ ), (ii) if the Reference Market Price is equal to or greater
than $ , shares of Common Stock per TIMES and (iii) if the Reference
Market Price is less than $ , 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 % of the
Trust's initial assets. As a consequence the Trust's investments will be
concentrated in whatever industry the Company does business in. The Trust has
also adopted a fundamental policy that the Contract may not be disposed of
during the term of the Trust and that the U.S. Treasury securities held by the
Trust may not be disposed of prior to the earlier of their respective maturities
and the termination of the Trust. The foregoing policies are fundamental
policies of the Trust that may not be changed without the approval of 100% in
interest of the Holders.
The value of the Common Stock (or cash or Marketable Securities received in
lieu thereof) that will be received by Holders in respect of the TIMES on the
Exchange Date may be more or less than the amount paid for the TIMES offered
hereby.
For illustrative purposes only, the following chart shows the number of
shares of Common Stock that a Holder would receive for each TIMES at various
Reference Market Prices. The chart assumes that there would be no adjustments to
the number of shares of Common Stock deliverable under the Contract by reason of
the occurrence of any of the events described under '--The Contract--Dilution
Adjustments.' There can be no assurance that the Reference Market Price will be
within the range set forth below. Given the initial price of $ per TIMES and
the Reference Market Price is above $ or below $ , a Holder would
receive in
8
<PAGE>
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
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
</TABLE>
The following table sets forth information regarding the distributions to
be received on the U.S. Treasury securities, the portion of each year's
distributions that will constitute a return of capital for 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>
......................................... $ $ $ $
.........................................
.........................................
.........................................
</TABLE>
The annual distribution of $ per TIMES is payable quarterly on each
, , and
, commencing , 1997. Quarterly distributions on the TIMES
will consist solely of the cash received from the U.S. Treasury securities. The
Trust will not be entitled to any dividends that may be declared on the Common
Stock. See 'Management and Administration of the Trust--Distributions.'
ENHANCED YIELD; LESS POTENTIAL APPRECIATION THAN COMMON STOCK;
NO DEPRECIATION PROTECTION
Holders will receive quarterly distributions, whereas the Company does not
currently pay dividends on the Common Stock. However, the Company could commence
paying dividends on its Common Stock at any time and there is no assurance that
the yield on the TIMES will be higher than the dividend yield on the Common
Stock over the term of the Trust. In addition, the opportunity for equity
appreciation afforded by an investment in the TIMES is less than that afforded
by an investment in the Common Stock because Holders will realize no equity
appreciation if, on the Exchange Date, the Reference Market Price of the Common
Stock is below $ (which represents an appreciation of %).
Moreover, because Holders will receive only shares of Common Stock if
the Reference Market Price exceeds $ , Holders will be entitled to
receive upon exchange only % (the percentage equal to $ divided
by $ ) of any appreciation of the value of the Common Stock in excess
of $ over that amount. Holders of TIMES will realize the entire
decline in value if the Reference Market Price is less than the price to public
per TIMES shown on the cover page hereof. Accordingly, the value of the Common
Stock or cash equivalent received by a Holder may be less than the amount paid
by such Holder for its TIMES, in which event its investment will result in a
loss.
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 10, 1997 the high and
low bids for the Common Stock were $ and $ , respectively, and the
closing price was $ .
<TABLE>
<CAPTION>
HIGH BID LOW BID
-------- -------
<S> <C> <C>
1996
First Quarter (commencing February 2, 1996)........................... $ 11.875 $ 8.750
Second Quarter........................................................ 16.250 10.000
Third Quarter......................................................... 22.875 12.438
Fourth Quarter........................................................ 30.750 19.750
1997
First Quarter......................................................... $ 36.750 $20.500
Second Quarter........................................................ 35.000 20.500
July 1--September 10.................................................. 44.750 32.750
</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.
Further, if the Company shall pay a dividend or make a distribution to all
holders of Common Stock, in either case, of evidences of its indebtedness or
other non-cash assets (excluding any distributions in shares of Common Stock)
or issue to all holders of Common Stock rights or warrants to subscribe for or
purchase any of
11
<PAGE>
its securities (other than rights or warrants referred to in the previous
paragraph), then the Exchange Rate shall be multiplied by a dilution adjustment
equal to a fraction, of which the numerator shall be the Then-Reference Market
Price per share of Common Stock, and the denominator shall be such price less
the fair market value (as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Administrator) as of
the time the adjustment is calculated of the portion of such evidences of
indebtedness, non-cash assets or rights or warrants payable in respect of one
share of Common Stock.
If, after the date hereof, the Company distributes or declares a record
date in respect of a distribution of cash (other than any Permitted Dividend,
any cash distributed in consideration of fractional shares of Common Stock and
any cash distributed in a Reorganization Event), by dividend or otherwise, to
all holders of Common Stock, or 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 '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. '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 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 [$ ]
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. Upon any such adjustment the Threshold Appreciation Price, Floor
Price and Initial Value shall also be adjusted in the manner described above.
If any adjustment in the Exchange Rate is required to be calculated as
described above, corresponding adjustments to the initial $ ,
$ and $ figures, as previously adjusted, shall be
calculated.
Dilution adjustments shall be effected: (i) in the case of any dividend,
distribution or issuance described above, at the opening of business on the
business day following the record date for determination of holders of Common
Stock entitled to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after such record
date, at the time such dividend, distribution or issuance shall be announced by
the Company; (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, 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.
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
such 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
15
<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 and its affiliates
into shares of Common Stock on a one-for-one basis.
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon ('stripped') U.S.
Treasury securities with face amounts and maturities corresponding to the
distributions payable with respect to the TIMES and the payment dates thereof.
The Trust may invest up to 30% of its total assets in these U.S. Treasury
Securities. In the event that the Contract is accelerated or disposed of as
described under the caption 'Management Administration of the Trust--Trustees',
then any such U.S. Treasury securities then held in the Trust shall be
liquidated by the Administrator and distributed pro rata to the Holders,
together with the amounts distributed upon acceleration or any consideration
received by the Trust upon disposition of the Contract. See '--Collateral
Arrangements; Acceleration' and '--Trust Termination.'
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest the proceeds of the U.S.
Treasury securities and any other cash held by the Trust in short-term
obligations of the U.S. Government maturing no later than the business day
preceding the next following distribution date. Not more than 5% of the Trust's
total assets will be invested in such short-term obligations or held in cash at
any one time.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy, the Trust may not purchase any
securities or instruments other than the U.S. Treasury securities, the Contract
and the Common Stock or other assets received pursuant to the Contract and, for
cash management purposes, short-term obligations of the U.S. Government; issue
any securities or instruments except for the TIMES; make short sales or purchase
securities on margin; write put or call options; borrow money; underwrite
securities; purchase or sell real estate, commodities or commodities contracts
including futures contracts; or make loans. The Trust also has adopted a
fundamental policy that the Contract may not be disposed of during the term of
the Trust and that the U.S. Treasury securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities and the
termination of the Trust.
TRUST TERMINATION
The Trust will terminate automatically on or shortly after the Exchange
Date. Alternatively, in the event that the Contract is accelerated, then any
U.S. Treasury securities then held in the Trust shall be liquidated by the
Administrator and distributed pro rata to the Holders, together with the amounts
distributed upon acceleration, and the Trust shall be terminated. See
'--Collateral Arrangements; Acceleration' and '--The U.S. Treasury Securities.'
16
<PAGE>
RISK FACTORS
INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT
The Trust will be internally managed by its Trustees and will not have any
separate investment adviser. It is a fundamental policy of the Trust that the
Contract may not be disposed of during the term of the Trust and that the U.S.
Treasury securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust. As a
result, the Trust will continue to hold the Contract despite significant
declines in the market price of the Common Stock or adverse changes in the
financial condition of the Company (or, after an Adjustment Event, comparable
developments affecting any Marketable Securities or the issuer thereof). The
Trust will not be managed like a typical closed-end investment company.
LIMITED APPRECIATION POTENTIAL; COMMON STOCK DEPRECIATION RISK
The Trust anticipates that on the Exchange Date it will receive the Common
Stock deliverable pursuant to the Contract, which it will then distribute to
Holders. There is no assurance that the yield on the TIMES will be higher than
the dividend yield on the Common Stock over the term of the Trust. In addition,
because the Contract calls for the Seller to deliver less than the full number
of shares of Common Stock subject to the Contract where the Reference Market
Price exceeds $ (and therefore less than one full share of Common Stock for
each outstanding TIMES), the TIMES have more limited appreciation potential than
the Common Stock. Therefore, the TIMES may trade below the value of the Common
Stock if the Common Stock appreciates in value. The value of the Common Stock to
be received by Holders on the Exchange Date (and any cash received in lieu
thereof) may be less than the amount paid by them for their TIMES. Holders of
TIMES will realize the entire decline in value if the Reference Market Price is
less than the price to public per TIMES shown on the cover page hereof.
DILUTION ADJUSTMENTS; SHAREHOLDER RIGHTS
The number of shares of Common Stock that Holders are entitled to receive
at the termination of the Trust is subject to adjustment for certain events
arising from stock splits and combinations, stock dividends and certain other
actions of the Company that modify its capital structure. See 'Investment
Objective and Policies--The Contract--Dilution Adjustments.' The number of
shares to be received by Holders may not be adjusted for other events, such as
offerings of Common Stock for cash or in connection with acquisitions, that may
adversely affect the price of the Common Stock and, because of the relationship
of the amount to be received pursuant to the Contract to the price of the Common
Stock, such other events may adversely affect the trading price of the TIMES.
There can be no assurance that the Company will not take any of the foregoing
actions, or that it will not make offerings of, or that major shareholders will
not sell any, Common Stock in the future, or as to the amount of any such
offerings or sales. In addition, until the receipt of the Common Stock by
Holders as a result of the exchange of the TIMES for the Common Stock, Holders
will not be entitled to any rights with respect to the Common Stock (including
without limitation voting rights and the rights to receive any dividends or
other distributions in respect thereof).
TRADING VALUE; LISTING
The Trust is a newly organized closed-end investment company with no
previous operating history and the TIMES are innovative securities. It is not
possible to predict how the TIMES will trade in the secondary market. The
trading price of the TIMES may vary considerably prior to the Exchange Date due
to, among other things, fluctuations in the price of the Common Stock (which may
occur due to changes in the Company's financial condition, results of operations
or prospects, or because of complex and interrelated political, economic,
financial and other factors that can affect the capital markets generally, the
stock exchanges or quotation systems on which the Common Stock is traded and the
market segment of which the Company is a part) and fluctuations in interest
rates and other factors that are difficult to predict and beyond the Trust's
control. The Trust believes, however, that because of the yield on the TIMES and
the formula for determining the number of shares of Common Stock to be delivered
on the Exchange Date, the TIMES will tend to trade at a premium to the market
value of the Common Stock to the extent the Common Stock price falls and at a
discount to the market value of the Common Stock to the extent the Common Stock
price rises.
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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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<PAGE>
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 $ . 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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<PAGE>
CUSTODIAN
The Trust's custodian (the 'Custodian') is The Bank of New York pursuant to
a custodian agreement (the 'Custodian Agreement'). In the event of any
termination of the Custodian Agreement by the Trust or the resignation of the
Custodian, the Trust must engage a new Custodian to carry out the duties of the
Custodian as set forth in the Custodian Agreement. Pursuant to the Custodian
Agreement, all net cash received by the Trust will be invested by the Custodian
in short-term U.S. Treasury securities maturing on or shortly before the next
quarterly distribution date. The Custodian will also act as collateral agent
under the Collateral Agreement and will hold a perfected security interest in
the Common Stock and U.S. Government obligations or other assets consistent with
the terms of the Contract.
PAYING AGENT
The transfer agent, registrar and paying agent (the 'Paying Agent') for the
TIMES is The Bank of New York pursuant to a paying agent agreement (the 'Paying
Agent Agreement'). In the event of any termination of the Paying Agent Agreement
by the Trust or the resignation of the Paying Agent, the Trust will use its best
efforts to engage a new Paying Agent to carry out the duties of the Paying
Agent.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Paying Agent, the Administrator
and the Custodian with respect to any claim, liability, loss or expense
(including the costs and expenses of the defense against any claim or liability)
that it may incur in acting as Trustee, Paying Agent, Administrator or Custodian
as the case may be, except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of their respective duties or where applicable
law prohibits such indemnification. Seller has agreed to reimburse the Trust for
any amounts it may be required to pay as indemnification to any Trustee, the
Administrator, the Custodian or the Paying Agent.
DISTRIBUTIONS
The Trust intends to distribute to Holders on a quarterly basis an amount
equal to $ per TIMES (which amount equals the pro rata portion of the fixed
quarterly cash distributions from the proceeds of the maturing U.S. Treasury
securities held by the Trust). The first distribution, in respect of the period
from the Closing until , 1997 will be payable on to Holders of
record as of and will equal $ per TIMES. Thereafter, distributions
will be made on , , and of each year to Holders of
record as of each , , and , 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 $ and estimated
costs of the Trust in connection with the initial registration and public
offering of the TIMES in the amount of $ will be paid by the Trust from the
proceeds of the offering of the TIMES. Other estimated costs of the Trust in
connection with the public offering of the TIMES in the amount of $ will be
paid by the Seller.
The amount payable to the Administrator in respect of ongoing expenses of
the Trust was determined based on estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. There cannot, however, be any assurance that actual
operating expenses of the Trust will not be substantially more than this amount.
Any excess expenses will be paid by Bear, Stearns & Co. Inc. Bear, Stearns & Co.
Inc. will be reimbursed by the Seller for all fees and expenses of the Trust
paid by it.
21
<PAGE>
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 and of the proceeds of the
offering will be used by the Trust to purchase the U.S. Treasury securities and
as payments for the Contract, respectively.
TREATMENT OF THE CONTRACT
Each Holder will be treated as having entered into a pro rata portion of
the Contract and, at the Exchange Date, as having received a pro rata portion of
the Common Stock, cash, Marketable Securities, Other Property or a combination
thereof delivered to the Trust.
DISTRIBUTION OF THE COMMON STOCK
The delivery of Common Stock pursuant to the Contract will not be taxable
to the Holders. Each Holder's basis in its Common Stock will be equal to its
basis in its pro rata portion of the Contract less the portion of such basis
allocable to any fractional share of Common Stock for which cash is received. A
Holder will recognize capital gain or loss upon receipt of cash in lieu of a
fractional share of Common Stock distributed upon termination of the Trust equal
to the difference between the amount of cash received and the basis of such
fractional share. The holding period for the Common Stock will begin on the date
it is acquired.
DISTRIBUTION OF CASH 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 or Other Property
received will be equal to its basis in its pro rata portion of the Contract less
the portion of such basis allocable to any 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.................................
Salomon Brothers Inc....................................
----------------
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 $
per TIMES. The Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $ per TIMES to certain brokers and dealers.
After the TIMES are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Underwriters.
In light of the fact that the proceeds of the sale of the TIMES will be
used in part by the Trust to purchase the Contract from the Seller, the
Underwriting Agreement provides that the Seller will pay to the Underwriters as
compensation $ per TIMES.
The Trust has granted the Underwriters an option exercisable for 30
calendar days after the date of this Prospectus to purchase up to an aggregate
of 205,000 TIMES solely to cover over-allotments, if any. If the Underwriters
exercise their over-allotment option, they will receive the Underwriters'
compensation referred to above for each TIMES so purchased. In addition, in
connection with any such exercise, the Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of the TIMES to be purchased by each of them, as shown
in the foregoing table, bears to the 2,000,000 TIMES initially offered.
The Seller 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 $ ) 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, Bear, Stearns & Co. Inc. and Salomon Brothers Inc (the 'Underwriters')
are permitted to engage in certain transactions to stabilize the price of the
TIMES or the Common Stock. Such transactions consist of bids or offers for the
purpose of pegging, fixing or maintaining the price of the TIMES or the Common
Stock.
If the Underwriters create a short position in the TIMES in connection with
the Offering, i.e., if they sell more TIMES than are set forth on the cover page
of this Prospectus, the Underwriters may reduce that short position by
purchasing TIMES in the open market. The Underwriters may also elect to reduce
any short position by exercising all or part of the over-allotment option
described above.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase TIMES in the
open market to reduce the Underwriters' short position or to stabilize the price
of the TIMES, they may reclaim the amount of the selling concession to any of
the Underwriters and any selling group members who sold those TIMES as part of
the Offering.
The purchase of a TIMES for the purpose of stabilization or to reduce a
short position could cause the price of the security to be higher than it might
be in the absence of such purchases. The imposition of a penalty might also have
an effect on the price of a security to the extent that it were to discourage
resales of such securities.
Neither the Trust nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the TIMES or on the Common Stock. In
addition, neither the Trust nor any of the Underwriters makes any representation
that the Underwriters will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
Certain of the Underwriters render investment banking and other financial
services to the Company and/or the Seller from time to time. In addition, in
February 1996 and January 1997, Bear, Stearns & Co. Inc. acted as managing
underwriter for the Company's initial public offering and secondary offering
respectively. In August 1996, Bear, Stearns & Co. Inc. acted as one of the
initial purchasers in the Company's convertible notes offering. From November
1995 through June 1997 Bear, Stearns & Co. Inc. acted as co-placement agent for
seven securitization transactions for the Company. In addition, Sheldon I.
Stein, a Senior Managing Director of Bear, Stearns & Co. Inc., is a director of
the Company.
VALIDITY OF TIMES
The validity of the TIMES will be passed upon for the Trust and the
Underwriters by their counsel, Skadden, Arps, Slate, Meagher & Flom LLP, 919
Third Avenue, New York, New York 10022.
EXPERTS
The financial statement included in this Prospectus has been audited by
Deloitte & Touche LLP independent accountants, as stated in their opinion
appearing herein, and has been so included in reliance upon such opinion given
upon the authority of that firm as experts in accounting and auditing.
FURTHER INFORMATION
The Trust has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act with
respect to the TIMES offered hereby. Further information concerning the TIMES
and the Trust may be found in the Registration Statement of which this
Prospectus constitutes a part. The Registration Statement may be inspected
without charge at the Commission's office in Washington, D.C., and copies of all
or any part thereof may be obtained from such office after payment of the fees
prescribed by the Commission. In addition, the Registration Statement may be
accessed electronically at the Commission's site on the World Wide Web located
at http://www.sec.gov.
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.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
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 August 1, 1997. 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 and organizational 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 (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
FIRSTPLUS FINANCIAL GROUP, INC. COMMON STOCK)
---------------------------------------------
PROSPECTUS
---------------------------------------------
JOINT BOOK-RUNNING MANAGERS
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
, 1997
================================================================================
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
*Part A - Report of Independent Accountants.
Statement of Assets and Liabilities.
Part B - None.
<TABLE>
<S> <C> <C>
(b) Exhibits:
2.a.(i) Form of Amended and Restated Trust Agreement
2.a.(ii) Certificate of Trust has been incorporated by reference to
Exhibit 2.a.(ii) Pre-effective Amendment No. 1 to the
Registration Statement filed with the Commission on August 1, 1997.
2.d Form of Specimen Certificate of Mandatory Exchange Security
2.h Form of Underwriting Agreement
2.j Form of Custodian Agreement
2.k.(i) Form of Administration Agreement
2.k.(ii) Form of Paying Agent Agreement
2.k.(iii) Form of Purchase Agreement
2.k.(iv) Form of Collateral Agreement
2.k.(v) Form of Fund Expense Agreement
2.k.(vi) Form of Fund Indemnity Agreement
2.l Opinion and Consent of Counsel to the Trust
2.n.(i) Tax Opinion of Counsel to the Trust (Consent contained in
Exhibit 2.n.(i))
2.n.(iii) Consent of Independent Public Accountants
2.p Form of Subscription Agreement
</TABLE>
- ---------------
Item 25. Marketing Arrangements
See the form of Underwriting Agreement to be filed as Exhibit 2.h to
this Registration Statement.
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
5
<PAGE>
Registration fees..................................... $33,322
American Stock Exchange listing fee................... $20,000
Printing (other than certificates).................... $50,000
Engraving and printing certificates................... $10,000
Fees and expenses of qualification under
state securities laws (excluding fees
of counsel)......................................... $0
Accounting fees and expenses.......................... $28,000
Legal fees and expenses............................... $125,000
NASD fee.............................................. $1,500
Miscellaneous......................................... $20,000
Total........................................ $287,822
- ----------
* To be furnished by amendment.
Item 27. Person Controlled by or under Common Control with Registrant
Prior to October 4, 1996 the Trust had no existence. As of the
effective date, the Trust will have entered into a Subscription Agreement for
2,205,000 TIMES with Bear, Stearns & Co. Inc. and Salomon Brothers Inc and an
Underwriting Agreement with respect to 2,205,000 TIMES with the Underwriters.
Item 28. Number of Holders of TIMES
Number of
Title of class Record Holders
- -------------- --------------
Mandatory Exchange Securities 0
Item 29. Indemnification
The Underwriting Agreement, filed as Exhibit 2.h to this Registration
Statement, provides for indemnification to the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Act").
Insofar as indemnification for liabilities arising under the Act, may
be permitted to trustees, officers and controlling persons of the Registrant,
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit
6
<PAGE>
to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
Item 30. Business and Other Connections of Investment Adviser
Not Applicable
Item 31. Location of Accounts and Records
The Trust's accounts, books and other documents are currently located
at the offices of the Registrant, c/o Bear, Stearns & Co. Inc., 245 Park Avenue,
New York, New York 10167 and at the offices of The Bank of New York, the
Registrant's Administrator, Custodian, paying agent, transfer agent and
registrar.
Item 32. Management Services
Not Applicable
Item 33. Undertakings
(a) The Registrant hereby undertakes to suspend offering of its units
until it amends its prospectus if (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than 10 percent from
its net asset value as of the effective date of the Registration Statement or
(2) the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.
(b) The Registrant hereby undertakes that (i) for the purpose of
determining any liability under the Act, the information omitted from the form
of prospectus filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Registrant under Rule
497(h) under the Act shall be deemed to be part of this registration statement
as of the time it was declared effective; (ii) for the purpose of determining
any liability under the Act, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering thereof.
7
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 10th
day of September___, 1997.
MANDATORY COMMON EXCHANGE TRUST
By: /s/ Donald J. Puglisi
------------------------------
Donald J. Puglisi as Trustee
By: /s/ William R. Latham III
------------------------------
William R. Latham III as Trustee
By: /s/ James B. O'Neill
------------------------------
James B. O'Neill as Trustee
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Name Title Date
- ---- ----- ----
/s/ Donald J. Puglisi President, Vice September 10, 1997
- ----------------------- President/Secretary,
Donald J. Puglisi and Treasurer
8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description Number
------ ----------- ------
<S> <C> <C>
2.a.(i) Amended and Restated
Trust Agreement
2.a.(ii)* Certificate of Trust
2.d Form of Specimen
Certificate of Trust
Issued Mandatory Exchange
Securities
2.h Form of Underwriting
Agreement
2.j Form of Custodian
Agreement
2.k.(i) Form of Administration
Agreement
2.k.(ii) Form of Paying Agent
Agreement
2.k.(iii) Form of Purchase Agreement
2.k.(iv) Form of Collateral
Agreement
2.k.(v) Form of Fund Expense Agreement
2.k.(vi) Form of Fund Indemnity Agreement
2.l Opinion and Consent
of Counsel to the Trust
2.n.(i) Tax Opinion of Counsel
to the Trust (Consent contained
in Exhibit 2.n.i)
2.n.(iii) Consent of Independent
Public Accountants
2.p Form of Subscription Agreement
----------
* Previously filed.
</TABLE>
9
Exhibit 2.a.(i)
================================================================================
AMENDED AND RESTATED
TRUST AGREEMENT
CONSTITUTING
MANDATORY COMMON EXCHANGE TRUST
Dated as of September 11, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.................................................. 1
ARTICLE II TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES;
ADMINISTRATION............................................... 6
SECTION 2.1 Declaration of Trust; Purposes of
the Trust.................................................... 6
SECTION 2.2 General Powers and Duties of the
Trustees..................................................... 6
SECTION 2.3 Portfolio Acquisition........................................ 8
SECTION 2.4 Portfolio Administration..................................... 9
SECTION 2.5 Manner of Sales.............................................. 12
SECTION 2.6 Limitations on Trustees' Powers.............................. 12
ARTICLE III ACCOUNTS AND PAYMENTS....................................... 13
SECTION 3.1 The Trust Account........................................... 13
SECTION 3.2 Payment of Fees and Expenses................................ 14
SECTION 3.3 Distributions to Holders.................................... 14
SECTION 3.4 Segregation................................................. 14
SECTION 3.5 Investments................................................. 14
ARTICLE IV REDEMPTION.................................................. 15
SECTION 4.1 Redemption.................................................. 15
ARTICLE V ISSUANCE OF CERTIFICATES; REGISTRY;
TRANSFER OF TIMES........................................... 15
SECTION 5.1 Form of Certificate......................................... 15
SECTION 5.2 Transfer of Times; Issuance,
Transfer and Interchange of
Certificates................................................ 16
SECTION 5.3 Replacement of Certificates................................. 17
ARTICLE VI ISSUANCE OF THE CONTRACT.................................... 18
SECTION 6.1 Execution of the Contract................................... 18
i
<PAGE>
ARTICLE VII TRUSTEES.................................................... 18
SECTION 7.1 Trustees.................................................... 18
SECTION 7.2 Vacancies................................................... 18
SECTION 7.3 Powers...................................................... 19
SECTION 7.4 Meetings.................................................... 19
SECTION 7.5 Resignation and removal..................................... 20
SECTION 7.6 Liability................................................... 20
SECTION 7.7 Compensation................................................ 21
ARTICLE VIII MISCELLANEOUS............................................... 21
SECTION 8.1 Meetings of Holders......................................... 21
SECTION 8.2 Books and Records; Reports.................................. 22
SECTION 8.3 Termination................................................. 23
SECTION 8.4 Amendment and Waiver........................................ 24
SECTION 8.5 Accountants................................................. 26
SECTION 8.6 Nature of Holder's Interest................................. 27
SECTION 8.7 Delaware Law to Govern...................................... 27
SECTION 8.8 Notices..................................................... 27
SECTION 8.9 Severability................................................ 28
SECTION 8.10 Counterparts................................................ 28
ii
<PAGE>
TRUST AGREEMENT
This Trust Agreement, dated as of _______, 1997 (the "Trust
Agreement"), by and between Bear, Stearns & Co. Inc., as sponsor (the
"Sponsor"), and Donald J. Puglisi, William R. Latham, III and James B. O'Neill,
as trustees (the "Trustees"), constituting the Mandatory Common Exchange Trust
(the "Trust") .
W I T N E S S E T H:
WHEREAS, Wesley M. Jones, as sole trustee, had previously
filed in the State of Delaware a Certificate of Trust dated October 4, 1996 (the
"Trust Certificate"), creating Mandatory Common Exchange Trust; and
WHEREAS, the parties hereto desire to create the TIMES Trust
Agreement;
NOW, THEREFORE, the parties hereto agree to the provisions set
forth herein.
ARTICLE I
DEFINITIONS
Whenever used in this Trust Agreement, the following words and
phrases shall have the meanings listed below. Any reference to any agreement
shall be a reference to such agreement as supplemented or amended from time to
time.
"ACCELERATION AMOUNT NOTICE" - An Acceleration Amount Notice
as defined in the Contract.
"ACCELERATION VALUE" - The Acceleration Value as defined in
the Contract.
"ADMINISTRATION AGREEMENT" - The Administration Agreement,
dated as of the date hereof, between the Administrator and the Trustees, and any
substitute agreement therefor entered into pursuant to Section 2.2(a) hereof.
"ADMINISTRATOR" - The Bank of New York or its successor as
permitted under [Section 6.1] of the
<PAGE>
Administration Agreement or appointed pursuant to Section 2.2(a) hereof.
"AGGREGATE ACCELERATION VALUE" - The Aggregate Acceleration
Value as defined in the Contract.
"BUSINESS DAY" - A day on which the American Stock Exchange,
Inc. is open for trading that is not a day on which banks in The City of New
York are authorized or obligated by law to close.
"CASH SETTLEMENT ALTERNATIVE" - The Cash Settlement
Alternative as defined in the Contract.
"CERTIFICATE" - Any certificate evidencing the ownership of
TIMES substantially in the form of Exhibit A hereto.
"CODE" - The Internal Revenue Code of 1986, as amended from
time to time; each reference herein to any section of the Code or any regulation
thereunder shall constitute a reference to any successor provision thereto.
"COLLATERAL AGENT" - The Bank of New York or its successor as
permitted under the Collateral Agreement.
"COLLATERAL AGREEMENT" - The Collateral Agreement between the
Collateral Agent and the Seller, securing the Seller's obligations under the
Contract, substantially in the form of Exhibit B hereto.
"COLLATERAL EVENT OF DEFAULT" - A Collateral Event of Default
as defined in the Contract.
"COMMENCEMENT DATE" - The day on which the Underwriting
Agreement is executed.
"COMMISSION" - The United States Securities and Exchange
Commission.
"COMMON STOCK" - Common Stock, no par value, of FirstPlus
Financial, Inc.
"COMPANY" - FIRSTPLUS Financial, Inc., a Nevada corporation.
2
<PAGE>
"CONTRACT" - The forward purchase contract entered into by the
Trustees, the Seller and the other parties thereto, substantially in the form of
Exhibit C hereto.
"CUSTODIAN" - The Bank of New York or its successor as
permitted under [paragraph 11] of the Custodian Agreement or appointed pursuant
to Section 2.2(a) hereof.
"CUSTODIAN AGREEMENT" - The Custodian Agreement, dated as of
the date hereof, between the Custodian and the Trustees, and any substitute
agreement therefor entered into pursuant to Section 2.2(a) hereof.
"DEPOSITARY" - The Depository Trust Company, or
any successor thereto.
"DISTRIBUTION DATE" - Each ________, ________, ________ and
________ of each year commencing ________, 1997, to and including ________ __,
____ or if any such date is not a Business Day, then the first Business Day
thereafter.
"EXCESS PURCHASE PAYMENT" - Excess Purchase Payment as defined
under the Contract.
"EXCHANGE DATE" - ________ __, ____.
"EXCHANGE RATE" - The Exchange Rate as defined in the
Contract.
"FIRM PURCHASE PRICE" - The Firm Purchase Price as defined in
the Contract.
"FIRST TIME OF DELIVERY" - The First Time of Delivery as
defined in the Underwriting Agreement.
"HOLDER" - The registered owner of any TIMES as recorded on
the books of the Paying Agent.
"INDEPENDENT DEALERS" - Independent Dealers as defined in the
Contract.
"INDEMNITY AGREEMENT" - The Fund Indemnity Agreement dated as
of the date hereof between the
3
<PAGE>
Trustees and the Sponsor substantially in the form of Exhibit D hereto.
"INVESTMENT COMPANY ACT" - The Investment Company Act of 1940,
as amended from time to time; each reference herein to any section of such Act
or any rule or regulation thereunder shall constitute a reference to any
successor provision thereto.
"MANAGING TRUSTEE" - The Trustee designated the Managing
Trustee by resolution of the Trustees.
"MANDATORY EXCHANGE" - The delivery by the Trustees to the
Holders of Shares (or, if the seller elects the Cash Settlement Alternative
under the Contract, the amount in cash specified in the Contract as payable in
respect thereof) in mandatory exchange for the TIMES on the Exchange Date.
"MARKETABLE SECURITIES" - Marketable Securities as defined in
the Contract.
"PARTICIPANT" - A Person having a book-entry only system
account with the Depositary.
"PAYING AGENT" - The Bank of New York or its successor as
permitted under Section 6.6 of the Paying Agent Agreement or appointed pursuant
to Section 2.2(a) hereof.
"PAYING AGENT AGREEMENT" - The Paying Agent Agreement, dated
as of the date hereof, between the Paying Agent and the Trustees, and any
substitute agreement therefor entered into pursuant to Section 2.2(a) hereof.
"PERSON" - An individual, a partnership, a corporation, a
trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.
"PROSPECTUS" - The prospectus relating to the Trust
constituting a part of the Registration Statement, as first filed with the
Commission pursuant to Rule 497(b) or (h) under the Securities Act, and as
subsequently amended or supplemented by the Trust.
4
<PAGE>
"QUARTERLY DISTRIBUTION" - $______ per TIMES paid to each
Holder on each Distribution Date.
"RECORD DATE" - Each ________, ________, ________, and
________ of each year commencing ________, 1997.
"REFERENCE MARKET PRICE" - Reference Market Price as defined
in the Contract.
"REGISTRATION STATEMENT" - Registration Statement on Form N-2
(Registration No. 333-15927, 811- 7847) of the Trust, as amended.
"REORGANIZATION EVENT" - A Reorganization Event as defined in
the Contract.
"SECOND TIME OF DELIVERY" - The Second Time of Delivery as
defined in the Underwriting Agreement.
"SECURITIES ACT" - The Securities Act of 1933, as amended from
time to time.
"SELLER" - The person named as Seller in the Contract.
"SHARES" - Shares of Common Stock to be exchanged by the
Trustees for the TIMES on the Exchange Date.
"TEMPORARY INVESTMENTS" - U.S. Treasury securities and any
other cash held by the Trust in direct short-term U.S. government obligations,
as specified from time to time by the Trustees or through standing instructions
from the Trustees to the Administrator or the Paying Agent.
"TIMES" - $.___ Trust Issued Mandatory Exchange Security of
the Trust evidencing a Holder's undivided interest in the Trust and right to
receive a pro rata distribution upon liquidation of the Trust Estate.
"TRANSFER AGENT AND REGISTRAR" - The Bank of New York, as
Transfer Agent and Registrar for the Common Stock.
5
<PAGE>
"TREASURY SECURITIES" - The meaning specified in Section
2.3(b) hereof.
"TRUST ACCOUNT" - The account created pursuant to Section 3.1
hereof.
"TRUST ESTATE" - The Contract and the Treasury Securities held
at any time by the Trust, together with any Temporary Investments held at any
time pursuant to Section 3.5 hereof, and any proceeds thereof or therefrom and
any other moneys held at any time in the Trust Account.
"UNDERWRITERS" - The Underwriters named in the Underwriting
Agreement.
"UNDERWRITING AGREEMENT" - The Underwriting Agreement as
described in the Prospectus.
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
SECTION 2.1 DECLARATION OF TRUST; PURPOSES OF THE TRUST. The
Sponsor hereby creates the Trust in order that it may acquire the Treasury
Securities, enter into the Contract, issue and sell to the Sponsor and the
Underwriters the TIMES, hold the Trust Estate in trust for the use and benefit
of all present and future Holders and otherwise carry out the terms and
conditions of this Trust Agreement, all for the purpose of achieving the
investment objectives set forth in the Prospectus. The Trustees hereby declare
that they will accept and hold the Trust Estate in trust for the use and benefit
of all present and future Holders. The Sponsor has heretofore deposited with the
Trustees the sum of $10 to accept and hold in trust hereunder until the issuance
and sale of the TIMES to the Underwriters, whereupon such sum shall be donated
to an organization satisfying the requirements of Section 170(c)(2) of the Code
selected by unanimous consent of the Trustees.
