As filed with the Securities and Exchange Commission on April 8, 1997
Securities Act File No. 333-
Investment Company Act File No. 811-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [ ]
(check appropriate box or boxes)
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BCD HITS TRUST
(Exact Name of Registrant as Specified in Charter)
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C/O PUGLISI & ASSOCIATES
850 Library Avenue
Suite 204
Newark, Delaware 19715
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (302) 738-6680
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Donald J. Puglisi
Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19715
(Name and Address of Agent for Service)
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Copies to:
Bruce K. Dallas, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
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Approximate date of proposed public offering: As soon as
practicable after the effective date of this Registration Statement.
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If any securities being registered on this form will be offered on a delayed
or continuous basis in reliance on Rule 415 under the Securities Act of 1933,
as amended, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [ ]
It is proposed that this filing will become effective
[ ] when declared effective pursuant to section 8(c)
If appropriate, check the following box:
[ ] this [post-effective] amendment designates a new effective date for a
previously filed [post-effective amendment] [registration statement].
[ ] 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 _________.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Maximum Aggregate
Title of Securities Amount Being Offering Price Offering Amount of
Being Registered Registered Per Share (1) Price (1) Registration Fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HITS representing shares of beneficial interest 1,000,000 HITS $10.00 $10,000,000 $3,031
- --------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee.
</TABLE>
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
==============================================================================
SUBJECT TO COMPLETION, DATED APRIL 8, 1997
[(BCD) LOGO]
HITS(SM)
BCD HITS Trust
(Subject to Exchange for Common Shares of (BCD Company) or Cash)
-------------------
Each of the Hybrid Income Trust Securities(SM) (the "HITS") of
BCD HITS Trust (the "Trust") offered hereby represents a proportionate share
of beneficial interest in the Trust, which entitles the holder to receive an
annual distribution of $ , and will be exchanged for between % and
100% of each type of Reference Property (or, in certain
circumstances, cash, or a combination of cash and Reference Property) upon the
conclusion of the term of the Trust on ,200_ (the "Exchange Date").
The term "Reference Property" means initially one Common Share, par value $
per share (the "BCD Common Stock"), of (BCD Company) (the "Company")
and shall be subject to adjustment from time to time prior to the Business Day
(as defined herein) immediately preceding the Exchange Date to reflect the
addition or substitution of any cash, securities and/or other property
resulting from the application of the adjustment provisions described herein.
The annual distribution of $ per HITS is payable quarterly on each
February 15, May 15, August 15 and November 15, commencing August 15, 1997.
The HITS are not subject to redemption.
The Trust is a newly created Delaware business trust established to
purchase and hold (i) a series of zero-coupon U.S. Government securities ("U.S.
Treasury Securities") maturing on a quarterly basis through the Exchange Date
and (ii) a forward purchase contract (the "Contract") with an existing
stockholder (the "Contracting Stockholder") of the Company relating to the
Reference Property. The Trust's investment objective is to distribute to
holders of the HITS on a quarterly basis $ per HITS and, on or
shortly after the Exchange Date, a percentage of each type of Reference
Property (or, in certain circumstances, cash, or a combination of cash and
Reference Property) per HITS equal to the Exchange Amount. The "Exchange
Amount" is equal to: (a) if the Reference Property Value (as defined herein)
is greater than or equal to $ (the "Threshold Appreciation Price"),
% of each type of Reference Property, (b) if the Reference Property Value
is less than the Threshold Appreciation Price but greater than the Initial
Price, a percentage of each type of Reference Property, allocated as
proportionately as practicable, so that the aggregate Then-Current Value (as
defined herein) of such percentage as of the Exchange Date equals the Initial
Price and (c) if the Reference Property Value is less than or equal to the
Initial Price, 100% of each type of Reference Property. The "Initial Price"
is $ , which amount is equal to the last reported sale price of the BCD
Common Stock on [ ] ("[ ]") on
, 1997. Holders otherwise entitled to receive fractional units or
interests of any type of Reference Property in respect of their aggregate
holdings of HITS will receive cash in lieu thereof. Pursuant to the terms of
the Contract, the Contracting Stockholder is obligated to deliver to the Trust
on the Business Day immediately preceding the Exchange Date the Reference
Property required by the Trust in order to exchange all of the HITS on the
Exchange Date in accordance with its investment objective. The obligation of
the Contracting Stockholder to deliver Reference Property under the Contract
may be cash settled, at the option of such Contracting Stockholder (the "Cash
Settlement Option"), in whole or in part, by delivering to the Trust on the
Business Day immediately preceding the Exchange Date, in lieu of the portion
of the Reference Property otherwise deliverable in respect of which an
election to exercise the Cash Settlement Option is made, cash in an amount per
outstanding HITS equal to the aggregate Then-Current Value (as defined herein)
of such Reference Property as of the Exchange Date. If the Contracting
Stockholder elects to exercise the Cash Settlement Option, holders of the HITS
will receive cash, or a combination of cash and Reference Property, on or
shortly after the Exchange Date. AS DESCRIBED HEREIN, THE REFERENCE PROPERTY
VALUE WILL REPRESENT A DETERMINATION OF THE VALUE OF THE REFERENCE PROPERTY
IMMEDIATELY PRIOR TO THE EXCHANGE DATE. ACCORDINGLY, THERE CAN BE NO ASSURANCE
THAT THE AMOUNT RECEIVABLE BY HOLDERS OF THE HITS UPON EXCHANGE WILL BE EQUAL
TO OR GREATER THAN THE ISSUE PRICE OF THE HITS. IF THE REFERENCE PROPERTY
VALUE IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT RECEIVABLE WILL BE LESS THAN
THE ISSUE PRICE PAID FOR THE HITS, IN WHICH CASE AN INVESTMENT IN THE HITS
WILL RESULT IN A LOSS. See "Investment Objectives and Policies--General" and
"--The Contract" and "Risk Factors--Limitations on Opportunity for Equity
Appreciation; Potential Losses".
(continued on following page)
See "Risk Factors" commencing on page 19 for a discussion of
certain factors that should be considered by prospective purchasers of the
HITS offered hereby.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Sales Proceeds to
Public Load (1) Trust (2)
- -------------------------------------------------------------------
Per HITS............ $ $0.00 $
Total (3)........... $ $0.00 $
- -------------------------------------------------------------------
(1) The Contracting Stockholder will pay the Underwriters a Sales Load of $
per HITS, or $ in total. See "Underwriting" for
information concerning indemnification of the Underwriters and other
matters.
(2) Expenses of the offering, which are payable by the Contracting
Stockholder, are estimated at approximately $ .
(3) The Trust has granted the Underwriters a 30-day option to purchase up to
additional HITS solely to cover over-allotments, if any. If the
Underwriters exercise this option in full, the Price to Public will total $
, the Sales Load will total $0.00 and the Proceeds to Trust will
total $ . See "Underwriting".
-------------------
The HITS are offered by the several Underwriters named 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 delivery of the HITS will
be made through the facilities of The Depository Trust Company on or about
, 1997.
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(SM) Service mark of Montgomery Securities
-------------------
Montgomery Securities
, 1997
(continued from previous page)
In the event of a consolidation or merger of the Company or any
successor thereto into another entity, or the liquidation of the Company or
any such successor, or certain related events, or upon the occurrence of
certain defaults by the Contracting Stockholder under the Contract or the
collateral arrangements described herein, the Contract will be accelerated,
the Trust's assets (other than assets received pursuant to the Contract) will
be liquidated, the assets of the Trust (including the proceeds of such
liquidation and any assets received pursuant to the Contract, net of unpaid
Trust expenses, if any) will be distributed pro rata to the holders of the
HITS ("Holders") and the term of the Trust will expire. See "Investment
Objective and Policies--The Contract--Reorganization Events Causing a
Dissolution of the Trust" and "--Collateral Arrangements; Acceleration".
Reference is made to the accompanying prospectus of the Company (the
"Company Prospectus") with respect to the shares of BCD Common Stock that
may be received by a Holder on or shortly after the Exchange Date or upon
earlier dissolution of the Trust. The Company is not affiliated with the
Trust, will not receive any of the proceeds from the sale of the HITS and
will have no obligations with respect to the HITS. See "Risk Factors--No
Affiliation Between the Trust and the Company".
Application will be made for [listing/quotation] of the HITS on [ ].
Prior to the offering there has been no public market for the HITS. Shares
of closed-end investment companies have in the past frequently traded at a
discount from their net asset values and initial public offering prices.
The risks associated with this characteristic of closed-end investment
companies may be greater for investors expecting to sell shares of a
closed-end investment company soon after the completion of an initial
public offering. See "Risk Factors--Absence of Trading History;
Marketability; Possibility of the HITS Trading at a Discount from Net
Asset Value".
The HITS are designed to provide investors with a current distribution
yield (the Company has not paid any dividends on the BCD Common Stock)
while also providing the opportunity for investors to share in the
appreciation, if any, of the value of the Reference Property above the
Threshold Appreciation Price. However, the opportunity for equity
appreciation afforded by an investment in the HITS is less than that
afforded by a direct investment in the Reference Property because the
amount receivable by a Holder of a HITS upon exchange will only exceed the
issue price of such HITS if the Reference Property Value exceeds the
Threshold Appreciation Price, which represents an appreciation of
% over the Initial Price. In addition, because each HITS will entitle the
Holder to receive only % of each type of Reference Property if the
Reference Property Value exceeds the Threshold Appreciation Price, Holders
will be entitled to receive upon exchange only % of any appreciation of
the value of the Reference Property above the Threshold Appreciation Price.
See "Risk Factors--Limitations on Opportunity for Equity Appreciation;
Potential Losses".
The HITS may be a suitable investment for investors who are able to
understand the unique nature of the Trust and the economic characteristics
of the Contract and the U.S. Treasury Securities held by the Trust.
The Trust has adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that, except in limited
circumstances described herein, the U.S. Treasury Securities may not be
disposed of prior to their respective maturities. As a result, the Trust will
continue to hold the Contract despite any significant decline in the value of
the Reference Property, including the BCD Common Stock, or adverse changes in
the financial condition of the issuer of any Reference Security (as defined
herein), including the Company. The Trust will not be managed like a typical
closed-end investment company. See "Risk Factors--No Active Portfolio
Management".
The Trust will be a grantor trust for federal income tax purposes and each
Holder will be treated as the owner of its pro rata portion of the U.S.
Treasury Securities and the Contract. The U.S. Treasury Securities will be
treated as having "original issue discount", which Holders must recognize
currently as income as it accrues. It is currently anticipated that a
substantial portion of each quarterly cash distribution will be treated as a
tax-free return of the Holders' costs of the U.S. Treasury Securities and
therefore will not be considered current income for federal income tax
purposes. Holders will not recognize income, gain, or loss upon the Trust's
entry into the Contract and, although the matter is not entirely free from
doubt, Holders will not recognize income with respect to the Contract prior to
its settlement. Upon settlement of the Contract, Holders will recognize
taxable gain or loss if cash is delivered, but, although the matter is not
entirely free from doubt, Holders will not recognize gain or loss if other
Reference Property is delivered. See "Certain United States Federal Income
Tax Consequences".
This Prospectus sets forth information about the Trust that a prospective
investor ought to know before investing and should be read and retained for
future reference.
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Certain persons participating in this Offering may engage in
transactions that stabilize, maintain, or otherwise affect the price of the
HITS or the BCD Common Stock. Specifically, the Underwriters may overallot
in connection with the Offering, and may bid for, and purchase, HITS or
shares of the BCD Common Stock in the open market. For a description of
these activities, see "Underwriting".
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus. Unless otherwise
indicated, the information contained in this Prospectus assumes that the
Underwriters' over-allotment option is not exercised. Unless the context
otherwise requires, the information contained in this Prospectus assumes that
on the Exchange Date the Reference Property consists only of shares of BCD
Common Stock.
The Trust
BCD HITS Trust (the "Trust") is a newly created Delaware
business trust that will be registered as a non-diversified closed-end
management investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The term of the Trust will expire on
or shortly after , 200_ (the "Exchange Date"), except that the Trust may
be dissolved prior to such date under certain limited circumstances. See "The
Trust" and "Investment Objective and Policies--Trust Dissolution". The Trust
will be treated as a grantor trust for United States Federal income tax
purposes. See "Certain United States Federal Income Tax Considerations".
The Offering
The Trust is offering (the "Offering") HITS,
each representing a proportionate share of beneficial interest in the Trust,
at an initial public offering price of $ per HITS (which is equal to the
last reported sale price of the BCD Common Stock on [ ] on
, 1997). The Underwriters have been granted an option, exercisable
for 30 days from the date of this Prospectus, to purchase up to an aggregate of
additional HITS to cover over-allotments, if any. See
"Underwriting".
The Company
[Description]
Reference is made to the accompanying prospectus of the Company
(the "Company Prospectus") with respect to the shares of BCD Common Stock that
may be received by a holder of HITS on or shortly after the Exchange Date or
upon earlier dissolution of the Trust. The Company is not affiliated with the
Trust, will not receive any of the proceeds from the sale of the HITS and will
have no obligations with respect to the HITS. The Company Prospectus is being
attached hereto and delivered to prospective purchasers of HITS together with
this Prospectus for convenience of reference only. The Company Prospectus
does not constitute a part of this Prospectus, nor is it incorporated by
reference herein. See "Risk Factors--No Affiliation Between the Trust and the
Company".
Investment Objective and Policies
The Trust will purchase and hold a series of zero-coupon U.S.
