<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1997
SECURITIES ACT FILE NO. 333-35147
INVESTMENT COMPANY ACT FILE NO. 811-08345
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM N-2
Registration Statement Under The Securities Act of 1933 [X]
Pre-Effective Amendment No. 2 [X]
Post-Effective Amendment No. ___ [ ]
Registration Statement Under The Investment Company Act of 1940 [X]
Amendment No. 2 [X]
------------------------------------
DECS TRUST II
(Exact Name of Registrant as Specified in Charter)
C/O PUGLISI & ASSOCIATES
850 LIBRARY AVENUE, SUITE 204
NEWARK, DELAWARE 19715
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (302) 738-6680
DONALD J. PUGLISI
C/O PUGLISI & ASSOCIATES
850 LIBRARY AVENUE, SUITE 204,
NEWARK, DELAWARE 19715
(Name and Address of Agent for Service)
WITH COPIES TO:
RAYMOND B. CHECK, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON
ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10006
(212) 225-2000
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, as
amended, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [ ]
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT BEING MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------
DECS representing shares
of beneficial
interest................ 3,577,500(1) US$27.75(2) US$90,950,625(2) US$27,561(3)
DECS representing shares
of beneficial
interest................ 300,000 US$27.25(4) US$8,175,000(4) US$2,477
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes an aggregate of 427,500 DECS that may be issued in connection with
the exercise of an over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended on the
basis of the average of the high and low prices on The New York Stock
Exchange on October 7, 1997.
(3) Previously paid.
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(e) under the Securities Act of 1933, as amended, on the
basis of the average of the high and low prices reported on The New York
Stock Exchange on October 27, 1997.
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.
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<PAGE> 2
DECS TRUST II
CROSS-REFERENCE SHEET
PARTS A AND B OF PROSPECTUS*
<TABLE>
<CAPTION>
ITEM NO. CAPTION PROSPECTUS CAPTION
- -------- ----------------------------------------- -----------------------------------------
<C> <S> <C>
1. Outside Front Cover...................... Front Cover Page
2. Inside Front and Outside Back Cover
Page................................... Front Cover Page; Inside Front Cover Page
3. Fee Table and Synopsis................... Prospectus Summary; Fees and Expenses
4. Financial Highlights..................... Not Applicable
5. Plan of Distribution..................... Front Cover Page; Prospectus Summary;
Underwriting
6. Selling Shareholders..................... Not Applicable
7. Use of Proceeds.......................... Use of Proceeds; Investment Objectives
and Policies
8. General Description of the Registrant.... Front Cover Page; Prospectus Summary; The
Trust; Investment Restrictions;
Investment Objectives and Policies;
Risk Factors
Relating to DECS
9. Management............................... Management and Administration of the
Trust
10. Capital Stock, Long-Term Debt and
Other Securities; Federal Income Tax
Considerations......................... Description of DECS
11. Defaults and Arrears on Senior
Securities............................. Not Applicable
12. Legal Proceedings........................ Not Applicable
13. Table of Contents of the Statement of
Additional Information................. Not Applicable
14. Cover Page............................... Not Applicable
15. Table of Contents........................ Not Applicable
16. General Information and History.......... The Trust
17. Investment Objective and Policies........ Investment Objectives and Policies;
Investment Restrictions
18. Management............................... Management and Administration of the
Trust
19. Control Persons and Principal Holders
of Securities.......................... Management and Administration of the
Trust
20. Investment Advisory and Other Services... Management and Administration of the
Trust
21. Brokerage Allocation and Other
Practices.............................. Investment Objectives and Policies
22. Tax Status............................... Certain United States Federal Income Tax
Considerations
23. Financial Statements..................... Statement of Assets, Liabilities and
Capital
</TABLE>
- ---------------
* Pursuant to the General Instructions to Form N-2, all information required to
be set forth in Part B: Statement of Additional Information has been included
in Part A: The Prospectus. Information required to be included in Part C is
set forth under the appropriate item, so numbered, in Part C of the N-2
Registration Statement.
<PAGE> 3
SUBJECT TO COMPLETION
OCTOBER 29, 1997
PROSPECTUS
3,150,000 DECS(SM)
DECS TRUST II
(SUBJECT TO EXCHANGE INTO SUBORDINATE VOTING SHARES, WITHOUT PAR VALUE, OF ROYAL
GROUP TECHNOLOGIES LIMITED)
The issue price (the "Initial Price") of each of the DECS (each, a "DECS") of
the DECS Trust II (the "Trust") being offered hereby will be US$ (the
last sale price of the subordinate voting shares, without par value (the
"Subordinate Voting Shares"), of Royal Group Technologies Limited (the
"Company") on , 1997, as reported on the New York Stock Exchange
Composite Tape). Each of the DECS represents the right to receive (a) an annual
distribution of US$ , payable quarterly on each February 15, May 15,
August 15 and November 15, during the term of the Trust, beginning February 15,
1998 and (b) upon the conclusion of the term of the Trust on November 15, 2000
(the "Exchange Date"), between and 1.0 Subordinate Voting Shares or
cash with an equivalent value. The DECS are not subject to redemption prior to
the Exchange Date or the earlier termination of the Trust.
The Trust is a newly organized Delaware business trust that is registered as a
closed-end investment company and was established to purchase and hold (a) a
series of zero-coupon U.S. Treasury securities maturing on a quarterly basis
during the term of the Trust (the "Treasury Securities") and (b) forward
purchase contracts (the "Contracts") with certain shareholders (the "Sellers")
of the Company relating to the Subordinate Voting Shares.
The investment objectives of the Trust are to provide holders of DECS with a
quarterly distribution of US$ per DECS over the term of the Trust and
to provide holders of DECS, at the Exchange Date, a number of Subordinate Voting
Shares (or, if some or all of the Sellers exercise their cash settlement option
in the Contracts under the circumstances described herein, the cash equivalent
of all or part thereof or a combination of Subordinate Voting Shares and cash)
at the Exchange Rate (as defined herein). The Exchange Rate is equal to, subject
to certain adjustments, (a) if the Exchange Price (as defined herein) is greater
than US$ per Subordinate Voting Share (the "Threshold Appreciation
Price"), Subordinate Voting Shares per DECS, (b) if the Exchange Price
is less than or equal to the Threshold Appreciation Price but is greater than
the Initial Price, a fraction equal to the Initial Price divided by the Exchange
Price of one Subordinate Voting Share per DECS such that the value (determined
at the Exchange Price) of the Subordinate Voting Shares delivered at the
Exchange Date equals the Initial Price and (c) if the Exchange Price is less
than or equal to the Initial Price, one Subordinate Voting Share per DECS. The
"Exchange Price" means the average Closing Price (as defined herein) per
Subordinate Voting Share on the 20 Trading Days (as defined herein) immediately
prior to the Exchange Date, except as otherwise described herein. Accordingly,
the value of the Subordinate Voting Shares to be received by holders of the DECS
at the Exchange Date will not necessarily equal the Initial Price. If the
Exchange Price is less than the Initial Price, the value of the Subordinate
Voting Shares to be received at the Exchange Date will generally be less than
the price paid for the DECS. See "Investment Objectives and Policies."
SEE "RISK FACTORS RELATING TO DECS" BEGINNING ON PAGE 21 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS.
(Cover continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO SALES PROCEEDS TO
PUBLIC LOAD TRUST AND SALOMON(2)
<S> <C> <C> <C>
Per DECS............... US$ US$ (3) US$
Total(1)............... US$ US$ (3) US$
</TABLE>
- --------------------------------------------------------------------------------
(1) The Trust has granted to the Underwriter an option, exercisable within 30
days from the date hereof, to purchase up to an additional 427,500 DECS to
cover over-allotments, if any. If the Underwriter exercises such option in
full, the total Price to Public and Proceeds to the Trust and Salomon
Brothers Inc ("Salomon") will be US$ and US$ , respectively.
See "Underwriting."
(2) All of the DECS are being issued and sold by the Trust, except for
DECS being sold by Salomon that Salomon acquired in connection with the
formation of the Trust. The Proceeds to the Trust will be US$ ,
before deducting estimated expenses of US$456,000, payable by Salomon, which
will be reimbursed by the Sellers as provided in the Underwriting Agreement
and the Reimbursement Agreement. The proceeds to Salomon will be US$100,000.
(3) In light of the fact that the proceeds of the sale of the DECS will be used
in part by the Trust to purchase the Contracts from the Sellers, the
Underwriting Agreement provides that the Sellers will pay to the Underwriter
as compensation US$ per DECS, including in respect of DECS previously
purchased by Salomon and offered hereby. See "Underwriting."
The DECS are offered subject to receipt and acceptance by the Underwriter, to
prior sales and to the Underwriter's right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the DECS will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about , 1997.
- --------------
- ----------------------------------------------
SALOMON BROTHERS INC
- --------------------------------------------------------------------------------
The date of this Prospectus is , 1997.
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.
<PAGE> 4
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DECS OR THE SUBORDINATE
VOTING SHARES, INCLUDING PURCHASES OF THE DECS OR THE SUBORDINATE VOTING SHARES
TO STABILIZE THEIR MARKET PRICE AND PURCHASES OF THE DECS OR THE SUBORDINATE
VOTING SHARES TO COVER SOME OR ALL OF A SHORT POSITION IN THE DECS OR THE
SUBORDINATE VOTING SHARES MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES SEE "UNDERWRITING."
------------------------
(Continued from previous page)
In the event of certain Adjustment Events (as defined herein), holders may
receive property other than (or in addition to) Subordinate Voting Shares or a
combination of such property and cash. See "Investment Objectives and Policies
- -- The Contracts -- Dilution Adjustments; Adjustment Events." In addition,
holders otherwise entitled to receive fractional shares in respect of their
aggregate holdings of DECS will receive cash in lieu thereof.
The Trust has adopted a policy that the Contracts may not be disposed of during
the term of the Trust. The Trust will continue to hold the Contracts despite any
significant decline in the market price of the Subordinate Voting Shares or
adverse changes in the financial condition of the Company.
This Prospectus sets forth information about the Trust that a prospective
investor ought to know before investing. Potential investors are advised to read
this Prospectus and to retain it for future reference.
DECS may be a suitable investment for those investors who are capable of
evaluating the risks involved in making an investment in the Subordinate Voting
Shares and the advantages and disadvantages of doing so in a manner which will
give investors in the DECS a potentially higher yield but a lesser opportunity
for equity appreciation than would be afforded by a direct investment in the
Subordinate Voting Shares. There is no assurance that the yield on the DECS will
be higher than the dividend yield on the Subordinate Voting Shares over the term
of the Trust. See "Investment Objectives and Policies."
Attached hereto for convenience of reference is a prospectus of the Company
relating to the Subordinate Voting Shares that may be received by holders of
DECS at the Exchange Date. The Company is not affiliated with the Trust, will
not receive any of the proceeds from the sale of the DECS and will have no
obligations with respect to the DECS or the Contracts. The outstanding
Subordinate Voting Shares are listed for trading on the New York Stock Exchange,
Inc. (the "NYSE"), The Toronto Stock Exchange (the "TSE") and The Montreal
Exchange under the symbol "RYG."
The Trust will be a grantor trust owned solely by the present and future holders
of DECS for U.S. federal income tax purposes and each holder will be treated as
the owner of its pro rata portion of the Treasury Securities and the Contracts.
The Treasury Securities will be treated as having "original issue discount"
which holders must recognize currently as income as it accrues. Holders will not
recognize income, gain or loss upon the Trust's entry into the Contracts, and
the delivery of Subordinate Voting Shares pursuant to the Contracts will not be
taxable to holders. Holders should not recognize income, gain or loss with
respect to the Contracts over their term. See "Certain United States Federal
Income Tax Considerations."
THE TRUST IS A NEWLY ORGANIZED CLOSED-END INVESTMENT COMPANY WITH NO PREVIOUS
HISTORY OF PUBLIC TRADING. THE DECS HAVE BEEN APPROVED FOR LISTING ON THE NYSE
UNDER THE SYMBOL "RYD," SUBJECT TO OFFICIAL NOTICE OF ISSUANCE. TYPICAL
CLOSED-END FUND SHARES FREQUENTLY TRADE AT A DISCOUNT FROM NET ASSET VALUE. THIS
CHARACTERISTIC OF INVESTMENTS IN A CLOSED-END INVESTMENT COMPANY IS A RISK
SEPARATE AND DISTINCT FROM THE RISK THAT THE TRUST'S NET ASSET VALUE WILL
DECREASE. THE TRUST CANNOT PREDICT WHETHER THE DECS WILL TRADE AT, BELOW OR
ABOVE NET ASSET VALUE. THE RISK OF PURCHASING INVESTMENTS IN A CLOSED-END
COMPANY THAT MIGHT TRADE AT A DISCOUNT IS MORE PRONOUNCED FOR INVESTORS WHO WISH
TO SELL THEIR INVESTMENTS SOON AFTER COMPLETION OF AN INITIAL PUBLIC OFFERING.
The address of the Trust is c/o Puglisi & Associates, 850 Library Avenue, Suite
204, Newark, Delaware 19715, and the Trust's telephone number is (302) 738-6680.
Investors are advised to read this Prospectus and to retain it for future
reference.
"DECS" is a service mark of Salomon Brothers Inc.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus.
THE TRUST
DECS Trust II (the "Trust") is a newly organized Delaware business trust
that is registered as a non-diversified closed-end management investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"). The term of the Trust will expire on or shortly after November 15, 2000
(the "Exchange Date"), except that the Trust may be dissolved prior to such date
under certain limited circumstances. The Trust will be treated as a grantor
trust owned solely by the present and future holders of DECS for U.S. federal
income tax purposes.
THE OFFERING
3,150,000 DECS representing shares of beneficial interest in the Trust (the
"DECS") are being offered for sale by Salomon Brothers Inc (the "Underwriter")
to the public at a purchase price of US$ per DECS (the "Initial Price")
(which is equal to the last sale price of the subordinate voting shares, without
par value (the "Subordinate Voting Shares"), of Royal Group Technologies Limited
(the "Company") on October , 1997, as reported on the NYSE Composite Tape).
The DECS being offered for sale include DECS previously purchased by Salomon
Brothers Inc ("Salomon") in connection with formation of the Trust. In addition,
the Underwriter has been granted an option by the Trust to purchase up to an
additional 427,500 DECS to cover over-allotments, if any. See "Underwriting."
PURPOSE OF THE TRUST
The DECS are designed to provide investors (the "Holders") with a higher
yield than the current dividend yield paid on the Subordinate Voting Shares,
while also providing the opportunity for Holders to share in the appreciation,
if any, of the Subordinate Voting Shares above the Threshold Appreciation Price
(as defined below). The annual calendar year distribution on the DECS is
US$ per DECS. No annual dividend is paid on the Subordinate Voting
Shares currently.
The yield on the DECS is higher than the current dividend yield on the
Subordinate Voting Shares. However, there is no assurance that the yield on the
DECS will be higher than the dividend yield on the Subordinate Voting Shares
over the term of the Trust. In addition, the opportunity for equity appreciation
afforded by an investment in the DECS is less than the opportunity for equity
appreciation afforded by a direct investment in the Subordinate Voting Shares
because the value of the Subordinate Voting Shares to be received by Holders of
the DECS at the Exchange Date (the "Amount Receivable at the Exchange Date")
will generally exceed the Initial Price only if the Exchange Price (as defined
herein) exceeds US$ per Subordinate Voting Share (the "Threshold
Appreciation Price," which represents an appreciation of % over the Initial
Price) and because Holders will be entitled to receive at the Exchange Date only
% of any appreciation of the value of the Subordinate Voting Shares in
excess of the Threshold Appreciation Price. Moreover, if the Exchange Price is
less than the Initial Price, the value of the Subordinate Voting Shares to be
received at the Exchange Date will generally be less than the price paid for the
DECS.
DISTRIBUTIONS PRIOR TO EXCHANGE DATE
The Holders are entitled to receive distributions at the rate per DECS of
US$ per annum or US$ 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 (as defined herein), on the next succeeding Business Day (each a
"Distribution Date"), to Holders of record as of each February 1, May 1, August
1 and November 1, respectively. The first distribution will be payable on
February 15, 1998 to Holders of record as of February 1, 1998. See "Investment
Objectives and Policies -- Trust Assets."
3
<PAGE> 6
DISTRIBUTIONS ON EXCHANGE DATE
At the Exchange Date, in respect of each outstanding DECS, Holders will
have the right to receive between and 1.0 Subordinate Voting Shares,
subject to adjustment in the event of certain dividends or distributions,
subdivisions, splits, combinations, issuances of certain rights or warrants or
distributions of certain assets with respect to the Subordinate Voting Shares.
In the event of a merger of the Company into another entity, or the liquidation
of the Company, or in certain related events, Holders would receive
consideration in the form of cash, Reported Securities (as defined under
"Investment Objectives and Policies -- The Contracts -- Dilution Adjustments;
Adjustment Events") or a combination thereof, rather than (or in addition to)
Subordinate Voting Shares. If some or all of the Sellers exercise their cash
settlement option, Holders would receive cash in lieu of all or part of the
Subordinate Voting Shares or Reported Securities that would otherwise be
deliverable. See "Investment Objectives and Policies -- The Contracts --
General." Additionally, the occurrence of certain defaults by a Seller under its
Contract or the related collateral arrangements would cause the acceleration of
such Contract and the distribution to the Trust for distribution pro rata to
Holders of all or a portion of the Subordinate Voting Shares, Reported
Securities, cash or a combination thereof subject to such Contract and of a
portion of the Treasury Securities (as defined below) then held by the Trust.
See "Investment Objectives and Policies -- The Contracts -- Collateral
Requirements of the Contracts; Acceleration" and "-- The Treasury Securities."
At the Exchange Date, no Subordinate Voting Shares or Reported Securities
will be distributed to any Holder that is a national or resident of Canada, a
corporation, partnership or other entity created or organized in or under the
laws of Canada or of any political subdivision thereof, any estate or trust the
income of which is subject to Canadian federal income taxation, regardless of
its source (other than any non-Canadian branch of a Canadian person), or a
Canadian branch of any non-Canadian person or entity (any such Holder, a
"Canadian Holder"). The Trust will sell any Subordinate Voting Shares or
Reported Securities that would otherwise be distributable to such Canadian
Holder at the market price available at the time of distribution and distribute
the cash proceeds from such sale to such Canadian Holder in lieu of such
Subordinate Voting Shares or Reported Securities.
VOTING RIGHTS
Holders will not have voting rights with respect to the Subordinate Voting
Shares unless and until the Sellers have delivered Subordinate Voting Shares to
the Trust pursuant to the Contracts and the Trust has distributed such shares to
the Holders. See "Investment Objectives and Policies -- The Company." The
Holders have the right to vote on matters affecting the Trust, as described
under "Description of DECS."
ASSETS OF THE TRUST; INVESTMENT OBJECTIVES AND POLICIES
The Trust will purchase and hold (i) a series of zero-coupon U.S. Treasury
securities (the "Treasury Securities") maturing on a quarterly basis during the
term of the Trust and representing in the aggregate approximately % of the
initial assets of the Trust and (ii) one or more forward purchase contracts (the
"Contracts") with certain existing shareholders (the "Sellers") of the Company
relating to the Subordinate Voting Shares and representing approximately %
of the initial assets of the Trust. The Trust's investment objective is to
provide each Holder with a quarterly distribution of US$ per DECS over
the term of the Trust, equal to the pro rata portion of the quarterly cash
distributions from the Treasury Securities. It is also the Trust's investment
objective to provide each Holder, at the Exchange Date, a number of Subordinate
Voting Shares (or, if any Seller exercises its cash settlement option in the
Contracts under the circumstances described herein, the cash equivalent of all
or part thereof) at the Exchange Rate. The Exchange Rate is equal to, subject to
certain adjustments, (a) if the Exchange Price (as defined herein) is greater
than the Threshold Appreciation Price, Subordinate Voting Shares per
DECS, (b) if the Exchange Price is less than or equal to the Threshold
Appreciation Price but is greater than the Initial Price, a fraction equal to
the Initial Price divided by the Exchange Price of one Subordinate Voting Share
per DECS such that the value (determined at the Exchange Price) of the
4
<PAGE> 7
Subordinate Voting Shares delivered at the Exchange Date equals the Initial
Price and (c) if the Exchange Price is less than or equal to the Initial Price,
one Subordinate Voting Share per DECS. Holders otherwise entitled to receive
fractional Subordinate Voting Shares or Reported Securities in respect of their
aggregate holdings of DECS will receive cash in lieu thereof. See "Investment
Objectives and Policies -- The Contracts" and "-- Delivery of Subordinate Voting
Shares and Reported Securities; No Fractional Subordinate Voting Shares or
Reported Securities."
The Trust will enter into Contracts with the Sellers obligating the
Sellers, severally and not jointly, at the Exchange Date, to deliver to the
Trust 3,150,000 Subordinate Voting Shares in the aggregate (excluding shares
required to be delivered in respect of DECS issued to cover the Underwriter's
over-allotment option), except that (i) if the Exchange Price per Subordinate
Voting Share is greater than the Threshold Appreciation Price, each Seller will
be obligated to deliver under its Contract a number of Subordinate Voting Shares
equal to the product of times the initial number of Subordinate Voting
Shares subject to such Contract, (ii) if the Exchange Price per Subordinate
Voting Share is less than or equal to the Threshold Appreciation Price but
greater than the Initial Price, each Seller will be obligated to deliver under
its Contract a number of Subordinate Voting Shares equal to the product of (A)
the Initial Price divided by the Exchange Price multiplied by (B) the initial
number of Subordinate Voting Shares subject to such Contract and (iii) if the
Exchange Price per Subordinate Voting Share is less than or equal to the Initial
Price, each Seller will be obligated to deliver under its contract a number of
Subordinate Voting Shares equal to the initial number of Subordinate Voting
Shares subject to such Contract. This provides the Trust with the opportunity to
share in the appreciation, if any, of the Subordinate Voting Shares above the
Threshold Appreciation Price. Each Seller has the right to deliver cash in lieu
of all (but not part) of its Subordinate Voting Shares delivery obligation. The
purchase price under the Contracts is equal to US$ per Subordinate
Voting Share and US$ in the aggregate and is payable to the Sellers by
the Trust on the closing of this offering.
The obligations of each Seller under its Contract will be secured by a
pledge of one Subordinate Voting Share (or, in the case of any holder of
multiple voting shares of the Company ("Multiple Voting Shares"), either one
Subordinate Voting Share or one Multiple Voting Share) for each share subject to
the Contract or, at the election of such Seller, by substitute collateral
consisting of U.S. Government securities. See "Investment Objectives and
Policies -- The Contracts -- Collateral Requirements of the Contracts;
Acceleration."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
There are no regulations, published rulings or judicial decisions
addressing the characterization for federal income tax purposes of securities
with terms substantially the same as the DECS. The Trust intends to treat a DECS
for U.S. federal income tax purposes as a beneficial interest in a grantor trust
owned solely by the present and future Holders of DECS that holds the Treasury
Securities and Contracts, and to report Holders' income to the Internal Revenue
Service in accordance with this treatment. Under this approach, the tax
consequences of holding a DECS will be as described below and as described in
"Certain United States Federal Income Tax Considerations." Prospective investors
in the DECS should be aware that the Internal Revenue Service might take a
different view as to the proper characterization of the DECS and of the tax
consequences to a Holder.
The Treasury Securities held by the Trust will be treated for U.S. federal
income tax purposes as having "original issue discount" that will accrue over
the term of the Treasury Securities. It is currently anticipated that a
substantial portion of each quarterly cash distribution to the Holders will be
treated as a tax-free return of the Holders' costs of the Treasury Securities
and therefore will not be considered current income for U.S. federal income tax
purposes. However, a Holder (whether on the cash or accrual method of tax
accounting) must recognize currently as income original issue discount on the
Treasury Securities as it accrues.
A Holder will not recognize income, gain or loss upon the Trust's entry
into the Contracts and should not recognize income, gain or loss with respect to
the Contracts over their term. Prospective investors in
5
<PAGE> 8
the DECS should be aware that it is possible that the Internal Revenue Service
will assert that a Holder should include in income over the term of the
Contracts additional amounts which together with the original issue discount on
such Holder's pro rata portion of the Treasury Securities may exceed the
aggregate amount of the quarterly cash distributions to such Holder. See
"Certain United States Federal Income Tax Considerations."
The delivery of Subordinate Voting Shares to the Trust pursuant to the
Contracts will not be taxable to the Holders. The distribution of Subordinate
Voting Shares upon the termination of the Trust will not be taxable to the
Holders. A Holder will have taxable gain or loss upon receipt of cash in lieu of
fractional Subordinate Voting Shares distributed upon termination of the Trust.
Each Holder's aggregate basis in its Subordinate Voting Shares will be equal to
its basis in its pro rata portion of the Contracts less the portion of such
basis allocable to pay any fractional Subordinate Voting Shares for which cash
is received. A Holder will have taxable gain or loss upon receipt of cash, if
any, upon dissolution of the Trust or if a Seller elects to exercise the Cash
Delivery Option and satisfy its obligations under the Contract with cash.
THE COMPANY
The Company is one of North America's largest extruders of
polyvinylchloride (PVC) building products, serving the renovation/remodeling and
new construction markets. The Company is an innovative, technology-based growth
company and believes it is a low-cost producer in its industry. The Company's
building products include custom profiles (primarily used for window frames),
vertical blinds, siding, pipe and doors. Through its building technologies
group, the Company also manufactures The Royal Building System(TM), foundations,
garages and sheds. The Company operates over 80 wholly owned or joint venture
businesses, primarily in Canada and the United States, with additional
facilities in Argentina, Colombia, Italy and Mexico.
Attached hereto is a prospectus of the Company which describes the Company
and the Subordinate Voting Shares that may be delivered to the Trust by the
Sellers, and by the Trust to the Holders, at the Exchange Date or upon earlier
acceleration of a Contract. The Company is not affiliated with the Trust, will
not receive any of the proceeds from the sale of the DECS and will have no
obligations with respect to the DECS or the Contracts. THE PROSPECTUS OF THE
COMPANY IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF DECS
TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF REFERENCE ONLY. THE PROSPECTUS
OF THE COMPANY DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR IS IT
INCORPORATED BY REFERENCE HEREIN.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
The Trust will be internally managed and will not have an investment
adviser. The administration of the Trust will be overseen by three Trustees. The
day-to-day administration of the Trust will be carried out by The Bank of New
York (or its successor) as trust administrator (the "Administrator"). The Bank
of New York (or its successor) will also act as custodian for the Trust's assets
(the "Custodian") and as paying agent, registrar and transfer agent (the "Paying
Agent") with respect to the DECS. Except as aforesaid, and except for its role
as Collateral Agent under the Collateral Agreements between each Seller, the
Trust and the Collateral Agent (see "Investment Objectives and Policies -- The
Contracts -- Collateral Requirements of the Contracts; Acceleration"), The Bank
of New York has no other affiliation with, and is not engaged in any other
transaction with, the Trust.
TERM OF THE TRUST
The Trust will terminate automatically on or shortly after the Exchange
Date, except that the Trust may expire prior to such date under certain limited
circumstances. Promptly after the Exchange Date the Subordinate Voting Shares
delivered under the Contracts (or the equivalent amount of cash, to the extent
any Seller exercises its cash settlement option) and other remaining Trust
assets, if any, will be distributed pro rata to Holders. See "Investment
Objectives and Policies -- Trust Termination."
6
<PAGE> 9
RISK FACTORS
The Trust has adopted a policy that the Contracts may not be disposed of
during the term of the Trust and that the Treasury Securities held by the Trust
may not be disposed of prior to the earlier of their respective maturities and
the termination of the Trust except upon the acceleration of one or more
Contracts as described herein. The Trust will continue to hold the Contracts
despite any significant decline in the market price of the Subordinate Voting
Shares or adverse changes in the financial condition of the Company.
The yield on the DECS is higher than the current dividend yield on the
Subordinate Voting Shares, which currently do not pay dividends. However, there
is no assurance that the yield on the DECS will be higher than the dividend
yield on the Subordinate Voting Shares over the term of the Trust.
The Amount Receivable at the Exchange Date is not fixed, but is based on
the market price of the Subordinate Voting Shares as reflected in the Exchange
Rate. There can be no assurance that the Amount Receivable at the Exchange Date
will be equal to or greater than the Initial Price of the DECS. If the Exchange
Price is less than the Initial Price, the Amount Receivable at the Exchange Date
will generally be less than the amount paid for the DECS, in which case an
investment in DECS will result in a loss and, if the Company became insolvent or
bankrupt, could result in a total loss. Holders of the DECS, therefore, bear the
full risk of a decline in the value of the Subordinate Voting Shares prior to
the Exchange Date.
In addition, the opportunity for equity appreciation afforded by an
investment in the DECS is less than the opportunity for equity appreciation
afforded by a direct investment in the Subordinate Voting Shares because the
Amount Receivable at the Exchange Date will generally exceed the Initial Price
only if the Exchange Price exceeds the Threshold Appreciation Price, which
represents an appreciation of % over the Initial Price. Moreover, Holders
will be entitled to receive at the Exchange Date only % of any appreciation
of the value of the Subordinate Voting Shares in excess of the Threshold
Appreciation Price. Because the market price of the Subordinate Voting Shares
are subject to market fluctuations, the Amount Receivable at the Exchange Date
may be more or less than the Initial Price of the DECS. Additionally, because
the Exchange Price is generally determined based on a 20-Trading Day average,
the value of a Subordinate Voting Share distributed on the Exchange Date may be
more or less than the Exchange Price used to determine the Amount Receivable at
the Exchange Date.
The Trust is classified as a "non-diversified" investment company under the
Investment Company Act. Consequently, the Trust is not limited by the Investment
Company Act in the proportion of its assets that may be invested in the
securities of a single issuer. Since the only securities held by the Trust will
be the Treasury Securities and the Contracts, the Trust may be subject to
greater risk than would be the case for an investment company with more
diversified investments.
The trading prices of the DECS in the secondary market will be directly
affected by the trading prices of the Subordinate Voting Shares in the secondary
market. Trading prices of the Subordinate Voting Shares will be influenced by
the Company's operating results and prospects and by economic, financial and
other factors and market conditions.
Holders of the DECS will not be entitled to any rights with respect to the
Subordinate Voting Shares (including, without limitation, voting rights and
rights to receive any dividends or other distributions in respect thereof)
unless and until such time, if any, as the Sellers deliver Subordinate Voting
Shares to the Trust pursuant to the Contracts and the Trust has distributed such
shares to the Holders.
Under Canadian insolvency law, in the event an insolvent entity attempts to
reorganize thereunder, the stay provisions of such laws may apply to the
Contracts and consequently prevent the liquidation of the Subordinate Voting
Shares or Multiple Voting Shares pledged as collateral by the insolvent Seller
under the related Collateral Agreement. Furthermore, under Canadian insolvency
law, it is possible, at the discretion of the court, for the businesses of
related entities to be "substantively consolidated" and treated as one entity
for insolvency reorganization and bankruptcy purposes or for the stay granted to
one entity to be extended to closely interrelated entities. Accordingly, the
bankruptcy of a Seller could
7
<PAGE> 10
adversely affect the timing of settlement and, as a result, the amount received
by the Holders in respect of the DECS.
LISTING
The DECS have been approved for listing on the New York Stock Exchange
("NYSE") under the symbol "RYD," subject to official notice of issuance.
8
<PAGE> 11
FEES AND EXPENSES
In light of the fact that proceeds from the sale of the DECS will be used
by the Trust to purchase the Contracts from the Sellers, the Underwriting
Agreement provides that the Sellers will pay to the Underwriter as compensation
US$ per DECS, including in respect of DECS previously purchased by
Salomon and offered hereby. See "Underwriting." Estimated organization costs of
the Trust in the amount of US$10,000 and estimated costs of the Trust in
connection with the initial registration and public offering of the DECS in the
amount of approximately US$160,000 will be paid by Salomon at the closing of
this offering. In addition, each of the Administrator, the Custodian and the
Paying Agent, and each Trustee will be paid by Salomon at the closing of this
offering a one-time, up-front amount in respect of its ongoing fees and, in the
case of the Administrator, anticipated expenses of the Trust (estimated to be
US$286,000 in the aggregate) over the term of the Trust. Salomon has agreed to
pay any on-going expenses of the Trust in excess of these estimated amounts and
to reimburse the Trust for any amounts it may be required to pay as
indemnification to any Trustee, the Administrator, the Custodian or the Paying
Agent. Salomon will be reimbursed by the Sellers for expenses of the Trust as
provided in the Underwriting Agreement and the Reimbursement Agreement and
reimbursements of indemnifications paid by it. See "Management and
Administration of the Trust -- Estimated Expenses."
Regulations of the Securities and Exchange Commission (the "Commission")
applicable to closed-end investment companies designed to assist investors in
understanding the costs and expenses that an investor will bear directly or
indirectly require the presentation of Trust expenses in the following format.
Because the Trust will not bear any ongoing fees or expenses, investors will not
bear any direct expenses. The only expenses that an investor might be considered
to be bearing indirectly are (a) the Underwriter's compensation payable by the
Sellers with respect to such investor's DECS and (b) the ongoing expenses of the
Trust (including fees of the Administrator, Custodian, Paying Agent and
Trustees), estimated at US$95,333 per year in the aggregate, payable by Salomon
at the closing of the offering.
<TABLE>
<S> <C>
Investor Transaction Expenses
Sales Load (as a percentage of offering price)................................ %
======
Annual Expenses
Management Fees............................................................... 0%
Other Expenses (after reimbursement by the Sellers)*.......................... 0%
------
Total Annual Expenses*..................................................... 0%
======
</TABLE>
- ---------------
* Absent the reimbursement, the Trust's "total annual expenses" would be equal
to approximately % of the Trust's average net assets.
Commission regulations also require that closed-end investment companies
present an illustration of cumulative expenses (both direct and indirect) that
an investor would bear. The example is required to factor in the applicable
Sales Load and to assume, in addition to a 5% annual return, the reinvestment of
all distributions at net asset value. INVESTORS SHOULD NOTE THAT THE ASSUMPTION
OF A 5% ANNUAL RETURN DOES NOT ACCURATELY REFLECT THE FINANCIAL TERMS OF THE
TRUST. SEE "INVESTMENT OBJECTIVES AND POLICIES -- TRUST ASSETS." ADDITIONALLY,
THE TRUST DOES NOT PERMIT THE REINVESTMENT OF DISTRIBUTIONS.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
-------- --------
<S> <C> <C>
You would pay the following expenses (i.e., the applicable sales
load and allocable portion of ongoing expenses paid by Salomon
and the Sellers) on a US$1,000 investment, assuming a 5% annual
return......................................................... US$ US$
</TABLE>
9
<PAGE> 12
THE TRUST
DECS Trust II is a newly organized Delaware business trust that is
registered as a closed-end management investment company under the Investment
Company Act. The Trust was formed on September 2, 1997 pursuant to a Declaration
of Trust dated as of September 2, 1997, as amended and restated in its entirety
by the Amended and Restated Declaration of Trust, dated as of October 22, 1997,
among the Trustees, Salomon Brothers Inc, the initial trustee and the initial
sponsor (as so amended and restated, the "Declaration of Trust"). The term of
the Trust will expire on or shortly after November 15, 2000, except that the
Trust may be dissolved prior to such date under certain limited circumstances.
The address of the Trust is c/o Puglisi & Associates, 805 Library Avenue, Suite
204, Newark, Delaware 19715 (telephone number: (302) 738-6680).
USE OF PROCEEDS
The net proceeds of this offering received by the Trust, together with the
proceeds of DECS previously sold by the Trust to Salomon, will be used on or
shortly after the date on which this offering is completed to purchase a fixed
portfolio comprised of a series of zero-coupon U.S. Treasury securities maturing
quarterly during the term of the Trust and to pay the purchase price under the
Contracts to the Sellers.
INVESTMENT OBJECTIVES AND POLICIES
TRUST ASSETS
The Trust's investment objectives are to provide Holders with a quarterly
distribution of US$ per DECS on each Distribution Date during the term
of the Trust (representing the pro rata portion of the quarterly distributions
in respect of the maturing Treasury Securities held by the Trust) and to provide
Holders, at the Exchange Date, a number of Subordinate Voting Shares at the
Exchange Rate (as defined below) or, to the extent that some or all of the
Sellers elect the Cash Delivery Option (as defined below), an amount in cash
equal to the Exchange Price (as defined below) of all or part thereof. On or
prior to the 25th Business Day prior to the Exchange Date, each of the Sellers
will be obligated to notify the Trust concerning its exercise of the Cash
Delivery Option, and the Trust in turn will notify The Depository Trust Company
and publish a notice in a daily newspaper of national circulation stating
whether Holders of DECS will receive Subordinate Voting Shares, cash or a
combination thereof and, if a combination of Subordinate Voting Shares and cash,
the relative proportion of each. See "-- The Contracts -- General" below.
"Business Day" means any day that is not a Saturday, a Sunday or a day on which
the NYSE or banking institutions or trust companies in The City of New York are
authorized or obligated by law or executive order to close.
The "Exchange Rate" is equal to, subject to certain adjustments, (a) if the
Exchange Price (as defined below) is greater than the Threshold Appreciation
Price, Subordinate Voting Shares per DECS, (b) if the Exchange Price
is less than the Threshold Appreciation Price but is greater than or equal to
the Initial Price, a fraction, equal to the Initial Price divided by the
Exchange Price, of one Subordinate Voting Share per DECS and (c) if the Exchange
Price is less than or equal to the Initial Price, one Subordinate Voting Share
per DECS. Accordingly, the value of the Subordinate Voting Shares to be received
by Holders of the DECS (or, as discussed below, the cash equivalent to be
received in lieu of such Subordinate Voting Shares) at the Exchange Date will
not necessarily equal the Initial Price of the DECS. The numbers of Subordinate
Voting Shares per DECS specified in clauses (a), (b) and (c) of the Exchange
Rate are hereinafter referred to as the "Share Components." Any Subordinate
Voting Shares delivered by the Trust to the Holders of the DECS that are not
affiliated with the Company will be free of any transfer restrictions and the
Holders of the DECS will be responsible for the payment of any and all brokerage
costs upon the subsequent sale of such shares. Holders otherwise entitled to
receive fractional shares in respect of their aggregate holdings of DECS will
receive cash in lieu thereof. See "-- Delivery of Subordinate Voting Shares and
Reported Securities; No Fractional Subordinate Voting
10
<PAGE> 13
Shares or Reported Securities" below. Notwithstanding the foregoing, (i) in the
case of certain dilution events, the Exchange Rate will be subject to adjustment
and (ii) in the case of certain adjustment events, the consideration received by
Holders at the Exchange Date will be cash or Reported Securities (as defined
herein) or a combination thereof, rather than (or in addition to) Subordinate
Voting Shares. See "-- The Contracts -- Dilution Adjustments; Adjustment Events"
below.
The Trust has adopted a fundamental policy to invest at least 65% of its
portfolio in the Contracts. The Contracts will comprise approximately % of
the Trust's initial assets. The Trust has also adopted a fundamental policy that
the Contracts may not be disposed of during the term of the Trust and that the
Treasury Securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust except
for the partial liquidation of Treasury Securities following acceleration of any
Contract as described below under "-- The Treasury Securities." The foregoing
fundamental policies of the Trust may not be changed without the vote of a
majority in interest of the Holders. A "majority in interest of the Holders"
means the lesser of (i) 67% of the DECS represented at a meeting at which more
than 50% of the outstanding DECS are represented and (ii) more than 50% of the
outstanding DECS.
The "Exchange Price" means the average Closing Price per Subordinate Voting
Share on the 20 Trading Days immediately prior to (but not including) the
Exchange Date; provided, however, that if there are not 20 Trading Days for the
Subordinate Voting Shares occurring later than the 60th calendar day immediately
prior to, but not including, the Exchange Date, the Exchange Price shall be
defined as the market value per share of the Subordinate Voting Shares as of the
Exchange Date as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator. The "Closing Price"
of any security on any date of determination means (i) the closing sale price
(or, if no closing price is reported, the last reported sale price) of such
security (regular way) on the NYSE on such date, (ii) if such security is not
listed for trading on the NYSE on any such date, the closing sale price (or, if
no closing sale price is reported, the last reported sale price) of such
security (regular way) on the principal Canadian securities exchange on which
such security is listed, (iii) if such security is not listed for trading on a
Canadian securities exchange on any such date, as reported in the composite
transactions for the principal United States securities exchange on which such
security is so listed, (iv) if such security is not so listed on a United States
national or regional securities exchange, as reported by The Nasdaq Stock
Market, (v) if such security is not so reported, the last quoted bid price for
such security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization or (vi) if such security is not so
quoted, the average of the mid-point of the last bid and ask prices for such
security from at least three nationally recognized investment banking firms
selected by the Administrator for such purpose. The Closing Price will be
expressed in U.S. Dollars. A "Trading Day" is defined as a day on which the
security the Closing Price of which is being determined (A) is not suspended
from trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of such
security provided, however, that with respect to any security the Closing Price
of which is determined pursuant to clause (ii) of the definition of "Closing
Price," the references to "national or regional securities exchange or
association" shall be deemed to refer to such exchanges or associations in
Canada.
11
<PAGE> 14
For illustrative purposes only, the following chart shows the number of
Subordinate Voting Shares or the amount of cash that a Holder would receive for
each DECS at various Exchange Prices. The chart assumes that there would be no
adjustments to the Exchange Rate by reason of the occurrence of any of the
events described under "-- The Contracts -- Dilution Adjustments; Adjustment
Events" below, that no Contracts will be accelerated and that either no Sellers
exercise the Cash Delivery Option or all Sellers do. There can be no assurance
that the Exchange Price will be within the range set forth below. Given the
Initial Price of US$ per DECS and the Threshold Appreciation Price of
US$ , a Holder would receive at the Exchange Date the following number
of Subordinate Voting Shares or amount of cash (if all Sellers exercise the Cash
Delivery Option) per DECS:
<TABLE>
<CAPTION>
EXCHANGE PRICE OF NUMBER OF
SUBORDINATE VOTING SHARES SUBORDINATE VOTING SHARES AMOUNT OF CASH
------------------------- ------------------------- --------------
<S> <C> <C>
US$ US$
</TABLE>
As the foregoing chart illustrates, if at the Exchange Date, the Exchange
Price is greater than US$ , the Trust will be obligated to deliver
Subordinate Voting Shares per DECS, resulting in the DECS Holder
receiving only percent of the appreciation in market value above
US$ . If at the Exchange Date, the Exchange Price is greater than
US$ and less than or equal to US$ , the Trust will be
obligated to deliver only a fraction of a Subordinate Voting Share having a
value at the Exchange Price equal to US$ , resulting in the DECS Holder
receiving none of the appreciation in market value. If at the Exchange Date, the
Exchange Price is less than or equal to US$ , the Trust will be
obligated to deliver one Subordinate Voting Share per DECS, regardless of the
market price of such share, resulting in the DECS Holder realizing the entire
loss on the decline in market value of the Subordinate Voting Shares.
The following table sets forth information regarding the distributions to
be received on the Treasury Securities held by the Trust, the portion of each
year's distributions that will constitute a return of capital for U.S. federal
income tax purposes and the amount of original issue discount accruing on the
Treasury Securities with respect to a Holder who acquires its DECS at the issue
price from the Underwriter in the original offering. See "Certain United States
Federal Income Tax Considerations."
<TABLE>
<CAPTION>
ANNUAL GROSS ANNUAL INCLUSION
ANNUAL GROSS DISTRIBUTIONS FROM OF ORIGINAL ISSUE
DISTRIBUTIONS FROM TREASURY SECURITIES ANNUAL RETURN OF DISCOUNT IN INCOME
YEAR TREASURY SECURITIES PER DECS CAPITAL PER DECS PER DECS
- --------------------- ------------------- ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
1997................. US$ US$ US$ US$
1998.................
1999.................
2000.................
</TABLE>
The annual distribution of US$ per DECS is 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), commencing February 15,
1998. Quarterly distributions on the DECS will consist solely of the cash
received from the Treasury Securities. The Trust will not be entitled to any
dividends that may be declared on the Subordinate Voting Shares.
ENHANCED YIELD; LESS POTENTIAL FOR EQUITY APPRECIATION THAN SUBORDINATE VOTING
SHARES;
NO DEPRECIATION PROTECTION
The yield on the DECS is higher than the current dividend yield on the
Subordinate Voting Shares, which currently do not pay dividends. However, there
is no assurance that the yield on the DECS will be
12
<PAGE> 15
higher than the dividend yield on the Subordinate Voting Shares over the term of
the Trust. In addition, the opportunity for equity appreciation afforded by an
investment in the DECS is less than the opportunity for equity appreciation
afforded by a direct investment in the Subordinate Voting Shares because the
Amount Receivable at the Exchange Date will generally exceed the Initial Price
only if the Exchange Price exceeds the Threshold Appreciation Price (which
represents an appreciation of % over the Initial Price) and because Holders
will be entitled to receive at the Exchange Date only % (the percentage
equal to the Initial Price divided by the Threshold Appreciation Price) of any
appreciation of the value of the Subordinate Voting Shares in excess of the
Threshold Appreciation Price. Moreover, Holders of DECS will realize the entire
decline in value if the Exchange Price on the Exchange Date is less than the
Initial Price. Additionally, because the Exchange Price is generally determined
based on a 20-Trading Day average, the value of a Subordinate Voting Share
distributed on the Exchange Date may be more or less than the Exchange Price
used to determine the Amount Receivable at the Exchange Date.
THE COMPANY
The Company is one of North America's largest extruders of
polyvinylchloride (PVC) building products, serving the renovation/remodeling and
new construction markets. The Company is an innovative, technology-based growth
company and believes it is a low-cost producer in its industry. The Company's
building products include custom profiles (primarily used for window frames),
vertical blinds, siding, pipe and doors. Through its building technologies
group, the Company also manufactures The Royal Building System, foundations,
garages and sheds. The Company operates over 80 wholly owned or joint venture
businesses, primarily in Canada and the United States, with additional
facilities in Argentina, Colombia, Italy and Mexico.
Holders will not be entitled to rights with respect to the Subordinate
Voting Shares (including, without limitation, voting rights and rights to
receive dividends or other distributions in respect thereof) unless and until
such time, if any, as the Sellers deliver Subordinate Voting Shares to the Trust
pursuant to the Contracts and the Trust has distributed such shares to the
Holders.
Attached hereto is a prospectus of the Company which describes the Company
and the Subordinate Voting Shares that may be delivered to the Trust by the
Sellers, and by the Trust to the Holders, at the Exchange Date or upon earlier
acceleration of a Contract.
The Subordinate Voting Shares are traded on the NYSE, the TSE and The
Montreal Exchange. The following table sets forth, for the indicated periods,
the reported high and low sales prices of the Subordinate Voting Shares on the
NYSE Composite Tape and the TSE. The Company has paid no cash dividends per
Subordinate Voting Share since the Company's initial public offering in November
1994.
<TABLE>
<CAPTION>
PRICE RANGE
------------------------
THE NEW YORK STOCK EXCHANGE: HIGH LOW
--------- ---------
(US$)
<S> <C> <C>
1996
Second Quarter (commenced trading April 1, 1996)............... US$16.50 US$14.25
Third Quarter.................................................. 17.63 13.75
Fourth Quarter................................................. 19.38 16.75
1997
First Quarter.................................................. 22.25 18.00
Second Quarter................................................. 27.25 19.63
Third Quarter.................................................. 30.75 25.00
Fourth Quarter (through October 28, 1997)...................... 30.13 22.00
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
PRICE RANGE
------------------------
THE TORONTO STOCK EXCHANGE: HIGH LOW
--------- ---------
(CDN$)
<S> <C> <C>
1996
First Quarter.................................................. Cdn$22.63 Cdn$19.88
Second Quarter................................................. 22.15 19.40
Third Quarter.................................................. 23.85 19.05
Fourth Quarter................................................. 25.95 23.05
1997
First Quarter.................................................. 30.50 24.90
Second Quarter................................................. 37.40 27.40
Third Quarter.................................................. 42.60 34.35
Fourth Quarter (through October 28, 1997)...................... 41.00 30.00
</TABLE>
The Company is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the DECS and will have no obligations with respect to
the DECS or the Contracts. This Prospectus relates only to the DECS offered
hereby and does not relate to the Company or the Subordinate Voting Shares. The
Company has filed a registration statement on Form F-10 with the Commission with
respect to the Subordinate Voting Shares that may be delivered to the Trust by
the Sellers, and by the Trust to the Holders of DECS, at the Exchange Date or
upon earlier acceleration of a Contract. The prospectus of the Company
constituting a part of such registration statement includes information relating
to the Company and Subordinate Voting Shares, including certain risk factors
relevant to an investment in Subordinate Voting Shares. THE PROSPECTUS OF THE
COMPANY IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF DECS
TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF REFERENCE ONLY. THE PROSPECTUS
OF THE COMPANY DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR IS IT
INCORPORATED BY REFERENCE HEREIN.
THE CONTRACTS
General. The Trust will enter into one or more Contracts with the Sellers
obligating each Seller, severally and not jointly, at the Exchange Date to
deliver to the Trust a number of Subordinate Voting Shares equal to the initial
number of Subordinate Voting Shares subject to such Seller's Contract multiplied
by the Exchange Rate. The Exchange Rate is equal to, subject to adjustment as
described in "-- Dilution Adjustments; Adjustment Events" below, (i) if the
Exchange Price per Subordinate Voting Share is greater than the Threshold
Appreciation Price, , (ii) if the Exchange Price per Subordinate
Voting Share is less than or equal to the Threshold Appreciation Price but
greater than the Initial Price, the Initial Price divided by the Exchange Price
and (iii) if the Exchange Price per Subordinate Voting Share is less than or
equal to the Initial Price, one. The purchase price under the Contracts is equal
to US$ per Subordinate Voting Share and US$ in the aggregate
and is payable to the Sellers by the Trust on the closing of this offering. The
purchase price of the Contracts was arrived at by arm's length negotiations
between the Trust and the Sellers taking into consideration factors including
the price, expected dividend level and volatility of the Subordinate Voting
Shares, current interest rates, the term of the Contracts, current market
volatility generally, the collateral security pledged by the Sellers, the value
of other similar instruments and the costs and anticipated proceeds of the
offering of the DECS. All matters relating to the administration of the
Contracts will be the responsibility of either the Trust's Administrator or
Custodian.
Although it is the Sellers' current intention to deliver Subordinate Voting
Shares at the Exchange Date, each Seller may, at its option, deliver cash in
lieu of delivering all, but not less than all, of the Subordinate Voting Shares
otherwise deliverable by it on the Exchange Date (the "Cash Delivery Option"),
except where such delivery would violate applicable state law. The amount of
cash deliverable by a Seller upon the exercise of the Cash Delivery Option will
be equal to the product of the number of Subordinate Voting Shares otherwise
deliverable by such Seller on the Exchange Date multiplied by the Exchange
Price. On or prior to the 25th Business Day prior to the Exchange Date, each of
the Sellers will be obligated to notify the Trust concerning its exercise of the
Cash Delivery Option, and the Trust in turn
14
<PAGE> 17
will notify The Depository Trust Company and publish a notice in a daily
newspaper of national circulation stating whether the Holders of DECS will
receive Subordinate Voting Shares, cash or a combination thereof and, if a
combination of Subordinate Voting Shares and cash, the relative proportion of
each.
Dilution Adjustments; Adjustment Events. The Exchange Rate is subject to
adjustment if the Company shall (i) pay a stock dividend or make a distribution,
in either case, with respect to Subordinate Voting Shares in Subordinate Voting
Shares, (ii) subdivide or split its outstanding Subordinate Voting Shares, (iii)
combine its outstanding Subordinate Voting Shares into a smaller number of
shares, (iv) issue by reclassification (other than a reclassification pursuant
to clause (ii), (iii), (iv) or (v) of the definition of Adjustment Event below)
of its Subordinate Voting Shares any other equity securities of the Company or
(v) issue rights or warrants (other than rights to purchase Subordinate Voting
Shares pursuant to a plan for the reinvestment of dividends or interest) to all
holders of Subordinate Voting Shares entitling them to subscribe for or purchase
Subordinate Voting Shares at a price per share less than the Market Price (as
defined below) of the Subordinate Voting Shares on the Business Day next
following the record date for the determination of holders of Subordinate Voting
Shares entitled to receive such rights or warrants.
In the case of the events referred to in clauses (i), (ii), (iii) and (iv)
above, the Exchange Rate shall be adjusted by adjusting each of the Share
Components of the Exchange Rate in effect immediately prior to such event so
that the Trust will be entitled to receive at the Exchange Date, with respect to
each Contract, the number of Subordinate Voting Shares (or, in the case of a
reclassification referred to in clause (iv) above, the number of other equity
securities of the Company issued pursuant thereto) which it would have owned or
been entitled to receive immediately following such event had the Exchange Date
occurred immediately prior to such event or any record date with respect
thereto. In the case of the event referred to in clause (v) above, the Exchange
Rate shall be adjusted by multiplying each of the Share Components of the
Exchange Rate in effect on the record date for the issuance of the rights or
warrants referred to in clause (v) above, by a fraction, of which the numerator
shall be (A) the number of Subordinate Voting Shares outstanding on the record
date for the issuance of such rights or warrants plus (B) the number of
additional Subordinate Voting Shares offered for subscription or purchase
pursuant to such rights or warrants, and of which the denominator shall be (x)
the number of Subordinate Voting Shares outstanding on the record date for the
issuance of such rights or warrants plus (y) the number specified in clause (B)
above multiplied by the quotient of the exercise price of such rights or
warrants divided by the Market Price of the Subordinate Voting Shares on the
Business Day next following the record date for the determination of holders of
Subordinate Voting Shares entitled to receive such rights or warrants. To the
extent that such rights or warrants expire prior to the Exchange Date of the
DECS and Subordinate Voting Shares are not delivered pursuant to such rights or
warrants prior to such expiration, the Exchange Rate shall be readjusted to the
Exchange Rate which would then be in effect had such adjustments for the
issuance of such rights or warrants been made upon the basis of delivery of only
the number of Subordinate Voting Shares actually delivered pursuant to such
rights or warrants. For purposes of this paragraph, dividends will be deemed to
be paid as of the record date for such dividend. "Market Price" means, as of any
date of determination, the average Closing Price per Subordinate Voting Share on
the 20 Trading Days immediately prior to (but not including) the date of
determination; provided, however, that if there are not 20 Trading Days for the
Subordinate Voting Shares occurring later than the 60th calendar day immediately
prior to, but not including, such date, the Market Price shall be determined as
the market value per Subordinate Voting Share as of such date as determined by a
nationally recognized investment banking firm retained for such purpose by the
Administrator. All adjustments to the Exchange Rate will be calculated to the
nearest 1/10,000th of a Subordinate Voting Share (or, if there is not a nearest
1/10,000th of a share, to the next higher 1/10,000th of a share). No adjustment
in the Exchange Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however, that
any adjustments which by reason of the foregoing are not required to be made
shall be carried forward and taken into account in any subsequent adjustment. If
an adjustment is made to the Exchange Rate pursuant to clauses (i), (ii), (iii),
(iv) or (v) above, an adjustment will also be made to the Exchange Price as such
term is used throughout the definition of Exchange Rate. The required adjustment
to the
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Exchange Price shall be made at the Exchange Date by multiplying the Exchange
Price by the cumulative number or fraction determined pursuant to the Exchange
Rate adjustment procedure described above. In the case of the reclassification
of any Subordinate Voting Shares into any equity securities of the Company other
than the Subordinate Voting Shares, such equity securities shall be deemed
Subordinate Voting Shares for all purposes. Each such adjustment to the Exchange
Rate and the Exchange Price shall be made successively.
In the event of (i) any dividend or distribution by the Company to all
holders of Subordinate Voting Shares of evidences of its indebtedness or other
assets (excluding any dividends or distributions referred to in clause (i) of
the first paragraph under the caption "-- Dilution Adjustments; Adjustment
Events," any equity securities issued pursuant to a reclassification referred to
in clause (iv) of such paragraph and any Ordinary Cash Dividends (as defined
below)) or any issuance by the Company to all holders of Subordinate Voting
Shares of rights or warrants to subscribe for or purchase any of its securities
(other than rights or warrants referred to in clause (v) of the first paragraph
under the caption "-- Dilution Adjustments; Adjustment Events"), (ii) any
consolidation, merger, amalgamation or plan of arrangement of the Company with
or into another entity (other than a merger, consolidation, amalgamation or plan
of arrangement in which the Company is the continuing corporation or is not one
of the amalgamating corporations and in which the Subordinate Voting Shares
outstanding immediately prior to the merger, consolidation, amalgamation or plan
of arrangement are not exchanged for cash, securities or other property of the
Company or another corporation or the corporation continuing from such
amalgamation or plan of arrangement), (iii) any sale, transfer, lease or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety, (iv) any statutory exchange of securities of
the Company with another corporation (other than in connection with a merger or
acquisition) or (v) any liquidation, dissolution or winding up of the Company
(any such event, an "Adjustment Event"), each Seller will be obligated to
deliver at the Exchange Date, in lieu of or (in the case of an Adjustment Event
described in clause (i) above) in addition to, Subordinate Voting Shares as
described above, cash in an amount equal to (A) if the Exchange Price is greater
than the Threshold Appreciation Price, multiplied by the Transaction Value (as
defined below), (B) if the Exchange Price is less than or equal to the Threshold
Appreciation Price but is greater than the Initial Price, the product of (x) the
Initial Price divided by the Exchange Price multiplied by (y) the Transaction
Value and (C) if the Exchange Price is less than or equal to the Initial Price,
the Transaction Value. Following an Adjustment Event, the Exchange Price, as
such term is used in this paragraph and throughout the definition of Exchange
Rate, shall be deemed to equal (A) if Subordinate Voting Shares are outstanding
at the Exchange Date, the Exchange Price of the Subordinate Voting Shares, as
adjusted pursuant to the method set forth in the preceding paragraph, otherwise
zero, plus (B) the Transaction Value.
Notwithstanding the foregoing, with respect to any securities received in
an Adjustment Event that (A) are (i) listed on a Canadian or United States
national securities exchange, (ii) reported on a United States national
securities system subject to last sale reporting, (iii) traded in the
over-the-counter market and reported on the National Quotation Bureau or similar
organization or (iv) for which bid and ask prices are available from at least
three nationally recognized investment banking firms and (B) are either (x)
perpetual equity securities or (y) non-perpetual equity or debt securities with
a stated maturity after the Exchange Date of the DECS ("Reported Securities"),
each Seller is obligated, in lieu of delivering cash in respect of such Reported
Securities received in an Adjustment Event, to deliver a number of such Reported
Securities with a value equal to all cash amounts that would otherwise be
deliverable in respect of Reported Securities received in such Adjustment Event,
as determined in accordance with clause (ii) of the definition of Transaction
Value, unless such Seller has made an election to exercise the Cash Delivery
Option or such Reported Securities have not yet been delivered to the holders
entitled thereto following such Adjustment Event or any record date with respect
thereto. If a Seller delivers any Reported Securities, upon distribution thereof
by the Trust to Holders of DECS, each Holder of a DECS will be responsible for
the payment of any and all brokerage and other transaction costs upon the sale
of such Reported Securities. If, following any Adjustment Event, any Reported
Security ceases to qualify as a Reported Security, then (x) the Sellers shall
not deliver such Reported Security but instead shall deliver an equivalent
amount of cash and (y) notwithstanding clause (ii) of the definition of
Transaction Value,
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the Transaction Value of such Reported Security shall mean the fair market value
of such Reported Security on the date such security ceases to qualify as a
Reported Security, as determined by a nationally recognized investment banking
firm retained for this purpose by the Administrator.
Because each DECS represents the Holder's right to receive a pro rata
portion of the Subordinate Voting Shares or other assets delivered by the
Sellers pursuant to the Contracts, the amount of cash and/or the kind and number
of securities which the Holders of DECS are entitled to receive after an
Adjustment Event shall be subject to adjustment following the date of such
Adjustment Event in the same manner and upon the occurrence of the same type of
events as described under this caption "-- Dilution Adjustments; Adjustment
Events" with respect to Subordinate Voting Shares and the Company.
For purposes of the foregoing, the term "Ordinary Cash Dividend" means,
with respect to any consecutive 365-day period, any dividend with respect to
Subordinate Voting Shares paid in cash to the extent that the amount of such
dividend, together with the aggregate amount of all other dividends on the
Subordinate Voting Shares paid in cash during such 365-day period, does not
exceed on a per share basis 10% of the average of the Closing Prices of the
Subordinate Voting Shares over such 365-day period.
The term "Transaction Value" means (i) for any cash received in any
Adjustment Event, the amount of cash received per Subordinate Voting Share, (ii)
for any Reported Securities received in any Adjustment Event, an amount equal to
(x) the average Closing Price per security of such Reported Securities on the 20
Trading Days immediately prior to (but not including) the Exchange Date
multiplied by (y) the number of such Reported Securities (as adjusted pursuant
to the second preceding paragraph) received per Subordinate Voting Share and
(iii) for any property received in any Adjustment Event other than cash or such
Reported Securities, an amount equal to the fair market value of the property
received per Subordinate Voting Share on the date such property is received, as
determined by a nationally recognized investment banking firm retained for this
purpose by the Administrator; provided, however, that in the case of clause
(ii), (x) with respect to securities that are Reported Securities by virtue of
only clause (iv) of the definition of Reported Securities above, Transaction
Value with respect to any such Reported Security means the average of the
mid-point of the last bid and ask prices for such Reported Security as of the
Exchange Date from each of at least three nationally recognized investment
banking firms retained for such purpose by the Administrator multiplied by the
number of such Reported Securities (as adjusted pursuant to the method set forth
in the third preceding paragraph) received per Subordinate Voting Share and (y)
with respect to all other Reported Securities, if there are not 20 Trading Days
for any particular Reported Security occurring after the 60th calendar day
immediately prior to, but not including, the Exchange Date, Transaction Value
with respect to such Reported Security means the market value per security of
such Reported Security as of the Exchange Date as determined by a nationally
recognized investment banking firm retained for such purpose by the
Administrator multiplied by the number of such Reported Securities (as adjusted
pursuant to the method set forth in the third preceding paragraph) received per
Subordinate Voting Share. For purposes of calculating the Transaction Value, any
cash, Reported Securities or other property receivable in an Adjustment Event
shall be deemed to have been received immediately prior to the close of business
on the record date for such Adjustment Event or, if there is no record date for
such Adjustment Event, immediately prior to the close of business on the
effective date of such Adjustment Event.
No adjustments will be made for certain other events, such as offerings of
Subordinate Voting Shares by the Company for cash or in connection with
acquisitions. Likewise, no adjustments will be made for any sales of Subordinate
Voting Shares or Multiple Voting Shares by the Sellers.
Each Seller is required under its Contract to notify the Trust promptly
upon becoming aware that an event that requires an adjustment to the Exchange
Rate or an Adjustment Event is pending or has occurred. The Trust is required,
within ten Business Days following the occurrence of an event that requires an
adjustment to the Exchange Rate or the occurrence of an Adjustment Event (or, in
either case, if the Trust is not aware of such occurrence, as soon as
practicable after becoming so aware), to provide written notice to each Holder
of DECS of the occurrence of such event including a statement in reasonable
detail setting forth the method by which the adjustment to the Exchange Rate or
change in
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the consideration to be received by Holders of DECS following the Adjustment
Event was determined and setting forth the revised Exchange Rate or
consideration, as the case may be; provided, however, that, in respect of any
adjustment to the Exchange Price, such notice will only disclose the factor by
which the Exchange Price is to be multiplied in order to determine which clause
of the Exchange Rate definition will apply at the Exchange Date.
Collateral Requirements of the Contracts; Acceleration. Each Seller's
obligations under its Contract will be secured by a security interest in one
Subordinate Voting Share or, in the case of the Principal Shareholder (as
defined below), one Multiple Voting Share (the Subordinate Voting Shares and the
Multiple Voting Shares together, the "Voting Shares") for each Subordinate
Voting Share subject to such Contract (subject to adjustment in accordance with
the dilution provisions of such Contract), pursuant to a Collateral Agreement
among such Seller, the Trust and The Bank of New York, as collateral agent (the
"Collateral Agent"). Unless a Seller is in default in its obligations under the
Collateral Agreement, the Seller will be permitted to substitute for the pledged
Voting Shares collateral consisting of short-term, direct obligations of the
U.S. Government. Any U.S. Government obligations pledged as substitute
collateral for Voting Shares will be required to have an aggregate market value
at the time of substitution and at daily mark-to-market valuations thereafter of
not less than 150% (or, from and after any Insufficiency Determination that
shall not be cured by the close of business on the next business day thereafter,
as described below, 200%) of the product of the market price of the Subordinate
Voting Shares at the time of each valuation times the number of Voting Shares
for which such obligations are being substituted. Each Collateral Agreement will
provide that, in the event of an Adjustment Event, the relevant Seller will
pledge as alternative collateral any Reported Securities, plus cash in an amount
at least equal to the Transaction Value of any consideration other than Reported
Securities, received by it in respect of the maximum number of Subordinate
Voting Shares subject to such Seller's Contract at the time of the Adjustment
Event. The number of Reported Securities required to be pledged shall be subject
to adjustment if any event requiring a dilution adjustment under the Contracts
shall occur. Each Seller will be permitted to substitute U.S. Government
obligations for Reported Securities or cash pledged after any Adjustment Event.
Any U.S. Government obligations so substituted will be required to have an
aggregate market value at the time of substitution and at daily mark-to-market
valuations thereafter of: (A) in the case of obligations substituted for pledged
Reported Securities, not less than 150% (or, from and after any Insufficiency
Determination that shall not be cured by the close of business on the next
business day thereafter, as described below, 200%) of the product of the market
price per security of Reported Securities at the time of each valuation times
the number of Reported Securities for which such obligations are being
substituted; and (B) in the case of obligations substituted for pledged cash,
not less than 105% of the amount of cash for which such obligations are being
substituted. The Collateral Agent will promptly pay over to each Seller any
dividends, interest, principal or other payments received by the Collateral
Agent in respect of any collateral, including any substitute collateral, unless
the relevant Seller is in default of its obligations under its Collateral
Agreement, or unless the payment of such amount to the relevant Seller would
cause the collateral to become insufficient under the Collateral Agreement.