SECTION 2.2 GENERAL POWERS AND DUTIES OF THE TRUSTEES. In
furtherance of the provisions of Section
6
<PAGE>
2.1 hereof, the Sponsor authorizes and directs the Trustees:
(a) to enter into and perform (and, in accordance
with Section 8.4(a) hereof, amend), the Contract, the Collateral
Agreement, the Underwriting Agreement, the Indemnity Agreement, the
Custodian Agreement, the Administration Agreement and the Paying Agent
Agreement and to perform all obligations of the Trustees (including the
obligation to provide indemnity hereunder and thereunder) and enforce
all rights and remedies of the Trust under each of such agreements; and
if any of the Custodian Agreement, the Administration Agreement, the
Collateral Agreement and the Paying Agent Agreement terminates, or the
agent of the Trust thereunder resigns or is discharged, to appoint a
substitute agent and enter into a new agreement with such substitute
agent containing provisions substantially similar to those contained in
the agreement being terminated; provided that in any such new agreement
(i) the Custodian and the Paying Agent shall each be a commercial bank
or trust company organized and existing under the laws of the United
States of America or any state therein, shall have full trust powers
and shall have minimum capital, surplus and retained earnings of not
less than $100,000,000; and (ii) the Administrator and the Collateral
Agent shall each be a reputable financial institution qualified in all
respects to carry out its obligations under the Administration
Agreement or the Collateral Agreement, as the case may be;
(b) to hold the Trust Estate in trust, to create and
administer the Trust Account, to direct payments received by the Trust
to the Trust Account and to make payments out of the Trust Account as
set forth in Article III hereof;
(c) to issue and sell to the Underwriters an
aggregate of up to 2,205,000 TIMES (including those TIMES subject to
the over-allotment option of the Underwriters provided for in the
Underwriting Agreement) pursuant to the Underwriting Agreement and as
contemplated by the Prospectus; provided, however, that subsequent to
the determination of the
7
<PAGE>
public offering price per TIMES and related underwriting discount for
the TIMES to be sold to the Underwriters but prior to the sale of the
TIMES to the Underwriters, the TIMES originally issued to the Sponsor
shall be split into a greater number of TIMES so that immediately
following such split the value of each TIMES held by the Sponsor will
equal the aforesaid public offering price less the related underwriting
discount;
(d) to select independent public accountants and,
subject to the provisions of Section 8.5 hereof, to engage such
independent public accountants;
(e) to engage legal counsel and, to the extent
required by Section 2.4 hereof, to engage professional advisors and pay
reasonable compensation thereto;
(f) to defend any action commenced against the
Trustees or the Trust and to prosecute any action which the Trustees
deem necessary to protect the Trust and the rights and interests of
Holders, and to pay the costs thereof;
(g) to arrange for the bonding of officers and
employees of the Trust as required by Section 17(g) of the Investment
Company Act and the rules and regulations thereunder;
(h) to delegate any and all of its powers and duties
hereunder as contemplated by the Custodian Agreement, the Paying Agent
Agreement and the Administration Agreement, to the extent permitted by
applicable law; and
(i) to adopt and amend bylaws, and take any and all
such other actions as necessary or advisable to carry out the purposes
of the Trust, subject to the provisions hereof and applicable law,
including, without limitation, the Investment Company Act.
SECTION 2.3 PORTFOLIO ACQUISITION. In furtherance of the
provisions of Section 2.1 hereof, the
8
<PAGE>
Sponsor further specifically authorizes and directs the Trustees:
(a) to enter into the Contract with respect to the
Shares subject thereto with the Seller on the Commencement Date for
settlement on the date or dates provided thereunder and, subject to
satisfaction of the conditions set forth in the Contracts, to pay the
Firm Purchase Price and the Additional Purchase Price, if any,
thereunder with the proceeds of the sale of the TIMES, net of
underwriting commissions and other expenses payable in connection with
the public offering of the TIMES as described in Section 3.2 hereof and
net of the purchase price paid for the Treasury Securities as provided
in paragraph (b) below; and, subject to the adjustments and exceptions
set forth in the Contract, the Contract shall entitle the Trust to
receive from the Seller on the Exchange Date the Shares subject thereto
(or, if the Seller elects the Cash Settlement Alternative under the
Contract, the amount in cash specified in the Contract in respect
thereof) so that the Trust may execute the Exchange with the Holders;
and
(b) to purchase for settlement at the First Time of
Delivery, and at the Second Time of Delivery, as appropriate, with the
proceeds of the sale the TIMES, net of underwriting commissions and
other expenses payable in connection with the public offering of the
TIMES, U.S. Treasury securities from such brokers or dealers as the
Trustees shall designate in writing to the Administrator having the
terms set forth on Schedule I hereto ("Treasury Securities").
SECTION 2.4 PORTFOLIO ADMINISTRATION. In furtherance of the
provisions of Section 2.1 hereof, the Sponsor further specifically authorizes
and directs the Trustees:
(a) DETERMINATION OF DILUTION OR MERGER ADJUSTMENTS.
Upon receipt of any notice pursuant to Section 5.4(b) of the Contract
of an event requiring an adjustment to the Exchange Rate, or upon
otherwise acquiring knowledge of such an event, to calculate the
required adjustment and furnish notice
9
<PAGE>
thereof to the Collateral Agent and the Seller, or to request from the
Seller such further information as may be necessary to calculate or
effect the required adjustment;
(b) SELECTION OF INDEPENDENT INVESTMENT BANK. Upon
receipt of notice of (i) the occurrence of a Reorganization Event in
which property other than cash or Marketable Securities is to be
received in respect of the Common Stock as described in Section 6.2 of
the Contract or (ii) an Excess Purchase Payment in which the Company
has paid or will pay consideration other than cash as described in
Section 6.1(d) of the Contract, to select and retain a nationally
recognized investment banking firm to determine the market value of
such property as provided in the Contract, and to deliver to the Seller
notice pursuant to Section 8.1 of the Contract identifying the firm
proposed to be selected and retained, and to consult with the Seller on
such selection and retention as provided in such Section 8.1;
(c) ACCELERATION. Upon receipt of any notice pursuant
to Section 5.4(a) of the Contract or pursuant to Section 6(a) of the
Collateral Agreement that a Collateral Event of Default has occurred,
or upon otherwise acquiring notice that an Event of Default has
occurred, to request quotations from Independent Dealers, compute
Acceleration Value and Aggregate Acceleration Value and deliver an
Acceleration Amount Notice, in each case with respect to the Contract,
all as described in Article VII of the Contract;
(d) DETERMINATION OF EXCHANGE DATE AMOUNTS. To
calculate, on the Exchange Date, the number of Shares (or, if the
Seller elects the Cash Settlement Alternative under the Contract, the
amount in cash) required to be delivered by the Seller under Section
1.1 of the Contract or, if a Reorganization Event shall have occurred,
the amount of cash required to be delivered by the Seller, and the
number of Marketable Securities permitted to be delivered by the Seller
in lieu of all or a portion of such cash, all as provided in Section
6.2 of the Contract; and to furnish Notice of the amounts so
10
<PAGE>
determined to the Collateral Agent and the
Seller;
(e) DISTRIBUTION OF EXCHANGE CONSIDERATION. Unless a
Reorganization Event shall have occurred (in which event distribution
of proceeds shall be governed by Section 8.3 below) or the Seller
elects the Cash Settlement Alternative under the Contract (in which
event the cash received in respect thereof shall be distributed pro
rata to the Holders of TIMES):
(i) DETERMINATION OF FRACTIONAL SHARES. To
determine, on the Exchange Date: (A) for each Holder of TIMES,
such Holder's pro rata share of the total number of Shares
delivered to the Trustees under the Contract on the Exchange
Date; and (B) the number of fractional Shares allocable to
each Holder (including, in the case of the Depositary,
fractional shares allocable to beneficial owners of TIMES who
own through Participants) and in the aggregate;
(ii) CASH FOR FRACTIONAL SHARES. To sell, in
the Principal market therefor, on the Exchange Date, a number
of Shares equal to the aggregate number of fractional Shares
determined pursuant to clause (i) (B) above, rounded down to
the nearest integral number; and to determine the difference
between (A) the aggregate proceeds of such sale (net of any
brokerage or related expenses) and (B) the product of the
number of Shares so sold and the Reference Market Price; and,
in accordance with the Indemnity Agreement, to pay such
difference, if positive, to Bear, Stearns & Co. Inc., or to
request payment of such difference, if negative, from Bear,
Stearns & Co. Inc.;
(iii) DELIVERY OF SHARES. To deliver the
remaining Shares to the Transfer Agent and Registrar on the
Exchange Date, with instructions that such Shares be
re-registered and re-issued as follows: (A) for and in the
name of each Holder (other than the Depositary) who holds
TIMES in definitive form,
11
<PAGE>
the Transfer Agent and Registrar shall be instructed to issue
definitive certificates representing a number of Shares equal
to such Holder's pro rata share of the total delivered to the
Trustees under the Contract, rounded down to the nearest
integral number; (B) the Transfer Agent and Registrar Shares
shall be instructed to transfer all remaining Shares to the
account of the Custodian held through the Depositary, who
shall then be instructed to transfer and credit such Shares to
each Participant who holds TIMES, with each Participant
receiving its pro rata share of the total Shares delivered to
the Trust on the Exchange Date, reduced by the aggregate
fractional shares allocable to such Participant;
(iv) DISTRIBUTION OF CASH IN RESPECT OF
FRACTIONAL SHARES. To distribute to each Holder of TIMES cash
in the amount of: (A) the fraction of a Share, if any,
allocable to such Holder as determined pursuant to clause (i)
(B) above; times (B) the Reference Market Price; and
(v) RECORD DATE. The distributions described
in this paragraph (e) shall be made to Holders of record as of
the close of business on the Business Day preceding the
Exchange Date.
SECTION 2.5 MANNER OF SALES. Any sale of Trust property
permitted under Section 8.3(c) hereof shall be made through such executing
brokers or to such dealers as the Trustees, seeking best price and execution for
the Trust, shall designate in writing to the Paying Agent, taking into account
such factors as price, commission, size of order, difficulty of execution and
brokerage skill required.
SECTION 2.6 LIMITATIONS ON TRUSTEES' POWERS. The Trustees are
not permitted:
(a) to purchase or hold any securities or instruments
except for the Shares, the Contract, the Treasury Securities, the
Temporary Investments
12
<PAGE>
contemplated by Section 3.5 hereof and, in the event of a
Reorganization Event, Marketable Securities;
(b) to dispose of the Contract prior to the Exchange
Date;
(c) to issue any securities or instruments except for
the TIMES, or to issue any TIMES other than the TIMES sold to the
Sponsor and the TIMES to be sold pursuant to the Underwriting Agreement
and until such TIMES have been so purchased and paid for in full;
(d) to make short sales or purchases on margin;
(e) to write put or call options;
(f) to borrow money;
(g) to underwrite securities;
(h) to purchase or sell real estate, commodities or
commodities contracts;
(i) to purchase restricted securities;
(j) to make loans; or
(k) to take any action, or direct or permit the
Administrator, the Paying Agent or the Custodian to take any action,
that would vary the investment of the Holders within the meaning of
Treasury Regulation Section 301.7701-4(c), or otherwise take any action
or direct or permit any action to be taken that would or could cause
the Trust not to be a "grantor trust" under the Code.
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 THE TRUST ACCOUNT. The Trustees shall, upon
issuance of the TIMES, establish with the Paying Agent an account to be called
the "Trust Account". All moneys received by the Trustees in respect of the
13
<PAGE>
Contract, the Treasury Securities and any Temporary Investments held pursuant to
Section 3.5 hereof, all moneys received from the sale of the TIMES to the
Sponsor, and any proceeds from the sale to the Underwriters of the TIMES after
the purchase of the Contract and the Treasury Securities and the payment of the
Trust's expenses described in Section 3.2 hereof shall be credited to the Trust
Account.
SECTION 3.2 PAYMENT OF FEES AND EXPENSES. The Administrator is
authorized to pay from the Trust Account out of the net proceeds of the sale of
the TIMES, the fees and expenses of the Trust incurred in connection with the
offering of the TIMES and the costs and expenses incurred in the organization of
the Trust.
SECTION 3.3 DISTRIBUTIONS TO HOLDERS. On or shortly after each
Distribution Date the Trustees shall distribute to each Holder of record at the
close of business on the preceding Record Date, at the post office address of
the Holder appearing on the books of the Trust or Paying Agent or by any other
means mutually agreed upon by the Holder and the Trustees, an amount equal to
such Holder's pro rata share of the Quarterly Distribution computed as of the
close of business on such Distribution Date.
SECTION 3.4 SEGREGATION. All moneys and other assets deposited
or received by the Trustees hereunder shall be held by them in trust as part of
the Trust Estate until required to be disbursed or otherwise disposed of in
accordance with the provisions of this Trust Agreement, and the Trustees shall
handle such moneys and other assets in such manner as shall constitute the
segregation and holding in trust within the meaning of the Investment Company
Act.
SECTION 3.5 INVESTMENTS. To the extent necessary to enable the
Paying Agent to make the next succeeding Quarterly Distribution, any moneys
deposited with or received by the Trustees in the Trust Account shall be
invested as soon as possible by the Paying Agent in Temporary Investments
maturing no later than the Business Day preceding the next following
Distribution Date. Except as otherwise specifically provided herein or in the
Paying Agent Agreement, the Paying Agent shall not have the power to sell,
transfer or otherwise dispose
14
<PAGE>
of any Temporary Investment prior to the maturity thereof, or to acquire
additional Temporary Investments. The Paying Agent shall hold any Temporary
Investments to its maturity and shall apply the proceeds thereof upon maturity
to the payment of the next succeeding Quarterly Distribution. All such Temporary
Investments shall be selected from time to time by the Trustees or pursuant to
standing instructions from the Trustees to the Administrator, and the
Administrator and/or Paying Agent shall have no liability to the Trust or any
Holder or any other Person with respect to any such Temporary Investment. Any
interest or other income received on any moneys in the Trust Account shall, upon
receipt thereof, be deposited into the Trust Account. Notwithstanding the
foregoing, not more than 5% of the assets of the Trust may be held at any time
in the form of cash and Temporary Investments, and the Trustees shall distribute
cash, or liquidate Temporary Investments and distribute the proceeds thereof,
if, when and to the extent needed to maintain compliance with the foregoing
restriction.
ARTICLE IV
REDEMPTION
SECTION 4.1 REDEMPTION. The Trustees shall have no right or
obligation to redeem TIMES.
ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY;
TRANSFER OF TIMES
SECTION 5.1 FORM OF CERTIFICATE. Each Certificate evidencing
TIMES shall be countersigned manually or in facsimile by the Managing Trustee
and executed manually by the Paying Agent in substantially the form of Exhibit A
hereto with the blanks appropriately filled in, shall be dated the date of
execution and delivery by the Paying Agent and shall represent a fractional
undivided interest in the Trust, the numerator of which fraction shall be the
number of TIMES set forth on the face of such Certificate and the denominator of
which shall be the total number of TIMES
15
<PAGE>
outstanding at that time. All TIMES shall be issued in registered form and shall
be numbered serially.
Pending the preparation of definitive Certificates, the
Trustees may execute and the Paying Agent shall authenticate and deliver
temporary Certificates (printed, lithographed, typewritten or otherwise
reproduced, in each case in form satisfactory to the Paying Agent). Temporary
Certificates shall be issuable as registered Certificates substantially in the
form of the definitive Certificates but with such omissions, insertions and
variations as may be appropriate for temporary Certificates, all as may be
determined by the Trustees with the concurrence of the Paying Agent. Every
temporary Certificate shall be executed by the Managing Trustee and be
authenticated by the Paying Agent upon the same conditions and in substantially
the same manner, and with like effect, as the definitive Certificates. Without
unreasonable delay the Managing Trustee shall execute and shall furnish
definitive Certificates and thereupon temporary Certificates may be surrendered
in exchange therefor without charge at each office or agency of the Paying Agent
and the Paying Agent shall authenticate and deliver in exchange for such
temporary Certificates definitive Certificates for a like aggregate number of
TIMES. Until so exchanged, the temporary Certificates shall be entitled to the
same benefits hereunder as definitive Certificates.
SECTION 5.2 TRANSFER OF TIMES; ISSUANCE, TRANSFER AND
INTERCHANGE OF CERTIFICATES. TIMES may be transferred by the Holder thereof by
presentation and surrender of properly endorsed Certificates at the office of
the Paying Agent, accompanied by such documents executed by the Holder or his
authorized attorney as the Paying Agent deems necessary to evidence the
authority of the person making the transfer. Certificates issued pursuant to
this Trust Agreement are interchangeable for one or more other Certificates in
an equal aggregate number of TIMES and all Certificates issued as may be
requested by the Holder and deemed appropriate by the Paying Agent shall be
issued in denominations of one TIMES or any multiple thereof. The Paying Agent
may deem and treat the person in whose name any TIMES shall be registered upon
the books of the Paying Agent as the owner of such TIMES for all purposes
hereunder and the
16
<PAGE>
Paying Agent shall not be affected by any notice to the contrary. The transfer
books maintained by the Paying Agent for the purposes of this Section 5.2 hereof
shall include the name and address of the record owners of the TIMES and shall
be closed in connection with the termination of the Trust pursuant to Section
8.3 hereof.
A sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such transfer shall be paid to the
Paying Agent by the Holder. A Holder may be required to pay a fee for each new
Certificate to be issued pursuant to the preceding paragraph in such amount as
may be specified by the Paying Agent and approved by the Trustees.
All Certificates cancelled pursuant to this Trust Agreement
may be voided by the Paying Agent in accordance with the usual practice of the
Paying Agent or in accordance with the instructions of the Trustees; provided,
however, that the Paying Agent shall not be required to destroy cancelled
Certificates.
The Paying Agent may adopt other reasonable rules and
regulations for the registration, transfer and tender of TIMES as it may, in its
discretion, deem necessary.
SECTION 5.3 REPLACEMENT OF CERTIFICATES. In case any
Certificate shall become mutilated or be destroyed, stolen or lost, the Paying
Agent shall execute and deliver a new Certificate in exchange and substitution
therefor upon the Holder's furnishing the Paying Agent with proper
identification and satisfactory indemnity, complying with such other reasonable
regulations and conditions as the Paying Agent may prescribe and paying such
expenses and charges, including any bonding fee, as the Paying Agent may incur
or reasonably impose; provided that if the Trust has terminated or is in the
process of terminating, the Paying Agent, in lieu of issuing such new
Certificate, may, upon the terms and conditions set forth herein, make the
distributions set forth in Section 8.3(c) hereof. Any mutilated Certificate
shall be duly surrendered and cancelled before any duplicate Certificate shall
be issued in exchange and substitution therefor. Upon issuance of any duplicate
Certificate pursuant to this Section 5.3 hereof, the original Certificate
claimed to
17
<PAGE>
have been lost, stolen or destroyed shall become null and void and of no effect,
and any bona fide purchaser thereof shall have only such rights as are afforded
under Article 8 of the Uniform Commercial Code to a Holder presenting a
Certificate for transfer in the case of an overissue.
ARTICLE VI
ISSUANCE OF THE CONTRACT
SECTION 6.1 Execution of the Contract. The Contract shall be
countersigned manually or in facsimile by the Managing Trustee and executed
manually by the Seller and shall be dated the date of execution and delivery by
the Seller.
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees. The Trust shall have three Trustees who
shall initially be elected by the Sponsor. One Trustee shall be the Managing
Trustee and, as such, is authorized to execute documents and instruments on
behalf of the Trust. The Managing Trustee will be appointed by resolution of the
Trustees. Each Trustee shall serve until the next regular annual or special
meeting of Holders called for the purpose of electing Trustees and, then, until
such Trustee's successor is duly elected and qualified. Holders may not cumulate
their votes in the election of Trustees. Each Trustee shall not be considered to
have qualified for the office unless such Trustee shall agree to be bound by the
terms of this Trust Agreement and shall evidence his consent by executing this
Trust Agreement or a supplement hereto.
SECTION 7.2 Vacancies. Any vacancy in the office of a Trustee
may be filled in compliance with Sections 10 and 16 of the Investment Company
Act by the vote, within thirty days, of the remaining Trustees; provided that if
required by Section 16 of the Investment Company Act, the Trustees shall
forthwith cause to be held as promptly as possible and in any event within
18
<PAGE>
sixty days (unless the Commission by order shall extend such period) a meeting
of Holders for the purpose of electing Trustees in compliance with Sections 10
and 16 of the Investment Company Act. Until a vacancy in the office of any
Trustee is filled as provided above, the remaining Trustees in office,
regardless of their number, shall have the powers granted to the Trustees and
shall discharge all the duties imposed upon the Trustees by this Trust
Agreement. Election shall be by the affirmative vote of Holders of a majority of
the TIMES entitled to vote present in person or by proxy at a special meeting of
Holders called for the purpose of electing any Trustee. Each individual Trustee
shall be at least 21 years of age and shall not be under any legal disability.
No Trustee who is an "interested person", as defined in the Investment Company
Act, may assume office if it would cause the composition of the Trustees of the
Trust not to be in compliance with the percentage limitations on interested
persons in Section 10 of the Investment Company Act. Trustees need not be
Holders. Notice of the appointment or election of a successor Trustee shall be
mailed promptly after acceptance of such appointment by the successor Trustee to
each Holder.
SECTION 7.3 POWERS. The Trust will be managed solely by the
Trustees, who will, subject to the provisions of Article II hereof, have
complete and exclusive control over the management, conduct and operation of the
Trust's business, and shall have the rights, powers and authority of a board of
directors of a corporation organized under Delaware law. The Trustees shall have
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Trust and shall not employ, or permit another to employ, such funds or
assets in any manner except for the exclusive benefit of the Trust and except in
accordance with the terms of this Trust Agreement. Subject to the continuing
supervision of the Trustees and as permitted by applicable law, the functions of
the Trust shall be performed by the Custodian, the Paying Agent, the
Administrator and such other entities engaged to perform such functions as the
Trustees may determine, including, without limitation, any or all administrative
functions.
SECTION 7.4 MEETINGS. Meetings of the Trustees shall be held
from time to time upon the call of any Trustee on not less than 48 hours' notice
(which may
19
<PAGE>
be waived by any or all of the Trustees in writing either before or after such
meeting or by attendance at the meeting unless the Trustee attends the meeting
for the express purpose of objecting to the transaction of any business on the
ground that the meeting has not been lawfully called or convened). The Trustees
shall act either by majority vote of the Trustees present at a meeting at which
at least a majority of the Trustees then in office are present or by a unanimous
written consent of the Trustees without a meeting. Except as otherwise required
under the Investment Company Act, all or any of the Trustees may participate in
a meeting of the Trustees by means of a conference telephone call or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to such
communications equipment shall constitute presence in person at such meeting.
SECTION 7.5 RESIGNATION AND REMOVAL. Any Trustee may resign
and be discharged of the trust created by the Trust Agreement by executing an
instrument in writing resigning as Trustee, filing the same with the
Administrator and sending notice thereof to the remaining Trustees, and such
resignation shall become effective immediately unless otherwise specified
therein. Any Trustee may be removed in the event of incapacity by vote of the
remaining Trustees and for any reason by written declaration or vote of the
Holders of more than 66 2/3% of the outstanding TIMES, notice of which vote
shall be given to the remaining Trustees and the Administrator. The resignation,
removal or failure to reelect any Trustee shall not cause the termination of the
Trust.
SECTION 7.6 LIABILITY. The Trustees shall not be liable to the
Trust or any Holder for any action taken or for refraining from taking any
action except in the case of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties of their office. Specifically, without
limitation, the Trustees shall not be responsible for or in respect of the
recitals herein or the validity or sufficiency of this Trust Agreement or for
the due execution hereof by any other Person, or for or in respect of the
validity or sufficiency of TIMES or certificates representing TIMES and shall in
no event assume or incur any liability, duty or obligation to any Holder or to
any other Person, other than as expressly
20
<PAGE>
provided for herein. The Trustees may employ agents, attorneys, administrators,
accountants and auditors, and shall not be answerable for the default or
misconduct of any such Persons if such Persons shall have been selected with
reasonable care. Action in good faith may include action taken in good faith in
accordance with an opinion of counsel. In no event shall any Trustee be
personally liable for any expenses with respect to the Trust. Each Trustee shall
be indemnified from the Trust Account with respect to any claim, liability, loss
or expense incurred in acting as Trustee of the Trust, including the costs and
expenses of the defense against any such claim or liability, except in the case
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties of his office.
SECTION 7.7 COMPENSATION. Each Trustee, other than a Trustee
who is a director, officer or employee of the Sponsor, any Underwriter, or the
Administrator or any affiliate thereof, shall receive a one-time, up-front fee
of $10,800, in respect of its annual fee and anticipated out-of-pocket expenses.
In addition, the Managing Trustee shall receive an additional one-time, up-front
fee of $14,400 for serving in such capacity. The Trustees will not receive any
pension or retirement benefits. In the event of the resignation or removal of a
Trustee, such Trustee shall remit to the Trust the portion of its fee ratable
for the period from the day of such resignation or removal through the Exchange
Date.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 MEETINGS OF HOLDERS. The Trustees shall not hold
annual or regular meetings of Holders except as set forth herein. A special
meeting may be called at any time by the Trustees or upon petition of Holders of
not less than 51% of the TIMES outstanding (unless substantially the same matter
was voted on during the preceding 12 months), and shall be called as provided in
Section 7.2 hereof (or as otherwise required by the Investment Company Act and
the rules and regulations thereunder, including, without limitation, when
requested by the Holders of not less than 10% of the TIMES outstanding for the
purposes of voting upon the question
21
<PAGE>
of the removal of any Trustee or Trustees). The Trustees shall establish, and
notify the Holders in writing of, the record date for each such meeting which
shall be not less than 10 nor more than 50 days before the meeting date. Holders
at the close of business on the record date will be entitled to vote at the
meeting. The Administrator shall, as soon as possible after any such record date
(or prior to such record date if appropriate), mail by first class mail to each
Holder a notice of meeting and a proxy statement and form of proxy in the form
approved by the Trustees and complying with the Investment Company Act and the
rules and regulations thereunder. Except as otherwise specified herein or in any
provision of the Investment Company Act and the rules and regulations
thereunder, any action may be taken by vote of Holders of a majority of the
TIMES outstanding present in person or by proxy if Holders of a majority of
TIMES outstanding on the record date are so represented. Each TIMES shall have
one vote and may be voted in person or by duly executed proxy. Any proxy may be
revoked by notice in writing, by a subsequently dated proxy or by voting in
person at the meeting, and no proxy shall be valid after eleven months following
the date of its execution.
SECTION 8.2 BOOKS AND RECORDS; REPORTS. (a) The Trustees shall
keep a certified copy or duplicate original of this Trust Agreement on file at
the office of the Trust and the office of the Administrator available for
inspection at all reasonable times during its usual business hours by any
Holder. The Trustees shall keep proper books of record and account for all the
transactions under this Trust Agreement at the office of the Trust and the
office of the Administrator, and such books and records shall be open to
inspection by any Holder at all reasonable times during usual business hours.
The Trustees shall retain all books and records in compliance with Section 31 of
the Investment Company Act and the rules and regulations thereunder.
(b) With each payment to Holders the Paying Agent
shall set forth, either in the instruments by means of which payment is
made or in a separate statement, the amount being paid from the Trust
Account expressed as a dollar amount per TIMES and the other
information required under Section 19 of the Investment Company Act and
the rules and
22
<PAGE>
regulations thereunder. The Trustees shall prepare and file or
distribute reports as required by Section 30 of the Investment Company
Act and the rules and regulations thereunder. The Trustees shall
prepare and file such reports as may from time to time be required to
be filed or distributed to Holders under any applicable state or
Federal statute or rule or regulation thereunder, and shall file such
tax returns as may from time to time be required under any applicable
state or Federal statute or rule or regulation thereunder. One of the
Trustees shall be designated by resolution of the Trustees to make the
filings and give the notices required by Rule 17g-1 under the
Investment Company Act.
(c) In calculating the net asset value of the Trust
as required by the Investment Company Act, (i) the Treasury Securities
will be valued at the mean between the last current bid and asked
prices or, if quotations are not available, as determined in good faith
by the Trustees, (ii) short-term investments having a maturity of 60
days or less will be valued at cost with accrued interest or discount
earned included in interest receivable and (iii) the Contract will be
valued at the mean of the bid prices received by the Administrator from
at least three independent broker-dealer firms unaffiliated with the
Trust to be named by the Trustees who are in the business of making
bids on financial instruments similar to the Contract and with terms
comparable thereto.
SECTION 8.3 TERMINATION. (a) This Trust Agreement and the
Trust created hereby shall terminate upon the earliest of (i) the date 90 days
after the execution of this Trust Agreement if (x) the TIMES have not
theretofore been issued or (y) the net worth of the Trust is not at least
$100,000 at such time, (ii) the date of the repayment, sale or other
disposition, as the case may be, of all of the Contract, the Treasury Securities
and any other securities held hereunder, (iii) the date 10 Business Days after
the Exchange Date (or, if the Contracts shall be accelerated pursuant to Article
VIII thereof, 10 Business Days after the date on which the Trust shall receive
the Shares then required to be delivered by the Seller, or the proceeds of any
sale of
23
<PAGE>
collateral pursuant to Section 8(c) of the Collateral Agreement), and (iv) the
date which is 21 years less 91 days after the death of the last survivor of all
of the descendants of [NAME] living on the date hereof. The Trust is
irrevocable, the Sponsor has no right to withdraw any assets constituting a
portion of the Trust Estate, and the dissolution of the Sponsor shall not
operate to terminate the Trust. The death or incapacity of any Holder shall not
operate to terminate this Trust Agreement, nor entitle his legal representatives
or heirs to claim an accounting or to take any action or proceeding in any court
for a partition or winding up of the Trust, and shall not otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) Written notice of any termination shall be sent
to Holders specifying the record date for any distribution to Holders
and the time of termination as determined by the Trustees, upon which
the books maintained by the Paying Agent pursuant to Section 5.2 hereof
shall be closed.
(c) For purposes of termination under Sections
8.3(a)(ii), (iii) and (iv) hereof, within five Business Days after such
termination, the Trustees shall, subject to any applicable provisions
of law, effect the sale of any remaining property of the Trust, and the
Paying Agent shall distribute pro rata as soon as practicable
thereafter to each Holder, upon surrender for cancellation of its
Certificates, its interest in the Trust Estate. Together with the
distribution to the Holders, the Trustees shall furnish the Holders
with a final statement as of the date of the distribution of the amount
distributable with respect to each TIMES.
SECTION 8.4 AMENDMENT AND WAIVER. (a) This Trust Agreement,
and any of the agreements referred to in Section 2.2(a) hereof, may be amended
from time to time by the Trustees for any purpose prior to the issuance and sale
to the Underwriters of the TIMES and thereafter without the consent of any of
the Holders (i) to cure any ambiguity or to correct or supplement any provision
contained herein or therein which may be defective or inconsistent with any
other provision contained herein or therein; (ii) to change any provision hereof
or thereof as may be required by applicable law or the Commission or
24
<PAGE>
any successor governmental agency exercising similar authority; or (iii) to make
such other provisions in regard to matters or questions arising hereunder or
thereunder as shall not materially adversely affect the interests of the Holders
(as determined in good faith by the Trustees, who may rely on an opinion of
counsel).
(b) This Trust Agreement may also be amended from
time to time by the Trustees (or the performance of any of the
provisions of the Trust Agreement may be waived) with the consent by
the required vote of the Holders in accordance with Section 8.1 hereof;
provided that this Trust Agreement may not be amended (i) without the
consent by vote of the Holders of all TIMES then outstanding, so as to
increase the number of TIMES issuable hereunder above the number of
TIMES specified in Section 2.2(c) hereof or such lesser number as may
be outstanding at any time during the term of this Trust Agreement,
(ii) to reduce the interest in the Trust represented by TIMES without
the consent of the Holders of such TIMES, (iii) if such amendment is
prohibited by the Investment Company Act or other applicable law, (iv)
without the consent by vote of the Holders of all TIMES then
outstanding, if such amendment would effect a change in the voting
requirements set forth in Section 8.1 hereof or this Section 8.4, or
(v) without the consent by vote of the Holders of the lesser of (x) 67%
or more of the TIMES represented at a special meeting of Holders, if
more than 50% of the TIMES outstanding are represented at such meeting,
and (y) more than 50% of the TIMES outstanding, if such amendment would
effect a change in Section 2.1 or 2.6 hereof.
(c) Promptly after the execution of any amendment,
the Trustees shall furnish written notification of the substance of
such amendment to each Holder.
(d) Notwithstanding subsections (a) and (b) of this
Section 8.4 no amendment hereof shall permit the Trust, the Trustees,
the Administrator, the Paying Agent or the Custodian to take any action
or direct or permit any Person to take any action that (i) would vary
the investment of Holders within
25
<PAGE>
the meaning of Treasury Regulation Section 301.7701-4(c), or (ii) would
or could cause the Trust, or direct or permit any action to be taken
that would or could cause the Trust, not to be a "grantor trust" under
the Code.
SECTION 8.5 ACCOUNTANTS.
(a) The Trustees shall, in accordance with Section 30
of the Investment Company Act, file annually with the Commission such
information, documents and reports as investment companies having
securities registered on a national securities exchange are required to
file annually pursuant to Section 13(a) of the Securities Exchange Act
of 1934, as amended, and the rules and regulations issued thereunder.
The Trustees shall transmit to the Holders, at least semi-annually, the
reports required by Section 30(d) of the Investment Company Act and the
rules and regulations thereunder, including, without limitation, a
balance sheet accompanied by a statement of the aggregate value of
investments on the date of such balance sheet, a list showing the
amounts and values of such investments owned on the date of such
balance sheet, and a statement of income for the period covered by the
report. Financial statements contained in such annual reports shall be
accompanied by a certificate of independent public accounts based upon
an audit not less in scope or procedures than that which independent
public accountants would ordinarily make for the purpose of presenting
comprehensive and dependable financial statements and shall contain
such information as the Commission may prescribe. Each such report
shall state that such independent public accountants have verified
investments owned, either by actual examination or by receipt of a
certificate from the Custodian.
(b) The independent public accountants referred to in
subsection (a) above shall be selected at a meeting held within thirty
days before or after the beginning of the fiscal year by the vote, cast
in person, of a majority of the Trustees who are not "interested
persons" as defined in the Investment Company Act and such selection
shall be submitted for ratification at the first meeting of
26
<PAGE>
Holders to be held as set forth in Section 8.1 hereof, and thereafter
as required by the Investment Company Act and the rules and regulations
thereunder. The employment of any independent public accountant for the
Trust shall be conditioned upon the right of the Holders by a vote of
the lesser of (i) 67% or more of the TIMES present at a special meeting
of Holders, if Holders of more than 50% of TIMES outstanding are
present or represented by proxy at such meeting or (ii) more than 50%
of the TIMES outstanding to terminate such employment at any time
without penalty.