Government securities ("U.S. Treasury Securities") maturing on a quarterly
basis through the Exchange Date and a forward purchase contract (the
"Contract") with an existing stockholder (the "Contracting Stockholder") of
the Company relating to the Reference Property. The Trust's investment
objective is to distribute to holders of the HITS ("Holders") on a quarterly
basis $ per HITS (which amount equals the pro rata portion of the
fixed quarterly distributions from the proceeds of the maturing U.S. Treasury
Securities held by the Trust) and, on or shortly after the Exchange Date, a
percentage of each type of Reference Property (or, in certain circumstances,
cash, or a combination of cash and Reference Property) per HITS equal to the
Exchange Amount. The "Exchange Amount" is equal to: (i) if the Reference
Property Value (as defined herein) is greater than or equal to $ (the
"Threshold Appreciation Price"), % of each type of Reference
Property, (ii) if the Reference Property Value is less than the Threshold
Appreciation Price but greater than $ (the "Initial Price"), a percentage
of each type of Reference Property, allocated as proportionately as
practicable, so that the aggregate Then-Current Value (as defined herein) of
such percentage as of the Exchange Date equals the Initial Price and (iii) if
the Reference Property Value is less than or equal to the Initial Price, 100%
of each type of Reference Property. The term "Reference Property" means
initially one share of BCD Common Stock and shall be subject to adjustment
from time to time prior to the Business Day (as defined herein) immediately
preceding the Exchange Date to reflect the addition or substitution of any
cash, securities and/or other property resulting from the application of the
adjustment provisions described herein. As more fully described under
"Investment Objective and Policies--The Contract--Reference Property
Adjustments", upon application of such adjustment provisions, in the future
the Reference Property may include, in addition to or in lieu of BCD Common
Stock, other securities (including rights or warrants) of the Company,
securities of another issuer, cash or other property. Holders otherwise
entitled to receive fractional units or interests of any type of Reference
Property in respect of their aggregate holdings of HITS will receive cash in
lieu thereof. See "Investment Objective and Policies-- General" and
"--Fractional Interests".
Pursuant to the terms of the Contract, the Contracting
Stockholder is obligated to deliver to the Trust on the Business Day
immediately preceding the Exchange Date the Reference Property required by the
Trust in order to exchange all of the HITS (including any HITS issued pursuant
to the over-allotment option granted by the Trust to the Underwriters and HITS
issued in connection with the creation of the Trust) on the Exchange Date in
accordance with its investment objective. The obligation of the Contracting
Stockholder to deliver Reference Property under the Contract may be cash
settled, at the option of the Contracting Stockholder (the "Cash Settlement
Option"), in whole or in part, by delivering to the Trust on the Business Day
immediately preceding the Exchange Date, in lieu of the portion of the
Reference Property otherwise deliverable in respect of which an election to
exercise the Cash Settlement Option is made, cash in an amount per outstanding
HITS equal to the aggregate Then-Current Value of such Reference Property as
of the Exchange Date. If the Contracting Stockholder elects to exercise the
Cash Settlement Option, Holders will receive cash, or a combination of cash
and Reference Property, on or shortly after the Exchange Date. See
"Investment Objective and Policies--The Contract".
Holders of the HITS will receive distributions at the rate per
HITS of $ per annum, or $ per quarter, payable quarterly
on each February 15, May 15, August 15 and November 15 (or, if any such date
is not a Business Day, on the next succeeding Business Day), to Holders of
record as of each February 1, May 1, August 1 and November 1, respectively.
The first distribution (in respect of the period from , 1997
until August 14, 1997) will be payable on August 15, 1997 to Holders of record
as of August 1, 1997, and will equal $ per HITS. See
"Investment Objective and Policies--Trust Assets".
On the Exchange Date, each outstanding HITS will be exchanged
for between % and 100% of each type of Reference Property (or, if
the Contracting Stockholder elects to exercise the Cash Settlement Option,
cash, or a combination of cash and Reference Property), depending on the
Reference Property Value. As described herein, the Reference Property Value
will represent a determination of the value of the Reference Property
immediately prior to the Exchange Date. Accordingly, there can be no
assurance that the amount receivable by Holders upon exchange will be equal to
or greater than the issue price of the HITS. If the Reference Property Value
is less than the Initial Price, such amount receivable will be less than the
issue price paid for the HITS, in which case an investment in the HITS will
result in a loss. In the event of a consolidation or merger of the Company or
any successor thereto into another entity, or the liquidation of the Company
or any such successor, or certain related events, or upon the occurrence of
certain defaults by the Contracting Stockholder under the Contract or the
collateral arrangements described herein, the Contract will be accelerated,
the Trust's assets (other than assets received pursuant to the Contract) will
be liquidated, the assets of the Trust (including the proceeds of such
liquidation and any assets received pursuant to the Contract, net of unpaid
Trust expenses, if any) will be distributed pro rata to the Holders and the
term of the Trust will expire. See "Investment Objective and Policies--The
Contract--Reorganization Events Causing a Dissolution of the Trust" and
"--Collateral Arrangements; Acceleration" and "Risk Factors--Limitations on
Opportunity for Equity Appreciation; Potential Losses".
Trust Assets
The Trust's assets will consist primarily of: (i) a series of
zero-coupon U.S. Treasury Securities with face amounts and maturities
corresponding to the amounts and payment dates of the distributions payable
with respect to the HITS, comprising approximately % of the initial
assets of the Trust, and (ii) the Contract with the Contracting Stockholder
relating to the Reference Property, comprising approximately % of the
initial assets of the Trust.
Pursuant to the terms of the Contract, the Contracting
Stockholder is obligated to deliver to the Trust on the Business Day
immediately preceding the Exchange Date an aggregate number or amount of each
type of Reference Property equal to the product of the Exchange Amount and the
aggregate number of HITS then outstanding, subject to the Cash Settlement
Option. The purchase price (the "Purchase Price") under the Contract is equal
to $ in the aggregate (assuming the Underwriters'
over-allotment option is not exercised) and is payable to the Contracting
Stockholder by the Trust on or about , 1997. No other
consideration is payable by the Trust to the Contracting Stockholder in
connection with its acquisition of the Contract or the performance of the
Contract by the Contracting Stockholder. See "Investment Objective and
Policies--The Contract".
The obligations of the Contracting Stockholder under the
Contract initially will be secured by a pledge of the maximum number of shares
of BCD Common Stock deliverable by the Contracting Stockholder pursuant the
Contract or, at the election of such Contracting Stockholder, by substitute
collateral consisting of U.S. Government obligations. See "Investment
Objective and Policies--The Contract--Collateral Arrangements; Acceleration".
Relationship to BCD Common Stock
Holders will receive distributions at the rate of % of
the issue price per annum. The Company has not paid any dividends on the BCD
Common Stock. Any future determination as to the payment of dividends will be
at the discretion of the Company's Board of Directors and will depend upon the
Company's operating results, financial condition and capital requirements,
contractual restrictions, general business conditions and such other factors
as the Company's Board of Directors deems relevant. Except to the extent that
the Reference Property will be adjusted for certain Extraordinary Cash
Dividends (as defined herein), Holders will not be entitled to receive any
future dividends on the BCD Common Stock unless and until such time, if any,
as the Trust shall have delivered BCD Common Stock in exchange for HITS on or
shortly after the Exchange Date or upon earlier dissolution of the Trust, and
unless the applicable record date for determining stockholders entitled to
receive such dividends occurs after such delivery. See "Risk Factors--No
Stockholder Rights".
The opportunity for equity appreciation afforded by an
investment in the HITS is less than that afforded by a direct investment in
the BCD Common Stock because the amount receivable by a Holder of a HITS upon
exchange will only exceed the issue price of such HITS if the Reference
Property Value exceeds the Threshold Appreciation Price (which represents an
appreciation of % over the Initial Price). Moreover, each HITS will
entitle the Holder to receive only % (the percentage equal to the Initial
Price divided by the Threshold Appreciation Price) of any appreciation of the
value of Reference Property above the Threshold Appreciation Price. Holders
will realize the entire decline in value if the Reference Property Value is
less than the Initial Price. See "Risk Factors--Limitations on Opportunity
for Equity Appreciation; Potential Losses".
Dilution
The percentage of each type of Reference Property (or the
amount of cash or combination of cash and Reference Property) that Holders are
entitled to receive upon exchange will not be adjusted for certain events, such
as offerings of BCD Common Stock by the Company for cash or in connection with
acquisitions. The Company is not restricted from issuing additional shares of
BCD Common Stock during the term of the Trust and has no obligation to
consider the interests of Holders for any reason. Additional issuances of
shares of BCD Common Stock may materially and adversely affect the price of
BCD Common Stock and, because of the relationship of the percentage of each
type of Reference Property (or the amount of cash or combination of cash and
Reference Property) to be received upon exchange to the price of the BCD
Common Stock, such other events may adversely affect the trading price of the
HITS. See "Risk Factors--Reference Property Adjustments" and "--Comparison
to Other Equity Securities; Relationship to BCD Common Stock".
Term of the Trust
The Trust will dissolve on or shortly after the Exchange Date,
except if dissolved earlier under certain limited circumstances. Promptly
after the Exchange Date, the Reference Property and/or cash to be exchanged
for the HITS and any other remaining Trust assets, net of any remaining Trust
expenses, if any, will be distributed pro rata to Holders. If the Company or
any successor thereto is the subject of an Acceleration Event (as defined
herein) or certain defaults shall have occurred with respect to the
Contracting Stockholder under the Contract or the collateral arrangements
described herein, the Contract will accelerate, the Trust's assets (other than
assets received pursuant to the Contract) will be liquidated, the assets of
the Trust (including the proceeds of such liquidation and any assets received
pursuant to the Contract, net of unpaid Trust expenses, if any) will be
distributed pro rata to the Holders and the term of the Trust will expire.
See "Investment Objective and Policies--The Contract" and "--Trust
Dissolution" and "Risk Factors--Limited Term".
Certain United States Federal Income Tax Considerations
The Trust will be 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 realized (including original issue discount
realized) 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", which
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' costs of 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. It is also
expected that the tax-free portion of each quarterly cash distribution will
increase as a percentage of the total distribution during the life of the
Trust.
Under existing law, Holders will not recognize income, gain, or
loss upon the Trust's entry into the Contract and, although the matter is not
entirely free from doubt, Holders will not recognize income with respect to the
Contract prior to its settlement. Upon settlement of the Contract, Holders
will recognize taxable gain or loss if cash is delivered, but, although the
matter is not entirely free from doubt, Holders will not recognize gain or loss
if other Reference Property is delivered. A Holder will have a basis in any
Reference Property received (other than cash) equal to the pro rata portion of
the Holder's adjusted basis in the Contract allocable to such property. See
"Certain United States Federal Income Tax Considerations".
Management Arrangements
The Trust will be internally managed and will not have an
investment adviser. The Trust's portfolio will not be actively managed. See
"Risk Factors--No Active Portfolio Management". The administration of the
Trust will be overseen by the Trustees. The day-to-day administration of the
Trust will be carried out by [ ] (or its successor) as trust
administrator (the "Administrator"). [ ] (or its successor) will
also act as custodian for the Trust's assets (the "Custodian") and as paying
agent, registrar and transfer agent (the "Paying Agent") with respect to the
HITS. The Trustees have delegated most of their operational duties to the
Administrator. Except as aforesaid, and except for its role as collateral
agent under the Trust's Security and Pledge Agreement (see "Investment
Objective and Policies--The Contract--Collateral Arrangements; Acceleration"),
[ ] has no other affiliation with, and is not engaged in any
other transaction with, the Trust. For their services, the Contracting
Stockholder will pay each of the Administrator, the Custodian and the Paying
Agent at the closing of the Offering a one-time, up-front amount in respect of
its fee. See "Management Arrangements".
Risk Factors
The Trust has adopted a fundamental policy that the Contract
may not be disposed of during the term of the Trust and that, unless the Trust
dissolves prior to the Exchange Date due to the occurrence of an Acceleration
Event with respect to the Company or any successor thereto or in the event of
a Default (as defined herein) by the Contracting Stockholder, the U.S.
Treasury Securities may not be disposed of prior to their respective
maturities. The Trust will continue to hold the Contract despite any
significant decline in the value of the Reference Property, including the BCD
Common Stock, or adverse changes in the financial condition of the issuer of
any Reference Security (as defined herein), including the Company. See "Risk
Factors--No Active Portfolio Management".
Although the HITS will provide investors with a current
distribution yield (the Company has not paid any dividends on the BCD Common
Stock), the opportunity for equity appreciation afforded by an investment in
the HITS is less than that afforded by a direct investment in the BCD Common
Stock. The value of the Reference Property receivable by a Holder of a HITS
upon exchange will only exceed the issue price of such HITS if the Reference
Property Value exceeds the Threshold Appreciation Price, which represents an
appreciation of % over the Initial Price. Moreover, because each HITS
will entitle the Holder to receive only % of each type of Reference
Property if the Reference Property Value exceeds the Threshold Appreciation
Price, Holders will be entitled to receive upon exchange only % of any
appreciation of the value of the Reference Property above the Threshold
Appreciation Price. As described herein, the Reference Property Value will
represent a determination of the value of the Reference Property immediately
prior to the Exchange Date. Accordingly, there can be no assurance that the
amount receivable by Holders upon exchange will be equal to or greater than
the issue price of the HITS. If the Reference Property Value is less than the
initial price, such amount receivable will be less than the issue price paid
for the HITS, in which case an investment in the HITS will result in a loss.
See "Risk Factors--Limitations on Opportunity for Equity Appreciation;
Potential Losses".
The Trust is classified as a "non-diversified" investment
company under the Investment Company Act. Consequently, the Trust is not
limited by the Investment Company Act in the proportion of its assets that may
be invested in the securities of a single issuer. Since the only securities
held by the Trust will be the U.S. Treasury Securities and the Contract, the
Trust may be subject to greater risk than would be the case for an investment
company with more diversified investments. See "Risk Factors--Non-diversified
Portfolio".
The trading prices of the HITS in the secondary market will be
directly affected by the trading prices of the BCD Common Stock in the
secondary market. It is impossible to predict whether the price of BCD Common
Stock will rise or fall. Trading prices of BCD Common Stock will be
influenced by the Company's operating results and prospects and by economic,
financial and other factors and market conditions. See "Risk
Factors--Comparison to Other Equity Securities; Relationship to BCD Common
Stock".
Holders will not be entitled to any rights with respect to the
BCD Common Stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions in respect thereof) unless and
until such time, if any, as the Trust shall have delivered shares of BCD
Common Stock in exchange for HITS on or shortly after the Exchange Date or
upon earlier dissolution of the Trust, and unless the applicable record date,
if any, for the exercise of such rights occurs after such delivery. See "Risk
Factors--No Stockholder Rights".
A bankruptcy of the Contracting Stockholder could adversely
affect the timing of exchange and, as a result, the amount received by the
Holders. See "Risk Factors--Risk Relating to Bankruptcy of the Contracting
Stockholder".