If the Collateral Agent shall determine (an "Insufficiency Determination")
that U.S. Government obligations pledged by any Seller as substitute collateral
fail to meet the foregoing requirements at any valuation, or that such Seller
has failed to pledge additional collateral required as a result of a dilution
adjustment increasing the maximum number of Subordinate Voting Shares or
Reported Securities subject to such Contract, and such failure shall not be
cured by the close of business on the next business day after such Seller has
been notified in writing of such determination, then, unless a Collateral Event
of Default (as defined below) under such Collateral Agreement shall have
occurred and be continuing, the Collateral Agent shall commence (i) sales of the
collateral consisting of U.S. Government obligations and (ii) purchases, using
the proceeds of such sales, of Subordinate Voting Shares or Reported Securities,
in an amount sufficient to cause the collateral to meet the requirements under
such Collateral Agreement. The Collateral Agent shall discontinue such sales and
purchases if at any time a Collateral Event of Default under such Collateral
Agreement shall have occurred and be continuing.
The occurrence of a Collateral Event of Default (as defined below) under
any Collateral Agreement, or the bankruptcy or insolvency of any Seller, will
cause an automatic acceleration of such Seller's
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obligations under its Contract. A "Collateral Event of Default" under any
Collateral Agreement shall mean, at any time, (A) if no U.S. Government
obligations shall be pledged as substitute collateral at such time, failure of
the collateral to consist of at least the maximum number of Voting Shares
subject to the relevant Seller's Contract at such time (or, if an Adjustment
Event shall have occurred at or prior to such time, failure of the collateral to
include the amount of cash and the maximum number of any Reported Securities
required to be pledged as described above); (B) if any U.S. Government
obligations shall be pledged as substitute collateral for Voting Shares (or
Reported Securities) at such time, failure of such U.S. Government obligations
to have a market value at such time of at least 105% of the market price of the
Subordinate Voting Shares (or the then-current market price per security of
Reported Securities, as the case may be) times the difference between (x) the
maximum number of Subordinate Voting Shares (or Reported Securities) subject to
the relevant Seller's Contract at such time and (y) the number of Voting Shares
(or Reported Securities) pledged as collateral at such time; and (C) if any U.S.
Government obligations shall be pledged as substitute collateral for any cash at
such time, failure of such U.S. Government obligations to have a market value at
such time of at least 105% of such cash, if such failure shall not be cured
within one Business Day after notice thereof is delivered to the relevant
Seller.
Except as described below, upon acceleration of any Seller's Contract, the
Collateral Agent will to the extent permitted by law distribute to the Trust for
distribution pro rata to the Holders, with respect to such Seller's Contract,
the maximum number of Subordinate Voting Shares subject to such Contract, in the
form of the Voting Shares then pledged by that Seller (with any Multiple Voting
Shares pledged as collateral to be converted into Subordinate Voting Shares
before any such distribution), or cash generated from the liquidation of U.S.
Government obligations then pledged by that Seller, or a combination thereof
(or, after an Adjustment Event, in the form of Reported Securities then pledged,
cash then pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof). In addition, in the event
that by the Exchange Date any substitute collateral has not been replaced by
Voting Shares (or, after an Adjustment Event, cash or Reported Securities)
sufficient to meet the obligations under any Contract, the Collateral Agent will
distribute to the Trust for distribution pro rata to the Holders, with respect
to such Contract, the market value of the Subordinate Voting Shares required to
be delivered thereunder, in the form of any Subordinate Voting Shares then
pledged by the relevant Seller (any Multiple Voting Shares then pledged by such
Seller being converted into Subordinate Voting Shares before any such
distribution) plus cash generated from the liquidation of U.S. Government
obligations then pledged by such Seller (or, after an Adjustment Event, the
market value of the alternative consideration required to be delivered
thereunder, in the form of any Reported Securities then pledged, plus any cash
then pledged, plus cash generated from the liquidation of U.S. Government
obligations then pledged).
If upon acceleration of a Seller's Contract, such Seller is subject to a
proceeding under the U.S. Bankruptcy Code, Canadian insolvency laws or similar
laws, the Collateral Agent will to the extent permitted by law distribute to the
Trust for distribution pro rata to the Holders, with respect to such Seller's
Contract, a number of Subordinate Voting Shares, in the form of the Voting
Shares then pledged by that Seller (any Multiple Voting Shares then pledged by
such Seller being converted into Subordinate Voting Shares before any such
distribution), or cash generated from the liquidation of U.S. Government
obligations then pledged by that Seller, or a combination thereof (or, after an
Adjustment Event, in the form of Reported Securities then pledged, cash then
pledged, cash generated from the liquidation of U.S. Government obligations then
pledged, or a combination thereof), with an aggregate value equal to such
Seller's "Acceleration Value." The Acceleration Value will be determined by the
Administrator on the basis of quotations from independent dealers. Each
quotation will be for an amount that would be paid to the relevant dealer in
consideration of an agreement that would have the effect of preserving the
Trust's rights to receive the number of Subordinate Voting Shares (or, after an
Adjustment Event, Reported Securities, cash or a combination thereof) subject to
such Seller's Contract on the Exchange Date. The Administrator will request
quotations from four nationally recognized independent dealers on or as soon as
reasonably practicable following the date of acceleration. If four quotations
are provided, the Acceleration Value will be the arithmetic mean of the two
quotations remaining after disregarding the highest and lowest quotations. If
two or three quotations are provided, the Acceleration Value will be the
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arithmetic mean of such quotations. If one quotation is provided, the
Acceleration Value will be such quotation. If no quotations are provided, the
Acceleration Value will be the aggregate value of the number of Subordinate
Voting Shares (or, after an Adjustment Event, Reported Securities, cash or a
combination thereof) that would be required to be delivered under such Seller's
Contract on the date of acceleration if the Exchange Date were redefined to be
the date of acceleration.
Two of the Sellers are companies that are wholly-owned, indirectly, by Mr.
Vic De Zen, chairman, chief executive officer and president of the Company (the
"Principal Shareholder"). The obligations of each such Seller under its Contract
will be secured by a security interest in one Multiple Voting Share held by such
Seller for each Subordinate Voting Share subject to such Contract (subject to
adjustment in accordance with the dilution provisions of such Contract),
pursuant to the terms of the Collateral Agreement to which such Seller is a
party. The Principal Shareholder and such Seller are parties to a stock control
agreement that restricts the transfer of the Multiple Voting Shares beneficially
owned by the Principal Shareholder through such Seller. To permit compliance
with such stock control agreement, the Multiple Voting Shares pledged by such
Seller will be held in Canada by CIBC Mellon Trust Company, as sub-collateral
agent (the "Sub-Collateral Agent"), for the benefit of the Trust pursuant to an
agreement among the Principal Shareholder, such Seller, the Trust, the Company,
the Collateral Agent and the Sub-Collateral Agent (the "Collateral Agency
Agreements"). Under the Collateral Agency Agreements, the Sub-Collateral Agent
will perform no function other than holding the Multiple Voting Shares pledged
as collateral by each such Seller. Upon (i) the early liquidation of the Trust;
(ii) the insolvency of the Principal Shareholder or any corporation wholly owned
by the Principal Shareholder that, directly or indirectly, is a shareholder of a
Seller or (iii) any other event that obligates the delivery of Voting Shares
pledged as collateral under the related Collateral Agreement, the Collateral
Agency Agreements require the Sub-Collateral Agent to convert such Multiple
Voting Shares into Subordinate Voting Shares prior to delivery to the Trustee;
under no circumstances will the Sub-Collateral Agent deliver Multiple Voting
Shares to the Trustee. For more information regarding the restrictions on the
transfer of the Multiple Voting Shares, see the prospectus of the Company
attached hereto under "Description of Capital Stock -- Restrictions on Transfer
of the Multiple Voting Shares."
Description of Sellers. The Sellers are individual principal shareholders
of the Company or wholly-owned corporations, trusts, foundations or other
entities through which such individuals, including the Principal Shareholder,
hold their Subordinate Voting Shares or, in the case of the Principal
Shareholder, Multiple Voting Shares. Specific information on the holdings of the
Sellers, as required by the Securities Act of 1933, as amended (the "Securities
Act"), is included in the prospectus of the Company attached hereto under
"Selling Shareholders."
THE TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon ("stripped") U.S.
Treasury securities with such face amounts and maturities as will provide
Holders with a quarterly distribution of US$ per DECS on each
Distribution Date during the term of the Trust. Up to 35% of the Trust's total
assets may be invested in these Treasury Securities. If any Contract is
accelerated, a proportionate amount of the Treasury Securities of each maturity
then held in the Trust will be liquidated by the Administrator and the proceeds
thereof distributed pro rata to the Holders, together with proceeds from the
acceleration of such Contract. See "-- The Contracts -- Collateral Requirements
of the Contracts; Acceleration" above and "-- Trust Termination" below.
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest the proceeds of the
Treasury Securities held by the Trust and any other cash held by the Trust in
short-term obligations of the U.S. Government maturing no later than the
Business Day preceding the next following Distribution Date.
TRUST TERMINATION
The Trust will terminate automatically on or shortly after the Exchange
Date or following the distribution of all Trust assets to the Holders, if
earlier.
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In the event that all of the Contracts remaining in effect at any time are
accelerated, then any Treasury Securities then held by the Trust will be
liquidated by the Administrator and the proceeds thereof distributed pro rata to
the Holders, together with all Subordinate Voting Shares subject to each
Seller's Contract that are pledged by each Seller, or cash generated from the
liquidation of U.S. Government obligations then pledged by each Seller, or a
combination thereof (or, after an Adjustment Event, in the form of Reported
Securities then pledged, cash then pledged, cash generated from the liquidation
of U.S. Government obligations then pledged, or a combination thereof) or in
certain cases, the Acceleration Value of a Seller's Contract, and the term of
the Trust will expire. See "-- The Contracts -- Collateral Requirements of the
Contracts; Acceleration" above.
DELIVERY OF SUBORDINATE VOTING SHARES AND REPORTED SECURITIES; NO FRACTIONAL
SUBORDINATE VOTING SHARES OR REPORTED SECURITIES
Subordinate Voting Shares and Reported Securities delivered under the
Contracts at the Exchange Date are expected to be distributed by the Trust to
the Holders pro rata shortly after the Exchange Date, except that no fractional
Subordinate Voting Shares or Reported Securities will be distributed. If more
than one DECS shall be surrendered at one time by the same Holder, the number of
full Subordinate Voting Shares or Reported Securities which shall be delivered
upon termination of the Trust, in whole or in part, as the case may be, shall be
computed on the basis of the aggregate number of DECS so surrendered at the
Exchange Date. In lieu of delivering any fractional share or security, the Trust
will sell a number of shares or securities equal to the total of all fractional
shares or securities that would otherwise be delivered to Holders of all DECS,
and each such Holder will be entitled to receive an amount in cash equal to the
pro rata portion of the proceeds of such sale (which may be at a price lower
than the Exchange Price).
No Subordinate Voting Shares or Reported Securities will be distributed to
any Holder that is a national or resident of Canada, a corporation, partnership
or other entity created or organized in or under the laws of Canada or of any
political subdivision thereof, any estate or trust the income of which is
subject to Canadian federal income taxation, regardless of its source (other
than any non-Canadian branch of a Canadian person), or a Canadian branch of any
non-Canadian person or entity (any such Holder, a "Canadian Holder"). The Trust
will sell any Subordinate Voting Shares or Reported Securities that would
otherwise be distributable to such Canadian Holder at the market price available
at the time of distribution and distribute the cash proceeds from such sale to
such Canadian Holder in lieu of such Subordinate Voting Shares or Reported
Securities.
INVESTMENT RESTRICTIONS
The Trust has adopted a fundamental policy that the Trust may not purchase
any securities or instruments other than the Treasury Securities, the Contracts
and the Subordinate Voting Shares or other assets received pursuant to the
Contracts and, for cash management purposes, short-term obligations of the U.S.
Government; issue any securities or instruments except for the DECS; make short
sales or purchase securities on margin; write put or call options; borrow money;
underwrite securities; purchase or sell real estate, commodities or commodities
contracts; or make loans. The Trust has also adopted a fundamental policy that
the Contracts may not be disposed of during the term of the Trust and that
(except for a partial liquidation of Treasury Securities following acceleration
of any Contract as described above under "Investment Objectives and Policies --
The Treasury Securities") the Treasury Securities may not be disposed of prior
to the earlier of their respective maturities and the termination of the Trust.
RISK FACTORS RELATING TO DECS
INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT
The Trust will be internally managed by its Trustees and will not have any
separate investment adviser. It is a fundamental policy of the Trust that the
Contracts may not be disposed of during the term of the Trust and that the
Treasury Securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust, except
for a partial liquidation of Treasury
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Securities following acceleration of any Contract. As a result, the Trust will
continue to hold the Contracts despite any significant decline in the market
price of the Subordinate Voting Shares or adverse changes in the financial
condition of the Company (or, after an Adjustment Event, comparable developments
affecting any Reported Securities or the issuer thereof). The Trust will not be
managed like a typical closed-end investment company.
RELATIONSHIP TO SUBORDINATE VOTING SHARES; LIMITATIONS ON OPPORTUNITY FOR EQUITY
APPRECIATION; POTENTIAL LOSSES
The yield on the DECS is higher than the current dividend yield on the
Subordinate Voting Shares, which currently pay no dividends. However, there is
no assurance that the yield on the DECS will be higher than the dividend yield
on the Subordinate Voting Shares over the term of the Trust.
The Amount Receivable at the Exchange Date is not fixed, but is based on
the market price of the Subordinate Voting Shares as reflected in the Exchange
Rate. There can be no assurance that the Amount Receivable at the Exchange Date
will be equal to or greater than the Initial Price of the DECS. If the Exchange
Price is less than the Initial Price, the Amount Receivable at the Exchange Date
will generally be less than the amount paid for the DECS, in which case an
investment in DECS will result in a loss and, if the Company became insolvent or
bankrupt, could result in a total loss. Holders of the DECS, therefore, bear the
full risk of a decline in the value of the Subordinate Voting Shares prior to
the Exchange Date.
In addition, the opportunity for equity appreciation afforded by an
investment in the DECS is less than the opportunity for equity appreciation
afforded by a direct investment in the Subordinate Voting Shares because the
Amount Receivable at the Exchange Date will generally exceed the Initial Price
only if the Exchange Price exceeds the Threshold Appreciation Price (which
represents an appreciation of % over the Initial Price) and because Holders
will be entitled to receive at the Exchange Date only % of any appreciation
of the value of the Subordinate Voting Shares in excess of the Threshold
Appreciation Price. See "Investment Objectives and Policies -- Trust Assets" for
an illustration of the Amount Receivable at the Exchange Date that a DECS Holder
would receive at various Exchange Prices. Because the market price of the
Subordinate Voting Shares is subject to market fluctuations, the Amount
Receivable at the Exchange Date may be more or less than the Initial Price of
the DECS. Additionally, because the Exchange Price is generally determined based
on a 20-Trading Day average, the value of a Subordinate Voting Share distributed
on the Exchange Date may be less than the Exchange Price used to determine the
Amount Receivable at the Exchange Date.
The market price of the DECS at any time will be affected primarily by
changes in the price of Subordinate Voting Shares. It is impossible to predict
whether the price of the Subordinate Voting Shares will rise or fall. Trading
prices of Subordinate Voting Shares will be influenced by the Company's
operational results and by complex and interrelated political, economic,
financial and other factors that can affect the capital markets generally, the
stock exchanges on which Subordinate Voting Shares are traded and the market
segment of which the Company is a part. See the prospectus relating to the
Company and to the Subordinate Voting Shares attached hereto. Trading prices of
the Subordinate Voting Shares also may be influenced if any of the Sellers or
another principal shareholder of the Company hereafter issues securities with
terms similar to those of the DECS or otherwise transfers Subordinate Voting
Shares. Concurrently with the offering of the DECS, certain of the Company's
senior officers and employees (including certain of the Sellers) are offering
for sale in a separate offering (the "Share Offering") 3,500,000 Subordinate
Voting Shares (4,025,000 Subordinate Voting Shares if the over-allotment option
granted to the underwriters in the Share Offering by the Company is exercised in
full). As of the date hereof, the Sellers held an aggregate of 21,040,672
Subordinate Voting Shares and 17,635,444 Multiple Voting Shares, of which the
Sellers may deliver up to 3,150,000 Subordinate Voting Shares (3,577,500 shares
if the Underwriter's over-allotment option is exercised in full) to the Trust at
the Exchange Date.
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<PAGE> 25
IMPACT OF THE DECS ON THE MARKET FOR THE SUBORDINATE VOTING SHARES
It is not possible to predict accurately how or whether the DECS will trade
in the secondary market or whether such market will be liquid. Any market that
develops for the DECS is likely to influence and be influenced by the market for
the Subordinate Voting Shares. For example, the price of the Subordinate Voting
Shares could become more volatile and could be depressed by investors'
anticipation of the potential distribution into the market of substantial
additional amounts of Subordinate Voting Shares at the termination of the Trust,
by possible sales of the Subordinate Voting Shares by investors who view the
DECS as a more attractive means of equity participation in the Company and by
hedging or arbitrage trading activity that may develop involving the DECS and
the Subordinate Voting Shares.
DILUTION ADJUSTMENTS; SHAREHOLDER RIGHTS
The number of Subordinate Voting Shares that Holders are entitled to
receive at the termination of the Trust is subject to adjustment for certain
events arising from stock splits and combinations, stock dividends and certain
other actions of the Company that modify its capital structure. See "Investment
Objectives and Policies -- The Contracts -- Dilution Adjustments; Adjustment
Events." Such number of shares to be received by Holders may not be adjusted for
other events, such as offerings of Subordinate Voting Shares for cash or in
connection with acquisitions, that may adversely affect the price of the
Subordinate Voting Shares and, because of the relationship of the number of
Subordinate Voting Shares to be received pursuant to the Contracts to the price
of the Subordinate Voting Shares, such other events may adversely affect the
trading price of the DECS. There can be no assurance that the Company will not
take any of the foregoing actions, or that it will not make offerings of, or
that major shareholders will not sell any, Subordinate Voting Shares in the
future, or as to the amount of any such offerings or sales. In addition, until
the receipt of the Subordinate Voting Shares by Holders upon a distribution
thereof by the Trust, Holders will not be entitled to any rights with respect to
the Subordinate Voting Shares (including without limitation voting rights and
the rights to receive any dividends or other distributions in respect thereof).
NO OBLIGATION ON THE PART OF THE COMPANY WITH RESPECT TO THE DECS OR THE
CONTRACTS
The Company has no obligations with respect to the DECS, the Contracts or
the Amount Receivable at the Exchange Date, including any obligation to take the
needs of the Trust or of Holders of the DECS into consideration for any reason.
The Company will not receive any of the proceeds of the offering of the DECS
made hereby and is not responsible for, and has not participated in, the
determination of the time of sale of, quantities of or prices for the DECS to be
issued or the determination or calculation of the Amount Receivable at the
Exchange Date. The Company is not involved with the administration or trading of
the DECS.
TRADING VALUE; LISTING
The DECS are innovative securities and have no trading history, and it is
not possible to predict how they will trade in the secondary market. The trading
price of the DECS may vary considerably prior to the Exchange Date due to, among
other things, fluctuations in the price of the Subordinate Voting Shares (which
may occur due to changes in the Company's financial condition, results of
operations or prospects, or because of complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, the stock exchanges or quotation systems on which the Subordinate
Voting Shares are traded and the market segment of which the Company is a part)
and fluctuations in interest rates and other factors that are difficult to
predict and beyond the Trust's control.
The Underwriter currently intends, but is not obligated, to make a market
in the DECS and any such market-making may be discontinued at any time in the
sole discretion of the Underwriter without notice. There can be no assurance
that a secondary market will develop or, if a secondary market does develop,
that it will provide the Holders of the DECS with liquidity of investment or
that it will continue for the life of the DECS.
The DECS have been approved for listing on the NYSE, subject to official
notice of issuance. There can be no assurance that the DECS will not later be
delisted or that trading in the DECS on the NYSE will
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<PAGE> 26
not be suspended. In the event of a delisting or suspension of trading on such
exchange, the Trust will apply for listing of the DECS on another national
securities exchange or for quotation on another trading market. If the DECS are
not listed or traded on any securities exchange or trading market, or if trading
of the DECS is suspended, pricing information for the DECS may be more difficult
to obtain, and the price and liquidity of the DECS may be adversely affected.
NET ASSET VALUE
The Trust is a newly organized closed-end investment company with no
previous operating history. Shares of closed-end investment companies frequently
trade at a discount from their net asset value, which is a risk separate and
distinct from the risk that the Trust's net asset value will decrease. The Trust
cannot predict whether the DECS will trade at, below or above their net asset
value. The risk of purchasing investments that might trade at a discount is more
pronounced for investors who wish to sell their investments in a relatively
short period of time after completion of the Trust's initial public offering
because for those investors realization of a gain or loss on their investments
is likely to be more dependent upon the existence of a premium or discount than
upon portfolio performance. The DECS are not subject to redemption prior to the
Exchange Date or the earlier termination of the Trust.
NON-DIVERSIFIED STATUS
The Trust is considered non-diversified under the Investment Company Act,
which means that the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. Because the only
securities held or received by the Trust will be the Treasury Securities and the
Contracts or other assets subject to the Contracts, the Trust may be subject to
greater risk than would be the case for an investment company with more
diversified investments.
UNCERTAINTY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
No statutory, judicial or administrative authority directly addresses the
characterization of the DECS or instruments similar to the DECS for U.S. federal
income tax purposes. As a result, significant aspects of the U.S. federal income
tax consequences of an investment in the DECS are not certain. No ruling is
being requested from the Internal Revenue Service with respect to the DECS and
no assurance can be given that the Internal Revenue Service will agree with the
conclusions expressed under "Certain United States Federal Income Tax
Considerations."
RISK FACTORS RELATING TO THE COMPANY
Investors in the DECS should carefully consider the information in the
prospectus of the Company attached hereto, including the information contained
therein under "Risk Factors."
RISK RELATING TO BANKRUPTCY OF THE SELLERS
The Sellers are corporations incorporated under the laws of Canada or the
Province of Ontario. Under Canadian insolvency laws (the "Canadian Insolvency
Laws"), in the event an insolvent entity attempts to reorganize thereunder, the
stay provisions of the Canadian Insolvency Laws may apply to the insolvent
entity and the insolvent entity's property. Accordingly, although the Contract
between the Trust and the insolvent Seller could be terminated if it constitutes
an "eligible financial contract" under the Canadian Insolvency Laws, the
Subordinate Voting Shares or Multiple Voting Shares pledged as collateral by
such Seller under the related Collateral Agreement may not be liquidated during
the period that such Seller is under the protection of the Canadian Insolvency
Laws, which period could extend for several months. (The stay provisions of the
Canadian Insolvency Laws do not, however, affect the validity of the Trust's
security interests in the property pledged under any such Seller's Collateral
Agreement.)
The Sellers are special purpose companies that are wholly owned, directly
or indirectly, by other corporations which also hold shares of the Company and
engage in other businesses. For each such Seller, the activities that may be
conducted by such Seller and its ability to incur debt are restricted by the
applicable Contract in a manner intended to reduce the likelihood that a
bankruptcy proceeding would be commenced by or against such Seller on the basis
of activities unrelated to owning the Multiple
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<PAGE> 27
Voting Shares or Subordinate Voting Shares, as the case may be, or undertaking
the transactions contemplated by this Prospectus, the applicable Contract and
the applicable Collateral Agreement. It is possible, however, under the Canadian
Insolvency Laws, at the discretion of the court, for the businesses of related
entities to be "substantively consolidated" and treated as one entity for
insolvency reorganization and bankruptcy purposes or for the stay granted to one
entity to be extended to closely interrelated entities. Each Seller that is a
corporation and its shareholders have agreed with the Trust, essentially, that
(i) they will keep their respective assets separate and apart; (ii) they will
advise creditors in connection with any financial disclosure of the separation
and segregation of their respective assets and businesses; (iii) they will
maintain a degree of separate management; and (iv) they will not lend money, or
otherwise provide financial assistance, to each other. In addition, each of
these Sellers has agreed with the Trust that it will not, directly or
indirectly, incur any obligations (other than under the Contracts and specified
related agreements and other than obligations imposed by law, statutory or
otherwise) or acquire any assets or engage in any other business except entering
into the Contracts and certain related transactions. The Trust has been advised
by Canadian counsel to the Trust, and by Canadian counsel to the Sellers, that,
although substantive consolidation and the expansive stay rights mentioned above
remain at the discretion of the court, these provisions should be effective to
prevent their application in respect of the Sellers that are corporations with
any other entities.
It is possible that the Sellers would be the subject of proceedings under
the U.S. Bankruptcy Code. The Trust believes that the Contracts constitute
"securities contracts" for purposes of the U.S. Bankruptcy Code, liquidation of
which would not be subject to the automatic stay provisions of the U.S.
Bankruptcy Code in the event of the bankruptcy of the Sellers. It is, however,
possible that the Contracts will be determined not to qualify as "securities
contracts" for this purpose. Furthermore, it is unclear whether a stay of
proceedings under Canadian Insolvency Laws would be effective to prevent a
liquidation of the contracts in respect of Subordinate Voting Shares located in
the United States at the time of such liquidation, even if a Seller were the
subject of concurrent or ancillary proceedings under the U.S. Bankruptcy Code.
Proceedings under the Canadian Insolvency Laws or the U.S. Bankruptcy Code
in respect of a Seller may thus cause a delay in settlement of such Seller's
Contract, or otherwise subject such Contract to such proceedings, which could
adversely affect the timing of settlement and could impair the Trust's ability
to distribute the Subordinate Voting Shares or other assets subject to such
Contract and the related Collateral Agreement to the Holders on a timely basis
and, as a result, could adversely affect the amount received by the Holders in
respect of the DECS and/or the timing of such receipt.
NET ASSET VALUE
The net asset value of the portfolio will be calculated by the
Administrator no less frequently than quarterly by dividing the value of the net
assets of the Trust (the value of its assets less its liabilities) by the total
number of DECS outstanding. The Trust's net asset value will be published
semiannually as part of the Trust's semi-annual report to Holders and at such
other times as the Trustees may determine. The Treasury Securities held by the
Trust will be valued at the mean between the last current bid and asked prices
or, if quotations are not available, as determined in good faith by the
Trustees. Short-term investments having a maturity of 60 days or less will be
valued at cost with accrued interest or discount earned included in interest to
be received. The Contracts will be valued at the mean of the bid prices received
by the Trust from at least three independent broker-dealer firms unaffiliated
with the Trust who are in the business of making bids on financial instruments
similar to the Contracts and with terms comparable thereto. In the event that
the Trust (acting through the Administrator) is unable to obtain valuations from
three independent broker-dealer firms, as required by the preceding sentence, on
a timely basis or without unreasonable effort or expense, the Contracts shall be
valued at the median of bid prices received from two such broker-dealer firms.
In the event that the Trust (acting through the Administrator) is unable to
obtain a valuation for the Contracts that it believes to be reasonable through
the above method, valuation shall be established at a level deemed to be fair
and reflective of the market value for the Contracts based on all appropriate
factors relevant to the value of the Contracts as set forth in pricing
guidelines adopted by the Trustees.
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<PAGE> 28
DESCRIPTION OF THE DECS
Each DECS represents an equal proportional interest in the Trust. Upon
liquidation of the Trust, Holders are entitled to share pro rata in the net
assets of the Trust available for distribution. DECS have no preemptive,
redemption or conversion rights. The DECS, when issued and outstanding, will be
fully paid and nonassessable. The only securities that the Trust is authorized
to issue are the DECS offered hereby. See "Underwriting."
Holders are entitled to one vote for each DECS held on all matters to be
voted on by Holders and are not able to cumulate their votes in the election of
Trustees. The Trustees of the Trust have been selected initially by Salomon as
the initial Holder of the Trust. The Trust intends to hold annual meetings as
required by the rules of the NYSE. The Trustees may call special meetings of
Holders for action by Holder vote as may be required by either the Investment
Company Act or the Declaration of Trust. The Holders have the right, upon the
declaration in writing or vote of more than two-thirds of the outstanding DECS,
to remove a Trustee. The Trustees will call a meeting of Holders to vote on the
removal of a Trustee upon the written request of the record Holders of 10% of
the DECS or to vote on other matters upon the written request of the record
Holders of 51% of the DECS (unless substantially the same matter was voted on
during the preceding 12 months). The Trustees shall establish, and notify the
Holders in writing of, the record date for each such meeting, which shall be not
less than 10 nor more than 50 days before the meeting date. Holders at the close
of business on the record date will be entitled to vote at the meeting. The
Trust will also assist in communications with other Holders as required by the
Investment Company Act.
BOOK-ENTRY SYSTEM
The DECS will be issued in the form of one or more global securities (the
"Global Securities") deposited with The Depository Trust Company (the
"Depositary") and registered in the name of a nominee of the Depositary.
The Depositary has advised the Trust and the Underwriter as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. The
Depositary was created to hold securities of persons who have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of certificates. Such participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective DECS represented by such Global Security to the accounts
of participants. The accounts to be credited shall be designated by the
Underwriter. Ownership of beneficial interests in such Global Securities will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests by participants in such Global Securities will
be shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depositary or its nominee for such Global
Securities. Ownership of beneficial interests in such Global Securities by
persons that hold through participants will be shown on, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the DECS. Except
as set forth below, owners of beneficial interests in such Global Securities
will
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<PAGE> 29
not be entitled to have the DECS registered in their names and will not receive
or be entitled to receive physical delivery of the DECS in definitive form and
will not be considered the owners or holders thereof.
Subordinate Voting Shares or other assets deliverable in respect of, and
any quarterly distributions on, DECS registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner or the holder of the Global Security. None
of the Trust, any Trustee, the Paying Agent, the Administrator or the Custodian
for the DECS will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Trust expects that the Depositary, upon receipt of any payment in
respect of a permanent 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 DECS in definitive registered form in exchange for the Global Security
representing such DECS. In that event, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in definitive form of DECS
represented by such Global Security equal in number to that represented by such
beneficial interest and to have such DECS registered in its name.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The Trust will be internally managed by three Trustees, none of whom is an
"interested person" of the Trust as defined in the Investment Company Act, and
will not have an investment adviser. Under the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable to grantor trusts, the
Trustees will not have the power to vary the investments held by the Trust. It
is a fundamental policy of the Trust that the Contracts may not be disposed of
during the term of the Trust and that the Treasury Securities held by the Trust
may not be disposed of prior to the earlier of their respective maturities and
the termination of the Trust, except for a partial liquidation of Treasury
Securities following acceleration of any Contract.
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<PAGE> 30
The names of the persons who have been elected by Salomon, the initial
Holder of the Trust, to serve as the Trustees are set forth below. The positions
and the principal occupations of the individual Trustees during the past five
years are also set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- ------------------------------------------------ ----------------- -----------------------
<S> <C> <C>
Donald J. Puglisi, 52........................... Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham, III, 53...................... Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 58............................ Trustee Professor of Economics
Center for Economic University of Delaware
Education and
Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
Each Trustee who is not a director, officer or employee of the Underwriter
or the Administrator, or of any affiliate thereof, will be paid by Salomon
(which will be reimbursed by the Sellers), in respect of its annual fee and
anticipated out-of-pocket expenses, a one-time, up-front fee of US$10,800. The
Trust's Managing Trustee will also receive an additional up-front fee of
US$3,600 for serving in that capacity. The Trustees will not receive, either
directly or indirectly, any compensation, including any pension or retirement
benefits, from the Trust. None of the Trustees receives any compensation for
serving as a trustee or director of any other affiliated investment company.
ADMINISTRATOR
The day-to-day affairs of the Trust will be managed by The Bank of New
York, as Trust Administrator pursuant to an Administration Agreement. Under the
Administration Agreement, the Trustees have delegated most of their operational
duties to the Administrator, including without limitation, the duties to: (i)
receive invoices for and pay, or cause to be paid, all expenses incurred by the
Trust; (ii) with the approval of the Trustees, engage legal and other
professional advisors (other than the independent public accountants for the
Trust); (iii) instruct the Paying Agent to pay distributions on DECS as
described herein; (iv) prepare and mail, file or publish all notices, proxies,
reports, tax returns and other communications and documents, and keep all books
and records, for the Trust; (v) at the direction of the Trustees, institute and
prosecute legal and other appropriate proceedings to enforce the rights and
remedies of the Trust; and (vi) make all necessary arrangements with respect to
meetings of Trustees and any meetings of holders of DECS. The Administrator will
not, however, select the independent public accountants for the Trust or sell or
otherwise dispose of the Trust assets (except in connection with an acceleration
of the Contracts, or the settlement of the Contracts at the Exchange Date, and
upon termination of the Trust).
The Administration Agreement may be terminated by either the Trust or the
Administrator upon 60 days' prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
Except for its roles as Administrator, custodian, paying agent, registrar
and transfer agent of the Trust, and except for its role as Collateral Agent
under the Collateral Agreements, The Bank of New York has no other affiliation
with, and is not engaged in any other transactions with, the Trust.
The address of the Administrator is 101 Barclay Street, New York, New York
10286.
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<PAGE> 31
CUSTODIAN
The Trust's Custodian is The Bank of New York pursuant to a custodian
agreement (the "Custodian Agreement"). In the event of any termination of the
Custodian Agreement by the Trust or the resignation of the Custodian, the Trust
must engage a new Custodian to carry out the duties of the Custodian as set
forth in the Custodian Agreement. Pursuant to the Custodian Agreement, all net
cash received by the Trust will be invested by the Custodian in short-term U.S.
Government securities maturing on or shortly before the next quarterly
distribution date. The Custodian will also act as Collateral Agent under the
Collateral Agreements and will hold a perfected security interest in the
Subordinate Voting Shares or Multiple Voting Shares and U.S. Government
obligations or other assets consistent with the terms of the Contracts, the
Collateral Agreements and the Collateral Agency Agreements. CIBC Mellon Trust
Company will act as Sub-Collateral Agent of the Custodian, pursuant to the
Collateral Agency Agreements, solely for purposes of holding in Canada the
Multiple Voting Shares pledged by any Seller that is wholly owned by the
Principal Shareholder. Any such Multiple Voting Shares delivered to the
Collateral Agent for further delivery to the Trustee in satisfaction of
obligations under a Contract will be converted into an equivalent number of
Subordinate Voting Shares before any such delivery.
PAYING AGENT
The transfer agent, registrar and paying agent (the "Paying Agent") for the
DECS is The Bank of New York pursuant to a paying agent agreement (the "Paying
Agent Agreement"). In the event of any termination of the Paying Agent Agreement
by the Trust or the resignation of the Paying Agent, the Trust will use its best
efforts to engage a new Paying Agent to carry out the duties of the Paying
Agent.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Administrator, the Custodian,
the Sub-Custodian and the Paying Agent with respect to any claim, liability,
loss or expense (including the costs and expenses of the defense against any
claim or liability) which it may incur in acting as Trustee, Administrator,
Custodian, Sub-Custodian or Paying Agent, as the case may be, except in the case
of willful misfeasance, bad faith, gross negligence or reckless disregard of
their respective duties or where applicable law prohibits such indemnification.
Salomon has agreed to reimburse the Trust for any amounts it may be required to
pay as indemnification to any Trustee, the Administrator, the Custodian, the
Sub-Custodian or the Paying Agent. Salomon will in turn be reimbursed by the
Sellers for all such reimbursements paid by it.
DISTRIBUTIONS
The Trust intends to distribute to Holders on a quarterly basis the
proceeds of the Treasury Securities held by the Trust. The first distribution,
reflecting the Trust's operations from the date of the offering, will be made on
February 15, 1998 to Holders of record as of February 1, 1998. Thereafter,
distributions will be made on 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, of
each year to Holders of record as of each February 1, May 1, August 1 and
November 1, respectively. A portion of each such distribution should be treated
as a tax-free return of the Holder's investment. See "Investment Objective and
Policies -- Trust Assets" and "Certain United States Federal Income Tax
Considerations." If any Contract is accelerated as described in "Investment
Objectives and Policies -- The Contracts -- Collateral Requirements of the
Contracts; Acceleration," each Holder will receive its pro rata share of the
proceeds from the acceleration of such Contract and from the liquidation of a
proportionate amount of the Treasury Securities then held in the Trust. Upon
termination of the Trust as described in "Investment Objectives and Policies --
Trust Termination," each Holder will receive its pro rata share of any remaining
net assets of the Trust.
The Trust does not permit the reinvestment of distributions.
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<PAGE> 32
ESTIMATED EXPENSES
At the closing of this offering Salomon will pay to each of the
Administrator, the Custodian and the Paying Agent, and to each Trustee, a
one-time, up-front amount in respect of its fee and, in the case of the
Administrator, anticipated expenses of the Trust over the term of the Trust. The
anticipated Trust expenses to be borne by the Administrator include, among other
things, expenses for legal and independent accountants' services, costs of
printing proxies, DECS certificates and Holder reports, expenses of the
Trustees, fidelity bond coverage, stock exchange listing fees and expenses of
qualifying the DECS for sale in the various states. The aggregate of the
one-time, up-front payments described above will be in the amount of US$250,000.
Salomon will also pay estimated organization costs of the Trust in the amount of
US$10,000 and estimated costs of the Trust in connection with the initial
registration and public offering of the DECS in the amount of US$160,000 at the
closing of the offering. Salomon will be reimbursed by the Sellers for such
payments as provided in the Underwriting Agreement and the Reimbursement
Agreement.
The amount payable to the Administrator in respect of ongoing expenses of
the Trust was determined based on estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. There cannot, however, be any assurance that actual
operating expenses of the Trust will not be substantially more than this amount.
Any excess expenses will be paid by Salomon or, in the event of its failure to
pay such amounts, the Sellers, or, in the event of the failure of either Salomon
or the Sellers to pay such amounts, the Trust. Salomon will be reimbursed by the
Sellers for expenses of the Trust paid by it as provided in the Underwriting
Agreement and the Reimbursement Agreement.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal U.S. federal income tax
consequences that may be relevant to a holder of a DECS that is a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized under the laws of the United States, an estate the income
of which is subject to U.S. federal income taxation regardless of its source, or
a trust if (i) a U.S. court is able to exercise primary supervision over the
trust's administration and (ii) one or more United States persons have the
authority to control all of the trust's substantial decisions (a "U.S. person")
or a holder that is otherwise subject to U.S. federal income taxation on a net
income basis in respect of a DECS (such a holder and any U.S. person, a "U.S.
Holder"). The discussion below is based on the advice of Cleary, Gottlieb, Steen
& Hamilton.
This summary is based on the U.S. federal income tax laws, regulations,
rulings and decisions now in effect, all of which are subject to change. Except
to the extent discussed below under "Non-United States Persons," this summary
deals only with U.S. Holders that will hold DECS as capital assets. This summary
deals only with initial Holders and does not address tax considerations
applicable to investors that may be subject to special tax rules, such as banks,
insurance companies, dealers in securities, persons that will hold DECS as a
position in a "straddle" for tax purposes or as a part of a "synthetic security"
or a "conversion transaction" or other integrated investment comprised of a DECS
and one or more other investments, or persons that have a functional currency
other than the U.S. dollar. It does not include any description of the tax laws
of any state or local governments or of any foreign government that may be
applicable to the DECS or to the Holders thereof. It also does not discuss the
tax consequences of the ownership of the Subordinate Voting Shares or Reported
Securities. Prospective purchasers of DECS are urged to review the discussion
under "Certain Income Tax Considerations" in the accompanying prospectus of the
Company concerning the federal income tax consequences of an investment in the
Subordinate Voting Shares. Investors should consult their own tax advisors in
determining the tax consequences to them of holding DECS, including the
application to their particular situation of the U.S. federal income tax
considerations discussed below, as well as the application of state, local or
other tax laws.
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<PAGE> 33
There are no regulations, published rulings or judicial decisions
addressing the characterization for federal income tax purposes of securities
with terms substantially the same as the DECS. The Trust intends to treat a DECS
for U.S. federal income tax purposes as a beneficial interest in a trust that
holds zero-coupon U.S. Treasury securities and Contracts, and to report Holders'
income to the Internal Revenue Service in accordance with this treatment. Under
this approach, the tax consequences of holding a DECS will be as described
below. However, prospective investors in the DECS should be aware that the
Internal Revenue Service might take a different view as to the proper
characterization of the DECS and of the tax consequences to a Holder.
TAX STATUS OF THE TRUST
The Trust will be taxable as a grantor trust owned solely by the present
and future Holders of the DECS for federal income tax purposes, and income
received by the Trust will be treated as income of the Holders in the manner set
forth below.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
Tax Basis of the Treasury Securities and the Contracts. Each Holder will
be considered the owner of its pro rata portion of the Treasury Securities and
the Contracts in the Trust. The cost to the Holder of its DECS will be allocated
among the Holder's pro rata portion of the Treasury Securities and the Contracts
(in proportion to the fair market values thereof on the date on which the Holder
acquires its DECS) in order to determine the Holder's tax bases. It is currently
anticipated that % and % of the net proceeds of the offering will be used
by the Trust to purchase the Treasury Securities and as payments under the
Contracts, respectively.
Recognition of Original Issue Discount on the Treasury Securities. The
Treasury Securities in the Trust will consist of zero-coupon U.S. Treasury
securities. A Holder will be required to treat its pro rata portion of each
Treasury Security in the Trust as a bond that was originally issued on the date
the Holder purchased its DECS and at an original issue discount equal to the
excess of the Holder's pro rata portion of the amounts payable on such Treasury
Security over the Holder's tax basis therefor as discussed above. The Holder
(whether on the cash or accrual method of tax accounting) is required to include
original issue discount (other than original issue discount on short-term
Treasury Securities as described below) in income for federal income tax
purposes as it accrues, in accordance with a constant yield method, prior to the
receipt of cash attributable to such income. Because it is expected that more
than 20% of the Holders will be accrual basis taxpayers, original issue discount
on any short-term Treasury Security (i.e., any Treasury Security with a maturity
of one year or less from the date it is purchased) held by the Trust will also
be required to be included in income by the Holders as it is accrued. Unless a
Holder elects to accrue the original issue discount on a short-term Treasury
Security according to a constant yield method based on daily compounding, such
original issue discount will be accrued on a straight-line basis. The Holder's
tax basis in a Treasury Security will be increased by the amount of any original
issue discount included in income by the Holder with respect to such Treasury
Security.
Treatment of the Contracts. Each Holder will be treated as having entered
into a pro rata portion of the Contracts and, at the Exchange Date, as having
received a pro rata portion of the Subordinate Voting Shares (or cash, Reported
Securities or combination thereof) delivered to the Trust. Under existing law, a
Holder will not recognize income, gain or loss upon entry into the Contracts. A
Holder should not be required under existing law to include in income additional
amounts over the term of the Contracts.
The Internal Revenue Service may contend that a DECS should be
characterized for federal income tax purposes in a manner different from the
approach described above. For example, the Internal Revenue Service might assert
that the Contracts should be treated as contingent debt obligations of the
Sellers that are subject to Treasury regulations promulgated in June 1996
governing contingent payment debt instruments. If the Internal Revenue Service
were to prevail in making such an assertion, original issue discount would
accrue with respect to each Contract at a "comparable yield" for the Seller
under that Contract, determined at the time the Contract is entered into. A
Holder's pro rata portion of original
31
<PAGE> 34
issue discount in respect of the Contracts and original issue discount in
respect of the Treasury Securities might exceed the aggregate amount of the
quarterly cash distributions to a Holder. In addition, under this treatment, a
Holder would be required to treat any gain realized on the sale, exchange or
redemption of the DECS as ordinary income to the extent that such gain is
allocable to the Contracts. Any loss realized on such sale, exchange or
redemption that is allocable to the Contracts would be treated as an ordinary
loss to the extent of the Holder's original issue discount inclusions with
respect to the Contracts, and as capital loss to the extent of loss in excess of
such inclusions. It is also possible that the Internal Revenue Service could
take the view that a Holder should include in income the amount of cash actually
received each year in respect of the DECS, or that the DECS as a whole
constitute a contingent payment debt instrument subject to the rules described
above.
Sale of the DECS. Upon a sale of all or some of a Holder's DECS, a Holder
will be treated as having sold its pro rata portion of the Treasury Securities
and Contracts underlying the DECS. The selling Holder will recognize gain or
loss equal to the difference between the amount realized and the Holder's
aggregate tax bases in its pro rata portion of the Treasury Securities and the
Contracts. Any gain or loss will be long-term capital gain or loss if the Holder
has held the DECS for more than one year. The distinction between capital gain
or loss and ordinary income or loss is important for purposes of the limitations
on a Holder's ability to offset capital losses against ordinary income. In
addition, certain individuals are subject to taxation at a reduced rate on
long-term capital gains. The Taxpayer Relief Act of 1997 further reduces tax
rates on capital gains recognized by individuals in respect of assets held for
more than 18 months. Holders are advised to consult their own tax advisers as to
the consequences of the Taxpayer Relief Act of 1997 in their particular
circumstances. Gain recognized by a Holder generally will be treated as from
sources within the United States for U.S. foreign tax credit purposes.
Distribution of the Subordinate Voting Shares. The delivery of Subordinate
Voting Shares to the Trust pursuant to the Contracts will not be taxable to the
Holders. The distribution of Subordinate Voting Shares upon the termination of
the Trust will not be taxable to the Holders. A Holder will have taxable gain or
loss (which will be short-term capital gain or loss) upon receipt of cash in
lieu of fractional Subordinate Voting Shares distributed upon termination of the
Trust, in an amount equal to the difference between the cash received and the
portion of the basis of the Contracts allocable to fractional shares (based on
the relative number of fractional shares and full shares delivered to the
Holder). Each Holder's aggregate basis in its Subordinate Voting Shares will be
equal to its basis in its pro rata portion of the Contracts less the portion of
such basis allocable to any fractional Subordinate Voting Shares for which cash
is received.
Distribution of Cash. If a Holder receives cash upon dissolution of the
Trust or as a result of a Seller's election to deliver cash under the Cash
Delivery Option, a Holder will recognize capital gain or loss equal to any
difference between the amount of cash received from the Sellers and the Holder's
tax basis in the DECS at that time. Such gain or loss generally will be
long-term capital gain or loss if the Holder has held the DECS for more than one
year at the Exchange Date.
Distribution of Cash or Reported Securities as a Result of an Adjustment
Event. If as a result of an Adjustment Event, cash, Reported Securities or a
combination of cash and Reported Securities is delivered pursuant to the
Contracts, a Holder will have taxable gain or loss upon receipt equal to the
difference between the amount of cash received, including cash received in lieu
of fractional Reported Securities, and its basis in its pro rata portion of the
Contracts allocable to any Subordinate Voting Shares for which such cash or
fractional Reported Securities were received. Any gain or loss will be capital
gain or loss, and if the Holder has held the DECS for more than one year, such
gain or loss will be long-term capital gain or loss. A Holder's basis in any
Reported Securities received will be equal to its basis in its pro rata portion
of the Contracts less the portion of such basis allocable to any Subordinate
Voting Shares for which cash or fractional Reported Securities were received.
See "Investment Objectives and Policies -- The Contracts."
Fees and Expenses of the Trust. A Holder's pro rata portion of the
expenses in connection with the organization of the Trust, underwriting
discounts and commissions and other offering expenses should be includible in
the cost to the Holder of the DECS. However, there can be no assurance that the
Internal
32
<PAGE> 35
Revenue Service will not take a contrary view. If the Internal Revenue Service
were to prevail in treating such expenses as excludable from the Holder's cost
of the DECS, such expenses would not be includible in the basis of the assets of
the Trust and should instead be amortizable and deductible over the term of the
Trust. If such expenses were treated as amortizable and deductible, an
individual Holder who itemizes deductions would be entitled to amortize and
deduct (subject to any other applicable limitations on itemized deductions) such
expenses over the term of the Trust only to the extent that such amortized
annual expenses together with such Holder's other miscellaneous deductions
exceed 2% of such Holder's adjusted gross income.
NON-UNITED STATES PERSONS
In the case of a Holder of the DECS that is not a U.S. person, payments
made with respect to the DECS will not be subject to U.S. withholding tax,
provided that such Holder complies with applicable certification requirements
(including in general the furnishing of an Internal Revenue Service Form W-8 or
a substitute form). Any capital gain realized upon the sale or other disposition
of the DECS by a Holder that is not a U.S. person will generally not be subject
to U.S. federal income tax if (i) such gain is not effectively connected with a
U.S. trade or business of such Holder and (ii) in the case of an individual,
such individual is not present in the United States for 183 days or more in the
taxable year of the sale or other disposition or the gain is not attributable to
a fixed place of business maintained by such individual in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A Holder of a DECS may be subject to information reporting and to backup
withholding at a rate of 31 percent of certain amounts paid to the Holder unless
such Holder (a) is a corporation or comes within certain other exempt categories
and, when required, provides proof of such exemption or (b) provides a correct
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. Information reporting and backup withholding do not apply to
payments made to a Holder of a DECS that is not a U.S. person if the beneficial
owner of the DECS certifies as to its non-U.S. status or otherwise establishes
an exemption, provided that the Trust or its agent does not have actual
knowledge that the Holder is a U.S. person.
Payment of the proceeds from the sale of a DECS to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding, except that if the broker is a U.S. person, a controlled foreign
corporation for U.S. tax purposes or a foreign person 50 percent or more of
whose gross income from all sources for the three-year period ending with the
close of its taxable year preceding the payment was effectively connected with a
U.S. trade or business, information reporting may apply to such payments.
Payment of the proceeds from a sale of a DECS to or through the U.S. office of a
broker is subject to information reporting and backup withholding unless the
Holder or beneficial owner certifies as to its non-U.S. status or otherwise
establishes an exemption from information reporting and backup withholding.
Any amounts withheld under the backup withholding rules are not an
additional tax and may be credited against the U.S. Holder's U.S. federal income
tax liability, provided that the required information is furnished to the
Internal Revenue Service.
CERTAIN CANADIAN INCOME TAX CONSIDERATIONS
The following discussion is a summary of the principal Canadian federal
income tax consequences that may be relevant to a person who acquires DECS
pursuant to this offering and who (i) throughout the period during which the
purchaser owns DECS, is neither resident in Canada nor deemed to be resident in
Canada for purposes of the Income Tax Act (Canada) (the "Tax Act") and is a
resident of the United States for purposes of the Canada-U.S. Income Tax
Convention (the "Convention"); (ii) holds DECS as capital property; (iii) does
not use or hold, and is not deemed to use or hold, the DECS in connection
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<PAGE> 36
with a business that the holder carries on or is deemed to carry on in Canada or
in connection with providing independent personal services in Canada; and (iv)
in the case of an insurer who carries on an insurance business in Canada and
elsewhere, establishes that the DECS are not effectively connected with an
insurance business carried on in Canada (a "United States Holder"). The DECS
will generally be considered to be capital property to a United States Holder
unless either the United States Holder holds the DECS in the course of carrying
on a business or the United States Holder has acquired the DECS in one or more
transactions considered to be an adventure in the nature of trade.
This summary is based on the current provisions of the Convention, the Tax
Act and the regulations thereunder, the current administrative practices and
policies published by Revenue Canada and all specific proposals to amend the Tax
Act, the regulations thereunder and the Convention that have been publicly
announced by the Minister of Finance (Canada) prior to the date hereof. This
summary does not otherwise take into account or anticipate any other changes in
the law, whether by judicial, governmental or legislative decision or action,
nor does it take into account the tax legislation or considerations of any
province, territory or foreign jurisdiction.
This summary is of a general nature only and is not, and should not be
interpreted as, legal or tax advice to any particular United States Holder and
no representation is made with respect to the Canadian income tax consequences
to any particular person acquiring DECS. Accordingly, prospective purchasers are
advised to consult their own tax advisors with respect to their particular
circumstances.
Provided that the Trustees are not resident or deemed to be resident in
Canada for purposes of the Tax Act, and that the Trust will have no connection
with Canada other than as a party to the Contracts, the Trust will not be
subject to any Canadian withholding or income tax (including taxes on capital
gains) ("Canadian Taxes") (i) with respect to the acquisition, holding or
disposition of the Treasury Securities or the receipt of income thereunder, (ii)
as a consequence of being a party to the Contracts, including the receipt of
Subordinate Voting Shares or cash pursuant to the Cash Delivery Option in
accordance with the terms of such Contracts or (iii) with respect to the
distribution of Subordinate Voting Shares to United States Holders, provided
that at the time of such distribution: (a) the Subordinate Voting Shares are
listed on a prescribed stock exchange; and (b) at no time during the five-year
period immediately preceding such distribution were 25% or more of the issued
shares (including any interest therein or option in respect thereof) of any
class or series of the capital stock of the Company owned by the Trust, persons
with whom the Trust did not deal at arm's length or any combination thereof, and
a United States Holder will not be subject to any Canadian Taxes on
distributions by the Trust with respect to the Treasury Securities or of
Subordinate Voting Shares or cash received by the Trust pursuant to the
Contracts.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Trust, the Company, each of the Sellers
and the Underwriter, the Trust has agreed to sell to the Underwriter, and the
Underwriter has agreed to purchase, the number of DECS set forth below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF DECS
- ------------------------------ ---------------------------------------
<S> <C>
Salomon Brothers Inc..........
</TABLE>
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, that the obligations of the Underwriter
are subject to certain conditions precedent and that the Underwriter will be
obligated to purchase all the DECS offered hereby if any of the DECS are
purchased.
The Underwriter proposes to offer the DECS directly to the public initially
at the public offering price set forth on the cover of this Prospectus, and to
certain dealers at such price less a concession not in excess of US$
per DECS. The Underwriter may allow, and such dealers may reallow, a concession
not in excess of US$ per DECS to other dealers. After the initial
public offering, such
34
<PAGE> 37
public offering price and such concession and reallowance may be changed. The
sales load of US$ per DECS is equal to % of the initial public
offering price.
The Company and those Selling Shareholders listed under the caption
"Selling Shareholders" in the prospectus of the Company attached hereto who
individually hold, directly or indirectly, greater than 1% of the Voting Shares
of the Company, including the Sellers, have agreed not to offer for sale, sell
or contract to sell, or otherwise dispose of, or announce the offering of, or
file or cause the filing of any registration statement under the Securities Act
with respect to, without the prior written consent of the Underwriter, any
Subordinate Voting Shares or any securities convertible into or exchangeable
for, or warrants to acquire, Subordinate Voting Shares for a period of 60 days
after the date of this Prospectus; provided, however, that (i) such restriction
shall not affect the ability of (A) the Company or the Sellers to take any such
actions in connection with the offering of the DECS made hereby or pursuant to
the terms of the Contracts and the Collateral Agreements, (B) the Company to
take any such actions in connection with any employee stock option plan, stock
ownership plan or dividend reinvestment plan of the Company in effect at the
date of this Prospectus or (C) the Sellers and the Company to take any such
action in connection with the offering of additional Subordinate Voting Shares
by certain Sellers and the Company in an underwritten transaction concurrent
with the sale of the DECS and (ii) two of the Selling Shareholders (other than
the Principal Shareholder) may each sell up to 50,000 Subordinate Voting Shares.
In light of the fact that proceeds from the sale of the DECS will be used
by the Trust to purchase the Contracts from the Sellers, the Underwriting
Agreement provides that the Sellers will pay to the Underwriter as compensation
US$ per DECS, including in respect of DECS previously purchased by Salomon
and offered hereby.
The Trust has granted to the Underwriter an option, exercisable for a
30-day period after the date of this Prospectus, to purchase up to an additional
DECS at the same price per DECS as the initial DECS to be purchased by
the Underwriter. The Underwriter may exercise such option only for the purpose
of covering over-allotments, if any, incurred in connection with the sale of the
DECS offered hereby.
The DECS will be a new issue of securities with no established trading
market. The Underwriter intends to make a market in the DECS, subject to
applicable laws and regulations. However, the Underwriter is not obligated to do
so and any such market-making may be discontinued at any time at the sole
discretion of the Underwriter without notice. Accordingly, no assurances can be
given as to the liquidity of such market.
The Underwriting Agreement provides that the Company and the Sellers have
agreed to indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act, or contribute to payments the Underwriter
may be required to make in respect thereof.
In connection with the formation of the Trust, Salomon subscribed for and
purchased DECS for a purchase price of US$100,000. All of such DECS are
being sold by Salomon in this offering. Following the offering, Salomon will not
own any DECS, although Salomon may thereafter acquire DECS in connection with
its market-making activities, as described above, or otherwise. Salomon
sponsored the formation of the Trust for purposes of this offering, including
selecting its initial Trustees.
The Underwriter has agreed that, as part of the distribution of the DECS,
it has not offered or sold, and will not offer or sell, directly or indirectly,
any DECS or distribute any prospectus relating to DECS in Canada or to any
dealer who does not so agree. As used herein, "Canada" means Canada, its
provinces, territories, possessions and other areas subject to its jurisdiction,
and an offer or sale shall be in Canada if it is made to (i) any individual
resident in Canada or (ii) any corporation, partnership, pension, profit-sharing
or other trust or other entity (including any such entity acting as an
investment adviser with discretionary authority) whose office most directly
involved with the purchase is located in Canada.
In connection with this offering, the Underwriter and certain selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the DECS or the
Subordinate Voting Shares. Such transactions may include stabilization
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<PAGE> 38
transactions effected in accordance with Rule 104 of Regulation M under the
Securities Exchange Act pursuant to which such persons may bid for or purchase
DECS or Subordinate Voting Shares for the purpose of stabilizing their market
price. The Underwriter also may create a short position for its account by
selling more DECS in connection with this offering than it is committed to
purchase from the Trust, and in such case may purchase DECS in the open market
following completion of this offering to cover all or a portion of such short
position. In addition, the Underwriter may impose "penalty bids" under
contractual arrangements whereby it may reclaim from a dealer participating in
this offering the selling concession with respect to DECS that are distributed
in this offering but subsequently purchased of the account of the Underwriter in
the open market. Any of the transactions described in this paragraph may result
in the maintenance of the price of the DECS at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if they are undertaken, they may be discontinued at
any time.
The Underwriter and its affiliates may in the future perform investment
banking and financial advisory services for the Company and its affiliates.
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and the Underwriter
by Cleary, Gottlieb, Steen & Hamilton, New York, New York. Certain matters of
Canadian law will be passed upon for the Trust and the Underwriter by Lang
Michener, Toronto, Ontario. Certain matters of Delaware law will be passed upon
for the Trust by Richards, Layton & Finger, Wilmington, Delaware. Certain legal
matters will be passed upon for the Sellers by Shearman & Sterling, New York,
New York, and Ogilvy Renault, Toronto, Ontario and Montreal, Quebec.
EXPERTS
The statement of assets, liabilities and capital included in this
Registration Statement has been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and is
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
ADDITIONAL INFORMATION
The Trust has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act with
respect to the DECS offered hereby. Further information concerning the DECS and
the Trust may be found in the Registration Statement, of which this Prospectus
constitutes a part. The Registration Statement may be inspected without charge
at the Commission's office in Washington, D.C., and copies of all or any part
thereof may be obtained from such office after payment of the fees prescribed by
the Commission. Such Registration Statement is also available on the
Commission's website (http://www.sec.gov).
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<PAGE> 39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE TRUSTEES OF DECS TRUST II:
We have audited the accompanying statement of assets, liabilities and
capital of DECS Trust II (a Delaware trust) as of October 8, 1997. This
financial statement is the responsibility of the Trustees of the Trust. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets, liabilities and
capital is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statement of
assets, liabilities and capital. An audit also includes assessing the accounting
principles used and significant estimates made by the Trustees of the Trust, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets, liabilities and capital referred
to above presents fairly, in all material respects, the financial position of
DECS Trust II as of October 8, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
October 8 1997 (except with respect to the matter
discussed in Note IV, as to which the date is October 28, 1997).
37
<PAGE> 40
DECS TRUST II
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
OCTOBER 8, 1997
<TABLE>
<S> <C>
ASSETS
Cash........................................................................ US$100,000
----------
Total Assets.............................................................. US$100,000
==========
LIABILITIES
Total Liabilities......................................................... US$ --
==========
NET ASSETS.................................................................. US$100,000
==========
CAPITAL
DECS, 1 DECS issued and outstanding......................................... US$100,000
==========
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE> 41
DECS TRUST II
NOTES TO STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
OCTOBER 8, 1997
I. ORGANIZATION
DECS Trust II (the "Trust"), organized as a Delaware business trust on
September 2, 1997, is a closed-end management investment company registered
under the Investment Company Act of 1940. The term of the Trust is anticipated
to expire in the year 2000; however, the exact date will be determined in the
future. The Trust may be dissolved prior to its planned termination date under
certain circumstances as outlined in the registration statement.
The Trust has registered 3,277,500 DECS representing shares of beneficial
interest in the Trust. The only securities that the Trust is authorized to issue
are the DECS. Each of the DECS represents the right to receive (a) quarterly
distributions during the term of the Trust, and (b) upon the conclusion of the
term of the Trust (the "Exchange Date"), certain subordinate voting shares (the
"Subordinate Voting Shares") or cash or a combination of cash and shares with an
equivalent value (such amounts determined as described in the registration
statement). The DECS are not subject to redemption prior to the Exchange Date or
the earlier termination of the Trust. The Trust will hold a series of
zero-coupon U.S. Treasury securities and one or more forward purchase contracts
relating to the Subordinate Voting Shares. The business activities of the Trust
are limited to the matters discussed above. The Trust will be treated as a
grantor trust owned solely by the present and future holders of the DECS for
U.S. federal income tax purposes.
On October 8, 1997, the Trust issued one DECS to Salomon Brothers Inc
("Salomon") in consideration for a purchase price of US$100,000.
II. ORGANIZATIONAL COSTS, FEES AND EXPENSES
Organizational costs and ongoing fees of the Trust will be borne by
Salomon.
III. MANAGEMENT AND ADMINISTRATION OF THE TRUST
The Trust will be managed by its trustees and will not have a separate
investment adviser. The Trust will be overseen by three trustees and the daily
administration will be carried out by The Bank of New York as the administrator.
The Bank of New York will also serve as the Trust's custodian, paying agent,
registrar and transfer agent with respect to the DECS. CIBC Mellon Trust Company
will serve as sub-collateral agent for The Bank of New York.
IV. SUBSEQUENT EVENT
On October 27, 1997, the Trustees of the Trust approved the registration of
an additional 300,000 DECS representing shares of beneficial interest in the
Trust. Such registration is scheduled to occur on October 29, 1997.
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<PAGE> 42
NO DEALER, SALESPERSON OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST OR THE
UNDERWRITER. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE TRUST SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE. HOWEVER, IF ANY MATERIAL
CHANGE OCCURS WHILE THIS PROSPECTUS IS
REQUIRED BY LAW TO BE DELIVERED, THIS
PROSPECTUS WILL BE AMENDED OR
SUPPLEMENTED ACCORDINGLY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION.
- ---------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Prospectus Summary.......................... 3
Fees and Expenses........................... 9
The Trust................................... 10
Use of Proceeds............................. 10
Investment Objectives and Policies.......... 10
Investment Restrictions..................... 21
Risk Factors Relating to DECS............... 21
Net Asset Value............................. 25
Description of the DECS..................... 26
Management and Administration of the
Trust..................................... 27
Certain United States Federal Income Tax
Considerations............................ 30
Certain Canadian Income Tax
Considerations............................ 33
Underwriting................................ 34
Legal Matters............................... 36
Experts..................................... 36
Additional Information...................... 36
Report of Independent Public Accountants.... 37
Statement of Assets, Liabilities and
Capital................................... 38
</TABLE>
UNTIL , 1997, ALL DEALERS
EFFECTING TRANSACTIONS IN THE DECS,
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.
3,150,000 DECS(SM)
DECS TRUST II
(SUBJECT TO EXCHANGE INTO
SUBORDINATE VOTING SHARES,
WITHOUT PAR VALUE, OF
ROYAL GROUP TECHNOLOGIES LIMITED)
---------------------------------------------
--------------------------------------
SALOMON BROTHERS INC
--------------------------------------
PROSPECTUS
DATED , 1997
<PAGE> 43
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
Part A --
(i) Report of Independent Public Accountants
(ii) Statement of Assets, Liabilities and Capital as of October 8, 1997
Part B --
none
2. EXHIBITS
<TABLE>
<S> <C>
(a)(1)(A) -- Declaration of Trust dated as of September 2, 1997/**/
(a)(1)(B) -- Amended and Restated Declaration of Trust dated as of October 22, 1997
(a)(2)(A) -- Certificate of Trust dated September 2, 1997/**/
(a)(2)(B) -- Restated Certificate of Trust dated as of October 22, 1997
(b) -- Not applicable
(c) -- Not applicable
(d)(1) -- Form of specimen certificate of DECS (included in Exhibit 2(a)(1)(B))
(d)(2) -- Portions of the Amended and Restated Declaration of Trust defining the
rights of Holders of DECS (included in Exhibit 2(a)(1)(B))
(e) -- Not applicable
(f) -- Not applicable
(g) -- Not applicable
(h) -- Form of Underwriting Agreement
(i) -- Not applicable
(j)(1) -- Custodian Agreement dated as of October 8, 1997
(j)(2) -- Form of Collateral Agency Agreements
(k)(1) -- Form of Administration Agreement
(k)(2) -- Form of Paying Agent Agreement
(k)(3) -- Form of Forward Purchase Contract
(k)(4) -- Form of Collateral Agreement
(k)(5) -- Form of Fund Expense Agreement
(k)(6) -- Form of Fund Indemnity Agreement
(l) -- Opinion and Consent of Counsel to the Trust
(m) -- Not applicable
(n)(1) -- Tax Opinion of Counsel to the Trust (Consent contained in Exhibit 2(n)(1))
(n)(2) -- Consent of Independent Public Accountants
(n)(3) -- Consents to being named as Trustee
(o) -- Not applicable
(p) -- Subscription Agreement dated as of October 8, 1997
(q) -- Not applicable
(r) -- Financial Data Schedule
</TABLE>
- ---------------
/**/ Previously filed.
ITEM 25. MARKETING ARRANGEMENTS
See Exhibit 2(h) to this Registration Statement.