(c) The foregoing provisions of this Section 8.5 are
in addition to any applicable requirements of the Investment Company
Act and the rules and regulations thereunder.
SECTION 8.6 NATURE OF HOLDER'S INTEREST. Each Holder holds at
any given time a beneficial interest in the Trust Estate, but does not have any
right to take title or possession of any portion of the Trust Estate. Each
Holder expressly waives any right he may have under any rule of law, or the
provisions of any statute, or otherwise, to require the Trustees at any time to
account, in any manner other than as expressly provided in this Trust Agreement,
for the Shares, the Contract, the Treasury Securities or other assets or moneys
from time to time received, held and applied by the Trustees hereunder. No
Holder shall have any right except as provided herein to control or determine
the operation and management of the Trust or the obligations of the parties
hereto. Nothing set forth herein or in the certificates representing TIMES shall
be construed to constitute the Holders from time to time as partners or members
of an association.
SECTION 8.7 DELAWARE LAW TO GOVERN. This Trust Agreement is
executed and delivered in the State of Delaware, and all laws or rules of
construction of the State of Delaware shall govern the rights of the parties
hereto and the Holders and the construction, validity and effect of the
provisions hereof.
SECTION 8.8 NOTICES. Any notice, demand, direction or
instruction to be given to the Sponsor hereunder shall be in writing and shall
be duly given if
27
<PAGE>
mailed or delivered to Bear, Stearns & Co., 245 Park Avenue, New York, New York
10167, Attention: ________, or at such other address as shall be specified by
the Sponsor to the other parties hereto in writing. Any notice, demand,
direction or instruction to be given to the Trust and the Trustees hereunder
shall be in writing and shall be duly given if mailed or delivered to the Trust
at Puglisi & Associates, 860 Library Avenue, Suite 204, Newark, Delaware 19715
[___________] and to each Trustee at such Trustee's address set forth beneath
its signature below, or such other address as shall be specified to the other
parties hereto by such party in writing. Any notice to be given to a Holder
shall be duly given if mailed, first class postage prepaid, or by such other
substantially equivalent means as the Trustees may deem appropriate, or
delivered to such Holder at the address of such Holder appearing on the registry
of the Paying Agent.
SECTION 8.9 SEVERABILITY. If any one or more of the covenants,
agreements, provisions or terms of this Trust Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
and terms of this Trust Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Trust Agreement or of the
Certificates, or the rights of the Holders thereof.
SECTION 8.10 COUNTERPARTS. This Trust Agreement may be
executed in counterparts, and as so executed will constitute one agreement,
binding on all of the parties hereto.
28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed.
BEAR, STEARNS & CO. INC.
___________________________________________
Name:
Address:
TRUSTEES:
___________________________________________
Name: Donald J. Puglisi
Address: 860 Library Avenue
Suite 204
Newark, Delaware 19715
___________________________________________
Name: William R. Latham, III
Address: 860 Library Avenue
Suite 204
Newark, Delaware 19715
___________________________________________
Name:
Address: 860 Library Avenue
Suite 204
Newark, Delaware 19715
29
<PAGE>
Schedule I
TREASURY SECURITIES
All terms specified are for stripped principal or interest
components of U.S. Treasury debt obligations.
TIMES Payment Date Aggregate Face Amount,
per
TIMES, Payable
at Payment Date
30
<PAGE>
Exhibit A
THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS, PROVISIONS AND
CONDITIONS OF THE TRUST AGREEMENT REFERRED TO BELOW TO WHICH THE HOLDER OF THIS
CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND. $___. TRUST
ISSUED MANDATORY EXCHANGE SECURITIES
MANDATORY COMMON EXCHANGE TRUST
CUSIP NO. 562613109
NO. _____ _______ SHARES
THIS CERTIFIES
THAT____________________________________________________________ IS THE RECORD
OWNER OF ____________________ $___ TRUST ISSUED MANDATORY EXCHANGE SECURITIES OF
FIRSTPLUS FINANCIAL, INC. MANDATORY COMMON EXCHANGE TRUST, CONSTITUTING
FRACTIONAL UNDIVIDED INTERESTS IN MANDATORY COMMON EXCHANGE TRUST, A TRUST
CREATED UNDER THE LAWS OF THE STATE OF DELAWARE PURSUANT TO A TRUST AGREEMENT
BETWEEN BEAR, STEARNS & CO. INC. AND THE TRUSTEES NAMED THEREIN. THIS
CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS, PROVISIONS AND
CONDITIONS OF THE TRUST AGREEMENT TO WHICH THE HOLDER OF THIS CERTIFICATE BY
VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND, A COPY OF WHICH TRUST
AGREEMENT IS AVAILABLE AT THE OFFICE OF THE TRUST'S ADMINISTRATOR AND PAYING
AGENT, THE BANK OF NEW YORK, 101 BARCLAY STREET, NEW YORK, NEW YORK 10286. THIS
CERTIFICATE IS TRANSFERABLE AND INTERCHANGEABLE BY THE REGISTERED OWNER IN
PERSON OR BY HIS DULY AUTHORIZED ATTORNEY AT THE OFFICE OF THE PAYING AGENT UPON
SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED OR ACCOMPANIED BY A WRITTEN
INSTRUMENT OF TRANSFER AND ANY OTHER DOCUMENTS THAT THE PAYING AGENT MAY REQUIRE
FOR TRANSFER, IN FORM SATISFACTORY TO THE PAYING AGENT AND PAYMENT OF THE FEES
AND EXPENSES PROVIDED IN THE TRUST AGREEMENT.
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY COUNTERSIGNED BY
THE PAYING AGENT.
<PAGE>
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING
TRUSTEE.
MANDATORY COMMON EXCHANGE TRUST
DATED: By______________________________
Managing Trustee
COUNTERSIGNED:
THE BANK OF NEW YORK,
as Paying Agent
By________________________
Authorized Signature
Exhibit 2.d
TEMPORARY CERTIFICATE: EXCHANGEABLE FOR DEFINITIVE
ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY
SHARES OF BENEFICIAL INTEREST
PAR VALUE $.01
PER SHARE
MANDATORY COMMON EXCHANGE TRUST
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE THIS
CERTIFICATE IS TRANSFERABLE IN NEW YORK, NEW YORK
CUSIP
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
MANDATORY COMMON EXCHANGE TRUST
transferable on the books of the Trust by the holder hereto in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed. This
Certificate and the shares of beneficial interest represented hereby are issued
and shall be subject to all the provisions of the Declaration of Trust and
ByLaws of the Trust, each as from time to time amended, copies of which are on
file with the Transfer Agent, to all of which the holder by acceptance hereof
assents.
This Certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar.
Witness the facsimile seal of the Trust and the facsimile signatures of its duly
authorized officers.
DATED:
COUNTERSIGNED AND REGISTERED:
THE BANK OF NEW YORK
(New York, New York) Trustee
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
Page 2
MANDATORY COMMON EXCHANGE TRUST
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT________ Custodian________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right Act__________________________
of survivorship and not as (State)
tenants in common
</TABLE>
Additional abbreviations may also be used though not in the
above list.
For value Received, ______________________ hereby sell, assign
and transfer unto
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Trust, with full
power of substitution in the premises.
Dated ___________________
__________________________________
Exhibit 2.h
2,205,000 Shares of Trust Issued
Mandatory Exchange Securities
MANDATORY COMMON EXCHANGE TRUST
UNDERWRITING AGREEMENT
[Date]
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, N.Y. 10167
Ladies and Gentlemen:
Mandatory Common Exchange Trust, a business trust organized
and existing under the laws of Delaware (the "Trust"), proposes, subject to the
terms and conditions stated herein, to issue and sell to the several
underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
2,000,000 shares (the "Firm Shares") of its Trust Issued Mandatory Exchange
Securities, $.01 par value per share (the "TIMES"), and, for the sole purpose of
covering over-allotments in connection with the sale of the Firm Shares, at the
option of the Underwriters, up to an additional 205,000 shares (the "Additional
Shares") of TIMES. The Firm Shares and any Additional Shares purchased by the
Underwriters are referred to herein as the "Shares". The Shares are more fully
described in the Registration Statement referred to below. Each Share will be
exchanged for one or fewer
<PAGE>
shares of common stock, par value $0.01 per share (the "Common Stock"), of
FIRSTPLUS Financial Group, Inc., a Nevada corporation ("FPFG"), or for cash
pursuant to the Cash Settlement Alternative (as such term is defined in the
Prospectus (as defined in Section 1(a)(i) hereof)) on the Exchange Date (as such
term is defined in the Prospectus). The Trust will enter into a Purchase
Agreement dated as of the Closing Date (the "Contract") with Banc One Capital
Holdings Corporation (the "Seller") obligating the Seller to deliver to the
Trust on the Exchange Date (as such term is defined in the Prospectus) a number
of shares of Common Stock equal to the product of the Exchange Rate (as such
term is defined in the Prospectus) times the initial number of shares of Common
Stock subject to the Contract. The Seller's obligations under the Contract will
be secured by pledges of collateral pursuant to the terms of a Collateral
Agreement, dated as of _____, 1997 (the "Collateral Agreement"), among the
Seller, The Bank of New York ("BONY"), as collateral agent (in such capacity,
the "Collateral Agent"), and the Trust .
1. Representations and Warranties of the Trust. The Trust
represents and warrants to, and agrees with, the Underwriters and the Seller
that:
(a) A notification on Form N-8A (the "Notification")
of registration of the Trust as an investment company has been filed with the
Securities and Exchange Commission (the "Commission"). The Trust has filed with
the Commission a registration statement, and may have filed an amendment or
amendments thereto, on Form N-2 (Securities Act No. 33-15927 and Investment
Company Act No. 811-7847), for the registration of the Shares under the
Securities Act of 1933, as amended (the "Act"), and the Investment Company Act
of 1940, as amended (the "1940 Act"). Such registration statement, including the
prospectus, financial statements and schedules, exhibits and all other documents
filed as a part thereof, as amended at the time of effectiveness of the
registration statement, including any information deemed to be a part thereof as
of the time of effectiveness pursuant to paragraph (b) of Rule 430A or Rule 434
of the Rules and Regulations of the Commission under the Act (such Rules and
Regulations, together with any Rules and Regulations under the 1940 Act and the
Securities Exchange Act of 1934, the "Regulations"), is herein
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<PAGE>
called the "Registration Statement" and the prospectus, in the form first filed
with the Commission pursuant to Rule 497 of the Regulations or filed as part of
the Registration Statement at the time of effectiveness if no Rule 497 or Rule
434 filing is required, is herein called the "Prospectus". The term "preliminary
prospectus" as used herein means a preliminary prospectus as described in Rule
430 of the Regulations. Any reference herein to the Registration Statement, any
preliminary prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to the Instructions of
Form N-2 which were filed under the 1940 Act on or before the effective date of
the Registration Statement, the date of such preliminary prospectus or the date
of the Prospectus, as the case may be, and any reference herein to the terms
"amend", "amendment" or "supplement" with respect to the Registration Statement,
any preliminary prospectus or the Prospectus shall be deemed to refer to and
include (i) the filing of any document with the Commission after the effective
date of the Registration Statement, the date of such preliminary prospectus or
the date of the Prospectus, as the case may be, which is incorporated therein by
reference and (ii) any such document so filed.
(b) At the time of the effectiveness of the
Registration Statement or the effectiveness of any post-effective amendment to
the Registration Statement, when the Prospectus is first filed with the
Commission pursuant to Rule 497 or Rule 434 of the Regulations, when any
supplement to or amendment of the Prospectus is filed with the Commission, when
any document incorporated therein by reference is filed with the Commission and
at the Closing Date and the Additional Closing Date, if any (as hereinafter
respectively defined), the Notification, the Registration Statement and the
Prospectus and any amendments thereof and supplements thereto complied or will
comply in all material respects with the applicable provisions of the Act, the
1940 Act and the Regulations and does not or will not contain an untrue
statement of a material fact and does not or will not omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein (i) in the case of the Registration Statement, not misleading and (ii)
in the case of the Prospectus, in light of the circumstances under which they
were
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<PAGE>
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions in the Registration Statement or
the Prospectus made in reliance upon and in conformity with information
furnished in writing to the Trust by the Underwriters or the Seller expressly
for use therein. When any related preliminary prospectus was first filed with
the Commission (whether filed as part of the registration statement for the
registration of the Shares or any amendment thereto or pursuant to Rule 424(a)
of the Regulations) and when any amendment thereof or supplement thereto was
first filed with the Commission, such preliminary prospectus and any amendments
thereof and supplements thereto complied in all material respects with the
applicable provisions of the Act and the Regulations and the 1940 Act and did
not contain an untrue statement of a material fact and did not omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein in light of the circumstances under which they were made not
misleading. No representation and warranty is made in this subsection (b),
however, with respect to any statement or omissions in the Registration
Statement or the Prospectus or any related preliminary prospectus or any
amendment thereof or supplement thereto made in reliance upon and in conformity
with information furnished in writing to the Trust by or on behalf of any
Underwriters or the Seller expressly for use therein. If Rule 434 is used, the
Trust will comply with the requirements of Rule 434.
(c) Deloitte & Touche, L.L.P., who have certified the
financial statements and supporting schedules included in the Registration
Statement, are independent public accountants as required by the Act and the
Regulations.
(d) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as
set forth in the Registration Statement and the Prospectus, there has been no
material adverse change or any development involving a prospective material
adverse change in the business, prospects, properties, operations, condition
(financial or other) or results of operations of the Trust, whether or not
arising from transactions in the ordinary course of business, and since the date
of the
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<PAGE>
latest balance sheet presented in the Registration Statement and the Prospectus,
the Trust has not incurred or undertaken any liabilities or obligations, direct
or contingent, which are material to the Trust, except for liabilities or
obligations which are reflected in the Registration Statement and the
Prospectus.
(e) This Agreement and the transactions contemplated
herein have been duly and validly authorized by the Trust and this Agreement has
been duly and validly executed and delivered by the Trust.
(f) The execution, delivery and performance of this
Agreement by the Trust and the consummation by the Trust of the transactions
contemplated hereby do not and will not (i) conflict with or result in a breach
of any of the terms and provisions of, or constitute a default (or an event
which with notice or lapse of time, or both, would constitute a default) under,
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Trust pursuant to, any material agreement,
instrument, franchise, license or permit to which the Trust is a party or by
which its properties or assets may be bound or (ii) violate or conflict with any
provision of the Declaration or Certificate of Trust of the Trust or any
judgment, decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over the Trust or
any of its properties or assets. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any court or
any public, governmental or regulatory agency or body having jurisdiction over
the Trust or any of its properties or assets is required for the execution,
delivery and performance by the Trust of this Agreement or the consummation by
the Trust of the transactions contemplated hereby, including the issuance, sale
and delivery of the Shares to be issued, sold and delivered by the Trust
hereunder, except the registration under the 1940 Act of the Trust and under the
Act of the Shares and, if the Shares are no longer listed on the American Stock
Exchange, such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares.
5
<PAGE>
(g) All of the outstanding shares of TIMES are duly
and validly authorized and issued, fully paid and nonassessable and were not
issued and are not now in violation of or subject to any preemptive rights. The
Shares, when issued, delivered and sold in accordance with this Agreement, will
be duly and validly issued and outstanding, fully paid and nonassessable, and
will not have been issued in violation of or be subject to any preemptive
rights. The TIMES, the Firm Shares and the Additional Shares conform to the
descriptions thereof contained in the Registration Statement and the Prospectus.
Except as described in the Prospectus, no holder of securities of the Trust has
any rights to the registration of securities of the Trust because of the filing
of the Registration Statement or otherwise in connection with the sale of the
Shares contemplated hereby.
(h) The Trust has been duly organized and is validly
existing as a business trust in good standing under the laws of Delaware. The
Trust is duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the character or location of its properties (owned, leased
or licensed) or the nature or conduct of its business makes such qualification
necessary, except for those failures to be so qualified or in good standing
which will not in the aggregate have a material adverse effect on the Trust. The
Trust has all requisite power and authority, and all necessary consents,
approvals, authorizations, orders, registrations, qualifications, licenses and
permits of and from all public, regulatory or governmental agencies and bodies,
to own, lease and operate its properties and conduct its business as now being
conducted and as described in the Registration Statement and the Prospectus,
except to the extent that the failure to obtain the foregoing would not have a
material adverse effect on the Trust and, if the Shares are no longer listed on
the American Stock Exchange, except for such consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits as
may be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares. No such consent, approval,
authorization, order, registration, qualification, license or permit contains a
materially burdensome restriction not adequately disclosed in the Registration
Statement and the Prospectus.
6
<PAGE>
(i) Except as described in the Prospectus, there is
no litigation or governmental proceeding to which the Trust is a party or to
which any property of the Trust is subject or which is pending or, to the
knowledge of the Trust, contemplated against the Trust which might result in any
material adverse change or any development involving a material adverse change
in the business, prospects, properties, operations, condition (financial or
other) or results of operations of the Trust taken as a whole or which is
required to be disclosed in the Registration Statement and the Prospectus.
(j) The Trust has not taken and will not take,
directly or indirectly, any action designed to cause or result in, or which
constitutes or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of TIMES to facilitate
the sale or resale of the Shares.
(k) The financial statements, including the notes
thereto, and supporting schedules included in the Registration Statement and the
Prospectus present fairly the financial position of the Trust as of the dates
indicated; except as otherwise stated in the Registration Statement, said
financial statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis; and the supporting
schedules included in the Registration Statement present fairly the information
required to be stated therein.
(l) The documents incorporated or deemed to be
incorporated by reference in the Prospectus, at the time they were or hereafter
are filed with the Commission, are permitted to be incorporated by reference in
the Prospectus and, if prepared by or relating to the Trust, complied and will
comply in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission under the Exchange Act, and, when
read together with the other information in the Prospectus, at the time the
Registration Statement and any amendments thereto become effective and at the
Closing Date, will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
7
<PAGE>
(m) The Trust is registered with the Commission as a
non-diversified closed-end management investment company under the 1940 Act and
no order of suspension or revocation of such registration has been issued or
proceedings therefor initiated or, to the knowledge of the Trust, threatened by
the Commission. No person is serving or acting as an officer or trustee of the
Trust except in accordance with the provisions of the 1940 Act;
(n) The Contract, The Collateral Agreement, the
Administration Agreement between BONY and the Trust (the "Administration
Agreement"), the Custodian Agreement between BONY and the Trust (the "Custodian
Agreement"), the Paying Agent Agreement between BONY and the Trust (the "Paying
Agent Agreement"), the Fund Expense Agreement between the Representatives and
BONY (the "Fund Expense Agreement") and the Fund Indemnity Agreement between the
Representatives and the Trust (the "Fund Indemnity Agreement") (the Contract,
the Collateral Agreement, the Administration Agreement, the Custodian Agreement,
the Paying Agent Agreement, the Fund Expense Agreement and the Fund Indemnity
Agreement are herein collectively called the "Fundamental Agreements") has been
duly authorized, executed and delivered by the Trust and, assuming due
authorization, execution and delivery by the other parties thereto, constitutes
a valid and legally binding agreement of the Trust, enforceable against the
Trust in accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and to general equity
principles (whether considered in a proceeding in equity or at law).
(o) The Amended and Restated Trust Agreement dated
_______, 1997 (the "Trust Agreement") and the Fundamental Agreements comply with
all applicable provisions of the Act and the 1940 Act, and all approvals of such
agreements required under the 1940 Act by the holders of the TIMES and the
trustees have been obtained and are in full force and effect. The Trust
Agreement and the Fundamental Agreements conform in all material respects to the
descriptions thereof contained in the Prospectus.
8
<PAGE>
(p) The Trust is not in default in the performance or
observance of any obligation, covenant or condition contained in any other
agreement or instrument to which it is a party or by which it or any of its
properties may be bound other than this Agreement;
(q) The statements set forth in the Prospectus under
the caption "Description of the TIMES", insofar as they purport to constitute a
summary of the terms of the Shares, under the caption "Certain Federal Income
Tax Considerations", and under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and agreements referred to
therein, are accurate, complete and fair;
(r) There are no material restrictions, limitations
or regulations with respect to the ability of the Trust to invest its assets as
described in the Prospectus, other than as described therein; and
(s) The Shares and any TIMES outstanding prior to the
issuance of the Shares have been approved for listing on the American Stock
Exchange subject to notice of issuance; and the Trust's Registration Statement
on Form 8-A under the Exchange Act is effective;
(t) Deloitte & Touche L.L.P., who have certified
certain financial statements and supporting schedules included in the
Registration Statement, are independent public accountants as required by the
Act and the Regulations.
2. Representations and Warranties of the Seller. The Seller
represents and warrants to, and agrees with each of the Underwriters and the
Trust that:
(a) The compliance by the Seller with all the
provisions of this Agreement, the Contract, the Collateral Agreement and
Reimbursement Agreement and the consummation of the transactions herein and
therein contemplated will not conflict or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which the Seller is a party or by which the Seller is bound or to
which any of the property or assets of the Seller is subject, nor will such
action
9
<PAGE>
result in any violation of the provisions of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Seller or any of the property of the Seller; and no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the compliance by the Seller with or
the consummation by the Seller of the transactions contemplated by this
Agreement, the Contract, or the Collateral Agreement or the Reimbursement
Agreement, except such as may be required by the NASD or the registration under
the Act or the 1940 Act of the Shares and, if the Shares are no longer listed on
the American Stock Exchange, except for such consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits as
may be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares.
(b) This Agreement has been duly authorized,
executed and delivered by the Seller. Each of the Contract, the Collateral
Agreement and the Reimbursement Agreement have been duly authorized, by the
Seller and when duly executed and delivered by the Seller pursuant to the terms
hereof, and, assuming due authorization, execution and delivery by the other
parties thereto, will constitute a valid and legally binding agreement of the
Seller, enforceable against the Seller in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditor's rights generally and to general equity principles (whether considered
in a proceeding in equity or at law).
(c) The Seller has, and immediately prior to the
Closing Date and the Additional Closing Date (as defined in Section 3(c) hereof)
the Seller will have, good and valid title to _______ shares of Common Stock and
_______ shares of Nonvoting Common Stock $_____ par value per share (the
"Nonvoting Stock" and together with the Common Stock, the "Stock") of FPFG
(except with respect to the Common Stock on loan pursuant to a lending agreement
dated ), free and clear of all liens, encumbrances, equities, restrictions,
legends or claims other than those created pursuant to the Collateral Agreement;
each share of Nonvoting
10
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Common owned by the Seller is convertible at any time by any person other than
the Seller and its Affiliates or Farm Bureau Insurance Company and its
Affiliates into one share of Common Stock (subject to certain adjustments)
without payment of further consideration; all consents, approvals,
authorizations and orders necessary for the Seller to pledge and assign the
shares of Stock to be pledged and assigned by the Seller pursuant to the
Collateral Agreement have been obtained; the Seller has full right, power and
authority to pledge and assign the shares of Stock to be pledged and assigned by
the Seller pursuant to the Collateral Agreement; and upon delivery of such
shares of Stock and payment therefor pursuant to the Contract, good and valid
title to such shares of Stock, free and clear of all liens, encumbrances,
equities, restrictions, legends or claims, will pass to the Trust.
(d) The representations and warranties of the Seller
set forth in Section 3 of the Collateral Agreement are true and correct on and
as of the date hereof with the same effect as though such representations and
warranties had been set forth in full in this Agreement;
(e) During the period beginning from the date hereof
and continuing to and including the date 90 days after the date of the
Prospectus, the Seller will not offer, sell, contract to sell or otherwise
dispose of, except as provided hereunder, any Common Stock or any securities of
FPFG that are substantially similar to the Common Stock, including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive, Common Stock or any such substantially similar
securities without your prior written consent; provided however, that to the
extent the Seller has, at the date of the Prospectus or at any time thereafter,
borrowings under a margin loan (which loan shall not be in excess of $____) the
foregoing restrictions shall not apply to sales by the lender or any or all
those shares of Stock that are pledged by the Seller as collateral for such
margin loan upon default or failure to meet a margin call by Seller [and
provided further, that if the Underwriters have not exercised their right to
purchase all the Additional Shares pursuant to subsection 2(b) hereof as of the
30th calendar day after the date of the Prospectus, the agreement of
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<PAGE>
the Seller in this paragraph (e) of subsection 2 shall not apply to those
Additional Shares the Underwriters have not purchased by such date;
(f) Seller has not taken, nor will Seller take,
directly or indirectly, any action which is designed to or which has constituted
or which might reasonably by expected to cause or result in stabilization or
manipulation of the price of any security of the Trust to facilitate the sale or
resale of the TIMES;
(g) At the time of the effectiveness of the
Registration Statement or the effectiveness of any post-effective amendment to
the Registration Statement, when the Prospectus is first filed with the
Commission pursuant to Rule 497 or Rule 434 of the Regulations, when any
supplement to or amendment of the Prospectus is filed with the Commission, when
any document incorporated therein by reference is filed with the Commission and
at the Closing Date and the Additional Closing Date, if any (as hereinafter
respectively defined), the Notification, the Registration Statement and the
Prospectus and any amendments thereof and supplements thereto complied or will
comply in all material respects with the applicable provisions of the Act, the
1940 Act and the Regulations and does not or will not contain and untrue
statement of a material fact and does not or will not omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein (i) in the case of the Registration Statement, not misleading and (ii)
in the case of the Prospectus, in light of the circumstances under which they
were made, not misleading;
(h) The Seller is not, and has not during the three
month period preceding the date of this Agreement been, an "affiliate" of the
Trust or FPFG, as such term is defined in Rule 12b-2 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or an executive officer or
director of FPFG; and
(i) Each Share of Stock owned by the Seller is freely
transferable without registration under Section 5 of the Act by reason of the
exemption set forth in Section 4(1) of the Act.
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<PAGE>
3. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Trust agrees to sell to the Underwriters and
the Underwriters, severally and not jointly, agree to purchase from the Trust,
at a purchase price per Share of $_______, the number of Firm Shares set forth
opposite the respective names of the Underwriters in Schedule I hereto plus any
additional number of Shares which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 10 hereof.
(b) Payment of the purchase price for, and delivery
of certificates for, the Shares shall be made at the office of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, or at
such other place as shall be agreed upon by you and the Trust, at 10:00 A.M. on
the third or fourth business day (as permitted under Rule 15c6-1 under the
Exchange Act) (unless postponed in accordance with the provisions of Section 10
hereof) following the date of the effectiveness of the Registration Statement
(or, if the Trust has elected to rely upon Rule 430A of the Regulations, the
third or fourth business day (as permitted under Rule 15c6-1 under the Exchange
Act) after the determination of the initial public offering price of the
Shares), or such other time not later than ten business days after such date as
shall be agreed upon by you and the Trust (such time and date of payment and
delivery being herein called the "Closing Date"). Payment shall be made to the
Trust by wire transfer in same day funds, against delivery to you for the
respective accounts of the Underwriters of certificates for the Shares to be
purchased by them. Certificates for the Shares shall be registered in such name
or names and in such authorized denominations as you may request in writing at
least two full business days prior to the Closing Date. The Trust will permit
you to examine and package such certificates for delivery at least one full
business day prior to the Closing Date.
(c) In addition, the Trust hereby grants to the
Underwriters the option to purchase up to 205,000 Additional Shares at the same
purchase price per share to be paid by the Underwriters to the Trust for the
Firm
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Shares as set forth in this Section 3, for the sole purpose of covering
over-allotments in the sale of Firm Shares by the Underwriters. This option may
be exercised at any time, in whole or in part, on or before the thirtieth day
following the date of the Prospectus, by written notice by you to the Trust.
Such notice shall set forth the aggregate number of Additional Shares as to
which the option is being exercised and the date and time, as reasonably
determined by you, when the Additional Shares are to be delivered (such date and
time being herein sometimes referred to as the "Additional Closing Date");
provided, however, that the Additional Closing Date shall not be earlier than
the Closing Date or earlier than the second full business day after the date on
which the option shall have been exercised nor later than the eighth full
business day after the date on which the option shall have been exercised
(unless such time and date are postponed in accordance with the provisions of
Section 10 hereof). Certificates for the Additional Shares shall be registered
in such name or names and in such authorized denominations as you may request in
writing at least two full business days prior to the Additional Closing Date.
The Trust will permit you to examine and package such certificates for delivery
at least one full business day prior to the Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter
shall be the number which bears the same ratio to the aggregate number of
Additional Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto (or such number
increased as set forth in Section 10 hereof) bears to 2,000,000, subject,
however, to such adjustments to eliminate any fractional shares as you in your
sole discretion shall make.
Payment for the Additional Shares shall be made by wire
transfer in same day funds at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, 919 Third Avenue, New York, New York 10022, or such other location as
may be mutually acceptable, upon delivery of the certificates for the Additional
Shares to you for the respective accounts of the Underwriters.
4. Offering. Upon your authorization of the release of the
Firm Shares, the Underwriters propose to
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<PAGE>
offer the Shares for sale to the public upon the terms set forth in the
Prospectus.
5. Covenants of the Trust and the Seller.
(a) The Trust covenants and agrees with the
Underwriters that:
(i) If the Registration Statement has not yet been
declared effective the Trust will use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
possible, and if Rule 430A is used or the filing of the Prospectus is otherwise
required under Rule 497 or Rule 434, the Trust will file the Prospectus
(properly completed if Rule 430A has been used) pursuant to Rule 497 or Rule 434
within the prescribed time period and will provide evidence satisfactory to you
of such timely filing. If the Trust elects to rely on Rule 434, the Trust will
prepare and file a term sheet that complies with the requirements of Rule 434.
The Trust will notify you promptly (and, if requested
by you, will confirm such notice in writing) (i) when the Registration Statement
and any amendments thereto become effective, (ii) of any request by the
Commission for any amendment of or supplement to the Registration Statement or
the Prospectus or for any additional information, (iii) of the mailing or the
delivery to the Commission for filing of any amendment of or supplement to the
Registration Statement or the Prospectus, (iv) of the issuance by the Trust of
any stop order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto or of the initiation, or the threatening, of
any proceedings therefor, (v) of the receipt of any comments from the
Commission, and (vi) of the receipt by the Trust of any notification with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose or enter a stop order at any time, the
Trust will make every reasonable effort to prevent the issuance of any such stop
order and, if issued, to obtain the lifting of such order as soon as possible.
The Trust will not file any amendment to the Registration Statement or any
amendment of or supplement to the Prospectus (including
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<PAGE>
the prospectus required to be filed pursuant to Rule 497 or Rule 434) that
differs from the prospectus on file at the time of the effectiveness of the
Registration Statement before or after the effective date of the Registration
Statement or file any document under the Exchange Act if such document would be
deemed to be incorporated by reference into the Prospectus to which you shall
reasonably object in writing after being timely furnished in advance a copy
thereof.
(ii) If at any time when a prospectus relating to the
Shares is required to be delivered under the Act any event shall have occurred
as a result of which the Prospectus as then amended or supplemented would, in
the judgment of the Underwriters or the Trust include an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it shall be necessary at any
time to amend or supplement the Prospectus or Registration Statement to comply
with the Act or the Regulations, or to file under the Exchange Act so as to
comply therewith any document incorporated by reference in the Registration
Statement or the Prospectus or in any amendment thereof or supplement thereto,
the Trust will notify you promptly and prepare and file with the Commission an
appropriate amendment or supplement (in form and substance reasonably
satisfactory to you) which will correct such statement or omission or which will
effect such compliance and will use its reasonable best efforts to have any
amendment to the Registration Statement declared effective as soon as possible.
(iii) The Trust will promptly deliver to you two
signed copies of the Registration Statement, including exhibits and all
documents incorporated by reference therein and all amendments thereto, and the
Trust will promptly deliver to each of the Underwriters such number of copies of
any preliminary prospectus, the Prospectus, the Registration Statement, and all
amendments of and supplements to such documents, if any, and all documents
incorporated by reference in the Registration Statement and Prospectus or any
amendment thereof or supplement thereto, without exhibits in such quantity as
you may reasonably request.
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(iv) During a period of three years from the
effective date of the Registration Statement, the Trust will furnish to you
copies of (i) all reports to its shareholders; and (ii) all reports, financial
statements and proxy or information statements filed by the Trust with the
Commission or any national securities exchange.
(v) The Trust will apply the net proceeds from the
sale of the Shares as set forth under "Use of Proceeds" in the Prospectus.
(vi) The Trust will use its reasonable best efforts
to cause the Shares to be listed on the American Stock Exchange.
(vii) The Trust, during the period when the
Prospectus is required to be delivered under the Act or the Exchange Act, will
file all documents required to be filed with the Commission pursuant to Section
20 or 30 of the 1940 Act within the time periods required by the 1940 Act and
the rules and regulations thereunder.
(viii) The Trust will make generally available to the
Trust's security holders as soon as practicable, but in any event not later than
eighteen months after the effective date of the Registration Statement (as
defined in Rule 158(c) under the Act), an earnings statement of the Trust (which
need not be audited) complying with Section 11(a) of the Act and the Regulations
(including, at the option of the Trust, Rule 158).
(b) The Seller covenants and agrees with the
Underwriters to execute and deliver signed copies of the Contract, the
Collateral Agreement and the Reimbursement Agreement to the Underwriters at or
before the Closing Date.
6. Payment of Expenses. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
the Seller hereby agrees to pay all costs and expenses incident to the
performance of the obligations of the Trust hereunder, including those in
connection with (i) preparing, printing, duplicating, filing and distributing
the Registration Statement, as originally filed and all amendments
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thereof (including all exhibits thereto), any preliminary prospectus, the
Prospectus and any amendments or supplements thereto (including, without
limitation, reasonable fees and expenses of the Seller's and Trust's accountants
and counsel), the underwriting documents (including this Agreement and the
Agreement Among Underwriters and the Selling Agreement) and all other documents
related to the public offering of the Shares (including those supplied to the
Underwriters in quantities as hereinabove stated), (ii) the issuance, transfer
and delivery of the Shares to the Underwriters, including any transfer or other
taxes payable thereon, (iii) the qualification of the Shares under state or
foreign securities or Blue Sky laws, including the costs of printing and mailing
a preliminary and final "Blue Sky Survey" and the reasonable fees of counsel for
the Underwriters and such counsel's disbursements in relation thereto, (iv)
listing the Shares on the American Stock Exchange and the fees and expenses in
connection with the preparation and filing of a registration statement under the
Exchange Act relating to the Shares, (v) filing fees of the Commission and the
National Association of Securities Dealers, Inc.; (vi) the cost of printing
certificates representing the Shares, (vii) all expenses and taxes incident to
the sale and delivery of the shares of Stock to be sold or pledged by the
Seller, (viii) all fees, expenses and costs in connection with the marketing of
the Shares, and (ix) all other costs and expenses incident to the performance by
the Trust and the Seller of their respective obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except, as provided in this Section, and Sections 9 and 12 hereof, the
Underwriters will pay all of their own costs and expenses, including the
up-front fees of the Administrator, the Custodian and the Paying Agent provided
for in the Fundamental Agreements and the up-front fees of the Trustees, the
fees of their counsel, transfer taxes on resale of any of the TIMES by them, and
any advertising expenses connected with any offers they may make.