Listing
Application will be made for [listing/quotation] of the HITS on
[ ].
FEE TABLE
Regulations of the Securities and Exchange Commission (the
"Commission") applicable to closed-end investment companies designed to assist
investors in understanding the costs and expenses that an investor will bear
directly or indirectly require the presentation of Trust expenses in the
following format. Because the Trust will not bear any ongoing fees or
expenses, investors will not bear any direct expenses. The Contracting
Stockholder will pay the Underwriters a Sales Load of $ per HITS (or
%).
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load (as a percentage of offering price) 0% (a)
Automatic Dividend Reinvestment Plan Fees............ Not Applicable
ANNUAL EXPENSES (as a percentage of net assets)
Management Fees(b)................................... 0%
Other Expenses(c).................................... 0%
-
TOTAL ANNUAL EXPENSES(c) 0%
=
- -----------
(a) See the cover page of this Prospectus and "Underwriting".
(b) See "Management Arrangements". The Trust will be internally managed;
consequently there is no separate investment advisory fee paid by the
Trust. [ ] will act as the administrator of the Trust.
(c) The organization costs of the Trust in the amount of $ , the costs
associated with the initial registration and offering of the HITS estimated
to be approximately $ , and approximately $ in respect
of anticipated ongoing expenses over the term of the Trust will be paid by
the Contracting Stockholder. Any unanticipated expenses of the Trust will
be paid by Montgomery Securities, which will be reimbursed by the
Contracting Stockholder. See "Management Arrangements--Estimated
Expenses". Absent such arrangements, the Trust's "Other Expenses" and
"Total Annual Expenses" would be approximately % of the Trust's 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.
EXAMPLE 1 YEAR 3 YEARS
An investor would pay the following expenses on a $1,000
investment, including the maximum sales load of $0.00 and
assuming (1) no annual expenses and (2) a 5% annual return
throughout the periods: $ 0.00 $ 0.00
The Example set forth above assumes reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return as mandated by
Commission regulations. The Example should not be considered a
representation of future expenses or annual rates of return, and actual
expenses or annual rates of return may be more or less than those assumed
for purposes of the Example.
THE TRUST
BCD HITS Trust is a newly created Delaware business trust and
will be registered as a non-diversified closed-end management investment
company under the Investment Company Act. The Trust was created on April 4,
1997 pursuant to a Trust Agreement dated as of such date (as amended and
restated as of , 1997, the "Trust Agreement"). The term of the
Trust will expire on or shortly after , 200_, except that the Trust may
be dissolved prior to such date under certain limited circumstances. The
Trust will be treated as a grantor trust for United States Federal income tax
purposes. See "Certain United States Federal Income Tax Considerations". The
Trust's principal office is located at 850 Library Avenue, Suite 204, Newark,
Delaware 19715 and its telephone number is (302) 738-6680.
USE OF PROCEEDS
The net proceeds of the Offering will be approximately $ (or
approximately $ if the Underwriters' over-allotment option is
exercised in full). At the time of the closing of the Offering, or
shortly thereafter, the net proceeds of the Offering will be used to
purchase a fixed portfolio comprised of a series of zero-coupon U.S.
Treasury Securities with face amounts and maturities corresponding to
the amounts and payment dates of the distributions payable with
respect to the HITS and to pay the Purchase Price under the Contract
to the Contracting Stockholder.
INVESTMENT OBJECTIVE AND POLICIES
General
The Trust will purchase and hold (i) a series of zero-coupon
U.S. Treasury Securities maturing on a quarterly basis through the Exchange
Date and (ii) the Contract with the Contracting Stockholder relating to the
Reference Property. The Trust's investment objective is to distribute to
Holders on a quarterly basis $ per HITS (which amount equals the pro
rata portion of the fixed quarterly distributions from the proceeds of the
maturing U.S. Treasury Securities held by the Trust) and, on or shortly after
the Exchange Date, a percentage of the number or amount of each type of
Reference Property (or, in certain circumstances, cash, or a combination of
cash and Reference Property) per HITS equal to the Exchange Amount. The
"Exchange Amount" is equal to: (i) if the Reference Property Value is greater
than or equal to the Threshold Appreciation Price, % of the number or
amount of each type of Reference Property, (ii) if the Reference Property
Value is less than the Threshold Appreciation Price but greater than the
Initial Price, a percentage of the number or amount of each type of Reference
Property, allocated as proportionately as practicable, so that the aggregate
Then-Current Value of such percentage as of the Exchange Date equals the
Initial Price and (iii) if the Reference Property Value is less than or equal
to the Initial Price, 100% of the number or amount of each type of Reference
Property. There can be no assurance that the value of the Reference Property
receivable by Holders upon exchange will be equal to or greater than the issue
price of the HITS. If the Reference Property Value is less than the initial
price, the value of the Reference Property receivable upon exchange will be
less than the issue price paid for the HITS, in which case an investment in
the HITS will result in a loss. Holders otherwise entitled to receive
fractional units or interests of any Reference Property in respect of their
aggregate holdings of HITS will receive cash in lieu thereof. See
"--Fractional Interests".
The term "Reference Property" initially means one share of BCD
Common Stock and shall be subject to adjustment from time to time prior to the
Business Day immediately preceding the Exchange Date to reflect the addition
or substitution of any cash, securities and/or other property resulting from
the application of the adjustment provisions described below under "--The
Contract--Reference Property Adjustments". As more fully described below,
upon application of such adjustment provisions, in the future the Reference
Property may include, in addition to or in lieu of BCD Common Stock, other
securities (including rights or warrants) of the Company, securities of
another issuer, cash or other property. The term "Reference Security" means,
at any time, any security (as defined in Section 2(1) of the Securities Act of
1933, as amended (the "Securities Act")) then constituting part of the
Reference Property. The term "Reference Property Value" means the aggregate
Then-Current Value as of the Exchange Date of the number or amount of each
type of Reference Property. The term "Then-Current Value" means, for any item
of Reference Property as of any date, (a) if such item of Reference Property
consists of cash, the amount of such cash, (b) if such item of Reference
Property consists of property other than cash or Reference Securities, the
fair market value of such property (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the Trust) as
of 10:00 A.M. (New York City time) on the third Business Day preceding such
date, and (c) if such item of Reference Property consists of a Reference
Security, an amount equal to the average Closing Price per unit of such
Reference Security on the 20 Trading Days immediately prior to, but not
including, the second Trading Day preceding such date. The "Closing Price" of
any Reference Security on any date of determination means the closing sale
price (or, if no closing price is reported, the last reported sale price) of
such Reference Security on [ ] on such date or, if such Reference
Security is not [listed for trading/quoted] on [ ] on any such
date, as reported in the composite transactions for the principal United
States securities exchange on which such Reference Security is listed for
trading[, or, if such Reference Security is not listed on a United States
national or regional securities exchange, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System] or, if
such price for such Reference Security is not so reported, the last quoted bid
price for such Reference Security in the over-the-counter market as reported
by the National Quotation Bureau or similar organization or, if such bid price
is not available, the market value of such Reference Security on such date as
determined by a nationally recognized independent investment banking firm
retained for this purpose by the Trust. A "Trading Day" is defined as a day
on which the Reference Security the Closing Price of which is being determined
(A) is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of business
and (B) has traded at least once on the national or regional securities
exchange or association or over-the-counter market that is the primary market
for the trading of such Reference Security. The term "Business Day" means any
day that is not a Saturday, a Sunday or a day on which the New York Stock
Exchange[, [ ],] or banking institutions or trust companies in The
City of New York are authorized or obligated by law or executive order to
close.
Pursuant to the terms of the Contract, the Contracting
Stockholder is obligated to deliver to the Trust on the Business Day
immediately preceding the Exchange Date the aggregate number or amount of each
type of Reference Property required by the Trust in order to exchange all of
the HITS (including any HITS issued pursuant to the over-allotment option
granted by the Trust to the Underwriters and HITS issued in connection with
the creation of the Trust) on the Exchange Date in accordance with its
investment objective. The obligation of the Contracting Stockholder to
deliver Reference Property under the Contract may be cash settled, at the
option of such Contracting Stockholder (the "Cash Settlement Option"), in
whole or in part by delivering to the Trust on the Business Day immediately
preceding the Exchange Date, in lieu of the portion of the number or amount of
each type of Reference Property otherwise deliverable in respect of which an
election to exercise the Cash Settlement Option is made, cash in an amount
equal to the aggregate Then-Current Value of such Reference Property as of the
Exchange Date. If the Contracting Stockholder elects to exercise the Cash
Settlement Option, Holders will receive cash, or a combination of cash and
Reference Property, on or shortly after the Exchange Date. On or prior to the
twenty-sixth Business Day preceding the Exchange Date, the Trust will notify
The Depository Trust Company (the "Depositary") and publish a notice in The
Wall Street Journal or another daily newspaper of national circulation stating
whether the applicable percentage of the number or amount of each type of
Reference Property or cash, or a combination thereof, will be delivered in
exchange for the HITS. At the time such notice is published, the Reference
Property Value will not have been determined. If the Contracting Stockholder
elects to deliver Reference Property, Holders will be responsible for the
payment of any and all brokerage costs upon the subsequent sale thereof.
The Trust has adopted a fundamental policy as required by the
Trust Agreement to invest at least 65% of its portfolio in the Contract. The
Contract will comprise approximately % of the Trust's initial assets. The
Trust has also adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that, unless the Trust dissolves
prior to the Exchange Date due to the occurrence of an Acceleration Event with
respect to the Company or any successor thereto or in the event of a Default
by the Contracting Stockholder, the U.S. Treasury Securities may not be
disposed of prior to their respective maturities. The foregoing fundamental
policies of the Trust may not be changed without the vote of 100% in interest
of the Holders.
Trust Assets
The Trust's assets will consist primarily of: (i) U.S. Treasury
Securities and (ii) the Contract. The Trust may also make certain temporary
investments. See "--Temporary Investments". For illustrative purposes only,
the following table shows the number of shares of BCD Common Stock that a
Holder would receive for each HITS at various Reference Property Values. The
table assumes that there will be no Reference Property adjustments as
described below under "--The Contract --Reference Property Adjustments" and,
accordingly, that on the Exchange Date the Reference Property will consist of
one share of BCD Common Stock. There can be no assurance that the Reference
Property Value will be within the range set forth below. Given the Initial
Price of $ and the Threshold Appreciation Price of $ , a Holder
would receive on or shortly after the Exchange Date the following number of
shares of BCD Common Stock or amount of cash (if the Contracting Stockholder
elects to exercise the Cash Settlement Option and satisfy its obligations
under the Contract, in whole, with cash) per HITS:
Number of Shares of BCD
Reference Property Value Common Stock Amount of Cash
------------------------ ----------------------- --------------
$ $
The following table sets forth information regarding the distributions
to be received on the U.S. Treasury Securities, the portion of each year's
distributions that will constitute a return of capital for United States
Federal income tax purposes and the amount of original issue discount
accruing, assuming a yield-to-maturity accrual election, on the U.S.
Treasury Securities with respect to a Holder who acquires its HITS at the
issue price from an Underwriter pursuant to the Offering. See "Certain
United States Federal Income Tax Considerations".
<TABLE>
<CAPTION>
Annual Gross
Annual Gross Distributions from U.S. Annual Inclusion of
Distributions from U.S. Treasury Securities per Annual Return of Original Issue Discount
Year Treasury Securities HITS Capital per HITS in Income per HITS
- ----------- ------------------------ ------------------------ ---------------- -----------------------
<S> <C> <C> <C> <C>
$ $ $ $
</TABLE>
The annual distribution of $ per HITS is payable quarterly on each
February 15, May 15, August 15, and November 15, commencing August 15, 1997.
Quarterly distributions on the HITS will consist solely of the cash received
from the proceeds of the maturing U.S. Treasury Securities held by the Trust.
The Trust will not be entitled to any future dividends that may be declared on
the BCD Common Stock. See "Dividends and Distributions".
Enhanced Yield; Less Potential for Equity Appreciation than BCD Common Stock;
No Depreciation Protection
Although the HITS will provide investors with a current
distribution yield (the Company has not paid any dividends on the BCD Common
Stock), the opportunity for equity appreciation afforded by an investment in
the HITS is less than that afforded by a direct investment in the BCD Common
Stock. The value of the Reference Property receivable by a Holder of a HITS
upon exchange will only exceed the issue price of such HITS if the Reference
Property Value exceeds the Threshold Appreciation Price, which represents an
appreciation of % of the Initial Price. Moreover, because each HITS will
entitle the Holder to receive only % of the number or amount of each
type of Reference Property if the Reference Property Value exceeds the
Threshold Appreciation Price, Holders will be entitled to receive upon
exchange only % (the percentage equal to the Initial Price divided by
the Threshold Appreciation Price) of any appreciation of the value of the
Reference Property above the Threshold Appreciation Price. Holders will
realize the entire decline in value if the Reference Property Value is less
than the Initial Price. See "Risk Factors--Limitations on Opportunity for
Equity Appreciation; Potential Losses".
The Company
[Description]
The shares of BCD Common Stock are traded on [ ]
under the symbol "[ ]". The following table sets forth, for the
periods indicated, the reported high and low sale prices of the shares of BCD
Common Stock on [ ] (as adjusted for any stock splits or stock
dividends).
Year Ended December 31, 1995:
Quarter High Low
- ---------------------------------------- ------- -------
First................................... $ $
Second..................................
Third...................................
Fourth..................................
Year Ended December 31, 1996:
Quarter High Low
- ---------------------------------------- ------- -------
First................................... $ $
Second..................................
Third...................................
Fourth..................................
Year Ended December 31, 1997:
Quarter High Low
- ---------------------------------------- ------- -------
First................................... $ $
Second (through __________)............. $ $
As of , there were holders of record of
the BCD Common Stock, including Cede & Co., a nominee of the Depositary, which
holds shares of BCD Common Stock on behalf of an indeterminate number of
beneficial owners.
The Company has not paid any dividends on the BCD Common Stock.
Any future determination as to the payment of dividends will be at the
discretion of the Company's Board of Directors and will depend upon the
Company's operating results, financial condition and capital requirements,
contractual restrictions, general business conditions and such other factors
as the Company's Board of Directors deems relevant.