C-1
<PAGE> 44
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:
<TABLE>
<S> <C>
Registration fees........................................................ $ 30,038
New York Stock Exchange listing fee...................................... 85,000
Printing (other than certificates)....................................... 10,000
Engraving and printing certificates...................................... 1,000
Fees and expenses of qualification under state securities laws
(including fees of counsel)............................................ 10,000
Accounting fees and expenses............................................. 10,000
Legal fees and expenses.................................................. 10,000
NASD fees................................................................ 10,404
Miscellaneous............................................................ 3,558
------
Total.................................................................... $170,000
</TABLE>
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management and
Administration of the Trust" is incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
As of the effective date of this Registration Statement:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
---------------------------------------------------------------------- --------------
<S> <C>
DECS representing shares of beneficial interest....................... 1
</TABLE>
ITEM 29. INDEMNIFICATION
The Underwriting Agreement (Exhibit 2(h) to this Registration Statement)
provides for indemnification.
The Amended and Restated Declaration of Trust filed as Exhibit 2(a)(1)(B)
to this Registration Statement provides for indemnification to each Trustee
against any claim or liability incurred in acting as Trustee of the Trust,
except in the case of willful misfeasance, bad faith, gross negligence or
reckless disregard of the Trustee's duties. The Custodian Agreement,
Administration Agreement and Paying Agent Agreement filed as Exhibits 2(j),
2(k)(1) and 2(k)(2) to this Registration Statement provide for indemnification
to the Custodian, Administrator and Paying Agent against any loss or expense
incurred in the performance of their obligations under the respective
agreements, unless such loss or expense is due to willful misfeasance, bad
faith, gross negligence or reckless disregard of their obligations. The Fund
Indemnity Agreement filed as Exhibit 2(k)(6) to this Registration Statement
provides that Salomon will indemnify the Trust for certain indemnification
expenses incurred under the Amended and Restated Declaration of Trust, the
Custodian Agreement, the Administration Agreement and the Paying Agent
Agreement.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling
C-2
<PAGE> 45
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Not applicable.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained as follows: journals, ledgers, securities records and other original
records are maintained principally at the offices of the Registrant, c/o Salomon
Brothers Inc, Seven World Trade Center, New York, New York 10048 and at the
offices of The Bank of New York, the Registrant's Administrator, Custodian,
paying agent, transfer agent and registrar. All other records so required to be
maintained are maintained at the offices of the Registrant, c/o Salomon Brothers
Inc, Seven World Trade Center, New York, New York 10048.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend the offering of the shares
covered hereby until it amends its prospectus contained herein if (1) subsequent
to the effective date of this Registration Statement, its net asset value per
share declines more than ten percent from its net asset value per share as of
the effective date of this Registration Statement or (2) the net asset value per
share increases to an amount greater than its net proceeds as stated in its
prospectus contained herein.
(b) The Registrant hereby undertakes that (i) for the purpose of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the Registrant
under Rule 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; (ii) for the
purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of the securities at that time shall be deemed to be the initial
bona fide offering thereof.
C-3
<PAGE> 46
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 29th day of October, 1997.
DECS TRUST II
By: /s/ DONALD J. PUGLISI
------------------------------------
Donald J. Puglisi,
Managing Trustee
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
person, in the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ----------------------------------------- ------------------------------- ------------------
<C> <S> <C>
/s/ DONALD J. PUGLISI Managing Trustee October 29, 1997
- -----------------------------------------
Donald J. Puglisi
/s/ WILLIAM R. LATHAM, III Trustee October 29, 1997
- -----------------------------------------
William R. Latham, III
/s/ JAMES B. O'NEILL Trustee October 29, 1997
- -----------------------------------------
James B. O'Neill
</TABLE>
<PAGE> 47
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NAME OF EXHIBIT
--------- --------------------------------------------------------------------------
<S> <C>
(a)(1)(A) Declaration of Trust dated as of September 2, 1997/**/
(a)(1)(B) Amended and Restated Declaration of Trust dated as of October 22, 1997
(a)(2)(A) Certificate of Trust dated September 2, 1997/**/
(a)(2)(B) Restated Certificate of Trust dated as of October 22, 1997
(b) Not applicable
(c) Not applicable
(d)(1) Form of specimen certificate of DECS (included in Exhibit 2(a)(1)(B))
(d)(2) Portions of the Amended and Restated Declaration of Trust defining the
rights of Holders of DECS (included in Exhibit 2(a)(1)(B))
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) Form of Underwriting Agreement
(i) Not applicable
(j)(1) Custodian Agreement dated as of October 8, 1997
(j)(2) Form of Collateral Agency Agreements
(k)(1) Form of Administration Agreement
(k)(2) Form of Paying Agent Agreement
(k)(3) Form of Forward Purchase Contract
(k)(4) Form of Collateral Agreement
(k)(5) Form of Fund Expense Agreement
(k)(6) Form of Fund Indemnity Agreement
(l) Opinion and Consent of Counsel to the Trust
(m) Not applicable
(n)(1) Tax Opinion of Counsel to the Trust (Consent contained in Exhibit 2(n)(1))
(n)(2) Consent of Independent Public Accountants
(n)(3) Consents to being named as Trustee
(o) Not applicable
(p) Subscription Agreement dated as of October 8, 1997
(q) Not applicable
(r) Financial Data Schedule
</TABLE>
- ---------------
/**/Previously filed.
<PAGE> 1
Exhibit 99.2.A(i)(b)
AMENDED AND RESTATED
DECLARATION OF
TRUST
CONSTITUTING
DECS TRUST II
Dated as of October 22, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I 1
DEFINITIONS 1
SECTION 1.1 Definitions 1
ARTICLE II 6
TRUST DECLARATION; PURPOSES, POWERS AND DUTIES OF THE TRUSTEES;
ADMINISTRATION 6
SECTION 2.1 Name 6
SECTION 2.2 Office 6
SECTION 2.3 Resignation of Initial Trustee; Transfer of Beneficial
Interest; Ratification and Approval of Action of Either or Both
of the Initial Sponsor and the Initial Trustee 6
SECTION 2.4 Declaration of Trust; Purposes of the Trust;
Statement of Intent 7
SECTION 2.5 General Powers and Duties of the Trustees 7
SECTION 2.6 Portfolio Acquisition 9
SECTION 2.7 Portfolio Administration 9
SECTION 2.8 Manner of Sales 12
SECTION 2.9 Limitations on Trustees' Powers 12
SECTION 2.10 Legal Title to Trust Property 13
SECTION 2.11 Situs of Trust 13
ARTICLE III 13
ACCOUNTS AND PAYMENTS 13
SECTION 3.1 The Trust Account 13
SECTION 3.2 Payment of Fees and Expenses 13
SECTION 3.3 Distributions to Holders 13
SECTION 3.4 Segregation 14
SECTION 3.5 Temporary Investments 14
ARTICLE IV 14
REDEMPTION 14
SECTION 4.1 Redemption 14
ARTICLE V 15
ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF DECS 15
SECTION 5.1 Form of Certificate 15
SECTION 5.2 Transfer of DECS; Issuance, Transfer and Exchange
of Certificates 16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
SECTION 5.3 Replacement of Certificates 16
SECTION 5.4 Limitation on Liability 17
SECTION 5.5 General Provisions Regarding the DECS 17
ARTICLE VI 17
ISSUANCE OF THE CONTRACTS 17
SECTION 6.1 Execution of the Contracts 17
ARTICLE VII 18
TRUSTEES 18
SECTION 7.1 Trustees 18
SECTION 7.2 Vacancies 18
SECTION 7.3 Powers 18
SECTION 7.4 Meetings 19
SECTION 7.5 Resignation and Removal 19
SECTION 7.6 Liability 19
SECTION 7.7 Compensation 20
ARTICLE VIII 20
MISCELLANEOUS 20
SECTION 8.1 Meetings of Holders 20
SECTION 8.2 Books and Records; Reports 21
SECTION 8.3 Termination 21
SECTION 8.4 Amendment and Waiver 22
SECTION 8.5 Accountants 23
SECTION 8.6 Nature of Holder's Interest 24
SECTION 8.7 Delaware Law to Govern 24
SECTION 8.8 Notices 24
SECTION 8.9 Severability 25
SECTION 8.10 Counterparts 25
SECTION 8.11 Successors and Assigns 25
</TABLE>
SCHEDULE 1
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
EXHIBIT E
EXHIBIT F
EXHIBIT G
<PAGE> 4
AMENDED AND RESTATED DECLARATION OF TRUST
This Amended and Restated Declaration of Trust, dated as of October 22,
1997 (the "Trust Agreement"), by and between Salomon Brothers Inc, as sponsor
(the "Sponsor"), Donald J. Puglisi, William R. Latham III and James B. O'Neill
as trustees (the "Trustees"), Michael E. Sherman, as initial sponsor, Peter B.
Blanton, as initial trustee, and the Holders (as defined herein), constituting
DECS Trust II (the "Trust").
WITNESSETH:
WHEREAS, Michael E. Sherman (the "Initial Sponsor") and Peter B. Blanton,
as trustee (the "Initial Trustee"), have previously entered into a Declaration
of Trust dated as of September 2, 1997 (the "Original Agreement"), creating
DECS Trust II;
WHEREAS, the Initial Sponsor desires to transfer his interest in the Trust
to the Sponsor;
WHEREAS, the Initial Trustee desires to resign as trustee of the Trust,
such resignation to be effective upon the appointment and acceptance of the
Trustees as provided herein;
WHEREAS, the Trustees hereby ratify and approve the transfer of the
interest of the Initial Sponsor in the Trust to the Sponsor;
WHEREAS, the parties hereto desire to amend and restate the Original
Agreement in certain respects; and
WHEREAS, the Initial Trustee and the Sponsor entered into a Subscription
Agreement dated October 8, 1997, (the "Subscription Agreement") pursuant to
which the Trust issued to the Sponsor one DECS in consideration of the
aggregate purchase price therefor of $100,000 in satisfaction of the
requirements of Section 14(a)(1) under the Investment Company Act;
NOW, THEREFORE, the parties hereto agree to amend and restate the Original
Agreement as provided herein. Upon the execution and delivery of copies hereof
by the parties hereto, the Original Agreement will be automatically amended and
restated in its entirety to read as provided herein.
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Whenever used in this Trust Agreement, the
following words and phrases shall have the meanings listed below. Any
reference to any agreement shall be a reference to such agreement as
supplemented or amended from time to time.
<PAGE> 5
"Act": The Delaware Business Trust Act, 12 Del. C. Section 3801 et seq.
"Additional Purchase Price": The Additional Purchase Price as defined in
the Contracts.
"Adjustment Event": An Adjustment Event as defined in the Contracts.
"Administration Agreement": The Administration Agreement, between the
Administrator and the Trust substantially in the Form of Exhibit B hereto.
"Administrator": The Bank of New York or its successor as permitted under
Section 6.1 of the Administration Agreement or appointed pursuant to Section
2.5(a) hereof.
"Business Day": A day on which the New York Stock Exchange, Inc. is open
for trading that is not a day on which banks in The City of New York are
authorized or obligated by law to close.
"Canadian Holder": The meaning specified in Section 2.7(d) hereof.
"Cash Delivery Option": The Cash Delivery Option as defined in the
Contracts.
"Certificate": Any certificate evidencing the ownership of DECS
substantially in the form of Exhibit A hereto.
"Closing Date": The Closing Date as defined in the Underwriting
Agreement.
"Code": The Internal Revenue Code of 1986, as amended from time to time;
each reference herein to any section of the Code or any regulation thereunder
shall constitute a reference to any successor provision thereto.
"Collateral Agency Agreements": The Collateral Agency Agreements among
certain of the Sellers, the Trust, the Collateral Agent, the Sub-Collateral
Agent and the Company, substantially in the form of Exhibit C hereto.
"Collateral Agent": The Bank of New York or its successor as permitted
under the Collateral Agreements.
"Collateral Agreements": The Collateral Agreements among each of the
Sellers the Trust and the Collateral Agent, securing the Sellers' obligations
under the Contracts, substantially in the form of Exhibit D hereto.
"Commencement Date": The day on which the Underwriting Agreement is
executed.
"Commission": The United States Securities and Exchange Commission.
<PAGE> 6
"Company": Royal Group Technologies Limited, a corporation amalgamated
under the laws of Canada.
"Contracts": The forward purchase agreements between the Trust and one or
more existing shareholders of the Company, substantially in the form of Exhibit
E hereto.
"Custodian": The Bank of New York or its successor as permitted under
paragraph 11 of the Custodian Agreement or appointed pursuant to Section 2.5(a)
hereof.
"Custodian Agreement": The Custodian Agreement, dated as of October 8,
1997, between the Custodian and the Trust, and any substitute agreement
therefor entered into pursuant to Section 2.5(a) hereof.
"DECS": The DECS issued by the Trust evidencing a Holder's undivided
interest in the Trust and right to receive a pro rata distribution upon
liquidation of the Trust Estate.
"Depositary": The Depository Trust Company, or any successor thereto.
"Distribution Date": Each February 15, May 15, August 15 and November 15
of each year commencing February 15, 1998, to and including November 15, 2000
or if any such date is not a Business Day, then the first Business Day
thereafter.
"Event of Default": An Event of Default as defined in the Contracts.
"Exchange": The distribution by the Trust to the Holders of the Shares,
Reported Securities and/or cash delivered to the Trust pursuant to the
Contracts (or, to the extent one or more Sellers elect the Cash Delivery Option
under the Contracts, the amount in cash specified in such Contracts as payable
in respect thereof), on the Exchange Date.
"Exchange Date": The Exchange Date as defined in the Contracts.
"Exchange Rate": The Exchange Rate as defined in the Contracts.
"Firm Purchase Price": The Firm Purchase Price as defined in the
Contracts.
"Holder": The registered owner of any DECS as recorded on the books of
the Paying Agent.
"Indemnity Agreement": The Fund Indemnity Agreement between the Trust and
the Sponsor, substantially in the form of Exhibit F hereto.
"Investment Company Act": The Investment Company Act of 1940, as amended
from time to time; each reference herein to any section of such Act or any rule
or regulation thereunder shall constitute a reference to any successor
provision thereto.
<PAGE> 7
"Managing Trustee": The Trustee designated as such by the Trustees, who
hereby initially designate Donald J. Puglisi as the Managing Trustee.
"Non-Canadian Holder": The meaning specified in Section 2.7(d)(iii)
hereof.
"Option Closing Date": The settlement date for the sale of any Option
DECS with respect to which the option provided for in Section 4(b) of the
Underwriting Agreement is exercised by the Underwriter.
"Original Agreement": The meaning specified in the recitals hereof.
"Participant": A Person having an account with the Depositary.
"Paying Agent": The Bank of New York or its successor as permitted under
Section 6.6 of the Paying Agent Agreement or appointed pursuant to Section
2.5(a) hereof.
"Paying Agent Agreement": The Paying Agent Agreement, between the Paying
Agent and the Trust substantially in the form of Exhibit G hereto.
"Person": An individual, a partnership, a corporation (including a
business trust), a trust, a limited liability company, an unincorporated
association, a joint venture or other entity or a government or any agency or
political subdivision thereof.
"Prospectus": The prospectus of the Trust relating to the offering of the
DECS and constituting a part of the Registration Statement, as first filed with
the Commission pursuant to Rule 497(b) or (h) under the Securities Act, and as
subsequently amended or supplemented by the Trust.
"Quarterly Distribution": $_______ per DECS paid to each Holder on each
Distribution Date.
"Record Date": Each February 1, May 1, August 1 and November 1 of each
year commencing February 1, 1998.
"Registration Statement": Registration Statement on Form N-2
(Registration Nos. 333-35147 and 811-08345) of the Trust, as amended.
"Reported Securities": Reported Securities as defined in the Contracts.
"Securities Act": The Securities Act of 1933, as amended from time to
time.
"Sellers": The Persons named as Sellers in the Contracts.
"Shares": Subordinate Voting Shares that may be delivered by the Sellers
to the Trust pursuant to the Contracts, and by the Trust to the Holders
pursuant to the DECS, on the Exchange Date.
<PAGE> 8
"Sub-Collateral Agent" means CIBC Mellon Trust Company or its successor
as permitted under the Collateral Agency Agreement.
"Subordinate Voting Shares": The Subordinate Voting Shares as defined in
the Contracts.
"Subscription Agreement": The meaning specified in the recitals hereof.
"Temporary Investments": Direct short-term U.S. government obligations,
as specified from time to time by the Trustees or through standing instructions
from the Trustees to the Administrator or the Paying Agent.
"Transfer Agent and Registrar": With respect to the Subordinate Voting
Shares or any Reported Securities at any time, the Person then acting as
Transfer Agent and Registrar for such Subordinate Voting Shares or Reported
Securities.
"Treasury Securities": The meaning specified in Section 2.6(b) hereof.
"Trust Account": The account created pursuant to Section 3.1 hereof.
"Trust Agreement": The meaning specified in the recitals hereof.
"Trust Estate": The Contracts and the Treasury Securities held at any
time by the Trust, together with any Temporary Investments held at any time
pursuant to Section 3.5 hereof, and any proceeds thereof or therefrom and any
other moneys held at any time in the Trust Account.
"Trustee": The meaning specified in the recitals hereof.
"Underwriter": Salomon Brothers Inc, in its capacity as underwriter of
the DECS pursuant to the Underwriting Agreement.
"Underwriting Agreement": The Underwriting Agreement as described in the
Prospectus.
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
SECTION 2.1 Name. The Trust is named "DECS Trust II," as such name may
be modified from time to time by the Trustees following written notice to the
Holders and in which name the Trustees may conduct the affairs of the Trust,
make and execute contracts and other instruments on behalf of the Trust and sue
and be sued on behalf of the Trust. The Trust's
<PAGE> 9
activities may be conducted under the name of the Trust or any other name
deemed advisable by the Trustees.
SECTION 2.2 Office. The address of the principal office and registered
office for service of process of the Trust is c/o Puglisi and Associates, 850
Library Avenue, Suite 204, Newark, Delaware 19715. On ten Business Days'
written notice to the Holders, the Trustees may designate another principal
office.
SECTION 2.3 Resignation of Initial Trustee; Transfer of Beneficial
Interest; Ratification and Approval of Prior Actions .
(a) The Initial Sponsor hereby assigns, transfers, conveys and sets over
to the Sponsor all of its rights and interests in, to and under the Original
Agreement. The Sponsor hereby accepts such assignment effective as of the date
hereof.
(b) The Initial Trustee hereby resigns as trustee of the Trust, such
resignation to be effective upon the appointment and acceptance of the Trustees
pursuant to Section 2.4(b) of this Agreement. The Initial Trustee hereby
conveys, assigns and transfers to the Trustees, effective as of the date
hereof, and to their successors and assigns, all the rights, powers and trusts
of the Initial Trustee as trustee, under and pursuant to the Original
Agreement, and all property and money held by the Initial Trustee as trustee
under the Original Agreement. The Initial Trustee hereby represents to the
Sponsor and the Trustees that, at the time the Trustees' appointment as such
becomes effective, it will hold no monies or other property as trustee under
the Original Agreement.
(c) The Sponsor and the Trustees hereby ratify and approve any and all
actions taken by either or both of the Initial Sponsor and the Initial Trustee
on behalf of the Trust on or prior to the date hereof.
SECTION 2.4 Declaration of Trust; Purposes of the Trust; Statement of
Intent.
(a) The Sponsor hereby creates the Trust in order that it may acquire the
Treasury Securities, enter into the Contracts, issue and sell to the Sponsor
and the Underwriter the DECS, hold the Trust Estate in trust for the use and
benefit of all present and future Holders and otherwise carry out the terms and
conditions of this Trust Agreement, all for the purpose of achieving the
investment objectives set forth in the Prospectus.
(b) The Sponsor hereby appoints the Trustees of the Trust effective as of
the date hereof, to have all the rights, powers and duties set forth herein and
in the Act. Effective as of date hereof, the Trustees shall have all rights,
powers and duties set forth herein and in the Act with respect to accomplishing
the purposes of the Trust. The Trustees hereby accept such
<PAGE> 10
appointment and agree to hold the Trust Estate in trust for the use and benefit
of all present and future Holders, subject to all trusts, conditions and
provisions of this Agreement, and accept, upon the trusts expressed in this
Agreement, all the rights, powers and trusts of the Initial Trustee as trustee
under and pursuant to the Original Agreement and agree to be bound by all the
terms of the Original Agreement and this Agreement, such acceptance and
agreement to be effective as of the close of business on the date hereof.
(c) The Trust shall not engage in any activities other than those
required or authorized by the terms of this Agreement relating to the issuance,
sale and payment of the DECS in accordance with their terms, and the
acquisition, management, collection and holding of the Trust Estate, all in
accordance with the terms of this Agreement.
(d) It is the intention of the parties hereto that the Trust constitute a
business trust under the Act and that this Trust Agreement constitute the
governing instrument of the Trust. It is the intention of the parties hereto
that, for purposes of federal income taxes and state and local income and
franchise taxes imposed upon, measured by, or based upon gross or net income,
the Trust shall be treated as a grantor trust owned solely by the present and
future Holders and the provisions of this Agreement shall be interpreted in a
manner consistent with such intention.
(e) The Sponsor hereby waives the 30-day notice requirement of Section 5
of the Original Agreement. The Initial Sponsor has heretofore deposited with
the Initial Trustee the sum of $1 to accept and hold in trust hereunder until
the issuance and sale of the DECS to the Underwriter, whereupon such sum shall
be donated to an organization satisfying the requirements of Section 170(c)(2)
of the Code selected by unanimous consent of the Trustees.
SECTION 2.5 General Powers and Duties of the Trustees. In furtherance of
the provisions of Section 2.4 hereof, the Sponsor authorizes and directs the
Trustees, on behalf of the Trust:
(a) to enter into and perform (and, in accordance with Section
8.4(a) hereof, amend), the Contracts, the Collateral Agreements, the
Collateral Agency Agreements, the Underwriting Agreement, the Indemnity
Agreement, the Custodian Agreement, the Administration Agreement and the
Paying Agent Agreement and to perform all obligations of the Trust
(including the obligation to provide indemnity hereunder and thereunder)
and enforce all rights and remedies of the Trust under each of such
agreements; and if any of the Custodian Agreement, the Administration
Agreement, the Collateral Agreements, the Collateral Agency Agreements
and the Paying Agent Agreement terminates, or the agent of the Trust
thereunder resigns or is discharged, to appoint a substitute agent and
enter into a new agreement with such substitute agent containing
provisions substantially similar to those contained in the agreement
being terminated; provided that in any such new agreement (i) the
Custodian and the Paying Agent shall each be a commercial bank or trust
company organized and existing under the laws of the United States of
America or any state therein, shall have full trust powers and shall have
minimum capital, surplus and retained earnings of not less than
$100,000,000;
<PAGE> 11
and (ii) the Administrator, the Collateral Agent and the Sub-Collateral
Agent shall each be a reputable financial institution qualified in all
respects to carry out its obligations under the Administration Agreement
or the Collateral Agreements or the collateral Agency Agreements as the
case may be;
(b) to hold the Trust Estate in trust, to create and administer the
Trust Account, to direct payments received by the Trust to the Trust
Account and to make payments out of the Trust Account as set forth in
Article III hereof;
(c) to issue and sell to the Underwriters an aggregate of up to
3,577,500 DECS (including those DECS subject to the over-allotment option
of the Underwriter provided for in the Underwriting Agreement) pursuant
to the Underwriting Agreement and as contemplated by the Prospectus;
provided, however, that subsequent to the determination of the public
offering price per DECS and related underwriting discount for the DECS to
be sold to the Underwriter but prior to the sale of the DECS to the
Underwriter, the DECS originally issued to the Sponsor shall be split
into a greater number of DECS, with any fractional shares being rounded
down to the nearest integral number, so that immediately following such
split the value of each DECS held by the Sponsor will equal the aforesaid
public offering price;
(d) to select independent public accountants and, subject to the
provisions of Section 8.5 hereof, to engage such independent public
accountants;
(e) to engage legal counsel and, to the extent required by Section
2.7 hereof, to engage professional advisors and pay reasonable
compensation thereto;
(f) to defend any action commenced against the Trustees or the Trust
and to prosecute any action which the Trustees deem necessary to protect
the Trust and the rights and interests of Holders, and to pay the costs
thereof;
(g) to arrange for the bonding of officers and employees of the
Trust as required by Section 17(g) of the Investment Company Act and the
rules and regulations thereunder;
(h) to delegate any and all of its powers and duties hereunder as
contemplated by the Custodian Agreement, the Paying Agent Agreement and
the Administration Agreement, to the extent permitted by applicable law;
and
(i) to adopt and amend bylaws, and take any and all such other
actions as necessary or advisable to carry out the purposes of the Trust,
subject to the provisions hereof and applicable law, including, without
limitation, the Investment Company Act.
SECTION 2.6 Portfolio Acquisition. In furtherance of the provisions of
Section 2.4 hereof, the Sponsor further specifically authorizes and directs the
Trustees, acting on behalf of the Trust:
<PAGE> 12
(a) to enter into the Contracts with respect to the Shares subject
thereto with the Sellers on the Commencement Date for settlement on the
date or dates provided thereunder and, subject to satisfaction of the
conditions set forth in the Contracts, to pay the Firm Purchase Price and
the Additional Purchase Price, if any, thereunder with the proceeds of
the sale of the DECS, net of underwriting commissions and net of the
purchase price paid for the Treasury Securities as provided in paragraph
(b) below; and, subject to the adjustments and exceptions set forth in
the Contracts, the Contracts shall entitle the Trust to receive from each
of the Sellers on the Exchange Date the Shares and/or Reported Securities
subject thereto (or, if one or more Sellers elect the Cash Delivery
Option under the Contracts, the amount in cash specified in such
Contracts in respect thereof) so that the Trust may execute the Exchange
with the Holders; and
(b) to purchase for settlement at the Closing Date, and at the
Option Closing Date, as appropriate, with the proceeds of the sale of the
DECS, net of underwriting commissions, U.S. Treasury securities from such
brokers or dealers as the Trustees shall designate in writing to the
Administrator having the terms set forth on Schedule I hereto ("Treasury
Securities").
SECTION 2.7 Portfolio Administration. In furtherance of the provisions
of Section 2.4 hereof, the Sponsor further specifically authorizes and directs
the Trustees:
(a) Determination of Exchange Rate Adjustments. Upon receipt of any
notice pursuant to Section 5.4(b) of the Contracts of an event requiring
an adjustment to the Exchange Rate, Exchange Price or Closing Price, or
upon otherwise acquiring knowledge of such an event, to calculate the
required adjustment and furnish notice thereof to the Collateral Agent,
the Sellers and the Administrator, or to request from the Sellers or the
Administrator such further information as may be necessary to calculate
or effect the required adjustment;
(b) Selection of Independent Investment Bank. At such times and for
such purposes as provided in the Contracts, to select and retain a
nationally recognized investment banking firm to determine the market
value of any property as provided in the Contracts, and to deliver to the
Sellers notice pursuant to Section 8.1 of the Contracts identifying the
firm proposed to be selected and retained, and to consult with the
Sellers on such selection and retention as provided in such Section 8.1;
(c) Acceleration. In the event an Acceleration Date shall occur due
to an Event of Default as provided in Article VII of any of the
Contracts, to deliver the notice to the related Sellers contemplated in
the last paragraph of Article VII of the Contracts, if applicable, and to
liquidate a proportionate amount of Treasury Securities and distribute
the proceeds thereof pro rata to each of the Holders of the DECS,
together with any Shares or other amounts to be distributed to the
Holders of the DECS, in each case in accordance with the Contracts, the
Collateral Agreements and the Collateral Agency Agreement;
<PAGE> 13
(d) Notice of Transfer Restrictions. To deliver notice to each
Holder of the DECS, on both an annual basis, as part of the annual notice
provided to Holders required by Section 8.2(b) hereof, and not less than
30 Business Days prior to the Exchange Date, stating that: (i) on the
Exchange Date, no Shares or Reported Securities will be distributed to
any Holder that is a national or resident of Canada, a corporation,
partnership or other entity created or organized in or under the laws of
Canada or of any political subdivision thereof, any estate or trust the
income of which is subject to Canadian federal income taxation,
regardless of its source (other than any non-Canadian branch of a
Canadian person), or a Canadian branch of any non-Canadian person or
entity (a "Canadian Holder"); (ii) on the Exchange Date, the Trust will
sell any Shares or Reported Securities that would otherwise be
distributable to such Canadian Holder at the market price available at
the time of distribution and distribute the cash proceeds from such sale
to such Canadian Holder in lieu of such Shares or Reported Securities;
and (iii) that each Holder must notify the Trust, in writing, not less
than 15 Business Days prior to the Exchange Date, whether such Holder is
a Canadian Holder, and that if any Holder fails to provide such
information 15 Business Days prior to the Exchange Date, the Trust will
treat such Holder as a non-Canadian Holder (a "Non-Canadian Holder") for
distribution purposes on the Exchange Date.
(e) Determination of Exchange Date Amounts. To calculate, on the
Exchange Date, the number of Shares (or, if one or more Sellers elect the
Cash Delivery Option under his or her Contract, the amount in cash)
required to be delivered by each of the Sellers under Section 1.1 of the
Contracts or, if an Adjustment Event shall have occurred, the amount of
cash required to be delivered by the Sellers, and the number of Reported
Securities permitted to be delivered by the Sellers in lieu of all or a
portion of such cash, all as provided in Section 6.2 of the Contracts,
and to furnish notice of the amounts so determined to the Collateral
Agent and the Sellers.
(f) Distribution of Exchange Consideration. Unless an Event of
Default or an Adjustment Event shall have occurred or one or more Sellers
elect the Cash Delivery Option under the Contracts (in which event the
cash received in respect thereof shall be distributed pro rata to the
Holders of the DECS):
(i) Determination of Fractional Shares. To determine, on the
Exchange Date: (a) for each Holder of DECS, such Holder's pro rata
share of the total number of Shares delivered to the Trust under
the Contracts on the Exchange Date; and (b) the number of
fractional Shares allocable to each Holder (including, in the case
of the Depositary, fractional shares allocable to beneficial owners
of Securities who own through Participants) and in the aggregate;
(ii) Cash for Fractional Shares. To sell, in the principal
market therefor, on the Exchange Date, a number of Shares equal to
the aggregate number of fractional Shares determined pursuant to
clause (i)(b) above, rounded down to the nearest integral number;
and to distribute to the Holders, pro rata in accordance
<PAGE> 14
with the fractional shares to which they would otherwise have been
entitled, the aggregate proceeds of such sale (net of any brokerage
or related expenses);
(iii) Cash for Canadian Holders. To sell, in the principal
market therefor, on the Exchange Date, a number of Shares equal to
the pro rata share of all Holders who are determined to be Canadian
Holders pursuant to clause (d)(iii) above of the total number of
Shares delivered to the Trust under the Contracts, rounded down to
the nearest integral number; and to distribute to the Canadian
Holders, pro rata in accordance with the Shares to which they would
otherwise have been entitled, the aggregate proceeds of such sale
(net of any brokerage or related expenses);
(iv) Delivery of Shares. To deliver the remaining Shares to
the Transfer Agent and Registrar on the Exchange Date, with
instructions that such Shares be re-registered and re-issued as
follows: (a) for and in the name of each Non-Canadian Holder
(other than the Depositary) who holds DECS in definitive form, if
any, the Transfer Agent and Registrar shall be instructed to issue
definitive certificates representing a number of Shares equal to
such Holder's pro rata share of the total number of Shares
delivered to the Trust under the Contracts, rounded down to the
nearest integral number, and the Trustees shall cause the delivery
of such re-registered and re-issued Shares to each respective
Holder; and (b) the Transfer Agent and Registrar shall be
instructed to transfer all remaining Shares to the account of the
Custodian held through the Depositary, who shall then be instructed
to transfer and credit such Shares to each Participant who holds
DECS, with each Participant receiving its pro rata share of the
total Shares delivered to the Trust on the Exchange Date, reduced
by the aggregate fractional shares allocable to such Participant as
described in (i) above;
(v) Distribution of Other Property. To distribute on the
Exchange Date to each Holder of DECS such Holder's pro rata share
of the total number or amount of each other type of property owned
by the Trust at the Exchange Date, rounded down to the nearest
integral number; provided, however, that any distribution of
Reported Securities to Canadian Holders shall be subject to the
same provisions of clause (iv) above as for Shares; and
(vi) Record Date. The distributions described in this
paragraph (f) shall be made to Holders of record as of the close of
business on the Business Day preceding the Exchange Date.
SECTION 2.8 Manner of Sales Any sale of Trust property permitted under
Section 8.3(c) hereof shall be made through such executing brokers or to such
dealers as the Trustees, seeking best price and execution for the Trust, shall
designate in writing to the Paying Agent, taking into account such factors as
price, commission, size of order, difficulty of execution and brokerage skill
required.
<PAGE> 15
SECTION 2.9 Limitations on Trustees' Powers. The Trustees are not
permitted:
(a) to purchase or hold any securities or instruments except for the
Shares, the Contracts, the Treasury Securities, the Temporary Investments
contemplated by Section 3.5 hereof and any Reported Securities, cash or
other property delivered pursuant to the terms of any Contract;
(b) to dispose of the Contracts prior to the Exchange Date;
(c) to issue any securities or instruments except for the DECS, or
to issue any DECS other than the DECS sold to the Sponsor and the DECS to
be sold pursuant to the Underwriting Agreement;
(d) to make short sales or purchases on margin;
(e) to write put or call options;
(f) to borrow money;
(g) to underwrite securities;
(h) to purchase or sell real estate, commodities or commodities
contracts;
(i) to purchase restricted securities;
(j) to make loans; or
(k) to take any action, or direct or permit the Administrator, the
Paying Agent or the Custodian to take any action, that would vary the
investment of the Holders within the meaning of Treasury Regulation
Section 301.7701-4(c), or otherwise take any action or direct or permit
any action to be taken that would or could cause the Trust not to be a
"grantor trust" owned solely by the present and future Holders under the
Code.
SECTION 2.10 Legal Title to Trust Property. Legal title to the Trust
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Trust Estate to be vested in a trustee or trustees, in which case legal
title shall be deemed to be vested in the Trustees, a co-trustee and/or a
separate trustee, as the case may be.
SECTION 2.11 Situs of Trust The Trust shall be located and administered
in, and all bank accounts of the Trust maintained in, the State of Delaware or
the State of New York. Payments shall be received by the Trust only in the
State of Delaware or the State of New York, and payments will be made by the
Trust only from the State of Delaware or the State of New York.
<PAGE> 16
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 The Trust Account. The Trustees shall, upon issuance of the
DECS, establish with the Paying Agent an account to be called the "Trust
Account." All moneys received by the Trust or the Trustees in respect of the
Contracts, the Treasury Securities and any Temporary Investments held pursuant
to Section 3.5 hereof, all moneys received from the sale of the DECS to the
Sponsor, and any proceeds from the sale of the DECS to the Underwriter after
the purchase of the Contracts and the Treasury Securities shall be credited to
the Trust Account.
SECTION 3.2 Payment of Fees and Expenses. The Sponsor will pay the fees
and expenses of the Trust incurred in connection with the offering of the DECS
and the costs and expenses incurred in the organization of the Trust.
SECTION 3.3 Distributions to Holders. On or shortly after each
Distribution Date, the Trust shall distribute to each Holder of record at the
close of business on the preceding Record Date, at the post office address of
the Holder appearing on the books of the Trust or Paying Agent or by any other
means mutually agreed upon by the Holder and the Trust, an amount equal to such
Holder's pro rata share of the Quarterly Distribution computed as of the close
of business on such Distribution Date.
SECTION 3.4 Segregation. All moneys and other assets deposited or
received by the Trust or the Trustees hereunder shall be held by them in trust
as part of the Trust Estate until required to be disbursed or otherwise
disposed of in accordance with the provisions of this Trust Agreement, and the
Trust or the Trustees shall handle such moneys and other assets in such manner
as shall constitute the segregation and holding in trust within the meaning of
the Investment Company Act.
SECTION 3.5 Temporary Investments. To the extent necessary to enable the
Paying Agent to make the next succeeding Quarterly Distribution, any moneys
deposited with or received by the Trust or the Trustees in the Trust Account
shall be invested as soon as possible by the Paying Agent in Temporary
Investments maturing no later than the Business Day preceding the next
following Distribution Date. Except as otherwise specifically provided herein
or in the Paying Agent Agreement, the Paying Agent shall not have the power to
sell, transfer or otherwise dispose of any Temporary Investment prior to the
maturity thereof, or to acquire additional Temporary Investments. The Paying
Agent shall hold any Temporary Investment to its maturity and shall apply the
proceeds thereof upon maturity to the payment of the next succeeding Quarterly
Distribution. All such Temporary Investments shall be selected from time to
time by the Trustees or pursuant to standing instructions from the Trustees to
the Administrator, and the Administrator and/or Paying Agent shall have no
liability to the Trust or any Holder or any other Person with respect to any
such Temporary Investment. Any interest or other income received on any moneys
in the Trust Account shall, upon receipt thereof, be deposited into the Trust
Account. Notwithstanding the foregoing, not more than 5% of the assets
<PAGE> 17
of the Trust may be held at any time in the form of cash and Temporary
Investments, and the Trustees shall distribute cash, or liquidate Temporary
Investments and distribute the proceeds thereof, if, when and to the extent
needed to maintain compliance with the foregoing restriction.
ARTICLE IV
REDEMPTION
SECTION 4.1 Redemption The Trustees shall have no right or obligation to
redeem DECS.
ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF DECS
SECTION 5.1 Form of Certificate. Each Certificate evidencing DECS shall
be countersigned manually or in facsimile by the Managing Trustee and
countersigned manually by the Paying Agent in substantially the form of Exhibit
A hereto with the blanks appropriately filled in, shall be dated the date of
execution and delivery by the Paying Agent and shall represent a fractional
undivided interest in the Trust, the numerator of which fraction shall be the
number of DECS set forth on the face of such Certificate and the denominator of
which shall be the total number of DECS outstanding at that time. All DECS
shall be issued in registered form and shall be numbered serially.
The DECS delivered to the Underwriter on the Closing Date and on any
settlement date under Section 4(b) of the Underwriting Agreement will be issued
in the form of a global Certificate or Certificates representing the DECS
issued to the Underwriter, to be delivered to the Depositary by or on behalf of
the Trust. Such Certificate or Certificates shall initially be registered on
the books and records of the Trust in the name of Cede & Co., the nominee of
DTC, and no beneficial owner of such DECS will receive a definitive Certificate
representing such beneficial owner's interest in such DECS, except as provided
in the next paragraph. Unless and until definitive, fully registered
Certificates have been issued pursuant to the next paragraph, the Trust shall
be entitled to deal with the Depositary for all purposes of this Agreement as
the Holder and the sole holder of the Certificates and shall have no obligation
to the beneficial owners thereof, and none of the Trust, the Trustees, or any
agent of the Trust or the Trustees shall have any liability with respect to or
responsibility for the records of the Depositary.
If the Depositary elects to discontinue its services as securities
depository and a successor depositary is not appointed by the Trust within 90
days, then definitive Certificates shall be prepared by the Trust. Upon
surrender of the global Certificate or Certificates accompanied by registration
instructions, the Trustees shall cause definitive Certificates to be delivered
to the beneficial owners in accordance with the instructions of the Depositary.
Neither
<PAGE> 18
the Trustees nor the Trust shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying
on, such instructions.
Pending the preparation of definitive Certificates, the Trustees may
execute and the Paying Agent shall authenticate and deliver temporary
Certificates (printed, lithographed, typewritten or otherwise reproduced, in
each case in form satisfactory to the Paying Agent). Temporary Certificates
shall be issuable as registered Certificates substantially in the form of the
definitive Certificates but with such omissions, insertions and variations as
may be appropriate for temporary Certificates, all as may be determined by the
Trustees with the concurrence of the Paying Agent. Every temporary Certificate
shall be executed by the Managing Trustee and be authenticated by the Paying
Agent upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Certificates. Without unreasonable delay the
Managing Trustee shall execute and shall furnish definitive Certificates and
thereupon temporary Certificates may be surrendered in exchange therefor
without charge at each office or agency of the Paying Agent and the Paying
Agent shall authenticate and deliver in exchange for such temporary
Certificates definitive Certificates for a like aggregate number of DECS.
Until so exchanged, the temporary Certificates shall be entitled to the same
benefits hereunder as definitive Certificates.
SECTION 5.2 Transfer of DECS; Issuance, Transfer and Exchange of
Certificates. DECS may be transferred by the Holder thereof by presentation
and surrender of properly endorsed Certificates at the office of the Paying
Agent, accompanied by such documents executed by the Holder or his authorized
attorney as the Paying Agent deems necessary to evidence the authority of the
person making the transfer. Certificates issued pursuant to this Trust
Agreement are exchangeable for one or more other Certificates representing an
equal aggregate number of DECS and all Certificates issued as may be requested
by the Holder and deemed appropriate by the Paying Agent shall be issued in
denominations of one DECS or any multiple thereof. The Paying Agent may deem
and treat the person in whose name any DECS shall be registered upon the books
of the Paying Agent as the owner of such DECS for all purposes hereunder and
the Paying Agent shall not be affected by any notice to the contrary. The
transfer books maintained by the Paying Agent for the purposes of this Section
5.2 shall include the name and address of the record owners of the DECS and
shall be closed in connection with the termination of the Trust pursuant to
Section 8.3 hereof.
A sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any such transfer shall be paid to the Paying Agent
by the Holder. A Holder may be required to pay a fee for each new Certificate
to be issued pursuant to the preceding paragraph in such amount as may be
specified by the Paying Agent and approved by the Trustees.
All Certificates canceled pursuant to this Trust Agreement may be voided
by the Paying Agent in accordance with the usual practice of the Paying Agent
or in accordance with the instructions of the Trustees; provided, however, that
the Paying Agent shall not be required to destroy canceled Certificates.
<PAGE> 19
The Paying Agent may adopt other reasonable rules and regulations for the
registration, transfer and tender of DECS as it may, in its discretion, deem
necessary.
SECTION 5.3 Replacement of Certificates. In case any Certificate shall
become mutilated or be destroyed, stolen or lost, the Paying Agent shall
execute and deliver a new Certificate in exchange and substitution therefor
upon the Holder's furnishing the Paying Agent with proper identification and
satisfactory indemnity, complying with such other reasonable regulations and
conditions as the Paying Agent may prescribe and paying such expenses and
charges, including any bonding fee, as the Paying Agent may incur or reasonably
impose; provided that if the Trust has terminated or is in the process of
terminating, the Paying Agent, in lieu of issuing such new Certificate, may,
upon the terms and conditions set forth herein, make the distributions set
forth in Section 8.3(c) hereof. Any mutilated Certificate shall be duly
surrendered and canceled before any duplicate Certificate shall be issued in
exchange and substitution therefor. Upon issuance of any duplicate Certificate
pursuant to this Section 5.3 hereof, the original Certificate claimed to have
been lost, stolen or destroyed shall become null and void and of no effect, and
any bona fide purchaser thereof shall have only such rights as are afforded
under Article 8 of the Uniform Commercial Code to a Holder presenting a
Certificate for transfer in the case of an overissue.
SECTION 5.4 Limitation on Liability. Pursuant to Section 3803(a) of the
Act, the Holders of the DECS shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
SECTION 5.5. General Provisions Regarding the DECS.
(a) The consideration received by the Trust for the issuance of the DECS
shall constitute a contribution to the capital of the Trust and shall not
constitute a loan to the Trust.
(b) Upon issuance of the DECS as provided in this Trust Agreement, the
DECS so issued shall be deemed to be validly issued, fully paid and
non-assessable.
(c) Every person, by virtue of having become a Holder in accordance with
the terms of this Trust Agreement, shall be deemed to have expressly assented
and agreed to the terms of, and shall be bound by, this Trust Agreement.
(d) The DECS are not subject to preemptive rights.
ARTICLE VI
ISSUANCE OF THE CONTRACTS
SECTION 6.1 Execution of the Contracts The Contracts shall be
countersigned manually or in facsimile by the Managing Trustee and executed
manually by each of the Sellers and shall be dated the date of execution and
delivery by each of the Sellers.
<PAGE> 20
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees. The Trust shall have three Trustees who shall
initially be elected by the Initial Trustee. One Trustee shall be the Managing
Trustee and, as such, is authorized to execute documents and instruments on
behalf of the Trust. The Managing Trustee will be appointed by resolution of
the Trustees. Each Trustee shall serve until the next regular annual or
special meeting of Holders called for the purpose of electing Trustees and,
then, until such Trustee's successor is duly elected and qualified. Holders
may not cumulate their votes in the election of Trustees. Each Trustee shall
not be considered to have qualified for the office unless such Trustee shall
agree to be bound by the terms of this Trust Agreement and shall evidence his
consent by executing this Trust Agreement or a supplement hereto.
SECTION 7.2 Vacancies. Any vacancy in the office of a Trustee may be
filled in compliance with Sections 10 and 16 of the Investment Company Act by
the vote, within 30 days, of the remaining Trustees; provided that if required
by Section 16 of the Investment Company Act, the Trustees shall forthwith cause
to be held as promptly as possible and in any event within 60 days (unless the
Commission by order shall extend such period) a meeting of Holders for the
purpose of electing Trustees in compliance with Sections 10 and 16 of the
Investment Company Act. Until a vacancy in the office of any Trustee is filled
as provided above, the remaining Trustees in office, regardless of their
number, shall have the powers granted to the Trustees and shall discharge all
the duties imposed upon the Trustees by this Trust Agreement. Election shall
be by the affirmative vote of Holders of a majority of the DECS entitled to
vote present in person or by proxy at a special meeting of Holders called for
the purpose of electing any Trustee. Each individual Trustee shall be at least
21 years of age and shall not be under any legal disability. No Trustee who is
an "interested person," as defined in the Investment Company Act, may assume
office if it would cause the composition of the Trustees of the Trust not to be
in compliance with the percentage limitations on interested persons in Section
10 of the Investment Company Act. Trustees need not be Holders. Notice of the
appointment or election of a successor Trustee shall be mailed promptly after
acceptance of such appointment by the successor Trustee to each Holder.
SECTION 7.3 Powers. The Trust will be managed solely by the Trustees,
who will, subject to the provisions of Article II hereof, have complete and
exclusive control over the management, conduct and operation of the Trust's
business, and shall have the rights, powers and authority of a board of
directors of a corporation organized under Delaware law. The Trustees shall
have fiduciary responsibility for the safekeeping and use of all funds and
assets of the Trust and shall not employ, or permit another to employ, such
funds or assets in any manner except for the exclusive benefit of the Trust and
except in accordance with the terms of this Trust Agreement. Subject to the
continuing supervision of the Trustees and as permitted by applicable law, the
functions of the Trust shall be performed by the Custodian, the Paying Agent,
the Administrator and such other entities engaged to perform such functions as
the Trustees may determine, including, without limitation, any or all
administrative functions.
<PAGE> 21
SECTION 7.4 Meetings. Meetings of the Trustees shall be held from time
to time upon the call of any Trustee on not less than 48 hours' notice (which
may be waived by any or all of the Trustees in writing either before or after
such meeting or by attendance at the meeting unless the Trustee attends the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting has not been lawfully called or convened). The
Trustees shall act either by majority vote of the Trustees present at a meeting
at which at least a majority of the Trustees then in office are present or by a
unanimous written consent of the Trustees without a meeting. Except as
otherwise required under the Investment Company Act, all or any of the Trustees
may participate in a meeting of the Trustees by means of a conference telephone
call or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to such communications equipment shall constitute presence in
person at such meeting.
SECTION 7.5 Resignation and Removal. Any Trustee may resign and be
discharged of the trust created by the Trust Agreement by executing an
instrument in writing resigning as Trustee, filing the same with the
Administrator and sending notice thereof to the remaining Trustees, and such
resignation shall become effective immediately unless otherwise specified
therein. Any Trustee may be removed in the event of incapacity by vote of the
remaining Trustees and for any reason by written declaration or vote of the
Holders of more than 66 2/3% of the outstanding DECS, notice of which vote
shall be given to the remaining Trustees and the Administrator. The
resignation, removal or failure to reelect any Trustee shall not cause the
termination of the Trust.
SECTION 7.6 Liability. The Trustees shall not be liable to the Trust or
any Holder for any action taken or for refraining from taking any action except
in the case of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties of their office. Specifically, without limitation, the
Trustees shall not be responsible for or in respect of the recitals herein or
the validity or sufficiency of this Trust Agreement or for the due execution
hereof by any other Person, or for or in respect of the validity or sufficiency
of DECS or certificates representing DECS and shall in no event assume or incur
any liability, duty or obligation to any Holder or to any other Person, other
than as expressly provided for herein. The Trustees may employ agents,
attorneys, administrators, accountants and auditors, and shall not be
answerable for the default or misconduct of any such Persons if such Persons
shall have been selected with reasonable care. Action in good faith may
include action taken in good faith in accordance with an opinion of counsel.
In no event shall any Trustee be personally liable for any expenses with
respect to the Trust. Each Trustee shall be indemnified from the Trust Account
with respect to any claim, liability, loss or expense incurred in acting as
Trustee of the Trust, including the costs and expenses of the defense against
any such claim or liability, except in the case of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties of his office.
SECTION 7.7 Compensation. Each Trustee, other than a Trustee who is a
director, officer or employee of the Sponsor, any Underwriter or the
Administrator or any affiliate thereof, shall receive a one-time, up-front fee
of $10,800, in respect of its annual fee and
<PAGE> 22
anticipated out-of-pocket expenses. In addition, the Managing Trustee shall
receive an additional one-time, up-front fee of $3,600 for serving in such
capacity. The Trustees will not receive any pension or retirement benefits.
In the event of the resignation or removal of a Trustee, such Trustee shall
remit to the Trust the portion of its fee ratable for the period from the day
of such resignation or removal through the Exchange Date.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Meetings of Holders. The Trustees shall not hold annual or
regular meetings of Holders except as set forth herein. A special meeting may
be called at any time by the Trustees or upon petition of Holders of not less
than 51% of the DECS outstanding (unless substantially the same matter was
voted on during the preceding 12 months), and shall be called as provided in
Section 7.2 hereof (or as otherwise required by the Investment Company Act and
the rules and regulations thereunder, including, without limitation, when
requested by the Holders of not less than 10% of the DECS outstanding for the
purposes of voting upon the question of the removal of any Trustee or
Trustees). The Trustees shall establish, and notify the Holders in writing of,
the record date for each such meeting which shall be not less than 10 nor more
than 50 days before the meeting date. Holders at the close of business on the
record date will be entitled to vote at the meeting. The Administrator shall,
as soon as possible after any such record date (or prior to such record date if
appropriate), mail by first class mail to each Holder a notice of meeting and a
proxy statement and form of proxy in the form approved by the Trustees and
complying with the Investment Company Act and the rules and regulations
thereunder. Except as otherwise specified herein or in any provision of the
Investment Company Act and the rules and regulations thereunder, any action may
be taken by vote of Holders of a majority of the DECS outstanding present in
person or by proxy if Holders of a majority of DECS outstanding on the record
date are so represented. Each DECS shall have one vote and may be voted in
person or by duly executed proxy. Any proxy may be revoked by notice in
writing, by a subsequently dated proxy or by voting in person at the meeting,
and no proxy shall be valid after 11 months following the date of its
execution. Any investment company (as defined in Section 3 of the Investment
Company Act) owning DECS in excess of the limits imposed by Sections
12(d)(1)(A)(i) and 12(d)(1)(c) of the Investment Company Act will be required
to vote its DECS in proportion to the votes of all other Holders.
SECTION 8.2 Books and Records; Reports. (a) The Trustees shall keep a
certified copy or duplicate original of this Trust Agreement on file at the
office of the Trust and the office of the Administrator available for
inspection at all reasonable times during its usual business hours by any
Holder. The Trustees shall keep proper books of record and account for all the
transactions under this Trust Agreement at the office of the Trust and the
office of the Administrator, and such books and records shall be open to
inspection by any Holder at all reasonable times during usual business hours.
The Trustees shall retain all books and records in compliance with Section 31
of the Investment Company Act and the rules and regulations thereunder.
<PAGE> 23
(b) With each payment to Holders the Paying Agent shall set forth, either
in the instruments by means of which payment is made or in a separate
statement, the amount being paid from the Trust Account expressed as a dollar
amount per DECS and the other information required under Section 19 of the
Investment Company Act and the rules and regulations thereunder. The Trustees
shall prepare and file or distribute reports as required by Section 30 of the
Investment Company Act and the rules and regulations thereunder. The Trustees
shall prepare and file such reports as may from time to time be required to be
filed or distributed to Holders under any applicable state or Federal statute
or rule or regulation thereunder, and shall file such tax returns as may from
time to time be required under any applicable state or Federal statute or rule
or regulation thereunder. One of the Trustees shall be designated by
resolution of the Trustees to make the filings and give the notices required by
Rule 17g-1 under the Investment Company Act.
(c) In calculating the net asset value of the Trust as required by the
Investment Company Act, (i) the Treasury Securities shall be valued at the mean
between the last current bid and asked prices or, if quotations are not
available, as determined in good faith by the Trustees, (ii) short-term
investments having a maturity of 60 days or less shall be valued at cost with
accrued interest or discount earned included in interest receivable and (iii)
the Contracts shall be valued at the mean of the bid prices received by the
Administrator from at least three independent broker-dealer firms unaffiliated
with the Trust to be named by the Trustees who are in the business of making
bids on financial instruments similar to the Contracts and with terms
comparable thereto. In the event that the Trust (acting through the
Administrator) is unable to obtain valuations from three independent
broker-dealer firms, as required by clause (iii) of the preceding sentence, on
a timely basis or without unreasonable effort or expense, the Contracts shall
be valued at the median of bid prices received from two such broker-dealer
firms. In the event that the Trust (acting through the Administrator) is
unable to obtain a valuation for the Contracts that it believes to be
reasonable through the above method, valuation shall be established at a level
deemed to be fair and reflective of the market value for the Contracts based on
all appropriate factors relevant to the value of the Contracts as set forth in
pricing guidelines adopted by the Trustees.
SECTION 8.3 Termination. (a) The Trust created hereby shall dissolve,
and its affairs be wound up, upon the earliest of (i) the date 90 days after
the execution of this Trust Agreement if (x) the DECS have not theretofore been
issued or (y) the net worth of the Trust is not at least $100,000 at such time,
(ii) the date of the repayment, sale or other disposition, as the case may be,
of all of the Contracts, the Treasury Securities and any other securities held
hereunder, (iii) the date 10 Business Days after the Exchange Date (or, if the
Contracts shall be accelerated pursuant to Article VII thereof, 10 Business
Days after the date on which the Trust shall receive the Shares, cash or other
property then required to be delivered by each of the Sellers, or the proceeds
of any sale of collateral pursuant to the Collateral Agreements) and (iv) the
date which is 21 years less 91 days after the death of the last survivor of all
of the descendants of Joseph P. Kennedy living on the date hereof. The Trust
is irrevocable, the Sponsor has no right to withdraw any assets constituting a
portion of the Trust Estate, and the
<PAGE> 24
dissolution of the Sponsor shall not operate to terminate the Trust. The death
or incapacity of any Holder shall not operate to terminate this Trust
Agreement, nor entitle his legal representatives or heirs to claim an
accounting or to take any action or proceeding in any court for a partition or
winding up of the Trust, and shall not otherwise affect the rights, obligations
and liabilities of the parties hereto.
(b) Written notice of any dissolution shall be sent to Holders specifying
the record date for any distribution to Holders and the time of dissolution as
determined by the Trustees, upon which the books maintained by the Paying Agent
pursuant to Section 5.2 hereof shall be closed.
(c) To the extent permitted by applicable law, for purposes of
dissolution under Sections 8.3(a)(ii), (iii) and (iv) hereof, within five
Business Days after such dissolution, the Trustees shall effect the sale of any
remaining property of the Trust, and the Paying Agent shall distribute pro rata
as soon as practicable thereafter to each Holder, upon surrender for
cancellation of its Certificates, its interest in the Trust Estate. Together
with the distribution to the Holders, the Trustees shall furnish the Holders
with a final statement as of the date of the distribution of the amount
distributable with respect to each DECS.
(d) Upon the winding up of the Trust and its dissolution, the Managing
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Office of the Secretary of State of the
State of Delaware in accordance with the provisions of Section 3810 of the Act.
Upon the dissolution of the Trust, the sale of Trust property and distribution
of the Trust Estate to the Holders, and the filing of the certificate of
cancellation, the Trust shall terminate and this Agreement shall be of no
further force or effect.
SECTION 8.4 Amendment and Waiver. (a) This Trust Agreement, and any of
the agreements referred to in Section 2.5(a) hereof, may be amended from time
to time by the Trustees for any purpose prior to the issuance and sale to the
Underwriter of the DECS and thereafter without the consent of any of the
Holders (i) to cure any ambiguity or to correct or supplement any provision
contained herein or therein which may be defective or inconsistent with any
other provision contained herein or therein; (ii) to change any provision
hereof or thereof as may be required by applicable law or the Commission or any
successor governmental agency exercising similar authority; or (iii) to make
such other provisions in regard to matters or questions arising hereunder or
thereunder as shall not materially adversely affect the interests of the
Holders (as determined in good faith by the Trustees, who may rely on an
opinion of counsel).
(b) This Trust Agreement may also be amended from time to time by the
Trustees (or the performance of any of the provisions of the Trust Agreement
may be waived) with the consent by the required vote of the Holders in
accordance with Section 8.1 hereof; provided that this Trust Agreement may not
be amended (i) without the consent by vote of the Holders of all DECS then
outstanding, so as to increase the number of DECS issuable hereunder above the
number of DECS specified in Section 2.5(c) hereof or such lesser number as may
be outstanding
<PAGE> 25
at any time during the term of this Trust Agreement, (ii) to reduce the
interest in the Trust represented by DECS without the consent of the Holders of
such DECS, (iii) if such amendment is prohibited by the Investment Company Act
or other applicable law, (iv) without the consent by vote of the Holders of all
DECS then outstanding, if such amendment would effect a change in the voting
requirements set forth in Section 8.1 hereof or this Section 8.4 or (v) without
the consent by vote of the Holders of the lesser of (x) 67% or more of the DECS
represented at a special meeting of Holders, if more than 50% of the DECS
outstanding are represented at such meeting, and (y) more than 50% of the DECS
outstanding, if such amendment would effect a change in Section 2.4 or 2.9
hereof.
(c) Promptly after the execution of any amendment, the Trustees shall
furnish written notification of the substance of such amendment to each Holder.
(d) Notwithstanding subsections (a) and (b) of this Section 8.4, no
amendment hereof shall permit the Trust, the Trustees, the Administrator, the
Paying Agent or the Custodian to take any action or direct or permit any Person
to take any action that (i) would vary the investment of Holders within the
meaning of Treasury Regulation Section 301.7701-4(c), or (ii) would or could
cause the Trust, or direct or permit any action to be taken that would or could
cause the Trust, not to be a "grantor trust" under the Code.
SECTION 8.5 Accountants. (a) The Trustees shall, in accordance with
Section 30 of the Investment Company Act, file annually with the Commission
such information, documents and reports as investment companies having
securities registered on a national securities exchange are required to file
annually pursuant to Section 13(a) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations issued thereunder. The Trustees shall
transmit to the Holders, at least semi-annually, the reports required by
Section 30(d) of the Investment Company Act and the rules and regulations
thereunder, including, without limitation, a balance sheet accompanied by a
statement of the aggregate value of investments on the date of such balance
sheet, a list showing the amounts and values of such investments owned on the
date of such balance sheet, and a statement of income for the period covered by
the report. Financial statements contained in such annual reports shall be
accompanied by a certificate of independent public accounts based upon an audit
not less in scope or procedures than that which independent public accountants
would ordinarily make for the purpose of presenting comprehensive and
dependable financial statements and shall contain such information as the
Commission may prescribe. Each such report shall state that such independent
public accountants have verified investments owned, either by actual
examination or by receipt of a certificate from the Custodian.
(b) The independent public accountants referred to in subsection (a)
above shall be selected at a meeting held within 30 days before or after the
beginning of the fiscal year by the vote, cast in person, of a majority of the
Trustees who are not "interested persons" as defined in the Investment Company
Act and such selection shall be submitted for ratification at the first meeting
of Holders to be held as set forth in Section 8.1 hereof, and thereafter as
required by the Investment Company Act and the rules and regulations
thereunder. The employment of any
<PAGE> 26
independent public accountant for the Trust shall be conditioned upon the right
of the Holders by a vote of the lesser of (i) 67% or more of the DECS present
at a special meeting of Holders, if Holders of more than 50% of DECS
outstanding are present or represented by proxy at such meeting or (ii) more
than 50% of the DECS outstanding to terminate such employment at any time
without penalty.
(c) The foregoing provisions of this Section 8.5 are in addition to any
applicable requirements of the Investment Company Act and the rules and
regulations thereunder.
SECTION 8.6 Nature of Holder's Interest. Each Holder holds at any given
time a beneficial interest in the Trust Estate, but does not have any right to
take title or possession of any portion of the Trust Estate. Each Holder
expressly waives any right he may have under any rule of law, or the provisions
of any statute, or otherwise, to require the Trustees at any time to account,
in any manner other than as expressly provided in this Trust Agreement, for the
Shares, the Contracts, the Treasury Securities or other assets or monies from
time to time received, held and applied by the Trustees hereunder. No Holder
shall have any right except as provided herein to control or determine the
operation and management of the Trust or the obligations of the parties hereto.
Nothing set forth herein or in the certificates representing DECS shall be
construed to constitute the Holders from time to time as partners or members of
an association.
SECTION 8.7 Delaware Law to Govern. This Trust Agreement is executed and
delivered in the State of Delaware, and all laws or rules of construction of
the State of Delaware shall govern the rights of the parties hereto and the
Holders and the construction, validity and effect of the provisions hereof.
SECTION 8.8 Notices. Any notice, demand, direction or instruction to be
given to the Sponsor hereunder shall be in writing and shall be duly given if
mailed or delivered to Salomon Brothers Inc General Counsel (fax no.: (212)
783-1752) and confirmed to the General Counsel, c/o Salomon Brothers Inc, at
Seven World Trade Center, New York, New York 10048, Attention: General
Counsel. Any notice, demand, direction or instruction to be given to the Trust
and the Trustees hereunder shall be in writing and shall be duly given if
mailed or delivered to the Trust c/o Puglisi and Associates, 850 Library
Avenue, Suite 204, Newark, Delaware 19715, with a copy to Salomon Brothers Inc
General Counsel c/o Salomon Brothers Inc, at Seven World Trade Center, New
York, New York 10048, and to each Trustee at such Trustee's address set forth
beneath its signature below, or such other address as shall be specified to the
other parties hereto by such party in writing. Any notice to be given to a
Holder shall be duly given if mailed, first class postage prepaid, or by such
other substantially equivalent means as the Trustees may deem appropriate, or
delivered to such Holder at the address of such Holder appearing on the
registry of the Paying Agent.
SECTION 8.9 Severability. If any one or more of the covenants,
agreements, provisions or terms of this Trust Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
and terms of this Trust Agreement and shall in no way affect
<PAGE> 27
the validity or enforceability of the other provisions of this Trust Agreement
or of the Certificates, or the rights of the Holders thereof.
SECTION 8.10 Counterparts. This Trust Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute one and the same instrument.
SECTION 8.11 Successors and Assigns Whenever in this Trust Agreement any
of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to be included, and all covenants and agreements in
this Trust Agreement by the Sponsor and Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether or not so
expressed.
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed.
SALOMON BROTHERS INC
By:
/s/ Larry S. Wieseneck
------------------------------------------
TRUSTEES:
Managing Trustee
/s/ Donald J. Puglisi
------------------------------------------
Name: Donald J. Puglisi
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
/s/ William R. Latham III
------------------------------------------
Name: William R. Latham III
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
/s/ James B. O'Neill
------------------------------------------
Name: James B. O'Neill
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
INITIAL SPONSOR:
/s/ Michael E. Sherman
------------------------------------------
Name: Michael E. Sherman
INITIAL TRUSTEE:
/s/ Peter B. Blanton
------------------------------------------
Name: Peter B. Blanton
<PAGE> 29
Schedule I
TREASURY SECURITIES
All terms specified are for stripped principal or interest components of
U.S. Treasury debt obligations.
<TABLE>
<S> <C> <C>
STRIPS Payment Date Aggregate Face Amount,
Per Security, Payment
Date
- ------ ----------------- ----------------------
February 15, 1998
May 15, 1998
August 15, 1998
November 15, 1998
February 15, 1999
May 15, 1999
August 15, 1999
November 15, 1999
February 15, 2000
May 15, 2000
August 15, 2000
November 15, 2000
</TABLE>
<PAGE> 30
Exhibit A
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York Corporation ("DTC"), to DECS Trust II
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. (or in such other
name as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein. This certificate may be exchanged by an authorized representative of
DTC in whole or in part for securities in definitive form, registered in the
names of such holders as such representative of DTC shall specify, in which
case, a new certificate will be issued in the name of Cede & Co. (or in such
other name as is requested by such authorized representative of DTC)
representing the securities not issued in definitive form.
THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS, PROVISIONS
AND CONDITIONS OF THE TRUST AGREEMENT REFERRED TO BELOW TO WHICH THE HOLDER OF
THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND.