7. Conditions of Underwriters' Obligations. The
obligations of the Underwriters to purchase and pay for the Firm Shares and the
Additional Shares, as provided herein, shall be subject to the accuracy of the
representations and warranties of the Trust and the Seller herein contained, as
of the date hereof and as of
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the Closing Date (for purposes of this Section 7 "Closing Date" shall refer to
the Closing Date for the Firm Shares and any Additional Closing Date, if
different, for the Additional Shares), to the absence from any certificates,
opinions, written statements or letters furnished to you or to Skadden, Arps,
Slate, Meagher & Flom LLP ("Underwriters' Counsel") pursuant to this Section 7
of any misstatement or omission, to the performance by the Trust of its
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become
effective and all necessary stock exchange approval has been received not later
than [if pricing pursuant to Rule 430A 5:30 P.M., New York time, on the date of
this Agreement] [if pricing pursuant to a pricing amendment -- 12:00 P.M., New
York time on the date an amendment to the Registration Statement containing the
public offering price has been filed with the Commission], or at such later time
and date as shall have been consented to in writing by you; if the Trust shall
have elected to rely upon Rule 430A or Rule 434 of the Regulations, the
Prospectus shall have been filed with the Commission in a timely fashion in
accordance with Section 4(a) hereof; and, at or prior to the Closing Date no
stop order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereof shall have been issued and no proceedings
therefor shall have been initiated or threatened by the Commission.
(b) At the Closing Date you shall have received the
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Trust,
dated the Closing Date addressed to the Underwriters and the Seller and in form
and substance satisfactory to the Underwriters and the Seller, to the effect
that:
(i) The Trust has been duly organized and is
validly existing as a business trust in good standing under the laws of
Delaware. The Trust is duly qualified and in good standing as a foreign
entity in each jurisdiction in which the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its
business makes such qualification necessary, except for those
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failures to be so qualified or in good standing which will not in the
aggregate have a material adverse effect on the Trust. The Trust is
registered with the Commission as a non-diversified closed-end
management investment company under the 1940 Act.
(ii) The Trust has an authorized capital
interest as set forth in the Registration Statement and the Prospectus.
All of the outstanding shares of TIMES are duly and validly authorized
and issued, are fully paid and nonassessable and were not issued in
violation of or subject to any preemptive rights. The Shares to be
delivered on the Closing Date have been duly and validly authorized
and, when delivered by the Trust in accordance with this Agreement,
will be duly and validly issued, fully paid and nonassessable and will
not have been issued in violation of or subject to any preemptive
rights. The Firm Shares and the Additional Shares conform to the
descriptions thereof contained in the Registration Statement and the
Prospectus.
(iii) The Shares to be sold under this
Agreement to the Underwriters are duly authorized for listing on the
American Stock Exchange.
(iv) Each of this Agreement and each of the
Fundamental Agreements has been duly and validly authorized, executed
and delivered by the Trust and, assuming due authorization, execution
and delivery by the other parties thereto, constitutes a valid and
legally binding agreement to the Trust, enforceable in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(v) The execution, delivery and performance
of this Agreement and each of the Fundamental Agreements and the
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consummation of the transactions contemplated hereby and thereby by the
Trust do not and will not (A) conflict with or result in a breach of
any of the terms and provisions of, or constitute a default (or an
event which with notice or lapse of time, or both, would constitute a
default) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Trust pursuant
to, any agreement, instrument, franchise, license or permit
specifically identified to such counsel as being material to its
business to which the Trust is a party or by which the Trust or its
properties or assets may be bound or (B) violate or conflict with any
provision of the Declaration of Trust or Certificate of Formation of
the Trust, or, to the best knowledge of such counsel, any Delaware, New
York or U.S. Federal law or statute, any rule or regulation of any
Delaware, New York or U.S. Federal court or governmental or regulatory
agency or body having jurisdiction over the Trust or any of its
properties or assets or any judgment, decree or order specifically
identified to such counsel. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
such court, governmental or regulatory agency or body by the Trust is
required for the execution, delivery and performance by the Trust of
this Agreement or any of the Fundamental Agreements or the consummation
of the transactions contemplated hereby or thereby, except for (1) such
as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters (as to which such counsel need express no opinion) and (2)
such as have been made or obtained under the Act, the Exchange Act and
the 1940 Act. The opinions set forth in the previous two sentences
shall extend only to such Delaware, New York or U.S. Federal laws,
statutes, rules and regulations as are in their experience typically
applicable to transactions of the type contemplated by this Agreement
and the Fundamental Agreement.
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(vi) The Registration Statement and the
Prospectus and any amendments thereof or supplements thereto (other
than the financial statements and schedules and other financial data
included or incorporated by reference therein, as to which no opinion
need be rendered) comply as to form in all material respects with the
requirements of the 1940 Act, the Act and the Regulations.
(vii) The Registration Statement is
effective under the Act, and, to the best knowledge of such counsel, no
stop order suspending the effectiveness of the Registration Statement
or any post-effective amendment thereof has been issued and no
proceedings therefor have been initiated or threatened by the
Commission and all filings required by Rule 497 of the Regulations have
been made.
(viii) The statements in the Prospectus
under the caption "Certain Federal Income Tax Considerations", to the
extent that such statements constitute summaries of the legal matters
referred to therein, fairly represent their opinion as to such matters.
(ix) In addition, such opinion shall also
contain a statement that such counsel has participated in conferences
with officers and representatives of the Trust, representatives of the
independent public accountants for the Trust and the Underwriters at
which the Prospectus and related matters were discussed and no facts
have come to the attention of such counsel which have caused such
counsel to believe that either the Registration Statement at the time
it became effective (including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule
430A(b) or Rule 434, if applicable), or any amendment thereof made
prior to the Closing Date as of the date of such amendment, contained
an untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements
therein
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<PAGE>
not misleading or that the Prospectus as of its date (or any amendment
thereof or supplement thereto made prior to the Closing Date as of the
date of such amendment or supplement) and as of the Closing Date
contained or contains an untrue statement of a material fact or omitted
or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (it being understood that
such counsel need express no belief or opinion with respect to the
financial statements and schedules and other financial data included or
incorporated by reference therein).
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent they deem proper, on certificates of responsible officers
of the Trust and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Trust, provided that copies of any
such statements or certificates shall be delivered to Underwriters' Counsel.
(c) At the Closing Date you shall have received the
opinion of Squire, Sanders & Dempsey, counsel for the Seller, dated the Closing
Date, addressed to the Underwriters and in form and substance satisfactory to
you, to the effect that:
(i) This Agreement and each of the
Fundamental Agreements to which it is a party has been duly authorized,
executed and delivered by the Seller and, assuming due authorization,
execution and delivery by the other parties thereto, each of the
Fundamental Agreements to which it is a party constitutes a valid and
legally binding agreement of the Seller, enforceable against the Seller
in accordance with its terms, subject as to enforcement to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and
to general
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equitable principles (whether considered in a proceeding in equity or
at law);
(ii) The execution, delivery and performance
by the Seller of this Agreement and each of the Fundamental Agreements
to which it is a party and the consummation by the Seller of the
transactions contemplated hereby and thereby do not and will not (A)
result in a breach of any of the terms and provisions of, or constitute
a default (or an event which with notice or lapse of time, or both,
would constitute a default) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Seller pursuant to, any agreement (other than the
Contract and the Collateral Agreement) or instrument, specifically
identified to such counsel as being material to its business to which
the Seller is a party or by which the Seller or any of its properties
or assets may be bound or (B) violate any provision of the certificate
of incorporation or code of regulations of the Seller or, to the best
knowledge of such counsel, any Ohio or U.S. Federal law or statute or
any rule or regulation of any Ohio or U.S. Federal court or government
or regulatory agency or body having jurisdiction over the Seller or any
of its properties or assets or any judgment, decree or order
specifically identified to such counsel. No consent, approval,
authorization, order, registration, filing, qualification, license or
permit of or with any such court or governmental or regulatory agency
or body is required for the execution, delivery and performance by the
Seller of this Agreement or any of the Fundamental Agreements to which
it is a party or the consummation by the Seller of the transactions
contemplated hereby or thereby. The opinions set forth in the previous
two sentences shall extend only to such Ohio or U.S. Federal laws,
statutes, rules and regulations as are in their experience typically
applicable to transactions of the type contemplated by this Agreement,
the Reimbursement Agreement and the
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Fundamental Agreements to which the Seller is a party.
(iii) Assuming due authorization,
execution and delivery thereof by the Trust and the Collateral Agent,
the Collateral Agreement, together with the delivery of (x) the
certificates in registered form representing the Stock pledged
thereunder by the Seller and proper evidence of any U.S. Treasury
securities pledged thereunder by the Seller and (y) undated stock and
transfer powers with respect thereto duly endorsed in blank, to the
Collateral Agent for the benefit of the Trust in the State of New York
creates in favor of the Collateral Agent for the benefit of the Trust a
perfected security interest in such Stock under the Uniform Commercial
Code as in effect in the State of New York (the "New York UCC"); upon
such delivery, at the Closing Date, assuming that (A) the Collateral
Agent and the Trust will acquire the security interest in such shares
of Stock and U.S. Treasury securities in good faith and without notice
of any adverse claim (within the meaning of the New York UCC) and (B)
Seller has rights in the shares of Stock and U.S. Treasury Securities
subject to such Collateral Agreement, the Collateral Agent will acquire
such security interest in such shares of Stock and U.S. Treasury
securities for the benefit of the Trust free of any adverse claims
(within the meaning of the New York UCC).
(iv) Upon payment for and delivery of
shares of Common Stock in accordance with the Contract and Collateral
Agreement, assuming due authorization, execution and delivery thereof
by the Trust and the Collateral Agent, and assuming that (A) the Seller
continues to be the sole registered owner of the shares of Common Stock
to be sold by it, (B) the certificates representing such shares do not
contain any notation of liens or restrictions and (C) the purchasers of
Shares will acquire such shares in good faith and without notice of any
adverse claims (within the meaning
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of the New York UCC), the purchasers will acquire all of the rights
of the Seller in the shares of Common Stock and will also acquire their
interest in such shares free of any adverse claims (within the meaning
of the New York UCC).
(v) Each share of Nonvoting Common owned by
the Seller is by its terms as set forth in the Articles of
Incorporation of the Company convertible at any time by any person
other than the Seller and its Affiliates and Farm Bureau Life Insurance
Company and its Affiliates into one share of Common Stock without
payment of further consideration.
(vi) The Seller is not, and has not during
the three month period preceding the date of this Agreement been, an
"affiliate" of the Trust or FPFG, as such term is defined in Rule 12b-2
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or an executive officer or director of FPFG; and
(vii) Each Share of Common Stock owned by
the Seller is freely transferable without registration under Section 5
of the Act by reason of the exemption set forth in Section 4(1) of the
Act.
(d) All proceedings taken in connection with the sale
of the Firm Shares and the Additional Shares as herein contemplated shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and the
Underwriters shall have received from said Underwriters' Counsel a favorable
opinion, dated as of the Closing Date with respect to the issuance and sale of
the Shares, the Registration Statement and the Prospectus and such other related
matters as you may reasonably require, and the Trust shall have furnished to
Underwriters' Counsel such documents as they request for the purpose of enabling
them to pass upon such matters.
(e) At the Closing Date you shall have received a
certificate of the managing trustee of the
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Trust, dated the Closing Date, to the effect that (i) the condition set forth in
subsection (a) of this Section 7 has been satisfied, (ii) as of the date hereof
and as of the Closing Date the representations and warranties of the Trust set
forth in Section 1 hereof are accurate, (iii) as of the Closing Date the
obligations of the Trust to be performed hereunder on or prior thereto have been
duly performed and (iv) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been any material adverse change, or any development involving a material
adverse change, in the business, prospects, properties, operations, condition
(financial or otherwise) or results of operations of the Trust, except in each
case as described in or contemplated by the Prospectus.
(f) (i) There shall not have occurred any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, results of operations, prospects,
investment objectives, investment policies or liabilities of the Trust and its
subsidiaries taken as a whole, otherwise than as set forth or contemplated in
the Prospectus, (ii) FPFG and its subsidiaries, taken as a whole shall not have
sustained since December 31, 1996 any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, and (iii) there shall not have been any change in the outstanding
capital stock of FPFG in excess of _____ shares or long term debt (net of
current maturities) and long term debt (net of current maturities) of the
Company in excess of $ on a consolidated basis or any change, or any development
involving a prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of FPFG and
its subsidiaries, taken as a whole, the effect of which, in any such case
described in clause (i), (ii) or (iii), is in your reasonable judgment so
material and adverse as to make it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares being issued at the Closing
Date on the terms and in the manner contemplated in the Prospectus.
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(g) On or after the date hereof (i) no downgrading
shall have occurred in the rating accorded FPFG's debt securities or preferred
stock by any "nationally recognized statistical rating organization," as that
term is defined by the Commission for purposes of Rule 436(g)(2) under the Act,
and (ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of any
of FPFG's debt securities or preferred stock.
(h) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or Nasdaq; (ii) a suspension or material limitation in trading in
the securities of FPFG or the Trust on Nasdaq or the American Stock Exchange;
(iii) a general moratorium on commercial banking activities declared by either
U.S. Federal or New York State authorities; or (iv) the outbreak or escalation
of hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event specified
in this clause (iv) in the reasonable judgment of the Underwriters makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being issued at the Closing Date on the terms and in the manner
contemplated in the Prospectus.
(i) Each Fundamental Agreement shall have been
executed and delivered by all parties thereto and the Seller shall have
delivered to the Collateral Agent the number of shares of Stock and/or U.S.
Treasury securities required by the Collateral Agreement to be initially pledged
thereunder in accordance with the requirements of the Collateral Agreement.
(j) The Trust and the Seller shall have furnished or
caused to be furnished to you at the Closing Date certificates of officers of
the Trust and the Seller satisfactory to you as to the accuracy of the
representations and warranties of the Trust and the Seller, respectively, herein
and in the Contract and Collateral Agreement at and as of the Closing Date, as
to the satisfaction and performance by the Trust and the Seller of all of their
respective obligations hereunder
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and thereunder to be performed at or prior to the Closing Date, as to the
matters set forth in subsections (a) and (f) of this Section and as to such
other matters as you may reasonably request.
(k) Prior to the Closing Date the Trust shall have
furnished to you such further information, certificates and documents as you may
reasonably request.
(l) At the Closing Date, the Shares shall have been
approved for listing on the American Stock Exchange upon notice of issuance.
If any of the conditions specified in this Section 7 shall not
have been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 7 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
cancelled by you at, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may be
cancelled by you at, or at any time prior to, the Additional Closing Date.
Notice of such cancellation shall be given to the Trust and the Seller in
writing, or by telephone, telex or telegraph, confirmed in writing.
8. Indemnification.
(a) The Seller agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all losses, liabilities, claims, damages and expenses whatsoever
as incurred (including but not limited to reasonable attorneys' fees and any and
all expenses whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or
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are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, as originally filed or any
amendment thereof, or any related preliminary prospectus or the Prospectus, or
in any supplement thereto or amendment thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Seller will not be liable in any such case to the
extent but only to the extent that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Seller or the Trust
by or on behalf of any Underwriter expressly for use therein; and provided,
further, that this indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, liabilities, claims, damages or expenses
purchased Shares, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Trust shall have furnished
any such amendments or supplements thereto) was not sent or given by or on
behalf of such Underwriter to such person, if such is required by law, at or
prior to the written confirmation of the sale of such Shares to such person and
if the Prospectus (as so amended or supplemented, but excluding documents
incorporated or deemed to be incorporated by reference therein) would have
corrected the defect giving rise to such loss, liability, claim, damage or
expense, it being understood that this proviso shall have no application if such
defect shall have been corrected in a document which is incorporated or deemed
to be incorporated by reference in the Prospectus. This indemnity agreement will
be in addition to any liability which the Seller may otherwise have including
under this Agreement.
(b) Each Underwriter severally, and not jointly,
agrees to indemnify and hold harmless the Trust, the Seller, each of the
trustees or directors thereof, each of the officers of the Trust who shall have
signed the Registration Statement, and each other person, if any, who controls
the Trust or the Seller within the meaning of Section 15 of the Act or Section
30
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20(a) of the Exchange Act, against any losses, liabilities, claims, damages and
expenses whatsoever as incurred (including but not limited to reasonable
attorneys' fees and any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), jointly or severally, to which they or any of them
may become subject under the Act, or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, as originally filed or
any amendment thereof, or any related preliminary prospectus or the Prospectus,
or in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Seller or the Trust by or on behalf of any Underwriter through
you expressly for use therein; provided, however, that in no case shall any
Underwriter be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder. This indemnity will be in addition to any liability which any
Underwriter may otherwise have including under this Agreement. The Trust
acknowledges that the statements set forth in the last paragraph of the cover
page and under the caption "Underwriting" in the Prospectus constitute the only
information furnished in writing by or on behalf of any Underwriter expressly
for use in the Registration Statement as originally filed or in any amendment
thereof, any related preliminary prospectus or the Prospectus or in any
amendment thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party
under subsection (a) or (b) above of notice of the commencement of any action,
such indemnified
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party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party (i) shall not relieve it from any
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) shall not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification provided in paragraph (a) or (b) above. In
case any such action is brought against any indemnified party, and it notifies
an indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action, (ii) the
indemnifying party shall not have employed counsel to have charge of the defense
of such action within a reasonable time after notice of commencement of the
action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events the reasonable fees and expenses of such counsel shall be borne by
the indemnifying parties; provided, however, that in no event shall the
indemnifying party be liable for the expenses of more than one separate counsel
(plus any local counsel) representing the indemnified parties who are parties to
such action except to the extent one or more indemnified parties assert defenses
in conflict with defenses asserted by the other indemnified parties.
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<PAGE>
Anything in this subsection to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was not
unreasonably withheld.
9. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 8 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Seller and the
Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting any contribution
received by the indemnified party from persons, other than the indemnifying
party, who may also be liable for contribution, including persons who control
the indemnified party within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, and officers of the Trust who signed the Registration
Statement) as incurred to which the Seller and one or more of the Underwriters
may be subject, in such proportions as is appropriate to reflect the relative
benefits received by the Seller and the Underwriters from the offering of the
Shares or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 8 hereof, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Seller and the Underwriters in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Seller and the Underwriters shall be
deemed to be in the same proportion as (x) the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Trust and (y) the underwriting discounts and commissions
received by the Underwriters, respectively, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the Seller and
of the Underwriters
33
<PAGE>
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Seller or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Seller and
the Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this Section 9, (i) in no
case shall any Underwriter be liable or responsible for any amount in excess of
the underwriting discount or commission applicable to the Shares purchased by
such Underwriter hereunder, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 9 and the
preceding sentence, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. For purposes of this Section 9, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each person, if any, who controls the Seller within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, each officer of the Trust who
shall have signed the Registration Statement and each officer and director of
the Seller, and each trustee of the Trust, shall have the same rights to
contribution as the Seller, subject in each case to clauses (i) and (ii) of this
Section 9. Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party or
parties, notify each party or parties from whom
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<PAGE>
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 9 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its consent; provided, however, that such consent was not unreasonably
withheld.
10. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default
in its or their obligation to purchase Firm Shares or Additional Shares
hereunder, and if the Firm Shares or Additional Shares with respect to which
such default relates do not (after giving effect to arrangements, if any, made
by you pursuant to subsection (b) below) exceed in the aggregate 10% of the
number of Firm Shares or Additional Shares, then the Firm Shares or Additional
Shares to which the default relates shall be purchased by the non-defaulting
Underwriters in proportion to the respective proportions which the numbers of
Firm Shares set forth opposite their respective names in Schedule I hereto bear
to the aggregate number of Firm Shares set forth opposite the names of the
non-defaulting Underwriters.
(b) In the event that such default relates to more
than 10% of the Firm Shares or Additional Shares, as the case may be, you may in
your discretion arrange for yourself or for another party or parties (including
any non-defaulting Underwriter or Underwriters who so agree) to purchase such
Firm Shares or Additional Shares, as the case may be, to which such default
relates on the terms contained herein. In the event that within five calendar
days after such a default you do not arrange for the purchase of the Firm Shares
or Additional Shares, as the case may be, to which such default relates as
provided in this Section 10, this Agreement or, in the case of a default with
respect to the Additional Shares, the obligations of the Underwriters to
purchase and of the Trust to sell the Additional Shares shall thereupon
terminate, without liability on the part of the Trust or the Seller with respect
thereto (except in each case as provided in Section 6, 8(a) and 9 hereof) or the
Underwriters, but nothing in this Agreement shall relieve a defaulting
Underwriter, the
35
<PAGE>
Trust or Underwriters of its or their liability, if any, to the other
Underwriters, the Trust and the Seller for damages occasioned by its or their
default hereunder.
(c) In the event that the Firm Shares or
Additional Shares to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Trust or the Seller shall have the right to postpone
the Closing Date or Additional Closing Date, as the case may be for a period,
not exceeding five business days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus or in
any other documents and arrangements, and the Trust agrees to file promptly any
amendment or supplement to the Registration Statement or the Prospectus which,
in the opinion of Underwriters' Counsel, may thereby be made necessary or
advisable. The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 10 with like effect as if it had originally
been a party to this Agreement with respect to such Firm Shares and Additional
Shares.
11. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the Underwriters,
the Trust and the Seller contained in this Agreement, including the agreements
contained in Section 6, the indemnity agreements contained in Section 8 and the
contribution agreements contained in Section 9, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter or any controlling person thereof or by or on behalf of the
Trust, any of its officers and directors or any controlling person thereof, and
shall survive delivery of and payment for the Shares to and by the Underwriters.
The representations contained in Section 1 and the agreements contained in
Sections 6, 8, 9 and 12(d) hereof shall survive the termination of this
Agreement, including termination pursuant to Section 10 or 12 hereof.
12. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective, upon the later of when (i) you, the
Seller and the Trust shall have received notification of the effectiveness
36
<PAGE>
of the Registration Statement or (ii) the execution of this Agreement. If
either the initial public offering price or the purchase price per Share has not
been agreed upon prior to 5:00 P.M., New York time, on the fifth full business
day after the Registration Statement shall have become effective, this Agreement
shall thereupon terminate without liability to the Trust, the Seller or the
Underwriters except as herein expressly provided. Until this Agreement becomes
effective as aforesaid, it may be terminated by the Trust or the Seller by
notifying you or by you notifying the Trust and the Seller. Notwithstanding the
foregoing, the provisions of this Section 12 and of Sections 1, 6, 8 and 9
hereof shall at all times be in full force and effect.
(b) You shall have the right to terminate this
Agreement at any time prior to the Closing Date or the obligations of the
Underwriters to purchase the Additional Shares at any time prior to the
Additional Closing Date, as the case may be, if (A) any domestic or
international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, the market for the
Trust's or FPFG's securities or securities in general; or (B) if trading on the
New York or American Stock Exchanges or the Nasdaq National Market shall have
been suspended, or minimum or maximum prices for trading shall have been fixed,
or maximum ranges for prices for securities shall have been required, on the New
York or American Stock Exchanges or the Nasdaq National Market by the New York
or American Stock Exchanges or the NASD or by order of the Commission or any
other governmental authority having jurisdiction; or (C) if a banking moratorium
has been declared by a state or U.S. Federal authority or if any new restriction
materially adversely affecting the distribution of the Firm Shares or the
Additional Shares, as the case may be, shall have become effective; or (D) if
any downgrading shall have occurred in the rating of FPFG's debt securities or
preferred stock by any "nationally recognized statistical rating-organization"
(as defined for purposes of Rule 436(g) under the Act shall have occurred; or
(E) (i) if there is an outbreak or escalation of hostilities involving the
United States or there is a declaration of a national emergency or war by the
United States or (ii) if there shall have been such change in political,
financial or economic conditions, if the effect of any such event in (i) or
37
<PAGE>
(ii) specified in this clause (D) as in your reasonable judgment makes it
impracticable or inadvisable to proceed with the public offering, sale or
delivery of the Firm Shares or the Additional Shares, as the case may be, on the
terms contemplated by the Prospectus.
(c) Any notice of termination pursuant to this
Section 12 shall be by telephone, telefacsimile, telex, or telegraph, confirmed
in writing by letter.
(d) If this Agreement shall be terminated pursuant
to any of the provisions hereof (otherwise than pursuant to Section 10(b)
hereof), or if the sale of the Shares provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth herein is
not satisfied or because of any refusal, inability or failure on the part of the
Trust or the Seller to perform any agreement herein or comply with any provision
hereof, the Seller will, subject to demand by you, reimburse the Underwriters
for all out-of-pocket expenses (including the reasonable fees and expenses of
their counsel with respect to the transactions contemplated by this Agreement
exclusive of, but not including, the initial structuring and organization of the
Trust on behalf of Bear, Stearns & Co. Inc.), incurred by the Underwriters in
connection herewith.
13. Notice. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and , if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to such Underwriter c/o Bear, Stearns & Co. Inc., 245 Park Avenue,
New York, N.Y. 10167, Attention: _____________ and Salomon Brothers Inc, 7 World
Trade Center, New York, N.Y. 10048, Attention: ________; if sent to the Trust,
shall be mailed, delivered, or telegraphed and confirmed in writing to the
Trust, 850 Library Avenue, Suite 200, Newark, Delaware 19715, Attention:
Donald J. Puglisi; and if sent to the Seller, shall be mailed, delivered or
telegraphed and confirmed in writing to the Seller, 150 East Gay Street,
Columbus, Ohio 43215, Attention: General Counsel.
14. Parties. This Agreement shall insure solely to the benefit
of, and shall be binding upon, the Underwriters, the Seller and the Trust and
the controlling
38
<PAGE>
persons, directors, officers, employees and agents referred to in Section 8
and 9, and their respective successors and assigns, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained. The term "successors and assigns" shall not include a purchaser, in
its capacity as such, of Shares from any of the Underwriters.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, but without
regard to principles of conflicts of law.
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<PAGE>
If the foregoing correctly sets forth the understanding
between you, the Trust and the Seller, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.
Very truly yours,
MANDATORY COMMON EXCHANGE TRUST
By: ________________________
as Trustee
By: ________________________
as Trustee
By: ________________________
as Trustee
BANC ONE CAPITAL HOLDINGS
CORPORATION
By: ________________________
Accepted as of the date first above written
BEAR, STEARNS & CO. INC. SALOMON BROTHERS INC
By: ____________________ By: _____________________
On behalf of themselves and the other Underwriters named in Schedule I hereto.
<PAGE>
SCHEDULE I
Number of Firm
Name of Underwriter Shares to be Purchased
- ------------------- ----------------------
Bear, Stearns & Co. Inc...........................
Salomon Brothers Inc..............................
------------
Total. . . . . . .
============
41
Exhibit 2.j
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT dated as of this _____ day of
_______, 1997 by and between The Bank of New York, a New York banking
corporation (the "Custodian"), and Mandatory Common Exchange Trust (the
"Trust"), a business trust organized under the laws of the State of Delaware,
under and by virtue of a Trust Agreement, dated as of _______, 1997 (the "Trust
Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"Investment Company Act"), formed to purchase and hold certain U.S. treasury
securities (the "Treasury Securities"), to enter into and hold a forward
contract with an existing shareholder of FIRSTPLUS Financial Group, Inc. (the
"Contract"), and to issue Trust Issued Mandatory Exchange Securities (the
"TIMES") in accordance with the terms and conditions of the Trust Agreement;
WHEREAS, the Trust desires to engage the services of the
Custodian to perform certain custodial duties for the Trust; and
WHEREAS, the Custodian is willing to assume such duties, on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein
shall have the respective meanings specified in the Trust Agreement.
2. APPOINTMENT OF CUSTODIAN; TRANSFER OF ASSETS. The Trust
hereby constitutes and appoints the Custodian, and the Custodian accepts such
appointment, as agent of the Trust and as custodian of all of the
<PAGE>
property, including but not limited to, the Contract, the Treasury Securities,
the Marketable Securities, any cash and any other property at any time owned or
held by the Trust (collectively, the "Assets"). The Trust hereby deposits the
Assets with the Custodian and the Custodian hereby accepts such into its custody
and the Trustees shall deliver to the Custodian all of the Assets, including all
monies, securities and other property received by the Trust at any time during
the period of this Agreement, subject to the following terms and conditions. The
Custodian hereby agrees that it shall hold the Assets in a segregated custody
account, separate and distinct from all other accounts, in accordance with
Section 17(f) of, and in such manner as shall constitute the segregation and
holding in trust within the meaning of, the Investment Company Act and the rules
and regulations thereunder. The Trustees authorize the Custodian, for any Assets
held hereunder, to use the services of any United States securities depository
permitted to perform such services for registered investment companies and their
custodians under Rule 17f-4 under the Investment Company Act and which have been
approved by the Trustees, including but not limited to, The Depository Trust
Company and the Federal Reserve Book Entry System. The Custodian shall be under
no duty or obligation to inspect, review or examine any Assets to determine that
they are genuine, enforceable, or appropriate for the represented purpose or
that they are other than what they purport to be on their face.
3. ASSET DISPOSITION; EXAMINATIONS. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise dispose of the
Assets, except pursuant to a written direction in accordance with paragraph 4
below and then only for the account of the Trust. The Assets shall be subject to
no lien or charge of any kind in favor of the Custodian for itself or for any
other person claiming through the Custodian. The Custodian shall permit actual
examination of the Assets by the Trust's independent public accountant at the
end of each annual and semi-annual fiscal period of the Trust and at least one
other time during the fiscal year of the Trust chosen by such independent public
accountant and shall permit the inspection of the Assets by the Commission
through its employees or agents during the normal business hours of the
Custodian upon reasonable request.
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<PAGE>
4. AUTHORIZED ACTIONS. The Custodian shall take such actions
with respect to the Assets as directed in writing by any two Trustees or
officers of the Administrator duly authorized by the Trustees to give written
instructions on behalf of the Trustees and named in such resolutions of the
Trustees, certified by a Trustee, as may be received by the Custodian from time
to time.
5. CUSTODIAN'S ACTIONS TAKEN IN GOOD FAITH. In connection with
the performance of its duties under this Agreement, the Custodian shall have no
duties or obligations other than those specifically set forth herein or in the
Trust Agreement or as may subsequently be agreed in writing by the parties
hereto and shall be under no liability to the Trust or any Holder for any action
taken in good faith in reliance on any paper, order, certification, list,
demand, request, consent, affidavit, notice, opinion, direction, endorsement,
assignment, resolution, draft or other document, prima facie properly executed,
or for the disposition of the Assets pursuant to the Trust Agreement or in
respect of any action taken or suffered under the Trust Agreement in good faith,
in accordance with an opinion of counsel or at the direction of the Trustees
pursuant hereto; provided that this provision shall not protect the Custodian
against any liability to which it would otherwise be subject by reason of its
wilful misfeasance, faith or gross negligence in the performance of its duties
hereunder or its negligence or reckless disregard of its obligations and duties
hereunder. Notwithstanding any other provision of this Agreement, the Custodian
shall under no circumstances be liable for any punitive, exemplary, indirect or
consequential damages.
6. TRUST AGREEMENT VALIDITY. The Custodian shall not be
responsible for the validity or sufficiency of the Trust Agreement or the due
execution thereof, or for the form, character, genuineness, sufficiency, value
or validity of any of the Assets and the Custodian shall in no event assume or
incur any liability, duty or obligation to any Holder or to the Trustees, other
than as expressly provided for herein. The Custodian shall not be responsible
for or in respect of the validity of any signature by or on behalf of the
Trustees.
7. LITIGATION OBLIGATIONS, COSTS AND INDEMNITY. The Custodian
shall not be under any obligation to appear in, prosecute or defend any action
which in its opinion may involve it in expense or liability, unless it
3
<PAGE>
shall be furnished with such reasonable security and indemnity against such
expense or liability as it may require, and any pecuniary costs of the Custodian
from such actions shall be expenses which are reimbursable pursuant to paragraph
13 hereof.
8. TAXES; TRUST EXPENSES. In no event shall the Custodian be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the Assets or upon the monies, securities or other properties
included therein. The Custodian shall be reimbursed and indemnified by the Trust
for all such taxes and charges, for any tax or charge imposed against the Trust
and for any expenses, including counsel fees, interest, penalties and additions
to tax which the Custodian may sustain or incur with respect to such taxes or
charges.
9. CUSTODIAN RESIGNATION, SUCCESSION. (a) The Custodian may
resign by executing an instrument in writing resigning as Custodian and
delivering the same to the Trustees, not less than 60 days before the date
specified in such instrument when, subject to clause (b) of this paragraph 9,
such resignation is to take effect. Upon receiving such notice of resignation,
the Trustees shall use their reasonable efforts promptly to appoint a successor
Custodian in the manner and meeting the qualifications provided in the Trust
Agreement, by written instrument or instruments delivered to the resigning
Custodian and the successor Custodian.
(b) In case no successor Custodian shall have been appointed
within 30 days after notice of resignation has been received by the Trust, the
resigning Custodian may forthwith apply to a court of competent jurisdiction for
the appointment of a successor Custodian and shall not resign until a successor
Custodian has been appointed. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribed, appoint a successor Custodian.
10. CUSTODIAN REMOVAL. The Trust may remove the Custodian upon
60 days' prior written notice to the Custodian and appoint a successor
Custodian. In case at any time the Custodian shall not meet the requirements set
forth in the Trust Agreement or shall become incapable of acting or if a court
having jurisdiction shall enter a decree or order for relief in respect of the
4
<PAGE>
Custodian in an involuntary case, or the Custodian shall commence a voluntary
case, under any applicable bankruptcy, insolvency, or other similar law now or
hereafter in effect, or any receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) for the Custodian or for any substantial part
of its property shall be appointed, or the Custodian shall make any general
assignment for the benefit of creditors, or shall generally fail to pay its
debts as they become due, the Trust may remove the Custodian immediately and
appoint a successor Custodian. The termination of the Administration Agreement
or the Paying Agent Agreement shall cause the removal of the Custodian
simultaneously therewith, unless otherwise agreed by both parties in writing.
11. TRANSFERS TO SUCCESSOR CUSTODIAN. Upon the request of any
successor Custodian, the Custodian hereunder shall, upon payment of all amounts
due it, execute and deliver an instrument acknowledged by it transferring to
such successor Custodian all the rights and powers of the resigning Custodian;
and the resigning Custodian shall transfer, deliver and pay over to the
successor Custodian the Assets at the time held by it hereunder, if any,
together with all necessary instruments of transfer and assignment or other
documents properly executed necessary to effect such transfer and such of the
records or copies thereof maintained by the resigning Custodian in the
administration hereof as may be requested by the successor Custodian, and shall
thereupon be discharged from all duties and responsibilities hereunder. Any
resignation or removal of the Custodian shall become effective upon such
acceptance of appointment by the successor Custodian. The indemnification of
the resigning Custodian provided for hereunder shall survive any resignation,
discharge or removal of the Custodian hereunder.