Except to the extent that the Reference Property will be adjusted for
certain Extraordinary Cash Dividends, Holders of HITS will not be entitled
to receive any future dividends on the BCD Common Stock unless and until
such time, if any, as the Trust shall have delivered BCD Common Stock in
exchange for HITS on the Exchange Date or upon earlier dissolution of the
Trust, and unless the applicable record date for determining stockholders
entitled to receive such dividends occurs after such delivery. See "Risk
Factors--No Stockholder Rights".
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Accordingly, the Company files reports, proxy and information statements
and other information with the Commission. Copies of such material can be
inspected and copied at the public reference facilities maintained by the
Commission at the address specified under "Additional Information".
The Company is not affiliated with the Trust, will not receive any of
the proceeds from the sale of the HITS and will have no obligations with
respect to the HITS. This Prospectus relates only to the HITS offered
hereby and does not relate to the Company or the BCD Common Stock. The
Company has filed a registration statement on Form S-3 with the Commission
with respect to the shares of BCD Common Stock that may be received by a
Holder on or shortly after the Exchange Date or upon earlier dissolution of
the Trust. The Company Prospectus constituting a part of such registration
statement includes information relating to the Company and the BCD Common
Stock[, including certain risk factors relevant to an investment in the BCD
Common Stock]. The Company Prospectus is being attached hereto and
delivered to prospective purchasers of HITS together with this Prospectus
for convenience of reference only. The Company Prospectus does not
constitute a part of this Prospectus, nor is it incorporated by reference
herein. See "Risk Factors--No Affiliation Between the Trust and the
Company".
The Contract
General. Pursuant to the terms of the Contract, the Contracting
Stockholder is obligated to deliver to the Trust on the Business Day
immediately preceding the Exchange Date an aggregate number or amount of
each type of Reference Property equal to the product of the Exchange Amount
and the aggregate number of HITS then outstanding.
The obligation of the Contracting Stockholder to deliver Reference
Property under the Contract may be cash settled, at the option of the
Contracting Stockholder, in whole or in part, by delivering to the Trust on
the Business Day immediately preceding the Exchange Date, in lieu of the
portion of the aggregate number or amount of each type of Reference
Property otherwise deliverable in respect of which an election to exercise
the Cash Settlement Option is made, cash in an amount per outstanding HITS
equal to the aggregate Then-Current Value of such Reference Property as of
the Exchange Date.
Reference Property Adjustments. The Reference Property is subject to
adjustment if an issuer of a Reference Security shall: (i) subdivide or
split the outstanding units of such Reference Security into a greater
number of units; (ii) combine the outstanding units of such Reference
Security into a smaller number of units; (iii) issue by reclassification
of units of such Reference Security any units of another security of such
issuer; (iv) issue rights or warrants to all holders of such Reference
Security entitling them, for a period expiring prior to the fifteenth
calendar day following the Exchange Date, to subscribe for or purchase any
of its securities or other property (other than rights to purchase units of
such Reference Security pursuant to a plan for the reinvestment of
dividends or interest); or (v) pay a dividend or make a distribution to all
holders of such Reference Security of cash, securities or other property
(excluding any cash dividend on any Reference Security consisting of
capital stock that does not constitute an Extraordinary Cash Dividend (as
defined herein), excluding any payment of interest on any Reference
Security consisting of an evidence of indebtedness and excluding any
dividend or distribution referred to in clause (i), (ii), (iii) or (iv)
above) or issue to all holders of such Reference Security rights or
warrants to subscribe for or purchase any of its securities or other
property (other than those referred to in clause (iv) above) (any of the
foregoing cash, securities or other property or rights or warrants,
"Distributed Assets") (any such event described in clause (i), (ii),
(iii), (iv) or (v), a "Dilution Event").
In the case of the Dilution Events referred to in clauses (i),
(ii) and (iii) above, the Reference Property will be adjusted to include the
number of units of such Reference Security and/or security of such issuer that
a holder of units of such Reference Security would have owned or been entitled
to receive immediately following any such event had such holder held,
immediately prior to such event, the number of units of such Reference Security
constituting part of the Reference Property immediately prior to such event.
Each such adjustment will become effective immediately after the effective
date for such subdivision, split, combination or reclassification, as the case
may be. Each such adjustment will be made successively.
In the case of the Dilution Event referred to in clause (iv)
above, the Reference Property will be adjusted to include an amount in cash
equal to the fair market value (determined as described below), as of the
fifth Business Day (except as provided below) following the date on which such
rights or warrants are received by securityholders entitled thereto (the
"Receipt Date"), of each such right or warrant multiplied by the product of
(A) the number of such rights or warrants issued for each unit of such
Reference Security and (B) the number of units of such Reference Security
constituting part of the Reference Property on the date of issuance of such
rights or warrants, immediately prior to such issuance, without interest
thereon. For purposes of the foregoing, the fair market value of each such
right or warrant will be the quotient of (x) the highest net bid, as of
approximately 10:00 A.M. (New York City time) on the fifth Business Day
following the Receipt Date, for settlement three Business Days later, by a
recognized securities dealer in The City of New York selected by or on behalf
of the Trust (from three (or such fewer number of dealers as may be providing
such bids) such recognized dealers selected by or on behalf of the Trust), for
the purchase by such quoting dealer of the number of rights or warrants (the
"Aggregate Number") that a holder of such Reference Security would receive if
such holder held, as of the record date for determination of stockholders
entitled to receive such rights or warrants, a number of units of such
Reference Security equal to the product of (1) the aggregate number of
outstanding HITS as of such record date and (2) the number of units of such
Reference Security constituting part of the Reference Property, divided by (y)
the Aggregate Number. Each such adjustment will become effective on the fifth
Business Day following the Receipt Date of such rights or warrants. If for
any reason the Trust is unable to obtain the required bid on the fifth
Business Day following the Receipt Date, it will attempt to obtain such bid at
successive intervals of three months thereafter and on the third Business Day
prior to the Exchange Date until it is able to obtain the required bid or, if
earlier, until the third Business Day prior to the Exchange Date. From the
date of issuance of such rights or warrants until the required bid is obtained
or those efforts end on the third Business Day prior to the Exchange Date, the
Reference Property will include the number of such rights or warrants issued
for each unit of such Reference Security multiplied by the number of units of
such Reference Security constituting part of the Reference Property on the
date of issuance of such rights or warrants, immediately prior to such
issuance, and such rights or warrants constituting part of the Reference
Property will be deemed for all purposes to have a fair market value of zero.
In the case of the Dilution Event referred to in clause (v)
above, the Reference Property will be adjusted to include, from and after such
dividend, distribution or issuance, the number or amount of each type of
Distributed Assets received for each unit of such Reference Security
multiplied by the number of units of such Reference Security constituting part
of the Reference Property on the date of such dividend, distribution or
issuance, immediately prior to such dividend, distribution or issuance,
without interest thereon.
An "Extraordinary Cash Dividend" means, with respect to any
Reference Security consisting of capital stock, any cash dividend on such
Reference Security that, together with all cash dividends on such Reference
Security occurring in the immediately preceding 12-month period (or, if such
Reference Security was not outstanding at the commencement of such 12-month
period, occurring in such shorter period during which such Reference Security
was outstanding) exceeds on a per share basis 10% of the Then-Current Value of
such Reference Security as of the date of declaration of such dividend;
provided that, for purposes of the foregoing definition, the amount of cash
dividends paid on a per share basis will be appropriately adjusted to reflect
the occurrence during such 12-month period (or such shorter period during
which such Reference Security was outstanding) of any stock dividend or
distribution of shares of capital stock of the issuer of such Reference
Security or any subdivision, split, combination or reclassification of shares
of such Reference Security.
In the event of (A) any consolidation, merger or conversion of
an issuer of a Reference Security with or into another entity (other than a
consolidation, merger, or conversion in which such issuer is the continuing
corporation and in which the units of such Reference Security outstanding
immediately prior to the consolidation, merger, or conversion are not
exchanged for cash, securities or other property of such issuer or another
entity), (B) any sale, transfer, lease or conveyance to another corporation of
the property of an issuer of a Reference Security as an entirety or
substantially as an entirety, (C) any statutory exchange of securities of an
issuer of a Reference Security with another entity (other than in connection
with a merger or acquisition) or (D) any liquidation, dissolution, winding up
or bankruptcy of an issuer of a Reference Security (excluding any distribution
in such Dilution Event referred to in clause (v) above) (any such event
described in clause (A), (B), (C) or (D), a "Reorganization Event"), the
Reference Property will be adjusted to include, from and after the effective
date for such Reorganization Event, in lieu of the number of units of such
Reference Security constituting part of the Reference Property immediately
prior to the effective date for such Reorganization Event, the amount or
number of any cash, securities and/or other property owned or received in such
Reorganization Event with respect to each unit of such Reference Security
multiplied by the number of units of such Reference Security constituting part
of the Reference Property immediately prior to the effective date for such
Reorganization Event. In the event that holders of such Reference Security
are entitled to elect to own or receive either Marketable Common Stock (as
defined under "--Reorganization Events Causing a Dissolution of the Trust") or
cash and/or other securities or property, or a combination thereof, in such
Reorganization Event in respect of such Reference Security, for purposes of
determining the Reference Property adjustments described herein (and for
purposes of determining whether such Reorganization Event constitutes an
Acceleration Event (as defined under "--Reorganization Events Causing a
Dissolution of the Trust)), each holder of such Reference Security shall be
deemed to have elected to own or receive the maximum possible amount of
Marketable Common Stock.
The Trust is required, within ten Business Days following the
occurrence of an event that requires an adjustment to the Reference Property
(or if the Trust is not aware of such occurrence, as soon as practicable after
becoming so aware), to provide written notice to the Holders of the occurrence
of such event and a statement in reasonable detail setting forth the amount or
number of each type of Reference Property.
No adjustments to the Reference Property will be made for
certain other events, such as offerings of BCD Common Stock by the Company for
cash or in connection with acquisitions. Likewise, no adjustments to the
Reference Property will be made for any sales of BCD Common Stock by the
Contracting Stockholder. See "Risk Factors--Reference Property Adjustments".
Reorganization Events Causing a Dissolution of the Trust.
Notwithstanding anything to the contrary contained in the Contract, if an
Acceleration Event with respect to the Company, or any surviving entity or
subsequent surviving entity of the Company (a "Company Successor"), occurs,
the Contracting Stockholder's obligations under the Contract will be
automatically accelerated and the Contracting Stockholder will be obligated to
deliver to the Trust, on the tenth Business Day after the effective date for
such Acceleration Event (the "Early Settlement Date"), the aggregate number or
amount of each type of Reference Property (or, at the option of the Contracting
Stockholder, cash) that would be required to be delivered on such date under
the Contract if the Exchange Date were redefined to be the Early Settlement
Date.
"Acceleration Event" means any Reorganization Event with
respect to the Company or any Company Successor other than such a
Reorganization Event (i) that is of the type described in clause (A) of the
definition of "Reorganization Event" and (ii) in which (1) at least 80%
(determined as set forth below) of any cash, securities and/or other property
owned or received in such Reorganization Event with respect to the BCD Common
Stock (or the common stock of a Company Successor, as the case may be) (the
"Event Consideration") consists of shares of common equity securities listed
on a U.S. national securities exchange or any foreign securities exchange or
quoted on the National Market System of the Nasdaq Stock Market ("Marketable
Common Stock") and (2)(x) a majority of the board of directors of the
continuing corporation consists of persons who were directors of the Company
(or such Company Successor, as the case may be) immediately prior to such
Reorganization Event and (y) the chairman of the board of directors of the
continuing corporation is the person who was the chairman of the board of
directors of the Company (or such Company Successor, as the case may be)
immediately prior to such Reorganization Event. The percentage of the Event
Consideration consisting of Marketable Common Stock will be determined by
comparing the aggregate Then-Current Value as of the effective date of such
Reorganization Event of the Marketable Common Stock constituting part of the
Event Consideration to the aggregate Then-Current Value as of the effective
date of such Reorganization Event of the Event Consideration.
If an Acceleration Event with respect to the Company or any
Company Successor occurs, the Trust's assets (other than assets received
pursuant to the Contract) will be liquidated, the assets of the Trust
(including the proceeds of such liquidation and any assets received pursuant
to the Contract, net of unpaid Trust expenses, if any) will be distributed pro
rata to the Holders and the term of the Trust will expire. In such event, the
U.S. Treasury Securities will be sold by the Trust, and the proceeds therefrom
will be distributed along with Reference Property (or cash) received under the
Contract on the Early Settlement Date after providing for any expenses of the
Trust.
Collateral Arrangements; Acceleration. Pursuant to a Security
and Pledge Agreement among the Contracting Stockholder, the Trust and [
], as collateral agent (the "Collateral Agent"), the Contracting
Stockholder's obligations under the Contract will be secured by a security
interest in the maximum number or amount of each type of Reference Property
(initially shares of BCD Common Stock) deliverable by the
Contracting Stockholder under the Contract. Unless the Contracting
Stockholder is in default in its obligations under the Security and Pledge
Agreement, the Contracting Stockholder will be permitted to substitute for the
pledged Reference Property collateral consisting of short-term, direct
obligations of the U.S. Government. Any U.S. Government obligations pledged
as substitute collateral will be required to have an aggregate market value
at the time of substitution and at daily mark-to-market valuations thereafter
of not less than 150% (or, from and after any Insufficiency Determination (as
defined herein) that shall not be cured by 4:00 P.M. (New York City time) on
the third Business Day following the day on which notice thereof is given, as
described below, 200%) of the aggregate Then-Current Value as of the time of
each valuation of the number or amount of each type of Reference Property for
which such obligations are being substituted. The Collateral Agent will
promptly pay over to the Contracting Stockholder any dividends, interest,
principal or other payments received by the Collateral Agent in respect of any
collateral pledged by the Contracting Stockholder, including any substitute
collateral, unless the Contracting Stockholder is in default of its
obligations under the Security and Pledge Agreement, or unless the payment of
such amount to the Contracting Stockholder would cause the collateral to
become insufficient under the Security and Pledge Agreement. The Contracting
Stockholder will have the right to vote any pledged units of any Reference
Security for so long as such units are owned by it and pledged under the
Security and Pledge Agreement.