$____ DECS
DECS TRUST II
CUSIP NO. ___________
NO. __ ____________ DECS
THIS CERTIFIES THAT CEDE & CO. IS THE RECORD OWNER OF ____________ DECS
OF DECS TRUST II CONSTITUTING FRACTIONAL UNDIVIDED INTERESTS IN DECS TRUST II,
A TRUST CREATED UNDER THE LAWS OF THE STATE OF DELAWARE PURSUANT TO AN AMENDED
AND RESTATED DECLARATION OF TRUST BETWEEN SALOMON BROTHERS INC AND THE TRUSTEES
NAMED THEREIN. THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS,
PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT TO WHICH THE HOLDER OF THIS
CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND, A COPY OF
WHICH TRUST AGREEMENT IS AVAILABLE AT THE OFFICE OF THE TRUST'S ADMINISTRATOR
AND PAYING AGENT, THE BANK OF NEW YORK, 101 BARCLAY STREET, FLOOR 12E, NEW YORK
10286, ATTENTION: MARK G. WALSH. THIS CERTIFICATE IS TRANSFERABLE AND
EXCHANGEABLE BY THE REGISTERED OWNER IN PERSON OR BY HIS DULY AUTHORIZED
ATTORNEY AT THE OFFICE OF THE PAYING AGENT UPON SURRENDER OF THIS CERTIFICATE
PROPERLY ENDORSED OR ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER AND ANY
OTHER
<FF>
<PAGE> 31
DOCUMENTS THAT THE PAYING AGENT MAY REQUIRE FOR TRANSFER, IN FORM SATISFACTORY
TO THE PAYING AGENT AND PAYMENT OF THE FEES AND EXPENSES PROVIDED IN THE TRUST
AGREEMENT.
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY COUNTERSIGNED BY THE PAYING
AGENT.
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING TRUSTEE.
DECS Trust II
DATED:
By:
----------------------------
Managing Trustee
COUNTERSIGNED:
The Bank of New York, as Paying Agent
By:
----------------------------
Authorized Signature
<PAGE> 1
Exhibit 99.2.A(ii)(b)
RESTATED CERTIFICATE OF TRUST
OF
DECS TRUST II
THIS Restated Certificate of Trust of DECS Trust II (the "Trust"), dated
October 22, 1997, is being duly executed and filed by Donald J. Puglisi, William
R. Latham III and James B. O'Neill, as trustees, to restate the original
Certificate of Trust of the Trust which was filed on September 2, 1997 with the
Secretary of State of the State of Delaware under the Delaware Business Trust
Act (12 Del. C. Section 3801 et seq.) (the "Original Certificate of Trust").
The Original Certificate of Trust is hereby restated in its entirety to
read as follows:
1. Name. The name of the business trust formed hereby is DECS Trust II.
2. Registered Office: Registered Agent. The business address of the
registered office of the Trust in the State of Delaware is c/o Puglisi &
Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715. The name of
the Trust's registered agent at such address is Puglisi & Associates.
3. Effective Date. This Restated Certificate of Trust will be effective
upon the date and time of filing.
4. The Trust is to be registered under the Investment Company Act of
1940, as amended, prior to the issuance of beneficial interests in the Trust.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust,
have executed this Certificate of Trust as of the date first-above written.
By: /s/ Donald J. Puglisi
-----------------------------------
Donald J. Puglisi,
as Managing Trustee
By: /s/ William R. Latham III
-----------------------------------
William R. Latham III,
as Trustee
By: /s/ James B. O'Neill
-----------------------------------
James B. O'Neill,
as Trustee
<PAGE> 1
Exhibit 99.2.H
DECS TRUST II
___________ DECSSM*
(Representing Beneficial Interests in Contracts Relating to Subordinate Voting
Shares, without par value, of Royal Group Technologies Limited)
Underwriting Agreement
New York, New York
October __, 1997
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
DECS Trust II, a statutory business trust organized under the Delaware
Business Trust Act, 12 Del.C. Section 3801 et seq., (the "Delaware Act") of
the State of Delaware (such trust and the trustees thereof acting in their
capacities as such being referred to herein as the "Trust"), proposes to issue
and sell to Salomon Brothers Inc ("SBI") an aggregate of ___________ DECS
representing shares of beneficial interest in the Trust (the "Underwritten
DECS"). In addition, SBI will have an option to purchase up to 427,500 DECS
(the "Option DECS" and, together with the Underwritten DECS, the "DECS") to
cover over-allotments, if any. The Option DECS and the Underwritten DECS,
together with the __________ DECS of the Trust subscribed for by SBI pursuant
to the Subscription Agreement, dated as of October 8, 1997, between SBI and the
Trust (the "Subscription DECS"), are referred to herein as the "Securities."
The Securities are to be issued under an Amended and Restated Declaration of
Trust, dated as of October 22, 1997 (the "Trust Agreement"), among the trustees
of the Trust (the "Trustees") and SBI, as sponsor.
The Trust has entered into forward purchase contracts (the "Contracts")
with the persons listed on Schedule I hereto (each, a "Seller" and
collectively, the "Sellers") and the related persons listed on Schedule I
hereto under "Corporate Seller Control Person" (each, a "Corporate Seller
Control Person" and collectively, the "Corporate Seller Control Persons")
pursuant to which each Seller has agreed to sell, and the Trust has agreed to
purchase, the number of subordinate voting shares, without par value (the
"Shares"), of Royal Group
* Plus an option to purchase from DECS Trust II up to 427,500 additional
DECS to cover over-allotments.
<PAGE> 2
Technologies Limited (the "Company") specified therein on November 15, 2000
(the "Exchange Date") (subject to the Sellers' right to deliver cash with a
value equivalent thereto, or other property, as provided in the Contracts).
Each Seller's obligations under his or its respective Contract will be secured
by a pledge of collateral under a collateral agreement (each a "Collateral
Agreement") among such Seller, the Trust and The Bank of New York ("BoNY"), as
collateral agent (in such capacity, the "Collateral Agent") and, in some cases,
under a collateral agency agreement (the "Collateral Agency Agreement") among
such Seller, the Trust, the Collateral Agent, the Company and CIBC Mellon Trust
Company, as sub-collateral agent (the "Sub-Collateral Agent").
It is understood that two forms of prospectus are to be prepared relating
to the offering and sale of the Shares in connection with the offering and the
sale of the DECS: one Canadian form of prospectus and one U.S. form of
prospectus, which is to be attached to the Preliminary Trust Prospectus and the
Trust Prospectus described below. The two forms of prospectus are identical
except for certain substitute pages, including the outside front and outside
back cover pages and certain legends required under Canadian or U.S. law.
Unless the context otherwise requires, references herein to any Company
prospectus, whether in preliminary or final form, and whether as amended or
supplemented, shall include both the U.S. and Canadian versions thereof.
Certain terms used in this Agreement are defined in paragraph (d) of
Section 1 and paragraph (d) of Section 2.
1. Representations and Warranties of the Trust. The Trust represents and
warrants to, and agrees with, SBI as set forth below in this Section 1.
(a) The Trust meets the requirements for use of Form N-2 under the
Securities Act of 1933, as amended (the "Act") and has filed with the
Securities and Exchange Commission (the "Commission") (a) a notification on
Form N-8A (the "Notification") of registration of the Trust as an investment
company under the Investment Company Act of 1940, as amended (the "Investment
Company Act") and (b) a registration statement on Form N-2 (Nos. 333-35147 and
811-08345), including a related preliminary prospectus, for the registration of
the offering and sale of the DECS under the Act. The Trust may have filed one
or more amendments thereto, including the related preliminary prospectus, each
of which has previously been furnished to you. The Trust will next file with
the Commission either (i) prior to effectiveness of such registration
statement, a further amendment to such registration statement (including the
form of final prospectus) or (ii) after effectiveness of such registration
statement, a final prospectus in accordance with Rules 430A and 497(h). In the
case of clause (ii), the Trust has included in such registration statement, as
amended at the Trust Effective Date, all information (other than Rule 430A
Information) required by the Act and the rules thereunder to be included in
such prospectus with respect to the DECS and the offering thereof. As filed,
such amendment and form of final prospectus, or such final prospectus, shall
contain all Rule 430A Information, together with all other such required
information, with respect to the DECS and the offering thereof and, except to
the extent SBI shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to the Execution Time
or, to the extent not completed at the
2
<PAGE> 3
Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Trust
Prospectus) as the Trust has advised you, prior to the Execution Time, will be
included or made therein.
(b) On the Trust Effective Date, the Trust Registration Statement and the
Notification did or will, and, when the Trust Prospectus is first filed (if
required) in accordance with Rule 497(h) and on the Closing Date, the Trust
Prospectus (and any supplements thereto) will, comply in all material respects
with the applicable requirements of the Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the Investment Company Act, and the
respective rules thereunder.
(c) On the Trust Effective Date, the Trust Registration Statement did not
or will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading; on the Trust Effective Date, the Trust
Prospectus, if not filed pursuant to Rule 497(h), did not or will not, and, on
the date of any filing pursuant to Rule 497(h) and on the Closing Date, the
Trust Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(d) The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "Trust Effective Date" shall mean each date that
the Trust Registration Statement and any post-effective amendment or amendments
thereto became or become effective. "Execution Time" shall mean the date and
time that this Agreement is executed and delivered by the parties hereto.
"Preliminary Trust Prospectus" shall mean any preliminary prospectus referred
to in paragraph (a) of this Section 1 and any preliminary prospectus included
in the Trust Registration Statement at the Trust Effective Date that omits Rule
430A Information. "Trust Prospectus" shall mean the prospectus relating to the
DECS that is first filed pursuant to Rule 497(h) after the Execution Time or,
if no filing pursuant to Rule 497(h) is required, shall mean the form of final
prospectus relating to the DECS that is included in the Trust Registration
Statement at the Trust Effective Date. "Trust Registration Statement" shall
mean the registration statement referred to in paragraph (a) of this Section 1,
including exhibits and financial statements, as amended at the Execution Time
(or, if not effective at the Execution Time, in the form in which it shall
become effective) and, in the event any post-effective amendment thereto
becomes effective prior to the Closing Date, shall also mean such registration
statement as so amended. Such term shall include any Rule 430A Information
deemed to be included therein at the Trust Effective Date as provided by Rule
430A. "Rule 430A," "Rule 497(h)," "Rule 462(b)" and "Regulation S-K" refer to
such rules or regulation under the Act. "Rule 430A Information" means
information with respect to the DECS, the Shares and the offering thereof
permitted to be omitted from the Trust Registration Statement when it becomes
effective pursuant to Rule 430A. If the Trust has filed an abbreviated
registration statement to register additional DECS pursuant to Rule 462(b) (a
"Rule 462 Trust Registration Statement"), then any reference herein to the term
"Trust Registration Statement" shall be deemed to include such Rule 462 Trust
Registration Statement. As used herein, the
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<PAGE> 4
terms "Trust Registration Statement", "Preliminary Trust Prospectus" and "Trust
Prospectus" shall not include the any Company prospectus attached thereto.
(e) No stop order suspending the effectiveness of the Trust Registration
Statement is in effect, no order preventing or suspending the use of any
Preliminary Trust Prospectus has been issued by the Commission, no notice or
order under Section 8(e) of the Investment Company Act has been issued, and no
proceedings for any such purpose are pending before or threatened by the
Commission.
(f) The Trust has been duly created, is validly existing as a business
trust under the Delaware Act, has the power and authority to own its properties
and conduct its business as described in the Trust Prospectus and to enter into
and perform its obligations under this Agreement, the Trust Agreement and each
of the Fundamental Documents (as defined below) and is duly qualified to do
business and is in good standing under the laws of each jurisdiction in which
it owns or leases properties or conducts any business so as to require such
qualification other than where the failure to be so qualified would not have a
material adverse effect on the Trust or its assets. The Trust has no
subsidiaries.
(g) The Trust is registered with the Commission as a non-diversified,
closed-end management investment company under the Investment Company Act and
no order of suspension or revocation of such registration has been issued or
proceedings therefor initiated or, to the knowledge of the Trust, threatened by
the Commission. No person is serving or acting as an officer or trustee of the
Trust except in accordance with the provisions of the Investment Company Act.
(h) This Agreement has been duly authorized, executed and delivered by the
Trust.
(i) Each of the Contracts, the Collateral Agreements, the Collateral
Agency Agreements, the Administration Agreement between BoNY and the Trust (the
"Administration Agreement"), the Custodian Agreement between BoNY and the Trust
(the "Custodian Agreement"), the Paying Agent Agreement between BoNY and the
Trust (the "Paying Agent Agreement") and the Fund Indemnity Agreement between
SBI and the Trust (the "Fund Indemnity Agreement") (the Contracts, the
Collateral Agreements, the Collateral Agency Agreements, the Administration
Agreement, the Custodian Agreement, the Paying Agent Agreement and the Fund
Indemnity Agreement are referred to herein, collectively, as the "Fundamental
Agreements") has been duly authorized, executed and delivered by the Trust and,
assuming due authorization, execution and delivery by the other parties
thereto, is a valid and binding agreement of the Trust, enforceable against the
Trust in accordance with its terms except as such enforceability may be limited
by applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and by general equitable principles.
(j) The execution and delivery by the Trust of, and the performance by the
Trust of its obligations under, this Agreement and each Fundamental Agreement
(including the issue and sale by the Trust of the DECS as contemplated by this
Agreement) do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or
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<PAGE> 5
constitute a breach of, or default under, or give the holder of any
indebtedness of the Trust the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Trust pursuant to, any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or other agreement or instrument
to which the Trust is a party or by which it may be bound, or to which any of
the property or assets of the Trust is subject, nor will such action result in
any violation of the provisions of the Trust Agreement or any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Trust or any of its assets or properties; and no consent, approval,
authorization, order of, or qualification or filing with, any governmental body
or agency, self-regulatory organization or court or other tribunal, whether
foreign or domestic, is required for the execution and delivery by the Trust of
this Agreement or the Fundamental Agreements or the performance by the Trust of
its obligations hereunder and thereunder, except for the filing of a
Certificate of Trust and the filing of a Restated Certificate of Trust with the
office of the Secretary of State of the State of Delaware (which filings have
been duly made) and such as have been obtained and as may be required by the
securities or Blue Sky laws of the various states and foreign jurisdictions in
connection with the offer and sale of the DECS by SBI.
(k) The DECS, the Trust Agreement and the Fundamental Agreements conform
in all material respects to the descriptions thereof contained in the Trust
Prospectus.
(l) The Trust Agreement and the Fundamental Agreements comply with all
applicable provisions of the Act, the Exchange Act and the Investment Company
Act, and all approvals of such documents required under the Investment Company
Act by the holders of the Securities and the Trustees have been obtained and
are in full force and effect.
(m) On the Closing Date, as defined below in Section 5, the Fundamental
Agreements will be in full force and effect and the Trust will not be in
default thereunder and, to the knowledge of the Trust, no event will have
occurred which with the passage of time or the giving of notice or both would
constitute a default thereunder. The Trust is not currently in breach of, or
in default under, the Trust Agreement or any other written agreement or
instrument to which it or its property is bound or affected.
(n) All of the outstanding Securities have been duly authorized and are
validly issued, fully paid and non-assessable undivided beneficial interests in
the assets of the Trust, and the form of certificate used to evidence the
Securities is in due and proper form and complies with all provisions of
applicable law.
(o) The DECS have been duly authorized by the Trust for issuance to SBI
pursuant to this Agreement and, when issued and delivered by the Trust in
accordance with the terms of this Agreement and the Trust Agreement against
payment of the purchase price therefor as provided herein, will be validly
issued, fully paid and non-assessable undivided beneficial interests in the
assets of the Trust, and the issuance of such DECS will not be subject to any
preemptive or similar rights. No person has rights to the registration of any
securities because of
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<PAGE> 6
the filing of the Trust Registration Statement, and no holder of the Securities
will be subject to personal liability by reason of being such a holder.
(p) The DECS have been approved for listing on the New York Stock
Exchange, Inc. (the "NYSE"), subject to official notice of issuance. The
Trust's Registration Statement on Form 8-A under the Exchange Act is effective.
(q) There has not occurred any material adverse change, or any development
involving a prospective material adverse change, in the condition, financial or
otherwise, of the Trust, or in the investment objectives, investment policies,
liabilities, business, prospects or operations of the Trust from that set forth
in the Trust Prospectus (exclusive of any supplements thereto subsequent to the
date of this Agreement) and there have been no transactions entered into by the
Trust which are material to the Trust other than those in the ordinary course
of its business or as described in the Trust Prospectus (exclusive of any
supplements thereto subsequent to the date of this Agreement).
(r) There are no legal or governmental proceedings pending or, to the
knowledge of the Trust, threatened against or affecting the Trust that are
required to be described in the Trust Registration Statement or the Trust
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the Trust Registration
Statement or the Trust Prospectus or to be filed as exhibits to the Trust
Registration Statement that are not described or files as required.
(s) The Trust has all necessary consents, authorizations, approvals,
orders (including exemptive orders), certificates and permits of and from, and
has made all declarations and filings with, all governmental authorities,
self-regulatory organizations and courts and other tribunals, whether foreign
or domestic, to own and use its assets and to conduct its business in the
manner described in the Trust Prospectus, except to the extent that the failure
to obtain or file the foregoing would not have a material adverse effect on the
Trust and except such as may be required by the securities or Blue Sky laws of
the various states in connection with the offer and sale of the DECS.
(t) There are no material restrictions, limitations or regulations with
respect to the ability of the Trust to invest its assets as described in the
Trust Prospectus, other than as described therein.
(u) The Trust has good title to all properties owned by it, in each case,
free and clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (a) are described in
the Trust Prospectus or (b) do not, singly or in the aggregate, materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Trust.
(v) There are no legal or governmental proceedings pending to which the
Trust is a party or of which any property of the Trust is the subject which, if
determined adversely to the Trust, would individually or in the aggregate have
a material adverse effect on the current or future financial position or
results of operations of the Trust; and, to the best of the
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<PAGE> 7
Trust's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(w) The statement of assets, liabilities and capital included in the Trust
Registration Statement and the Trust Prospectus, together with the notes
thereto, present fairly the financial position of the Trust at the date
indicated, and such financial statement has been prepared in conformity with
generally accepted accounting principles in the United States.
(x) The accountants who certified the financial statements and supporting
schedules included in the Trust Registration Statement are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
(y) The Trust has not taken and will not take, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the DECS or the Shares, and has not effected
any sales of the Company's common stock that, if effected by the Company, would
be required to be disclosed in response to Item 701 of Regulation S-K.
2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, SBI as set forth below in this Section 2.
(a) The Company has prepared and filed a preliminary short form prospectus
relating to the Shares (the "Canadian Preliminary Prospectus") in the Province
of Ontario, which has been notified that it has been selected as the principal
jurisdiction related to the offering and sale of the Shares in connection with
the offering and sale of the DECS. The Company meets the requirements for use
of Form F-10 under the Act and has filed with the Commission a registration
statement (file number 333-7744) on such Form F-10, including a related
preliminary prospectus (which shall be the Canadian Preliminary Prospectus with
such deletions therefrom and additions thereto as are permitted or required by
Form F-10 and the applicable rules and regulations of the Commission), for the
registration under the Act of the offering and sale of the Shares in connection
with the offering and sale of the DECS. The Company may have filed one or more
amendments thereto, including the related preliminary prospectuses, each of
which has previously been furnished to you. Either (A) the Company has
prepared and proposes to file, on or prior to the Company Effective Date (i) in
the Province of Ontario a final short-form prospectus relating to the Shares
and the offering thereof (the "Canadian Final Prospectus") and (ii) with the
Commission, prior to effectiveness of such registration statement, an amendment
to such registration statement, including the Canadian Final Prospectus (with
such deletions therefrom and additions thereto as are permitted or required by
Form F-10 and the applicable rules and regulations of the Commission) or (B) if
the Company has elected to rely upon the rules and procedures established
pursuant to National Policy Statement No. 44 of the Canadian Securities
Administrators for the pricing of securities after the final receipt for a
prospectus has been obtained (the "PREP Procedures"), the Company (i) has
prepared and filed (x) in the Province of Ontario, and has obtained from the
Ontario Securities Commission a receipt or deemed receipt for, a final short
form prospectus relating to the Shares and the offering thereof
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<PAGE> 8
(the "Final PREP Prospectus") omitting the PREP Information and (y) with the
Commission, an amendment to such registration statement, including the Final
PREP Prospectus (with such deletions therefrom and additions thereto as are
permitted or required by Form F-10 and the applicable rules and regulations of
the Commission) omitting the PREP Information, which most recent such amendment
has been declared effective by the Commission, and (ii) will prepare and file,
as soon as possible and in any event within two business days (being a day that
is a business day in [both/either] Toronto and New York City) after the
Execution Time (x) in the Province of Ontario, in accordance with the PREP
Procedures, a supplemented Final PREP Prospectus setting forth the PREP
Information (the "PREP Prospectus Supplement") and (y) with the Commission, in
accordance with General Instruction II.L of Form F-10, the PREP Prospectus
Supplement with such deletions therefrom and additions thereto as are permitted
or required by Form F-10 and the applicable rules and regulations of the
Commission (the "U.S. Company Prospectus Supplement").
(b) On the Company Effective Date, the Company Registration Statement did
or will, and on the date of its first filing the U.S. Company Prospectus did or
will, and on the Closing Date, the U.S. Company Prospectus (and any amendment
or supplement thereto) will, comply in all material respects with the
applicable requirements of the Act, the Exchange Act and the respective rules
and regulations of the Commission thereunder; on the Company Effective Date,
the Company Registration Statement did not or will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
on the applicable filing date, the U.S. Company Prospectus and any amendment or
supplement thereto did not or will not, and on the Closing Date, the U.S.
Company Prospectus (together with any amendment or supplement thereto) will
not, include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representation or warranty as to the
information contained in or omitted from the Company Registration Statement or
the U.S. Company Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with information furnished in writing to the
Company (i) by SBI specifically for inclusion in the Company Registration
Statement or the U.S. Company Prospectus (or any amendment or supplement
thereto) or (ii) by any Seller specifically for inclusion in the Company
Registration Statement or the U.S. Company Prospectus (or any amendment or
supplement thereto).
(c) The Company has also prepared and filed with the Commission an
appointment of agent for service of process upon the Company on Form F-X in
conjunction with the filing of the Company Registration Statement (the "Form
F-X").
(d) The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "Company Effective Date" shall mean each date
that the Company Registration Statement and any post-effective amendment or
amendments thereto became or become effective. "U.S. Preliminary Company
Prospectus" shall mean each prospectus used in the United States that is used
(i) before the Company Effective Date or (ii) if the Company has elected to
rely on the PREP Procedures, after the Company Effective Date and
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<PAGE> 9
prior to the filing of the PREP Prospectus Supplement and that omits the PREP
Information, in each case including the documents incorporated by reference
therein. "Canadian Prospectus" shall mean the Canadian Final Prospectus or, if
the Company has elected to rely upon the PREP Procedures, the Final PREP
Prospectus, including the documents incorporated by reference therein, except
that, if, after the Execution Time, a PREP Prospectus Supplement containing the
PREP Information is (i) furnished to SBI or (ii) filed with the Ontario
Securities Commission, the term "Canadian Prospectus" shall refer to such PREP
Prospectus Supplement, including the documents incorporated by reference
therein. "U.S. Company Prospectus" shall mean the prospectus relating to the
Shares that is used in connection with the offering and sale of the DECS that
is included in the Company Registration Statement at the Company Effective
Date, except that, if a U.S. Company Prospectus Supplement containing the PREP
Information is furnished to SBI after the Execution Time (whether or not such
prospectus is required to be filed pursuant to the rules and regulations of the
Commission under the Act), the term "U.S. Company Prospectus" shall refer to
such U.S. Company Prospectus Supplement, including the documents incorporated
by reference therein. "Company Registration Statement" shall mean the
registration statement referred to in paragraph (a) of this Section 2 including
incorporated documents, exhibits and financial statements, as amended at the
Execution Time and including, if applicable, the PREP Information (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date, shall also mean such registration
statement as so amended. The information, if any, included in the PREP
Prospectus Supplement that is omitted from the Final PREP Prospectus but that
is deemed under the PREP Procedures to be incorporated by reference into the
Final PREP Prospectus as of date of the PREP Prospectus Supplement is referred
to herein as the "PREP Information." "Supplementary Material" shall refer
collectively to any amendment or supplement to the Canadian Prospectus or the
U.S. Company Prospectus (including in each case any document incorporated by
reference therein) that may be filed by or on behalf of the Company with the
Commission prior to the completion of distribution of the DECS and the Shares.
Any reference herein to the Company Registration Statement, Canadian
Preliminary Prospectus, U.S. Preliminary Company Prospectus, Canadian
Prospectus or U.S. Company Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 4 of Form F-10
that were filed under the Exchange Act with the Commission, or with the Ontario
Securities Commission under the Canadian Securities Laws (as defined below in
paragraph (e) of this Section 3), on or before the Company Effective Date or
the issue date of such Canadian Preliminary Prospectus, U.S. Preliminary
Company Prospectus, Canadian Prospectus or U.S. Company Prospectus, as the case
may be; and any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Company Registration Statement, any Canadian
Preliminary Prospectus, any U.S. Preliminary Company Prospectus, the Canadian
Prospectus or the U.S. Company Prospectus shall be deemed to refer to and
include the filing of any document under the Exchange Act with the Commission
or the filing of any document with the Ontario Securities Commission under the
Canadian Securities Laws, in each case after the Company Effective Date or the
issue date of any Canadian Preliminary Prospectus, any U.S. Preliminary Company
Prospectus, the Canadian Prospectus or the U.S. Company Prospectus, as the case
may be, deemed to be incorporated therein by reference.
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<PAGE> 10
(e) At the Closing Date (as defined below in Section 5) (i) the Canadian
Prospectus will comply in all material respects with all applicable securities
laws in each of the Canadian provinces and the respective rules and regulations
under such laws, together with applicable published policy statements
(including the PREP Procedures, if applicable), blanket orders and applicable
notices of the Ontario Securities Commission (the "Canadian Securities Laws")
and the Ontario Securities Commission shall have issued a receipt for the
Canadian Prospectus; (ii) the U.S. Company Prospectus will be identical to the
Canadian Prospectus except for such deletions therefrom or additions thereto as
are permitted or required by Form F-10 and the applicable rules and regulations
of the Commission; and (iii) the Canadian Prospectus (together with any
supplement thereto) will not include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representation or
warranty as to the information contained in or omitted from the Canadian
Prospectus (or any supplement thereto) in reliance upon and in conformity with
information furnished in writing to the Company (i) by SBI specifically for
inclusion in the Canadian Prospectus (or any supplement thereto) or (ii) by any
Seller specifically for inclusion in the Canadian Prospectus (or any supplement
thereto).
(f) No order preventing or suspending the use of the Canadian Preliminary
Prospectus has been issued and no proceeding for that purpose has been
initiated or, to the knowledge of the Company, threatened, by the Ontario
Securities Commission; as of its date, the Canadian Preliminary Prospectus
complied in all material respects with the Canadian Securities Laws. No stop
order suspending the effectiveness of the Company Registration Statement is in
effect, no order preventing or suspending the use of any U.S. Preliminary
Company Prospectus has been issued by the Commission, and no proceedings for
any such purpose are pending before or, to the knowledge of the Company,
threatened by the Commission. Each document incorporated by reference in the
Company Registration Statement or the U.S. Company Prospectus, when they were
filed or are filed with the Commission, conformed or will conform in all
material respects to the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder, and none of such documents contained
or will contain an untrue statement of a material fact or omitted or will omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading. Each document incorporated by reference in
the Canadian Preliminary Prospectus and the Canadian Prospectus, or any
amendment or supplement thereto, when they were filed or are filed in the
Province of Ontario, conformed or will conform in all material respects to the
Canadian Securities Laws as interpreted and applied by the Ontario Securities
Commission.
(g) Schedule II to this Agreement contains a complete and correct list of
all material direct and indirect subsidiaries of the Company (the
"Subsidiaries").
(h) Neither the Company nor any of the Subsidiaries has sustained since
the date of the latest audited financial statements included in the Canadian
Prospectus and the U.S. Company Prospectus any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, other than as set forth or contemplated in the
Canadian
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<PAGE> 11
Prospectus and the U.S. Company Prospectus; and, since the respective dates as
of which information is given in the Company Registration Statement, the
Canadian Prospectus and the U.S. Company Prospectus, there has not been any
change in the outstanding capital stock, long-term debt, or (other than in the
ordinary course of business) short-term debt of the Company or a material
adverse effect on (i) the business, operations, properties, assets,
liabilities, net worth, condition (financial or otherwise) or prospects of the
Company or any of its Subsidiaries or (ii) the ability of the Company to
perform any of its obligations under this Agreement, taken as a whole (a
"Company Material Adverse Effect"), or any development involving a prospective
Company Material Adverse Effect, otherwise than as set forth or contemplated in
the Canadian Prospectus and the U.S. Company Prospectus.
(i) The Company and each of the Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by each of them, free and clear of all liens,
encumbrances and defects except such as are described in the Canadian
Prospectus and the U.S. Company Prospectus or such as do not materially affect
the value of such property and do not materially interfere with the use made
and proposed to be made of such property by the Company and such Subsidiaries;
and any real property and buildings held under lease by the Company or any of
the Subsidiaries are held by it under valid, subsisting and enforceable leases
with such exceptions as are not material and do not materially interfere with
the use made and proposed to be made of such property and buildings by the
Company or such Subsidiaries.
(j) The Company and each of the Subsidiaries have been duly incorporated
and are validly existing as corporations in good standing under the laws of
their respective jurisdictions of incorporation, with power and authority
(corporate and other) to own or lease their respective properties and conduct
their respective businesses as described in the Canadian Prospectus and the
U.S. Company Prospectus, and each has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of each other jurisdiction which requires such qualification in which it
owns or leases material properties, or conducts any material business, except
where the failure or failures to so qualify or be in good standing would not in
the aggregate result in a Company Material Adverse Effect.
(k) The Company has an authorized capitalization as set forth in the
Canadian Prospectus and the U.S. Company Prospectus; all of the issued shares
of capital stock of the Company have been duly and validly authorized and
issued, are fully paid and nonassessable and conform to the description of the
capital stock of the Company contained in the Canadian Prospectus and the U.S.
Company Prospectus; except as described in the Canadian Prospectus and the U.S.
Company Prospectus, there are no preemptive or other rights to subscribe for or
to purchase any securities of the Company; except as described in the Canadian
Prospectus and the U.S. Company Prospectus, there are no warrants, options or
other rights to purchase any securities of the Company; neither the filing of
the Company Registration Statement nor the offering or sale of the Shares or
the DECS as contemplated by this Agreement, the Canadian Prospectus and the
U.S. Company Prospectus gives rise to any rights for or relating to the
registration of any securities of the Company with respect to such filing,
offering or sale, other than rights which have been waived or satisfied.
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<PAGE> 12
(l) All outstanding shares of capital stock of each of the Subsidiaries
have been duly and validly authorized and issued, are fully paid and
non-assessable and, except as noted on Schedule II, are owned by the Company,
either directly or through wholly-owned subsidiaries, free and clear of any
perfected security interest and any other security interest, claim, lien or
encumbrance.
(m) The performance of this Agreement by the Company and the consummation
of the other transactions herein contemplated will not conflict with or result
in a breach or violation of any terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any Subsidiary is a party or by
which any of the property or assets of the Company or any Subsidiary is bound
or to which any of the property or assets of the Company or any Subsidiary is
subject, nor will such action result in any violation of the provisions of the
Articles of Incorporation or By-laws of the Company or the constituent
documents of any Subsidiary or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the Company
or any Subsidiary or any of their respective properties; and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for consummation by the
Company of the transactions contemplated by this Agreement, the Canadian
Prospectus and the U.S. Company Prospectus, except such consents, approvals,
authorizations, registrations or qualifications as may be required under the
Act, the Canadian Securities Laws and state securities or Blue Sky laws in
connection with the offer and sale of the Shares.
(n) There are no legal or governmental proceedings pending to which the
Company or any of its Subsidiaries is a party or of which any property of the
Company or any of its Subsidiaries is the subject, other than as set forth or
contemplated in the Canadian Prospectus and the U.S. Company Prospectus, which,
if determined adversely to the Company or any of its Subsidiaries, would
individually or in the aggregate, result in a Company Material Adverse Effect
and, to the best of the Company's knowledge, no such proceedings are threatened
or contemplated by any governmental authorities or by any other persons.
(o) KPMG (who have certified certain financial statements of the Company)
are, with respect to the Company, independent public accountants as required by
the Act, the rules and regulations of the Commission thereunder and the Canada
Business Corporations Act.
(p) All employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) established,
maintained or contributed to by the Company that are subject to ERISA comply in
all material respects with the requirements of ERISA, and no employee pension
benefit plan (as defined in Section 3(2) of ERISA) has incurred or assumed an
"accumulated funding deficiency" within the meaning of Section 302 of ERISA or
has incurred or assumed any material liability (other than for the payment of
premiums) to the Pension Benefit Guaranty Corporation.
(q) All Employee Plans and any amendments thereto are duly registered or
filed where required or permitted by law, including registration or filing with
the relevant tax
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<PAGE> 13
authorities where such registration or filing is required to qualify for
beneficial tax status, and the Employee Plans have been established,
registered, invested and administered in accordance with all applicable laws,
except where the failure to do so, individually or in the aggregate, would not
result in a Material Adverse Effect. All obligations regarding the Employee
Plans have been satisfied and there are no outstanding defaults or violations
by any party thereto, and no taxes are owing or eligible under any Employee
Plan, which defaults, violations or tax deficiencies, individually or in the
aggregate, could result in a Material Adverse Effect. There have been no
improper withdrawals, transfers or applications of assets from or under the
Employee Plans or the funds relating thereto, and neither the Company, the
Subsidiaries nor any of their agents, have been in breach of any fiduciary
obligation with respect to the administration of the Employee Plans or the
funds relating thereto that could result in a Material Adverse Effect. All
returns, filings, reports and disclosures relating to Employee Plans required
pursuant to the terms of such plans or by application of law have been filed or
distributed in accordance with the terms of such Employee Plans and applicable
laws, except where the failure to so comply, individually or in the aggregate,
would not result in a Material Adverse Effect. There are no actions, suits,
claims, trials, demands, arbitrations or other proceedings pending or, to the
knowledge of the Company, threatened with respect to the Employee Plans against
the Company or any of the Subsidiaries or any fiduciary, funding agent, insurer
or fund of such Employee Plans, other than ordinary and usual claims for
benefits by employees or beneficiaries, that could be expected to materially
adversely affect the business or condition of the Company and the Subsidiaries
taken as a whole. All Employee Plans that are funded plans are funded or
insured in accordance with their terms, rules and all applicable laws, except
where the failure to so comply, individually or in the aggregate, would not
result in a Material Adverse Effect. All required contributions, premium
payments and source-deducted employee contributions under the Employee Plans
have been or will be made to the funding agents as required by the Employee
Plans or applicable law, including all current service costs and any special
payments or contributions required to be made, except where the failure to so
comply, individually or in the aggregate, would not result in a Material
Adverse Effect. In this paragraph (q), "Employee Plans" mean each retirement,
pension, bonus, stock purchase, profit sharing, stock option, deferred
compensation, severance or termination pay, insurance, medical, hospital,
dental, vision care, drug, sick leave, disability, salary continuation, legal
benefits, unemployment benefits, vacation, incentive or other compensation plan
or arrangement or other employee benefit which is maintained, or otherwise
contributed to or required to be contributed to, by the Company or the
Subsidiaries for the benefit of employees or former employees of the Company
and the Subsidiaries.
(r) The consolidated financial statements of the Company, together with
the related schedules and notes thereto, included or incorporated in the
Company Registration Statement, the Canadian Prospectus and the U.S. Company
Prospectus (and any amendment or supplement thereto) present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company at the indicated dates and for the indicated periods;
such financial statements have been prepared in accordance with Canadian
generally accepted accounting principles and reconciled to U.S. generally
accepted accounting principles consistently applied throughout the periods
presented, except as noted in the notes thereon, and all adjustments necessary
for a fair presentation of results for such periods have been made; and the
selected financial information included in the Canadian Prospectus and the U.S.
Company
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<PAGE> 14
Prospectus presents fairly the information shown therein and has been compiled
on a basis consistent with the financial statements presented therein.
(s) The Company and each Subsidiary have timely filed all necessary U.S.
and Canadian federal, provincial, state and foreign income, franchise and
excise tax returns and have paid all taxes shown thereon as due, and there is
no tax deficiency that has been or, to the best knowledge of the Company, might
be asserted against the Company or any Subsidiary that might result in a
Company Material Adverse Effect, except for any such assessment, fine or
penalty that is currently being contested in good faith and for which the
Company retains adequate reserves; and all tax liabilities are adequately
provided for on the books of the Company.
(t) Neither the Company nor any of the Subsidiaries is in violation of any
international, federal, provincial or state law, regulation, or treaty relating
to the storage, handling, transportation, treatment or disposal of hazardous
substances (as defined in 42 U.S.C. Section 9601) or hazardous materials (as
defined by any international, federal, provincial or state law or regulation)
or other waste products, which violation may result in a Company Material
Adverse Effect, and the Company and each of the Subsidiaries have received all
material permits, licenses or other approvals as may be required of them under
applicable international, federal, provincial and state environmental laws and
regulations to conduct their business as described in the Canadian Prospectus
and the U.S. Company Prospectus; and the Company and each of the Subsidiaries
are in compliance in all material respects with the terms and conditions of any
such permit, license or approval; neither the Company nor any of the
Subsidiaries has received any notices or claims that it is a responsible party
or a potentially responsible party in connection with any claim or notice
asserted pursuant to 42 U.S.C. Section 9601 et seq. or any state superfund law;
and, to the best knowledge of the Company, the disposal of all of the Company's
and each Subsidiary's hazardous substances, hazardous materials and other waste
products, if any, has been lawful.
(u) The Company and the Subsidiaries are and have been, and the condition
of any properties previously owned, occupied, managed or used at any time by
the Company or the Subsidiaries are and were during the period of ownership,
occupancy, management or use, in compliance in all material respects with all
Environmental Laws, and the operation of the business does not constitute a
breach of any Environmental Laws, except for any breaches that, singly or in
the aggregate, would not have a Material Adverse Effect, nor has any claim of
nuisance, tort or trespass been made. The Company and the Subsidiaries have
neither received nor are subject to any notice of any violation of or
allegations of non-compliance with any Environmental Law, except for such
violations that, singly or in the aggregate, would not have a Material Adverse
Effect, nor, to the knowledge of the Company, are there any existing conditions
which might constitute a basis for such allegations nor has the Company or the
Subsidiaries received any notice or request for information, from any person,
governmental agency or authority issued pursuant to any Environmental Law. The
Company and the Subsidiaries have maintained all documents and records, in the
manner and for the periods required by Environmental Laws in all material
respects, except for such failures to do so that, singly or in the aggregate,
would not have a Material Adverse Effect. In this paragraph (u),
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<PAGE> 15
"Environmental Laws" mean all applicable Canadian and United States federal,
provincial, state, municipal and local laws, statutes, ordinances by-laws and
regulations, and orders, directives and decisions rendered by, and policies,
instructions, guidelines and similar guidance of, any ministry, department or
administrative or regulatory agency relating to the protection of the
environment, occupational health and safety or the manufacture, processing,
distribution, use, treatment storage, disposal, discharge, packaging,
transport, handling, containment, clean-up or other remediation or corrective
action of any pollutants, contaminants, chemicals or industrial, toxic or
hazardous wastes or substances.
(v) No material relationship, direct or indirect, exists between or among
the Company or any of the Subsidiaries, on the one hand, and the directors,
officers, shareholders, customers or suppliers of the Company or any of the
Subsidiaries on the other hand, except as described in the Company Registration
Statement, the Canadian Prospectus and the U.S. Company Prospectus or documents
incorporated by reference therein.
(w) Neither the Company nor any of the Subsidiaries has taken and none of
such entities will take, directly or indirectly, any action that is designed to
or that has constituted or that might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or the DECS.
(x) Each of the Company and the Subsidiaries owns or possesses, or can
acquire on reasonable terms, adequate licenses, copyrights, trademarks, service
marks, trade names and patents (collectively, "intellectual property")
necessary to carry on its business as presently operated by it, including,
without limitation, intellectual property relating to The Royal Building
System, except where the failure to own or possess or have the ability to
acquire any such intellectual property would not, individually or in the
aggregate, result in a Company Material Adverse Effect, and neither the Company
nor any of the Subsidiaries has received any notice or is otherwise aware of
any infringement of or conflict with asserted rights of others with respect to
any intellectual property or of any facts which would render any intellectual
property invalid or inadequate to protect the interest of the Company or any of
the Subsidiaries therein and which infringement or conflict could result in a
Company Material Adverse Effect.
(y) The Company holds and is operating in compliance, in all material
respects, with all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates and orders of any governmental or
self-regulatory body required for the conduct of its business as presently
being conducted ("licenses"), and all licenses are valid and in full force and
effect, and the Company is in compliance with all laws, regulations, orders and
decrees applicable to it, except for such failures that, singly or in the
aggregate, would not have a Material Adverse Effect.
(z) The Company and the Subsidiaries maintain, with financially sound
insurers, insurance of the types and in the amounts that are reasonable,
customary or required for the business operated by them, all of which insurance
is in full force and effect.
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<PAGE> 16
(aa) This Agreement has been duly authorized, executed and delivered by
the Company.
(bb) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with Canadian generally accepted accounting principles
and to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(cc) There is no document or contract of a character required to be
described in the Company Registration Statement, the Canadian Prospectus or the
U.S. Company Prospectus or to be filed as an exhibit to the Company
Registration Statement which is not described or filed as required. All such
contracts to which the Company or any Subsidiary is a party constitute valid
and binding agreements of the Company or such Subsidiary and are enforceable
against and (to the best of the Company's knowledge) by the Company or such
Subsidiary in accordance with the terms thereof, except as may be limited by
bankruptcy, insolvency, fraudulent transfer or other similar laws affecting the
rights and remedies of creditors generally and subject to general principles of
equity.
(dd) The outstanding shares of the Company's subordinate voting shares are
duly listed and admitted or posted for trading on the NYSE, The Toronto Stock
Exchange (the "TSE") and The Montreal Exchange (the "ME").
3. Representations and Warranties of the Sellers. (a) Each of the
Sellers, severally and not jointly, represents and warrants to, and agrees
with, SBI, the Company and the Trust that:
(i) Such Seller has been duly created, is validly existing as a
corporation under the laws of the Province of Ontario or Canada, and has
the power and authority to own its property and to conduct its business
and is duly qualified to transact business in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be
so qualified could not have a material adverse effect on such Seller's
assets, financial condition or ability to perform its obligations under
this Agreement, each of the Contract, the Collateral Agreement and the
Collateral Agency Agreement to which such Seller is a party or the
Reimbursement Agreement (as defined below).
(ii) Such Seller has full right, power and authority to enter into
and perform its obligations under this Agreement, the Contract of
Collateral Agreement and the Collateral Agency Agreement to which such
Seller is a party and the letter agreement between the Sellers, the
Corporate Seller Control Persons (as defined below) and SBI relating to
expenses of the Trust (the "Reimbursement Agreement").
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<PAGE> 17
(iii) This Agreement has been duly authorized, executed and
delivered by such Seller. Each of the Contract, the Collateral Agreement
and the Collateral Agency Agreement to which such Seller is a party and
the Reimbursement Agreement has been duly authorized, executed and
delivered by such Seller and, assuming due authorization, execution and
delivery by the other parties thereto, is a valid and binding agreement
of such Seller, enforceable against such Seller in accordance with its
terms.
(iv) The execution and delivery by such Seller of this Agreement,
each of the Contract, the Collateral Agreement to which such Seller is a
party and the Reimbursement Agreement, the performance by such Seller of
its obligations hereunder and thereunder and the consummation of the
transactions herein and therein contemplated do not and will not, whether
with or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default under, or give the holder of
any indebtedness the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by such Seller under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of such Seller pursuant to, any
contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or any other agreement or instrument to which such Seller may
be bound, or to which any of the property or assets of such Seller is
subject, nor will such action result in any violation of any applicable
law, statute, rule or regulation of any government or government
instrumentality having jurisdiction over such Seller or any of such
Seller's assets, properties or operations, or any applicable judgment,
order, writ or decree of any government, government instrumentality or
court having jurisdiction over such Seller or any of such Seller's
assets, properties or operations. Amounts received by such Seller at the
Closing Time and, if any Option DECS are purchased, at the time of
delivery thereof pursuant to Section 4(b), pursuant to such Seller's
Contract will not be used by such Seller for the purpose, whether
immediate, incidental or ultimate, of buying or carrying a margin stock,
as such terms are defined in Regulation G promulgated by the Board of
Governors of the Federal Reserve System.
(v) Such Seller is not an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act.
(vi) Such Seller is the sole registered owner of and has, and on the
Closing Date (and, if any Option DECS are purchased, at the time of
delivery thereof pursuant to Section 4(b)) will have, good and valid
title to the Shares to be pledged and assigned by it under its Collateral
Agreement, free and clear of any security interests, claims, liens,
equities and other encumbrances, except for those created pursuant to its
Collateral Agreement; and such Seller has the full right, power and
authority, and all authorization and approval required by law or, in the
case of the 126033 Ontario Limited and 3422543 Canada Inc., under the
stock control agreement (the "Stock Control Agreement"), dated as of
November 30, 1994, among the holders of the multiple voting shares of the
Company, the Company and CIBC Mellon Trust Company, as successor trustee
to The R-M Trust Company, to pledge and assign the Shares to be pledged
and assigned by such Seller pursuant to its Collateral Agreement.
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<PAGE> 18
(vii) Assuming payment of the purchase price on the Closing Date,
delivery of the Shares to be sold by such Seller pursuant to such
Seller's Contract on the Exchange Date will pass to the Trust and the
holders of the Securities title to such Shares free and clear of any
security interests, claims, liens, equities and other encumbrances,
including, without limitation, any transfer restriction created under the
Stock Control Agreement. The sale, transfer and delivery of the Shares
to be sold by such Seller pursuant to such Seller's Contract is not, and
at the time of delivery of such Shares will not be, subject to any right
of first refusal or similar rights of any person pursuant to any contract
to which such Seller or (in the case of a Trust Seller) any beneficiary
or subsidiary of such Seller is a party or by which any of them is bound.
(viii) Such Seller hereby repeats and confirms as if set forth in
full herein each of the representations, warranties and agreements made
by such Seller in such Seller's Contract and Collateral Agreement and
agrees that such representations, warranties and agreements are made
hereby for the benefit of, and may be relied upon by, (A) SBI, Lang
Michener, Canadian counsel to SBI and Cleary, Gottlieb, Steen & Hamilton,
U.S. counsel to SBI and (B) the Company, Ogilvy Renault, Canadian counsel
to the Company and the Sellers and Shearman & Sterling, U.S. counsel to
the Company.
(ix) Such Seller has not taken and will not take, directly or
indirectly, any action which is designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares or the DECS.
(x) Such Seller is familiar with the Company Registration Statement,
the Canadian Prospectus and the U.S. Company Prospectus and verifies that
the information set forth therein respecting him or it is true and
complete and has no knowledge of any material fact, condition or
information not disclosed in the Canadian Prospectus and the U.S.
Prospectus or any supplement thereto which has adversely affected or may
adversely affect the business of the Company or any of its subsidiaries;
and the sale of Shares by such Seller pursuant hereto is not prompted by
any information concerning the Company or any of its subsidiaries which
is not set forth in the Canadian Prospectus and the U.S. Prospectus or
any supplement thereto.
(xi) Such Seller has no reason to believe that any of the
representations and warranties of the Company contained in Section 2
hereof are not true and correct in all material respects.
(b) Each of the Corporate Seller Control Persons, severally and not
jointly, represents and warrants to, and agrees with, SBI and the Trust
that:
(i) Such Corporate Seller Control Person has full right, power and
authority to enter into and perform his obligations under this Agreement,
its Contract and the Reimbursement Agreement.
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<PAGE> 19
(ii) This Agreement has been duly executed and delivered by such
Corporate Seller Control Person. Each of its Contract and the
Reimbursement Agreement has been duly executed and delivered by such
Corporate Seller Control Person and, assuming due authorization,
execution and delivery by the other parties thereto, is a valid and
binding agreement of such Corporate Seller Control Person, enforceable
against such Corporate Seller Control Person in accordance with its
terms.
(iii) The execution and delivery by such Corporate Seller Control
Person of this Agreement, its Contract and the Reimbursement Agreement,
the performance by such Corporate Seller Control Person of his
obligations hereunder and thereunder and the consummation of the
transactions herein and therein contemplated do not and will not, whether
with or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default under, or give the holder of
any indebtedness the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by such Corporate
Seller Control Person under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of such
Corporate Seller Control Person pursuant to, any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any
other agreement or instrument to which such Corporate Seller Control
Person may be bound, or to which any of the property or assets of such
Corporate Seller Control Person is subject, nor will such action result
in any violation of any applicable law, statute, rule or regulation of
any government or government instrumentality having jurisdiction over
such Corporate Seller Control Person or any of such Corporate Seller
Control Person's assets, properties or operations, or any applicable
judgment, order, writ or decree of any government, government
instrumentality or court having jurisdiction over such Corporate Seller
Control Person or any of such Corporate Seller Control Person's assets,
properties or operations.
4. Purchase and Sale. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Trust
agrees to sell to SBI, and SBI agrees to purchase from the Trust, at a price of
US$__________ per DECS, __________ Underwritten DECS. The purchase price shall
be payable in Canadian dollars, calculated at an exchange rate of
Cdn$________/US$________.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Trust hereby grants an
option to SBI to purchase up to 427,500 Option DECS at the same purchase price
per DECS as SBI shall pay for the Underwritten DECS. Such option may be
exercised only to cover over-allotments in the sale of the Underwritten DECS by
SBI. Such option may be exercised in whole or in part at any time (but not
more than once) on or before the 30th day after the date of the Final Trust
Prospectus upon written or telecopied notice by SBI to the Trust setting forth
the number of the Option DECS as to which SBI is exercising the option and the
settlement date. Delivery of certificates for the Option DECS, and payment
therefor, shall be made as provided in Section 5 hereof.
(c) As compensation to SBI for its commitment hereunder, and in view of
the fact that the proceeds of the sale of the DECS will be used by the Trust as
specified in the
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<PAGE> 20
Contracts, the Sellers agree to pay to SBI, at the time of each delivery of
DECS pursuant to Section 5 hereof, an amount equal to US$__________ per DECS
being delivered at such time plus US$__________ per DECS for each Subscription
DECS owned by SBI after giving effect to the subdivision of the Subscription
DECS provided for in the Subscription Agreement; provided, however, that the
aggregate amount payable to SBI by the Sellers shall be paid by the Sellers on
a pro rata basis according to the number of Shares pledged by each Seller
pursuant to the Collateral Agreement to which such Seller is a party.
5. Delivery and Payment. Delivery of and payment for the Underwritten
DECS and the Option DECS (if the option provided for in Section 4(b) hereof
shall have been exercised on or before the first business day prior to the
Closing Date) shall be made at 10:00 AM, New York City time, on November __,
1997 (or such later date not later than five business days after such specified
date as SBI shall designate), which date and time may be postponed by agreement
between SBI and the Trust (such date and time of delivery and payment for the
DECS being herein called the "Closing Date"). Delivery of the DECS shall be
made to SBI for the account of SBI against payment by SBI of the purchase price
thereof to or upon the order of the Trust by wire transfer to an account
designated in writing by the Trust at least two business days in advance of the
Closing Date, payable in same-day funds. Delivery of the DECS shall be made
through the facilities of The Depository Trust Company.
The Trust agrees to have the DECS available for inspection and checking by
SBI in New York, New York, not later than 1:00 PM on the business day prior to
the Closing Date.
If the option provided for in Section 4(b) hereof is exercised after the
first business day prior to the Closing Date, the Trust will deliver (at the
expense of the Trust) to SBI at Seven World Trade Center, New York, New York,
on the date specified by SBI (which shall be within three business days after
exercise of said option), certificates for the Option DECS in such names and
denominations as SBI shall have requested against payment of the purchase price
thereof to or upon the order of the Trust by wire transfer to an account
designated in writing by the Trust at least two business days in advance of
such settlement date, payable in same-day funds. If settlement for the Option
DECS occurs after the Closing Date, the Trust, the Company and the Sellers will
deliver to SBI on the settlement date for the Option DECS, and the obligation
of SBI to purchase the Option DECS shall be conditioned upon receipt of,
supplemental opinions, certificates and letters confirming as of such date the
opinions, certificates and letters delivered on the Closing Date pursuant to
Section 10 hereof.
6. Offering by SBI. It is understood that SBI proposes to offer the DECS
for sale to the public as set forth in the Trust Prospectus.
7. Agreements of the Trust. The Trust agrees with SBI that:
(a) The Trust will use its best efforts to cause the Trust Registration
Statement, if not effective at the Execution Time, and any amendment thereof,
to become effective. Prior to the termination of the offering of the DECS, the
Trust will not file any amendment of the Trust Registration Statement or
supplement to the Trust Prospectus without SBI's prior consent. Subject to the
foregoing sentence, if the Trust Registration Statement has
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<PAGE> 21
become or becomes effective pursuant to Rule 430A, or filing of the Trust
Prospectus is otherwise required under Rule 424(b), the Trust will cause the
Trust Prospectus, properly completed, and any supplement thereto to be filed
with the Commission pursuant to the applicable paragraph of Rule 424(b) within
the time period prescribed and will provide evidence satisfactory to SBI of
such timely filing. The Trust will promptly advise SBI (i) when the Trust
Registration Statement, if not effective at the Execution Time, and any
amendment thereto, shall have become effective, (ii) when the Trust Prospectus,
and any supplement thereto, shall have been filed (if required) with the
Commission pursuant to Rule 424(b), (iii) when, prior to termination of the
offering of the DECS, any amendment to the Trust Registration Statement shall
have been filed or become effective, (iv) of any request by the Commission for
any amendment of the Trust Registration Statement or supplement to the Trust
Prospectus or for any additional information, (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the Trust
Registration Statement or the institution or threatening of any proceeding for
that purpose and (vi) of the receipt by the Trust of any notification with
respect to the suspension of the qualification of the DECS for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Trust will use its best efforts to prevent the issuance of any
such stop order and, if issued, to obtain as soon as possible the withdrawal
thereof.
(b) If, at any time when a prospectus relating to the DECS is required to
be delivered under the Act, any event occurs as a result of which the Trust
Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend the Trust Registration
Statement or supplement the Trust Prospectus to comply with the Act or the
rules thereunder, the Trust promptly will prepare and file with the Commission,
subject to the second sentence of paragraph (a) of this Section 7, an amendment
or supplement which will correct such statement or omission or effect such
compliance.
(c) The Trust will furnish to SBI and counsel for SBI, without charge,
copies of the Trust Registration Statement (including exhibits thereto). The
Trust will furnish to SBI not later than (i) 6:00 PM, New York City time, on
the date of determination of the public offering price of the DECS, if such
determination occurred at or prior to 12:00 Noon, New York City time, on such
date or (ii) 6:00 PM, New York City time, on the business day following the
date on which the public offering price was determined, if such determination
occurred after 12:00 Noon, New York City time, on such date, as many copies of
each Preliminary Trust Prospectus, the Trust Prospectus and any supplement
thereto as SBI may reasonably request; further, so long as delivery of a
prospectus by SBI or any dealer may be required by the Act, as many copies of
each Preliminary Trust Prospectus and the Trust Prospectus and any supplement
thereto as SBI may reasonably request.
(d) The Trust will arrange for the qualification of the DECS and the
Shares for sale under the laws of such jurisdictions as SBI may designate and
will maintain such qualifications in effect so long as required for the
distribution of the DECS and will pay the fee
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<PAGE> 22
of NASD Regulation, Inc. (the "NASD") in connection with its review, if any, of
the Trust Registration Statement and the offering of the DECS.
8. Agreements of the Company. The Company agrees with SBI that:
(a) The Company will use its best efforts to cause the Company
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective under the Act as promptly as possible
and, if the Company elects to rely upon the PREP Procedures, to prepare the
U.S. Company Prospectus in a form approved by you and to comply with the
requirements of the PREP Procedures and General Instruction II.L of Form F-10;
if the Company does not elect to rely on the PREP Procedures, the Company has
obtained or will obtain as promptly as practicable but no later than 4:30 PM
Toronto time on the date hereof from the Ontario Securities Commission a
receipt or deemed receipt for the Final Canadian Prospectus, and has caused or
will cause as promptly as possible but no later than 10:00 AM New York City
time one business day after the date hereof, the Company Registration Statement
to become effective under the Act or, in each case, at such later time or later
date as SBI and the Company may agree to in writing. Prior to the termination
of the offering of the DECS, the Company will not file any amendment of the
Company Registration Statement or supplement to the Canadian Final Prospectus,
or any amendment or supplement (i) if the Company has not elected to rely on
the PREP Procedures, to the Canadian Prospectus, the U.S. Company Prospectus or
any Supplementary Material or (ii) if the Company has elected to rely upon the
PREP Procedures, to any U.S. Company Prospectus included in the Company
Registration Statement at the time it becomes effective, the Canadian
Prospectus, the U.S. Company Prospectus Supplement, the PREP Prospectus
Supplement or any Supplementary Material, unless the Company has furnished you
a copy for your review prior to filing and will not file any such proposed
amendment or supplement to which SBI reasonably objects. The Company will
advise SBI promptly after it receives notice thereof, of the time when any
amendment to the Company Registration Statement has been filed or becomes
effective or any supplement to the Canadian Prospectus or the U.S. Company
Prospectus or any amended Canadian Prospectus or U.S. Company Prospectus has
been filed and will furnish SBI with copies thereof. The Company will file
promptly all reports and definitive proxy or information statements required to
be filed by the Company with the Commission pursuant to Section 13(a), 15 or
15(d) of the Exchange Act subsequent to the date of the U.S. Company Prospectus
or with the Ontario Securities Commission pursuant to the Canadian Securities
Laws subsequent to the date of the Canadian Prospectus and for so long as
delivery of a prospectus is required in connection with the offering or sale of
the Shares in connection with the offering and sale of the DECS. The Company
will promptly advise SBI (i) when the Ontario Securities Commission shall have
issued or be deemed to have issued a receipt for the Canadian Final Prospectus
or Final PREP Prospectus, as applicable, when the Company Registration
Statement or any post-effective amendment to the Company Registration Statement
shall have been filed with the Commission or shall have become effective and
when any supplement to the Canadian Prospectus or the U.S. Company Prospectus
or any amended Canadian Prospectus, U.S. Company Prospectus or any
Supplementary Material shall have been filed, (ii) of the receipt of any
comments or other communications from the Ontario Securities Commission or from
the Commission with respect to the Canadian Prospectus or the Company
Registration Statement, (iii) of any request by the
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<PAGE> 23
Ontario Securities Commission to amend or supplement the Canadian Prospectus or
for any additional information, or of any request by the Commission to amend
the Company Registration Statement or to amend or supplement the U.S. Company
Prospectus or for any additional information (iv) of the issuance by the
Ontario Securities Commission of any order having the effect of ceasing or
suspending the distribution of the Shares or the institution or threatening of
any proceeding for that purpose and (v) of the issuance by the Commission or
the Ontario Securities Commission, as applicable, of any stop order suspending
the effectiveness of the Company Registration Statement or any post-effective
amendment ,or any order directed at any document incorporated by reference in
the Company Registration Statement, the Canadian Prospectus or the U.S. Company
Prospectus or any amendment or supplement thereto, or any order preventing or
suspending the use of any U.S. Preliminary Company Prospectus, the U.S. Company
Prospectus or the Canadian Prospectus or any amendment or supplement thereto or
any post-effective amendment to the Company Registration Statement, or of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, or of the institution or threatening of any proceeding for any
such purpose. The Company will use its best efforts to prevent the issuance of
any such order or stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) Within the time during which a prospectus relating to the Shares is
required to be delivered under the Act, the Company will comply with all
requirements imposed on it by the Canadian Securities Laws or the Act and by
the applicable rules and regulations of the Ontario Securities Commission and
the Commission thereunder, as from time to time in force, to the extent
necessary to permit the continuance of sales of or dealings in the Shares as
contemplated by the provisions hereof, the Canadian Prospectus and the U.S.
Company Prospectus. If the delivery of a prospectus is required at any time
prior to the expiration of nine months after the time of issue of the Canadian
Prospectus or the U.S. Company Prospectus in connection with the offering and
sale of the Shares in connection with the offering and sale of the DECS and if
at such time any event shall have occurred as a result of which the Canadian
Prospectus or the U.S. Company Prospectus, in each case as then supplemented or
amended, would include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if for any other
reason it shall be necessary during such period to amend the Company
Registration Statement or supplement the Canadian Prospectus or the U.S.
Company Prospectus, or to file under the Exchange Act or pursuant to the
Canadian Securities Laws any document incorporated by reference in the Canadian
Prospectus or the U.S. Company Prospectus in order to comply with the Canadian
Securities Laws, the Act or the Exchange Act or the respective rules and
regulations thereunder, the Company (i) as soon as practicable will notify SBI
of such event or necessity and (ii) promptly will prepare and file with the
Ontario Securities Commission and with the Commission, subject to the second
sentence of paragraph (a) of this Section 8, an amendment or supplement which
will correct such statement or omission or effect such compliance and (iii)
promptly will supply to you any supplemented or amended Canadian Prospectus
complying with the Canadian Securities Laws and any supplemented or amended
U.S. Company Prospectus complying with Section 10(a)(3) of the Act in such
quantities as you may reasonably request.
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(c) As soon as practicable, the Company will make generally available to
its security holders and to SBI an earnings statement or statements of the
Company and its subsidiaries which will satisfy the provisions of Section 11(a)
of the Act and Rule 158 under the Act.
(d) The Company will furnish to SBI and counsel for SBI, without charge,
signed copies of the Company Registration Statement (including exhibits
thereto) and the Form F-X. The Company will furnish to SBI not later than (A)
6:00 PM, New York City time, on the date of determination of the public
offering price of the DECS, if such determination occurred at or prior to 12:00
Noon, New York City time, on such date or (B) 6:00 PM, New York City time, on
the business day following the date on which the public offering price of the
DECS was determined, if such determination occurred after 12:00 Noon, New York
City time, on such date, as many copies of each U.S. Preliminary Company
Prospectus, the U.S. Company Prospectus and any supplement thereto as SBI may
reasonably request and, so long as delivery of a prospectus by SBI or any
dealer may be required by the Act (including in respect of the offering and
sale of the DECS), as many copies of each U.S. Preliminary Company Prospectus
and the U.S. Company Prospectus and any supplement thereto as SBI may
reasonably request. The Company will pay the expenses of printing or other
production of all documents related to the offering (including in respect of
the offering and sale of the DECS).
(e) The Company will cooperate with the Trust for purposes of the
qualification of the DECS and the Shares for sale under the laws of such
jurisdictions in the United States as SBI may designate and will maintain such
qualifications in effect so long as required for the distribution of the DECS
and the Shares and will pay the fee of the NASD in connection with its review,
if any, of the Company Registration Statement and the offering of the Shares in
connection with the offering of the DECS; provided, however, that in connection
therewith, the Company shall not be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action that you
subject it to service of process in suits, other than those arising out of the
offering or sale of the Shares in connection with the offering and sale of the
DECS, in any jurisdiction where it is not now so subject.
(f) The Company will not, for a period of 60 days following the Execution
Time, without the prior written consent of SBI, offer, sell or contract to
sell, or otherwise dispose of (or enter into any transaction which is designed
to, or could be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company), directly or
indirectly, or announce the offering of, any subordinate voting shares of the
Company or any securities convertible into, or exchangeable for, or warrants to
acquire, subordinate voting shares of the Company; provided, however, that the
foregoing shall not restrict the ability of the Company to take any of the
foregoing actions in connection with (i) the offering by the Trust of the DECS
or any delivery of Shares pursuant to the terms of the DECS, (ii) the offering
by the Company, certain of the Sellers and others of up to 4,025,000 Shares as
described in Section 10(r) below or (iii) any employee stock option plan, share
ownership plan or dividend reinvestment plan of the Company in effect at the
Execution Time.
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<PAGE> 25
(g) The Company will furnish the Trust in sufficient quantities for
transmission to holders of the DECS the Company's annual report to shareholders
and reports on Forms 40-F and 6-K as soon as practicable after such reports are
required to be filed with the Commission.
(h) The Company will take such actions as may be necessary to comply with
the rules and regulations of the NYSE, the TSE and the ME in respect of the
offering of the Shares contemplated hereby.
9. Agreements of the Sellers. Each of the Sellers agrees with SBI that
such Seller will not, for a period of 60 days following the Execution Time,
without the prior written consent of SBI, offer, sell or contract to sell, or
otherwise dispose of (or enter into any transaction which is designed to, or
could be expected to, result in the disposition (whether by actual disposition
or effective economic disposition due to cash settlement or otherwise) by the
Seller or any affiliate of the Seller or any person in privity with the Seller
or any affiliate of the Seller), directly or indirectly, or announce the
offering of, any subordinated voting shares of the Company or any securities
convertible into, or exchangeable for, or warrants to acquire, subordinate
voting shares of the Company; provided, however, that the foregoing shall not
restrict the ability of such Seller to take any of the foregoing actions in
connection with (i) the offering by the Trust of the DECS or any delivery of
Shares pursuant to the terms of the DECS, (ii) the offering by the Company,
certain of the Sellers and others of up to 4,830,000 Shares as described in
Section 10(r) below, (iii) any employee stock option plan, stock ownership plan
or dividend reinvestment plan of the Company in effect at the Execution Time
and (iv) the sale by each of Gary Brown and Douglas Dunsmuir (or persons,
trusts or entities controlled, directly or indirectly, by them) of up to 50,000
Shares.
10. Conditions to the Obligations of SBI. The obligations of SBI to
purchase the DECS shall be subject to the accuracy of the representations and
warranties on the part of the Trust, the Company and the Sellers contained
herein as of the Execution Time, the Closing Date and any settlement date
pursuant to Section 4(b) hereof, to the accuracy of the statements of the
Trust, the Company and the Sellers made in any certificates pursuant to the
provisions hereof, to the performance by the Trust, the Company and the Sellers
of their respective obligations hereunder and to the following additional
conditions:
(a) If the Trust Registration Statement or the Company Registration
Statement has not become effective prior to the Execution Time, unless SBI
agrees in writing to a later time, such Trust Registration Statement or Company
Registration Statement will become effective not later than (i) 6:00 PM, New
York City time, on the date of determination of the public offering price of
the DECS, if such determination occurred at or prior to 3:00 PM, New York City
time, on such date or (ii) 9:30 AM, New York City time, on the business day
following the day on which the public offering price of the DECS was
determined, if such determination occurred after 3:00 PM, New York City time,
on such date; if filing of the Trust Prospectus or the U.S. Company Prospectus,
or any supplements thereto, is required pursuant to Rule 497(h) or Rule 424(b),
such Trust Prospectus or U.S. Company Prospectus, and any such supplements,
will be filed in the manner and within the time period required by such Rule;
no
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stop order suspending the effectiveness of the Trust Registration Statement or
any part thereof or the Company Registration Statement or any part thereof
shall have been issued and no proceedings for that purpose shall have been
instituted or threatened by the Ontario Securities Commission or the
Commission; and all requests for additional information on the part of the
Ontario Securities Commission or the Commission shall have been complied with
to the reasonable satisfaction of SBI.