12. CUSTODIAN MERGER, CONSOLIDATION. Any corporation into
which the Custodian may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Custodian shall be a party, shall be the successor
custodian hereunder and under the Trust Agreement without the execution or
filing of any paper, instrument or further act to be done on the part of the
parties hereto, provided that such corporation meets the requirements set forth
in the Trust Agreement
5
<PAGE>
and provided further that the Trust has given its prior written consent to the
Custodian with respect to any new successor Custodian.
13. COMPENSATION; EXPENSES. The Custodian shall receive
compensation for performing the usual, ordinary, normal and recurring services
under this Custodian Agreement and, with the prior written approval of the
Trustees, reimbursement for any and all expenses and disbursements incurred
hereunder, as provided in Section 3.1 of the Administration Agreement.
14. SECTION 17(f) QUALIFICATION. The Custodian hereby
represents that it is qualified to act as a custodian under Section 17(f) of the
Investment Company Act.
15. CUSTODIAN'S LIMITED LIABILITY. The Trust shall indemnify
and hold the Custodian harmless from and against any loss, damages, cost or
expense (including the costs of investigation, preparation for and defense of
legal and/or administrative proceedings related to a claim against it and
reasonable attorneys' fees and disbursements), liability or claim incurred by
reason of any inaccuracy in information furnished to the Custodian by the
Trustees, or any act or omission in the course of, connected with or arising out
of any services to be rendered hereunder, provided that the Custodian shall not
be indemnified and held harmless from and against any such loss, damages, cost,
expense, liability or claim arising from its willful misfeasance, bad faith or
negligence in the performance of its duties, or its reckless disregard of its
duties and obligations hereunder. Neither the Federal Reserve Book Entry
System nor the Depository Trust Company shall be deemed to be agents of the
Custodian.
16. RIGHTS OF SET-OFF; BANKER'S LIEN. The Custodian hereby
waives all rights of set-off or banker's lien it may have with respect to the
Assets held by it as Custodian hereunder.
17. TERMINATION. This Agreement shall terminate upon the
earlier of the termination of the Trust or the appointment of a successor
Custodian.
6
<PAGE>
18. CHOICE OF LAW. This Agreement is executed and delivered in
the State of New York, and all laws or rules of construction of the State of New
York shall govern the right of the parties hereto and the interpretation of the
provisions hereof.
19. NOTICES. Any notice to be given to the Trust hereunder
shall be in writing and shall be duly given if mailed or delivered to Mandatory
Common Exchange Trust, c/o Donald J. Puglisi, Managing Trustee, 850 Liberty
Avenue, Suite 204, Newark, Delaware 19715, and to the Custodian if mailed or
delivered to The Bank of New York, 101 Barclay Street, Floor 12E, New York, New
York 10286, Attention: Mark G. Walsh or at such other address as shall be
specified by the addressee to the other party hereto in writing.
20. NO THIRD PARTY BENEFICIARIES. Nothing herein, express or
implied, shall give to any person, other than the Trustees, the Custodian and
their respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim hereunder.
21. AMENDMENTS; TRUST AGREEMENT CHANGES; WAIVER. This
Agreement shall not be deemed or construed to be modified, amended, rescinded,
cancelled or waived, in whole or in part, except by a written instrument signed
by a duly authorized representative of the party to be charged. The Trustees
shall notify the Custodian of any change in the Trust Agreement prior to the
effective date of any such change. Failure of either party hereto to exercise
any right or remedy hereunder in the event of a breach hereof by the other party
shall not constitute a waiver of any such right or remedy with respect to any
subsequent breach.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
MANDATORY
----------------------------
as Trustee
THE BANK OF NEW YORK
By _________________________
Name:
Title:
8
Exhibit 2.k.(i)
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT dated as of this ____ day of
_______, 1997 by and between The Bank of New York, a New York banking
corporation (the "Administrator"), and Mandatory Common Exchange Trust (the
"Trust"), a business trust organized under the laws of the State of Delaware
under and by virtue of a Trust Agreement, dated as of ______, 1997 (the "Trust
Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"Investment Company Act"), formed to purchase and hold certain U.S. treasury
securities (the "Treasury Securities"), to enter into and hold a forward
contract with an existing shareholder (the "Seller") of FIRSTPLUS Financial
Group, Inc. (the "Contract") and to issue Trust Issued Mandatory Exchange
Securities (the "TIMES") in accordance with the terms and conditions of the
Trust Agreement;
WHEREAS, the Trust desires to engage the services of the
Administrator to assume certain duties and responsibilities of the Trustees
under the Trust Agreement and the Investment Company Act and to undertake
certain services on behalf of and subject to the supervision of the Trustees as
provided herein; and
WHEREAS, the Administrator is qualified and willing to assume
such duties and responsibilities and to undertake to render such services,
subject to the supervision of the Trustees, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust Agreement.
ARTICLE II
ENGAGEMENT OF ADMINISTRATOR
2.1 ENGAGEMENT. The Trust hereby engages the Administrator,
and the Administrator hereby agrees to be so engaged, to provide or cause the
provision of the services hereinafter enumerated.
2.2 SERVICES OF ADMINISTRATOR. Subject to the supervision of
the Trustees, the Administrator shall on behalf of the Trust take the actions
set forth in Sections 2.3, 2.4 and 2.5 of the Trust Agreement, to the extent
such responsibilities can lawfully be delegated to the Administrator, and to
effectuate the terms of the Contract; provided, however, that the Administrator
shall not (i) render investment advisory services to the Trust as defined in the
Investment Company Act or the Investment Advisers Act of 1940; (ii) have the
power of the Trustees to sell the Contract or the Treasury Securities except as
provided in Sections 2.5 of the Trust Agreement; or (iii) have the power to
select the independent public accountants or counsel for the Trust.
Additionally, the Administrator shall be responsible for rendering the following
services:
(a) instruct the Paying Agent to pay out of the Net Proceeds
of the sale of the TIMES the fees and expenses of the Trust incurred in
connection with the offering of the Securities as specified in Schedule I
hereto;
(b) instruct the Paying Agent to pay out of the Net Proceeds
of the sale of the TIMES the fees and expenses of the Trust incurred in
connection with the organization of the Trust as specified in Schedule II
hereto;
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(c) instruct the Paying Agent on behalf of the Trust to take
the actions set forth in Sections 2.3, 2.4 and 2.5 of the Trust Agreement and to
otherwise perform the duties of the Paying Agent referred to in the Trust
Agreement and the Paying Agent Agreement and coordinate, monitor and supervise
the activities of those providing services to the Trust;
(d) with the approval of the Trustees, engage legal and other
professional advisors, other than the Trust's independent accountants as
provided in clause 2.2 (iii) above;
(e) receive all demands, bills and invoices for expenses
incurred by or on behalf of the Trust and pay the same, or cause the Paying
Agent to pay the same, out of moneys paid to the Administrator pursuant to the
Fund Expense Agreement but in no event out of any assets of the Trust, and give
notice to [the Underwriter][and the Seller] pursuant to the Fund Indemnity
Agreement of any claim for Indemnification Expenses (as defined in the Fund
Indemnity Agreement) or any threatened claim for Indemnification Expenses;
(f) (i) keep or cause to be kept all the books and records of
the Trust (other than those to be kept by the Paying Agent), and (ii) cause the
legal and other professional advisors engaged pursuant to Section 2.2(d) to
prepare and, as necessary, file any and all reports, returns and other documents
as required under the Investment Company Act, the Securities Exchange Act of
1934, or the Internal Revenue Code of 1986 as amended, or, as reasonably
requested by the Trustees, under any other applicable laws, rules or regulations
or otherwise;
(g) at the request of the Trustees and upon being furnished
with such reasonable security and indemnity against any related expense or
liability as the Administrator may require, institute and prosecute, in
accordance with the instructions of the Trustees, legal or other appropriate
proceedings to enforce any and all rights and remedies of the Trust;
(h) prepare, receive and review on behalf of the Trust all
notices, reports, certificates and other documents regarding the Contract and
the Treasury Securities;
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(i) make or cause to be made all necessary arrangements with
respect to meetings of Trustees and meetings of Holders, including, without
limitation, the preparation of notices, proxies and minutes, subject to the
approval of Trustees;
(j) respond to inquiries by Holders;
(k) in conjunction with the Trustees, determine and publish,
in such manner as the Trustees shall direct in writing, the Trust's net asset
value in accordance with Section 8.2(a) of the Trust Agreement and the Trust's
policy.
2.3 CERTAIN RIGHTS OF THE ADMINISTRATOR. In connection with
the performance of its duties under this Agreement, the Administrator shall not
be liable to the Trust, the Trustees or any Holder (i) for any action taken or
for refraining from taking any action hereunder except in the case of its
willful misfeasance, bad faith, gross negligence or the reckless disregard of
its duties hereunder, (ii) with respect to any action taken or omitted to be
taken by it in good faith in accordance with the directions of the Trustees or
of any Trustee or (iii) in connection with the performance of its duties under
Section 2.2(k) hereof, for good faith reliance upon information furnished by
third parties selected by the Administrator with due care. The Administrator
shall under no circumstances be liable for any punitive, exemplary, indirect
or consequential damages. The Administrator may consult with counsel and the
written advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon. The Administrator may perform its duties
and exercise its rights hereunder either directly or by or through agents or
attorneys appointed with due care by it but shall be liable for the acts and
omissions of such persons to the same extent as if the functions had been
performed by the Administrator itself (except to the extent that the Trustees
shall have directed the Administrator to retain such persons, in which event
the Administrator shall not be liable for such persons' acts or omissions).
Without limiting the generality of the preceding sentence, the Administrator (i)
may select and employ independent accountants acceptable to the Trustees (other
than the independent public accountants referred
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<PAGE>
to in clause (iii) of Section 2.2 of this Agreement and Section 2.5(d) of the
accountants referred to in clause (iii) of Section 2.2 of this Agreement and
Section 2.5(d) of the Trust Agreement) to keep the financial books and records
of the Trust, to prepare the financial statements of the Trust and to prepare
Trust tax returns, and (ii) may select and engage attorneys acceptable to the
Trustees to prepare annual, semiannual and periodical reports, notices of
meetings and proxy statements, annual reports to holders of the Securities and
other documents required under the Investment Company Act or the Securities
Exchange Act of 1934. The Administrator shall not be liable and shall be fully
protected in acting upon any writing or document reasonably believed by it to be
genuine and to have been given, signed or made by the proper person or persons
and shall not be held to have any notice of any change of authority of any
person until receipt of written notice thereof from a Trustee.
2.4 POWER OF ATTORNEY. The Trustees hereby appoint the
Administrator, acting through any duly appointed officer, the attorney-in-fact
and agent of the Trust for the purpose of performing the duties prescribed in
Sections 2.2(f)(ii) and 2.2(i).
2.5 DELIVERY OF CERTAIN DOCUMENTS. The Trust will deliver to
the Administrator, promptly following the execution hereof: (a) a complete
conformed copy of the registration statement of the Trust under the Securities
Act and the Investment Company Act, including all amendments, exhibits and
schedules thereto; and (b) the EDGAR access codes (Central index Key, CIK
Confirmation Code, Password and Password Modification Access Code) employed to
file such registration statement.
ARTICLE III
COMPENSATION OF ADMINISTRATOR
3.1 COMPENSATION. For services to be rendered by the
Administrator pursuant to this Agreement, as custodian under the Custodian
Agreement, dated as of September __, 1997, between the Administrator, as
custodian, and the Trust, as paying agent under the Paying Agent Agreement,
dated as of September __, 1997, between the Administrator, as paying agent, and
the Trust, and as
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<PAGE>
collateral agent under the Collateral Agreement, dated as of September __, 1997,
among the Administrator, as collateral agent, the Seller and the Trust, and for
the payment of Trust expenses pursuant to Section 2.2(e) hereof, the
Administrator shall receive only such fees and expenses as shall be paid to it
pursuant to the Fund Expenses Agreement and shall have no recourse to the assets
of the Trust for the payment of any such amounts.
3.2 ADDITIONAL SERVICES. If and to the extent that the
Trustees shall request the Administrator to render services for the Trust, other
than those to be rendered by the Administrator hereunder, and if the
Administrator agrees to render such services, such additional services shall be
compensated separately on terms to be agreed upon between the Administrator and
the Trustees from time to time.
ARTICLE IV
TERMINATION
4.1 TERMINATION.
(a) This Agreement shall terminate immediately upon written
notice of termination from the Trust to the Administrator if any of the
following events shall occur:
(i) If the Administrator shall violate any provision
of this Agreement, the Trust Agreement, or the Investment Company Act, and after
notice of such violation, shall not cure such default within 30 days; or
(ii) If the Administrator shall be adjudged
bankrupt or insolvent by a court of competent jurisdiction, or an order shall be
made by a court of competent jurisdiction for the appointment of a receiver,
liquidator, or trustee of the Administrator, or of all or substantially all of
its property by reason of the foregoing, or approving any petition filed against
the Administrator for its reorganization, and such adjudication or order shall
remain in force or unstayed for a period of 30 days; or
(iii) If the Administrator shall institute
proceedings for voluntary bankruptcy, or shall file a
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<PAGE>
petition seeking reorganization under the Federal bankruptcy laws, or for relief
under any law for the relief of debtors, or shall consent to the appointment of
a receiver of the Administrator or of all or substantially all of its property,
or shall make a general assignment for the benefit of its creditors, or shall
admit in writing its inability to pay its debts generally as they become due; or
(iv) Upon the voluntary or involuntary dissolution of
the Administrator, or unless the Trust shall have given its prior written
consent thereto, the merger or consolidation of the Administrator with any other
entity.
If any of the events specified in clauses (ii), (iii) or (iv)
of this Section 4.1(a) shall occur, the Administrator shall give immediate
written notice thereof to the Trust.
(b) Notwithstanding anything to the contrary contained herein,
this Agreement shall terminate immediately (i) upon termination of the Trust
Agreement, (ii) upon termination of the Paying Agent Agreement, (iii) upon
termination of the Collateral Agreement, (iv) upon termination of the Custodian
Agreement or (v) upon the resignation or removal of the Custodian.
(c) The Trustees may remove the Administrator, or the
Administrator may resign, and thereby terminate this Agreement without penalty
upon 60 days' prior written notice to the other party hereto; provided that
neither party hereto may terminate this Agreement pursuant to this Section
4.1(c) unless a successor Administrator shall have been appointed and shall have
accepted the duties of the Administrator. If, within 30 days after notice by the
Administrator to the Trust of termination of this Agreement, no successor
Administrator shall have been selected and accepted the duties of the
Administrator, the Administrator may apply to a court of competent jurisdiction
for the appointment of a successor Administrator.
4.2 EFFECT OF TERMINATION. The Administrator shall forthwith
upon termination of this Agreement deliver to the Trustees any records or
other property of the Trust then in the possession or custody of the Admin-
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<PAGE>
istrator. The Administration shall pay over to any successor administrator any
remaining portion of the one-time, up-front amount paid to the Administrator at
the closing of the offering of the TIMES with respect to its ongoing fees and
anticipated expenses of the Trust. Any obligation to indemnify the Administrator
pursuant to Section 6.6 shall survive the termination of this Agreement.
ARTICLE V
RECORDS AND REPORTS
5.1 BOOKS AND RECORDS; INSPECTION AND COPYING. The
Administrator shall keep, or cause to be keep, appropriate, and reasonably
detailed and accurate, books and records of all its activities pursuant to this
Agreement. The Trustees and their representatives shall have the right to
inspect such books and records during the Administrator's normal business hours
upon reasonable request, and to make copies of the same at the expense of the
Trust.
5.2 ACCESS TO INFORMATION. The Administrator shall make
available to each of the Trustees all information it generates, receives or
compiles with respect to the Contract and the Treasury Securities, the moneys
available to the Trust, the financial condition of the Trust and all other
relevant matters concerning the Trust.
ARTICLE VI
MISCELLANEOUS
6.1 BINDING EFFECT. Any corporation into which the
Administrator may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Administrator shall be a party, shall be the successor Administrator
hereunder and under the Trust Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
provided that such corporation meets the requirements set forth in the Trust
Agreement and provided
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<PAGE>
further that the Trustees have given their prior written consent to the
Administrator with respect to any such merger, conversion or consolidation. This
Agreement shall be binding on and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
6.2 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings, whether oral or written. This
Agreement shall not be amended, changed, modified, or discharged, in whole or in
part, except by an instrument in writing signed by both parties hereto, or their
respective successors or permitted assigns.
6.3 NOTICES. Any notice, report or other communication
required or permitted to be given hereunder shall be in writing, and shall,
unless some other method of giving such notice, report or other communication is
accepted by the party to whom it is to be given or is required by the Trust
Agreement or the Investment Company Act, be given by being mailed by U.S. first
class mail, certified or registered, return receipt requested, postage prepaid,
to the following addresses of the parties hereto:
The Trust: Mandatory Common Exchange Trust
c/o Donald J. Puglisi, Managing
Trustee
850 Library Avenue
Newark, Delaware 19715
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
The Administrator: The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Mark Walsh
Telephone: (212) 815-5228
Telecopier: (212) 815-7157
Any party may at any time give written notice to the other
party that it wishes to change its address for the purposes of this Section 6.3.
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<PAGE>
6.4 APPLICABLE LAW. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect except to the extent such law is preempted by federal
law.
6.5 NON-ASSIGNABILITY. This Agreement and the rights and
obligations of the parties hereunder may not be assigned or delegated by either
party without the prior written consent of the other party.
6.6 INDEMNIFICATION. The Trust shall indemnify and hold the
Administrator harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of any
inaccuracy in information furnished to the Administrator by the Trustees, or any
act or omission in the course of, connected with or arising out of any services
to be rendered hereunder, provided that the Administrator shall not be
indemnified and held harmless from and against any such loss, damages, cost,
expense, liability or claim incurred by reason of its willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or its reckless
disregard of its duties and obligations hereunder.
6.7 PROVISIONS OF LAW TO CONTROL. This Agreement shall be
subject to the applicable provisions of the Investment Company Act and the rules
and regulations of the Commission thereunder. To the extent that any provisions
herein contained conflict with any applicable provisions of the Investment
Company Act or of such rules and regulations, the latter shall control.
6.8 COUNTERPARTS. This Agreement may be signed in counterparts
with all counterparts constituting one and the same instrument.
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IN WITNESS WHEREOF the parties have hereunto executed this
Administration Agreement as of the day and year first above written.
MANDATORY COMMON EXCHANGE TRUST
_______________________________
as Trustee
THE BANK OF NEW YORK
By____________________________
Name:
Title:
<PAGE>
ADMINISTRATION AGREEMENT
SCHEDULE I
Cost incurred by the Trust in connection with the offering of the Securities:
Registration Fees $ [ ]
American Stock Exchange listing fee [ ]
Printing (other than certificates) [ ]
Engraving and printing certificates [ ]
Fees and expenses of qualification under
state securities laws (excluding fees of
counsel) [ ]
Accounting fees and expenses [10,000]
Legal fees and expenses [ ]
NASD fee [ ]
Miscellaneous [ ]
---------
Total $[10,000]
=========
* To be confirmed with D&T on 9/11/97
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<PAGE>
ADMINISTRATION AGREEMENT
SCHEDULE II
Cost incurred by the Trust in connection with the organization of the Trust:
Registration fees $ [ ]
Filing fees [ ]
Accounting fees and expenses [ ]
Legal fees and expenses [ ]
Miscellaneous [ ]
Total [ ]
-------
13
Exhibit 2.k.(ii)
PAYING AGENT AGREEMENT
This PAYING AGENT AGREEMENT dated as of this ___ day of
______, 1997, by and between The Bank of New York, a New York banking
corporation (the "Paying Agent"), and Mandatory Common Exchange Trust (the
"Trust"), a business trust organized under the laws of the State of Delaware
under and by virtue of a Trust Agreement, dated as of ________, 1997 (the "Trust
Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"Investment Company Act"), formed to purchase and hold the U.S. treasury
securities (the "Treasury Securities"), to enter into and hold a forward
contract with an existing shareholder of FIRSTPLUS Financial Group, Inc. (the
"Contract") and to issue Trust Issued Mandatory Exchange Securities (the
"TIMES") to the public in accordance with the terms and conditions of the Trust
Agreement;
WHEREAS, the Trust desires to engage the services of the
Paying Agent to assume certain responsibilities and to perform certain duties as
the transfer agent, registrar and paying agent with respect to the TIMES upon
the terms and conditions of this Agreement; and
WHEREAS, the Paying Agent is qualified and willing to assume
such responsibilities and to perform such duties, subject to the supervision of
the Trustees, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust Agreement.
ARTICLE II
PAYING AGENT
2.1 APPOINTMENT OF PAYING AGENT AND ACCEPTANCE. The Trust
Agreement provides that The Bank of New York shall act as the initial Paying
Agent. The Bank of New York accepts such appointment and agrees to act in
accordance with its standard procedures and the provisions of the Trust
Agreement and the provisions set forth in this Article II as Paying Agent with
respect to the TIMES. Without limiting the generality of the foregoing, The Bank
of New York, as Paying Agent, agrees that it shall establish and maintain the
Trust Account, subject to the provisions of Section 2.3 hereof.
2.2 CERTIFICATES AND NOTICES. The Trustees shall deliver to
the Paying Agent the certificates and notices required to be delivered to the
Paying Agent pursuant to the Trust Agreement, and the Paying Agent shall mail or
publish such certificates or notices as required by the Trust Agreement, but the
Paying Agent shall have no responsibility to confirm or verify the accuracy of
certificates or notices of the Trustees so delivered.
2.3 PAYMENTS AND INVESTMENTS. The Paying Agent shall make
payments out of the Trust Account as provided for in Section 3.2 of the Trust
Agreement. The Paying Agent, on behalf of the Trust, shall effect the
transactions set forth in Sections 2.3, 2.4, 2.5, 3.5 and 8.3 of the Trust
Agreement upon instructions to do so from the Administrator (except that with
respect to its obligations under Section 8.3 of the Trust Agreement, the Paying
Agent shall act without instructions from the Administrator) and shall invest
moneys on deposit in the Trust Account in Temporary Investments in accordance
with Section 3.5 of the Trust Agreement. Except as otherwise specifically
provided herein or in the Trust Agreement, the Paying Agent shall not have the
power to sell, transfer
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<PAGE>
or otherwise dispose of any Temporary Investment prior to the maturity
thereof, or to acquire additional Temporary Investments. The Paying Agent shall
hold any Temporary Investment to its maturity and shall apply the proceeds
thereof paid upon maturity to the payment of the next succeeding Quarterly
Distribution. All such Temporary Investments shall be selected by the Trustees
from time to time or pursuant to standing instructions from the Trustees, and
the Paying Agent shall have no liability to the Trust or any Holder or any other
Person with respect to any such Temporary Investment.
2.4 INSTRUCTIONS FROM ADMINISTRATOR. The Paying Agent shall
receive and execute all instructions from the Administrator, except to the
extent they conflict with or are contrary to the terms of the Trust Agreement or
this Agreement.
ARTICLE III
TRANSFER AGENT AND REGISTRAR
3.1 ORIGINAL ISSUE OF CERTIFICATES. On the date TIMES sold
pursuant to the Underwriting Agreement are originally issued, certificates for
the TIMES shall be issued by the Trust, and, at the request of the Trustees,
registered in such names and such denominations as the underwriters shall have
previously requested of the Trustees, executed manually or in facsimile by the
Managing Trustee and countersigned by the Paying Agent. At no time shall the
aggregate number of TIMES represented by such countersigned certificates exceed
the number of then outstanding TIMES, except as permitted by Section 3.4.
3.2 REGISTRY OF HOLDERS. The Paying Agent shall maintain a
registry of the Holders of the TIMES.
3.3 REGISTRATION OF TRANSFER OF THE TIMES. The TIMES shall be
registered for transfer or exchange, and new certificates shall be issued, in
the name of the designated transferee or transferees, upon surrender of the old
certificates in form deemed by the Paying Agent properly endorsed for transfer
with (a) all necessary endorsers' signatures guaranteed in such manner and form
as the Paying Agent may require by a guarantor reasonably believed by the Paying
Agent to be responsible, (b) such
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<PAGE>
assurances as the Paying Agent shall deem necessary or appropriate to evidence
the genuineness and effectiveness of each necessary endorsement and (c)
satisfactory evidence of compliance with all applicable laws relating to the
collection of taxes or funds necessary for the payment of such taxes.
3.4 LOST CERTIFICATES. If there shall be delivered to the
Paying Agent (i) evidence to its satisfaction of the destruction, loss or theft
of any certificate for TIMES and (ii) such security or indemnity as may be
required by it to hold it and any of its agents harmless, then, in the absence
of notice to the Paying Agent that such certificate has been acquired by a bona
fide purchaser, the Managing Trustee shall execute and upon its request the
Paying Agent shall countersign and deliver, in lieu of any such destroyed, lost
or stolen certificate, a new certificate of like tenor bearing a number not
contemporaneously outstanding. Any request by the Managing Trustee to the Paying
Agent to issue a replacement or new certificate pursuant to this Section 3.4
shall be deemed to be a representation and warranty by the Trustees to the
Paying Agent that such issuance will comply with provisions of law, the Trust
Agreement and the resolutions adopted by the Trustees with respect to lost
securities. If, after the delivery of such new certificate, a bona fide
purchaser of the original certificate in lieu of which such new certificate was
issued presents for payment such original certificate, the Trustees and the
Paying Agent shall be entitled to recover such new certificate from the person
to whom it was delivered or any transferee thereof, except a bona fide
purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Trustees or the Paying Agent in connection therewith. Upon the issuance of
any new certificate under this Section 3.4, the Trustees and the Paying Agent
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Paying Agent) connected
therewith.
3.5 TRANSFER BOOKS. The Paying Agent shall maintain the
transfer books listing the Holders of the TIMES. In case of any written request
or demand for the inspection of the transfer books of the Trust or any
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<PAGE>
other books in the possession of the Paying Agent, the Paying Agent will notify
the Trustees and secure instructions as to permitting or refusing such
inspection. The Paying Agent reserves the right, however, to exhibit the
transfer books or other books to any person in case it is advised by its counsel
that its failure to do so would be unlawful.
3.6 DISPOSITION OF CANCELLED CERTIFICATES; RECORDS. The Paying
Agent shall retain certificates which have been cancelled in transfer or in
exchange and accompanying documentation in accordance with applicable rules and
regulations of the Commission for six calendar years from the date of such
cancellation, and shall make such records available during this period at any
time, or from time to time, for reasonable periodic, special, or other
examinations by representatives of the Commission and the Board of Governors of
the Federal Reserve System. Thereafter such records shall not be destroyed by
the Paying Agent but will be safely stored for possible future reference. In
case of any request or demand for the inspection of the register of the Trust or
any other books in the possession of the Paying Agent, the Paying Agent will
notify the Trustees and seek to secure instructions as to permitting or refusing
such inspection. The Paying Agent reserves the right, however, to exhibit the
register or other records to any person in case it is advised by its counsel
that its failure to do so would (i) be unlawful, or (ii) expose it to liability,
unless the Trustees shall have offered indemnification satisfactory to the
Paying Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TRUSTEES
The Trustees represent and warrant to the Paying Agent that:
(a) the Trust is a validly existing trust under the laws of
the State of Delaware and the Trustees have full power under the Trust Agreement
to execute and deliver this Agreement and to authorize, create and issue the
TIMES;
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<PAGE>
(b) this Agreement has been duly and validly authorized,
executed and delivered by the Trustees and constitutes the valid and binding
agreement of the Trustees, enforceable against the Trustees in accordance with
its terms, subject as to such enforceability to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equitable principles;
(c) the form of the certificate evidencing the TIMES complies
with all applicable laws of the State of Delaware;
(d) the TIMES have been duly and validly authorized, executed
and delivered by the Trustees and are validly issued;
(e) the offer and sale of the TIMES has been registered under
the Securities Act of 1933 and the Trust has been registered under the
Investment Company Act and no further action by or before any governmental body
or authority of the United States or of any state thereof is required in
connection with the execution and delivery of this Agreement or the issuance of
the TIMES;
(f) the execution and delivery of this Agreement and the
issuance and delivery of the TIMES do not and will not conflict with, violate,
or result in a breach of, the terms, conditions or provisions of, or constitute
a default under, the Trust Agreement, any law or regulation, any order or decree
of any court or public authority having jurisdiction over the Trust, or any
mortgage, indenture, contract, agreement or undertaking to which the Trustees
are a party or by which any of them are bound; and
(g) no taxes are payable upon or in respect of the execution
of this Agreement or the issuance of the TIMES.
ARTICLE V
DUTIES AND RIGHTS
5.1 DUTIES. (a) The Paying Agent is acting solely as agent for
the Trustees hereunder and owes no
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<PAGE>
fiduciary duties to any other Person by reason of this Agreement.
(b) In the absence of bad faith, gross negligence or willful
misfeasance on its part in the performance of its duties hereunder or its
reckless disregard of its duties and obligations hereunder, the Paying Agent
shall not be liable for any action taken, suffered, or omitted in the
performance of its duties under this Agreement or in accordance with any
direction or request of the Managing Trustee not inconsistent with the
provisions of this Agreement. The Paying Agent shall under no circumstances be
liable for any punitive, exemplary, indirect or consequential damages hereunder.
5.2 RIGHTS. (a) The Paying Agent may rely and shall be
protected in acting or refraining from acting upon any communication authorized
hereby and upon any written instruction, notice, request, direction, consent,
report, certificate, share certificate or other instrument, paper or document
reasonably believed by it to be genuine. The Paying Agent shall not be liable
for acting upon any telephone communication authorized hereby which the Paying
Agent believes in good faith to have been given by the Trustees.
(b) The Paying Agent may consult with legal counsel and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Paying Agent shall not be required to advance, expend
or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Paying Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys appointed
with due care by it hereunder.
5.3 DISCLAIMER. The Paying Agent makes no representation as to
(a) the first two recitals of this Agreement or (b) the validity or adequacy of
the TIMES.
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<PAGE>
5.4 COMPENSATION, EXPENSES AND INDEMNIFICATION. (a) The Paying
Agent shall receive for all services rendered by it under this Agreement and,
upon the prior written approval of the Trustees, for all expenses, disbursements
and advances incurred or made by the Paying Agent in accordance with any
provision of this Agreement (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), the compensation set
forth in Section 3.1 of the Administration Agreement.
(b) The Trust shall indemnify the Paying Agent for and hold it
harmless against any loss, liability, claim or expense (including the costs of
investigation, preparation for and defense of legal and/or administrative
proceedings relating to a claim against it and reasonable attorneys' fees and
disbursements) arising out of or in connection with the performance of its
obligations under this Agreement, provided such loss, liability or expense is
not the result of gross negligence, willful misfeasance or bad faith on its part
in the performance of its duties hereunder or its reckless disregard of its
duties or obligations hereunder, including the costs and expenses of defending
itself against any claim or liability in connection with its exercise or
performance of any of its duties or obligations hereunder and thereunder. The
indemnification provided by this Section 5.4(b) shall survive the termination of
this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 TERM OF AGREEMENT. (a) The term of this Agreement is
unlimited unless terminated as provided in this Section 6.1 or unless the Trust
is terminated, in which case this Agreement shall terminate ten days after the
date of termination of the Trust. This Agreement may be terminated by either
party hereto without penalty upon 60 days' prior written notice to the other
party hereto; provided that neither party hereto may terminate this Agreement
pursuant to this Section 6.1(a) unless a successor Paying Agent shall have been
appointed and shall have accepted the duties of the Paying Agent. The
termination of the Trust Agreement, the Collateral Agreement, the Administration
Agreement or the Custodian Agreement
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or the resignation or removal of the Custodian shall cause the termination of
this Agreement simultaneously therewith. If, within 30 days after notice by the
Paying Agent of termination of this Agreement, no successor Paying Agent shall
have been selected and accepted the duties of the Paying Agent, the Paying Agent
may apply to a court of competent jurisdiction for the appointment of a
successor Paying Agent.
(b) Except as otherwise provided in this paragraph (b), the
respective rights and duties of the Trustees and the Paying Agent under this
Agreement shall cease upon termination of this Agreement. The Trustees'
representations, warranties, covenants and obligations to the Paying Agent under
Article IV and Section 5.4 hereof shall survive the termination hereof. Upon
termination of this Agreement, the Paying Agent shall, at the Trustees' request,
promptly deliver to the Trustees or to any successor Paying Agent as requested
by the Trustees (i) copies of all books and records maintained by it and (ii)
any funds deposited with the Paying Agent by the Trustees.
6.2 COMMUNICATIONS. Except for communications authorized to be
made by telephone pursuant to this Agreement, all notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and given to such person at its address or telecopy number set
forth below:
If to the Trust,
addressed: Mandatory Common Exchange Trust
c/o Donald J. Puglisi, Managing Trustee
850 Library Avenue
Newark, Delaware 19715
Telephone:
Telecopier:
with a copy to the Administrator if the duties of the Administrator are being
performed by a Person other than the Person performing the obligations of the
Paying Agent.
If to the Paying Agent,
addressed: The Bank of New York
101 Barclay Street
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New York, New York 10286
Attn: Mark G. Walsh
Telephone: (212) 815-5228
Telecopier: (212) 815-7157
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Trust by the Trustees (or by the
Administrator, provided that the Trustees shall not have delivered to the Paying
Agent an instrument in writing revoking the authorization of the Administrator
to act for it pursuant hereto) and on behalf of the Paying Agent by a Senior
Vice President or Vice President of the Paying Agent assigned to its Corporate
Trust Department.
6.3 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof, and there
are no other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to the
subject matter hereof.
6.4 NO THIRD PARTY BENEFICIARIES. Nothing herein, express or
implied, shall give to any Person, other than the Trustees, the Paying Agent and
their respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim hereunder.
6.5 AMENDMENT; WAIVER. (a) This Agreement shall not be deemed
or construed to be modified, amended, rescinded, cancelled or waived, in whole
or in part, except by a written instrument signed by a duly authorized
representative of the party to be charged. The Trustees shall notify the Paying
Agent of any change in the Trust Agreement prior to the effective date of any
such change.
(b) Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
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6.6 SUCCESSORS AND ASSIGNS. Any corporation into which the
Paying Agent may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Paying Agent shall be a party, shall be the successor Paying Agent hereunder
and under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, provided
that such corporation meets the requirements set forth in the Trust Agreement,
provided further that the Trustees have given their prior written consent to the
Paying Agent with respect to any such merger, conversion or consolidation. This
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the respective successors of each of the Trust and the Paying Agent. This
Agreement shall not be assignable by either the Trustees or the Paying Agent,
without the prior written consent of the other party.