If the Collateral Agent shall determine (an "Insufficiency
Determination") that U.S. Government obligations pledged by the Contracting
Stockholder as substitute collateral shall fail to meet the foregoing
requirements at any valuation, and such failure shall not be cured by 4:00
P.M. (New York City time) on the third Business Day following the day on which
notice of such determination is given, then, unless a Collateral Event of
Default (as defined herein) under the Security and Pledge Agreement shall have
occurred and be continuing, the Collateral Agent will, if practicable,
commence (i) sales of the collateral pledged by the Contracting Stockholder
consisting of U.S. Government obligations and (ii) purchases, using the
proceeds of such sales, of each type of Reference Property, in such numbers or
amounts sufficient to cause the collateral pledged by the Contracting
Stockholder to meet the requirements of the Security and Pledge Agreement.
The Collateral Agent will discontinue such sales and purchases if at any time
a Collateral Event of Default under the Security and Pledge Agreement shall
have occurred and be continuing. A "Collateral Event of Default" under the
Security and Pledge Agreement will mean, at any time, (A) if no U.S.
Government obligations shall be pledged as substitute collateral at such time,
failure of the collateral pledged by the Contracting Stockholder to consist of
at least the maximum number or amount of each type of Reference Property
deliverable by the Contracting Stockholder under the Contract; and (B) if any
U.S. Government obligations shall be pledged by the Contracting Stockholder as
substitute collateral for Reference Property at such time, failure of such
U.S. Government obligations to have a market value at such time of at least
105% of the difference between (x) the aggregate Then-Current Value as of such
time of the maximum number or amount of each type of Reference Property
deliverable by the Contracting Stockholder under the Contract and (y) the
aggregate Then-Current Value as of such time of the number or amount of each
type of Reference Property pledged by the Contracting Stockholder as
collateral at such time.
The occurrence of a Collateral Event of Default with respect to
the Contracting Stockholder under the Security and Pledge Agreement or the
bankruptcy or insolvency of the Contracting Stockholder (each such event, a
"Default") will cause an automatic acceleration of the Contracting
Stockholder's obligations under the Contract. In any such event, the
Contracting Stockholder's option to settle the Contract in cash will terminate
and the Contracting Stockholder will become obligated to deliver a number or
amount of each type of Reference Property, allocated as proportionately as
practicable, having an aggregate Then-Current Value as of the Acceleration Date
equal to the "Aggregate Acceleration Value." The Aggregate Acceleration Value
will be based on an "Acceleration Value" determined by the Trust on the basis
of quotations from independent dealers. Each quotation will be for an amount
that would be paid to the relevant dealer in consideration of an agreement
between the Trust and such dealer that would have the effect of preserving the
Trust's rights to receive the number or amount of each type of Reference
Property under a portion of the Contract that corresponds to 1,000 of the HITS
offered hereby. The Trust will request quotations from four nationally
recognized independent dealers on or as soon as reasonably practicable
following the date of acceleration. If four quotations are provided, the
Acceleration Value will be the arithmetic mean of the two quotations remaining
after disregarding the highest and the lowest quotations. If two or three
quotations are provided, the Acceleration Value will be the arithmetic mean of
such quotations. If one quotation is provided, the Acceleration Value will be
such quotation. The Aggregate Acceleration Value will be computed by dividing
the Acceleration Value by 1,000 and multiplying the quotient by the aggregate
number of HITS then outstanding, except that, if no quotations are provided,
the Aggregate Acceleration Value will be the aggregate Then-Current Value as
of the Acceleration Date of the aggregate number or amount of each type of
Reference Property that would be required to be delivered on such date under
the Contract if the Exchange Date were redefined to be the acceleration date.
Upon the occurrence of a Collateral Event of Default or the bankruptcy or
insolvency of the Contracting Stockholder, the number or amount of each type
of Reference Property deliverable for each HITS will be based solely on the
Aggregate Acceleration Value described above for the Contract.
Upon any acceleration, the Collateral Agent will distribute to
the Trust, for distribution pro rata to the Holders, the Aggregate
Acceleration Value in the form of Reference Property then pledged, or cash
generated from the liquidation of the U.S. Government obligations then
pledged, or a combination thereof. In addition, if by the Exchange Date any
substitute collateral has not been replaced by Reference Property sufficient
to meet the obligations of the Contracting Stockholder under the Contract, the
Collateral Agent will distribute to the Trust for distribution pro rata to the
Holders the aggregate value of the Reference Property to be delivered by the
Contracting Stockholder thereunder, in the form of Reference Property then
pledged by the Contracting Stockholder plus cash generated from the
liquidation of U.S. Government obligations then pledged by the Contracting
Stockholder. See "--Trust Dissolution".
Fractional Interests. No fractional units of any Reference
Security will be delivered if the Contracting Stockholder satisfies its
obligations under the Contract in whole or in part by delivering Reference
Property. In lieu of any fractional unit otherwise deliverable in respect of
the Contracting Stockholder's obligations under the Contract, the Trust will
be entitled to receive an amount in cash equal to the Then-Current Value of
such fractional unit as of the Exchange Date.
To the extent practicable, the Contracting Stockholder will
deliver fractional interests of any Reference Property other than cash or a
Reference Security if the Contracting Stockholder satisfies its obligations
under the Contract in whole or in part by delivering Reference Property. If
such delivery is not practicable, in lieu of delivering any such fractional
interest otherwise deliverable in respect of the Contracting Stockholder's
obligations under the Contract, the Trust will be entitled to receive an
amount in cash equal to the Then-Current Value of such fractional interest as
of the Exchange Date.
Description of Contracting Stockholder. The Contracting
Stockholder is [ ]. Specific information regarding the
holdings of BCD Common Stock by the Contracting Stockholder is included or
incorporated by reference in the accompanying Company Prospectus with respect
to the shares of BCD Common Stock that may be received by a Holder on or
shortly after the Exchange Date or upon earlier dissolution of the Trust.
Purchase Price. The Purchase Price under the Contract is equal
to $ in the aggregate and is payable to the Contracting Stockholder
by the Trust on or about , 1997. No other consideration is
payable by the Trust to the Contracting Stockholder in connection with its
acquisition of the Contract or the performance of the Contract by the
Contracting Stockholder.
The Contract will be valued by the Trust at fair value as
determined in good faith at the direction of the Trustees (if necessary,
through consultation with accountants, bankers and other specialists). See
"Net Asset Value".
The U.S. Treasury Securities
The Trust will purchase and hold a series of zero-coupon U.S.
Treasury Securities with face amounts and maturities corresponding to the
amounts and payment dates of the distributions payable with respect to the
HITS. Up to % of the Trust's total assets may be invested in these U.S.
Treasury Securities. If the Contract is accelerated as described under
"--Reorganization Events Causing a Dissolution of the Trust" or "--Collateral
Arrangements; Acceleration", then any such U.S. Treasury Securities then held
in the Trust will be liquidated and distributed pro rata to the Holders,
together with amounts distributed upon acceleration.
Temporary Investments
For cash management purposes, the Trust may invest the proceeds
of the U.S. Treasury Securities and any other cash held by the Trust in
short-term obligations of the U.S. Government maturing no later than the
Business Day preceding the next following distribution date.
Trust Dissolution
The Trust will dissolve on or shortly after the Exchange Date,
except if dissolved earlier under certain limited circumstances described
herein. Although the Trust has adopted a fundamental policy that it will not
dispose of the Contract prior to the Exchange Date, under certain
circumstances the Contract may terminate prior to the Exchange Date. If the
Company or any Company Successor is the subject of an Acceleration Event or a
Default shall have occurred with respect to the Contracting Stockholder, the
Trust's assets (other than assets received pursuant to the Contract) will be
liquidated, the assets of the Trust (including the proceeds of such
liquidation and any assets received pursuant to the Contract, net of unpaid
Trust expenses, if any) will be distributed pro rata to the Holders and the
term of the Trust will expire. See "--The Contract--Reorganization Events
Causing a Dissolution of the Trust" and "--Collateral Arrangements;
Acceleration".
Fractional Interests
No fractional units of any Reference Security, or fractional
interests of any Reference Property other than cash or a Reference Security,
will be distributed by the Trust to Holders on the Exchange Date or upon
earlier dissolution of the Trust. All fractional units or interests to which
Holders would otherwise be entitled on the Exchange Date or upon earlier
dissolution of the Trust will be aggregated and liquidated and, in lieu of the
fractional unit or interest to which a Holder would otherwise have been
entitled in respect of the total number of HITS held by such Holder, such
Holder will receive its pro rata portion of the proceeds from such liquidation
(net of any brokerage or related expenses).
INVESTMENT RESTRICTIONS
The Trust has adopted a fundamental policy that the Trust may
not purchase any securities or instruments other than the U.S. Treasury
Securities, the Contract and any Reference Security received pursuant to the
Contract and, for cash management purposes, short-term obligations of the U.S.
Government; issue any securities or instruments except for the HITS; make
short sales or purchase securities on margin; write put or call options;
borrow money; underwrite securities; purchase or sell real estate, commodities
or commodities contracts; or make loans. The Trust has adopted a fundamental
policy to invest at least 65% of its portfolio in the Contract. The Trust has
also adopted a fundamental policy that the Contract may not be disposed of
during the term of the Trust and that, unless the Trust dissolves prior to the
Exchange Date due to the occurrence of an Acceleration Event or a Default by
any Contracting Stockholder, the U.S. Treasury Securities may not be disposed
of prior to their respective maturities.
Because of the foregoing limitations, the Trust's investments
will be concentrated initially in the [ ] industry, which is the
industry in which the Company currently operates. However, to the extent that
in the future the Company diversifies its operations into one or more other
industries, or the Reference Property includes a Reference Security of an
issuer that operates in another industry, the Trust's investments will be less
concentrated in the [ ] industry. See "Risk
Factors--Non-diversified Portfolio".
RISK FACTORS
The following risk factors should be considered carefully in
addition to the other information contained in this Prospectus and the
accompanying Company Prospectus before purchasing the HITS offered hereby.
As described in more detail below, the trading price of the
HITS may vary considerably prior to the Exchange Date due to, among other
things, fluctuations in the price of the BCD Common Stock or other Reference
Securities and other events that are difficult to predict and beyond the
Trust's control.
No Active Portfolio Management
The Trust will not be managed like a typical closed-end
investment company. The Trust will be internally managed by its Trustees and
will not have any separate investment advisor. See "Management Arrangements".
It is a fundamental policy of the Trust that the Contract may not be disposed
of during the term of the Trust and that, unless the Trust dissolves prior to
the Exchange Date due to the occurrence of an Acceleration Event with respect
to the Company or any Company Successor or a Default by the Contracting
Stockholder, the U.S. Treasury Securities may not be disposed of prior to
their respective maturities. As a result, the Trust will continue to hold the
Contract despite any significant decline in the value of the Reference
Property, including the BCD Common Stock, or adverse changes in the financial
condition of the issuer of any Reference Security, including the Company.
Absence of Trading History; Marketability; Possibility of the HITS Trading at
a Discount from Net Asset Value
The HITS have no trading history and it is not possible to
predict how they will trade in the secondary market. The trading price of the
HITS may vary considerably prior to the Exchange Date due to, among other
things, fluctuations in trading prices of the BCD Common Stock (which may
occur due to changes in the Company's financial condition, results of
operations or prospects, 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 BCD Common
Stock is traded and the market segment of which the Company is a part or
because of sales of substantial amounts of BCD Common Stock in the market
subsequent to the Offering or the perception that such sales could occur) and
fluctuations in interest rates and other factors that are difficult to predict
and beyond the Trust's control.
The Underwriters currently intend, but are not obligated, to
make a market in the HITS. There can be no assurance that a secondary market
will develop or, if a secondary market does develop, that it will provide
Holders with liquidity of investment or that it will continue for the life of
the HITS. Application has been made for [listing/quotation] of the HITS on [
]. There can be no assurance that the HITS will not later be delisted
or that trading in the HITS on [ ] will not be suspended. In the
event of a delisting or suspension of trading, the Trust will apply for
listing of the HITS on another national securities exchange or for quotation on
another trading market. If the HITS are not listed or traded on any
securities exchange or trading market, or if trading of the HITS is suspended,
pricing information for the HITS may be more difficult to obtain, and the price
and liquidity of the HITS may be adversely affected.
The Trust is a newly organized closed-end investment company
with no previous operating history. Shares of closed-end investment companies
frequently trade at a discount from their net asset value, which is a risk
separate and distinct from the risk that the Trust's net asset value will
decrease. The Trust cannot predict whether the HITS will trade at, below or
above their net asset value. The risk of purchasing investments that might
trade at a discount is more pronounced for investors who wish to sell their
investments in a relatively short period of time after completion of the
Trust's initial public offering because for those investors realization of a
gain or loss on their investments is likely to be more dependent upon the
existence of a premium or discount than upon performance of the Trust's
assets. The HITS are not subject to redemption.
Reference Property Adjustments
The Reference Property (or, if the Contracting Stockholder
elects to exercise the Cash Settlement Option, the amount of cash or
combination of cash and Reference Property) that the Trust is entitled to
receive pursuant to the Contract is subject to adjustment for certain events
arising from, among others, a merger, consolidation or conversion in which
the Company is not the surviving or resulting corporation and the liquidation,
dissolution, winding up or bankruptcy of the Company, as well as stock splits
and combinations, stock dividends and certain other actions of the Company
that modify its capital structure. See "Investment Objective and Policies--The
Contract-- Reference Property Adjustments". The Reference Property (or the
amount of cash or combination of cash and Reference Property) to be received
by the Trust pursuant to the Contract immediately prior to the Exchange Date
will not be adjusted for other events, such as offerings of BCD Common Stock
for cash or in connection with acquisitions. BCD is not restricted from
issuing additional shares of BCD Common Stock during the term of the Trust and
neither the Company nor the Contracting Stockholder has any obligation to
consider the interests of the Holders for any reason. Additional issuances
may materially and adversely affect the price of the BCD Common Stock and
thereby materially and adversely affect the trading price of the HITS. 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, BCD Common Stock in the future, or as to the amount of any
such offerings or sales.