(b) SBI shall have received the opinion of Richards, Layton & Finger,
special Delaware counsel for the Trust, dated the Closing Date, with respect to
such matters as SBI may reasonably request.
(c) SBI shall have received the opinion of Ogilvy Renault, Canadian
counsel for the Company and the Sellers, dated the Closing Date, in form and
substance satisfactory to SBI, to the effect that:
(i) each of the Company, Plastibec Limited, Roybridge
Investments Limited, Royal Building Systems (Canada) Limited,
Royal Plastics Inc. and Royplast Limited (collectively, other
than the Company, the "Canadian Opinion Subsidiaries") is a
corporation amalgamated, continued or incorporated, as the
case may be, and is validly subsisting under the laws of the
jurisdiction of its amalgamation, continuance or
incorporation, with full corporate power and authority to own
its properties and conduct its business as described in the
Canadian Prospectus and the U.S. Company Prospectus, and is
duly qualified as an extra-provincial corporation under the
laws of the Province of Ontario or Quebec to the extent
required by applicable law;
(ii) the certificates for the Shares comply in all
material respects with the applicable requirements of the
Canada Business Corporation Act; and the holders of
outstanding multiple voting shares or subordinate voting
shares of the Company are not entitled to preemptive or other
rights to subscribe for the Shares;
(iii) the statements in the Canadian Prospectus and
the U.S. Company Prospectus under the heading "Description of
Share Capital," insofar as they purport to summarize certain
provisions of the Shares and the Articles of Incorporation of
the Company, provide a fair summary of such provisions, and
under the headings "Certain Income Tax Considerations,"
insofar as they purport to describe the provisions of the laws
of Canada, fairly summarize the matters therein described; and
the statements in the Trust Prospectus under the headings
"Risk Factors--Risk Relating to Bankruptcy of the Sellers" and
"Certain Canadian Income Tax Considerations," insofar as they
purport to describe the provisions of the laws of Canada,
fairly summarize the matters therein described;
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<PAGE> 27
(iv) this Agreement has been duly authorized, executed and
delivered by the Company;
(v) neither the performance of this Agreement by the Company, nor
the distribution of the Shares and the consummation of the
other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in a
breach or violation of, or constitute a default under any law
or the Articles of Incorporation or By-laws of the Company or
the terms of any material indenture or other agreement or
instrument and to which the Company or any of its subsidiaries
is a party or bound (as identified by the Company to such
counsel);
(vi) no consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or
body in Canada is required for the consummation by the Company
of the transactions contemplated by this Agreement, except such
as have been obtained;
(vii) the Company is eligible to file a short form prospectus with
the Ontario Securities Commission and use the PREP Procedures
in respect of the Shares;
(viii) a receipt has been obtained in respect of the Canadian
Prospectus from the Ontario Securities Commission, and to the
best of such counsel's knowledge the Ontario Securities
Commission has not revoked such receipt; all necessary
authorizations, approvals, permits, consents and orders have
been obtained under the securities laws of the Province of
Ontario to permit the Shares to be delivered in accordance with
the terms of the Contracts; and no other authorization,
approval, permit, consent or license of any government,
governmental instrumentality or court of Canada or of the
Province of Ontario is required for the issuance, sale and
delivery of the DECs and the delivery of the Shares in
accordance with the terms of the Contracts;
(ix) insofar as matters of Canadian law are concerned, the Company
Registration Statement and the filing of the Company
Registration Statement with the Commission have been duly
authorized by and on behalf of the Company; and the Company
Registration Statement has been duly executed pursuant to such
authorization by and on behalf of the Company;
(x) the submission by the Company, each Seller and each Corporate
Seller Control Person in Section 14 hereof to the jurisdiction
of any New York Court (as defined herein), and service of
process effected in the manner set forth in Section 14 hereof,
in each case will be recognized by the courts of the Provinces
of Ontario and Quebec as conferring jurisdiction on any New
York Court; the submission by each Seller and each Corporate
Seller Control Person in Section 8.9 of the applicable
Contract, Section 10(e)(ii) of the applicable Collateral
Agreement and Section ___ of the applicable Collateral Agency
Agreement to the jurisdiction of any New York Court (as defined
therein), and service of process effected in the manner set
forth in such Section 8.9, 10(e)(ii) or ____ thereof, in each
case will be recognized by the courts of the Provinces of
Ontario and Quebec as conferring jurisdiction on any New York
Court; the laws of the Provinces of Ontario and Quebec permit
an action to be brought in an Ontario or Quebec court on any
final and conclusive judgment in personam of a court of the
State of New York or a federal court sitting in the State of
New York (each, a "New York Court"), that is not impeachable as
void or voidable under New York law, for a sum certain if: (A)
the court rendering such judgment properly exercised
jurisdiction over the judgment debtor, as recognized by the
courts of the Provinces of Ontario and Quebec; (B) such
judgment was not obtained by fraud or in a manner contrary to
natural justice and the enforcement thereof would not be
inconsistent with public policy, as such term is understood
under the laws of the Provinces of Ontario and Quebec and the
federal laws of Canada applicable therein or contrary to any
order made by the Attorney General of Canada under the Foreign
Extraterritorial Measures Act (Canada); (C) the enforcement of
such judgment does not constitute, directly or indirectly, the
enforcement of foreign revenue, expropriatory or penal laws in
the Provinces of Ontario and Quebec; (D) no new admissible
evidence relevant to the action is discovered prior to the
rendering of judgment by the court in the Provinces of Ontario
and Quebec; (E) the action to enforce such judgment is
commenced within the relevant limitation period prescribed
under the laws of the Provinces of Ontario and Quebec; and (F)
in the case of a judgment obtained by default, there has been
no manifest error in the granting of such judgment;
(xi) the Canadian Prospectus and any Supplementary Material in
connection with the offering of the Shares (including the PREP
Information if applicable, but excluding the financial,
statistical and accounting information included therein, as to
which such counsel need express no opinion) comply as to form
in all material respects with the Canadian Securities Laws,
including the PREP Procedures, if applicable, as interpreted
and applied by the Ontario Securities Commission in connection
with the transactions contemplated by this Agreement;
(xii) no stamp duty, registration or documentary taxes, duties or
similar charges are payable under the laws of the Province of
Ontario, the Province of Quebec or the federal laws of Canada
applicable therein in connection with the creation, issuance
and delivery to SBI of the DECS or the authorization, execution
and delivery of the Contracts and this Agreement;
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(xiii) to the best of such counsel's knowledge without a specific
investigation for the purposes of this opinion, there is no
action, proceeding or investigation pending of threatened
against the Company which questions the validity of the
issuance of the DECS or the offering thereof by SBI;
(xiv) each of the Sellers is a corporation
incorporated and validly subsisting under the laws of the
Province of Ontario or Canada;
(xv) this Agreement has been duly authorized, executed
and delivered by each of the Sellers; each of the Contracts,
the Collateral Agreements, the Collateral Agency Agreement and
the Reimbursement Agreement have been duly authorized,
executed and delivered by each Seller and, assuming due
authorization, execution and delivery by the other parties
thereto, constitutes a valid and legally binding agreement of
such Seller, enforceable against such Seller in accordance
with its terms, subject to bankruptcy, insolvency and other
similar laws affecting creditors' rights generally, and to
general equitable principles; and the compliance by each
Seller with all of the provisions of this Agreement, the
Contract, Collateral Agreement and the Collateral Agency
Agreement to which such Seller is a party and the
Reimbursement Agreement, and the consummation of the
transactions herein and therein contemplated, will not violate
any statute, rule or regulation or any order or decree known
to such counsel of any court or governmental agency or body
having jurisdiction over any Seller or any of its properties;
(xvi) this Agreement has been duly executed and
delivered by each of the Corporate Seller Control Persons;
each of the Contracts to which it is a party and the
Reimbursement Agreement has been duly executed and delivered
by each Corporate Seller Control Person and, assuming due
authorization, execution and delivery by the other parties
thereto, constitutes a valid and legally binding agreement of
such Corporate Seller Control Person, enforceable against such
Corporate Seller Control Person in accordance with its terms,
subject to bankruptcy, insolvency and other similar laws
affecting creditors' rights generally, and to general
equitable principles; and the compliance by each Corporate
Seller Control Person with all of the provisions of this
Agreement, the Contract to which it is a party and the
Reimbursement Agreement, and the consummation of the
transactions herein and therein contemplated, will not result
in a breach or default under any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument
identified on an annexed schedule furnished by such Corporate
Seller Control Person and which such Corporate Seller Control
Person has represented lists all material agreements and
instruments to which such Corporate Seller Control Person is a
party or by which such Corporate Seller Control Person is
bound or to which any of the property or assets of such
Corporate Seller Control Person is subject,
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nor will such action violate any statute, rule or regulation
or any order or decree known to such counsel of any court or
governmental agency or body having jurisdiction over any
Corporate Seller Control Person or any of his properties;
(xvii) no consent, approval, license, authorization, order or
validation of, and no filing recording or registration with,
any governmental authority, agency or body or, to such
counsel's knowledge, any court is required for the compliance
by each Seller with all of the provisions of this Agreement,
each of the Contract, the Collateral Agreement and the
Collateral Agency Agreement to which such Seller is a party
and the Reimbursement Agreement, except such as have been
obtained;
(xviii) no consent, approval, license, authorization, order or
validation of, and no filing recording or registration with,
any governmental authority, agency or body or, to such
counsel's knowledge, any court is required for the compliance
by each Corporate Seller Control Person with all of the
provisions of this Agreement, the Contract and the
Reimbursement Agreement, except such as have been obtained;
(xix) a spouse of any Corporate Seller Control Person
does not have any claims with respect to the Collateral (as
defined therein) pledged thereunder that may be superior to
the rights of the Trust in such Collateral in the event of a
change in the marital status of such Corporate Seller Control
Person;
(xx) each Contract, Collateral Agreement and
Collateral Agency Agreement against the related Seller will be
(A) binding on and legally enforceable against the estate of a
deceased Corporate Seller Control Person or the legal
representative, attorney, or guardian of a Corporate Seller
Control Person who becomes legally incapable and (B) binding
on and legally enforceable against any Seller despite the
death or legal incapacity of any office, director, or
shareholder of such Seller;
(xxi) insofar as the laws of the Provinces of Ontario
and Quebec are applicable thereto, each Collateral Agreement
creates a valid security interest in favour of the Collateral
Agent in the Collateral (as defined therein) in which the
Seller now has rights, and is sufficient to create a valid
security interest in favour of the Collateral Agent in any
Collateral (as defined therein) in which the Seller hereafter
acquires rights when those rights are acquired by the Seller,
in each case to secure performance of the obligations
described therein as being secured thereby;
(xxii) assuming the deposit and maintenance of the Multiple Voting
shares pledged as Collateral (as defined therein) under the
applicable Collateral Agreement, the law of the Province of
Ontario will govern the perfection of the security interest
therein in favor of the Collateral Agent;
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(xxiii) registration has been made in all public offices provided for
under the laws of the Provinces of Ontario and Quebec and the
federal laws of Canada where such registration is necessary
or desirable to preserve, protect or perfect the security
interests created by the Collateral Agreement in favour of
the Collateral Agent in the Collateral (as defined therein)
and no other registration, notice or other action is
necessary or desirable to preserve, protect or perfect the
security interest created by the Collateral Agreement in
favour of the Collateral Agent;
(xxiv) such counsel has conducted, or has caused to be conducted,
the searches identified in Schedule A to the opinion for
filing or registrations made in those offices of public record
in Ontario, in each case as of the dates set forth in such
schedule;
(xxv) a financing statement has been registered on
behalf of the Collateral Agent under the Personal Property
Security Act (Ontario) for a term acceptable to the Trust [add
equivalent provision for Quebec]; and
(xxvi) [opinion re: Collateral Agency Agreement].
In addition, such counsel shall state in a separate letter that, with
respect to each Corporate Seller, assuming compliance by such Corporate Seller
and the applicable Corporate Seller Control Person with their obligations and
agreements under the Contract to which such Seller and Corporate Seller Control
Person are parties, a court in any bankruptcy, insolvency or similar proceeding
should not be able to find a sufficient degree of intermingling to justify an
order of substantive consolidation, as such term is construed under the
Canadian insolvency laws, with respect to such Corporate Seller. Such counsel
shall further state that equitable remedies are available to ensure the
compliance of such Seller and Corporate Seller Control Person with such
obligations and agreements.
Furthermore, such counsel shall state in a separate letter that they have
participated in conferences with directors, officers and other representatives
of the Company, representatives of the independent public accountants for the
Company, the Sellers, SBI and counsel for SBI, at which conferences the
contents of the Company Registration Statement, the Canadian Prospectus and the
U.S. Company Prospectus and related matters were discussed, and, although such
counsel have not independently verified and are not passing upon and assume no
responsibility for the accuracy, completeness or fairness of the statements
contained in the Company Registration Statement, the Canadian Prospectus or the
U.S. Company Prospectus (except to the extent specified elsewhere in such
opinion or with reference to such counsel), no facts have come to the attention
of such counsel that lead such counsel to believe that, at the Company
Effective Date, the Company Registration Statement included any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading or that the Canadian Prospectus or the U.S. Company
Prospectus, at the date thereof or the Closing Date, includes any untrue
statement of a material fact or omits to state any material fact necessary to
make the
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<PAGE> 31
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that such counsel need express no view with
respect to the financial, statistical and accounting information contained or
incorporated by reference in the Company Registration Statement, the Canadian
Prospectus or the U.S. Company Prospectus).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the Province of
Ontario, the Province of Quebec or Canada, to the extent they deem proper and
specified in such opinion, upon the opinion of other counsel of good standing
whom they believe to be reliable and who are satisfactory to counsel for SBI and
(B) as to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. References to the
Canadian Prospectus or the U.S. Company Prospectus in this paragraph (c) include
any supplements thereto at the Closing Date.
(d) SBI shall have received the opinion of Douglas Dunsmuir,
general counsel for the Company, dated the Closing Date, in form and substance
satisfactory to SBI, to the effect that:
(i) all the outstanding shares of capital stock of each of the
Opinion Subsidiaries have been duly and validly authorized and
issued and are fully paid and nonassessable, and, except as
otherwise set forth in the Canadian Prospectus and the U.S.
Company Prospectus, all outstanding shares of capital stock of
each of the Opinion Subsidiaries are owned by the Company
either directly or through wholly owned subsidiaries free and
clear of any perfected security interest and, to the knowledge
of such counsel, after due inquiry, any other security
interests, claims, liens or encumbrances;
(ii) the outstanding subordinate voting shares of the Company have
been duly and validly authorized and issued and are fully paid
and nonassessable; the Shares are listed on the TSE and the ME;
and except as set forth in the Canadian Prospectus and the U.S.
Company Prospectus (or as may be issued pursuant to employee
stock option plans described therein), no options, warrants or
other rights to purchase, agreements or other obligations to
issue, or rights to convert any obligations into or exchange
any securities for, shares of capital stock of or ownership
interests in the Company are outstanding;
(iii) to the best knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator
involving the Company or any of its subsidiaries or any of
their respective properties of a character required to be
disclosed in the Canadian Prospectus which is not adequately
disclosed in the Canadian Prospectus;
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(vi) neither the performance of this Agreement by the Company, nor
the distribution of the Shares and the consummation of the
other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in
a breach or violation of, or constitute a default under any
law or the Articles of Incorporation or By-laws of the Company
or the terms of any indenture or other agreement or instrument
known to such counsel and to which the Company or any of its
subsidiaries is a party or bound, or any judgment, order or
decree known to such counsel to be applicable to the Company
or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of its subsidiaries; and
(v) no holders of securities of the Company other than the Sellers
have rights to the registration of such securities under the
Company Registration Statement.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the Province of
Ontario, the Province of Quebec or Canada, to the extent they deem proper and
specified in such opinion, upon the opinion of other counsel of good standing
whom they believe to be reliable and who are satisfactory to counsel for SBI and
(B) as to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. References to the
Canadian Prospectus or the U.S. Company Prospectus in this paragraph (d) include
any supplements thereto at the Closing Date.
(e) SBI shall have received the opinion of special Texas counsel to
the Company, dated the Closing Date, in form and substance satisfactory to SBI,
to the effect that Novo Industries L.P. (together with the Canadian Opinion
Subsidiaries and the U.S. Opinion Subsidiaries, the "Opinion Subsidiaries") has
been duly established and is validly existing as a limited partnership in good
standing under the laws of the jurisdiction in which it is established, with
full power and authority to own its properties and conduct its business as
described in the Canadian Prospectus and the U.S. Prospectus, and is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction that requires such qualification;
(f) SBI shall have received the opinion of Shearman & Sterling, U.S.
counsel for the Company, dated the Closing Date, in form and substance
satisfactory to SBI, to the effect that:
(i) each of Roybridge Investments (U.S.A.) Limited and Royal
Plastics Group (U.S.A.), LLC (the "U.S. Opinion Subsidiaries"
has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction
in which it is chartered or organized, with full corporate power
and authority to own its properties and conduct its business as
described in the Canadian Prospectus and the U.S.
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<PAGE> 33
Company Prospectus, and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of
each jurisdiction that requires such qualification;
(ii) the statements set forth in the Canadian
Prospectus and the U.S. Company Prospectus under the caption
"Certain Income Tax Considerations--United States Federal
Income Tax Considerations," insofar as they purport to
describe the provisions of the law, are accurate and fair
summaries of the matters stated therein;
(iii) the Company is not and, after giving effect to
the offering and sale of the Shares contemplated by this
Agreement and the application of the proceeds thereof as
described in the Canadian Prospectus and the U.S. Company
Prospectus, will not be required to register as an "investment
company" as such term is defined in the Investment Company Act
of 1940, as amended;
(iv) the Shares have been duly authorized for listing
on the NYSE;
(v) no consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body in the United States or the State
of New York is required for the consummation by the Company of
the transactions contemplated by this Agreement, except such
as have been made or obtained under the Act and such as may be
required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Shares or
the DECS by SBI in the manner contemplated in this Agreement
in the United States;
(vi) on October ___, 1997 a prospectus was filed with
the Commission pursuant to General Instructions II.L of Form
F-10 under the Securities Act in the manner and within the
time period required by General Instructions II.L of Form F-10
under the Securities Act, and on November ____, 1997 at _____
P.M., a member of the Staff of the Commission advised such
counsel orally that there was no stop order suspending the
effectiveness of the Registration Statement;
(vii) assuming that the Canadian Prospectus and the
Final PREP Prospectus are in compliance with all applicable
Canadian federal and provincial laws, and the rules and
regulations thereunder, the Company Registration Statement and
the U.S. Company Prospectus (except for financial, statistical
and accounting information included therein, as to which such
counsel need express no opinion) and the Form F-X (filed by
the Company with the Commission on October 9, 1997), as of
their respective issue dates, appeared on their face to be
appropriately responsive in all material respects with the Act
and the applicable rules and regulations of the Commission
thereunder; and the documents incorporated by reference
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<PAGE> 34
in the U.S. Company Registration Statement and the U.S.
Company Prospectus (except for financial, statistical and
accounting information included therein, as to which such
counsel need express no opinion), at the time they were filed
with the Commission, appeared on their face to have been
appropriately responsive in all material respects with the
requirements of the Exchange Act and the applicable rules and
regulations of the Commission thereunder;
(viii) assuming the due authorization, execution and delivery of
this Agreement under Canadian federal and Ontario law, this
Agreement has been duly executed and delivered by the Company,
the Sellers and the Corporate Seller Control Persons;
(ix) no consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body in the United States or the State
of New York is required for the compliance by each Seller or
Corporate Seller Control Person with all of the provisions of
this Agreement, the Contract, Collateral Agreement and
Collateral Agency Agreement to which such Seller is a party
and the Reimbursement Agreement, except such as have been made
or obtained under the Act and such as may be required under
the blue sky laws of any jurisdiction in connection with the
purchase and distribution of the Shares or the DECS by SBI in
the manner contemplated in this Agreement in the United
States;
(x) none of the Sellers is and, after giving effect
to the transactions contemplated by this Agreement and the
application of the proceeds thereof as described in the
Canadian Prospectus and the U.S. Company Prospectus, will be
required to register as an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended;
(xi) the Contracts and the Collateral Agreements
create a valid security interest in favor of the Collateral
Agent for the benefit of the Trust in the Shares pledged
thereunder as security for the performance by the applicable
Seller of its obligations under the Contract to which such
Seller is a party and to secure the observance and performance
of the covenants and agreements of the applicable Seller
contained in the Contract and the Collateral Agreement to
which such Seller is a party (the "Obligations"); and upon
delivery to the Collateral Agent for the benefit of the Trust
in the State of New York of the certificates in registered
form representing Subordinate Voting Shares and assuming the
maintenance of the Subordinate Voting Shares in the State of
New York, the Collateral Agent for the benefit of the Trust
will have a perfected, first priority security interest in the
Subordinate Voting Shares to secure the Obligations;
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<PAGE> 35
(xii) the Contracts and the Collateral Agreements create a valid
security interest in favor of the Collateral Agent for the
benefit of the Trust in the multiple voting shares of the
Company (the "Multiple Voting Shares") pledged thereunder as
security for the performance by the applicable Seller of its
obligations under the Contract to which such Seller is a
party and to secure the observance and performance of the
covenants and agreements of the applicable Seller contained
in the Collateral Agreement and the Contract to which such
Seller is a party; and assuming delivery of such Multiple
Voting Shares to the Sub-Collateral Agent in the Province of
Ontario, perfection of such security interest will be
governed by the law of the Province of Ontario pursuant to
Section 9-103(6)(b) of the Uniform Commercial Code as in
effect in the State of New York (the "New York UCC"); and
(xiii) each holder of the DECS will own the Shares delivered to the
Trust in respect of such holder's Contract pursuant to Section
2.7 of the Trust Agreement free of any adverse claims (within
the meaning of Section 8-303 of the New York UCC), assuming
such holder of DECS has acquired its interest in such Shares
without notice of any adverse claims and that security
certificates in registered form evidencing such Shares are
registered in the name of such holder of DECS, or indorsed to
such holder or in blank, and delivered to such holder of DECS
in the State of New York.
In addition, such counsel shall state in a separate letter to be addressed
to SBI that they have participated in conferences with directors, officers and
other representatives of the Company, representatives of the independent public
accountants for the Company, the Sellers and counsel for the Sellers, SBI and
counsel for SBI, at which conferences the contents of the Company Registration
Statement, the Canadian Prospectus and the U.S. Company Prospectus and related
matters were discussed, and, although such counsel have not independently
verified and are not passing upon and assume no responsibility for the
accuracy, completeness or fairness of the statements contained in the Company
Registration Statement, the Canadian Prospectus or the U.S. Company Prospectus
(except to the extent specified elsewhere in such opinion or with reference to
such counsel), no facts have come to the attention of such counsel that lead
such counsel to believe that, at the Company Effective Date, the Company
Registration Statement included any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading or
that the Canadian Prospectus or the U.S. Company Prospectus, at the date
thereof or the Closing Date, includes any untrue statement of a material fact
or omits to state any material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no view with respect to the
financial, statistical and accounting information contained or incorporated by
reference in the Company Registration Statement, the Canadian Prospectus or the
U.S. Company Prospectus).
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<PAGE> 36
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York or the United States, to the extent they deem proper and specified in
such opinion, upon the opinion of other counsel of good standing whom they
believe to be reliable and who are satisfactory to counsel for SBI and (B) as
to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. References to the
Canadian Prospectus or the U.S. Company Prospectus in this paragraph (f)
include any supplements thereto at the Closing Date.
(g) SBI shall have received from Lang Michener, Canadian counsel for SBI
and the Trust, such opinion or opinions, dated the Closing Date, with respect
to the issuance and sale of the DECS, the Trust Registration Statement, the
Trust Prospectus (together with any supplement thereto), the Fundamental
Documents, the Company Registration Statement, the Canadian Prospectus
(together with any supplement thereto) and the U.S. Company Prospectus
(together with any supplement thereto) and other related matters as SBI may
reasonably require, and the Trust, the Company, the Sellers and the Corporate
Seller Control Persons shall have furnished to such counsel such documents as
they reasonably request for the purpose of enabling them to pass upon such
matters.
(h) SBI shall have received from Cleary, Gottlieb, Steen & Hamilton, U.S.
counsel for SBI and the Trust, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the DECS, the Trust Registration
Statement, the Trust Prospectus (together with any supplement thereto), the
Fundamental Documents, the Company Registration Statement, the Canadian
Prospectus (together with any supplement thereto) and the U.S. Company
Prospectus (together with any supplement thereto) and other related matters as
SBI may reasonably require, and the Trust, the Company, the Sellers and the
Corporate Seller Control Persons shall have furnished to such counsel such
documents as they reasonably request for the purpose of enabling them to pass
upon such matters.
(i) The Trust shall have furnished to SBI a certificate of the Trust,
signed by the Managing Trustee and dated the Closing Date, to the effect that:
(i) the representations and warranties of the Trust in this
Agreement are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date and the
Trust has complied in all material respects with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at
or prior to the Closing Date; and
(ii) no stop order suspending the effectiveness of the Trust
Registration Statement or the use of the Trust Prospectus has been issued
and no proceedings for that purpose have been instituted or, to the
Trust's knowledge, threatened.
(j) The Company shall have furnished to SBI a certificate of the Company,
signed by the Chairman of the Board and the principal financial or accounting
officer of the Company, dated the Closing Date, to the effect that the signers
of such certificate have carefully examined the Company Registration Statement,
the Canadian Prospectus, the U.S. Company
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<PAGE> 37
Prospectus, any supplements to the Canadian Prospectus or the U.S. Company
Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date, and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) no order having the effect of ceasing or suspending the
distribution of the Shares has been issued by the Ontario Securities
Commission and no proceedings for that purpose have been instituted or,
to the Company's knowledge, threatened, and no stop order suspending the
effectiveness of the Company Registration Statement or the use of the
U.S. Company Prospectus has been issued by the Commission and no
proceedings for that purpose have been instituted or, to the Company's
knowledge, threatened;
(iii) subsequent to the Execution Time, there has not been any
decrease in the ratings of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act) or any notice given of any
intended or potential decrease in any such rating or of a possible change
in any such rating that does not indicate the direction of the possible
change; and
(iv) since the date of the most recent financial statements
included in, or incorporated by reference in, the Canadian Prospectus and
the U.S. Company Prospectus (in each case exclusive of any supplement
thereto), there has been no Company Material Adverse Effect, except as
set forth in or contemplated in the Canadian Prospectus and the U.S.
Company Prospectus (exclusive of any supplement thereto).
(k) Each of the Sellers and the Corporate Seller Control Persons shall
have furnished to SBI a certificate, dated the Closing Date, reasonably
satisfactory to SBI as to the accuracy of the respective representations and
warranties of such Seller or Corporate Seller Control Person herein at and as
of the Closing Date, as to the performance by such Seller or Corporate Seller
Control Person of all of such Seller's or Corporate Seller Control Person's
obligations hereunder to be performed at or prior to the Closing Date and as to
such other matters as SBI may reasonably request.
(l) At the Execution Time and at the Closing Date, KPMG shall have
furnished to SBI a letter or letters, dated as of such dates, in form and
substance satisfactory to SBI, confirming that they are independent accountants
within the meaning of the Act and the applicable published rules and
regulations thereunder and that they have performed a review of the Company's
unaudited condensed financial information for the nine-month periods ended June
30, 1997 and June 30, 1996 in accordance with the standards established by the
Canadian Institute of Chartered Accountants and stating in effect that:
(i) in their opinion the audited financial statements included in
the Company Registration Statement, the Canadian Prospectus and the U.S.
Company
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<PAGE> 38
Prospectus and reported on by them comply as to form in all material
respects with the applicable accounting requirements of the Act, the
related published rules and regulations with respect to registration
statements on Form F-10 and the Canadian Securities Laws;
(ii) on the basis of a reading of the latest unaudited consolidated
financial statements made available by the Company and its subsidiaries;
their limited review in accordance with the standards established by the
Canadian Institute of Chartered Accountants of the unaudited condensed
consolidated interim financial information for the nine-month period
ended June 30, 1997, and as at June 30, 1997; carrying out certain
specified procedures (but not an examination in accordance with generally
accepted audited standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such letter; a
reading of the minutes of the meetings of the stockholders, the Board of
Directors and the audit committee of the Company and the Subsidiaries;
the inquiries of certain officials of the Company who have responsibility
for financial and accounting matters of the Company as to whether the
unaudited consolidated financial statements included in the registration
statement are presented, in all material respects, on a basis consistent
with that of the audited financial statements, nothing came to their
attention which caused them to believe that:
(1) the unaudited consolidated financial statements included
in the Company Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements
of the Act, the applicable rules and regulations thereunder and the
Canadian Securities Laws or that the unaudited consolidated
financial statements are not presented, in all material respects,
in accordance with accounting principles generally accepted in
Canada for interim reporting purposes applied on a basis consistent
with the audited consolidated financial statements; or
(2) with respect to the period subsequent to the date of the
most recent financial statements (other than capsule information),
audited or unaudited, included in the Company Registration
Statement, the Canadian Prospectus and the U.S. Company Prospectus,
there were, at a specified date not more than five business days
prior to the date of the letter, any material increases in the term
debt of the Company and its subsidiaries, any material change in
the number of issued shares of capital stock of the Company, any
material decreases in the total assets or shareholders' equity of
the Company or any material decreases in the excess of current
assets over current liabilities of the Company and its subsidiaries
as compared with the amounts shown on the most recent consolidated
balance sheet included in the Company Registration Statement, the
Canadian Prospectus and the U.S. Company Prospectus, or for the
period from the date of the most recent financial statements
included in the Company Registration Statement, the Canadian
Prospectus and the U.S. Company Prospectus to such specified date
there were any decreases, as compared with the corresponding period
in the preceding year in net sales, operating margin, earnings
before income taxes and minority interest or total or per share
amounts of earnings of the Company and its
39
<PAGE> 39
subsidiaries; except in all instances for changes or decreases set
forth in such letter, in which case the letter shall be accompanied
by an explanation by the Company as to the significance thereof
unless said explanation is not deemed necessary by SBI; and
(iii) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the general
accounting records of the Company and its subsidiaries) set forth in the
Company Registration Statement, the Canadian Prospectus and the U.S.
Company Prospectus agrees with the accounting records of the Company and
its subsidiaries, excluding any questions of legal interpretation.
References to the Canadian Prospectus or the U.S. Company Prospectus in
this paragraph (l) include any supplement thereto at the date of the letter.
(m) Subsequent to the Execution Time or, if earlier, the dates as of which
information is given in each of the Trust Registration Statement and the
Company Registration Statement (exclusive of any amendment thereof) and each of
the Trust Prospectus, the Canadian Prospectus and the U.S. Company Prospectus
(exclusive of any supplement thereto), there shall not have been (i) any change
or decrease specified in the letter or letters referred to in paragraph (l) of
this Section 9 or (ii) any change, or any development involving a prospective
change, in or affecting the business or properties of the Company and its
direct and indirect subsidiaries the effect of which, in any case referred to
in clause (i) or (ii) above, is, in the judgment of SBI, so material and
adverse as to make it impractical or inadvisable to proceed with the offering
or delivery of the DECS as contemplated by the Trust Registration Statement and
the Company Registration Statement (in either case, exclusive of any amendment
thereof) and the Trust Prospectus, the Canadian Prospectus and the U.S. Company
Prospectus (in either case, exclusive of any supplement thereto).
(n) Subsequent to the Execution Time, there shall not have been any
decrease in the ratings of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act) or any notice given of any intended or
potential decrease in any such rating or of a possible change in any such
rating that does not indicate the direction of the possible change.
(o) At the Execution Time, the Company shall have furnished to SBI letters
substantially in the form of Exhibit A hereto from the directors and officers
of the Company.
(p) The DECS shall have been approved for listing on the NYSE, subject
only to official notice of issuance.
(q) The NASD shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
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<PAGE> 40
(r) Each Fundamental Agreement shall have been executed and delivered by
all parties thereto, and each Seller shall have delivered to the Collateral
Agent the number of Shares required by the Collateral Agreement to which such
Seller is a party to be initially pledged and assigned by such Seller
thereunder in accordance with the requirements of such Collateral Agreement.
(s) The underwriting agreement (the "Secondary Offering Underwriting
Agreement") relating to the offer and sale of subordinate voting shares by
certain selling shareholders of the Company shall have been executed and
delivered by, and valid, binding and enforceable with respect to, all parties
thereto, and each selling shareholder thereunder shall have delivered to SBI
and the other underwriters party thereto the number of subordinate voting
shares required under the Secondary Offering Underwriting Agreement in exchange
for payment therefor by SBI and the other underwriters party thereto.
(t) Prior to the Closing Date, the Trust, the Company and each of the
Sellers and the Corporate Seller Control Persons shall have furnished to SBI
such further information, certificates and documents as SBI may reasonably
request.
If any of the conditions specified in this Section 10 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or
if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to SBI and counsel for SBI, this Agreement and all obligations of
SBI hereunder may be canceled at, or at any time prior to, the Closing Date by
SBI. Notice of such cancellation shall be given to the Trust and the Company
in writing or by telephone or facsimile confirmed in writing.
11. Expenses. (a) Each of the Sellers (and the related Corporate Seller
Control Persons), severally in proportion to the number of "Total Shares" set
forth opposite the names of the Sellers on Schedule I hereto, will pay all
expenses incident to the performance by the Trust and each Seller of their
respective obligations under this Agreement and their Contracts and Collateral
Agreements, including (i) the preparation, printing and filing of the
Notification and the Trust Registration Statement (including financial
statements and exhibits) as originally filed and of each amendment thereto,
(ii) the preparation, printing and delivery of this Agreement, the Trust
Agreement, each of the Fundamental Agreements and such other documents as may
be required in connection with the offering, purchase, sale, issuance or
delivery of the DECS, (iii) the preparation, issuance and delivery of the
certificates for the DECS to SBI, (iv) the fees and disbursements of the
Trust's counsel, accountants and other advisors, (v) the fees and disbursements
of the Sellers' counsel and other advisors, (vi) the qualification of the DECS
under securities laws in accordance with the provisions of Section 7(d) hereof,
including filing fees and the reasonable fees and disbursements of the counsel
for SBI in connection therewith and in connection with the preparation of the
related blue sky survey and any supplement thereto, (vii) the printing and
delivery to SBI of copies of each Preliminary Trust Prospectus, the Trust
Prospectus and any amendments or supplements thereto, (viii) the fees and
expenses of any transfer agent or registrar for the DECS, (ix) the filing fees
incident to, and the reasonable fees and disbursements of counsel to SBI in
connection with, securing any required review by the
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<PAGE> 41
NASD of the Trust Registration Statement and the offering of the DECS in
accordance with the provisions of Section 7(d) hereof, (x) the fees and
expenses incurred in connection with the listing of the DECS on the NYSE and
(xi) the fees and expenses incurred in connection with the preparation and
filing of a registration statement under the Exchange Act relating to the DECS.
The Sellers and the Corporate Seller Control Persons severally (in proportion
to the number of "Total Shares" set forth opposite the names of the Sellers on
Schedule I hereto) will reimburse SBI on the Closing Date in immediately
available funds for the Up-Front Fee Amount and the Up-Front Expense Amount
(each as defined in the Fund Expense Agreement to be dated as of the Closing
Date between SBI and BoNY) and for the up-front fees of the trustees of the
Trust paid by SBI.
(b) The Company will pay all expenses incident to the performance by the
Company of its obligations under this Agreement, including (i) the preparation,
printing and filing of the Company Registration Statement and the Canadian
Prospectus (including financial statements and exhibits) as originally filed
and of each amendment thereto, (ii) the preparation, issuance and delivery of
the certificates for the Shares to the Trust, (iii) the fees and disbursements
of the Company's counsel, accountants and other advisors, (iv) the
qualification of the Shares under Canadian federal, provincial or state
securities laws in accordance with the provisions of Section 8(e) hereof,
including filing fees and the reasonable fees and disbursements of the counsel
for SBI in connection therewith and in connection with the preparation of any
related blue sky survey and any supplement thereto, (v) the printing and
delivery to SBI of copies of each Canadian Preliminary Prospectus, U.S.
Preliminary Company Prospectus, the Canadian Prospectus and any amendments or
supplements thereto and the U.S. Company Prospectus and any amendments or
supplements thereto, (vi) the fees and expenses of any transfer agent or
registrar for the Shares, (vii) the filing fees incident to, and the reasonable
fees and disbursements of counsel to SBI in connection with, securing any
required review by the NASD of the Company Registration Statement and the
offering of the Shares in accordance with the provisions of Section 8(e) hereof
and (viii) the fees and expenses incurred in connection with the listing of the
Shares on the NYSE, the TSE and the ME.
(c) If the sale of the DECS provided for herein is not consummated because
any condition to the obligations of SBI set forth in Section 10 hereof is not
satisfied, because of any termination pursuant to Section 13 hereof or because
of any refusal, inability or failure on the part of the Company or any Seller
to perform any agreement herein or comply with any provision hereof other than
by reason of a default by SBI, the Company, each of the Sellers and each of the
Corporate Seller Control Persons jointly and severally will reimburse SBI upon
demand for all reasonable out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by SBI in connection
with the proposed purchase and sale of the DECS.
12. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Trust, each of the Trustees, SBI, the
directors, officers, employees and agents of SBI, and each person who controls
the Trust or SBI within the meaning of the Act, the Exchange Act or any
Canadian federal or provincial or other U.S. federal or state statutory law or
regulation, at common law or otherwise, against any and all losses, claims,
damages or liabilities,
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joint or several, to which they or any of them may become subject under the
Act, the Exchange Act or any Canadian federal or provincial or other U.S.
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Company Registration Statement as
originally filed or in any amendment thereof, or in any Canadian Preliminary
Company Prospectus, any U.S. Preliminary Prospectus, the Canadian Prospectus,
or in any amendment thereof or supplement thereto, or the U.S. Company
Prospectus, or in any amendment thereof or supplement thereto (each such
document, a "Company Registration Document"), or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and agrees to reimburse each such indemnified party, as incurred, for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable under the indemnity agreement in
this paragraph (a) to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made in any Company Registration
Document in reliance upon and in conformity with (i) written information
furnished to the Company by SBI specifically for inclusion therein or (ii)
written information relating to a Seller furnished to the Company by such
Seller specifically for inclusion therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) Subject to paragraph (g) of this Section 12, each Seller and each
Corporate Seller Control Person agrees to indemnify and hold harmless the
Trust, each of the Trustees, SBI, the directors, officers, employees and agents
of SBI, and each person who controls the Trust or SBI within the meaning of the
Act, the Exchange Act or any Canadian federal or provincial or other U.S.
federal or state statutory law or regulation, at common law or otherwise,
against any and all losses, claims, damages or liabilities, joint or several,
to which they or any of them may become subject under the Act, the Exchange Act
or any Canadian federal or provincial or other U.S. federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in (i) any Company Registration Document or (ii) the Trust
Registration Statement as originally filed or in any amendment thereof, or in
any Preliminary Trust Prospectus or the Trust Prospectus, or in any amendment
thereto or supplement thereto (each such document, a "Trust Registration
Document"), or arise out of or are based upon the omission or alleged omission
to state in any Company Registration Document or Trust Registration Document a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and in each such case agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Sellers and the
Corporate Seller Control Persons will not be liable under the indemnity
agreement in this paragraph (b) to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made in any Company
Registration Document or Trust Registration Document in reliance upon and in
conformity with written
43
<PAGE> 43
information furnished to the Company or the Trust by SBI specifically for
inclusion therein. This indemnity agreement will be in addition to any
liability which any Seller may otherwise have.
(c) SBI agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who signs the Company Registration Statement,
and each person who controls the Company within the meaning of either the Act,
the Exchange Act or any Canadian federal or provincial or other U.S. federal or
state statutory law or regulation, at common law or otherwise, to the same
extent as the foregoing indemnity in paragraph (a) from the Company to SBI, but
only with reference to written information furnished to the Company by SBI
specifically for inclusion in the Company Registration Documents. This
indemnity agreement will be in addition to any liability which SBI may
otherwise have. The Company acknowledges that the statements set forth in the
first paragraph of the inside cover page and the third and ninth paragraphs
under the heading "Plan of Distribution" in any Canadian Preliminary
Prospectus, any U.S. Preliminary Company Prospectus, the Canadian Prospectus or
the U.S. Company Prospectus constitute the only information furnished in
writing by or on behalf of SBI for inclusion in the Company Registration
Documents, and SBI confirms that such statements are correct.
(d) SBI agrees to indemnify and hold harmless each Seller and each
Corporate Seller Control Person to the same extent as the foregoing indemnity
in paragraph (b) from such Seller and Corporate Seller Control Person to SBI,
but only with reference to written information furnished to the Company or the
Trust by SBI specifically for inclusion in the Company Registration Documents
or the Trust Registration Documents. This indemnity agreement will be in
addition to any liability which SBI may otherwise have. Each Seller and each
Corporate Seller Control Person acknowledges that the statements set forth in
the first paragraph of the inside cover page and the third and ninth paragraphs
under the heading "Plan of Distribution" in any Canadian Preliminary
Prospectus, any U.S. Preliminary Company Prospectus, the Canadian Prospectus or
the U.S. Company Prospectus and in the last paragraph of the cover page, the
first paragraph of the inside cover page and the third and eleventh paragraphs
under the heading "Underwriting" in any Preliminary Trust Prospectus or the
Trust Prospectus constitute the only information furnished in writing by or on
behalf of SBI for inclusion in the Company Registration Documents or the Trust
Registration Documents, and SBI confirms that such statements are correct.
(e) Promptly after receipt by an indemnified party under this Section 12
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 12, notify the indemnifying party in writing of the commencement
thereof; but the failure so to notify the indemnifying party (i) will not
relieve it from any liability under paragraphs (a), (b), (c) or (d) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraphs (a), (b), (c) or (d) above.
The indemnifying party shall be entitled to appoint counsel of indemnifying
party's choice at the
44
<PAGE> 44
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded upon the advice of its
counsel that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available
to the indemnifying party, (iii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action
or (iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. An indemnifying
party will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(f) In the event that the indemnity provided in paragraph (a), (b), (c) or
(d) of this Section 12 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company, each Seller, each Corporate
Seller Control Person and SBI agree as among themselves to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending
same) (collectively "Losses") to which the Company, each Seller, each Corporate
Seller Control Person and SBI may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company, by such
Seller, by such Corporate Seller Control Person and by SBI from the offering of
the DECS; provided, however, that in no case shall SBI be responsible for any
amount in excess of the underwriting discount applicable to the DECS purchased
by SBI hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company, each Seller, each
Corporate Seller Control Person and SBI shall contribute in such proportion as
is appropriate to reflect not only such relative benefits but also the relative
fault of the Company, such Seller, such Corporate Seller Control Person and SBI
in connection with the statements or omissions which resulted in such Losses as
well as any other relevant equitable considerations. The benefits received by
the Company and the Sellers shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses) received by the Trust,
and the benefits received by SBI shall be deemed to be equal to the total
underwriting discounts and commissions, in each case as set forth on the cover
page of the Trust Prospectus and, as between the Company and SBI, the Company
shall be deemed for this purpose to have received such total net proceeds as
are received by the Trust. Relative fault
45
<PAGE> 45
shall be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the Company, a Seller, a Corporate
Seller Control Person or SBI. The Company, each Seller, each Corporate Seller
Control Person and SBI agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (f), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 12, each
person who controls SBI within the meaning of either the Act or the Exchange
Act and each director, officer, employee and agent of SBI shall have the same
rights to contribution as SBI, and each person who controls the Company or any
Seller within the meaning of either the Act or the Exchange Act, each officer
of the Company who shall have signed the Company Registration Statement and
each director of the Company shall have the same rights to contribution as the
Company or such Seller, as the case may be, subject in each case to the
applicable terms and conditions of this paragraph (f).
(g) The liability of each of the Sellers and the related Corporate Seller
Control Person under paragraph (b)(i) of this Section 12 with respect to any
Company Registration Document shall be limited to an amount equal to the
initial public offering price of a portion of the DECS equal to such Seller's
proportionate share of the total Shares listed on Schedule I hereto, less the
underwriting discount with respect to such DECS.
13. Termination. This Agreement shall be subject to termination in the
absolute discretion of SBI, by notice given to the Trust, the Sellers and the
Company prior to delivery of and payment for the DECS, if prior to such time
(i) trading in the Company's common stock shall have been suspended by the
securities commission or regulatory authority of any province of Canada, the
Commission, the TSE or the NYSE or trading in securities generally on the TSE
or the NYSE shall have been suspended or limited or minimum prices shall have
been established on the TSE or the NYSE, (ii) a banking moratorium shall have
been declared by either Canadian federal, Ontario, U.S. federal or New York
State authorities or (iii) there shall have occurred any outbreak or escalation
of hostilities, declaration by Canada or the United States of a national
emergency or war or other calamity or crisis, the effect of which on financial
markets of Canada or the United States is such as to make it, in the judgment
of SBI, impracticable or inadvisable to proceed with the offering or delivery
of the DECS as contemplated by the Trust Prospectus (exclusive of any
supplement thereto).
14. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of
the Trust, the Company, the Sellers, the Corporate Seller Control Persons or
their respective officers, if applicable, and of SBI set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of SBI, the Trust, the Company, the
Sellers, the Corporate Seller Control Persons or any of the officers, directors
or controlling persons referred to in Section 12 hereof, and will survive
delivery of and payment for the DECS. The provisions of Sections 11 and 12
hereof shall survive the termination or cancellation of this Agreement.
46
<PAGE> 46
15. Jurisdiction. The Company, each of the Sellers and each of the
Corporate Seller Control Persons agree that any legal suit, action or
proceeding against the Company, any of the Sellers or any of the Corporate
Seller Control Persons brought by SBI or by any person who controls SBI within
the meaning of the Act, the Exchange Act or any Canadian federal or provincial
or other U.S. federal or state statutory law or regulation, at common law or
otherwise, arising out of or based upon this Agreement or the transactions
contemplated hereby may be initiated in any state or federal court in the
Borough of Manhattan in The City of New York, New York, and waive any objection
which any of them may now or hereafter have to the laying of venue for any such
proceeding, and irrevocably submits to the non-exclusive jurisdiction of such
courts in any legal suit, action or proceeding. The Company, each of the
Sellers and each of the Corporate Seller Control Persons have appointed Novo
Industries, L.P. as the authorized agent (the "Authorized Agent") for each of
them upon whom process may be served in any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby which may be instituted in any state or federal court in the Borough of
Manhattan in The City of New York, New York, by SBI or by any person who
controls SBI within the meaning of the Act, the Exchange Act or any Canadian
federal or provincial or other U.S. federal or state statutory law or
regulation, at common law or otherwise, and expressly accepts the non-exclusive
jurisdiction of any such court in respect of any such legal suit, action or
proceeding. Such appointment shall be irrevocable. The Company, each Seller
and each of the Corporate Seller Control Persons represents and warrants that
the Authorized Agent has agreed to act as said agent for service of process,
and the Company, each Seller and each Corporate Seller Control Person agrees to
take any and all action, including the filing of any and all documents and
instruments, that may be necessary to continue such appointment in full force
and effect as aforesaid. Service of process upon the Authorized Agent and
written notice of such service to the Company (in all cases) and to the
applicable Seller or Corporate Seller Control Person, as the case may be, shall
be deemed, in every respect effective service of process upon the Company, such
Seller or such Corporate Seller Control Person, as the case may be.
Notwithstanding the foregoing, any action based on this Agreement may be
instituted by SBI or by any person who controls SBI within the meaning of the
Act, the Exchange Act or any Canadian federal or provincial or other U.S.
federal or state statutory law or regulation, at common law or otherwise, in
any competent court in Canada.
16. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to SBI, will be mailed, delivered or
telegraphed and confirmed to it at Seven World Trade Center, New York, New York
10048, attention of the Legal Department; if sent to the Trust, will be mailed,
delivered or telegraphed and confirmed to it c/o Puglisi & Associates at 850
Library Avenue, Suite 204, Newark, Delaware 19715, Attention: Donald J.
Puglisi; if sent to the Company, will be mailed, delivered, telegraphed and
confirmed to it at 1 Royal Gate Boulevard, Woodbridge, Ontario, Canada L4L 827,
Attention: Secretary; if sent to the Sellers, will be mailed, delivered or
telegraphed and confirmed to them at the address set forth on Schedule III
hereto; and if sent to the Corporate Seller Control Persons, will be mailed,
delivered or telegraphed and confirmed to them c/o Royal Group Technologies
Limited at 1 Royal Gate Boulevard, Woodbridge, Ontario, Canada L4L 827.
47
<PAGE> 47
17. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 12
hereof, and no other person will have any right or obligation hereunder.
18. Counterparts. This Agreement may be executed by any one or more of
the parties in any number of counterparts, each of which shall be deemed to be
an original, but all such counterparts shall together constitute one and the
same instrument.
19. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
48
<PAGE> 48
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Trust, the Company, the Sellers, the Corporate Seller Control Persons
and SBI.
Very
truly yours,
DECS
Trust II
By:
____________________________
Name:
Title:
Royal
Group Technologies Limited
By:_____________________________
Name:
Title:
SELLERS
1260333 Ontario Limited
By:_____________________________
Name:
Title:
3422543 Canada Inc.
By:______________________________
Name:
Title:
1260334 Ontario Limited
By:_____________________________
Name:
Title:
49
<PAGE> 49
3422461 Canada Inc.
By:_____________________________
Name:
Title:
3422470 Canada Inc.
By:_____________________________
Name:
Title:
3422488 Canada Inc.
By:_____________________________
Name:
Title:
50
<PAGE> 50
CORPORATE SELLER CONTROL PERSONS
________________________________
Vic De Zen
________________________________
Domenic D'Amico
________________________________
Fortunato Bordin
________________________________
Gary
Brown
________________________________
Douglas Dunsmuir
51
<PAGE> 51
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
Salomon Brothers Inc
By:___________________________
Vice President
52
<PAGE> 52
SCHEDULE I
List of Sellers
<TABLE>
<S> <C> <C> <C> <C>
Corporate Seller Option Total
Seller Control Person Underwritten Shares Shares Shares
1260333 Ontario Limited Vic De Zen 1,636,250 0 1,636,250
3422543 Canada Inc. Vic De Zen 363,750 427,500 791,250
1260334 Ontario Limited Domenic D'Amico 500,000 0 500,000
3422461 Canada Inc. Fortunato Bordin 500,000 0 500,000
3422470 Canada Inc. Gary Brown 100,000 0 100,000
3422488 Canada Inc. Douglas Dunsmir 50,000 0 50,000
------------------- ------- ---------
Total 3,150,000 427,500 3,577,500
=================== ======= =========
</TABLE>
I-1
<PAGE> 53
SCHEDULE II
List of Material Subsidiaries
Plastibec Limited
Roybridge Investments Limited
Royal Building Systems (Canada) Limited
Royal Plastics Inc.
Royplast Limited
Novo Industries L.P.
Roybridge Investments (U.S.A.) Limited
Royal Plastics Group (U.S.A.), LLC
II-1
<PAGE> 54
SCHEDULE III
Notices
<TABLE>
<S> <C>
Seller Address
1260333 Ontario Limited
3422543 Canada Inc.
1260334 Ontario Limited
3422461 Canada Inc.
3422470 Canada Inc.
3422488 Canada Inc.
</TABLE>
<PAGE> 55
EXHIBIT A
, 1997
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement") among DECS Trust II, a
Delaware statutory business trust (the "Trust"), Royal Group Technologies
Limited, a corporation organized under the laws of Canada (the "Company"), the
Sellers named therein and Salomon Brothers Inc relating to an underwritten
public offering of DECS of the Trust, representing beneficial interests in
contracts relating to subordinate voting shares, without par value, of the
Company ("Subordinate Voting Shares").
In order to induce you to enter into the Underwriting Agreement, the
undersigned agrees not to offer for sale, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce the offering of, or
cause the filing of any registration statement under the Securities Act of 1933
with respect to, any Subordinate Voting Shares beneficially owned by the
undersigned or any securities convertible into, or exchangeable for, or
warrants to acquire, Subordinate Voting Shares for a period of 60 days
following the day on which the Underwriting Agreement is executed without the
prior written consent of Salomon Brothers Inc, other than Subordinate Voting
Shares disposed of (i) pursuant to the Underwriting Agreement and the
undersigned seller's Contract (as defined in the Underwriting Agreement), (ii)
pursuant to the Secondary Offering Underwriting Agreement (as defined in the
Underwriting Agreement) or (iii) as bona fide gifts approved by SBI.
If for any reason the Underwriting Agreement shall be terminated prior to
the Closing Date (as defined in the Underwriting Agreement), the agreement set
forth above shall likewise be terminated.
Very truly yours,
_________________________________
A-1
<PAGE> 1
Exhibit 99.2.J(i)
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT dated as of this 8th day of October, 1997 by
and between The Bank of New York, a New York banking corporation (the
"Custodian"), and DECS Trust II (such trust and the trustees thereof acting in
their capacity as such being referred to herein as the "Trust"), a statutory
business trust organized under the Business Trust Act of the State of Delaware
pursuant to a Declaration of Trust dated as of September 2, 1997 (as it may be
amended and restated from time to time, the "Trust Agreement").
WITNESSETH
WHEREAS, the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"Investment Company Act"), formed to purchase and hold certain U.S. treasury
securities (the "Treasury Securities"), to enter into and hold forward purchase
contracts with one or more existing shareholders of Royal Group Technologies
Limited (individually, a "Contract" and collectively, the "Contracts"), to hold
security for the performance of such shareholders of their obligations under
the Contracts pursuant to related collateral agreements (the "Collateral
Agreements") and to issue DECS in accordance with the terms and conditions of
the Trust Agreement;
WHEREAS, the Trustees desire to engage the services of the Custodian to
perform certain custodial duties for the Trust; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
have the respective meanings specified in the Trust Agreement.
2. Appointment of Custodian; Transfer of Assets. The Trust hereby
constitutes and appoints the Custodian, and the Custodian accepts such
appointment, as agent of the Trust and as custodian of all of the property,
including but not limited to, the Contracts, the Treasury Securities, the
Temporary Investments, any cash and any other property at any time owned or
held by the Trust (other than Pledged Items(as defined in the Collateral
Agreements) held by the Collateral Agent thereunder) (collectively, the
"Assets"). The Trust hereby deposits the Assets owned by the Trust on the date
hereof with the Custodian and the Custodian hereby accepts such
<PAGE> 2
Assets into its custody, and the Trust shall deliver to the Custodian all
additional Assets, including all monies, securities and other property,
received by the Trust at any time during the period of this Agreement, subject
to the following terms and conditions. The Custodian hereby agrees that it
shall hold the Assets in a segregated custody account, separate and distinct
from all other accounts, in accordance with Section 17(f) of, and in such
manner as shall constitute the segregation and holding in trust within the
meaning of, the Investment Company Act and the rules and regulations
thereunder. The Trust authorizes the Custodian, for any Assets held hereunder,
to use the services of any United States securities depository permitted to
perform such services for registered investment companies and their custodians
under Rule 17f-4 under the Investment Company Act and which have been approved
by the Trust, including but not limited to, The Depository Trust Company and
the Federal Reserve Book Entry System. The Custodian shall be under no duty or
obligation to inspect, review or examine any Assets to determine that they are
genuine, enforceable, or appropriate for the represented purpose or that they
are other than what they purport to be on their face.
3. Asset Disposition; Examinations. The Custodian shall have no
power or authority to assign, hypothecate, pledge or otherwise dispose of the
Assets, except pursuant to a written direction in accordance with paragraph 4
below and then only for the account of the Trust. The Assets shall be subject
to no lien or charge of any kind in favor of the Custodian for itself or for
any other Person claiming through the Custodian. The Custodian shall permit
actual examination of the Assets by the Trust's independent public accountants
at the end of each annual and semi-annual fiscal period of the Trust and at
least one other time during the fiscal year of the Trust chosen by such
independent public accountants and shall permit the inspection of the Assets by
the Commission through its employees or agents during the normal business hours
of the Custodian upon reasonable request.
4. Authorized Actions. The Custodian shall take such actions with
respect to the Assets as directed in writing by any Trustee or by any officer
of the Administrator as may be received by the Custodian from time to time.
5. Custodian's Actions Taken In Good Faith. In connection with the
performance of its duties under this Agreement, the Custodian shall have no
duties or obligations other than those specifically set forth herein or in the
Trust Agreement or as may subsequently be agreed in writing by the parties
hereto and shall be under no liability to the Trust or any Holder for any
action taken in good faith in reliance on any paper, order, certification,
list, demand, request, consent, affidavit, notice, opinion, direction,
endorsement, assignment, resolution, draft or other document, prima facie
properly executed, or for the disposition of the Assets pursuant to the Trust
Agreement or in respect of any action taken or suffered under the Trust
Agreement in good faith, in accordance with an opinion of counsel or at the
direction of the Trustees pursuant hereto; provided that this provision shall
not protect the Custodian against any liability to which it would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties
2
<PAGE> 3
hereunder. Notwithstanding any other provision of this Agreement, the Custodian
shall under no circumstances be liable for any punitive, exemplary, indirect or
consequential damages.
6. Trust Agreement Validity. The Custodian shall not be responsible for the
validity or sufficiency of the Trust Agreement or the due execution thereof, or
for the form, character, genuineness, sufficiency, value or validity of any of
the Assets, and the Custodian shall in no event assume or incur any liability,
duty or obligation to any Holder or to the Trustees, other than as expressly
provided herein. The Custodian shall not be responsible for or in respect of the
validity of any signature by or on behalf of the Trustees.
7. Litigation Obligations; Costs and Indemnity. The Custodian shall not be
under any obligation to appear in, prosecute or defend any action which in its
opinion may involve it in expense or liability, unless it shall be furnished
with such reasonable security and indemnity against such expense or liability as
it may require, and any pecuniary costs of the Custodian from such actions shall
be expenses which are reimbursable pursuant to paragraph 13 hereof.
8. Taxes; Trust Expenses. In no event shall the Custodian be personally
liable for any taxes or other governmental charges imposed upon or in respect of
the Assets or upon the monies, securities or other properties included therein.
The Custodian shall be reimbursed and indemnified by the Trust for all such
taxes and charges, for any tax or charge imposed against the Trust and for any
expenses, including counsel fees, interest, penalties and additions to tax which
the Custodian may sustain or incur with respect to such taxes or charges.
9. Custodian Resignation, Succession. (a) The Custodian may resign by
executing an instrument in writing resigning as Custodian and delivering the
same to the Trustees, not less than 60 days before the date specified in such
instrument when, subject to clause (b) of this paragraph 9, such resignation is
to take effect. Upon receiving such notice of resignation, the Trustees shall
use their reasonable efforts promptly to appoint a successor Custodian in the
manner and meeting the qualifications provided in the Trust Agreement, by
written instrument or instruments delivered to the resigning Custodian and the
successor Custodian.
(b) In case no successor Custodian shall have been appointed within 30 days
after notice of resignation has been received by the Trustees, the resigning
Custodian may forthwith apply to a court of competent jurisdiction for the
appointment of a successor Custodian. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribed, appoint a successor
Custodian.
10. Custodian Removal. The Trust may remove the Custodian upon 60 days'
prior written notice to the Custodian and appoint a successor Custodian. In case
at any time the Custodian shall not meet the requirements set forth in the Trust
Agreement or shall become incapable of acting or if a court having jurisdiction
shall enter a decree or order for relief in
3
<PAGE> 4
respect of the Custodian in an involuntary case, or the Custodian shall commence
a voluntary case, under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or any receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) for the Custodian or for
any substantial part of its property shall be appointed, or the Custodian shall
make any general assignment for the benefit of creditors, or shall generally
fail to pay its debts as they become due, the Trust may remove the Custodian
immediately and appoint a successor Custodian. The termination of the
Administration Agreement or the Paying Agent Agreement shall cause the removal
of the Custodian simultaneously therewith.
11. Transfers to Successor Custodian. Upon the request of any successor
Custodian, the Custodian hereunder shall, upon payment of all amounts due it,
execute and deliver an instrument acknowledged by it transferring to such
successor Custodian all the rights and powers of the retiring Custodian; and
the retiring Custodian shall transfer, deliver and pay over to the successor
Custodian the Assets at the time held by it hereunder, if any, together with
all necessary instruments of transfer and assignment or other documents
properly executed necessary to effect such transfer and such of the records or
copies thereof maintained by the retiring Custodian in the administration
hereof as may be requested by the successor Custodian, and shall thereupon be
discharged from all duties and responsibilities hereunder. Any resignation or
removal of the Custodian shall become effective upon such acceptance of
appointment by the successor Custodian. The indemnification of the resigning
Custodian provided for hereunder shall survive any resignation, discharge or
removal of the Custodian hereunder.
12. Custodian Merger, Consolidation. Any corporation into which the
Custodian may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to
which the Custodian shall be a party, shall be the successor Custodian
hereunder and under the Trust Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto
or thereto, provided that such corporation meets the requirements set forth in
the Trust Agreement and provided further that the Trust has given its prior
written consent to the Custodian with respect to any such merger, conversion or
consolidation.
13. Compensation; Expenses. The Custodian shall receive compensation
for performing the usual, ordinary, normal and recurring services under this
Custodian Agreement and, with the prior written approval of the Trust,
reimbursement for any and all expenses and disbursements incurred hereunder, as
provided in Section 3.1 of the Administration Agreement.
14. Section 17(f) Qualification. The Custodian hereby represents that
it is qualified to act as a custodian under Section 17(f) of the Investment
Company Act.
15. Custodian's Limited Liability. The Trust shall indemnify and hold
the Custodian harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a
4
<PAGE> 5
claim against it and reasonable attorneys' fees and disbursements), liability
or claim incurred by reason of any inaccuracy in information furnished to the
Custodian by the Trustees, or any act or omission in the course of, connected
with or arising out of any services to be rendered hereunder, provided that the
Custodian shall not be indemnified and held harmless from and against any such
loss, damages, cost, expense, liability or claim arising from its willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
its reckless disregard of its duties and obligations hereunder. Neither the
Federal Reserve Book Entry System nor the Depository Trust Company shall be
deemed to be agents of the Custodian.
16. Rights of Set-off: Banker's Lien. The Custodian hereby waives all
rights of set-off or banker's lien it may have with respect to the Assets held
by it as Custodian hereunder.
17. Termination. This Agreement shall terminate upon the earlier of the
termination of the Trust or the appointment of a successor Custodian.
18. Choice of Law. This Agreement is executed and delivered in the
State of New York, and all laws or rules of construction of the State of New
York shall govern the right of the parties hereto and the interpretation of the
provisions hereof.
19. Notices. Any notice to be given to the Trust hereunder shall be in
writing and shall be duly given if mailed or delivered to DECS Trust II, c/o
Peter B. Blanton, Salomon Brothers Inc. Seven World Trade Center, New York, New
York 10048, and to the Custodian if mailed or delivered to The Bank of New York,
101 Barclay Street, Floor 12E, New York, New York 10286, Attention: Mark G.
Walsh, Tel: (212) 815-5228, Fax: (212) 815-7157 or at such other address as
shall be specified by the addressee to the other party hereto in writing.
20. No Third Party Beneficiaries. Nothing herein, express or implied,
shall give to any Person, other than the Trust, the Custodian and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim hereunder.
21. Amendments; Trust Agreement Changes; Waiver. This Agreement shall
not be deemed or construed to be modified, amended, rescinded, canceled or
waived, in whole or in part, except by a written instrument signed by a duly
authorized representative of the party to be charged. The Trustees shall notify
the Custodian of any change in the Trust Agreement prior to the effective date
of any such change. Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
22. Counterparts. This Agreement may be signed in counterparts with
all counterparts one and the same instrument.
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
Trustee
/s/ Peter B. Blanton
-------------------------
Peter B. Blanton
as Trustee
The Bank of New York
By: /s/ Mark G. Walsh
---------------------
Name: Mark G. Walsh
6
<PAGE> 1
Exhibit 99.2.J(ii)
COLLATERAL AGENCY AGREEMENT
THIS COLLATERAL AGENCY AGREEMENT, dated as of this ____ day of November,
1997, among ___________ (the "Pledgor"), a corporation organized under the law
of the Province of Ontario; DECS Trust II (such trust and the trustees thereof
acting in their capacity as such being referred to herein as the "Trust" and
the "Trustees," respectively), a statutory business trust organized under the
Business Trust Act of the State of Delaware pursuant to a Declaration of Trust
dated as of September 4, 1997 (as it may be amended and restated from time to
time, the "Trust Agreement"); The Bank of New York, a New York banking
corporation, as collateral agent (the "Collateral Agent") for the Trust under
the Collateral Agreement (the "Collateral Agreement"), dated as of November
___, 1997, among the Pledgor, the Collateral Agent and the Trust; Royal Group
Technologies Limited, a company amalgamated under the laws of Canada (the
"Company"); and CIBC Mellon Trust Company, a trust company incorporated under
the laws of Canada, as sub-collateral agent (the "Sub-Collateral Agent"), as
stock trustee (the "Stock Trustee") under the Stock Control Agreement referred
to below and as transfer agent (the "Transfer Agent") of the Company's
Subordinate Voting Shares (as defined below).