6.7 SEVERABILITY. If any clause, provision or section hereof
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any of the remaining clauses, provisions or sections hereof.
6.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
6.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
TRUSTEES
-----------------------------,
as Trustee
-----------------------------,
as Trustee
-----------------------------,
as Trustee
THE BANK OF NEW YORK
By: __________________________
Name:
Title:
Exhibit 2.k.(iii)
PURCHASE AGREEMENT
THIS AGREEMENT is made as of this _____ day of September, 1997
between Banc One Capital Holdings Corporation, an Ohio corporation ("Seller"),
and Mandatory Common Exchange Trust (such trust and the trustees thereof acting
in their capacity as such being referred to herein as the "Trust" or
"Purchaser").
WHEREAS, Seller owns shares of voting common stock, $.01 par
value per share (the "Voting Common Stock"), of FIRSTPLUS Financial Group, Inc.,
a Nevada corporation (the "Company")and nonvoting common stock, $.01 par value
per share ("Nonvoting Common"), of the Company;
WHEREAS, Purchaser has filed with the Securities and Exchange
Commission a registration statement contemplating the offering of up to
_________ Trust Issued Mandatory Exchange Securities (the "TIMES"), the terms of
which contemplate delivery by Purchaser to the holders thereof of a number of
shares (the "Shares") of Voting Common Stock (or, at the option of the Seller,
the equivalent in cash equal to the Reference Market Price), on [DATE] (the
"Exchange Date");
WHEREAS, Seller has agreed, pursuant to the Collateral
Agreement (the "Collateral Agreement") dated as of September , 1997, among
Purchaser, Seller and The Bank of New York, as collateral agent (the "Collateral
Agent"), to grant Purchaser a security interest in a specified amount of U.S.
Treasury securities and/or shares of Voting Common Stock and/or Nonvoting Common
and in certain other circumstances certain other collateral to secure the
obligations of the Seller hereunder;
WHEREAS, Purchaser has agreed, pursuant to an underwriting
agreement, dated September ____, 1997 (the "Underwriting Agreement"), among
Purchaser, Seller, Bear, Stearns & Co. Inc. and Salomon Brothers Inc, on behalf
of the other several underwriters named therein (the "Underwriters"), to issue
and sell to the Underwriters an aggregate of _________ TIMES ("the Initial
TIMES") and, at the Underwriters' option, all or any part of _________
additional TIMES (the "Additional TIMES") to cover overallotments;
<PAGE>
NOW, THEREFORE, in consideration of their mutual covenants
herein contained, the parties hereto, intending to be legally bound, hereby
mutually covenant and agree as follows:
DEFINITIONS
As used herein, the following words and phrases shall have the
following meanings:
"Acceleration Amount" has the meaning provided in Article VII.
"Acceleration Amount Notice" has the meaning provided in
Article VII.
"Acceleration Date" has the meaning provided in Article VII.
"Acceleration Value" has the meaning provided in Article VII.
"Additional Purchase Price" has the meaning provided in
Section 1.2(b).
"Additional Share Base Amount" means the number of Additional
TIMES that the Underwriters shall elect to purchase under the Underwriting
Agreement.
"Additional Shares" has the meaning provided in Section
1.1(b).
"Additional STRIPS" means the U.S. Treasury obligations
purchased by Purchaser for settlement on the Option Closing Date.
"Administrator" means the Bank of New York, administrator for
Purchaser under the Administration Agreement dated as of September , 1997, or
any successor thereto.
"Aggregate Acceleration Value" has the meaning provided in
Article VII.
"Business Day" means: (i) as used in Article VI, any day on
which commercial banks are open for business in New York City and (ii) as used
in Article VII, any day on which commercial banks are open for business in New
York City and the New York Stock Exchange is not closed.
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"Calculation Period" means any period of Trading Days for
which an average security price must be determined pursuant to this Agreement.
"Cash Settlement Alternative" has the meaning provided in
Section 1.3(d).
"Closing Price" means, for any security on any Trading Day,
(i) the last reported executed trade price (regular way) of such security on the
principal trading market for such security on such date; (ii) if no regular way
executed trade price for such security is reported on the principal trading
market for such security on such date, the average of the closing bid and
offered prices for such security as reported by the principal trading market for
such security on such date; (iii) if no regular way executed traded price or
closing bid and offered prices for such security are reported on the principal
trading market for such security on such date, the Closing Price (as determined
in accordance with clauses (i) or (ii)) for the next succeeding Trading Day (if
any) within the relevant Calculation Period on which the Closing Price may be so
determined; or (iv) if such security is no longer listed or admitted to trading
on any exchange or in the over-the-counter market, the average of the closing
bid and offered prices for such day as furnished by a member firm of the most
recent principal trading market for such security. The Closing Price shall be
subject to adjustment in certain events as provided in Section 6.1(e).
"Contract Shares" has the meaning provided in Section 1.1(b).
"Custodian" means The Bank of New York, custodian for
Purchaser under the Custodian Agreement dated as of September ___, 1997, or any
successor thereto.
"Dilution Adjustment" means any fraction or number by which
the Exchange Rate shall be multiplied pursuant to Section 6.1(a), (b), (c) or
(d).
"Event of Default" has the meaning provided in Article VII.
"Excess Purchase Payment" has the meaning provided in Section
6.1(d).
"Exchange Date" has the meaning provided in Section 1.3(c).
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"Exchange Rate" has the meaning provided in Section 1.1(c).
"Firm Share Base Amount" has the meaning provided in Section
1.1(a).
"Firm Shares" has the meaning provided in Section 1.1(a).
"Firm Payment Date" has the meaning provided in Section
1.3(a).
"Firm Purchase Price" has the meaning provided in Section
1.2(a).
"Floor Price" has the meaning provided in Section 1.1(c).
"Independent Dealer" has the meaning provided in Article VII.
"Initial Value" has the meaning provided in Section 1.1(c).
"Marketable Securities" has the meaning provided in Section
6.2.
"Option Closing Date" has the meaning provided in Article IV
of the Underwriting Agreement.
"Permitted Dividend" has the meaning provided in Section
6.1(d).
"Purchase Price" means the sum of the Firm Purchase Price and
the Additional Purchase Price (if any).
"Reference Market Price" means the average Closing Price per
share of the Common Stock for a Calculation Period of 20 Trading Days
immediately prior to (but not including) the Exchange Date, provided that if no
Closing Price may be determined for one or more (but not all) of such Trading
Days, such Trading Day shall be disregarded in the calculation of the Reference
Market Price (but no additional Trading Day shall be added to the Calculation
Period). If no Closing Price may be determined for any of such Trading Days, the
Reference Market Price shall be the Closing Price per share of the Common Stock
for the most recent
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Trading Day prior to such 20 Trading Days for which a Closing Price for the
Common Stock may be determined.
"Reorganization Event" has the meaning provided in Section
6.2.
"Then-Reference Market Price" of the Common Stock, for the
purpose of applying any adjustment pursuant to Section 6.1, means the average
Closing Price per share of the Common Stock for the Calculation Period of five
Trading Days immediately prior to the time such adjustment is effected (or, in
the case of an adjustment effected on the Business Day next following a record
date as described in Section 6.1(f)(i), immediately prior to the earlier of the
time such adjustment is effected and the related ex-date); provided that if no
Closing Price for the Common Stock may be 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 may be determined for any of such Trading Days, the Then-Reference Market
Price shall be the Closing Price for the Common Stock for the most recent
Trading Day prior to such five Trading Days for which a Closing Price for the
Common Stock may be determined. The "ex-date" with respect to any dividend,
distribution or issuance shall mean the first date on which the shares of Common
Stock trade regular way on their principal market without the right to receive
such dividend, distribution or issuance.
"Threshold Appreciation Price" has the meaning provided in
Section 1.1(c).
"Trading Day" means, with respect to any security, a day on
which the principal trading market for such security is open for trading or
quotation.
"Transaction Value" has the meaning provided in Section 6.2.
"Trust Agreement" means the Declaration of Trust of the
Mandatory Common Exchange Trust dated as of September , 1997.
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I.
SALE AND PURCHASE
1.1 Sale and Purchase. (a) Firm Shares. Upon the terms and
subject to the conditions of this Agreement, Seller agrees to sell to Purchaser,
and Purchaser agrees to purchase and acquire from Seller, the number of Shares
(the "Firm Shares") equal to the product of _________ (the "Firm Share Base
Amount") and the Exchange Rate.
(b) Additional Shares. Upon the terms and
subject to the conditions of this Agreement, Seller agrees to sell to Purchaser,
and Purchaser shall have a right to purchase, a number of additional Shares (the
"Additional Shares") equal to the product of the Exchange Rate and the
Additional Share Base Amount. If the Underwriters exercise their option to
purchase Additional TIMES pursuant to the Underwriting Agreement, Purchaser
shall notify Seller in writing that Purchaser will purchase the Additional
Shares, which notice shall specify the Additional Share Base Amount and the date
on which Purchaser shall deliver the purchase price for the Additional Shares,
which shall be the Option Closing Date. The Firm Shares and the Additional
Shares (if any) are collectively referred to herein as the "Contract Shares".
(c) Exchange Rate. The "Exchange Rate" shall be
determined in accordance with the following formula, subject to adjustment as a
result of certain events relating to the Common Stock or the Shares as provided
in Article VI: (i) if the Reference Market Price is less than $_____ (the
"Threshold Appreciation Price") but equal to or greater than $_____ (the "Floor
Price"), a number or fractional number (rounded upward or downward to the
nearest 1/10,000th or, if there is not a nearest 1/10,000th, to the next lower
1/10,000th) equal to $_____ (the "Initial Value") divided by the Reference
Market Price, (ii) if the Reference Market Price is equal to or greater than the
Threshold Appreciation Price, 0.x and (iii) if the Reference Market Price is
less than the Floor Price, 1.xx.
1.2 Purchase Price. (a) Firm Purchase Price. The purchase
price for the Firm Shares (the "Firm Purchase Price") shall be $_________ in
cash.
(b) Additional Purchase Price. The purchase price for
the Additional Shares (the "Additional Purchase Price") shall be the difference
between: (i) the aggregate proceeds to
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Purchaser from the sale of the Additional TIMES; and (ii) the aggregate cost to
Purchaser, as notified by Purchaser to Seller on the Option Closing Date, of the
Additional STRIPS.
1.3 Payment for and Delivery of Contract Shares. (a) Firm
Payment Date. Upon the terms and subject to the conditions of this Agreement,
Purchaser shall deliver to Seller the Firm Purchase Price on September , 1997
(the "Firm Payment Date") at the offices of Skadden, Arps, Slate, Meagher & Flom
LLP, 919 Third Avenue, New York, New York 10022, or at such other place as shall
be agreed upon by Purchaser and Seller, paid by certified or official bank check
or checks duly endorsed to, or payable to the order of, Seller, or by wire
transfer to an account designated by Seller, in New York Clearing House Funds.
(b) Option Closing Date. Upon the terms and
subject to the conditions of this Agreement, Purchaser shall deliver to Seller
the Additional Purchase Price on the Option Closing Date at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York
10022, or at such other place as shall be agreed upon by Purchaser and Seller,
paid by certified or official bank check or checks duly endorsed to, or payable
to the order of, Seller, or wire transfer to an account designated by Seller, in
New York Clearing House Funds.
(c) Delivery of Contract Shares. On ,
200 (the "Exchange Date"), Seller agrees to deliver the Contract Shares to
Purchaser. Delivery shall be effected by delivery by the Collateral Agent to the
Custodian, for the account of Purchaser, of shares of Common Stock then held by
the Collateral Agent as collateral under the Collateral Agreement, in an amount
representing a number of shares equal to the number of Contract Shares, rounded
down to the nearest whole number. Instead of any fractional share that would
otherwise be deliverable to Purchaser at the Exchange Date, Seller agrees to
make a cash payment in respect of such fractional share in an amount equal to
the value thereof at the Reference Market Price. Notwithstanding the foregoing,
if a Reorganization Event shall have occurred prior to the Exchange Date then,
in lieu of the foregoing, delivery shall be effected as follows: (i) in the case
of any cash required to be delivered on the Exchange Date as provided in Section
6.2, by wire transfer of immediately available funds to an account designated by
Purchaser; or (ii) in the case of any shares of Marketable Securities elected by
Seller to be delivered in lieu of cash as provided in Section 6.2, at Seller's
election, by instruction to the Collateral Agent to deliver to the Custodian,
for the account of Purchaser, a specified number of shares of
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Marketable Securities then held as collateral under the Collateral Agreement, as
provided in Section 6(g) of the Collateral Agreement.
(d) Cash Settlement Alternative. At its option,
Seller may deliver to Purchaser on the Exchange Date, in lieu of the Contract
Shares, an amount in cash equal to the Reference Market Price of the Contract
Shares (the "Cash Settlement Alternative"), paid by wire transfer to an account
designated by Custodian, in New York Clearing House funds. Seller may elect the
Cash Settlement Alternative in respect of all, but not less than all, Contract
Shares by notice to Purchaser, the Collateral Agent and the Custodian not less
than 20 trading days immediately prior to (but not including) the Exchange Date.
II.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that each
representation and warranty made by Seller pursuant to Section 2 of the
Underwriting Agreement is true and correct on the date hereof.
III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
(a) Purchaser has been duly created and is validly
existing as a statutory business trust under the laws of the State of Delaware.
(b) This Agreement has been duly authorized,
executed and delivered by Purchaser and, assuming due authorization, execution
and delivery by Seller, is a legal, valid and binding agreement of Purchaser,
enforceable against Purchaser in accordance with its terms except as (i) such
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
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(c) The execution and delivery by Purchaser of,
and the performance by Purchaser of its obligations under, this Agreement will
not contravene any provision of applicable law or the Trust Agreement or any
agreement or other instrument binding upon Purchaser or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
Purchaser, whether foreign or domestic, and no consent, approval, authorization,
order of, or qualification with, any governmental body or agency,
self-regulatory organization or court or other tribunal, whether foreign or
domestic.
IV.
CONDITIONS TO PURCHASER'S OBLIGATIONS
(a) The obligation of Purchaser to deliver the
Purchase Price on the Firm Payment Date is subject to the satisfaction of the
following conditions:
(i) the purchase by the Underwriters of the Initial
TIMES pursuant to the Underwriting Agreement shall have been
consummated as contemplated therein; and
(ii) the representations and warranties of Seller
contained in Article III hereof shall be true and correct as of the
Firm Payment Date.
(b) The obligation of Purchaser to deliver the
Additional Purchase Price on the Option Closing Date is subject to the condition
that the purchase by the Underwriters of the Additional TIMES pursuant to the
Underwriting Agreement shall have been consummated as contemplated therein.
V.
COVENANTS
5.1 Taxes. Seller shall pay any and all documentary, stamp,
transfer or similar taxes and charges that may be payable in respect of the
entry into this Agreement and the transfer and delivery of the Contract Shares
pursuant hereto.
5.2 Forward Contract. Seller hereby agrees that:
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(i) it will not treat this Agreement, any portion of this Agreement, or any
obligation hereunder as giving rise to any interest income or other inclusions
of ordinary income; (ii) it will not treat the delivery of any portion of the
Contract Shares, cash or Marketable Securities to be delivered pursuant to this
Agreement as the payment of interest or ordinary income; (iii) it will treat
this Agreement in its entirety as a forward contract for the delivery of such
Contract Shares, cash or Marketable Securities; and (iv) it will not take any
action (including filing any tax return or form or taking any position in any
tax proceeding) that is inconsistent with the obligations contained in (i)
through (iii). Notwithstanding the preceding sentence, Seller may take any
action or position required by law, provided that Seller delivers to Purchaser
an unqualified opinion of counsel, nationally recognized as expert in Federal
tax matters, to the effect that such action or position is required by a
statutory change, Treasury regulation, or applicable court decision published
after the date of this Agreement.
5.3 Limitations on Trading During Certain Days. Seller hereby
agrees that it will not buy shares of Common Stock for its own account during
the 60 days prior to the Exchange Date; provided, however, that if any
adjustment is made to the Exchange Rate pursuant to Section 6.1(c) or (d) during
the 65 days prior to the Exchange Date the Seller may buy a maximum number of
shares of Common Stock equal to the increase in the number of Contract Shares
deliverable by the Seller on the Exchange Date solely as a result of such
adjustment; provided, further, that in no event may the Seller buy shares of
Common Stock for its own account on and after the date on which the Seller has
elected the Cash Settlement Alternative.
5.4 Notices. Seller will cause to be delivered to
Purchaser:
(a) Promptly upon the occurrence of any Event of
Default hereunder or under the Collateral Agreement, or upon Seller obtaining
knowledge that any of the conditions or events described in paragraph (a) or (b)
of Article VII shall have occurred with respect to the Company, notice of such
occurrence; and
(b) In case at any time prior to the Exchange
Date Seller receives notice, or obtains knowledge, that any event requiring that
an adjustment be effected pursuant to Article VI hereof shall have occurred or
be pending, then Seller shall promptly cause to be delivered to Purchaser a
notice identifying
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such event and stating, if known to Seller, the date on which such event is to
occur and, if applicable, the record date relating to such event. Seller shall
cause further notices to be delivered to Purchaser if Seller subsequently
receives notice, or obtains knowledge, of any further or revised information
regarding the terms or timing of such event or any record date relating thereto.
5.5 Further Assurances. From time to time on and after the
date hereof through the Exchange Date, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper and advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement in accordance with the terms and conditions hereof, including (i)
using reasonable best efforts to remove any legal impediment to the consummation
of such transactions and (ii) the execution and delivery of all such deeds,
agreements, assignments and further instruments of transfer and conveyance
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement in accordance with the terms and conditions
hereof.
VI.
ADJUSTMENT OF EXCHANGE RATE, THRESHOLD PRICES,
INITIAL VALUE AND CLOSING PRICE
6.1 Dilution Adjustments. The Exchange Rate, Threshold
Appreciation Price, Floor Price and the Initial Value shall be subject to
adjustment from time to time as follows:
(a) Stock Dividends, Splits, Reclassifications,
Etc. If the Company shall, after the date hereof,
(i) pay a stock dividend or make a distribution
with respect to Common Stock in shares of such stock;
(ii) subdivide or split the outstanding shares of
Common Stock into a greater number of shares of Common Stock;
(iii) combine the outstanding shares of Common Stock
into a smaller number of shares of Common Stock; or
(iv) issue by reclassification of shares of Common
Stock any shares of common stock of the Company;
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then, in each such case, the Exchange Rate shall be multiplied by a Dilution
Adjustment equal to the number of shares of common stock (or the fraction
thereof) that a holder who held one share of Common Stock immediately prior to
such event would be entitled solely by reason of such event to hold immediately
after such event. Upon any such adjustment the Threshold Appreciation Price,
Floor Price and Initial Value shall also be adjusted in the manner described in
Section 6.1(e).
(b) Right or Warrant Issuances. If the Company shall, after
the date hereof, issue, or declare a record date in respect of an issuance of,
rights or warrants to all holders of Common Stock entitling them to subscribe
for or purchase shares of Common Stock (other than rights to purchase Common
Stock pursuant to a plan for the reinvestment of dividends or interest) at a
price per share less than the Then-Reference Market Price of the Common Stock,
then, in each such case, the Exchange Rate shall be multiplied by the following
Dilution Adjustment: a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the time the adjustment
is effected, plus the number of additional shares of Common Stock offered for
subscription or purchase pursuant to such rights or warrants, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately prior to the time as of which the adjustment is effected plus the
number of additional shares of Common Stock which the aggregate offering price
of the total number of shares of Common Stock so offered for subscription or
purchase pursuant to such rights or warrants would purchase at the
Then-Reference Market Price of the Common Stock, which shall be determined by
multiplying the total number of shares so offered for subscription or purchase
by the exercise price of such rights or warrants and dividing the product so
obtained by such Then-Reference Market Price. To the extent that shares of
Common Stock are not delivered in connection with exercises of such rights or
warrants, the Exchange Rate shall be readjusted to the Exchange Rate which would
then be in effect had such adjustments for the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock actually delivered. Upon any such adjustment the Threshold
Appreciation Price, Floor Price and Initial Value shall also be adjusted in the
manner described in Section 6.1(e).
(c) Distributions of Other Assets. If the
Company shall, after the date hereof, declare or pay a dividend or distribution
to all holders of Common Stock, in either case, of evidences of its indebtedness
or other non-cash assets (excluding any dividends or distributions referred to
in Section
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6.1(a) above) or shall issue to all holders of Common Stock rights or warrants
to subscribe for or purchase any of its securities (other than rights or
warrants referred to in Section 6.1(b) above) or other assets or the value of
which (such as in the case of contingent value rights) is calculated by
reference to changes in the value of the Common Stock or any other reference,
then, in each such case, the Exchange Rate shall be multiplied by the following
Dilution Adjustment: 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 fair market value (as
determined by a nationally recognized independent investment banking firm
retained for this purpose by Purchaser) as of the time the adjustment is
effected of the portion of the assets or evidences of indebtedness so
distributed or of such subscription rights or warrants or other assets or amount
of value applicable to one share of Common Stock. Upon any such adjustment the
Threshold Appreciation Price, Floor Price and Initial Value shall also be
adjusted in the manner described in Section 6.1(e).
(d) Cash Dividends; Excess Purchase Payments.
If, after the date hereof, the Company distributes or declares a record date in
respect of a distribution of cash (other than any Permitted Dividend, any cash
distributed in consideration of fractional shares of Common Stock and any cash
distributed in a Reorganization Event), by dividend or otherwise, to all holders
of Common Stock, or 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, (A) "Permitted Dividend" means
any cash dividend in respect of the Common Stock, other than a cash dividend
that, together with any other cash dividends during the preceding 12 months,
exceeds 10% of the average of the Closing Prices during such 12-month period and
(B) "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 Purchaser) 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
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<PAGE>
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
[$_____] in aggregate consideration in respect of share repurchases without any
adjustment pursuant to this Section 6.1(d) being required, provided that no such
repurchase involves an Excess Purchase Payment of more than five percent of the
Then-Reference Market Price of the Common Stock on the date an adjustment
therefor would otherwise be required to be effected. Upon any such adjustment
the Threshold Appreciation Price, Floor Price and Initial Value shall also be
adjusted in the manner described in Section 6.1(e).
(e) Corresponding Adjustments to Initial Value,
Threshold Appreciation Price, Floor Price and Closing Price.
(i) If any adjustment is made to the Exchange Rate
pursuant to Section 6.1 (a), (b), (c) or (d), an adjustment shall also
be made to the Threshold Appreciation Price, the Floor Price and the
Initial Value. The required adjustment shall be made by dividing each
of the Threshold Appreciation Price, the Floor Price and the Initial
Value by the relevant Dilution Adjustment.
(ii) If, during any Calculation Period used in
calculating the Reference Market Price, the Then-Reference Market Price
or the Transaction Value, there shall occur any event requiring an
adjustment to be effected pursuant to this Section 6.1, then the
Closing Price for each Trading Day in the Calculation Period occurring
prior to the day on which such adjustment is effected shall be adjusted
by being divided by the relevant Dilution Adjustment.
(iii) Appropriate adjustment shall also be made if
any event of the type referred to above occurs with respect to the
Nonvoting Common which has an effect on the proportion of the net
assets of the Company allocable to the Voting Common Stock.
(f) Timing of Dilution Adjustments. Each Dilution
Adjustment required hereunder shall be effected:
(i) in the case of any dividend, distribution or
issuance, at the opening of business on the Business Day next following
the record date or determination of holders
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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, 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.
(g) General; Failure of Dilution Event to Occur.
All Dilution Adjustments shall be rounded upward or downward to the nearest
1/10,000th or if there is not a nearest 1/10,000th to the next lower
1/10,000th). No adjustment in the Exchange Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason of this
sentence are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. If any announcement or declaration of a
record date in respect of a dividend, distribution, issuance or repurchase
requiring an adjustment pursuant to this Section 6.1 shall subsequently be
cancelled by the Company, or such dividend, distribution, issuance or repurchase
shall fail to receive requisite approvals or shall fail to occur for any other
reason, then, upon such cancellation, failure of approval or failure to occur,
the Exchange Rate shall be readjusted to the Exchange Rate which would then have
been in effect had adjustment for such event not been made. If a Reorganization
Event shall occur after the occurrence of one or more events requiring an
adjustment pursuant to this Section 6.1, the Dilution Adjustments previously
applied to the Exchange Rate in respect of such events shall not be rescinded
but shall be applied to the new Exchange Rate provided for under Section 6.2.
6.2 Adjustment for Consolidation, Merger or Other
Reorganization Event. In the event of (i) any dividend or distribution by the
Company to all holders of Common Stock of
15
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evidences of its indebtedness or other assets (excluding (i) dividends or
distributions referred to in Section 6.1(a)(i), shares issued in a
reclassification referred to in Section 6.1(a)(iv) and Permitted Dividends),
(ii) any consolidation or merger of the Company, or any surviving entity or
subsequent surviving entity of the Company (a "Company Successor"), 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 or any
Company Successor as an entirety or substantially as an entirety, (iv) any
statutory exchange of securities of the Company or any Company Successor with
another entity (other than in connection with a merger or acquisition) or (v)
any liquidation, dissolution or winding up of the Company or any Company
Successor (any such event described in clause (i), (ii), (iii), (iv) or (v), a
"Reorganization Event"), the Exchange Rate shall be adjusted so that on the
Exchange Date Purchaser shall receive, in lieu of, or (in the case of an
Adjustment Event described in this Section 6.2(i)) in addition to, the Contract
Shares, cash in an amount equal to the product of (x) the Firm Share Base Amount
plus the Additional Share Base Amount (if any) and (y)(i) if the Reference
Market Price is greater than or equal to the Threshold Appreciation Price, o.xx
multiplied by the Transaction Value, (ii) 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 (A) the Floor Price divided by the Reference Market Price
multiplied by (B) the Transaction Value and (iii) 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 herein, shall be deemed
to equal (A) the Reference Market Price of the Common Stock, as adjusted
pursuant to Section 6.1(e); plus (B) the Transaction Value. Notwithstanding the
foregoing, if any Marketable Securities are received in such Reorganization
Event, Seller may, at its option, in lieu of delivering cash as described above,
deliver an equivalent amount (based on the value determined in accordance with
clause (z) of the following paragraph) of Marketable Securities, but not
exceeding, as a percentage of the total consideration required to be delivered,
the percentage of the total Transaction Value attributable to such Marketable
Securities; 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
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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: (x) for any cash
received in any such Reorganization Event, the amount of cash received per share
of Common Stock; (y) for any property other than cash or Marketable Securities
received in any such Reorganization Event, an amount equal to the market value
on the date the Reorganization 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 Purchaser; and (z) for any
Marketable Securities received in any such Reorganization Event, an amount equal
to the average Closing Price per share of such Marketable Securities for the
Calculation Period of 20 Trading Days immediately prior to the Exchange Date
multiplied by the number of such shares received for each share of Common Stock;
provided that if no Closing Price for such Marketable Securities may be
determined for one or more (but not all) of such Trading Days, such Trading Day
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 may be determined for all such Trading Days,
the calculation in the preceding clause (z) shall be based on the most recently
available Closing Price for the Marketable Securities prior to such 20 Trading
Days.
17
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"Marketable Securities" means any securities 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.
The number of shares of any Marketable Securities included in the calculation of
Transaction Value pursuant to the clause (z) of the preceding paragraph, and the
Threshold Appreciation Price, Floor Price and Initial Value, shall be subject to
adjustment if any event that would, had it occurred with respect to the Common
Stock or the Company, have required an adjustment pursuant to Section 6.1, shall
occur with respect to such Marketable Securities or the issuer thereof
subsequent to the date the Reorganization Event is consummated. Adjustment for
such subsequent events shall be as nearly equivalent as practicable to the
adjustments provided for in Section 6.1.
VII.
ACCELERATION
If one or more of the following events (each an "Event of
Default") shall occur:
(a) Seller shall commence a voluntary case or
other proceeding seeking a liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall take any corporate action to
authorize any of the foregoing;
(b) an involuntary case or other proceeding shall
be commenced against Seller seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator,
18
<PAGE>
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 60 days; or an order for relief shall be entered
against Seller under the federal bankruptcy laws as now or hereafter in effect;
or
(c) a Collateral Event of Default within the
meaning of the Collateral Agreement;
then, upon the occurrence of any such event, an Acceleration Date shall occur,
and Seller shall become obligated to deliver immediately upon receipt of the
Acceleration Amount Notice, the Acceleration Amount. The "Acceleration Amount"
means that number of shares of Common Stock determined by dividing: (i) the
Aggregate Acceleration Value by (ii) the Closing Price on the Acceleration Date.
If a Reorganization Event shall have occurred on or before the Acceleration
Date, then in lieu of the Acceleration Amount, Seller shall deliver cash,
Marketable Securities or a combination thereof, as the case may be, having an
aggregate value, based on the Closing Price per share of the Marketable
Securities on the Acceleration Date, equal to the Aggregate Acceleration Value;
provided that the percentage of such aggregate value that may be delivered in
the form of Marketable Securities shall not exceed the percentage of the
Transaction Value that would be attributable to Marketable Securities if the
Exchange Date were the Acceleration Date.
The "Aggregate Acceleration Value" means the product obtained
by multiplying (i) the Acceleration Value (as defined below) by (ii) the
quotient obtained by dividing (A) the sum of the Firm Share Base Amount and the
Additional Share Base Amount (if any) by (B) 1,000; except that, if no
quotations for the determination of the Acceleration Value are obtained as
described below, the Aggregate Acceleration Value shall be the Closing Price on
the Acceleration Date times the number of shares of Common Stock that would be
required to be delivered by Seller on such date under this Agreement if the
Exchange Date were the Acceleration Date.
The "Acceleration Value" means an amount determined on the
basis of quotations from up to four Independent Dealers, as defined below. Each
quotation will be for the amount that would be paid to the relevant Independent
Dealer in consideration of an agreement between Purchaser and such Independent
Dealer that would have the effect of preserving for Purchaser the economic
equivalent of the payments and deliveries that Purchaser would,
19
<PAGE>
but for the occurrence of the Acceleration Date, have been entitled to receive
after the Acceleration Date under Article I hereof (taking into account any
adjustments to the Exchange Rate that may have been effected on or prior to the
Acceleration Date) provided that, for purposes of determining the payments and
deliveries to which Purchaser is entitled under Article I hereto, the Additional
Share Base Amount shall be redefined to be zero and the Firm Share Base Amount
shall be redefined to be 1,000. On or as soon as reasonably practicable
following the date on which Purchaser receives notice, or obtains knowledge of,
such Acceleration Date, Purchaser will request each Independent Dealer to
provide its quotation as soon as reasonably practicable, but in any event within
two Business Days. Purchaser shall compute Acceleration Value upon receipt of
each Independent Dealer's quotation, provided that if, at the close of business
on the fourth Business Day following the date on which Purchaser receives
notice, or obtains knowledge of, such Acceleration Date, Purchaser shall have
received quotations from fewer than four of the Independent Dealers, Purchaser
shall compute the Acceleration Value using the quotations, if any, it shall have
received at or prior to such time. If four quotations are provided, the
Acceleration Value will be the arithmetic mean of the two quotations remaining
after disregarding the highest and lowest quotations. (For this purpose, if more
than one quotation has the same highest or lowest value, then one of such
quotations shall be disregarded.) If two or three quotations are provided, the
Acceleration Value will be the arithmetic mean of such quotations. If one
quotation is provided, the Acceleration Value will be equal to such quotation.
If no quotations are provided, the Acceleration Value will not be determined and
the Aggregate Acceleration Value will be determined as provided above.
"Independent Dealer" means a nationally recognized independent
investment banking firm selected in good faith by Purchaser.
As promptly as reasonably practicable after receipt of the
quotations on which the Acceleration Value is based (or, as the case may be,
after failure to receive any such quotations within the time period prescribed
above, Purchaser shall deliver to Seller a notice (the "Acceleration Amount
Notice") specifying the Acceleration Amount of Shares required to be delivered
by Seller.
Purchaser and Seller agree that the Aggregate Acceleration
Value is a reasonable pre-estimate of loss and not a penalty. Such amount is
payable for the loss of bargain and
20
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Purchaser will not be entitled to recover additional damage as a consequence of
loss resulting from an Event of Default.
VIII.
MISCELLANEOUS
8.1 Adjustments of Exchange Rate; Selection of Independent
Investment Banking Firm. Purchaser shall be responsible for the effectuation and
calculation of any adjustment pursuant to Article VI hereof and shall furnish
Seller notice of any such adjustment and shall provide Seller reasonable
opportunity to review the calculations pertaining to any such adjustment. If,
pursuant to the terms and conditions hereof, Purchaser shall be required to
retain a nationally recognized independent investment banking firm for any
purpose provided herein, such nationally recognized independent investment
banking firm shall be selected and retained by Purchaser only after consultation
with Seller. Purchaser may delegate the selection of any such firm, or the
effectuation and calculation of any such adjustments, to the Administrator.
8.2 Notices. Any notice provided for herein, unless otherwise
specified, shall be in writing (including transmittal by telex or telecopier)
and shall be given to a party at the address set forth opposite such party's
name on the signature pages hereto or at such other address as may be designated
by notice duly given in accordance with this Section 8.2 to each other party
hereto.
8.3 Governing Law; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
To the extent permitted by law, the unenforceability or invalidity of any
provision or provisions of this Agreement shall not render any other provision
or provisions herein contained unenforceable or invalid.
8.4 Entire Agreement. Except as expressly set forth herein,
this Agreement constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior agreements, understandings
and negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
8.5 Amendments; Waivers. Any provision of this Agreement may
be amended or waived if, and only if, such amendment
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<PAGE>
or waiver is in writing and signed, in the case of an amendment, by
Purchaser and Seller or, in the case of a waiver, by the party against whom the
waiver is to be effective. No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
8.6 No Third Party Rights; Successors and Assigns. This
Agreement is not intended and shall not be construed to create any rights in any
person other than Seller and Purchaser and their respective successors and
assigns and no person shall assert any rights as third party beneficiary
hereunder. Whenever any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party. All the
covenants and agreements herein contained by or on behalf of Seller and
Purchaser shall bind, and inure to the benefit of, their respective successors
and assigns whether so expressed or not, and shall be enforceable by and inure
to the benefit of Purchaser and its successors and assigns.
8.7 Counterparts. This Agreement may be executed acknowledged
and delivered in any number of counterparts, and such counterparts taken
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have signed this Agreement as
of the date and year first above written.
SELLER:
Banc One Capital Holdings
Corporation
By ______________________________
Address for Notices:
_________________________________
_________________________________
_________________________________
_________________________________
Attention:_______________________
PURCHASER:
Mandatory Common Exchange Trust
_________________________________
as Trustee
Address for Notices:
_________________________________
_________________________________
_________________________________
_________________________________
Attention:_______________________
23
Exhibit 2.k.(iv)
================================================================================
Draft
COLLATERAL AGREEMENT
Among
Banc One Capital Holdings Corporation, As Pledgor,
The Bank of New York, As Collateral Agent
and
MANDATORY COMMON EXCHANGE TRUST
Dated as of
_____________, 1997
================================================================================
<PAGE>
The following Table of Contents has been inserted for
convenience of reference only and does not constitute a part of the Collateral
Agreement.