Limited Term
The term of the Trust will expire on or shortly after the
Exchange Date, unless the Trust is dissolved earlier under certain limited
circumstances described herein. On or shortly after the Exchange Date, the
Trust will distribute the Reference Property and/or cash received by the Trust
pursuant to the Contract and other assets held by the Trust (net of unpaid
Trust expenses, if any) pro rata to the Holders and dissolve shortly
thereafter. If the Company or any Company Successor is the subject of an
Acceleration Event or a Default shall have occurred with respect to the
Contracting Stockholder, the Trust's assets (other than assets received
pursuant to the Contract) will be liquidated, the assets of the Trust (net of
unpaid Trust expenses, if any) will be distributed pro rata to the Holders and
the term of the Trust will expire.
Non-diversified Portfolio
The Trust's assets will consist almost entirely of the Contract
and the U.S. Treasury Securities. As a result, investments in the Trust may
be subject to greater risk than would be the case for a company with a more
diversified portfolio of investments.
Comparison to Other Equity Securities; Relationship to BCD Common Stock
The terms of the HITS are similar to those of ordinary equity
securities in that the value of the Reference Property (or, if the Contracting
Stockholder elects to exercise the Cash Settlement Option, the amount of cash
or combination of cash and Reference Property) that a Holder will receive on
or shortly after the Exchange Date is not fixed, but is based on the Reference
Property Value. See "Investment Objective and Policies--General" and "--The
Contract". There can be no assurance that such amount receivable by Holders
will be equal to or greater than the issue price paid for the HITS. If the
Reference Property Value is less than the initial price, such amount
receivable will be less than the issue price paid for the HITS, in which case
an investment in the HITS will result in a loss. Accordingly, a Holder
assumes the risk that the market value of the BCD Common Stock may decline,
and that such decline could be substantial. Reference is made to the
accompanying Company Prospectus[, including the information under the caption
"Risk Factors" therein].
The trading prices of the HITS in the secondary market will be
affected by the trading prices of the BCD Common Stock in the secondary
market. It is impossible to predict whether the price of BCD Common Stock will
rise or fall. Trading prices of BCD Common Stock will be influenced by the
Company's financial condition, results of operations and prospects, by 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 BCD Common Stock is traded and the market segment of which the
Company is a part and by sales of substantial amounts of BCD Common Stock in
the market subsequent to the Offering or the perception that such sales could
occur.
Any market that develops for the HITS is likely to influence
and be influenced by the market for the BCD Common Stock. For example, the
price of the BCD Common Stock could be depressed by investors' anticipation
of the potential distribution into the market of substantial additional
amounts of BCD Common Stock on or shortly after the Exchange Date, by possible
sales of BCD Common Stock by investors who view HITS as a more attractive
means of equity participation in BCD and by hedging or arbitrage trading
activity that may develop involving the HITS and the BCD Common Stock.
Limitations on Opportunity for Equity Appreciation; Potential Losses
The opportunity for equity appreciation afforded by an
investment in the HITS is less than the opportunity for equity appreciation
afforded by a direct investment in the BCD Common Stock because the amount
receivable by a Holder of a HITS upon exchange will only exceed the issue
price of such HITS if the Reference Property Value exceeds the Threshold
Appreciation Price (which represents an appreciation of % over the Initial
Price). Moreover, each HITS will entitle the Holder to receive only %
(the percentage equal to the Initial Price divided by the Threshold
Appreciation Price) of any appreciation of the value of the Reference Property
above the Threshold Appreciation Price. See "Investment Objective and
Policies--The Contract". Therefore, the HITS may trade below the value of the
Common Stock if the Common Stock appreciates in value. Because the value of
the Reference Property is subject to market fluctuations, the value of the
Reference Property (or, if the Contracting Stockholder elects to exercise the
Cash Settlement Option, the amount of cash) received by the Trust immediately
prior to the Exchange Date, determined as described herein, may be more or
less than the issue price paid for the HITS.
If the Contracting Stockholder elects to exercise the Cash
Settlement Option, the amount of cash delivered to the Trust (and therefore
distributed to Holders) will be determined with respect to any Reference
Property consisting of Reference Securities on the basis of the average of the
Closing Price of such Reference Securities over the 20 Trading Days
immediately prior to the second Trading Day prior to the Exchange Date. The
price of the BCD Common Stock (or other Reference Securities) is subject to
market fluctuations and, as a result, the amount of cash distributed on or
shortly after the Exchange Date in respect of each HITS may be more or less
than the market price on the Exchange Date of the BCD Common Stock (or other
Reference Securities) that a holder would otherwise have been entitled to
receive. See "Investment Objective and Policies--The Contract".
No Stockholder Rights
Holders of the HITS will not be entitled to any rights with
respect to the Reference Property (including, without limitation, voting
rights and rights to receive any dividends or other distributions in respect
of any Reference Security) unless and until such time, if any, as the Trust
shall have delivered the Reference Property in exchange for HITS on or shortly
after the Exchange Date or upon earlier dissolution of the Trust, and unless
the applicable record date, if any, for the exercise of such rights occurs
after such delivery.
The Contracting Stockholder is not responsible for the
determination or calculation of the amount receivable by Holders in respect of
the HITS. The Contract between the Trust and the Contracting Stockholder is a
commercial transaction and does not create any rights in or for the benefit of
any third party, including any Holder.
No Affiliation Between the Trust and the Company
The Trust is not affiliated with the Company and, although the
Trust has no knowledge that any of the events described under "--Reference
Property Adjustments" above not heretofore publicly disclosed by the Company
are currently being contemplated by the Company or of any event that would
have a material adverse effect on the Company or on the price of the BCD
Common Stock, such events are beyond the Trust's ability to control and are
difficult to predict.
The Company has no obligations with respect to the HITS,
including any obligation to take the needs of the Trust or of Holders into
consideration for any reason. The Company will not receive any of the
proceeds of the Offering and is not responsible for and has not participated
in the determination or calculation of the amount receivable by Holders on the
Exchange Date. The Company is not involved with the administration or trading
of the HITS and has no obligations with respect to the amount receivable by
Holders on the Exchange Date.
Risk Relating to Bankruptcy of the Contracting Stockholder
The Trust believes that the Contract will constitute a
"securities contract" for purposes of Title 11 of the United States Code (the
"Bankruptcy Code"), performance of which would not be subject to the automatic
stay provisions of the Bankruptcy Code in the event of bankruptcy of the
Contracting Stockholder. It is, however, possible that the Contract will be
determined not to qualify as a "securities contract" for this purpose, in which
case the bankruptcy of the Contracting Stockholder may cause a delay in
settlement of the Contract, or otherwise subject the Contract to the
bankruptcy proceedings, which could adversely affect the time of exchange and,
as a result, the amount received by the Holders in respect of the HITS.
DESCRIPTION OF THE HITS
Each HITS represents a proportionate share of beneficial
interest in the Trust, and a total of HITS will be issued in the
Offering, assuming no exercise of the Underwriters' over-allotment option.
Upon liquidation of the Trust, Holders are entitled to share pro rata in the
net assets of the Trust available for distribution. HITS have no preemptive,
redemption or conversion rights. The HITS, when issued and outstanding, will
be fully paid and nonassessable undivided beneficial interests in the assets
of the Trust.
Holders are entitled to one vote for each HITS held on all
matters to be voted on by Holders and are not able to cumulate their votes in
the election of Trustees. The Trust Agreement provides that any investment
company or group of affiliated investment companies that hold HITS in excess
of the limitations described under "Underwriting--Investment Restrictions"
will vote such HITS in proportion to the votes of all other Holders. The
Trust intends to hold annual meetings as required by the rules of [
]. The Holders have the right, upon the declaration in writing or vote of
more than two-thirds of the outstanding HITS, to remove a Trustee. The
Trustees will call a meeting of Holders to vote on the removal of a Trustee
upon the written request of the record Holders of 10% of the HITS or to vote
on other matters upon the written request of the record Holders of 51% of the
HITS (unless substantially the same matter was voted on during the preceding
12 months).
Book-entry System
The HITS will be issued in the form of one or more global
securities (the "Global Securities") deposited with the Depositary and
registered in the name of a nominee of the Depositary.
The Depositary has advised the Trust and the Underwriters as
follows: The Depositary is a limited-purpose trust company organized under
the laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to Section 17A of the
Exchange Act. The Depositary was created to hold securities of persons who
have accounts with the Depositary ("participants") and to facilitate the
clearance and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
certificates. Such participants include securities brokers and dealers,
banks, trust companies and clearing corporations. Indirect access to the
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its
nominee will credit the respective HITS represented by such Global Security to
the accounts of participants. The accounts to be credited will be designated
by the Underwriters. Ownership of beneficial interests in such Global
Securities will be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests by participants in
such Global Securities will be shown on, and the transfer of those ownership
interests will be effected only through, records maintained by the Depositary
or its nominee for such Global Securities. Ownership of beneficial interests
in such Global Securities by persons that hold through participants will be
shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The
laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
such laws may impair the ability to transfer beneficial interests in a Global
Security.
So long as the Depositary for a Global Security, or its nominee, is
the registered owner of such Global Security, such Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of
the HITS. Except as set forth below, owners of beneficial interests in
such Global Securities will not be entitled to have the HITS registered in
their names and will not receive or be entitled to receive physical
delivery of the HITS in definitive form and will not be considered the
owners or Holders thereof.
Payment of Reference Property or amounts payable or other
consideration deliverable on exchange of, and any quarterly distributions
on, HITS registered in the name of or held by the Depositary or its nominee
will be made to the Depositary or its nominee, as the case may be, as the
registered owner or the holder of the Global Security. None of the Trust,
any Trustee, the Administrator, the Paying Agent or the Custodian for the
HITS will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Trust expects that the Depositary, upon receipt of any payment in
respect of a Global Security, will credit immediately participants'
accounts with payments in amounts proportionate to their respective
beneficial interests in the principal amount of such Global Security as
shown on the records of the Depositary. The Trust also expects that
payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such participants.
A Global Security may not be transferred except as a whole by
the Depositary to a nominee or a successor of the Depositary. If the
Depositary is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Trust within ninety days, the
Trust will issue HITS in definitive registered form in exchange for the Global
Security representing such HITS. In addition, the Trust may at any time and
in its sole discretion determine not to have any HITS represented by one or
more Global Securities and, in such extent, will issue HITS in definitive form
in exchange for all of the Global Securities representing the HITS. Further,
if the Trust so specifies with respect to the HITS, an owner of a beneficial
interest in a Global Security representing HITS may, on terms acceptable to
the Trust and the Depositary for such Global Security, receive HITS in
definitive form. In any such instance, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in definitive form of
HITS represented by such Global Security equal in number to that represented
by such beneficial interest and to have such HITS registered in its name.
TRUSTEES
The Trustees of the Trust consist of three individuals, none of
whom is an "interested person" of the Trust as defined in the Investment
Company Act. The Trustees of the Trust are responsible for the overall
supervision of the operations of the Trust and perform the various duties
imposed on the trustees of management investment companies by the Investment
Company Act.
The Trustees of the Trust are:
<TABLE>
<S> <C> <C>
Principal Occupation During
Name, Age and Address Title Past Five Years
- --------------------- ----------------- ---------------------------
Donald J. Puglisi, 51........................ Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham, I, 52..................... Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 57......................... Trustee Professor of Economics
Center for Economic Education University of Delaware
& Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
Compensation of Trustees
Each unaffiliated Trustee will be paid by the Contracting Stockholder,
in respect of its annual fee and anticipated out-of-pocket expenses, a one-
time, up-front fee of $10,800. The Trust's Managing Trustee will also
receive an additional up-front fee of $3,600 for serving in that capacity.
The Trustees will not receive, either directly or indirectly, any
compensation, including any pension or retirement benefits, from the Trust.
None of the Trustees receives any compensation for serving as a trustee or
director of any other affiliated investment company.
MANAGEMENT ARRANGEMENTS
Portfolio Management and Administration
The Trust will be internally managed and will not have an
investment adviser. The Trust's portfolio will not be actively managed. The
Trustees of the Trust will authorize the purchase of the Contract and the U.S.
Treasury Securities as directed by the Trust Agreement. It is a fundamental
policy of the Trust that the Contract may not be disposed of during the term
of the Trust and that, unless the Trust dissolves prior to the Exchange Date
due to the occurrence of an Acceleration Event with respect to the Company or
any Company Successor or a Default by the Contracting Stockholder, the U.S.
Treasury Securities may not be disposed of prior to their respective
maturities.
The Contracting Stockholder will pay all expenses incurred in
the operation of the Trust, including, among other things, accounting
services, expenses for legal and auditing services, taxes, costs of printing
proxies, listing fees, if any, stock certificates and shareholder reports,
charges of the Custodian (as defined herein) and the Paying Agent (as defined
herein), expenses of registering the HITS under Federal and state securities
laws, Commission fees, fees and expenses of Trustees, accounting and pricing
costs, insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, mailing and other expenses properly
payable by the Trust. See "--Estimated Expenses".
Administrator
The day-to-day affairs of the Trust will be managed by [
], as trust administrator pursuant to an Administration Agreement.
Under the Administration Agreement, the Trustees have delegated most of their
operational duties to the Administrator, including without limitation, the
duties to: (i) receive invoices for and pay, or cause to be paid, all expenses
incurred by the Trust; (ii) with the approval of the Trustees, engage legal and
other professional advisors (other than the independent public accountants for
the Trust); (iii) instruct the Paying Agent to pay distributions on the HITS
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 will not, however, select the independent public accountants for
the Trust or sell or otherwise dispose of the Trust assets (except in
connection with an acceleration of the Contract as described under "Investment
Objective and Policies--The Contract--Reorganization Events Causing a
Dissolution of the Trust" and "--Collateral Arrangements; Acceleration" or the
settlement of the Contract on the Business Day immediately preceding the
Exchange Date).
The Administration Agreement may be terminated by either the
Trust or the Administrator upon 60 days prior written notice, except that no
termination will become effective until a successor Administrator has been
chosen and has accepted the duties of the Administrator.
Except for its roles as Administrator, Custodian, Paying Agent,
registrar and transfer agent of the Trust, and except for its role as
Collateral Agent under the Security and Pledge Agreement, [
] has no other affiliation with, and is not engaged in any other transactions
with, the Trust.
The address of the Administrator is [ ].