WITNESSETH:
WHEREAS, the Trust is a non-diversified, closed-end management investment
company, as defined in the Investment Company Act of 1940, formed to purchase
and hold certain U.S. treasury securities, to enter into and hold forward
purchase contracts with one or more existing shareholders of Royal Group
Technologies Limited (the "Company"), including a forward purchase contract
(the "Contract") to which the Pledgor is a party, to hold security for the
performance of such shareholders of their obligations under the forward
purchase contracts pursuant to related collateral agreements, including the
collateral agreement (the "Collateral Agreement") to which the Pledgor is a
party, and to issue DECS in accordance with the terms and conditions of the
Trust Agreement;
WHEREAS, the Pledgor may pledge as security under its Contract and
Collateral Agreement either subordinate voting shares ("Subordinate Voting
Shares") or multiple voting shares ("Multiple Voting Shares" and, together with
Subordinate Voting Shares, "Voting Shares") of the Company;
WHEREAS, the Pledgor, CIBC Mellon Trust Company, as Stock Trustee and as
Transfer Agent, the Company and other holders from time to time of Multiple
Voting Shares have entered into a Stock Control Agreement (the "Stock Control
Agreement"), dated as of November 30, 1994, governing the holding and transfer
of Multiple Voting Shares;
<PAGE> 2
WHEREAS, in order to comply with the terms of the Stock Control Agreement, the
Pledgor, the Trust, the Company and the Collateral Agent desire to engage the
services of the Sub-Collateral Agent to perform certain duties with respect to
the Multiple Voting Shares; and
WHEREAS, the Sub-Collateral Agent is qualified and willing to assume such
duties on the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
1. Appointment of Sub-Collateral Agent; Transfer of Multiple Voting Shares.
The Collateral Agent hereby constitutes and appoints the Sub-Collateral Agent,
and the Sub-Collateral Agent accepts such appointment, as agent of the Trust
and the Collateral Agent and as custodian of all Multiple Voting Shares pledged
by the Pledgor as collateral under the Collateral Agreement to secure its
obligations under the Contract. The Stock Trustee hereby deposits such
Multiple Voting Shares (the particulars of such Multiple Voting Shares being
set forth in Schedule A hereto) with the Sub-Collateral Agent, and the
Sub-Collateral Agent hereby accepts such Multiple Voting Shares into its
custody, and the Stock Trustee shall deliver to the Sub-Collateral Agent all
additional Multiple Voting Shares pledged as collateral under the Collateral
Agreement that are received by the Stock Trustee at any time during the period
of this Agreement, subject to the following terms and conditions. The
Sub-Collateral Agent hereby agrees that it shall hold the certificates
representing the Multiple Voting Shares in a segregated custody account,
separate and distinct from all other accounts, in accordance with Section 17(f)
of, and in such manner as shall constitute the segregation and holding in trust
within the meaning of, the U.S. Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations thereunder. All
certificates representing the Multiple Voting Shares held by the Sub-Collateral
Agent shall be held in Canada. The Sub-Collateral Agent shall be under no duty
or obligation to inspect, review or examine any of the certificates
representing the Multiple Voting Shares to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they are other
than what they purport to be on their face.
2. Multiple Voting Share Disposition. The Sub-Collateral Agent shall have
no power or authority to assign, hypothecate, pledge or otherwise dispose of
the Multiple Voting Shares, except pursuant to and in accordance with paragraph
3 below and then only for the account of the Collateral Agent. The Multiple
Voting Shares shall be subject to no lien or charge of any kind in favor of the
Sub-Collateral Agent for itself or for any other Person claiming through the
Sub-Collateral Agent. The Sub-Collateral Agent shall permit actual examination
of the certificates representing the Multiple Voting Shares by the Trust's
independent public accountants at the end of each annual and semi-annual fiscal
period of the Trust and at least one other time during the fiscal year of the
Trust chosen by such independent public accountants and shall permit the
inspection of the certificates representing the Multiple Voting Shares by the
Commission through its employees or agents during the normal business hours of
the Sub-Collateral Agent upon reasonable written request.
2
<PAGE> 3
3. Authorized Actions. The Sub-Collateral Agent shall take no actions
with respect to the Multiple Voting Shares except as follows:
(a) Upon receipt of written directions from the Pledgor and the
Collateral Agent, the Sub-Collateral Agent shall transfer and deliver to
the Stock Trustee any Multiple Voting Shares that have been released from
their pledge as collateral under the Collateral Agreement and that have
not been converted and are not required at such time to be converted into
Subordinate Voting Shares, whether pursuant to clause (b) of this
paragraph 3 or otherwise; and
(b) Upon receipt of written directions from the Collateral Agent
upon the occurrence of (i) the termination of the Trust, (ii) the
Exchange Date, as defined in the Contract, or (iii) any other event
requiring the delivery under the Contract and the Collateral Agreement of
Subordinate Voting Shares in fulfillment of the obligation of the Pledgor
under the Contract, the Sub-Collateral Agent together with the Stock
Trustee shall effect the conversion of the Multiple Voting Shares held by
the Sub-Collateral Agent into Subordinate Voting Shares, registered as
directed in writing by the Collateral Agent, and the Sub-Collateral Agent
shall deliver such Subordinate Voting Shares to the Collateral Agent in
accordance with an irrevocable direction from the Company to issue
Subordinate Voting Shares addressed to the Stock Trustee as Transfer
Agent, such direction being attached hereto as Schedule B. The
Sub-Collateral Agent shall have no obligation or right to question the
validity of any such written directions received from the Collateral
Agent. Any written directions provided by the Collateral Agent pursuant
to this clause (b) of this paragraph 3 shall be irrevocable.
4. Sub-Collateral Agent's Actions Taken In Good Faith. In connection with
the performance of its duties under this Agreement, the Sub-Collateral Agent
(a) shall have no duties or obligations other than those specifically set forth
herein or as may subsequently be agreed in writing by the parties hereto, (b)
shall have no liability or responsibility arising under any other agreement,
including any agreement referred to in this Agreement to which the
Sub-Collateral Agent is not a party and (c) shall be under no liability to the
Pledgor or the Collateral Agent for any action taken in good faith in reliance
on any paper, order, certification, list, demand, request, consent, affidavit,
notice, opinion, direction, endorsement, assignment, resolution, draft or other
document, prima facie properly executed, or for the disposition of the Multiple
Voting Shares pursuant to the Collateral Agreement or in respect of any action
taken or suffered under the Collateral Agreement in good faith, in accordance
with an opinion of counsel or at the direction of the Pledgor or the Collateral
Agent pursuant hereto; provided that this provision shall not protect the
Sub-Collateral Agent against any liability to which it would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder. Notwithstanding any other provision of this
Agreement, the Sub-Collateral Agent shall under no circumstances be liable for
any punitive, exemplary, indirect or consequential damages.
3
<PAGE> 4
5. Collateral Agreement Validity. The Sub-Collateral Agent shall not be
responsible for the validity or sufficiency of the Collateral Agreement or the
due execution thereof, or for the form, character, genuineness, sufficiency,
value or validity of any of the Multiple Voting Shares, and the Sub-Collateral
Agent shall in no event assume or incur any liability, duty or obligation to
any holder of the DECS issued by the Trust or to the Trustees, other than as
expressly provided herein. The Sub-Collateral Agent shall not be responsible
for or in respect of the validity of any signature by or on behalf of the
Pledgor, the Collateral Agent, the Company or the Trustees.
6. Sub-Collateral Agent Resignation, Succession. (a) The Sub-Collateral
Agent may resign by executing an instrument in writing resigning as
Sub-Collateral Agent and delivering the same to the Pledgor, the Collateral
Agent and the Trustees, not less than 60 days before the date specified in such
instrument when, subject to clause (b) of this paragraph 6, such resignation is
to take effect. Upon receiving such notice of resignation, the Pledgor, the
Collateral Agent and the Trustees shall use their reasonable efforts promptly
to appoint a successor Sub-Collateral Agent in the manner and meeting the
qualifications provided in the Collateral Agreement and the Stock Control
Agreement, by written instrument or instruments delivered to the resigning
Sub-Collateral Agent and the successor Sub-Collateral Agent.
(b) In case no successor Sub-Collateral Agent shall have been appointed
within 30 days after notice of resignation has been received by the Pledgor,
the Collateral Agent and the Trustees, the resigning Sub-Collateral Agent may
forthwith apply to a court of competent jurisdiction at the Pledgor's cost and
expense for the appointment of a successor Sub-Collateral Agent. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribed,
appoint a successor Sub-Collateral Agent.
7. Sub-Collateral Agent Removal. In case at any time the Sub-Collateral
Agent shall not meet the requirements set forth in the Collateral Agreement and
the Stock Control Agreement or shall become incapable of acting or if a court
having jurisdiction shall enter a decree or order for relief in respect of the
Sub-Collateral Agent in an involuntary case, or the Sub-Collateral Agent shall
commence a voluntary case, under any applicable bankruptcy, insolvency, or
other similar law now or hereafter in effect, or any receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) for the
Sub-Collateral Agent or for any substantial part of its property shall be
appointed, or the Sub-Collateral Agent shall make any general assignment for
the benefit of creditors, or shall generally fail to pay its debts as they
become due, either the Trust or the Collateral Agent may remove the
Sub-Collateral Agent immediately and appoint a successor Sub-Collateral Agent.
8. Transfers to Successor Sub-Collateral Agent. Upon the request of any
successor Sub-Collateral Agent and upon compliance with the requirements of the
Stock Control Agreement, the Sub-Collateral Agent hereunder shall, upon payment
of all amounts due it, execute and deliver an instrument acknowledged by it
transferring to such successor Sub-Collateral Agent all the rights and powers
of the retiring Sub-Collateral Agent; and the retiring
4
<PAGE> 5
Sub-Collateral Agent shall transfer and deliver to the successor Sub-Collateral
Agent the Multiple Voting Shares at the time held by it hereunder, if any,
together with all necessary instruments of transfer and assignment or other
documents property executed necessary to effect such transfer and such of the
records or copies thereof maintained by the retiring Sub-Collateral Agent in
the administration hereof as may be requested by the successor Sub-Collateral
Agent, and shall thereupon be discharged from all duties and responsibilities
hereunder. Any resignation or removal of the Sub-Collateral Agent shall become
effective upon such acceptance of appointment by the successor Sub-Collateral
Agent. The indemnification of the resigning Sub-Collateral Agent provided for
hereunder shall survive any resignation, discharge or removal of the
Sub-Collateral Agent hereunder.
9. Sub-Collateral Agent Merger, Consolidation. Any corporation into which
the Sub-Collateral Agent may be merged, converted or amalgamated or with which
it may be consolidated or combined pursuant to a plan of arrangement, or any
corporation resulting from any merger, conversion, amalgamation, consolidation
or plan of arrangement to which the Sub-Collateral Agent shall be a party,
shall be the successor Sub-Collateral Agent hereunder and under the Collateral
Agreement without the execution or filing of any paper, instrument or further
act to be done on the part of the parties hereto or thereto, provided that such
corporation meets the requirements set forth in this Agreement and the
requirements set forth for the Stock Trustee under the Stock Control Agreement.
10. Compensation. The Sub-Collateral Agent shall receive compensation and
reimbursement for reasonable expenses and disbursements from the Pledgor for
performing the usual, ordinary, normal and recurring services under this
Collateral Agency Agreement, as provided by a separate agreement between the
Pledgor and the Sub-Collateral Agent. None of the provisions of this
Collateral Agency Agreement shall require the Sub-Collateral Agent to expend
its own funds or otherwise incur financial liability in the performance of any
of its duties or in the exercise of any of its rights and powers. The
Sub-Collateral Agent may retain legal counsel and advisors in Canada and/or the
State of New York for the purpose of discharging its duties or determining its
rights under this Agreement, and may rely and act upon the advice of such
counsel or advisors. The Pledgor shall pay or reimburse the reasonable
expenses and disbursements of such counsel or advisors.
11. Section 17(f) Qualification. The Sub-Collateral Agent hereby
represents that it is an "Eligible Foreign Custodian," as defined in Rule
17f-5 of the Investment Company Act ("Rule 17f-5").
12. Sub-Collateral Agent's Limited Liability. The Pledgor shall indemnify
and hold the Sub-Collateral Agent harmless from and against any loss, damages,
cost or expense (including the costs of investigation, preparation for and
defense of legal and/or administrative proceedings related to a claim against
it and reasonable attorneys' fees and disbursements), liability or claim
incurred by reason of any act or omission in the course of, connected with or
arising out of any services to be rendered hereunder, provided that the
Sub-Collateral Agent shall
5
<PAGE> 6
not be indemnified and held harmless from and against any such loss, damages,
cost, expense, liability or claim arising from its willful misfeasance, bad
faith or gross negligence in the performance of its duties, or its reckless
disregard of its duties and obligations hereunder. This provision shall
survive the resignation or removal of the Sub-Collateral Agent or the
termination of this Agreement.
13. Rights of Set-Off; Banker's Lien. The Sub-Collateral Agent hereby
waives all rights of set-off or banker's liens it may have with respect to the
Multiple Voting Shares held by it as Sub-Collateral Agent hereunder.
14. Termination. This Agreement shall terminate upon the earlier of the
termination of the Trust or the appointment of a successor Sub-Collateral
Agent. Upon any termination of the Trust, the Sub-Collateral Agent together
with the Stock Trustee shall effect the immediate conversion of all Multiple
Voting Shares held by the Sub-Collateral Agent at such time into Subordinate
Voting Shares and deliver such Subordinate Voting Shares to the Collateral
Agent [in accordance with the irrevocable direction of the Company to issue the
Subordinate Voting Shares].
15. Choice of Law. This Agreement shall be deemed to executed and
delivered in the State of New York, and all laws or rules of construction
of the State of New York shall govern the right of the parties hereto and
the interpretation of the provisions hereof.
16. Notices. Any notice to be given to the Pledgor hereunder shall be in
writing and shall be duly given if mailed or delivered to [name of Pledgor],
_____________, Attention: ____________, Tel: _________, Fax: ___________; to
the Sub-Collateral Agent, Stock Control Trustee and Transfer Agent if mailed or
delivered to CIBC Mellon Trust Company, 393 University Avenue, 5th Floor,
Toronto, Ontario, Canada M5G 1E6, Attention: Manager of Client Services, Tel:
(416) 813-4500, Fax: (416) 813-4555; to the Collateral Agent if mailed or
delivered to The Bank of New York, 101 Barclay Street, Floor 12E, New York, New
York 10286, Attention: Mark G. Walsh, Tel: (212) 815-5228, Fax: (212)
815-7157; to the Company if mailed or delivered to Royal Group Technologies
Limited, 1 Royal Gate Boulevard, Woodbridge, Ontario, Canada L4L 8Z7; and to
the Trust if mailed or delivered to DECS Trust II, c/o Puglisi & Associates,
850 Library Avenue, Suite 204, Newark, Delaware 19711; or at such other address
as shall be specified by the addressee to the other parties hereto in writing.
17. No Third Party Beneficiaries. Nothing herein, express or implied,
shall give to any person, other than the Pledgor, the Trust, the Sub-
Collateral Agent, the Collateral Agent and their respective successors and
assigns, any benefit of any legal or equitable right, remedy or claim
hereunder.
18. Amendments; Stock Control Agreement Changes; Waiver. This Agreement
shall not be deemed or construed to be modified, amended, rescinded, canceled
or waived, in whole or in part, except by a written instrument signed by a duly
authorized representative of all
6
<PAGE> 7
parties hereto. The Stock Trustee shall notify the Sub-Collateral Agent of any
change in the Stock Control Agreement prior to the effective date of any such
change. Failure of any party hereto to exercise any right or remedy hereunder
in the event of a breach hereof by any other party or parties shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
19. No Delegation. Nothing herein, express or implied, shall be deemed to
be a delegation by the Trust to the Collateral Agent of the duties and
responsibilities of a "Foreign Custody Manager" within the contemplation of
Rule 17f-5.
20. Counterparts. This Agreement may be signed in counterparts with all
counterparts constituting one and the same instrument.
21. Further Acts. The parties hereto shall do and perform and cause to be
done and performed such further and other acts and things as may be necessary
or desirable in order to give full effect to this Agreement.
22. Severability. If any provision, or portion thereof, of this Agreement,
or of the application thereof to any person or circumstances shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement, or the
application of such provision or portion thereof, to any other person or
circumstance shall not be affected thereby and each provision of this Agreement
shall be valid and enforceable to fullest extent permitted by law.
23. Entire Agreement. This Agreement shall constitute the entire agreement
between the parties hereto with respect to the subject matter hereof.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
_______________, as Pledgor
By:
Vic De Zen
as Director
DECS
Trust II
Donald J. Puglisi
as Managing Trustee
The
Bank of New York, as Collateral
Agent
By:
Name: Mark G. Walsh
Title:
CIBC
Mellon Trust Company, as
Sub-Collateral Agent, Stock
Trustee and Transfer Agent
By:
Name:
Title:
8
<PAGE> 9
SCHEDULE A
Multiple Voting Shares
9
<PAGE> 10
SCHEDULE B
Irrevocable Direction
10
<PAGE> 1
Exhibit 99.2.K.(i)
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT dated as of this day of November, 1997
by and between The Bank of New York, a New York banking corporation (the
"Administrator"), and DECS Trust II (such trust and the trustees thereof acting
in their capacity as such being referred to herein as the "Trust"), a statutory
business trust organized under the Business Trust Act of the State of Delaware
pursuant to a Declaration of Trust dated as of September 2, 1997, as amended
and restated as of October 22, 1997 (the "Trust Agreement").
WITNESSETH
WHEREAS, the Trust is a non-diversified, closed-end management investment
company, as defined in the Investment Company Act of 1940 (the "Investment
Company Act"), formed to purchase and hold certain U.S. treasury securities
(the "Treasury Securities"), to enter into and hold forward purchase contracts
with one or more existing shareholders (the "Sellers") of Royal Group
Technologies Limited (the "Company") (individually, a "Contract" and
collectively, the "Contracts") and to issue DECS in accordance with the terms
and conditions of the Trust Agreement;
WHEREAS, the Trust desires to engage the services of the Administrator to
assume certain duties and responsibilities of the Trust under the Trust
Agreement and the Investment Company Act and to undertake certain services on
behalf of and subject to the supervision of the Trust as provided herein; and
WHEREAS, the Administrator is qualified and willing to assume such duties
and responsibilities and to undertake to render such services, subject to the
supervision of the Trust, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms not otherwise defined herein shall
have the respective meanings specified in the Trust Agreement.
ARTICLE II
ENGAGEMENT OF ADMINISTRATOR
2.1. Engagement. The Trust hereby engages the Administrator, and the
Administrator hereby agrees to be so engaged, to provide or cause the provision
of the services hereinafter enumerated.
<PAGE> 2
2.2. Services of Administrator. Subject to the supervision of the Trust,
the Administrator shall on behalf of the Trust take the actions set forth in
Sections 2.6, 2.7 and 2.8 of the Trust Agreement, to the extent such
responsibilities can lawfully be delegated to the Administrator; provided,
however, that the Administrator shall not (i) render investment advisory
services to the Trust as defined in the Investment Company Act or the
Investment Advisers Act of 1940; (ii) have the power of the Trustees to sell
the Treasury Securities except as provided in Section 2.8 of the Trust
Agreement; or (iii) have the power to select the independent public accountants
for the Trust. Additionally, the Administrator shall be responsible for
rendering the following services:
(a) instructing the Paying Agent on behalf of the Trust to take the
actions set forth in Sections 2.6, 2.7, 2.8 and 3.5 of the Trust Agreement and
to otherwise perform the duties of the Paying Agent referred to in the Trust
Agreement;
(b) with the approval of the Trustees, engaging legal and other
professional advisors, other than the Trust's independent public accountants as
provided in clause 2.2 (iii) above;
(c) receiving all demands, bills and invoices for expenses incurred by or
on behalf of the Trust and pay the same, or causing the Paying Agent to pay the
same, out of moneys paid to the Administrator pursuant to the Fund Expense
Agreement dated the date hereof between Salomon Brothers Inc and The Bank of
New York (the "Fund Expense Agreement") but in no event out of any assets of
the Trust, and giving notice to Salomon Brothers Inc pursuant to the Fund
Indemnity Agreement dated the date hereof between Salomon Brothers Inc and the
Trust (the "Fund Indemnity Agreement") of any claim for Indemnification
Expenses (as defined in the Fund Indemnity Agreement) or any threatened claim
for Indemnification Expenses;
(d) (i) keeping or causing to be kept all the books and records of the
Trust (other than those to be kept by the Paying Agent), and (ii) preparing
and, as necessary, mailing, filing or publishing, or, as appropriate, directing
the Paying Agent or causing the legal and other professional advisors engaged
pursuant to Section 2.2(b) to prepare and, as necessary, mail, file or publish,
any and all notices, proxies, reports and other communications and documents as
required under the Trust Agreement, the Investment Company Act, the Securities
Exchange Act of 1934, or the Code, or, as reasonably requested by the Trustees,
under any other applicable laws, rules or regulations or otherwise; provided,
however, that responsibility for the adequacy and accuracy of any such reports,
returns, etc. shall be that of the Trustees and provided, further, that the
Administrator shall have no liability for the adequacy or accuracy of such
reports, returns, etc.;
(e) at the request of the Trustees and upon being furnished with such
reasonable security and indemnity against any related expense or liability as
the Administrator may require, instituting and prosecuting, in accordance with
the instructions of the Trustees, legal or other appropriate proceedings to
enforce any and all rights and remedies of the Trust;
<PAGE> 3
(f) receiving and reviewing on behalf of the Trust all notices, reports,
certificates and other documents regarding the Contracts and the Treasury
Securities;
(g) making or causing to be made all necessary arrangements with respect
to meetings of Trustees and meetings of Holders, including, without limitation,
the preparation of notices, proxies and minutes, subject to the approval of the
Trustees; and
(h) in conjunction with the Trustees, determining and publishing, in such
manner as the Trustees shall direct in writing, the Trust's net asset value in
accordance with Section 8.2(c) of the Trust Agreement and the Trust's policy as
set forth in the Prospectus.
2.3. Certain Rights of the Administrator. In connection with the
performance of its duties under this Agreement, the Administrator shall not be
liable to the Trust, the Trustees or any Holder (i) for any action taken or for
refraining from taking any action hereunder except in the case of its willful
misfeasance, bad faith, gross negligence or the reckless disregard of its
duties hereunder, (ii) with respect to any action taken or omitted to be taken
by it in good faith in accordance with the directions of the Trustees or of any
Trustee or (iii) in connection with the performance of its duties under Section
2.2(h) hereof, for good faith reliance upon information furnished by third
parties selected by the Administrator with due care. The Administrator shall
under no circumstances be liable for any punitive, exemplary, indirect or
consequential damages. The Administrator may consult with counsel and the
written advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon. The Administrator may perform its
duties and exercise its rights hereunder either directly or by or through
agents or attorneys appointed with due care by it but shall be liable for the
acts and omissions of such persons to the same extent as if the functions had
been performed by the Administrator itself (except as to the extent that the
Trustees shall have directed the Administrator to retain such persons, in which
event the Administrator shall not be liable for such person's acts or
omissions). Without limiting the generality of the preceding sentence, the
Administrator (i) may select and employ independent public accountants
acceptable to the Trustees (other than the independent public accountants
referred to in clause (iii) of Section 2.2 of this Agreement and Section 2.5(d)
of the Trust Agreement) to keep the financial books and records of the Trust,
to prepare the financial statements of the Trust and to prepare Trust tax
returns, and (ii) may select and engage attorneys acceptable to the Trustees to
prepare annual, semiannual and periodical reports, notices of meetings and
proxy statements, annual reports to Holders and other documents required under
the Investment Company Act or the Securities Exchange Act of 1934. The
Administrator shall not be liable and shall be fully protected in acting upon
any writing or document reasonably believed by it to be genuine and to have
been given, signed or made by the proper person or persons and shall not be
held to have any notice of any change of authority of any person until receipt
of written notice thereof from a Trustee.
2.4. Power of Attorney. The Trustees hereby appoint the Administrator,
acting through any duly appointed officer, the attorney-in-fact and agent of
the Trust for the purpose of performing the duties prescribed in Sections
2.2(d)(ii) and 2.2(g) hereof.
<PAGE> 4
2.5. Delivery of Certain Documents. The Trust will deliver to the
Administrator, promptly following the execution hereof: (a) a complete
conformed copy of the Registration Statement of the Trust under the Securities
Act and the Investment Company Act, including all amendments, exhibits and
schedules thereto; and (b) the EDGAR access codes (Central Index Key, CIK
Confirmation Code, Password and Password Modification Access Code) employed to
file such Registration Statement.
ARTICLE III
COMPENSATION OF ADMINISTRATOR
3.1. Compensation. (a) For services to be rendered by the Administrator
(i) pursuant to this Agreement, (ii) as custodian under the Custodian
Agreement, dated as of October 8, 1997, between the Administrator, as
custodian, and the Trust, (iii) as paying agent under the Paying Agent
Agreement, dated as of November , 1997, between the Administrator, as paying
agent, and the Trust, (iv) as collateral agent under the Collateral Agreements,
dated as of November , 1997, among the Administrator, as collateral agent,
each of the Sellers and the Trust, and (v) as collateral agent under the
Collateral Agent Agreements, dated as of November , 1997, among the
Administrator, as collateral agent, [1260333 Ontario Limited] as pledgor, CIBC
Mellon Trust Company, as sub-collateral agent, and the Trust, and for the
payment of Trust expenses pursuant to Section 2.2(c) hereof, the Administrator
shall receive only such fees and expenses as shall be paid to it pursuant to
the terms of the Fund Expense Agreement and shall have no recourse to the
assets of the Trust for the payment of any such amounts.
(b) In connection with the performance of the services referred to in
Section 3.1(a) hereof, the Administrator, as such or in any other capacity,
shall not be required to advance, expend or risk its own funds or otherwise
incur or become exposed to financial liability in the performance of its duties
hereunder or under the other agreements referred to in Section 3.1(a) hereof.
3.2. Additional Services. If and to the extent that the Trustee shall
request the Administrator to render services for the Trust, other than those to
be rendered by the Administrator hereunder, and if the Administrator agrees to
render such services, such additional services shall be compensated separately
on terms to be agreed upon between the Administrator and the Trustees from time
to time.
ARTICLE IV
TERMINATION
4.1. Termination.
(a) This Agreement shall terminate immediately upon written notice of
termination from the Trustees to the Administrator if any of the following
events shall occur:
(i) If the Administrator shall violate or default in the
performance of any provision of this Agreement, the Trust Agreement or
the Investment Company Act, and
<PAGE> 5
after notice of such violation or default, shall not cure such violation
or default within 30 days; or
(ii) If the Administrator shall be adjudged bankrupt or insolvent
by a court of competent jurisdiction, or an order shall be made by a
court of competent jurisdiction for the appointment of a receiver,
liquidator or trustee of the Administrator, or of all or substantially
all of its property by reason of the foregoing, or approving any petition
filed against the Administrator for its reorganization, and such
adjudication or order shall remain in force or unstayed for a period of
30 days; or
(iii) If the Administrator shall institute proceedings for
voluntary bankruptcy, or shall file a petition seeking reorganization
under the Federal bankruptcy laws, or for relief under any law for the
relief of debtors, or shall consent to the appointment of a receiver of
the Administrator or of all or substantially all of its property, or
shall make a general assignment for the benefit of its creditors, or
shall admit in writing its inability to pay its debts generally as they
become due; or
(iv) Upon the voluntary or involuntary dissolution of the
Administrator or, unless the Trust shall have given its prior written
consent thereto, the merger or consolidation of the Administrator with
any other entity.
If any of the events specified in clauses (ii), (iii) or (iv) of this
Section 4.1(a) shall occur, the Administrator shall give immediate written
notice thereof to the Trustee.
(b) Notwithstanding anything to the contrary contained herein, this
Agreement shall terminate immediately (i) upon termination of the Trust
Agreement, (ii) upon termination of the Paying Agent Agreement, (iii) upon
termination of all Collateral Agreements, (iv) upon termination of the
Custodian Agreement or (v) upon the resignation or removal of the Custodian.
(c) The Trustees may remove the Administrator, or the Administrator may
resign, and thereby terminate this Agreement without penalty upon 60 days'
prior written notice to the other party hereto; provided that neither party
hereto may terminate this Agreement pursuant to this Section 4.1(c) unless a
successor Administrator shall have been appointed and shall have accepted the
duties of the Administrator. If, within 30 days after notice by the
Administrator to the Trustees of termination of this Agreement, no successor
Administrator shall have been selected and accepted the duties of the
Administrator, the Administrator may apply to a court of competent jurisdiction
for the appointment of a successor Administrator.
4.2. Effect of Termination. The Administrator shall forthwith upon
termination of this Agreement deliver to the Trustees any records or other
property of the Trust then in the possession or custody of the Administrator.
Any obligation to indemnify the Administrator pursuant to Section 6.6 hereof
shall survive the termination of this Agreement.
ARTICLE V
RECORDS AND REPORTS
<PAGE> 6
5.1. Books and Records; Inspection and Copying. The Administrator shall
keep, or cause to be kept, appropriate, and reasonably detailed and accurate,
books and records of all its activities pursuant to this Agreement. The
Trustees shall have the right to inspect such books and records during the
Administrator's normal business hours upon reasonable request, and to make
copies of the same at the expense of the Trust.
5.2. Access to Information. The Administrator shall make available to
each of the Trustees all information it receives and compiles with respect to
the Contracts and the Treasury Securities, the moneys available to the Trust,
the financial condition of the Trust and all other relevant matters concerning
the Trust.
ARTICLE VI
MISCELLANEOUS
6.1. Binding Effect. Any corporation into which the Administrator may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Administrator shall be a party, shall be the successor Administrator hereunder
and under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto,
provided that such corporation meets the requirements set forth in the Trust
Agreement and provided further that the Trustees have given their prior written
consent to the Administrator with respect to any such merger, conversion or
consolidation. This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
6.2. Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the matters contained herein and supersedes
all prior agreements or understandings, whether oral or written. This
Agreement shall not be amended, changed, modified, or discharged, in whole or
in part, except by an instrument in writing signed by both parties hereto, or
their respective successors or permitted assigns.
6.3. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing, and shall, unless some
other method of giving such notice, report or other communication is accepted
by the party to whom it is to be given or is required by the Trust Agreement or
the Investment Company Act, be given by being mailed by U.S. first class mail,
certified or registered, return receipt requested, postage prepaid, to the
following addresses of the parties hereto:
<TABLE>
<S> <C>
The Trust: DECS Trust II
c/o Puglisi and Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
The Administrator: The Bank of New York
101 Barclay Street,
Floor 12E
New York, New York 10286
Attn: Mark G. Walsh
Telephone: 212-815-5228
Telecopier: 212-815-7157
</TABLE>
Any party may at any time give written notice to the other party that it
wishes to change its address for the purposes of this Section 6.3.
6.4. Applicable Law. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of New York as at the
time in effect except to the extent such law is preempted by federal law.
6.5. Non-assignability. This Agreement and the rights and obligations of
the parties hereunder may not be assigned or delegated by either party without
the prior written consent of the other party.
6.6. Indemnification. The Trust shall indemnify and hold the
Administrator harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of
any inaccuracy in information furnished to the Administrator by the Trustees,
or any act or omission in the course of, connected with or arising out of any
services to be rendered hereunder, provided that the Administrator shall not be
indemnified and held harmless from and against any such loss, damages, cost,
expense, liability or claim incurred by reason of its willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or its reckless
disregard of its duties and obligations hereunder.
6.7. Provisions of Law to Control. This Agreement shall be subject to the
applicable provisions of the Investment Company Act and the rules and
regulations of the Commission thereunder. To the extent that any provisions
herein contained conflict with any applicable provisions of the Investment
Company Act or such rules and regulations, the latter shall control.
6.8. Counterparts. This Agreement may be signed in counterparts with all
counterparts constituting one and the same instrument.
<FF>
<PAGE> 8
IN WITNESS WHEREOF, the parties have hereunto executed this Administration
Agreement as of the day and year first above written.
DECS TRUST II
-----------------------------------
Donald J. Puglisi, as Trustee
850 Library Avenue, Suite 204
Newark, Delaware 19715
-----------------------------------
William R. Latham III, as Trustee
850 Library Avenue, Suite 204
Newark, Delaware 19715
----------------------------------
James B. O'Neill, as Trustee
850 Library Avenue, Suite 204
Newark, Delaware 19715
THE BANK OF NEW YORK
By:
------------------------------
Name:
Title:
<PAGE> 1
Exhibit 99.2.K(ii)
PAYING AGENT AGREEMENT
This PAYING AGENT AGREEMENT dated as of this day of November 1997, by
and between The Bank of New York, a New York banking corporation (the "Paying
Agent"), and DECS Trust II (such trust and the trustees thereof acting in their
capacity as such being referred to herein as the "Trust"), a statutory business
trust organized under the Business Trust Act of the State of Delaware pursuant
to a Declaration of Trust dated as of September 2, 1997, as amended and
restated as of October 22, 1997 (the "Trust Agreement").
WITNESSETH
WHEREAS, the Trust is a non-diversified, closed-end management investment
company, as defined in the Investment Company Act of 1940 (the "Investment
Company Act"), formed to purchase and hold the U.S. treasury securities (the
"Treasury Securities"), to enter into and hold forward purchase contracts with
one or more existing shareholders of Royal Group Technologies Limited
(individually, a "Contract" and collectively, the "Contracts") and to issue
DECS to the public in accordance with the terms and conditions of the Trust
Agreement;
WHEREAS, the Trustees desire to engage the services of the Paying Agent to
assume certain responsibilities and to perform certain duties as the transfer
agent, registrar and paying agent with respect to the DECS upon the terms and
conditions of this Agreement; and
WHEREAS, the Paying Agent is qualified and willing to assume such
responsibilities and to perform such duties, subject to the supervision of the
Trustees, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms not otherwise defined herein shall
have the respective meanings specified in the Trust Agreement.
ARTICLE II
PAYING AGENT
2.1 Appointment of Paying Agent and Acceptance. The Trust Agreement
provides that The Bank of New York shall act as the initial Paying Agent. The
Bank of New York hereby accepts such appointment and agrees to act in
accordance with its standard procedures and the provisions of the Trust
Agreement and the provisions set forth in this Article
<PAGE> 2
II as Paying Agent with respect to the DECS. Without limiting the generality
of the foregoing, The Bank of New York, as Paying Agent, agrees that it shall
establish and maintain the Trust Account, subject to the provisions of Section
2.3 hereof.
2.2 Certificates and Notices. The Trustees shall deliver to the Paying
Agent the certificates and notices required to be delivered to the Paying Agent
pursuant to the Trust Agreement, and the Paying Agent shall mail or publish
such certificates or notices as required by the Trust Agreement, but the Paying
Agent shall have no responsibility to confirm or verify the accuracy of
certificates or notices of the Trustees so delivered.
2.3 Payments and Investments. The Paying Agent shall make payments out of
the Trust Account as provided in Section 3.3 of the Trust Agreement. The
Paying Agent on behalf of the Trust shall effect the transactions set forth in
Sections 2.6, 2.7, 2.8, 3.5 and 8.3 of the Trust Agreement upon instructions to
do so from the Administrator (except that with respect to its obligations under
Section 8.3 of the Trust Agreement, the Paying Agent shall act without
instructions from the Administrator) and shall invest moneys on deposit in the
Trust Account in the Temporary Investments in accordance with Section 3.5 of
the Trust Agreement. Except as otherwise specifically provided herein or in
the Trust Agreement, the Paying Agent shall not have the power to sell,
transfer or otherwise dispose of any Temporary Investment prior to the maturity
thereof, or to acquire additional Temporary Investments. The Paying Agent
shall hold any Temporary Investments to its maturity and shall apply the
proceeds thereof paid upon maturity to the payment of the next succeeding
Quarterly Distribution. All such Temporary Investments shall be selected by
the Trustees from time to time or pursuant to standing instructions from the
Trustees, and the Paying Agent shall have no liability to the Trust or any
Holder or any other Person with respect to any such Temporary Investment.
2.4 Instructions from Administrator. The Paying Agent shall execute all
instructions received from an officer of the Administrator, except to the
extent that they conflict with or are contrary to the terms of the Trust
Agreement or this Agreement.
ARTICLE III
TRANSFER AGENT AND REGISTRAR
3.1 Original Issue of Certificates. On the date DECS sold pursuant to the
Underwriting Agreement are originally issued, certificates for such DECS shall
be issued by the Trust, and, at the request of the Trustees, registered in such
names and such denominations as the Underwriters shall have previously
requested of the Trustees, executed manually or in facsimile by the Managing
Trustee and countersigned by the Paying Agent. At no time shall the aggregate
number of DECS represented by such countersigned certificates exceed the number
of then outstanding DECS except as permitted by Section 3.4 hereof.
3.2 Registry of Holders. The Paying Agent shall maintain a registry of
the Holders of the DECS.
3.3 Registration of Transfer of DECS. DECS shall be registered for
transfer or exchange, and new certificates shall be issued, in the name of the
designated transferee or
<PAGE> 3
transferees, upon surrender of the old certificates in form deemed by the
Paying Agent properly endorsed for transfer with (a) all necessary endorsers'
signatures guaranteed in such manner and form as the Paying Agent may require
by a guarantor reasonably believed by the Paying Agent to be responsible, (b)
such assurances as the Paying Agent shall deem necessary or appropriate to
evidence the genuineness and effectiveness of each necessary endorsement and
(c) satisfactory evidence of compliance with all applicable laws relating to
the collection of taxes or funds necessary for the payment of such taxes.
3.4 Lost Certificates. If there shall be delivered to the Paying Agent
(a) evidence to its satisfaction of the destruction, loss or theft of any
certificate for DECS and (b) such security or indemnity as may be required by
it to hold it and any of its agents harmless, then, in the absence of notice to
the Paying Agent that such certificate has been acquired by a bona fide
purchaser, the Managing Trustee shall execute and upon its request the Paying
Agent shall countersign and deliver, in lieu of any such destroyed, lost or
stolen certificate, a new certificate of like tenor bearing a number not
contemporaneously outstanding. Any request by the Managing Trustee to the
Paying Agent to issue a replacement or new certificate pursuant to this Section
3.4 shall be deemed to be a representation and warranty by the Trust to the
Paying Agent that such issuance will comply with provisions of law, the Trust
Agreement and the resolutions adopted by the Trustees with respect to lost
securities. If, after the delivery of such new certificate, a bona fide
purchaser of the original certificate in lieu of which such new certificate was
issued presents for payment such original certificate, the Trust and the Paying
Agent shall be entitled to recover such new certificate from the person to whom
it was delivered or any transferee thereof, except a bona fide purchaser, and
shall be entitled to recover upon the security or indemnity provided therefor
to the extent of any loss, damage, cost or expense incurred by the Trust or the
Paying Agent in connection therewith. Upon the issuance of any new certificate
under this Section 3.4, the Trust and the Paying Agent may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Paying Agent) connected therewith.
3.5 Transfer Books. The Paying Agent shall maintain the transfer books
listing the Holders of the DECS. In case of any written request or demand for
the inspection of the transfer books of the Trust or any other books in the
possession of the Paying Agent, the Paying Agent will notify the Trustees and
secure instructions as to permitting or refusing such inspection. The Paying
Agent reserves the right, however, to exhibit the transfer books or other books
to any person in case it is advised by its counsel that its failure to do so
would be unlawful.
3.6 Disposition of Canceled Certificates, Records. The Paying Agent shall
retain certificates which have been canceled in transfer or in exchange and
accompanying documentation in accordance with applicable rules and regulations
of the Commission for six calendar years from the date of such cancellation,
and shall make such records available during this period at any time, or from
time to time, for reasonable periodic, special or other examinations by
representatives of the Commission and the Board of Governors of the Federal
Reserve System. Thereafter such records shall not be destroyed by the Paying
Agent but will be safely stored for possible future reference. In case of any
request or demand for the inspection of
<PAGE> 4
the register of the Trust or any other books in the possession of the Paying
Agent, the Paying Agent will notify the Trustees and secure instructions as to
permitting or refusing such inspection. The Paying Agent reserves the right,
however, to exhibit the register or other records to any person in case it is
advised by its counsel that its failure to do so would (i) be unlawful or (ii)
expose it to liability, unless the Trustees shall have offered indemnification
satisfactory to the Paying Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to the Paying Agent that:
(a) the Trust is a validly existing trust under the
laws of the State of Delaware and the Trustees have full power
under the Trust Agreement to execute and deliver this
Agreement and to authorize, create and issue the DECS;
(b) this Agreement has been duly and validly
authorized, executed and delivered by the Trust and
constitutes the valid and binding agreement of the Trust,
enforceable against the Trust in accordance with its terms,
subject as to such enforceability to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general
equitable principles;
(c) the form of the certificate evidencing the DECS
complies with all applicable laws of the State of Delaware and
the State of New York;
(d) the DECS have been duly and validly authorized,
executed and delivered by the Trust and are validly issued;
(e) the DECS have been registered under the
Securities Act of 1933, the Trust has been registered under
the Investment Company Act, and no further action by or before
any governmental body or authority of the United States or of
any state thereof is required in connection with the execution
and delivery of this Agreement or the issuance of the DECS;
(f) the execution and delivery of this Agreement and
the issuance and delivery of the DECS do not and will not
conflict with, violate, or result in a breach of, the terms,
conditions or provisions of, or constitute a default under,
the Trust Agreement, any law or regulation, any order or
decree of any court or public authority having jurisdiction
over the Trust, or any mortgage, indenture, contract,
agreement or undertaking to which the Trust or the Trustees
are a party or by which any of them are bound; and
(g) no taxes are payable upon or in respect of the
execution of this Agreement or the issuance of the DECS.
<PAGE> 5
ARTICLE V
DUTIES AND RIGHTS
5.1 Duties.
(a) The Paying Agent is acting solely as agent for
the Trust hereunder and owes no fiduciary duties to any other
Person by reason of this Agreement.
(b) In the absence of bad faith, gross negligence or
willful misfeasance on its part in the performance of its
duties hereunder or its reckless disregard of its duties and
obligations hereunder, the Paying Agent shall not be liable
for any action taken, suffered or omitted in the performance
of its duties under this Agreement or in accordance with any
direction or request of the Managing Trustee not inconsistent
with the provisions of this Agreement. The Paying Agent shall
under no circumstances be liable for any punitive, exemplary,
indirect or consequential damages hereunder.
5.2. Rights.
(a) The Paying Agent may rely and shall be protected
in acting or refraining from acting upon any communication
authorized hereby and upon any written instruction, notice,
request, direction, consent, report, certificate, share
certificate or other instrument, paper or document reasonably
believed by it to be genuine. The Paying Agent shall not be
liable for acting upon any telephone communication authorized
hereby which the Paying Agent believes in good faith to have
been given by the Trustees.
(b) The Paying Agent may consult with legal counsel
and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Paying Agent shall not be required to
advance, expend or risk its own funds or otherwise incur or
become exposed to financial liability in the performance of
its duties hereunder.
(d) The Paying Agent may perform its duties and
exercise its rights hereunder either directly or by or through
agents or attorneys appointed with due care by it hereunder.
5.3 Disclaimer. The Paying Agent makes no representations as to (a) the
first two recitals of this Agreement or (b) the validity or adequacy of the
DECS.
<PAGE> 6
5.4 Compensation, Expenses and Indemnification.
(a) The Paying Agent shall receive for all services
rendered by it under this Agreement and, upon the prior
written approval of the Trustees, for all expenses,
disbursements and advances incurred or made by the Paying
Agent in accordance with any provision of this Agreement
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), the compensation set
forth in Section 3.1 of the Administration Agreement.
(b) The Trust shall indemnify the Paying Agent for
and hold it harmless against any loss, liability, claim or
expense (including the costs of investigation, preparation for
and defense of legal and/or administrative proceedings
relating to a claim against it and reasonable attorneys' fees
and disbursements) arising out of or in connection with the
performance of its obligations under this Agreement, provided
such loss, liability or expense is not the result of gross
negligence, willful misfeasance or bad faith on its part in
the performance of its duties hereunder or its reckless
disregard of its duties or obligations hereunder, including
the costs and expenses of defending itself against any claim
or liability in connection with its exercise or performance of
any of its duties or obligations hereunder and thereunder.
The indemnification provided by this Section 5.4(b) shall
survive the termination of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Term of Agreement.
(a) The term of this Agreement is unlimited unless
terminated as provided in this Section 6.1 or unless the Trust
is terminated, in which case this Agreement shall terminate
ten days after the date of termination of the Trust. This
Agreement may be terminated by either party hereto without
penalty upon 60 days' prior written notice to the other party
hereto; provided that neither party hereto may terminate this
Agreement pursuant to this Section 6.1(a) unless a successor
Paying Agent shall have been appointed and shall have accepted
the duties of the Paying Agent. The termination of the
Administration Agreement or the resignation or removal of the
Custodian shall cause the termination of this Agreement
simultaneously therewith. If, within 30 days after notice by
the Paying Agent of termination of this Agreement, no
successor Paying Agent shall have been selected and accepted
the duties of the Paying Agent, the Paying Agent may apply to
a court of competent jurisdiction for the appointment of a
successor Paying Agent.
(b) Except as otherwise provided in this paragraph
(b), the respective rights and duties of the Trust and the
Paying Agent under this Agreement shall cease upon termination
of this Agreement. The Trust's representations, warranties,
covenants and obligations to the Paying Agent under Sections 4
and 5.4 hereof
<PAGE> 7
shall survive the termination hereof. Upon termination of the
Agreement, the Paying Agent shall, at the Trust's request, promptly
deliver to the Trust or to any successor Paying Agent as requested
by the Trust (i) copies of all books and records maintained by it
and (ii) any funds deposited with the Paying Agent by the Trust.
6.2 Communications. Except for communications authorized to be made by
telephone pursuant to this Agreement, all notices, requests and other
communications to any party hereunder shall be in writing (including telecopy
or similar writing) and given to such person at its address or telecopy number
set forth below:
<TABLE>
<S> <C>
If to the Trust, DECS Trust II
addressed c/o Puglisi and Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
</TABLE>
with a copy to the Administrator if the duties of the Administrator are being
performed by a Person other than the Person performing the obligations of the
Paying Agent.
<TABLE>
<S> <C>
If to the Paying Agent, The Bank of New York
addressed 101 Barclay Street, Floor 12E
New York, New York 10286
Attn: Mark G. Walsh
Telephone: 212-815-5228
addressed: Telecopier: 212-815-7183
</TABLE>
or such other address or telecopy number as such party may hereafter specify
for such purposes by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified
herein. Communications shall be given on behalf of the Trust by the Trustees
(or by the Administrator, provided that the Trust shall not have delivered to
the Paying Agent an instrument in writing revoking the authorization of the
Administrator to act for it pursuant hereto) and on behalf of the Paying Agent
by a Senior Vice President or Vice President of the Paying Agent assigned to
its Corporate Trust Department.
6.3 Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter
hereof.
6.4 No Third Party Beneficiaries. Nothing herein, express or implied,
shall give to any Person, other than the Trustees, the Paying Agent and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim hereunder.
<PAGE> 8
6.5 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed
to be modified, amended, rescinded, canceled or waived, in
whole or in part, except by a written instrument signed by a
duly authorized representative of the party to be charged.
The Trust shall notify the Paying Agent of any change in the
Trust Agreement prior to the effective date of any such
change.
(b) Failure of either party hereto to exercise any
right or remedy hereunder in the event of a breach hereof by
the other party shall not constitute a waiver of any such
right or remedy with respect to any subsequent breach.
6.6 Successors and Assigns. Any corporation into which the Paying Agent
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Paying Agent shall be a party, shall be the successor Paying Agent under the
Trust Agreement without the execution or filing of any paper, instrument or
further act to be done on the part of the parties hereto, provided that such
corporation meets the requirements set forth in the Trust Agreement and
provided further that the Trust has given its prior written consent to the
Paying Agent with respect to any such merger, conversion or consolidation.
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors of each of the Trust and the Paying
Agent. This Agreement shall not be assignable by either the Trust or the
Paying Agent without the prior written consent of the other party.
6.7 Severability. If any clause, provision or section hereof shall be
ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections hereof.
6.8 Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
6.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of law.
<FF>
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
DECS TRUST II
----------------------------------
Donald J. Puglisi, as Trustee
850 Library Avenue, Suite 204
Newark, Delaware 19715
----------------------------------
William R. Latham III, as Trustee
850 Library Avenue, Suite 204
Newark, Delaware 19715
----------------------------------
James B. O'Neill, as Trustee
850 Library Avenue, Suite 204
Newark, Delaware 19715
THE BANK OF NEW YORK
By:
-------------------------------
Name: Mark G. Walsh
<PAGE> 1
Exhibit 99.2.K (iii)
FORWARD PURCHASE AGREEMENT
THIS AGREEMENT is made as of this ___ day of October, 1997 between
[Selling Shareholder] ("Seller" and, together with the Other Sellers (as
defined below), "Sellers"), Corporate Seller Control Person (as defined below),
and DECS Trust II, a business trust organized under the laws of the State of
Delaware under and by virtue of an Amended and Restated Declaration of Trust,
dated as of October 22, 1997 (the "Declaration of Trust") (such trust and the
trustees thereof acting in their capacity as such being referred to herein as
"Purchaser").
WHEREAS, Seller owns either Subordinate Voting Shares, without par value
(the "Subordinate Voting Shares"), of Royal Group Technologies Limited, a
corporation organized under the law of Canada (including its successors, the
"Company"), or Multiple Voting Shares, without par value (the "Multiple Voting
Shares" and, together with the Subordinate Voting Shares, "Voting Shares"), of
the Company that are convertible into Subordinate Voting Shares;
WHEREAS, Purchaser has filed with the U.S. Securities and Exchange
Commission a registration statement contemplating the offering of up to
3,577,500 DECS (the "DECS"), the terms of which contemplate delivery by
Purchaser to the holders thereof of a number of Subordinate Voting Shares (or,
if some or all of the Sellers exercise their cash settlement option, cash in
lieu of part or all thereof), on November 15, 2000 (the "Sale Date");
WHEREAS, in exchange for certain consideration to be paid by Purchaser
hereunder and under other similar agreements, Purchaser and Sellers desire to
provide for the future acquisition, sale and delivery of the aggregate number
of Subordinate Voting Shares contemplated to be delivered by Purchaser in
respect of the DECS on the Sale Date, at a price to be established under this
Agreement and such other agreements;
WHEREAS, Seller has agreed to enter into a Collateral Agreement (the
"Collateral Agreement") among Seller, Purchaser and The Bank of New York, as
collateral agent (the "Collateral Agent"), substantially in the form of Exhibit
A hereto, pursuant to which Seller will grant Purchaser a security interest in
the Subordinate Voting Shares or Multiple Voting Shares specified therein and
in certain other circumstances certain other collateral to secure the
obligations of Seller hereunder;
[WHEREAS, Seller has agreed to enter into a Collateral Agency Agreement
(the "Collateral Agency Agreement") among Seller, Purchaser, the Collateral
Agent, the Company
This is a form of Forward Purchase Agreement. A substantially identical
agreement will be entered into by each Seller. Text surrounded by "[ ]" will
appear only in the Forward Purchase Agreements for the Sellers selling
Additional Shares. Text surrounded by "{ }" will appear only in the other
Forward Purchase Agreements.
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and CIBC Mellon Trust Company, as sub-collateral agent (the "Sub-Collateral
Agent"), relating to the Multiple Voting Shares pledged by Seller as
collateral;]
WHEREAS, Purchaser has agreed, pursuant to an underwriting agreement,
dated ___________, 1997 (the "Underwriting Agreement"), among Purchaser,
Seller, the other entities named as "Sellers" therein (collectively, the "Other
Sellers"), the Company, Salomon Brothers Inc (the "Underwriter") and certain
other persons named therein, to issue and sell to the Underwriter an aggregate
of 3,150,000 DECS (the "Initial DECS") and, at the Underwriter's option, up to
427,500 additional DECS (the "Additional DECS") to cover over-allotments, if
any;
WHEREAS, Seller is a corporation organized under the laws of the Province
of Ontario or of Canada, as the case may be, and is, directly or indirectly,
wholly owned by an individual named on the signature page of this Agreement
("Corporate Seller Control Person");
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
DEFINITIONS
As used herein, the following words and phrases shall have the following
meanings:
"Acceleration Date" has the meaning provided in Article VII.
"Acceleration Value" has the meaning provided in Article VII.
["Additional Closing Date" means the settlement date for the Additional
DECS under Section 5 of the Underwriting Agreement.]
["Additional DECS" has the meaning provided in the recitals of this
Agreement.]
["Additional Purchase Price" has the meaning provided in Section 1.2(b).]
["Additional Share Base Amount" means a number equal to the number of
Additional DECS that the Underwriter elects to purchase under the Underwriting
Agreement.]
["Additional Shares" has the meaning provided in Section 1.1(b).]
["Additional STRIPS" means the U.S. Treasury obligations purchased by
Purchaser for settlement on the Additional Closing Date.]
"Adjustment Event" has the meaning provided in Section 6.2.
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"Administrator" means The Bank of New York, administrator for Purchaser
under the Administration Agreement, to be dated as of the Advance Payment Date,
or any successor thereto.
"Advance Payment Date" has the meaning provided in Section 1.3(a).
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a partner in, or a director or officer of, such Person. For
purposes of this definition, "control" (including the terms "controlled by" or
"under common control with") means, as to any Person, the possession, direct or
indirect, of the power to vote ten percent or more of the securities having
ordinary voting power for the election of directors of such Person or the power
to direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities or by contract or otherwise.
"Associate" when used to indicate a relationship with any Person means (i)
a corporation or organization of which such Person is an officer, director or
partner or is, directly or indirectly, the beneficial owner of ten percent or
more of any class of equity securities, (ii) any trust or other estate in which
such Person serves as trustee or in a similar capacity, and (iii) any relative
or spouse of such Person, or any relative of such spouse, who has the same home
as such Person.
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which the NYSE or banking institutions or trust companies in The City of New
York are authorized or obligated by law or executive order to close.
"Calculation Period" means any period of Trading Days for which an average
security price must be determined pursuant to this Agreement.
"Canadian Business Day" means any day that is not a Saturday, a Sunday or
a day on which The Toronto Stock Exchange or banking institutions or trust
companies in The City of Toronto are authorized or obligated by law or
executive order to close.
"Cash Delivery Option" has the meaning provided in Section 1.3(d).
"Closing Price" means, for any security on any date of determination, (i)
the closing sale price (or, if no closing price is reported, the last reported
sale price) of such security (regular way) on the NYSE on such date, (ii) if
such security is not listed for trading on the NYSE on any such date, the
closing sale price (or, if no closing price is reported, the last reported sale
price) of such security (regular way) on the principal Canadian securities
exchange on which such security is listed, (iii) if such security is not listed
for trading on a Canadian securities exchange on any such date, as reported in
the composite transactions for the principal United States securities exchange
on which such security is so listed, (iv) if such security is not so listed on
a United States national or regional securities exchange, as reported by The
Nasdaq Stock Market, (v) if such security is not so reported, the last quoted
bid price for such security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization
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or (vi) if such security is not so quoted, the average of the mid-point of the
last bid and ask prices for such security from at least three nationally
recognized U.S. investment banking firms selected by the Administrator for such
purpose. The Closing Price will be expressed in U.S. dollars. In the event
that the Closing Price is determined on the basis of prices in Canadian dollars,
the Closing Price will be translated into U.S. dollars at the noon buying rate
in The City of New York for cable transfers in Canadian dollars as certified for
customs purposes by the Federal Reserve Bank of New York on the date of
determination. The Closing Price as determined pursuant to the foregoing shall
be subject to adjustment in certain circumstances as provided in Section 6.1(c).
"Collateral Agent" has the meaning provided in the recitals of this
Agreement.
"Collateral Agreement" has the meaning provided in the recitals of this
Agreement.
"Company" has the meaning provided in the recitals of this Agreement.
"Contract Shares" has the meaning provided in Section 1.1.
"Corporate Seller Control Person" has the meaning provided in the recitals
of this Agreement.
"Custodian" means The Bank of New York, custodian for Purchaser under the
Custodian Agreement dated as of October 8, 1997, or any successor thereto.
"Declaration of Trust" has the meaning provided in the introductory
paragraph of this Agreement.
"DECS" has the meaning provided in the recitals of this Agreement.
"Dilution Adjustment" means any fraction or number by which the Exchange
Rate shall be multiplied pursuant to Section 6.1(a) or (b) or by which Closing
Prices may be divided pursuant to Section 6.1(c).
"Event of Default" has the meaning provided in Article VII.
"Exchange Date" has the same meaning as "Sale Date."
"Exchange Price" means the average Closing Price per Subordinate Voting
Share on the 20 Trading Days immediately prior to (but not including) the Sale
Date; provided, however, that if there are not 20 Trading Days for the
Subordinate Voting Shares occurring later than the 60th calendar day
immediately prior to, but not including, the Sale Date, Exchange Price shall
mean the market value per Subordinate Voting Share as of the Sale Date as
determined by a nationally recognized independent U.S. investment banking firm
retained for this purpose by the Administrator. The Exchange Price as
determined pursuant to the foregoing shall be subject to adjustment in certain
circumstances as provided in Section 6.1(c).
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"Exchange Rate" has the meaning provided in Section 1.1(c).
"Firm Purchase Price" has the same meaning as "[Initial] Purchase Price."
"Forward Purchase Contract Characterization" has the meaning provided in
Section 5.2(a).
"Independent Dealers" has the meaning provided in Article VII.
"Independent Director" has the meaning provided in Section 2(b)(i).
"Independent Officer" has the meaning provided in Section 2(b)(i).
"Initial DECS" has the meaning provided in the recitals of this Agreement.
"Initial Price" has the meaning provided in Section 1.1(c).
["Initial Purchase Price" has the meaning provided in Section 1.2(a).]
["Initial Share Base Amount" has the meaning provided in Section 1.1(a).]
["Initial Shares" has the meaning provided in Section 1.1(a).]
"Market Price" means, as of any date of determination, the average Closing
Price per Subordinate Voting Share on the 20 Trading Days immediately prior to
(but not including) the date of determination; provided, however, that if there
are not 20 Trading Days for the Subordinate Voting Shares occurring later than
the 60th calendar day immediately prior to, but not including, such date, the
Market Price shall mean the market value per Subordinate Voting Share as of
such date as determined by a nationally recognized U.S. investment banking firm
retained for such purpose by the Administrator.
"Multiple Voting Shares" has the meaning provided in the recitals of this
Agreement.
"NYSE" means the New York Stock Exchange Inc.
"Ordinary Cash Dividend" means, with respect to any consecutive 365-day
period, any dividend with respect to Subordinate Voting Shares paid in cash to
the extent that the amount of such dividend, together with the aggregate amount
of all other dividends on the Subordinate Voting Shares paid in cash during
such 365-day period, does not exceed on a per share basis 10% of the average of
the Closing Prices of the Subordinate Voting Shares over such 365-day period;
provided that, for purposes of the foregoing definition, the amount of cash
dividends paid on a per share basis shall be appropriately adjusted to reflect
the occurrence during such period of any event described in Article VI.
"Other Sellers" has the meaning provided in the recitals of this
Agreement.
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"Parent" has the meaning provided in Section 2(b)(i).
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
limited liability company, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Purchase Price" has the meaning provided in Section 1.2.
"Purchaser" has the meaning provided in the introductory paragraph of this
Agreement.
"Reimbursement Agreement" means the reimbursement agreement, to be dated
as of the Advance Payment Date, among the Underwriter and the Sellers,
substantially in the form of Exhibit [B] {C} hereto.
"Reported Securities" has the meaning provided in Section 6.2.
"Sale Date" has the meaning provided in the recitals of this Agreement.
"Seller" and "Sellers" have the meaning provided in the introductory
paragraph of this Agreement.
{"Share Base Amount" has the meaning provided in Section 1.1(a).}
"Subordinate Voting Shares" has the meaning provided in the recitals of
this Agreement.
"Threshold Appreciation Price" has the meaning provided in Section 1.1(c).
"Trading Day" means, with respect to any security the Closing Price of
which is being determined, a day on which such security (A) is not suspended
from trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of such
security; provided, however, that with respect to any security the Closing
Price of which is determined pursuant to clause (ii) of the definition of
"Closing Price," the references to "national or regional securities exchange or
association" shall be deemed to refer to such exchanges or associations in
Canada.
"Transaction Value" has the meaning provided in Section 6.2.
"U.S. Bankruptcy Code" has the meaning provided in Section 8.7.
"Underwriter" has the meaning provided in the recitals of this Agreement.
"Underwriting Agreement" has the meaning provided in the recitals of this
Agreement.
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ARTICLE I
SALE AND PURCHASE
1.1 Sale and Purchase.
(a) [Initial] {Contract} Shares. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell to Purchaser, and Purchaser
agrees to purchase and acquire from Seller, on the Sale Date, the number of
Subordinate Voting Shares (the "[Initial] {Contract} Shares") equal to the
product of ________ (the "[Initial] Share Base Amount") and the Exchange Rate.
(b) {Intentionally left blank.} [Additional Shares. Upon the terms and
subject to the conditions of this Agreement, Seller agrees to sell to
Purchaser, and Purchaser agrees to purchase and acquire from Seller, on the
Sale Date, a number of additional Subordinate Voting Shares (the "Additional
Shares") equal to the product of the Additional Share Base Amount and the
Exchange Rate. In addition to the other conditions set forth herein, such
purchase and sale shall be conditioned on the Underwriter's purchase of the
Additional Share Base Amount of Additional DECS pursuant to the Underwriting
Agreement on the Additional Closing Date. Promptly after receipt by Purchaser
of notice that the Underwriter is exercising its option to purchase Additional
DECS, Purchaser will provide Seller with written notice of such exercise by the
Underwriter, stating the related Additional Share Base Amount and the date on
which Purchaser shall deliver the purchase price for the Additional Shares,
which shall be the Additional Closing Date for the Additional DECS. The
Initial Shares and the Additional Shares (if any) are collectively referred to
herein as the "Contract Shares."]
(c) Exchange Rate. The "Exchange Rate" shall be determined in accordance
with the following formula, subject to adjustment as a result of certain events
as provided in Article VI: (i) if the Exchange Price is greater than
US$________ (the "Threshold Appreciation Price"), _____ , (ii) if the Exchange
Price is less than or equal to the Threshold Appreciation Price but greater
than US$______ (the "Initial Price"), a fraction (rounded upward or downward to
the nearest 1/10,000th or, if there is not a nearest 1/10,000th, to the next
higher 1/10,000th) equal to the Initial Price divided by the Exchange Price and
(iii) if the Exchange Price is less than or equal to the Initial Price, 1.
1.2 Purchase Price.
[(a) Initial Purchase Price.] The purchase price for the [Initial]
{Contract} Shares (the "[Initial] Purchase Price") shall be US$_______ in cash.
[(b) Additional Purchase Price. The purchase price for the Additional
Shares (the "Additional Purchase Price") shall be an amount equal to (i) the
difference between (1) the aggregate proceeds to Purchaser from the sale of the
Additional DECS and (2) the aggregate cost to Purchaser, as notified by
Purchaser to Seller on the Additional Closing Date for the Additional
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<PAGE> 8
DECS, of the Additional STRIPS. The Initial Purchase Price and the Additional
Purchase Price (if applicable) are collectively referred to herein
as the "Purchase Price."]
1.3 Payment for and Delivery of Contract Shares.
(a) Advance Payment Date. Upon the terms and subject to the conditions of
this Agreement, Purchaser shall deliver to Seller the [Initial] Purchase Price
on ____________, 1997 (the "Advance Payment Date") at the offices of Cleary,
Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York 10006, or at
such other place as shall be agreed upon by Purchaser and Seller, paid by wire
transfer of Federal (immediately available) funds to an account designated by
Seller.
(b) {Intentionally left blank.} [Additional Closing Date. Upon the terms
and subject to the conditions of this Agreement, Purchaser shall deliver to
Seller the Additional Purchase Price on the Additional Closing Date at the
offices of Cleary, Gottlieb, Steen & Hamilton, New York, New York 10006, or at
such other place as shall be agreed upon by Purchaser and Seller, paid by wire
transfer of Federal (immediately available) funds to an account designated by
Seller.]
(c) Delivery of Contract Shares.
(i) On the Sale Date, Seller will deliver the Contract Shares to
Purchaser. Seller shall be deemed to have instructed the Collateral
Agent to deliver to the Custodian, for the account of Purchaser,
Subordinate Voting Shares then held by the Collateral Agent as collateral
under the Collateral Agreement [(with any Multiple Voting Shares held by
any agent of the Collateral Agent being first converted on or immediately
prior to the Sale Date into Subordinate Voting Shares and delivered to
the Collateral Agent at such time)], in an amount equal to the number of
Contract Shares, rounded down to the nearest whole number. Instead of
any fractional Subordinate Voting Shares that would otherwise be
deliverable (prior to rounding) to Purchaser at the Sale Date, Seller
agrees to make a cash payment in respect of such fractional Subordinate
Voting Shares in an amount equal to the value thereof at the Exchange
Price. Notwithstanding the foregoing, if an Adjustment Event shall have
occurred prior to the Sale Date then, in lieu of the foregoing, Seller
shall be deemed to have instructed: (A) in the case of any cash required
to be delivered on the Sale Date as provided in Section 6.2, the
Collateral Agent to wire transfer Federal (immediately available) funds
to an account designated by Purchaser; and (B) in the case of any
Reported Securities required to be delivered by Seller in lieu of cash as
provided in Section 6.2, the Collateral Agent to deliver to the
Custodian, for the account of Purchaser, a specified number of Reported
Securities then held as collateral under the Collateral Agreement, as
provided in Section 6(g) of the Collateral Agreement.
(ii) In the event that by the Sale Date any substitute collateral
has not been replaced by Subordinate Voting Shares (and/or, after an
Adjustment Event, cash or Reported Securities) sufficient to meet
Seller's obligations hereunder, delivery shall be effected by delivery by
the Collateral Agent to the Custodian, for the account of Purchaser, of
the market value of the Subordinate Voting Shares required to be
delivered
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hereunder, in the form of any Voting Shares then pledged by Seller [(with
any Multiple Voting Shares pledged by Seller first being converted into
Subordinate Voting Shares)] plus cash generated from the liquidation of
U.S. Government obligations then pledged by Seller (or, after an
Adjustment Event, the market value of the alternative consideration
required to be delivered hereunder, in the form of any Reported
Securities then pledged, plus any cash then pledged, plus cash generated
from the liquidation of U.S. Government obligations then pledged). In
such event, Seller shall be deemed to have instructed the Collateral
Agent to liquidate and turn into cash the U.S. Government obligations
then pledged by Seller to the extent necessary to satisfy Seller's
obligations hereunder.