TABLE OF CONTENTS
SECTION PAGE
1. The Security Interests............................................1
2. Definitions.......................................................2
3. Representations and Warranties of the Pledgor.....................7
4. Representations and Warranties of the
Collateral Agent..................................................8
5. Certain Covenants of the Pledgor..................................8
6. Administration of the Collateral and Valuation
of the Securities................................................10
7. Income and Voting Rights on Collateral...........................16
8. Remedies upon Events of Default..................................17
9. The Collateral Agent.............................................21
10. Miscellaneous....................................................24
11. Termination of Collateral Agreement..............................26
12. No Personal Liability of Trustees................................26
Exhibit A - Certificate for Substituted Collateral
Exhibit B - Certificate for Additional Collateral
ii
<PAGE>
COLLATERAL AGREEMENT
THIS COLLATERAL AGREEMENT (the "Agreement"), dated as of
September ___, 1997, among Banc One Capital Holdings Corporation, an Ohio
corporation, ("Pledgor"), The Bank of New York, a New York banking corporation,
as collateral agent (the "Collateral Agent") hereunder for the benefit of
Mandatory Common Exchange Trust, a trust duly created under the laws of the
State of Delaware (such trust and the trustees thereof acting in their capacity
as such being referred to herein as the "Trust" or "Purchaser"), and the Trust;
W I T N E S S E T H :
WHEREAS, pursuant to the Purchase Agreement (the "Purchase
Agreement"), dated as of September ___, 1997, between the Pledgor and Purchaser,
the Pledgor has agreed to sell and Purchaser has agreed to purchase voting
common stock, $.01 par value per share (the "Common Stock"), of FIRSTPLUS
Financial Group, Inc., a Nevada corporation (the "Company"), subject to the
terms and conditions of the Purchase Agreement; and
NOW, THEREFORE, to secure the performance by the Pledgor of
its obligations under the Purchase Agreement and to secure the observance and
performance of the covenants and agreements contained herein and in the Purchase
Agreement, the parties hereto agree as follows:
1. THE SECURITY INTERESTS.
In order to secure the observance and performance of the
covenants and agreements contained herein and in the Purchase Agreement:
(a) Effective upon and subject to the receipt by the Pledgor
of the Firm Purchase Price on the Firm Payment Date, the Pledgor hereby grants,
sells, conveys, assigns, transfers and pledges unto the Collateral Agent, as
agent of and for the benefit of the Trust, a security interest in and to, and a
lien upon and right of set-off against, all of its right, title and interest in
and to (i) the Pledged Items described in paragraph (b); (ii) all additions to
and substitutions for such Pledged Items; (iii) all income, proceeds and
collections received
<PAGE>
or to be received, or derived or to be derived, now or any time hereafter
from or in connection with the Pledged Items; and (iv) all powers and rights now
owned or hereafter acquired under or with respect to the Pledged Items (such
Pledged Items, additions, substitutions, proceeds, collections, powers and
rights being herein collectively called the "Collateral"). The Collateral Agent
shall have all of the rights, remedies and recourses with respect to the
Collateral afforded a secured party by the New York Uniform Commercial Code, in
addition to, and not in limitation of, the other rights, remedies and recourses
afforded to the Collateral Agent by this Agreement.
(b) On the Firm Payment Date, the Pledge shall deliver to the
Collateral Agent in pledge hereunder Eligible Collateral having a Pledge Value
equal to or greater than the Pledge Value Requirement on such date.
(c) Effective upon and subject to the receipt by the Pledgor
of the Additional Purchase Price, on the Option Closing Date, the Pledgor shall
deliver to the Collateral Agent and pledge hereunder additional Eligible
Collateral such that the Pledge Value of all Collateral pledged hereunder is
equal to or greater than the Pledge Value Requirement on such date.
2. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Purchase Agreement. Capitalized terms
used herein shall have the meanings as follows:
"Authorized Representative" of the Pledgor means any officer
of the Pledgor as to whom the Pledgor shall have delivered notice to the
Collateral Agent that such officer or other representative is authorized to act
hereunder on behalf of the Pledgor.
"Business Day" means any day except a Saturday, Sunday or
other day on which banking institutions in New York City are authorized or
obligated by law or regulation to close or a day on which the New York Stock
Exchange is closed.
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"Cash Delivery Obligations" means, at any time (A) if no
Reorganization Event shall have occurred prior to such time, zero, and (B) from
and after any Reorganization Event, the Dilution Adjustment that shall have been
applied to the Exchange Rate pursuant to Section 6.1 of the Purchase Agreement
at or prior to the Reorganization Event, times the product of: (i) the Firm
Share Base Amount plus the Additional Share Base Amount (if any); and (ii) the
Transaction Value of any property other than Marketable Securities received by
the Pledgor in such Reorganization Event.
"Collateral" has the meaning specified in Section 1(a).
"Collateral Agent" means the financial institution identified
as such in the preliminary paragraph hereof, or any successor appointed in
accordance with Section 9.
"Collateral Agreement" means this Collateral Agreement and any
exhibits hereto.
"Collateral Event of Default" has the meaning specified in
Section 6(e).
"Collateral Requirement" means, as of any date and with
respect to: (i) any Common Stock or Nonvoting Common, 100%; (ii) any Marketable
Securities, 100%; (iii) any U.S. Government Securities pledged in respect of
Cash Delivery Obligations, 105%; and (iv) any other U.S. Government Securities,
150%, provided that upon and after any failure to cure an Insufficiency
Determination by 4:00 p.m. New York City time on the tenth Business Day
following telephonic notice of such Insufficiency Determination as described in
Section 6(e), which insufficiency shall be continuing on such tenth business
day, the Collateral Requirement relating to any U.S. Government Securities
(other than in respect of Cash Delivery Obligations) shall be 200%. The portion
of any pledged U.S. Government Securities that shall be deemed at any time to be
in respect of Cash Delivery Obligations shall be as provided in Section 6(e).
"Eligible Collateral" means (i) Common Stock, (ii) Nonvoting
Common, (iii) U.S. Government Securities, and (iv) from and after any
Reorganization Event, Marketable
3
<PAGE>
Securities, provided, in each case, that the Pledgor has good and
marketable title thereto, free of all Liens (other than the Liens created by
this Collateral Agreement) and Transfer Restrictions and that the Collateral
Agent has a valid, first priority perfected security interest therein and first
lien thereon, and provided further that to the extent the number of shares of
Marketable Securities pledged hereunder exceeds at any time the Maximum
Deliverable Number thereof, such excess shares shall not be Eligible Collateral.
"Event of Default" means the occurrence of: (i) an event
described in clause (a) or (b) of Article VII of the Purchase Agreement, (ii) a
Collateral Event of Default, (iii) a failure by Pledgor to have caused the
Collateral to meet the requirements described in Section 5(d) on the Exchange
Date or (iv) if a Reorganization Event shall have occurred prior to the Exchange
Date, failure by Pledgor to cause to be delivered to Purchaser on the Exchange
Date the consideration then required to be delivered pursuant to Section 6.2 of
the Purchase Agreement.
"Ineligible Collateral" means Collateral that does not
constitute "Eligible Collateral".
"Insufficiency Determination" has the meaning specified in
Section 6(e)(1).
"Lien" means any lien, mortgage, security interest, pledge,
charge or encumbrance of any kind.
"Market Value" means, as of any date: (a) with respect to any
Common Stock or Nonvoting Common (except as otherwise provided in Section
6(e)(2)), the Closing Price of the Common Stock on such date; (b) with respect
to any U.S. Government Security, the product of (x)(i) the average unit bid
price for such security as published on the Trading Day prior to such date in
the New York edition of The Wall Street Journal or The New York Times or, if not
so published, (ii) the lower bid price quoted (which quotation shall be
evidenced in writing) on the Trading Day prior to such date by either of two
nationally recognized dealers making a market in such security which are members
of the National Association of Securities Dealers, Inc. and (y) the number of
such units comprised in the outstanding principal amount of such
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security; and (c) with respect to any share of Marketable Securities, the
Closing Price thereof on the Trading Day prior to such date; provided that the
"Market Value" of any Ineligible Collateral shall be zero.
"Maximum Deliverable Number" means, on any date, with respect
to the Common Stock, the product of the Firm Share Base Amount plus the
Additional Share Base Amount (if any), multiplied successively by each number by
which the Exchange Rate shall have been multiplied on or prior to such date
pursuant to the adjustments provided for under Section 6.1 of the Purchase
Agreement. The Maximum Deliverable Number of Marketable Securities means, on any
date, the product of (i) the Firm Share Base Amount plus the Additional Share
Base Amount (if any) and (ii) the number of Marketable Securities received by
the Pledgor in the Reorganization Event for each share of Common Stock,
multiplied successively by each number by which the Exchange Rate shall have
been multiplied on or prior to such date and after the date of such
Reorganization Event pursuant to the adjustments provided for under Article VI
of the Purchase Agreement.
"Nonvoting Common" means shares of nonvoting common stock,
$.01 par value per share, of the Company.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Pledge Value" means, as of any date and with respect to any
particular type of Collateral, an amount equal to the aggregate Market Value of
such Collateral divided by the Collateral Requirement for such Collateral.
"Pledge Value Requirement" means, as of any date, (a) the
aggregate Market Value on such date of the Maximum Deliverable Number of shares
of Common Stock on such date or, from and after a Reorganization Event,
Marketable Securities, plus (b) from and after a Reorganization Event, the Cash
Delivery Obligations.
"Pledged Items" means, as of any date, any and all securities
and instruments delivered by the Pledgor to be held by the Collateral Agent
under this Collateral
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Agreement as Collateral, whether Eligible Collateral or Ineligible Collateral.
"Prior Collateral" has the meaning specified in Section
6(b)(1).
"Responsible Officer" means, when used with respect to the
Collateral Agent, any vice president, assistant vice president, assistant
treasurer or assistant secretary located in the division or department of the
Collateral Agent responsible for performing the obligations of the Collateral
Agent under this Collateral Agreement, or in any other division or department of
the Collateral Agent performing operations substantially equivalent to those
performed by such division or department pursuant hereto, or any other officer
of the Collateral Agent or any successor Collateral Agent customarily performing
functions similar to those performed by any of the aforesaid officers, and also
means, with respect to any matter relating to this Collateral Agreement or the
Collateral, any other officer to whom such matter is referred because of its
knowledge of and familiarity with the particular subject.
"Transfer Restriction" means, with respect to any item of
Collateral, any condition to or restriction on the ability of the holder thereof
to sell, assign or otherwise transfer such item of Collateral or to enforce the
provisions thereof or of any document related thereto whether set forth in such
item of Collateral itself or in any document related thereto, including, without
limitation, (i) any requirement that any sale, assignment or other transfer or
enforcement of such item of Collateral be consented to or approved by any
Person, including, without limitation, the issuer thereof or any other obligor
thereon, (ii) any limitations on the type or status, financial or otherwise, of
any purchaser, pledgee, assignee or transferee of such item of Collateral, (iii)
any requirement of the delivery of any certificate, consent, agreement, opinion
of counsel, notice or any other document of any Person to the issuer of, any
other obligor on or any registrar or transfer agent for, such item of
Collateral, prior to the sale, pledge, assignment or other transfer or
enforcement of such item of Collateral and (iv) any registration or
qualification requirement for such item of Collateral pursuant to any federal or
state securities law; provided that (x) the required
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delivery of any assignment from the seller, pledgor, assignor or transferor of
such item of Collateral, together with any evidence of the corporate or other
authority of such Person, or (y) any registration or qualification requirement
for such item of Collateral pursuant to any Federal or state securities law
which is generally applicable to all holders of such item of Collateral shall
not constitute a "Transfer Restriction."
"Trustee" or "Trustees" means any trustee or trustees of the
Trust identified on the signature pages hereto, or any successor as such trustee
or trustees.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York.
"U.S. Government Securities" means direct obligations of the
United States of America that mature on a date that is one year or less from the
date such obligations are pledged hereunder, but in any event prior to the
Exchange Date.
3. REPRESENTATIONS AND WARRANTIES OF THE PLEDGOR.
The Pledgor hereby represents and warrants to the Collateral
Agent and the Trust that:
(a) No Transfer Restrictions. No Transfer Restrictions exist
with respect to or otherwise apply to the assignment of, or transfer by the
Pledgor of possession of, any items of Collateral to the Collateral Agent
hereunder, or the subsequent sale or transfer of such items of Collateral by the
Collateral Agent pursuant to the terms hereof.
(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Pledged Items, free of all Liens
(other than the Lien created by this Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Collateral to the Collateral Agent hereunder,
the Collateral Agent will obtain a valid, first priority perfected security
interest in, and a first lien upon, such Collateral subject to no other Lien;
none of such Collateral is or shall be pledged by the Pledgor as collateral for
any other purpose.
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4. REPRESENTATIONS AND WARRANTIES OF THE
COLLATERAL AGENT.
The Collateral Agent represents and warrants to the Pledgor
and the Trust that:
(a) Corporate Existence and Power. The Collateral Agent is a
trust company, duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, and has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to enter into, and perform its obligations under, this
Collateral Agreement.
(b) Authorization and Non-Contravention. The execution,
delivery and performance by the Collateral Agent of this Collateral Agreement
have been duly authorized by all necessary corporate action on the part of the
Collateral Agent (no action by the shareholders of the Collateral Agent being
required) and do not and will not violate, contravene or constitute a default
under any provision of applicable law or regulation or of the charter or by-laws
of the Collateral Agent or of any material agreement, judgment, injunction,
order, decree or other instrument binding upon the Collateral Agent.
(c) Binding Effect. This Collateral Agreement constitutes a
legal, valid and binding agreement of the Collateral Agent enforceable against
the Collateral Agent in accordance with its terms.
5. CERTAIN COVENANTS OF THE PLEDGOR.
The Pledgor agrees that, so long as any of its obligations
under the Purchase Agreement remain outstanding:
(a) Title to Collateral. The Pledgor shall at all times
hereafter have good and marketable title to the Collateral pledged by him, free
of all Liens (other than the Liens created by this Collateral Agreement) and
Transfer Restrictions, and, subject to the terms of this Collateral Agreement,
will at all times hereafter have good, right and lawful authority to assign,
transfer and pledge such Collateral and all such additions thereto and
substitutions therefor under this Collateral Agreement.
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(b) Convertibility of Nonvoting Common. The Pledgor shall
cause all shares of Nonvoting Common held by the Collateral Agent as Collateral
to be convertible upon any delivery or disposition by the Collateral Agent to
any other Person (other than the Pledgon and its affiliates or Farm Bureau Life
Insurance Company and its Affiliate) into shares of Common Stock on a
share-for-share basis without payment of any consideration, fee or cost of any
kind and shall, in connection with any such delivery or disposition, take any
action requested by the Collateral Agent so that such other person shall receive
shares of Common Stock subject to no Transfer Restrictions.
(c) Pledge Value Requirement. The Pledgor shall cause the
aggregate Pledge Value of the Collateral to be equal to or greater than the
Pledge Value Requirement at all times, and shall pledge additional Collateral in
the manner described in Section 6(d) as necessary to cause such requirement to
be met.
(d) Pledge upon Reorganization Event. Upon the occurrence of a
Reorganization Event, the Pledgor shall immediately cause to be delivered to the
Collateral Agent, in the manner provided in Section 6(d): (i) U.S. Government
Securities having an aggregate Market Value at least equal to 105% of the Cash
Delivery Obligations; and (ii) Marketable Securities in an amount at least equal
to the Maximum Deliverable Number thereof, or, at Pledgor's election, U.S.
Government Securities having an aggregate Market Value at least equal to 150% of
such Maximum Deliverable Number of Marketable Securities; in each case to be
held as substitute Collateral hereunder.
(e) Pledge of Purchase Agreement Consideration.
Notwithstanding the Pledgor's right to substitute Collateral pursuant to Section
6(b), the Pledgor shall cause the Collateral to include, on the Exchange Date,
unless a Reorganization Event shall have occurred or unless the Pledgor shall
have elected the Cash Settlement Alternative, a number of shares of any
Combination of Common Stock and Nonvoting Common at least equal to the number of
shares of Common Stock required to be delivered under the Purchase Agreement on
the Exchange Date. If the Pledgor shall have elected the Cash Settlement
Alternative, the Pledgor shall cause the Collateral to include, on the Exchange
Date, cash in an amount at least equal to 105% of the Then-Reference Market
Price of the Contract Shares.
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(f) Further Assurances. The Pledgor shall, at its expense and
in such manner and form as the Trust or the Collateral Agent may require, give,
execute, deliver, file and record any financing statement, notice, instrument,
document, agreement or other papers that may be necessary or desirable in order
to create, preserve, perfect, substantiate or validate any security interest
granted pursuant hereto or to enable the Collateral Agent to exercise and
enforce its rights and the rights of the Trust hereunder with respect to such
security interest. To the extent permitted by applicable law, the Pledgor hereby
authorizes the Collateral Agent to execute and file, in the name of the Pledgor
or otherwise, Uniform Commercial Code financing or continuation statements
(which may be carbon, photographic, photostatic or other reproductions of this
Agreement or of a financing statement relating to this Agreement) which the
Collateral Agent in its sole discretion may deem necessary or appropriate to
further perfect, or maintain the perfection of the security interests granted
hereby.
6. ADMINISTRATION OF THE COLLATERAL AND VALUATION OF
THE SECURITIES.
(a) Valuation of Collateral. The Collateral Agent shall
determine on each Business Day whether the Pledge Value is at least equal to the
Pledge Value Requirement and whether an Insufficiency Determination or
Collateral Event of Default shall have occurred and, from and after any
substitution of U.S. Government Securities for pledged Common Stock, Nonvoting
Common or Marketable Securities pursuant to paragraph (b) of this Section 6,
shall determine the Pledge Value on each Business Day and shall provide written
notice of the Pledge Value to the Pledgor.
(b) Substitution of Collateral. The Pledgor may substitute
Collateral in accordance with the following provisions:
(1) Unless an Event of Default or a failure by the
Pledgor to meet any of its obligations under Section 5(b), (c) or (d)
hereof has occurred and is continuing, the Pledgor shall have the right
at any time and from time to time to deposit Eligible Collateral with
the Collateral Agent in substitution for Pledged Items previously
deposited
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hereunder ("Prior Collateral") and to obtain the release from the Lien
hereof of such Prior Collateral.
(2) If the Pledgor wishes to deposit Eligible
Collateral with the Collateral Agent in substitution for Prior
Collateral, it shall (i) give written notice to the Collateral Agent
identifying the Prior Collateral to be released from the Lien hereof,
(ii) deliver to the Collateral Agent concurrently with such Eligible
Collateral a certificate of an Authorized Officer of the Pledgor
substantially in the form of Exhibit A and dated the date of such
delivery, (A) identifying the items of Eligible Collateral being
substituted for the Prior Collateral and the Prior Collateral that is
to be transferred to the Pledgor and (B) certifying that the
representations and warranties contained in such Exhibit A are true and
correct on and as of the date thereof and (iii) deliver to the
Collateral Agent concurrently with such Eligible Collateral an opinion
(dated the date of such delivery) of counsel (who may be an employee of
the Pledgor) addressed to the Collateral Agent confirming the
representations contained in the second sentence of paragraph 3(b) of
Exhibit A. The Pledgor hereby covenants and agrees to take all actions
required under Section 6(d) and any other actions necessary to create
for the benefit of the Collateral Agent a valid, first priority
perfected security interest in, and a first lien upon, such Eligible
Collateral deposited with the Collateral Agent in substitution for
Prior Collateral.
(3) No such substitution shall be made unless and
until the Collateral Agent shall have determined that the aggregate
Pledge Value of all of the Collateral at the time of such proposed
substitution, after giving effect to the proposed substitution, shall
at least equal the Pledge Value Requirement.
(c) Additional Collateral. The Pledgor may pledge additional
Collateral hereunder at any time. Concurrently with the delivery of any
additional Eligible Collateral, the Pledgor shall deliver (i) a certificate of
an Authorized Officer of the Pledgor substantially in the form of Exhibit B and
dated the date of such delivery,
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(A) identifying the additional items of Eligible Collateral being pledged
and (B) certifying that with respect to such items of additional Eligible
Collateral the representations and warranties contained in such Exhibit B are
true and correct on and as of the date thereof and (ii) an opinion (dated the
date of such delivery) of counsel (who may be an employee of the Pledgor)
addressed to the Collateral Agent confirming the representations contained in
the second sentence of paragraph 2(b) of Exhibit B. The Pledgor hereby covenants
and agrees to take all actions required under Section 6(d) and any other actions
necessary to create for the benefit of the Collateral Agent a valid, first
priority perfected security interest in, and a first lien upon, such additional
Eligible Collateral.
(d) Delivery of Collateral. The Pledgor shall deliver the
Collateral to the Collateral Agent in accordance with the following
provisions:
(1) Pledged Common Stock. In the case of Collateral
consisting of Common Stock or Nonvoting Common, by delivery to the
Collateral Agent of Common Stock or Nonvoting Common, as the case may
be, registered in the name of the Collateral Agent or its nominee;
(2) Pledged U.S. Government Securities. In the case
of Collateral consisting of U.S. Government Securities, by transfer
thereof through the Book Entry System of the Federal Reserve System to
the account of the Collateral Agent or to an account (other than an
account of the Pledgor) designated by the Collateral Agent; and
(3) Pledged Marketable Securities. In the case of
Collateral consisting of Marketable Securities, by delivery of
certificates evidencing such Marketable Securities, registered in the
name of the Collateral Agent or its nominee or, if such Marketable
Securities are not issuable in certificated form but are held in book
entry form by The Depository Trust Company, by transfer to an account
of the Collateral Agent or to an account (other than an account of the
Pledgor) designated by the Collateral Agent with The Depository Trust
Company. Each such delivery of Marketable Securities shall be
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accompanied by an opinion of counsel (who may be an employee of the
Pledgor) that the Collateral Agent has obtained a valid, first priority
perfected security interest in, and a first lien upon, such Marketable
Securities.
Upon delivery of any Pledged Item under this Collateral
Agreement, the Collateral Agent shall examine such Pledged Item and any opinions
and certificates delivered pursuant to Sections 6(b) or (c) or otherwise
pursuant to the terms hereof in connection therewith to determine that they
comply as to form with the requirements for Eligible Collateral. The Pledgor
hereby designates the Collateral Agent as the person in whose name any
Collateral held in book entry form in the Federal Reserve System shall be
registered.
(e) Insufficiency Determination.
(1) If on any Business Day the Collateral Agent
determines that the aggregate Pledge Value of the Collateral is less
than the Pledge Value Requirement (any such determination, an
"Insufficiency Determination"), the Collateral Agent shall promptly
notify the Pledgor of such determination by telephone call to an
Authorized Representative of the Pledgor followed by a written
confirmation of such call.
(2) If, by 4:00 p.m., New York City time on the tenth
Business Day following the day on which telephonic notice shall have
been given pursuant to the preceding paragraph (e)(1), the Pledgor
shall have failed to deliver, in the manner set forth in paragraphs (c)
and (d) of this Section 6, sufficient additional Eligible Collateral so
that, after giving effect to such delivery, the aggregate Pledge Value
of the Collateral, as of such tenth Business Day, is at least equal to
the Pledge Value Requirement, then (x) the Collateral Requirement with
respect to any U.S. Government Securities pledged hereunder (other than
in respect of Cash Delivery Obligations) shall be increased from 150%
to 200%, and (y) unless a Collateral Event of Default shall have
occurred and be continuing, the Collateral Agent shall:
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(i) commence sales, in the manner described in paragraph (3)
below, of such portion of the Collateral consisting of U.S. Government
Securities as may be required to be sold in order to generate proceeds
sufficient to purchase Common Stock or, after a Reorganization Event, Marketable
Securities, as described in the following clause (ii); and (ii) commence
purchases, in the manner described in paragraph (3) below, of Common Stock or,
after a Reorganization Event, Marketable Securities, in an amount sufficient to
cause the aggregate Pledge Value of the Collateral to be at least equal to the
Pledge Value Requirement.
Notwithstanding the foregoing, the Collateral Agent shall
discontinue sales and purchases pursuant to the preceding clauses (i) and (ii),
respectively, if at any time a Collateral Event of Default shall have occurred
and be continuing. The Collateral Agent shall determine the Market Value and the
Pledge Value of the Collateral after each purchase of Common Stock or Marketable
Securities pursuant to the preceding clause (ii) in order to determine whether
the Pledge Value Requirement is met and whether a Collateral Event of Default
has occurred. Solely for purposes of such calculation, the Market Value of the
Common Stock or Marketable Securities shall be: (A) the most recent sales price
as reported in the composite transactions for the principal securities exchange
on which the Common Stock or Marketable Securities, as the case may be, are then
listed or, if such securities are not so listed, the last quoted ask price for
such securities in the over-the-counter market as reported by The NASDAQ
National Market or, if not so reported, by the National Quotation Bureau or a
similar organization; or (B) if higher, in the case of Common Stock, the most
recent available Closing Price.
A "Collateral Event of Default" shall mean, at any time, the
occurrence of any of the following: (A) failure of the aggregate Market Value of
the Collateral to equal or exceed the Pledge Value Requirement; (B) failure of
the Market Value of any U.S. Government Securities pledged at such time (not
including any U.S. Government Securities pledged in respect of Cash Delivery
Obligations at such time) to have an aggregate Market Value of at least 105% of
the Market Value of a number of shares of Common Stock (or, from and after any
Reorganization Event, Marketable Securities) equal to (x) the
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Maximum Deliverable Number thereof minus (y) the number thereof pledged as
Collateral hereunder at such time; or (C) from and after any Reorganization
Event, failure of the U.S. Government Securities pledged in respect of Cash
Delivery Obligations to have an aggregate Market Value at least equal to 105% of
the Cash Delivery Obligations at such time, if, in the case of a failure
described in this clause (C), such failure shall continue to be in effect at
4:00 p.m., New York City time, on the tenth Business Day following the day on
which telephonic notice in respect thereof shall have been given pursuant to
paragraph (e)(1) above. For purposes of this Agreement, the portion of any
pledged U.S. Government Securities that shall be deemed to be in respect of Cash
Delivery Obligations at any time shall be a portion having a Market Value equal
to 105% of the Cash Delivery Obligations at such time (or, if less, the
aggregate Market Value of all U.S. Government Securities pledged at such time).
(3) Collateral sold and Common Stock or shares of
Marketable Securities purchased by the Collateral Agent pursuant to the
preceding paragraphs (e)(i) and (ii) may be sold and purchased on any
securities exchange or in any over-the-counter market or in any private
purchase transaction, and at such price or prices, in each case as the
Collateral Agent may deem satisfactory. The Pledgor covenants and
agrees that it will execute and deliver such documents and take such
other action as the Collateral Agent deems necessary or advisable in
order that any such sales and purchases may be made in compliance with
law.
(f) Release of Excess Collateral. If on any Business Day the
Collateral Agent determines that the aggregate Pledge Value of the Pledgor's
Eligible Collateral exceeds the Pledge Value Requirement and no Event of Default
or failure by the Pledgor to meet any of its obligations under Sections 5 or 6
hereof has occurred and is continuing, the Pledgor may obtain the release from
the Lien hereof of any Collateral having an aggregate Pledge Value on such
Business Day less than or equal to such excess, upon delivery to the Collateral
Agent of a written notice from an Authorized Representative of the Pledgor
indicating the items of Collateral to be released. Such Collateral shall be
released only after the Collateral Agent shall have determined that the
aggregate
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Pledge Value of all of the Collateral remaining after such release as determined
on such Business Day is at least equal to the Pledge Value Requirement.
(g) Delivery of Purchase Agreement Consideration. On the
Exchange Date, unless a Reorganization Event shall have occurred prior thereto
or the Pledgor shall have elected the Cash Settlement Alternative, the
Collateral Agent shall deliver to the Trust Common Stock then held by it
hereunder representing the number of shares of Common Stock then required to be
delivered under the Purchase Agreement. If a Reorganization Event shall have
occurred prior to the Exchange Date, then, if so instructed by the Pledgor by
the close of business on the Business Day preceding the Exchange Date, the
Collateral Agent shall deliver to the Trust, to the extent permitted to be
delivered in lieu of cash required to be delivered on such date under Section
6.2 of the Purchase Agreement, the Marketable Securities then held by the
Collateral Agent hereunder. Upon such delivery, the Trust shall hold such Common
Stock or Marketable Securities, as the case may be, absolutely and free from any
claim or right whatsoever. If the Pledgor shall have elected the Cash Settlement
Alternative and shall have delivered Collateral to the Collateral Agent as
required by Section 6(e), the Collateral Agent shall deliver to the Trust the
amount of cash required to satisfy the Pledgor's obligations under the Cash
Settlement Alternative.
7. INCOME AND VOTING RIGHTS ON COLLATERAL.
(a) Unless an Event of Default or failure by the Pledgor to
meet any of its obligations under Section 5(b) or (c) has occurred and is
continuing, the Pledgor shall be entitled to receive for its own account all
dividends, interest and, if any, principal and premium relating to all of the
Collateral, unless the payment thereof to the Pledgor would reduce the aggregate
Pledge Value of the Collateral below the Pledge Value Requirement. The
Collateral Agent agrees to remit to the Pledgor on the Business Day received or
the first Business Day thereafter all such payments received by it. If an Event
of Default or failure by the Pledgor to meet any of its obligations under
Section 5(b) or (c) has occurred and is continuing, all such payments made or
accrued after and during the continuance of such default or failure shall
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be retained by the Collateral Agent, and any such payments which are received by
the Pledgor shall be received in trust for the benefit of the Trust, shall be
segregated from other funds of the Pledgor and shall forthwith be paid over to
the Collateral Agent. Any such payments so retained by, or paid over to, the
Collateral Agent shall be held by the Collateral Agent as Collateral hereunder.
(b) Unless an Event of Default has occurred and is continuing,
the Pledgor shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Collateral, and the
Collateral Agent shall, upon receiving a written request from the Pledgor,
deliver to the Pledgor or as specified in such request such proxies, powers of
attorney, consents, ratifications and waivers in respect of any of the
Collateral which is registered in the name of the Collateral Agent or its
nominee as shall be specified in such request and be in form and substance
satisfactory to the Collateral Agent.
If an Event of Default shall have occurred and be continuing,
the Collateral Agent shall have the right to the extent permitted by law, and
the Pledgor shall take all such action as may be necessary or appropriate to
give effect to such right, to vote and to give consents, ratifications and
waivers, and take any other action with respect to any or all of the Collateral
with the same force and effect as if the Collateral Agent were the absolute and
sole owner thereof.
8. REMEDIES UPON EVENTS OF DEFAULT.
(a) If any Event of Default shall have occurred and be
continuing, the Collateral Agent may exercise on behalf of the Trust all the
rights of a secured party under the Uniform Commercial Code (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
without being required to give any notice, except as herein provided or as may
be required by mandatory provisions of law, shall: (i) deliver all Collateral
consisting of Common Stock, Nonvoting Common (which shall become Common Stock
upon such delivery) or Marketable Securities (but not, in either case, in excess
of the number of shares thereof deliverable under the Purchase Agreement at such
time) to the Trust on the date of the Acceleration Notice relating to
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such Event of Default (or, in the case of an Event of Default described in
clause (iii) or (iv) of the definition thereof, on the Exchange Date) (in either
case, the "Delivery Date"), whereupon the Trust shall hold such Common Stock or
Marketable Securities absolutely free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor which may be
waived, and the Pledgor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter adopted; and (ii) if such delivery shall
be insufficient to satisfy in full all of the obligations of Pledgor under the
Purchase Agreement, sell all of the remaining Collateral, or such lesser portion
thereof as may be necessary to generate proceeds sufficient to satisfy in full
all of the obligations of Pledgor under the Purchase Agreement, at public or
private sale or at any broker's board or on any securities exchange, for cash,
upon credit or for future delivery, and at such price or prices as the
Collateral Agent may deem satisfactory. The Pledgor covenants and agrees that it
will execute and deliver such documents and take such other action as the
Collateral Agent deems necessary or advisable in order that any such sale may be
made in compliance with law. Upon any such sale the Collateral Agent shall have
the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser at any such sale shall hold the Collateral so
sold absolutely and free from any claim or right of whatsoever kind, including
any equity or right of redemption of the Pledgor which may be waived, and the
Pledgor, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Section 9 of the UCC shall (1) in case of a public sale, state the time and
place fixed for such sale, (2) in case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof so being sold,
will first be offered for sale at such board or exchange, and (3) in the case of
a private sale, state the day after which such sale may be consummated. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix in the notice of
such sale. At any such sale the Collateral may
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be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may determine. The Collateral Agent shall not be obligated to make any
such sale pursuant to any such notice. The Collateral Agent may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Collateral
Agent until the selling price is paid by the purchaser thereof, but the
Collateral Agent shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice. The Collateral
Agent, instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the security
interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(b) Power of Attorney. Upon any delivery or sale of all or any
part of any Collateral made either under the power of delivery or sale given
hereunder or under judgment or decree in any judicial proceedings for
foreclosure or otherwise for the enforcement of this Collateral Agreement, the
Collateral Agent is hereby irrevocably appointed the true and lawful attorney of
the Pledgor, in the name and stead of the Pledgor, to make all necessary deeds,
bills of sale and instruments of assignment, transfer or conveyance of the
property thus delivered or sold. For that purpose the Collateral Agent may
execute all such documents and instruments. This power of attorney shall be
deemed coupled with an interest, and the Pledgor hereby ratifies and confirms
all that its attorneys acting under such power, or such attorneys' successors or
agents, shall lawfully do by virtue of this Collateral Agreement. If so
requested by the Collateral Agent, by the Trustees or by any purchaser of the
Collateral or a portion thereof, the Pledgor shall further ratify and confirm
any such delivery or sale by executing and delivering to the Collateral Agent,
to the Trustees or to such purchaser or purchasers at the expense of the Pledgor
all proper deeds, bills of sale,
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<PAGE>
instruments of assignment, conveyance of transfer and releases as may be
designated in any such request.