Custodian
The Trust's custodian (the "Custodian") is [
] pursuant to a custodian agreement (the "Custodian Agreement"). In the
event of any termination of the Custodian Agreement by the Trust or the
resignation of the Custodian, the Trust must engage a new Custodian to carry
out the duties of the Custodian as set forth in the Custodian Agreement.
Pursuant to the Custodian Agreement, all net cash received by the Trust will
be invested by the Custodian in short-term U.S. Government securities maturing
on or shortly before the next quarterly distribution date. The Custodian will
also act as Collateral Agent under the Security and Pledge Agreement and will
hold a perfected security interest in the Reference Property and U.S.
Government obligations or other assets pledged thereunder.
Paying Agent
The transfer agent, registrar and paying agent (the "Paying
Agent") for the HITS is [ ] pursuant to a paying agent
agreement (the "Paying Agent Agreement"). In the event of any termination of
the Paying Agent Agreement by the Trust or the resignation of the Paying
Agent, the Trust will use its best efforts to engage a new Paying Agent to
carry out the duties of the Paying Agent.
Indemnification
The Trust will indemnify each Trustee, the Administrator, the
Paying Agent and the Custodian with respect to any claim, liability, loss or
expense (including the costs and expenses of the defense against any claim or
liability) that it may incur in acting as Trustee, Administrator, Paying Agent
or Custodian, as the case may be, except in the case of willful misfeasance,
bad faith, gross negligence or reckless disregard of their respective duties
or where applicable law prohibits such indemnification. Montgomery Securities
has agreed to reimburse the Trust for any amounts it may be required to pay as
indemnification to any Trustee, the Administrator, the Paying Agent or the
Custodian. Montgomery Securities will in turn be reimbursed by the
Contracting Stockholder for all such reimbursements paid by it.
Estimated Expenses
At the closing of the Offering the Contracting Stockholder will
pay to each of the Administrator, the Custodian and the Paying Agent a
one-time, up-front amount in respect of its fee and, in the case of the
Administrator, anticipated ongoing expenses of the Trust over the term of the
Trust. The anticipated Trust expenses to be borne by [the Contracting
Stockholder] include, among other things, expenses for legal and independent
accountants' services, costs of printing proxies, HITS certificates and
Holder reports and stock exchange fees. 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 HITS in the amount of
approximately $ will be paid by the Contracting Stockholder.
The amount payable to the Administrator in respect of the
anticipated ongoing expenses of the Trust was determined based on expense
estimates made in good faith on the basis of information currently available
to the Trust, including estimates furnished by the Trust's agents. Any
unanticipated expenses will be paid by Montgomery Securities. Montgomery
Securities will be reimbursed by the Contracting Stockholder for all fees and
expenses of the Trust paid by it.
DIVIDENDS AND DISTRIBUTIONS
The Trust intends to distribute to Holders on a quarterly basis
the proceeds of the U.S. Treasury Securities held by the Trust, net of any
Trust expenses. The first distribution, in respect of the period from
, 1997 until August 14, 1997, will be made on August 15, 1997 to Holders of
record as of August 1, 1997, and will equal $ per HITS. Thereafter,
distributions will be made on February 15, May 15, August 15 and November 15
of each year to Holders of record as of each February 1, May 1, August 1 and
November 1, respectively. Upon dissolution of the Trust as described in
"Investment Objective and Policies--Trust Dissolution", each Holder will share
pro rata in any remaining net assets of the Trust.
NET ASSET VALUE
The net asset value of the HITS will be calculated by the Trust
no less frequently than quarterly by dividing the value of the net assets of
the Trust (the value of its assets less its liabilities) by the total number
of HITS outstanding. The Trust's net asset value will be published
semi-annually as part of the Trust's semi-annual report to Holders and at such
other times as the Trustees may determine. The U.S. Treasury Securities held
by the Trust will be valued at the mean between the last current bid and asked
prices or, if quotations are not available, as determined in good faith by the
Trust under the direction of the Trustees. Short-term investments having a
maturity of 60 days or less are valued at cost with accrued interest or
discount earned included in interest receivable. The Contract will be valued
at the mean of the bid prices received by the Trust from at least three
independent broker-dealer firms unaffiliated with the Trust who are in the
business of making bids on financial instruments similar to the Contract and
with terms comparable thereto.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is based on the opinion of Davis Polk &
Wardwell, special tax counsel to the Trust ("Counsel"), as to certain of
the material United States federal income tax consequences that may be
relevant to the ownership of a HITS. This general discussion addresses
only initial Holders who purchase the HITS at the Price to Public appearing
on the cover of this Prospectus, and who hold the HITS as capital assets
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). The discussion set forth below does not address all
of the tax consequences that may be relevant to a Holder in light of its
particular circumstances or to Holders subject to special treatment under
federal income tax laws (e.g., certain financial institutions, tax-exempt
organizations, dealers in options or securities, or persons who hold a HITS
as a part of a hedging transaction or straddle or as part of a "conversion
transaction" or a "synthetic security" or other integrated transaction).
It also does not discuss the tax consequences of the ownership of the BCD
Common Stock. [Prospective purchasers of HITS are urged to review the
discussion under ["Taxation"] in the accompanying Company Prospectus
concerning the federal tax consequences of an investment in the BCD Common
Stock, which is based upon the opinion of [ ], counsel to the Company.]
The summary set forth below is based on the Code, administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, changes to any of which subsequent to the date of this
Prospectus may affect the tax consequences described herein. No ruling has
been requested from the Internal Revenue Service ("IRS") with respect to
the HITS and Counsel has advised that, because of the lack of statutory,
judicial or administrative authority on point, there are uncertainties
regarding the United States federal income tax consequences of an
investment in the HITS. Accordingly, prospective purchasers are urged to
consult their tax advisors regarding the United States federal income tax
consequences of an investment in the HITS and with respect to any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
As used herein, the term "United States Holder" means a Holder
that is, for United States federal income tax purposes, (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) an estate or trust the income of which
is subject to United States federal income taxation regardless of its source.
The term "Non-U.S. Holder" means a Holder that is not a United States Holder.
Tax Status of the Trust
The Trust will be treated as a grantor trust for federal income
tax purposes, and income received by the Trust will be treated as income of
the Holders in the manner set forth below.
Tax Consequences to United States Holders
Tax Basis of the U.S. Treasury Securities and the Contracts.
Each Holder will be considered the owner of its pro rata portion of the
stripped U.S. Treasury Securities and the Contract in the Trust under the
grantor trust rules of Sections 671-679 of the Code. The cost to the Holder
of its HITS will be allocated among the Holder's pro rata portion of the U.S.
Treasury Securities and the Contract (in proportion to the fair market values
thereof on the date on which the Holder acquires its HITS) in order to
determine the Holder's tax bases. It is currently anticipated that __% and
__% of the net proceeds of the offering will be used by the Trust to purchase
the U.S. Treasury Securities and as payment under the Contract, respectively.
Recognition of Original Issue Discount 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 HITS and 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 as discussed above. The Holder (whether on the cash or accrual
method of tax accounting) is required to include original issue discount
(other than original issue discount on short-term U.S. Treasury Securities, as
defined herein) in income for federal income tax purposes as it accrues, in
accordance with a constant yield method. The return 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 will also be
required to be included in income by the Holders as it is accrued. Unless a
Holder elects to accrue the return on a short-term U.S. Treasury Security
according to a constant yield method, 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 amount of any original issue discount
included in income by the Holder with respect to such U.S. Treasury Security.
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 Reference Property
delivered to the Trust. A Holder will not recognize income, gain or loss upon
entry into the Contract. In the opinion of Counsel, a Holder will not
recognize income with respect to the Contract prior to its settlement,
although the matter is not entirely free from doubt.
Sale or Exchange of HITS Prior to Settlement. Prior to the
Exchange Date, upon the sale or exchange of a HITS, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized on
the sale or exchange and such Holder's adjusted tax basis in the HITS. In
Counsel's opinion, although the matter is not entirely free from doubt, any
such gain or loss will generally be long-term capital gain or loss, as the
case may be, if at the time the HITS has been held for more than one year.
Upon Settlement. In Counsel's opinion, on settlement of the
HITS a Holder will not recognize any gain or loss with respect to any
Reference Property other than cash received with respect to the Contract,
although the matter is not entirely free from doubt. The Holder will have an
adjusted tax basis in such Reference Property equal to the pro rata portion of
the Holder's adjusted tax basis in the Contract allocable to such Reference
Property. The allocation of adjusted tax basis in the HITS between cash
received, if any, and other Reference Property received should be based on the
relative fair market value, as of settlement, of the cash and the other
Reference Property. The Holder's holding period for any Reference Property
received upon settlement will start on the day after the Exchange Date.
With respect to any cash received upon settlement, a Holder
will recognize gain or loss, as the case may be, to the extent that the amount
of such cash received differs from the pro rata portion of the Holder's
adjusted tax basis in the Contract allocable to the cash received. Counsel
generally is of the opinion that the character of this gain or loss will be
capital rather than ordinary, although the matter is not entirely free from
doubt.
Possible Alternative Tax Treatments of an Investment in the
HITS. It is possible that the IRS would seek to impose tax consequences on
Holders different from those described above. The IRS may contend, for
example, that Holders should include imputed interest income over the term of
the Contract. Also the IRS conceivably could argue that settlement of the
Contract is a taxable event and that gain realized on sale or exchange of a
HITS is ordinary rather than capital. Although Counsel is of the opinion that
such suggestions would not prevail, opinions of Counsel are not binding on the
IRS or the courts, and the matter is not free from doubt due to the lack of
authority directly on point.
Tax Consequences to Non-U.S. Holders
Subject to the discussion below concerning backup withholding
and income that is effectively connected with a trade or business of a
Non-U.S. Holder in the United States, under present United States federal
income tax law:
(a) payments of principal and interest (including any original
issue discount) on a Non-U.S. Holder's pro rata portion of any U.S. Treasury
Security will not be subject to United States federal withholding tax provided
that, in the case of interest, the statement requirement set forth in Section
871(h) or Section 881(c) of the Code has been fulfilled with respect to the
beneficial owner, as discussed below; and
(b) any gain realized by a Non-U.S. Holder on the sale of its
HITS will not be subject to U.S. federal income tax provided that, in the case
of a Non-U.S. Holder who is a non-resident alien individual, such Holder is not
present in the United States for 183 days or more during the taxable year of
the sale.
Sections 871(h) and 881(c) of the Code require that, in order
to obtain the portfolio interest exemption from withholding tax described in
paragraph (a) above, either the beneficial owner of the HITS, or a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"Financial Institution") and that is holding the HITS on behalf of such
beneficial owner, file a statement with the Trust to the effect that the
beneficial owner of the HITS is not a United States Holder. Under temporary
United States Treasury Regulations, such requirement will be fulfilled if the
beneficial owner of HITS certifies on IRS Form W-8 (or a successor form),
under penalties of perjury, that it is not a United States Holder and provides
its name and address, and any Financial Institution holding the HITS on behalf
of the beneficial owner files a statement with the Trust to the effect that it
has received such a statement from the Holder (and furnishes the Trust with a
copy thereof).
If any interest (including any original issue discount) or gain
realized by a Non-U.S. Holder is effectively connected with the Holder's trade
or business in the United States, such interest or gain will be subject to
regular U.S. federal income tax in the same manner as if the Non-U.S. Holder
were a U.S. Holder. See "Tax Consequences to United States Holders" above.
In lieu of the certificate described in the preceding paragraph, such a
Non-United States Holder will be required to provide to the Trust a properly
executed IRS Form 4224 (or a successor form) in order to claim an exemption
from withholding tax. In addition, if such Non-U.S. Holder is a foreign
corporation, such interest or gain may be included in the earnings and profits
of such Holder in determining such Holder's U.S. branch profits tax liability.
Backup Withholding and Information Reporting
A Holder of a HITS may be subject to information reporting and
to backup withholding at a rate of 31 percent of the amounts paid to the
Holder, unless such Holder provides proof of an applicable exemption or a
correct taxpayer identification number, and otherwise complies with applicable
requirements of the backup withholding rules. The amounts withheld under the
backup withholding rules are not an additional tax and may be refunded, or
credited against the Holder's United States federal income tax liability,
provided the required information is furnished to the IRS.
UNDERWRITING
Each of the underwriters named below (the "Underwriters") has
severally agreed, subject to the terms and conditions set forth in an
underwriting agreement (the "Underwriting Agreement") among the Company, the
Trust, the Contracting Stockholder and the Underwriters, to purchase from the
Trust the number of HITS indicated below opposite their respective names at
the public offering price set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters are
committed to purchase all of such HITS, if any are purchased.
Underwriter Number of HITS
- ---------- --------------
Montgomery Securities....................
-------
Total..............................
=======
The Underwriters have advised the Trust that they initially
propose to offer the HITS to the public on the terms set forth on the cover
page of this Prospectus. The Underwriters may allow to selected dealers a
concession of not more than $ per share, and the Underwriters may allow,
and such dealers may reallow, a concession of not more than $ per share
to certain other dealers. After the public offering, the offering price and
other selling terms may be changed by the Underwriters. The HITS are offered
subject to receipt and acceptance by the Underwriters and to certain other
conditions, including the right to reject orders in whole or in part. The
Underwriters may offer the HITS through a selling group.
The Trust has granted an option to the Underwriters,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to a maximum of additional HITS to cover
over-allotments, if any, at the same price per HITS as the initial
HITS to be purchased by the Underwriters. To the extent the Underwriters
exercise this option, each of the Underwriters will be committed, subject to
certain conditions, to purchase such additional HITS in the same proportion as
set forth in the above table. The Underwriters may purchase such HITS only to
cover overallotments made in connection with the Offering.
The Contracting Stockholder has agreed not to (i) offer, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of BCD
Common Stock or any securities convertible into or exercisable or exchangeable
for BCD Common Stock (whether such shares or any such securities are now owned
by such party or hereafter acquired) or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, the economic
consequences of ownership of the BCD Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of BCD Common Stock or other securities, in cash or otherwise, for a period of
90 days after the date of this Prospectus without the prior written consent of
Montgomery Securities. Montgomery Securities may, in its sole discretion and
at any time without notice, release all or any portion of the securities
subject to this lock-up agreement.