(iii) Certificates representing [Subordinate Voting Shares] [Voting
Shares ](or Reported Securities) in registered form that are part of the
Contract Shares shall be registered in Purchaser's name or in the name of
a depositary or a nominee of a depositary as requested by Purchaser,
unless such [Subordinate Voting Shares] [Voting Shares] (and/or Reported
Securities) are represented by one or more global certificates registered
in the name of a depositary or a nominee of a depositary or are book
entry securities, in which event Purchaser's interest in such securities
shall be noted in a manner satisfactory to Purchaser and its counsel.
(iv) Seller's right to deliver (or cause to be delivered) to
Purchaser hereunder Subordinate Voting Shares and Reported Securities
shall be conditioned upon such Subordinate Voting Shares and Reported
Securities to be so delivered being transferable by Purchaser, following
receipt from Seller, without any restrictions not generally applicable to
all holders of such Subordinate Voting Shares or Reported Securities, as
the case may be. If the condition set forth in the preceding sentence
shall not be satisfied with respect to any Subordinate Voting Shares or
Reported Securities to be delivered by Seller, then, notwithstanding the
provisions hereof, Seller shall exercise the Cash Delivery Option.
(d) Cash Delivery Option. At its option, Seller may deliver to Purchaser
on the Sale Date, in lieu of the Contract Shares, an amount in cash (U.S.
dollars) equal to, subject to adjustment as provided in Section 6.2, the
Exchange Price of the Contract Shares (the "Cash Delivery Option"), paid by
wire transfer to an account designated by Purchaser, in Federal (immediately
available) funds. Seller may elect the Cash Delivery Option in respect of all,
but not less than all, Contract Shares and may do so by notice to Purchaser,
the Collateral Agent and the Custodian not less than 25 Business Days prior to
the Sale Date. If Seller elects the Cash Delivery Option and so notifies
Purchaser, Purchaser shall promptly notify The Depository Trust Company and
publish a notice in a daily newspaper of national circulation stating whether
the holders of DECS will receive Subordinate Voting Shares, cash or a
combination thereof and, if a combination of Subordinate Voting Shares and
cash, the relative proportion of cash. In no event will Multiple Voting Shares
be distributed to holders of DECS.
(e) Seller represents, and Purchaser acknowledges, that it is Seller's
current intention to deliver Contract Shares to Purchaser on the Sale Date and
not to exercise the Cash Delivery Option; however, Seller intends to consider
all relevant economic and market factors in
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<PAGE> 10
ultimately determining whether to deliver Contract Shares on the Sale Date or
to exercise the Cash Delivery Option.
(f) Purchaser agrees to comply with the provisions of Section 2.7(d) of
the Trust Agreement and to follow the procedures set forth in Section 2.7(f)(3)
of the Trust Agreement in connection with the delivery of Subordinate Voting
Shares to holders of DECS and not to amend either of such provisions without
the prior written consent of Seller.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND
CORPORATE SELLER CONTROL PERSON
(a) Seller represents and warrants to Purchaser that each representation
and warranty made by Seller in Section 3 of the Underwriting Agreement is true
and correct on the date hereof.
(b) Seller further represents and warrants to Purchaser that:
(i) At least one member of its Board of Directors (herein referred
to as the "Independent Director") and at least one officer (herein
referred to as the "Independent Officer") is an individual who is not
related by blood or marriage to any holder, directly, indirect or
beneficial, of any class of equity securities of Seller, and is not a
direct, indirect or beneficial holder of two percent or more of any class
of equity securities, director, officer or employee of any Affiliate of
any Person that directly or indirectly through one or more intermediaries
controls Seller (each such Person, a "Parent"). The same person may
serve both as an Independent Director and as an Independent Officer.
(ii) Seller maintains its registered office at a location separate
and apart from those of any Affiliate or Associate of Seller or the
Company or any of its subsidiaries.
(iii) Seller holds itself out, and its Parent or Parents holds or
hold Seller out, to the public (including any Affiliate's creditors) as a
separate and distinct entity operating under Seller's own name, and
Seller acts solely under its own corporate name and through its
authorized officers and agents.
(iv) Seller separately identifies and segregates its funds and other
assets. Seller maintains its financial statements and accounting records
separate from those of, and does not commingle its funds or other assets
with those of, any Affiliate or any other person or entity. Seller
maintains its own separate bank accounts, payroll and books of account.
All of Seller's assets are held by or on behalf of Seller and, when held
on behalf of Seller by another entity, are kept identifiable (in
accordance with customary usages) as assets owned by Seller. None of
Seller's assets are held on its behalf by an Affiliate.
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<PAGE> 11
(v) Seller pays out of its own funds fees, if any, for its directors
and salaries, if any, of its officers and employees.
(vi) Seller observes all customary formalities regarding the
corporate existence of Seller, including without limitation holding
regular meetings of its board of directors and its shareholders and
maintenance of current minute books.
(vii) Seller has paid from its assets all obligations of any kind
incurred by Seller (other than organizational expenses) and has promptly
reimbursed any Affiliate for any service provided to Seller by such
Affiliate (including those provided pursuant to any lease or any
management services agreement between Seller and any Affiliate). Seller
has sufficient assets to pay its obligations as they become due.
(viii) Seller has advised its creditors in connection with any
financial disclosure made thereto of the separation and segregation of
its business assets and accounts and that none of the assets and accounts
of an Affiliate are available to satisfy payment of any such debt.
(ix) Seller does not, directly or indirectly, engage in any business
in any jurisdiction and has not incurred or undertaken to incur any
obligations (including debt) other than entering into this Agreement, the
Collateral Agreement, the Underwriting Agreement and the Reimbursement
Agreement and performing its obligations hereunder and thereunder, does
not own any property or assets other than the Voting Shares subject to
this Agreement and the Collateral Agreement and does not have any
subsidiaries.
(x) Seller has not, directly or indirectly, been named or entered
into an agreement to be named as a direct or contingent beneficiary or
loss payee on any insurance policy covering the property of any of its
Affiliates.
(xi) Seller has not guaranteed the debts or obligations of any of
its Affiliates, nor has it loaned money or otherwise provided financial
assistance to any of its Affiliates, nor has it pledged, granted a
security interest in or lien upon its assets for the benefit of any of
its Affiliates, nor held itself out to be responsible for the debts or
obligations of any of its Affiliates or the decisions or actions
respecting the daily business and affairs of any of its Affiliates.
(xii) Seller has not permitted any of its Affiliates to guarantee or
undertake to guarantee the debts or obligations of Seller (other than the
guarantee by Corporate Seller Control Person of Seller's obligations
under the Underwriting Agreement and the Reimbursement Agreement), nor
has it permitted any of its Affiliates to loan money or otherwise provide
financial assistance to Seller, nor has it permitted any of its
Affiliates to pledge, grant a security interest in or lien upon such
Affiliate's assets for the benefit of Seller, nor has it permitted any
Affiliate to hold itself out to be responsible for the debts or
obligations of Seller or the decisions or actions respecting the daily
business and affairs of Seller.
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(c) Corporate Seller Control Person represents and warrants to Purchaser
that each representation and warranty made by Corporate Seller Control Person
in Section 3(b) of the Underwriting Agreement is true and correct on the date
hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that each representation
and warranty made by Purchaser in Section 1 of the Underwriting Agreement is
true and correct on the date hereof.
ARTICLE IV
CONDITIONS TO PURCHASER'S OBLIGATIONS
[(a)] The obligation of Purchaser to deliver the [Initial] Purchase
Price on the Advance Payment Date is subject to the satisfaction of the
following conditions:
(i) the purchase by the Underwriter of the Initial DECS pursuant to
the Underwriting Agreement shall have been consummated as contemplated
under the Underwriting Agreement;
(ii) the representations and warranties of Seller contained in
Article II hereof shall be true and correct as of the Advance Payment
Date;
(iii) the representations and warranties of Corporate Seller Control
Person contained in Article II hereof shall be true and correct as of the
Advance Payment Date;
(iv) the Collateral Agreement shall have been executed by Seller and
the delivery of the Collateral thereunder shall have been made; and
(v) the Reimbursement Agreement shall have been executed by Seller.
[(b) The obligation of Purchaser to deliver the Additional Purchase
Price on the Additional Closing Date is subject to the satisfaction of the
following conditions:
(i) the purchase by the Underwriter of the Additional DECS pursuant
to the Underwriting Agreement shall have been consummated as contemplated
under the Underwriting Agreement;
(ii) the representations and warranties of Seller contained in
Article II hereof shall be true and correct as of the Additional Closing
Date;
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<PAGE> 13
(iii) the representations and warranties of Corporate Seller Control
Person contained in Article II hereof shall be true and correct as of the
Advance Payment Date; and
(iv) the delivery of any additional collateral under the Collateral
Agreement shall have been made.]
ARTICLE V
COVENANTS
5.1 Taxes. Seller shall pay any and all documentary, stamp,
transfer or similar taxes and charges that may be payable in respect of the
entry into this Agreement and the transfer and delivery of the Contract Shares,
cash or Reported Securities pursuant hereto.
5.2 Forward Purchase Contract. Each of Purchaser and Seller hereby
agrees that:
(a) it will treat this Agreement in its entirety as a forward
purchase contract for the delivery of Subordinate Voting Shares on the Sale Date
(including as a result of acceleration or otherwise) (the "Forward Purchase
Contract Characterization"), under the terms of which contract (i) at the time
of issuance of the DECS Purchaser deposits irrevocably with Seller a fixed
amount of cash equal to the Purchase Price to assure the fulfillment of
Purchaser's purchase obligation described in clause (ii) below, which deposit
will unconditionally and irrevocably be applied at the Sale Date to satisfy such
obligation and (ii) at the Sale Date such cash deposit unconditionally and
irrevocably will be applied by Seller in full satisfaction of Purchaser's
obligation under the forward purchase contract, and Seller will deliver to
Purchaser the number of Subordinate Voting Shares that Purchaser is entitled to
receive at that time pursuant to the terms of this Agreement (subject to
Seller's right to deliver cash in lieu of the Subordinate Voting Shares);
(b) it will treat, consistent with the above characterization,
amounts paid to Seller in respect of this Agreement as allocable in their
entirety to the amount of the cash deposit attributable to such Agreement;
(c) it will not treat this Agreement, any portion of this Agreement
or any obligation hereunder as giving rise to any interest income or other
inclusions of ordinary income (in the case of Purchaser) or as giving rise to
any interest expense or other deductions of ordinary expense (in the case of
Seller);
(d) it will not treat the delivery of any portion of the Contract
Shares, cash or Reported Securities to be delivered pursuant to this Agreement
as the payment of interest or ordinary income; and
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(e) it will not take any action (including filing any tax return or
form or taking any position in any tax proceeding) that is inconsistent with the
obligations contained in clauses (a) through (d), unless such action or position
is required by an applicable taxing authority or unless such action or position
is required by a change in statutory law or regulation or by a judicial or other
authoritative interpretation of the law enacted, promulgated or published after
the date of this Agreement.
5.3 Limitations on Trading During Certain Days. Seller hereby
agrees that he will not, and will cause each of its Affiliates that is under its
control not to, buy or sell Voting Shares or Reported Securities for its own
account during the 60 days prior to the Sale Date.
5.4 Notices. Seller will cause to be delivered to Purchaser:
(a) Immediately upon the occurrence of any Event of Default
hereunder or under the Collateral Agreement, or upon Seller's obtaining
knowledge that any of the conditions or events described in paragraph (a) or (b)
of Article VII shall have occurred with respect to the Company, notice of such
occurrence; and
(b) In case at any time prior to the Sale Date Seller receives
notice, or otherwise obtains knowledge, that any event requiring that an
adjustment be effected pursuant to Article VI hereof shall have occurred or be
pending, then Seller shall promptly cause to be delivered to Purchaser a notice
identifying such event and stating, if known to Seller, the date on which such
event is to occur and, if applicable, the record date relating to such event.
Seller shall cause further notices to be delivered to Purchaser if Seller shall
subsequently receive notice, or shall otherwise obtain knowledge, of any further
or revised information regarding the terms or timing of such event or any record
date relating thereto.
5.5 Affirmative Covenants of Seller. During the term of this
Agreement, Seller covenants and agrees that it will:
(a) Comply in all material respects with all applicable laws, rules,
regulations and orders to the extent noncompliance would have a material adverse
effect on the ability of Seller to perform its obligations hereunder or under
the Collateral Agreement, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments and governmental
charges imposed upon him or upon its property, including the collateral pledged
under the Collateral Agreement, except to the extent contested in good faith.
(b) Furnish to Purchaser as soon as possible and in any event within
20 calendar days after Seller shall become aware of the occurrence of any
failure by such Seller to comply with or perform any agreement or obligation
contained in this Agreement or the Collateral Agreement, a statement of Seller
describing such failure and setting forth details of such failure and the action
which Seller has taken and proposes to take with respect thereto.
(c) Continue to be validly existing as a corporation under the laws
of its jurisdiction of incorporation and will continue to be wholly owned,
directly or indirectly, by its Corporate Seller Control Person.
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(d) Comply in all respects with the requirements and limitations of
its corporate powers set forth in its certificate of incorporation.
(e) At any given time, have at least one Independent Director and at
least one Independent Officer, each of whom shall be an individual who is not
related by blood or marriage to any holder, direct, indirect or beneficial, of
any class of equity securities of Seller, and is not a direct, indirect or
beneficial holder of two percent or more of any class of equity securities,
director, officer or employee of any Affiliate of any Parent. The same
individual may serve both as an Independent Director and an Independent Officer.
(f) At all times maintain its registered office at a location
separate and apart from those of any Affiliate or Associate of Seller or the
Company or any of its subsidiaries.
(g) At all times hold itself out, and its Corporate Seller Control
Person will at all times hold Seller out, to the public (including any
Affiliate's creditors) as a separate and distinct entity operating under
Seller's own name and Seller will act solely under its own corporate name and
through its authorized officers and agents.
(h) Separately identify and segregate funds and other assets of
Seller. Seller will maintain its financial statements and accounting records
separate from those of, and will not commingle its funds or other assets with
those of, any Affiliate or any other Person or entity. Seller will maintain its
own separate bank accounts, payroll and books of account. All of Seller's
assets will at all times be held by or on behalf of Seller and, when held on
behalf of Seller by another entity, will at all times be kept identifiable (in
accordance with customary usages) as assets owned by Seller. In no event will
any of Seller's assets be held on its behalf by an Affiliate.
(i) Pay out of its own funds fees, if any, for its directors and
salaries, if any, of its officers and employees.
(j) Observe all customary formalities regarding the corporate
existence of Seller, including without limitation holding regular meetings of
its board of directors and its shareholders and maintenance of current minute
books.
(k) Only enter into business transactions with an Affiliate that
will be on terms and conditions that are not more or less favorable to Seller
than the terms and conditions that would be expected to have been obtained,
under similar circumstances, from unaffiliated persons or entities.
(l) Disclose in its annual financial statements (or any consolidated
annual financial statements of any Parent), to the extent required by generally
accepted accounting principles, any transactions between Seller and any
Affiliate. Any consolidated annual financial statements of such Parent will
contain detailed notes clearly stating that (i) all of Seller's assets are owned
by Seller and (ii) Seller is a separate corporate entity with its own separate
creditors and such creditors.
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(m) Pay from its assets all obligations of any kind incurred by
Seller (other than organizational expenses) and shall promptly reimburse any
Affiliate for any service provided to Seller by such Affiliate (including those
to be provided pursuant to any lease or any management services agreement
between Seller and any Affiliate). Seller expects to have sufficient assets to
pay its obligations as they become due.
(n) Advise its creditors in connection with any financial disclosure
made thereto of the separation and segregation of its business, assets and
accounts and that none of its assets and accounts shall be available to satisfy
payment of any such debt. Seller shall also ensure that the terms and
conditions applicable to any such debt do not include a cross-default to any
Affiliate, unless, prior to the inclusion of such provision in any such debt,
Seller receives an acknowledgment from the creditor of the matters specified in
this Section 5.5(n).
5.6 Negative Covenants of Seller. During the term of this
Agreement, Seller covenants and agrees that Seller will not:
(a) Directly or indirectly, incur any obligations (including debt)
other than pursuant to or necessary to comply with the terms and obligations
imposed by this Forward Purchase Agreement, the Collateral Agreement, the
Underwriting Agreement or the Reimbursement Agreement and obligations imposed by
law, statutory or otherwise.
(b) Acquire or own any property or assets nor engage in any business
other than entering into this Forward Purchase Agreement, the Collateral
Agreement, the Underwriting Agreement and the Reimbursement Agreement and those
necessary to comply with the terms and obligations imposed by this Forward
Purchase Agreement, the Collateral Agreement, the Underwriting Agreement or the
Reimbursement Agreement.
(c) Directly or indirectly, be named and shall not enter into an
agreement to be named as a direct or contingent beneficiary or loss payee on any
insurance policy covering the property of any of its Affiliates.
(d) Guarantee the debts or obligations of any of its Affiliates, nor
loan money or otherwise provide financial assistance to any of its Affiliates,
nor will it pledge, grant a security interest in or lien upon its assets for the
benefit of any of its Affiliates, nor will it hold itself out to be responsible
for the debts or obligations of any of its Affiliates or the decisions or
actions respecting the daily business and affairs of any of its Affiliates.
(e) Permit any of its Affiliates to guarantee the debts or
obligations of Seller (other than the guarantee by Corporate Seller Control
Person of Seller's obligations under the Underwriting Agreement and the
Reimbursement Agreement), nor will it permit any of its Affiliates to loan money
or otherwise provide financial assistance to Seller, nor will it permit any of
its Affiliates to pledge, grant a security interest in or lien upon such
Affiliate's assets for the benefit of Seller, nor will it permit any Affiliate
to hold itself out to be responsible for the debts or obligations of Seller or
the decisions or actions respecting the daily business and affairs of Seller.
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5.7 Covenants of Corporate Seller Control Person. During the term of
this Agreement, Corporate Seller Control Person covenants and agrees that
Seller:
(a) Will cause, in his capacity as a direct or indirect shareholder,
Seller to comply with its obligations under this Agreement and the Collateral
Agreement.
(b) Will not, and will cause each of his Affiliates (other than the
Company) that is under his control not to, buy or sell Voting Shares or
Reported Securities for his own account during the 60 days prior to the Sale
Date.
[(c) Will not, and will cause each of his Affiliates that is under
his control not to, approve or permit any change to the terms of the Multiple
Voting Shares unless similar changes are made to the terms of the Subordinate
Voting Shares.]
5.8 Further Assurances. From time to time on and after the date
hereof through the Sale Date (or, if later, the date on which this Agreement has
been fully performed), each of the parties hereto shall use its reasonable best
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper and advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement in accordance with the terms and conditions hereof, including (i)
using reasonable best efforts to remove any legal impediment to the consummation
of such transactions and (ii) the execution and delivery of all such deeds,
agreements, assignments and further instruments of transfer and conveyance
necessary, proper or advisable to consummate and make effective the transactions
contemplated by the Agreement in accordance with the terms and conditions
hereof.
ARTICLE VI
ADJUSTMENT OF EXCHANGE RATE, EXCHANGE PRICE AND CLOSING PRICE
6.1 Dilution Adjustments. The Exchange Rate, Exchange Price and
Closing Price shall be subject to adjustment successively from time to time as
follows:
(a) Stock Dividends, Splits, Reclassifications, Etc. If the Company
shall, after the date hereof,
(i) pay a stock dividend or make a distribution, in either case,
with respect to Subordinate Voting Shares in shares of such stock;
(ii) subdivide or split its outstanding Subordinate Voting Shares
into a greater number of shares;
(iii) combine its outstanding Subordinate Voting Shares into a
smaller number of shares; or
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(iv) issue by reclassification (other than a reclassification
pursuant to clause (b), (c), (d) or (e) of the definition of Adjustment
Event) of its Subordinate Voting Shares any other equity securities of
the Company;
then, in each such case, the Exchange Rate shall be multiplied by a Dilution
Adjustment equal to the number of Subordinate Voting Shares (or the fraction
thereof) that a holder who held one Subordinate Voting Share immediately prior
to such event would be entitled solely by reason of such event to hold
immediately after such event. In the case of the reclassification of any
Subordinate Voting Shares into any other equity securities of the Company other
than the Subordinate Voting Shares, such other equity securities shall be
deemed Subordinate Voting Shares for all purposes hereunder. The Exchange
Price and Closing Price shall also be adjusted in the manner described in
paragraph (c).
(b) Rights or Warrants Issuances. If the Company shall, after the
date hereof, issue, or declare a record date in respect of an issuance of,
rights or warrants (other than rights to purchase Subordinate Voting Shares
pursuant to a plan for the reinvestment of dividends or interest) to all holders
of Subordinate Voting Shares entitling them to subscribe for or purchase
Subordinate Voting Shares at a price per share less than the Market Price of the
Subordinate Voting Shares on the Business Day next following the record date for
the determination of holders of Subordinate Voting Shares entitled to receive
such rights or warrants, then, in each such case, the Exchange Rate shall be
multiplied by the following Dilution Adjustment: a fraction, of which the
numerator shall be (A) the number of Subordinate Voting Shares outstanding on
the record date for the issuance of such rights or warrants plus (B) the number
of additional Subordinate Voting Shares offered for subscription or purchase
pursuant to such rights or warrants, and of which the denominator shall be (x)
the number of Subordinate Voting Shares outstanding on the record date for the
issuance of such rights or warrants plus (y) the number specified in clause (B)
above multiplied by the quotient of the exercise price of such rights or
warrants divided by the Market Price of the Subordinate Voting Shares on the
Business Day next following the record date for the determination of holders of
Subordinate Voting Shares entitled to receive such rights or warrants. To the
extent that such rights or warrants expire prior to the Sale Date and
Subordinate Voting Shares are delivered with respect to less than all of such
rights or warrants prior to such expiration, the Exchange Rate shall be
readjusted to the Exchange Rate which would then be in effect had such
adjustments for the issuance of such rights or warrants been made upon the basis
of delivery of only the number of Subordinate Voting Shares actually delivered
pursuant to such rights or warrants. The Exchange Price and Closing Price shall
also be adjusted in the manner described in paragraph (c).
(c) Corresponding Adjustments to Exchange Price; Adjustment of
Closing Price in Certain Circumstances.
(i) If any adjustment is made to the Exchange Rate pursuant to
paragraph (a) or (b) of this Section 6.1, an adjustment shall also be
made to the Exchange Price as such term is used throughout the definition
of Exchange Rate. The required adjustment to the Exchange Price shall be
made at the Sale Date by multiplying the Exchange Price by the cumulative
Dilution Adjustment.
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(ii) If, during any Calculation Period used in calculating the
Exchange Price, the Market Price or the Transaction Value, there shall
occur any event requiring an adjustment to be effected pursuant to this
Section 6.1, then the Closing Price for each Trading Day in the
Calculation Period occurring prior to the day on which such adjustment is
effected shall be adjusted by being divided by the relevant Dilution
Adjustment.
(d) Timing of Dilution Adjustments. Each Dilution Adjustment shall
be effected:
(i) in the case of any dividend, distribution, or issuance of rights
or warrants, at the opening of business on the Business Day next following
the record date for determination of holders of Subordinate Voting Shares
entitled to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after such
record date, at the time such dividend, distribution or issuance shall be
announced by the Company; and
(ii) in the case of any subdivision, split, combination or
reclassification, on the effective date of such transaction.
(e) General; Failure of Dilution Event to Occur. All Dilution
Adjustments shall be rounded upward or downward to the nearest 1/10,000th (or if
there is not a nearest 1/10,000th, to the next higher 1/10,000th). No
adjustment in the Exchange Rate shall be required unless such adjustment would
require an increase or decrease of at least one percent therein; provided,
however, that any adjustments which by reason of this sentence are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment. If any announcement or declaration of a record date in respect of a
dividend, distribution or issuance requiring an adjustment pursuant to this
Section 6.1 shall subsequently be canceled by the Company, or such dividend,
distribution or issuance shall fail to receive requisite approvals or shall fail
to occur for any other reason, then, upon such cancellation, failure of approval
or failure to occur, the Exchange Rate shall be readjusted to the Exchange Rate
which would then have been in effect had adjustment for such event not been
made. If an Adjustment Event shall occur after the occurrence of one or more
events requiring an adjustment pursuant to this Section 6.1, the Dilution
Adjustments previously applied to the Exchange Rate in respect of such events
shall not be rescinded but shall be applied to the new Exchange Rate provided
for under Section 6.2.
6.2 Adjustment for Consolidation, Merger or Other Adjustment Event.
In the event of (a) any dividend or distribution by the Company to all holders
of Subordinate Voting Shares of evidences of its indebtedness or other assets
(excluding any dividends or distributions referred to in Section 6.1(a)(i), any
other equity securities issued pursuant to a reclassification referred to in
Section 6.1(a)(iv) and any Ordinary Cash Dividends) or any issuance by the
Company to all holders of Subordinate Voting Shares of rights or warrants to
subscribe for or purchase any of its securities (other than rights or warrants
referred to in Section 6.1(b)), (b) any consolidation, merger, amalgamation or
plan of arrangement of the Company with or into another entity (other than a
merger, consolidation, amalgamation or plan of arrangement in
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which the Company is the continuing corporation or is not one of the
amalgamating corporations and in which the Subordinate Voting Shares outstanding
immediately prior to the merger, consolidation, amalgamation or plan of
arrangement are not exchanged for cash, securities or other property of the
Company, another corporation or the corporation continuing from such
amalgamation or plan of arrangement), (c) any sale, transfer, lease or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety, (d) any statutory exchange of securities of the
Company with another corporation (other than in connection with a merger or
acquisition) or (e) any liquidation, dissolution or winding up of the Company
(any such event described in clause (a), (b), (c), (d) or (e), an "Adjustment
Event"), the Exchange Rate shall be adjusted so that on the Sale Date Seller
shall deliver to Purchaser, in lieu of or (in the case of an Adjustment Event
described in clause (a) above) in addition to, the Contract Shares, cash in an
amount equal to the product of the number of Contract Shares and the Transaction
Value (as defined below). Following an Adjustment Event, the Exchange Price, as
such term is used throughout the definition of Exchange Rate, shall be deemed to
equal (A) if Subordinate Voting Shares are outstanding at the Sale Date, the
Exchange Price of the Subordinate Voting Shares, as adjusted pursuant to Section
6.1(c), otherwise zero, plus (B) the Transaction Value.
Notwithstanding the foregoing, with respect to any Reported Securities (as
defined below), received by holders of Subordinate Voting Shares in an
Adjustment Event, Seller shall, in lieu of delivering cash in respect of such
Reported Securities as described above, deliver a number of such Reported
Securities with a value, as determined in accordance with clause (ii) of the
definition of Transaction Value, equal to all cash amounts that would otherwise
be deliverable in respect of Reported Securities received in such Adjustment
Event, unless Seller has made an election to exercise the Cash Delivery Option
or such Reported Securities have not yet been delivered to the holders entitled
thereto following such Adjustment Event or any record date with respect thereto.
If, following any Adjustment Event, any Reported Security ceases to qualify as a
Reported Security, then (x) Seller shall not deliver such Reported Security but
instead shall deliver of an equivalent amount of cash and (y) notwithstanding
clause (ii) of the definition of Transaction Value, the Transaction Value of
such Reported Security shall mean the fair market value of such Reported
Security on the date such security ceases to qualify as a Reported Security, as
determined by a nationally recognized investment banking firm retained for this
purpose by the Administrator.
"Transaction Value" means (i) for any cash received in any Adjustment
Event, the amount of cash received per Subordinate Voting Share, (ii) for any
Reported Securities received in any Adjustment Event, an amount equal to (x)
the average Closing Price per security of such Reported Securities on the 20
Trading Days immediately prior to (but not including) the Sale Date multiplied
by (y) the number of such Reported Securities (as adjusted pursuant to the
definition thereof) received per Subordinate Voting Share and (iii) for any
property received in any Adjustment Event other than cash or Reported
Securities, an amount equal to the fair market value of the property received
per Subordinate Voting Share on the date such property is received, as
determined by a nationally recognized U.S. investment banking firm retained for
this purpose by the Administrator; provided, however, that in the case of
clause (ii), (x) with respect to securities that are Reported Securities by
virtue of only clause (iv) of the definition of
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Reported Securities, Transaction Value with respect to any such Reported
Security means the average of the mid-point of the last bid and ask prices for
such Reported Security as of the Sale Date from each of at least three
nationally recognized investment banking firms retained for such purpose by the
Administrator multiplied by the number of such Reported Securities (as adjusted
pursuant to the definition thereof) received per Subordinate Voting Share and
(y) with respect to all other Reported Securities, if there are not 20 Trading
Days for any particular Reported Security occurring after the 60th calendar day
immediately prior to, but not including, the Sale Date, Transaction Value with
respect to such Reported Security means the fair market value per security of
such Reported Security as of the Sale Date as determined by a nationally
recognized investment banking firm retained for such purpose by the
Administrator multiplied by the number of such Reported Securities (as adjusted
pursuant to the definition thereof) received per Subordinate Voting Share. For
purposes of calculating the Transaction Value, any cash, Reported Securities or
other property receivable in an Adjustment Event shall be deemed to have been
received immediately prior to the close of business on the record date for such
Adjustment Event or, if there is no record date for such Adjustment Event,
immediately prior to the close of business on the effective date of such
Adjustment Event.
"Reported Securities" means any securities received in an Adjustment Event
that (A) are (i) listed on a Canadian or United States national securities
exchange, (ii) reported on a United States national securities system subject
to last sale reporting, (iii) traded in the over-the-counter market and
reported on the National Quotation Bureau or similar organization or (iv) for
which bid and ask prices are available from at least three nationally
recognized investment banking firms and (B) are either (x) perpetual equity
securities or (y) non-perpetual equity or debt securities with a stated
maturity after the Sale Date. The number of shares of any Reported Securities
included in the calculation of Transaction Value pursuant to clause (ii) of the
definition thereof shall be subject to adjustment if any event that would, had
it occurred with respect to the Subordinate Voting Shares or the Company, have
required an adjustment pursuant to Section 6.1 or 6.2, shall occur with respect
to such Reported Securities or the issuer thereof subsequent to the date the
Adjustment Event is consummated. Adjustment for such subsequent events shall
be as nearly equivalent as practicable to the adjustments provided for in
Section 6.1 or 6.2, as applicable.
ARTICLE VII
ACCELERATION
If one or more of the following events (each an "Event of Default")
shall occur:
(A) Seller shall commence a voluntary case or other proceeding
seeking a liquidation, reorganization or other relief with respect to
himself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of him or any
substantial part of its property, or shall consent to any such relief or
to the appointment of or taking possession by any such official in an
involuntary case or other
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proceeding commenced against him, or shall take any action to authorize
any of the foregoing;
(B) an involuntary case or other proceeding shall be commenced
against Seller seeking liquidation, reorganization or other relief with
respect to him or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of him
or any substantial part of its property; or an order for relief shall be
entered against Seller under any bankruptcy, insolvency or other similar
law as now or hereafter in effect; or
(C) a Collateral Event of Default within the meaning of the
Collateral Agreement;
then an "Acceleration Date" shall occur, Seller's rights under Section 1.3(d)
shall terminate immediately and
(x) in the case of clause (C), Seller shall become obligated to the
extent permitted by law to deliver to Purchaser (and shall be deemed to
instruct the Collateral Agent to deliver to the Custodian, for the
account of Purchaser, and to liquidate and turn into cash the U.S.
Government obligations then pledged by Seller to the extent necessary to
satisfy such obligation) the Contract Shares, in the form of the
Subordinate Voting Shares then pledged by Seller [(any Multiple Voting
Shares then pledged by Seller being converted into Subordinate Voting
Shares before any such delivery)], or cash generated from the liquidation
of U.S. Government obligations then pledged by Seller, or a combination
thereof (or, after an Adjustment Event, the alternate consideration to be
delivered, in the form of Reported Securities then pledged, cash then
pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof); or
(y) in the case of clause (A) or (B), Seller shall become obligated
to the extent permitted by law to deliver to Purchaser (and shall be
deemed to instruct the Collateral Agent to deliver to the Custodian, for
the account of Purchaser, and to liquidate and turn into cash the U.S.
Government obligations then pledged by Seller to the extent necessary to
satisfy such obligation) a number of Subordinate Voting Shares, in the
form of the Subordinate Voting Shares then pledged by Seller [(any
Multiple Voting Shares then pledged by Seller being converted into
Subordinate Voting Shares before any such delivery)], or cash generated
from the liquidation of U.S. Government obligations then pledged by
Seller, or a combination thereof (or, after an Adjustment Event, the
alternate consideration to be delivered, in the form of Reported
Securities then pledged, cash then pledged, cash generated from the
liquidation of U.S. Government obligations then pledged, or a combination
thereof), with an aggregate value (based on the Closing Price on the
Acceleration Date) equal to the Acceleration Value (as defined below).
"Acceleration Value" means an amount determined by the Administrator
on the basis of quotations from Independent Dealers (as defined below). Each
quotation will be for an amount that would be paid to the relevant Independent
Dealer in consideration of an agreement
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between Purchaser and such Independent Dealer that would have the effect of
preserving for Purchaser the economic equivalent of the payments and deliveries
that Purchaser would, but for the occurrence of the Acceleration Date, have
been entitled to receive after the Acceleration Date hereunder (taking into
account any adjustments to the Exchange Rate that may have been effected on or
prior to the Acceleration Date). On or as soon as reasonably practicable
following the Acceleration Date, the Administrator will request each
Independent Dealer to provide its quotation as soon as reasonably practicable,
but in any event within two Business Days. The Administrator shall compute the
Acceleration Value upon receipt of each Independent Dealer's quotation,
provided that if, at the close of business on the fourth Business Day following
the Acceleration Date, the Administrator shall have received quotations from
fewer than four of the Independent Dealers, the Administrator shall compute the
Acceleration Value using the quotations, if any, it shall have received at or
prior to such time. If four quotations are provided, the Acceleration Value
will be the arithmetic mean of the two quotations remaining after disregarding
the highest and lowest quotations. (For this purpose, if more than one
quotation has the same highest or lowest value, then one of such quotations
shall be disregarded.) If two or three quotations are provided, the
Acceleration Value will be the arithmetic mean of such quotations. If one
quotation is provided, the Acceleration Value will be equal to such quotation.
If no quotations are provided, the Acceleration Value will be the aggregate
value (based on the Closing Price on the Acceleration Date) of the number of
Subordinate Voting Shares (or, after an Adjustment Event, Reported Securities,
cash or a combination thereof) that would be required to be delivered hereunder
on the Acceleration Date if the Sale Date were redefined to be the Acceleration
Date.
"Independent Dealers" means four nationally recognized independent
U.S. investment banking firms selected in good faith by the Administrator.
As promptly as reasonably practicable after receipt of the quotations
on which the Acceleration Value is based (or, as the case may be, after failure
to receive any such quotations within the time period prescribed above),
Purchaser shall deliver to Seller and the Collateral Agent a notice specifying
the number of Subordinate Voting Shares (or, after an Adjustment Event, the
alternate consideration) required to be delivered by Seller. Purchaser and
Seller agree that the obligations contained in clauses (x) and (y) above are a
reasonable pre-estimate of loss and not a penalty. Such amount is payable for
the loss of bargain and Purchaser will not be entitled to recover additional
damage as a consequence of loss resulting from an Event of Default.
ARTICLE VIII
MISCELLANEOUS
8.1 Adjustments; Selection of Independent Investment Banking Firm.
Purchaser shall be responsible for the effectuation and calculation of any
adjustment pursuant to Article VI hereof and shall furnish Seller notice of any
such adjustment and shall provide Seller reasonable opportunity to review the
calculations pertaining to any such adjustment. If, pursuant
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to the terms and conditions hereof, the Administrator shall be required to
retain a nationally recognized independent U.S. investment banking firm for any
purpose provided herein, such nationally recognized independent U.S. investment
banking firm shall be selected and retained by the Administrator only after
consultation with Seller; provided, however, that Seller shall be deemed to
have waived its right to consult if Seller fails to consult within five
Business Days of notice being sent by the Administrator to Seller seeking
consultation. Purchaser may delegate the effectuation and calculation of any
such adjustments to its Administrator.
8.2 Notices. Notices to Purchaser shall be directed to it in care of
the Administrator for Purchaser, The Bank of New York, at 101 Barclay Street,
New York, New York 10286, Telephone: 212-815-5228, Telecopier: 212-815-7157,
Attention: Mark Walsh; notices to Seller shall be directed to it
at______________________, with a copy to ____________; and notices to Corporate
Seller Control Person shall be directed to it at______________________, with a
copy to ____________. Notwithstanding the foregoing, notices to a party shall
be directed to such other address for such party as shall be specified by such
party in a like notice given pursuant to this Section 8.2. All notices and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if either (i) personally delivered (including delivery by
courier service or by Federal Express or any other nationally recognized
overnight delivery service for next day delivery) to the offices specified in
the preceding sentence, in which case they shall be deemed received on the first
Business Day by which delivery shall have been made to said offices, or the
first Canadian Business Day by which delivery shall have been made to said
offices if such delivery is made in Canada; or (ii) sent by certified mail,
return receipt requested, in accordance with the preceding sentence, in which
case they shall be deemed received when receipted for unless acknowledgment is
refused (in which case delivery shall be deemed to have been received on the
first Business Day on which such acknowledgment is refused (or the first
Canadian Business Day on which acknowledgment is refused if such refusal occurs
in Canada)). Any notice, demand or other communication to be provided by or on
behalf of Purchaser pursuant to this Agreement shall be sent to the address of
Seller or Corporate Seller Control Person provided in this Section 8.2
notwithstanding the death of Corporate Seller Control Person, the adjudication
of Seller or Corporate Seller Control Person as incompetent or the appointment
of a guardian with respect to the affairs of Seller or Corporate Seller Control
Person. Any failure by Seller or Corporate Seller Control Person or any
guardian, conservator, executor, administrator or other similarly appointed
person to receive any such notice, demand or communication shall in no way
abrogate, invalidate or otherwise affect the validity or enforceability of the
notice, demand or communication or the matters set forth therein.
8.3 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
8.4 Entire Agreement. Except as expressly set forth herein, this
Agreement constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all prior agreements, understandings
and negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
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<PAGE> 25
8.5 Amendments; Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser, Seller and Corporate Seller
Control Person or, in the case of a waiver, by the party against whom the waiver
is to be effective. No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
8.6 No Third Party Rights; Successors and Assigns. This Agreement is
not intended and shall not be construed to create any rights in any person other
than Seller and Purchaser and their respective successors and assigns and no
person shall assert any rights as third party beneficiary hereunder. Whenever
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and permitted assigns of such party.
8.7 Application of U.S. Bankruptcy Code. The parties hereto
acknowledge and agree that the Collateral Agent is a "financial institution"
within the meaning of Section 101(22) of Title 11 of the United States Code (the
"U.S. Bankruptcy Code") and is acting as agent and custodian for Purchaser in
connection with this Agreement and that Purchaser is a "customer" of the
Collateral Agent within the meaning of said Section 101(22). The parties hereto
further acknowledge and agree that this Agreement is a "securities contract," as
such term is defined in Section 741(7) of the U.S. Bankruptcy Code, entitled to
the protection of Section 555 of the U.S. Bankruptcy Code.
8.8 Application of Canadian Insolvency Laws. The parties hereto
further acknowledge and agree that this Agreement is an "eligible financial
contract" as defined in Subsection 65.1(8) of the Bankruptcy and Insolvency Act
(Canada) and Subsection 11.1(1) of the Companies' Creditors Arrangement Act
(Canada) and is therefore exempt from the provisions of Subsection 65.1(1) of
the Bankruptcy and Insolvency Act (Canada) and is entitled to the benefit of
Subsections 11.1(2) and (3) of the Companies' Creditors Arrangement Act
(Canada).
8.9 Governing Law; Jurisdiction; Severability; Waiver of Jury Trial.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York. For the purpose of any suit, action or proceeding
arising out of or relating to this Agreement, the parties hereto hereby
expressly and irrevocably consent and submit to the non-exclusive jurisdiction
of any United States Federal or New York State court sitting in the Borough of
Manhattan, City and State of New York, and expressly and irrevocably waive, to
the extent permitted under applicable law, any immunity from the jurisdiction
thereof and any claim or defense in such suit, action or proceeding based on a
claim of improper venue, forum non conveniens or any similar basis to which it
or he might otherwise be entitled. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this Agreement
shall not render any other provision or provisions herein contained
unenforceable or invalid. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
25
<PAGE> 26
ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR
TORT OR OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT OR HE HAS BEEN
INFORMED BY THE OTHER PARTIES HERETO THAT THE PROVISIONS OF THIS SECTION
CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH OTHER PARTIES HERETO HAVE
RELIED, ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT AND ANY
DOCUMENT RELATED THERETO. EACH PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART
OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH OF
THE OTHER PARTIES HERETO TO THE WAIVER OF ITS OR HIS RIGHTS TO TRIAL BY JURY.
Each of Seller and Corporate Seller Control Person hereby irrevocably
appoints Novo Industries L.P. (the "Process Agent"), with an office on the date
hereof at 7611 Railhead Lane, Houston, Texas 77086, United States, as its or
his agent to receive on behalf of Seller and Corporate Seller Control Person
and their respective property service of copies of the summons and complaint
and any other process which may be served in any such action or proceeding.
Such service may be made (A) by delivering a copy of such process to Seller or
Corporate Seller Control Person, as the case may be, in care of the Process
Agent at the Process Agent's above address, and each of Seller and Corporate
Seller Control Person hereby irrevocably authorizes and directs the Process
Agent to accept such service on its behalf, or (B) by the mailing of copies of
such process to Seller or Corporate Seller Control Person, as the case may be,
at its or his address specified in Section 8.2. Each of Seller and Corporate
Seller Control Person agrees that a final and nonappealable judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Section 8.9 shall affect the right of Purchaser to serve legal
process in any other manner permitted by law or affect the right of Purchaser
to bring any action or proceeding against Seller or Corporate Seller Control
Person or their respective property in the courts of any other jurisdictions.
To the extent that either Seller or Corporate Seller Control Person has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, each of Seller and Corporate Seller Control Person hereby
irrevocably waives, to the fullest extent it may legally do so, such immunity
in respect of its obligations under this Forward Purchase Agreement and,
without limiting the generality of the foregoing, agrees that the waivers set
forth in this subsection shall have the fullest scope permitted under the
Foreign Sovereign Immunities Act of 1976 of the United States, as amended, and
are intended to be irrevocable for purposes of such Act.
8.10 Judgment Currency Indemnity. If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder in United
States dollars into another currency, the parties hereto agree, to the fullest
extent that they may effectively do so, that the rate of exchange used shall be
that at which in accordance with normal banking procedures the Collateral Agent
could purchase United States dollars with such other currency in the New York
City foreign exchange market at or about 11:00 A.M. (New York City time) on the
Business Day preceding that on which final judgment is given for delivery on
the following Business Day.
26
<PAGE> 27
The obligation of Seller in respect of any sum due from it to Purchaser or
the Collateral Agent hereunder shall, notwithstanding any judgment in a
currency other than United States dollars, be discharged only to the extent
that on the Business Day following receipt by Purchaser or the Collateral Agent
of any sum adjudged to be so due in such other currency the Collateral Agent
may in accordance with normal banking procedures purchase United States dollars
with such other currency; if the United States dollars so purchased are less
than the sum originally due to Purchaser or the Collateral Agent in United
States dollars, Seller agrees as a separate obligation and notwithstanding any
such judgment, to indemnify Purchaser or the Collateral Agent against such loss
and if the United States dollars so purchased exceed the sum originally due to
Purchaser or the Collateral Agent in United States dollars, Purchaser and the
Collateral Agent agree to remit to Seller such excess.
27
<PAGE> 28
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date and year first above written.
<TABLE>
<S> <C>
PURCHASER: SELLER:
DECS TRUST II [Seller]
By: _______________________________ By: _______________________________
Name: Name:
Title: Title:
CORPORATE SELLER CONTROL
PERSON:
___________________________________
Name:
</TABLE>
28
<PAGE> 29
EXHIBIT A
FORM OF COLLATERAL AGREEMENT
29
<PAGE> 30
[EXHIBIT B
FORM OF COLLATERAL AGENCY AGREEMENT]
30
<PAGE> 31
EXHIBIT [B] {C}
FORM OF REIMBURSEMENT AGREEMENT
31
<PAGE> 1
Exhibit 99.2.K(iv)
COLLATERAL AGREEMENT
Among
[Selling Shareholder],
As Pledgor,
THE BANK OF NEW YORK, As Collateral Agent
and
DECS TRUST II
Dated as of
, 1997
The following is a form of Collateral Agreement for non-individual Sellers. A
substantially identical agreement for each Seller will be entered into.
Alternative language for the Collateral Agreements of Sellers that will pledge
Multiple Voting Shares is indicated by brackets ({ }).
<PAGE> 2
The following Table of Contents has been inserted for convenience of
reference only and does not constitute a part of the Collateral Agreement.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION
1. The Security Interests. 1
2. Definitions. 3
3. Representations and Warranties of the Pledgor. 6
4. Representations and Warranties of the Collateral Agent. 7
5. Certain Covenants of the Pledgor. 8
6. Administration of the Collateral and Valuation of the Securities. 9
7. Income and Voting Rights on Collateral. 14
8. Remedies upon Events of Default. 15
9. The Collateral Agent. 18
10. Miscellaneous. 21
11. Termination of Collateral Agreement. 23
12. No Personal Liability of Trustees. 23
</TABLE>
Exhibit A - Certificate for Substituted Collateral
Exhibit B - Certificate for Additional Collateral
<PAGE> 3
COLLATERAL AGREEMENT
THIS COLLATERAL AGREEMENT (the "Agreement"), dated as of _________, 1997,
among [Selling Shareholder] (the "Pledgor"), a corporation organized under the
laws of [the Province of Ontario] [Canada], The Bank of New York, a New York
banking corporation, as collateral agent (the "Collateral Agent") hereunder for
the benefit of DECS Trust II, a statutory business trust organized under the
Business Trust Act of the State of Delaware (such trust and the trustees thereof
acting in their capacity as such being referred to herein as the "Trust" or
"Purchaser"), and the Trust;
W I T N E S S E T H:
WHEREAS, pursuant to the Forward Purchase Agreement (the "Forward Purchase
Agreement"), dated as of _________, 1997, between the Pledgor and Purchaser, the
Pledgor has agreed to sell and Purchaser has agreed to purchase subordinate
voting shares, without par value (the "Subordinate Voting Shares"), of Royal
Group Technologies Limited, a corporation organized under the laws of Canada
(the "Company"), subject to the terms and conditions of the Forward Purchase
Agreement;
NOW, THEREFORE, to secure the performance by the Pledgor of its obligations
under the Forward Purchase Agreement and to secure the observance and
performance of the covenants and agreements contained herein and in the Forward
Purchase Agreement, the parties hereto agree as follows:
1. The Security Interests.
In order to secure the observance and performance of the covenants and
agreements contained herein and in the Forward Purchase Agreement:
(a) Security Interests. The Pledgor hereby grants, sells, conveys,
assigns, transfers and pledges unto the Collateral Agent, as agent of and
for the benefit of the Trust, a security interest in and to, and a lien
upon and right of set-off against, all of Pledgor's right, title and
interest in and to (i) the Pledged Items described in paragraph{s} (b){
and (c)}; (ii) all additions to and substitutions for such Pledged Items;
(iii) all income, proceeds and collections received or to be received, or
derived or to be derived, now or any time hereafter from or in connection
with the Pledged Items (whether such proceeds arise before or after the
commencement of any proceeding under any applicable bankruptcy,
insolvency or other similar law, by or against the Pledgor with respect
to the Pledgor); and (iv) all powers and rights now owned or hereafter
acquired under or with respect to the Pledged Items (such Pledged Items,
additions, substitutions, income proceeds, collections, powers and rights
being herein collectively called the "Collateral"). The Collateral Agent
shall have all of the rights, remedies and recourses with respect to the
Collateral afforded a secured party by the New York Uniform Commercial
Code, in addition to, and not in limitation of, the other rights,
remedies and recourses afforded to the Collateral Agent by this
Agreement.
<PAGE> 4
(b) Advance Payment Date. At the Advance Payment Date, the Pledgor
shall deliver to the Collateral Agent in pledge hereunder one or more
certificates in registered form representing in the aggregate ___________
Subordinate Voting Shares, indorsed in blank or in the name of the
Collateral Agent for the benefit of the Trust (together with all
signature guarantees and any other documents necessary to permit the
Collateral Agent to effect the re-registration of such Subordinate Voting
Shares without further action by the Pledgor) or, if such Subordinate
Voting Shares are not issuable in certificated form but are held in book
entry form by The Depository Trust Company, the Pledgor shall transfer
such number of Subordinate Voting Shares to an account of the Collateral
Agent or to an account (other than an account of the Pledgor) designated
by the Collateral Agent with The Depository Trust Company. {At the
Advance Payment Date, the Pledgor may deliver in lieu of any or all
Subordinate Voting Shares to be delivered pursuant to this Section 2(b)
multiple voting shares of the Company ("Multiple Voting Shares") at the
ratio of one Multiple Voting Share for every Subordinate Voting Share
otherwise deliverable at such time. Such Multiple Voting Shares shall be
delivered in the Province of Ontario to CIBC Mellon Trust Company, as
sub-collateral agent (the "Sub-Collateral Agent") for the Collateral
Agent, indorsed in blank or in the name of the [Sub-Collateral
Agent][Collateral Agent] for the benefit of the Trust (together with all
signature guarantees and any other documents necessary to permit the
Sub-Collateral Agent to effect the re-registration of such Multiple
Voting Shares without further action by the Pledgor)}.
{(c) Additional Closing Date. Effective upon and subject to the
receipt by the Pledgor of the Additional Purchase Price, at the
Additional Closing Date, the Pledgor shall deliver to the Collateral
Agent in pledge hereunder one or more certificates in registered form
representing in the aggregate a number of Subordinate Voting Shares equal
to the Additional Share Base Amount, indorsed in blank or in the name of
the Collateral Agent for the benefit of the Trust (together with all
signature guarantees and any other documents necessary to permit the
Collateral Agent to effect the re-registration of such Subordinate Voting
Shares without further action by the Pledgor) or, if such Subordinate
Voting Shares are not issuable in certificated form but are held in book
entry form by The Depository Trust Company, the Pledgor shall transfer
such number of Subordinate Voting Shares to an account of the Collateral
Agent or to an account (other than an account of the Pledgor) designated
by the Collateral Agent with The Depository Trust Company.}
(c){(d)} Reregistration. Immediately following the Advance Payment
Date {and the Additional Closing Date}, the Collateral Agent shall cause
all certificates for Subordinate Voting Shares {or Multiple Voting
Shares} delivered pursuant to Section 1(b){ or 1(c)} above to be
re-registered on the books of the transfer agent for the Subordinate
Voting Shares {or Multiple Voting Shares}into the name of the Collateral
Agent or its nominee {including the Sub-Collateral Agent}, and shall
thereafter maintain them in such form until the termination of this
Agreement; provided, however, that at any time following the Advance
Payment Date {or the Additional Closing Date,}, as applicable, the
Collateral Agent may cause any such certificates for the Subordinate
2
<PAGE> 5
Voting Shares to be deposited with The Depository Trust Company and thereafter
hold such certificates in book-entry form.
2. Definitions.
Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to them in the Forward Purchase Agreement. Capitalized terms
used herein shall have the meanings as follows:
{"Additional Closing Date" has the meaning specified in Section 1.3(b) of
the Forward Purchase Agreement.}
"Authorized Representative" of the Pledgor means any officer or other
representative as to whom Pledgor shall have delivered notice to the Collateral
Agent that such officer or other representative is authorized to act hereunder
on behalf of Pledgor.
"Business Day" has the meaning specified in the Forward Purchase Agreement.
"Canadian Business Day" means any day that is not a Saturday, a Sunday or a
day on which The Toronto Stock Exchange or banking institutions or trust
companies in The City of Toronto are authorized or obligated by law or executive
order to close.
Cash Delivery Obligations" means, at any time (A) if no Adjustment Event
shall have occurred prior to such time, zero, and (B) from and after any
Adjustment Event, the product of: (i) the Initial Share Base Amount plus the
Additional Share Base Amount (if any) and (ii) the Transaction Value of any
property other than Reported Securities received by the Pledgor in such
Adjustment Event, multiplied successively by each number by which the Exchange
Rate shall have been multiplied on or prior to the Adjustment Event pursuant to
the adjustments provided for under Section 6.1 of the Forward Purchase
Agreement.
"CDS & Co." means the Canadian Depositary for Securities Limited.
"Collateral" has the meaning specified in Section 1(a).
"Collateral Agent" means the financial institution identified as such in
the preliminary paragraph hereof, or any successor appointed in accordance with
Section 9.
"Collateral Agreement" means this Collateral Agreement and any exhibits
hereto.
"Collateral Event of Default" has the meaning specified in Section 6(e).
"Collateral Requirement" means, as of any date and with respect to: (i)
any Subordinate Voting Shares, 100%; (ii) any Reported Securities, 100%; (iii)
any U.S. Government Securities pledged in respect of Cash Delivery Obligations,
105%; and (iv) any other U.S. Government Securities, 150%, provided that upon
and after any failure to cure an Insufficiency Determination by 4:00 p.m. New
York City time on the Canadian Business Day following telephonic notice of such
Insufficiency Determination as described in Section 6(e), which
3
<PAGE> 6
insufficiency shall be continuing on such Canadian Business Day, the Collateral
Requirement relating to any U.S. Government Securities (other than U.S.
Government Securities pledged in respect of Cash Delivery Obligations) shall be
200%. The portion of any pledged U.S. Government Securities that shall be
deemed at any time to be in respect of Cash Delivery Obligations shall be as
provided in Section 6(e).
"Delivery Date" has the meaning specified in Section 8(a).
"Eligible Collateral" means (i) Subordinate Voting Shares {or Multiple
Voting Shares}, (ii) U.S. Government Securities and (iii) from and after any
Adjustment Event, Reported Securities, provided, in each case, that (A) the
Pledgor has good and marketable title thereto, free of all Liens (other than the
Liens created by this Collateral Agreement and Transfer Restrictions {other than
the Transfer Restriction created by the Stock Control Agreement}, and (B) the
Collateral Agent has a valid, first priority perfected security interest therein
and first lien thereon, and provided further that to the extent the number of
Subordinate Voting Shares{, Multiple Voting Shares} or Reported Securities
pledged hereunder exceeds at any time the Maximum Deliverable Number thereof,
such excess shares shall not be Eligible Collateral.
"Event of Default" means the occurrence of: (i) an event described in
clause (a) or (b) of Article VII of the Forward Purchase Agreement, (ii) a
Collateral Event of Default, (iii) a failure by Pledgor to have caused the
Collateral to meet the requirements described in Section 5(d) hereof, (iv) if an
Adjustment Event shall have occurred prior to the Sale Date, failure by Pledgor
to cause to be delivered to Purchaser on the Sale Date the consideration then
required to be delivered pursuant to Section 6.2 of the Forward Purchase
Agreement or (v) if Pledgor shall have exercised its Cash Delivery Option, a
failure by the Pledgor to deliver cash on the Sale Date in the amount required
under Section 1.3(d) of the Forward Purchase Agreement.
"Independent Officer" has the meaning specified in Section 3(f).
"Ineligible Collateral" means Collateral that does not constitute "Eligible
Collateral."
"Lien" means any lien, mortgage, security interest, pledge, charge or
encumbrance of any kind.
"Market Value" means, as of any date: (a) with respect to any Subordinate
Voting Shares {or Multiple Voting Shares }(except as otherwise provided in
Section 6(e)(2)), the Closing Price {of the Subordinate Voting Shares }on such
date; (b) with respect to any U.S. Government Security, the product of (x)(i)
the average unit bid price for such security as published on the Trading Day
prior to such date in the New York edition of The Wall Street Journal or The New
York Times or, if not so published, (ii) the lower bid price quoted (which
quotation shall be evidenced in writing) on the Trading Day prior to such date
by either of two nationally recognized dealers making a market in such security
which are members of the National Association of Securities Dealers, Inc. and
(y) the number of such units comprised in the outstanding principal amount of
such U.S. Government Security; and (c) with respect to any
4
<PAGE> 7
unit of Reported Securities, the Closing Price thereof on the Trading Day prior
to such date; provided that the "Market Value" of any Ineligible Collateral
shall be zero.
"Maximum Deliverable Number" means, on any date, with respect to the
Subordinate Voting Shares, the product of the Initial Share Base Amount plus the
Additional Share Base Amount (if any), multiplied successively by each number by
which the Exchange Rate shall have been multiplied on or prior to such date
pursuant to the adjustments provided for under Section 6.1 of the Forward
Purchase Agreement. The Maximum Deliverable Number of Reported Securities
means, on any date, the product of (i) the Initial Share Base Amount plus the
Additional Share Base Amount (if any) and (ii) the number of Reported Securities
received by the Pledgor in the Adjustment Event for each share of Subordinate
Voting Shares, multiplied successively by each number by which the Exchange Rate
shall have been multiplied on or prior to such date and after the date of such
Adjustment Event pursuant to the adjustments provided for under Article VI of
the Forward Purchase Agreement.
"Parent" has the meaning specified in Section 3(f).
"Person" means an individual, a corporation, a partnership, an association,
a limited liability company, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Pledge Value" means, as of any date and with respect to any particular
type of Collateral, an amount equal to the aggregate Market Value of such
Collateral divided by the Collateral Requirement for such Collateral.
"Pledge Value Requirement" means, as of any date, (a) the aggregate Market
Value on such date of the Maximum Deliverable Number of Subordinate Voting
Shares and/or, from and after an Adjustment Event, Reported Securities, on such
date plus (b) from and after an Adjustment Event, the Cash Delivery Obligations.
"Pledged Items" means, as of any date, any and all securities and
instruments delivered by the Pledgor to be held by the Collateral Agent under
this Collateral Agreement as Collateral, whether Eligible Collateral or
Ineligible Collateral.
"Prior Collateral" has the meaning specified in Section 6(b)(i) hereof.
"Responsible Officer" means, when used with respect to the Collateral
Agent, any vice president, assistant vice president, assistant treasurer or
assistant secretary located in the division or department of the Collateral
Agent responsible for performing the obligations of the Collateral Agent under
this Collateral Agreement, or in any other division or department of the
Collateral Agent performing operations substantially equivalent to those
performed by such division or department pursuant hereto, or any other officer
of the Collateral Agent or any successor Collateral Agent customarily performing
functions similar to those performed by any of the aforesaid officers, and also
means, with respect to any matter relating to this Collateral Agreement or the
Collateral, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
5
<PAGE> 8
{"Stock Control Agreement" means the stock control agreement, dated as of
November 30, 1994, among the holders of the Multiple Voting Shares, the Company
and CIBC Mellon Trust Company, as successor to The R-M Trust Company, as
amended.}
"Transfer Restriction" means, with respect to any item of Collateral, any
condition to or restriction on the ability of the holder thereof to sell, assign
or otherwise transfer such item of Collateral or to enforce the provisions
thereof or of any document related thereto whether set forth in such item of
Collateral itself or in any document related thereto, including, without
limitation, (i) any requirement that any sale, assignment or other transfer or
enforcement of such item of Collateral be consented to or approved by any
Person, including, without limitation, the issuer thereof or any other obligor
thereon, (ii) any limitations on the type or status, financial or otherwise, of
any purchaser, pledgee, assignee or transferee of such item of Collateral, (iii)
any requirement of the delivery of any certificate, consent, agreement, opinion
of counsel, notice or any other document of any Person to the issuer of, any
other obligor on or any registrar or transfer agent for, such item of
Collateral, prior to the sale, pledge, assignment or other transfer or
enforcement of such item of Collateral and (iv) any registration or
qualification requirement for such item of Collateral pursuant to any Canadian
or U.S. federal, provincial or state securities law; provided that the required
delivery of any assignment from the seller, pledgor, assignor or transferor of
such item of Collateral, together with any evidence of the corporate or other
authority of such Person, shall not constitute a "Transfer Restriction."
"Trustee" or "Trustees" means any trustee or trustees of the Trust
identified on the signature pages hereto, or any successor as such trustee or
trustees.
"UCC" means the Uniform Commercial Code as in effect in the State of New
York.
"U.S. Government Securities" means direct obligations of the United States
of America that mature on a date that is one year or less from the date such
obligations are pledged hereunder, but in any event prior to the Sale Date.
3. Representations and Warranties of the Pledgor.
The Pledgor hereby represents and warrants to the Collateral Agent and the
Trust that:
(a) Corporate Existence and Power. The Pledgor is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to enter into, and perform its obligations under, this Collateral
Agreement.
(b) Authorization and Non-Contravention. The execution, delivery and
performance by the Pledgor of this Collateral Agreement have been duly
authorized by all necessary corporate action on the part of the Pledgor (no
action by the shareholders of the Pledgor being required) and do not and
will not violate, contravene or constitute a
6
<PAGE> 9
default under any provision of applicable law or regulation or of the
charter or by-laws of the Pledgor or of any material agreement, judgment,
injunction, order, decree or other instrument binding upon the Pledgor. The
Pledgor is not in default under any agreement by which the Collateral may
be bound and no litigation, arbitration or administrative proceedings are
current or pending, which default, litigation, arbitration or
administrative proceedings are material to the Collateral in the context of
this Collateral Agreement.
(c) Binding Effect. This Collateral Agreement constitutes a valid and
binding agreement of the Pledgor enforceable against the Pledgor in
accordance with its terms.
(d) No Transfer Restrictions. Except for any legend with respect to
restrictions pursuant to applicable Canadian or U.S. federal, provincial or
state securities laws on transfer of the Subordinate Voting Shares {or
Multiple Voting Shares }pledged by the Pledgor hereunder which appears on
the [face] [back] of the certificates representing such Subordinate Voting
Shares or Multiple Voting Shares (and which (i) will not be applicable to
the delivery of any such Subordinate Voting Shares on the Sale Date and
(ii) will be removed at the request of the Collateral Agent to the transfer
agent for the Subordinate Voting Shares prior to the Sale Date), no
Transfer Restrictions exist with respect to or otherwise apply to the
assignment of, or transfer by the Pledgor of possession of, any items of
Collateral to the Collateral Agent hereunder, or the subsequent sale or
transfer of such items of Collateral by the Collateral Agent pursuant to
the terms hereof. {Such Seller has all authorization and approval required
under the Stock Control Agreement to pledge and assign any Multiple Voting
Shares pledged and assigned as Collateral hereunder.}
(e) Title to Collateral; Perfected Security Interest. The Pledgor has
good and marketable title to the Pledged Items, free of all Liens (other
than the Lien created by this Collateral Agreement {(other than the
Transfer Restriction created by the Stock Control Agreement)} and Transfer
Restrictions. Upon delivery of the Pledged Items described in paragraph{s}
(b) {and (c)} of Section 1 to the Collateral Agent hereunder, the
Collateral Agent will obtain a valid, first priority perfected security
interest in, and a first lien upon, such Pledged Items subject to no other
Lien. None of the Collateral is or shall be pledged by the Pledgor as
collateral for any other purpose.
4. Representations and Warranties of the Collateral Agent.
The Collateral Agent represents and warrants to the Pledgor and the Trust
that:
(a) Corporate Existence and Power. The Collateral Agent is a banking
corporation, duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, and has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to enter into, and perform its obligations under, this
Collateral Agreement.
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(b) Authorization and Non-Contravention. The execution,
delivery and performance by the Collateral Agent of this Collateral
Agreement have been duly authorized by all necessary corporate action on
the part of the Collateral Agent (no action by the shareholders of the
Collateral Agent being required) and do not and will not violate,
contravene or constitute a default under any provision of applicable law
or regulation or of the charter or by-laws of the Collateral Agent or of
any material agreement, judgment, injunction, order, decree or other
instrument binding upon the Collateral Agent.
(c) Binding Effect. This Collateral Agreement constitutes a
valid and binding agreement of the Collateral Agent enforceable against
the Collateral Agent in accordance with its terms.
(d) Section 17(f) Qualification. The Collateral Agent is
qualified to act as a custodian under Section 17(f) of the Investment
Company Act of 1940, as amended (the "Investment Company Act").
5. Certain Covenants of the Pledgor.
The Pledgor agrees that, so long as any of its obligations under the
Forward Purchase Agreement remain outstanding:
(a) Title to Collateral. The Pledgor shall at all times
hereafter have good and marketable title to the Collateral pledged
hereunder, free of all Liens (other than the Liens created by this
Collateral Agreement and Transfer Restrictions {(other than the Transfer
Restriction created by the Stock Control Agreement)} and, subject to the
terms of this Collateral Agreement, will at all times hereafter have good,
right and lawful authority to assign, transfer and pledge such Collateral
and all such additions thereto and substitutions therefor under this
Collateral Agreement.
(b) Pledge Value Requirement. The Pledgor shall cause the
aggregate Pledge Value of the Collateral to be equal to or greater than
the Pledge Value Requirement at all times, and shall pledge additional
Collateral in the manner described in Section 6(d) as necessary to cause
such requirement to be met.
(c) Pledge upon Adjustment Event. Upon the occurrence of an
Adjustment Event, the Pledgor shall immediately cause to be delivered to
the Collateral Agent, in the manner provided in Section 6(d): (i) U.S.
Government Securities having an aggregate Market Value at least equal to
105% of the Cash Delivery Obligations; and (ii) Reported Securities in an
amount at least equal to the Maximum Deliverable Number thereof (if any)
or, at Pledgor's election, U.S. Government Securities having an aggregate
Market Value at least equal to 150% of such Maximum Deliverable Number of
Reported Securities; in each case to be held as substitute or additional
Collateral hereunder.