(c) Application of Collateral and Proceeds. In the case of an
Event of Default, the Collateral Agent may proceed to realize upon the security
interest in the Collateral against any one or more of the types of Collateral,
at any one time, as the Collateral Agent shall determine in its sole discretion
subject to the foregoing provisions of this Section 8. The proceeds of any sale
of, or other realization upon, or other receipt from, any of the remaining
Collateral shall be applied by the Collateral Agent in the following order of
priorities:
first, to the payment to the Trust of an amount equal
to: (A) the aggregate Market Value of a number of shares of Common
Stock equal to (1) the number of shares of Common Stock required to be
delivered under the Purchase Agreement on the Delivery Date minus (2)
the number of shares of Common Stock delivered by the Collateral Agent
to the Trust on the Delivery Date as described above; or (B) from and
after a Reorganization Event, the sum of (1) the Cash Delivery
Obligations on the Delivery Date and (2) the aggregate Market Value on
the Delivery Date of a number of Marketable Securities equal to (x) the
number thereof permitted to be delivered on the Delivery Date under
Section 6(b) of the Purchase Agreement minus (y) the number thereof
delivered by the Collateral Agent to the Trust on the Delivery Date as
described above;
second, to the payment to the Collateral Agent of the
expenses of such sale or other realization, including reasonable
compensation to the Collateral Agent and its agents and counsel, and
all expenses, liabilities and advances incurred or made by the
Collateral Agent in connection therewith, including brokerage fees in
connection with the sale by the Collateral Agent of any Pledged Item;
and
finally, if all of the obligations of the Pledgor
hereunder and under the Purchase Agreement have been fully discharged
or sufficient funds have been set aside by the Collateral Agent at the
request of the Pledgor for the discharge thereof, any remaining
proceeds shall be released to the Pledgor.
20
<PAGE>
9. THE COLLATERAL AGENT.
The Collateral Agent accepts its duties and responsibilities
hereunder as agent for the Trust, on and subject to the following terms and
conditions:
(a) Performance of Duties. The Collateral Agent undertakes to
perform such duties and only such duties as are expressly set forth herein and,
beyond the exercise of reasonable care in the performance of such duties, no
implied covenants or obligations shall be read into this Collateral Agreement
against the Collateral Agent. No provision hereof shall be construed to relieve
the Collateral Agent from liability for its own grossly negligent action,
grossly negligent failure to act or its own wilful misconduct, subject to the
following:
(1) The Collateral Agent may consult with counsel,
and the advice or opinion of such counsel shall be full and complete
authorization and protection in respect of an action taken or suffered
hereunder in good faith and in accordance with such advice or opinion
of counsel.
(2) The Collateral Agent shall not be liable with
respect to any action taken, suffered or omitted by it in good faith
(i) reasonably believed by it to be authorized or within the discretion
or rights or powers conferred on it by this Collateral Agreement or
(ii) in accordance with any direction or request of the Trustees.
(3) The Collateral Agent shall not be liable for any
error of judgment made in good faith by any of its officers, unless the
Collateral Agent was grossly negligent in ascertaining the pertinent
facts.
(4) In the absence of bad faith on its part, the
Collateral Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
any note, notice, resolution, consent, certificate, affidavit, letter,
telegram, teletype message, statement, order or other document
reasonably believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons.
21
<PAGE>
(5) No provision of this Collateral Agreement shall
require the Collateral Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(6) The Collateral Agent may perform any duties
hereunder either directly or by or through agents or attorneys,
provided that the Collateral Agent shall remain liable to fulfill all
of such duties to the same extent, and with the same protections, as if
the Collateral Agent was performing them itself. In furtherance
thereof, any subsidiary owned or controlled by the Collateral Agent, or
its successors, as agent for the Collateral Agent, may perform any or
all of the duties of the Collateral Agent relating to the valuation of
securities and other instruments constituting Collateral hereunder.
(7) In no event shall the Collateral Agent be
personally liable for any taxes or other governmental charges imposed
upon or in respect of (i) the Collateral or (ii) the income or other
distributions thereon.
(8) Unless and until the Collateral Agent shall have
received notice from the Pledgor, or unless and until a Responsible
Officer of the Collateral Agent shall have actual knowledge to the
contrary, the Collateral Agent shall be entitled to deem and treat all
Collateral delivered to it hereunder as Eligible Collateral hereunder,
provided that the Collateral Agent has carried out the duties specified
in Section 6 with respect to such Collateral at the time of delivery
thereof.
The Collateral Agent shall not be responsible for the correctness of the
recitals and statements herein which are made by the Pledgor or for any
statement or certificate delivered by the Pledgor pursuant hereto. Except as
specifically provided herein, the Collateral Agent shall not be responsible for
the validity, sufficiency, collectibility or marketability of any Collateral
given
22
<PAGE>
to or held by it hereunder or for the validity or sufficiency of the Purchase
Agreement or the Lien on the Collateral purported to be created hereby.
(b) Knowledge. The Collateral Agent shall not be deemed to
have knowledge of any Event of Default (except a Collateral Event of Default),
unless and until a Responsible Officer of the Collateral Agent shall have actual
knowledge thereof or shall have received written notice thereof.
(c) Merger. Any corporation or association into which the
Collateral Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its agency business and assets
as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, shall, subject to the prior written consent of the Trust,
be and become a successor Collateral Agent hereunder and vested with all of the
title to the Collateral and all of the powers, discretions, immunities,
privileges and other matters as was its predecessor without, except as provided
above, the execution or filing of any instrument or any further act, deed or
conveyance on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
(d) Resignation. The Collateral Agent and any successor
Collateral Agent may at any time resign by giving thirty days' written notice by
registered or certified mail to the Pledgor and notice to the Trust in
accordance with the provisions of Section 10(d) hereof. Such resignation shall
take effect upon the appointment of a successor Collateral Agent by the Trust.
(e) Removal. The Collateral Agent may be removed at any time
by an instrument or concurrent instruments in writing delivered to the
Collateral Agent and to the Pledgor and signed by the Trust.
(f) Appointment of Successor. (1) If the Collateral Agent
hereunder shall resign or be removed, or be dissolved or shall be in the course
of dissolution or liquidation or otherwise become incapable of action hereunder,
or if it shall be taken under the control of any public officer or officers or
of a receiver appointed
23
<PAGE>
by a court, a successor may be appointed by the Trust by an instrument or
concurrent instruments in writing signed by the Trust or by its attorneys in
fact fully authorized. A copy of such instrument or concurrent instruments shall
be sent by registered mail to the Pledgor.
(2) Every such temporary or permanent successor Collateral
Agent appointed pursuant to the provisions hereof shall be a trust company or
bank in good standing, having a reported capital and surplus of not less than
$100,000,000 and capable of holding the Collateral in the State of New York, if
there be such an institution willing, qualified and able to accept the duties of
the Collateral Agent hereunder upon customary terms.
(g) Acceptance by Successor. Every temporary or permanent
successor Collateral Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and also to the Pledgor and the Trust an instrument
in writing accepting such appointment hereunder, whereupon such successor,
without any further act, deed or conveyance, shall become fully vested with all
the estates, properties, rights, powers, duties and obligations of its
predecessors. Such predecessor shall, nevertheless, on the written request of
its successor or the Pledgor, execute and deliver an instrument transferring to
such successor all the estates, properties, rights and powers of such
predecessor hereunder. Every predecessor Collateral Agent shall deliver all
Collateral held by it as the Collateral Agent hereunder to its successor. Should
any instrument in writing from the Pledgor be required by a successor Collateral
Agent for more fully and certainly vesting in such successor the estates,
properties, rights, powers, duties and obligations hereby vested or intended to
be vested in the predecessor, any and all such instruments in writing shall, at
the request of the temporary or permanent successor Collateral Agent, be
forthwith executed, acknowledged and delivered by the Pledgor.
10. MISCELLANEOUS.
(a) Benefit of Agreement; Successors and Assigns. Whenever
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party. All the covenants and
agreements herein contained by or on behalf of the
24
<PAGE>
Pledgor and the Collateral Agent shall bind, and inure to the benefit of, their
respective successors and assigns whether so expressed or not, and shall be
enforceable by and inure to the benefit of the Trust and its successors and
assigns.
(b) Separability. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this Collateral
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(c) Amendments and Waivers. Any term, covenant, agreement or
condition of this Collateral Agreement may be amended or compliance therewith
may be waived (either generally or in a particular instance and either
retrospectively or prospectively) but only by a writing signed by the Collateral
Agent, the Pledgor and the Trust.
(d) Notices. (1) Any notice provided for herein, unless
otherwise specified, shall be in writing (including transmittals by telex or
telecopier) and shall be given to a party at the address set forth opposite such
party's name on the signature pages hereto or at such other address as may be
designated by notice duly given in accordance with this Section 10(d) to each
other party hereto.
(2) Each such notice given pursuant to paragraph (1) shall be
effective (i) if sent by certified mail (return receipt requested), 72 hours
after being deposited in the United States mail, postage prepaid; (ii) if given
by telex or telecopier, when such telex or telecopied notice is transmitted, or
(iii) if given by any other means, when delivered at the address specified in
this Section 10(d).
(e) Governing Law. This Collateral Agreement shall be governed
by and construed in accordance with the laws of the State of New York; provided
that as to Pledged Items located in any jurisdiction other than the State of New
York, the Collateral Agent on behalf of the Trust shall have all of the rights
to which a secured party is entitled under the laws of such other jurisdiction.
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<PAGE>
(f) Counterparts. This Collateral Agreement may be executed,
acknowledged and delivered in any number of counterparts and such counterparts
taken together shall constitute one and the same instrument.
11. TERMINATION OF COLLATERAL AGREEMENT.
This Collateral Agreement and the rights hereby granted by the
Pledgor in the Collateral shall cease, terminate and be void upon fulfillment of
all of the obligations of the Pledgor under the Purchase Agreement, and the
Pledgor shall have no further liability hereunder upon such termination. Any
Collateral remaining at the time of such termination shall be fully released and
discharged from the Lien hereof and delivered to the Pledgor by the Collateral
Agent, all at the expense of the Pledgor.
12. NO PERSONAL LIABILITY OF TRUSTEES.
By executing this Collateral Agreement none of the Trustees
assumes any personal liability hereunder.
26
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Collateral
Agreement to be duly executed on its behalf, and the Collateral Agent has caused
this Collateral Agreement to be duly executed on its behalf, as of the date
hereof.
PLEDGOR:
BANC ONE CAPITAL HOLDINGS
CORPORATION
By_____________________________
Name:
Title:
Address for Notices:
________________________________
________________________________
________________________________
Attention:______________________
COLLATERAL AGENT:
[_________________],
as Collateral Agent
By_____________________________
Name:
Title:
Address for Notices:
[_________________ ]
Attention: [______________]
27
<PAGE>
THE TRUST:
MANDATORY COMMON EXCHANGE TRUST
--------------------------------
as Trustee
Address for Notices:
_________________________________
_________________________________
_________________________________
Attention:______________________
28
<PAGE>
Exhibit A
to
Collateral Agreement
CERTIFICATE FOR SUBSTITUTED COLLATERAL
The undersigned, Banc One Capital Holdings Corporation (the
"Pledgor"), hereby certifies, pursuant to Section 6(b) of the Collateral
Agreement dated as of September __, 1997 among the Pledgor, The Bank of New
York, as Collateral Agent, and MANDATORY COMMON EXCHANGE TRUST (the "Collateral
Agreement"; terms defined in the Collateral Agreement being used herein as
defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as substituted Collateral
(the "Substituted Collateral"):
2. The Pledgor requests that the Collateral Agent transfer to
the Pledgor the following Prior Collateral, pursuant to Section 6(b) of the
Collateral Agreement:
3. The Pledgor hereby represents and warrants to the
Collateral Agent and the Trust that:
(a) Consents to Transfer. No Transfer Restrictions exist with
respect to or otherwise apply to the assignment of, or transfer by the Pledgor
of possession of, any items of Substituted Collateral to the Collateral Agent
under the Collateral Agreement, or the subsequent sale or transfer of such items
of Substituted Collateral by the Collateral Agent pursuant to the terms of the
Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Substituted Collateral, free of all
Liens (other than the Lien created by the Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Substituted Collateral to the Collateral
Agent, the Collateral Agent will obtain a valid, first priority perfected
security interest in, and a first lien upon, such Substituted Collateral subject
to no other Lien. None of such
29
<PAGE>
Substituted Collateral is or shall be pledged by the Pledgor as collateral for
any other purpose.
This Certificate may be relied upon by the Trust as fully and
to the same extent as if this Certificate had been specifically addressed to the
Trust.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _______ day of _______________ , ______________.
-------------------------------
Name:
Title:
30
<PAGE>
Exhibit B
to
Collateral Agreement
CERTIFICATE FOR ADDITIONAL COLLATERAL
The undersigned, Banc One Capital Holdings Corporation (the
"Pledgor"), hereby certifies, pursuant to Section 6(c) of the Collateral
Agreement, dated as of September __, 1997, among the Pledgor, The Bank of New
York, as Collateral Agent and MANDATORY COMMON EXCHANGE TRUST (the "Collateral
Agreement"; terms defined in the Collateral Agreement being used herein as
defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as additional Collateral
(the "Additional Collateral"):
2. The Pledgor hereby represents and warrants to the
Collateral Agent that:
(a) Consents to Transfer. No Transfer Restrictions exist with
respect to or otherwise apply to the assignment of, or transfer by the Pledgor
of possession of, any items of Additional Collateral to the Collateral Agent
under the Collateral Agreement, or the subsequent sale or transfer of such items
of Additional Collateral by the Collateral Agent pursuant to the terms of the
Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Additional Collateral, free of all
Liens (other than the Lien created by the Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Additional Collateral to the Collateral
Agent, the Collateral Agent will obtain a valid, first priority perfected
security interest in, and a first lien upon, such Additional Collateral subject
to no other Lien. None of such Additional Collateral is or shall be pledged by
the Pledgor as collateral for any other purpose.
31
<PAGE>
This Certificate may be relied upon by the Trust as fully and
to the same extent as if this Certificate had been specifically addressed to the
Trust.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this ____ day of ______________ , .
-------------------------------
Name:
Title:
32
Exhibit 2.k.(v)
FUND EXPENSE AGREEMENT
Agreement dated as of September __, 1997 between Bear, Stearns
& Co. Inc. ("Bear, Stearns & Co. Inc.") and The Bank of New York (the "Service
Provider"), in its capacities as administrator, custodian and paying agent and
collateral agent for Mandatory Common Exchange Trust (the "Trust").
WHEREAS the Trust is a business trust formed under the laws of
the State of Delaware pursuant to a Trust Agreement dated as of October 4, 1996,
as amended and restated as of September 11, 1997, (the "Trust Agreement"); and
WHEREAS, Bear, Stearns & Co. Inc., as sponsor under the Trust
Agreement, desires to make provision for the payment of certain initial and on
going expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree as follows.
1. Definitions. (a) Capitalized terms used herein and not
defined herein shall have the meanings ascribed thereto in the Trust Agreement.
(b) The following terms shall have the following meanings.
"Additional Expense" means an Ordinary Expense the incurring
of which will require the Service Provider to provide the Additional Expense
Notice pursuant to Section 3(a) hereof and any Ordinary Expense incurred
thereafter.
"Additional Expense Notice" means the notice required to be
given by the Service Provider to Bear, Stearns & Co., Inc. pursuant to Section
3(a)(i) hereof.
"Closing Date" shall have the meaning ascribed thereto in the
Underwriting Agreement.
"Ordinary Expense" of the Trust means any expense of the
Trusts other than any expense of the Trust arising under Section 6.6 of the
Administration Agreement, Section 7 of the Custodian Agreement, Section 5.4(b)
of the Paying Agent Agreement and Section 7.6 of the Trust Agreement and Section
9 of the Collateral Agreement.
"Up-front Fee Amount" means the amount set forth as such on
Schedule I hereto payable as a one-time payment to the Service Provider in
respect of its collective services as Administrator, Custodian and Paying Agent
and Collateral Agent for the entire term of the Trust.
"Up-front Expense Amount" means the amount set forth as such
on Schedule I hereto payable as a one-time payment to the Service Provider in
respect of Ordinary Expenses anticipated to be incurred by the Administrator on
behalf of the Trust, pursuant to the Administration Agreement, during the term
of the Trust.
2. Agreement to Pay Up-front Fees and Expenses. Bear, Stearns
& Co., Inc. agrees to pay to the Service Provider in New York Clearing House
funds on the Closing Date (as defined in the Underwriting Agreement) the
Up-front Fee Amount and the Up-front Expense Amount.
3. Agreement to Pay Additional Expenses. (a) Prior to
incurring any Ordinary Expense on behalf of the Trust that, together with all
prior ordinary expenses incurred by the Administrator on behalf of the Trust,
would cause the aggregate amount of Ordinary Expenses of the Trust to exceed the
Up-front Expense Amount, the Administrator shall provide to Bear, Stearns & Co.,
Inc. (i) prompt written notice to the effect that the aggregate amount of
Ordinary Expenses of the Trust will exceed the Up-front Expense Amount, and (ii)
an accounting, in such detail as shall be reasonably acceptable to Bear, Stearns
& Co., Inc., of all Ordinary Expenses incurred on behalf of the Trust through
the date of the Additional Expense Notice.
(b) From and after the date of the Additional Expense Notice,
the Service Provider agrees that it will not, without the prior written consent
of Bear, Stearns & Co., Inc., incur on behalf of the Trust (i) any single
expense in excess of $______ or (ii) in any calendar {period}, expenses
aggregating in excess of $_____. Subject to the foregoing, the Service Provider
shall give notice to Bear, Stearns & Co., Inc. in writing promptly following the
incurring of any Additional Expense. Such notice shall be accompanied by any
demand, bill, invoice or other similar document in respect f such Additional
Expense.
(c) Subject to the first sentence of paragraph (b) of this
Section 3, Bear, Stearns & Co. Inc. agrees to pay to the Service Provider from
time to time the amount of any Additional Expense. Payment by Bear, Stearns &
Co., Inc. of any Additional Expense shall be made in New York Clearing House
funds by the later of (i) five Business Days after the receipt by Bear, Stearns
& Co., Inc. of written notice from the Service Provider of the incurring thereof
or (ii) the due date for the payment of such Additional Expense.
(d) Bear, Stearns & Co., Inc. may contest in good faith the
reasonableness of Additional Expense and the parties shall attempt to resolve
amicably the disagreement; provided that if the parties cannot resolve the
dispute by the due date hereunder with respect to such Additional Expense,
subject to the first sentence of paragraph (b) of this Section 3, Bear, Stearns
& Co., Inc. shall pay the amount of such Additional Expense subject to later
adjustment and credit if such dispute is resolved in favor of Bear, Stearns &
Co., Inc.
4. Condition to Payment. Bear, Stearns & Co., Inc.'s
obligations under paragraphs 2 and 3 hereof shall be subject to the condition
that the Trust Issued Mandatory Exchange Securities shall have been issued and
paid for on the Closing Date.
5. Trust Termination; Refund of Unused Expense Funds. If at
the termination of the Trust in accordance with Section 8.3 of the Trust
Agreement the aggregate amount of Ordinary Expenses incurred by the Service
Provider on behalf of the Trust through the date of termination shall be less
than the Up-front Expense Amount, the Service Provider shall, promptly following
the date of such termination, pay to Bear, Stearns & Co., Inc. in New York
Clearing House funds the amount of such excess.
6. Termination of Administration Agreement. In the event of
the termination of the Administration Agreement in accordance with Section 4.1
thereof, the Service Provider shall promptly pay to Bear, Stearns & Co., Inc.
the portion of its Up-front Fee Amount ratable for the period from the date of
the termination of the Administration Agreement to the Exchange Date together
with any unexpended portion of the Up-front Expense Amount.
7. Statements and Reports. The Service Provider shall collect
and safekeep all demands, bills, invoices or other written communications
received from third parties in connection with any Ordinary Expenses and shall
prepare and maintain adequate books and records showing all receipts and
disbursements of funds in connection therewith. Bear, Stearns & Co., Inc. shall
have the right to inspect and to copy, at its expense, all such documents, books
and records at all reasonable times and from time to time during the term of
this Agreement.
8. Term of Contract. This Agreement, shall continue in effect
until the termination of the Trust in accordance with Section 8.3 of the Trust
Agreement.
9. No Assignment. No party to this Agreement may assign its
rights or delegate its duties hereunder without the prior written consent of the
other party.
10. The Service Provider agrees that it will not consent to
any amendment to any of the Administration Agreement, the Custodian Agreement or
the Paying Agent Agreement or the Collateral Agreement without the prior written
consent of Bear, Stearns & Co., Inc.
11. Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings. No amendment or modification
of this Agreement shall be valid unless the amendment or modification is in
writing and is signed by all the parties to this Agreement.
12. Notices. All notices, demands, reports, statements,
approvals or consents given by any party under this Agreement shall be in
writing and shall be delivered in person or by telecopy or other facsimile
communication or sent by first-class U.S. mail, registered or certified, postage
prepaid, to the appropriate party at its address on the signature pages hereof
or at such other address subsequently notified to the other parties hereto. Any
party may change its address for purposes hereof by delivering a written notice
of the change to the other parties. All notices given under this Agreement shall
be deemed received (a) in the case of hand delivery, ont he day of delivery, (b)
in the case of telecopy or other facsimile communication, on the day of
transmission, and (c) in the case of mailing, ont he third day after such notice
was deposited in the mail.
13. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
14. Governing Law. This Agreement shall be governed by and be
construed in accordance with the laws of the State of New York.
15. Counterparts. This Agreement may be signed in counterpart
with all of such counterparts constituting one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their authorized representatives the date first above written.
BEAR, STEARNS & CO. INC.
By: ____________________
Address;
245 Park Avenue
New York, NY 10167
THE BANK OF NEW YORK
By: ___________________
Address;
101 Barclay Street
New York, NY 10286
Exhibit 2.k.(vi)
FUND INDEMNITY AGREEMENT
Agreement dated as of September ___, 1997 between Bear,
Stearns & Co. Inc. ("Bear, Stearns") and Mandatory Common Exchange Trust (the
"Trust").
WHEREAS the Trust is a business trust formed under the laws of
the State of Delaware and pursuant to a Trust Agreement dated as of September
___, 1997 (the "Trust Agreement"); and
WHEREAS, Bear Stearns, as sponsor under the Trust Agreement,
desires to make provision for the payment of certain indemnification expenses of
the Trust;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used herein and not defined
herein shall have the meanings ascribed thereto in the Trust Agreement.
2. AGREEMENT TO PAY EXPENSES. Bear, Stearns agrees to pay to
the Trust, and hold the Trust harmless from, any expenses of the Trust arising
under Sections 2.2(f) and 6.6 of the Administration Agreement, Section 15 of the
Custodian Agreement, Section 5.4(b) of the Paying Agent Agreement and Section
7.6 of the Trust Agreement (collectively, "Indemnification Expenses"). Subject
to paragraph 4 hereof, payment hereunder by Bear, Stearns shall be made in New
York Clearing House funds no later than five Business Days after the receipt by
Bear, Stearns, pursuant to paragraph 3 hereof, of written notice of any claim
for Indemnification Expenses.
3. NOTICE OF RECEIPT OF CLAIM. The Trustees shall give notice
to, or cause notice to be given to, Bear, Stearns in writing of any claim for
Indemnification Expenses or any threatened claim for Indemnification Expenses
immediately upon their acquiring knowledge thereof. Such written notice shall be
accompanied by any demand, bill, invoice or other communication received from
any third party claimant (a "Claimant") in respect of such Indemnification
Expense.
<PAGE>
4. RIGHT TO CONTEST. The Trust agrees that Bear, Stearns may,
and Bear, Stearns is authorized on behalf of the Trustees and the Trust to,
contest in good faith with any Claimant any amount contained in any claim for
Indemnification Expense, provided, that if, within such time period as Bear,
Stearns shall determine to be reasonable, Bear, Stearns and such Claimant are
unable to resolve amicably any disagreement regarding such claim for
Indemnification Expense, Bear, Stearns shall retain counsel reasonably
satisfactory to the Trustees to represent the Trustees in any resulting
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. It is understood that Bear, Stearns shall not, in respect of
the legal expenses of any indemnified party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel).
Bear, Stearns shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if there be a
final judgment for the Claimant, Bear, Stearns agrees to indemnify the Trustees
and the Trust from and against any loss or liability by reason of such
settlement or judgment.
5. STATEMENTS AND REPORTS. The Trustees shall collect and
safekeep all demands, bills, invoices or other written communications received
from third parties in connection with any claim for Indemnification Expenses and
shall prepare and maintain adequate books and records showing all receipts and
disbursements of funds in connection therewith. Bear, Stearns shall have the
right to inspect and to copy, at its expense, all such documents, books and
records at all reasonable times and from time to time during the term of this
Agreement.
6. TERM OF CONTRACT. This Agreement shall continue in effect
until the termination of the Trust in accordance with Section 8.3 of the Trust
Agreement.
7. NO ASSIGNMENT. No party to this Agreement may assign its
rights or delegate its duties hereunder without the prior written consent of the
other parties, except that the Trust may delegate any and all duties hereunder
to the Administrator to the extent permitted by law.
8. ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties with respect to
2
<PAGE>
the matters contained herein and supersedes all prior agreements or
understandings. No amendment or modification of this Agreement shall be valid
unless the amendment or modification is in writing and is signed by all parties
to this Agreement.
9. NOTICES. All notices, demands, reports, statements,
approvals or consents given by any party under this Agreement shall be in
writing and shall be delivered in person or by telecopy or other facsimile
communication or sent by first-class U.S. mail, registered or certified, postage
prepaid, to the appropriate party at its address on the signature pages hereof
or at such other address subsequently notified to the other parties hereto. A
copy of any communication to Bear, Stearns shall be furnished to Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022,
Attention: Richard T. Prins, Esq.,) provided that the failure to furnish such
copy shall not affect the effectiveness of any such communication. Any party may
change its address for purposes hereof by delivering a written notice of the
change to the other parties. All notices, given under this Agreement shall be
deemed received (a) in the case of hand delivery, on the day of delivery, (b) in
the case of telecopy or other facsimile communication, on the day of
transmission, and (c) in the case of mailing, on the third day after such notice
was deposited in the mail.
10. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
11. GOVERNING LAW. This Agreement shall be governed by and be
construed in accordance with the laws of the State of New York.
12. COUNTERPARTS. This Agreement may be signed in counterparts
with all of such counterparts constituting one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their authorized representatives the date first above written.
BEAR, STEARNS & CO. INC.
By_____________________________
Address:
245 Park Avenue
New York, NY 10167
MANDATORY COMMON EXCHANGE
TRUST
_______________________________
By: Donald J. Puglisi
as Managing Trustee
Address: 850 Library Avenue
Suite 204
Exhibit 2.n.(iii)
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees of Mandatory Common Exchange
Trust:
We consent to the use in this Registration Statement on Form N-2 of our report
dated September 11, 1997 relating to the Mandatory Common Exchange Trust
appearing in the Prospectus, which is a part of such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
September 11, 1997
Exhibit 2.l
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022-3897
---------------------------
Tel: (212) 735-3000
Fax: (212) 735-2000
September 11,1997
Mandatory Common Exchange Trust
c/o The Bank of New York
850 Library Avenue
Newark, Delaware 19715
Gentlemen:
We have acted as counsel for Mandatory Common Exchange Trust (the "Trust")
in connection with the preparation and filing of a Registration Statement on
Form N-2 (Registration Nos. 333-15927 and 811-07847) initially filed with the
Securities and Exchange Commission on November 12, 1996, and amended thereafter,
relating to the sale of Trust Issued Mandatory Exchange Securities (the
"Times"), pursuant to an Underwriting Agreement relating thereto (the
"Underwriting Agreement").
We have examined such records, certificates and other documents and such
questions of law as we have considered necessary and appropriate for the
purposes of this opinion. Based on the foregoing, we are of the opinion that:
1. The Trust has been duly created and is validly existing as a trust under
the laws of the State of Delaware.
2. The TIMES to be sold by the Trust pursuant to the Underwriting Agreement
have been duly authorized and, when sold in accordance with the Underwriting
Agreement, will be validly issued, fully paid and nonassessable.
Members of our firm are admitted to the Bar in the State of Delaware, and
we do not express an opinion as to the laws of any other jurisdiction other
than the
<PAGE>
Mandatory Common Exchange Trust
September 11, 1997
Page 2
federal laws of the United States of America to the extent specifically
referred to herein.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and consent to the references to our firm in the
Registration Statement and in the Prospectus of the Trust included therein.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher &
Flom LLP
Exhibit 2.n.(i)
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 Third Avenue
New York 10022-3897
--- [Letterhead]
Tel: (212) 735-3000
Fax: (212) 735-2000
September 11, 1997
Mandatory Common Exchange Trust
850 Library Avenue
Suite 204
Newark, Delaware 19715
Ladies and Gentlemen:
We have acted as special United States tax counsel to Mandatory Common
Exchange Trust, a statutory business trust formed under the laws of the State of
Delaware (the "Trust"), in connection with the preparation of a Registration
Statement (No. 333-15927) on Form N-2, which was filed by the Company and the
Trust with the Securities and Exchange Commission (the "Commission") on November
12, 1996, under the Securities Act of 1933, as amended (the "Act") (such
Registration Statement, as amended, being hereinafter referred to as the
"Registration Statement") relating to the registration under the Act of the
Trust Issued Mandatory Exchange Securities (the "TIMES") to be issued by the
Trust.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, such documents,
certificates and records as we have deemed necessary or appropriate as a basis
for the opinion set forth herein.
In rendering our opinion, we have considered the current provisions of the
Internal Revenue Code of 1986, as amended, Treasury regulations promulgated
thereunder, judicial decisions and Internal Revenue Service rulings, all of
which are subject to change, which changes may be retroactively applied. A
change in the authorities upon which our opinion is based could affect our
conclusions. There can be no assurances, moreover, that any of the opinions
expressed herein will be accepted by the Internal Revenue Service or, if
challenged, by a court.
<PAGE>
Mandatory Common Exchange Trust
September 11, 1997
Page 2
Based upon the foregoing, we are the opinion that the summary set forth
under the caption "Certain Federal Income Tax Considerations" in the prospectus
included as part of the Registration Statement correctly describes the material
aspects of the United States federal income tax treatment, under current law, of
an investment in the TIMES.
We hereby consent to the filing of this opinion with the Commission as part
of Exhibit 8-1 to the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Commission promulgated thereunder. This opinion is expressed as of the date
hereof unless otherwise expressly state, and we disclaim any undertaking to
advise you of any subsequent changes of the facts stated or assumed herein or
any subsequent changes in applicable law.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher
& Flom LLP
Exhibit 2.p
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is entered into as of the ___ day
of ______, 1997, between Mandatory Common Exchange Trust, a trust organized and
existing under the laws of Delaware (the "Trust"), and Bear, Stearns & Co. Inc.,
Salomon Brothers Inc or one of its affiliates (each, a "Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF THE SECURITIES
1.1 SALE AND ISSUANCE OF UNITS. Subject to the terms and
conditions of this Agreement, the Trustees agree to sell to each Purchaser, and
each Purchaser agrees to purchase from the Trustees, Trust Issued Mandatory
Common Exchange Securities, representing undivided beneficial interests in the
Trust (the "Securities") at an aggregate purchase price of 50,000
[$___________].
1.2 CLOSING. The purchase and sale of the Securities shall
take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York, at ___a.m., on _________, 1997, or at such other
time ("Closing Date") and place as the Trustees and the Purchaser mutually agree
upon. At or after the Closing, the Trustees shall deliver to each Purchaser
certificates representing the Securities, registered in the name of each
Purchaser or its nominee. Payment for the Securities shall be made on the
Closing Date by the Purchaser by bank wire transfers or by delivery of certified
or official bank checks, in either case in immediately available funds, of an
amount equal to the purchase price of the Securities purchased by the Purchaser.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
Each Purchaser hereby represents and warrants to, and covenants for the benefit
of, the Trust that:
2.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
by the Trustees with the Purchaser in reliance upon the Purchaser's
representation to the
<PAGE>
Trustees, which by the Purchaser's execution of this Agreement the Purchaser
hereby confirms, that the Securities are being acquired for investment for the
Purchaser's own account, and not as a nominee or agent and not with a view to
the resale or distribution by the Purchaser of any of the Securities, and that
the Purchaser has no present intention of selling, granting any participation
in, or otherwise distributing the Securities, in either case in violation of any
securities registration requirement under applicable law, but subject
nevertheless, to any requirement of law that the disposition of its property
shall at all times by within its control. By executing this Agreement, the
Purchaser further represents that the Purchaser does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities.
2.2 INVESTMENT EXPERIENCE. The Purchaser acknowledges that it
can bear the economic risk of the investment for an indefinite period of time
and has such knowledge and experience in financial and business matters (and
particularly in the business in which the Trust operates) as to be capable of
evaluating the merits and risks of the investment in the Securities. The
Purchaser is an "accredited investor" as defined in Rule 501(a) of Regulation D
under the Securities Act of 1933 (the "Act").
2.3 RESTRICTED SECURITIES. The Purchaser understands that the
Securities are characterized as "restricted securities" under the United States
securities laws inasmuch as they are being acquired from the Trustees in a
transaction not involving a public offering and that under such laws and
applicable regulations such Securities may be resold without registration under
the Act only in certain circumstances. In this connection, the Purchaser
represents that it understands the resale limitations imposed by the Act and is
generally familiar with the existing resale limitations imposed by Rule 144.
2.4 FURTHER LIMITATIONS ON DISPOSITION. The Purchaser further
agrees not to make any disposition directly or indirectly of all or any portion
of the Securities unless and until:
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<PAGE>
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) The Purchaser shall have furnished the Trustees with an
opinion of counsel, reasonably satisfactory to the Trustees, that such
disposition will not require registration of such Securities under the Act.
(c) Notwithstanding the provisions of subsections (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by the Purchaser to any affiliate of the Purchaser, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if it were the original Purchaser hereunder.
2.5 LEGENDS. It is understood that the certificate
evidencing the Securities may bear either or both of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel reasonably
satisfactory to the Trustees of Mandatory Common Exchange Trust that such
registration is not required."
(b) Any legend required by the laws of any other applicable
jurisdiction.
The Purchaser and the Trustees agree that the legend contained
in the paragraph (a) above shall be removed at a holder's request when they are
no longer necessary to ensure compliance with federal securities laws.
2.6 TRUST AGREEMENT: SPLIT OF THE SECURITIES. The Purchaser
consents to (a) the execution and delivery by the Trustees and Bear, Stearns &
Co. Inc., as sponsor of the Trust, of the Trust Agreement in the form attached
hereto and (b) the split of the Purchaser's Securities. Subsequent to the
determination of the public offering price per Security and related underwriting
discount for the Securities to be sold to the Underwriters (as defined
3
<PAGE>
in the aforementioned Trust Agreement) but prior to the sale of the Securities
to the Underwriters, each Security purchased hereby shall be split into a
greater number of Securities so that immediately following such split the value
of each Security held by the Purchaser will equal the aforesaid public offering
price less the related underwriting discount.
2.7 COUNTERPARTS. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
TRUSTEES
------------------------------------
as Trustee
------------------------------------
as Trustee
------------------------------------
as Trustee
Bear, Stearns & Co. Inc.
By:
---------------------------------
Title:
Address: 245 Park Avenue
New York, NY 10167
Salomon Brothers Inc
By:
-------------------------------
Title:
Address: Seven World Trade
Center
New York, NY 10048
5