The Underwriting Agreement provides that the Company and the
Contracting Stockholder will indemnify the Underwriters against certain
liabilities under the Securities Act, or will contribute to payments the
Underwriters may be required to make in respect thereof.
In connection with the creation of the Trust, Montgomery
Securities subscribed for and purchased an aggregate of HITS for an
aggregate purchase price of $100,000. Under the Contract, the Contracting
Stockholder will be obligated to deliver to the Trust on the Business Day
immediately preceding the Exchange Date a number or amount of each type of
Reference Property (or, in certain circumstances, cash, or a combination of
cash and Reference Property, with an equal value) in respect of such HITS on
the same terms as the HITS offered hereby.
In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
HITS or the BCD Common Stock. Specifically, the Underwriters may overallot
the Offering, creating a syndicate short position. In addition, the
Underwriters may bid for, and purchase, HITS or shares of BCD Common Stock in
the open market to cover syndicate shorts or to stabilize the price of the HITS
or the BCD Common Stock. Finally, the underwriting syndicate may reclaim
selling concessions allowed for distribution the HITS in the Offering if the
syndicate repurchases previously distributed HITS in syndicate covering
transactions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the HITS or the BCD
Common Stock above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
Certain of the Underwriters render investment banking and other
financial services to the Company and the Contracting Stockholder from time to
time.
Investment Restrictions
The Investment Company Act limits all investment companies
(including foreign investment companies) in their acquisition of voting stock
of an investment company such as the Trust. Accordingly, an investment
company may acquire no more than 3% of the outstanding HITS, and any group of
affiliated investment companies may acquire no more than 10% of the
outstanding HITS. Montgomery Securities has applied to the Commission to
permit investment companies and groups of affiliated investment companies to
acquire HITS in excess of these limitations, but no assurance can be given
that this relief will be granted.
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and for
the Underwriters by their counsel, Davis Polk & Wardwell, New York, New York.
Certain matters of Delaware law will be passed upon for the Trust by Richards,
Layton & Finger, Wilmington, Delaware.
EXPERTS
The statement of assets, liabilities and capital included in
this Prospectus has been audited by [ ], independent auditors, as
stated in their opinion appearing herein, and has been included in reliance
upon such opinion given on the authority of said firm as experts in auditing
and accounting.
ADDITIONAL INFORMATION
The Trust has filed with the Commission, Washington D.C.
20549, a Registration Statement under the Securities Act with respect to the
HITS offered hereby. Further information concerning the HITS and the Trust
may be found in the Registration Statement, of which this Prospectus
constitutes a part. The Registration Statement may be inspected without
charge at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or
any part thereof may be obtained from such office after payment of the fees
prescribed by the Commission. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, such as the Trust, that file
electronically with the Commission.
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of BCD HITS Trust:
We have audited the accompanying statement of assets,
liabilities and capital of BCD HITS Trust as of , 1997. This
financial statement is the responsibility of the Trust's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the statement of assets,
liabilities and capital is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement. An audit also includes assessing the accounting
principles used and significant estimates made by the Trust's management, as
well as evaluating the overall financial statement presentation. We believe
that our audit of the financial statement provides a reasonable basis for our
opinion.
In our opinion, the financial statement referred to above
presents fairly, in all material respects, the financial position of BCD HITS
Trust, as of , 1997 in conformity with generally accepted
accounting principles.
[ ]
New York, New York
, 1997
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
, 1997
Assets
Cash........................................................... $100,000
--------
Total Assets................................................. $100,000
========
Liabilities
Total Liabilities............................................ $ 0
========
Net Assets...................................................... $100,000
========
Capital
HITS, par value $.10 per HITS; 1 HITS issued and outstanding
(Note 3)..................................................... $100,000
========
- ----------
(1) The Trust was created as a Delaware business trust on April 4, 1997 and
has had no operations other than matters relating to its organization and
registration as a non-diversified, closed-end management investment
company under the Investment Company Act of 1940, as amended. Costs
incurred in connection with the organization of the Trust and ongoing
administrative expenses will be paid by the Contracting Stockholder.
(2) Offering expenses will be payable upon completion of the Offering and also
will be paid by the Contracting Stockholder.
(3) On , 1997, the Trust issued one HITS to Montgomery Securities
in consideration for the purchase price of $100,000.
The Amended and Restated Trust Agreement provides that prior to the
Offering, the Trust will split the outstanding HITS to be effected on the
date that the price and underwriting discount of the HITS being offered to
the public is determined, but prior to the sale of the HITS to the
Underwriters. The one outstanding HITS will be split into the smallest
whole number of HITS that would result in the per HITS amount recorded as
shareholders' equity, after effecting the split, not exceeding the public
offering price per HITS.
<TABLE>
<S> <C>
====================================================== ===============================
No dealer, sales representative or any other person
has been authorized to give any information or to
make any representations in connection with this
offering 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 by the Trust or any of the
Underwriters. This Prospectus does not constitute an HITS(SM)
offer to sell or a solicitation of an offer to buy any
securities other than the HITS to which it relates or BCD HITS Trust
an offer to, or a solicitation of, any person in any
jurisdiction where such an offer or solicitation would Subject to Exchange for
be unlawful. Neither the delivery of this Prospectus Common Shares of
nor any sale made hereunder shall, under any
circumstances, create an implication that there has [(BCD) Logo]
been no change in the affairs of the Trust or that
information contained herein is correct as of any time or Cash
subsequent to the date hereof.
-----------------
TABLE OF CONTENTS
----------------- ----------------
PROSPECTUS
Page ----------------
----
Prospectus Summary................5
Fee Table........................11
The Trust........................11
Use of Proceeds..................12
Investment Objective Policies....12
Investment Restrictions..........22
Risk Factors.....................23
Description of the HITS..........26
Trustees.........................28
Management Arrangements..........29 Montgomery Securities
Dividends and Distributions......30
Net Asset Value..................31
Certain United States Federal
Income Tax Considerations.......31 , 1997
Underwriting.....................34
Legal Matters....................35
Experts..........................35
Additional Information...........36
Independent Auditors' Report.....37
Statement of Assets,
Liabilities and Capital........38
----------------
Until , 1997 (25 days after the (SM) Service Mark of Montgomery
commencement of the Offering), all dealers effecting Securities
transaction in the HITS, 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.
====================================================== ===============================
</TABLE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
1. Financial Statements
Part A - Independent Auditors' Report
Statement of Assets, Liabilities and Capital as of
, 1997
Part B - None
2. Exhibits
(a) (1) Trust Agreement
(2) Certificate of Trust
(3) Restated Certificate of Trust *
(4) Amended and Restated Trust Agreement *
(b) Not applicable
(c) Not applicable
(d) (1) Form of specimen certificate for HITS*
(2) Portions of the Amended and Restated Trust Agreement of the
Registrant defining the rights of holders of HITS*
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) Form of Underwriting Agreement*
(i) Not applicable
(j) Form of Custodian Agreement *
(k) (1) Form of Paying Agent Agreement*
(2) Form of Forward Purchase Contract*
(3) Form of Administration Agreement *
(4) Form of Security and Pledge Agreement*
(5) Form of Fund Expense Agreement*
(6) Form of Fund Indemnity Agreement*
(l) Opinion and Consent of Richards, Layton & Finger, counsel to the Trust*
(m) Not applicable
(n) (1) Consent of __________, independent auditors for the Trust*
(2) Tax opinion and consent of Davis Polk & Wardwell, counsel to the
Trust*
(o) Not applicable
(p) Form of Subscription Agreement*
(q) Not applicable
(r) Financial Data Schedule*
- -----------
* To be filed by amendment.
Item 25. Marketing Arrangements
See Exhibit (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:
SEC Registration fees *
Listing fee *
Printing (other than certificates) *
Engraving and printing certificates *
Fees and expenses of qualifications under state
securities laws (including fees of counsel) *
Accounting fees and expenses *
Legal fees and expenses *
NASD fees *
Miscellaneous *
Total *
- -----------
* To be furnished by amendment.
Item 27. Person Controlled by or under Common Control with Registrant
The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management
Arrangements" is incorporated herein by reference.
Item 28. Number of Holders of Securities
There will be one record holder of the HITS as of the effective date
of this Registration Statement.
Item 29. Indemnification
[Certain agreements to be specified] provide for indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted to
trustees, officers and controlling persons of the Registrant, pursuant to the
foregoing provisions or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such trustee, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
Item 30. Business and Other Connections of Investment Adviser
The Trust is internally managed and does not have an investment
adviser.
Item 31. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the
rules promulgated thereunder are maintained at the offices of the
Registrant (Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware 19716) and its paying agent ( ).
Item 32. Management Services
Not applicable.
Item 33. Undertakings
(a) The Registrant hereby undertakes to suspend the offering of the HITS
covered hereby until it amends its prospectuses contained herein if (1)
subsequent to the effective date of this Registration Statement, its net asset
value per share declines more than 10 percent from its net asset value per
share as of the effective date of the Registration Statement or (2) the net
asset value increases to an amount greater than its net proceeds as stated in
the prospectus.
(b) The Registrant hereby undertakes that (i) for purpose of determining
any liability under the 1933 Act, the information omitted from the form of
prospectuses filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant under
rule 497(h) under the 1933 Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective, and (ii) for the purpose
of determining any liability under the 1933 Act, each post-effective amendment
that contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
thereof.
SIGNATURES
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 Newark, State of Delaware, on the
8th day of April, 1997.
BCD HITS TRUST
By: /s/ Donald J. Puglisi
----------------------
Name: Donald J. Puglisi
Title: Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacities and on the date indicated.
Name Title Date
---- ----- ----
Principal Executive Officer, April 8, 1997
/s/ Donald J. Puglisi Principal Financial Officer,
- --------------------- Principal Accounting Officer, and
Donald J. Puglisi Trustee
Exhibit (a) (1)
TRUST AGREEMENT OF BCD HITS TRUST
TRUST AGREEMENT, dated as of April 4, 1997 among Montgomery
Securities, as Depositor, and Donald J. Puglisi, as Trustee. The Depositor and
the Trustee hereby agree as follows:
1. The Trust created hereby shall be known as "BCD HITS Trust",
in which name the Trustee may conduct the business of the Trust, make and
execute contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets
over to the Trustee the sum of $1. The Trustee hereby acknowledges receipt of
such amount in trust from the Depositor, which amount shall constitute the
initial trust estate. The Trustee hereby declares that it will hold the trust
estate in trust for the Depositor. It is the intention of the parties hereto
that the Trust created hereby constitute a business trust under Chapter 38 of
Title 12 of the Delaware Code, 12 Del. C. Section 3801, et seq. and that this
document constitute the governing instrument of the Trust. The Trustee is
hereby authorized and directed to execute and file a certificate of trust with
the Delaware Secretary of State in such form as the Trustee shall approve.
3. The Depositor and the Trustee will enter into an Amended and
Restated Trust Agreement, satisfactory to each such party, to provide for the
contemplated operation of the Trust created hereby. Prior to the execution
and delivery of such Amended and Restated Trust Agreement, the Trustee shall
not have any duty or obligation hereunder or with respect to the trust estate,
except as otherwise required by applicable law or as may be necessary to
obtain prior to such execution and delivery any licenses, consents or
approvals required by applicable law or otherwise.
4. The Depositor and the Trustee hereby authorize and direct the
Trustee (i) to file with the Securities and Exchange Commission (the
"Commission") and to execute, on behalf of the Trust, (a) a Registration
Statement, including pre-effective or post-effective amendments to such
Registration Statement, relating to the registration under the Securities Act
of 1933, as amended (the "1933 Act"), and the Investment Company Act of 1940
(the "1940 Act"), of the HITS of the Trust and (b) any preliminary prospectus
or prospectus or supplement thereto relating to the HITS required to be filed
under the 1933 Act or the 1940 Act; (ii) to file with any national securities
exchange or automated quotation system and execute on behalf of the Trust a
listing application and all other applications, statements, certificates,
agreements and other instruments as shall be necessary or desirable to cause
the HITS to be listed on such exchange or quotation system; and (iii) to file
and execute on behalf of the Trust such applications, reports, surety bonds,
irrevocable consents, appointments of attorney for service of process and
other papers and documents as shall be necessary or desirable to register the
HITS under the securities or "Blue Sky" laws of such jurisdictions as the
Trustee, on behalf of the Trust, may deem necessary or desirable.
5. The number of trustees of the Trust initially shall be one
and thereafter the number of trustees of the Trust shall be such number as
shall be fixed from time to time by a written instrument signed by the
Depositor which may increase or decrease the number of trustees of the Trust.
Subject to the foregoing, the Depositor is entitled to appoint or remove
without cause any trustee of the Trust at any time. Any trustee of the Trust
may resign upon thirty days' prior notice to the Depositor.
6. This Trust Agreement may be executed in one or more counterparts.
7. All laws or rules of construction of the State of Delaware,
without regard to principles of conflict of laws, shall govern the rights
of the parties hereto and the construction, validity and effect of the
provisions hereof.
8. The Trust will be a registered investment company under the
1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
DEPOSITOR:
Montgomery Securities,
as Depositor
By: /s/ Michael Yagemann
--------------------
Name: Michael Yagemann
Title: Managing Director
TRUSTEE:
/s/ Donald J. Puglisi
---------------------
Donald J. Puglisi,
as Trustee
Exhibit (a) (2)
CERTIFICATE OF TRUST OF BCD HITS TRUST
This Certificate of Trust of BCD HITS Trust (the "Trust"),
dated April 4, 1997, is being duly executed and filed by Donald J. Puglisi, as
trustee, to form a business trust under the Delaware Business Trust Act (12
Del. C. Section 3801, et seq.).
1. Name. The name of the business trust formed hereby is BCD
HITS Trust.
2. Registered Office; Registered Agent. The business address of
the registered office of the Trust in the State of Delaware is Puglisi &
Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19716. The name
of the Trust's registered agent at such address is Donald J. Puglisi.
3. Effective Date. This Certificate of Trust shall be effective
upon the date and time of filing.
4. Investment Company Act of 1940. The Trust will be a registered
investment company under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above-
written.
/s/ Donald J. Puglisi
---------------------
Donald J. Puglisi, as Sole Trustee