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<PAGE> 11
(d) Composition of Pledged Items. Notwithstanding the
Pledgor's right to substitute Collateral pursuant to Section 6(b), the
Pledgor shall cause the Collateral to include, on the Sale Date, unless
Pledgor shall have exercised its Cash Delivery Option, a number of
Subordinate Voting Shares {and/or Multiple Voting Shares} (and/or, if an
Adjustment Event shall have occurred, Reported Securities) at least equal
to the number of Subordinate Voting Shares (and/or, if an Adjustment Event
shall have occurred, Reported Securities) required to be delivered under
the Forward Purchase Agreement on the Sale Date. If the Pledgor exercises
its Cash Delivery Option, then the Pledgor shall cause the Collateral to
consist entirely of U.S. Government Obligations or cash at all times from
and after the date 25 Business Days prior to the Sale Date.
(e) Further Assurances. The Pledgor shall, at his expense and
in such manner and form as the Trust or the Collateral Agent may require,
give, execute, deliver, file and record any financing statement, notice,
instrument, document, agreement or other papers that may be necessary or
desirable in order to create, preserve, perfect, substantiate or validate
any security interest granted pursuant hereto or to enable the Collateral
Agent to exercise and enforce its rights and the rights of the Trust
hereunder with respect to such security interest. To the extent permitted
by applicable law, the Pledgor hereby authorizes the Collateral Agent to
execute and file, in the name of the Pledgor or otherwise, Uniform
Commercial Code financing or continuation statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or of a
financing statement relating to this Agreement) which the Collateral Agent
in its sole discretion may deem necessary or appropriate to further
perfect, or maintain the perfection of the security interests granted
hereby.
6. Administration of the Collateral and Valuation of the Securities.
(a) Valuation of Collateral. The Collateral Agent shall
determine on each Business Day whether the Pledge Value is at least equal
to the Pledge Value Requirement and whether an Insufficiency Determination
or Collateral Event of Default shall have occurred and, from and after any
substitution of U.S. Government Securities for pledged Subordinate Voting
Shares{, or Multiple Voting Shares} or Reported Securities pursuant to
paragraph (b) of this Section 6, shall determine the Pledge Value on each
Business Day and shall provide written notice of the Pledge Value to the
Pledgor.
(b) Substitution of Collateral. The Pledgor may substitute
Collateral in accordance with the following provisions:
(i) Unless an Event of Default or a failure by the
Pledgor to meet any of its obligations under Section 5(b) or (c)
hereof has occurred and is continuing, the Pledgor shall have the
right at any time and from time to time to deposit Eligible
Collateral with the Collateral Agent in substitution for Pledged
Items previously deposited hereunder ("Prior Collateral") and to
obtain the release from the Lien hereof of such Prior Collateral.
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<PAGE> 12
(ii) If the Pledgor wishes to deposit Eligible Collateral
with the Collateral Agent in substitution for Prior Collateral, the
Pledgor shall (A) give written notice to the Collateral Agent
identifying the Prior Collateral to be released from the Lien
hereof, (B) deliver to the Collateral Agent concurrently with such
Eligible Collateral a certificate of the Pledgor substantially in
the form of Exhibit A hereto and dated the date of such delivery,
(1) identifying the items of Eligible Collateral being substituted
for the Prior Collateral and the Prior Collateral that is to be
transferred to the Pledgor and (2) certifying that the
representations and warranties contained in such Exhibit A hereto
are true and correct on and as of the date thereof and (C) deliver
to the Collateral Agent concurrently with such Eligible Collateral
{or, in the case of Multiple Voting Shares, concurrently with the
delivery of such Multiple Voting Shares to the Sub-Collateral Agent
in the Province of Ontario} an opinion (dated the date of such
delivery) of counsel addressed to the Collateral Agent confirming
the representations contained in the second sentence of paragraph
3(b) of Exhibit A hereto. The Pledgor hereby covenants and agrees
to take all actions required under Section 6(d) and any other
actions necessary to create for the benefit of the Collateral Agent
a valid, first priority perfected security interest in, and a first
lien upon, such Eligible Collateral deposited with the Collateral
Agent {or, in the case of Multiple Voting Shares, the Sub-Collateral
Agent} in substitution for Prior Collateral.
(iii) No such substitution shall be made unless and until
the Collateral Agent shall have determined that the aggregate Pledge
Value of all of the Collateral at the time of such proposed
substitution, after giving effect to the proposed substitution,
shall at least equal the Pledge Value Requirement.
(c) Additional Collateral. The Pledgor may pledge additional
Collateral hereunder at any time. Concurrently with the delivery of any
additional Eligible Collateral, the Pledgor shall deliver (i) a
certificate of the Pledgor substantially in the form of Exhibit B hereto
and dated the date of such delivery, (A) identifying the additional items
of Eligible Collateral being pledged and (B) certifying that with respect
to such items of additional Eligible Collateral the representations and
warranties contained in such Exhibit B hereto are true and correct on and
as of the date thereof and (ii) an opinion, dated the date of such
delivery, of counsel addressed to the Collateral Agent confirming the
representations contained in the second sentence of paragraph 2(b) of
Exhibit B hereto. The Pledgor hereby covenants and agrees to take all
actions required under Section 6(d) and any other actions necessary to
create for the benefit of the Collateral Agent a valid, first priority
perfected security interest in, and a first lien upon, such additional
Eligible Collateral.
(d) Delivery of Collateral. The Pledgor shall deliver all
Collateral to the Collateral Agent {(or, in the case of Multiple Voting
Shares, to the Sub-Collateral Agent)}in accordance with the following
provisions:
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<PAGE> 13
(i) Pledged Subordinate Voting Shares. In the case of
Collateral consisting of Subordinate Voting Shares, by delivery of
certificates evidencing such Subordinate Voting Shares, indorsed in
blank (together with all signature guarantees and any other
documents necessary to permit the Collateral Agent to effect the
re-registration thereof without further action by the Pledgor) or
registered in the name of the Collateral Agent or its nominee or, if
such Subordinate Voting Shares are not issuable in certificated form
but are held in book entry form by The Depository Trust Company, by
transfer to an account of the Collateral Agent or to an account
(other than an account of the Pledgor) designated by the Collateral
Agent with The Depository Trust Company;
{(ii) Pledged Multiple Voting Shares. In the case of
Collateral consisting of Multiple Voting Shares, by delivery of
certificates evidencing such Multiple Voting Shares, indorsed in
blank (together with all signature guarantees and any other
documents necessary to permit the Sub-Collateral Agent to effect the
re-registration thereof without further action by the Pledgor) or
registered in the name of the [Sub-Collateral Agent][Collateral
Agent] or its nominee.}
(ii) {iii} Pledged U.S. Government Securities. In the
case of Collateral consisting of U.S. Government Securities, by
transfer thereof through the Book Entry System of the Federal
Reserve System to the account of the Collateral Agent or to an
account (other than an account of the Pledgor) designated by the
Collateral Agent; and
(iii) {iv} Pledged Reported Securities. In the case of
Collateral consisting of Reported Securities, by delivery of
certificates evidencing such Reported Securities, indorsed in blank
(together with all signature guarantees and any other documents
necessary to permit the Collateral Agent to effect the
re-registration thereof without further action by the Pledgor) or
registered in the name of the Collateral Agent or its nominee or, if
such Reported Securities are not issuable in certificated form but
are held in book entry form by The Depository Trust Company or CDS &
Co., by transfer to an account of the Collateral Agent or to an
account (other than an account of the Pledgor) designated by the
Collateral Agent with The Depository Trust Company. Each such
delivery of Reported Securities shall be accompanied by an opinion
of counsel satisfactory to the Collateral Agent that the Collateral
Agent has obtained a valid, first priority perfected security
interest in, and a first lien upon, such Reported Securities.
Upon delivery of any Pledged Item under this Collateral
Agreement, the Collateral Agent shall examine such Pledged Item and any
opinions and certificates delivered pursuant to Sections 6(b), 6(c),
6(d)(iii){(iv)} or otherwise pursuant to the terms hereof in connection
therewith to determine that they comply as to form with the requirements
for Eligible Collateral. Immediately following the delivery to the
Collateral Agent of any Collateral in the form of certificates indorsed in
blank, the Collateral Agent shall cause all such certificates to be
re-registered on the books of the applicable transfer
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<PAGE> 14
agent into the name of the Collateral Agent or its nominee {(which may be
the Sub-Collateral Agent)}, and shall thereafter maintain all such
Collateral in such form until the termination of this Agreement; provided,
however, that at any time following such delivery to the Collateral Agent,
the Collateral Agent may cause any such certificates to be deposited with
The Depository Trust Company and thereafter hold such certificates in
book-entry form. The Pledgor hereby designates the Collateral Agent as
the person in whose name any Collateral held in book entry form in the
Federal Reserve System shall be registered.
(e) Insufficiency Determination.
(i) If on any Business Day the Collateral Agent
determines that the aggregate Pledge Value of the Collateral is less
than the Pledge Value Requirement (any such determination, an
"Insufficiency Determination"), the Collateral Agent shall, by
telephone call to an Authorized Representative of the Pledgor
followed by a written confirmation of such call, promptly notify the
Pledgor of such determination and of the amount of the
insufficiency.
(ii) If, by 4:00 p.m., New York City time on the Canadian
Business Day following the day on which telephonic notice shall have
been given pursuant to the preceding paragraph (e)(i), the Pledgor
shall have failed to deliver, in the manner set forth in paragraphs
(c) and (d) of this Section 6, sufficient additional Eligible
Collateral so that, after giving effect to such delivery (and taking
into account that Subordinate Voting Shares{, Multiple Voting
Shares} and Reported Securities in excess of the Maximum Deliverable
Number thereof shall not constitute Eligible Collateral), the
aggregate Pledge Value of the Collateral, as of such Canadian
Business Day, is at least equal to the Pledge Value Requirement,
then (x) the Collateral Requirement with respect to any U.S.
Government Securities pledged hereunder (other than in respect of
Cash Delivery Obligations) shall be increased from 150% to 200%, and
(y) unless a Collateral Event of Default shall have occurred and be
continuing, the Collateral Agent shall:
(A) commence sales, in the manner described in
paragraph (iii) below, of such portion of the Collateral
consisting of U.S. Government Securities as may be required to
be sold in order to generate proceeds sufficient to purchase
Subordinate Voting Shares and/or, after an Adjustment Event,
Reported Securities, as described in the following clause (B);
and
(B) commence purchases, in the manner described in
paragraph (iii) below, of Subordinate Voting Shares and/or,
after an Adjustment Event, Reported Securities, in an amount
sufficient to cause the aggregate Pledge Value of the
Collateral to be at least equal to the Pledge Value
Requirement.
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Notwithstanding the foregoing, the Collateral Agent shall discontinue
sales and purchases pursuant to the preceding clauses (A) and (B),
respectively, if at any time a Collateral Event of Default shall have
occurred and be continuing. The Collateral Agent shall determine the
Market Value and the Pledge Value of the Collateral after each purchase of
Subordinate Voting Shares or Reported Securities pursuant to the preceding
clause (B) in order to determine whether the Pledge Value Requirement is
met and whether a Collateral Event of Default has occurred. Solely for
purposes of such calculation, the Market Value of the Subordinate Voting
Shares or Reported Securities shall be: (x) the most recent sales price
as reported in the composite transactions for the principal securities
exchange on which the Subordinate Voting Shares or Reported Securities, as
the case may be, are then listed or, if such securities are not so listed,
the last quoted ask price for such securities in the over-the-counter
market as reported by The NASDAQ National Market or, if not so reported,
by the National Quotation Bureau or a similar organization; or (y) if
higher, in the case of Subordinate Voting Shares, the most recent
available Closing Price.
A "Collateral Event of Default" shall mean, at any time, the
occurrence of any of the following: (x) failure of the aggregate Market
Value of the Collateral to equal or exceed the Pledge Value Requirement;
(y) failure of the Market Value of any U.S. Government Securities pledged
at such time (not including any U.S. Government Securities pledged in
respect of Cash Delivery Obligations at such time) to have an aggregate
Market Value of at least 105% of the Market Value of a number of
Subordinate Voting Shares (and/or, from and after any Adjustment Event,
Reported Securities) equal to (A) the Maximum Deliverable Number thereof
minus (B) the number thereof pledged as Collateral hereunder at such time;
or (z) from and after any Adjustment Event, failure of the U.S. Government
Securities pledged in respect of Cash Delivery Obligations to have an
aggregate Market Value at least equal to 105% of the Cash Delivery
Obligations at such time, if, in the case of a failure described in this
clause (z), such failure shall continue to be in effect at 4:00 p.m., New
York City time, on the Business Day following the day on which telephonic
notice in respect thereof shall have been given pursuant to paragraph
(e)(i) above. For purposes of this Agreement, the portion of any pledged
U.S. Government Securities that shall be deemed to be in respect of Cash
Delivery Obligations at any time shall be a portion having a Market Value
equal to 105% of the Cash Delivery Obligations at such time (or, if less,
the aggregate Market Value of all U.S. Government Securities pledged at
such time).
(iii) Collateral sold and Subordinate Voting Shares or
shares of Reported Securities purchased by the Collateral Agent
pursuant to the preceding paragraphs (e)(ii)(A) and (B) may be sold
and purchased on any securities exchange or in any over-the-counter
market or in any private purchase transaction, and at such price or
prices, in each case as the Collateral Agent may deem satisfactory.
The Pledgor covenants and agrees that it will execute and deliver
such documents and take such other action as the Collateral Agent
deems necessary or advisable in order that any such sales and
purchases may be made in compliance with law.
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(f) Release of Excess Collateral. If on any Business Day the
Collateral Agent determines that the aggregate Pledge Value of the
Pledgor's Eligible Collateral exceeds the Pledge Value Requirement and no
Event of Default or failure by the Pledgor to meet any of its obligations
under Sections 5 or 6 hereof has occurred and is continuing, the Pledgor
may obtain the release from the Lien hereof of any Collateral having an
aggregate Pledge Value on such Business Day less than or equal to such
excess, upon delivery to the Collateral Agent of a written notice from an
Authorized Representative of the Pledgor indicating the items of
Collateral to be released. Such Collateral shall be released only after
the Collateral Agent shall have determined that the aggregate Pledge Value
of all of the Collateral remaining after such release as determined on
such Business Day is at least equal to the Pledge Value Requirement.
(g) Delivery of Forward Purchase Agreement Consideration. On
the Sale Date, unless Pledgor shall have exercised its Cash Delivery
Option, the Collateral Agent shall deliver to the Trust Subordinate Voting
Shares (and/or, if an Adjustment Event shall have occurred, Reported
Securities) then held by it hereunder representing the number of
Subordinate Voting Shares (and/or, if an Adjustment Event shall have
occurred, Reported Securities) then required to be delivered under the
Forward Purchase Agreement. Upon such delivery, the Trust shall hold such
Subordinate Voting Shares and/or Reported Securities, as the case may be,
absolutely and free from any claim or right whatsoever. {On or
immediately prior to the Sale Date, any Multiple Voting Shares held as
Collateral at such time shall be converted into an equivalent number
Subordinate Voting Shares before delivery to the Trust. In no event shall
Multiple Voting Shares be delivered to the Trust on the Sale Date. Upon
such conversion and delivery, the Trust shall hold the resulting
Subordinate Voting Shares absolutely and free from any claim or right
whatsoever.}
(h) Investment of Cash Collateral. The Collateral Agent shall
invest any cash received by it pursuant to Section 6.2 of the Forward
Purchase Agreement in U.S. Treasury Securities maturing on or before the
Sale Date.
7. Income and Voting Rights on Collateral.
(a) Unless an Event of Default or failure by the Pledgor to
meet any of Pledgor's obligations under Section 5(b) or (c) hereof has
occurred and is continuing, the Pledgor shall be entitled to receive for
Pledgor's own account all dividends, interest and, if any, principal and
premium relating to all of the Collateral, unless the payment thereof to
the Pledgor would reduce the aggregate Pledge Value of the Collateral
below the Pledge Value Requirement. The Collateral Agent agrees to remit
to the Pledgor on the Business Day received or the first Business Day
thereafter all such payments received by it. If an Event of Default or
failure by the Pledgor to meet any of its obligations under Section 5(b)
or (c) hereof has occurred and is continuing, all such payments made or
accrued after and during the continuance of such Event of Default or
failure shall be retained by the Collateral Agent, and any such payments
which are received by the
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<PAGE> 17
Pledgor shall be received in trust for the benefit of the Trust, shall be
segregated from other funds of the Pledgor and shall forthwith be paid
over to the Collateral Agent. Any such payments so retained by, or paid
over to, the Collateral Agent shall be held by the Collateral Agent as
Collateral hereunder.
(b) Unless an Event of Default has occurred and is continuing,
the Pledgor shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Collateral, and
the Collateral Agent shall promptly deliver to the Pledgor such proxies,
powers of attorney, consents, ratifications and waivers in respect of any
of the Collateral which is registered in the name of the Collateral Agent
or its nominee and shall further deliver such documents and instruments as
shall be specified in a written request by the Pledgor.
If an Event of Default shall have occurred and be continuing,
the Collateral Agent shall have the right to the extent permitted by law,
and the Pledgor shall take all such action as may be necessary or
appropriate to give effect to such right, to vote and to give consents,
ratifications and waivers, and take any other action with respect to any
or all of the Collateral with the same force and effect as if the
Collateral Agent were the absolute and sole owner thereof.
8. Remedies upon Events of Default.
(a) If any Event of Default shall have occurred and be
continuing, the Collateral Agent may exercise on behalf of the Trust all
the rights of a secured party under the UCC (whether or not in effect in
the jurisdiction where such rights are exercised) and, in addition,
without being required to give any notice, except as herein provided or as
may be required by mandatory provisions of law, shall: (i) deliver all
Collateral consisting of Subordinate Voting Shares {(with all Collateral
held in the form of Multiple Voting Shares being immediately converted
into Subordinate Voting Shares before delivery to the Trust)} or Reported
Securities (but not, in either case, in excess of the number of shares
thereof deliverable under the Forward Purchase Agreement at such time) to
the Trust on the date of the notice delivered to the Collateral Agent
pursuant to Section 7(C) of the Forward Purchase Agreement relating to
such Event of Default (or, in the case of an Event of Default described in
clause (iii), (iv) or (v) of the definition thereof, on the Sale Date) (in
either case, the "Delivery Date"), whereupon the Trust shall hold such
Subordinate Voting Shares or Reported Securities absolutely free from any
claim or right of whatsoever kind, including any equity or right of
redemption of the Pledgor which may be waived, and the Pledgor, to the
extent permitted by law, hereby specifically waives all rights of
redemption, stay or appraisal which Pledgor has or may have under any law
now existing or hereafter adopted; and (ii) if such delivery shall be
insufficient to satisfy in full all of the obligations of Pledgor under
the Forward Purchase Agreement, sell all of the remaining Collateral, or
such lesser portion thereof as may be necessary to generate proceeds
sufficient to satisfy in full all of the obligations of Pledgor under the
Forward Purchase Agreement, at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery, and at such
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<PAGE> 18
price or prices as the Collateral Agent may deem satisfactory. The
Pledgor covenants and agrees to execute and deliver such documents and
take such other action as the Collateral Agent deems necessary or
advisable in order that any such sale may be made in compliance with law.
Upon any such sale the Collateral Agent shall have the right to deliver,
assign and transfer to the purchaser thereof the Collateral so sold. Each
purchaser at any such sale shall hold the Collateral so sold absolutely
and free from any claim or right of whatsoever kind, including any equity
or right of redemption of the Pledgor which may be waived, and the
Pledgor, to the extent permitted by law, hereby specifically waives all
rights of redemption, stay or appraisal which Pledgor has or may have
under any law now existing or hereafter adopted. The notice (if any) of
such sale required by Article 9 of the UCC shall (1) in case of a public
sale, state the time and place fixed for such sale, (2) in case of sale at
a broker's board or on a securities exchange, state the board or exchange
at which such sale is to be made and the day on which the Collateral, or
the portion thereof so being sold, will first be offered for sale at such
board or exchange, and (3) in the case of a private sale, state the day
after which such sale may be consummated. Any such public sale shall be
held at such time or times within ordinary business hours and at such
place or places as the Collateral Agent may fix in the notice of such
sale. At any such sale the Collateral may be sold in one lot as an
entirety or in separate parcels, as the Collateral Agent may determine.
The Collateral Agent shall not be obligated to make any such sale pursuant
to any such notice. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed
for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the selling price is paid by the
purchaser thereof, but the Collateral Agent shall not incur any liability
in case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Collateral Agent, instead of
exercising the power of sale herein conferred upon it, may proceed by a
suit or suits at law or in equity to foreclose the security interests and
sell the Collateral, or any portion thereof, under a judgment or decree of
a court or courts of competent jurisdiction.
(b) Power of Attorney. The Collateral Agent is hereby
irrevocably appointed the true and lawful attorney of the Pledgor with
full power and authority, in the name and stead of the Pledgor, to do all
of the following: (i) upon any delivery or sale of all or any part of any
Collateral made either under the power of delivery or sale given hereunder
or under judgment or decree in any judicial proceedings for foreclosure or
otherwise for the enforcement of this Collateral Agreement, to make all
necessary deeds, bills of sale and instruments of assignment, transfer or
conveyance of the property thus delivered or sold; (ii) upon the
occurrence of an Adjustment Event while any Subordinate Voting Shares {or
Multiple Voting Shares }are Pledged Items, to take any necessary actions
with respect to such Subordinate Voting Shares {or Multiple Voting Shares
}to cause the Pledged Items to conform to the requirements of this
Collateral Agreement following the occurrence of the Adjustment Event,
including, without limitation, the
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tender of Subordinate Voting Shares {or Multiple Voting Shares }and the
sale of property (other than Reported Securities) received in respect of
Subordinate Voting Shares {or Multiple Voting Shares}. For such purposes
the Collateral Agent may execute all necessary documents and instruments.
This power of attorney shall be deemed coupled with an interest, and the
Pledgor hereby ratifies and confirms all that his attorneys acting under
such power, or such attorneys' successors or agents, shall lawfully do by
virtue of this Collateral Agreement. If so requested by the Collateral
Agent, by the Trustees or by any purchaser of the Collateral or a portion
thereof, the Pledgor shall further ratify and confirm any such delivery or
sale by executing and delivering to the Collateral Agent, to the Trustees
or to such purchaser or purchasers at the expense of the Pledgor all
proper deeds, bills of sale, instruments of assignment, conveyance of
transfer and releases as may be designated in any such request. The
Pledgor's obligations and authorizations hereunder shall not be terminated
by operation of law or the occurrence of any event whatsoever.
(c) Application of Collateral and Proceeds. In the case of an
Event of Default, the Collateral Agent may proceed to realize upon the
security interest in the Collateral against any one or more of the types
of Collateral, at any one time, as the Collateral Agent shall determine in
its sole discretion subject to the foregoing provisions of this Section 8.
The proceeds of any sale of, or other realization upon, or other receipt
from, any of the Collateral remaining after delivery to the Trust pursuant
to Section 8(a) shall be applied by the Collateral Agent in the following
order of priorities:
(i) first, to the payment to the Trust of an amount equal
to: (A) the aggregate Market Value of a number of Subordinate Voting
Shares equal to (1) the number of Subordinate Voting Shares required
to be delivered under the Forward Purchase Agreement on the Delivery
Date minus (2) the number of Subordinate Voting Shares delivered by
the Collateral Agent to the Trust on the Delivery Date as described
above; or (B) from and after an Adjustment Event, the sum of (1) the
Cash Delivery Obligations on the Delivery Date and (2) the aggregate
Market Value on the Delivery Date of a number of Reported Securities
(and, if applicable, Subordinate Voting Shares) equal to (x) the
number thereof required to be delivered on the Delivery Date under
Section 6.2 of the Forward Purchase Agreement minus (y) the number
thereof delivered by the Collateral Agent to the Trust on the
Delivery Date as described above; or (C) if the Pledgor shall have
exercised its Cash Delivery Option, the amount of cash required to
be delivered under Section 1.3(d) of the Forward Purchase Agreement
minus the amount of cash so delivered;
(ii) second, to the payment to the Collateral Agent of the
expenses of such sale or other realization, including reasonable
compensation to the Collateral Agent and its agents and counsel, and
all expenses, liabilities and advances incurred or made by the
Collateral Agent in connection therewith, including brokerage fees
in connection with the sale by the Collateral Agent of any Pledged
Item; and
50
<PAGE> 20
(iii) finally, if all of the obligations of the Pledgor
hereunder and under the Forward Purchase Agreement have been fully
discharged or sufficient funds have been set aside by the Collateral
Agent at the request of the Pledgor for the discharge thereof, any
remaining proceeds shall be released to the Pledgor.
9. The Collateral Agent.
The Collateral Agent accepts its duties and responsibilities hereunder as
agent for the Trust on and subject to the following terms and conditions:
(a) Performance of Duties. The Collateral Agent undertakes to
perform such duties and only such duties as are expressly set forth herein
and, beyond the exercise of reasonable care in the performance of such
duties, no implied covenants or obligations shall be read into this
Collateral Agreement against the Collateral Agent. No provision hereof
shall be construed to relieve the Collateral Agent from liability for its
own grossly negligent action, grossly negligent failure to act or its own
willful misconduct, subject to the following:
(i) The Collateral Agent may consult with counsel, and the
advice or opinion of such counsel shall be full and complete
authorization and protection in respect of an action taken or
suffered hereunder in good faith and in accordance with such advice
or opinion of counsel.
(ii) The Collateral Agent shall not be liable with respect
to any action taken, suffered or omitted by it in good faith (A)
reasonably believed by it to be authorized or within the discretion
or rights or powers conferred on it by this Collateral Agreement or
(B) in accordance with any direction or request of the Trustees.
(iii) The Collateral Agent shall not be liable for any
error of judgment made in good faith by any of its officers, unless
the Collateral Agent was grossly negligent in ascertaining the
pertinent facts.
(iv) In the absence of bad faith on its part, the
Collateral Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein,
upon any note, notice, resolution, consent, certificate, affidavit,
letter, telegram, teletype message, statement, order or other
document believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons.
(v) No provision of this Collateral Agreement shall
require the Collateral Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that
18
<PAGE> 21
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(vi) The Collateral Agent may perform any duties
hereunder either directly or by or through agents or attorneys, and
the Collateral Agent shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due
care by it hereunder. In furtherance thereof, any subsidiary owned
or controlled by the Collateral Agent, or its successors, as agent
for the Collateral Agent, may perform any or all of the duties of
the Collateral Agent relating to the valuation of securities and
other instruments constituting Collateral hereunder.
(vii) In no event shall the Collateral Agent be
personally liable for any taxes or other governmental charges
imposed upon or in respect of (A) the collateral or (B) the income
or other distributions thereon.
(viii) Unless and until the Collateral Agent shall have
received notice from the Pledgor, or unless and until a Responsible
Officer of the Collateral Agent shall have actual knowledge to the
contrary, the Collateral Agent shall be entitled to deem and treat
all Collateral delivered to it hereunder as Eligible Collateral
hereunder, provided that the Collateral Agent has carried out the
duties specified in Section 6 with respect to such Collateral at the
time of delivery thereof.
(ix) Nothing herein, express or implied, shall constitute
a delegation to the Collateral Agent of the duties and
responsibilities of a "foreign collateral manager," within the
meaning of Rule 17f-5 under the Investment Company Act, with respect
to any foreign agent or sub-custodian appointed to hold any
securities or other instruments constituting Collateral hereunder.
The Collateral Agent shall not be responsible for the correctness of
the recitals and statements herein which are made by the Pledgor or for any
statement or certificate delivered by the Pledgor pursuant hereto. Except
as specifically provided herein, the Collateral Agent shall not be
responsible for the validity, sufficiency, collectibility or marketability
of any Collateral given to or held by it hereunder or for the validity or
sufficiency of the Forward Purchase Agreement or the Lien on the Collateral
purported to be created hereby.
(b) Knowledge. The Collateral Agent shall not be deemed to
have knowledge of any Event of Default (except a Collateral Event of
Default), unless and until a Responsible Officer of the Collateral Agent
shall have actual knowledge thereof or shall have received written notice
thereof.
(c) Merger. Any corporation or association into which the
Collateral Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its agency business and
assets as a whole or substantially as a whole,
19
<PAGE> 22
or any corporation or association resulting from any such conversion, sale,
merger, consolidation or transfer to which it is a party, shall, subject to
the prior written consent of the Trust, be and become a successor
Collateral Agent hereunder and vested with all of the title to the
Collateral and all of the powers, discretions, immunities, privileges and
other matters as was its predecessor without, except as provided above, the
execution or filing of any instrument or any further act, deed or
conveyance on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
(d) Resignation. The Collateral Agent and any successor
Collateral Agent may at any time resign by giving thirty days' written
notice by registered or certified mail to the Pledgor and notice to the
Trust in accordance with the provisions of Section 10(d) hereof. Such
resignation shall take effect upon the appointment of a successor
Collateral Agent by the Trust.
(e) Removal. The Collateral Agent may be removed at any time
by an instrument or concurrent instruments in writing delivered to the
Collateral Agent and to the Pledgor and signed by the Trust.
(f) Appointment of Successor.
(i) If the Collateral Agent hereunder shall resign or be
removed, or be dissolved or shall be in the course of dissolution or
liquidation or otherwise become incapable of action hereunder, or if
it shall be taken under the control of any public officer or
officers or of a receiver appointed by a court, a successor may be
appointed by the Trust by an instrument or concurrent instruments in
writing signed by the Trust or by its attorneys in fact fully
authorized a copy of such instrument or concurrent instruments shall
be sent by registered mail to the Pledgor.
(ii) Every such temporary or permanent successor
Collateral Agent appointed pursuant to the provisions hereof shall
be a trust company or bank in good standing, having a reported
capital and surplus of not less than US$100,000,000 and capable of
holding the Collateral {(other than the Multiple Voting Shares)} in
the State of New York, if there be such an institution willing,
qualified and able to accept the duties of the Collateral Agent
hereunder upon customary terms.
(g) Acceptance by Successor. Every temporary or permanent
successor Collateral Agent appointed hereunder shall execute, acknowledge
and deliver to its predecessor and also to the Pledgor an instrument in
writing accepting such appointment hereunder, whereupon such successor,
without any further act, deed or conveyance, shall become fully vested with
all the estates, properties, rights, powers, duties and obligations of its
predecessors. Such predecessor shall, nevertheless, on the written request
of its successor or the Pledgor, execute and deliver an instrument
transferring to such successor all the estates, properties, rights and
powers of such predecessor hereunder. Every predecessor Collateral Agent
shall deliver all Collateral
20
<PAGE> 23
held by it as the Collateral Agent hereunder to its successor. Should any
instrument in writing from the Pledgor be required by a successor
Collateral Agent for more fully and certainly vesting in such successor the
estates, properties, rights, powers, duties and obligations hereby vested
or intended to be vested in the predecessor, any and all such instruments
in writing shall, at the request of the temporary or permanent successor
Collateral Agent, be forthwith executed, acknowledged and delivered by the
Pledgor.
10. Miscellaneous.
(a) Benefit of Agreement; Successors and Assigns. Whenever any
of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party. All the covenants and
agreements herein contained by or on behalf of the Pledgor and the
Collateral Agent shall bind, and inure to the benefit of, their respective
successors and assigns whether so expressed or not, and shall be
enforceable by and inure to the benefit of the Trust and its successors and
assigns.
(b) Separability. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this
Collateral Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.
(c) Amendments and Waivers. Any term, covenant, agreement or
condition of this Collateral Agreement may be amended or compliance
therewith may be waived (either generally or in a particular instance and
either retrospectively or prospectively) but only by a writing signed by
the Collateral Agent, the Pledgor and the Trust.
(d) Notices.
(i) Any notice provided for herein, unless otherwise
specified, shall be in writing (including transmittals by telex or
telecopier) and shall be given to a party at the address set forth
opposite such party's name on the signature pages hereto or at such
other address as may be designated by notice duly given in
accordance with this Section 10(d) to each other party hereto.
(ii) Each such notice given pursuant to paragraph (i)
shall be effective (A) if sent by certified mail (return receipt
requested), 72 hours after being deposited in the Canadian or United
States mail, postage prepaid; (B) if given by telex or telecopier,
when such telex or telecopied notice is transmitted; or (C) if given
by any other means, when delivered at the address specified in this
Section 10(d).
(e) Governing Law.
(i) This Collateral Agreement shall in all respects be
construed in accordance with and governed by the laws of the State
of New York; provided that as to Pledged Items located in any
jurisdiction other than the State of New
21
<PAGE> 24
York, the Collateral Agent on behalf of the Trust shall have all of
the rights to which a secured party is entitled under the laws of
such other jurisdiction.
(ii) The Pledgor hereby irrevocably submits to the
jurisdiction of any New York State or United States Federal court
sitting in the Borough of Manhattan in The City of New York and any
appellate court related thereto in any action or proceeding arising
out of or relating to this Collateral Agreement and the Pledgor
hereby irrevocably agrees that all claims in respect of such action
or proceeding may be heard and determined in such New York State
court or in such United States Federal court. The Pledgor hereby
irrevocably waives, to the fullest extent it may effectively do so,
the defense of an inconvenient forum to the maintenance of such
action or proceeding. The Pledgor hereby irrevocably appoints Novo
Industries, L.P. (the "Process Agent"), with an office on the date
hereof at 7611 Railhead Lane, Houston, Texas 77086, United States,
United States,] as its agent to receive on behalf of the Pledgor and
its property service of copies of the summons and complaint and any
other process which may be served in any such action or proceeding.
Such service may be made (A) by delivering a copy of such process to
the Pledgor in care of the Process Agent at the Process Agent's
above address, and the Pledgor hereby irrevocably authorizes and
directs the Process Agent to accept such service on its behalf, or
(B) by the mailing of copies of such process to the Pledgor at its
address specified in Section 10(d). The Pledgor agrees that a final
and nonappealable judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this
Section 10(e) shall affect the right of the Trust or the Collateral
Agent to serve legal process in any other manner permitted by law or
affect the right of the Trust or the Collateral Agent to bring any
action or proceeding against the Pledgor or its property in the
courts of any other jurisdictions.
(iii) To the extent that the Pledgor has or hereafter may
acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution, execution or otherwise)
with respect to itself or its property, the Pledgor hereby
irrevocably waives, to the fullest extent it may legally do so, such
immunity in respect of its obligations under this Collateral
Agreement and, without limiting the generality of the foregoing,
agrees that the waivers set forth in this subsection (iii) shall
have the fullest scope permitted under the Foreign Sovereign
Immunities Act of 1976 of the United States, as amended, and are
intended to be irrevocable for purposes of such Act.
(f) Judgment Currency Indemnity.
(i) If for the purposes of obtaining judgment in any
court it is necessary to convert a sum due hereunder in United
States dollars into another currency, the parties hereto agree, to
the fullest extent that they may effectively do
22
<PAGE> 25
so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Collateral Agent could
purchase United States dollars with such other currency in the New
York City foreign exchange market at or about 11:00 A.M. (New York
City time) on the Business Day preceding that on which final
judgment is given for delivery on the following Business Day.
(ii) The obligation of the Pledgor in respect of any sum
due from it to the Collateral Agent hereunder shall, notwithstanding
any judgment in a currency other than United States dollars, be
discharged only to the extent that on the Business Day following
receipt by the Collateral Agent of any sum adjudged to be so due in
such other currency the Collateral Agent may in accordance with
normal banking procedures purchase United States dollars with such
other currency; if the United States dollars so purchased are less
than the sum originally due to the Collateral Agent in United States
dollars, the Pledgor agrees as a separate obligation and
notwithstanding any such judgment, to indemnify the Collateral Agent
against such loss and if the United States dollars so purchased
exceed the sum originally due to the Collateral Agent in United
States dollars, the Collateral Agent agrees to remit to the Pledgor
such excess.
(g) Counterparts. This Collateral Agreement may be executed,
acknowledged and delivered in any number of counterparts and such
counterparts taken together shall constitute one and the same instrument.
(h) Application of Bankruptcy Code. The parties hereto
acknowledge and agree that the Collateral Agent is a "financial
institution" within the meaning of Section 101(22) of Title 11 of the
United States Code (the "Bankruptcy Code") and is acting as agent and
custodian for the Trust in connection with the Forward Purchase Agreement
and that the Trust is a "customer" of the Collateral Agent within the
meaning of said Section 101(22).
11. Termination of Collateral Agreement.
This Collateral Agreement and the rights hereby granted by the Pledgor in
the Collateral shall cease, terminate and be void upon fulfillment of all of the
obligations of the Pledgor under the Forward Purchase Agreement, and the Pledgor
shall have no further liability hereunder upon such termination. Any Collateral
remaining at the time of such termination shall be fully released and discharged
from the Lien hereof and delivered to the Pledgor by the Collateral Agent, all
at the expense of the Pledgor.
12. No Personal Liability of Trustees.
By executing this Collateral Agreement none of the Trustees assumes any
personal liability hereunder.
23
<PAGE> 26
IN WITNESS WHEREOF, the Pledgor has caused this Collateral Agreement to be
duly executed on its behalf, the Collateral Agent has caused this Collateral
Agreement to be duly executed on its behalf, and the Trust has caused this
Collateral Agreement to be duly executed on its behalf as of the date hereof.
PLEDGOR:
By:
Name:
Title:
Address for Notices:
Attention:
COLLATERAL AGENT:
THE BANK OF NEW YORK
as Collateral Agent
By:
Name:
Title:
Address for Notices:
101 Barclay Street
New York, New York 10286
Attention: Mark G. Walsh
24
<PAGE> 27
THE TRUST:
DECS TRUST II
By:
Donald J. Puglisi,
as Trustee
By:
William R. Latham, III,
as Trustee
By:
James B. O'Neill,
as Trustee
Address for Notices:
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Attention: Donald J. Puglisi
25
<PAGE> 28
Exhibit A
to
Collateral Agreement
CERTIFICATE FOR SUBSTITUTED COLLATERAL
The undersigned, _____________ (the "Pledgor"), hereby certifies, pursuant to
Section 6(b) of the Collateral Agreement dated as of _________, 1997 among the
Pledgor, The Bank of New York, as Collateral Agent, and DECS TRUST II (the
"Collateral Agreement"; terms defined in the Collateral Agreement being used
herein as defined therein), that:
1. The Pledgor is delivering the following securities to the Collateral
Agent to be held by the Collateral Agent as substituted Collateral (the
"Substituted Collateral"):
2. The Pledgor requests that the Collateral Agent transfer to the Pledgor
the following Prior Collateral, pursuant to Section 6(b) of the Collateral
Agreement:
3. The Pledgor hereby represents and warrants to the Collateral Agent and
the Trust that:
(a) Consents to Transfer. No Transfer Restrictions exist with respect
to or otherwise apply to the assignment of, or transfer by the Pledgor of
possession of, any items of Substituted Collateral to the Collateral Agent
under the Collateral Agreement, or the subsequent sale or transfer of such
items of Substituted Collateral by the Collateral Agent pursuant to the
terms of the Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The Pledgor has
good and marketable title to the Substituted Collateral, free of all Liens
(other than the Lien created by the Collateral Agreement and Transfer
Restrictions {(other than Transfer Restrictions imposed by the Stock
Control Agreement)}. Upon delivery of the Collateral to the Collateral
Agent, the Collateral Agent will obtain a valid, first priority perfected
security interest in, and a first lien upon, such Substituted Collateral
subject to no other Lien. None of such Substituted Collateral is or shall
be pledged by the Pledgor as collateral for any other purpose.
This Certificate may be relied upon by the Trust as fully and to the same
extent as if this Certificate had been specifically addressed to the Trust.
A-1
<PAGE> 29
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
_____ day of ____________, 199__.
Name:
Title:
A-2
<PAGE> 30
Exhibit B
to
Collateral Agreement
CERTIFICATE FOR ADDITIONAL COLLATERAL
The undersigned, __________________ (the "Pledgor"), hereby certifies,
pursuant to Section 6(c) of the Collateral Agreement, dated as of , 1997, among
the Pledgor, The Bank of New York, as Collateral Agent and DECS TRUST II (the
"Collateral Agreement"; terms defined in the Collateral Agreement being used
herein as defined therein), that:
1. The Pledgor is delivering the following securities to the Collateral
Agent to be held by the Collateral Agent as additional Collateral (the
"Additional Collateral"):
2. The Pledgor hereby represents and warrants to the Collateral Agent
that:
(a) Consents to Transfer. No Transfer Restrictions exist with respect
to or otherwise apply to the assignment of, or transfer by the Pledgor of
possession of, any items of Additional Collateral to the Collateral Agent
under the Collateral Agreement, or the subsequent sale or transfer of such
items of Additional Collateral by the Collateral Agent pursuant to the
terms of the Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The Pledgor has
good and marketable title to the Additional Collateral, free of all Liens
(other than the Lien created by the Collateral Agreement) and Transfer
Restrictions {(other than Transfer Restrictions created by the Stock
Control Agreement)}. Upon delivery of the Collateral to the Collateral
Agent, the Collateral Agent will obtain a valid, first priority perfected
security interest in, and a first lien upon, such additional Collateral
subject to no other Lien. None of such Additional Collateral is or shall
be pledged by the Pledgor as collateral for any other purpose.
This Certificate may be relied upon by the Trust as fully and to the same
extent as if this Certificate had been specifically addressed to the Trust.
3
<PAGE> 31
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
_____ day of ____________, 199__.
Name:
Title:
4
<PAGE> 1
Exhibit 99.2.K(v)
FUND EXPENSE AGREEMENT
Agreement dated as of November , 1997 between Salomon Brothers Inc
("Salomon") and The Bank of New York (the "Service Provider"), in its
capacities as administrator, custodian, paying agent and collateral agent for
DECS Trust II (the "Trust").
WHEREAS, the Trust is a statutory business trust organized under the
Business Trust Act of the State of Delaware pursuant to a Declaration of Trust
dated as of September 2, 1997, as amended and restated as of October 22, 1997
(the "Trust Agreement"); and
WHEREAS, Salomon desires to make provision for the payment of certain
initial and ongoing expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
. Definitions. (a) Capitalized terms used herein and not defined herein
shall have the meanings ascribed thereto in the Trust Agreement.
(b) The following terms shall have the following meanings:
"Additional Expense" means the Ordinary Expense the incurring of which
will require the Service Provider to provide the Additional Expense Notice
pursuant to Section 3(a) hereof and any Ordinary Expense incurred thereafter.
"Additional Expense Notice" means the notice required to be given by the
Service Provider to Salomon pursuant to Section 3(a)(i) hereof.
"Closing Date" shall have the meaning ascribed thereto in the Underwriting
Agreement.
"Ordinary Expense" of the Trust means any expense of the Trust other than
any expense of the Trust arising under Sections 2.2(e) and 6.6 of the
Administration Agreement, Section 15 of the Custodian Agreement, Section 5.4(b)
of the Paying Agent Agreement and Section 7.6 of the Trust Agreement.
"Up-front Fee Amount" means the amount set forth as such on Schedule I
hereto payable as a one-time payment to the Service Provider in respect of its
collective services as administrator, custodian, paying agent and collateral
agent for the entire term of the Trust.
"Up-front Expense Amount" means the amount set forth as such on Schedule I
hereto payable as a one-time payment to the Service Provider in respect of
Ordinary Expenses anticipated to be incurred by the Administrator on behalf of
the Trust, pursuant to the Administration Agreement, during the term of the
Trust.
<PAGE> 2
2. Agreement to Pay Up-front Fees and Expenses. Salomon agrees to pay to
the Service Provider in New York Clearing House funds on the Closing Date the
Up-front Fee Amount and the Up-front Expense Amount.
3. Agreement to Pay Additional Expenses. (a) Prior to incurring any
Ordinary Expense on behalf of the Trust that, together with all prior Ordinary
Expenses incurred by the Administrator on behalf of the Trust, would cause the
aggregate amount of Ordinary Expenses of the Trust to exceed the Up-front
Expense Amount, the Administrator shall provide to Salomon (i) prompt written
notice to the effect that the aggregate amount of Ordinary Expenses of the
Trust will exceed the Up-front Expense Amount, and (ii) an accounting, in such
detail as shall be reasonably acceptable to Salomon, of all Ordinary Expenses
incurred on behalf of the Trust through the date of the Additional Expense
Notice.
(b) From and after the date of the Additional Expense Notice, the Service
Provider agrees that it will not, without the prior written consent of Salomon,
incur on behalf of the Trust (i) any single expense in excess of $3,000 or (ii)
in any calendar quarter, expenses aggregating in excess of $15,000. Subject to
the foregoing, the Service Provider shall give notice to Salomon in writing
promptly following the incurring of any Additional Expense. Such notice shall
be accompanied by any demand, bill, invoice or other similar document in
respect of such Additional Expense.
(c) Subject to the first sentence of paragraph (b) of this Section 3,
Salomon agrees to pay to the Service Provider from time to time the amount of
any Additional Expense. Payment by Salomon of any Additional Expense shall be
made in New York Clearing House funds by the later of (i) five Business Days
after the receipt by Salomon of written notice from the Service Provider of the
incurring thereof or (ii) the due date for the payment of such Additional
Expense.
(d) Salomon may contest in good faith the reasonableness of any
Additional Expense and the parties shall attempt to resolve amicably the
disagreement; provided that if the parties cannot resolve the dispute by the
due date hereunder with respect to such Additional Expense, subject to the
first sentence of paragraph (b) of this Section 3, Salomon shall pay the amount
of such Additional Expense, subject to later adjustment and credit if such
dispute is resolved in favor of Salomon.
4. Condition to Payment. The obligations of Salomon hereunder shall be
subject to the condition that the Trust's DECS shall have been issued and paid
for on the Closing Date.
5. Trust Termination; Refund of Unused Expense Funds. If at the
termination of the Trust in accordance with Section 8.3 of the Trust Agreement
the aggregate amount of Ordinary Expenses incurred by the Service Provider on
behalf of the Trust through the date of termination shall be less than the
Up-front Expense Amount, the Service Provider shall, promptly following the
date of such termination, pay to Salomon in New York Clearing House funds the
amount of such excess.
<PAGE> 3
6. Termination of Administration Agreement. If the Administration
Agreement is terminated in accordance with Section 4.1 thereof, the Service
Provider shall promptly pay to Salomon (i) the ratable portion of its Up-front
Fee Amount for the period from the date of the termination of the
Administration Agreement to the Exchange Date and (ii) any unexpended portion
of the Up-front Expense Amount.
7. Statements and Reports. The Service Provider shall collect and safekeep
all demands, bills, invoices or other written communications received from
third parties in connection with any Ordinary Expenses and Additional Expenses
and shall prepare and maintain adequate books and records showing all receipts
and disbursements of funds in connection therewith. Salomon shall have the
right to inspect and to copy, at its expense, all such documents, books and
records at all reasonable times and from time to time during the term of this
Agreement.
8. Term of Contract. This Agreement shall continue in effect until the
termination of the Trust in accordance with Section 8.3 of the Trust Agreement.
9. No Assignment. No party to this Agreement may assign its rights or
delegate its duties hereunder without the prior written consent of the other
party.
10. Amendments. The Service Provider agrees that it will not consent to any
amendment to any of the Administration Agreement, the Custodian Agreement, the
Paying Agent Agreement or the Collateral Agreement without the prior written
consent of Salomon.
11. Entire Agreement. This Agreement contains the entire agreement among
the parties with respect to the matters contained herein and supersedes all
prior agreements or understandings. No amendment or modification of this
Agreement shall be valid unless the amendment or modification is in writing and
is signed by all the parties to this Agreement.
12. Notices. All notices, demands, reports, statements, approvals or
consents given by any party under this Agreement shall be in writing and shall
be delivered in person or by telecopy or other facsimile communication or sent
by first-class U.S. mail, registered or certified, postage prepaid, to the
appropriate party at its address on the signature pages hereof or at such other
address subsequently notified to the other parties hereto. A copy of any
communication to Salomon shall be furnished to Cleary, Gottlieb, Steen &
Hamilton, One Liberty Plaza, New York, New York 10006, Attention: Raymond B.
Check, provided that the failure to furnish such copy shall not affect the
effectiveness of any such communication. Any party may change its address for
purposes hereof by delivering a written notice of the change to the other
parties. All notices given under this Agreement shall be deemed received (a)
in the case of hand delivery, on the day of delivery, (b) in the case of
telecopy or other facsimile communication, on the day of transmission, and (c)
in the case of mailing, on the third day after such notice was deposited in the
mail.
13. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
<PAGE> 4
14. Governing Law. This Agreement shall be governed by and be construed in
accordance with the laws of the State of New York.
15. Counterparts. This Agreement may be signed in counterpart with all of
such counterparts constituting one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their authorized representatives as of the date first above written.
SALOMON BROTHERS INC
By:
-----------------------------------
Address: Seven World Trade Center
New York, New York 10048
Attention: Larry S, Wieseneck
THE BANK OF NEW YORK
By:
-----------------------------------
Address: 101 Barclay Street
New York, New York 10286
Attention: Mark Walsh
<PAGE> 5
SCHEDULE I
to Fund Expense Agreement
Up-front Fee Amount:
Up-front Expense Amount:
<PAGE> 1
Exhibit 99.2.K(vi)
FUND INDEMNITY AGREEMENT
Agreement dated as of November , 1997 between Salomon Brothers Inc
("Salomon") and DECS Trust II (such trust and the trustees thereof acting in
their capacity as such being referred to herein as the "Trust").
WHEREAS, the Trust is a statutory business trust organized under the
Business Trust Act of the State of Delaware pursuant to a Declaration of Trust
dated as of September 2, 1997, as amended and restated as of October 22, 1997
(the "Trust Agreement"); and
WHEREAS, Salomon, as sponsor under the Trust Agreement, desires to make
provision for the payment of certain indemnification expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
1. Definitions. Capitalized terms used herein and not defined herein shall
have the meanings ascribed thereto in the Trust Agreement.
2. Agreement to Pay Expenses. Salomon agrees to pay to the Trust, and hold
the Trust harmless from, any expenses of the Trust arising under Sections
2.2(e) and 6.6 of the Administration Agreement, Section 15 of the Custodian
Agreement, Section 5.4(b) of the Paying Agent Agreement and Section 7.6 of the
Trust Agreement (collectively, together with any amounts paid pursuant to
paragraph 4 of this Agreement, "Indemnification Expenses"). Subject to
paragraph 4 hereof, payment hereunder by Salomon shall be made in New York
Clearing House funds no later than five Business Days after the receipt by
Salomon, pursuant to paragraph 3 hereof, of written notice of any claim for
Indemnification Expenses.
3. Notice of Receipt of Claim. The Trust shall give notice to, or cause
notice to be given to, Salomon in writing of any claim for Indemnification
Expenses or any threatened claim for Indemnification Expenses immediately upon
the Trust acquiring knowledge thereof. Such written notice shall be
accompanied by any demand, bill, invoice or other communication received from
any third party claimant (a "Claimant") in respect of such Indemnification
Expense.
4. Right to Contest. The Trust agrees that Salomon may, and Salomon is
authorized on behalf of the Trust to, contest in good faith with any Claimant
any amount contained in any claim for Indemnification Expense, provided, that
if, within such time period as Salomon shall determine to be reasonable,
Salomon and such Claimant are unable to resolve amicably any disagreement
regarding such claim for Indemnification Expense, Salomon shall retain counsel
reasonably satisfactory to the Trustees to represent the Trustees in any
resulting proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. Notwithstanding any other provision herein, it is
understood that (a) Salomon shall not, in
<PAGE> 2
respect of the legal expenses of any indemnified party in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel), and (b) Salomon shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the Claimant, Salomon agrees to
indemnify the Trust from and against any loss or liability by reason of such
settlement or judgment.
5. Statements and Reports. The Trust shall collect and safekeep all
demands, bills, invoices or other written communications received from third
parties in connection with any claim for Indemnification Expenses and shall
prepare and maintain adequate books and records showing all receipts and
disbursements of funds in connection therewith. Salomon shall have the right
to inspect and to copy, at its expense, all such documents, books and records
at all reasonable times and from time to time during the term of this
Agreement.
6. Term of Contract. This Agreement shall continue in effect until the
termination of the Trust in accordance with Section 8.3 of the Trust Agreement.
7. No Assignment. No party to this Agreement may assign its rights or
delegate its duties hereunder without the prior written consent of the other
parties, except that the Trust may delegate any and all duties hereunder to the
Administrator to the extent permitted by law.
8. Entire Agreement. This Agreement contains the entire agreement among
the parties with respect to the matters contained herein and supersedes all
prior agreements or understandings. No amendment or modification of this
Agreement shall be valid unless the amendment or modification is in writing and
is signed by all the parties to this Agreement.
9. Notices. All notices, demands, reports, statements, approvals or
consents given by any party under this Agreement shall be in writing and shall
be delivered in person or by telecopy or other facsimile communication or sent
by first-class U.S. mail, registered or certified, postage prepaid, to the
appropriate party at its address on the signature pages hereof or at such other
address subsequently notified to the other parties hereto. A copy of any
communication to Salomon shall be furnished to Cleary, Gottlieb, Steen &
Hamilton, One Liberty Plaza, New York, New York 10006, Attention: Raymond B.
Check, provided that the failure to furnish such copy shall not affect the
effectiveness of any such communication. Any party may change its address for
purposes hereof by delivering a written notice of the change to the other
parties. All notices given under this Agreement shall be deemed received (a)
in the case of hand delivery, on the day of delivery, (b) in the case of
telecopy or other facsimile communication, on the day of transmission, and (c)
in the case of mailing, on the third day after such notice was deposited in the
mail.
10. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
11. Governing Law. This Agreement shall be governed by and be construed in
accordance with the laws of the State of New York.
<PAGE> 3
12. Counterparts. This Agreement may be signed in counterpart with all of
such counterparts constituting one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their authorized representatives the date first above written.
SALOMON BROTHERS INC
By: ___________________________________
Address: Seven World Trade Center
New York, New York 10048
Attention: Larry S. Wieseneck
DECS TRUST II
_______________________________________
Donald J. Puglisi
as Trustee
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
_______________________________________
William R. Latham III
as Trustee
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
_______________________________________
James B. O'Neill
as Trustee
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
<PAGE> 1
Exhibit 99.2.L
RICHARDS, LAYTON & FINGER
A Professional Association
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Telephone (302) 658-6541
Telecopier (302) 658-6548
October 29, 1997
DECS Trust II
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Re: DECS Trust II
Ladies and Gentlemen:
We have acted as special Delaware counsel for DECs Trust II, a Delaware
business trust (the "Trust"), in connection with the matters set forth herein.
At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of executed or conformed
counterparts, or copies otherwise proved to our satisfaction, of the following:
(a) The Certificate of Trust of the Trust (the "Original Certificate
of Trust"), dated September 2, 1997, as filed in the office of the
Secretary of State of the State of Delaware (the "Secretary of State") on
September 4, 1997;
(b) The Restated Certificate of Trust of the Trust (the "Restated
Certificate of Trust"; and together with the Original Certificate of Trust,
the "Certificate of Trust"), dated October 22, 1997, as filed in the office
of the Secretary of State on October 22, 1997;
<PAGE> 2
DECS Trust II
October 29, 1997
Page 2
(c) The Declaration of Trust of the Trust, dated as of September
2, 1997, between Michael E. Sherman, as sponsor (the "Initial Sponsor"),
and Peter B. Blanton, as trustee (the "Initial Trustee");
(d) The registration statement (the "Initial Registration
Statement") on Form N-2, including a prospectus (the "Prospectus"),
relating to the issuance of up to 3,577,500 DECS of the Trust representing
undivided beneficial interests in the assets of the Trust (the "DECS"), as
filed by the Trust with the Securities and Exchange Commission (the "SEC")
on September 8, 1997, as amended by Pre-Effective Amendment No. 1 to the
Initial Registration Statement ("Amendment No. 1"), filed by the Trust with
the SEC on October 9, 1997, as amended by Pre-Effective Amendment No. 2 to
the Initial Registration Statement ("Amendment No. 2"), filed by the Trust
with the SEC on October 29, 1997 (the Initial Registration Statement, as
amended by Amendment No. 1 and Amendment No. 2, being hereinafter referred
to as the "Registration Statement");
(e) A form of Amended and Restated Trust Agreement of the Trust,
to be entered into among the Initial Sponsor, the Initial Trustee, Salomon
Brothers Inc, as sponsor, Donald J. Puglisi, William R. Latham III and
James B. O'Neill, as trustees, and the Holders (as defined therein),
including Exhibit A attached thereto (the "Trust Agreement"); and
(f) A Certificate of Good Standing for the Trust, dated October
29, 1997, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are used
as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents other than
the documents listed in paragraphs (a) through (f) above. In particular, we have
not reviewed any document (other than the documents listed in paragraphs (a)
through (f) above) that is referred to in or incorporated by reference into the
documents reviewed by us. We have assumed that there exists no provision in any
document that we have not reviewed that bears upon or is inconsistent with the
opinions stated herein. We have conducted no independent factual investigation
of our own but rather have relied solely upon the foregoing documents, the
statements and information set forth therein and the additional matters recited
or assumed herein, all of which we have assumed to be true, complete and
accurate in all material respects.
With respect to all documents examined by us, we have assumed that (i) all
signatures on documents examined by us are genuine, (ii) all documents submitted
to us as originals are authentic, and (iii) all documents submitted to us as
copies conform with the original copies of those documents.
<PAGE> 3
DEC Trust II
October 29, 1997
Page 3
For purposes of this opinion, we have assumed (i) that the Trust Agreement
and the Certificate of Trust constitute the entire agreement among the parties
thereto with respect to the subject matter thereof, including with respect to
the creation, operation and termination of the Trust, and that the Trust
Agreement and the Certificate of Trust are in full force and effect and have
not been amended, (ii) except to the extent provided in paragraph 1 below, the
due creation or due organization or due formation, as the case may be, and
valid existence in good standing of each party to the documents examined by us
under the laws of the jurisdiction governing its creation, organization or
formation, (iii) the legal capacity of natural persons who are parties to the
documents examined by us, (iv) that each of the parties to the documents
examined by us has the power and authority to execute and deliver, and to
perform its obligations under, such documents, (v) the due authorization,
execution and delivery by all parties thereto of all documents examined by us,
(vi) the receipt by each person to whom a DECS is to be issued by the Trust
(collectively, the "DECS Holders") of an interest in the DECS Certificate
(substantially in the form of Exhibit A to the Trust Agreement) and the payment
for the DECS acquired by it, in accordance with the Trust Agreement and the
Registration Statement, and (vii) that the DECS are issued and sold to the DECS
Holders in accordance with the Trust Agreement and the Registration Statement.
We have not participated in the preparation of the Registration Statement and
assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal
laws and rules and regulations relating thereto. Our opinions are rendered only
with respect to Delaware laws and rules, regulations and orders thereunder
which are currently in effect.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del.
C. sec. 3801, et seq.
2. When issued and sold, the DECS will represent valid and, subject
to the qualifications set forth in paragraph 3 below, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust.
3. The DECS Holders, as beneficial owners of the Trust, will be
entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note
<PAGE> 4
DECS Trust II
October 29, 1997
Page 4
that the DECS Holders may be obligated to make payments as set forth in the
Trust Agreement.
We consent to the filing of this opinion with the SEC as an exhibit to the
Registration Statement. In addition, we hereby consent to the use of our name
under the heading "Legal Matters" in the Prospectus. In giving the foregoing
consents, we do not thereby admit that we come within the category of Persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the SEC thereunder. Except as stated
above, without our prior written consent, this opinion may not be furnished or
quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
/s/ RICHARDS, LAYTON & FINGER
<PAGE> 1
Exhibit 99.2N(ii)
INDEPENDENT AUDITORS' CONSENT
DECS Trust II
We consent to the inclusion in this Pre-Effective Amendment No. 2 to the
Registration Statement of DECS Trust II (the "Trust") on Form N-2 of our
report dated October 28, 1997 relating to the audit of the statement of assets,
liabilities and capital of the Trust and to the reference to us under the
headings "Experts" and "Statement of Assets, Liabilities and Capital" in the
Prospectus, which are parts of the Registration Statement.
Arthur Andersen LLP
New York, New York
October 28, 1997
<PAGE> 1
Exhibit 99.2.N(iii)
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the Registration
Statement on Form N-2 of DECS Trust II (the "Trust") and any amendments thereto,
as a person about to become a Trustee of the Trust.
Dated: October 22, 1997
/s/ James B. O'Neill
------------------------
James B. O'Neill
<PAGE> 2
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the Registration
Statement on Form N-2 of DECS Trust II (the "Trust") and any amendments
thereto, as a person about to become a Trustee of the Trust.
Dated: October 22, 1997
/s/ Donald J. Puglisi
---------------------
Donald J. Puglisi
<PAGE> 3
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the Registration
Statement on Form N-2 of DECS Trust II (the "Trust") and any amendment thereto,
as a person about to become a Trustee of the Trust.
Dated: October 22, 1997
/s/ William R. Latham
----------------------
William R. Latham, III
<PAGE> 1
Exhibit 99.2.N(2)
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT dated as of the 8th day of October, 1997,
is entered into between DECS Trust II, a statutory business trust organized
under the Business Trust Act of the State of Delaware (such trust and the
trustees thereof acting in their capacity as such being referred to herein as
the "Trust"), and Salomon Brothers Inc (the "Purchaser"),
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of the DECS.
1.1. Sale and Issuance of DECS. Subject to the terms and conditions
of this Agreement, the Trust agrees to sell to the Purchaser, and the Purchaser
agrees to purchase from the Trust, one DECS (the "Subscription DECS"),
representing an undivided beneficial interest in the Trust, at a purchase
price of $100,000.
1.2. Closing. The purchase and sale of the Subscription DECS shall
take place at the offices of Cleary, Gottlieb, Steen & Hamilton, One Liberty
Plaza, New York, New York 10006 at 10:00 a.m., on October 8, 1997, or at such
other time (the "Closing Date") and place as the Trust and the Purchaser
mutually agree upon. At or after the Closing Date, the Trust shall deliver to
the Purchaser a certificate representing the Subscription DECS, registered in
the name of the Purchaser or its nominee. Payment for the Subscription DECS
shall be made on the Closing Date by the Purchaser by bank wire transfer or by
delivery of a certified or official bank check, in either case in immediately
available funds, of an amount equal to the purchase price of the Subscription
DECS.
2. Representations, Warranties and Covenants of the Purchaser. The
Purchaser hereby represents and warrants to, and covenants for the benefit of,
the Trust that:
2.1. Purchase Entirely for Own Account. This Agreement is made by
the Trust with the Purchaser in reliance upon the Purchaser's representation to
the Trust, which by the Purchaser's execution of this Agreement the Purchaser
hereby confirms, that the Subscription DECS are being acquired for investment
for the Purchaser's own account, and not as a nominee or agent and not with a
view to the resale or distribution by the Purchaser of such Subscription DECS,
and that the Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing such Subscription DECS, in either
case in violation of any securities registration requirement under applicable
law, but subject nevertheless to any requirement of law that the disposition of
its property shall at all times be within its control. By executing this
Agreement, the Purchaser further represents that the Purchaser does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person, or to any third person, with
respect to any of the Subscription DECS.
[/R]
<PAGE> 2
2.2. Investment Experience. The Purchaser acknowledges that it can bear the
economic risk of the investment for an indefinite period of time and has such
knowledge and experience in financial and business matters (and particularly in
the business in which the Trust operates) as to be capable of evaluating the
merits and risks of the investment in the Subscription DECS. The Purchaser is an
"accredited investor" as defined in Rule 501(a) of Regulation D under the
Securities Act of 1933 (the "Act").
2.3. Restricted Securities. The Purchaser understands that the Subscription
DECS are characterized as "restricted securities" under the United States
securities laws inasmuch as they are being acquired from the Trust in a
transaction not involving a public offering and that under such laws and
applicable regulations such Subscription DECS may be resold without registration
under the Act only in certain circumstances. In this connection, the Purchaser
represents that it understands the resale limitations imposed by the Act and is
generally familiar with the existing resale limitations imposed by Rule 144
under the Act.
2.4. Further Limitations on Disposition. The Purchaser further agrees not
to make any disposition directly or indirectly of all or any portion of the
Subscription DECS unless and until:
(a) There is then in effect a registration statement under the Act covering
such proposed disposition and such disposition is made in accordance with
such registration statement; or
(b) The Purchaser shall have furnished the Trust with an opinion of
counsel, reasonably satisfactory to the Trust, that such disposition will
not require registration of such Subscription DECS under the Act.
(c) Notwithstanding the provisions of subsections (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by the Purchaser to any affiliate of the Purchaser; if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if it were the original Purchaser hereunder.
2.5. Legends. It is understood that the certificate evidencing the
Subscription DECS may bear either or both of the following legends:
(a) "These securities have not been registered under the Securities Act of
1933. They may not be sold, offered for sale, pledged or hypothecated in
the absence of a registration statement in effect with respect to the
securities under such Act or an opinion of counsel reasonably satisfactory
to the Trustee of DECS Trust II that such registration is not required."
2
<PAGE> 3
(b) Any legend required by the laws of any other applicable
jurisdiction.
The Purchaser and the Trust agree that the legend contained in
paragraph (a) above shall be removed at a holder's request when it is no longer
necessary to ensure compliance with federal securities laws.
2.6. Amendment to Declaration of Trust: Split of DECS. The Purchaser
consents to (a) the execution and delivery by the Trustees and Salomon Brothers
Inc, as sponsor of the Trust, of an Amended and Restated Declaration of Trust
substantially in the form attached hereto and (b) the split of the Subscription
DECS subsequent to the determination of the public offering price per DECS and
related underwriting discount for the DECS to be sold to the Underwriter (as
defined in such Amended and Restated Declaration of Trust) but prior to the
sale of the DECS to the Underwriter into a greater number of DECS so that
immediately following such split the value of the Subscription DECS will equal
the aforesaid public offering price per DECS.
2.7 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
2.8 Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of New York applicable
to agreements made and to be performed wholly within such state.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DECS TRUST II
By: /s/ Peter B. Blanton
---------------------------------
Peter B. Blanton,
as Trustee
SALOMON BROTHERS INC
By: /s/ Larry S. Wieseneck
---------------------------------
Larry S. Wieseneck
Director
3
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECS TRUST
II STATEMENT OF ASSETS, LIABILITIES AND CAPITAL AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> OCT-28-1997
<PERIOD-END> OCT-28-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 100,000
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 100,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
